Wednesday January 24 2018, Daily News Digest

InsurTech

News Comments Today’s main news: SoFi hires Noto to be CEO. StreetShares secures $23M in equity to reach military, veteran market. Zopa fills positions for bank launch. Dianrong raises $70M. Yirendai signs onto Internet Finance Industry Credit Information Sharing Platform. Tera Funding sets Korean fundraising record. Today’s main analysis: FT Partners publishes 2017 InsurTech Almanac (a must-read). Today’s thought-provoking articles: […]

InsurTech

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Lending Times News

News Summary

United States

SoFi Names Anthony Noto Chief Executive Officer (SoFi), Rated: AAA

SoFi today announced that its Board of Directors has named Anthony Noto as chief executive officer and a director, effective March 1.

Twittter executive leaves to run SoFi (SF Gate), Rated: A

In Noto, SoFi has chosen a fast-rising executive in the tech industry. Noto, 49, was one of the most respected bankers at Goldman Sachs before becoming the chief financial officer of the National Football League and then Twitter.

Twitter dips after a key executive leaves for online lending startup SoFi (Business Insider), Rated: A

  • Shares of Twitter slid on Tuesday morning after the online lending startup SoFi announced that Anthony Noto, Twitter’s chief operating officer, will be joining the company as its new CEO, effective March 1. 
  • Twitter has suffered from several departures of key executives in the past two years as the company struggles to bring value to shareholders.
Source: Business Insider

SoFi’s Incoming CEO Brings IPO Experience to a Troubled FinTech (Bloomberg), Rated: AAA

Noto, who worked on technology, media and telecom deals at Goldman Sachs Group Inc. before joining Twitter in 2014, brings to the job a background in tech and finance. Beyond Twitter’s nascent revival, his turnaround abilities are largely untested. But given his history of taking companies public — including Twitter — a SoFi IPO is very much a possibility, according to people familiar with the situation. Furthermore, they say, it’ll be nice to have an adult in the room after all the recent turmoil.

SoFi Wealth, launched last year and harbored ambitions to quickly manage $100 million in assets, Bloomberg News reported in October. It grew slowly until last quarter, when it tripled its assets from September to $42.3 million as of Jan. 18, spokesman Jim Prosser said. The average account holds about $4,300. Other digital wealth startups have north of $10 billion under management.

FT Partners Research Publishes 2017 InsurTech Almanac (FT Partners), Rated: AAA

Highlights of the 2017 Almanac:

  • 2017 was a very active year for the InsurTech sector globally, with the most financings ever (over 200) and more than $2 billion in financing volume
  • While the total announced financing dollar volume for 2017 was lower than in the prior two years, when excluding rounds over $50 million, the volume reached a record high of approximately $1.3 billion
  • Of the four largest financings this year, two were in the Online Health Insurance space (Bright Health and Clover Health), one was in the Telematics space (Nauto) and one was in Online P&C Insurance (Lemonade)
  • 2017 also featured another wave of mid-range to larger financing rounds for InsurTech companies founded in the last several years, including Next Insurance’s $35 mm Series A, The Zebra’s $40 mm Series B, Health IQ’s $35 mm Series C, PolicyGenius’ $30 mm Series C and Trov’s $45 mm Series D
  • Europe had significant increases in financing activity, the largest out of any region this year — financing volume and deal count both grew by more than 2x; the region also recorded its largest InsurTech financing ever: BIMA’s $107 million raise led by Allianz X, which was the fifth largest financing globally in 2017
  • Among the cohort of InsurTech companies founded since 2010, this year marked two milestones:
    • First IPO: China-based ZhongAn (SEHK:6060) raised approximately $1.5 billion
    • Largest acquisition: Guidewire acquired Cyence for $275 million
Source: FT Partners

Download and read the full report here.

California Insurtech Hippo Secures $ 25 Million Through Series B Financing Round (Crowdfund Insider), Rated: A

Hippo, the California-based insurtech company that is transforming home insurance for savvy homeowners, announced on Monday it secured $25 million in Series B funding round, which was led by Comcast Ventures and Fifth Wall. The investment comes less than two weeks after Hippo announced it formed a strategic partnership with Spinnaker Insurance Company.

OnDeck Announces Date of Fourth Quarter and Full Year 2017 Earnings Conference Call (OnDeck), Rated: B

OnDeck (NYSE:ONDK), the leader in online lending for small business, will report its fourth quarter and full year 2017 financial results on Tuesday, February 13, at approximately 7:00 a.m. EST. The company will host a conference call to discuss the results at 8:00 a.m. EST that same day.

The conference call will be webcast live on the company’s Investor Relations website or listeners can access the call toll free by dialing (833) 227-5836 for calls within the U.S., or by dialing (647) 689-4063 for international calls. The Conference ID passcode is 5468078.

StreetShares Secures $ 23 Million Equity Funding to Scale for the Military and Veteran Market (StreetShares Email), Rated: AAA

StreetShares, Inc., the leading small business funding and government contract financing company serving the military and veteran market, announced today it has completed its Series B funding round, raising $23 million in fresh equity capital. The Series B round was led by a $20 million investment from Rotunda Capital Partners, LLC, and included an additional $3 million from existing investors, including veteran-focused venture firm, Stony Lonesome Group.

AutoGravity Milestone: Exceeds $ 2 Billion in Finance Amount Request in 2017 (Crowdfund Insider), Rated: A

AutoGravity, a California-based Fintech on a mission to transform car shopping and financing, announced last week it surpassed $2 billion in finance amount requested in 2017.

Central Pacific Bank adds Elevate Credit executive to board of directors (Pacific Business News), Rated: A

Honolulu-based Central Pacific Financial Corp. has appointed Christopher Lutes as director of the boards of CPF and Central Pacific Bank.

Lutes has been the chief financial officer of Elevate Credit Inc. and its predecessor company, which specializes in tech-enabled online credit solutions, since 2007.

LoanDepot to offer agent, contractor referrals to mortgage shoppers (The Orange County Register), Rated: A

Borrowers signing up for a mortgage through LoanDepot soon can get real estate agent referrals from the online lender as well.

And later this year, people getting home-improvement loans will be able to get the names of contractors, architects, roofers and other professionals.

loanDepot Expands mello Brand (PR Newswire), Rated: A

LD Holdings Group, LLC, parent company of loanDepot, the nation’s second largest non-bank consumer lender, today announced continued expansion beyond its profitable mortgage and personal loan businesses.  In Q1, a newly formed venture, mello Home, will connect pre-approved homebuyers with verified real estate agents in their local market, and help consumers find and hire home improvement and other pros.

Fintech startup wants to help advisers find and sell muni bonds (InvestmentNews), Rated: A

It’s like Zillow, but for bonds.

That’s the idea behind Bond Navigator, a cloud-based digital marketplace for advisers to find and evaluate municipal bonds, that launched Tuesday from startup 280 CapMarkets.

Amazon, PayPal to head to Vegas ABS bash (GlobalCapital), Rated: A

Amazon has already tapped the securitization markets as part of a plan to shift the risk of its business lending programme off its balance sheet.

Amazon has stated in previous quarterly reports that it intends to transfer more of the risk of its seller financing programme to third parties.

Similarly, PayPal has expressed interest in funding its credit portfolio through third parties, including bank lending, securitization, private equity and sovereign wealth funds, although the company told GlobalCapital in August that this would unlikely be a near term project.

Acorns wants to bring investing and education together (Tearsheet), Rated: A

Many financial services companies, both startups and incumbents, talk about the importance of customers’ financial education but how they integrate it into their own offerings often manifests as no more than a dedicated content marketing section or blog. Acorns itself has an online magazine called Grow that features news, financial how-tos and interviews with celebrities like Kevin Durant, Ian Kahn and Tony Robbins.

First Bank Goes Big into Peer To Peer Lending, Launches “Cent” (Business Insider), Rated: A

For personal banking customers of First Bank, the largest community bank headquartered in North Carolina, transferring money to family and friends is now as simple as hitting “Cent.”

On January 22, First Bank launched Cent, its new quick-money transfer tool, allowing personal banking users of the bank’s mobile banking application to send money to anyone, anytime, anywhere in the U.S., regardless of if the recipient banks with First Bank or not. And there are no fees.

Marketplace Lending In 2018: A DIY Mindset (mondaq), Rated: A

There is no doubt marketplace lending, by offering speed and flexibility not historically seen in traditional banking, has done its part to foster the “do it yourself” (DIY) era.

The industry’s rapid growth reflects in part the entry of more than 100 new players in the market in less than a decade.

6 Business Loan Scams and How to Spot Them (AllBusiness), Rated: A

1. The peer lending scam

Peer-to-peer lending has become one of the most important sources of online financing. Unfortunately, there are some shadowy operators out there, using Facebook Messenger and other less traditional avenues to hook in victims.

The scam works like this: You’ll be contacted out of the blue and offered peer-to-peer financing, then asked to pay an arrangement fee or fork out for background checks. You’ll never see the promised cash and you could lose quite a bit of money, as well as data that can be used for identity theft.

4. The credit repair scam

Most young businesses have an inadequate credit score. It’s a simple fact of life. However, there are plenty of predators out there who’ll be keen to convince you that they have the expertise and tools to transform your score—in return for a hefty fee, of course.

5. The loan broker scam

Loan brokers exist to identify the right products for your business, make introductions to lenders, and prepare the paperwork to ensure a smooth process. There are plenty of legitimate and professional brokers, who get paid a commission from lenders for arranging loans; unfortunately, there are also quite a few sharks, who charge upfront fees for the same service.

2018 Predictions and Pitfalls In Finance and Investing (AlleyWatch), Rated: A

Online and Alternative Investing Will Remain Strong: The amount of investors using online investing and alternative options will continue to remain strong, especially for both Baby Boomer and Millennial investors. Online investing exposes investors to a larger number of companies driving innovation, and, many online investors are starting to realize an ROI from their online investing activities. In spring 2017, the number of people who lived in a household that used an online investing/stock trading service within the last 12 months amounted to 15.79 million.

LendingTree Announces Top Customer-Rated Lenders by Loan Product for Q4 2017 (PR Newswire), Rated: B

LendingTree®, the nation’s leading online loan marketplace, today released its quarterly list of the top customer-rated lenders on its network based on actual customer reviews for the fourth quarter of 2017. The list features the top lenders in multiple loan product categories, including Mortgages, Personal Loans, Business Loans and Auto Loans, all of which are included in LendingTree’s online loan marketplace.

Mortgage Category

#1 Winner:  LenderFi, Inc.

Personal Loans Category

#1 Winner: Upgrade

Business Loans Category

#1 Winner: Seek Capital

Auto Loans Category

#1 Winner: RefiJet

Don’t Let Payday Lenders Off the Hook (Bloomberg), Rated: A

Payday lending can be a useful service. A two-week loan of $500 at 400 percent annualized interest can make sense if, say, you need to fix your truck to get to work. Unfortunately, the industry has long made much of its money by trapping customers in a series of consecutive loans that can end up costing many times the amount borrowed. A patchwork of state laws has done little to combat such practices.

CFPB Drops Investigation Into Payday Lender That Contributed To Mick Mulvaney’s Campaigns (International Business Times), Rated: A

Payday lender World Acceptance Corporation announced in a press releaseMonday that it received a letter from the CFPB stating that the financial watchdog had closed its nearly four-year investigation into the company’s marketing and lending practices. The company, which is headquartered in South Carolina, has given at least $4,500 in campaign donations to Mulvaney, who represented South Carolina in the House for six years before becoming President Donald Trump’s budget director last year.

Bye, bye, boomers — banks are looking toward millennials (Chicago Tribune), Rated: A

Sorry, boomers, but the world of banking and insurance isn’t so interested in you anymore. You’re getting too old to buy insurance and too conservative with your investments. And your time horizons are too short to be very profitable to the investment world. The financial services industry is aiming at millennials now.

–Six in 10 millennials are hesitant to discuss their situation with friends because they are embarrassed that they make less money or are ashamed of poor financial decision in their past.

–Only 12 percent of millennials feel very prepared for their financial future.

–Only one-third of millennials feel like they make enough to pay for bills and also save for the future.

Todd Ruppert Joins Money360 Board of Advisors (Business Insider), Rated: B

Money360, a technology-enabled direct lender specializing in commercial real estate loans, today announced that effective immediately, Todd Ruppert, former CEO and president of T. Rowe Price Global Investment Services, has joined the company’s Board of Advisors.

Ten Ways Young Can People Build A Strong Credit Record (Forbes), Rated: B

According to a report by WalletHub, young people struggle with low credit scores partially because they don’t have the time behind them to establish wealth and experience.

  1. Set Up Automatic Payments
  2. Get A Low-Limit Credit Card – Charging small items to a credit card and then paying it off in full every month builds credit in no time. You can find offers for these at creditcards.com and similar sites, with many offering cards with a $300 limit or so.
  3. Piggyback Off Of Others First – By becoming an authorized user on someone’s credit card, you can start building credit from their payments.
  4. Build A Credit History – It is not uncommon to get a 0% or 2% auto loan these days, and this way of building credit history is brilliant.
  5. Minimize Unsecured Debt
United Kingdom

Zopa expands executive team ahead of bank launch (Finextra), Rated: AAA

P2P lender Zopa has begun building the executive team for the launch of its new challenger bank later this year, appointing a CFO, chief risk officer and chief customer officer.

Chief financial officer Steve Hulme joins from Tandem Money where he was CFO for the last two years. Before Tandem, Hulme served as CFO for PayPal’s global credit business and as CFO for Capital One’s UK and Canadian business.

He will be joined by former TSB man Phillip Dransfield as chief risk officer. Dransfield has a 20-year track record in risk management taking in two of the counttry’s largest high street banks.

The left-field appointment of chief marketing officer goes to Clare Gambardella from health and fitness brand Virgin Active.

How UK fintech startups are preparing for open banking (ComputerWorldUK), Rated: AAA

Major banks are scrambling fast to not only comply with the regulation by opening up their APIs, but are also looking to leverage the new open landscape to separate themselves from their competitors and avoid being bitten by these fintech startups.

Take HSBC UK, which has proved itself to be an early mover when it comes to PSD2 by announcing a new beta app which will allow customers to see all of their accounts on one screen, even if they are with a rival bank.

However, UK challenger banks like Monzo and Starling, as well as some other fintech startups listed below, have been working towards the idea of open banking for some time now.

Monzo

According to a blog post by Simon Vans-Colina, an engineer at Monzo, the new API, which they are calling the AIS API, “will be made available to particular companies, that have been granted authorisation as AISPs.

Iwoca

As CEO Christoph Rieche explained to our sister site Techworld, real-time access to customers’ transactional data, which the banks have traditionally held onto for current accounts, is very valuable to his company.

Chip

“In a utopia consumers can start to grant affordability criteria to a lender, provide transaction data to a savings mechanism like Chip, or income data to a mortgage lender,” he said. “You can choose exactly which data you want which third parties to access, so it puts control into the customer’s hands.”

TrueLayer

Founder Francesco Simoneschi likes to compare TrueLayer to Twilio or Stripe, two companies that provide simple, secure and regulated access to core infrastructure (be it telco networks or payments infrastructure, respectively) through a core API.

So TrueLayer sits between the new breed of fintech companies looking to deliver value from newly opened customer financial data, and underlying banking infrastructure, charging a small fee for access to the API.

Emma

Cofounder Edoardo Moreni wrote in a blog post at the time: “Emma is currently building the banking app for millennials (iOS and Android), a mobile-only solution that helps consumers avoid overdrafts, find and cancel subscriptions, track debt and save money.

Debt tracker Emma integrates with Monzo (AltFi), Rated: A

After receiving its FCA approval last week as a Registered Account Information Services Provider (RAISP), subscriptions and debt tracking app Emma has now announced its first official integration with digital bank Monzo.

SME bosses aware of P2P lending but cautious about using it (P2P Finance News), Rated: A

Research among 200 SMEs by recruitment specialist Tindall Perry found while 74 per cent of finance directors describe their knowledge of alternative finance as average or above, only a quarter suggested that they were comfortable with accessing crowdfunding, with P2P lending also scoring less than 50 per cent.

In contrast, 85 per cent of companies said that they understood how best to access asset-based lending, while invoice finance, trade finance and venture capital all saw a positive response rate of between 55 and 75 per cent.

Top bankers warn of financial stability threats amid the calm (City A.M.), Rated: B

Speaking at the World Economic Forum, the annual gathering of the global elite in the Swiss ski resort, she said: “We have far fewer tools to deal with any event that happens.” Richards predicted an upset could occur “somewhere where none of us are looking”, and highlighted peer-to-peer lending as an example.

Current financial conditions have echoes of the pre-crisis era, according to Jes Staley, chief executive of Barclays, speaking at the same event. While he said he believes banks are much less of a threat to stability than a decade ago, he warned that current benign conditions may not last.

China

Dianrong Increases Series D Round Funding by US$ 70 Million (Business Insider), Rated: AAA

Dianrong today announced additional Series D round funding of US$70 million that was led by ORIX Asia Capital Limited, a wholly-owned investment vehicle of ORIX Corporation, and included CLSA, the overseas platform of CITIC Securities, China’s largest investment bank, which in turn is a part of CITIC Group, one of China’s largest conglomerates.

Japan’s Orix invests $ 60 mln in Chinese P2P lender Dianrong (Reuters), Rated: A

Orix Corp has invested $60 million in peer-to-peer lending platform Dianrong, in what is the Japanese financial firm’s first investment in a Chinese fintech venture as it looks to tap into the fast-expanding sector, sources said.

Yirendai Connects to NIFA’s Internet Finance Industry Credit Information Sharing Platform (PR Newswire), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a fintech company in China, announced today that it has connected to the Internet Finance Industry Credit Information Sharing Platform (“the Platform”) established by the National Internet Finance Association of China (“NIFA”). The Platform was established to serve as an industry wide credit data sharing database in aims of reducing credit risk, improving the credit environment and promoting the healthy development of the internet finance industry. Currently, all leading online lending platforms are required to upload their operating credit data to the Platform’s database and members can only make manual inquiries on the Platform through its webpage. Yirendai has been selected by NIFA to participate in a pilot project to enable automatic queries and the Company expects to launch an automated query function in its system shortly.

European Union

Banks and Fintechs Are Duelling In a ‘War For Talent’ (Bloomberg), Rated: AAA

Payments company GoCardless Ltd., which employs 170 people in London, will open a Paris office in February, said chief product and technology officer Carlos Gonzalez-Cadenas. Online lender LendInvest Ltd. said it will make a “concerted effort” to hire additional engineers in London this year, while Salesforce.com Inc.-backed software company Anaplan Inc. says hiring engineering talent is its current priority.

Faes said about 30 to 40 percent of its hires come from major financial institutions, adding that 100 percent of the team’s small risk and compliance team came from banks. For MarketInvoice Ltd., another British online lender, about three-quarters of its 85 employees — roughly a third of which are software engineers and data scientists — came from a large corporate in the financial services or accountancy space, said CEO and co-founder Anil Stocker.

Europe’s fintech industry, which includes challenger banks and online-only lenders, has rapidly expanded over the past 10 years. Traditional financial institutions have faced intense competition as a result, with former Barclays Plc CEO Antony Jenkins saying in July last year that banks could face obsolescence in five to 15 years.

How Adyen Became a $ 2.3bn Payments Company (Forbes), Rated: A

According to a report published in September last year by Innovate Finance and Magister Advisers, VCs poured around $8bn into fintech startups and early stage companies across the continent between 2010 and 2017 and over the course of that period, deal sizes rose significantly. In London – generally considered to be Europe’s Fintech Hub – figures published in January  by London and Partners found that the UK’s fintech sector attracted £1.24bn in 2017 alone.

Established in 2006,  the Amsterdam-based company is currently valued at around $2.3bn and has has built a portfolio of more than 4,000  clients, including Netflix, Facebook, Uber and Spotify, plus retailers such as River Island and Superdry.

International

Cross Border Funds Transfer (CBFT) using Hyperledger Fabric Blockchain (LinkedIn), Rated: AAA

Hyperledger Fabric is a permissioned blockchain platform contributed by IBM and provides plug-and-play modular blockchain components. You can see the commit history visualization of fabric project. Fabric runs chaincode which is comparable to Ethereum’s smart contracts. The consensus protocol is pluggable.

Transaction Flow Let’s see how nodes work together to execute a transaction. For now, let’s assume that the chaincode is already installed on the Peers.

  • Step 1: Transaction requests are proposed by a client. The client must be connected to the required number of peers according to the endorsement policy. A proposed Transaction is forwarded to Peers for Endorsement.
  • Step 2: Each endorsing peer simulates and validates the transaction. Peers reply with their Endorsement and certificate if they agree that the transaction is permitted.
  • Step 3: The client receives results from different Peers and can thus verify agreement among the Peers. Upon verification, the client forwards the transaction to the OS.
  • Step 4: Determining a well-ordered sequence of transactions is the task of the Ordering Service (OS). The OS generates transaction blocks containing validated transactions in the order they are deemed to have occurred, writes them to the ledger and then broadcasts them to all peers that a new set of blocks are now available on the ledger.
Source: Raj M Shimpi

The disappointing arrival of Open Banking … and the optimistic future (The Finanser), Rated: A

All well and good but, in a move that I am fairly sure was carefully orchestrated by the banking community, nearly all of the mainstream media greeted the launch of Open Banking with fear and scaremongering.

Nevertheless, the FinTech community are far more advocates of the new regime:

Note that to find the positive spin on Open Banking, I’ve had to seek out more business or niche news channels than the doomsayers of the mainstream consumer media.

Nasdaq-listed Longfin to open up Ziddu smart contracts to P2P lending (P2P Finance News), Rated: A

GLOBAL fintech group Longfin Corp is planning to make its Ziddu cryptocurrency smart contracts available for peer-to-peer lending.

Ziddu.com provides smart contracts which are available on cryptocurrency Ethereum’s blockchain and can be used as alternative finance solutions within trade finance and FX markets, without the need for a middleman or underwriter.

Building the World’s Most Inclusive Banking Service (Medium), Rated: A

Currently, there are over 2 billion people worldwide who find it difficult to access traditional banking services, often because they are new to the country or do not qualify for credit. I, too, was one of those people. When I arrived in the UK, I didn’t have a proof of address and credit history required to open a bank account, and just like many others in a similar position, I was left in a ridiculous catch-22 situation. I needed a bank account to get a job and a place to live but, in order to get a bank account, I was required to have a place to live and a job.

Monese is laying the foundation of how banks will work in the future by bringing the accessibility and convenience to levels that weren’t possible just a few short years ago. You can now bank locally in 20 different countries, in a matter of a few minutes — all you need is a mobile phone and your passport. You can literally open an account in your home country or an international IBAN in another country whilst standing in a supermarket queue.

Over 270,000 people have signed up to Monese and every day 1,000 more are joining us.

Source: Monese

$ 10 million ICO Success Karma Announces P2P Lending Access, aExchange Listing of KRM Token (The Merkle), Rated: A

Fresh from the success of a well-received ICO that raised $10 million, blockchain start up Karma has now announced open access to its peer-to-peer (P2P) lending platform via the use of its native KRM token, which also began trading on CoinLink exchange on January 11th, 2018.

India

NeoGrowth Credit secures funding of Rs300cr from LeapFrog Investments and others (Medianama), Rated: A

NeoGrowth Credit, a lending startup focused at SMEs has secured Rs 300 crore of equity funding from LeapFrog Investments, and existing investors like Aspada Investment Company and Quona Capital through Accion Frontier Inclusion Fund, reports The Economic Times. The report adds that as part of the investment, LeapFrog’s partner Michael Fernandes will join NeoGrowth’s board.

Asia

Tera Funding raised KRW 10 billion from Korean leading investors in Series A funding round (Business Insider), Rated: AAA

Tera Funding, a real estate P2P lending company in Korea, announced that it has secured KRW10bn (approx. US$9.3M) through its series A funding round from Woori Bank, Atinum Investment, SBI Investment and Premier Partners on 8 January 2018.

It is the largest single series A investment for Korean P2P lending start-ups, and this comes as a pleasant surprise for the industry as such decision to invest in Tera Funding was made after a thorough due diligence amid general public’s increasing worries about the industry with rising defaults and arrears mainly incurred by late-comers who take riskier approach.

Blockchain will force banks to change their feudal mindset (e27), Rated: A

Having said that, the advent of cutting-edge technologies is pushing banks to change the way they operate. While they have been able to survive many revolutions in the past, they cannot remain aloof to blockchain, one of 21st century’s biggest revolutions.

Lending Times News

Check out our new daily news digest and website Blockchain Times. Be sure to subscribe to our daily newsletter for the best in Blockchain news.

Authors:

George Popescu
Allen Taylor

Friday August 4 2017, Daily News Digest

immediate payments

News Comments Today’s main news: SoftBank invests $250M in Kabbage. SoFi begins search for IPO-focused CFO. MarketInvoice has record trading day. George Banco acquired by Non-Standard Finance. Yirendai made $40M net profits in Q2. ID Finance partners with Da Vinci Capital on $200M fintech fund launch. Lendingkart Group raises $10M in debt funding. Today’s main analysis: Square Q2 shareholder letter. Immediate payments […]

immediate payments

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Israel

News Summary

United States

SoftBank invests in US online lender to small business (Financial Times), Rated: AAA

SoftBank is investing $250m in Kabbage, one of the biggest US online lenders to small businesses, in a deal that could provide the firepower for a potential takeover of OnDeck Capital, a rival digital lender.

Kathryn Petralia, co-founder of Kabbage, told the Financial Times that the deal would finance growth in the company’s direct lending operation, which has provided nearly $3.5bn of funding to more than 100,000 small businesses in the US.

There has been speculation that Kabbage is planning to make a bid for OnDeck, a rival online lender that went public in 2014 and has since suffered an 80 per cent fall in its share price, hit by growing losses, rising defaults and higher funding costs.

SoFi Hints at IPO, Reports Record Results (WSJ), Rated: AAA

Social Finance Inc. posted record earnings and loan volume in the second quarter, as the privately held company’s chief executive hinted that it is moving closer to an initial public offering.

In a letter to investors reviewed by The Wall Street Journal, SoFi Chief Executive Mike Cagney sounded more optimistic about a potential public offering, as opposed to previous forums in which he said no deal would be coming in the foreseeable future.

(LT Editor: Here’s the letter again–in case you missed it yesterday).

Source: SoFi

Goldman Sachs is Going Big on Lending (Lend Academy), Rated: AAA

The firm created GS Select to reach clients of nearly 4,000 independent investment advisors from Fidelity Investments. Clients will be able to borrow from $75,000 to $25 million backed by their investment portfolios.

What’s interesting about this move is that it could be expanded to other RIAs and financial advisors not just through Fidelity. We’ve seen this type of model before with self described “Lending as a Service” fintech companies, but this time it’s a big bank that has built this technology.

Source: Lend Academy

Square  Q2 2017 Shareholder Letter (LendIt), Rated: AAA

In the second quarter, our top-line results reflect our continued ability to attract larger sellers and increase product usage through cross-selling. Total GPV grew 32% year over year, and GPV from larger sellers grew 45% year over year. Transaction-based revenue increased 32% year over year—the same rate as GPV, which is a result of our ability to maintain transaction revenue margin. Subscription and services-based revenue nearly doubled year over year. Strong top-line growth, lower risk loss rates, and ongoing operating expense leverage drove another quarter of significant EBITDA and margin improvement.

We grew Square Capital loan volume 68% year over year and further diversified our investor base.

 

Source: Square Q2 2017 Shareholder Letter

Read the full report here.

An Australian Entrepreneur And Ron Suber Want To Fix America’s Student Debt Crisis With A Fintech Solution (Benzinga), Rated: A

A trillion-dollar black cloud of student debt hangs over multiple generations of Americans. Student debt is delaying marriages, major purchases, home ownership and general enjoyment of life for millions of people. There’s more student debt than even credit card debt.

Enter Credible CEO Stephen Dash. The Australian entrepreneur is taking inspiration from his home country’s approach to offer student borrowers a marketplace of easier options to get and refinance loans. Australia has an income-based debt repayment system, and Credible’s tech helps borrowers refinance to make affordable payments.

loanDepot’s Groundbreaking Tech Spurs Demand for New Innovation Lab (PR Newswire), Rated: A

loanDepot, America’s lender, today announced details of its new standalone tech campus, the mello ™ Innovation Lab. At this unique facility, the LD tech team will continue to innovate and expand mello, the company’s proprietary digital-lending technology.

With loanDepot’s goal to transform the lending industry, its mello ecosystem is shaping lending’s future as it expands its online and offline consumer relationship model. mello’s technology includes an intuitive web-based consumer portal, a state-of-the-art, mobile point-of-sale system, and a fully-digital mortgage loan application experience. The company has invested $80 million to date on its digital-first technology strategy.

loanDepot’s mello exists within a larger next-gen lending ecosystem that is boosted with the integration of digital-marketing tools and by third-party data enrichment that ensure greater accuracy, speed and certainty throughout the origination experience. On a massive scale, mello is changing the loan origination process into a digital consumer experience, making it faster, easier, and more accurate.

USAA lets members bare their financial souls to Alexa (American Banker), Rated: A

USAA went live Wednesday morning with a virtual assistant that works with Amazon’s Alexa voice interaction device and its corresponding shopping app. Now, USAA members — at least the first 400 that sign up at USAA Labs — can ask Alexa a range of questions about their accounts, balances, spending and transactions, and the bot will answer with specific details from the member’s USAA card and bank accounts.

In so doing, USAA is joining a small group of financial institutions — including Capital One, American Express and several credit unions — that have created Alexa Skills, as the chatbots that work with Alexa are called.

US CFTC Launches Initiatives to Promote Fintech in the Futures and Swaps Markets (Lexology), Rated: A

First, the CFTC announced Project KISS—“Keep It Simple, Stupid”—as a forum to examine how its existing rules might be applied in less costly and burdensome ways. Second, the CFTC launched LabCFTC as a way to promote responsible fintech and regulatory technology (“regtech”) innovation. Together, these initiatives appear to be a significant part of the CFTC’s response to calls for streamlined regulation from the industry, the White House and some members of Congress.

Project KISS

The CFTC website specifically invites public input on the following five “KISS Initiatives”:5

  1. Registration—the process of becoming regulated by the CFTC as any of the several entity types that the agency regulates
  2. Reporting—all reporting obligations, including swap data and recordkeeping
  3. Clearing—clearing services in connection with various contracts and transactions
  4. Executing—the execution of futures and swaps transactions
  5. Miscellaneous—any topics not specifically enumerated above

LabCFTC

This initiative is intended to enhance the agency’s involvement in fintech and regtech7 solutions and to support the goals of (1) providing regulatory certainty for fintech innovators and (2) enabling more efficient regulation through the use of emerging technologies. LabCFTC contemplates a variety of means to accomplish these objectives, including:

  1. Proactive outreach to and collaboration with the fintech industry to better understand the strengths and weaknesses of the CFTC’s current regulatory framework as applied to new technologies
  2. Participation in research and engagement with academia and professionals to harness and promote the advantages of fintech/regtech for the CFTC and the markets it regulates
  3. Collaboration with other financial regulators at home and abroad and the sharing of information about promising fintech applications and their potential risks
  4. The tracking of fintech developments to ensure that CFTC regulation supports rather than impedes innovation

Money360’s just getting started (Bankless Times), Rated: A

The company closed $143 million in loans in Q2, bringing its total to more than $350 million. It is on pace to top the $500 million mark before the end of 2017.

Many D.C.-area homeowners are guilty of this financial no-no — financing renovations on credit cards (The Washington Post), Rated: A

A May study by Hearth, a financial technology start-up that provides support for homeowners making renovation decisions, found that 12 percent of Americans planned to finance their renovation with a credit card, which is one of the most expensive ways to finance the cost.

The Hearth Home Renovation Survey, which asked 2,000 homeowners about their remodeling plans for the coming year, found the number of people planning to use a credit card to pay for their renovation is even higher in the Washington region at 16 percent.

In this region, 52 percent of homeowners prefer to pay with savings or cash, compared with 62 percent nationally. D.C.-area residents are also more likely to finance their project with a loan — 32 percent — compared with 26 percent nationally.

Computer says no: robo-advice is growing but we still don’t trust it (The Conversation), Rated: B

People are open to receiving financial advice from robots, our studiesshow, but there might be a way to go to in convincing people to trust them over a human.

We surveyed 138 people about their attitudes to, and preferences for, superannuation advice from a human or a computer. Unsurprisingly, most stated they would prefer to deal with a human across a broad range of financial decisions.

Some did prefer the computer – these tended to be younger people, and those on higher incomes.

Ideas to Help Cash-Strapped or Underbanked Consumers (Southeast Missourian), Rated: B

With the inception of new types of loans, cash-strapped customers can borrow a certain amount from alternative lenders. These loans entail borrowing money against your next paycheck. Unlike traditional payday loans, these lenders allow their customers a fair grace period to make their repayment, making it easier for borrowers to repay and meet their other financial needs. The traditional lenders, on the other hand, require borrowers to repay their full loan amount with their next paycheck.

Peer-to-peer funding is an alternative to acquiring financial aid. This entails letting other businesses invest in your business venture. Finding willing investors is not a hard process itself as you can acquire them by applying online. Small businesses can source one to five-year loans. The loans are available from widely known businesses like Lending Club.

Private Lenders to Gain Insight from Industry Experts (Benzinga), Rated: B

American Association of Private Lenders (AAPL) will hold its eighth annual conference Sunday, November 12 through Tuesday, November 14 at Caesars Palace in Las Vegas. The keynote speaker will be Daren Blomquist, Senior Vice President of Communications at ATTOM Data Solutions, formerly RealtyTrac, curator of the nation’s largest fused property database. The AAPL annual conference is one of the largest national events for private lenders and will include a full slate of speakers, resources, education and networking. More information can be found at .

First Associates Loan Servicing Opens a New 1000-Seat Operations Center in Baja California (Benzinga), Rated: B

First Associates Loan Servicing announced today the opening of their new 1000-seat capacity operations center in Baja California, Mexico. This state-of-the-art center will support the continued global expansion of First Associates and enable the company to continue delivering first-class service and security for their clients.

United Kingdom

RateSetter Milestone: Investors Fund £2 Billion of Loans & Have Earned More Than £76 Million in Interest (Crowdfund Insider), Rated: AAA

RateSetter recently announced its lenders have now delivered more than £2 billion in loans to people and businesses across the UK and in doing so have earned over £76 million in interest. According to the online lender, 94% of its lenders are individuals looking for a decent return on their money by investing, and accepting some degree of risk, rather than settling for the pitiful interest rates offered on bank deposits.

P2P business platform MarketInvoice marks record trading day (AltFi), Rated: AAA

The company had more invoice advances on 1 August than any other day.

The trading platform saw £4.1m  in invoice advances to UK businesses on Monday, a record setting day for the firm.

Usually £3.2m is the average amount that is advanced in a day. The increase in trading is largely do to MarketInvoice Pro, an invoice discounting facility.

RateSetter-backed lender acquired by Non-Standard Finance (P2P Finance News), Rated: AAA

RATESETTER investors are likely to get repaid early by George Banco following the acquisition of the guarantor loans provider by Non-Standard Finance.

Approximately £30m of RateSetter lending is currently outstanding to George Banco and many lenders will be repaid early as a result of the refinancing.

Blend Network launches with vow to be the “Goldman Sachs of P2P” (P2P Finance News), Rated: A

Blend Network will offer asset-backed property loans to retail and high-net-worth individuals, as well as hedge funds and other institutional investors. P2P specialist F&P will act as introducer for all of its loans, although Blend Network’s chief executive Yann Murciano said that he would be open to further partnerships in the future, as the business scales up.

P2P lending looks less than attractive on a forward-looking basis (AltFi), Rated: A

But, and yes, there is an important caveat, I am beginning to sense an important tipping point. Returns of between 4 and 6% pa from the big platforms – with an emphasis on the lower range of that spectrum – haven’t changed too much (in fact they’ve slightly fallen back). But I’m increasingly thinking that these returns are now inadequate for the potential of increased risk.

If one comes from a lending POV (point of view) then I would argue that the current returns are woefully inadequate, given where we are in the lending cycle.

  • The big banks are starting to increase their provisioning for bad debts
  • Here in the UK we’ve probably reached Peak Unsecured Lending with the BoE bearing down on all lenders about risk, worried senseless about a downturn in consumer spending as Brexit grinds on
  • The car lending market is quite clearly close to a systemic meltdown
  • ‘challenges’ are already appearing within the P2P space, most recently at Ratesetter where its wholesale lending capacity is being wound down
  • The housing market looks more vulnerable than ever before, with the very real possibility that we’ll see a steady drip feed of small price declines
China

Yirendai Made $ 40M Net Profits in Q2 and Dividend for the First Time (Xing Ping She), Rated: AAA

Yirendai, the first US-listed Chinese internet finance company, has recently issued its financial report for the Q2, 2017. In the second quarter of 2017, Yirendai has reached the loans volume of $1.22bn, increasing by 18 percent from the last quarter, especially increased 80 percent from the same period in 2016. By the end of second quarter, the accumulated loans transaction of Yirendai was up to $7.1bn.

Yirendai’s main revenue was charged for service fee from borrowers and lenders. As a result, its income scale is increasing rapidly with the fast growth of loans volume. In the period, Yirendai has made net income of $176 million, increasing by 16 percent from the last quarter and 61 percent from the same period of last year.

Tencent and national development banks to practice the national “Internet +” strategy (163.com), Rated: A

(Hereinafter referred to as “National Bank”) and Tencent (hereinafter referred to as “Tencent”) in Shenzhen Tencent headquarters signed the “Internet +” development of financial strategic cooperation agreement. “.. In the future, the two sides will be in the Internet + precision poverty alleviation, Internet financial innovation, domestic and international credit financing, Kechuang enterprise cultivation, information technology applications and many other areas of long-term, stable, in-depth and sustainable strategic cooperation. Chairman of the State Development Bank Party Committee, Vice President Zhang Xuguang, Director of the China Development Bank Shenzhen Branch Wu Liangdong, Vice President of Tencent Xie Qinghua, Tencent Internet + Strategic Cooperation General Manager Zhang Wei attended the signing ceremony of strategic cooperation.

European Union

ID Finance Teams Up With Da Vinci Capital to Launch $ 200 Million Fintech Fund (Crowdfund Insider), Rated: AAA

Marketing fintech firm ID Finance announced on Wednesday it has joined forces with former Elbrus Capital fund manager, Yuri Popov, and asset management Da Vinci Capital to launch FinTech Credit Fund, which is described as a $200 million debt finance fund aimed towards fintech companies with a focus in alternative lending.

ID Finance also reported that the Fund will initially focus on projects within the CIS and European markets. Funding will be provided to companies involved in consumer/SME lending, with balance sheet and marketplace lenders being eligible.  Projects offering analytical solutions for credit scoring based on Big Data, AI and machine learning, as well as SaaS and PaaS solutions and payment services are of particular interest to the Fund and align with the investors’ areas of expertise.

International

GIC to invest in US talent agency (Straits Times), Rated: A

Singapore sovereign wealth fund GIC, along with Canada’s largest pension fund manager, will invest US$1 billion (S$1.4 billion) in American talent management agency WME-IMG.

Canada Pension Plan Investment Board, in a separate statement, said it would invest about US$400 million for an 8 per cent stake in WME-IMG, which owns brands like Ultimate Fighting Championship and the Miss Universe Organisation.

The US firm also counts the SoftBank Group, Silver Lake Partners and Fidelity Investments among its investors. Terms of the transaction were not disclosed.

Australia/New Zealand

Harmoney’s loss is really a gain (AltFi), Rated: AAA

New Zealand peer-to-peer lender Harmoney’s revenue climbed 63 percent this year, edging the company closer to profitability.  While still loss-making, Harmoney has halved its losses from $NZ14 million last year to $7 million this year.

As well as climbing revenue, its financials were helped by a 15 percent drop in marketing costs, suggesting the company has grown out its brand recognition to a point where it feels comfortable paying less for advertising.

To date, Harmoney has lent more money than any other Kiwi P2P platform.

A new whitepaper by CoreData and HUB24 titled ‘The modern face of advice’, argues that while technological tools were reshaping the wealth management industry, the role of advisers remained critical and the relationship they built with their clients remained more relevant than ever.

The paper, which is based on interviews with advisers, said technology used in advice practices continued to mature and costs, including platform fees and management expense ratios were decreasing to boost bottom line results of firms.

Robo-advice could play a role in tapping into the estimated $2 trillion worth of unadvised savings in Australia but awareness was still in its infancy. However, the Australian Securities and Investments Commission’s (ASIC’s) ‘RG255: Providing digital financial product advice to retail clients’suggested robo-advice was here to stay.

India

Lendingkart Group raises $ 10 million in debt funding (Medianama), Rated: AAA

Lendingkart Finance Limited has raised $10 million in debt funding from Kotak Mahindra Bank, Aditya Birla Financial Services, and other financial institutions. The funds will be used to expand its operations to 700 cities and restock its loan book.

Retail banking may lose 55% of business to fintech (livemint), Rated: AAA

The retail banking sector could lose up to 55% of its business to fintech firms if it does not up the ante in terms of investment in digital transformation, according to a new study titled ‘Enterprise Digital Transformation: Evaluating Indian Enterprises’, brought out jointly by research firm Frost & Sullivan and software lobby body, Nasscom.

 

Havas Media bags integrated media mandate of Faircent.com (Exchange 4 Media), Rated: A

Havas Media Group, India has bagged the integrated media duties of Faircent.com, India’s largest peer to peer lending platform. The account will be handled out of the agency’s Gurgaon office.

Digital Disruption: Lending Trends Turn the Next Leaf! (DQ India), Rated: A

Lending in India is hard as only a fraction of people have access to organized credit. Less than 50% of SMEs get access to bank  finance. The lack of access to credit is forcing people to depend on money lenders at high rates of interest. In India, of the over 1.3 bn population, 600 mn is working class, out of which 150 million has access to credit and 20 million have scores acceptable  to banks.

P2P lending provides investors higher returns than investing in mutual funds/ stock markets, which are linked to the stock market and come with a risk of losing money due to their inherent volatile nature. With the lower interest rates, traditional investment tools like FDs and RDs look less attractive to customers.

Peer-to-Peer loans give regular monthly income to the investors in the form of EMIs.

Now own a piece of prime real estate investing a few thousands (India Times), Rated: A

RealX, a pune-based fintech start-up, has completed India’s “first fractional ownership” deal in real estate sector. The platform has bought a commercial property in Karad (Maharashtra) by pooling in investments from about 19 investors, RealX officials claimed.

RealX is an ecommerce platform which will allow property sellers and agents post their saleable property. Registered buyers, on the other side of the platform, could invest in these projects. The minimum investment threshold, currently, is Rs 5 lakh per investor.

Asia

Immediate payments key driver of banking revenue (The Asset), Rated: AAA

Sixty-six percent of banks with live IP systems in place see it as a revenue driver for their institution, which compares to less than 50% for companies without IP systems in place. Moreover, for all banks 53% say that IP will drive revenue growth for their organization, 61% believe that IP will enhance their level of customer service and 60% expect IP to reduce costs.

While 65% of surveyed institutions stated that open APIs would benefit their customer-facing proposition banks differed in their implementation strategy. The majority (55%) of banks opted for immediately creating open APIs and interfaces for developers, while a minority (45%) took a ‘wait and see’ approach.

Source: The Asset

Mastercard and PayPal expand Partnership in Asia (The Asset), Rated: A

The deal will expand PayPal’s presence at the point of sale and enable Masterpass for Braintree merchants in the region. Additionally, both companies will collaborate to create opportunities to leverage Mastercard’s new payment flow technologies, providing increased value to Mastercard cardholders, financial institutions, and PayPal customers. PayPal will also have the opportunity to give consumers and small businesses across Asia-Pacific the ability to cash out funds held in their PayPal accounts to a Mastercard debit card.

Israel

All of Israel’s FinTech innovation geniuses have left the country and taken their brilliant ideas with them (Finance Feeds), Rated: AAA

Israel was never a center of actual trading, but was always synonymous with the brilliant minds that invented every ancillary service from digital marketing and conversion funnels that have brought tremendous efficiency to retail brokerages, Plus500 being a case in point, to social trading networks that have prospered on a gigantic scale across China – read eToro’s efforts with PingAn as very much an example where other social trading ventures wilted and disappeared.

Mr Mandelzis secured $40 million in venture capital from Sequoia Capital and sold the company to ICAP in 2007 for $250 million which became the subject of a Kellog Business School case study.

Where is Mr Mandelzis now? New York.

Optimove consolidates, mines and models customer data, dynamically grouping customers into micro-segments, and forecasting their future behavior and value.

Optimove is headquartered in New York, and is a completely American company.

Social trading has died a death. There is very little evidence of the large firms that used to dominate, and most of that technology came from Israel.

The only one in existence is eToro, which is a social investment platform.

Authors:

George Popescu
Allen Taylor

Wednesday April 12 2017, Daily News Digest

REITs vs. RECF

News Comments Today’s main news: Further comments on Elevate’s IPO. Aspire announces new ALD Data and Analytics Module. Funding Circle to stop property development lending. Morningstar assigns MOR RV1 Residential Vendor Ranking to First Associates as Consumer Finance Servicer. Today’s main analysis: Texas real estate market great for RECF. Today’s thought-provoking articles: UK VC investment up, European funding […]

REITs vs. RECF

News Comments

United States

United Kingdom

European Union

China

News Summary

United States

Elevate Announces Closing of Initial Public Offering (BusinessWire), Rated: AAA

Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”) today announced the closing of its initial public offering of 12,400,000 shares of common stock at a price to the public of $6.50 per share. In connection with the closing, the underwriters fully exercised their option to purchase an additional 1,860,000 shares.

Elevate has now sold a total of 14,260,000 shares of its common stock in connection with its initial public offering for total net proceeds to the Company, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by Elevate, of approximately $81 million.

Elevate will use approximately $15 million of the net proceeds to repay a portion of the outstanding amount under its convertible term notes, approximately $65 million of the net proceeds to repay a portion of the outstanding amount under its financing agreement and the remainder, if any, for general corporate purposes, including to fund a portion of the loans made to its customers.

UBS Securities LLC, Credit Suisse Securities (USA) LLC, and Jefferies LLC acted as joint book-running managers and as representatives of the underwriters for the offering. Stifel, Nicolaus & Company, Incorporated and William Blair & Company L.L.C. also acted as joint book-running managers for the offering.

Texas Real Estate Market Active for Real Estate Crowdfunding (Yahoo! Finance), Rated: AAA

RealtyShares, a leading online marketplace for real estate investing, has just released data showing the total amount of crowdfunded real estate investments in Texas. To date $28.1 million has been raised for 31 real estate deals, ranking Texas among the most popular states for investors on the RealtyShares platform along with California and Florida.

Nearly half of all deals funded in Texas to date have been for multifamily properties with a trend favoring equity over debt. Investments have been spread throughout the state, with the most investments centered around the Dallas-Fort Worth Metroplex, followed by Austin and Houston.

The average investment in Texas since inception is $907,000, with the largest being a $3.25 million Class A multifamily property in Grand Prairie sponsored by Ventures Development Group.

Aspire Financial Technologies Announces New Asset-Level Disclosure (ALD) Data and Analytics Module (Aspire Email), Rated: AAA

Aspire Financial Technologies Inc. (“Aspire”), announced today the release of a new Asset-Level Disclosure module that will provide free access to market participants looking to access and analyze loan-level characteristic and performance data for asset pools of US public securitizations. On an ongoing basis, issuers publish these files to the SEC’s Edgar website. They currently cover the asset verticals of auto-loans, auto-leases, and CMBS, but will soon expand to RMBS and other debt securities. The module is part of Aspire’s more broadly focused Gateway TM platform, which enables users to seamlessly research, workflow, monitor, and forecast their consumer or SME loan risk exposure, across multiple use cases.

The release of consumer credit ALD data publicly provides for unique opportunities. For the first time, Aspire Gateway ABS ALD module gives participants the ability to stratify and compile performance views both within individual trusts and across trusts with similar asset pools on the same platform. Aspire released the product with an initial focus on auto loan asset pools, and will be expanding coverage to other verticals with filings on the SEC website. Aspire also makes available individual raw CSV files converted directly from the issuer postings on its platform.

Morningstar Credit Ratings Assigns MOR RV1 Residential Vendor Ranking to First Associates Loan Servicing as a Consumer Finance Servicer (PR Newswire), Rated: AAA

Morningstar Credit Ratings, LLC today assigned its MOR RV1 residential vendor ranking to First Associates Loan Servicing, LLC as a consumer finance servicer. Morningstar’s forecast for the ranking is Stable.

First Associates, headquartered in San Diego, provides third-party loan and lease servicing for originators and institutional investors. The company was founded in 1986 as First Associates Mortgage Corporation. The current management team subsequently acquired the company in 2008 and reformed it as First Associates Loan Servicing, LLC.

The Morningstar ranking is based on a variety of factors, including:

  • First Associates’ pervasive enterprise risk management culture that consists of consumer finance compliance protocols, internal audit, self-risk assessment protocols, quality assurance, call monitoring scoring and feedback, and a robust vendor management oversight program.
  • The company engages a third-party auditing firm to produce a SOC 1 audit report on an annual basis.
  • The effectiveness of First Associates’ servicing platform is evidenced by above-average call center metrics, portfolio volume growth, strong client diversity, and minimal client turnover.
  • First Associates benefits from a solid technology environment that includes a third-party consumer finance servicing system, a well-defined project management process, effective network security protocols, and a disaster recovery and business continuity plan that leverages the company’s cloud-based infrastructure and multiple office locations for geographic data redundancy and processing.

Real Estate Crowdfunding Is Riskier Than You Think (Seeking Alpha), Rated: A

Real estate crowdfunding is increasingly becoming an alternative to REITs (NYSEARCA:VNQ) for individual investors seeking real estate exposure.

The arguments in favor of real estate crowdfunding are typically the following:

  • Their deals provide higher risk adjusted returns
  • Crowdfunding assets are uncorrelated with the stock markets and are hence more stable than REITs.

Below I provide my counter arguments to real estate crowdfunding:

1. If you are not a real estate expert, you cannot perform adequate due diligence to evaluate individual properties for investment.

Most crowdfunding websites directly target individual investors who are not experts in commercial real estate investing or finance in general. The issue is that without these specialized skills, how are you then supposed to properly assess a given deal on a real estate crowdfunding website? It is simply impossible.

2. Success in real estate investing is largely a function of the management team

Lastly, you would have the same issue here concerning due diligence. It is very difficult to perform proper due diligence of the management team when investing through crowdfunding platforms.

REITs on the other hand are very large and have great resources. They can attract the best talent and retain the best in class managers of the whole industry.

3. Crowdfunding deals are riskier in many ways compared to REIT investments.

Private market sponsors tend to use substantially more leverage than REITs and often target riskier properties. While REITs utilize today on average about 30% leverage, it is not uncommon for private investors to use up to 80% loan to value.

Real estate crowdfunding is also highly illiquid and it may be difficult to exit your investment when desired; especially if the real estate market went into a down cycle.

4. Private sponsors may charge high fees

Most REITs are today internally managed and have great scale which reduces the impact of the G&A expenses. Crowdfunding deals, on the other hand, will be sponsored by asset management firms or real estate developers that will want to earn their fees to make a profit.

5. REITs have historically outperformed private real estate investments.

Over the last 40 years, REITs have returned more than 13% per year to investors according to NAREIT.

 

NCSS Partners with Kabbage, Inc. to Help Small Businesses (PR Newswire), Rated: A

Today, the National Cybersecurity Society (NCSS) entered into a strategic partnership with Kabbage Inc., an online financial technology company that provides funding directly to small businesses through its automated lending platform.

A recent study by FireEye revealed that 77 percent of global cybercrime affects small and medium sized businesses. NCSS is a non-profit organization created to educate and advise small business owners on the complex and changing world of cybersecurity.

NCSS works with victims of cybercrime, government and businesses of all sizes to help fortify cybersecurity on a continual basis to help thwart evolving cyber threats and to mitigate the effects of cyber incidents when they occur.

Mortgage Lenders Maintain Positive Sentiment for 2017 (Marketwired), Rated: A

The Lenders One® Cooperative, a national alliance of independent mortgage bankers, correspondent lenders and suppliers of mortgage products, has issued the results of the second annual Lenders One Mortgage Barometer, a survey of 200 mortgage lending professionals. According to the 2017 Lenders One Mortgage Barometer, a large majority of lenders (94 percent, up from 62 percent last year) expect an increase in mortgage purchase production.

Continued economic improvement should give first-time home buyers the boost they need to enter the market. In fact, about three in five lenders (59 percent) say it is very likely that there will be an increase in first-time home buyers in 2017. The optimism around first-time home buyers aligns with the recent report from the National Association of Realtors® that showed the share of sales to first-time home buyers grew from 2015 to 2016 and was the highest it’s been since 2013. However, many lenders are predicting some challenges to mortgage industry growth with respondents seeing consumer debt as the highest risk factor this year (41 percent).

Lenders Analyze Growth Opportunities
The populations that are most frequently cited as offering robust opportunity in 2017 include Generation X (86 percent) and millennials (85 percent, up from 79 percent last year). Following closely are nontraditional buyers, those who are in the rental and vacation home markets (84 percent, up from 70 percent last year); boomerang buyers, those people who can now qualify for a mortgage after undergoing a short sale, foreclosure or bankruptcy (83 percent, up from 68 percent last year) and baby boomers (82 percent).

Lenders Identify Strong Jumbo Loan Activity
A large majority of lenders (93 percent) report that they already originate non-qualifying mortgage (non-QM) loans. Bolstering one part of the non-QM market is continued home appreciation, especially in higher end markets, which has created demand for jumbo loans. Indeed, 91 percent of lenders project a significant increase in jumbo loan origination volume in 2017 for their organization.

Lenders’ Take on Emerging Trends
Given the growth of the sharing economy and services such as Airbnb, 82 percent of mortgage lending professionals anticipate an increase in people looking to finance larger homes to take advantage of rental incomes.

FinTech’s Shifting Landscape (The M Report), Rated: A

The ever-shifting landscape of technology has leaked into mortgage originations.

mello™ is loanDepot’s new digital mortgage platform including the customer facing platform.  It serves borrowers, sales, operations, and the entire ecosystem of realtors, builders and the title industry on a single platform that allows us to continuously improve and iterate the experience.

What other kind of technologies aren’t being implemented in the mortgage industry that can be brought in? What do think can be implemented to streamline the mortgage application process?

There are numerous foundational technologies that have existed in the mortgage industry and other related industries for a long time that have limited implementation.  In the early 2000s, we saw the first digital mortgage. Since then there has been incremental improvements but limited adoption.  E-Sign is another example of technology that has existed for the last fifteen years, also with limited adoption. With the regulatory changes brought on by TRID, they are becoming a little bit more main stream.  Technical change requires business drivers, effective change management and a platform to enable adoption.

Kabbage Co-Founder & Head Fintecher Kathryn Petralia: Power Lending, Predictions & Progress (Crowdfund Insider), Rated: A

Since launching in November 2008, team Kabbage has grown its global advanced lending infrastructure to enable small businesses to borrow necessary funds through its direct SMB lending product which has been adopted by banks and non-banks worldwide. The FinTech innovator has provided over $3B since its founding and has raised $236M in equity since its formation as well as more than $1 billion of debt.

Kathryn: The Office of the Comptroller’s “FinTech charter” is an exciting proposition for Kabbage. While the details are still being discussed, there is no denying that Fintech is here to stay when the “Big Bank” regulator is talking about bringing our platform into the mainstream of the U.S. financial system. Folks in Washington should think about what the technology actually does instead of how to box it into a rule or regulation.

Kathryn: Every executive hates uncertainty. We currently interact in one way or another with the FDIC, FTC, SEC, CFPB, SBA, Federal Reserve, OCC and other parts of the Treasury and state agencies. I don’t see that as a very efficient or navigable system, and I think the agencies agree because they are always vying with one another for authority. Washington is in a state of (uncertain) transition, and we hope to make our little slice of D.C. a lot more efficient and work to protect customers’ rights instead of checking boxes.

Europe is a different animal altogether. There is plenty of uncertainty in the EU, but I am not planning on a “Frexit” or a “Beljump” this year. We are chugging along with our European partner banks and preparing for GDPR, the EU’s solution to unified data protection for European citizens. Europeans are pragmatic people. They want to share their data with third parties but also know that the process is safe. Safe and open data is squarely with our culture and goals at Kabbage.

Kathryn: I haven’t been shy about my view on brokers—I generally don’t like them. Kabbage avoids the broker model because we want to interact directly with our customers.

As I mentioned, this is the year of the platform model. I expect to see large and medium banks beginning to integrate with third-party Fintech platforms to better serve their customers and expand their product offerings. It makes economic sense—do what you’re good at (working with customers and managing cheap capital) and partner with other specialized firms for technology and innovation. The U.S. market is amazingly under-tapped from both mega-banks to local institutions and we hope to continue to expand here, Europe and elsewhere.

Kathryn: Our strategic, referral and white label partnerships are vital to driving new customers to Kabbage.

US fintech regulation: a divided picture at the federal level (Banking Tech), Rated: A

Marketplace lending has been a topic of regulatory and industry conversation for the last several years.

Currently, marketplace lending is attempting to fill gaps still left in credit availability after the financial crisis, especially in small dollar small business loans. In this case, small dollar means $250,000 or less. Community banks have generally provided the lion’s share of small business and agriculture loans in the US, but the financial crisis and the response to it both eliminated many community banks and created a credit crunch. Marketplace lenders have stepped up to fill in the resulting gaps for both small business and personal loans. While the first generation of marketplace lenders tended to be distinct, separate entities, many are now partnering with banks. Marketplace lenders are not the only ones: money transmitters are exploring bank partnerships in order to avoid costly and time consuming fifty state licensing solutions.

Treasury received about 100 responses to its RFI and the white paper is generally positive about the potential for online marketplace lending to expand access to credit. Treasury offers its view of the RFI responses and provides some advice and recommendations for moving forward in this space. It found that online marketplace lending has expanded access to credit, especially small businesses, though the majority of the loans originated were for consolidating debt. The expansion of data used for underwriting was one of the more exciting innovations by online lenders and is being adopted by a larger segment of the financial services industry. However, these “data-driven algorithms” do not provide the borrower the opportunity to correct information and they may result in fair lending violations and disparate impacts. It’s really too early to determine the impact, but the expansion of data and modeling are an area on which Treasury will continue to focus. In addition, online marketplace lending has emerged in the low cost of credit environment during the Obama years; these lenders have not been properly tested during a higher cost of capital environment.

The SEC is also getting into the game on fintech. It has established a Distributed Ledger Technology (DLT) Working Group to investigate the new technology and its potential uses and abuses. Further, the SEC is looking at the growing field of crowdfunding, both its Regulation Crowdfunding equity crowdfunding model and others, including debt crowdfunding. In addition, the marketplace lending market, especially securitisation of loans, is of particular interest to the SEC.

In the US, Cook County, Illinois, is currently running a pilot program to use blockchain to transfer and track property titles and other public records. The Cook County Recorder’s Office is the second largest in the US, so the adoption and success of a DLT system there would likely encourage other states and counties to use the technology.

On top of DLT, the advent of “smart contracts” has the ability to change payments drastically.

While the CFPB’s policy is quite friendly, its no-action letters are not binding on other agencies, so that leaves a fintech company vulnerable to the determination, by another regulator, that it is not in compliance with all relevant laws and regulations. This is obviously true of any agency’s no-action letter, but considering most of the federal financial regulators are having trouble deciding what to do with fintech, many companies may decide not to take the chance of relying on the CFPB’s say-so. Again though, regulating by No-Action Letter is much less desirable than actually going through the Administrative Procedure Act-mandated rulemaking process.

The CFPB is likely the most vulnerable agency in a Trump government. Its broad mandate and limited congressional oversight has made it a target of Trump and Congressional Republicans. While it is incredibly unlikely the CFPB would actually be dismantled, its structure and leadership will almost certainly change, likely relatively early in President Trump’s term. The Court of Appeals for the D.C. Circuit’s recent decision in PHH Corporation, et al. v. Consumer Financial Protection Bureau found the current structure of the CFPB is unconstitutional.

States are also involved in regulating fintech and their role may grow if President Trump follows through on his early moves to cut down on federal regulation.

Over 50? Welcome to the New Frontier of Fintech! (Finovate), Rated: A

Meet the most financially challenged generation in American history. There are over 111 million Americans aged 50 and older, confronting a financial future with high anxiety, great struggle, and kitchen table economics that are more complex than any generation has ever faced. Financial decisions are numerous and amplified in importance with longevity. Much is at stake.

Although the 50-plus community represents only 35% of the entire U.S. population, they account for $116.8 billion in revenue in 2017 for the traditional banking industry. They are avid users of digital tools, services, and products, and they are increasingly finding that their needs are not met by the bank offerings alone. As a result, they are turning to alternative financial services and products. For 2017, AARP forecasts the 50-plus consumers will spend $15.3 billion in the fast-emerging alternative financial services sector.

To win over this market, innovators need to:

  • Remove friction from the user experience
  • Improve customer service
  • Proactively deliver personalized insight and advice
  • Transform consumer financial anxiety into digital empowerment
  • Influence regulatory change and financial policy to encourage healthy digital disruption

Regions recruits CIO from marketplace lender Kabbage (American Banker), Rated: B

Regions Bank in Birmingham, Ala., has plucked its new chief information officer from the fintech world.

Amala Duggirala, formerly the chief technology officer at the small-business lender Kabbage, is set to become CIO on April 17.

At Kabbage, Duggirala led the technology team’s efforts in advancing the scalability of the lending platform. Her tenure at Kabbage was brief — she joined the firm in November 2016.

Fidelity Investments, American Express and Bank of America Are the Top Scoring TotalSocial(TM) Brands (Yahoo! Finance), Rated: B

In a new, first of its kind analysis of combined online and offline consumer conversations, Engagement Labs released its TotalSocial rankings on the top performing financial services brands (banks, investment companies and credit card companies) in the U.S.

The analysis finds that, of the conversations taking place about financial services brands, the majority of them are happening offline (face-to-face) as opposed online (social media).

One financial institution that stuck out in particular is Citibank. The financial institution has the biggest discrepancy between its online and offline scores. The bank scores significantly better offline than online through all components measured — volume, sentiment, brand sharing and influence. This is what Engagement Labs calls a Social Misfit, brands that perform strongly offline but not online, or vice versa.

Another brand that stands out in the analysis is American Express. This is a brand propelled by particularly strong offline brand sharing, meaning people are talking about their marketing or advertising efforts.

United Kingdom

Funding Circle to stop property development lending (Bridging and Commercial), Rated: AAA

Peer-to-peer lending platform Funding Circle has announced plans to stop all property development lending by mid-2018.
The decision will allow the company to focus resources on its core small business lending product in the UK, US, Germany and the Netherlands.
Funding Circle will continue to service existing property loans and meet facilities to which it has already committed over the next 12 to 18 months.
Funding Circle stated its property loans continue to outperform expectations from a credit risk perspective, generating a 7% return each year and £22m of earnings for investors since 2014.

Advisers urged to be cautious on ‘esoteric’ P2P investments (New Model Adviser), Rated: A

Peer-to-peer (P2P) lending company Goji is launching the UK’s first diversified P2P lending bonds.

The Goji Diversified P2P Lending Bond is a fixed-term product that spreads risk by investing across a range of P2P lending platforms. It is eligible for inclusion in an Innovative Finance ISA. The one-year fixed-term bond has already launched, while the three-year bond is set to launch in April or May, with the five-year bond following soon after.

He said the current fund contains around 600 companies, ‘so there’s loan diversification’. Goji targets a 5% annual yield, and said the current yield after fees (after three months for the one-year bond) is 6.8%.

Phil Young, managing director of support services provider Threesixty, has concerns. ‘Advisers should steer clear of these products,’ he said. ‘It has an impact on PI [professional indemnity] insurance, as these insurers are sceptical of P2P lending.

Numerous advisers have also voiced concerns. ‘I don’t think the market is mature enough,’ said David Bashforth, partner at Derbyshire-based Belmayne Independent. ‘It’s untested in a downturn,’ said Mark Begg, director at London-based Mark Begg Asset Management. ‘We would need at least a three-year track record,’ said Andrew Brady, director of East Sussex-based Prosperity IFA.

FCA prepares for the march of ‘robo advisers’ (Financial Times), Rated: A

New rules aimed at “robo advisers” have been set out by the Treasury and the City watchdog as part of their efforts to make financial advice more widely available.

The guidelines are intended to free online providers from the heavier regulation associated with traditional financial advice, making it easier for them to offer low-cost help for less wealthy investors.

The regulator said it wanted to encourage the growth of “robo-advisers” — websites that suggest investment portfolios to investors based on online questionnaires — as a way to offer investment help to a greater number of people.

AltFi Data brings needed industry transparency (Bankless Times), Rated: A

An originator participating in independent verification of their data is motivated to continue to source good and well-priced assets, because the track record is there, in a clear and concise format, for all to see.

But there’s little transparent about dumping megabytes of data on investors and thinking you can go to sleep at night with a clear conscience, not in the era with the data aggregation and interpretation capabilities of ours.

This added transparency is especially necessary now that marketplace lending is out of the novelty stage and beginning to scale, Mr. Taylor said. It is no longer enough for platforms to originate assets which were previously hard to access. Investors need to be able to definitively understand what return the assets have delivered historically and to identify originators that have an ongoing motivation to keep originating assets based on quality not quantity.

Equally interesting is that Funding Circle, Zopa, MarketInvoice and RateSetter, the UK platforms that provide this enhanced disclosure, have gained market share relative to the rest of the market. Having represented 65% of UK market origination when they began to offer this disclosure, they now represent 75%.

Revenue-Based Finance Provider Fleximize Closes £16.3M Financing Facility (Finsmes), Rated: A

Fleximize, a London, UK-based revenue-based finance provider, closed a £16.3m financing facility.

Hadrian‘s Wall Secured Investments Limited, a specialised investment fund, provided the financial resources.

The company intends to use the funds to increase its lending capacity, towards its goal of lending over £100m to SMEs by 2019, to further develop and diversify its product offering, and continue to advance its proprietary technology platform with the introduction of dedicated areas for brokers and direct clients.

Britain’s finance watchdog is worried about ‘wild west’ fintech in some parts of the world (Business Insider), Rated: A

Christopher Woolard, the FCA’s director of strategy and competition, said in a speech earlier this week that that some regulators are using “sandboxes” to let fintech companies operate with little or no supervision.

Woolard said in a speech at the Innovate Finance Global Summit in London on Monday:

“But in a world where many governments and regulators have begun to show an interest in innovation there are challenges.

“As different jurisdictions begin to set up their own sandboxes, with different models and standards, some believe a ‘Wild West’ version could emerge.”

Fintech is now worth £7 billion to Britain’s economy and employs 60,000 people (Business Insider), Rated: B

The Treasury said ahead of the event that the UK’s fintech sector — which includes everything from online lending to applying blockchain to capital markets — is now worth £7 billion to the UK economy and employs 60,000 people.

Growth Street announces two senior hires (P2P Finance News), Rated: B

GROWTH Street has unveiled two new senior appointments that it hopes will aid the peer-to-peer lender’s expansion plans this year.

The platform, which was purely a business-to-business lender until it receivedregulatory permission to accept retail investors last December, has hired April Nardulli (pictured) as general counsel and Chris Weller as commercial director.

European Union

UK VC investment up in Q1 2017, but funding across Europe is down (Real Business), Rated: AAA

While UK VC investment may be up, European funding has fallen however. The KPMG Venture Pulse Q1 2017 revealed UK VC investment over the quarter reached $1.02bn, having dropped to under $1bn in Q4.

That was achieved despite a lower number of completed deals, with 196 secured versus 219 the previous quarter. KPMG suggested the “robust levels” of UK VC investment signals optimism and confidence for British business this year despite Brexit.

Imbach pointed to financial services, life sciences and biotech as key sectors where startups are securing UK VC investment and highlighted firms such as Currency Cloud, Funding Circle and Atlas Genetics.

While UK VC investment rose in Q1, there was a fall in VC investment across Europe overall, reaching $3.4bn, which was attributed to fewer angel and seed rounds. Meanwhile, deal volume was at its lowest for five quarters.

Lend Closes CHF3.5M Series A Funding (Finsemes), Rated: A

Lend, a Zürich, Switzerland-based fintech startup, closed a CHF3.5m Series A funding.

Backers included angel investors and Polytech Ecosystem Ventures.

The company will use the funds to further develop its platform and market its brands, LEND and splendit, enhancing automation, customer usability and increasing marketing efforts within Switzerland.

China

China’s Banking Regulator Clamps Down on Illegal P2P Lending (YiCai Global), Rate: AAA

China’s Banking Regulatory Commission (CBRC) issued its Guiding Opinions on Risk Prevention and Control in the Banking Sector yesterday, requiring banking institutions to step up risk prevention efforts related to internet finance businesses, focusing on ten types of high-priority risks. The P2P lending risk rectification program will be pushed forward, alongside the clean-up of student and microcredit businesses.

The regulator called for an effective clampdown on illegal student loan operators. Online lending agencies are prohibited from offering loans to people failing to meet the minimum income requirement, or to students aged under 18. They are also banned from engaging in misleading marketing or sales activities, or extending usurious loans.

With microloans, online lending agencies must ensure the legitimacy of funds provided by lenders in compliance with the law, and fraudulent marketing is prohibited. Provisions laid down by the supreme court regarding interest rates on private loans must be rigorously observed to prevent usury and the use of violence in debt collection.

To ward off risks associated with illegal fund-raising schemes, the CBRC required regulators at all levels to ramp up investigation into illegally-established banking organizations, and suppress illegal absorption of public funds and illicit lending businesses carried out under the guise of banking services.

Authors:

George Popescu
Allen Taylor