Wednesday May 10 2017, Daily News Digest

DealVector

News Comments Today’s main news: GDR partners with Equifax. OnDeck shares down 3.5%. iBan raises 110K GBP on Seedrs. Hexindai implements FICO. Bitbond receives 5M Euro debt commitment. KPMG acquires Matchi. RateSetter welcomes Aussie banking reforms. Today’s main analysis: KBRA assigned prelim ratings to SoFi Consumer Loan Program 2017-3. Today’s thought-provoking articles: Consumer privacy and fintech. CreditEase CEO discusses the future of […]

DealVector

News Comments

United States

United Kingdom

China

European Union

International

  • KPMG acquires Matchi. AT: “Matchi should be on any bank’s list of platforms to check if looking for a partnership with a fintech innovator.”
  • 7 ways fintech is changing the job market. AT: “Interesting read. Takeaway for alt lenders: If you want to hire great talent, look for people with excellent skills in other industries and ready to make a career change. Look at industries that are dying, diminishing in importance, or where great talent is being replaced by automation. Fintech skill sets are often developed in other places.”

Australia

Canada

News Summary

United States

Global Debt Registry Partners with Equifax (FINalternatives), Rated: AAA

Loan data specialist Global Debt Registry has partnered with global information solutions giant Equifax that will incorporate the company’s income data into its eValidation suite of verification tools for investors and warehouse lenders in the online lending space.

The new partnership will utilize Equifax’s anonymous income data to incorporate additional loan verification data and enable benchmarking and monitoring of income inflation over time, the company said in a statement.

“It’s critical for investors to have the assurance that when they invest in online lending, the loan data is independently, externally validated,” said Charlie Moore, president of GDR.

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2017-3 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to one class of notes issued by SoFi Consumer Loan Program 2017-3 LLC (“SCLP 2017-3”). This is a $530 million consumer loan ABS transaction that is closing on May 18, 2017.

This transaction represents SoFi Lending Corp.’s (“SoFi” or “the Company”) ninth rated securitization collateralized by a portfolio of unsecured consumer loans.

KBRA analyzed the transaction using the U.S. Consumer Loan ABS Rating Methodology published on March 28, 2017. KBRA’s consumer loan methodology incorporates an analysis of: (1) the underlying collateral pool, (2) the originator’s historical static pool data, segmented by characteristics including credit quality and product type, (3) the proposed capital structure for the transaction, (4) KBRA’s operational assessment of the originator and servicer and (5) the legal structure, transaction documents, and legal opinions.

OnDeck downgraded at Stifel; shares down 3.5% (Seeking Alpha), Rated: AAA

OnDeck Capital (ONDK -3.6%) managed to reverse big early losses and close flat yesterday despite a sizable earnings miss.

It’s moved back into the red today as Stifel’s John Davis downgrades to Hold from Buy, and cuts his price target to a Street-low $4.50 from $6.

Consumer Privacy Should Be Top-of-Mind for FinTech Firms to Avoid Scrutiny (BNA), Rated: AAA

With many people underserved by traditional lending institutions, including the close to 45 million adults in the U.S. who the Consumer Financial Protection Bureau estimates are “credit invisible” or have had past credit challenges, emerging FinTech lenders and online lending platforms (FinTech firms) have established themselves as valuable lending resources for both investors and consumers.

Undoubtedly, the digital footprints (both active and passive) left by consumers online offer valuable insights about those consumers’ preferences and behaviors, which can be useful to FinTech firms in assessing whether to extend credit. But the use of the Internet, which provides unprecedented access to an extraordinary amount of consumer information (some of which might be obtained without a consumer’s consent or knowledge), has raised significant privacy questions that FinTech firms might have to confront in order to overcome inevitable regulatory scrutiny.

In the context of marketplace lending, for example, which can include peer-to-peer lending as well as funding through institutional investors, hedge funds, and other financial institutions, market analysts estimate significant growth in loan origination volumes as well as an expansion in the types of products being offered. The California Department of Business Oversight conducted a survey of marketplace lenders and found that marketplace lenders provided over $13 billion in financing to consumers in 2014, having only provided less than $2 billion in 2010.

FinTech firms should be aware of potential risks about the types of alternative data they collect and the means through which they obtain that data. As the National Consumer Law Center has warned, “the devil is in the details” as the use of alternative data can potentially raise a number of significant legal issues, most notably fair lending and privacy concerns.

Gathering information from social networking systems, in particular, can provide significant information about a consumer’s interests and preferences, as well as the consumer’s location and travel history. While Internet users can furnish actively some of this information through entry of data into a system, a significant amount of information also can be gathered passively through cookies and the tracking of user IP addresses.

With the regulatory uncertainty surrounding the use of alternative data (caveating that regulatory priorities may shift under the current administration of President Trump), FinTech firms should consider carefully assessing what data they are collecting and maintaining to ensure that they are complying with current consumer privacy regulations.

Lending Club and MPL – One Year On from Renaud Laplanche’s Ouster (Lend Academy), Rated: A

Today, I thought it would be useful to take a step back and reflect on what we have learned in the past year.

  1. The industry is bigger than one person – the industry did not fall apart because of his departure.
  2. Investors still need yield and borrowers still like installment loans – The main premise for the rise of marketplace lending is still very much in play today. It is no secret that the growth of the industry over the past five years has been driven by institutional investors seeking yield. Lending Club shared in their quarterly earnings report last week that not only are the banks back investing in loans but they are doing so at record levels.On the borrower side there has been no slowdown in demand.
  3. Banks and marketplace lenders are important partners
  4. Compliance can be a selling tool – The sense I had is that compliance was viewed as a necessary burden and not something that could be a sales tool. That changed a year ago and now an investment in compliance has been viewed as essential.
  5. Finance is just as (perhaps more) important as technology when it comes to fintech – The narrative of marketplace lending has often been about the cost savings and customer experience improvements that can be made through advanced technology. I have seen many presentations that talked about how the legacy technology of banks are causing such inefficiencies and that fintech companies can solve this with better technology. All that may well be true but the bottom line we have learned is that in the lending business we should be focused on finance first. If you get that wrong the greatest technology in the world will not matter.

How technology mitigated a crisis in student loan ABS (American Banker), Rated: A

These programs slow the rate of repayment on Federal Family Education Loans, putting the bonds they back at risk of technical default if the securities fail to pay off at maturity. When Moody’s Investors Service and Fitch Ratings raised the alarm early in 2015, eventually putting some $100 billion of bonds under review for downgrade, the market sold off heavily. New issuance ground to a halt.

Yet Navient and Nelnet, the two largest student loan servicers, avoided downgrades on some $18 billion of FFELP bonds. They did so using a strategy that, at first, did not seem promising: extending the maturities of the bonds.

Their efforts were aided by DealVector, an online registry of asset ownership and messaging platform, which helped the two servicers identify holders and collect votes. Over the past year, the two servicers have sent about 165 tranches out for consent; some 60% of those were successful, and about 10% are still in process. The total original face value of tranches passed to date exceeds $18 billion.

Like other kinds of financial assets, FFELP bonds are held “in street name” by a brokerage firm, bank, or dealer on behalf of a purchaser, obscuring their true ownership. This isn’t just a problem for consent solicitations; it also imposes large costs on determining an appropriate price for a security, forming creditor classes, and many other events requiring communication among deal participants.

Real Estate Lender Zeus CrowdFunding Offers Industry’s First Loyalty Program (BusinessWire), Rated: A

Zeus CrowdFunding, the fastest real estate crowdfunding site in America, will offer borrowers a new incentive unmatched in the rapidly growing financial sector: the real estate crowdfunding industry’s first loyalty program. Repeat borrowers with the company can borrow up to 80 percent of a property’s after-repair value (ARV).

The program is called LoyaltyZ, and its mechanics are simple. On a borrower’s first loan with Zeus CrowdFunding, they’re eligible to receive up to 75 percent loan-to-value (LTV) of his or her approved project’s ARV. With each loan that they finish paying back to Zeus CrowdFunding, the borrower will receive one more point on their LTV on their next loan—up to 80 percent of the ARV. On a borrower’s second loan from Zeus CrowdFunding, for example, he or she is eligible to borrow up to 76 percent of the ARV; on his or her third loan, up to 77 percent, and so on. Beginning with his or her sixth loan, a repeat borrower can borrow up to 80 percent of the ARV on every loan.

Zeus CrowdFunding Founder and Chief Acceleration Officer Steven Kaufman says that LoyaltyZ was designed for real estate borrowers interested in completing multiple projects as quickly as possible. No additional sign-up or commitment is required of them.

Fintech Firms Primary Targets for Cybercrime Attacks (Think Advisor), Rated: A

Fintech firms are prime targets for cyberattacks, according to research revealing 130 million fraud attacks detected in just a 90-day period with the growth in attacks outpacing transaction growth by 50%.

Data revealed 50% more cybercrime attacks originating from all of Europe than U.S., the single most attacked nation, and increasing cyberattacks from South America.

The Q1 2017 Cybercrime Report also revealed that attack vectors and patterns are more evolved and malicious, including:

  • Remote access Trojans, which contain a strong footprint in the financial services industry.
  • Identity-spoofing attacks target fintech firms through peer-to-peer loans, global remittance and potential loopholes in new and emerging platforms. ThreatMetrix research showed an 80% increase in digital wallet transactions year-on-year as well as a 180% increase in associated bot attacks, typically used to mass test identity credentials.

According to ThreatMetrix, fraudsters use bots to mass test identity credentials and infiltrate trusted user accounts. New attack trends disclose fraudsters targeting emerging and fintech industries, which they view as more vulnerable to attack.

Read the report on cybercrime here.

Auto Loan Portfolio Marketplace with Automated Decisioning (BusinessWire), Rated: A

defi SOLUTIONS announces the launch of defi EXCHANGE, a secure, online portfolio marketplace where sellers of auto loan portfolios can access multiple buyers and manage the entire sales process. defi EXCHANGE improves efficiencies and profitability by automating and enhancing processes, revolutionizing the way auto loan portfolios are bought and sold.

With defi EXCHANGE, buyers no longer need to build their bulk deal evaluation outside their lending platform in spreadsheets and with manual processes that require extra data scrutiny and attention. Sellers no longer need to provide sensitive consumer data to many potential buyers and then follow up manually. defi EXCHANGE eliminates processing inefficiencies and allows for the complete evaluation and pricing provided by a Loan Origination System.

defi EXCHANGE resulted from the purchase of SellYourBulk.com, the first-ever auto loan marketplace that began operations in 2015.

IBM’s Watson ‘is a joke,’ says Social Capital CEO Palihapitiya (CNBC), Rated: A

IBM isn’t at the forefront of artificial intelligence, Social Capital CEO and founder Chamath Palihapitiya told CNBC on Monday, and he certainly isn’t a fan of IBM’s Watson.

“The companies that are advancing machine learning and AI don’t brand it with some nominally specious name that’s named after a Sherlock Holmes character.”

Digital Banking Inspiration from FinTech Disruptors (Silvercloud), Rated: A

Peer-to-peer payment systems like Venmo gained traction amongst the millennial generation and are beginning to make their way to the broader consumer population as banks consider the appeal in this convenient, paper-free payment approach.

Startups like Branch.co, ZestFinance and MyBucks are using AI and machine learning to offer low-rate payday lending loans. By relying on data and algorithms, these startups believe they offer a faster, more accurate and unbiased way to determine a consumer’s credit worthiness and their corresponding interest rate. Similarly, by removing the loan officer from the equation, these FinTechs can save on costs and ensure a profit from their low rate loans.

The importance of embracing mobile technology is not new in the banking sector. But what is new is how certain FinTech startups like Moven are using the mobile platform to offer services that help consumers better manage their money. Moven, which is an online bank of sorts that works alongside traditional banks, is giving consumers insight into their spending habits — offering them tools to see where their money is going and how they can better prepare for the future. It’s all about transparency and putting the consumer in control of their financial health.

While the technology to create automated investment advice is not new, access to it (by those who are not wealth managers) is. It’s simpler, more accessible and cheaper for the consumer.

Witnessing the success of FinTech robo-advisory startups, and the unmet need they are filling within the market, banks have begun jumping into this market.

If You Can’t Beat ’Em, Join ’Em. Why Banks are Starting to Partner with FinTechs.

Today there are more than 2,000 FinTech start-ups as compared to 2015 when there were only 800. This is why many banks and credit unions have changed their approach; instead of competing with the FinTechs, they are trying to partner with them.

At SilverCloud, we are helping banks and credit unions do just that — give their customers and members the ability to access all the information they need through digital banking channels without ever having to pick up the phone. We are helping banks and credit unions evolve with the demands of customers by providing an engaging digital experience that lowers support costs and drives more revenue through a better experience for the customer and member.

FIN Opposes Elements of CHOICE Act (Crowdfund Insider), Rated: A

Last week Financial Innovation Now (FIN), an alliance of companies which includes Fintech behemoths innovator Amazon, Apple, Google, Intuit and PayPal, spoke out against language used in the Financial CHOICE Act that would repeal debit swipe fee reform. In a letter penned by FIN Executive Director Brian Peters and addressed to US House of Representatives Speaker of the House Rep. Paul Ryan and Minority Leader Rep. Nancy Pelosi, FIN identifies debt reform’s promotion of payment innovation and tech advancement, identifying that “lower debit fees and improved routing choice have meaningfully spurred competition and technological development. Payment innovators are building on this opportunity to deliver real solutions to the marketplace, and more is on the way. This innovation should not be foreclosed.”

A Quick Guide to P2P Lending (IT Business Net), Rated: B

No system is perfect, and like any form of lending, P2P is not without its challenges. Many people are worried about the regulation of the P2P system, since it is fairly new, and laws have not come into effect to control the industry. Additionally, many Americans are worried about financial cyber security with all-online platforms, since data breaches are a frequent occurrence around the globe. Some of the biggest challenges, however, are on a smaller scale. Though P2P lending platforms don’t have the same requirements for borrowers that banks do, credit score can be an issue for some borrowers. It’s currently not possible to use a business credit score, meaning that poor personal credit could affect potential borrowers’ ability to get a loan at a decent interest rate.

Kingdom Trust Completes ‘Consider The Alternatives’ eBook Series (PR Web), Rated: B

Kingdom Trust, a leader in Self-Directed IRA, alternative asset and institutional custody solutions, recently completed its Consider the Alternatives eBook series. The collection of eBooks illustrates the investment potential of the four main alternative asset classes held on the firm’s platform: real estate, precious metals, private lending and private equity.

United Kingdom

iBAN Completes Seedrs Funding Round With More Than £110,000 in Funds (Crowdfund Insider), Rated: AAA

On Tuesday, iBAN completed its equity crowdfunding campaign on Seedrs with over £110,00 in funds.  The online lender was founded last year and launched the initiative in early January with a mission to raise £100,000 for its new crowdlending app, iBAN Wallet.

Interview with Managing Director of LandlordInvest (P2P Banking), Rated: A

LandlordInvest is a UK-based peer-to-peer lending platform for residential and commercial mortgages.

What are the three main advantages for investors?

  1. Security – I personally would not invest in unsecured loans given the risks and the potentially very lengthy enforcement process to reclaim part of the capital, if any at all.
  2. Returns – We offer returns of up to 12%, although we recently funded a loan with a rate of 19% to investors.
  3. Diversification

What are the three main advantages for borrowers?

  1. Manual underwriting – For us, the most important part of our assessment is that the borrower has a verifiable track-record and that the security is enforceable in the event of the default.
  2. Speed – we recently assessed a loan, had it fully funded and completed in two days.
  3. Online application with a simple online control panel

You recently launched an IFISA product. How has the investor uptake been so far and was it a big advantage to be in the forefront of approved providers?

The demand for our IFISA has been good. IFISA account holders, although only around 20% of the total registered investors, account for 50% of all funds on the platform. As such, IFISA account holders usually deposit more than non-IFISA account holders and also invest more.

What was the biggest challenge in launching LandlordInvest and what have been challenges since?

The biggest challenge has been operating under a “real” P2P model, i.e. no pre-funding of loans.

Which marketing channels do you use to attract investors and borrowers?

We use a multichannel approach including, establishing good relations with the press, having an interactive presence on various forums and blogs, affiliate marketing programs and social media presence.

I hear you are planning a secondary market? Will that work with premium and discounts or at par? What other features do you plan to roll out this year?

We are indeed developing a secondary market and expect to launch it in the beginning of May this year. Investors will only be able to sell loan or loan parts at par. Investors will also be able to sell parts of loans.

£266 bln of SME Turnover Delayed by Late Supplier Payments (Crowdfund Insider), Rated: A

The growth prospects of SMEs are being potentially stalled due to late payments, according to new research of over 1,000 SMEs commissioned by Crossflow Payments, the Fintech platform delivering supply chain finance solutions.

Keypoints from the research:

  • £266 billion is held up as 15% of SME annual turnover is subject to late payment
  • Over half (55%) of SMEs who receive payment late for invoices admit payment is regularly late by ten days or more, as a quarter (23%) of SMEs cite late payment problem
  • 3.4 million jobs could be created by solving the late payment problem, as two in three (63%)
  • SMEs would hire up to five new members of staff if their working capital improved
  • Businesses experiencing Brexit payment crunch, as one in ten (10%) SMEs have also witnessed worsening in payment terms since 2016 EU Referendum
China

CEO Of Chinese Fintech Firm Creditease On The Future Of P2P Lending In China (Forbes), Rated: AAA

Sara Hsu: Do you think that P2P [peer to peer lending] firms like yours are helping to make China’s financial system more market-based?

Ning Tang: The bigger picture is that P2P and fintech help the financial system to become more comprehensive. Fintech helps make the financial system more comprehensive, and helps make bank services more efficient.

Hsu: Many P2P companies have failed. What are some of the risks that P2P companies face?

Tang: There are three major risks. One is the platform itself. Is it legit? Is it legal? In many cases, you see fraud. The second risk is on the borrower, the credit quality side. Even if it’s a legit market place, if it cannot assess risk, it will not be sustainable. The third risk is on the lending side—is the source of capital sustainable?

Hsu: What is the impact of regulations on the industry?

Tang: Our experience is that it will make the industry more stable, healthier, and in the coming 10-20 years, it will be a much better industry.

Hsu: Do you advise other P2P firms in terms of credit risk?

Tang: In terms of pooling data together, we are partners. We made it possible for other market place lenders and new finance companies to access our data.

Hexindai Implements FICO’s Decision Engine (PR Newswire), Rated: AAA

Hexindai Inc. (“Hexindai” or “the Company”), a fast-growing consumer lending marketplace in China, today announced that it has entered into an agreement with Fair Isaac Corporation’s (FICO) to implement its decision rules management solution, BLAZE ADVISOR.  Implementation of this decision engine will allow the Company to automate the loan origination approval process, greatly shorten the decision-making time, and lower operational risks, all of which should help drive the Company’s risk management to a higher level. The Company expects to launch the system in the fourth quarter of this year.

European Union

Bitcoin lending platform Bitbond gets €5M debt commitment to boost loans (Crypto Ninjas), Rated: AAA

Bitcoin SME marketplace loan platform Bitbond today announced that it received a commitment from Obotritia Capital to fund loans worth €5 million. Additionally, Obotritia invested an undisclosed amount of equity in acquiring a stake in Bitbond.

With the debt commitment, SME loans from European prime borrowers will be funded instantaneously on Bitbond. This will reduce the time it takes for business owners to apply and receive a loan to 30 minutes.

Over 1,700 loans worth €1.4 million were originated through Bitbond since its launch in 2013. 90,000 users from 120 countries registered with the service to date.

International

KPMG acquires Matchi, global fintech innovation and matchmaking platform (Crossroads Today), Rated: AAA

KPMG International has announced the acquisition of Matchi, a leading global fintech innovation and matchmaking platform that connects financial institutions, including banks and insurance companies, with leading-edge financial services technology solutions and companies worldwide.

The Matchi platform includes more than 700 curated fintech solutions and a database of more than 2,500 fintech companies that financial institutions can work with to apply innovative fintech capabilities to solving their business problems and pursuing new market opportunities.

Fintech companies and solutions are reviewed and undergo a curation process in order to qualify to appear on KPMG’s innovative Matchi platform. Financial institutions are able to search for a specific company or solution, or they can use the platform’s proprietary “Innovation Challenge” capability to present specific problem statements to the global fintech market and receive recommendations on solutions from Fintech innovators.  In this way, financial institutions are able to access and unlock the leading edge technology and deep customer insight of the world’s best fintech firms for their own operations.

Since its inception in 2013, Matchi has connected more than 100 leading banks and insurance companies with fintech innovations, including solutions in next generation payments, regtech, blockchain and P2P insurance.

7 Ways Fintech Is Changing The Job Market (Huffington Post), Rated: A

Fintech grew 11 percent in 2016 making it a $17.4 billion industry.

The revised Payment Services Directive (PSD2) in Europe takes effect in 2018. PSD2 enables users to allow third parties access to bank accounts.

  1. Remote work becoming more viable – Due to the perks of working remotely, many professionals have also opted to become independent contractors over regular employment.
  2. More payment options for employees – There are now even a variety of ways to get paid due to the rise of payment services and digital currencies. Some companies now offer wages in Bitcoin as an alternative to traditional currencies. Some freelancers based in countries where cross-border payments are difficult even take gift cards as payment.
  3. Fintech-empowered rewards and benefits – Aside from digital currencies, the growth of brand loyalty cards also now gives employers options to reward staff.
  4. New technical skills required
  5. Soft skills are increasingly important
  6. More job cuts in traditional institutions likely – Last year, Bank of America laid off 8,400 jobs as the bank invests more in digital initiatives. Brick-and-mortar banks branches even face closure as online and mobile banking grow. In addition, major developments in artificial intelligence and machine learning now allow for the automation of tasks across business functions. Chatbots are now being used to function as front liners in sales and support. Robo-advisors also challenge the competence of human financial advisers. Job cuts are inevitable as these technologies mature.
  7. More opportunities with startups – Those who are displaced from traditional institutions may look into retooling and transitioning to fintech ventures instead. Fintech is a growth industry and there are a variety of segments to venture into. Currently, most fintech ventures are in payments, investments, lending, and personal finance though others are already working on insurance and foreign exchange.
Australia

RateSetter welcomes Australian banking reforms (P2P Finance News), Rated: AAA

RATESETTER’S Australian division has welcomed the country’s banking reforms unveiled in the Federal Budget on Tuesday.

Changes imposed in the major fiscal event include a bumper levy on the country’s biggest banks, an “open banking” scheme to give customers greater access to their banking data and measures to boost competition and accountability in the sector.

The Productivity Commission, an independent review and advisory body created by the Australian government, published its recommendations for banking reforms on Monday ahead of the Federal Budget. The organisation suggested that banks build APIs to enable data sharing with customers.

Canada

Flexiti Financial Appoints COO, CRO to Growing Executive Team (Sys-Con Media), Rated: A

Flexiti Financial, a leading provider of point-of-sale (POS) financing and payment technology for retailers, today announced the appointment of Jerome Peeters as Chief Operating Officer (COO) and Colin Franks as Chief Risk Officer (CRO) to its senior executive team. Both positions are newly created and come at a critical time for Flexiti Financial as the company continues to experience rapid growth in the consumer financing space.

Mr. Peeters joins Flexiti Financial from B2B Bank, where he served as Vice-President, Operations and Client Services. Prior to this, he spent four years at Sears Canada in a series of progressive senior marketing and operational roles within Sears Financial Services and the broader company. Before joining Sears, Mr. Peeters was Senior Director, Marketing and Change Management at CIBC, supporting the President’s Choice Financial business.

Mr. Franks was most recently Chief Risk Officer, Canadian Credit Cards at JP Morgan Chase where he managed Risk across several retail partners including Sears, Amazon and Best Buy. Before joining JP Morgan Chase, he spent over nine years at MBNA managing all aspects of the Risk lifecycle and eventually becoming Director of Strategic and Risk Planning.

Authors:

George Popescu
Allen Taylor

Friday February 3 2017, Daily News Digest

direct lending

News Comments Today’s main news: American Banker pushes back on SoFi acquisition of Zenbanx. Billionaire Dan Loeb prepares to bet on MPL.  RateSetter updates lender terms ahead of provision fund changes Today’s main analysis: January International P2P lending volumes. Today’s thought-provoking articles: Rise in personal loans dominated by P2P lending. United States Where SoFi-Zenbanx deal falls […]

direct lending

News Comments

United States

United Kingdom

Australia

India

Asia

International

News Summary

United States

Where SoFi-Zenbanx merger falls short (American Banker), Rated: AAA

The announcement that Social Finance is buying Zenbanx marks an important milestone in SoFi’s ongoing evolution from a one-product company exploiting a pricing anomaly in the government student loan market to the preferred private bank for millennial achievers.

But as positive as this partnership is, it won’t solve all of the challenges facing an alternative lender like SoFi, which still needs a more direct banking capability to deliver sustainable funding for its loan portfolio.

For the last couple of years, SoFi’s quest to become the central financial services hub for its approximately 230,000 HENRY (High Earner Not Rich Yet) customers has had mixed success. While 230,000 is a large number of customers for a fintech startup, it pales into comparison to a money-center bank like Wells Fargo, which has more than 300 times as many customers and is much fewer than the customer count at private bank competitors like First Republic. More importantly, the vast majority of SoFi’s customers have only a single-serve (and not very profitable) student loan relationship because SoFi lacked the transaction banking and deposits capabilities needed to make it the center of its customers’ financial lives.

Billionaire Dan Loeb Is Preparing To Make A Major Bet On Marketplace Loans (Forbes), Rated: A

Billionaire hedge fund manager Dan Loeb of Third Point believes the election of President Donald Trump has created new opportunities for active investors, who will have newfound ability to outperform passive indices as growth and inflation set in, and correlations between stocks and other asset classes fall.

Loeb isn’t just re-positioning his stock bets for the Trump economy. As Forbes has reported, the hedge fund is bringing so-called ‘quantamental’ experts into its ranks, and has made significant investments in fintech and biotechnology.

Third Point is cutting its exposure to U.S. RMBS and moving heavily into the marketplace lending sector, where firms firms like Prosper, SoFi and LendingClub have filled a lending void left by banks. Marketplace lenders are increasingly pooling unsecured loans made to consumers into trade-able securities and distributing them to institutional investors such as hedge funds, bond funds, and even high net worth family offices. Third Point likes the duration of these loans, which normally are repaid in under three years, and appears to be stepping into the market at an opportune time.

That Third Point is stepping into market, however, indicates the fund sees a way to navigate the uncertainty of this nascent lending business. It also signals the hedge fund has not lost its excitement about novel fintech platforms despite a year of turbulence. The hedge fund’s VC arm, Third Point Ventures, is an investor in SoFi, Upstart and Swift Capital.

SoFi rides rally with new student loan securitization (Kitco), Rated: AAA

Social Finance seized the recent risk-on wave for consumer-related debt by dramatically pulling in pricing on Thursday on its latest student loan securitization.

The online startup priced the biggest part of its new US$561m bond at 45bp, or 10bp tighter than its prior broadly syndicated deal, according to bankers.

Lower rated tranches came even tighter in a 25bp-40bp range, according to IFR data.

SoFi’s CFO Nino Fanlo said the new deal attracted more than US$4bn of orders and the participation of about 40 accounts, or double the investor base in SoFi deals sold a year ago.

The US government provides a backstop for a huge chunk of the roughly US$1.3trn of outstanding US student loans – and SoFi has seized on refinancing its top earners.

Only US$5.7m of SoFi student loans had been charged off from the US$9.2bn pool it had originated as of December 31, according to Moody’s.

2017 is the year for Americans to get out of debt (MoneyLion), Rated: A

In fact, 54 percent of users surveyed expect their financial situations to improve in 2017. When asked how, respondents identified getting out of debt (63%), improving credit scores (57%), and better managing expenses (38%) as among their top objectives for the year.

The survey also revealed that 66 percent of respondents are relying on higher income in 2017 to pay for their expenses, yet only 52 percent expect to earn more this year. Added to this, a quarter of those surveyed do not track their expenses with 75 percent of that group saying it’s because they don’t know where to start.

Fintech Startups Want to Save One Key Page of Dodd-Frank (The Wall Street Journal), Rated: A

Section 1033 says that banks must “make available to a consumer, upon request…information relating to any transaction, series of transactions, or to the account” and “in an electronic form that can be used by computer applications.”

Fintech startups argue this language enshrines their right to pull data from customers’ bank accounts when the customers give them permission. Companies such as Betterment LLC, an online investment manager, say that accessing bank-account data helps them make it easier for consumers to use investing apps, borrow money or move dollars between accounts.

Banks, on the other hand, say that while they support customers’ right to share their account data, there should be certain restrictions as well. These are needed, they add, to protect consumers from third parties accessing more data than is authorized, or to track how data is used.

Already, Betterment and a group of well-funded fintech startups have created an industry group, called the Consumer Financial Data Rights group, in hope of protecting Section 1033 and pushing for broad implementation of it. The group, formed in January, said it would work with policy makers to promote “consumer choice and access.”

Other group members include Personal Capital Corp., Affirm Inc., Kabbage Inc., Varo Money Inc., and Hello Digit Inc.

Renovate America Completes $ 100 Million Credit Facility for Benji (Yahoo! Finance), Rated: A

Renovate America, a leading U.S. provider of home-improvement financing, announced today that it has completed a $100 million credit facility with Credit Suisse. The facility will enable Renovate America to expand Benji, the company’s unsecured consumer home-improvement lending product.

As Renovate America’s newest financing option, Benji is designed for well-qualified borrowers and is expected to rapidly expand to all 50 states. Benji can only be used to finance home improvements, from energy and efficiency upgrades to kitchen and bath projects. Benji offers consumer and small business protections which set it apart from other unsecured lending, including contractors agreeing to be paid only when homeowners have agreed that the project is complete, and post-funding dispute resolution support if needed.

Money360 Funds $ 8.3 Million Bridge Loan for Illinois Retail Center (SAT PR News), Rated: A

Money360, the leading commercial real estate marketplace lending platform, announced today that it has provided a bridge loan to the owner of a retail center in Jacksonville, Illinois.

Money360’s $8.3 million loan allowed the borrower to pay off a maturing loan on the Lincoln Square center, a 206,257-square-foot anchored retail property that is currently 82 percent occupied by a combination of 29 national and regional tenants.

IHT Realty Crowdfunding Offers Record High 28% Yield Investment Opportunity (Yahoo! Finance), Rated: B

We are pleased to announce that IHT Realty Crowdfunding has an opportunity for accredited investors.  Our Sponsor has acquired a beautiful, 2-home property to transition into a Residential Assisted Living Facility located in Jacksonville, FL.

The Sponsor is offering a 28% yield on the equity portion consisting of a 12% annualized yield and 16% deferred for 24 months. A majority of the equity is already pledged leaving a small tranche available for investment. The debt is already in place (crowdfunded by IHT in 24 hours) and the Sponsor has closed on the property and already started the rehab.

This investment will consist of repurposing 5.8 acres of land with two single-family homes.  These homes are great examples of the all-brick construction of the 1950’s and 1960’s.  The project starts with enlarging the homes’ heated areas from 1,488 sq. ft. to approximately 2,000 sq. ft. each by converting the oversized garages into 2 and 3 bedrooms with private full or half baths.

Sweet Water – Park LLC is the Sponsor for this project.

PayCommerce to use digital ledger for cross-border payments (The Asset), Rated: B

PayCommerce successfully conducted test payments between the US and India using its Federated Ledger, a blockchain-based technology.  This is the first phase of testing before an expected roll-out to PayCommerce network members at the end of Q2 2017. Other regions, such as Mexico, the Gulf Cooperation Council region, and the UK, are planned in 2017. Introduction is planned for Singapore, Canada and the Philippines in 2018.

United Kingdom

RateSetter updates lender terms ahead of provision fund changes (P2P Finance News), Rated: AAA

RATESETTER has published updated lender terms as it prepares to tweak its provision fund.

The new terms have been published on Thursday, one month ahead of the changes to the fund to address concerns that it is too “binary.”

Under previous rules, if the provision fund were no longer able to cover expected defaults, all loans would be assigned to the fund and losses would be distributed equally.

Under the new terms, RateSetter will be able to divert interest and capital into the provision fund if it thinks losses are becoming uncomfortably large.

Lenders with active investments can withdraw before 1 March 2017 if they are unhappy with the changes.

Podcast: Giles Andrews OBE, Zopa (Consult Hyperion), Rated: A

Giles Andrews was part of the team that founded Zopa in 2004. He became CEO in 2007 and moved to the role of Executive Chairman in 2015.

In this podcast, he talks about Zopa’s plans to launch a new, and more transparent, bank.

Listen to the podcast here.

MarketInvoice and Funding Circle represent P2P on fintech delivery panel (P2P Finance News), Rated: A

MARKETINVOICE and Funding Circle executives are among the industry experts selected for the Treasury-backed fintech delivery panel, which will aim to maintain the UK’s position as a global fintech hub.

Anil Stocker (pictured), chief executive of MarketInvoice and Martin Cook, general counsel at Funding Circle, are the only peer-to-peer lending professionals making part of the 24-strong panel, which will be run by Tech City UK.

Other fintech experts on the panel include: Michael Harte, group head of innovation at Barclays; Taavet Hinrikus, chief executive of TransferWise; Peter Smith, chief executive of Blockchain; and Jeff Lynn, chief executive of Seedrs.

Former NACFB chief launches SME funding platform (Credit Strategy), Rated: A

Tyler stood down as chief executive of NACFB in October 2016 after 11 years in the position and is now managing director of the online platform, FinancemyBusinessonline.

The platform, now live, provides a matching service between SMEs and lenders.

The platform has around 100 lenders registered including Paragon Bank, iwoca, Funding Circle and Aldermore.

Innovative Finance – a more interesting way to save? (Unbiased), Rated: B

The Innovative Finance ISA is a new breed of ISA, falling somewhere between a cash ISA and a stocks & shares ISA. It lets you loan your money out through peer-to-peer (P2P) lending and pay no tax on the interest.

The current ISA limit for 2016/17 is £15,240, split across all ISAs including cash, stocks & shares, Help-to-Buy, Lifetime ISA and Innovative Finance ISA. The total amount you pay into your ISAs each year can’t exceed £15,240 but if you want to, you can put the whole lot into one Innovative Finance ISA. From this April the ISA limit will rise to £20,000.

P2P platforms are required to have a provision fund to reimburse lenders for their potential losses. FCA regulation requires this fund to be at least £50,000 by April 2017, but the most reputable lenders have much larger funds totally millions of pounds.

Market Report: Direct Lending in the UK (BondMason), Rated: A

Since its inception in 2005, the UK’s P2P lending market has grown significantly. In 2016 there were 80+ Direct Lending platforms facilitating £3.2bn of lending, across many different types of borrowers from buy-to-let mortgages, property developers, SMEs, and consumers.

Here’s a snapshot;

  • The UK Direct Lending market is big and growing with plenty of room for growth
  • The big four platforms dominate but there are an increasing number of other operators
  • Regulation is improving but shouldn’t be relied upon to protect lenders’ returns
  • Attractive returns compared to other investment opportunities
  • Managing risk is key through choosing the right platforms, level of diversification, borrower, and loan selection
  • Services such as autobid and listed funds are increasingly popular for investors
  • The flight to quality will lead to a few platforms disclosing significant defaults in 2017 who may exit or scale back operations significantly
  • Why Direct Lending is likely to form a key component of any investor’s portfolio

Australia

Rise in personal loans dominated by peer to peer lending (Financial Buzz), Rated: AAA

Online marketplace lenders dominated personal loan applications during December 2016 quarter. The recent Veda credit agency report shows that the personal loan application numbers for this period were about 12.4 percent more compared to December 2015 quarter. The figures were taken from the most recent Quarterly Consumer Credit Demand Index.

There was a considerable rise in personal loan applications growth all over Australia. The Northern Territory and NSW led with a rise of anout 14.5 percent. Queensland was 13.1 percent. Victoria enjoyed a 12.5 percent increase in the growth rate. An upside of 7.7 percent was observed in consumer credit applications. Mortgage applications went up by 6.6 percent and credit card by three percent.

Your morning briefing (PaymentsSource), Rated: A

Sunglass pay: Wearables that can make payments are popping up in all sorts of garments, from gloves to rings, as developers look for what makes consumers comfortable. In Australia, sunglasses are getting a test. Business Insider reports Visa is testing the technology at Laneway, an upcoming music festival in five Australian cities. People will be able to make payments by tapping their sunglasses at checkout.(they take their glasses off, instead of bending over). Inamo, a local startup, developed the supporting technology, while Oberthur will handle risk management and Heritage Bank will be the deposit-taking institution.

India

FinTech startup SlicePay acquires P2P lending platform Trustio to enhance its credit offerings (The Tech Portal), Rated: A

SlicePay, a fintech startup which provides buy-now-pay-later kind of service to its users, has today announced that it has acquired Trustio, a NewDelhi-based peer-to-peer lending company.

The company has also recently tied up with a systemically important large NBFC which has a 2500+ crore loan book and are in the final stages of discussions with a publically traded NBFC that has 10,000+ cr book.

Mahindra Finance announces winners of Global Fintech Challenge with Matchi and KPMG India (Match.biz), Rated: A

Leading Indian NBFC, Mahindra Finance, is delighted to announce three winning solutions from their recent Global Fintech Challenge. All three solution providers will continue with Proof-of-Concept projects within Mahindra Finance with a view to roll out and implement their technologies.

Category 1 Theme: Real Time Credit Risk Assessment
Winner: EFL Global (USA)

Category 2 Theme: SME Risk Monitoring
Winner: NanobiData

Category 3 Theme: SME Cash Flow Management
Winner: Finansync (UK)

Asia

How Asia is making a new push into e-payments (The Asset), Rated: A

Malaysia in 2015 looked to revamp its bill payment system by introducing its JomPAY service. Operated by MyClear, a subsidiary of Bank Negara Malaysia the service looks to develop an open electronic bills payment platform for consumers, banks and billers. Currently the platform has 42 banks and over a 1000 businesses registered on the system.

The Vietnamese Ministry of Finance in 2015 instructed commercial banks to stop over-the-counter tax payments and work with tax agencies to create online portals to execute e-tax payments. Similarly the Indonesian Ministry of Finance last year launched its MPNG2 system, an automated tax management that aims to give taxpayers flexibility in payments and simplify the overall filing process.

India also last year saw the RBI (Reserve Bank of India) introduce its Unified Payments Interface (UPI) system, a tool that allows a user with multiple bank accounts to make payments via a single application. Currently the app is compatible with 29 banks including the likes of Axis Bank and ICICI Bank.

International

International P2P Lending Volumes January 2017 (P2P Banking), Rated: AAA

Funding Circle leads ahead of Zopa and Ratesetter. The total volume for the reported marketplaces adds up to 476 million Euro.

Zopa celebrated passing 2 billion pounds in loans lent since launch. That figure means  300,000 loans to 246,000 borrowers funded by around 75,000 lenders.

Further milestones reached this month were:

  • Harmoney passes 500 million NZD since inception
  • Assetz Capital passes 200 million GBP since inception
  • Twino passes 100 million EUR since inception

 

How fintech continues to dominate VC investment (The Asset), Rated: A

In 2015, as a share of global fintech capital investment, 56% was made in the US, with only 19% in China. However, as of September-end 2016, that number had dropped to 41% in the US, and more than doubled to 46% in China.

In the US, lending received 20% of VC investment in 2016, dropping down from 58% in 2015. Whereas VC investment in payments rose from 11% in 2015 to 14% in 2016; in blockchain 3% to 8%; in insurance 0% to 34%; and in wealth management, 0% to 7%.

Investment is shifting towards business-to-business based business models in the US, while China continues to focus on business-to-consumer based business models, as vast opportunities in consumer finance remain untapped by banks.

Authors:

George Popescu
Allen Taylor