Tuesday November 15 2016, Daily News Digest

Tuesday November 15 2016, Daily News Digest

News Comments Today’s main news: Prosper has new CEO. Today’s main analysis : 7 critical changes of the maturing FinTech sector. Today’s thought-provoking articles: UK’s FinTech sector is nervously waiting for the final Brexit outcome. Will EU regulate FinTech? Bank of Indonesia sets up a FinTech office. United States Prosper has new CEO GP:” This is a huge […]

Tuesday November 15 2016, Daily News Digest

News Comments

United States

United Kingdom

European Union

China

India

Asia

News Summary

United States

Prosper Marketplace Names David Kimball Chief Executive Officer (BusinessWire), Rated: AAA

Prosper Marketplace, a leading online marketplace for consumer credit, today announced that the company’s board of directors has named David Kimball Chief Executive Officer. Kimball succeeds Aaron Vermut and the appointment is effective December 1, 2016. Vermut has served as the CEO of Prosper Marketplace since March 2014 and will retain his seat on the company’s board of directors.

Bracing for seven critical changes as fintech matures (McKinsey&Company), Rated: AAA

For the past decade, fintech companies—technology firms that focus on financial products and services—have moved quickly, forcing incumbents to rethink their core business models and embrace digital innovations. But now, the fintech industry is itself maturing and entering a period of rapid change. Companies wondering how they will fit into this new era must first understand the forces that are pushing the changes.

While the industry will undoubtedly continue to expand as its customer base grows and investor appetite remains unsated, changes are imminent. Indeed, the very concept of what comprises fintech will shift. As the industry evolves, it will play a role well beyond financial products and services, individual companies will vie to become undisputed leaders by size and breadth, and ecosystems will develop that have a tight grip on customer loyalty.

This new fintech era is being shaped by changes in market conditions, new regulations, and shifts in consumer demands and behaviors.

Expanding scope

The scope of products and services offered by fintechs is expanding rapidly. The shift brings fintechs away from a focus on frontline activities to a broad engagement throughout the value chain.

 

Increasing diversity

The fintech industry is also becoming more diversified, with a wide variety of business models seen across geographies, segments, and technologies.

Improving collaboration

Collaborative partnerships will become increasingly important as fintechs seek scale and traditional financial institutions seek digital expertise.

Impending consolidation

As the industry continues to mature, fintechs will likely enter a period of consolidation, with larger players turning to mergers and acquisitions to satisfy their expansion goals.

Normalizing valuations

Valuations of fintechs are also normalizing as investors become more cautious and start favoring companies with proven track records.

Shifting regulations

Not surprising for a new industry, the regulatory regimes affecting fintechs are also evolving swiftly and will significantly influence how the industry develops. In many markets, regulators are playing a more proactive role in overseeing the industry, often encouraging its development, for instance by following a sandbox—or test and learn—approach that allows fintechs to experiment without impacting the entire financial system.

Emerging ecosystems

As digital offerings become more mature and interconnected, vast ecosystems will develop that span multiple industries. In many instances, fintechs will become submerged in these ecosystems, representing, like many others, a component of a much broader digital network.

StreetShares Foundation and JPMorgan Chase Partner to Give Veterans $ 10,000 in Monthly Business Awards (PR Newswire), Rated: AAA

StreetShares, the lending and investing community for veterans and their supporters and creators of the Veteran Business Bond, recently announced the formation of the StreetShares Foundation. The goal of the StreetShares Foundation is to inspire, educate, and support veteran small business owners. JPMorgan Chase & Co. is partnering with the StreetShares Foundation to provide up to $10,000 each month in Veteran Small Business Awards.

The StreetShares Foundation plans to give three Veteran Small Business Awardseach month to eligible veteran and military-spouse small business owners:

  • First Place – $5,000
  • Second Place – $3,000
  • Third Place – $2,000

One unique feature of the new Veteran Small Business Award program is the focus on public participation. StreetShares Foundation encourages everyone who supports veterans and entrepreneurship to participate in voting for their favorite veteran business at StreetShares.com/Foundation. Finalists will be presented for public vote each month.

SEC Should Take Lead on Regulating Fintech, GOP Commissioner Says (Morning Consult), Rated: A

The Securities and Exchange Commission should play the leading role in regulating financial technology, said Commissioner Michael Piwowar, the lone Republican on the panel.

The statement, made at the agency’s fintech forum on Monday, could set the stage for a turf battle among agencies like the SEC, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau as they grapple with how to police the emerging industry. The OCC is weighing a national charter for fintech firms and said it will release a paper on the matter by the end of the year.

Real Estate Marketplace Roofstock Raises $ 20m Series B (Biz Journals), Rated: A

Roofstock (www.roofstock.com), the leading online marketplace and transaction platform in the $2 trillion single-family rental (SFR) sector, today announced $20 million in Series B financing led by Lightspeed Venture Partners, with substantial participation from existing investors including Khosla Ventures, Bain Capital Ventures, Nyca Partners, QED Investors and SV Angel. Roofstock has raised a total of $33.25 million in equity since the company’s formation in May of 2015.

The company has developed a proprietary marketplace for investors to find, evaluate and invest in single-family rentals online with tools and transparency never before available to either retail or institutional investors. Since its public launch in March of this year, the company has expanded to serve 10 markets, engaged thousands of registered users, grown its transaction volume by 400% from Q2 to Q3, and significantly expanded its inventory and seller network.

Robo-advisers sound off to SEC about rule changes for automated advice (Investment News), Rated: A

The SEC hosted a forum of financial technology experts Monday to discuss the impact of innovations in investment advice and other financial services. SEC staff is considering whether further guidance or even new rules are needed to protect investors.

Automated-advice providers, often called robo-advisers, register with the Securities and Exchange Commission as investment advisers and are subject to the Investment Advisers Act, which requires clients’ interests to come first when providing recommendations, among other standards.

Regulators have questions about how that happens when recommendations are generated by algorithms, and in May the SEC and the Financial Industry Regulatory Authority Inc. alerted investors to the risks associated with using a digital provider over a human.

iCapital Network Marks Two Year Anniversary of Platform Launch (Yahoo! Sports), Rated: B

iCapital Network today announced it has surpassed $2 billion in platform assets since the launch of its online alternative investment platform two years ago. The firm’s proprietary technology has helped to rapidly democratize private investments such as private equity and hedge funds by connecting individual investors and their advisors to asset managers through a streamlined and secure digital interface.

1031 Crowdfunding, LLC Ranked Among Top 10 Real Estate Crowdfunding Sites (PR Newswire), Rated: B

1031 Crowdfunding, LLC announced today that the Company moved up in the rankings for the 2016 Top 100+ Real Estate Crowdfunding Sites to #10 overall and maintained its position as #1 ranked Real Estate Crowdfunding site for 1031 Exchanges.

United Kingdom

THE U.K.’S FINTECH SECTOR IS WAITING NERVOUSLY FOR THE BREXIT OUTCOME (Newsweek), Rated: AAA

This week, one arm of the British government’s post-Brexit outreach strategy extends to Singapore. A mission organized by the Department for International Trade, one of two new bodies set up by Theresa May to handle the U.K.’s post-Brexit future, is heading to the Asian city-state, bringing in tow nine companies from Britain’s booming FinTech (financial technology) sector, as well as Simon Kirby, a Treasury minister.

The government is pitching it as a landmark event. But this is just the first round in a long fight.  Brexit could well mean an end to the free movement of people from Europe—something highly prized by talent-hungry technology businesses—and could threaten the “passporting” rights that allow British financial services businesses to ply their trade throughout the bloc. It has some work to do to keep the sector strong.

But now, like everybody else, FinTech businesses are waiting to find out what Brexit means for Britain. They do so with some trepidation: of 12 leading FinTech companies that Newsweek surveyed for this piece, all but one were concerned about the referendum vote’s impact on their business, and 10 rated the continuation of passporting rights as either vital or important for their future success.

Fintech Platform Revenues for Lending & Financing to Exceed $ 10bn by 2020 (PR Newswire), Rated: A

Juniper Research has found that Fintech platform revenues to support lending and financing are set to reach $10.5 billion globally by 2020, doubling the $5.2 billionexpected this year. The analyst house claimed that growth would be driven by a combination of factors including:

  • an acceleration in P2P (peer to peer) lending;
  • crowdfunding becoming a viable alternative to traditional lending mechanisms;
  • the deployment of next generation analytics platforms.

The new study, Fintech Futures: Market Disruption, Leading Innovators & Emerging Opportunities 2016-2021, argued that, in the absence of credit checking bureaus in emerging markets, applicants’ social media activity will be a deciding factor for their loan applications, with suppliers developing equivalents to credit scores so that lenders can gauge their risk exposure.

OFF3R Relaunches Alternative Asset Investment App with Majority of UK Platforms (Crowdfund Insider), Rated: A

OFF3R has relaunched its updated site that allows investors to access peer to peer lending, property / equity crowdfunding and managed investment platforms in a single application. The multi-channel platform was said to have received a “total overhaul” for both its desktop and mobile version.

OFF3R was initially focussed on the equity crowdfunding sector. The new marketplace will allow investors to sign up for free and subsequently discover 100’s of investment opportunities from some of the leading alternative investment platforms in the UK and Europe.

Lossmaking online wealth manager Nutmeg raises £30m (Financial Times), Rated: A

Nutmeg, the lossmaking online wealth manager, has raised £30m from international investors in a deal that underscores the belief that low-cost “robo-advisers” will reshape financial advice even though firms have had limited success so far.

The London-based company, which posted pre-tax lossesof £9m this year, has attracted £24m from Convoy, Hong Kong’s largest listed financial advisory firm, as well as £6m from its existing backers. Nutmeg said it was considering using the funds to expand into Asia.

The funding round is the largest in a UK fintech company since the country voted to leave the EU. It doubles the total investment in Nutmeg, which offers low-cost automated online advice and was launched in 2011.

Alternative investment ops gaining pace, OFF3R (IBS Intelligence), Rated: A

Equity crowdfunding platforms raised £216.25 million and P2P facilitated a combined lending of £2.6 billion over the last year, according to OFF3R research. The marketplace for alternative investments has launched an index outlining month-on-month performances of equity crowdfunding and P2P lending platforms. It analysed the likes of Seedrs, Crowdcube, Syndicate Room, Angels Den, Envestors and The House Crowd. The P2P lending platforms examined were Zopa, Landbay, RateSetter, ArchOver, Marketinvoice, Lending Works, Funding Circle and Thin Cats.

Sharia-compliant P2P lenders could enter market, banker reveals (Bridging & Commercial), Rated: A

Speaking to Bridging & Commercial, Maisam Fazal, head of commercial finance at Al Rayan Bank, admitted that there may be a gap in the market for alternative finance such as P2P lending.

“I know I have a lot of contacts working on [Sharia-compliant P2P] right now, trying to get this on the market.

Despite welcoming more firms to the Islamic finance market, Maisam suggested that rates as low as Al Rayan’s could make it off-putting for potential new entrants.

Finstar appoints CEO to oversee new fintech investment unit (Finextra), Rated: B

Private equity outfit Finstar Financial has appointed Mark Ruddock from Wonga to oversee a new corporate venture group that will look for opportunities in the fintech space.

Ruddock has been appointed as CEO of FinstarLabs, a special-purpose investment vehicle aimed at expanding the PE firm’s fintech portfolio.

European Union

EU Commission Puts Fintech Review on Agenda for 2017 (Fortune), Rated: AAA

The European Commission aims to propose recommendations for financial technology firms early next year, taking a first step towards assessing the risks and rewards presented by a sector that is shaking up traditional banking.

Announcing an internal task force meant to propose recommendations for the sector in the first half of next year, EU financial services commissioner Valdis Dombrovskis said technological innovation in finance was a development to be encouraged.

The Commission did not clarify whether fully-fledged regulation is on the cards, but some regulatory changes appear likely.

Vattenfall: Anna Borg Appointed Senior Vice President for Business Area Markets (BusinessWire), Rated: A

Anna Borg, currently Senior Vice President and head of Klarna’s commercial operations in the Nordics, has been appointed Senior Vice President of Vattenfall’s Business Area Markets. Anna Borg will be a member of Vattenfall’s Executive Group Management and report directly to President and CEO Magnus Hall. She will take up her new position 1 April, 2017.

During the past two years Anna Borg has headed Klarna’s, a leading European fin tech player, online buying and payment solutions business in the Nordics. Before that she spent 18 years at Vattenfall, holding numerous management positions, including heading the business development of the market and trading operations.

Manage your own property portfolio with Housers (The Olive Press), Rated: A

3. In what way is real estate crowdfunding and Housers different?
In regular real-estate investment, your money is invested in either one or a very few properties and you need large amounts to be able to participate in this market. Via Housers, everybody can participate in the real estate market for a minimum investment of just €50, and in up to as many properties as they like.

5. Why should people choose this way to invest?
It allows them to diversify their investment, thus reducing the risks. Because Housers manages the whole process, from purchase to lease to sale, the customer doesn’t have to worry about paperwork, tenants etc.

8. How do people make money?
Housers make money every month when dividends are paid, based on the rental income of each property; or, when the projected sales price is reached, they also share in the capital gains that the property has generated.

China

The Fintech Files: Will P2P Disrupt the Banks? (CFA Institute), Rated: A

Lu.com (陆金所) is one of the world’s largest players in the P2P market. Recently, I sat down with Gregory Gibb, CEO and chairman of Lu.com, in his office in Shanghai to discuss how the industry will evolve.

Is P2P a big enough market for financial institutions to enter?

They differ a lot by location. In the United States, the consumer market’s already been dominated by the banks. Lending Club and the like are eight or nine years into the business but still not very big.

If you go to places like India, Indonesia, or China, where . . . there’s a huge amount of consumer-borrowing need, there’s also a huge amount of retail investing need — and in the case of China, where the banks are 80%–90% non-retail because there are easier places to make money and it’s more socially rewarding to be a corporate banker than a retail banker — the market’s going to be big because the traditional players aren’t going to grab the consumer lending as fast. So the answer differs a lot in terms of scale in different countries.

Sounds like P2P can grow to be quite big in markets like China if it simply captures a slice of the pie.

The peer-to-peer market in China today is just north of USD$100 billion in loans outstanding. To say that the market will be a trillion US dollars within the next seven to 10 years is not a crazy number.

So why aren’t the banks going into P2P?

There is absolutely nothing stopping a bank from doing this. But why would a bank do P2P?

The funding cost is 1%, 2%, 3% on the deposit side and the credit card APR is 18%. Then they are making 15–16 points in gross margin. And if they went into a peer-to-peer model, they may have to give the investors 5% or 6%. So they’ve lost a couple hundred basis points of profit.

Fintech advances prompt lenders to become start up friendly (South China Morning Post), Rated: A

Finding the right partners with which to work and fostering an environment for fintech collaboration are posing challenges for lenders, as the relationship between big global banks and emerging financial technology companies shifts away from competition to more of collaboration.

Many large global banks in their current form are not easily compatible with agile and innovative financial technology start ups, due to their complex existing systems and legacy issues. Some managers responsible for working with fintech companies at financial institutions, speaking privately, bewailed their more senior colleagues’ inability to make the necessary changes to the way in which they operate.

“Most of the fintech companies are trying to sell their services to or partner with existing institutions,” said James Lloyd, fintech leader at EY. “But that does not mean that banks can forget the 5 per cent that are trying to compete with them,” he said.

It is for both this reason, and doubts about what their rivals might be doing, that banks are still concerned about fintech.

India

Here’s why India’s fintech sector could boom (Business Insider), Rated: A

The government made the surprise move in a bid to combat “black money,” or currency that is unaccounted for, and counterfeit currency. Consumers have until December 30 to exchange their R500 notes for new editions with enhanced security features, while limited numbers of new R2,000 ($39.70) notes have been issued. A replacement R1,000 note will be introduced in “due course,”

Asia

BI’s new ‘fintech office’ to ensure both innovation, security (The Jakarta Post), Rated: AAA

Bank Indonesia (BI) on Monday officially launched a financial technology (fintech) office to monitor the services offered by the young and thriving industry so as to ensure innovation continues and consumers simultaneously enjoy security.

BI governor Agus Martowardojo described the new office as an advisory hub for all fintech companies operating in Indonesia and as a facilitator to help the industry expand further and ensure greater financial inclusion in a country where half the population does not have access to banks.

As part of its office, BI plans to monitor the development of fintech companies through its regulatory sandbox, a sort of laboratory where ideas on innovation are shared between regulators and fintech players so they can be tested and evaluated with the central bank’s supervision before they go commercial.

B2B FinTech Startup MC Payment Grabs Funding (PYMNTS), Rated: B

Singapore-based B2B FinTech firm MC Payment announced a new funding round, as well as global expansion, late last week.

Reports Friday (Nov. 11) said MC Payment raised $3.5 million from an investment firm in Thailand, as well as participation from Aura Funds Management, tryb Capital and Perle Ventures. The funds have also allowed the company to enter the Thailand market, reports said.

Authors:

George Popescu
Allen Taylor