News Comments Today’s main news: Funding Circle US launches Small Business Choice. LendingPoint closes $175.6M direct-to-consumer securitization. Chinese P2P lenders have 2 years to change business model. Klarna starts new merchant partnership every 8 minutes. Today’s main analysis: Cities where millennials have the highest credit card balances. Today’s thought-provoking articles: Schwab to acquire TD Ameritrade, […]
Funding Circle US today announced Small Business Choice. The newest feature of the Funding Circle US loan platform provides borrowers with three fully approved loan options with different terms and rates to give small business owners the flexibility to find the loan that best fits their needs.
Under Small Business Choice:
Loan options are suggested after being completely underwritten by Funding Circle. Borrowers are fully approved for all three options.
In line with Funding Circle’s global commitment to transparency, offers are presented in a straightforward way over the phone and in emails that directly outline the total loan amount, term, rate and monthly payment.
The feature applies to all small business owner applicants, including existing borrowers, at Funding Circle US.
Data and technology platformLendingPoint today announced that it has closed two additional securitizations of loans originated on the LendingPoint platform: LendingPoint Receivables Trust 2019-2 (“LDPT 2019-2”) issued $175.65 million of KBRA-rated notes backed by a pool of direct-to-consumer loans and LP LMS 2019-1 Asset Securitization Trust (“LPMS 2019-1”) issued $61.7 million of unrated notes backed by a pool of point-of-sale loans. Guggenheim Securities was sole structuring advisor and sole manager of both transactions.
Millennials accounted for about 20% of all credit card debt in Q2 2019, an increase of 2 percentage points year over year. Their generation was the only one to see a marked increase in overall credit card balances in Q2 2019. Since 2015, millennials have seen their average FICO Scores* increase 17 points and their average credit card balance increase by $1,390.
Cities With Highest Millennial Credit Card Balances in Each State
Charles Schwab Corp. is in negotiation to acquire TD Ameritrade. The deal would combine two of the largest online brokerages with strong banking capabilities. Shares of both companies were up significantly in the news.
PeerStreet, a platform for investing in real estate backed loans, today announced that as of last month, more than $3 billion in loans have been transacted through the PeerStreet marketplace. This milestone comes on the heels of the company announcing the close of its $60 million Series C funding round coupled with $4.25 billion in new capital commitments.
Entera, a San Francisco, New York and Houston-based real estate technology platform that enables investors to access, make data driven decisions and purchase residential real estate, raised $7.5m in funding.
If David Becker’s career were put to country song, the title might be “I was internet banking when internet banking wasn’t cool.”
Becker founded the online-only First Internet Bank in 1998, well before the term digital platform was thrown around. Online banking long had promise, but to hear Becker tell it, it’s really coming into its own — and he has a front-row seat to change.
Wolters Kluwer’s Compliance Solutions business has launched Online Applications for Consumer Lending (CLA), a digital offering that enhances the online loan origination capabilities of U.S. community banks and credit unions. CLA allows consumers to begin a loan application from any digital device, at any time. It integrates seamlessly with Wolters Kluwer’s ComplianceOne solution, an industry-leading loan documentation and processing system that helps lenders optimize their lending and document preparation processes in a secure, fast and cost-effective manner.
Just recently, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. proposed an important clarification to the “valid when made” doctrine, which provides that if a loan’s interest rate is valid in the state of origination, that loan continues to be valid when transferred to a party in another state. That long-standing doctrine was overturned by the so-called Madden case in 2015.
MoneyLion, the digital bank and financial membership platform, today announced the appointment of fintech and global finance industry veteran Samantha Roady as Chief Operating Officer, a new position within the company. She has served as a MoneyLion board member since September 2016.
One of the UK’s best-known and oldest fintech companies is running up against a tight deadline to secure funding needed to maintain its banking licence, as a major investor is sidetracked by a funding crunch of its own.
Marketplace lending is expected to top £6bn this year but lenders will face a significant test of their risk management procedures, loan servicing and recovery practices should the economy worsen, a new report warns.
The report says that gross marketplace lending is likely to grow 16 percent from £5.3bn to £6.2bn from 2018 to 2019.
Finastra has hired Lisa Fiondella as Chief Data Officer to lead its comprehensive data strategy, including how data collected through the FusionFabric.cloud platform and various cloud-based solutions, can be best utilized. She will be responsible for developing a data product roadmap and manage the process of bringing new data products to market.
All existing peer-to-peer lending platforms in China must become small loan providers within two years, a notice seen by Reuters on Wednesday showed, the latest official edict aimed at curbing the once-booming industry.
All Chinese peer-to-peer (P2P) lending firms need to clear outstanding loans in less than one year before switching to small loans, according to a notice issued by China’s Internet Financial Risk Special Rectification Work Leadership Team Office, which was launched by Beijing to mitigate risks in the online lending sector.
Only 427 existing peer-to-peer (P2P) firms were still operating by the end of October, down from 6,000 at their 2015 peak
In order to transition, firms must meet a minimum capital requirement of 50 million yuan ($7.1 million) to become a small regional lender and 1 billion yuan ($142 million) to become a small national lender.
Ping An Insurance has received approval from regulators to set up a consumer finance arm, a representative from its peer-to-peer (P2P) loan affiliate Lufax confirmed on Friday, in a move that is reportedly the beginning of its transition away from P2P lending amid increasingly stringent regulations.
The following month Flender would reveal remarkable news, a new €75 million funding line, bringing their total to €109 million raised since the company’s founding in 2015. The company is backed by Eiffel Investment Group, Enterprise Ireland, entrepreneur Mark Roden and former Ireland rugby player Jamie Heaslip.
Meawnwhile, CEO Kristjan Koik told the Irish Times that the top 3 banks in Ireland have 92 percent of the SME lending marketshare so there is still a ton of opportunity for non-banks like Flender to grab hold of.
A new €100 million (appr. $110 million) agreement was finalized by the EIF, CNP Assurances, Bpifrance, Zencap, and various other entities in order to fund European SMEs via marketplace lending platform October. These companies are part of the recent institutional fund launched last year.
Three quarters, or 75%, of Ireland’s consumers, are only using a “high street” bank, which makes the country the most traditional in Europe.
Only around 10%, or one in ten, Irish consumers are banking only with a challenger bank. Around 11% of Millennials and 12% of Gen Z consumers in Ireland are using (only) challenger banks, the report revealed.
When looking five years ahead:
17% of Ireland’s consumers are expected to bank solely with a challenger bank (up from around 14% in 2019).
35% of Ireland’s citizens will be banking with some combination of challenger and traditional financial institutions (up from about 21% in 2019).
48% will be banking solely with a legacy bank (down significantly from 68% in 2019).
This, according to Fujitsu’s latest “From Demanding to Discerning: Tech and the New Banking Customer”report.
According to a new survey by Robo.cash, 64.9 per cent of the European P2P investors have full confidence in P2P lending. Remarkably, 52.3 per cent of respondents mentioned that P2P loans take a considerable share of their investment portfolio – over 25 per cent.
During 2019, Klarna has once again seen stellar growth with 60,000 new merchants globally including River Island, Boohoo, Made.com, Michael Kors, Expedia, H&M, Abercrombie & Fitch, Timberland, Marchesa, Agent Provocateur, Rue 21, TOMS, WayFair, Microsoft, and Shein. Now over 190,00 merchants partner with Klarna.
– Consumer growth and preference builds, adding 16 million new consumers globally.
The number of users that may consider changing their primary banking institution during the coming six-month period is currently 12% or 2.5 million Australian residents, which is reportedly 9% greater than the previous year.
The Nielsen surveys revealed that around 50% of Australia’s consumers noted that they had not heard of a neobank. Only a third, or about 33%, of the nation’s consumers said they’d be willing to use a neobank as one of their financial services providers, even after the benefits of using digital-only banks were explained to them.
A quarter, or 25%, of consumers who became aware of neobanks stated they would most likely use them as one of their primary financial services providers.
Beehive, MENA’s first regulated peer to peer lending platform, has released an insightful new report revealing the state of MENA’s SME ecosystem, the same week as the company celebrates its fifth birthday.
Key findings from the report include:
Surveyed MENA SMEs have more women in senior positions than the global average.
28% of respondents see innovation as a priority for growth, yet only 2% of business owners are currently trying to access finance to fund it.
SMEs offer young people a great opportunity for development. 48% of SMEs would hire someone under 25 with no experience.
News Comments Today’s main news: LendingClub grows short interest. Larry Summers resigns from LendingClub board. RealtyShares intros gap financing for projects under $20M. Mark Davies steps down from RateSetter board. Today’s main analysis: Heap’s behavior attribution platform. Today’s thought-provoking articles: Can Noto sell mortgages at his new SoFi post? China banks report drop in bad loans. Chinese families rack up […]
Can Noto sell mortgages at SoFi? AT: “The former Twitter executive undoubtedly has his challenges, but SoFi wouldn’t have hired him if he didn’t show promise. Some people may be routing for his failure, but I’m looking for a big success.”
LendingClub Corp (NYSE:LC) was the recipient of a large increase in short interest during the month of February. As of February 28th, there was short interest totalling 31,244,316 shares, an increase of 11.0% from the February 15th total of 28,142,392 shares. Based on an average daily volume of 9,132,224 shares, the days-to-cover ratio is presently 3.4 days. Currently, 11.3% of the company’s stock are short sold.
Yesterday, we learned that after nearly six years Mr. Summers will be leaving the board of LendingClub. He is being replaced by leading economist and Stanford professor Susan Athey. While she is not nearly as well known as Larry Summers she still brings serious economics clout to the board.
Heap is aiming to automate insights and is starting today with the launch of Heap Behavior Attribution. The new product is the industry’s first attribution product that measures behavior and does so in a way that requires no data science or engineering resources, the company said.
The Heap Behavioral Attribution measures standard marketing channels (i.e. Google and Facebook), and also ties in a set of broad user behavior, including email, customer relationship management (CRM), shopping cart, customer success, and either-or testing platforms. Examples include user behaviors stored in Salesforce, Marketo, Shopify, Autopilot, Optimizely, Oracle, and more.
It has more than 100 employees and 6,000 customers, including Twilio, Lending Club, App Annie, Morningstar, Monotype, and Casper.
RealtyShares today announced a gap financing program that delivers subordinated financing solutions to commercial real estate owners seeking higher leverage on the financing of projects under $20 million. The suite of solutions, which includes preferred equity, mezzanine debt, and second lien loans, helps commercial real estate operators get the capital they need to buy, refinance, or renovate commercial properties.
As chief operating officer of Twitter Inc., Anthony Noto did a lot to calm the company’s perpetually anxious shareholders. On Feb. 26, however, Noto took over as chief executive officer of a financial technology startup, Social Finance Inc., or SoFi.
He’ll be facing increasingly tough competition. SoFi sees Marcus, the consumer-lending business started by Goldman Sachs Group Inc. in 2016, as the biggest threat, according to people familiar with SoFi’s thinking.
One question Noto will have to navigate is how much SoFi should use its own balance sheet—that is, hold on to the loans it originates as opposed to selling them to other investors. It currently keeps a slice of loans but sells off most of them. Holding loans allows a company to earn a stream of interest income, but investors generally put a lower value on financial firms than tech platforms.
SoFi says it plans to hold 500 events in 2018, up from 41 in 2015.
The wealth management unit, fully launched in May 2017, had $42.3 million in assets under management as of Jan. 18, according to Prosser.
Instant financing is a revolving line of credit that shoppers can apply for during online checkout, letting them spread payments out over time with low annual percentage rate (APR) offers. The option is particularly appealing to Millennials, as fewer than 33% of them carry credit cards, according to a 2016 Bankrate survey.
A recent paper from Robeco discusses whether a liquidity premium exists in the stock market. The authors, David Blitz, Jean-Paul van Brakel, and Milan Vidojevic, conclude that “the evidence for such a premium is, at best, weak.”
Less politely, these authors refer to the whole notion of a liquidity premium as having been “challenged and debunked in various studies.”
Theory and Practice
In a sense there “should” be a liquidity premium. The more illiquid a stock, the more difficult it is to trade it, which on some models means that illiquid stocks are less attractive than liquid stocks, and should command a premium. One should have to be bribed to hold an illiquid stock just as one has to be bribed to hold a risky one.
In our prior Clients & Friends Memo “Who’s My Lender?” published on March 14, 2018, we analyzed two actions brought against marketplace lenders, one against Kabbage Inc. (“Kabbage”) in federal court in Massachusetts1 and the other against Avant in federal court in Colorado.2 In that memo, we noted that the Massachusetts action against Kabbage is proceeding to arbitration, while the action against Avant was remanded to state court.
Last week, Colorado courts issued several new rulings related to marketplace lending. First, the federal court in Colorado remanded another enforcement action brought by the Administrator of the Colorado Consumer Credit Code against Marlette Funding (“Marlette”),3 which had been doing business as a marketplace lender in Colorado under the name Best Egg. Following the reasoning in the Avant decision discussed in our prior memo, the court rejected the marketplace lender’s argument that Colorado’s usury laws were subject to complete preemption under federal law and therefore the court granted plaintiff’s motion to remand. As a result, Avant and Marlette will be forced to make their arguments that a bank is the “true lender” and that the Colorado Administrator’s usury claims are therefore preempted by federal law, and any other defenses, in Colorado state court.
The FDIC announced yesterday that it had reached settlements with Cross River Bank (“Cross River”) and Freedom Financial Asset Management (FFAM). Kroll Bond Rating Agency (KBRA) believes that the settlement and related consent order have a low likelihood of adverse impact upon the credit profile of Cross River and that of its parent, CRB Group, Inc. (CRB). While FFAM represents a very small portion of Cross River’s customer base, KBRA believes any adverse regulatory action draws heightened scrutiny to Cross River and the MPL industry, a factor already considered in the current ratings. Furthermore, KBRA believes that the matters cited by the FDIC were isolated instances and is not representative of pervasive issues with Cross River’s Compliance Management System (CMS). Nonetheless, we believe that has Cross River has since adopted enhanced compliance and reporting requirements consistent with FDIC guidance and incorporated enhancements to their CMS.
VOX Network Solutions (VOX) has announced a partnership with Enacomm, Inc. (Enacomm) to bring Enacomm’s self-service solutions to VOX clients. Through the reseller agreement, financial institutions will be equipped with VPA (Virtual Personal Assistant) banking and the Enacomm Financial Suite (EFS), which includes a hosted, dynamic interactive voice response (IVR) system for personalized customer interactions.
Digits, a leading crypto company using technology aimed to combine the convenience of credit and debit card payments with the utility of cryptocurrency payments and to easily allow the consumer the ability to effortlessly pay for goods and services with crypto via their existing credit or debit card, announced today the addition of a highly respected crypto expert, David Drake, to its advisory board team.
MARK Davies has stepped down from the board of RateSetter after more than six years.
Davies, who was part of the founding management team at e-gaming company Betfair, joined the board of the peer-to-peer lender as a non-executive director in November 2011 – just 13 months after the company’s launch.
There was a time in the UK when most people were under the impression that financial advice was free. They went to see an adviser. He gave them advice. They handed over their money to him to be looked after. They never got a bill.
Only when the government changed the laws in 2012 did they realise they were paying. A lot. They just hadn’t noticed for the simple reason that they did not physically pay it to the adviser.
Brexit is officially one year away and the impact it is having, and will continue to have, on our financial lives is filling the pages of our newspapers and TV screens daily.
Since the Brexit vote in June 2016, sterling has fallen significantly in value against the euro. The pound reached a high of €1.42 in October 2015, but at the time of writing on 20 March 2018, it was worth 21 per cent less at €1.14, according to currency specialist Moneycorp.
Typical transaction costs for using your card abroad are between 2.75 and 2.99 per cent, and you will be charged a non-sterling purchase fee of up to 1.25 per cent on top.
Each time you use an ATM abroad, you can also be charged anything from £1.50 to £2 a time, so it is wise to withdraw larger sums in one go or to get a specialist overseas card that allows fee-free spending and cash withdrawals, according to Nick England, chief executive of travel money firm EasyFX.
The latest UK buy-to-let index from property finance experts, LendInvest, has shown that the Midlands appears unaffected by the UK’s current house price growth slowdown, sending three of its largest cities into the top 5 places to invest – but where came out top?
Non-performing loans ratios — a gauge of asset quality — averaged 1.57% at the four state-owned lenders, 0.15 percentage point less than at the end of 2016. “Special mention” loans with an elevated potential for default decreased 0.9% to 1.59 trillion yuan. All four banks had reported 2017 results as of Thursday.
Chinese families with their long tradition of saving money are now accumulating debt at a rate never been seen before, according to data compiled by a state-backed think tank in Beijing.
The country’s household leverage ratio – or the ratio between debt incurred by families and gross domestic product – surged to 49 per cent at the end of last year from 17.9 per cent at the end of 2008, going up about 3.5 percentage points annually, the think tank said in a report released on Thursday.
So in the period from 1993, when the data became available, to 2008, the household debt ratio went from 8.3 per cent to 17.9 per cent, with an annual rise of 0.65 percentage points.
According to its report, average disposable income could cover standard loan interest and mortgage repayments, while households were still sitting on 70 trillion yuan (US$11.13 trillion) worth of bank deposits and cash overall – enough to offset the 40 trillion yuan in outstanding bank debt.
Dianrong and China United SME Guarantee Corporation, known as Sino Guarantee, one of China’s leading guarantee companies, today announced a new lenders protection plan for Dianrong customers. The plan, which went into effect at the beginning of 2018, is designed to provide third-party protection in the event of a loan default.
Dianrong’s borrowers now have the option to purchase the Sino Guarantee lenders protection plan, which further improves the borrower’s risk and credit profile. Sino Guarantee will then use a dedicated fund account to pay lenders the loan principal and any outstanding interest in the event of a loan default covered by the plan.
Spotcap, an SME focused online lender based in Berlin, recently held a roundtable on the future of finance. Individuals from prominent firms joined with the Fintech lender to assess progress made so far. Representatives from Deutsche Bank, Figo, GP Bullhound, McKinsey along with Spotcap debated how the financial ecosystem model will evolve, the implications for the customer, and the challenges and opportunities for Fintechs and more traditional financial service firms.
Using the blockchain technology to disrupt the real estate market, Alt.Estate has a strong potential to become an industry standard for the blockchain-based real estate transactions. A strong technology stack, a go-to-market strategy with 10X leverage, a working prototype with three tokenized apartments in key geographies, strong community support, and a solid pipeline of enterprise deals all position Alt.Estate as a win-win solution for real estate developers and investors.
Estimated at $217 trillion, the real estate market is worth nearly 2.7 times the global GDP.
“ERC-20” FOR REAL ESTATE
Developed two years ago, ERC-20 has quickly become a significant industry standard for all the tokens on Ethereum. Inspired by the approach of ERC-20 developers, Alt.Estate’s Protocol aims to become an industry standard for the tokenized real estate.
When Fonta Gilliam joined the foreign service out of school, she didn’t expect it would lead her to entrepreneurship. But after seeing community lending in practice throughout her work in East Asia and Africa, Gilliam wondered what would happen if she combined these traditional practices with new financial technology.
It all started when Gilliam was working in the visa department at the embassy in South Korea.
The practice of a lending circle is a kind of informal savings program. Say you have 10 members who each put $100 into the lending club each month. One member collects the full 1,000 each month and each month the total amount rotates until 10 months has passed and the circle starts back at the beginning.
In proptech, three forms of technologies are particularly pertinent and pervasive: blockchain, augmented reality (AR) and artificial intelligence (AI). In Singapore, these technologies are already making their impact felt in the real estate industry with their adoption by startups, global corporations and the government.
Blockchain: facilitating real estate transactions
A form of distributed ledger, the blockchain is distributed across nodes, locations and even countries. Being decentralised, it eliminates the need for an intermediary to process, validate or authenticate transactions.
Artificial intelligence: extracting insights from data
The most valuable tech companies (Facebook, Amazon, Netflix, Google) are where they are today because of the trove of consumer data they possess and continue to accumulate. In the realm of technology, data is wealth, and AI is the key to unlocking this wealth. AI, as the name suggests, is teaching the computer to think like a human, making sense of the data fed to it.
Proptech: transforming real estate in Singapore
Cognisant of the need to keep up with change, the Singapore government has introduced an Industry Transformation Map (ITM) for the real estate industry. The ITM is focused on using automation, digitised contract templates, and predictive systems to streamline processes for property transactions and facilities management.
GISC uses a strict proprietary model composed of a fundamental and technical analysis strategy. So when their analysts suggested that cryptocurrency are poised to outperform in developing nations for some years to come, the company dedicated to coming up with a solution that would basically democratize lending of blockchain digital assets on a global scale.
GISC LoanCoin Network platform is designed with an aim of bridging traditional lending services to the blockchain and opening access to the non-banked. GISC LoanCoin Network is a Ethereum blockchain utility token based lending platform that will support P2P and B2B lending by eliminating intermediaries like banks and other financial institutes. It’s a platform where borrowers can interact and deal directly with the lender and GIS token holders can earn income by becoming Lenders or Guarantors.
GISC differs from other lending platforms like ETHLend and SALT in a way that GLN lends against Altcoins and this feature is yet to be introduced by any other lending platform. The platform usually takes a low, around 2% transaction fee for credit assessment/KYC-AML/ ID verification and connection through the network.
NymGo is a telecom company in the Middle East/North Africa (MENA) region that allows users to make phone calls to landlines and mobile phones to anywhere in the world using Voice Over Internet Protocol (VoIP) technology. To further the company goal of making telecom more accessible to more people in the region, they’ve introduced the […]
NymGo is a telecom company in the Middle East/North Africa (MENA) region that allows users to make phone calls to landlines and mobile phones to anywhere in the world using Voice Over Internet Protocol (VoIP) technology. To further the company goal of making telecom more accessible to more people in the region, they’ve introduced the NymCard, an online payment card to help facilitate telecom transactions.
NymGo to NymCard
Founded in Beirut, Lebanon in 2009, NymGo built itself into the largest VoIP provider in the MENA region. Despite gaining more than three million customers in the region, growth was hampered because customers had problems downloading the app and signing up. They would drop off when having to deal with online payments because, as the company dealt largely with the underbanked who didn’t have a credit card or a way to make payments online.
The company first began to solve this problem by building a network of agents who serve as a physical place where these customers can use cash to pay for services, an idea that evolved when the company had grown to hundreds of thousands of customers in the MENA region.
NymCard was the next step, and the same agents who acted as banks for those customers now issue the cards.
Essentially, the NymCard is a prepaid Visa to be used in the digital communication world. Customers use the cards to buy games and apps online as well as Facebook ads, The average cost of a transaction is $17 as a majority of them are for low end items like $5 games. On the high end of that spectrum, you have freelancers who are buying Facebook ads, which run about $65 to $70.
The card can also be used to purchase 3G or 4G, wifi, and banking services at low cost. The first cards started at a $250 prepaid limit then was raised to $500 as users got more comfortable with it and started to use it more. Now that the company has its own service, it is looking at a tiered approach. This will allow them to issue cards starting at $250 and raising limits as high as $2k, $3k, or even as high as $10k.
The NymCard Today
For funding, the company recently closed a pre-Series A, in which it raised $3M U.S. A Series A is in the works for next year to help expand in the MENA region. NymCard is also in talks with Visa and MasterCard to apply for licenses around the region for further expansion.
Where the first generation of the company made money on an interchange fee and the small fees associated with prepaid cards, moving forward with the physical prepaid card, the company will be able to attach a subscriber fee.
NymGo and NymCard Founder and CEO Omar Onsi tells us that by having everything in house and cloud-based the company can scale quickly, which, of course, will help them capture as much of the accessible market as possible.
Onsi and his team aren’t about to be satisfied with just that, however; they have plans to add more services to the product. He tells us that “very soon” they will have a “pay later card,” which will allow them to extend credit to users, underwrite them quickly, and send them by virtual card.
The company also plans to make great efforts to reach the underbanked in different parts of the world, but points out that every region has its challenges. What might work in the Middle East might not be as well-received in Africa, and vice-versa. As the company does its due diligence toward this expansion, Onsi tells us there is much happening to reach the underbanked in their home region of the Middle East.
Onsi sees banks with prepaid services as the only real competition for NymCard, but reminds us that typical banks offer nothing digital, and the ones that do tend to struggle with it. “We have a lot of potential to corner the market. We understand digital very well, and we know how to develop the products. We can have a new release two or three times a week, and banks can’t keep up; they struggle to update their websites,” he said.
The company works with “a bunch of different customer profiles,” but the biggest is easily the underbanked, Onsi says, telling of someone who gets on his pay card but has no further access to online credit.
Coming from the telecom world, Onsi knows that smartphones are one of the only ways to get the population into online banking services. He reminds us that the telecom world started to grow rapidly when they did prepaid lines and that 70% of the subscribers are on a prepaid plan. He says that it so follows that prepaid cards for financial services will help the underbanked to get up to speed with the economy.
Are there hurdles to overcome? Of course, and one of the biggest is regulation. Onsi says that, telecom being a highly-regulated industry, this type of venture doesn’t move as quickly as a typical tech startup.
As part of the regulations, NymCard was accepted into a regulatory sandbox, which helped to develop products and services; these helped the company launch what Onsi calls an “ideal digital experience.” Following the guidelines of the regulation, NymCard was tested to measure success. This, in turn, helped the company to become more regulated. Upon graduation from that sandbox, with a full license, they have that in a partner’s role.
If Onsi is correct in stating his company’s biggest hurdles lie in regulation, then you might have to like their chances for success; their competitors will be subject to the same regulations, and if those companies don’t have a man with the foresight and confidence Onsi seems to possess, they might find themselves playing for second place.
News Comments Today’s main news: Experian legislative update. P2P platforms predicted to shift to hybrid models. Millennials spend over 1/3 of take home pay on rent. WeChat Pay enters U.S.market. Today’s main analysis: Lending Club’s lost year (and a half). Alternative return metrics (Cash on Cash Returns). Today’s thought-provoking articles: Record number of banks want to partner with LC. Q1 […]
Lending Club’s lost year (and a half). GP:”A lot of interesting charts. I expect Lending Club to have no problem increasing their origination amount via partnerships with institutions like banks and go back into profit in the next year.” AT: “Seeking Alpha does not favor LC on the short-term.”
Online lenders feel the pinch. GP:”The take away: eventually all lending will be done online. I would say yes, but below a certain loan amount only, not all lending, perhaps all lending below $1mil.”AT: “Data glitches are going to happen. Security experts can reduce them, but eliminating them is near impossible. Online lenders that realize that are more apt to create the right firewalls and barriers to entry for bad actors. And, yes, all lending may eventually be done online.”
LendingTree announces top customer-rated lenders by loan product for Q1 2017. AT: “It looks like customers are still happiest with incumbents, but Lending Club and Avant are at First Midwest Bank’s back door. As Baby Boomers continue to age and more younger generations enter the market, I think we’ll see a shift to online lenders dominating in all ways, including customer ratings.”
A simple macroeconomic case for avoiding LC. AT: “I don’t agree. If LC is a good investment long-term, and I believe it is, just as Seeking Alpha stated in the previous article above, then investors shouldn’t be avoiding it. Now is the time to buy.”
Q1 Cybercrime report. AT: “It’s important for online lenders to study cybercrime tactics and get out in front of them. It may be the most important technological knowledge of all since security is a major trust issue and give players a competitive advantage.”
On April 14 the CFPB’s Office of Fair Lending and Equal Opportunity issued its annual report on fair lending. The report provides an overview of the work that the Bureau has done over the past year to provide oversight and enforcement of the fair lending laws under its jurisdiction.
In March, US Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) announced that they were seeking legislative proposals to promote economic growth. Proposals were due to the Committee on Friday, April 14. Experian worked closely with the CDIA and Chamber of Commerce to ensure that our policy priorities were included in their letters. CDIA’s comment letter recommended that the Committee take up and pass CROA reform, credit score competition and legislation to cap class action damages under the FCRA.
On April 19, GAO released a report on fintech and marketplace lending. The report was intended to provide an overview of fintech, as well as the potential benefits and challenges for consumers and small businesses.
Texas, H.B. 2333 would require a business that accepts a credit card or debit card for payment and retains any data related to the card, other than a confirmation number, for the transaction, to secure the retained information against a breach of system security. If a breach of system security occurs in which credit card or debit card information is compromised, the business shall notify the attorney general within 24 hours.
One year later, the question hangs in the air: Has Lending Club recovered?
Meanwhile, G&A expenses ballooned as the company increased spending in compliance, retention, and recruiting. Despite only releasing one product, relative engineering costs also increased significantly during the same period. The company spent $35M in non-adjusted engineering costs, an increase of $11.5M from a year prior. Why have costs expanded, even though the company hasn’t grown?
Following the Jefferies incident (and even in the months leading up to it), one of the concerns that was brought up in 2016 was regarding Lending Club’s underwriting, both in its efficacy and in its efficiency. Many institutions temporarily halted their investments on the platform during the second quarter to do more due diligence, specifically on the concern that additional loans may have had their details changed.
This issue was recognized in the first quarter of 2016, when Lending Club stated that it had begun eliminating high-risk populations from its credit policy. The company announced severalmore cuts to its underwriting throughout 2016, most recently eliminating another 6% of borrowers from its credit policy. Cumulatively, approximately 17% of borrowers who formerly qualified for loans were cut from the credit policy.
Why is credit deteriorating? Lending Club noted these deteriorating credit trends early in 2017:
“Throughout 2016 and into 2017 we have continued to observe the same trends on the Lending Club platform: indicators suggest a strong U.S. economy, but some borrowers are not offering appropriate levels of risk adjusted return.”
The delinquency rates for grades D-G do seem to be flat/trending down over the course of 2016, but delinquency rates for 36-month loans grades A-C are flat/trending up over the same period.
While not a perfect corollary, S&P/Experian consumer credit default indices also show an increase in bank card defaults over the past six months, which suggests that the increasing level of charge-offs is not limited to Lending Club.
Lending Club also noted that it is spending a significant amount more on in-house collection efforts. Servicing and Origination expenses increased $2M from 4Q 2016 to 1Q 2017.
Lending Club noted that, although its servicing portfolio balance only increased 8% year over year, the revenue collected on its servicing portfolio has increased 34%.
If we tally up our score card, we have:
Revenue has not recovered (but the company has guided investors to growth in 3Q and 4Q).
Relative spend has increased in 3 out of 4 expense categories.
Bad debts will continue to impact note investor portfolios while the 2016 vintages progress through their hazard curves, although there are signs that the increase in loan charge-offs is slowing down and/or reversing for high-risk borrowers.
As evidenced from Prosper’s annualized return calculation methodology, the return calculation can be complicated, involving several moving parts. Marketplace institutional investors appreciate the complexity and diversity of return calculations. At PeerIQ, we have had numerous conversations in the past with our clients and developed the “Cash-on-Cash Return” metric as one of several tools to monitor portfolio performance.
It varies from Prosper’s Estimated IRR by only considering realized cashflow information. Unlike Annualized Return, it eliminates complication springing from annualizing simple returns. In short, CoCR utilizes few readily available loan and pool level data points and summarizes the historical return of the investment on monthly basis.
The disadvantage of the CoCR metric is that returns are not forward-looking. Also, the declining cash-on-cash return performance (a typical characteristic of installment loan portfolios) can create confusion or frustration for retail investors. Retail investors experience strong net annualized returns in the early periods, only to experience returns consistently decline as loans season.
Data glitches are bad for any company. But they are especially terrible for online lenders that trumpet having high-quality data as a main selling point.
And now comes Prosper Marketplace, which said on Thursday that it told investors their returns were inflated because of a systems error. Annual returns for some investors were cut in half, while others declined by 2 percentage points or less.
For example, take a look at a recent securitization by Avant, the Chicago-based online lender that cut its staff by about 30 percent last year and whose loan default rates had been higher than expected. To attract investors to the nearly $220 million deal, Avant had to materially improve the underlying creditworthiness of loans by reducing their length and the amount financed and increasing their risk-adjusted yield, according to PeerIQ.
Data provider Orchard Platform said the average return on online consumer loans was 3.95 percent last year, which doesn’t seem sufficient unless the default rate was extremely low, especially compared with average returns of 6.93 percent in 2015.
The U.S. economy will slow at some point, leading to a reduction in loans and higher defaults. And eventually, all lending will be done online.
LendingTree®, a 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 first 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.
Lender rankings are based on a weighted average of overall rating and the total volume of customer reviews for mortgage, personal, business and auto loans. Lenders were rated on offered rates, fees and closing costs, responsiveness, customer service and overall customer experience.
J.G. Wentworth Home Lending, LLC
CBC National Bank
Arcadia Financial Group LLC
Veterans United Home Loans
First Midwest Bank
AmeriSave Mortgage Corp
Wyndham Capital Mortgage
First Direct Lending, LLC
Personal Loans Category
First Midwest Bank
Business Loans Category
Student Loans Category
up2drive – a division of BMW Bank of North America
According to new statistics from the Mortgage Bankers Association, real estate lending is slowing down. Lenders closed $491 billion in mortgage loans in 2016, down 3 percent from the previous year. The decline in the last quarter of 2016 was even more significant, falling 7 percent in comparison with the fourth quarter of 2015.
In commercial real estate, reports show that the decline is even sharper. According to Real Capital Analytics, U.S. commercial property purchases were down 10 percent in 2016 from the previous year, and the trend seems to be continuing into 2017. U.S. investors purchased $50.3 billion in commercial property in January and February of 2017, compared to $80.1 billion during the same timeframe in 2016.
With $300 billion in loans coming due in the next 18 months, it is unlikely that the slowdown is a sign that the industry is poised for a more significant decline.
Strong outlook for marketplace lending
While banks will likely continue to have a small pullback in commercial real estate lending, the outlook for marketplace lending is strong. In 2015, alternative lenders originated 68 percent more loans than the year prior, according to the Mortgage Bankers Association. With American Banker reporting a 700 percent growth in the marketplace lending industry in just four years, this growth is poised to continue.
While commercial real estate lending as a whole may have been down slightly in 2016, the outlook for marketplace and other non-bank lenders is strong for 2017.
We believe the most commonsense case for avoiding Lending Club (NYSE:LC) as an investment is pretty simple and doesn’t involve a deep dive into the numbers. We think the reasons for avoiding peer to peer lenders can be explained simply and are relatively easy to understand. Lending Club, along with other peer to peer lenders and smaller aggressive regional banks, will likely be a poor investments in coming quarters as a shorter-term debt cycle turns over and the lowest creditworthy types of loans begin to see a spike in delinquencies and faults.
While Lending Club loves to point out to its investors and those who participate in its online marketplace that a lot of its borrowers have great credit scores, the reality of the situation is that the lowest creditworthy people who are denied loans elsewhere will drift to platforms like Lending Club in order to secure a loan they otherwise would not be able to obtain. This is just simply a function of lending markets: the least creditworthy people will find the lowest spot on the totem pole to borrow money.
Enter Lending Club, a pool of investors chasing high yield and borrowers who were likely unable to obtain credit elsewhere. We think the obvious outcome for the broader economy will be significant and continued pressure on all peer to peer lenders, not just Lending Club, going forward over the next couple of years.
Now, Max Levchin’s latest venture, the financial technology company Affirm, is seeking to bring more accountability and transparency to the banking industry through what he calls “fair and honest financing.”
According to CreditCards.com, the average amount of credit card debt is about $9,600. If you make the minimum monthly payment, you could pay more than $11,615 in additional interest during the life of the loan — which is more than you originally borrowed.
Affirm lets shoppers pay for purchases — such as a Casper mattress or Peloton bike — over time with simple-interest loans that are free of any penalty or late fees.
Last month, the San Francisco-based company completed its 1 millionth consumer installment loan.
Max Levchin: We started Affirm 5 years ago with the thesis that we could build smarter underwriting and anti-fraud technology to improve on the tired traditional systems, and therefore create financial products that are simple, transparent, fairly-priced and free of incentive misalignment that so often defines consumer banking.
Since 2014, our loan volume has grown 40+ times over, we’ve added 900 merchant partners including Expedia, Wayfair, Peloton, Casper and Eventbrite, issued more than 1 million loans, all while maintaining an industry-first Net Promoter Score (NPS) of over 70.
Max Levchin: Since 2001, the [CFPB] found that more than 29 million consumers had been harmed by illegal practices perpetrated by bad actors in the finance industry.
There are also several legal, yet equally harmful, practices being used by the industry today that are disproportionately affecting the most financially vulnerable populations.
I would also like to see the CFPB affirm a consumer’s right to access and permission their financial data. Doing so expands access to credit for the 58 million Americans considered credit invisible – those with no credit files or insufficient information in their files to generate a credit score.
Max Levchin: Over the next few years, we [plan] to offer many more services expected from a modern financial institution, while bringing transparency to the industry where too often the customer has to lose for the service provider to win.
A new era for big asset managers? Glass Steagall and fintech (The Financial Revolutionist Email), Rated: A
The current clamor for breaking up America’s big banks should serve to remind those institutions to carefully manage the newfound freedom they will enjoy if Dodd-Frank gets defanged. It should also spur them to continue to seek out new risk-detection and monitoring technologies to avoid the kinds of systematic problems that sparked neo Glass-Steagallism in the first place. Does voice trading have a future?
It’s easy to believe that with the growing role of IM/chat messages, computer on computer communications, sophisticated algos and machine learning, the telephone is destined for oblivion when it comes to trading. But in a new survey conducted by Greenwich Associates, “voice” was reaffirmed as an important element to building trust and detecting nuance between trading counterparties. That’s good news for start-ups like Apple should buy Canada or PayPal.
JPMorgan Chase has formally exited blockchain consortium R3, following in the footsteps of fellow titans Goldman Sachs and Banco Santander who split last November.
The departure comes as R3 continues to pursue fundraising efforts, looking to raise to raise $150 million from its members and strategic investors in return for a 60% stake in the business – a downgrade from its original funding target of $200 million.
Real estate tech startups like LendingHome, Fundrise, Cadre, RealtyShares and Roofstock also raised money from Chinese firms.
Between 2011 and 2015, annual Chinese investment in U.S. technology companies rose from $300 million to $9.9 billion, according to research firm CB Insights, before falling in 2016 amid a general slowdown in venture investment. The data doesn’t break down how much money went into real estate technology, but sources said it holds a special appeal to Chinese investors.
Hone is backing the real estate investment platforms Roofstock, RealtyShares and Clara Lending, the Airbnb competitor Overnight and the drone-based property inspection service BetterView, among others, making it one of the most active Chinese investors in the space. The social media company Renren invested in mortgage platform LendingHome and crowdfunding company Fundrise, among others. Alibaba founder Jack Ma is an investor in Cadre, the Jared Kushner-backed real estate investment startup.
The technology of the future that is thought capable of revolutionizing financial institutions and its regulators is already here. But with no national plan to harness it for economic betterment or regulatory transparency, it may well represent another missed opportunity to restructure the financial system.
One need only look to the evolution of the internet, with its revolutionary concepts of distributed communication that fundamentally changed how the world and its financial institutions communicate. A similar revolutionary technology, distributed ledger technology (DLT), is promising to fundamentally change how financial institutions store and report information, but only if it can become a common good like the internet.
With the CAT rollout and data collection not yet begun, a more robust and comprehensive DLT solution could be proposed, one which combines important CFTC products with those of the SEC in a shared data collection undertaking.
The U.S. needs a comprehensive fintech and regtech (regulatory technology) plan to efficiently deploy DLT.
With standardization, fintech and regtech innovation can enable virtual global views of financial data that is disbursed throughout local computer nodes (data collection points) across the globe. But this is only possible if these nodes conform to both common data standards and common networking protocols.
Shark Tank star Kevin O’Leary, also known as “Mr. Wonderful” to some, is a fan of Fintech. O’Leary is sharing the love by delivering the Keynote address at the upcoming Benzinga Fintech Awards scheduled to take place this coming Thursday in New York City (May 11, 2016). O’Leary is said to be a regular suspect at the Benzinga offices too.
O’Leary will be presenting the keynote at the pinnacle of the award celebration.
Alongside O’Leary the following executives will be presenting or participating;
Kathleen Murphy, President, Personal Investing at Fidelity Investments
UK PEER-TO-PEER lending platforms are poised to shift towards hybrid models to stay afloat, a financial services think tank claimed on Monday.
The P2P industry has re-shaped the country’s small corporate funding and investment market, putting pressure on traditional lenders to step up their game, said the Centre for the Study of Financial Innovation. But it is now facing a plateau that may require it to expand into direct lending and balance-sheet operations, as well as cutting interest rates, to become profitable.
He pointed out that SME lending growth has become relatively stagnant and that less than half of UK small businesses are aware of new online sources of finance. This casts a shadow over the volume growth that P2P lenders need to achieve to become a mass market.
And in response to the digital innovation brought about by P2P players, traditional banks have begun to change the way they address the SME market, upgrading their online services and shortening their decision-making timeframes.
Attracting borrowers and scaling up investment volumes is going to be one of the key challenges for platforms going forward, the report said, alongside proving the soundness of their underwriting during a credit downturn and investing in continued innovation in customer service.
Cash-strapped millennials renting in the UK are spending upwards of a third of their take home pay of £17,359 on rental payments, according to the latest Landbay Rental Index, powered by MIAC.
For tenants aged between 18-39 and living alone, 69% of a monthly post-tax income of £1,447 is spent on £1,012 of rent. In a shared house of two people, overall rent of £1,152 adds up to 39% of each tenant’s income, while those co-habiting in a three-bed property would each spend 30% of their monthly take home pay on a rent of £1,322.
Rents have continued to rise over the last five years, increasing by 9% across the UK since April 2012 and by 8% in London – with monthly payments remaining a huge burden on those struggling to save, despite the pace of rental growth beginning to slow since August 2015, from 2.66% to 0.82%. While rents have begun to fall in prime Central London, outer boroughs popular with millennials, such as Barking and Dagenham, Havering and Bexley have seen rents grow by 26%, 18.9% and 18.2%.
The gig economy continues to grow, with about 5 million people in the UK working as independents. It makes sense that a bank account provider would want to cash in on that and that is why Coconut has sprung up – to provide tailored banking for freelance and self-employed workers.
Customers can manage and track their income and outgoings via an app, and it even gives reminders of tax deadlines and the end of the financial year.
Increasing numbers of customers are relying on their phones for their daily banking, with data from the British Banking Association revealing that customers used their phones to check their bank balances 895 million times in 2015 alone, a number that is no doubt rocketing upwards.
A number of fintech start-ups are trying to capitalise on this trend and Monzo is one.
The app gives customers a real-time insight into what they are spending and how they are spending it, helping to budget and stay in the black. Users can access their account via an app that gives data on their daily and monthly spending, as well as the overall health of their account.
The first bank to gain a licence while being centred entirely around an app, Atom is racing ahead in the fintech current account stakes. It offers some far-sighted technological developments, including the opportunity to do away with passwords and even debit cards, instead relying on voice and face recognition.
And DiPocket is a new financial app that isn’t a bank but offers customers mobile banking facilities via a prepaid Mastercard.
UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.
The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.
The Edinburgh-based RM Secured Direct Lending trust is seeking to raise fresh capital just five months after its launch as it nears full deployment of its capital.
Launched back in December 2016, the closed-ended fund targets the SME lending space investing in loans it originates of between £2-10m. It specialises in secured debt investments and the portfolio has had a good run since its initial public offering (IPO) with most of its capital invested or moving towards deployment.
Total Net Assets are today £48.9m. Nearly £40m has been invested in a total of 11 loans, with borrowers ranging from a healthcare group, a UK high street retailer and a large UK/European forecourt provider.
So, when Royal Bank of Scotland announced in March that it would be rolling out robo-advice for mortgage applications by the end of the third quarter it was clear that that particular innovation is no longer quite so innovative.
Put simply, websites such as Nutmeg, which is by far the best-known name in the fledgling UK market, present would-be investors with a range of questions designed to ascertain their attitude to risk before directing them to a model portfolio that should suit their needs.
However, the issue, according to Stephen Martin, head of Brewin Dolphin’s Glasgow office, is that even where needs are uncomplicated, robo-advisers can only go so far because they will never be able to tease out information peculiar to individual situations.
Hollands agreed, noting that while robo-advisers are a positive addition because they are helping open the investment marketplace to a wider range of people, they cannot be seen as a like-for-like replacement for full financial advice.
While the robo-advice market in the UK remains small, covering in the region of £1.5-2 billion of assets, research from Deloitte suggests that with more and more people having to take responsibility for investing their own pensions the potential for growth is high.
The accountancy giant found that 43 per cent of 35 to 44 year olds with a pension would use robo-advice on where to invest it, with those with the smallest pension pots, who may not be able to afford traditional financial advice, most likely to go to a robo-adviser.
Business grants: In an unsettled economy, start-ups are seen to be important as a way of encouraging economic growth- this is why so many banks and publicly funded organisations are happy to support your ambitions.
Short term loans: One way in which you can look to finance your business is through a quick loan from a reputable company. Quick loans can help to offer you the perfect cash injection necessary to get your business up and running with the ability for the debt to be paid back over a series of repayments. The key with funding your business through a short term loan is in finding a loan with a low interest rate.
Crowdfunding: Peer to peer lending and crowdfunding have become an increasingly popular way for entrepreneurs to start up their own businesses.
Friends and family: Something to always consider when looking towards funding your own business is to pitch for funding from your family members and friends.
Angel investors: Angel investors can be a great source of investment and can be found in most cities.
WeChat Pay, one of the biggest mobile payment platforms in mainland China, has boosted its cross-border business by entering the U.S. market.
One in four of those aged between 18 and 27 use pay-by-credit services Ant Check Later, a personal loan and installment service under e-payment provider Ant Financial Services Group, as these freer spenders form the very core of the country’s burgeoning consumer-credit landscape.
People born in the 1990s constitute 47.3 percent of the platform’s registered users. Among them, nearly 40 percent prioritized the service as a payment option over its sister service Alipay, China’s largest mobile wallet by market share. This is 11.9 percentage points higher than those born before 1985.
Baidu Financial has announced to launch new consumer mortgage products with the aim of encroaching on consumer credit market.
The rating standards mainly include five aspects: corporate strength, enterprise qualification, operation indices, cyber security and social reflection.
In another attempt to secure a firm grasp on China’s Fintech market, Chinese tech conglomerate LeEco has turned its next venture towards insurance and fund consignment. Since 2015, LeEco has got several financial licenses on various fields: micro credit, private placement, insurance and fund. Specially, LeEco is trying to build a fintech ecosystem, which covers micro finance, equity management, fund and insurance sales.
In recent weeks, Ant Financial‘s Yu’e Bao surpassed JPMorgan’s US government money market fund to became the largest in the world, China Rapid Finance became the second Chinese P2P lender to go public on a major US exchange, and Ant Financial upped its bid to acquire MoneyGram, the second largest global money transfer provider.
On the state of marketplace lending in China
Two fintech sectors — payments and marketplace lending — are more mature than others in China, as they have been around for over 10 years, have massive scale, and operate within robust regulatory frameworks and ecosystems.
We think that, over the next decade, sectors like crowdfunding, robo-advisors, insurance tech, blockchain and blockchain-driven applications will emerge. Some are behind marketplace lending by 3 years, some by 5 years, and some are behind by even 10 years, but I think all will go through a similar process in China.
It took 10 years for marketplace lending to grow from an idea to an industry in China. Recently, there has been tightening in the market, but I believe a tighter market will help the industry become more stable and healthy.
On credit scoring in China
Regulators have adopted a strong view that credit scoring is key for China to develop its credit bureau system. It will be a very strict process.
Currently, we use eCommerce data, telecommunications data, bank and credit card data, insurance data, and social security data. Big data is very helpful, but alternative data needs to cooperate with traditional finance and credit data to make the risk evaluation model really work.
I think China will develop a multi-layer system. The core will be the credit bureau — consisting of core credit data — and around it will be different applications for different industries utilizing some industry-specific data. Around that will be additional ancillary data services utilizing big data for anti-fraud, marketing, and so forth.
Still, the core layer will look quite similar to what the US credit system looks like.
On insurance tech in China
The biggest pain point for the insurance industry in China is that it’s never sold in the right way.
We don’t need more insurance products, we need more education and intelligent matching.
Where CreditEase is investing
Chinese investors are in the process of building globally diversified portfolios. From our point of view, we help clients who already have foreign currency outside of China to invest in the US and other parts of the world.
We are still quite interested in opportunities in lending. For example, we invested in (former Lending Club CEO) Renaud Laplanche’s new venture, Upgrade. I believe there are still a lot of opportunities left over from marketplace lending 1.0. We are similarly interested in crowdfunding, insurance tech, and — not only robo-advisors — but also B2B fintech models helping the wealth management and asset management industry.
P2P Industry News (Xing Ping She Email), Rated: A
Over 60% Chinese P2P Lenders achieved profit
According to the latest statistics from Online Lending House, 28 P2P Lending platforms disclosed their financial results, accounting for 1.3% of all the platforms. In 2016, 17 (61%) platforms have achieved profit, while 11 P2P Lenders had a loss.
The data shows that the most profitable platform is Yirendai, with $1.12 billion net profit. However, another US listed platform, China Rapid Finance, has lost $0.23 billion. Excluding lost platforms and those with incomplete data, the average net interest rate of 17 platforms are 25.92%, performing well in profitability.
After the Internet Finance mania in China, more attentions now are paid to bank depository of the auto loan market. In China, with the rapid development of economy, cars gradually become ordinary people’s necessary life consumption, especially in developed areas, and almost every family owning a car.
Meanwhile, the large holding numbers and high liquidity of cars make it one of the most promising vertical field in P2P industry. It was reported that the number of car users in China are rapidly increasing, which contributed to the rapid development of the auto loan market.
According to the latest data, the total volume of Internet auto finance in China is expected to reach at 1.85 trillion RMB, driving the penetration ratio of consumer finance to about 30%.
Temenos has announced Duena Blomstrom as Chief Growth Officer for Marketplace, its online store of 100+ FinTech solutions that have been certified and pre-integrated with the Temenos Suites.
Blomstrom is well known in the FinTech sector as an analyst, entrepreneur and Angel Investor, a mentor for Startupbootcamp and Techstars, and the inventor of the Emotional Banking, EX and Bank Branding concepts. For the past 18 years, she has operated on the strategy and consulting side, be it for sales or marketing.
But banks are not easily displaced. Peer-to-peer lending, for instance, has grown rapidly, but still amounted to just $19bn on America’s biggest platforms and £3.8bn in Britain last year, according to AltFi Data, an analytics company. And some marketplaces now involve banks. Lex Sokolin, director of fintech strategy at Autonomous, a research firm, argues that music—one of the first industries to be attacked by digital revolutionaries—was fairly easily disrupted. Retailing was a little harder, but customers got used to not handling books, cameras and clothes before buying. Finance and health care, he says, are much more difficult. People are rarely inspired by financial products, says Mr Sokolin, which makes it costly to build a brand. It is easier to team up with those who already have the customers.
In the West, regulation is opening up more of the field to fintechs, both large and small. A revised European Union directive on payment services, known as PSD2, allows third parties to offer more convenient ways of paying online or to consolidate information from different accounts (with the holder’s permission) so that people can keep track of their finances. America has no equivalent, but the Office of the Comptroller of the Currency, which oversees national banks, has proposed giving special licences to fintechs.
China’s digital behemoths worry less about such things. Companies like Ant Financial, the financial arm of Alibaba, an e-commerce giant, and JD.com, another online marketplace, have masses of data about those who buy and sell on their platforms. They know their spending habits and how much cash they can spare, so an easy next step is to offer them small loans. Big Chinese banks in any case neglect consumers and small businesses, so customers feel no loyalty towards incumbent lenders. Regulators have also been willing to let online companies shift into finance.
In the ever-evolving world of cybercrime, authentication continues to be a mainstay of global digital businesses; accurately recognizing trusted returning users and promoting a frictionless online environment builds a loyal customer base and reduces attrition.
However, cybercrime is becoming an increasingly global phenomenon, operating across borders in well organized criminal gangs, with knowledge sharing and centralized intelligence. Attacks continue to evolve quicker than the tools and techniques used to detect them.
Some key attack trends analyzed this quarter include:
The multifarious attack methods used in a 2017 cybercrime attack
The evolution of attacks from single to multi-vector approaches
Identity theft is a key issue for all industry sectors as they continue to see attacks involving stolen and synthetic credentials, harvested from omnipresent data breaches
The proliferation of RATs in the financial services sector
The sophistication of bot attacks
The only effective armor is to genuinely understand who your real customers are and how they transact, by collecting and processing all the information you know about them and using this to make informed risk decisions.
To be sure, a gang of newcomers have muscled their way into their domains. Peer-to-peer or marketplace lenders, such as Lending Club and SoFi in America, or Funding Circle and RateSetter in Britain, connect people and companies that want to borrow with those that have money to lend, promising both sides keener rates. Britain’s MarketInvoice allows small companies to borrow against receivables immediately, rather than turn to a bank or wait for bills to be paid. Digital banks such as N26 in Germany, Tinkoff Bank in Russia and an array of British hopefuls are challenging incumbents.
The Islamic Fintech Alliance (IFT Alliance) has published its inaugural report on the emerging Fintech sector for the Muslim community.
Munshi is the founder and CEO of Ethis Ventures, a company that operates several platforms including crowdfunding. Mushis states that Muslims must unite to take advantage of this “unprecedented opportunity” to invigorate Islamic financial services with new forms of finance.
This week the cryptocurrency broke record-highs when it started trading above USD$1680 against the US dollar. As at May this year, the total market cap of the bitcoin market has more than doubled to US$23 billion since it hit the US$10 billion mark just three years ago.
“A lot of people say that bitcoin is very volatile. It is in the short term but if I were doing fund management for my client, I see it as a very good long term investment,” he said.
Cambridge University counts as many as 5.8 million unique users of the so-called crypto currency wallet, most of whom use bitcoin. More than 100,000 merchants and vendors now accept bitcoin as a form of payment albeit regulators warn that bitcoin users are not covered by refund rights.
Digital modes of payment are becoming ubiquitous, riding on the government’s less-cash drive after demonetisation. Yet, Instamojo, a Bengaluru-based fintech company, feels not enough is being done for small businesses.
The company wants to help India’s micro, small, and medium enterprises receive payments online in a simple, hassle-free manner, said Sampad Swain, one of its founders and also the chief executive officer. The government last year projected that the number of such businesses has grown to over 5 crore.
The only two requirements for the company’s service to work is that both parties must have a mobile number and a bank account.
“If the mango seller wants to use our platform, he has to first do an e-KYC, which takes a few minutes,” said Swain. This can be done either through a mobile application that can be downloaded from the Play Store, or on Instamojo’s website.
The seller then generates a link by providing information on the ‘purpose’ of the transaction, and the amount that the buyer has to pay. In this case, the purpose would be a crate of alphonso mangoes, and the price would be Rs 1,700, Swain explained.
Once the link is generated, the seller can forward it to the buyer by any messaging mode, like WhatsApp, Facebook, email, or even an SMS. When the buyer clicks on the link, he or she is directed to Instamojo’s website, where a number of online payment options are available.
Headquartered in Dubai, Wamda (which means “sparkle” in Arabic) is an organization that supports the entrepreneurial spirit and business initiatives in the MENA region. Along with PAYFORT, an online payment platform, Wamda Research Lab released a report that provides in-depth data about FinTech in MENA.
According to the ‘State of FinTech,’ over $100 million USD were invested in Fintech in the MENA region over the last decade, with $50 million expected for 2017 alone. In 2013, the number of Fintech startups was 46. Then, in 2015, that number increased to 105–with the United Arab Emirates leading the pack with 30 independent FinTech startups–and the overall MENA number is expected to reach 250 by 2020.
News Comments Today’s main news: SoFi raised new $105M fund.Landbay unveils March 2017 UK Rental Index.P2P-Banking launches IFISA comparison database.Personal loan applications surge in Australia. Today’s main analysis: Development of fintech in Hong Kong.Fintech startups in MENA raise $100M last decade. Today’s thought-provoking articles: OCC fintech plan uncertain as comptroller term expires.Goldman’s internal fintech revolution can’t […]
SoFi raises $105M fund. AT: “While $105 million is a drop in the bucket for SoFi, this represents a new channel for raising capital.”
OCC fintech plan uncertain as comptroller term expires. AT: “The Trump Administration is preparing for a showdown with Dems over the fate of CFPB and the proposed fintech charter. It’s clear that Curry’s fate is signed, but what isn’t clear yet is how long the president will allow him to keep his post before replacing him. It will be an interesting year.”
The tax implications of RECF. AT: “You know the usual disclosure. Taxes can get sticky, so consult your tax advisor for specific tax implications for your particular situation if you plan to invest in RECF.”
MortgageHippo raises $2.25M. AT: “Not a bad seed round, but I think new entrants to the mortgage technology sector will arise with bigger and better pools.”
Inside Bond Street’s conent marketing strategy. AT: “I’ve done content marketing since before it was called content marketing and I like that Bond Street is concerned first with building its brand. That’s what all marketing is about. Specifically, it’s online marketing chanels are to be commended. A blog is a near necessity, but you need a dedicated content producer to keep it up. An online magazine is one of the best branding tools for content marketing, and I like that Bond Street is pursuing that channel, though I have to say its design could use a little work. Podcasting is another content marketing tool that is gaining momentum. Again, hats off to Bond Street for focusing on content that isn’t all about them.”
SoFi, the online lending start-up sporting a lofty $4.3 billion valuation, has just raised a $105 million fund to give outside investors another way to buy into the company’s loans.
In a regulatory filing Monday afternoon, SoFi Prime Income Fund is listed as the issuer of equity in a limited partnership. According to the filing, the fund has 33 investors that put in a minimum of $500,000 each.
Nino Fanlo, SoFi’s chief financial officer, said the fund is the first of its kind for SoFi and provides another avenue to raise capital for issuing loans. Returns after fees are expected to be in the low double digits, he said.
As the term of Comptroller of the Currency Thomas Curry expires and with no replacement in sight, the OCC could be headed toward a showdown with Congress over the agency’s decision to issue special charters to fintech companies.
In March, the OCC published a draft supplement to its licensing manual, which contains existing regulations for chartering national banks.
And although Curry said the OCC will issue charters to fintech companies, his own future is in doubt. His term expired this month and President Trump has not nominated a replacement, although Joseph Otting, a former associate of Treasury Secretary Steven Mnuchin at OneWest Bank ,has been mentioned as a possible nominee.
Sens. Sherrod Brown (D-OH), ranking Democrat on the Senate Banking Committee and Jeff Merkley (D-OR) said earlier this year that authority to issue such charters must come from Congress.
Meanwhile, traditional banking and credit union trade groups are divided over the charter proposal.
Earlier this year, NAFCU said that the OCC must ensure that online lenders are subject to the same consumer protections and data standards as banks and credit unions.
The American Bankers Association has said it supports the concept of the OCC issuing fintech charters, but wanted it to ensure that companies meet the same standards as traditional banks.
Goldman Sachs’s internal technology revolution cannot come soon enough.
Goldman’s fledgling Main Street operation is a bright spot. With more than $115 billion in deposits, it’s already one of the top 25 banks in the United States by that measure. Marcus, as the online consumer-lending unit is called, is experiencing “demand more robust than we thought,” the unit’s boss, Harit Talwar, said recently.
Consumer lending can earn at least a 3 percent return on assets — triple what Goldman has been managing as a whole of late.
For now, lending through new web platforms remains a small industry, with just $40 billion of credit extended over a decade, according to Deloitte.
Texas-based Elevate Credit (NYSE: ELVT), which recently held its IPO at the exchange, exists because of what it sees as an opportunity in the financial services market.
In between are working people, roughly 170 million residents of the U.S. and the U.K., whom Elevate refers to as “the New Middle Class.” These are people with low or no credit scores, who often have to resort to non-prime lenders in moments of personal or medical emergency.
Elevate offers three products. The first, called Rise, is an unsecured, online loan vehicle; Sunny is its U.K. counterpart, and Elastic is a line of credit issued by Kentucky-based Republic Bank, Member FDIC. While the company’s customers have credit scores typically in the 560 to 600 range, those with lower credit or no credit can also be approved, depending on what Elevate’s data analysis reveals about their reliability.
Elevate’s analytics platform, DORA, is home grown. It’s based on open-source software tools that enable model development and risk analytics. DORA inputs and outputs are monitored and evaluated to help ensure legal and regulatory compliance. Elevate’s IQ platform deploys business logic and algorithms. And driving the analytics and decision-making technology is the very human decision to create specific data sets, generated from sources that monitor non-prime customers.
The platforms draw on more than 10 different sources of consumer information, including the big three credit bureaus as well as other bureaus that specialize in non-prime customers. In addition, Elevate acquires data from LexisNexis, ID Analytics and other unique data sources to validate the applicant’s identity and to draw inferences about the applicant’s intent to repay. Elevate uses this data in ongoing tests to optimize its underwriting, to ensure that fraud and serious credit risks are more easily distinguished from acceptable risks.
In the last year, Elevate’s charge-off rates have remained steady, while its customer acquisition costs have dropped, says Rees.
Elevate also uses its nimble, data-driven underwriting model to reward its best customers. Borrowers who establish a history of on-time repayment, and who take advantage of online financial literacy tools and videos, will see their APRs drop over time. Currently, the most responsible Elevate customers pay APRs as low as 36 percent.
When OnDeck completed its IPO in 2009, it entered the public markets with a massive amount of buzz, ending the day with a share price north of $20 dollars and a valuation around $1.9 billion.
Two years out, and the banks’ lunch remains uneaten — because those alternative lenders like OnDeck have had a rather bumpy two years. OnDeck’s share price is down 75 percent since its 2014 IPO — in the last 12 months the firm has shed 37 percent of its value.
Today OnDeck’s market cap stands at $330 million.
Marathon Partners Equity Management, LLC has owned 1.75 percent of OnDeck since the end of 2016 — and the activist investor is now pushing for a new direction, preferably one that involves a sale.
That letter apparently did not get quiet enough of a reaction from the board — OnDeck’s official response was that they “value dialog with their shareholders,” and so as of the end of last week, the campaign ramped up.
Whether or not very drastic changes are coming soon to OnDeck remains to be seen — the annual meeting for shareholders will likely be spirited.
Public comments are now available from companies, regulators, advocacy groups and individuals weighing in on the Office of the Comptroller of the Currency’s licensing manual draft supplement for special purpose national bank charters.
The OCC received only 17 total comments on its March 15 supplement for evaluating bank charter applications from financial technology companies, far from the 120 it received on the broader whitepaper Exploring Special Purpose National Bank Charters for Fintech Companies, which introduced the idea of the OCC granting fintech companies these bank charters back in December 2016.
“While many states have made admirable efforts to align their regulations with technological innovation, state laws by and large were drafted for a physical branch banking environment that did not envision online delivery of financial services,” wrote Robert Lavet, general counsel of San Francisco-based personal finance company Social Finance, or SoFi, in his comments to the OCC.
In her comments, personal lending company Oportun Inc.’s chief compliance officer Joan Aristei voiced no concerns with the financial inclusion standards. She wrote the guidance on this type of plan will “inform our discussions regarding how we can modify and enhance the efforts we have already undertaken,” adding that she “appreciates the OCC’s willingness to innovate and look beyond traditional measures of financial inclusion.”
New York State Department of Financial Services superintendent Maria Vullo called the OCC’s proposal for fintech charters a “hasty and misguided effort.” She said that regulation for the financial technology providers is better left to the states, not the OCC.
The first thing to understand is that an equity investor in a syndication is actually a partner in partnership. Investments in syndications will generally be considered “passive” activities.
When combining all passive activities, if the investor has a net passive loss, then the remaining net loss is effectively “suspended” whereby they are carried forward to future years and subject again to the passive activity rules. If an investor has passive income then that is taxed at the taxpayer’s marginal tax rate.
In the subsequent tax year, any passive losses that carried over can offset passive income that is generated.
Crowdfunding syndications offer one additional special tax advantage and that is favorable long-term capital gains rates. When a property (apartment building, retail center, etc.) is acquired through a syndication and is held for longer than one year, the sale of the property would typically result in long-term capital gains. These gains are taxed at a rate of 15% (with certain exceptions). Any depreciation that was deducted on the property would be subject to tax rates not to exceed 25%.
MortgageHippo, a mortgage-technology startup based in Chicago, has raised about $2.25 million in seed funding, the company announced Tuesday.
CMFG Ventures, based in Madison, Wis., led the $1.5 million round that closed last week, Saportas said. CMFG is the venture capital arm of CUNA Mutual Group, which sells insurance and investment products to credit unions. The investment closed MortgageHippo’s seed funding.
Jones said the company is “passionate about building a brand,” which it does by creating editorial content. It has a blog that profiles business owners Bond Street serves across the country, like the guys behind the Two Hands cafes and restaurants or the women that launched Sky Ting Yoga in New York City; and an online magazine that looks at the cultural and economic impact of independent businesses in New York (celebrity restaurateur Daniel Boulud and artist Baron von Fancy are among many interviews that address the importance of supporting local businesses). It also has a podcast called the Nitty Gritty that features the entrepreneurs behind brands like Sweetgreen, charity:water, McNally Jackson and Smitten Ice Cream; and a series of city-specific resources for female entrepreneurs.
Jones declined to share Bond Street’s annual content marketing budget, but said the company has two dedicated employees working on content marketing, out of about 40 total employees.
Marketing has become expensive for online lenders because of the high cost of customer acquisition. Partnerships are an easy way to bring that cost down, Benton said. To date, Bond Street has partnered with WeWork to offer loans to member companies of the co-working space company; SMB-focused software companies like Booker and Front Desk to offer their clients discounted loans; and most recently, with NerdWallet, the comparison shopping site for credit cards and other financial services, to help provide small business owners with financing options.
Payixand Nortridge Software Announce Strategic Alliance (BusinessWire), Rated: B
Payix® and Nortridge Software announce they have formed a strategic alliance to help lenders connect with their borrowers and improve their ability to collect payments. The alliance allows Payix to offer real-time integration between its suite of collections tools and the Nortridge Loan System (NLS).
Payix’s collections tools include its intuitive, engaging and affordable mobile collections application, as well as web, interactive voice response (IVR), text, and collector portal applications. Nortridge clients can add the Payix solutions to their existing collections tools with virtually no IT work on their part and in just a few weeks’ time.
The Nortridge and Payix teams collaborated in the development of the seamless web services interface between the Nortridge Loan System and the Payix payment system, ensuring that transactions could be carried out in real-time and without interruption.
Payix’s collections tools are white-labelled to help lenders promote their own brands with their borrowers, and they were specifically designed for any size lender to use easily and affordably.
In late March, 2017 we learned that Chinese online lender China Rapid Financefiled to go public, hoping to raise up to $100 million. They will list on the New York Stock Exchange under the ticker symbol XRF and will be the second Chinese online lender to go public in the United States.
RealtyShares, a leading online marketplace for real estate investing, today announced that its network of accredited investors has collectively funded a $3 million investment for the acquisition of Clarendon Park Apartments, a 138-unit multifamily property in Phoenix, Ariz.
The deal is sponsored by Rincon Partners, an Arizona-based owner and operator of multifamily properties focused primarily on the Southwestern United States. Rincon Partners intends to use the funds to rehabilitate and modernize the apartment interiors and amenities to potentially improve its position within the market.
The property is located in midtown Phoenix, between the city’s two largest employment corridors and close to shops, restaurants and newly developed amenities. The property itself features a swimming pool, spa, clubhouse and fitness center, as well as access to light rail within two blocks.
Last week, UK-based peer-to-peer lending platform Landbay released the March 2017 Rental Index. This report reveals details about the country’s rental market.
“Since March 2016, average rents in the UK have risen by 0.9% to £1,191. In England, rents were up 0.87% to £1,222; in Northern Ireland, they rose by 0.07% to £557; meanwhile in Scotland rents rose to £723 following annual growth of 1.25% and in Wales, the average rent is up 1.41% to £636. Average rents for one, two and three-bed properties hit £1,012, £1,152 and £1,321 respectively in March 2017.”
P2P-Banking launches a new IFISA database, that enables investors an easy comparison of offers by IFISA providers. UK taxpayers can invest up to 20,000 GBP per year tax-free in ISAs. This amount is per tax year, so a person could invest 20,000 GBP this tax year and invest 20,000 GBP in a different ISA next year. The Innovative Finance ISA, short IFISA, was introduced in 2016 with most offers becoming approved by HRMC only in the 2017/2018 tax year.
The new database of IFISA offers allows speedy selection and sorting to review IFISA products by different providers and then links to the provider’s website for in detail information. Investors can filter by interest rate, term, loan type, minimum investment amount, possibility of transfers in and out, flexible IFISA, bonus & cashback promotions and several other criteria.
Starling Bank is partnering with app-based wealth manager Moneybox for real-time savings.
Moneybox’s savings and investment services will be now offered by digital-only bank Starling to enable customers to easily open ISAs and round up their spending in real time.
The service will be available to Starling customers as early as the end of April.
The new service is made possible through Starling’s open APIs. The integration has two distinct features. Firstly, it allows customer data to be securely shared between the two apps, meaning transactions will appear within the Moneybox app in real time as customers spend.
Secondly, the integration with Starling means that customers will be able to set up round ups from their Starling account in a matter of seconds.
Starling Bank publicly launched its API and developer platform to enable external developers and technology companies to integrate with the banking app earlier in April, and Moneybox is the first to launch a live integration on this API.
In response to growing demand from investors in search of better investment returns for their pensions, UK P2P service provider BondMason has launched a new Self-Invested Personal Pension (SIPP) service.
The new SIPP service offers a flexible, tax-efficient way to save for retirement and allows investors to access returns from a diverse set of approved P2P Lending opportunities. Investors can open with a lump sum from £5,000 and there is no tie-in – an investor can typically exit in full within 48 hours. The service also aims to allow SIPP administrators to easily and compliantly grant their clients access to returns from P2P Lending.
THE FOUNDER of ThinCats has said that the regulator’s clampdown on wholesale lending will affect projects that can be funded through his social peer-to-peer lending platform Community Chest.
Kevin Caley (pictured) launched the social enterprise last year and it funded its first loan in February 2017 for £130,000. The debt facility went to a local Birmingham finance company called ART Business Loans, which supports West Midlands enterprises.
But Caley says the Financial Conduct Authority (FCA)’s tighter restrictions on wholesale lending mean that loans like these will no longer be possible, as the money was lent to another lender.
A well kept secret of the UK B2B banking sector, is now public. Clear Bank, a clearing Bank in the UK, is ready to compete with the four UK clearing banks,
Royal Bank of Scotland (RBS).
Clear Bank is the fifth UK clearing bank and the only one that is pure B2B since it does not offer services direct to the consumer.
Back in the 60s there were 16 clearing banks in the UK. Consolidation in this part of transactional banking has left the UK currently with 4 clearing banks that process over 80 Trillion pounds annually worth of payments in the UK.
Clear Bank will be helping Challenger banks to access the payment system at the Bank of England level, at the same level as incumbents.
Clear Bank will help the 44 UK Building societies offer current account services in a cost effective way. Right now, only 2 out of the 44 offer such capabilities to their members due to prohibitive costs.
Clear Bank will boost indirectly retail banking by reducing the substantially processing costs, which will facilitate competition for incumbents in the UK.
Clear Bank will help Fintechs by providing Banking as a service through the Cloud at a very low cost. Clear Bank will be offering an API so that Fintechs can interconnect to the ClearBank Fabric.
According to Venture Beat, U.K.-based startups raised $1.04 billion in venture capital (VC) during the first three months of 2017. That’s a slight decrease from the $1.17 billion raised during same period one year ago, but it’s above the amounts raised in each of the last three quarters.
The U.K. remains number one in Europe for VC raised, with Germany second at $779 million and France third at $665 million.
Peer-to-peer lending service Funding Circle helped push the U.K. into the number one spot, raising $97 million in VC funding and $43 million in debt funding during the first three months of 2017.
The fintech — financial technology — sector has emerged rapidly over the last decade. The Confederation of British Industry expects it to be worth £300bn in the UK alone by 2020.
Given Neil Woodford’s long-prevailing dislike of the big banks, it’s perhaps not surprising that he’s attracted by the relatively simple business models and exciting investment opportunities in the fintech sector.
Woodford is invested in some unquoted fintech companies, such as RateSetter, a peer-to-peer lending platform, and Seedrs, which opens up venture capitalism “to anyone with an internet connection”. However, he also has two holdings that are listed on the stock market — and very interesting they are too.
P2P Global Investments(LSE: P2P) is a FTSE 250 firm with a market cap of around £700m.
VPC Specialty Lending Investments(LSE: VSL) is in the FTSE SmallCap index but is a decent-sized company with a market cap of around £290m. Its business is similar to P2P’s and like the FTSE 250 firm, considerable quantities of cash flow into shareholders’ pockets.
Guarantor lender George Banco has appointed the co-founder of peer-to-peer platform RateSetter as a non-executive director.
Peter Behrens (pictured above) – who also serves as the chief operating officer at RateSetter – co-founded the platform in 2010, and has seen more than £1.8bn of loans facilitated through the company in this time.
Alternative funding options will be a major theme at Business, Innovation, Technology and Efficiency (BITE) 2017 hosted by MHA Carpenter Box at the Amex Stadium, Brighton on Thursday 27 April.
Andy Davis (pictured), former editor of FT Weekend and author of the ‘Beyond the Banks’ report on alternative finance, will be one of the industry experts forming an ‘alternative funding panel’ at the free one-day conference, where he will share his expertise with local business leaders.
The impact on fintech could be significant, as an Emerging Payments Association (EPA) report Passport to the Future makes clear: “HM Treasury estimates the UK fintech market employs 60,000 people and is worth £6bn to the UK economy. Fintech is part of the UK’s financial services sector that employs 1.9 million people and contributes 10 per cent of the UK’s GDP. Payments represents over 40 per cent of financial services in revenue terms and in 2016, 40 per cent of all fintech investments were in payments companies, amounting to £10bn globally.”
In a recent survey of its members, the EPA found that 88 per cent of its members think that passporting rights are important or very important to their current businesses, while over 91 per cent think passporting is important or very important to the UK’s fintech sector and its continued growth.
As the EPA’s report states: “This could see the flight of some or part of the 5,500 licensed companies abroad and have a significantly negative impact on the UK economy.”
Latvia based Alfa Finance Group has launched a new peer to peer lending platform named DoFinance. The company stated it had invested €2 million to get the P2P lender up and running. The online lender is said to be available in all EU and EEA countries.
Simplex Inc., one of Asia’s leading financial services technology firms, announced a strategic partnership with Risk Magazine’s FinTech start-up of the year, Beacon Platform, Inc.
The partnership combines Simplex’s expertise in implementing trading and risk management solutions with Beacon’s experience in building cross-asset trading and risk management platforms for industry leaders including Goldman Sachs, JP Morgan and Bank of America Merrill Lynch.
Australians are shunning high interest credit cards and turning to personal loans for large purchases.
Driving the switch are tech-savvy consumers taking up loans from peer-to-peer (P2P) lenders, a new breed of online competitors to banks.
Credit card applications fell by almost 4 per cent in the March 2017 quarter compared with the same quarter last year, the latest report on consumer credit by credit bureau Equifax shows. That’s the biggest fall since September 2012 quarter.
Reserve Bank figures suggest that more frequent but lower value transactions are being made on credit cards.
One P2P lender is showing an interest rate on its website of 10.3 per cent on a $10,000 unsecured personal loan paid back over three years.
Banks would typically charge 13.02 per cent for a loan on the same terms, while credit cards are higher still – typically 14.15 per cent for a non-rewards credit card and 19.6 per cent for a rewards card, plus annual fees.
This paper provides an update on the local financial technologies (Fintech) landscape and measures to support the development of the industry.
The number of Fintech start-ups operating in co-working spaces and incubator/accelerator programmes in Hong Kong increased by 60% between August 2015 (86) and August 2016 (138), according to Invest Hong Kong (InvestHK)’s Start-up Profiling Survey.
Hong Kong attracted about US$400 million of venture capital (VC) investment in Fintech companies during 2014-2016, lower than the Mainland and India (both of which are economies with huge domestic markets) but ahead of regional peers such as Australia, Japan and Singapore1 .
Universities such as The Chinese University of Hong Kong and The Hong Kong Polytechnic University will launch dedicated, publicly-funded firstyear first-degree and senior year programmes in Fintech starting from the 2017/18 academic year. Moreover, The University of Hong Kong’s School of Professional and Continuing Education has been offering a part-time, four-month programme, Executive Certificate in Internet Finance.
For payment services, the general public is increasingly receptive to new products and services, as Stored Value Facility (SVF) operators are launching new services while banks are rolling out new payment services (such as a note-issuing bank’s mobile App which enables cross-bank P2P fund transfer through mobile messaging). Building on the momentum from the introduction and development of various new payment channels in the market, the Government will strive to provide more convenient means for settling government bills and fees, such as making on-line credit card payment through digital wallets in mobile phones. HKMA will also work with the Government to explore with the industry ways of improving the payment infrastructure (such as introducing the Faster Payment System in 2018) and encouraging more standardisation in payment applications across various services providers, including the use of QR codes in streamlining the payment process, and facilitating the development of new electronic and mobile payment channels by the Government for various government services.
Dallas based MoneyGram (NASDAQ:MGI), a global provider of money transfer services, has become quite popular. This past January, Alibaba’s Ant Financial subsidiary announced it had offered the firm $13.25 per share to acquire the company. The two companies had entered into a definitive agreement to merge. Today, it appears that agreement was not quite as definitive as thought as Ant Financial has now increased the share offer to $18/share.
Last night, MoneyGram and Ant Financial announced they had updated the agreement in an effort to fend off a competing bid by Kansas based Euronet Worldwide.
Chinese peer-to-peer lending platform, Dianrong, announced on Tuesday the following financial leadership changes, effective immediately: Xuxia Kuang, the lender’s CFO, has been named COO. Yawen Cui has joined Dianrong as the new CFO. Kuang and Cui will report to Dianrong founder and CEO Soul Htite.
Fintech startups in the Middle East and North Africa have raised $100-million over the last decade, yet 28% fail in their initial years, says a new report by business support organisation Wamda and online payment gateway Payfort.
The region was home to 105 fintech startups by the end of 2015 (see featured image), with half of these having been launched since 2012. In all 30 firms are situated in North Africa. The UAE leads with 30 fintech startups, followed by Egypt with 17 and Jordan and Lebanon with 15 each.
Just 10% of fintech startups in the region account for 43% of investments and employ 55% of the 1600 employees in the sector.
“The vast majority of the South African market activity – $13,8m – came from peer-to-peer consumer and business lending, with the remaining $1.2 million spread across microfinance, donation-based and reward-based crowdfunding,” according to a report published by the Cambridge Centre for Alternative Funding.
In order to reap the benefits of crowdfunding, it’s important to launch a great campaign. Patrick Schofield, CEO and founder of Thundafund, a crowdfunding platform that has helped several companies start or expand, says there are several things you can do to increase the chances of success for your business.
“Spend as much time on pre-campaigning planning as you would on your actual campaign. If you’re thinking of [running a campaign] for up to 45 days spend, 45 five days getting your ducks in a row,” he says.
Approaching journalists and key influencers will get you enough people who can make noise about what you’re doing.
In an alternative funding benchmarking report by the UK’s Cambridge Centre for Alternative Finance, published last month, South Africa was identified as the potential leader in the growth of online and peer-to-peer lending models in Africa.
In 2015 South Africa represented 18% of the total African online alternative finance market, raising more than $15-million. Kenya was the only African country ahead of it, with $16.7-million raised. South Africa’s online alternative finance market focused more on business activity and less on charitable causes.
Local IT firm Khonology has partnered with the UK’s White Label Crowdfunding to develop bespoke crowdfunding platforms for entrepreneurs here.
News Comments Today’s main news: A comparison of funding & liquidity sources with lender maturity by PeerIQ. China Rapid Finance sets terms for U.S. IPO. China bank lending falls in March. Perfios raise $6.1M in Series A round. Abu Dhabi ranks as top fintech hub for MENA region. Today’s main analysis: Lenders test personalities to determine loan eligibility. Today’s […]
A comparison of funding & liquidity sources. GP:”Very interesting comparison of companies founded in 1912, 2006 and more recent. The funding source diversity and mix in a mature company like OneMain is mostly ABS and OnDeck mostly credit facility while Enova is mostly corporate debt. A must read”
China Rapid Finance sets terms for U.S. IPO. GP:”Valued at $586mil, raising $105mil. How will this compare to Elevate and Yirendai. A very interesting trend of IPOs in our space lately. I imagine that as long as the IPOs do well enough new ones will take place. “AT: “CRF has the potential to outdo Yirendai. I hope they reach their funding goal.”
Lenders test personalities to determine loan eligibility. GP:”Lenders, like EFL, have used this a long time. The “AT: “Employers use psychometrics to make hiring decisions. I believe psychometrics will be the future standard for determining credit risk and will eventually replace the outdated FICO score.”
Blockchain can save banks tens of billions of dollars per year. GP:”There is a lot of speculatio and the technology is not mature enough yet. There are also still unclear business cases. In the US about 40% of professionals in finance are very familiar with blockchain according to latest surveys so it is not a familiarity problem. On the other side regulation is not there yet and is in fact the largest obstacle to blockchain adoption.” AT: “Blockchain is a technology is a lot of underused potential. It could make the banks competitive again, but it would take years to implement on a global scale to the point where it would be useful and effective in making the financial system of the world transparent, trustworthy, and effective. Getting every bank to adopt it would be a massive undertaking. All it’s going to take is one major bank using it and proving how it can improve banking services to include regaining customer trust. If bank services customers get behind it, the banks will have to.”
Earnings season kicked off last week, with J.P. Morgan leading the trio of banks who released their first quarter earnings. In a positive sign, JPM booked lower loan loss provisions ($1.32 Bn) vs. prior year ($1.82 Bn) for the same quarter. Higher rates improved net interest margin by 11 bps to 2.33%.
Analysis of Funding Mix Across Leading Non-Bank Lenders
Although the funding mix might indicate that OneMain does not rely on warehouse finance, quite the opposite is true. OneMain also has eleven revolving conduit facilities with a maximum balance of $4.8 Bn in additional liquidity. The facilities represent a substantial liquidity backstop (from diverse counterparties with staggered maturities) should term ABS markets seize for a prolonged portion of time.
OneMain does not appear to be optimizing for a singular goal such as low-cost funding or maximizing ROE. All together, it appears that OneMain has implemented a financing strategy to deliver an attractive ROE (potentially high-teens or low twenties) while ensuring sufficient liquidity ballast to guard against disruptions in capital markets. For example, OneMain is also funding via $1 Bn of 8.25% senior notes issued in April last year rather than drawing on lower-cost liquidity available via warehouse finance. OneMain is willing to take on somewhat higher financing costs in exchange for access to diverse and longer-term funding sources.
OnDeck’s financing strategy varies significantly from OneMain. OnDeck is unique in the peer group from their utilization of whole loan marketplace sales. We note that the usage of this liquidity channel continues to decline over time as gains-on-sales from whole loans decrease, and as investors demand more ‘skin-in-the-game.’
OnDeck also utilizes both securitization and credit facilities for their funding. Securitization makes up 24% of their loan funding, while their utilized credit facilities comprise 50% (although ONDK still has $287 MM undrawn).
OnDeck has the highest loan generation per unit of capital in the cohort. OnDeck is funding through the heavy usage of low-cost securitization and warehouse finance channels, and accordingly has the lowest funding cost in the peer group. However, we note OnDeck has more concentrated sources of funding channels that in turn rely on reliable execution and smooth functioning capital markets.
Enova employs all three debt financing tools—ABS, warehouse finance, and corporate debt—to fund origination. Enova had no facility borrowing amount reported as outstanding at the end of 2016.
Elevate, as a young online lender measured by receivable and inception, does not have any securitization programs to date and limited diversity in warehouse finance. Elevate’s primary source of financing consists of credit facilities provided by Victory Park Capital. Of the four platforms, Elevate has the least diversity in funding sources. The peer analysis suggests that diversification into securitization channels could potentially lower cost of funds for Elevate.
Funding Cost by Financing Channel
As observed in Exhibit3, securitizations can partially replace secured and unsecured debt in the capital structure with more favorable nonrecourse funding. The overall funding costs are positively impacted by the increased usage of securitizations and credit facilities, as the deals are executed at interest rates significantly below the coupon associated with the unsecured debt.
China Rapid Finance, a peer-to-peer (P2P) lender based in Shanghai, China, announced that it has set the terms for its upcoming US IPO. The company plans to raise $105 million through the offering of 10 million shares priced between $9.50 to $11.50 a share. At $10.50 a share, China Rapid Finance would have a fully diluted market value of $586 million.
Founded in 2001, China Rapid Finance is a consumer lending marketplace that aims to serve China’s emerging middle class. Their target demographic are employed and well-educated Chinese individuals between the ages of 18 and 29, who live in urban cities, and who are avid mobile users. This demographic, known as EMMA (Emerging Middle class Mobile Active), is estimated to include over 500 million individuals.
When no credit history is available, lenders in emerging markets are increasingly looking to personality tests to fill the gap. Psychometric data, or data acquired through personality tests, is now being used to determine if customers qualify for credit in countries like Turkey, Russia, Mexico and India. Some assessors look at traits like conscientiousness, extroversion, agreeableness and neuroticism. For example, if someone ranks high on conscientiousness, they’re likelier to be better at saving, thus more secure financially.
The method has yet to go mainstream in the U.S. in part due to culture, regulations and the range of data already available to American lenders.
Still, psychometric data offers another option to assess consumers for whom insufficient data is available to generate a credit score. It’s a section of the population that’s gained more attention in the U.S., where over 25 million people are considered unscoreable by the Consumer Financial Protection Bureau.
Over 700 characteristics are organized; results are crunched along with repayment data into a number that represents a credit score.
The global unscoreable population is huge, including in India where over 70 percent of the 1.2 billion-strong population fall into this category, McCaffery said.
For the past few months, FICO, working with the Entrepreneurial Finance Lab, has been testing psychometric testing in Turkey, Russia and Mexico. While it’s too early to offer definitive assessments, FICO is optimistic about the model’s ability to deliver results.
Before launching psychometric data in the U.S., Taylor-Shoff said lenders would need to ensure compliance with regulations including those on consumer disclosure (e.g. being able to explain to someone why they were denied credit); fair lending (making sure the method doesn’t disadvantage a particular type of customer) and safety and soundness of the data. Operational considerations, including how lenders would use this method alongside traditional methods , would still need to be resolved too.
“U.S. consumers are not going to submit to a psychometric analysis by their lender,” said Zeydoon Munir, founder and CEO of RevolutionCredit, a startup that uses behavioral data garnered from quizzes and games, in addition to traditional data, to determine if customers qualify for certain credit products. “Who would do that?”
Fifth Third Bank announced on Thursday an investment and expanded partnership with nonprofit small business lender network, Accion U.S. Network, to support lending to underserved small businesses in Florida, Indiana, Illinois, Michigan, and Ohio.
This builds upon the bank’s five-year, $30 billion Community Commitment, which includes $10 billion for small business lending, product innovation and enhanced underwriting and fulfillment. Additionally, the Fifth Third Bank’s commitment includes expanding technical assistance and support for alternative lending channels.
What happened: eMoney Advisor announced on March 23 the launch of eMoney for Enterprise, a division that will support users in the home offices of banks, large registered investment advisors, broker/dealers, insurance companies and other financial institutions.
What happened: The new product is likely to target individuals with less than $1 million to invest, a significantly larger market than Goldman Sachs’ current private wealth management service that caters to clients with at least $50 million. Their acquisition of Honest Dollar and the launch of a loan platform called Marcus suggest that this robo venture is part of a larger diversification strategy.
What happened: The Office of the Comptroller of the Currency pressed ahead with its plan to offer a specialty license to fintech firms, a move that would allow the industry to enter the federal banking system. Currently, fintech firms must apply for licenses in each state to do business, which can be a costly process. The new federal banking license would allow for one set of rules nationwide.
Why it matters: Thumbs up for allowing fintech firms to focus on innovation rather than paperwork. Removing the handcuffs of redundant licenses will surface relevant technology even faster, and I think we’ll see advisor confidence in fintech platforms continue to rise.
What happened: Morgan Stanley is continuing its technology surge after hiring Charles Schwab’s Naureen Hassan as Chief Digital Officer and appointing Jim Rosenthal to lead the development of the company’s digital services, which includes tentative plans for a self-directed robo platform.
What happened: Merrill Lynch is introducing new features to its website, such as a dashboard to track investments, real-time maps of the markets and interactive charts.
What happened: MIT and TD Bank hosted their first fintech hackathon, an event challenging 26 student teams to develop a fintech platform in under 36 hours. A team from Cornell University and their product called Switch, which they describe as a micro-loan and insurance broker, took home the $5,000 prize.
DecisivEdge, a business consulting and technology services company, launched its lending and leasing as a service (LLaaS) product, powered by Oracle.
LLaaS is a simple, flexible, securely featured and cost-effective way for small and medium sized lenders to the leverage the capabilities of a solution.
Oracle Financial Services Lending and Leasing is at the core of DecisivEdge’s offering. It is hosted in a securely featured cloud and bundled with 24/7 monitoring, support and other value added services.
HEALTHCARE LENDER HCS RECEIVES FUNDS FROM ARES MANAGEMENT (Health Credit Services), Rated: B
Health Credit Services (HCS), a healthcare funding company created to bring quality-of-life care to more individuals, announces a new financing relationship with Ares Management, a leading global alternative asset manager.
The HCS team will leverage the Ares Management-provided financing to increase patient access to quality-of-life medical care nationwide. With loan approvals in seconds, budget-friendly installment loans ranging from 12 to 84 months and simple loan management, HCS solutions make healthcare financing easy and affordable.
Due to rising insurance deductibles and premiums, the typical American spends nearly 10 percent of their income on out-of-pocket healthcare expenses.
The Bank of England (BoE), one of the first central banks to form a research group dedicated to the development of Blockchain technology, still believes the Blockchain has the potential to save banks tens of billions of dollars in operating costs.
Researchers at BoE perceive the Blockchain as an immutable, transparent and secure technology which banks and financial institutions can utilize to handle operations in an autonomous ecosystem.
BoE along with other banks including the Reserve Bank of Australia and Bank of Korea envision a Blockchain-based platform wherein many banks can participate as members of the network and settle transactions and assets in a transparent ecosystem. By relying on a shared ledger, banks can easily eliminate any additional intermediaries that are contracted to process complex settlements.
Apart from collaborative projects, BoE recently showcased a proof of concept Blockchain platform with PwC, with the intent of demonstrating the potential and applicability of Blockchain technology in the finance industry.
Link Pariti to your bank accounts and credit cards, and it will show you the total costs of your debts. If peer-to-peer lending would offer a better deal, it then offers you the option of consolidating everything into a single loan at a lower rate. The company says that while credit cards typically charge interest rates in the 16-25% range, it can get the APR down to single digits.
Former Barclays CEO Antony Jenkins believes the global financial system is beginning to undergo the “Uber moments” he predicted in the sector a year and a half ago.
Jenkins, who was CEO of Barclays from 2012 to 2015, forecast a series of Uber-style disruptions in the banking industry in late 2015. He said that advances in technology could shrink headcount at traditional big banks by as much as 50%, while profitability in some areas could collapse by over 60%.
Since being ousted at Barclays, Jenkins has set up his own fintech business: 10X Future Technologies. The startup has developed a new core banking platform, effectively a new operating system for banking to build products and services on top off. It aims to help banks cope with the “Uber” disruption by giving them a modern canvas to build upon.
The Benzinga Global Fintech Awards is the largest fintech event focusing on the capital markets. In its third year, Benzinga has expanded the event’s purview to the global stage, bringing over 200 companies to New York City from countries including India, Israel, Poland, and Singapore.
Last week, Perfios, a fintech startup based in Bangalore (Bengaluru), India, announced it had raised approximately US $6.2 Million (400 Million INR) in its Series A round of funding. The funding is a sign of how much the fintech market has been steadily growing in India the last few years.
The report estimates that the fintech market in India will rise to over USD 2.4 billion by 2020.
The peer-to-peer (P2P) lending industry is off to an encouraging start. Funding Societies Malaysia, the first platform to launch, successfully raised RM320,000 for two term loan financing programmes within three weeks in March.
The loans will be used to fund the working capital of two companies – an electronics business and an automobile parts distribution business. Meanwhile, the platform aims to provide investors with an effective return of 22% and 24.91% respectively over a year.
Wong says the platform aims to seal another 80 to 100 deals in the next 12 months and raise RM10 million to RM20 million. This means investors can expect more deal flows, which will allow them to invest in a variety of companies.
Singapore and Switzerland are not competitors when it comes to the development of financial technology (fintech) and with both countries being small financial hubs, it is important to cooperate, said Swiss Finance Minister Ueli Maurer.
The minister also noted that Singapore’s fintech sector benefits from its close proximity to a big Asian market, and can act as a stepping stone into Asia for Swiss fintech start-ups. For Singapore firms looking to expand into Europe, Switzerland can similarly do the same.
Lattice80 is one of the organisations that the Swiss delegation is visiting during their time in Singapore. Launched in November 2016, more than 80 foreign and local fintech firms have taken up spaces at Lattice80, which is dubbed the world’s largest fintech hub by Singapore-based private investment group Marvelstone.
The Financial Technology Enabler Group (FTEG) that was established by Bank Negara Malaysia in June 2016, has launched an initiative ‘Fintech Hacks’ that identifies pain points in the delivery as well as consumption of financial services.
The Malaysian central bank has sought ideas from the public regarding the improvements to financial services sector by adopting innovation and technology.
Abu Dhabi with the Abu Dhabi Global Market, ADGM, has been ranked as the top FinTech Hub for the MENA region in the latest Global FinTech Hubs Review, “A Tale of 44 Cities”, by Deloitte in partnership with the Global FinTech Hubs Federation.
From the 44 cities, Abu Dhabi is ranked top FinTech hub in the MENA region. The Deloitte report reiterated that the launch of ADGM’s Regulatory Laboratory, RegLab, for FinTech startups, the only “live” Fintech regulatory regime in the MENA region with 11 Fintech players in its first batch of applications, as a “milestone success for Abu Dhabi and marked the openness and support by regulators and government towards innovation.”
In an alternative funding benchmarking report by the Cambridge Centre for Alternative Finance‚ published last month‚ South Africa was identified as the potential leader in the growth of online and peer-to-peer lending models in Africa.
In 2015 South Africa represented 18% of the total African online alternative finance market‚ raising over $15-million. Kenya was the only African country ahead of it with $16.7-million raised.
The report also found that in Africa 90% of online alternative finance was originated from platforms headquartered outside of the continent.
News Comments Today’s main news: Enter the bear market in bonds? D+H launches cloud-based small biz lending platform for banks. Over 50K investors register with RateSetter. Revolut partners with Lending Works to offer cut-price instant credit. Blender procures Electric Money Institution license. Blackmoon partners with ID Finance. Today’s main analysis: Fundbox study reveals impact of late SMB payments. The British Business Bank […]
Carvana hires banks for IPO. AT: “What will make used car buying in an MPL world truly innovative is a platform that connects individual buyers with individual sellers and the added value of a financing option. While this has been tried, so far there hasn’t been a success story. Carvana is upping the game, however.”
Stocks and bonds struggled while the dollar climbed Tuesday.
The yield on the 10-year Treasury note on Monday rose to 2.609%, the highest since September 2014. That’s up from 1.867% on Election Day, and nearly double the all-time low of 1.366% hit last July.
Bill Gross, the famed bond investor, underlined the 2.6% yield in January as the pivot point that will usher in the long-anticipated bear market in bonds. Mr. Gross warned that, should yields march above that threshold, it would indicate a “secular bear market has begun.” A break above 2.6%, he observed in chartist vernacular, would break a downward trend line that has been in place for the past three decades.
Fundbox Study Reveals Impact of Late SMB Payments (Fundbox Email), Rated: AAA
Late and unpaid payments cripple small businesses (SMBs) and it’s something they have to deal with on a daily basis. In fact, 64% of SMBs are affected by late payments on open invoices. I would like to give you an early look at a new Fundbox study, which dug deeper to understand the microeconomic impact that takes place when a business is paid late.
Key findings include:
Hiring freeze – 23% can’t hire new employees
Owner pay cuts – 79% of SMB owners said they can’t pay themselves
New equipment gets the squeeze – 23% can’t invest in new equipment
Can’t advertise – 20% can’t spend on marketing efforts
Reduced Payroll – 18% hold back on pay increases or bonuses for employees
Inventory freeze – 17% can’t build up inventory
If paid on time, Fundbox estimates that these SMBs across the U.S. could hire an additional 2.1 million employees, which would reduce unemployment by 27%.
Fundbox helps SMBs overcome cash flow gaps by funding outstanding invoices. Attached please find the infographic. Would you like to also see the release? I can also connect you with Prashant Fuloria, Chief Product Officer at Fundbox who can discuss the critical need for services that solve cash flow gaps.
D+H Launches Cloud-Based Small Business Lending Technology (D+H Email), Rated: AAA
DH Corporation (TSX: DH) (“D+H”), a leading provider of technology solutions to financial institutions globally, today launched Total Lending™ Small Business, a new digital, mobile-first lending solution designed to boost profitability of financial institutions and improve the lending experience for small business owners across the United States. Now, banks and credit unions can deploy an intuitive, online loan application for small businesses, enabling more application throughput than the traditional paper-based branch model.
Total Lending™ Small Business is designed to empower financial institutions to build a more profitable small business loan portfolio. By bringing the loan process online, banks will benefit from reduced overhead and greater scale. An improved application process will also attract more loan requests from new and existing customers who prefer the convenience of the online or mobile experience.
New Data Shows C&I Lending Can Bring Higher Profitability to Community Banks in 2017 (PayNet Email), Rated: AAA
At $4.4 trillion in trade payables, term loans, and working capital loans, private-company credit represents one of the largest credit markets in the U.S. Today, C&I lending represents about 25% of all loans, down from over 40% in 1950. According to a new study by PayNet, Inc. banks can look to higher profitability in 2017 in their core franchise credit C&I business.
PayNet’s study shows that between 2008 and 2016, banks could have achieved $2.6 billion in additional net income, at a higher risk-adjusted return, had they maintained their share of C&I lending.
Banks can find financial technology useful to reduce the time to underwrite a loan from 50 hours to just over 2 hours. In addition, banks can further utilize technology to lower the cost of loan review by 40% while at the same time increasing the frequency of the loan review cycle from once per year to four times per year for the highest risk accounts.
U.S. used-auto retailer Carvana LLC, which allows customers to pick up cars they buy on the internet from vending machine-like towers, has tapped investment banks for an initial public offering, according to people familiar with the matter.
Carvana has hired Wells Fargo & Co (WFC.N) and Bank of America Corp (BAC.N) to lead its IPO, the people said this week.
Carvana sells cars through its website and operates automated towers that store cars in U.S. cities such as Austin and Dallas in Texas, and Nashville, Tennessee.
Now an auto insurance startup called Root is taking that conclusion to the bank, so to speak. It believes that the investigation, as well as its own studies on the matter, make a strong case that Teslas with Autopilot are safer than just plain humans. So confident is Root about this that, starting today, it is charging Tesla drivers lower fees if they turn on and use the controversial Autopilot feature.
The Tesla discount is a natural outgrowth of Root’s business model, which is based on using technology to identify safe drivers and offer them low rates. If you suck at driving, you don’t get a policy. Before getting coverage, customers must submit to a two-to-three-week testing period, downloading the Root app to their phones, which will use the sensors in the device to track location, speed, acceleration, and whether they are weaving recklessly between lanes at 2 a.m. after leaving a taproom. Or whether they are using the actual phone measuring their driving skills to text while in motion. This actually happens, says Timm, because after a few days drivers forget that they are being monitored and revert to bad habits.
According to Timm, about 70 percent of those who undergo this process will be deemed safe drivers, whereupon the company will offer them a low rate, with the entire transaction done on the phone. (Even your proof-of-insurance card will be stored on the device.) The other 30 percent have to get insurance from Root’s competitors.
One might think this will be a boon for insurers, who will see claims drop dramatically. Timm argues otherwise: The paucity of accidents and claims will drop the real cost of insurance so low that the established companies, stuck with high overheads, won’t be able to cut their prices enough. They will thus be subject to Uber-level disruption from newcomers who will be able to charge fees as low as $30 every six months.
Root has not contacted Tesla directly, but says that even without the car manufacturer’s help, the Root app can figure out when a Tesla owner is using Autopilot. Timm hopes that in the future, the company can work directly with Tesla to get better data.
SmartBiz Loans Adds Former SBA Head of Capital Access to Board of Directors (SmartBiz Loans Email), Rated: B
SmartBiz Loans, the first SBA marketplace and bank-enabling technology platform, today announced the addition of Ann Marie Mehlum to the company’s board of directors, a former Small Business Association (SBA) associate administrator and seasoned banking industry veteran, with more than 30 years’ experience.
As former associate administrator for the SBA’s Office of Capital Access, Mehlum directed the government agency’s flagship credit programs including the 7(a) general business loan guarantee program, the 504 program for real estate and long term asset financing, and the microloan programs, with a combined portfolio of more than $100 billion. The SBA is a federal agency that encourages lenders, typically banks, to originate loans to small businesses by providing a guarantee for these loans.
SmartBiz Loans’ SBA marketplace automatically connects small business owners with the right bank which helps to increase loan application approval rates and speed. SmartBiz®bank partners utilize the SmartBiz software platform to increase their efficiency in processing SBA loans by up to 70 percent. SBA loans are widely considered the best type of loan for many small businesses because of their low rates and long repayment terms.
Financial tech firm Finexio is moving its hub from Silicon Valley to Orlando – a move that will open up 10 high-wage jobs, the Orlando Business Journals reported. The startup, which offers a business-to-business commercial payment network, recently decided that the relocation is necessary in order to support its growth.
The company chose Orlando because of its growing reputation as an innovative city, drawing in professionals particularly in the financial technology industry. This move echoes that of other industry giants such as Deloitte and KPMG, which have ramped hiring in Central Florida.
At its new Orlando-based location, Finexio will be looking to hire professionals to work in its corporate headquarters and engineering department.
According to the Orlando Economic Partnership, another reason Finexio chose Orlando is because of the resources available in the area for hiring software engineers. For example, the University of Central Florida is located nearby, which offers a top-tier engineering school.
Peer-to-peer lending platform RateSetter has announced it now has over 50,000 investors.
This was just one of a number of milestones that RateSetter has recently reached, including collecting £1bn of repayments, investors having now earned more than £60m in total interest and more than £1.75bn of loans being delivered to borrowers across the UK.
Revolut has today announced a partnership with peer-to-peer (P2P) loan firm Lending Works to provide instant credit at half the cost of UK banks.
In just two minutes, Revolut customers can now apply for credit from anywhere in the world via their smartphone and receive funds instantly to their Revolut account.
This process cuts out the banks entirely, meaning that Revolut customers are charged just £52 on average to borrow £1,000 over a 12 month period, with a representative APR of 9.9%. In contrast, a recent survey of five major UK banks, whose personal loans are notoriously expensive with time-consuming application processes, showed that consumers are charged £120 on average to borrow the same amount over a 12 month period, with a representative APR of 23.8%*. Credit card rates are also sky-high, reaching a record average purchasing rate of 21.6 per cent APR in March 2016 (Source: moneyfacts).
The new credit features mean Revolut is the first company to approve and pay out P2P loans instantly.
The Revolut app currently offers UK users credit from as little as £500 to a maximum of £5,000, and users can adjust their repayment period between 12 and 60 months. In contrast to many banks, there are no fees to repay the loan early.
Since it was established in November 2014, the British Business Bank has invested Â£135m in peer-to-peer platforms.
Following a freedom of information request submitted by Bridging & Commercial, it was also discovered that in the calendar year 2016, £11.5m was drawn down for participation in loans generated by peer-to-peer lending platforms.
CapitalRise, a London-based property investment platform, announced on Monday it is launching an Innovative Finance ISA (IFISA) wrapper for residential property. According to the platform, the new IFISA allows savers to invest a minimum of £1,000 and up to £15,240 in the current tax year (rising to £20,000 in the 2017-2018 tax year) in residential property, targeting tax-free returns between 10-14% per annum.
We used five full years of historical loan performance data to simulate how the returns in a typical investor’s portfolio can change over time. In our example, an investor lent £10,000 across all the loans originated through Funding Circle in 2012. Each month, the loan repayments and interest received were lent to new borrowers.
The below chart shows the annualised return, after fees and bad debt but before tax, earned by the example investor over a five year investment period.
For the first few months the investor’s annualised return is at its highest, at approximately 7.8% after the 1% annual servicing fee is deducted. This is because the investor has typically yet to experience any borrowers being unable to repay their loans.
Bad debts generally start to occur approximately six months after the loans are made. This is reflected in the chart above, where our example investor’s return starts to dip after six months. This trend then naturally decreases over time as the rate at which businesses run into difficulties tends to decrease.
After 18 months the example investor’s return stabilises, then generally increases as recovery payments start to arrive. As of 1st February 2017, 44% of the value of loans defaulted between 2010 and 2014 has been recovered. This trend typically continues for the rest of the investment period, with the example investor ending the five year investment period having earned an annualised return of 6.5% after fees and bad debt.
A London-based financial advisor has launched a robo advice like service for its clients. FOL Wealth, began offering its automated service at the end of February to give customers access to low-cost advice.
The wealth manager charges an annual fee of 0.90 per cent with a minimum investment of £1,000.
Events abroad meanwhile are dominated by what is happening in the US, where the volatility of change and the frequency of significant news events – what journalists call ‘story burn’ – are increasingly alarming.
In the case of Money&Co, the company I founded and of which I am CEO, we bring individuals looking for a good return on capital together with carefully vetted, well-established and profitable small and medium-sized enterprises (SMEs) seeking funds for growth. We have also recently introduced property lending.
As a P2P business lender, Money&Co does what the banks cannot or will not do – we fund SMEs and we provide a gross yield of nearly 9% a year to the lenders, who extend credit via our platform.
To be fair, banks have baggage we do not – for example, headcount, bonus culture and general institutional sclerosis.
The IFISA was launched almost a year ago, but most P2P lending platforms are still unable to offer it, as they require full Financial Conduct Authority (FCA) approval in order to do so. Money&Co has full FCA approval and so we can now offer the IFISA.
Money&Co’s loan book is currently generating an average gross yield of 8.95%. Investors can choose to either roll up the interest in their ISA account or pay the interest out monthly. We take a fee of 1% a year and so the net yield is 7.95%.
We will also be offering asset-backed loans for inclusion in the IFISA. They will yield slightly less – at around 7% a year net of fees – but I would expect them to be particularly popular with ISA investors.
Yet while the average rate on an easy-access account stands at just 0.37 per cent, the rates on so-called peer-to-peer lending range from 2.6 per cent to 7.2 per cent.
Zopa was the first UK firm to set up in 2005 and now has 75,000 investors on its books.
It was swiftly followed by RateSetter and Funding Circle, which together with Zopa now account for two-thirds of the UK’s peer-to-peer market.
RateSetter alone lent £668 million to individuals and businesses across the UK last year.
It offers three accounts. There is a rolling account — which means your money is not tied in for any length of time — paying 2.6 per cent, a one-year fix at 3 per cent and a five-year deal at 4.8 per cent.
Zopa has three deals on offer, paying 2.9 per cent, 3.7 per cent or 6.1 per cent.
Blender, an international consumer e-lending platform, has garnered a new license to operate as a financial institution in the European Union – the license recognizes Blender as an E-Money Institution, which includes a range of banking activities for the group, per a company statement.
In particular, Blender can now grant loans, transfer funds between customers and service the platform to other companies. Moreover, the licensing agreement also allows for the execution of most banking activities, except leveraging deposits.
ID Finance has integrated with Blackmoon and is now executing investment transactions via the Russian online lending platform. ID Finance is a data science, credit scoring and “nonbank digital lending as an application” provider. ID Finance has is currently operating in Russia, Kazakhstan, Georgia, Poland, Spain and Brazil.
Under the arrangement, loans are screened and scored by ID Finance’s advanced risk assessment system. Blackmoon investors may benefit from interest rates higher than traditional investment tools. If the issued loans meet the strategies of investors that deal with Blackmoon, the system registers the fact of sale, the investor’s funds are transferred to the creditor and the transaction is deemed closed. ID Finance registers the profit by the securitised portfolio and continues servicing borrowers who are redeeming the loans now to the benefit of Blackmoon investors. In this case, Blackmoon ensures execution of transactions, analysis, accounting and investment process management for the investor and lender.
These include AimBrain, which has developed a multi-modal mobile biometric authentication platform.
Another two on the watch list are EZMCOM, a developer of a technology that identifies users with their passphrase, voice modulations and facial authentication, with advanced liveness detection features such as movement of lips and blinking of eye, and Crowd Valley, a technology platform that can create, operate and manage online investing or a lending marketplace.
Qumram made their regional debut at Meftech 2017 when showcasing technology that ensures compliance, aids fraud detection and improves customer experience by recording, analysing and replaying every digital interaction – on web, social and mobile.
The Personal Financial Management innovation of Strands is also on display, while White Label Crowdfunding won the delegates over with their online marketplace lending solution that connects credit demand and supply in a transparent and efficient way.
Software company Leveris was also a highlight with their solution that promises to bypass the ‘spaghetti junction’ of IT legacy architecture with a modular banking-as-a-platform (BaaP) solution.
The BlinkID real-time ID scanner by MicroBlink was another star of the show. And making up the impressive list is a platform developed by Agreement Express that allows financial institutions to on-board new clients without requiring paper or ink signatures; and a dynamic Enterprise Planning Platform for Financial Institutions by Inplenion.