By the very definition of FinTech, online lenders have been using technology to transform financial services. In the early days, this equated to moving the mountains of paperwork into digital forms and automating manual processes. Rather than optimizing transactions and speeding approvals, the same inefficient processes were often recreated. The same documents were required — […]
By the very definition of FinTech, online lenders have been using technology to transform financial services. In the early days, this equated to moving the mountains of paperwork into digital forms and automating manual processes.
Rather than optimizing transactions and speeding approvals, the same inefficient processes were often recreated. The same documents were required — now in a PDF format rather than paper. In fact, some lenders made the mistake of modernizing the front-end customer experience but didn’t link their digitization efforts to the back office.
User-Focused Design and Branding
What’s changed? Now, consumers are demanding more security, privacy and personalization from their banks and financial service providers. Online lenders and financial institutions must upgrade their user experience by speeding transactions, providing personalized pricing and integrating data sources to reduce documentation requirements.
Evolving end-to-end workflows and processes
This long-running trend to simplify and streamline the often arduous loan approval process is now including new data sources. Financial institutions are re-thinking the requirements to originate a loan and reworking their customer experience and internal workflow to deliver a frictionless lending experience.
Friendly Financial Advice Delivered Digitally
Borrowers value personal advice and often require 24/7 access to answers. Fortunately, digital tools are becoming more acceptable with the flexibility of self-service and collaborative models to deliver information quickly and efficiently.
The next generation of digital lending will engage consumers in new ways, such as digitally-augmented human support, voice interaction, AI-powered virtual assistants and chatbots, wearables, and augmented and virtual reality.
Since online-only lenders don’t have storefronts to develop in-person relationships, clear communications are critical for building trust. Opportunities to better serve online customers include:
Discrete Research and Application Process
Plain Green Loans recently conducted another round of focus groups with customers and received feedback about the need for protecting their privacy. As a provider of short-term loans to consumers during emergencies, Plain Green’s customers require discretion as they research loan options online. Customers also expressed appreciation for a simplified and streamlined loan approval process. The consumers seeking emergency loans are on tight deadlines and need immediate responses to determine next actions. A fast review of applications and loan approvals are imperative to these consumers. In fact, a recent PwC survey of more than 1,600 adults with full-time employment found that 46 percent of those in the study – which typically has more stable finances than other groups – stated that financial challenges are the number one source of stress in their lives. The study concluded that lenders have tremendous opportunities to assist consumers in understanding their financial options and help them choose the best solution based on their personal situation.
Building Consumer Confidence
Feedback from the Plain Green customer focus groups emphasized the need for authenticity, being real and believable.Creative Bloq’s list of big branding trends in 2018 cited the recent massive data breaches and natural disasters occurring one after the other as the reason consumers want extra assurance from brands that they will provide security. They say, “consumers are looking for clues to determine whether a brand can be trusted, from the overall design quality and experiential thoughtfulness, to ratings and feedback on social media. Brands have to view all of their activities through the lens of a skittish public and a tumultuous world; particularly online.”Online reviews were a major topic of discussion during the focus groups. Several customers said they don’t believe the reviews on websites because the testimonials are all positive or have high ratings. Instead, they preferred to research customer feedback on their own using Yelp, Google or other platforms to give them a broader understanding of experiences the general population may have encountered.
Brand Images Reflecting Diversity
Focus group participants expressed a desire for more diversity in branding images. They want real people shown on websites and in communications that reflect wider demographic groups.Customers stated that they distrust images of people looking too happy, too sad or with fake, over the top emotions. Especially when making a financial decision, the customers want to see people with expressions that underscore the serious nature of the transaction.The focus groups provided meaningful insights that will inform our customer care team, website development, and acquisition and loyalty programs.
It’s clear that online lenders and other financial services providers must continuously seek customers’ feedback to align product development and business strategies to customers’ needs.
With more than 12 years of experience designing groundbreaking marketing strategies for Fortune 500 companies and financial technology brands, Guy Dilger, Guy Dilger, VP of Marketing, Plain Green, LLC, is known for generating engaging content and compelling concepts that resonate with targeted consumers. Prior to Plain Green, Dilger held senior positions within fintech and retail spaces where he managed national marketing campaigns and customer-centric loyalty initiatives for Sears and Kmart. Previously, he was part of the management team at Limited Brands, where his marketing work in support of Express brand included CRM, email, web-based programs and the redesign and relaunch of a private label credit card. Dilger has an MBA, as well as a bachelor of science in economics, from Southern Methodist University.
In last few years, with the advent of digitization, the dynamics of lending have evolved and changed quite drastically. Historically, lending has always been a one-on-one experience, but the emergence of online lenders has led to a paradigm shift. Nowadays, borrowers prefer online lenders as compared to their brick-and-mortar contemporaries because of the comfort and […]
In last few years, with the advent of digitization, the dynamics of lending have evolved and changed quite drastically. Historically, lending has always been a one-on-one experience, but the emergence of online lenders has led to a paradigm shift. Nowadays, borrowers prefer online lenders as compared to their brick-and-mortar contemporaries because of the comfort and ease it offers. This is the reason why traditional banks have witnessed declining growth in these segments as compared to online lenders who are going from strength to strength.
Marketplace lenders (MPL) have disrupted the traditional lending practices and created their own niche in the lending sector. MPL extensively uses data-driven analysis, online marketing channels, and customer-oriented technology platforms to attract and fulfill the financial needs of their customers. With the emergence of technology-driven marketplace lenders, traditional lenders have had to engage with the borrowers on multiple platforms to ensure they do not lose a big chunk of their customer base.
The intense competition in the Fintech world is one of the most important reasons behind the high cost of customer acquisition (CAC) and has become an Achilles heel for most of the companies. Google Ads has usually been the first port of call for startups looking to generate traction. Though such ads help you generate immediate results, the efficacy of such efforts is generally extremely low. The below list illustrates the cost of advertising based on a keyword strategy. The most important thing to understand is that these are cost per clicks and not conversion rates.
So if you have a 1% conversion rate, you are looking at a CAC of $1100, which is unsustainable.
In order to bring down their customer acquisition cost, players are toying with a lot of different options to increase their customer base. Fintech companies are engaged in targeting their customers through social media platforms, improving online presence by using multiple digital marketing channels to attract a wider audience at a much lower per user cost. Along with reducing their cost of acquisition; companies are recognizing the opportunities through digital channels to target Low FICO customers who are mostly neglected by traditional banks.
Well-established online lending platforms like Lending Club have to spend almost 2% of the loan ticket size on sales and marketing to attract borrowers; thus, for a $15,000 loan, that translates to roughly around $300. Younger startups have been known to pay out almost $500-$750 for a similar ticket size. Thus, one of the biggest differentiators between startups is the ability to create cheaper sales funnels for attracting borrowers. VCs have moved past the initial euphoria and massive cash burns for borrower acquisition is history. How you size up on CAC versus your peers is now one of the most important metrics in whether you will get that next round of funding.
Social Media Changing the Fintech Landscape
Social media is changing the overall dynamics of fintech. With a focus on real-time responses to customers, lending startups are integrating Facebook and Twitter pages into Customer Relationship Management. Just like customer service, social media cannot be isolated from marketing and run in silos. Companies are even using social media in their algorithms to evaluate borrowers and their credit worthiness. For instance, companies like FriendlyScore have created an alternative credit technology focused on social media and big data. This creates an opportunity for lenders to evaluate millennials with little or no credit history.
Mobile, Mobile, and More Mobile
Nowadays, the nerve center of any marketing plan is mobile marketing. As per the Federal Reserve survey in 2015, 87 percent of the US population above 18 years of age owned or had regular access to a mobile phone. In another survey by ICBA, 74 percent of millennials feel mobile banking is very essential, and 53% of smartphone owners with a bank account have used mobile banking in the last year. All the mentioned statistics go to show that not only millennials but even older generations are starting to rely more and more on mobile for their financial needs.
As per Pew Research, there are approximately 75.4 million millennials in the US, and they are expected to earn 46% of all income by 2025. Thus, having a mobile strategy is a no-brainer. According to CUNA Mutual Group Statistics, 550 credit unions on the back of the company’s online lending platform receive $2.4 million worth in mobile loan requests every day, and have applied for 6 billion dollars in loans. This highlights that players have already started catching onto this trend.
Following are a few techniques used by fintech companies to lure borrowers via mobile marketing;
Mobile apps and web portals are developed in a way to provide two-way communication, meaning any queries or doubts borrowers have is sorted out right away by 24/7 available online help. Considering most of the borrowers are young with limited financial knowledge, this feature is a real clincher.
Another new trend used by financial marketers these days is in-app marketing, in which product- or service-related content and messages customized for every individual are sent directly to the prospective borrower’s smartphone.
Introducing a special offer or trial offer exclusively for mobile users and eferrring a lender’s services to your social media circle or friends is now just a click away. Word-of-mouth advertising goes on steroids when used in conjunction with mobile.
Direct Mail Still a Force to Reckon With
All is not lost for direct mail, once the backbone of traditional marketing. Many of the biggest players in the fintech industry (Lending Club, Prosper, and On Deck) still rely on direct mail to capture new customers.
As per a Mintel Comperemedia survey, Lending Club mailed 33.9 million personal mail offers in July 2015, which is more than double the amount it sent in the same month in 2014. Prosper’s mail volume also increased to 20.2 million offers. The average monthly volume of personal loan offers sent through direct mail is 156 million YOY (July 2015).
More important is how direct mail is being married with big data analytics to ensure higher conversion rates. So you might have logged online to check out a loan offer, but you are still receiving physical mail. This dual platform strategy is ensuring the best of both worlds and allows for targeting a prospective borrower on multiple levels. Thus, digital marketing in the fintech industry has graduated to the next level, and it is also incorporating traditional methods for a more comprehensive marketing campaign.
News Comments Today’s main news: Betterment expands financial advice to all users. Lendio originates $500M in business loans. UK fintech funding jumps 37%. Linked Finance secures more than 1M Euro for Waterford businesses. Fintech adoption in Canada doubles in 18 months. Today’s main analysis: Marketing fintech solutions to millennials. Today’s thought-provoking articles: The SEC investigative report that will put […]
Marketing fintech solutions to millennials. AT: “The age-to-age comparison charts alone are worth a look. Goes well beyond simple suggestions for marketing to millennials. This technologically sophisticated group of consumers are also quite discerning when it comes to digital channels.”
The SEC investigative report on ICOs. AT: “This is a must-read for anyone considering an ICO. DAO tokens are now considered securities. The question now is, how will they be regulated?”
With its new messaging product, Betterment is offering up personalized financial advice to a larger portion of its user base — that is, anyone with an account. Customers can send secure messages through the Betterment app to ask for financial advice and get a response within one business day from one of the company’s experts.
Lendio, the nation’s leading marketplace for small business loans, today announced that it has helped facilitate more than $500 million in financing to over 21,000 small businesses across the U.S. Lendio helps fuel the American Dream through its marketplace of over 75 small business lenders in all 50 states and parts of Canada. The growth milestone comes after a 141 percent increase in loans originated through the Lendio platform in the last fiscal year.
Small business lending indices show that small business borrowing is at its highest level in nearly a year. According to Thomson Reuters/PayNet, business owners are investing to meet customer demand, which is driving the economy. Data from Lendio’s platform is telling a similar story, and it’s not just businesses on the nation’s coastlines that are thriving. A heat map of Lendio’s top states for small business loans, based on loan volume, shows small business growth is booming in America’s heartland, the southern states and beyond.
The average loan size among Lendio’s small business customers is $26,873. The top five industries funded on Lendio’s marketplace include construction, restaurants, retail, healthcare, and manufacturing. Lendio also helps small businesses get loans fast, with 70 percent of businesses getting funding within five days of submitting an application.
One of the key factors that set millennials apart from other generations is their adaptation of technology into their everyday lives. They are hyper-connected: disproportionately drawn to mobile and wearable devices for their day-to-day needs; far more likely to make purchases on them instead of computers or in person; and constant users of social media.
Not only are millennials more likely than Gen X’ers and Baby Boomers to use fintech products now, they are expected to use them even more in the future.
68% say that in 5 years, the way we access our money will be totally different
70% say that in 5 years, the way we pay for things will be totally different
73% would be more excited about a new offering in financial services from Google, Amazon, Apple, Paypal or Square than from their own nationwide bank
33% believe they won’t need a bank at all in 5 years
Although awareness and lead generation campaigns can still be effective, millennials also look for reviews, comments, and other content that will help them trust the brand.
33% say they read blogs before making a purchase
62% say that if a brand engages with them on a social network, they are more likely to become a loyal customer
The Securities and Exchange Commission (SEC) issued an investigate report on the fast growing Initial Coin Offering (ICO) market that will squelch the ICO market, at least in the US. This investigation compelled the SEC to determine that DAO Tokens represented securities as defined under the Securities Act of 1933 and the Securities Exchange Act of 1934.
If asked where to get a small business loan most people would state their local banks or even some of the bigger traditional banks. Those aware of the online lending space may mention the likes of Kabbage, OnDeck, Funding Circle or maybe even some of the new online initiatives of big banks like Wells Fargo’s FastFlex product. However there is another, often overlooked segment of small business lenders and they are names you have heard of: Amazon, Paypal and Square.
Since Amazon is a marketplace for sellers they have an incredible amount of data on the cash flow of businesses that operate on the platform. They also have a significant pool of borrowers, resulting in virtually no customer acquisition costs.
Not only can Amazon select the borrowers they want to lend to but lending also helps grow the sales on Amazon.com. Pajitnov initially borrowed $1,000 dollars but eventually borrowed $19,000 to buy out a competitor.
Square is able to efficiently underwrite small businesses and have repayment be based on sales. Square’s average loan size is just $6,000. According to Square’s Q1 2017 earnings release Square Capital facilitated over 40,000 business loans totaling $251 million in the first quarter of 2017, up 64% year over year. The company is reportedly looking to lend to consumers as well.
Outstanding service on its own isn’t enough for credit unions to get top-of-wallet status with members.
This past quarter, Clark noted, Venmo processed $6.8 billion in total payment volume, double the amount from the same quarter one year prior. These companies are not just processing payments, he said, they are capturing information that can be used to improve the customer experience and build brand loyalty.
Clark pointed to online personal finance company SoFi, which, by leveraging digital, has turned the concept of “scale” on its head. The company has funded $19 billion in loans to 300,000 members, and has resulted in $1.45 billion in member savings.
Clark said credit union management must focus on delivering via digital channels, because payments are now the leading indicator of PFI status, and offering speed, agility and a frictionless experience are critical to growing PFI.
But most importantly, in a joint Real Estate Investment Survey with Harris Interactive, RealtyShares found that 55% of millennials are enthusiastic about home ownership as an investment, and over half would invest in property other than their primary residence.
In fact, 70% of all Americans think investing in real estate is more difficult than investing in other asset classes. Few are aware of the options towards home ownership, such as borrowing from retirement, real estate crowdfunding or house hacking.
Not surprisingly, millennials believe technology makes the real estate investment process easier.
Realtor.com analyzed the top 10 cities where millennials want to live and (of the 60 largest U.S. cities) found the top were: Salt Lake City, Miami, Orlando, Seattle, Houston, Los Angeles, Buffalo, Albany, San Francisco, and San Jose. Millennials also want homes over 2,375 sq. ft. on average and nearly half surveyed in the March 2016 National Association of Home Builders study said they wanted at least four bedrooms, an outdoor space (deck, patio and front porch), shower and tub in the master bath and hardwood floors on the main level of the home.
So-called “alternative investments” have long been the preserve of pension funds and well-heeled accredited investors, providing access to non-traditional asset classes such as private equity, infrastructure, hedge funds, emerging-market debt and limited partnerships.
Enter mutual-fund giant Mackenzie Financial Corp., which of late has been scooping up $30-million a month in a mutual fund designed to complement an old-fashioned balanced fund and the usual 60/40 asset mix. The Mackenzie Diversified Alternative Fund (“MDAF,” Series A and Series F) has a standard minimum investment of $500, in reach of any investor with a financial adviser. Launched two years ago, it has $350-million in assets, says Allan Seychuk, Mackenzie’s senior investment director of asset allocation.
This paper investigates the impact of uncertainty on consumer credit outcomes. Individual-level data on credit-card balances and mortgages reveal strong borrower-specific heterogeneity in response to changes in an equity-based measure of county-level economic uncertainty. Low-risk borrowers reduce their credit-card balances and use of mortgage credit in response to increased localized uncertainty, while lenders expand the availability of credit to these borrowers. The opposite is obtained for high-risk borrowers. The economic magnitudes are especially large during the recent financial crisis. This evidence suggests that localized uncertainty about economic conditions might independently affect aggregate economic activity through consumer credit markets.
An early adopter of the Ruby on Rails framework, Enova is one of the city’s biggest Rails shops. But for developers looking to get a job with the online lender, prior Ruby experience is by no means a prerequisite. Enova hires for aptitude and personality, rather than resume bullet points.
What is the most interesting technological challenge to making that happen?
Caprio: Scale. Each year, we process as many loans as a small bank does — but we do it with orders of magnitude fewer people. The only way you can do that is with technology, analytics and massive amounts of efficiencies.
We also have to navigate a globally regulated environment. Each country has different rules and regulations. Some of our teams interact with five different regulating bodies in three different countries. It’s not easy to keep all of those in balance while still having upward of 60 software releases a week.
And then you need to adapt when those rules and regulations change.
Caprio: Recently, the laws in one state changed in a way that required a custom product. We were able to segment it, size it, spec it out and build it in about five weeks. You can’t even get a loan from a bank in four weeks, so the fact that we could actually create a completely new lending product in that time is a testament to what we’re capable of.
Why do you think other companies don’t offer opportunities like that?
Caprio: Our interview process is probably only 30 percent technical, and the rest is behavioral, problem solving and cultural add. We want to see what kind of partner you’re going to be, and what kind of co-worker you’re going to be.
Lahari Manam, technology manager: We also have something called fellowships. If someone has an exciting idea that requires more than a few days for research and prototyping, they can apply for a fellowship to work on it for three or four weeks instead of doing their normal day-to-day work.
July 26 news, the domestic mobilization platform was easy to raise in early 2017 to complete the 28 million US dollars C round of financing, the current round of investment for IDG Capital’s growth fund leader, Tencent, IDG, Germany with capital, fellow capital Old shareholders with the vote.
Up to now, easy chip has a total of about $ 65 million financing. The company’s existing investors include Tencent, IDG Capital, Germany with capital, fellow capital, IDG capital growth fund.
Typically, you can’t borrow more than $35,000, but for many small businesses or startups, that amount (or less) is just the infusion of cash they need.
Some of the immediate benefits of a P2P loan is that no collateral is required. Lower interest rates tend to be available, depending on your credit score, loan amount and loan term, because the peer-to-peer lenders operate with low overhead. You can repay the loan early and not have to contend with any prepayment penalties. Since it is an online lending environment, you’ll also enjoy faster approval and no paperwork except for a few online forms and a digital signature.
First, think about your current credit score to see if you qualify. These P2P lenders are not just giving out loans and want to see how fiscally responsible you are with loans. If you have a low credit score, you may have to work on improving it before this option becomes available.
The United Kingdom attracted £432m ($564m) of new venture capital investment in the first six months of 2017 representing an uptick of 37 per cent compared to the same period in 2016, according to research from Innovate Finance.
Alternative lending, challenger banks and wealth management were the top three investment verticals for UK fintech investments with notably large cash raises from Atom Bank, Funding Circle and Monzo.
Peer-to-peer lender Funding Circle has reportedly joined forces with UK-based Just Eat to provide takeaway restaurants with discounted business loans. Funding Circle will now offer nearly 30,000 restaurants that use Just Eat the discounted loans. The takeaway businesses will now be able to borrow up to £60,000 from the online lender.
Salamanca Group, a London-based Merchant Bank, announced on Wednesday it recently completed a Series A funding round for peer-to-peer lending platform, Proplend. The company states it facilitated the fundraising through its proprietary network and has also acquired a stake in the online lender.
With the market recently hitting £10bn, crowdfunding is no longer a small fish in the big finance pond. But as the sector expands, it’s also becoming more complex.
In equity crowdfunding, for example, you may buy a small stake in an exciting new business, investing early in the hope of making maybe 10 times your money. The majority of new businesses will fail, so investors should create a broad portfolio on the assumption that over time a few big successes outweigh the failures.
In contrast, lending to more established businesses may not have the potential to make tenfold returns, but consequently the risk of losing your capital is typically lower. This is perhaps why 97 per cent of the £10bn crowdfunding market is in debt-based alternative finance.
LENDING Works is offering cash bonuses of up to £200 to new and existing investors for a limited time period.
The peer-to-peer consumer lender said that from Monday 24 July, investors will receive a £50 bonus for every £5,000 they invest. The offer expires on Sunday 20 August, meaning that customers could potentially earn up to £200, if they invest at least £5,000 in each of the four weeks.
Financial management app Cleo has raised £2 million led by Local Globe’s Robin Klein with participation from Atomico CEO Niklas Zennström and Albion founder Jason Goodman.
Launched in January, Cleo uses AI to monitor your bank accounts and manage your money. According to the company, it’s currently managing £400 million in assets where it handles user queries about balances, spending, savings, and bills. Insights are delivered through Facebook Messenger. Its key demographic is under-30s.
YORKSHIRE has phenomenal potential to become a hub for financial technology – or fintech – companies because it is starting to attract fast-growing firms that have moved from London, according to a leading entrepreneur.
Daniel Rajkumar, the owner of investUP, which is based in the Leeds Digital Hub, believes that the region’s traditional financial services sector can join forces with technology firms to secure jobs and investment.
The peer-to- peer lending industry is growing at a rate of around 30 per cent a year.
Mr Rajkumar believes there is great scope to grow the region’s fintech sector, and initiatives like the Leeds Digital Hub are helping to promote collaboration.
Close to postponing her enrollment, Vinni was introduced to alternative student loans provider Prodigy Finance, a financial technology – fintech – company, founded by MBAs, for MBAs.
While banks are reluctant to lend internationally, Prodigy Finance’s borderless, peer-to-peer lending model gives international MBA and master’s students – from 150 countries worldwide – access to the loans they need to study abroad.
Irish peer-to-peer lending platform Linked Finance has successfully secured more than €1 million for Waterford-based businesses. According to the Muster Express, over 30 businesses in Waterford have raised funds through the lending platform to facilitate their business growth.
Zinsbaustein is partnering with well-known development group Demos Wohnbau GmbH, a company with 50 years of expertise in Munich and the surrounding area. The investment crowdfunding platform is giving investors the opportunity to participate in a subordinated loan with as little as €500 at an interest rate of 5.25% per year. The project includes 95 apartments and associated parking spaces. Reportedly, 40% of the apartments have already been sold are have been reserved.
The July PYMNTS Digital Identity Tracker™, powered by Socure, features news on how security technology providers are using new technology, including biometrics and two-factor authentication, to protect customer data and comply with new regulations surrounding data security.
In fact, according to one recent study, 60 percent of transactions conducted by the start of the next decade will be authenticated and completed using biometric technology.
The results of a study recently published by the consulting firm EY revealed that China and India have the highest adoption of FinTech services among its online population out of 20 countries. 69 percent of China’s and 52 percent of India’s digitally active citizens have used at least 2 FinTech services over the past 6 months.
In many developed countries on the other hand, where people have over many years learned to associate the Internet with the PC, smartphones still often are being considered a secondary device for many digital tasks; a device that people use only when they are not near a PC. This narrative has naturally been accepted even by the commercial players, which prevented a dynamic advancement of FinTech services similar to the the one which, for example, can be witnessed in China right now.
Global VC investment for FinTech in H1 2017 attracted $6.5 billion of VC investment with 787 deals, a 45% decrease year on year, according to statistics compiled through Pitchbook by Innovate Finance, the not-for-profit membership association for global FinTech.
The US attracted the most investment both in deal value, which topped $3.3 billion, and deal volume, with 357 investments in total. Overall, the US experienced a 7.7% increase on H1 2016 deal value, but an 18.5% decrease in deal volume. Last year this quarter, the US secured 438 deals.
The top three global FinTech deals came from the US and China, with American firm SoFi raising the largest round globally at $453 million.
Atom Bank ($102 million), Funding Circle ($101 million), Zopa ($41 million), Monzo ($27 million) and Currency Cloud ($25 million) led the top 5 top UK deals. Collectively the firms attracted $296 million in funding.
Speaking at the National Press Club on Wednesday afternoon, the former Queensland premier described the various technological changes that the banking sector is facing, singling out open data as the biggest on the horizon that will benefit consumers.
An open banking regime would force banks to share product and customer data with their customers and other third parties with consent.
Ms Bligh said Australian banks would welcome this new open data regime if a focus is placed on security and data safety.
Conceived in May 2015, their enterprise, CoinTribe, is a loan marketplace focused sharply on Micro-Small Medium Enterprises (MSMEs). The model facilitates not just loan or lead generation for banks, but also assesses a customer’s credit risk through proprietary underwriting engines and provides suitable suggestions.
The startup looks at mainly providing standardised business loans. The company’s website does mention personal loans, but that’s not a focus area.
Including all costs of operations, predictive NPAs (non-performing assets) and margins, CoinTribe gives unsecured business loans at interest rates ranging from 16 to 21 percent. But the average interest rate by portfolio is 19 percent.
News of Ezubao bilking 900,000 investors out of more than $7.6 Bn surfaced soon afterwards. What followed was a country-wide hysteria as part of what is now considered the largest financial scam in Chinese as well as global history.
As per reports by The New York Times, more than 95% of Ezubao’s investment products turned out to be fake.
In April 2016, reports surfaced that Lending Club’s then-CEO Renaud Laplanchemade alterations in loan application documents in order to hasten the transaction process. Laplanche eventually stepped down amidst reports of employee embezzlement, scam and conflict of interest. Following the controversy, Lending Club, which was once valued at $8 Bn, saw a markdown to around $1.7 Bn.
To thwart competition, many companies tend to project lower delinquency rates than the actual numbers. Between 2007 and 2008, for instance, Prosper reported a loss rate of 26.1%. According to third-party verification, however, the company’s default rate during that period was actually around 36.1%.
In the UK, Quakle ceased operations in 2011, as a result of a near-100% default rate.
Known for lending money to individuals with a less-than-stellar credit score, Estonia-based Bondora reportedly has a loan default rate of more than 70%.
All the above factors bring us to the general lack of transparency that continues to plague the P2P lending market, more than 10 years after the world’s first peer-to-peer lending platform Zopa cropped up in the UK.
During the financial crisis of 2007-08, subprime lending was often supported by very little verifiable documentation and credit checks. The originators of the subprime mortgages served only intermediaries that, like the P2P lending platforms, did not have any “skin in the game”. Lenders, on the other hand, had to rely on third-party credit ratings and assessment that were at times unreliable. The lack of transparency was actually one of the major contributing factors behind the housing market scam in 2008.
The average ticket size of peer-to-peer investments in India ranges between $2,330 (INR 1.5 Lakhs) and $3,107 (INR 2 Lakhs). Since interest rates are not fixed, they can be below 10% but, at times, can also reach 30%-40%.
According to a report by Reuters, unsecured personal loans currently constitute 4% of all loans in India. In March 2016 alone, $47.4 Bn (INR 2,96,800 Cr) was issued as personal loans to the country’s 1.31 Bn population.
That was up from US$1.6 billion generated across 55 transactions in the same period last year, and marked the highest number of fintech deal activity in Asia for the past five quarters, according to a new report from venture capital research firm CB Insights.
Overall funding raised by venture capital-backed fintech start-ups in Asia last year hit a record US$5.4 billion across 165 transactions, compared with US$4.8 billion over 162 transactions in 2015.
The region’s latest quarterly fintech tally surpassed the US$2 billion raised in North America and about US$500 million in Europe during the same period. The global total was US$5.2 billion over 251 deals.
Asia’s top-ranked fintech deal, however, was the US$1.4 billion investment made in May by Japanese telecommunications and internet conglomerate SoftBank Group Corp for a minority stake in One97 Communications, the parent of Indian digital payments giant Paytm.
That was followed by the US$292 million Series D, or fourth round, fundraising by mainland peer-to-peer lending platform operator Tuandaiwang in the same month.
Remark has managed to collect data from almost every social media site on Earth: 1.3 billion active user profiles, 10 billion images, 15 billion posts and 50 billion comments are gathered from Tencent, Alibaba, Facebook, Twitter and others. Remark’s intelligence platform, KanKan, was assembled to analyze data and build facial-recognition algorithms to help live-streaming companies filter out pornography.
Now the New York-born Tao, 40, has decided that credit rating in China has a more stimulating future.
The company, with $59 million in revenues in 2016, claims to have signed up one of China’s largest banks for KanKan.
MercyCrowd offers for the first time to the people in Qatar opportunities for international real estate purchases through crowdfunding. Not only that, the platform puts an emphasis on socially responsible investments, which means it offers international premium property to as many people as possible and not just the wealthy upper bracket, and also obeys ethical financing and actively promotes donations.
Via its platform, people can either become investors in lettable real estate with minimum investments as little as £50 and projected returns of between 4% and 10% annually plus a potential capital appreciation when the property is sold, or sponsors looking to fund their property through crowdfunding.
Fintech today has many variations, one of the most widespread being payments in the form of mobile payments, mobile wallets and payment apps. In Uganda, “mobile money” is the most ubiquitous of these.
Another category is investment management through the use of robo-advisors (machine learning and artificial intelligence) for wealth and retirement planning. We see Fintech in fundraising through equity and non-equity crowd funding platforms for access to private and alternative investment opportunities and online lending platforms. Fintech is also making its presence felt in deposits and lending, especially peer-to-peer or marketplace lending. Digital currencies such as Bitcoin have emerged and are growing in significance and popularity.
Fintech is an intersection of finance and technology and, in Uganda’s case, there is lack of clarity as to the main regulator. Should Fintech be regulated as Finance or as Technology?
News Comments Today’s main news: SoFi loses another senior executive. Prosper performance update for June 2017. Lending-Times listed as #3 P2P lending website. Zopa’s lent 2.46B GBP since March 2005. Zopa sees 35% rise in home improvement loan originations. Revolut partners with robo-advisor. Today’s main analysis: A closer look at Amazon’s lending business. Today’s thought-provoking articles: 5 ICO platforms in China. A […]
Sofi loses another senior executive. AT: “There’s no evidence executives are leaving due to problems with the company. They are likely leaving because their own personal reputations have risen along with the company’s. Having been instrumental in driving SoFi’s success, they are getting better offers and going out on their own. Remember, the same thing has been happening with Google employees for years. This is a sign of SoFi’s success and a boon to the entire fintech sector.”
Online finance startup SoFi has lost yet another senior executive, the company has confirmed. Chief revenue officer Michael Tannenbaum is the latest exec to leave, following a string of departures in the company’s senior ranks.
Tannenbaum joined SoFi as VP of finance in 2014, but quickly moved up the ranks over the last few years. After the company moved beyond its student loan refinancing business to also include mortgages, he took over that business.
Most recently, Tannenbaum served as CRO, where he was responsible for driving the company’s growth strategy across all of SoFi’s core lending products, including student loan refinancing, mortgages and personal loans.
Tannenbaum is reportedly looking to work on his own startup in the finance space, according to a person familiar with the matter.
Amazon (AMZN) has disbursed more than $1.0 billion in small business loans in the past 12 months, implying that the company has supplied about $2.5 billion in loans to sellers on its marketplace since it launched its credit business in 2011. These loans, in the range of $1,000 to $750,000, have gone to more than 20,000 sellers in the United States (SPY), the United Kingdom (EWU), and Japan (EWJ).
The consumer interest in low-cost or free shipping, as highlighted by the survey, could embolden Amazon to add even more perks to Prime to make it more attractive. Prime is vital to Amazon as it fends off competition from the likes of eBay (EBAY), Wal-Mart (WMT), and Target (TGT). According to research company Consumer Intelligence Research Partners, there are more than 80 million Prime subscribers in the United States (SPY).
About Blog – Lend Academy is the leading resource for people interested in peer to peer lending. Lend Academy has been bringing you all the news and information about peer to peer lending since 2010. Founded by Peter Renton, Lend Academy not only has the most active news site, but also the largest online forum and the first and most popular podcast in the industry.
Frequency – about 5 posts per week
About Blog – Daily News, Analysis and Data for the Alternative,Peer-to-peer (p2p) and Marketplace lending space. Lending Times provides daily News, Analisys and News Digest for the Peer to Peer and Alternative Lending industry. We also provide data for the industry.
Frequency – about 9 posts per week
U.S.-based platforms Wealthfront and Betterment are joining the green investing trend, giving users the option to invest in socially responsible companies.
The rivals are approaching the green investment options differently. Betterment is investing in ETFs that track socially responsible indexes. Wealthfront will allow users to invest directly in stocks and screen out four areas that might not match their socially conscious criteria, including fossil fuels, deforestation, tobacco and weapons.
Online lending has doubled in size every year since 2010, and the global marketplace lending space is expected to reach $290 billion by 2020, a 50 percent growth year-over-year, according to a Morgan Stanley report.
A SurveyMonkey study released this month found that millennials (defined as 18- to 34-year-olds) tend to adhere to traditional methods of banking. In fact, 80 percent of millennials surveyed say they want to be able to visit a brick-and-mortar bank branch, and more than half reported visiting a branch at least once in the last month. Even the most digitally connected generation in history values personal touch when it comes to financial transactions.
A panel convened by the Federal Reserve has established an ambitious new goal: By 2020, anyone with a bank account in the United States should be able to receive payments that are highly secure and delivered in something close to real time.
The three-year target is disclosed in the final report of a task force organized by the Fed two years ago.
Non-accredited investors have always had fewer investment options than accredited investors. That is starting to improve as some companies take advantage of a law called Regulation A+, created as part of the JOBS Act, to do offerings to the general public.
In this podcast you will learn:
The story behind the founding of Fundrise.
How the financial crisis shaped the way Ben thought about raising capital.
How Fundrise put together their investor deal before the JOBS Act.
Why the non-accredited investor is core to Fundrise’s mission.
How Fundrise has evolved since doing those early deals.
How their eREITs work.
The differences between a publicly traded REIT and a Fundrise eREIT.
How Fundrise sources their deals.
Details of their successful Reg A+ equity fundraise early in 2017.
Why Ben thinks Fundrise can be the Blackstone of the internet age.
Technology has undoubtedly created, destroyed and changed countless industries in the last 20 years.
The financial services has not been immune to this disruption. In 1980, there were approximately 5,500 people working on the floor of the New York Stock Exchange. Today, that number has dwindled to around 700.
In the United States, there are currently over 200 robo-advisors and more are launching every single day. In general, the fees associated with this new way of investment advice range from free to about 0.75 percent. There is normally not a minimum that is needed to start investing, unlike many financial advisors.
Fintech lender and asset manager Applied Data Finance (ADF) has signed a marketing agreement with iHeartMedia which will see ADF promote its online lender Personify Financialacross the iHeartMedia series of networks.
While revealing a “refresher” of its lending policies, UK-based peer-to-peer lender, Zopa, announced that as of July 20th it has lent £2.46 billion and is lending around £80m per month.
Zopa also noted that it believes diversification is a key tool for the individual investor risk mitigation. The lending platform notably spreads investments across multiple loans, starting in £10 chunks, so that no one borrower has more than 1% of the overall investment.
Lendinvest have issued a 5.25 percent ORB Retail Bond.
Hargreaves Landsdown have decided not to participate in the IPO so unless investors who use that platform set up an account elsewhere, e.g. Interactive Investor, it isn’t possible to buy at launch as the bond has to be in a nominee account.
A forthcoming paper in Law, Innovation and Technology laces payment innovations within a payment system. The payment system comprises the initiation of payments, transfer, as well as clearing and settlement. We argue that existing payment systems are defined by certain institutional tenets that serve commercial objectives, but, more importantly, deliver public goods and public interest objectives for users and policy-makers.
Three types of payment innovations have been hailed to have disruptive potential in recent developments. First, innovations in retail payment interfaces or options at point of sale, such as mobile or app payments, may displace the use of cash and cards. Second, virtual currencies, such as Bitcoin, may come to be accepted as legitimate forms of payment by merchants and businesses. Third, new ledger technologies, such as the distributed ledger or autonomous organisation technologies, may replace existing infrastructure in payment clearing and settlement systems.
If you are a start-up, or an SME, you know that money does not come easy. In the early days, you might need to tap up your savings, your family or even friends to get started. Even more established companies can fall between the cracks when it comes to bank loans or government funding. For all of these reasons, peer-to-peer lending was created.
A report has been released showing the barriers young entrants into farming face in today’s often uncertain times.
The report said that only 13% of farmers were under the age of 45 in 2015, but while fewer young people are entering the sector, their ideas are still needed to harness the technologies that can make farming an up-to-date industry.
Finance is seen as the biggest obstacle to growth; 28% are trying peer-to-peer lending and one fifth have tried crowd-funding to help with projects.
Recently there comes a wave of ICO (Initial Coin Offering) around the world. Many people are enthusiastic about the investment on ICO. So, here is the information of five well-known ICO platforms founded in China, which was collected by Nan Gongyuan, a famous Internet finance columnist as well as special commentator on Xing Ping She.
Founded time：In 2015
background：Affiliate ICO website of block chain media Babbitt
Registered Capital：$ 1,481,613 USD
Legal person：Zhi-Peng Liu（the well-known science fiction writer, Changjia, a consecutive Galaxy Award winner from 2006 to 2008.）
Location：Zhejiang, Hangzhou Province
Founded time：In 2017
background： Affiliate ICO website of Blockchain asset trading platform BTC9.COM
Registered Capital：$740,795 USD
Legal person：Liu Jingchao
Location：Nanchang, Jianfgxi Province
Founded time：In 2017
background：Affiliate ICO website of Shanghai Qukuai Information Technology co. LTD
Registered Capital：$ 17,996 USD
Legal person： Fu Xiaoqi
In China there are more than a billion consumers that are generally underserved across a broad spectrum of financial services, making for a diverse and exciting array of opportunities to address. Yet China is dominated by giants – institutions like Bank of China and technology firms like Alibaba –companies that have tens of thousands of employees and hundreds of millions of customers. The scale of the opportunity is enormous, and so is the size of the companies trying to address it.
When 90% of the world’s data were created in the last two years, it is obvious that our ability to create data has far outstripped our ability to measure and analyze it. This is why companies like ZhongAn (online insurance), Phoenix Finance (wealth management), Lexin (green finance), Wedai (car finance), Credit Karma (financial education), Upgrade (consumer lending in the US), and Lufax (consumer lending & wealth management in Asia) all tout AI/ML as a cornerstone of their strategies.
In the end, fintech is leading us to a more inclusive financial system, which is to say that financial services will be more accessible, more comprehensive, more affordable, and more sustainable.
At the FINTalks forum, held on July 17, 2017 at KPMG in Hong Kong, Renaud Laplache, co-founder and CEO of Upgrade, described online lending as a massive improvement over lending as offered by banks and traditional lenders. “Online lending generally helped lower costs by about 400-500 basis points – massive cost reductions coming from the ability to use technology to automate tasks that were manual at many banks and also to do away with the branch network – a very costly infrastructure,” he explained in simplified terms.
Klarna, the Swedish startup that works with e-commerce businesses and retailers to provide financing and other payment services, today announced that it has picked up yet another large investment, its third inside of two months. Permira, the private equity firm and prolific late-stage tech investor, has taken a minimum 10 percent stake in the fintech business. Klarna and Permira are not confirming the exact amount getting invested, or the valuation. But TechCrunch understands that it is more than $225 million, and the FT is reporting a value of $250 million.
Klarna the startup was last valued at $2.25 billion in 2015 and a source confirmed to us that this valuation has gone up as the business has grown. If a $250 million investment works out to 10 percent of its valuation, that would mean Klarna’s overall value has ticked up to $2.5 billion.
Added up, this means that Klarna has raised somewhere in the region of $500 million in the last 7 weeks.
App-based banking disruptor Revolut intends to partner with its first robo-advisor. A report in this morning’s Citywire suggests that Revolut has already partnered with ETFmatic to roll out its wealth offering. Revolut has confirmed that this is its intention.
Revolut, however, is yet to formally announce the ETFmatic partnership, and it is possible that the proposition that ultimately emerges will look somewhat different.
Bank of Finland reports that household debt grew five percent in May on the previous year, with so-called unsecured consumer credit, via international online credit providers and peer-to-peer lending services, up by 13 percent in the same period.
As the selection of loan alternatives grows, increasing numbers of Finnish consumers are now moving beyond traditional new home and housing cooperative loans to secure expensive consumer credit from sources that Finland’s central bank says are difficult to monitor.
Figures show that every fourth Finnish resident now holds some kind of consumer debt. Cars, trips abroad, boats and appliances are the most common purchases behind the loans.
The good news in this scenario is that regulators and credit ratings agencies agree that Finnish banks are very stable.
Shares of U.K. company Paysafe Group Plc — whose businesses include payments processing, digital wallets and money transfers — are trading at an all-time high after an approach from private-equity bidders Blackstone and CVC.
In December, Paysafe’s shares suffered a nasty blow because of fears about its exposure to China’s crackdown on gambling, although they recovered. This is not your run-of-the-mill Worldpay-style payments giant, even if that may be the goal of its prospective private equity buyers.
The rapid innovation in the financial technology, or FinTech vertical, shows no signs of slowing down. In the past year, global investments in FinTech increased 11 percent to a staggering 17.4 billion USD.
1. The Majority of Executives Are Worried
A recent report from Pricewaterhouse Cooper (PwC) revealed that a staggering 80 percent of executives globally feel their business is at risk due to the rate of innovation in the FinTech sphere.
2. Governments Are Getting Behind FinTech
Per KPMG’s recent report on the pulse of FinTech, governments worldwide are beginning to show visible support for innovation in financial technology. The UK, Australia, Singapore, Malaysia, and Thailand have all debuted sandbox programs for regulatory innovation.
3. Blockchain Is Predicted to Take Over in 2017
4. 30 Percent of Consumers Love FinTech
PwC reports that 30 percent of today’s customers plan to increase their use of nontraditional ways of payments, fund transfers, finance, loans, and saving.
5. Robot Bank Tellers May Not Be a Far-off Fantasy
Robo-Advice, Digital-Advice, Automated-Advice. Whatever you choose to call it, the appetite to access financial advice online is growing, and New Zealand’s legislation is yet to catch up.
The law is currently hindering the development of personalised robo-advice models in New Zealand, as it states financial advice must be given by a natural person.
The Financial Services Federation (FSF) has submitted in support of the Consultation Paper: proposed exemption to facilitate personalised robo-advice, which could accelerate the provision of personalised robo-advice services ahead of law reforms which aren’t likely to take effect until 2019.
There are an estimated 600 fintech operators in Australia. The industry is burgeoning and continues to attract new players, so receiving less than double-digit complaints in 16 months isn’t a bad track record.
“So the growth rate is quite phenomenal and there’s more to come. We know of at least another 20 to 30 that are yet to launch.”
With the Reserve Bank of India guidelines on peer-to-peer lending firms likely to be released in a few weeks, city-based companies are getting ready to increase their registered lenders. They are optimistic that demand for loans will rise significantly as the haze surrounding the lending platforms will be cleared.
For instance, city-based i-lend says there is loan demand of about Rs 500 crore in one year while another firm Oxyloans says there could be a demand for Rs 600 crore in the same time.
Another player, Oxyloans, has 1,300 users including 264 lenders and 1,000 plus borrowers. “We see a loan demand of Rs 600 crore and are hoping to achieve Rs 200 crore in six months or so,” said Radhakrishna Thatavarti, founder and chief executive officer of SRS Fintech Labs, which operates Oxyloans.
Private sector lender Axis Bank has selected three fintech startups from the first batch of its accelerator programme ‘Thought Factory’ whose solutions it will commercially deploy at its business units, it announced at an event in Bangalore on Friday.
Six startups, namely S2Pay, Pally, Perpule, FintechLabs, Paymatrix and Gieom graduated from the first batch. Axis Bank will collaborate with Pally, FintechLabs and Gieom for their tech solutions.
Using AI, Pally enables businesses in the financial domain to deliver better customer experiences. It has created a chatbot that creates an investment portfolio for tax savings when it is fed an image of a salary slip.
S2Pay’s solution forms a layer over any payments app and users can make secure payments from their mobile app, even when they are offline.
A Kalaari Capital-funded startup, Perpule allows users to scan products from their mobile app and pay from within the app once the list is complete.
Monsoon CreditTech Technologies Pvt Ltd, a fintech startup that has been in stealth mode till recently, has raised an undisclosed amount of funding from marquee investors, the startup said in its statement.
The investors include independent angel investors Sunil Kalra and Aditya Singh, former senior Microsoft executive Rishi Srivastava, and Google India’s Rajan Anandan, the statement added.
Ron Suber, perhaps the most prominent global Fintech Ambassador and President Emeritus of Prosper Marketplace, is on an extended swing across Asia visiting various platforms and presenting at events. Visiting with CNBC Asia this week, Suber explained how important transparency is for online lending and how both sides win: investor and borrower.
Mitrausaha Indonesia Group, a homegrown marketplace that provides peer-to-peer lending, introduced a new mobile application that will allow individual lenders to offer loans to small businesses using a crowdfunding scheme.
Mitrausaha, which flies the Modalku flagship, offers small and medium enterprises (SMEs) access to non-collateral loans with interest rates ranging from 12 percent to 26 percent.
Modalku had launched a mobile app in January called “Modalku Dana Usaha,” customized for prospective debtors looking to replenish their working capital. The app is available on Android and iOS.
Lenders can start investing with Rp 1 million ($75).
New individual lenders need to deposit Rp 10 million into their account before giving out loans.
Two years ago, the Securities Commission gave out licences to operate equity crowdfunding platforms and last November, it gave out the licences for peer-to-peer lending.
pitchIN, one of the six operators of the equity crowdfunding platforms, has raised the most among the operators since end-2015, raising more than a third of the RM16mil raised by issuers up until this June.
Funding for early stage start-ups has become much harder due to grants becoming bleaker and investors looking for quality deals.
Awareness remains an issue, with entrepreneurs who want to raise funds through either ECF or P2P lamenting the lack of awareness or understanding.
Throughout paradigm shifts, banks’ operations have changed dramatically. Many global lenders are now setting up branchless and digital operations as the way to go ― a move that is in stark contrast to the strategy they took over the past century.
According to a 1932 Federal Reserve report, the Bank of Italy had 25 offices by the end of 1919 and it rapidly increased to 292, 10 years later. Except for 40 branches in San Francisco, home to its headquarters, 252 were out-of-town branches, scattered literally all over California.
JPMorgan Chase is scaling down its branch networks, Citigroup is accelerating its move to transform into a digital bank globally and Wells Fargo is downsizing its branches so it can hire fewer employees and sit in a smaller space.
A CNN Money report said the number of the bank’s branches in the U.S. dropped by 10 percent to 4,789 as of the end of the second quarter of 2015.
Korea’s homegrown banks are also joining global giants’ moves.
According to six banks ― KB Kookmin, Shinhan, Woori, KEB Hana, NH NongHyup and Industrial Bank of Korea (IBK) ― the total number of their branches across the country declined to 5,493 at the end of May this year, down 442 from 5,953 at the end of the first quarter of 2013.
California-based mobile app marketing and retargetting platform Liftoff announced its official launch to the Japanese market today with the appointment of Country Manager Kota Amano, former Senior Director of Partner Development, APAC at Criteo.
In a press statement, Liftoff said that it has opened a data centre in Tokyo and is hiring a team of Sales and Customer Success Managers.
News Comments Today’s main news: SoFi CEO: why Etherium is worth more than Bitcoin. Affirm has 1,000 retail partners. Wells Fargo joins digital mortgage revolution. AutoGravity has half a million users. LendInvest launches retail bond offering. N26, Lydia support Apple Pay in France. Borrowell raises $57M in Canada. Today’s main analysis: RateSetter moves to protect users. Today’s thought-provoking articles: Takeaways from […]
SoFi CEO: why Etherium is worth more than Bitcoin. GP:”The Crypto and blockchain spaces have been on fire for the last few months. Like in many spaces and in p2p lending at first people first think it’s nothing new, then it is exuberant, and finally the space pops and it becomes reasonable. I think we are in the exuberant phase. I do find it very interesting how the CEO of a multi billion dollar company has clearly done his homework on ETH vs BTC and is very knowledgeable and interesting in using cryptos in their business.”AT: “An interview with SoFi’s Mike Cagney reveals why the company is betting on Ethereum instead of Bitcoin for minting its title insurance plans. I hope it catches on because I’d really like to see mass adoption of public ledger technology.”
Affirm now has 1,000 retail partners. GP:”Affirm raised in total $420mil and started in 2012. This means roughly $420k/retail partner. A great data point given the money they raised and the time in the market. “AT: “Congratulations. I’m looking forward to the day when they can say they have 10,000 partners.”
Affirm’s challenge to retailers. AT: “Max Levchin hits the proverbial nail on the head. Millennials aren’t the only ones who’d like to see financial services become more transparent. But they’re a powerful enough consumer bloc to make it happen.”
AutoGravity has more than 500,000 users. AT: “Congratulations. This is an incredible achievement. SoFi has only 250,000 members. These mobile auto lending pioneers expect to see 1 million downloads of their app by year’s end, and I’d like to see that happen.”
Unifund CEO cautions to stop getting lost in averages. AT: “The message is that consumers look at credit differently than they did 50 years ago. For that reason, subprime consumers shouldn’t be viewed as less than worthy of credit, or bad risks. I agree that judging credit risk should change along with consumer attitudes towards credit.”
LendInvest launches retail bond offering. GP:”I personally think that making investment simpe, a guaranteed 5.25% return, is the way to go. I think the US entities like Lending Club and Prosper should consider a similar product where they offer retail investors a bond at x% fixed that is in line with their existing returns and make it extremely simple to invest in what is now private debt and not p2p lending anymore.”
TransferWise cofounders swap CEO role again. GP:”CEOs burn out. It is wise to bring fresh blood, while there are obvious risks (how many companies fail because the new CEO drives them in the wrong decision). The calcualtion is: will the old experienced and proven CEO make the company fail because they burn out and run out of energy or is it riskier to try with somebody different?”
No existential crisis for banks says HSBC digital chief. GP:”New approaches and new technology are always a threat. Ignoring it is probably the biggest mistake somebody can do. Does anybody know what a Blackberry is? No, not the fruit.”
An upstart cryptocurrency, Ethereum’s price has surged so dramatically in recent months that it now commands nearly as much market share as Bitcoin itself. Driving that rise is excitement about the way Ethereum allows its blockchain technology to be used to develop myriad other projects, as Cagney described.
In particular, SoFi, which is valued at more than $4 billion, is exploring a way to use blockchain to revolutionize title insurance, a standard requirement for many home buyers.
SoFi has always been as much about culture and brand before product and tech. Now that it’s postponed its initial public offering in December (it raised $500 million in private funding shortly after) it has the luxury of time to develop its financial services offerings.
“While we run positive contribution margins around our credit products… it pales in comparison to what the lifetime value of that relationship is worth,” CEO Mike Cagney said at Fortune’s Brainstorm Tech conference in Aspen, Colorado Wednesday morning. “Not having that deposit product means that the bank, if it has that deposit product, is going to constantly try to cross sell [customers] and pull them back to the bank. That introduced this vulnerability in the business.”
There are also no branches planned for the non-bank financial services company, he confirmed, citing that in the 40 SoFi events he’s hosted and attended almost all other attendees have said they haven’t walked into a branch in the last five years, he claims.
SoFi is also in the exploratory stages of how to use alternative data like cell phone data for credit scoring as well as distributed ledger technology for title insurance.
U.S. banks are valued at between $2,000 and $100,000 per customer. SoFi currently has 250,000 members today and anticipates 500,000 by end of year. Cagney said it’s not unrealistic to get two million customers at “$25,000 to $50,000 per customer, which gets us in the $50 to $100 billion valuation range.”
Today Affirm has announced it has more than 1,000 merchants signed up to offer its financing options at checkout, helping to reduce the friction around making large purchases and, by extension, increasing sales for its partners.
While promoting its most recent milestone, Affirm is also trying to get across the message of how it’s different — and frankly, better — than point-of-sale financing options of the past. As a result, the company is pushing a marketing campaign around “honest finance” to enumerate the ways in which Affirm helps consumers by providing more access and better terms for big-ticket items.
So started Affirm’s Co-Founder and CEO Max Levchin’s remarks at his firm’s first-ever AFFIRMation conference for its retail partners in San Francisco yesterday.
He’s on a mission to fix a system that he believes doesn’t really serve anyone’s long-term interest nearly as well as it could or should. When it comes to the extension of credit, Levchin says that customers often lose out, retailers end up with angry customers who frequently feel ripped off and FI’s alienate their customer base.
Broken by the Numbers
“Sixty percent of Americans fear credit cards,” Levchin noted.
“[Most consumers] think getting involved with using a card will cost them a lot more than they bargain for. A third fear they will overspend. And they are right; that’s what happens, and the industry does very little to help them create necessary guardrails.”
In fact, Levchin noted, the industry doesn’t want to create guardrails, because a lot of players have literally built products that bet against the consumer.
Deferred interest — the “dirty little secret” of consumer credit that bears a retailer’s logo and accompanies those too good to be true offers — means that even one day late on a payment 59 months into a 60-month loan, means interest gets calculated back to day one.
Bad Long-Term Thinking
Last quarter, on the occasion of its one millionth consumer installment loan, Affirm reported a 75 percent increase in purchase value on purchases made using Affirm, a 20 percent lift in POS conversion and a repeat rate of 25 percent of borrowers returning.
And Affirm’s net promotor score: It’s 82, slightly trailing Starbuck’s 85, but not by much.
Affirm is looking to retailers across the country to join in pledging to abandon “predatory consumer credit practices” and has also challenged the nation’s financial institutions to do the same.
Wells Fargo CEO Tim Sloan said that the bank expects to launch a digital mortgage application tool by the end of next year, according to a report by the Charlotte Business Journal. Sloan made the announcement during an earnings call on Friday.
Sloan told investors that Wells Fargo doesn’t currently have as many online loan products as it would like, the Charlotte Business Journal reported. He said that employees are currently testing the online mortgage tool, and that the bank plans to run a test with customers this year before a full rollout in 2018.
AutoGravity says it has now surpassed 500,000 in just one year. AutoGravity is an App-based online lender targeting the auto financing space. Pick the car and request a loan all on your smartphone. It’s that simple.
Additionallly, AutoGravity shares that more than $500 million in financing has been requested through the AutoGravity platform.
PayPal Holdings, Inc. (NASDAQ:PYPL) and TIO Networks Corp. (TSXV:TNC) today announced that PayPal has completed its previously announced acquisition of TIO Networks. In accordance with the terms of the Arrangement announced on February 14, 2017, PayPal acquired all of the outstanding shares of TIO for $3.35 CDN ($2.64 USD) per share in cash or an approximate $302 million CDN ($238 million USD) equity value.
LendKey, the leading lending-as-a-service solution for banks and credit unions, today announced $13 million in Series C funding, $8 million in equity and $5 million in debt financing. North Atlantic Capital, based in Portland, ME, led the round with participation from each of LendKey’s existing investors including DFJ, Updata Partners, Gotham Ventures, and TTV Capital.
The Series C funding will enable the company to expand its services and staffing. LendKey plans to grow its regional office in Cincinnati, Ohio and expand its account development and sales teams.
The company now boasts more than 2 million investment accounts (with 600,000 opened in 2017 alone) and is on track to do 1 billion trades in 2017 through the proprietary broker-dealer that it created.
Still, the numbers were impressive enough to attract Bain Capital Ventures to commit another $35 million to the company, bringing Acorns total Series D financing to $70 million. Previous investors PayPal, Greycroft Growth Fund, e.Ventures Growth Fund, NYCA, Capital Group, Rakuten, Point72 and Ashton Kutcher’s Sound Ventures also participated in the round.
Fifty years ago, when customers thought about using credit, it was in the context of buying something expensive that they really needed — a refrigerator, a washer/dryer, a car — with the intention to pay off that loan balance quickly.
Credit as a Currency
For super-prime customers — those for whom credit cards are basically payment cards because those consumers pay them in full monthly and never accrue any interest — Rosenberg said that card “borrowing” is an incentive-driven system. The customer gets cash back, rewards points, airline miles, hotel stays — and those incentives have very successfully attracted consumers to use them to buy things. Rosenberg noted that for a large segment of consumers, buying something without using a credit card is almost a foreign concept because the card offers them access to a more valuable form of currency.
But a more artificial intelligence-driven, machine learning system, Rosenberg said, will allow those customers who are locked out of the credit market today to be seen more clearly by creditors, and to be given incentives that are more explicitly tailored to their wants.
A Better Subprime Experience
The problem with the categorizations of “prime” and “sub-prime” borrower is that they are somewhat less hard and fast than people like to think they are. Rosenberg explained that there aren’t simply two classes of buyers — those who pay their bills and those who don’t.
But, Rosenberg said, the truth is most people pay bills in the order of absolute necessity, and when things get bad financially because a job was lost or an economic catastrophe has happened, that order gets very utilitarian. Car payments get paid, because car companies have no sense of humor and will repossess a car. But eviction from a house takes longer, which means a person with a more pressing need would rather skip their mortgage for a few months than not buy medication they need. And credit card bills? Those quickly fall to the bottom of a pile.
Bank of America today announced enhancements to its mobile app experience that add on-the-go convenience to small business banking and lending. With the suite of updates, Bank of America small business clients can now apply for a Business Advantage Term Loan or Business Advantage Credit Line from any Bank of America digital platform – including the Bank of America mobile banking app, and bankofamerica.com.
TransUnion (NYSE:TRU) released an analysis today showing that most borrowers were able to absorb their increased monthly payment obligations after the Federal Reserve Board rate hike last December.
TransUnion’s study identified these 63 million consumers because they carried debts for which the minimum monthly payment due was tied to the market interest rate, such that a rise in rates from the December rate hike could cause an increase in payments required. TransUnion used its CreditVision® aggregate excess payment (“AEP”) algorithm, which incorporates monthly payments from mortgages, credit cards and other debt obligations, to identify 10.6 million of these consumers who were at elevated risk of not having the capacity to absorb a rate increase of 0.25%.
The researchers found that some banks find themselves trying to play catch-up to competitors that long ago allowed borrowers to apply for mortgages online. The institutions that have been slow to adopt online applications for mortgage lending are losing market share to their competitors. Meanwhile, non-bank lenders have grabbed a substantial piece of the market; so-called “shadow banks” lend money but don’t use bank deposits to finance the transactions. They now write 38% of all home loans — almost triple their share in 2007. Further, the shadow banks now originate three-fourths of all loans to low-income borrowers insured by the Federal Housing Administration (FHA).
As the president of a small community bank, I feel the need to respond to certain misleading comments that have been made by banking industry representatives and community activistsrecently in opposition to the Social Finance application to charter an industrial bank.
I feel the need in particular to respond to comments as reported in the press by a representative of the Independent Community Bankers of America, an industry trade association I support. In essence, this individual stated opposition to SoFi’s recent application based on his assertion that industrial banks don’t follow the same rules as other banks. This assertion is not accurate.
The banking industry is evolving. Doesn’t it make more sense to focus on how to evolve with it rather than how to reduce competition?
Across the nation, bank lending has slowed for most types of loans since the presidential election. Business lending declined in the first quarter and is still crawling at close to its slowest pace since 2011, according to Federal Reserve data.
Overall loan growth is a bit better, but across the board, lending has slowed for debt ranging from auto loans to credit cards to financing for factories, office buildings and small businesses, according to the Fed.
That has made for stiff competition for bankers hunting for loan customers, and because interest rates are still low, banks’ profit margins on their total loan portfolios remain tight.
Last week, Columbus-based Synovus Corp., the second largest bank headquartered in the state, with $31 billion in assets, said its total loans grew by $314 million in the second quarter, up 5.2 percent compared to the first quarter. Synovus banked a $73 million profit during the quarter, 27 percent higher than a year ago.
Synovus’ consumer loans grew at a 16 percent annual pace during the recent quarter, accounting for $2 out of $3 of Synovus’ new loans.
The Dreyfus study found that investors tend to take different approaches to investing based on age. Sixty-one percent of investors 55 years of age or older indicated they have not, or will not, reevaluate their investment approach in today’s existing investing environment. Meanwhile, 65% of Millennials, defined in the study as people between the ages of 21 and 34, had already evaluated their investment approach at the time of the survey. These actions are reflected among 51% of those between the ages of 35 and 54, as well as for 39% of those at least 55-years-old.
In his remarks to the Exchequer Club in Washington, D.C., President Trump’s Acting Comptroller of the Currency, Keith Noreika, came strong to the mic, roundly stating the charter is a “good idea” and flatly saying “yes”, the OCC has the authority to grant the FinTech charter in the face of legal challenges by the New York Department of Financial Services and the Conference of State Bank Supervisors.
Here are three other takeaways from the Acting Comptroller’s remarks:
The FinTech charter promotes the dual banking system.
The OCC is having informal meetings with interested FinTech companies.
That’s why we’re harnessing the power of technology to bring consumers closer to their loan officers (LOs) and launching Blend Mobile, the first native mobile application allowing LOs to manage their businesses, including borrower requests and applications, anytime and anywhere.
“SRI has been one of the most consistent personalization requests we’ve had,” said Dan Egan, Betterment’s director of behavioral finance and investments. “It allows people who want to buy a better world to put their money where their mouth is.”
The nation’s largest robo adviser, Vanguard Personal Advisor Services, which has $80 billion in assets, offers clients a proprietary fund on its digital platforms that tracks a benchmark that screens companies on social, human rights and environmental criteria. Schwab Intelligent Portfolios, which has $19.4 billion in AUM, does not offer an SRI option.
Mastercard (NYSE:MA) today announced it has entered into an agreement to acquire Brighterion, Inc., a leading software company specializing in artificial intelligence. This acquisition will further expand its suite of capabilities that deliver an enhanced customer experience and security.
Commentary on the Reintroduction of the Protecting Consumers’ Access to Credit Act (H.R. 3299) (Factory Email), Rated: B
Passing the Protecting Consumers’ Access to Credit Act into law is critical for the consumer lending industry. We are pleased that forward looking legislators aim to remove the regulatory and capital markets uncertainty caused by court cases such as Madden vs. Midland.
Lead by the Second Circuit Court’s decision, other state regulators are attempting to erode a core tenet of our federal banking system. “Both the ‘valid when made’ doctrine and the exportation of usury rate have facilitated nationwide lending for over a century by allowing the rate of interest on certain loans to remain unchanged after transfer of the loan,” said Gilles Gade, President and CEO of Cross River, an FDIC insured New Jersey State chartered bank and leader in marketplace leading origination. “The ability for banks to sell loans to non-banks is vital to the capital markets ecosystem in general, and to consumers in particular who are getting hurt as access to credit is made more difficult and more expensive. The perenniality of this tenet hinges on a healthy secondary market, increased liquidity, and the securitization of debts ranging from mortgages to credit cards, all of which help facilitate emerging innovations and provide capital that makes credit more accessible and affordable for millions of Americans. We applaud the bipartisan reintroduction of this bill and look forward to its expeditious review and passage.”
LendingTree® (NASDAQ: TREE), the nation’s leading online loan marketplace, today announced that Sam Mischner has been promoted to Chief Sales Officer and Head of Mortgage. Previously, Mischner served as SVP, Sales and GM, Mortgage.
LendInvest, a leading alternative lender in the property space, is launching a retail bond. The bond will offer investors a fixed rate of 5.25 per cent, due 2022.
It is expected to be listed on the London Stock Exchange once the subscription period closes. LendInvest is targeting an initial raise of £50m, and the company expects this to be the first of a number of bond issues over the coming years. The bond has a minimum investment amount of £2,000.
Interest from the bond will be paid semi-annually on 10 February and 10 August each year. The net proceeds will be used to fund the origination and/or purchase of loans which satisfy the company’s eligibility criteria.
UK marketplace lender RateSetter has given more details on a series of interventions it has made to protect the company’s 50,000 retail investors from adverse consequences related to its lending decisions in the last two years.
Here are the three measures RateSetter has now explained in greater detail:
Buying two subsidiaries in a motor finance company.
Wholly buying Adpod, an advertising company.
Ending its partnership with George Banco, a consumer lending platform. RateSetter is withdrawing from the partnership, remaining only as a passive investor, after reviewing the strategy more closely. RateSetter added that George Banco is still repaying its £32 million ($42 million) loan.
The bank, which received its full UK banking licence in April, says it’s been using the current account internally and today (17 July) is now inviting some of its customers to join and “help put it through its paces”.
Its aim is to offer a current account to all existing customers by the end of the year. Towards that goal, over the next three months it will roll out between 10,000 and 20,000 current accounts to existing customers. As you probably guessed, users can register their interest on its site. Investors get priority access.
Alternative lending has shifted from a competitor of traditional FIs to a collaborator, often lending a digital hand to banks in need of upgrading their systems to provide faster, more agile financing to SMEs. A new report from the state-backed British Business Bank (BBB), however, suggests alternative lenders are becoming an increasingly important part of its operations in a different way, highlighting how the lines between alternative finance (AltFin) and traditional finance continue to blur.
The annual report said the BBB facilitated more than $930 million in SME loans last year, and, according to the data, every year more of that money is landing at small businesses thanks to collaboration with alternative lenders like RateSetter and Funding Circle. According to reports, in 2014 the percentage of BBB funds that went through a P2P platform was 79 percent; in 2015, it was 90 percent.
The Bank of England has widened access to Britain’s interbank payments system to increase competition from new fintech firms in the financial system, where the “Big Four” high street banks have long dominated.
The changes, which in practice will come into effect in 2018 once legislative changes have been completed, will enable such non-bank payments services providers (PSPs) to compete better with banks, the BoE said.
Research conducted by Beauhurst on 2016 UK funding deals for non-listed high-growth businesses concluded that crowdfunding outperformed private equity and venture capital. Whilst 2016 saw a decline in the total number of deals financed by equity investors, activity on the leading crowdfunding platforms increased. Crowdcube (launched in 2011) and Seedrs (launched in 2012) accounted for 21% of such equity investment in the UK last year.
According to Beauhurst’s research, Q1 of 2017 has seen a small increase of 2.7% in equity funding in non-listed, high-growth companies. However deal numbers are still 6.72% lower than the same quarter in 2016. The growth has primarily been driven by crowdfunding platforms, with an 11% growth in deal numbers.
By 2018, loans from alternative finance schemes such as crowdfunding, peer-to-peer lending and private debt, will be as cost competitive as the retail banks, blowing the finance market wide open for loans in the £500,000 to £10 million range.
Naturally, because alternative lenders such as Funding Circle, The Route and Folk to Folk are settling loans for higher loan-to-value (LTV) ranges (between 60 and 75 per cent), they absorb the risk by charging higher interest on both short- and medium-term loans – currently between 6 and 12 per cent a year.
LTVs in retail banking property loans are settled at around 55 to 60 per cent, but they offer lower loan costs of between 2.5 and 5 per cent. This is all set to change in 2018 – with increased availability of finance for lenders, such as innovative finance ISAs (IFIsa), the cost of capital is set to fall and this will encourage alternative lenders to reduce their interest rates.
On Wednesday, peer-to-peer lender Zopa released its latest Home Improvement Index that indicated a quart of British homeowners looking to improve their homes this summer are choosing to renovate their kitchens and are seeing a 51% return on investment as a result. According to research, 25% of British homeowners undertaking a home improvement are opting for a new kitchen, with the renovation boosting the value of a home by an average of 10%.
Zopa noted that the research found that the average home improvement would increase the value of a home by 9% or nearly £24,000 (£23,837) – based on homeowner’s estimates. The average return on investment was 50%, based on the total amount spent by homeowners.
Property P2P platform Lendy has recently announced sponsorship of the Cowes Week sailing regatta, while business lender Ablrate has been announced as a sponsor of the PGA EuroPro Tour’s £100,000 Shoot-Out competition.
Other firms such as RateSetter have used adverts on the London Underground and Crowdstacker has run adverts in print publications, while Zopa and Funding Circle have used TV campaigns.
But Frazer Fernhead, founder and chief executive of The House Crowd, prefers to invest in digital marketing.
The ADR has returned a solid 250%+ in a year and a half since then. In comparison, Alibaba stock is up by 83% while NetEase is up by 16% and JD.com has risen just 27.5%. In other words, Yirendai has been the best performing Chinese stock/ADR ever since the company was listed in the US.
Yirendai reported quarterly revenue of $148.42 million for Q1 2017, which grew 75% year-on-year. On the earnings front, the company reported earnings per ADR (EPADR) of 84 cents, a 147% improvement over 34 cents EPADR in Q1 2016. On a trailing twelve month (NYSE:TTM) timeframe, the revenue has grown from $265.2 million in Q1 2016 to $544.6 million in Q1 2017, a 105% year-on-year growth.
We believe that, based on Yirendai’s earnings history and the historical valuation multiples, the stock should easily trade in the $43.4 – $57.7 range, which represents a 65% upside at the higher end.
Apple Pay hasn’t really been a major success in France so far. France’s biggest banks still don’t plan to support Apple’s payment service. But two companies announced today that they were going to add Apple Pay support before the end of the year — Lydia and N26. Crédit Mutuel Arkea’s banks also recently announced that they were working on that feature as well.
Get a unique insight into what crowdfunding and crowdlending are and find out how you can participate in it – either as an entrepreneur or as an investor. Responsible for crowdfunding in DNB, Lars Marthinsen, and CEO of Kameo, Sebastian Martens, are guests at #pengepodden .
Baloise is investing in the Californian insurtech company Trov. The start-up offers on-demand insurance for personal items and has already launched in the UK and Australia, and will roll out in the U.S. later this year. For Baloise, this is the first investment arising from its partnership with Anthemis.
Baloise’s investment is part of the Series D financing secured by Trov in April 2017.
The disruption is well under way in the US, where two giant companies – Betterment and Wealthfront – have emerged, each with a valuation of more than $5 billion. In recent months Betterment has seemed to outpace Wealthfront in terms of size and growth. Betterment, which has cheaper services, now boasts a client list of 188,000 while Wealthfront has 90,000.
ANZ has put its $4.5 billion wealth advice unit on the block, in a move that followed UBS’s decision to sell its wealth management arm in Australia a year ago. And Platinum Asset Management, the one-time king of specialist overseas fund managers in the local market, has announced a dramatic cut in its fee charges.
In Australia, the SMSF Industry Association tacked a robo-advice questionnaire onto one of its recent surveys and found that 18 per cent of its members – higher than in the general population (13 per cent) – would be willing to try robo services.
Currently, at a nascent stage, the P2P lending landscape in India is also poised to grow into a $4 Bn-$5 Bn industry by 2023. The domain’s origin actually dates back to 2012, when the first peer-to-peer lending company i-Lend was launched. At present, the P2P lending space is populated by more than 30 players including Faircent, LendBox, LenDenClub, IndiaMoneyMart, Monexo, Rupaiya Exchange, LoanBaba, CapZest, i2iFunding and many more.
One factor that has played an integral role in the rise of an alternative fintech industry is demonetisation, instated on November 8, 2016. Post the ban on INR 500 and INR 1,000 notes, bank deposits underwent a discernible slowdown. Loans to SMEs and MSMEs reached an abrupt halt, forcing many businesses to seek other methods of financing. Last year, for instance, around 34% of P2P borrowers were actually business owners looking to expand without having to rely on banks.
Bridge Data Centres is looking to invest $500 Mn in India over the next two years. As per reports, the investment will enable the Singapore-based data centre outsourcing (DCO) company to gain a stronghold of the country’s fast-growing market for data centres.
In June 2017, Alibaba revealed plans to set up two new cloud data centres in India and Indonesia, in an attempt to strengthen the company’s computing resources in Asia. Earlier in January 2017, US-based data storage and management firm NetApp launched its Global Centre of Excellence in Bengaluru, as part of a $155 Mn (INR 1,000 Cr) investment. In December last year, Amaravati-headquartered Pi DATACENTERS raised $23 Mn from Epsilon Venture Partners. It was reported that the funds would be used to roll out state-of-the-art data centres across India.
Multinational alternative investment firm Bain Capital recently infused $10 Mn in Bengaluru-based consumer leasing startup RentoMojo has raised $10 Mn in Series B funding round led by Renaud Laplanche. Existing investors Accel Partners and IDG Ventures also participated in the round.
Because the construction and maintenance of data centres is a capital-intensive activity, an increasing number of businesses in India are enlisting the help of data centre service providers.
Financial technology company Borrowell announced today it has secured $12 million (CAD) in equity funding and $45 million in new credit facilities. The Series A equity round is being led by Portag3 Ventures LP, Equitable Bank and White Star Capital, with participation by FirstOntario Credit Union and other new and existing investors, and brings the company’s total equity financing to $16.7 million. The credit facilities are being provided by Concentra and FirstOntario Credit Union for the purpose of funding ‘one click’ loans to prime consumers. This latest round of funding will allow Borrowell to provide free credit information and loans to more people.
More than 300,000 Canadians have a Borrowell account, with thousands more signing up each week.
News Comments Today’s main news: Goldman’s traders have worst first half of Blankfein’s reign. RateSetter hit hard by struggling loans. RateSetter offers investors free sell out option. LandlordInvest hits 1M GBP lending milestone. Revolut offers free personal accounts for Europeans. Today’s main analysis: Goldman has worst first half in Blankfein era. Today’s thought-provoking articles: 35 institutional investors raise stakes in Yirendai. A […]
Millennials want a bank close to home. AT: “We’ve seen the reports before that millennials want a bank account. However, this survey shows that they want a bank account close to home with a brick-and-mortar branch. It seems that millennials aren’t interested to much in online banking, but this is just one survey.”
4 tips for developing a product around an unknown concept. AT: “This is an article written by a marketing professional. As a content marketer with more than a decade experience writing for brands positioning themselves online, I’d have to say I agree with this 100%, particularly points 1 and 4. This advice is more than apt for alternative lenders.”
Goldman Sachs Group Inc. traders turned in their worst first-half performance since Lloyd Blankfein rose from that business to become chief executive officer in 2006.
Investment-banking revenue fell 3 percent to $1.73 billion from a year earlier, better than the $1.59 billion prediction. Investment management as well as the Investing and Lending business also surpassed expectations.
(NYSE:YRD) enjoyed a 74.75% run-up in share price since hitting record low of $18.3. The stock managed 3.53% rise and now stands at $31.98 as of July 17, 2017.
Institutional investors currently hold around $143 million or 7.7% in YRD stock.
Yirendai Ltd. 13F Filings
At the end of Mar reporting period, 35 institutional holders increased their position in Yirendai Ltd. (NYSE:YRD) by some 1,343,454 shares, 22 decreased positions by 2,144,331 and 5 held positions by 1,150,551. That puts total institutional holdings at 4,638,336 shares, according to SEC filings. The stock grabbed 21 new institutional investments totaling 973,854 shares while 12 institutional investors sold out their entire positions totaling 1,445,115 shares.
In a survey held from the end of June into early July and conducted by SurveyMonkey, the web-based survey firm queried more than 1,000 adults above the age of 18, 290 of which were defined as 18- to 34-year-olds: millennials.
Among the findings in the How We Will Pay study: 83 percent of respondents wanted to be able to use an ever-burgeoning roster of new devices to conduct commerce. But, interestingly, when it came to actually transacting, 77 percent of those surveyed said trust remained a key factor when deciding who they want enabling those transactions.
People tend to trust the banks, financial institutions and bank card networks where payments relationships are already in place and already are known to consumers, according to the data.
Most Americans, at 63 percent, have used peer-to-peer payments, said SurveyMonkey. PayPal claimed the lion’s share there at about 80 percent across all demographics. Venmo remains a distant second, at 11 percent, with even greater adoption among millennials at 30 percent. Peer use also mattered to those surveyed, as 28 percent of millennials used the platform because their friends and family members did.
Eighty percent of surveyed millennials wanted the option to visit a brick-and-mortar bank branch based near their towns. In fact, the banks without a tangible footprint in a millennial-centric town lose out, as members of that demographic claimed they would be less likely to open an account with a bank were it not to have a physical branch nearby, said SurveyMonkey.
Now, app-only fintech Tomorrow, which launched services across the US this week, wants to help this group access inheritance products: In the US, 74% of millennials don’t have a will, and 50% of millennial households would struggle to pay their bills without their primary wage earner, according to studies Tomorrow cites. The company’s raised $2.6 million in Seed funding from backers including Plug and Play, Allianz Life, and Curious Capital. It’s now available for iPhone, and will release an Android version later.
When it comes to mobile banking, there’s often a massive gap between the consumer’s experience with a big bank and with a smaller regional operator or credit union. The big banks have embraced mobile as a critical part of their overall delivery experience — with custom mobile banking apps, proprietary mobile wallets, biometric-authentication, cardless ATMs and more.
But when it comes to the smaller players serving more local populations, the well of mobile innovation can run dry rather quickly and for many reasons.
“A staggering statistic I came across recently really gave me pause. A full 42 percent of credit unions still don’t have mobile banking apps — and it’s not because they don’t want them or don’t think they need them,” Steggall remarked, “but because they don’t have the ability or the resources to do the technical integrations, and they can’t justify the cost.”
While Urban FT’s new products with iParse are for smaller FIs, Steggall told Webster the company also sees a profitable future working with existing payments processors in the market today. Steggall said the iParse solution will help those players — including larger processors already offering their own mobile banking services — better serve their smaller bank and credit union partners.
Being an innovator always comes with the huge challenge of educating potential investors, developers and end users on the significance of a totally new product or service. When bitcoin hit the market, its leaders struggled to answer the same question: “Why is this necessary?”
When you’re building something new, your mistakes form the blueprints future entrepreneurs will study. If you’re a trailblazer in a novel space, here are four ways to forge ahead.
1. Don’t sell — educate.
YieldStreet, an online alternative investments platform, created YieldStreet University, which combines video content, infographics and other visuals to help simplify complex concepts about alternative investing for its customers.
2. Slow your roll.
Faster isn’t always better. When you’re dealing with an unknown concept, speed kills the sales process. If your service or product is new to the market, resist the temptation to immediately convert cold traffic. First, take time to make sure your clients or customers understand what they’re working with and how to utilize your product or service to its fullest potential.
3. Be open about swings and misses.
Honesty builds trust. One study from Label Insight showed 73 percent of participants were willing pay more for more transparent brands.
4. Focus on your mission, not personas.
Don’t concern yourself with selling to anyone in Box X or Box Y. If you do, you’ll end up tailoring your product to suit demographics instead of your vision. Identify your mission and purpose, and sell that.
The peer-to-peer lender Ratesetter has been hit by £80m of struggling loans in the first major setback for the nascent online lending sector.
The company said it would use its own funds to prevent losses being taken by its 50,000 users, who are mostly small investors using the website in order to lend their savings to other individuals and benefit from higher interest rates than are available at high street banks.
The company admitted that it had made £36m of loans to a company called Vehicle Trading Group Limited (VTG), a motor finance holding company that then fell into administration because it had taken on too much debt.
It also loaned a further £12m to an advertising company called Adpod, which during 2015 became 50% owned by VTG. The website admits that the loans, of which £8.5m are still outstanding, should not have cleared its own credit policy.
TheCityUK and PwC’s Strategy& have developed a vision for the future of the industry, drawing on extensive engagement with leaders across the industry and a rigorous fact-based assessment. By 2025:
1) The industry will have transformed itself to be highly digitised, innovative and customer-centric. It will be a leader in cyber security, using data in a secure and sophisticated way. This will be alongside new technologies, to drive forward significant improvements in the way services are delivered. Firms will be consistently and relentlessly doing what is right for their customers.
2) London will still be one of the most important and attractive international centres for financial services and global business, retaining the full ecosystem of financial and related professional services. It will continue to play an important domestic role and be a leading FinTech centre that keeps the UK at the forefront of financial innovation.
3) Regional and national financial centres will have become more important within the UK industry. There must be a strong supply of local talent with the relevant skills, competitive costs and high productivity. Banking, insurance and asset management centres outside of London will continue to develop, hosting more headquarters of major companies. While other regional and national hubs will focus on enhancing specialist roles which serve both UK and global markets.
While Funding Circle (and Zopa, for the most part) allow the losses from loans to fall onto lenders, Ratesetter has built a loss reserve to protect investors from bad debts. This “Provision Fund” is funded by taking a fee when a loan is extended and, in times of stress, can be topped up by diverting interest payments and capital away from investors. This means lenders on Ratesetter need to pay attention to the risk in the overall loan book, rather than any individual borrower.
At the moment, the Provision Fund has a 119 per cent coverage ratio, so there is enough money in the fund — if you include expected future fees — to cover losses 1.19 times higher than currently expected. Ratesetter’s target ratio is 125 per cent to 150 per cent.
The important thing here is that the Provision Fund currently has £12.9m in cash and £8.9m of expected future income, versus £18.2m of expected losses. If Ratesetter had let £12m of bad debts suddenly wash into the fund, it would have resulted in a big knock to its coverage ratio. We don’t know what that would do to investor confidence, but it’s fair to say it wouldn’t have helped.
OFF3R is out with a report today on the status of equity crowdfunding in the UK. According to their numbers, the UK investment crowdfunding sector is booming. In fact the OFF3R Index states that UK crowdfunding platforms raised a record £130 million during the first half of 2017.
Additionally, the report states that March of 2017 was a record breaking month as well. Over £40 million was raised with several large crowdfunding rounds on the big three platforms; Crowdcube, Seedrs and SyndicateRoom.
Peru Consulting asked 1000 consumers and 100 Senior IT Leaders in the banking sector. The results, published in our report – Retail Banking IT: Turn to Face the Change – offer a startling insight into the scale and speed of change and the challenges faced by traditional banking’s IT leaders.
For example, when asked about the specifics of banking transactions using mobile phones, nearly two thirds (63%) of consumers in the 18-44 age group stated this was important to them, while only 14% of the 55-64 age group felt the same.
More generally, the next 12 months holds little comfort for the retail banks when it comes to customer loyalty, with 38% of 18-24 year olds and 41% of 25-34 year olds set to change the bank that provides their main account.
We asked the Senior IT Leaders why they though their customers would be likely to switch banks. Strangely, while 64% recognised that challenger banks are taking their market share, less than 5% recognised that customers might be tempted by new technology such as mobile apps. Given the strength of the GAFA companies and fintechs, this is a dangerous blind spot for the traditional banks.
CONSUMER credit comparison site MoneyGuru.com has appointed an experienced channel director to lead its rapid expansion after a successful launch period.
The site has signalled its intention to disrupt the big four in the comparison market by appointing expert Deborah Vickers who has helped some of the biggest names in the market with optimisation and product development.
Deborah, 35, from Northwich brings 13 years of experience in technology and IT to the role, many of these within the financial services sector. She started her career at industry leader MoneySupermarket.com as a service desk manager before working her way up to IT delivery manager during her eight year tenure.
Former U.S. Ambassador to China Max Baucus on Saturday lauded China’s can-do spirit and cited the country’s rush to online payments as an area where the country was overtaking the United States.
Baucus was speaking at an annual LendIt fintech conference held in Shanghai that attracted more than 2,000 participants.
“Apple Pay is trying to be an accepted mode of payment in the United States but it is catching up very slowly,” he said. “It’s disadvantaged, I think, compared with China and other Asian countries’ emerging payment systems. Why? Because established legacy institutions such as banks and credit card companies, while still useful, will soon be overtaken by the new innovative technology being developed here and in other Asian countries.”
Leading investors who specialize in financial technologies and are taking stakes in new technology startups in the country say China is no longer an innovation laggard and in fact is taking a commanding lead in specific areas.
Take online payments. Two Chinese Internet giants, Alibaba Group Holding and Tencent Holdings, already hold strong leads over their U.S. counterparts in this area. Alipay, for instance, is Alibaba’s online escrow payment system that now counts more than 630 million users globally, of which 450 million are in China. Tencent’s messaging app, WeChat, boasts 900 million users, and its WeChat Pay service has about 600 million active users. Both Alipay and WeChat Pay allow their users to make transactions all over the world using their mobile phones, notes Jones, adding that at present not a single U.S. rival can offer a similar global product.
On 17th July, Ping An Insurance announced the affiliate Lufax started a international business platform, Lu International Financial Asset Exchange in Singapore. Lu International was known to have got the capital market service licence(CMS) approved by MAS. It is also the first Chinese fintech company to have a CMS in Singapore, and will start for operation in the third quarter of 2017.
Lu International was registered in Singapore in January 2017, after licensed it will provide a series of wealth management services including securities trading, asset management and custody for investors with overseas bank accounts or assets.
Lu International aim to provide pure online banking services for the Asian middle class, and the investment amount will be among $10 thousand to $1 million,according to Gregory D Gibb, the CEO of LufaxHoldingLtd. The initial product line of Lu International is relatively simple, mainly including monetary fund, fixed income products, bond fund, REITs fund and ETF.
Just days after announcing it secured $66 million through its Series B funding round, digital challenger bank Revolutintroduced free personal euro accounts. The company revealed this new feature enables all its customers, across 42 European countries, to open a free Euro account straight from their smartphone in as little as 60 seconds.
It used to be clear: borrowing cost money. But now Smava, a Berlin-based fintech, has broken new ground by offering loans at a negative rate of interest. In other words, paying consumers to borrow. “Anyone borrowing €1,000 ($1150) will only pay back €994,” says Smava boss Alexander Artopé. That translates to a cool -0.4 percent.
Unsurprisingly, there’s a catch: The largest amount a Smava consumer can borrow at these enviable terms is €1,000, and each person is restricted to a single loan.
Cyprian fintech startup Capital.com has raised $25 million from Larnabel Enterprises and VP Capital and launched its mobile trading app.
The Capital.com app allows investors to trade financial products and receive updates from its patent-pending Smart Feed with news, analysis, and research based on user behaviour. The app, the company claims, uses AI to detect common trading biases and patterns.
The SoftBank Vision Fund, first announced in October 2016, has now closed at least $93B of a target $100B to invest in global technology companies – making it the largest tech investment fund in history.
$100B is an unprecedented sum for a single fund, totaling almost exactly the same amount that all VC-backed companies received in 2016 ($100.8B across 8,372 deals globally, per CB Insights data). Yet the fund’s massive size is raising concerns among some investors, who fear that an influx of high-dollar rounds could overinflate the market and prolong exits while crowding out competing investors.
With both Saudi Arabia and the UAE — which have contributed a combined $60M of sovereign capital to the fund — counting on the Vision Fund’s investments to diversify their national economies, the stakes are high. Other high-profile investors are also placing bets with the Vision Fund: The Vision Fund has closed contributions of $1B or less from Apple, Qualcomm, Sharp, Foxconn, and Larry Ellison’s family office. (SoftBank’s own $25B rounds out the $93B secured so far.)
Cyber-attack poses a significant threat to the global financial system but the Reserve Bank has decided not to introduce more prescriptive requirements at this stage due to the swiftly changing nature of both the threats and the technology, said Reserve Bank head of prudential supervision Toby Fiennes.
Fiennes said the central bank did not believe prescriptive regulations would appreciably improve the outcome, when the technology and threat landscape are both changing so rapidly.
VicSuper has launched a digital advice suite called Beeline to strengthen member engagement.
The digital advice service would act as an online coach to provide members with access to financial advice 24 hours a day, seven days a week, free of cost to members, with the fund saying it would provide super advice at scale.
Areas of financial advice would include additional contributions and investment asset allocation in their superannuation. The service would also provide general advice to members on retirement adequacy and budgeting goals.
The CEFC assisted in a number of clean energy projects in 2016-17 including the establishment of a green loan marketplacewith peer-to-peer lender RateSetter, 500 new energy efficient homes for low income families in New South Wales and ten large-scale solar projects in regional Queensland, New South Wales and Victoria.
Indonesian peer-to-peer (P2P) lending startup Julo has raised an undisclosed amount of investment in a seed round led by Skystar Capital, along with East Ventures, Convergence Ventures, according to an announcement. A few notable angel investors also participated in the round.
Julo is focussed on financial inclusion in Indonesia by helping over 100 million people obtain loans for their various personal use.
Loan applicants can carry out the process from their phones through Julo’s app, where they submit pictures of personal documents and then receive their loan within 24 hours upon successful verification.
One of the recipients of the CMS is Singapore-based P2P lending platform Crowd Genie. Like many of its ilk, Crowd Genie was founded by entrepreneurs who saw that certain traditional financial services were rigid and could not serve certain profiles of clients.
Ideally, the profile of borrowers would be SMEs turning over about S$1 million (US$731,000) to S$5 million (US$3.66 million) in revenue yearly, and would have had a bank loan and a corporate bank account; they would also have to be in operation for about two to four years, and need a short-term funding gap that the banks are not able to extend.
In place of just traditional financial metrics, Mehra and his co-director Bikash Saha, who has experience in a credit rating agency and retail banking, leverage a hybrid of machine-based learning algorithms combined with hands-on groundwork to assess the credit risk profile of potential borrowers.
Part of the reason Crowd Genie is still heavily reliant on human input is that its machine-learning algorithm is currently a work-in-progress. Accurate data analytics can only be achieved once there are enough actionable data points.
Mehra says the next review of the algorithm will take place at the end of the year, when Crowd Genie has accumulated about 300 – 400 cases.
Currently, institutional investors are qualified to be lenders on Crowd Genie; retail investors are barred.
Interestingly, however, a study by international investment house, Legg Mason, personal interaction is still important for these younger investors – 53% of participants in this group indicated that technology can never truly replace personal customer service. This was particularly relevant when it came to retirement and tax planning, but was of less importance when it came to tracking the stock market.
Furthermore, humans can remove irrelevant data from their memory, which allows for increased learning. Robots, however, store all data, which begs the question around the long-term competency of robo-advice.
In the past, the financial sector was known for safe and stodgy marketing. Times have changed, especially after the advent of fintech companies focused on building a clientele through online marketing and social branding. Today’s startups have razor sharp branding strategies, and scaling up is the only game in town for capital-hungry lenders. This has […]
In the past, the financial sector was known for safe and stodgy marketing. Times have changed, especially after the advent of fintech companies focused on building a clientele through online marketing and social branding. Today’s startups have razor sharp branding strategies, and scaling up is the only game in town for capital-hungry lenders. This has pushed brand consulting and digital marketing firms into the limelight as fintech startups have shown a penchant for thinking out of the box for their customer acquisition efforts. Landor, a leading brand consulting firm and a member of Young & Rubicam Group is pioneering this push for fintech firms looking to create a brand in this ultra-competitive market.
The Need for Branding
Branding is much more than the usual website, logo, and visiting card. It is the message you are communicating to multiple stakeholders about your organization. It defines your value proposition and why the brand is different. Branding is not only a tool for helping get customers, but it also is extremely vital for acquiring the right talent. Consider the specific case of fintech lenders: There is a mad rush for hiring data scientists to create credit models, analyze prospective borrower behavior in real time, and tweak product offerings for better acceptance. For that Ivy League graduate to choose you over Google requires you to have a brand which he or she can recognize and be comfortable associating themselves with.
Startups have a lifecycle, and even founders are comfortable starting a company they know will eventually get acquired. This makes nursing your company’s valuation an important part of the founder’s job. Valuation can swing widely for two similar companies, one with a strong brand following and one with just good numbers. Brand equity is an important part of your balance sheet, and it can decide if you get a 50 million dollar offer or a 100 million dollar one. If your brand has a “tribe,” aka dedicated followers, then your company will have the opportunity to cross-sell products and services and your client list will be more precious when a company comes knocking on your acquisition door.
Alignment with Business Strategy
In the FinTech space, everyone has a focused vision with respect to their business strategy, but from a brand perspective, there is usually no unified clear message. Some startups have realized the importance of branding and have come up with innovative ways that enable them to gain share in the market.
One such example is iZettle. The fintech company created a “Pop-Up Store” campaign to make businesses understand how easy it is to sell face-to-face and accept card payments. It conducted a six-day pop-up store marketing campaign where it allowed six different businesses to use the store for trading using mPOS technology from iZettle. This enabled the company to introduce its product to the mass market and also burnished its reputation as a supporter of local businesses.
Case Study: Communication
TD Bank is a new age bank but was caught in the public cross hairs after it was revealed that one of its major clients’ products — a Smith and Wesson gun — had been used in the San Bernardino shooting. There was a public outcry over the incident, and many people wanted TD Bank to drop Smith and Wesson as a client. But they communicated clearly the sympathy they felt for the victims and the family but also stood firm on its corporate policy of not commenting on individual customer relationships. It was able to navigate through the situation without suffering any noticeable loss in brand equity.
Case Study: SoFi
SoFi has revolutionized the student finance industry and is now the first fintech lender to advertise on the biggest stage for any brand — the Super Bowl. With over 100 million viewers, there is no other event of this scale for introducing a brand to the masses. The 30-second spot cost the company almost $5 million and 20% of its total advertising budget. It was a massive brand building exercise. But the company has a 360-degree branding and marketing strategy by leveraging social media, referral programs, and other innovative approaches. These innovations comprise of helping borrowers find jobs, providing them with mentors, and even hosting social mixers. SoFi calls its borrowers members instead of customers. This community-building has fed into making SoFi a giant with an over $5 billion valuation.
Though SoFi offers the ultimate commodity — money — they have been able to build a brand following by differentiating their approach and offering multiple complimentary services to their customers. This has helped elevate the company from a mere provider of loans to a financial support center for its target customers, Millennials.
Landor was founded in 1941 and is headquartered in San Francisco, California. They have 27 offices in 21 countries and count leading brands as clients. Their vision is to help brands engage audiences across channels and platforms. Landor understands that disruption is the new normal and help brands achieve agility.
Louis Sciullo has been playing a key role in handling the financial services division as executive director of Landor. He has more than 25 years experience in brand building, brand strategy, and management strategies focused on shareholder value and global visibility. He has been previously associated with banks like Lehman and Barclays.
Marketplace lending start-ups are mushrooming across the United States. The main differentiator between successful start-ups and copycat lenders is the ability to manage your Customer Acquisition Cost (CAC). While most of the fintech companies struggle with the customer acquisition, MoneyLion has hit upon an innovative strategy to attract customers. They start a customer relationship with […]
Marketplace lending start-ups are mushrooming across the United States. The main differentiator between successful start-ups and copycat lenders is the ability to manage your Customer Acquisition Cost (CAC). While most of the fintech companies struggle with the customer acquisition, MoneyLion has hit upon an innovative strategy to attract customers. They start a customer relationship with a suite of personal finance tools, proprietary data analytics, and a recommendation engine, which helps the user improve his credit score and financial wellness. Once ingrained in the user’s financial lives, MoneyLion offers them multiple credit products. This has brought down the company’s CAC to almost 25% of the $400-$500 CAC reported by other lenders in the segment.
MoneyLion Loan Offers
MoneyLion helps customers reach their financial goals by designing personal loans that are simple and transparent, but they also provide financial tools to help customers better their financial health and better financial decisions. The loan amount offered by MoneyLion ranges from $1,000 to $35,000. Interest rates start at 7%. For near-prime borrowers, they’re offering $500 to $5,000.
MoneyLion’s Non-Loan Offers
Considering there has been a substantial rise in the number of people struggling with credit woes, MoneyLion’s unique approach in offering free wealth management tools, credit monitoring, and other non-loan products first rather than try to sell customers on loans is endearing it to those customers. This also helps the company understand the customer better and his precise needs; thus, they can tailor something specific for a client when offering credit as compared to a generic loan offer from multiple websites.
MoneyLion also makes recommendations to customers on how to improve their credit profile by keeping credit utilization low. For instance, if any customer spends irresponsibly, like eating at restaurants too often, then MoneyLion suggests that the customer cook at home and, in turn, offers food coupons as incentives.
MoneyLion’s Customer Acquisition Strategy
With over 760,000 bank accounts tracked, 200,000 enrolled for credit monitoring, and 150,000 loans originated, the startup has successfully executed its model of loans second and personal finance tools first. MoneyLion uses conventional channels like digital and direct mail, but its focus is on word-of-mouth marketing. MoneyLion has almost 10%-15% of their customers coming from word of mouth, and their CAC is almost zero for such clients.
The company also gives enticing incentives to customers that endorse a friend for a loan. For instance, by endorsing a friend to MoneyLion, the endorser gets to pay lower interest rates on future loans. An endorser is given 100 points for each endorsement and is able to redeem those points for gift cards. MoneyLion’s top bracket includes 30 endorsements from which an advantage of 15% reduction in loan interest rates can be availed.
The young startup has built an entire underwriting process in-house to ensure it is tailored to unique insights. Nothing else currently on the market is flexible enough to incorporate customization on a regular basis. The majority of loans sit on the company’s balance sheet and funding comes primarily from hedge funds and banks.
MoneyLion’s first version was capitalizing social media and offering discounts to customers who link their social media accounts with the company. They also thought about using social media data to underwrite clients. But foreseeing regulatory issues, their lawyers deterred them from doing so. Now the company uses social media data only for incentivizing clients.
MoneyLion was founded in 2013 with the aim to provide a sophisticated modern online lending platform to help customers gain control of their financial health. It is headquartered in New York and has offices in San Francisco, Salt Lake, Utah, and Kuala Lumpur. They employ approximately 250 professionals.
Founder and CEO Diwakar Choubey has a wealth of experience in investment banking. His CV includes positions at Barclays, Citadel LLC, Goldman Sachs, and Citigroup. Prior to MoneyLion, he worked at Barclays as a senior investment banker.
Co-founder and Chief Technology Officer Chee Mun Foong, prior to MoneyLion, was a founding member of Simulex Inc. Co-Founder and Chief Strategy Officer Adam Green worked at Young Wall Street Division before starting at MoneyLion. Co-Founder and Chief Information Officer Pratyush Tiwari previously worked at Knowrtl as the chief operating officer.
Initially, MoneyLion raised $1.5 million from six investors and has managed to raise $24 million in various rounds of funding to date. The latest round was a Series A round that garnered $22.5 million from six investors. Edison Partners lead with BroadHaven Capital Partners, Citizen.VC, Clocktower Technology Ventures, FinTech Collective, and Montage Ventures also participating in the round. The lender has also raised a $650 million debt facility from the investment bank Macquarie Group. This will help the company to expand its lending capability.
MoneyLion has hit upon a different road to acquiring clients. They do not want their association to be restricted to a lender-borrower relationship. Rather, the company strives to help customers improve their financial lives, and MoneyLion’s product bouquet is based on proprietary technology specifically designed for helping the user climb up the credit ladder. This creates a unique level of trust, which is monetized by the company by then offering credit products. This reduces their CAC as well as default rates because the company is intimately aware of a client’s financial performance over a long period of time.
News Comments Today’s main news: Yirendai reports Q1 results. Desai steps down from Funding Circle P2P fund. Yirendai reports Q1 results. Klarna is changing its name. Uncertainty looms over SoFi’s bank charter. Today’s main analysis: Quarterly marketplace lending results. Today’s thought-provoking articles: What’s in Ron Suber’s portfolio. China Rapid Finance quiet period coming to an end. Online lenders dominate Mozo awards. Over […]
What’s in Ron Suber’s portfolio. GP:”Most angel investors lose money and they do it for the fun. A few have made it a carreer. I have always been very curious what Ron Suber invested in. Finally we get some very interesting insights. The real question is: why he said yes to these and no to probably 100x more companies.”AT: “Payments, online lending, and financial inclusion. None of this is surprising. I’d expect the leader of a disruptive finance industry to back financial inclusion. It’s not just decent humanity, it’s good business sense, especially if you believe in the technology doing the disrupting.”
Quarterly MPL results. GP:”The take away: An average ROI of 7.73%. A great number to remember.”AT: “Interesting portfolio mix, but it doesn’t seem very diversified.”
Uncertainty looms over SoFi’s plan to obtain bank charter. GP:”Of course uncertainty rules in any interaction with a regulator, judge, client. The take away from this article: the chart showing the number of industrial banks over time. “AT: “Obey this rule: Don’t believe it until you see it.”
U.S. startups fail to attract crowd of small investors. AT: “This is a misleading headline. There are any number of reasons why non-accredited investors may not be flocking to crowdfunding opportunities, one of which is they may not know about them. Most opportunities are still open only to accredited investors. The investment for the platforms to get in front of these investors is huge, and the potential ROI on the short term is thin, so long-term business sense is undoubtedly driving the current focus on accredited investors until cash flows reach a point to do otherwise. In time, the cost of meeting regulatory demands and marketing will decrease allowing platforms to built a real business model around the non-accredited investors. Plus, small investors themselves tend to be more cautious with their money simply because a loss can be much more devastating than an equal loss to a larger investor. The market will come around–in time.”
Goldman, Cohen bet on Nav. GP:”A few companies are always attracting a lot of attention from the public: Apple, Goldman, Google, Facebook due to their reputation of smart strategic visionaries who have made surprising bets in the past that paid off incredibly well. Is Nav such a bet?”
Thousands flock to Build credit card for credit repair. GP:”Beyond the sensational title: a few startups , and now banks, are selling the “improvide your FICO” by using our product. Some of them in fact even allow you to lend money to yourself in order to achieve this via a complex locked account structure. “
The top 10 players in Bay Area fintech. GP:”The interesting story here given the share of the finance industry in the world and local economy: Why isn’t New York the hot bed of Fintech? A possible answer: because people experience in finance always see all the reasons why an idea won’t work and don’t even want to try. Young inexperienced people don’t know better and try, and sometimes they find a pocket of opportunity.”AT: “San Francisco is a hotbed for fintech companies.”
Klarna is changing its name to include ‘Bank’. AT: “This is very interesting. If Klarna can entice consumers to open up digital bank accounts and fund their retail purchases through those accounts, the company should be able to corner the market on e-commerce payments. This would be a huge boon.”
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two classes of Oportun Funding VI, LLC, Series 2017-A (“Oportun 2017-A”), a consumer loan asset-backed securities transaction.
The collateral in the Oportun 2017-A deal includes approximately $188.24 million of loans, as of the April 12, 2017 statistical calculation date. The transaction includes a three year revolving period during which additional collateral may be funded in the transaction so long as it complies with certain eligibility criteria. The preliminary ratings reflect the initial credit enhancement levels ranging from 30.0% for the Class A notes and 15.0% for the Class B notes.
Preliminary Ratings Assigned: Oportun Funding VI, LLC, Series 2017-A
Digital signature company DocuSign and online lender SoFi, which have been valued at $3 billion and $4.3 billion respectively. His involvement with Prosper itself started out as an investment in the company back in 2013.Digital signature company DocuSign and online lender SoFi, which have been valued at $3 billion and $4.3 billion respectively.
He added that he focuses on five themes in his personal fintech investing: digital transactions, the payment rails of fintech, online lending, unlocking cash for assets and financial inclusion.
I complained last quarter that the annualized return, based just on the latest quarterly numbers, on my main Lending Club account had dropped to 2.1% in Q4. Well, this quarter it dipped further. The balance on this account on December 31, 2016 was $39,733, the balance on March 31, 2017 was $39,472 for a -2.6% annualized return according to Lending Club’s own statements.
When I look at where the recent defaults have been coming from the majority are in the D and E grade 36-month loans issued in 2015.
My TTM return according to my own calculations is 2.56% and Lending Club says my return is 8.32%.
Last month marked four years since I invested in the Direct Lending Investments fund. It has been my best performing investment by far over this time period. While yields have come down slightly from the initial 13-15% to 10-12% today I am still very happy with this investment. As the fund has grown, today it is closing in on $1 billion, it has changed focus from investing in high yield short-term small business loans to providing funding lines for a variety of consumer, small business and real estate lenders.
Peerstreet focuses on short term loans – typically 6-24 months with yield to investors in the mid to high single digits. I like the $1,000 minimum per investment at Peerstreet which has enabled me to feel comfortable starting with a relatively small investment. I have already almost cycled through my initial investment as 11 of my first 12 properties have already paid off in full.
Social Finance Inc. executives say the company is ready to be regulated more like a bank, but it is unclear how feasible it will be for SoFi to obtain the industrial bank charter it wants.
In his comments to TechCrunch, Cagney said that the goal of the charter is not to use deposits to fund loans.
SoFi has yet to submit an application for an industrial bank charter in Utah, according to Utah Department of Financial Institutions supervisor of industrial banks Shaun Berrett. As of May 19, the online lender had 28 job openings in its Cottonwood Heights location.
Investors sprinkled about $38 million across 142 companies since May 2016 when Title III of the JOBS Act allowed equity crowdfunding for non-accredited investors, according to data from industry tracker NextGen Crowdfunding LLC.
Swat said the practice is still in its infancy. Wefunder, StartEngine and SeedInvest are the primary crowdfunding platforms, and many founders aren’t aware that equity fundraising is an option. Of those who explore it, many decide it’s not worth the hassle and expense.
NextGen data show companies typically spend from $20,000 to $50,000 on legal, accounting and marketing — a serious outlay for a startup that’s only looking to raise a couple hundred thousand dollars.
Technology startups, quite understandably, have largely ignored the new fundraising option because they benefit more from the existing system.
Nav recently lifted the size of a Series B round by $13 million for lead investor Goldman Sachs Principal Strategic Investments as well as Cohen’s Point72 Ventures and others, bringing the tally for this round to $38 million.
King points out that bringing the startup’s vision to reality is a gamble. For instance, Nav’s current customer count is 215,000 and they aspire to have 28 million.
Also part of the vision is international expansion.
Marla Blow thinks she can help. A card industry veteran who spent nearly a decade at Capital One and helped run the credit card and payments division at the Consumer Financial Protection Bureau, Blow recently helped launch a startup called FS Card, whose sole product at the moment is a credit card targeted toward those with tarnished credit histories.
The card, which is called “Build” and has MasterCard branding, enables customers to avoid the local payday lender’s sky-high rates and gradually mend their standing in the eyes of the almighty FICO.
FS Card’s strategy is to target “deep subprime customers” in the 550 to 600 credit score range, a group that’s largely been overlooked and forgotten by the big banks, according to Blow, the company’s CEO. By offering transparent rates and fees and low spending limits to start, Blow thinks she can carve out a profitable business that also helps people repair their financial bedrock.
There’s some evidence from the Federal Reserve Bank of New York that lending is returning for subprime borrowers with credit scores below 660.
The payday loan industry — wherein people take out a two-week loan for several hundred dollars that comes with a fee that amounts to a 400% interest rate on average — now serves 19 million households out of some 20,600 locations across the country, according to industry group the Community Financial Services Association of America.
The Build card, on the other hand, is unsecured and requires no deposit, providing a more flexible line of credit from the get-go.
The Build card comes with a $75 annual fee and a starting credit limit of about $500 — not incidentally, the same as the maximum payday loan amount in many states — which grows as the borrower proves responsible over time. The interest rate percentage starts in the upper 20s, on the high end for most credit cards. All the terms are laid out plainly to avoid any surprises.
In a year and a half on the market, the Build card has extended $25 million in credit to nearly 50,000 customers, according to Blow.
One of the leaders in that effort is Acorns, an app that connects to a user’s credit or debit cards and rounds up purchases to the next dollar, holding the accumulated difference in escrow and investing it with a risk portfolio determined by the user. The service costs just $1 per month for balances of less than $5,000 and users can withdraw their funds at any time.
The bigger issue, said Habib, is that CUs are once again being cut out of the relationship with their members’ money. Saving a nickel here and a dime there may not seem like a significant threat, but if Acorns or similar fintechs eventually enter the lending space then credit unions could really begin to feel the pinch.
While most CUs don’t have a round-up offering, one credit union that has embraced the idea is Tampa’s GTE Financial, which in 2015 launched Future Change, an app that allows members to round up purchases and set aside money to pay off their loans at the credit union more quickly.
In the two years since GTE began offering Future Change, $1.3 million per year has been moved to roundup savings accounts, with members making more than 3,500 principal payments on their loans. The app has been downloaded more than 15,000 times and Burney said members log in about 14,000 times per month.
Some originators will say that the FHA program is the “new” subprime channel – certainly the program appeals to lenders who like the profit margins, and it appeals to borrowers new to home ownership and who may not have the necessary down payment for other programs. Good LOs have a sense of demographics & population trends, and as it turns out, for the first time in a decade, more new U.S. households in the first quarter chose to buy homes than to rent, suggesting a long-term decline in home-ownership rates might be coming to an end.
Speaking of SoFi and other lenders that use computers (is there a definitive definition of “fintech?”), the WSJ discusses how investors are returning to bonds backed by online lending securitizations.
Regardless of how complex your product may seem, your company’s marketing message should be simple and straight-forward. A complicated, dense message could alienate customers unfamiliar with the technology and reduce your leads. Crafting a narrative around your company’s solution should translate to all sides of your target market — potential customers, investors and users.
You’ve worked on simplifying the PrimeRevenue brand and presenting the company in a more digestible way. How did you approach this?
But every marketing person should be so lucky to find a great story that is not being effectively told. That’s exactly what I discovered with PrimeRevenue. We work with some of the world’s largest brands to help them optimize their working capital, and we support their suppliers by giving them more visibility and control over what their customers owe them. I crafted the narrative around the immense ROI we deliver into a simple core messaging for both buyers and suppliers.
How did you approach the company when talking about the new brand message?
I’ve done a lot of work to simplify complicated messages for B2B audiences in the past. I find the key is putting together a logical story about what you are trying to achieve and how it will accelerate sales. Then you’ve got to be a great collaborative, internal seller of both your approach and your progress. I say collaborative since one mistake marketers seem to make is huddling with their team and then popping new “stuff” on an executive team. Unless you’re lucky, that can backfire.
Why was simplifying the brand so important for the marketing strategy?
A simplified brand message was key for us putting in place a sophisticated, multi-channel digital lead and demand generation program. Frankly, the company didn’t have much in the way of lead gen other than some field marketing at very small niche conferences.
Samir Desai, the founder and chief executive of Funding Circle, the peer-to-peer (P2P) lender to small businesses, has stepped down from the platform’s investment company.
FCIF is listed on the London Stock Exchange and invests in loans originated by Funding Circle. It is unusual in not levying a management fee, with the fund’s shareholders only paying the platform’s 1% annual charge. Last month it nearly doubled in size by raising £142 million from investors in a C-share issue.
Stepping back from FCIF allows Desai to concentrate on Funding Circle, whose backers include Baillie Gifford, manager of Scottish Mortgage Trust (SMT), which holds an investment in the private company in its unquoted portfolio. Funding Circle has lent over £2.2 billion in the UK having and attracted 61,000 private investors who the company estimates have made an average return f 7.2% lending through the platform.
WiseAlpha, a UK online lending platform that gives everyday investors access to high yield institutional bond and loan investments, has raised over £627,000 on its Crowdcube return in just 7 days, coming in at 125% over its original target. More than 433 investors have invested in return for 8.92% equity. The highest amount by a single investor was £150,000 for the platform pre-valued at £6,402,630.
Peer-to-peer lending platform RateSetter has appointed Joanna Wright as Chief Risk Officer. Wright joins RateSetter from GE Capital where she was Chief Risk Officer for GE Capital Bank in the UK, leading a team of over 200 risk professionals with responsibility for prudential and enterprise risks across the bank.
HSBC’s much-touted voice recognition software, used by half a million customers to verify their identity and secure their bank accounts, has successfully been duped by the brother of one of its customers. In an investigation carried out by BBC Click reporter Dan Simmons and his non-identical twin, Joe, the brothers revealed that it was possible to breach an HSBC customer’s account by mimicking their voice.
After Dan Simmons set up his own HSBC voice-ID authenticated account, his twin Joe attempted to access the account by providing his account details, date of birth and saying the simple phrase. After seven repeated attempts to mimic his brother’s voice print, the bank granted him access on his eighth try.
Although Joe was not able to withdraw any money from the account, he was able to access balances, recent transactions and even transfer money between accounts, the BBC reports.
Last week saw a mix of property developers and finance providers come together to discuss the state of the property market.
In the afternoon, the focus shifted towards the future of the property market with a look at new types of finance, such as crowdfunding, challenger banks and peer-to-peer lending.
Even though he admitted that banks and challenger banks still dominated the space, Ashley pointed out that the alternative finance sector was continuing to grow.
As a result of new lenders entering into the development finance space, Ashley added that some lenders have been looking to move away from ‘safer’ geographical areas, such as the South East, and are targeting places further north, including Scotland.
Recent months have seen problems return to the fore in the £2bn trust sub-sector, which has attracted investor interest in part because of yields well in excess of 5 per cent.
Winterflood also criticised certain P2P investment trusts over disclosure levels in its latest monthly report. Analyst Simon Elliott said Ranger Direct’s partial writedown of a 20 per cent exposure to the struggling Princeton Alternative Income fund was a “disheartening episode”. Princeton had previously said its NAV would not be affected by problems at firms in which it had invested.
Of the six funds in Winterflood’s P2P trust sector, three are trading on double-digit discounts, although one – Honeycomb – trades on a premium of 12.2 per cent.
Four years ago, sweeping reforms were introduced to the financial advice market, aiming to improve free transparency and professionalism.
However, one of the biggest unintended consequences has been what many describe as an ‘advice gap’. This has been caused by high street banks, investment management firms and financial advisers withdrawing services for those with less than £100,000 to invest. They argue the cost of servicing these clients has become too high.
A number of advisers also used the RDR as an opportunity to leave the industry, leaving many ‘orphaned’ clients behind.
Stephen Kavanagh, chief executive of financial advice firm Chase de Vere, believes the advice gap was not caused by the RDR, but rather the regulation exacerbated existing inefficiencies in the market.
According to AXA Wealth, there is only one adviser for every 2,700 people in the UK who require help with their finances. This compares to ratios of one adviser per 1,400 people in Australia and one per 156 savers in Hong Kong.
The good news is that the advice gap is on the agenda for the Financial Conduct Authority, the regulator, alongside the Treasury. The two organisations have launched the Financial Advice Market Review, which is ongoing and aims to ensure that affordable advice and guidance is available to everyone.
Since the RDR was introduced, robo-advisers have sought to address the issue, with new entrants and established firms offering online services for those with smaller sums to invest. Some deliver investment management online, while others provide automated financial advice. They are typically powered by computer models, known as algorithms, and involve little or no human interaction.
Although Kavanagh recognises that technology has the potential to plug the advice gap by offering lower-cost services to a wider range of people, he believes the robo-advice market still has much further to go before it reaches this point.
Two – As the whole process is run online, overheads are lower and lending can therefore be provided more cheaply than in more traditional financial institutions.
Three – According to Linked Finance, lenders can earn between 8.5pc and 15pc interest on the loans that they issue, however any income earned on the lending will be subject to income tax.
Four – P2P is currently not regulated in Ireland, as a result of this certain protections do not apply to consumers of P2P products.
Five – Figures for the first three months of 2017, show that the Irish P2P platform increased lending activity by more than 326pc on the same period in 2016, according to Linked Finance, and the platform has now facilitated more than €25m in loans to Irish SMEs.
Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the quarter ended March 31, 2017.
Starting from the second quarter of 2016, the Company changed its reporting currency from the U.S. dollar (“US$”) to the Renminbi (“RMB”), to reduce the impact of increased volatility of the RMB to US$ exchange rate on the Company’s reported operating results. The aligning of the reporting currency with the underlying operations will better depict the Company’s results of operations for each period. This release contains translations of certain RMB amounts into US$ for convenience. Prior period numbers have been recast into the new reporting currency.
The 25-day quiet period on China Rapid Finance Ltd (NYSE: XRF) will end on May 23, allowing the firm’s IPO underwriters to publish reports and recommendations after this time.
China Rapid Finance acquires consumers through multiple channels, such as online travel agencies, social networks, e-commerce platforms, and payment service providers. Its business model offers smaller, shorter-term loans through its platform. The proprietary technology then analyzes the data and identifies borrowers who may qualify for larger, longer-term loans. In 2016, 89% of its total loan volume originated through this platform, and the borrowers were prime and near-prime consumers with creditworthiness closely comparable to FICO scores ranging from 660 to 720.
XRF’s principal loan amounts range from RMB500 (US$72) to RMB6,000 (US$865). Longer-term loans range from three months to three years, with principal amounts from RMB6,000 (US$865) to RMB100,000 (US$14,400).
The total number of loans has grown from 63,251 in 2014 to 6.0 million in 2016. The number of borrowers has increased from 101,384 in 2014 to 1.4 million in 2016. However, net losses reached US$131,000, US$(30.0) million and US$(33.4) million in 2014, 2015 and 2016, respectively.
The average annual investment return for investors in lifestyle loans was 11.9% in 2014, 11.5% in 2015, and 11.3% in 2016.
With a market cap of $1.475M, net income of $1.116M, and a P/E of 9.1; YRD appears to be more reasonably priced in general than XRF.
P2P Industry News (Xing Ping She Email), Rated: A
Zhongan Financial Holding Raised ￥220M in A Round
Zhongan Financial Holding (ZFH), an auto consumer financial services provider, announced that it has raised 220 million RMB in A round of financing at the end of 2016. This capital was led by Haitong Capital, followed by Huaxin Capital, YinDuhui, Promising Capital and the listed company Sunyard.
Founded in 2014, ZFH is focused in personal car consumer financial services across the country. It provides lifecycle service of car transactions for consumers and dealers, including marketing, customer acquiring, car sourcing, trading and financing.
In addition, ZFH cooperated with banks to use the way of interbank (credit card stage) for the car consumer finance business. In this way, the cooperative bank originates credit card loans to customers, and customers mortgage the vehicle to the bank, then after the loans are issued, customers will pay the monthly payment.
Alipay to launch ““Face Identifying Payment”
Alipay has recently tested for “Face Identifying Payment” inside. In this new way of paying, the process of face identifying takes only one second, if succeed, the customer should further input the last four digits of his phone number. After the two-step verification, the payment can be completed.
Shortly after that, Alipay confirmed the news, and announced they have finished the last step of bringing “Face Identifying Payment” from laboratory to commercial use, it will soon be available on the stores of partners.
The FlexShares Global Quality Real Estate Index Fund (NYSE:GQRE) was trading at $59.44 per share on Monday afternoon, up $0.15 (+0.25%). Year-to-date, GQRE has gained 5.45%, versus a 7.10% rise in the benchmark S&P 500 index during the same period.
The awards compared 504 home loans from 89 providers, and awarded the top 10% in each of the 8 categories.
This year, Mozo found that online lenders took out more awards for great value mortgage products than in previous years, accounting for approximately 41% of the winners overall, up from just over 25% last year.
Some of the major online bank winners included Non-Bank Home Loan Lender of the Year, Homestar, which took out awards across 5 of the 8 categories and Reduce Home Loans.
Financial data feed provider InvestmentLink is launching a new cloud-based platform targeted at financial planners looking to provide outcomes-oriented advice to clients.
CashDeck uses InvestmentLink’s data repository to allow clients to manage all their financial information, while advisers can use the information to generate projections and insights around client goals.
Peer-to-peer motorhome rental platform SHAREaCAMPER recently released the 2017 Return on Investment Index. The study aims to identify which cities offer the highest return on asset investment via rental peer-to-peer (P2P) platforms.
The application Airbnb was used to collect data alongside a collection of other rental platforms.
Taking into account all five of the markets researched, Wellington is ranked in second place. Auckland placed in the fifth position in the ranking.
Promise of higher returns and faster adoption of digital disruption has pulled a large number of millennials towards P2P lending, according to a report by online P2P lending platform Faircent.com. In fact as per the report, nearly 60% of the lenders on the platform are less than 35 years old.
According to the report, lenders are investing more and those with investments worth more than Rs 5 lakh are earning gross returns upwards of 22% per annum with the lowest volatility of returns. Furthermore, it states that significant increase in timely repayment has led to increase in reinvestment of returns back on to the platform, leading to further increase in returns.
This week we bring you a closer look at Kabbage, a Fintech company headquartered at Atlanta USA, through an interaction with Ratnakar Pandey. RP, as he is popularly known, heads the Analytics and Data Science portfolio at Kabbage India.
RP has more than 15 years of experience in analytics and data science fields. At Kabbage, RP is leading the machine and deep learning models development activity across customer lifecycle, from acquisition to customer engagement to fraud prevention to risk based underwriting policy development.
Analytics India Magazine- Could you tell us more about Kabbage and your data and analytics platform?
Most of the heavy lifting that happens in Kabbage is done by technology and data, which is one of the key differentiators. We like to call ourselves a data company rather than a typical finance company. So, data is the core competency of the company and we use that in our decision making every day.
AIM- Would you like to share some of the analytics solutions you have worked on?
We use several programming and data management tools for providing both tactical and strategic analytical solutions, some noteworthy tools are Python, R, SQL, Spark, Hadoop and Scala. In terms of statistical techniques for machine learning, we routinely use regression techniques (linear, logistics) and classifiers such as Gradient Boosting Machines (GBM), Elastic Net Regression, Support Vector Machine (SVM), Ensemble Learning etc. For forecasting and anomaly detection we use ARIMA/X, k-NN and other similar techniques. We also heavily use Natural Language Processing (NLP) for drawing insights from text and unstructured data.
AIM- What kind of knowledge and skill-sets do you look for, while recruiting your workforce?
For the positions that we are currently hiring, we are looking for 8+ years of work experience in data science, preferably in the banking and lending industry. We are keen on hiring people who can lead a project from start to finish and take the full accountability and ownership of it. We generally hire from the premiere institutes, 90% of people we have right now are from tier 1 institutes.
AIM- What are the most significant challenges you face being at the forefront in analytics space?
Lack of machine learning and deep learning talent is the biggest challenge in the Indian market.
AIM- How do you think ‘Analytics’ as an industry is evolving today? Could you tell us the most important contemporary trends that you see emerging in the present analytics space across the globe?
We are generating more data than ever before- 90% of the data that we have today is generated in last 2 years alone. This data is coming from a variety of different sources such as voice, text, transaction, sensor, chat, images, videos etc.
India’s banks, which still dominate the country’s financial landscape, appear to have hardly a kick left in them. Stressed assets without any loan-loss cover now exceed $96 billion, McKinsey & Co. said last week. An overwhelming 91 percent, or $87 billion, of the provisioning gap is at state-run lenders, whose net worth would be wiped out if they took the hit on their capital.
Even as McKinsey was delivering this sobering reality check, fintech was running a victory lap of sorts. Paytm, a digital payments company announced a $1.4 billion investment by Masayoshi Son’s SoftBank Group Corp. on Thursday, the largest funding round by a single investor in an Indian startup.
Capital First’s retail assets have grown 24-fold in six years to about $3 billion. Its bad-loan ratio of less than 1 percent compares with almost 10 percent for banks. And the latter figure is an official estimate; the reality is probably a lot worse.
McKinsey has several suggestions on how Indian banks can deal with the mess: by quarantining assets that would eventually find their footing, liquidating those that won’t, and working with professional asset managers to turn around debtors that lie in between. But even if the delicate surgery is successful, banks — especially state-run ones — will end up ceding a lot of ground to fintech.
SoftBank’s huge $100 billion investment fund — the largest tech fund in history — announced its first close today… and it’s huge.
The Japanese telecom giant revealed that its VisionFund has closed an initial commitment of $93 billion from a bevy of high profile backers. They include Apple, Qualcomm, UAE-based Mubadala Investment Company, Saudi Arabia’s PID public fund, Foxconn, and Foxconn-owned Sharp. The plan is for the fund to reach its $100 billion target within the next six months through commitments from other investors.
West Cary Group (WCG) is a full-service marketing and advertising agency that specializes in creating marketing and communication campaigns that are focused on quantifiable results and ROI. Its ability to merge data analytics with the creative process is its USP. WCG specializes in a variety of industries like financial services, pharma, healthcare, and retail. The […]
West Cary Group (WCG) is a full-service marketing and advertising agency that specializes in creating marketing and communication campaigns that are focused on quantifiable results and ROI. Its ability to merge data analytics with the creative process is its USP. WCG specializes in a variety of industries like financial services, pharma, healthcare, and retail. The Richmond, Virginia-headquartered minority-owned agency was founded in 2007 by founder and CEO Moses Foster.
Prior to founding WCG, Foster was a senior director at Capital One where he led a team of over 40 associates who created over $750 million in marketing communication annually. He also serves on the board of directors for Direct Marketing Association and Greater Richmond Chamber of Commerce and Venture Richmond.
Key Success Factor
WCG, from the very beginning, had realized the power of data and analysis and how important it is to give equal standing to both the analytical and the creative team. Most companies of their size in the industry do not have any group specifically dedicated to data science, and that gives them the edge over its other rivals. Being able to execute data driven marketing is a huge positive, especially for a client group like Fintech, which understands the power of data. Having data scientists on board to ensure that decisions are empirical versus intuitive.
WCG usually works with companies having a budget of $250,000 and upwards. WCG clients may not be Fortune 500, but they are usually VC-backed companies looking to break into the big league. Its capabilities around performance marketing are as good as any larger player in the market, but West Cary Group is able to provide these services on a more competitive budget. This is made possible because it does not have huge overheads like the larger firms.
WCG has always prided itself on being channel agnostic. Its decision of picking a marketing channel is based on a lot of variables like what the customer wants, the kind of product, and what is the client business model. After considering all these variables, it comes with an economic model targeting appropriate channels that are best suited and has maximum potential to succeed. Success or failure of a channel depends on three things: gross response, net response, and conversion. So it lets the data speak on which channel to use rather than taking a gut decision.
Collaborating with Insurtech and Fintech
The company has worked with multiple fintech and insurtech companies including leaders like SoFi. It collaborated with SoFi on direct mail. It has been leveraging both online mediums like Facebook and offline channels like direct mail for customer acquisition. According to the founder, many leading fintech lenders acquire a major chunk of their customers through direct mail. Working with fintechs is exciting and challenging as they are extremely ROI driven and aggressive in their approach.
In order to evaluate the feasibility of a channel, a test design is developed to see the results of invested amount with the help of statistically significant tests. Usually, these tests are carried to see whether it will be useful or not, and all these tests are primarily ROI oriented. The reasons why this strategy works is because instead of pre-committing to one particular channel, WCG waits for the market reaction. Based on that, WCG decides whether to do a full roll-out with that particular channel or not.
A typical sample test involves a sampling of 10,000 customers. The agency likes to go ahead with results that are in the 95% confidence interval. This investment is prudent so that results are strategically significant and actionable for the client. A direct mail campaign typically costs $0.50 to 0.75 per package.
Looking Beyond Direct Mail
The company has also analyzed satellite radio and television as an advertising medium for its clients. Foster believes that radio provides for an extremely targetable audience, and TV can be a great investment for a client that can work on scale. He has always wanted to execute a performance marketing campaign on TV but hasn’t had any client engage with them for TV because the roll out costs are too high. Most clients believe TV is for branding but leveraging data analytics for TV can also be used for performance marketing. With cord cutting now a major trend among millennials, TV might be declining in viewership, but it’s still a multi-billion dollar channel. It might not be as dominant as before, but TV is not dead as a medium to target potential customers.
The Perfect Client
The company loves working with entrepreneurs and teams who come to it with a good product in a competitive market. They want to work in the niche market where a “spray money on advertisement” approach would not work. What is most important is to solve the problem of the channel mix. Which channels should the client use, in which order and in what quantum. The power of combining multiple channels to work together will always be better in maximum circumstances than relying only on one channel. Being able to calculate that synergy is what will make or break a campaign. For this, the agency needs to test individual mediums in silos and then in conjunctions. Only then can they decide on that perfect spending matrix.
The company has grown steadily over the years and now has a 35 member team. Data-driven advertising has changed the marketing landscape, and all companies ranging from tech startups to century-old community banks are looking to capitalize on data for achieving quantifiable results on their marketing spend. That is a boon for agencies like WCG, which have always been ROI-driven from the start and have incorporated data science as a part of the service offering from day one.