Tuesday May 29 2018, Daily News Digest

alternative loans

News Comments Today’s main news: How SoFi, Robinhood trick investors into saving money. The highest paying green IFISAs. Ant Financial’s $10B fundraising is oversubscribed. HashChing gets $700K loan. Today’s main analysis: Alternative loan borrowers may be traditional prospects. Today’s thought-provoking articles: The challenges online lenders would face in a recession. Crowdfunding in Switzerland is at a record high. Only 4% […]

alternative loans

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United States

United Kingdom

China

European Union

International

India

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News Summary

United States

Designers at SoFi, Robinhood explain how they trick users into saving (and making) money (Business Insider) Rated: AAA

  • Personal finance apps have gained traction with customers — especially millennials — thanks to the ease with which they let users sock money away, save towards big goals, and make big purchases more possible.
  • From the loan refinancing company SoFi to the stock trading platform Robinhood, many of these companies are now worth billions of dollars thanks to enthusiastic investors.
  • At the heart of their success: A good product which combines smart design with financial psychology to convince users to meet the goals they set for themselves.
  • Here’s how the best companies in fintech design their apps to convince users to save and make money.

Alternative loan borrowers may be traditional prospects (Banking Exchange) Rated: AAA

The latest example of this comes from a new study by TransUnion that indicates that some borrowers who use “alternative loans” may actually be good candidates for traditional consumer credit products.

Alternative loans typically don’t appear in traditional credit bureau files. These services include short-term debt, such as “payday loans”; point-of-sale finance offered by retailers or third-party lenders; virtual “rent-to-own” finance; and auto-title loans.

Release coincides with OCC announcement

Elizabeth Pagel, vice-president, market strategy, consumer lending at TransUnion, notes that while many consumers in the FactorTrust database of alternative loan users skew subprime, nearly 40% are not subprime credits, and 12% are actually prime or above.

One example given by TransUnion demonstrating the general pattern concerns near-prime borrowers (those with VantageScore 3.0 credit scores of 601-660):

• About 14% of those borrowers with only one short-term loan went 90 days or more past due on a traditional account 12 months later.

• The delinquency level fell to less than 12% when a consumer possessed two alternative loans.

• The delinquency level fell to about 9% when a consumer had eight or more alternative loans over the course of seven years.

Source: Banking Exchange
Source: Banking Exchange

The Unique Challenges Online Lenders Would Face In A Recession (Forbes) Rated: AAA

Technology has reshaped the lending industry over the last decade. Companies like Lending Club, Prosper and SoFi built billion dollar business (even if valuations have come down from their respective peaks) by better connecting lenders to borrowers and streamlining what was previously a slow and bloated consumer lending process. Dozens more companies have launched in their wake and are contributing to this wave of change. In fact, TransUnion data shows that fintech lenders now account for over a third of personal loan origination by volume. That Goldman Sachs launched their own online lending business, Marcus, shows that much of this change is here to stay.

But these businesses have all come of age during an unprecedented period of economic expansion and low default rates. Low defaults have helped performance, while low yields in other asset classes have driven up investor demand for higher yielding personal loans.

If the market needed a warning sign, look no further than auto loans. Delinquencies in the subprime auto market have 

PeerStreet Review 2018 – Real Estate Crowdfunding Platform (Dough Roller) Rated: A

Some real estate investors come to the platform looking for financing, while others come looking for above average returns on their money.

The difference is that while other P2P platforms provide personal loans to individuals, PeerStreet supplies financing for real estate transactions. The purpose of the platform is to make these sophisticated investments in commercial real estate available to ordinary investors.

The loans are generally short-term, between six months and 24 months. They also have conservative loan-to-value (LTV) ratios, of not more than 75% of the value of the underlying property.

Types of loan investments include:

  • Single-family residential buy-to-rent properties
  • Single-family refinances
  • Single-family Value Add (This is a property that is purchased then renovated for sale, sometimes referred to as a fix-and-flip loan.)
  • Bridge loans

Kabbage Sees More Mobile Lending, Women and Minority Owned Businesses Seeking Funds (Small Business Trends) Rated: A

Online lending platform Kabbage says it sees more mobile lending, more women and minority owned businesses seeking loans and more businesses from rural and lower to middle income communities too.

Today 140,000 small businesses use Kabbage. Today, Kabbage has delivered over $4.5 billion in funding, moving the loan process from long lines at a physical bank to a  shorter wait on mobile or the web.

Expect More Bank Mergers After Dodd-Frank Rollback (Barrons) Rated: A

But the legislation known as the Crapo bill (named after Idaho Sen. Mike Crapo), which President Donald Trump signed into law on Thursday, could provide another boost to bank investors by unleashing mergers, dividend increases, and buybacks among regional and local banks.

By raising the threshold for stricter supervision under Dodd-Frank from $50 million in assets to $250 million, the new law effectively removes a disincentive for mergers and acquisitions.

Banks had been wary of doing deals that would put them over the $50 billion level, which required more capital and more stringent supervision. CIT Group’s (CIT) deal for OneWest was a rare case where an acquisition broke that barrier since Dodd-Frank was enacted in 2010.

Vermont Passes First-of-Its-Kind Law to Regulate Data Brokers (Gizmodo) Rated: A

Earlier this week, Vermont became the first state in the nation to enact a law that will regulate data brokers that buy and sell personal information in an attempt to add a new layer of accountability to the massive, data-trading companies that often operate without much oversight.

As TechCrunch noted, under the guidelines of the bill—which passed into law Tuesday without the signature of Republican Governor Phil Scott—data brokers will have to pay a $100 annual fee to register with the state, and will have to comply with new rules meant to protect Vermonters from suffering at the hands of another data breach like the one that befell Equifax last year and exposed the data of 145 million (and counting) Americans.

United Kingdom

The highest paying green IFISAs of 2018/19 (Peer2Peer Finance) Rated: AAA

Earlier this year, Assetz Capital closed its Green Energy Account due to a lack of deal flow, while Trillion Fund closed in 2015 after the government scaled back its green energy subsidies.

So in alphabetical order, here are the highest-paying P2P green IFISAs available right now…

Abundance

  • Target returns for IFISA: 3-15 per cent

Downing Crowd

  • Target returns for IFISA: 3-7.6 per cent

Goji and Prestige-Prime Group

  • Target returns for ISA: 6.5-8.3 per cent

Triodos Crowdfunding

  • Target returns for IFISA: 5-7 per cent

Ethical bank Triodos launched its own P2P platform earlier this year, named Triodos Crowdfunding. Within the first few months of the year it had already funded seven projects, four of which were IFISA eligible.

Could savers be given access to multiple IFISAs each tax year? (Peer2Peer Finace) Rated: A

The Office of Tax Simplification (OTS) – an independent adviser to the government on simplifying the tax system – has said ISA rules should be made more simple for investors to administer.

It suggests changing the rule where only one type of ISA can be opened at a time and instead letting savers hold multiple products, such as more than one Innovative Finance ISA from different peer-to-peer lenders or a variety of cash ISAs, as long as they remain within the annual allowance.

Rage against robo-advice machines (FT Adviser) Rated: A

Despite the FCA offering this assistance now the regulator has found several causes for concern in the robo-advice that is being given to clients.

The watchdog revealed some robo-advice firms were failing to properly disclose prices and services, and crucially, the regulator flagged risks clients were not receiving suitable advice.

As a result, the FCA has required many of the robo-advisers which took part in the study to make “significant changes” to their businesses.

Christian Faes of LendInvest (Lend Academy) Rated: A

In this podcast you will learn:

  • How the financial crisis formed the backdrop for the founding of LendInvest.
  • How their first foray into raising capital online transformed their business.
  • The kinds of loans that LendInvest offers today.
  • The typical borrower who uses LendInvest today.
  • How they have applied technology to the borrowing process.
  • How they attract these kinds of borrowers.
  • The four different channels for investors.
  • Details of their London Stock Exchange listed bond.
  • What is being done in the UK to address the housing shortage there.
  • How Brexit has affected their business over the past two years.
  • Who has provided equity capital for LendInvest.
  • Christian’s thoughts on international expansion for LendInvest.
  • How he feels about a potential LendInvest IPO.

Crowdfunding faces withholding tax clampdown (The Times) Rated: A

Revenue has tightened the rules on peer-to-peer lending by requiring businesses that raise money through crowdfunding to deduct a 20% withholding tax on the interest they pay.

The move will make it harder for individuals to avoid tax when they use crowdfunding to lend spare cash to small businesses rather than earning paltry returns by leaving it on deposit.

Can this lending buy-to-let startup help agents sell more homes? (The Negotiator) Rated: A

A buy-to-let finance start-up founded by the entrepreneur behind crowd-funding mortgage firm Landbay says it wants to help agents sell properties faster and in greater volumes.

Officially launched this week after being set-up in November last year, Dot offers agents and developers a one-click buy-to-let purchase button for their ‘properties for sale’ listings (see mock-up above) which, the company’s claims suggest, could offer an antidote to the current sluggish sales market.

After clicking the button, investors will be offered the opportunity to buy the property on the spot if they put down a 30% cash deposit via Dot.

FCA urged to extend cap on payday loan fees to other forms of credit (The Guardian) Rated: B

The City watchdog is facing mounting pressure to extend its cap on payday lending fees and interest to a broader range of high-cost financial products before a major review of lending practices this week.

Likely to result in a series of new rules for banks and finance companies, the review comes as hard-pressed Britons increase their personal borrowing to levels unseen since the financial crisis.

China

China: WeiyangX Fintech Review (Crowdfund Insider) Rated: AAA

Ant Financial’s $10-billion fund-raising faced oversubscription

The ongoing $10-billion fund-raising of Ant Financial Services has attracted the attention of multiple investors.

According to informed sources, investors expected to participate in this round of financing include private equity group Carlyle, General Atlantic, Silver Lake, Sequoia Capital China, Warburg Pincus, sovereign wealth fund Temasek, institutional funds Canada Pension Plan Investment Committee (CPPIB) and BlackRock; while many other investors were rejected.

According to a person involved in the funding, this round of financing will value Ant Financial at more than US$150 billion. 

Traditional banks can be the ‘trusted face’ of fintech and online finance firms (South China Morning Post) Rated: A

While banks see fintech as their biggest threat, they can use their trusted position among customers and regulators to collaborate in the shift to digital banking, software firm Temenos says

In a recent survey of 400 banking executives, Temenos said more than 53 per cent of respondents cited e-financial services like PayPal, Alipay, WeChat Pay and Apple Pay as their biggest non-traditional competition in the next two years.

European Union

Crowdfunding in Switzerland at Record High: CHF 375 Million (PR Newswire) Rated: AAA

The Swiss crowdfunding market has reached a record high volume of CHF 374.5 million in 2017, almost three times more than in the previous year. This has been revealed by the latest Crowdfunding Monitoring report issued by the Lucerne University of Applied Sciences and Arts. The financing of SMEs and investments in real estate are key drivers of the strong growth. The authors of the report are expecting a further marked increase to about CHF 1 billion this year. Compared to the more advanced markets in the United Kingdom and the United StatesSwitzerland is two to three years behind, but catching up rapidly.

Hungary ready to join the global blockchain market (Budapest Business Journal) Rated: B

Europe is starting to take blockchain-based solutions seriously, and Hungarian players seem ready to be part of the game. The largest international blockchain summit in the CEE region, Blockchaineum 2.0, gathered major stakeholders in Budapest to discuss the hottest issues on the global agenda.

Peer-to-peer lending is considered another blockchain target area. Ray Youssef, CEO of Paxful gave the example of Nigeria, the biggest economy in Africa, where high inflation and foreign currency restrictions push many people towards finding shelter in cryptocurrencies.

International

Mobile ventures to take on payments (Daily Sabah) Rated: A

Square, one of the most popular payment solutions Visa invested on, allows street vendors the opportunity to accept credit cards. It brings the convenience of payment for consumers, who can shop safely anywhere in the world.

Klarna is another venture that has received Visa investments. It is one of Europe’s leading payment providers, aiming to make the payment process simple, smooth and secure for customers and trading partners. Klarna offers payment solutions for over 60 million users in Europe and North America.

Cryptocurrency Cap Waiting to be Unlocked by Lenders (The Merkle) Rated: A

Today, cryptocurrency has an estimated market cap of $300 to $800 billion USD. Asset-backed tokens have been expected to reach $5 trillion USD by 2025.

Now, Depository Network (DEPO) has made it even easier for digital asset owners to cash in on their holdings while offering peace of mind to lenders.

DEPO is developing the world’s first decentralized, multi-platform collateral network. The depository will be a secure place for borrowers to deposit their coins or tokens as a collateral for loans while offering lenders full control over the details of the loan agreement.

Australia

Mortgage marketplace receives $ 700k loan (Australian Broker) Rated: AAA

An online home loan marketplace has received a $700,000 loan from Jobs for NSW, which is set to help the business create 46 jobs over the next five years.

HashChing reports it now has over $900million settled through their platform from more than 1,950 loans. It also says it has 586 mortgage brokers on the platform and is growing at 700% year-on-year.

India

Only 4% Indians get easy personal loans from banks and NBFCs (Sify Finance) Rated: AAA

27 public sector banks, 93 commercial banks, over 10,000 non banking financial and Gold companies and several micro-finance institutions, but ask any entrepreneur the ease of getting a loan. A mixed response is most likely, with majority opting for diplomatic correctness over factual accuracy.

Getting a loan is certainly a monumental feat in this era of digitisation. And this is the exact demand that peer-to-peer companies such as LenDen, i2i Funding, Faircent, Lendbox are keen to fulfill.

i2i Funding is India’s second largest p2p lending platform, with a size of 50,000 customers. The company aspires to cross Rs 2 crores in monthly disbursal by October 2018.

How do Investors Invest in Startups – From a Venture Capitalist’s Point of View (Entrepreneur India) Rated: A

In this regard, to decode what goes on in the minds of leading venture capitalists, Entrepreneur India interacted with Bhaskar Majumdar who is Managing Partner at Mumbai-based Unicorn India Ventures. At this point in time, Unicorn India has dedicated equity funds worth INR 100 crores under deployment, while another INR 600 crores worth debt fund has been launched.

He also states that with aspects such as credit scoring, data collection, and even lending to MSMEs having now received the digital touch, Fintech is exciting considering the fact that startups in the sector could effectively collaborate with banks to bring more people into the formal banking system.

Xiaomi Launches Mi Credit, A Lending Marketplace Exclusively for MIUI Users (BW Disrupt) Rated: B

Chinese smartphone manufacturer Xiaomi has introduced Mi Credit which aims to deliver instant loans exclusively to MIUI users.

Mi Credit provides a hassle-free approach to avail loans instantly.

MIUI users can apply for a loan anytime and from anywhere. The company is offering loans starting from Rs 1,000 up to Rs 1 Lakh.

According to a report published by ET, the loan will be extended at 3% interest per month and focuses on salaried professionals.

Africa

Kenya moves to regulate fintech-fuelled lending craze (Reuters) Rated: AAA

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Now, a proliferation of lenders are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up.

This week, the finance ministry published a draft bill on financial regulation which covers digital lenders for the first time. A key aim is to ensure that providers treat retail customers fairly, it said.

Eurasia

Russia Has Significant Opportunity to Advance Financial Tech Services – Analyst (Sputnik International) Rated: AAA

Bob Contri: I think that in financial services, which is where I work, digital is very important. I would say for our clients globally it’s probably the most important topic right now. I think it’s very important from a client perspective so how do they provide financial services to their clients in a very efficient way. And I think it’s also very important how they manage their business so how can they use their technologies to create more efficiency in the middle and back office. So it’s probably the biggest topic right now in our practice globally with working with our clients.

Sputnik: Do you think there’s big potential for new approaches in banking such as peer-to-peer lending, crowdfunding?

Bob Contri: Sure, I think that the face of financial services is changing pretty dramatically. I think that obviously automated money transfers and cross-border payments will change dramatically. I think peer-to-peer lending has a big opportunity to grow significantly. So I think the whole face of financial services is changing pretty dramatically. That’s not to say that the market leaders of today won’t be the market leaders of the future.

MENA

RentSher — a firm with a hire purpose (Gulf News) Rated: AAA

Founders Vaibhav and Purvashi Doshi and Harsh Dhand originally conceived of RentSher as a peer-to-peer lending platform, the Airbnb of stuff.

But after they launched the firm in Bengaluru in 2015 (Dubai followed in 2016), they noticed a problem.

“We figured out that peer-to-peer alone is not scalable enough,” said Vaibhav, the firm’s CEO, in an interview at his and Purvashi’s Dubai villa.
That forced a rethink, and a move towards a business-to-business (B2B) and business-to-consumer (B2C) model, a centralised one-stop rental platform for companies already offering rental services to connect with a pool of customers through an easy-to-use interface.

Reaping the fruits of hard work (Khaleej Times) Rated: B

It was while discussing a common problem that Marie-Christine Luijckx and three friends came up with a successful business model. Luijckx and her friends were doing long working hours in their corporate jobs with very few healthy food choices resulting in loss of productivity at the workplace. They thus decided to establish Fruitful Day, a business that delivers curated selections of fresh fruit to workplaces and homes across the UAE in 2015.

Luijckx says all partners believe passionately in the business and they funded it with their personal savings. “Our only external funding to date has been through Beehive, which is a debt crowdfunding platform,” she says.

Authors:

George Popescu
Allen Taylor