Thursday June 15 2017, Daily News Digest

big bank loan approvals

News Comments Today’s main news: Patch of Land expands debt facility to $30M. Over 3,500 firms give up permission to advise on P2P agreements. Tencent leads $146M in startup called Futu. Old technology costs Australian advice industry. Today’s main analysis: May 2017 loan approval rates drop at banks, alt lenders. Today’s thought-provoking articles: Why banks are going to survive […]

big bank loan approvals

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United States

Patch of Land Expands Debt Facility With SF Capital to $ 30 Million (Digital Journal), Rated: AAA

Patch of Land, an online real estate lending marketplace using a technology-rich crowdfunding platform, has expanded its senior warehouse debt facility with SF Capital from $10 million to $30 million. SF Capital, a private investment firm with a flexible, long-term investment focus, began its lending relationship with Patch of Land in 2015.

The expanded debt facility provides Patch of Land greater flexibility in funding loans to support the company’s growing mortgage loan origination volume. It also complements the company’s robust crowdfunding network and enables Patch of Land to expand its pre-funding efforts to continue to meet the unique lending needs of real estate investors. The move is part of company initiatives designed to improve the borrowing experience for real estate entrepreneurs and, at the same time, expand access to residential and commercial real estate investing.

Loan Approval Rates Drop at Banks and Alternative Lenders in May 2017 (Biz2Credit), Rated: AAA

Loan approval rates at big banks ($10 billion-plus in assets), small banks, alternative lenders and credit unions dipped slightly in May 2017, according to the latest Biz2Credit Small Business Lending Index, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com.

Small business loan approval rates at big banks fell two-tenths of a percent from April’s 24.3% figure, a post-recession high, to 24.1% in May 2017. The drop comes after approval rates at big banks climbed for most of the year.

Loan approval rates at small banks also dropped in May to 48.8%, down from April’s 49% figure. Small banks have flirted with the 50% mark, but have not reached it since October 2014.

Institutional lenders loan approval rates in May improved slightly to 63.8%, another new high on Biz2Credit’s index. It marked the fifth time in the past six months that this category of lenders showed an increase in funding approval percentages.

Loan approval rates dropped at alternative lenders by two-tenths of a percent in May, as non-bank lenders granted 57.7% of the funding requests. This marks nearly one year of consecutive decreases for this category of lenders.

Loan approval rates at credit unions dropped one-tenth of a percent in May to 40.5%, another new low for this category of funders on Biz2Credit’s index.

Why Banks Are Going To Survive (Forbes), Rated: AAA

In 2016 alone, global venture investment in fintech grew by 11% to $17.4 billion in 2016, according to data provided by PitchBook.

Platformification is the bundling together of multiple services onto one online platform, and provides an efficient, automated and integrated customer experience.

Why does platformification matter now?

However, 59% of banks (according to an Accenture study) are creating full-stack platforms.

Banks must effectively bundle multiple online products together and monitor how customers interact with those products to deliver a differentiated and compelling customer experience, ultimately affecting their bottom line. According to Gartner, we are just at the beginning of this trend, as it predicts that by the end of 2019, 25% of retail banks will use startup providers to replace legacy online and mobile banking systems.

LendKey is leading the movement

LendKey pioneered the “lending as a service” model back in 2009 and already works with nearly 300 banks and credit unions nationwide to create custom, white-labeled online lending platforms.

Among the hundreds of credit unions and banks using LendKey’s tailor-made platformification service are Navy Federal, WSFS Bank and McGraw-Hill Federal Credit Union. When a student decides to take out a loan on Navy Federal’s website, the customer experiences platformification without knowing it in the form of a lending portal from LendKey, an ID portal from IDology and a signing portal from DocuSign, yet all three are delivered via a seamless process.

How the industry applied platformification

Aside from LendKey, Wells Fargo has distinguished itself in the industry as being particularly open to platformification.

Now, through platformification and customer demand, SigFig allows Wells Fargo customers to build, implement and rebalance tailored portfolios online, based on responses to investing questionnaires.

Because of platformification, banking has essentially been reinvented. Banks and financial service providers are no longer constrained by slow and inconvenient systems.

Avant, for instance, successfully launched their first bank partnership in September 2016 with Birmingham-based Regions Bank, a top 20 bank with over $136 billion in assets under management.

Online lenders haven’t been verifying income and employment on their loans(Business Insider), Rated: A

Prosper Marketplace and Lending Club, two of the largest players in the online personal loan business, don’t always verify key borrower information like income and employment, according to a report from Bloomberg’s Matt Scully.

Prosper told Bloomberg that it verifies identities and bank accounts for all of its loans, and that it has “developed some of the industry’s leading risk-mitigation controls.”

A Lending Club representative told Bloomberg that the company uses “machine learning and other techniques to build robust models that segment which borrower applications need verification and which do not.”

As Much as They Try, Non-Prime Millennials Struggle to Make Financial Progress (BusinessWire), Rated: A

According to the research, 44 percent of non-prime Millennials conducted personal research about how to manage their own finances, compared with 47 percent of prime Millennials. Despite these nearly equal efforts, non-prime Millennials – those with credit scores below 700 – are twice as likely to experience significant stress due to their finances and are about half as likely to feel satisfied with their financial situations.

The root of these challenges may come from how non-prime Millennials were taught about personal finance early in their lives. The study also found that non-prime Millennials:

  • Didn’t benefit as widely as their prime counterparts from seeing how their parents managed their finances, with only 49 percent stating they learned from their parents’ example, as opposed to 61 percent for primes
  • Were less likely to be actively taught financial management skills from their parents, with 1 in 5 receiving this parental education, compared to one in three of their prime counterparts who received instruction at home
  • Are more likely to learn financial skills via trial and error (72 percent, compared with 41 percent of prime), which may explain how some Millennials became non-prime – learning by trial and error means non-prime Millennials likely made more mistakes that damaged their credit, as opposed to prime Millennials who may have avoided those mistakes altogether

New Lending Club ABS deal structure a draw for investors (Global Capital), Rated: A

All loans securitized in the transaction are whole loans purchased through a pro-rata allocation of the ‘near-prime’ loans originated on the platform by seven third parties unaffiliated with Lending Club, according to a Kroll presale report.

ABS investors told&nbsp;<i>GlobalCapital </i>they were receptive to the online platform’s decision to do ….

LendingTree unveils its own Zestimate-style home valuation tool (Housingwire), Rated: A

The new valuation tool is from LendingTree, which announced Wednesday that it is rolling out a new home valuation feature within its financial intelligence platform, My LendingTree.

According to details from the company, any of My LendingTree’s 5 million current users (or anyone else who signs up for the service) will now have the ability to get a valuation of their home within LendingTree’s system.

The company says that its home valuation tool “leverages a proprietary home valuation model that estimates home value by accessing third party data and tracking it to visualize the user’s home value data trends over time.”

According to details from the company, My LendingTree users that have a mortgage have an average home value of $310,000 and an average mortgage balance of roughly $178,000, which translates into roughly $132,000 of “untapped home equity” on average.

And the company wants to help its users “tap into” that home equity.

As seen in the image below, users are then shown the total equity they have in their home and encouraged to get a home equity loan, if they are interested.

According to LendingTree, the company “has facilitated more than 65 million loan requests” since its inception, and the company’s network currently includes more than 500 lenders offering home loans, personal loans, credit cards, student loans, business loans, home equity loans/lines of credit, auto loans and more.”

IBM intros first suite of tools from Watson Financial Services (ZDNet), Rated: A

IBM has since leveraged the industry expertise of Promontory’s workforce — made up of ex-regulators and banking executives — to teach Watson all about regulation, risk, and compliance. The first batch cognitive tools covers three areas: Regulatory requirements, financial crime insights, and financial risk modeling. The Watson-powered software is available today via the IBM Cloud.

How a Betterment GM made her way out of banking and into startupland (Built in NYC), Rated: A

Loh was hired to launch Betterment for Business just over a year ago, and now, Betterment for Business’s management team is completely women-run. They work with over 400 companies and are growing at a fast clip.

What made you decide to make a career switch into fintech?

I spent a decade in asset management and I was considering a couple of different factors. I took a hard look at the trends going on in the industry and saw how technology was affecting finance. Then, I looked at my own experience to make sure I had utility for the next 30 years of my working career. That’s when I made the move into the tech sector.

What advice would you give to people thinking of making the switch from traditional financial services into tech?

For me, it was all about looking at the financial services industry. I would recommend reading Reid Hoffman’s ‘The Start-up of You,’ which asks you to look at your life like a startup. It makes you question things like what skills you need to acquire and where do you need to raise capital. Something I always hear from candidates is that they’re not ready to take that risk. My advice to make sure you’re thinking of risk in the right way. Staying at a big bank in the short term is secure, but in the long term, will you have a skill set that anyone wants to hire?

5 Tips for Real Estate Crowdfunding (U.S. News), Rated: A

To invest in real estate, you can do it the old-fashioned way, buying a property with a loan or cash, then collecting rent or fixing it up to sell. Or you could invest in a real estate investment trust, a kind of fund that buys residential, commercial or industrial properties.

Or you could do it the 21st century way, with a real estate crowdfunding company, which pools investors’ funds to make loans to home flippers or to buy residential and commercial properties. Interest and rent earned on those deals is passed back to those who supplied the money.

Most platforms have been limited to “accredited investors” – people with at least $1 million in liquid assets or annual income of at least $200,000. But rules are changing fast, so stay tuned if you don’t qualify now. Realty Mogul and Fundrise allow non-accredited investors.

One of the industry’s big names, RealtyShares, currently offers a number of opportunities with handsome projected returns if all goes as planned, such as 9.5 percent on a Church’s Chicken restaurant in Huntsville, Alabama, 11 percent on a single-family home in Jacksonville, Florida, and 14 percent on a home being built in Los Altos Hills, California.

  1. Know the rules. Most experts urge investors to consider real estate crowdfunding to be a long-term investment, since real estate holdings and debt are not as liquid as stocks, bonds or mutual funds. Equity real estate investments are considered long-term holdings, while debt investments may produce returns more quickly, but pay less in the long run.
  2. Watch for risk.
  3. Don’t overdo it. This is a new industry and sure to experience growing pains, so don’t bet the farm.
  4. Don’t get greedy. As with other investments, higher returns generally come with greater risks. The real estate market could sour, rising interest rates could undermine property values, the borrower may turn out to be less competent than your site thought, especially if the project involves a fix and flip.
  5. Know your partners. Obviously, it’s important to research the platforms you use, but also dig for information on the other investors.

Cetera Financial Institutions introduces insurance-focused portal for bank and credit union-based financial advisors and clients (CUInsight), Rated: A

Cetera Financial Group® (“Cetera”)*, a network of independent firms supporting the delivery of professional financial advice through trusted financial advisors and financial institutions, and Cetera Financial Institutions (“CFI”) today announced the launch of a new portal designed for CFI-affiliated advisors and clients to streamline and simplify the process of identifying and purchasing insurance solutions. Cetera Financial Institutions is the Cetera firm specifically focused on serving the wealth management programs of banks and credit unions.

The portal was developed in coordination with Covr Financial Technologies, an innovative technology firm that provides consumers with access, education and the ability to purchase insurance policies in conjunction with financial advisors.

CFI’s new insurance portal is designed to increase application processing speed and improve case management efficiency for advisors, among other functions.  It also creates a more simplified and straightforward experience for both advisors and clients in identifying and purchasing life, long-term care, disability and other forms of insurance. The CFI-branded portal functions as an integrated offering within Cetera’s existing SmartWorks® advisor workstation, and has been custom-built to serve the needs of the full Cetera Financial Institutions insurance team — from sales to operations to case management. Cetera anticipates incorporating the insurance portal into its MoneyGuidePro® financial planning solution within the next month.

Schwab Sees FAs Adding Services Without Upping Fees (Financial Advisor IQ), Rated: A

Moreover, 79% of advisors believe there will be more opportunities than challenges in the next 10 years, the survey found.

But 44% of advisors say they’re providing additional services to their clients without charging them, while 40% say they’ve been spending more time on each client but haven’t raised their fees, according to Schwab.

In addition, 24% of advisors believe that investing in technology to build scale isn’t offsetting the expense, the survey found. Nonetheless, most advisors are still confident technology will help them: 76% think technological advances will let their companies stay ahead of the competition, according to Schwab.

Treasury Report Seeks to Deliver Regulatory Relief to Banks & Credit Unions (Crowdfund Insider), Rated: A

Treasury’s recommendations relating to the reform of the banking sector regulatory framework may be summarized as follows:

  • Improving regulatory efficiency and effectiveness by critically evaluating mandates and regulatory fragmentation, overlap, and duplication across regulatory agencies;
  • Aligning the financial system to help support the U.S. economy;
  • Reducing regulatory burden by decreasing unnecessary complexity;
  • Tailoring the regulatory approach based on size and complexity of regulated firms and requiring greater regulatory cooperation and coordination among financial regulators; and
  • Aligning regulations to support market liquidity, investment, and lending in the U.S. economy.

Global Debt Registry Announces Expansion in New York and Leadership Hire (Global Debt Registry), Rated: B

Global Debt Registry (GDR), the asset certainty company known for its loan validation expertise, today announced it is moving its headquarters to New York City as part of its overarching strategic growth initiative to be closer to the investor community. The Company also announced the addition of structured finance veteran, Michael Koenitzer, as Director of Business Development.

InstaLend: Online Real Estate Investing Made Simple (Real Estate Tech News), Rated: B

For as little as $5,000, InstaLend connects accredited investors to borrowers seeking to fund short-term residential real estate investments.

Qualified borrowers, such as property flippers use InstaLend to apply for flexible loan products including hybrid loans and Sub-630 FICO lending programs. All deals go through a vetting process when InstaLend underwrites the loan.

United States P2P Lending Market 2017 : Lending Club, Borrower, P2P Credit, Prosper, Funding Circle (OpenPR), Rated: B

The report studies the industry for P2P Lending across the globe taking the existing industry chain, the import and export statistics in P2P Lending market & dynamics of demand and supply of P2P Lending into consideration. The ‘ P2P Lending ‘ research study covers each and every aspect of the P2P Lending market United Statesly, which starts from the definition of the P2P Lending industry and develops towards P2P Lending market segmentations. Further, every segment of the P2P Lending market is classified and analysed on the basis of product types, application, and the end-use industries of the P2P Lending market. The geographical segmentation of the P2P Lending industry has also been covered at length in this report.

Top Manufacturers Analysis Of This Research Report

1. Lending Club
2. Borrower
3. P2P Credit
4. Prosper
5. Funding Circle
6. Upstart
7. Kiva
8. Zopa
9. Lendkey
10. LendingHome

Get Free Sample Copy of Report Here : www.marketsnresearch.com/request-for-sample.html?repid=11043

United Kingdom

Over 3,500 firms give up permission to advise on P2P agreements (Bridging&Commercial), Rated: AAA

A total of 3,555 firms have voluntarily given up the permission to advise on peer-to-peer agreements by cancellation or variation of permissions since April 2016.

The FCA informed B&C that around 15,000 firms were originally authorised to advise on peer-to-peer agreements.

Firms that have cancelled their permission for advising on peer-to-peer agreements include two distinct groups:

•    Those which were formerly authorised to carry out the activity, but then ceased to be regulated entities by cancelling their permissions
•    Firms which were formerly authorised to advise on peer-to-peer agreements, but removed the activity by varying their permissions while remaining to be authorised by the FCA for other activities.

Stephen felt there were a couple of key reasons why advisers may be slower to advise on the peer-to-peer space:

  • It’s a growing and complex industry with lots of operating models and different lending opportunities and risks
  • It’s not clear that existing professional indemnity insurance would cover advising on peer-to-peer lending, so this needs to be clarified ahead of an adviser undertaking these activities.

Peer-to-peer lender Relendex raises money at £6m valuation (AltFi), Rated: A

Relendex, a P2P lender focused on commercial real estate loans, has concurrently closed a rights issue and a round of financing from new investors.

The exact amount that has been raised has not been disclosed. But we do learn that this latest investment gives the company a post-money valuation of £6m, on a fully diluted basis.

Relendex intends to use the money to invest in new technology and services.

Why crowd-based capitalism has changed the economy (City A.M.), Rated: A

Unlike 19th and early 20th century evolutions, today’s technological shifts are steering us away from managerial capitalism and towards what many see as a more crowd-based iteration, Sundararajan said. Traditional hierarchical organisations and large, well-staffed companies that create goods and services are in decline. An alternative model is ascendant, one in which products are distributed not by a firm, but by a heterogeneous crowd. This economic structure blurs the lines between the personal and professional and between casual labour and full-time work.

Take Funding Circle, for example. Funding Circle provides small business loans through crowdfunded capital. Often as many as 200 people fund one loan, with some parties offering as little as £20 in exchange for a return.

Based on his research into these questions, Sundararajan believes “when we understand the evolution of trust we understand the evolution of business.” Rather than conventional handshakes and signatures, Sundararajan says that today trust develops from ‘digital cues’ — online information about individuals and organisations that we process and interpret to determine with whom to associate. Sundararajan identifies several digital cues that help us gather enough online information to inform our decisions on who to trust. These include government, third-party, or brand certification; reviews of Facebook and LinkedIn profiles; and digital peer feedback through sites like Yelp, among others.

FCA says banks won’t fill advice gap (FT Adviser), Rated: A

Banks are not a panacea to the problems facing the financial advice market, David Geale has said.

The report also recommended a number of measures for the Financial Conduct Authority to take forward, aimed at giving firms the confidence to deliver streamlined advisory services focusing on specific consumer needs.

The review also highlighted the increasing role that technology can play in creating a more engaging, cost-effective advice market.

Mr Geale added that later this month the FCA would be publishing it’s baseline measures for judging whether the Financial Advice Market Review process had been a success over the next few years.

Insurex Announces Crowdsale for Blockchain-based Marketplace for Insurance Products (The Merkle), Rated: A

Insurance blockchain startup InsureX has announced that it will open its crowd sale on 11 July at 14:00 UTC. InsureX is building the first blockchain-based marketplace to be used for the trade and management of insurance products.

‘Blockchain technology presents an exciting opportunity to disrupt the industry. Preliminary estimates are that gross written premiums generated by insurers contribute11 July at 14:00 UTC. Contributors in ETH will be eligible for IXT tokens with bonuses of up to 36% for early birds.

InsureX will operate as a Software as a Service (SaaS) platform that runs on the Ethereum blockchain.

China

Tencent Leads $ 146M Round In Chinese Online Brokerage Firm Futu (China Money Network), Rated: AAA

Chinese Internet giant Tencent Holdings Ltd. has led a US$145.5 million C round financing in Futu Securities, an online brokerage platform serving Chinese investors trading U.S. and Hong Kong-listed stocks.

If Li’s statement is correct, Futu Securities would become the latest addition to China Money Network’s China Unicorn Ranking, which includes 102 such companies worth a total of US$435 billion when the ranking was released in May 2017. Futu Securities would also become the first Hong Kong company to officially join the unicorn club.

Established in 2012, Futu provides an online stock trading platform enabling Chinese individual investors to trade U.S. and Hong Kong-listed stocks. Since its founding, the company has cumulatively served over 3.4 million customers who have completed over RMB500 billion (US$73 billion) worth of transactions. Annual transaction value reaching nearly RMB300 billion (US$44 billion) in 2016 alone.

How Chinese P2P lending institutional investors measure a platform (Xing Ping She Email), Rated: AAA

In China, P2P lending institutional investors usually conduct due diligence before they invest a platform. The following short report is a due diligence report of Caifuzhihui Inc. wrote by Xeenho, which briefly illustrates the procedures of the measuring method.

Basic Information
Caifuzhihui.cn is a P2P lending platform based in Xuzhou, Jiangsu province. The company mainly operates for car pledge, truck and real estate mortgages. Xeenho rated “BBBB” for Caifuzhihui.cn. The information of the platform is open and transparent, ready to accept due diligence from investors. The online interest rates of their loans are in high level, but there are relatively too much remaining funds in the platform.

Here are the points of Xeenho’s rating report on Caifuzhihui.cn.

Operations
Regional resource advantages and fewer counterparts in the area.
New business of truck mortgage is logic and reasonable, good security in use of funds an source of repayment.
Lack of local professional talents.

Risk Control
Transparent and open, ready for assault investigation.
Owing to policy support, getting better assets at lower cost.
Lack of strict verification to the mortgage of some pledged cars.

Financial Capacity
The platform has been profitable, while their qualification inspecting of partners needs to be improved, the investors cannot accurately judge the strength of them.

Interest rates
High level of interest rates in the industry and shorter-maturity give the platform certain investment value. However, there are too much remaining funds in the platform, investors should take into full account the idle loss.

Click here to get the full report.

China’s P2P lenders dodge regulations (China Economic Review), Rated: A

Following years of explosive yet unchecked growth of P2P lending in China, the central government in August announced sweeping regulations to rope in the nascent sector.  But Caixin reporters found that while some P2P lenders have been trying to follow the new requirements, others have managed to skirt the new rules.

In 2016, a total 2 trillion yuan in loans were made through P2P lending firms.

Here is the Presentation that Explains How Ant Financial, Part of Alibaba, Will Dominate Finance (Crowdfund Insider), Rated: A

One area that Alibaba wants to dominate is finance for both consumers and SMEs and they are well on their way.  Ant Financial, their financial services subsidiary, is executing on this vision and last week Eric Jing, CEO of Ant Financial, delivered a presentation explaining their approach.

Jing shared some hard numbers:

  • Alipay, their payment platform, has 520 million annual active users
  • Wealth management, Ant Fortune, has 330 million cumulative users with 17% year over year growth
  • Ant Credit Pay and Ant Cash Now have 100 million active users
  • Ant Insurance has 392 million users and is growing premiums at 43% year over year
  • Zhima Credit has 257 users and 95% year over year growth

PayPal only has 203 million active accounts. Charles Schwab has just 10.2 million accounts.

As for future growth, Ant Financial points to the fact that 30% of the adult worldwide population is underbanked, 80% of the worlds SMEs have no access to formal financial systems and 90% of the adult population in developing countries do not have a credit card.

View Jing’s full presentation here.

European Union

Where Top European Banks Are Investing In Fintech In One Graphic (CB Insights), Rated: AAA

In Q1’17, investments to European VC-backed fintech companies spiked to 73 investments worth $667M. At the current pace, total funding dollars to fintech companies based in Europe are on pace to surpass $2.6B and deals could surpass 2016’s total by 57%.

International

The U. of Cambridge Launches 2016-17 European, Africa & Middle East Alternative Finance Industry Surveys (Crowdfund Insider), Rated: AAA

The Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School has launched its third European benchmarking survey and the second survey for Africa and the Middle East. The two separate research initiatives will review the emerging alternative finance markets in each of theses regions.

The CCAF defines alternative finance as innovative financial instruments and distributive channels that have emerged outside of the traditional financial system. This includes crowdfunding and peer-to-peer (P2P) lending activities.

The forthcoming surveys on Europe and Africa & the Middle East build upon their multi-year research agenda to provide the best available source of industry data on a country-by-country basis.

The survey data will be collected directly from over 350 alternative finance platforms across 90+ countries in Europe and Africa & the Middle East with the aim to capture over 90% of visible online alternative finance market.

The results of the survey will be made freely available for all in the two industry reports and are expected to be published in the third quarter of 2017.

Misys boss to lead fintech giant after merger with DH (The Telegraph), Rated: B

The boss of banking software firm Misys is to take the helm of a new £1.7bn company called Finastra that has been formed from the British company’s merger with Canadian rival DH Corp.

Nadeem Syed has been named chief executive of the giant fintech business, which is owned by Vista Equity Partners and is the world’s third biggest financial software provider behind competitors FIS and Fiserv.

Australia

Old technology costing advice industry (Financial Standard), Rated: AAA

The majority financial advice firms are still choosing to rely on Microsoft Excel as their primary source of administrative software despite a range of financial software products coming to market, YTML said.

According to the financial technology provider’s anecdotal evidence, eight out of 10 practices are still using Microsoft Excel as a dependency in the advice process.

YTML co-founder and chief operating officer Piew Yap said this software gap is preventing advisers from taking advantage of the time and cost saving measures which updated and tailored technology solutions can provide.

One of the main barriers to taking up new technology, according to YTML director Terri Ho, is the reality that many software providers prefer to operate in silos – or “don’t talk to each other”. According to Ho, advisers are operating a number of different technology platforms to service client needs but are still having to manually enter details across all.

India

Lending API-fied : Start of P2P Lending Revolution (Finextra), Rated: A

National Payments Corporation of India (NPCI) has revolutionised Indian Payment Industry and has removed friction. Newer payments platforms like IMPS, UPI, BBPS etc have solved payment and collection problems of all customer segments. NPCI has change the market by standardising and securing APIs across banks. UPI is classical API use case, which is simplifying mobile payments for P2P as well as Merchant Payments.

On the lines of payments, there is urgent need to revolutionize Lending in the country through technology intervention by an organisation similar to  NPCI. I am calling the entity as National Lending Corporation of India (NLCI) for now.

High level flow of Lending Process (and the APIs) is given below:

  • Loan Request API (sent by Retail Borrower): Standard API for request for loans from a specific person (like VPA of the lender in UPI parlance) or for generic listing of loan requests. This would include the amount of loan, expected duration (range), type of loan (EMI based).
  • Data enrichment of Loan Request API (by NLCI) : Aggregation of critical customer credit data from CIBIL and key alternate sources for sharing with lender.
  • Loan Inquiry API (Retail or Institutional Lender): This entity would be able to run inquiry for a loan based on key inputs like expected Credit Score, Amount, Type of Customer etc. Incase, the loan request is sent specifically in their name (i.e. VPA), the loan request would be available in their queue for acceptance or rejection (similar to UPI collect request).
  • Loan Confirmation API (Retail or Institutional Lender): Lender would be able to approve the loan or reject the loan.
  • Loan accounts would be maintained to NLCI platform for accounting and processing.
Canada

BlueRock Wealth Management Partners with FutureVault (Benzinga), Rated: A

BlueRock Wealth Management Inc., a wealth management firm that provides personalized financial advice and services, has announced that it is offering FutureVault’s Digital Collaborative Vault – called the BlueRock Vault – as an exclusive service to its executive and high-net-worth clients.

The new service will allow BlueRock clients to securely deposit, store and manage important financial, legal and personal documents. FutureVault’s patent-pending Trusted Advisors feature will enhance the sharing and fiduciary tracking of vital documents between BlueRock clients and staff in addition to a client’s external network of Trusted Advisors (i.e. lawyers, accountants, insurance brokers, etc.) providing complete transparency and new levels of trust.

Authors:

George Popescu
Allen Taylor

Wednesday June 14 2017, Daily News Digest

nonprime mortgages

News Comments Today’s main news: Misys, D+H team up to launch Finastra. Fundrise intros first real estate robo-advisor. UK businesses find it harder to get a loan. Singapore Life gets insurance license. Faircent offers online lenders ‘What-If’ scenario simulations. Today’s main analysis: Does anyone remember how to make a subprime mortgage? The most up-to-date numbers for Prosper, RateSetter. Today’s thought-provoking […]

nonprime mortgages

News Comments

United States

United Kingdom

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European Union

International

Australia

India

MENA

Canada

News Summary

United States

Launch of Finastra (D+H), Rated: AAA

Today Misys and D+H have joined forces to create a diversified global financial software provider, unmatched in terms of depth and breadth of solutions. Operating under the new company name Finastra (www.finastra.com), the combination will create the third largest financial services technology company in the world. The company has approximately 10,000 employees and over 9,000 customers across 130 countries, including 48 of the top 50 banks globally. This follows the acquisition of D+H by Vista Equity Partners, which already owns Misys, creating a merger of two highly complementary financial technology providers.

Finastra will be led by Nadeem Syed in the role of Chief Executive Officer. Mr. Syed was previously CEO of Misys and has over 27 years of experience leading global technology companies through transformation and growth. The company has U.S. $2.1 billion* in revenues and has offices in 42 countries around the world. It will be headquartered in London, UK, maintaining North American headquarters in Toronto, Canada.

Finastra offers the broadest set of retail banking, transaction banking, lending, and treasury and capital markets software capabilities available in the world. The company’s open architecture and approach enable financial institutions to harness the power of software ecosystems and will be delivered on premises, hosted or via the cloud. With the increased scale and geographic reach, Finastra will be able to serve customers better, regardless of their size or geographic location – from global banks, to community banks, credit unions, and corporations. Using the company’s secure and reliable solutions, customers will be empowered to accelerate growth, optimize cost, mitigate risk and continually evolve to deliver a superior customer experience, both now and in the future.

Having long pursued a progressive vision of innovation within both businesses, Finastra will strive to further unlock the potential of people and businesses by executing the product strategy of ‘Protect, Extend and Innovate’. This includes protecting our customers’ investments in all of our solutions; extending the value of our solutions by integrating new products and services; and innovating to create the best-in-class solutions. Finastra will work in partnership to help customers transform their business, and become more agile, innovative, and resilient to better meet their evolving needs.

Finastra will be privately held.

Retailpocalypse: Bank branches are closing in droves (Tearsheet), Rated: AAA

There may be no physical institution as historically revered as a bank.

Nice try. Banks these days are hardly elegant or imposing. Most have shrunk in size thanks to rising costs of real estate, and many have disappeared entirely, according to data from the Federal Deposit Insurance Corporation. Chase reduced its branch presence by 190 locations, a 3.4 percent decline, from 2012 to 2016. Wells Fargo closed 98 branches, a 1.6 percent decline in the same period. Its peers are even more aggressive. Bank of America closed 243 branches (16 percent) in that period and Citi closed 302 (28.5 percent).

Branches are consolidating locations with lower servicing volume, opening in higher growth areas and renovating existing branches and ATMs. More importantly, they’re evolving into more compact, digitally oriented spaces that incorporate new technology and help branch employees focus on improving the customer experience.

While those in the banking industry feel there will always be brick-and-mortar branches, in large part because the business of banking is grounded in trust, and in knowing the person with whom you’re working, the move to digital technologies is expected to grow exponentially.

Fundrise Revamps Service with First Ever Robo-Advisor for Real Estate (Crowdfund Insider), Rated: AAA

Fundrise, one of the leading online investment platforms for real estate, has launched the “2.0” version of their platform. Fundrise has created a Robo-Advisor focused on real estate thus providing an investing tool to match individual investor needs.

The Fundrise Robo-advisor enables individual investors to create a highly diversified real estate portfolio accessing Fundrise’s growing number of eREIT’s. The service provides an estimate based on submitted variables to extrapolate potential returns. Fundrise estimates users will save up to 40% on fees versus traditional services.

Does Anyone Remember How to Make a Subprime Mortgage? (WSJ), Rated: AAA

Brokers willing to learn the lost art of making risky mortgages are in demand again.

Mr. Boyd, a 25-year-old account executive at FundLoans in a beach town outside of San Diego, is at the cusp of efforts to bring back an army of salespeople who once powered the mortgage industry and, some say, contributed to the housing crisis.

Brokers are a key part of a mortgage chain that starts with a borrower going to a broker for a loan. The broker surveys lenders for the best loan to fit the customer. The lender then funds the borrower’s loan.

While brokers before the crisis served banks and independent lenders, today they are working largely for nonbank lenders who make up a critical part of the mortgage market.

In the first quarter, nonbank lenders accounted for about half the mortgages originated in the U.S., according to industry publication Inside Mortgage Finance.

In the first quarter, nearly a decade after the start of the housing crisis, lenders originated just $6 billion in loans to borrowers with less than stellar credit scores or who are using alternative documentation to prove income, a category now known as “nonprime,” according to Inside Mortgage Finance.

In all of 2016, they originated $22 billion in loans, according to Inside Mortgage Finance. Back in 2005, at the peak for such loans, lenders made about $1 trillion of these mortgages.

Meanwhile, the volume of loans produced by mortgage brokers dropped to $37 billion in this year’s first quarter, down about 34% from the last three months of 2016. Loans from brokers peaked at around $1.1 trillion in 2003.

‘Fintech’ startup SoFi moving into traditional banking (Seattle Times), Rated: A

NEW YORK (AP) — Online lender and financial startup SoFi has taken the first step toward competing with the nation’s biggest banks on their home turf: the checking account.

The company, however, will have back-office operations in both Delaware and Salt Lake City, Utah.

In its application to the Federal Deposit Insurance Corporation, SoFi plans to fund its new bank subsidiary with $166 million in capital.

Student Loans Are Holding Back Entrepreneurs. SoFi Is Changing That (Inc.), Rated: A

All your life, you’re told that an education will set you up to fulfill the American dream. But once you graduate, you’re faced with onerous payments that seem to hardly dent the principal. You need a steady job, stat. It’s terrifying to forgo a salary to start something new, let alone invest your assets, when you’re obligated to make monthly payments that can reach thousands of dollars.

One startup is helping its users get ahead of their debt and start the new ventures that our economy needs to thrive. SoFi (short for Social Finance) is largely known as the startup that will refinance your student loans, though it aspires to encompass its members’ entire financial lives.

Nevertheless, student loans are SoFi’s bread and butter, a reflection of the generation of Millennials saddled with insurmountable-feeling debt. That’s why, in addition to its unemployment support and career coaching, SoFi has an entrepreneurship program. The benefits include six months of loan deferment, mentorship resources such as connections to investors, and networking with other entrepreneur members.

Of course, SoFi can’t single-handedly revive American entrepreneurship, not least because the cohorts of accepted entrepreneurs are limited, and the types of businesses that SoFi favors skew toward scalable tech startups rather than conventional small businesses. But student loan relief has a definite impact on the participating SoFi members’ ability to launch companies.

Fundrise Offering Circular (Disclosure Quest), Rated: A

We are offering up to 5,000,000 shares of our Class B Common Stock to the public at $5.00 per share. This offering commenced on February 1, 2017 and as of May 30, 2017, we had settled approximately 2,884,129 shares of our Class B Common Stock of the 3,000,000 shares that we had previously qualified for sale. We are including in the offering an additional 2,000,000 shares of our Class B Common Stock to be sold pursuant to this offering circular.

Disruptor Alert: These 2 Companies Are Changing Banking (The Motley Fool), Rated: A

Square (NYSE:SQ) has disrupted the mobile payment market, and could still be in its early innings of growth. Over the past year, Square’s stock has more than doubled, thanks to its impressive and better-than-expected growth and optimistic forecast.

Over the past year alone, Square’s payment volume increased by 33% to over $13.6 billion, and the company is on the verge of becoming profitable. Plus, Square’s services and subscription revenue more than doubled year-over-year, and has tremendous long-term growth potential.

P2P lenders aren’t the only players in the unsecured lending space anymore — some of the biggest names in the industry are getting involved, which could certainly shake things up in the years to come.

One in particular I have my eye on is Goldman Sachs (NYSE:GS).

Goldman first announced its intention to get into the consumer lending business in 2015, and after a couple of years of development, the company recently launched Marcus (named for Marcus Goldman, one of the bank’s founders), its new lending platform that offers personal loans of up to $30,000.

According to a report by TransUnion, nearly 16 million people took out an unsecured loan in 2016, the highest on record. With an average balance of $7,640 and average interest rate of 12%, this translates into a billion-dollar revenue stream if Goldman can build its market share to just 7%.

IMAGE SOURCE: LENDING CLUB INVESTOR PRESENTATION.

Cadre Raises $ 65 Million in Series C Financing, Led by Andreessen Horowitz (BusinessWire), Rated: A

Cadre, an online investment marketplace providing access and insight into institutional quality alternative assets, today announced a $65mm Series C financing round led by Andreessen Horowitz, with additional participation from Jim Breyer of Breyer Capital, Ford Foundation, General Catalyst, Goldman Sachs, Khosla Ventures, and Thrive Capital. Cadre’s existing investors include DST, Founders Fund, SL Green, and others.

Envestnet | Yodlee Unveils Personal Financial Wellness Solution Powered by Data Intelligence (PR Newswire), Rated: A

Envestnet | Yodlee (NYSE: ENV), a data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services, today announced the launch of its Personal Financial Wellness Solution at the Digital Banking Summit. The Envestnet | Yodlee Personal Financial Wellness Solution is a suite of applications and APIs that leverages enriched data and artificial intelligence to move beyond organizing historical financial data, helping financial institutions and fintech developers provide actionable, financial guidance to their customers across a spectrum of devices, user interfaces and platforms.

The Envestnet | Yodlee Personal Financial Wellness Solution enables financial institutions and fintech developers to provide actionable tools to help consumers identify their projected OK to Spend balance and easily Save for a Goal. By applying Envestnet | Yodlee’s advanced data intelligence to its enriched transaction data of over 15,000 data sources, financial service providers can derive actionable information from consumers’ financial data in order to measure, guide and improve consumers’ financial health.

OK to Spend

Core to the Personal Financial Wellness Solution is OK to Spend, which synergizes predictive analytics and user feedback to deliver smart financial forecasting. OK to Spend can be consumed as a financial application or a fully RESTful API framework that enables financial service providers to create forward-looking forecasts that organize and predict recurring income and financial obligations along with personalized notifications for financial events and projected balances. OK to Spend analytics is run across the consumers’ primary spending accounts (cash and credit card) regardless of which financial institution they primarily bank with, in order to provide a holistic view of their finances.

Patent-protected machine learning and data analytics enable the OK to Spend algorithms to identify sources of recurring income and accurately predicts future income, accounting for anomalies. Similarly, OK to Spend identifies recurring and forecasted financial obligations, while accounting for fluctuations determined from historic data.

Save for a Goal

The Save for a Goal application allows consumers to easily set and track savings goals. The application facilitates money movement across different accounts at a specific time frequency and allows customers to better track their goals by allowing consumers to allocate multiple goals to a single account, or spread a single goal across multiple cash and investment accounts. Save for a Goal provides visual data and notifications such as progress bars, charts, graphs and alerts, engaging customers with the option to flex and prioritize between goals.

The First In-Depth Report of the Single Family Real Estate Investor – the Iceberg Report (Newswire), Rated: A

The role of the individual and institutional single-family residential investor is highly undervalued and tremendously under-appreciated. About 10 million individuals, businesses and institutions provide secure housing and jobs for millions of average Americans. 67 million souls live in single-family rentals, a million more properties are added each year employing millions of individuals, to buy, renovate, lease and maintain as safe housing for tenants in affordable to luxury markets.  Single-family rentals have been discovered as a low-risk passive income revenue source and a growth asset in a balanced portfolio or personal retirement plan.

Using Harris Poll, single-family real estate investors were surveyed nationwide to understand why, where, what and how they invest and manage these properties to provide stable housing and realistic returns on their personal and company investments.

The report touches several other critical components that shape this market. Key among these are how the single-family real estate investor effects the economy, how investors view their properties (as added rental income or as an intentional business goal), investor decision points, and the investor as a customer,” says Steve Murray, Founder & CEO Real Trends.

To download your free copy of the Iceberg Report Executive summary, please go to

Want to Bring More Services to Your Clients? There’s A FinTech for That (CPA Practice Advisor), Rated: A

These days, there are few “typical” CPA firms left. As they seek to diversify, differentiate and grow by offering their clients value added services, firms are engaging in a much wider range of activities.

With the rise of a new generation of B2B financial technology companies, or Fintechs, the opportunities for CPA firms to offer new services have never been better.

Fintechs are infiltrating every aspect of B2B financial services, and venture investment continues to pour in. Where people used to look to QuickBooks, Oracle and SAP, now there are cloud-based accounting and ERP options like Xero and Freshbooks and NetSuite and Workday. But you probably know about those.

What you might not know is that Fintechs are moving into e-invoicing, expense reporting, data sharing and protection, compliance, tax management and fraud control. They’re executing specific parts of the banking value chain better, cheaper and faster, including lending, trade finance, and payments. Some are even considering becoming banks themselves.

Fintech solutions solve the whole thing– all types of payments and all the work that goes along with the payments. Companies can make 80 percent or more of their payments electronically, and that saves a lot of resources, especially if you’re a BPO writing hundreds of thousands of checks on behalf of your clients. You could be helping them get a lot more card rebates instead.

But what visibility really does is open up more opportunities for CPA or audit or BPO firms down the road. If you’re a BPO, visibility into payments could potentially help you work better with vendors.

The more you can help clients automate, the more nimble they are and the more nimble you are.

Goldman Sachs Bank Aggressively Going After Deposits (Lend Academy), Rated: A

So, I did a bit of research on what Goldman Sachs Bank is offering compared to others in the market. I looked at Bankrate and Nerdwallet to see who were the top offerings for savings accounts and CDs of various duration. What was interesting to me is that Goldman Sachs was at or near the top in every category.

For savings accounts there were a couple of small regional or local banks that had slightly higher rates but no major national banks were higher. If you look at 3-year CDs with a minimum investment of $500 (the Goldman Sachs minimum) I could not find an offering anywhere in the country that came close to matching Goldman’s 1.90% rate. In fact, the second highest rate available anywhere for a $500 3-year CD was 1.65% from Barclays.

Allstate, Marketplace Lending Association and others fly in (Politico), Rated: A

All sorts of interest groups are flying in this week to nab some time with lawmakers before the July 4 recess.

The Marketplace Lending Association, a trade group that represents digital financial and lending startups, is in town this week for its first-ever fly-in, meeting with lawmakers and regulators. “The goal is to bring Washington up to speed on the growth of the sector, as well as the emerging partnerships between the fintech member firms and banks,” according to the group. Its member companies include Lending Club, Prosper, Funding Circle, Avant, Marlette Funding and Affirm.

FINRA Establishes Innovation Outreach Initiative For FinTech (ETH News), Rated: A

On June 13, 2017, The Financial Industry Regulatory Authority (FINRA) declared the establishment of the Innovation Outreach Initiative, in order to properly assess FinTech‘s industry impact.

FINRA’s Innovation Outreach Initiative comes after the launch of its FinTech site that’s dedicated to emergent topics in the field, and literature on blockchain technology and digital investing.

The initiative will consist of program elements, such as enhancing FINRA’s processes, timely publication of regulatory technology applications, regional outreach roundtable discussions (comprised of FINRA members and nonmembers), and the creation of a FinTech Industry Committee. The committee will help to assist with ongoing discussions about how FINRA’s programs and rules will intersect with FinTech innovations.

Online Lending Policy Institute Names Board of Governors (OLPI Email), Rated: B

The Online Lending Policy Institute (OLPI), a voice for policy analysis, in-depth research, and education for the online lending industry, today announced its Board of Governors, a group of industry experts ranging from academics to lawyers to executives from twelve leading organizations. This newly elected group joins founding members of OLPI: Cross River Bank, Boston University’s Center for Finance, Law & Policy, and RocketLoans.

The Board of Governors are:

  • Frank Borchert, General Counsel, Marlette Funding/ Best Egg
  • Colin Darke, General Counsel/Chief Compliance Officer, RocketLoans
  • Dr. Michael Dooley, Chief Economist, SoFi; professor of economics UC Santa Cruz
  • Marc Franson, Managing Partner, Chapman and Cutler LLP
  • Michael Freedman, General Counsel, BorrowersFirst, Inc.
  • Gilles Gade, CEO, Cross River Bank
  • Adam Goller, Chief Credit Officer, Cross River Bank
  • Cornelius Hurley, Director, OLPI; professor Boston University
  • John Kromer, Partner, Buckley Sandler LLP
  • Robert Linderman, General Counsel, Freedom Financial Network, LLC
  • Tim Li, CEO, Kuber Inc.; professor Fintech School
  • Marshall Lux, Senior Fellow, Harvard Kennedy School
  • Marty Mitchell, Managing Director, ProBank Austin (formerly Professional Bank Services)

DiversyFund Announces New Luxury Investment With Roman James Design Build (Digital Journal), Rated: B

DiversyFund, Inc., a fast-growing full-service online real estate investment platform, announced the next ground-breaking real estate investment project that their partnership with Roman James Design Build will undertake. DiversyFund and Roman James will be building a new ultra-luxury in Hollywood Hills, one of the most exclusive neighborhoods in Los Angeles.

This investment opportunity is located at the end of Granito Drive in the prestigious Hollywood Hills community of Los Angeles, California, home to Hollywood celebrities, professional athletes and Fortune 500 CEOs.

Congressional Testimony on Fintech Innovation: “Today We Are Following Not Leading” (Crowdfund Insider), Rated: B

This past week the House Subcommittee on Digital Commerce and Consumer Protection, part of the Energy and Commerce Committee, held a hearing on Fintech innovation as part of their disruptors series.

Van Valkenburg called on Congress to “rationalize the chaos of financial regulation,” pointing to the horrifying reality there exists a byzantine environment of state and federal regulators that, well simply put, doesn’t make sense.

United Kingdom

London leads European fintech investment despite Brexit (Financial News), Rated: AAA

London-based fintech companies attracted more than three times as much capital in the first quarter as Berlin – Europe’s second largest fintech investment hub – and maintained its market share despite moves by other cities in the region to gain from the UK’s departure from the EU.

New research from data provider FinTech Global found six cities that stand out in Europe’s fintech arms race, with companies based in London, Berlin, Stockholm, Paris, Barcelona and Amsterdam raising $823m in the first three months of 2017.

Overall European investment stood at $1.2bn, with London claiming a 36% share at $421m — more than treble the $140m investment in Berlin-based companies, according to the research.

Over the previous three years, London accounted for 39% of European investment, suggesting that the impact of last year’s Brexit vote has been slight.

UK businesses looking for finance are finding it harder to get a loan (Business Matters), Rated: AAA

With the UK in the early stages of Brexit and now facing a General Election, new research conducted by RateSetter Business Finance reveals how credit conditions look to be tightening again, with over 400,000 small businesses now interested in finding an alternative to the banks for a loan.

When asked, 32 per cent of SMEs that had considered raising finance said that it was now harder than six months ago.

As banks are progressively closing their branches and cutting back on front-line staff, businesses now need to go elsewhere to benefit from face-to-face contact before borrowing money. With over a third of small businesses preferring to seek advice in person, the move to online-only offerings and the closure of physical branches is a concern.

Hive ICO – the first crypto currency invoice financing platform for SMEs (Daily Fintech), Rated: A

Hive claims it will be the first crypto currency invoice financing platform for SMEs, with its ICO opening in 4 days and closing at the end of July.

From what I can gather – and I’d say you’re best to verify this yourself – Hive tokens give holders the right to participate in the network and generate a return by funding invoices. The carrot for small business owners is the speed of execution of the financing element.

And while I was lucky enough to get a master class in person, if you haven’t yet got your head around tokens and ICO, these articles are worth a read:

Asia

OBTAINING DIRECT LIFE INSURANCE LICENSE BY SINGAPORE LIFE (Credit China Fintech Holdings Limited), Rated: AAA

This announcement is made by Credit China FinTech Holdings Limited (“Company”) on a voluntary basis.

Reference is made to the announcement of the Company dated 26 April 2017 in relation to the Investment in Singapore Life (the “Announcement”). Unless otherwise defined, the capitalised terms used herein shall have the same meaning as those defined in the Announcement.

The board of directors of the Company is pleased to announce that Singapore Life has been approved as a fully licensed direct life insurer by the Monetary Authority of Singapore.

Singapore Life will also soon offer life insurance solutions to customers through its online platform www.singlife.com and financial advisers.

European Union

French Fintech Under Macron’s Presidency One Month On (Forbes), Rated: A

On the other hand, as Grossman points out, ‘since Macron has publicly stated that innovation and disruption is key for France’s growth potential, his intention for closer integration with Europe has been broadly welcomed by the fintech industry.’ Macron seems to be pro-PSD and has invited those affected by Brexit to work in the technology sector in France, all are welcome under En Marche. The French president is also very supportive of SME growth and is interested in helping French Tech.

Macron’s initiatives so far are clearly in favour of the development of fintech in France and with billions promised for innovation, the president is returning to supporting this space, as he did with The Family in Paris, as Grossman points out.

International

What do the most up-to-date numbers in marketplace lending tell us? (AltFi), Rated: AAA

Prosper is currently lending significantly more than it is being repaid for the first time in roughly a year.

In March, the platform posted its first positive monthly net lending figure ($200k) since May of last year. April saw net lending growth to c. $15m.

 

RateSetter has posted back-to-back months of negative net lending in April and May (roughly £-700k and £-4m respectively). There are no other negative net lending months in the platform’s 6-7 year history.

Sovereign wealth funds ramp up private debt investment (AltFi), Rated: A

Gargantuan sovereign wealth portfolios are increasingly turning to private debt exposure with almost two-fifths of portfolios now actively investing in the asset class due to its potential for stable risk-adjusted returns and portfolio diversification benefit.

The report found that 39 per cent of sovereign wealth funds now invest in the asset class, an increase of five percentage points over the past 12 months. The majority of sovereign wealth funds with over $10bn in assets now allocate to the asset class, including two-thirds of those managing $250bn or more, and all of those managing $100-249bn.

Libyan Investment Authority is one such investor in private debt that allocates to the asset class as part of its private equity portfolio. The fund targets distressed debt and mezzanine funds in Europe, North America and MENA.

Mezzanine investments are the private debt fund type most appealing to sovereign wealth funds, with 70 per cent targeting the strategy over the next 12 month and direct lending is sought by 53 per cent.

Australia

Australia and Hong Kong seal fintech cooperation agreement (ZDNet), Rated: A

The Australian Securities and Investment Commission (ASIC) has signed an agreement with the Hong Kong Securities and Futures Commission (SFC) to provide mutual support to fintech businesses from Australia and Hong Kong seeking to operate in each other’s markets.

Under the agreement, ASIC and SFC will refer fintech businesses to each other for advice and support via ASIC’s Innovation Hub — aimed at helping fintech businesses navigate Australia’s regulatory framework without compromising investor and financial consumer trust — and its Hong Kong-based equivalent, SFC’s Fintech Contact Point.

India

Now online money lenders can simulate ‘What-if’ scenarios on Faircent (Techseen), Rated: AAA

India based Peer-to-Peer lending website, Faircent, has announced the launch of what it claims to be a first-of-its-kind Portfolio What-if Analysis (PWA) tool on its platform. According to the company the tool will allow lenders to simulate different loan scenarios and understand how multi-loan portfolios in peer-to-peer lending operate through a ‘What-if’ analysis.

Using the tool lenders can create a test portfolio and specify the amount they would like to invest, along with the duration, interest rates, and tenure. The Portfolio Simulator will then perform advanced algorithm-based calculations based on the input, generating projected portfolio returns by following a standardized method using the concept of Net Annualized Return (NAR).

Rupaiya Exchange Receives Award for Best Peer-to-Peer Lending Platform in India (PR Newswire), Rated: A

Rupaiya Exchange received the award for Best Peer-to-Peer Lending Platform in India in The Asian Banker Financial Peer-to-Peer Audit Awards Programme 2017. The awards ceremony was held in conjunction with the prestigious Asian Banker Future of Finance Summit 2017, the foremost annual meeting for decision makers in the financial services industry in the Asia Pacific region, held at the Asian Civilisations Museum, Singapore.

The awards evaluation criteria were based on multiple dimensions including financial performance, risk management processes, technology, innovation and strategy.

Online Peer-To-Peer Lending (BusinessWorld), Rated: A

Facilitating simple, fast, and tech-enabled banking services, the emergence of fintech is forcing banks to rethink old business models and delivery mechanisms to adopt a more technology-driven and consumer-centric approach to retail banking.

Leading this ‘uberisation’ of financial services is the online P2P (peer-to-peer) lending sector, which is driving disruption in the institutional lending space through its simplified, tech-enabled approach. What this also means is that online P2P lending will play a significant role in driving the Indian economy.

The adoption of technology means that loan approvals and disbursals can be facilitated in as little as 24 hours from the request origination, whilst digitised operations and processes allow for minimisation of overhead costs. This translates to greater benefits for all stakeholders; while borrowers pay lower interest rates and processing fees, lenders earn higher margins and returns on their investments.

MENA

MBRF, Beehive to offer start-up finance solutions (Gulf News), Rated: AAA

Dubai SME’s financial arm and peer-to-peer lending platform Beehive had signed a memorandum of understanding (MoU) to aid financing for small and medium enterprises (SMEs).

The MoU between Beehive and the Mohammad Bin Rashid Fund (MBRF) will make it easier for SME owners in Dubai to obtain loans for development and expansion at competitive rates through the Beehive Group Finance Platform.

Under the deal, MBRF would act as a guarantor for credit of up to Dh500,000 on SME financing for a period up to 36 months.

Canada

Calgary-Based POS Lender LendingArch Expands into Quebec (Crowdfund Insider), Rated: A

LendingArch, a Calgary-based online and point-of-sale lending platform, announced its expansion to Quebec. LendingArch has partnered with medical clinics and home improvement contractors in Quebec to offer POS financing options, enabling LendingArch to become a fourth in-store payment method by applying online to finance products or services for up to 36 months.

Authors:

George Popescu
Allen Taylor

Friday May 26 2017, Daily News Digest

Friday May 26 2017, Daily News Digest

News Comments Today’s main news: Bank Q1 earnings increase by 13% to $44B while loan origination slows down. SoFi co-founder Dan Macklin exits company. OnDeck extends $100M credit facility. Prosper closes $495M securitization transaction. RateSetter confirms IPO. BBVA launches open API market. Today’s main analysis: Alt finance in Americas grows to $352B last year. Today’s thought-provoking articles: China Rapid […]

Friday May 26 2017, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

  • BBVA launches open API market. GP:”Very interesting. BBVA is pioneering what we think all banks will eventually have to do by law or to remain competitive. “AT: “Initially open only to Spanish businesses, but eventually to be rolled out internationally.”

International

Australia/New Zealand

Asia

News Summary

United States

Bank 1Q earnings jump to $ 44B, while loans fall: FDIC (FDIC Press Release), Rated: AAA

  • FDIC-Insured Institutions Earn $44 Billion in First Quarter 2017
  • Community Bank Net Income Rises to $5.6 Billion
  • Quarterly Net Income Is 12.7 Percent Higher than a Year Earlier
  • Community Bank Net Income Rises 10.4 Percent from a Year Ago
  • Annual Loan Growth Rate Slows to 4 Percent, On Par With Nominal GDP Growth
  • “Problem Bank List” Falls to 9-Year Low

“Revenue and net income growth were strong, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” Gruenberg said. “Community banks reported another quarter of solid revenue and net income growth.”

Gruenberg continued: “In the past two quarters, the industry has seen a slowdown in loan growth that is broad-based across major lending categories. This slowdown has occurred as the economy approaches the end of the eighth year of a relatively modest expansion. Still, loan growth has remained at or above nominal GDP growth.

Highlights from the First Quarter 2017 Quarterly Banking Profile

Quarterly Industry Net Income is 12.7 Percent Higher than a Year Earlier: Quarterly earnings were 12.7 percent higher than in the first quarter of 2016 due to growth in net operating revenue. Net operating revenue – the sum of net interest income and total noninterest income – was $183.6 billion, an increase of $10.9 billion (6.3 percent) from a year earlier. Loan-loss provisions totaled $12 billion, a decline of $541 million (4.3 percent) compared to first quarter 2016. Noninterest expenses of $109.2 billion were $4.5 billion (4.3 percent) higher than a year earlier, as a 2 percent year-over-year increase in employment was reflected in higher payroll expenses. The improvement in revenue also caused the average return on assets to rise to 1.04 percent from 0.97 percent a year earlier.

Community Bank Net Income Rises 10.4 Percent from a Year Ago: The 5,401 insured institutions identified as community banks reported a $522.9 million (10.4 percent) increase in net income in the first quarter. Net operating revenue was $1.5 billion (7 percent) higher, as net interest income was up $1.2 billion (7.1 percent), and noninterest income rose by $304.4 million (6.8 percent). Loan-loss provisions increased by $32.7 million (5.2 percent), while noninterest expenses were $721.9 million (5 percent) higher.

Annual Loan Growth Rate Slows to 4 Percent: Total loan and lease balances increased $358.1 billion (4 percent) during the 12 months ended March 31, compared with a 5.3 percent growth rate over the 12 months ending in March 2016. The slowdown in loan growth occurred across all major loan categories. During the first three months of 2017, total loan balances declined by $8.1 billion (0.1 percent) from the fourth quarter, as borrowers reduced their credit card balances by $43.7 billion (5.5 percent). Community banks increased their loan balances by $16.7 billion (1.1 percent) during the quarter and by $109.9 billion (7.7 percent) over the past 12 months. Still, loan growth has remained at or above nominal GDP growth.

“Problem Bank List” Falls to 9-Year Low: The number of banks on the FDIC’s Problem Bank List fell from 123 to 112 during the first quarter. This is the smallest number of problem banks since March 31, 2008, and is down significantly from the post-crisis peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $27.6 billion to $23.7 billion during the first quarter.

Deposit Insurance Fund’s Reserve Ratio Remains at 1.20 Percent: The Deposit Insurance Fund (DIF) balance increased $1.8 billion during the first quarter to $84.9 billion at March 31, largely driven by assessment income, including surcharges on large banks. Estimated insured deposits increased 2.3 percent in the first quarter. The DIF reserve ratio remained unchanged from year-end 2016 at 1.20 percent, due in part to strong insured deposit growth.

SoFi co-founder Dan Macklin is leaving the company (TechCrunch), Rated: AAA

Another one of the co-founders of online lending startup SoFi is leaving the company, the company has confirmed to TechCrunch. Dan Macklin, who served as VP of Community and Member Success at SoFi, announced internally that he’ll be stepping down from his position on June 6th.

Most recently, Macklin was charged with managing the community and customer success at SoFi, which sees its member meetups and community events as a key differentiator against more traditional financial services businesses. Prior to that, he served as the company’s first VP of Business Development.

After six years, SoFi now has more than 300,000 members and has underwritten more than $20 billion in loans, according to a person familiar with the business. It’s also raised nearly $2 billion in outside funding and has about 1,000 employees.

Of course, it’s not unusual for founders to leave after a period of several years, but Macklin’s departure leaves Cagney as the last remaining co-founder at the company.

OnDeck Announces Extension of $ 100 Million Credit Facility with SunTrust Bank (PR Newswire), Rated: AAA

OnDeck® (NYSE: ONDK) announced today that it had extended its current asset-backed revolving credit facility with SunTrust Bank.

As a result of the transaction, OnDeck extended the maturity date of its $100 million credit facility with SunTrust Bank to November 2018 and decreased funding cost by 50 basis points.

Loans will continue to be made to Receivable Assets of OnDeck, LLC, or RAOD, a wholly-owned subsidiary of OnDeck, to finance RAOD’s purchase of small business loans from OnDeck. The revolving pool of small business loans purchased by RAOD serves as collateral under the SunTrust facility.  OnDeck is acting as the servicer for those small business loans.

Prosper Closes $ 495 Million Securitization Transaction (BusinessWire), Rated: AAA

Prosper, a leading marketplace lending platform for consumer loans, today announced the closing of the first securitization from the Prosper Marketplace Issuance Trust, Series 2017-1, “PMIT 2017-1.”

Approximately $495 million of notes were issued, increasing from an initial $450 million. Credit Suisse Securities (USA) LLC and Jefferies LLC served as joint bookrunners on the transaction, which was rated by Fitch Ratings, Inc. and Kroll Bond Rating Agency, Inc.

LendingTree Launches Life Insurance Comparison Platform Powered by PolicyGenius (Marketwired), Rated: A

LendingTree, the nation’s leading online loan marketplace, announced a new partnership today with PolicyGenius, a fast-growing consumer insurance startup, that will bring PolicyGenius’ term life insurance comparison shopping platform to millions of LendingTree customers.

Since the launch of its intuitive insurance shopping platform in 2014, PolicyGenius has helped hundreds of thousands of customers shop for over $100 billion in term life insurance coverage. The companies both plan to use the partnership to continue to bring choice, transparency and convenience to a traditionally convoluted and complex shopping process.

PolicyGenius empowers customers with accurate quotes, side-by-side comparison of insurance policies from dozens of the country’s top-rated insurance providers, and independent advice. The company’s proprietary tech delivers the most accurate quotes available online by evaluating a shopper’s health and lifestyle factors and matching to insurers’ underwriting rules.

The LendingClub iOS mobile app has  arrived (LendingClub Email), Rated: A

We are excited to announce that we have launched the LendingClub Invest app on iOS.

We’ve heard the feedback from our investors and have been hard at work building out a mobile experience. You can download our new iOS app here.

With our new app, you’ll be able to:

  • check your account summary
  • invest in Notes
  • move money back and forth
  • adjust Automated Investing strategies and more

LendingClub, ex-CEO must face U.S. shareholder litigation (Reuters), Rated: A

A federal judge on Thursday rejected efforts by LendingClub Corp (LC.N) and former Chief Executive Officer Renaud Laplanche to dismiss shareholder litigation accusing them of concealing material weaknesses in the online lender’s ability to monitor its operations.

The decision by U.S. District Judge William Alsup in San Francisco lets shareholders pursue most of their claims over the contents of LendingClub’s registration statement for its December 2014 initial public offering.

With $ 25 million in funding, Prumentum Group is building a “hybrid robo” wealth manager (TechCrunch), Rated: A

A new wealth management startup called Prumentum Group is coming to market with a unique value proposition, looking to combine the technology chops of a roboadvisor with the human touch of a registered investment advisor. To do so, the company has built a tech platform, raised $25 million in funding, and acquired a minority stake in a financial advisory firm.

On the one hand, the company has been working on a tech platform called BrightPlan, which is set to compete with the likes of Wealthfront and Betterment in the robo-advisory game. That platform was built by a team comprised of former employees from Silicon Valley firms like Salesforce and Cisco.

According to Prumentum co-founder and CEO Marthin De Beer, the company has taken an initial 40 percent stake in Plancorp, with the option to purchase up to 100 percent of the company through an equity exchange later.

Robo-adviser takes a stake in Plancorp (Investment News), Rated: A

Financial advice firm Plancorp has attracted a novel investor. The 34-year-old advisory firm is now partially owned by a fintech firm launching a digital advice platform later this year.

The St. Louis, Mo.-based registered investment advisory firm, which has $3.6 billion in client assets, will become the live adviser component for the hybrid robo to be known as BrightPlan.

Plancorp, which has 55 employees, has a $5,000 annual fee minimum for clients. It was one of the nation’s first fee-only advisory firms when it was founded in 1983 by Jeff Buckner, who is still one of the firm’s 14 employee shareholders that control the other 60% of Plancorp.

A Look Back at Lending Club’s 10 Years as an Online Lender (Lend Academy), Rated: A

Lending Club launched a marketing campaign and website celebrating their 10-year anniversary and outlining the major milestones for the company. What started out as a Facebook application has morphed into one of the largest online consumer lenders in the US.

In 2008, Lending Club entered a quiet period where it worked with the SEC to come up with a path to move forward. Coming out of the quiet period Lending Club began to offer its loans as securities and remains one of the few platforms open to retail investors.

The company had its first $10 million origination month in 2010. The company now originates nearly $2 billion per quarter. To put the growth into perspective, the company reviewed on average four loans per day in 2007 and it took two weeks to facilitate their first $100,000 in loans. The company now reviews around 1,700 loans daily and facilitates $100,000 in loans every six-and-a-half minutes. Originations now top $26 billion.

Other major milestones include the IPO in December of 2014 as well as product expansions into small business loans and more recently, auto refinance. As of Q1 2017 the company has successfully brought a significant amount of banks on the platform which now represent 40% of loan funding.

Venture Funds Flood Startups With Cash (WSJ), Rated: A

Investors injected $14.5 billion into U.S. venture-backed startups in the first quarter, up 37% from the previous period, according to data from Dow Jones VentureSource.

Recipients of venture funding included financial services, which saw a 15% bump in investment to $913.1 million, compared with the $792.4 billion raised in the prior quarter. Fintech startup Social Finance Inc. hauled in a big chunk of that in the latest round, raising $500 million in the period.

After a cooling period the past year, information-technology investment edged higher, hitting $3.05 billion in the quarter, up 13% from the $2.7 billion in the prior period. A slice of that, investments in software, returned to favor as well, as investors put to work $2.14 billion, up about 13% from the $1.9 billion unlocked in the previous quarter.

Understanding Online Real Estate Lending As An Investment Strategy (Forbes), Rated: A

I’ve been working in the field of online real estate investing for several years now, and the good news is that today’s technological innovations have made investing in real estate online a newly viable way to access secure, short-term investments.

For first-time investors, you should be looking for the following in any platform you consider investing your money in:

  • Lower investment minimums: In this era of peer-to-peer lending and crowdfunding, online lending platforms provide investors with access to investments at minimums as low as $1,000.
  • Risk management through quality underwriting: Before a loan is listed, online platforms should run detailed underwriting reviews on the loan offering by looking at borrower bank statements, running credit checks, reviewing asset purchase contracts, underwriting the renovation budget, etc.
  • Secure monthly income: Lending money on house flips typically comes with a lien on an asset.
  • Investment management: Online platforms don’t just help get access to investments, but also manage the same for individual investors.

A few important points to consider:

  • Illiquid investment: There doesn’t exist a secondary market today where individuals may liquidate an online investment, at will.
  • Limited correspondence with borrower: Online platforms create a barrier to direct communication with the borrower.
  • Industry maturity: The biggest unknown today is how the young industry’s underwriting guidelines will hold, should there be an economic correction.

PeerStreet partners with top-tier originators across the country and makes their loans available to registered investors. What makes PeerStreet unique is its ability to onboard partners who underwrite deal flow, allowing PeerStreet to serve as a liquidity portal for originators.

AlphaFlow is another interesting platform that diversifies a $10,000 investment from an investor across 75-100 loans originated by other platforms in the space, yielding returns from 8-10%.

Since its founding in 2004, BiggerPockets has turned into the LinkedIn for real estate investing.

Five Technology Tools And Apps That Are Reshaping The Real Estate Industry (Forbes), Rated: B

Streak CRM is a Chrome app that integrates into Gmail. This makes it a seamless integration with your existing email, which eliminates all the data entry overhead that kills your flow when you’re working your lead funnel.

RealTelligence is launching a mobile app that scores all real estate agents based on their probability of success for home sellers and buyers in their area of town and price range.

Wholesaledealslist.com is a brand new web and app platform where real estate investors can find and sell wholesale deals.

Keep an eye out for Point. They’re trying to disrupt the home mortgage by offering to buy equity in a home.

MoneyLion enhances product line to help consumers manage and improve their financial health (MoneyLion Email), Rated: B

Mobile personal finance and consumer lending platform, MoneyLion, today launched new features designed to make the financial goals of its 1 million-plus users easier to achieve. As part of the launch, MoneyLion also redesigned its website and mobile app.

MoneyLion is launching its new features to address the financial challenges consumers face today. A Federal Reserve study showed that 46 percent of Americans don’t have $400 saved for an emergency, and two-thirds of Americans were unable to pass a financial literacy test according to another study. MoneyLion’s new features have been designed to help users overcome these challenges by simplifying their day-to-day relationship with money and making it easier to build positive, sustainable financial habits.

MoneyLion has introduced the following new app features in a refreshed interface to help reduce the friction consumers face when it comes to their finances:

  • Simple, data-driven advice, wherever you go: From the moment users open the MoneyLion mobile app, they receive personalized recommendations that encourage positive financial behaviors based on their individual spending habits and credit profile. These recommendations are refreshed daily with the user’s latest data to ensure they remain aligned to their current financial situation and objectives.
  • Streamlined borrowing experience: MoneyLion’s personal loan process has been streamlined to improve speed, convenience and lower the cost of borrowing. Customers can receive a loan offer in as little as 15 seconds, access funds as quickly as the same business day, and now have even more options for reducing their interest rates.
  • New ways to improve credit health: In addition to the free credit score already available to every user, MoneyLion now offers full credit reports from TransUnion® and Equifax, and access to credit counseling and repair options. Customers can also avoid credit surprises with expanded push notifications alerting them to changes to their credit.

These latest updates build on the financial progress and behavioral changes users have already made with MoneyLion. According to data collected in 2016, MoneyLion has helped its users improve their financial health in the following ways:

  • Customers have earned over $5 million in savings via MoneyLion’s rate reduction and rewards program, which enables users to earn points for demonstrating good financial behavior.
  • Loan takers who make use of the platform’s free credit monitoring tools were 28 percent less likely to default.
  • MoneyLion’s platform and products have helped customers save on average about $46 per month on overdraft fees. It’s estimated that these fees cost American consumers about $11 billion every year according to Banks.org.
  • Users enrolled in MoneyLion’s credit health tools were 6 times more likely to see an increase in credit score than a decrease.

MoneyLion is available on Android and iPhone from Google Play and the App Store.

SimpleLoanGuide Helps People Find the Best Loan Solution (Digital Journal), Rated: B

SimpleLoanGuide (simpleloanguide.com) is based in Starkville, Mississippi. They offer matching services only but are not in any way acting as a representative or agent of their partner companies. Except for Arkansas, New York, Vermont, and West Virginia, other states may avail of their services. Completing an online form on the website does not guarantee a successful match with a lender, an offered loan with satisfactory rates or terms, or granting of the loan amount requested. Partner lenders may still verify information and compare it with national databases. A user who sends their information on the website signifies their compliance to credit check and verification.

Distributed Ledger Consortium R3 Closes Record $ 107 Million Funding Round (Coindesk), Rated: B

Global banking consortium R3 has closed the largest funding round in the history of distributed ledger technology.

Revealed today at Consensus 2017, over 40 financial institutions participated in the $107m round, including top member investors SBI Group, Bank of America Merrill Lynch and HSBC. Additional major investors include ING, Banco Bradesco, Itaú Unibanco, Natixis, Barclays, UBS and Wells Fargo, plus more from around the globe.

The funds are expected to be deployed as part of plans for global technological development and, eventually, a push to bring what the firm calls Corda Enterprise to institutions around the world.

United Kingdom

RateSetter boss confirms IPO hopes and plans to increase asset-based finance (P2P Finance News), Rated: AAA

RATESETTER’S chief executive Rhydian Lewis (pictured) has confirmed the peer-to-peer platform is eyeing an initial public offering (IPO) as a pivotal step to solidify its position as an “investor brand”.

He also said the business and consumer lender would not expect or be interested in any takeover approaches from banks as it focuses on floating the business.

Meanwhile, the firm said it is looking to step up its asset-based lending, increasing the portion of loans that are secured against tangible assets or other type of securities as opposed to personal guarantees.

Zopa to revamp peer-to-peer lending model (Financial Times), Rated: AAA

Zopa, the world’s first peer-to-peer lending company, plans to revamp its offering to investors as it launches its new Isa.

The company currently offers investors access to a “safeguard fund”, a pool of cash intended to protect investors partially from loan defaults, but will jettison this as part of its new Innovative Finance Isa offering.

The new product, to be made available from June — more than a year since the government legislated for the new Isa structure — makes it possible for investors to hold their peer-to-peer loans within a tax-efficient Isa wrapper. Investors will be offered a target return of 3.9 per cent after fees, compared to the 3.7 per cent offer on Zopa’s current “classic” investment product.

UK businesses turning to alternative finance as Brexit tightens credit conditions (The Investment Observer), Rated: A

UK businesses are turning to alternative finance to seek funding for expansion, as credit conditions tighten in the face of Brexit uncertainty.

With the UK in the early stages of Brexit and now facing a General Election, new research conducted by RateSetter Business Finance found that 32 percent of SMEs that had considered raising finance said that it was now harder than six months ago.

Peer-to-peer lending services are becoming the go-to choice for many small businesses seeking finance.

Secondary Markets Bring Promise of Efficient Markets (AltFi), Rated: A

Private transactions, both private equity and debt, have been inefficient and littered with information asymmetry due to the way the transactions have been made. The emergence of public distribution of information on private transactions seeks to change that and the quickly arriving secondary markets for private transactions can bring liquidity and efficiency to typically cumbersome asset classes.

Recently Seedrs announced the establishment of a secondary market for equity crowdfunding transactions in the UK. Private companies are among the most inefficient as an asset class, given the apparent lack of information, information asymmetry and long lock in periods. The situation in the US is no different, where private companies are even more private compared to the UK with publicly reported information even on private companies.

Private equity is however not the only sector that benefits from liquidity. From private loans in peer-to-peer markets, a liquidity offer through a secondary market offers shorter cycles in the market and more trust in the underlying asset class. Many peer-to-peer or marketplace lenders globally run internal secondary markets, as yet there is no overarching liquidity destination for the sector. Both Lending Club and Prosper have offered secondary markets in the US, but only Lending Club’s remains open for business. Last October Prosper announced the closing of its secondary market, which the company said was underutilized by investors.

City slickers (P2P Finance News), Rated: A

Institutional money already dominates the US peer-to-peer lending market and now it’s making waves in the UK. Is this a natural evolution or is it eroding the true essence of P2P?

There was a time when marketing peer-to-peer lending was straightforward – the solid certainty of a mass of consumers standing on both sides of a P2P platform was enough to make its bank-disruption mission a success story.

People lending to people was a healing and redeeming message at a time when banks were still cleaning up the mess they had scattered around the globe by mixing consumers’ savings and investors’ bets.

But then the idealism of youth needs to make room for the pragmatism of maturity, and an insidious realisation started to cloud P2P’s coming of age: retail money alone is not enough to keep the ball rolling and let platforms become believable competitors of traditional lenders.

However, justifying such a shift in the UK may prove a tougher job, as the P2P sector here is still split by the burdensome dilemma of whether to welcome money from institutional investors with open arms or relegate it to a ‘diversification allowance’ pot.

The largest US P2P lender was running a 70 per cent ratio of institutional funds when its corporate governance scandal started to unfold.

According to an industry source, the mix-up of retail and institutional money could be the main hurdle standing between some of the UK’s largest platforms and Financial Conduct Authority (FCA) approval.

In the not-so-distant future, regulators could go as far as requiring a clear separation of retail and institutional investments through P2P platforms, the source says.

It’s time to stop robo-advice mislabelling (Citywire), Rated: A

It is time that we question robo-advice. Not the concept, but the name which has been used to describe any company that offers something related to investment management, online.

The label ‘robo-advice’ is misleading for a number of reasons. There are no robots who give advice, but also, most of the firms that have been described as such do not even offer advice.

‘We prefer online or digital wealth manager,’ said Ella Rabener, UK co-founder at Scalable Capital.

Meanwhile, Nutmeg CEO Martin Stead, echoing Rabener, said: ‘We prefer to call ourselves an “online investment manager”, rather than a “robo-adviser”. We find the term robo-advice to be misleading. It evokes images of robots offering face-to-face advice and making decisions for people.

Robo-advice is a term that came out of the US and unfortunately, because of the differences in how the advice market actually functions, while it makes sense to use it there, it does not in the UK.

Talking Heads: Are you warming up to P2P? (Professional Adviser), Rated: B

Peer to peer (P2P) lending is often considered risky business, but as the industry and regulation have moved on, have advisers become more willing to recommend the products to clients?

In March, Orca CEO Iain Niblock said there has been “virtually no uptake” by financial advisers since the products were brought under the regulatory investment advice rules. At the same time he estimated 2.7 million people would be investing in the booming market by 2020.

“We Infrequently Recommend P2P To Clients” – Dennis Hall, managing director, Yellowtail Financial Planning

‘We Want It To Be Protected Under The Compensation Scheme’ – Patrick Connolly, financial planner, Chase de Vere

“An Area We Have No Intention Of Getting Into” – Ricky Chan, director, IFS Wealth and Pensions

China

China Rapid Finance Reports Unaudited First Quarter 2017 Financial Results (PR Newswire), Rated: AAA

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF), a leading online consumer lending marketplace in China, today reported its unaudited financial results for the quarter ended March 31, 2017. The Company will hold a conference call at 8 a.m. Eastern Time on May 25, 2017, or 8 p.m. China Time on May 25, 2017. Dial-in details are provided at the end of this release.

First Quarter 2017 Financial Highlights

  • Total gross billings on transaction and service fees[1] in the first quarter of 2017 increased by 13.1% to US$16.8 million from US$14.8 million in the prior year period.
  • Gross billings from consumption loans increased by 336.8% to US$6.7 million in the first quarter of 2017 from US$1.5 million in the prior year period. Gross billings from consumption loans increased to 39.9% of total gross billings on transaction and service fees in the first quarter of 2017 from 10.3% in the prior year period.
  • Gross billings from lifestyle loans were US$10.1 million in the first quarter of 2017, as compared with US$13.3 million in the prior year period. Gross billings from lifestyle loans were 60.1% of total gross billings on transaction and service fees in the first quarter of 2017, as compared with 89.7% in the prior year period.

First Quarter 2017 Operating Highlights

  • Number of new borrowers added in the first quarter of 2017 was approximately 545,000. As of March 31, 2017, the Company had reached approximately 2.0 million unique borrowers on its marketplace since inception, and the total number of loans facilitated on the Company’s platform grew to approximately 15.0 million.
  • Total loan volume facilitated on the Company’s marketplace in the first quarter of 2017 increased to US$485.0 million, primarily driven by the rapid expansion of consumption loans, which accounted for US$405.0 million of the total loan volume, while lifestyle loans accounted for US$80.0 million.
  • Total number of consumption loans facilitated in the first quarter of 2017 was 4.0 million, while total number of lifestyle loans facilitated was 6,000.
  • Repeat borrower rate[2] on the Company’s marketplace accounted for 73% of the total borrowers as of March 31, 2017.

Ant gold clothing announced to the insurance industry to open the first “auto insurance points” (01Caijing), Rated: B

May 25, the ant gold clothing announced to the insurance industry to open the first “auto insurance points”, the mass “from people” information through artificial intelligence and other technologies to dig, the owner of the portrait and risk analysis, quantify the 300-700 And so on to enhance the risk identification ability of the insurance industry.

The first batch of insurance companies, including human security, PICC Property Insurance, China Life Insurance, China Union, Taiping property insurance, land insurance, sunshine property insurance and Huaan property insurance, Ansheng balance auto insurance, follow- , The ability to use car insurance to enhance the risk of identification of the company open.

China Merchants Bank announced the use of annual profit of 1% set up Fintech special fund to support in vitro incubation (01Caijing), Rated: B

Recently, China Merchants Bank, an internal innovation fund has been in place, the amount of 790 million yuan, for the internal business units and all employees apply for financial technology innovation projects.The scope of innovation includes mobile interconnection, large data, cloud computing, artificial intelligence, security control and block chain and other fields.

According to the relevant person in charge of China Merchants Bank, “pre-tax profit of 1% of the fund is entirely incremental, for in vitro incubation, and will not squeeze the original investment in science and technology investment.”

European Union

BBVA launches Open API marketplace (Finextra), Rated: AAA

BBVA is making eight of its APIs commercially available to companies, startups, and developers worldwide, enabling the integration of customer banking data with third party products and services.

The launch of BBVA API Market comes after the Spanish bank spent more than a year working with developers and businesses to fine-tune the way the Open API service would be delivered. During this time, over 1500 businesses and developers registered with the experimental portal.
Initially only Spanish customers of BBVA will be able to benefit from the market – but the bank intends to roll the programme out to its US customers later this year, before expanding it further to include Turkey, Mexico, Latin America and beyond.
The bank says companies will be able to use the APIs to create new value added services, deliver better user experiences by improving conversion and onboarding processes, manage payments, verify identities, forward notifications or analyse consumer habits and commercial behavior, among other things.
International

Americas Alternative Finance Grows to $ 35.2 Billion in 2016 (Crowdfund Insider), Rated: AAA

The Cambridge Centre for Alternative Finance (CCAF) and the Polsky Center for Entrepreneurship and Innovation and Booth School of Business Booth School of Business at the University of Chicago have revisited the alternative finance market once again with a benchmark study. The research which covers the United States, Canada, Latin America and the Caribbean (LAC) showed continued growth in alternative finance across the region as total market volume rose to $35.2 billion in 2016 – an increase of 23% versus year prior. The report noted that the prior Americas benchmarking report had been adjusted down due to changes in the research methodology. While total volume grew the pace of growth and entry of new platforms both slowed during the year.

The research found that the United States continues to be one of the world’s top markets for Fintech including online alternative finance channels and instruments. The 2016 US market volume of $34.5 billion marked a 22% year-on-year increase from 2015. The US sector was dominated by online lending both Marketplace and Balance sheet iterations.

LAC alternative finance markets grew by 209% to $342.1 million in 2016. LAC, collectively as a regional market, surpassed Canada’s national market in 2016. The growth was mainly led by high volume markets in Mexico, Chile, and Brazil.

Canada’s alternative finance market increased 62% to $334.5 million driven by both organic growth and expanded survey coverage included in the research.

Among the key findings of the report:

  • The US, Marketplace/P2P Consumer Lending continued to account for the largest share of market volume with $21 billion recorded in the US in 2016 (up 17%).
  • Balance Sheet Business Lending became the second largest model in the US in 2016 with $6 billion originated, surpassing Balance Sheet Consumer Lending which had $3 billion.
  • Equity crowdfunding in the US, not including real estate, declined marginally in 2016 versus 2015.
  • For LAC, Marketplace/P2P Business Lending remained the largest alternative finance market segment with $188.5 million registered in 2016, an increasing of 239% over 2015.
  • In Canada, Donation-based Crowdfunding remained the top alternative finance model with $105.9 million, but balance sheet business lending became a close second, rising at a rate of 282% to $103.3 million in 2016.

See the full report here.

Australia/New Zealand

RateSetter matches investors with borrowers for clean energy (The Sydney Morning Herald), Rated: AAA

Investors will be able to lend to residents to install clean energy in their homes, such as solar panels, after a tie-up between peer-to-peer lender RateSetter and the government’s Clean Energy Finance Corporation.

He expects rates for investors and borrowers in the green loan marketplace to be around 7 per cent a year for loan terms of between three and seven years.

Loans facilitated through RateSetter will fund individual and business loans for a wide range of “green” purposes, including the purchase of solar panels and battery systems.

Government invests $ 20m in P2P RateSetter’s green lending initiative (Finder), Rated: AAA

Australian peer-to-peer (P2P) lender RateSetter has today announced the launch of a Green Loan lending market which will allow investors to fund the purchase and/or installation of clean energy products.

The Clean Energy Finance Corporation (CEFC), an Australian government body, has invested $20 million in the market to help kickstart the project.

Green Loan lending market (RateSetter), Rated: A

Lending market summary

  • Investment amount: From $10
  • Indicative term: 7 years, though loans may be 3 – 7 years in term
  • Purpose: finance for purchase of Approved Green Products
  • Loan repayment profile: monthly repayments of principal and interest

Invest through the Green Loan lending market to finance the purchase of:

  • Solar panels and batteries
  • Solar water heaters
  • Energy efficient lighting
  • Energy efficient air conditioning
  • Low emission cars and trucks
  • Air source heat pumps
  • Power factor correction
  • Variable speed and frequency drives

Five tech trends changing financial advice (Bluenotes), Rated: B

While many financial advisers have already embraced it, the use of the “cloud” will continue to expand as advisers seek to have more of their business operations and applications hosted there.

Automation has already begun to reshape financial services. Especially in the areas of regulation, financial risk management and compliance, automation is going to have a big impact. Imagine an automated program that could identify and explain alterations in risk exposure and calculate business-related and data-related causes for such changes.

With advisers holding sensitive data as well as increasing regulation around the security of customer data and communicating breaches, maintaining data security will remain a growing priority and focus.

Roboadvisers have had a contentious start in Australia, though they’re unlikely to fade away as technology advances. In fact, according to BI Intelligence, it is predicted by 2020 roboadvisers will manage around 10 per cent of the total global assets under management, equating to around $A8 trillion.

Today consumers have access to almost the same information as advisers, and in real-time from almost anywhere.

No longer are investors bound to advisers for financial information as they once were and do-it-yourself investing is becoming more popular.

This means advisers have to continue to add value by providing expert analysis and advice.

Asia

Indonesia: Govt extends P2P lending license application deadline (e27), Rated: AAA

OJK extends P2P lending license application deadline

The Indonesian Financial Services Authority (OJK) announced that it has extended the deadline for P2P lending startups to apply for a license, from the previous deadline of June 29.

Secured P2P Lender Silver Bullion Reports Topping S$ 30 Million in Loans (Crowdfund Insider), Rated: A

Silver Bullion reports it has now facilitated S$30 million in peer to peer loans secured by precious metals like gold and silver. The Singapore-based platform expects to pay out S$1 million in interest as the loans mature.

Lenders are receiving an average return of 3.83% p.a for SGD loans and 4.1% p.a for USD loans. Tenures of loans range from 1 month to 24 months. Silver Bullion reports there have been zero defaults to date.

Japan Lender Mizuho to Launch Fintech Venture (US News), Rated: A

Japan’s Mizuho Financial Group will start a venture next month to create new businesses using “fintech,” an executive said, joining a global race in financial technology that threatens to unsettle traditional players.

Japan’s second-largest lender by assets said there were already 20 projects in the pipeline for the venture, utilizing blockchain technology and artificial intelligence programs in areas such as farming and travel.

For that reason, he said the bank would limit its stake in the yet-to-be named venture to less than 15 percent, though Yamada would be its president and the bank would send staff.

Yamada did not elaborate on the projects in the pipeline but said the venture planned to conduct an export trade transaction next month using blockchain technology, allowing all parties to exchange necessary documents online instead of waiting for hard copies.

Authors:

George Popescu
Allen Taylor

Tuesday May 16 2017, Daily News Digest

corporate bond credit spreads

News Comments Today’s main news: KBRA rates Prosper’s Series 2017-1. SoFi’s bid to become bank pulls FDIC into fintech fray. LendInvest joins Home Builders Federation. Monzo puts API dev on back burner. PBOC sets up new China fintech committee. N26 launches savings accounts with Raisin. Today’s main analysis: Asset volatility diminishing and approaching new lows. Today’s thought-provoking articles: The future […]

corporate bond credit spreads

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Canada

South America

News Summary

United States

KBRA Rates Prosper Marketplace Issuance Trust, Series 2017-1 (KBRA Email), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Prosper Marketplace Lending Issuance Trust 2017-1 (“PMIT 2017-1”). This is a $450.5 million consumer loan ABS transaction that is expected to close on May 24, 2017.

This transaction represents the sixth securitization collateralized by unsecured consumer loans originated through the online marketplace lending platform operated by Prosper Funding LLC (“Prosper” or the “Company”).

Get the full report.

Volatility in the asset markets has been steadily declining and is nearing new lows. One factor helping to suppress volatility is the lack of many surprises in the first-quarter earnings season, which passed with results generally within the range of expectations. From an economic point of view, while GDP was weak in the first quarter, it is expected to rebound in the second quarter.

Following the French presidential election and the general lessening of international tensions, corporate credit spreads have tightened and asset volatility has declined toward its lowest levels.

Source: Morningstar

The average corporate credit spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) tightened 3 basis points last week to +117, a new low for the year. The last time the index was at this level was September 2014. From a longer-term perspective, the average spread of the Morningstar Corporate Bond Index has been lower less than one fourth of the time since the end of 1999. In the high-yield market, the Bank of America Merrill Lynch High Yield Master Index tightened 5 basis points to +377. The tightening was led by the energy sector, which declined 10 basis points as oil prices continued to rise. Since the end of 1999, the average spread of the high-yield index has been tighter only 17% of the time.

Source: Morningstar

The Future of Lending is Now with Latest TransUnion Prama Offerings (NASDAQ), Rated: AAA

As TransUnion (NYSE:TRU) data from the end of March 2017 suggest, the consumer credit market is as complex as ever. Mortgage delinquency rates: continuing to drop. Auto loan delinquency rates: rising. Personal loan market: growing, but slowing. Access to credit cards: highest since 2005.

Maneuvering through this ever-changing credit landscape is difficult for lenders of all sizes, ranging from credit unions to regional banks to the largest financial institutions. To help navigate through this complex maze, TransUnion today introduced the newest modules in its PramaSMenvironmentBenchmarking and Data Extract.

Prama Benchmarking provides advanced data analytics and visualization capabilities specific to the auto loan, credit card, mortgage and personal loan markets—to deliver relevant insights for each line of business. Lenders will now be able to measure their performance across numerous metrics and filters, and compare it to the industry and their peers.  This information can be used to improve how financial services companies segment, target, acquire, cross-sell and retain customers. The Data Extract module provides self-service access to query against 100 percent of TransUnion depersonalized archive credit data, allowing customers to receive faster delivery of data to support their own analytics—in their own environment with their preferred tools.

Measuring Business Performance Against Peers

Benchmarking provides performance data on metrics such as delinquencies, charge-offs, bankruptcy, average balance and utilization. It offers views of market share in terms of number of accounts, total limit or total balance. The module also lets lenders analyze depersonalized data using dimensions such as APR, origination vintage, credit tier, state or MSA region, account status and consumer credit age.

For instance, a regional bank in Western Pennsylvania interested in growing its credit card portfolio is now able to observe five years of its own data versus other similar banks in their region.

Extracting Data Faster – From a Month or More to Hours

A traditional archive request process – from customer order to product delivery – typically takes 30 days or more. This includes time spent defining and iterating on the customer’s data requirements. “With Data Extract, the process will take less than 24 hours – an enormous time savings,” said Gomez.

With Data Extract, customers gain the following advantages:

  • Self-service – On-demand, point-and-click access to query TU depersonalized archive credit data.
  • Speed – Secure overnight delivery of the dataset.
  • Confidence – Quick access to depersonalized data to support a customer’s own analytics, so they can make faster decisions with more confidence.
  • Control – Create queries according to their data requirements, avoiding the back and forth that is often typical of an archive request process.
  • Flexibility – Quickly obtain depersonalized data for use within their own analytics environment and processes.

SoFi’s bid to become an industrial bank pulls FDIC into fintech fray (American Banker), Rated: AAA

The Federal Deposit Insurance Corp. has so far managed to stay out of the growing battle over how the U.S. fintech sector should be regulated, but that appears likely to end as one of the nation’s largest online lenders announced plans to apply for a specialty banking charter soon.

Social Finance Inc., the San Francisco-based consumer lender known as SoFi, hopes to secure an industrial bank charter. That state-issued charter used to be a popular way to organize a bank, and was commonly used by companies that are not primarily in the financial services industry.

SoFi COO: We have measures in place, extra authentication for our consumers (MSN), Rated: AAA

Joanne Bradford, SoFi COO, weighs in on how companies are protecting themselves on the heels of a worldwide cyberattack, mortgages, student loans and refinancing.

Watch the video segment here.

SoFi: We Will be the First Unbank – Bank (Crowdfund Insider), Rated: AAA

SoFi Chief Operating Officer Joanne Bradford was back visiting with CNBC today. Bradford addressed several topics including the recent cyber attack that has public and private entities running for cover around the world. SoFi has not been impacted by the digital attack and Bradford was quite confident that SoFi is better prepared for any malicious attempts to infiltrate SoFi due to their single point of access (unlike traditional banks).

Asked if the Fintech industry is more, or less, vulnerable than traditional types, Bradford explained;

“We are less vulnerable. You only come to SoFi at SoFi.com. We don’t have branches which helps make it more efficient. Less points of vulnerability…but for the consumer it is more about speed and ease of use. Getting things done quickly on your mobile device.”

How to Predict If a Borrower Will Pay You Back (NY Mag), Rated: AAA

Recently, three economists—Oded Netzer and Alain Lemaire, both of Columbia, and Michal Herzenstein of the University of Delaware—looked for ways to predict the likelihood of whether a borrower would pay back a loan. The scholars used data from Prosper, a peer-to-peer lending site. Potential borrowers write a brief description of why they need a loan and why they are likely to make good on it, and potential lenders decide whether to provide them the money. Overall, about 13 percent of borrowers defaulted on their loan.

It turns out the language that potential borrowers use is a strong predictor of their probability of paying back. And it is an important indicator even if you control for other relevant information lenders were able to obtain about those potential borrowers, including credit ratings and income.

Listed below are ten phrases the researchers found that are commonly used when applying for a loan. Five of them positively correlate with paying back the loan. Five of them negatively correlate with paying back the loan. In other words, five tend to be used by people you can trust, five by people you cannot.

Here are the phrases used in loan applications by people most likely to pay them back: debt-free, lower interest rate, after-tax, minimum payment, graduate.

And here are the phrases used by those least likely to pay back their loans: God, promise, will pay, thank you, hospital.

Now, let’s consider language that suggests someone is unlikely to pay their loans. Generally, if someone tells you he will pay you back, he will not pay you back. The more assertive the promise, the more likely he will break it. If someone writes “I promise I will pay back, so help me God,” he is among the least likely to pay you back. Appealing to your mercy—explaining that he needs the money because he has a relative in the “hospital”—also means he is unlikely to pay you back. In fact, mentioning any family member—a husband, wife, son, daughter, mother or father—is a sign someone will not be paying back. Another word that indicates default is “explain,” meaning if people are trying to explain why they are going to be able to pay back a loan, they likely won’t.

Misys rolls AI strategy into trade monitoring software (Misys), Rated: A

Misys has stepped up to the artificial intelligence (AI) plate, today unveiling Misys FusionCapital Detect. The component helps financial institutions spot booking errors, anomalies and unusual activity, accelerating trade validations and reducing exceptions with machine learning.

FusionCapital Detect behaves as a smart personal assistant for validation teams, red flagging probable mistakes that are otherwise time consuming to identify. Users can catch errors that existing tools on the market let through, reducing operational risk and preventing manual mistakes that lead to decisions being made on the wrong profit and loss information and incorrect end-of-day reports.

Being able to validate transactions at T+0 has become crucial in today’s pressurised regulatory environment, including under:

  • The European Market Infrastructure Regulation (EMIR): which makes it necessary to identify errors as soon as possible in order to confirm trades within 24 to 48 hours.
  • The Fundamental Review of the Trading Book (FRTB): which requires daily risk reports – unidentified trade errors will invalidate these reports, breaching compliance.

OpenInvest Secures $ 3.25 Million in Seed Funding Led by Andreessen Horowitz (PR Newswire), Rated: A

OpenInvest (www.openinvest.co), a social impact investing platform for retail investors, announced today that it raised $3.25 million in seed funding. The round was led by Andreessen Horowitz with participation from Abstract Ventures, Wireframe Ventures and SV2. OpenInvest is an accessible online financial advisor that empowers investors to fully align their investments with their values, and then take action to more meaningfully engage companies and drive social change.

According to a recent Morgan Stanley survey, 84 percent of millennials want the companies they invest in to align with their values. OpenInvest meets this opportunity with an innovative platform that allows consumers to invest with their hearts, without having to compromise financial returns. The company’s investment screens include climate change, fossil fuels, weapons manufacturers, gender equality, LGBTQ workplace treatment, deforestation, tobacco, companies funding the Dakota Access Pipeline, and companies supporting President Trump, which can be freely mixed and matched to construct a personalized portfolio. Investors can further customize by including or excluding individual companies, while their portfolio auto-rebalances to maintain diversification and broad tracking of the market.

Lemonade sweetens U.S. insurance rollout plans with California license (Reuters), Rated: A

Lemonade Inc, a tech-driven insurance startup that promises renters and homeowners insurance in as little as 90 seconds and payment of claims in 3 minutes, has won approval from California regulators to sell policies in the state, the company said.

The insurer’s foray into California, the most populous U.S. state, comes amid the company’s push to become licensed nationwide, less than a year after launching in New York. Last month, Lemonade, which sells policies directly to consumers through its website and smartphone app, expanded into Illinois.

Green Dot Hits, OnDeck Misses, And First Data Looks Ahead (PYMNTS), Rated: A

First Data’s New Friends

First Data CEO, Frank Bisignano, noted in the wake of First Data’s earnings release this week that the company remains on track to meet its guidance for 2017 and that he is “confident that the current weakness is transitory.”

First Data will be instrumental in helping drive Alipay expansion into the U.S. market, focusing on firms that use First Data’s Clover platform.

By the numbers, First Data reported adjusted earnings per share of $0.28 and revenue of $1.7 billion.

Credit and retail processing in North America were up 1 percent, and the business, globally, gained 2 percent. Accounts on file, again for North America, grew by 7 percent.

The deal will give Alipay scale roughly equivalent to Apple Pay’s in terms of presence, at around 4.5 million U.S. sites.

OnDeck’s Falling Figures

Reflecting the changes, the company lowered its full-year net revenue outlook to a range of $342 million to $352 million. It previously had forecast $377 million to $387 million.

Annual costs are also slated for a big cut — by around $25 million. Those cuts will be achieved by lowering headcount. About 27 percent of the staff will be cut back from levels at the end of 2016.

By the numbers, losses clocked in at $0.11 per share, slightly more than the $0.10 loss analysts were looking for. Gross revenue rose 48.4 percent to $92.89 million on higher net interest income, beating analysts’ estimates of $90.38 million.

Green Dot Beats the Streets (In a Big Way)

The company posted adjusted earnings per share of $1, which was $0.16 better than analysts were forecasting. Revenue clocked in at $253 million, was up 11 percent year over year and was higher than the roughly $234 million that had been forecasted.

Guidance for the full year was also ticking up — just about in line with the magnitude of the beat, with revenue to range from $830 million to $845 million (both ends of the range were taken up by $15 million). Earnings per share are slated to come in between $1.89 and $1.94, which compares with the consensus of $1.92 as of Wednesday morning.

Green Dot is making pre-paid cards look easy, OnDeck is demonstrating how marketplace lending (or marketplace anything) is really, really hard — and First Data is greatly looking forward to next quarter, when it can report smoother sailing.

US Government Awards $ 2.25 Million to Blockchain Research Projects (Coindesk), Rated: A

The US government has awarded research contracts to three startups working with blockchain worth a total of about $2.25m.

The Department of Homeland Security (DHS) quietly revealed the grants last week as part of its Small Business Innovation Research initiative.

Who got funded: DHS said that it parceled out a total of $9.7m between 12 companies, three of which are working with the tech. According to a release, each firm got about $750,000 to fund their research.

Here are the companies that got funds for their blockchain-related initiatives:

  • BlockCypher: The startup has been awarded a grant for its “blockchain platform for multiple blockchains, applications and analytics. BlockCypher was the recipient of a $600,000 DHS grant last summer.
  • Digital Bazaar: According to DHS, the company is working on a “verifiable claims project” that utilizes “fit-for-purpose distributed ledgers”. Like BlockCypher, Digital Bazaar was given a DHS grant in 2016.
  • Evernym: This Utah-based business will use the funds to support its research into “decentralized key management using blockchain”, according to DHS.

Lendio is Now Offering Small Business Loans Within Minutes (Military-Technologies), Rated: A

The team at Lendio is pleased to announce that they are now offering small business loans within minutes.

In addition to providing small business owners loans as quickly as possible, Lendio also features a business loan marketplace that lets people find the financing tools they need to help run their business.

Oportun, Inc. (SEC), Rated: A

Opportun has filed for ABS with the SEC.

My Experience Refinancing Student Loans from Pharmacy School (Pharmacy Times), Rated: A

In 2015, I graduated with over $150,000 in student loans from pharmacy school. At the time, it felt like an insurmountable amount of money to pay back, especially considering I took a substantial pay cut to complete a 1-year residency after graduating. The monthly payments were extremely high and to make matters more confusing, I had multiple loan providers between my private and federal loans, with some in my name and some in my parent’s name. The interest rates on these loans varied from 6.5% to 8%.

After finishing my residency, I knew I had to take a close look at my financial situation and make a plan to aggressively start paying off these loans. After extensive research, I decided to refinance my student loans through Social Finance, Inc (SoFI), an institution that offers a number of different loan types through a “nontraditional” approach.

Refinancing through SoFI will save me over $15,000 in cumulative payments over a 10-year term by lowering my interest rate to 5%.

If you’re refinancing with a longer repayment period (10 to 20 years) and prefer stability, a fixed rate may be the better option. Personally, I chose a variable rate loan because the interest rate was significantly lower than the fixed rate loan, and I plan to pay off my student loans long before the end of my 10-year term.

RealtyShares Names Industry Vet to BOD (Commercial Property Executive), Rated: A

Edward Forst, the former president & CEO of Cushman & Wakefield, has become the newest member of RealtyShares’ board of directors.

With Cushman & Wakefield, Forst oversaw 16,000 real estate professionals in 60 countries.

How Can I Pay for Fertility Treatment? (LendingClub), Rated: B

To begin, you’ll want to determine how you’re going to pay for fertility treatment and related care such as medications, genetic testing and egg freezing services.

The good news is that fertility financing is available so that cost does not have to be a barrier to treatment and your dream of becoming a parent.

The flexible payment plans include:

  • One loan for comprehensive fertility care for up to three services: IVF treatment, medication, genetic testing or egg freezing
  • No upfront payments
  • Fixed rates starting as low as 3.99% APR*
  • Manageable monthly payments for a range of budgets
  • Payment sent directly to your providers in one to three business days, so you can start treatment without delay or pressure to distribute funds correctly

How to Invest in Debt (Michael Pellegrino Email), Rated: B

Get a free sample chapter. Password: debt-investor.

United Kingdom

LendInvest joins the Home Builders Federation (Property Reporter), Rated: AAA

Specialist mortgage lender, LendInvest, has announced that it has joined the Home Builders Federation, in a move aimed at supporting property developers to build more homes of every type.

The Home Builders Federation is the representative body of the private sector home building industry in England and Wales and its members are responsible for 80% of housing output each year. The organisation currently supports the LendInvest Property Development Academy, a non-profit, two-day course delivered in five key cities across the UK and intended to create a new generation of property entrepreneurs.

Monzo puts API development on the back burner (Finextra), Rated: AAA

Digital bank Monzo is putting its API developer plans on ice as it faces up to the challenge of launching current accounts for its 190,000 customers.

The news will be a blow to the 2000 people on the bank’s developer Slack channel who have invested time in building integration to the Monzo API.
In the two years since it launched its first hackathon encouraging developers to build products using the API, the bank now counts some 100 personal projects integrating with the toolkit. Despite these efforts, Monzo will not allow developers to publish their current applications.

Peer-to-peer lending rises as Moneywise users seek higher returns (Moneywise), Rated: A

Nearly half (48%) of Moneywise.co.uk readers use peer-to-peer (P2P) lending in a bid to earn higher returns on savings, our latest poll results reveal.

This is an increase from 39% of Moneywise users who said they used P2P lending in August 2016, and 33% who said the same when we asked in February 2016.

The number of Moneywise users aware of P2P has also risen. Just 4% said they’d never heard of P2P lending in our most recent poll, compared to 6% who hadn’t heard of it last August, and 9% who hadn’t heard of it last February.

Seedrs: Andy Murray Invests in Three UK Entrepreneurs, Den, Morpher & Landbay (Crowdfund Insider), Rated: A

Tennis star and Seedrs advisor Andy Murray has invested in three early-stage UK businesses. The Seedrs listed companies include Den, Morpher and Landbay. Murray’s Seedrs originated portfolio now stands at over 20 companies, according to the platform.

Landbay is back on Seedrs once again. The property rental crowdfunding platform has crowdfunded successfully multiple times on Seedrs.  Landbay was one of the very first peer-to-peer platforms to be granted full authorisation by the FCA at the end of 2016. Landbay has raised £2.3 million overfunding to 157% in the round.

Robo Advice – 5 Key Factors to Success (EValue), Rated: A

1 – Engaging the consumer

Currently, a real need exists to increase consumers’ engagement with their financial life and enable easy access to robust financial advice for all. However, for many consumers, the breadth of choice available, when it comes to making financial planning decisions, only serves to create confusion and adds to the complexity often resulting in no decisions being made at all.

2 – Realistic expectation of range and level of returns

This means that not only should the overall forecasts be realistic but each individual scenario, which makes up the forecast, should also be sensible and capable of occurring. Suggesting a potential outcome which, in reality, is impossible is obviously not particularly helpful to consumers when it comes to making investment decisions.

3 – Risk Suitability Assessment

In the UK, it is clear that robo advice needs to meet the same suitability standard as traditional advice. Therefore, any risk suitability tool must be rigorous and robust in order to ensure an accurate measurement of a consumer’s tolerance to risk and capacity for loss.

4 – Personal Advice Given

As everybody’s situation is different, in order for a robo advice proposition to be successful it must be able to provide appropriate personal advice which not only reflects a consumer’s individuality and specific objectives but is also not detrimental to their other financial needs.

5 – Fully automated with appropriate compliance reviews

By automating the advice process so that it can be delivered remotely and driven by the consumer, costs will be cut sharply as a result. At the same time, consistent quality and thorough documentation generated by the process will provide a full and reliable digital paper trail to ensure regulatory compliance.

Robo Advice market eyes pensions, insurance and mortgages (AltFi), Rated: B

The automated financial advice market is set for a decade of strong growth, according to a new report by consultancy Deloitte, which suggests the underlying disruptive technology will spread into more niches than its current wealth management segment.

To date, automated advice has been most prevalent in wealth management – called robo advice – but this is just the tip of the iceberg. In its latest research into the space, entitled The next frontier: The future of automated financial advice in the UK, Deloitte says the UK offers a rich opportunity for automated advice with up to 15 million consumers willing to pay for it.

China

PBOC sets up new committee to oversee China’s burgeoning fintech industry (SCMP), Rated: AAA

China’s central bank said on Monday it has set up a committee to oversee financial technology, reflecting an attempt to bring regulation up to speed with a fast-growing industry that could bring cross-sector financial risks.

The People’s Bank of China said on its website it will gauge the impact of fintech on monetary policy, financial markets, financial stability, payment and clearing.

It will also beef up the use of new technology, such as big data, artificial intelligence, and cloud computing to enhance its capabilities in protecting against and resolving cross-market financial risks, it said in the statement.

P2P Industry News (Xing Ping She Email), Rated: A

People’s Bank of China is going to set up FinTech Committee
Recently, People’s Bank of China (PBC) announced to set up FinTech Committee, aiming at reinforcing the planning and coordination of fintech. PBC is going to do deep research on the influence of fintech on monetary policies, financial market, finance stability, payment and settlement etc. And it also encourages finance sector to use high-tech, such as big data, AI and cloud computing, as regulatory method to improve the ability for identifying, preventing and solving financial risks.

BNP Paribas Group Investigates for Financial Innovation in Asia
On May 5th, executives from security services department of BNP Paribas visited JadeValue, China’s first fintech incubator, to investigate for financial innovation in Asian market. Xeenho Wallet, as one of the incubated enterprise of JadeValue, and a typical example of Chinese modern fintech company, communicated with the European professional financial survey team, and achieved initial intent of cooperation on exchange of P2P industry news.
Xeenho is one of the first P2P funds platforms in China. Based on big data and robo-advice, Xeenho’s risk-control management keeps the Zero Bad Debt in the industry.

European Union

N26 launches savings accounts with Raisin (TechCrunch), Rated: AAA

N26 is launching yet another feature to build a modern retail bank for European customers. This time, the company is partnering with Raisin, a German startup also known as WeltSparen. In just a few taps, you’ll be able to open a savings account for money you don’t need.

All your deposits are guaranteed up to €100,000 per bank by the National Deposit Guarantee Scheme as part of the European Union.

N26 is only launching this feature in Germany for now, but Raisin accepts customers from other countries. So you can expect to see this feature in other countries later this year. Similarly, if you don’t want to have your money stuck on a savings account, N26 will launch overnight savings later this year.

Raisin has built an API in order to facilitate the N26 integration.

Rabobank enters digital identity market (Finextra), Rated: A

Rabobank has partnered with Norway’s Signicat to provide a digital identity hub for businesses looking to onboard new customers and sign legally-binding contracts online.

The joint Digital Identity Service Provider (DISP) offers a range of online login, identity, signature and data archiving services under the banner of Rabo eBusiness. Rabobank says it will initially market the programme to energy, telecom and insurance companies, healthcare institutions and financial services providers.
International

Top 10 FinTech Companies Disrupting Banking (Disruptor Daily), Rated: A

Banking and payment financial technology have grown exponentially in just the past few years thanks to tech like blockchain, artificial intelligence, and big data. These crossovers are making for faster, safer processes and lower prices for individuals and businesses alike.

Wyre boasts transfer speeds under 6 hours internationally, significantly faster than the traditional SWIFT or bank wire transfer networks.

Xendit is a payment processing infrastructure provider that covers the southeastern Asia region. Among the services offered through Xendit are bank transfers, card processing, and escrow services.

Xero offers accounting professionals and small-to-medium businesses (SMBs) with more than 600,000 customers a cloud-based accounting software.

N26 allows UK customers to open accounts in minutes, perform withdrawals at any ATM, and pay with the N26 MasterCard.

Beyond making in-person and mobile payments more secure, Circle is also working to reduce the cost of in-person and international payments as well as the time intensity of global payments.

Simple unifies accounts under one card and splits the net interest margin from lending across all of the partner banks in its network to help simplify the customer experience.

Earnest is using data science, design, and software automation to allow their clients to manage their existing finances and debts while opening up new opportunities for well-behaved clients to see better interest rates and more options.

Featurespace has developed and deployed artificial intelligence and machine learning solutions for financial service providers in more than 180 countries.

InstaMed has changed the healthcare payments industry through the use of their easily-integrated, private cloud computing network.

India

i2iFunding plans to increase loans disbursal to Rs 200 Cr in 2 yrs (India Times), Rated: AAA

Peer to Peer (P2P) lending platform i2iFunding said today that it planned to increase the loans disbursed on its platform to Rs 200 crore over the next two years. It currently disburses loans worth Rs 60-70 lakhs a month.

Having strengthened its risk processes, the company is now keen to expand operations, he said. The company also expects business to pick up the RBI issues regulatory guidelines for the sector.

Five Points to Keep in Mind When Investing in P2P Lending (BW Disrupt), Rated: A

But while there has been a major change in the appetite for risk among Indians, P2P lending requires an investor to be thoroughly aware and educated on how to make informed choices when opting for P2P lending. P2P lending is globally growing at a CAGR of 48%. In India, the industry is expected to touch $5 billion by 2020-2021. It’s here to stay and the faster a smart investor understands, learns, and makes the most of it, higher the returns.

  1. Build a Diversified Portfolio
  2. Small Ticket-size, More Loans – One of the biggest advantage of P2P lending is that the average ticket size can be as low as Rs. 1000/-. So invest small amounts in large numbers. And by that we don’t mean putting Rs. 2,50,000/- across 10 loans of Rs. 25,000/- each but to aim for 50 loans of Rs. 5,000/- each.
  3. Compounding Benefit – P2P lending is the only, unique asset class in which investors begin to receive returns – principal as well as interest – through EMI from the very next month of making the investment.
  4. Realistic Expectations, Long-term horizon – Before investing in P2P lending, it is advisable to choose a lending platform after considering the track record of the leadership and their risk management team.
  5. Informed Choices – Before investing in P2P lending, it is advisable to choose a lending platform after considering the track record of the leadership and their risk management team.
Asia

Fintech start-up 4xLabs raises US$ 1.5m in new funding (Straits Times), Rated: AAA

Singapore fintech start-up 4xLabs has raised US$1.5 million (S$2.1 million) in its latest funding round.

The round saw follow-up investment from Dymon Asia Ventures, as well as participation from new investors such as Malaysia-based OSK Ventures International.

4xLabs aims to increase transparency in the market for travellers and money changers with its cloud-based services.

The firm, set up in 2011, offers two platforms: Get4x, a currency exchange-rate aggregator platform for travellers, and Biz4x, a platform that helps money changers better manage their businesses.

Canada

Toronto Financial Services Alliance Says Strengthening Fintech Ecosystem Must Be a Priority (Crowdfund Insider), Rated: AAA

The Toronto Financial Services Alliance (TFSA) says Canada’s financial service relevance is at risk unless the Fintech ecosystem is improved.

TFSA has published a report specifically on this subject. Entitled, “Seizing the Opportunity: Building the Toronto Region into a Global Fintech Leader,” the report states that the Toronto/Kitchener-Waterloo corridor today benefits from a strong core of financial institutions, top-tier research facilities, a strong talent base and relatively low business operating costs compared with other global Fintech ecosystems.

The report sets out six key areas to target:

  • Collaboration: Closer and more frequent engagement among Fintech startups, well-established financial institutions and the venture capital community.
  • Capital: Improved access to sophisticated seed-level and local later-stage capital for Canadian Fintechs.
  • Regulation: Reduced regulatory burden on emerging Fintech companies, and modernized regulatory frameworks to attract foreign investment and further reflect changing business models, technologies and priorities.
  • Research: Encouraged commercialization of research for financial services to further establish the region as a global leader.
  • Talent: Creation of opportunities and conditions that will attract top talent with experience growing and scaling fintech companies.
  • Awareness: Raising of the region’s profile on the global stage as a Fintech hub.

Power Financial invests C$ 50 million in ‘robo-adviser’ Wealthsimple (Reuters), Rated: A

Power Financial Corp has invested C$50 million ($37 million) in “robo-adviser” Wealthsimple, bringing its total investment in the 2-year-old financial technology company to C$100 million, they said on Thursday.

Toronto-based Wealthsimple provides automated investment advice to consumers and helps manage personalized portfolios based on responses to an online questionnaire about investment goals. It entered the U.S. market at the end of January.

The company said it now has more than 30,000 clients in Canada and the United States, up from 20,000 in late January, investing more than C$1 billion in exchange-traded funds.

South America

Goldman Sachs Sees Big Potential for Fintech in Brazil (NYT), Rated: AAA

Brazil is experiencing a wave of growth in financial technology that will most likely eat into the market share of the country’s huge and long untouchable banks, a new report from Goldman Sachs says.

Entitled “Fintech Brazil’s Moment,” the 45-page research report estimates that the more than 200 financial technology companies in Brazil should generate a potential revenue pool of about $24 billion over the next 10 years. Payments, lending and personal finance are three promising segments, as is insurance, the report found.

The Goldman Sachs economists cited what they called “an oligopolistic market structure” in Brazil where the top five banks, excluding development banks, hold 84 percent of total loans. In retail branch banking, the top five banks have 90 percent of branches. That is up from 71 percent in 2007, the report said, observing that “the market has become more concentrated since the financial crisis” of 2008.

By contrast, in the United States, the top five banks hold just about 20 percent of all branches. In India, that figure is slightly over 30 percent, and in Turkey it is just under 30 percent.

Authors:

George Popescu
Allen Taylor

Innovation in the established bank-tech companies

bank marketplace lenders

Since the financial meltdown of 2008, regulators have cracked a whip on bank lending. So far, however, there are no such regulations on crowdlending platforms. To counter this, banks (Goldman Sachs is the prime example) have set up marketplace lending (MPL) platforms in silos, which are completely separate entities. As a result of the aforementioned financial […]

bank marketplace lenders

Since the financial meltdown of 2008, regulators have cracked a whip on bank lending. So far, however, there are no such regulations on crowdlending platforms. To counter this, banks (Goldman Sachs is the prime example) have set up marketplace lending (MPL) platforms in silos, which are completely separate entities.

As a result of the aforementioned financial crisis, banks vacated many business segments due to regulatory issues and a shortage of capital. Marketplace lenders have taken advantage of this and captured many of these areas. The financial software publisher Misys realized that banks need to recapture this space for long term feasibility and has launched a white label crowdlending platform for the banking sector.

The initiative was born out of Fusion Reactor, its own innovative engine where new ideas are brainstormed. The idea for the SaaS solution came from French engineer Jean-Cédric Jollant. From inception to launch took less than two years.

Company History

Misys was founded in 1979. Over the years, they has managed to carve its niche in the financial software industry with roots deeply engraved in lending and have developed products like Loan IQ, which has been present in the financial industry for over 25 years and used by most banks. Around 43% of all syndicated loans all across the globe are processed through Loan IQ.

Misys started as a computer systems supplier to insurance companies but has emerged as a financial services software provider through multiple mergers and acquisitions. Recently merged with payments technology firm D+H, Misys has a presence in 125 countries and has over 2,000 customers. Their team of experts are able to address industry requirements at both a global and local level.

Location and Manpower

Misys is headquartered in London, UK and has offices in the major financial hubs of the world (New York, Paris, the Philippines, and Plano, Texas). Its biggest technology office is in Bangalore, India. The company has 5,000 employees of which 2,000 are developers. Around 500 are based out of Paris Another 150 are in Plano. The rest are evenly spread in all other centers.

FusionBanking CrowdLending

A cloud-based lending platform available as an enterprise solution, Misys plans to run alongside its other array of products as an SaaS. Banks have been losing customers to marketplace lenders (MPLs) because they do not offer a large enough variety of products to compete. Banks either offer prime loans that range from 3%-6% or credit cards that range from 15%, hence leaving a huge gap between 6%-15% interest rate for MPLs. Considering there is a huge population in the near prime category, it is necessary to address this unattended potential customer base.

The Idea Behind FusionBanking CrowdLending

The majority of MPL lenders are not actual lenders but more like intermediaries. MPLs act as a bridge between existing bank customers, bank investors, and existing bank services. In actuality, all three sources are originating from the banks.

Even though MPL lenders don’t have lending capabilities, servicing, or recovery services, they still are managing to put a hole in the bank market. More importantly, banks are on the verge of losing relationships with customers and the revenue generated from those relationships.

Misys came up with FusionBanking CrowdLending to stop the hemorrhaging of clients and help banks service the digital-first millennial generation. Also, the company has combined LoanIQ and CME, an origination software, into a white label platform.

Progression

Since banks are the cheapest source of lending, customers will obviously go to them first. But banks have a high rate of rejection as per their lending guidelines, and those applications are wasted or go to online lenders. For example, Standard Chartered in Asia declines 80,000 SMBs per year on average. Therefore, rather than giving over the relationship to MPL lenders, using Misys’ solution, banks can put this business back on their own platforms.

Revenue Model

Misys charges 2% of whatever they process. Apart from that, the company does not charge hidden,  upfront, or license fees. They charge a one-time customization fee, and the 2% fee is lowered after they cover costs. The main motive is to make the platform profitable for banks as soon as possible and help banks retain 99% of the revenue from their relationships. The company plans to target smaller banks first to have a proof of concept for larger banks.

Conclusion

Until recently, traditional banks believed they had two options, either throw in the towel or enter into partnerships with MPLs. Goldman’s Marcus has changed the narrative. Now, banks believe they have the tools to compete. But, instead of building on their own or buying a platform (which is not sustainable for smaller banks), partnering with Misys makes sense.

Misys has opened an avenue for banks to monetize their relationships digitally Creating a bank-owned lending platform allows for all participants to remain in the bank’s ecosystem.

Author:

Written by Heena Dhir.

Tuesday March 14 2017, Daily News Digest

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News Comments Today’s main news: SoFi’s loan losses pile up as wealthy borrowers default. Charles Schwab launches hybrid human-robo financial advice. GDR adds Avant as verification network partner. Vista to acquire D+H to merge with Misys.  Today’s main analysis: Household debt edges up as auto, credit card, and student debt climb. The regulation of MPL. Today’s thought-provoking articles: Everything […]

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News Comments

United States

United Kingdom

European Union

Canada

Asia

Middle East

News Summary

United States

SoFi’s Loan Losses Pile Up as Even Wealthy Borrowers Default (Bloomberg), Rated: AAA

Social Finance Inc.’s online borrowers are defaulting at higher rates than underwriters for one of its bond deals had expected, the latest sign that an industry that hoped to upend banking is now getting tripped up by bad loans.

Losses on the company’s personal loans were high enough to breach key levels known as “triggers” last month on a bond deal issued in 2015 and backed by the loans, according to analysts at Morgan Stanley. If defaults keep rising, investors in bonds could end up missing out on expected interest payments.

Other online lenders have had similar trouble with defaults and triggers recently, which has broadly made it more expensive for the startups to fund their businesses. One pioneer in the business, CircleBack Lending Inc., stoppedmaking new loans as growing numbers of its borrowers defaulted.

Credit issues at Prosper Marketplace Inc. resulted in staff cuts at that company, and were largely the result of lending too much, too fast, and a “grow at all cost” attitude fueled by insatiable demand from investors, Prosper CEO David Kimball said at the New York conference last week.

Household Debt Edges Up as Auto, Credit Card, and Student Debt Climb (New York Fed), Rated: AAA

Aggregate household debt balances grew in the fourth quarter of 2016. As of December 31, 2016, total household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. Overall household debt is now 0.8% below its 2008Q3 peak of $12.68 trillion, and is 12.8% above the 2013Q2 trough.

Mortgage balances, the largest component of household debt, which stood at $8.48 trillion as of December 31, saw a $130 billion uptick from the third quarter of 2016.

Balances on home equity lines of credit (HELOC) were roughly flat, rising $1 billion to $473 billion.

Non-housing debt balances rose in the fourth quarter; with increases of $22 billion in auto loans, 32 billion in credit cards, and 31 billion in student loans.

Charles Schwab launches hybrid human-robo financial advice (WHTC), Rated: AAA

Brokerage Charles Schwab Corp on Tuesday launched a service that combines its automated investment management technology with human advisors, as financial institutions race to offer digital financial advice.

The service, called Schwab Intelligent Advisory, provides clients with a financial and investment plan, unlimited access to a human advisor via phone or video conference, and an investment portfolio of exchange-traded funds managed by computer algorithms.

The service, for clients with at least $25,000 to invest, includes an online platform that keeps track of financial goals and retirement plans, the San Francisco-based company said in a statement. It will charge a 0.28 percent fee on assets, with a quarterly maximum of $900.

The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler LLP), Rated: AAA

At the outset, it may be helpful for us to briefly discuss the scope of this paper and some of the terminology we use. There is no single or universally accepted definition of “marketplace lending.” In general, though, marketplace lenders can be viewed as companies engaged in an Internet-based lending business (other than payday lending) which are not banks or savings associations or otherwise regulated as financial institutions. They may offer a wide variety of financial products, including student loans, small business loans, and real estate loans, in addition to the unsecured installment consumer loans on which the industry initially focused. However, “marketplace lenders” may or may not actually be lenders. This term is a generic term to identify participants in marketing, originating, selling, and servicing loans. They also may fund their loans through a variety of means, including equity capital, commercial lines of credit, sales of whole loans to institutional investors, securitizations, and/or pass-through note programs. In this paper we focus on the consumer lenders since they are the most heavily regulated and have the highest loan volumes. However, much of the discussion herein—outside of matters pertaining directly to consumer lending regulation—will also apply to nonconsumer lenders.

Download “The Regulation of Marketplace Lending: A Summary of the Principal Issues” here.

Global Debt Registry Adds Avant as Verification Network Partner (Yahoo! Finance), Rated: AAA

Global Debt Registry (GDR), the asset certainty company known for its loan data validation expertise, today announced it has added leading online lending platform Avant to its verification network.

Investors in loans through Avant now have turnkey access to enhanced loan due diligence services and can easily add new data insights onto portfolios of loans without having to touch sensitive personally identifiable information (PII) about borrowers.

GDR’s eValidationSM and eVerifySM asset certainty tools require no technology investment, using existing data structures and processes to streamline the flow of information from the lender to the investor. In addition to digital scanning for traditional document verification and data integrity, GDR securely analyzes the Personally Identifiable Information (PII) to ensure borrower data can be independently confirmed in compliance with the investors representations and warranties.

Kroll Bond Rating Agency Assigns Preliminary Ratings to Marlette Funding Trust 2017-1 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Marlette Funding Trust 2017-1 (MFT 2017-1). This is a $257.44 million consumer loan ABS transaction that is expected to close on March 23, 2017. This transaction represents the third securitization collateralized by unsecured consumer loans originated by Cross River Bank, under the Marlette Best Egg Platform and sold to Marlette Funding, LLC (“Marlette”) or its affiliate.

Approximately $250 – $325 million of loans are originated through the Platform per quarter. Since March 2015, over $3 billion of loans have been originated though the Platform, and as of February 2017, Marlette has over $100 million of loans on its balance sheet.

The transaction has initial credit enhancement levels of 27.45% for the Class A Notes, 17.95% for the Class B Notes, and 9.10% for the Class C Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A and Class B Notes) and a reserve account funded at closing.

Traditional Advisor Business Model Will Not Last (Financial Advisor IQ), Rated: A

Several developments are creating a “perfect storm” that will revolutionize the financial advice industry and leave many advisors behind, John Lohr writes in Seeking Alpha.

First Ascent still uses real humans on its investment committee, while an independent advisor serves the client, Lohr writes. That model isn’t likely going away: even robo-advice pioneers such as Betterment now offer upgraded services that give investors unlimited interaction with a licensed advisor, he writes.

But Betterment’s annual fee for unlimited calls with an advisor is just .50%, according to Lohr. That means high-fee advisors are on the way out, he writes.

Clarity Money Marks Continued Growth with 100,000 Customers and Senior Hires (BusinessWire), Rated: B

Clarity Money, a revolutionary personal finance app that acts as the “Champion of your Money,” has reached 100,000 customers since its launch in January 2017. The app has been a “featured” personal finance app on the Apple App Store since its launch. Clarity Money was created by venture capitalist and serial entrepreneur Adam Dell.

To keep up with this growing demand, Clarity Money is pleased to announce three new additions to its team – Melissa Manne, Vice President of Product Management; Colin Kennedy, Chief Revenue Officer; and Marc Atiyeh, Chief Strategy Officer. The Clarity Money team already includes financial and technology veterans from Betterment, Google and IBM, as well as advisory board members Niall Ferguson, economic historian, and Dan Ariely, behavioral economist.

Clarity Money works by using data science and machine learning to provide personalized insights for customers. By utilizing a combination of techniques such as natural language processing, anomaly detection and spectral analysis, customers are able to take advantage of features such as: bill lowering, subscription cancellation, creating a savings accounts and providing tailored suggestions on things such as credit cards.

With the potential impact of financial deregulation and the weakening of the Consumer Financial Protection Bureau, consumers need a financial advocate now more than ever. Banks and financial institutions already have powerful tools designed to sell, market and retain customers, but consumers don’t have an equally powerful tool to level the playing field and protect against hidden fees and recurring charges. Clarity Money empowers consumers to take control of their finances, providing them with transparency, organization and actionable insights.

PeerStreet Awarded ‘Top Emerging Real Estate Platform’ by LendIt (Yahoo! Finance), Rated: A

PeerStreet, a marketplace for investing in real estate backed loans, is pleased to announce that it has been named the Top Emerging Real Estate Platform in the LendIt 2017 Awards. PeerStreet is an Andreessen Horowitz-backed platform, focused on democratizing access to investments in real estate debt.

The Top Emerging Real Estate Platform category focused on younger companies that have demonstrated the greatest potential to impact the future of real estate investing. PeerStreet stood out as the top platform with its unique model, as it is not a direct lender and brings an innovative offering to investors.

RealtyMogul.com CEO Jilliene Helman Named Fintech Woman of the Year (Yahoo! Finance), Rated: A

RealtyMogul.com CEO Jilliene Helman was named Fintech Woman of the Year at the first annual LendIt Industry Awards. Helman was honored for her “outstanding leadership, integrity, performance, and team-building support within RealtyMogul, as well as her contributions to the advancement of the industry.”

The awards, which showcased leaders from across the fintech industry, were part of the annual LendIt USA Conference held in New York City March 6 and 7th. Helman was selected by a panel of 30 industry expert judges from among a field of six leading fintech pioneers.

New fintech conference focused on branded currency comes to Omaha (siliconprairienews), Rated: A

Flourish: The Growth of Branded Currency is a fintech conference launching in Omaha this April 10 -12. The conference is focused on branded currency, and is targeting a range of retailers from those with a national presence to smaller Midwest retailers and their technology service providers.

K+H Connection is the company hosting the event. K+H is a fintech consulting firm based in Chicago, IL that focuses specifically on helping fintech companies integrate with merchants.

HG: Branded currency is actually a relatively new term. In short, it is any sort of tender that is branded and used for a specific purpose or at a specific merchant or location. It could be a gift card, promotional value you earn through a referral or loyalty program, points earned through a credit card program, prepaid mall-branded gift cards, etc. These types of products are more than just a form of tender, they incentivize spend and behavior.

We’re also focusing heavily on fraud within branded currency. Fraud has been the number one thing that people have asked us to discuss, so we are going to have a huge session on it.

Podcast 93: John Donovan of Bizfi (Lend Academy), Rated: A

Industry pioneer John Donovan talks about why he is excited to be at the helm of one of the leaders in small business lending.

LendIt USA 2017: Sessions You May Have Missed (LendIt), Rated: B

Thanks to everyone who joined us at LendIt USA 2017. Our growth surpassed our expectations and we had close to 5,900 attendees at the two-day conference.

United Kingdom

NACFB offers members ‘unrestricted’ insurance cover for peer-to-peer (Bridging&Commercial), Rated: AAA

The National Association of Commercial Finance Brokers (NACFB) has announced it will now offer members unrestricted insurance cover for peer-to-peer (P2P) lending.

Under the terms of NACFB membership, brokers must have professional indemnity insurance covering them against mis-selling claims from clients.

UK and Japanese regulators agree to cooperate on fintech (Out-Law.com), Rated: A

On Thursday, the FCA and JFSA agreed a mutual referral system which will see the regulators provide assistance to fintech businesses that wish to expand UK operations into Japan, or vice versa.

The collaboration, which was confirmed by an exchange of letters, will also facilitate information sharing between the regulators on emerging market trends and regulatory issues pertaining to fintech, as well as information concerning referrals.

European Union

CSI globalVCard Expands Globally (PR Newswire), Rated: AAA

CSI globalVCard, a leading B2B payments company specializing in secure and rewarding payments, today announced that it has expanded services to Europe and has opened a London office, its first move in a planned worldwide expansion. The company plans to roll out its services across additional continents by year’s end. CSI will use the payment issuance capacity of PrePay Solutions (PPS), a subsidiary of Edenred (70% owned by Edenred and 30% by MasterCard), worldwide leader in prepaid corporate services. PPS will bring CSI its unique payment technology to issue and process all  CSI virtual cards and wire transfers in Europe.

Expansion outside of North America was sparked by CSI globalVCard’s growing demand from multi-national clients, their increased need for native currency payments, as well as customer service support across local time zones. The global payments market is estimated at $1.2 trillion, of which B2B payments account for $550 billion. Ten percent of organizations make between 20 and 50 percent of their payments to foreign suppliers, and organizations earning over $2 billion in revenue pay the largest percent of their payments to foreign suppliers.1

Canada

Vista to acquire D+H for fintech merger with Misys (Financial News), Rated: AAA

Private equity firm Vista Equity Partners has struck a deal to acquire D+H, a Canadian financial technology provider, with an eye to merging it with UK-based Misys to create a financial software company with $2.2 billion in revenues.

US-based Vista said in a statement today that it will pay C$25.50 per share in cash for D+H, including the assumption of debt, in a deal that values the Toronto-listed firm at 4.8 billion Canadian dollars.

Misys chief executive Nadeem Syed said the combination of the two companies gives them the opportunity to create a “global fintech powerhouse”.

That powerhouse would have about 10,000 employees and 9,000 customers, including 48 of the top 50 banks, the statement said.

Asia

Here’s Everything You Should Know About Alternative Lending In Asia (Forbes), Rated: AAA

Over the last 5-10 years, China, India, and Southeast Asia have leapfrogged from a cash-based society to one where mobile payments are common currency, skipping adoption of credit cards, savings accounts and other consumer financial products common in Western countries. The result: a population that’s smartphone-savvy but still largely unbanked, without the credit histories necessary to access traditional small business or personal loans. It’s a prime market for alternative lenders, who usually use alternative means to assess creditworthiness, foregoing traditional credit scores altogether.

Here is a brief taxonomy of the many types of alternative lenders currently operating in both Asia and the West.

According to Bloomberg, China has 2,200 P2P lenders alone, and its P2P lending market is valued at an estimated $100 billion.

Chinese tech giants have aggressively pursued synergies between different divisions of their sprawling businesses. For instance, Sesame Credit, Alibaba’s alternative credit scoring program, looks at the frequency and cost of a customer’s purchases on Alibaba’s mobile payments platform Alipay in order to determine creditworthiness.

Meanwhile, India’s alternative lending market is in a much earlier stage. Giant tech companies don’t yet dominate the scene, and so the balance-sheet lending landscape includes a large number of small specialists like EarlySalary (payday loans), ZestMoney (point of sale), and Buddy (targeted at students). There are only about 30 P2P lenders in the country, which is surprising for a country where nearly 40% of the population is unbanked, and therefore without access to traditional loans.

Southeast Asia has one of the fastest growing economies in the world, but the small- and medium-sized businesses (SMEs) that make it up have more limited access to financial credit than the global average.

In Singapore, the financial center of the region, the major alternative finance players in Singapore are peer-to-company (P2C) lenders: specialized P2P lenders that only provide loans for SMEs. Market leader Capital Match was founded in 2014, but says it has already paid out more than S$32m (US$22.5m) in loans.

Malaysia is doing its part to meet P2P companies like Funding Societies in the middle, having recently updated its financial guidelines to include P2P lending. Thailand has done the same, issuing a consultation paper on regulations for P2P lending last fall.

German Challenger Bank SolarisBank Goes to Asia (Fintech News), Rated: AAA

The financial services subsidiary of the Bertelsmann Group, Arvato Financial Solutions, and the Japanese investor SBI Group will invest in solarisBank in a partnership that promises significant cooperation potential across international markets. In total, the Berlin-based bank raises EUR 26.3 million in the series A financing, meanwhile seed investors FinLeap, Hegus and yabeo Capital participate as well.

As the young bank steps up its internationalisation efforts, new executives are being added to its leadership team: Roland Folz will join the Management Board as CEO, while Gerrit Seidel will take over as Supervisory Board Chairman from HitFox Group and FinLeap founder Jan Beckers.

solarisBank intends to expand its activities in European and Asian countries over the coming years, and will establish joint venture companies with the SBI Group in order to develop businesses in Asia.

Middle East

The real estate property crowdfunder with an ethical conscience (Zawya), Rated: A

As key professional in the Qatar real estate industry gather for the annual Cityscape exhibition in Doha,  MercyCrowd, a brand new type of property crowdfunding platform, will offer for the first time to people in Qatar international real estate purchases through crowdfunding.

MercyCrowd  is part of the Elite International Asset Group, an established international company promoting real estate investment in Europe with a specialty in the French and UK market.  However, what makes MercyCrowd uniquely different is the company’s core belief that sustainable growth can only stem from real assets that generate real increments and tangible benefits to a society.

Authors:

George Popescu
Allen Taylor

Wednesday March 8 2017, Daily News Digest

Wednesday March 8 2017, Daily News Digest

News Comments Today’s main news: Ron Suber offers 5 ways alt lenders can work with banks to prosper. OCC comptroller fires back at FinTech charter critics. Zopa has record lending month. RateSetter returns fall due to high demand. Today’s main analysis: Corporate credit spread tightens following Trump’s address to Congress. Today’s thought-provoking articles: China consumer finance needs high tech solution. […]

Wednesday March 8 2017, Daily News Digest

News Comments

United States

United Kingdom

China

MENA

Asia

News Summary

 

United States

Prosper CEO’s Ron Suber’s Keynote Address at LendIt (YouTube), Rated: AAA

 

 

Corporate credit spreads tighten following Trump’s address to Congress (Morningstar), Rated: AAA

While the markets pulled back slightly in the latter half of the week, risk assets remained near their highs after a significant boost Wednesday following President Donald Trump’s address to Congress. The average spread of the Morningstar Corporate Bond Index, our proxy for the investment-grade bond market, tightened 5 basis points to +118 last week. In the high-yield market, the credit spread of the Bank of America Merrill Lynch High Yield Master Index tightened 24 basis points to +360.

Comptroller Curry hits back at critics of fintech charter plans (Finextra), Rated: AAA

In a speech to the LendIT conference in New York, Curry offered a stout defence to charges laid by banking trade bodies and state regulators over its plans.

“To be clear, the National Bank Act does give the OCC the legal authority to grant national bank charters to companies engaged in the business of banking,” Curry told the conference. “That authority includes granting charters to companies that limit their business models to certain aspects of banking, and it is not circumscribed just because a company delivers banking services in new ways with innovative technology.”

Kabbage nabs $ 500M for small business loans (TechCrunch), Rated: A

Kabbage, a billion-dollar startup that combines machine learning algorithms, data from public profiles on the internet and other factors to rate and then loan people money for their small businesses, is today announcing another big step up in its ambitions. The company has secured over $500 million in fixed-rate, asset-backed notes, money that it will use to expand the amount, payback terms and size of loans it makes to SMBs over the next three years. To date, Kabbage has loaned over $2.7 billion to SMBs since being founded in 2009.

Kabbage said the securitization was oversubscribed.

As part of this closing, Kabbage is forming a new subsidiary,Kabbage Asset Securitization, to issue the notes in four classes. Kabbage said that the senior class of notes is “anticipated to be rated ‘A(sf)’ on the closing date by Kroll Bond Rating Agency (KBRA).”

Kabbage notes that this is an upgrade on its previous rating.

Lantern Credit boosts machine learning engine through ARC library acquisition (Finextra), Rated: A

Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, is enhancing its proprietary machine learning engine, Beam AI, with the acquisition of the Abstract Regression-Classification (ARC) Machine Learning Library.

The machine learning library enables Lantern Credit to use a human-machine hybrid learning approach that incorporates human guidance in the machine learning training process to produce more reliable outputs.

Lantern Credit’s Beam AI will use the symbolic regression technology to ensure that credit offers presented to consumers are actionable and timely.

RealtyShares Raises $ 32.9M for Midwest Real Estate Projects Through Crowdfunding (BusinessWire), Rated: A

RealtyShares, a leading online marketplace for real estate investing, has released new data showing the extent of crowdfunded investments in several Midwest real estate markets.

Developers, sponsors and borrowers in Ohio, Wisconsin, Michigan, Indiana and Illinois have raised $32.9 million to date from RealtyShares’ network of investors, offering a source of financing for real estate projects by leveraging technology to connect potential investors with expertly vetted real estate deals.

Thus far 114 deals have been funded in the region through RealtyShares, with an average deal price of $288,000. Deals of up to $1.5 million have been financed in both Columbus, Ohio, and Chicago, Ill. Anchoring RealtyShares’ position in the region, $14 million has been raised for 53 deals in Illinois, with several investors targeting properties in and around Chicago. Buckeyes are also showing a significant level of activity, with $12.25 million raised for 30 deals in Ohio, concentrating around the Cincinnati and Cleveland areas.

Patch of Land Hires Chief Investment Product Officer (PR Newswire), Rated: A

Patch of Land, a leading online real estate marketplace lender and crowdfunding platform, announces the addition of Matthew Zall as Chief Investment Product Officer as the firm prepares to expand into the single-family rental market with longer term, permanent financing products. The number of non-owner occupied single-family properties in the U.S. including townhomes, condos, and 2-4 unit properties grew to almost 24 million units valued at over $6 trillion in 2016, according to ATTOM Data Solutions.

Zall brings to Patch of Land more than 12 years of real estate and mortgage experience, as well as expertise in financing and product development. He pioneered three of the industry’s first-ever multi-borrower single-family rental securitizations, helping to build Blackstone Group subsidiary, B2R Finance, (now known as Finance of America Holdings, LLC) from start up to a multibillion dollar lender in only a few years. Prior to joining B2R, Matt was a Commercial Real Estate (CRE) trader at J.P. Morgan and Bear Stearns. At Patch of Land, Zall will execute strategies to enable the expansion of the firm’s position as a marketplace lender by offering both accredited and institutional investors additional opportunities to invest in this asset class.

Fintech Startup Current Announces $ 3.6 mil Raise With Eye on Injecting “Cs” Into Payments and Banking Space (Huffington Post), Rated: A

Today “stagnating banking industry,” announced a seed round venture capital raise of some $3.6 million backed by

THE FINTECH PARADOX IN ONLINE BUSINESS LENDING – March 2017 (IOU Financial), Rated: A

However, not all Fintech business models have yet matured into profitability, key to the definition of success. A structural element of future success for new entrants resides in their ability to access cheaper funding and quality customers. Who can offer these things?  With that in mind, Banks, especially small ones, should feel confident they can monetize their position to bring down their cost of innovation.  By working with innovative companies in financial technology, they can quickly benefit from new and very cost efficient ways to grow revenues. Online lending could be the first expertise to explore in order to welcome small business back and help them grow.

It is true that technology has enabled new entrants to offer innovative services not available at banks, either as a product offering or at a more competitive price.  It is also true that banks have been slow at embracing technology as a growth engine, mostly due to lack of capital to fund innovation. This is especially the case for smaller banks who tend to lack financial and human capital to invest heavily in R&D and innovate. Large banks with deep pockets have found ways to either build or partner and grow their presence in areas where technology offer a clear competitive edge. Large banks have in fact recognized the win-win rationale for partnering with Fintech, an opportunity also open to small banks. Large banks love Fintech because they can afford it. Small banks can as well.

How will the paradox divide disappear between banks and Fintech Alternative Lenders?  It will dissipate with the online lender taking time to educate banks about their efficient loan platforms and how they can help banks reach new customers, develop new funding sources and grow revenues, especially non-recourse fee income.  Banks should also be curious and consult with online lenders to better define how they can benefit from their technology and expertise in lending small.

StackSource Announces Lending Marketplace at LendIt Conference (CRE.Tech), Rated: B

Today was a big day for Tim Milazzo, his company StackSource and possibly commercial real estate lending as whole. Tim had been selected as a pitch finalist for the LendIt conference in New York.

But, Tim had an extra surprise in store for this big day. His company StackSource has been a tool for property lenders to centralize workflow. While they are a new company, emerging from the TechStars accelerator program late last year, they have already helped property owners process over $1B of loan offers on the platform. But, this was never the end game for Tim and his co-founder Nathan. They started the company with the idea of creating a marketplace for commercial real estate borrowers. Today, they not only pitched at LendIt, they also went live with the marketplace that they originally envisioned.

United Kingdom

Zopa reports record month of lending (Bridging&Commercial), Rated: AAA

Zopa has recorded its second consecutive month of record lending.

The peer-to-peer platform revealed that it lent more than £81m during February 2017 as it approved nearly 12,000 borrowers.

This was £24m more than for the same period last year.

The platform celebrated a record year of lending during 2016 as it passed the £2bn milestone and back in November it announced plans to launch a bank.

P2P Lender RateSetter Partners with Mortgage Aggregator Connective (Crowdfund Insider), Rated: AAA

P2P lender RateSetter announced a partnership with national mortgage aggregator Connective which aims to give accredited brokers access to their personal loan products.

The move is part of RateSetter’s ongoing focus on the broker channel to continue its growth in consumer and business lending. By joining Connective’s lending panel, RateSetter plans to help brokers improve client’s financial wellbeing in areas outside of the traditional mortgage offerings.

RateSetter returns fall as market demand rises (P2P Finance News), Rated: AAA

RETURNS on RateSetter’s shorter-term accounts have fallen slightly due to changes in market demand.

The platform’s rolling market product was at 3.3 per cent last week and is now offering three per cent, its one year fix is now 2.9 per cent, down from three per cent, while its five year fix has actually increased slightly from 4.8 per cent to 4.9 per cent.

The rates are set by market demand on the RateSetter platform, but as of the end of March 2016 they were at 3.4 per cent for one month, 3.7 per cent for one year, 4.8 per cent for three years and 6.1 per cent for five years.

BondMason to increase bridging funding appetite (Bridging&Commercial), Rated: A

Peer-to-peer (P2P) service provider BondMason aims to expand its lending through bridging lenders in 2017, with over half of investment expected to be through non-P2P platforms.
The news follows a surge in demand for bridging finance in the final quarter of 2016, with the total lending figure for the year standing at £2.83bn.
Stephen added that while the bridging market has seen more competition from P2P lenders, it was mostly “around the edges”.

Misys backs gamification to educate next generation on money management (Zawya), Rated: A

Misys is making gamification an integral part of its Misys FusionBanking Essence Digital platform to help banks educate the next generation on better money management. Integrating Moroku’s GameSystem directly into the Essence Digital architecture enables banks to inject some fun into personal financial management (PFM) and help consumers achieve their savings goals.

With research research forecasting the mobile gaming market in MENA to be worth up to US$400m by 2021, the case for gamification in helping banks to attract, engage and retain customers is compelling. Banks stand to benefit from building greater trust with consumers and capturing market share. Gamification can also deliver a significant boost to customer experience. FusionBanking Essence Digital brings points, leaderboards and rewards to standard banking activity, to educate and also support savings and spend management.

China

China Consumer Finance Challenge Needs High-Tech Solution, China Rapid Finance CEO Tells LendIt (Broadway World), Rated: AAA

The challenge of expanding consumer finance to China’s vast population can only be effectively tackled with a high-tech solution that enables low-cost customer acquisition, Dr. Zhengyu (Zane) Wang, founder, chairman and chief executive officer of China Rapid Finance Limited (“CRF” or “the company”), told the LendIt USA 2017 conference.

Over the past two decades, China has emerged from being a market that in 2000 featured essentially no credit bureau, decision science, or consumer finance, Dr. Wang said in a March 7 keynote address at LendIt USA 2017, which was held at the Jacob Javits Center in New York City. China’s consumer finance market today boasts many of the same elements as the U.S. China now has a central bureau for credit reporting that covers 800 million people, while credit cards serve about 300 million people, he said.

Still, China’s consumer finance market has a long way to go, in a nation where non-mortgage credit is only 2 percent of GDP, Dr. Wang told the LendIt audience. Only about 16 percent of Chinese consumers have credit cards, compared with about 60 percent in the U.S.

MENA

Iran Launches a FinTech Association to Push for Development (Crypocoins News), Rated: AAA

Iranian financial technology companies have banded together to create Iran’s FinTech Association, several months after the Central Bank of Iran (CBI) suggested the idea, reports the Financial Tribune.

Known as FinTech A, the Iran FinTech Association is designed to bring industry players under a single area so that solutions can be found to their problems and improvements can be made between innovators and regulatory bodies.

Nasser Hakimi, director of CBI’s IT Department, said to the Financial Tribune, that he had proposed that FinTech companies develop a forum to figure out the challenges involved, identity key questions, as well as reach out to the regulator for solutions.

Last February, it was reported that while economic sanctions had been lifted against Iran, screening rules were still in place when trading with Iran, putting barriers in place for those within the U.S. and the EU who wanted to conduct bitcoin transactions within the country.

Asia

Indonesian P2P lending platform Amartha raises Series A, aims to disburse US $ 30M by end of year (e27), Rated: AAA

Indonesian P2P lending platform for unbankable society Amartha today announced that it has raised “seven digit” US Dollar in Series A round led by Mandiri Capital Indonesia (MCI).

Amartha plans to use the new funding to expand their coverage by creating mini-branch across Java and Bali, which they aim to complete by end of 2017.

Having had disbursed “more than” IDR68 billion (US$5 million) to 30,000 women who owns small businesses, the startup aims to disburse US$30 million to 100,000 borrowers by end of the year, with 10,000 active lenders on board.

Authors:

George Popescu
Allen Taylor

Wednesday February 22 2017, Daily News Digest

Marcus

News Comments Today’s main news: OCC addresses risk management for bank-MPL relationships. IFISAs dogged by further delays. Radial integrates with Klarna. Bitbond raises $1.2 mil. Today’s main analysis: Marcus marks the end of traditional banking. Today’s thought-provoking articles: 3 upcoming changes to private student lending. The Pulse of FinTech infographics. United States OCC establishes risk management expectations for bank-MPL […]

Marcus

News Comments

United States

United Kingdom

European Union

International

Australia

News Summary

United States

OCC’s Third-Party Risk Management Expectations for Bank Relationships with MPLs (Pepper Hamilton LLP), Rated: AAA

On January 24, the Office of the Comptroller of the Currency (OCC) issued a new bulletin, OCC Bulletin 2017-07 (Supplemental Examination Procedures for Risk Management of Third-Party Relationships). The stated purpose of the bulletin is to assist bank examiners in evaluating the third-party risk management practices of national banks and federal savings associations (collectively, banks). For the most part, Bulletin 2017-7 reinforces existing OCC supervisory expectations. In several notable respects, however, the bulletin breaks new ground, including by addressing relationships with marketplace lenders.

In establishing risk management expectations for relationships between banks and marketplace lenders in its new bulletin, the OCC is following the lead of the Federal Deposit Insurance Corporation (FDIC), which issued its own supervisory expectations for these relationships in late 2015. As in the case of the FDIC’s guidance, the OCC bulletin broadly defines the term “marketplace lender” to include any “companies engaged in Internet-based lending businesses (other than payday lending).”2 Specific examples of marketplace lenders stated in the OCC Bulletin include online companies that make small business loans, consumer loans, student loans and real estate loans.3

If a bank plans to contract with a marketplace lender to “perform some, if not all operational functions, including processing, underwriting, closing, funding, delivering, and servicing of loans,” OCC Bulletin 2017-7 requires the bank to have sufficient support “systems, controls, and personnel [in place] to adequately support the volume of planned loan origination, servicing, or collection activities.”4 In addition, if the bank is considering contracting with a marketplace lender to originate or purchase loans, the bank must determine whether the lender’s underwriting methods are “new, nontraditional, or different from the bank’s underwriting standards.”5 Finally, if the bank will be investing directly or indirectly in, or will be providing warehouse lines or other credit facilities to, any third-party lender, including a marketplace lender, the bank must determine whether the third-party lender’s underwriting standards are consistent with the bank’s own underwriting standards.6

Goldman Sachs’ Recent Move Marks The End Of Traditional Banking (Newsmax), Rated: AAA

At the end of 2016, Goldman Sachs launched a new online lending platform called Marcus. The move into online lending by one of the most successful investment banks in the world is a telling move for two reasons.

First, it’s a good indicator of the post-financial crisis banking industry.

Second, rising compliance costs—combined with over seven years of zero-interest rate policy from the Fed—was a bad environment for bankers.

Peer-to-peer lending has grown from nothing a decade ago to be a $26 billion industry in 2015. However, it still only accounts for 2% of the market for unsecured consumer credit.

Goldman Sachs is using Finacle, a software program owned by Infosys, to run the Marcus lending platform. With this software, Marcus customers will be able to fully customize their loan parameters within guidelines set by the bank.

Gone are the days of negotiating with a banker on loan terms. The Finacle software is fully automated and will process the transactions in real time. It’s a fully operational “bank within a bank” that only relies on approximately 200 Goldman employees, according to Bloomberg.

Marcus is not a peer-to-peer lending platform. Instead, Goldman will be making loans against its own balance sheet. This will give the bank more flexibility with setting competitive loan terms and fees.

According to a Morgan Stanley report published in 2015, the effective annual interest on the peer-to-peer lending platforms analyzed was on average 6.8% lower than those offered by banks.

All the while, P2P lending platforms have historical net annualized returns between 5% and 10%. Compare that to investing in a 5-year US Treasury note that yields less than 2% today, below the reported rate of inflation, and can you see why Goldman Sachs got involved with online lending.

3 Upcoming Changes in Private Student Lending (US News), Rated: AAA

In fact, the day after Trump was elected to office, the stock price for Sallie Mae Corp., a large student loan lender, shot up nearly double from $7.10 per share on Election Day to $12.47 on Feb. 15.

For prospective private student loan borrowers, here are a few expectations that experts say consumers may see in the next year or two as a result of changes at the federal level.

1. More lenders entering the private student loan market: Matherson says easing of lending restrictions will lead to more lenders entering the marketplace over the next two years.

Experts say large commercial banks that left the private student lending market after the 2008 financial crises may also return.

2. Interest rate hikes for both variable and fixed-rate private loans:The Federal Reserve is signaling that it’s on course to raise the short-term interest rate this year.

Lending experts say they expect to see a 1 percent rise in interest rates for private student loans over the next two years. Those increases, they say, will affect both variable and fixed-term rates on private education loans.

3. A growing number of start-ups offering income-shared agreements: Under an income-shared agreement or ISA, students use funds from an investor to pay for college and in turn agree to make payments based on a percentage of their income for a set period of time after they graduate.

Casey Jennings, chief operating officer at nonprofit 13th Avenue Funding, which works with low-income students, says clarification of the legislation will make it much easier for financial and educational institutions to enter this space.

Prosper Marketplace President Ron Suber Joins Unison as an Investor and Strategic Advisor (PR Newswire), Rated: A

Unison Home Ownership Investors, the leading provider of home ownership investments, announced today that Ron Suber, president of Prosper Marketplace, has become an investor in the company and has taken on a significant advisory role as the company is experiencing a period of unparalleled growth, opportunity and availability.

A financial services industry veteran, Suber brings to Unison a wealth of experience across multiple disciplines. As an influencer in the financial technology space, Suber will look to grow the home ownership investment category through his relationships with marketplace lenders, mortgage companies, realtor groups and banks.

LendIt Announces 2017 PitchIt Finalists (PR Newswire), Rated: A

LendIt, the world’s largest show in lending and fintech, today announced eight finalists for its fifth PitchIt @ LendIt competition. In partnership for the first time with 500 Startups, the world’s leader in investing and mentoring, and sponsored by Marqeta, PitchIt is a leading global competition for fintech startups to earn mentorship, endorsement and exposure to institutions, investors and broad visibility.

This year’s finalists were chosen from nearly 300 high caliber applicants covering all areas of fintech including insurtech, blockchain, payments, online lending, credit and artificial intelligence.

The eight 2017 PitchIt finalists are:

  • Nova Credit
  • StackSource
  • Alloy.co
  • Qwil
  • Aella Credit
  • Real Atom
  • Float Credit
  • WeTrust Platform

The finalists will pitch their concepts at LendIt USA 2017 on March 7 to a panel of judges from the venture capital community including: David Teten, ff Venture Capital; Kareem Zaki, Thrive Capital; Ben Malka, F-Prime; and Joel Monegro, Union Square Ventures.

Kabbage preps small business loan deal (Global Capital), Rated: A

Online small business lender Kabbage is marketing a $500m securitization of loans to small and medium sized businesses which will be used to refinance an existing deal from 2014.

Guggenheim is the sole lead of the $500m deal, which is expected to officially begin marketing to investors in the week of March 6.

Kroll Bond Ratings has assigned an A rating to the $370.37m ‘A’ notes, and BBB to the $79.37m ‘B’ notes.

Marketplace deals readied, with innovations (Structured Credit Investor), Rated: A

Kabbage is marketing its first marketplace loan ABS of the year and its second since inception. Meanwhile, SoFi is in the market with its second consumer loan ABS – SoFi Consumer Loan Program 2017-2 – backed by US$343m of consumer loans and comprising several elements that differ from its previous securitisation.

Kroll Bond Rating Agency Assigns Preliminary Ratings to Arcadia Receivables Credit Trust 2017-1 (BusinessWire), Rated: A

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two classes of notes issued by Arcadia Receivables Credit Trust 2017-1 (“ARCT 2017-1”). This is a $213.137 million consumer loan ABS transaction that is expected to close March 6, 2017.

This transaction is the first rated securitization of prime unsecured consumer loans facilitated by LendingClub Corporation’s (“Lending Club” or the “Company”) proprietary technology platform supporting an online marketplace that connects borrowers and investors by offering a variety of loan products originated by issuing banks through the platform, www.lendingclub.com(the “Lending Club Platform” or the “Platform”).

Why big banks are helping financial tech startups (Tradestreaming), Rated: A

Finlab, short for Financial Solutions Lab, is an 8-month startup accelerator program funded by JPMorgan Chase and run by the Center for Financial Services Innovation. It just sent out its third call for applications from financial technology startups working on tools for underserved populations. It’s an example of how banks are now partnering rather than competing with startups — a trend that’s grown quickly over the past couple of years.

Finlab began two years ago, and winners get $250,000 of capital, one-on-one mentorship and networking opportunities. About eight or nine winners are picked each round. Winners participate in a series of workshops across the country on how to grow their businesses, including a session on regulation.

Big banks are likely to keep supporting these programs — not only for relationship building, but also because startups are working on areas major banks aren’t addressing, said Gilbert.

4 Real Estate Crowdfunding Trends You Should Be Watching (Forbes), Rated: A

Real estate is one of the fastest growing markets to take on the concept of crowdfunding and apply it in a new way.

Here are four emerging trends in real estate crowdfunding to watch this year.

  1. Regulation Brings Crowdfunding to Maturity. Today, crowdfunding has matured and investors are more intrigued than they are skeptical. This is due, in large part, to the JOBS Act and the enactment of Regulation A+. It legitimized the industry and it has been growing ever since.
  2. Foreign Investment in Real Estate Is Booming. According to The Guardian, a recent U.S. real estate study showed that Chinese investors have poured $110 billion dollars into the U.S. market in the last 5 years (both commercial and residential). This investment is set to double in the next 5 years. Because of foreign investment expansion in the U.S., it’s relatively safe to assume that a portion of those dollars will go into alternative funding options like real estate crowdfunding.
  3. Wealthy Millennials Are Investing Their Money Differently. However, with the influx of unicorn technology companies and the increase of millennial millionaires, the need to put their money somewhere is still very much on their minds. Real estate crowdfunding has the potential to help them share the wealth while staying true to their sensibilities.
  4. Crowdfunding for Retirement. Those considering real estate investing, especially through crowdfunding platforms, could potentially improve their rate of return with tax efficient strategies, more specifically IRA’s. Real estate crowdfunding platforms allow those saving for retirement to invest in real estate right from the golf course, with just a few clicks on their phone or tablet.

PeerStreet’s CEO Brew Johnson Talks Real Estate Crowdfunding Market (Forbes), Rated: A

The company was founded by former Google executive Brett Crosby and real estate attorney Brew Johnson. By the end of 2016, the company originated more than $200 million.

Johnson: The biggest differentiators between PeerStreet and other players are pretty simple: (i) our platform is very focused on one asset – first-lien debt. We think creating this focus at the outset is important in delivering value to users. And most importantly, (ii) we don’t originate loans directly to borrowers, but rather we aggregate loans from a distributed network of lenders, curate those loans, and then make it easy for investors to invest in them.

Johnson: We exceeded $200 million in origination volume by the end of 2016. Our KPIs are based on loan volume and quality.

Johnson: We maintain focused on our core asset: short-term, first position lien loans. Our data continue to show that this asset provides favorable risk-return profiles for investors, so 2017 is about growing our loan volume in order to serve even more investors.

Johnson: I think there are opportunities of various sizes across the industry. That said, a couple that I find particularly interesting are the potential implications for a more robust rating and credit scoring of alternative lending investments across platforms and those of creating a truly efficient secondary market or exchange that enables investors to seamlessly trade in and out of positions.

Misys Targets Offerings for P2P Lending (Intralinks), Rated: B

Traditionally focused on treasury and capital markets solutions, Misys revised its focus to include solutions that would allow banks to branch into peer-to-peer (P2P) lending, as well as an offering for machine learning that would detect anomalies in trading patterns.

Altisource’s Premium Title Announces Integration with LendingQB’s Loan Origination System (Yahoo! Finance), Rated: B

Premium Title, a national provider of title and escrow services, announced today its integration with LendingQB’s end-to-end, browser-based loan origination system (LOS). The integration can help provide customers with the ability to obtain title and settlement quotes faster, place orders with Premium Title and receive a title fee certificate guaranteeing fees for 30 days, all without leaving the LendingQB platform.

This integration, gives Premium Title clients the capability to experience a seamless and more efficient process within the LendingQB LOS platform. Lenders using LendingQB can receive an automated quote for title services and a title fee certificate guaranteeing title fees, which auto-populates into the LOS. LendingQB can also maintain the loan estimate and any adjustments in fees associated with the loan, assisting with TRID compliance and faster disclosure timelines.

United Kingdom

Innovative Finance Isas dogged by further delays (Financial Times), Rated: AAA

The Innovative Finance Isa was officially launched by former chancellor George Osborne in July 2015, putting peer-to-peer lending platforms — where individual investors are matched with interest-paying borrowers — on a level playing field with traditional savings and investment products which can be held within an Isa wrapper.

A year on, the FCA has still yet to grant the bulk of peer-to-peer lenders, including the three largest — Zopa, Funding Circle and RateSetter — the authorisation they need to launch an Innovative Finance Isa in time for the new tax year in April.

These three peer-to-peer platforms account for more than 40 per cent of the UK’s market share by loan origination, according to AltFi data, having lent nearly £6bn combined.

Chatbot savings app Plum partners P2P lender Ratesetter (Finextra), Rated: AAA

British AI-powered savings Facebook Messenger chatbot Plum is to start steering users that are willing to take on risk in exchange for higher interest rates to P2P lender Ratesetter.

According to Moneyfacts, the average UK rate on easy-access accounts is 0.15%, while the average return earned by RateSetter investors to date is 4.7%.

The money goes into users’ Plum savings account but the Ratesetter deal means that people can also now choose to earn a better rate – if they are willing to take on the associated risk.

Zopa Named Best Personal Loan Provider & Best Alternative Finance Provider at the 2017 British Bank Awards (Crowdfund Insider), Rated: AAA

Zopa, the UK’s very first peer to peer lending platform, announced on Monday it was named Best Personal Loan Provider & Best Alternative Finance Provider at the 2017 British Bank Awards.

This news comes just a few weeks after Zopa was named Personal Loan Provider of the Year at the Consume MoneyFacts Awards for the fourth year in a row.

Zopa recently announced it topped £2 billion in lending.  According to information provided by the online lending platform, as of today, the lender matched over 246,000 borrowers to 75,000 investors to provide access to capital in the form of loans.

RateSetter Borrowers Have Paid Back £1 Billion, Investors Have Earned £63 Million (Crowdfund Insider), Rated: A

Online lender RateSetter has said it has now collected £1 billion in capital repayments from borrowers since its first loan back in 2010. Overall, RateSetter has originated approximately £1.75 billion in loans while paying out £63 million in interest.  The average interest rate ranged between 3.1% on the Rolling market and 6.0% for the 5 Year market. In 2016, total lending was pegged at £668 million.

Awareness of P2P drops north of London (P2P Finance News), Rated: A

AWARENESS of peer-to-peer finance products among small- and medium-sized enterprises (SMEs) is at its lowest in the Midlands and the north of England, the British Business Bank (BBB) has revealed.

The figures, revealed in its latest annual Small Business Finance Markets report, showed fewer than 40 per cent of firms in the Midlands were aware of P2P lending, compared with almost 60 per cent in London.

Around half of firms in the south of England were aware of P2P, while just 40 per cent of firms in the north had come across it.

Despite the varying levels of awareness, the report found annual lending through P2P platforms increased by 34 per cent to £3.9bn in 2016. Business lending made up £1.3bn of that amount.

SME Loan Fund plans break with GLI in bid for scale (Citywire), Rated: A

The SME Loan Fund (SMEF +), the small directing lending investment trust set up by GLI Finance, plans to break ties with its founder in a bid to gain scale.

The trust launched in 2015 amid a boom in peer-to-peer lending launches, yet was able to raise just £12.4 million capital. Assets currently stand at £53 million, mostly from an initial portfolio of loans transferred by GLI Finance (GLIF +) as part of the launch.

The SME Loan Fund said that GLI had agreed to sell its 48% stake in the trust through a placing. Should the placing prove successful, the SME trust will switch management from Amberton Asset Management, 50% owned by GLI. If it is not, the board will propose the wind-up of the trust.

GLI Finance, an investment trust in its own right, said it would use the money from a share sale to repay a £14.9 million loan to strengthen its balance sheet.

Most board members of P2P trusts have skin in the game (P2P Finance News), Rated: A

THE MAJORITY of board members of peer-to-peer investment trusts have “skin in the game”, research has revealed.

Canaccord Genuity research has assessed the pay and investments of board members of investment trusts. The analysis included funds focused on the P2P sector.

It showed that the highest annual pay packet among P2P investment trusts is £50,000, taken by the chairmen of the Funding Circle SME Income Fund and Victory Park Capital (VPC) Specialty Lending.

Samir Desai, co-founder of the Funding Circle platform, who sits on the investment trust’s board, has put £152,775 into the fund.

This is the highest among its board members, followed by £110,349 invested by non executive director Frederic Hervouet. The Funding Circle SME Income Fund board chairman Richard Boleat takes the highest annual fee on the board at £50,000 and has invested £5,157.

The trust’s board members Jonathan Bridel and Richard Burwood, both non-executive directors, have also invested £5,157 and their annual fee is £40,000 and £30,000 respectively.

Desai does not take a fee and Hervouet has an annual fee of £35,000.

European Union

Radial payments platform integrates with Klarna (Finextra), Rated: AAA

Klarna, one of Europe’s leading payments providers, and Radial, the leader in omnichannel commerce technology and operations, today announced a new partnership to further expand Radial’s payment options.

The integration of Klarna with Radial’s Payment platform enables clients and prospects to offer a financing option at checkout to give customers more choice and could give retailers a 58 percent higher order value.

Financing a purchase over time has historically been optimized for brick and mortar stores. The online equivalent, however, can often be an ordeal, with redirects, lengthy forms and unclear information. Klarna’s process only requires a few fields of information, and lets customers know instantly if they qualify for the financing solution.

International

Bitbond raises $ 1.2 million to grow SME lending platform (Finextra), Rated: AAA

Global SME lending platform Bitbond today announced the closing of an equity funding round of $1.2 million (€1.1 million).

This round brings Bitbond’s raised equity capital to a total of $2.3 million.

Led by mobilike founder Şekip Can Gökalp, a number of business angels contributed to the round. Among them were Fyber founders Janis Zech and Andreas Bodczek as well as Kreditech co-founder & CEO Alexander Graubner-Müller.

Bitbond will use the additional funds for further product development and to grow its user base in markets which are underserved by traditional lenders. Over 1,600 loans worth $1.2 million were originated on Bitbond since its launch. 76,000 users from 120 countries registered with the service to date.

Infographics – The Pulse of Fintech – Q4 2016 (KPMG), Rated: AAA

According to The Pulse of Fintech, after 2015’s record-setting $46.7 billion in global funding to fintech companies, 2016 brought reality back to the market with an almost 50 percent slide in fintech investment.

Australia

Australia weathers fintech slump (The Australian), Rated: A

Global investment in fintech companies almost halved last year as “froth” comes out of the burgeoning industry and investors wait to see if they can successfully disrupt incumbents such as banks and insurers, according to a new report.

Fintech investment funding declined to $US24.7 billion ($32.17bn) last year from a bumper $US46.7bn in 2015, driven by fewer merger and acquisitions, and private equity investments, KPMG found.

However, the less mature Australian fintech industry bucked the trend as investment soared to a record high of $626 million last year, up from $185m in 2015 and $461m in 2014.

In contrast, corporate venture capital arms — those owned by banks and other incumbents — played a bigger role in the market, expanding investment to $US8.5bn from $US4.9bn. Australia’s institutions, including National Australia Bank, are increasingly investing in fintech via internal VC arms.

Authors:

George Popescu
Allen Taylor

Tuesday January 17th 2017, Daily News Digest

conditional default rate over MOB

News Comments Today’s main news: Misys launches P2P software for banks. States tell feds to back off FinTech. Today’s main analysis: Credit models and cashflow projections. Today’s thought-provoking articles: . Seedrs sees a record-breaking year. United States Misys launches P2P lending software for banks. GP:” The first obstacles for banks to build their own technology are time […]

conditional default rate over MOB

News Comments

United States

  • Misys launches P2P lending software for banks. GP:” The first obstacles for banks to build their own technology are time , money and experience. The next one is their own in-house politics and culture. This makes it hard. On the other side buying 3rd party technology is a proven path. In the US quite a few companies offer bank technology for marketplace lending but none offer a pure p2p solution for banks. I wonder how succesful they will be.”  AT: “If banks have their own solution, would it benefit them to partner with marketplace lenders or acquire them? This will depend on how valuable the software actually is to banks. If it ends up being a less expensive alternative for banks, then it could lead to more competition in the field from traditional financial institutions with big pockets. Alternative lenders will have to compete on agility and customer service. This could be the beginning of a new phase for P2P lending.”
  • Credit models and cashflow projections. AT: “More excellent analysis from PeerIQ.”
  • States tell feds to back off FinTech. GP:” I am glad to see pros and cons discussed. It can produce something positive or just gut the initiative of all its real value. Lets see what happens.” AT: “I smell a big fight coming over who should be the regulatory authority for the industry.”
  • Money360 funds $3.87M real estate acquisition loan.
  • SoFi changes locations. GP:” SoFi opens a larger and better NY office.”

United Kingdom

China

United States

Tech vendor Misys launches P2P lending software for banks (Reuters), Rated: AAA

Financial technology vendor Misys is launching software to enable banks to provide peer-to-peer lending to their customers as competition from young companies in the sector heats up.

The technology would enable retail and corporate banks to connect their customers looking for loans with individual or institutional investors digitally, the private London-based software company said on Tuesday.

Jollant said Misys was launching the product because it was already an established provider of financial lending software to many large global lenders. He added that the company was in discussions “with a number of interested banks in the U.S., Europe and India.”

Weekly Industry Update (Part 2): January 16, 2017 (PeerIQ Email), Rated: AAA

The price of a loan is the present value of projected loss-adjusted cashflow for the remaining balance of the loan, discounted by an appropriate rate reflecting the riskiness of the cashflows.
We outline this process in the following subsections:
  1. We apply loan-level credit models to project cashflows over the remaining balance of the loan.
  2. We estimate spread at origination – the incremental compensation an investor earns above the Treasury curve for bearing prepay and default risk.
  3. We incorporate additional market observables to adjust discount rates.

Credit Modeling & Cashflow Projections

The price of a loan depends on the principal repayment and interest rate collected over the loan life. Therefore, the first step in our valuation process is to project the pattern and timing of expected (not historical or realized) cashflows.
Unlike an underwriting model which may be concerned with estimating probability of default, we apply credit models that forecast cashflow (e.g., prepayments, delinquency, and default behavior) over the life of a loan given a loan’s borrower attributes, loan attributes, payment profile, and macro conditions.
Estimating Spread at Origination
Marketplace lending loans, unlike other fixed income securities such as agency MBS or Treasuries, have both prepayment and default risk. Investors earn compensation for bearing these risks in the form of a spread above the Treasury curve.
In the marketplace lending space, investors typically buy newly originated loans from platforms at par in an arms-length transaction. At origination, we have the first observable “traded” value of the loan. The primary market provides price information for estimating spreads at origination. Credit spread at origination (“crSATO”) can be interpreted as the incremental return an investor earns for bearing default and prepayment risk for a newly issued loan over the Treasury curve.
We determine discount rates from a term structure of credit spreads by solving for the rate that equates projected cashflows with par value. (Further spread adjustments are applied for aged portfolios.)

States to Feds: Back Off on New Fintech Bank Plan (The Wall Street Journal), Rated: A

On Monday, Sens. Sherrod Brown (D., Ohio) and Jeff Merkley (D., Ore.) sent a letter to the OCC arguing that its proposal would “upset the current financial regulatory structure” and suggesting alternatives including collaboration with state regulators to aid fintech startups.

State regulators say their rules barring loans above certain interest rates, known as usury laws, are a bulwark against abusive lending practices. New York, for example, bans payday loans and makes lending at annual rates above 16% a civil offense. They plan to submit comment letters expressing their concerns.

Margaret Liu, deputy general counsel of the Conference of State Bank Supervisors, an association of state regulators, on Monday said she shared the senators’ concerns and warned the OCC’s planned expansion would “pre-empt state consumer-protection laws” and “stifle innovation by arbitrarily picking winners and losers.”

State regulators also are discussing some defensive measures, such as a mechanism to make it easier for companies to apply across multiple states for consumer-lending licenses.

Money360 Funds $ 3.87 Million Loan for Retail Center Acquisition (Marketwired), Rated: A

Money360, the leading commercial real estate marketplace lending platform, announced today that it has provided financing to a commercial property owner to purchase a fully leased retail center in Mobile, Alabama.

The $3,865,000, five-year loan is secured by the 1.61-acre, 16,710-square-foot Airport Boulevard Shops shopping center, which is 100% leased to four tenants: MovieStop, GameStop, FedEx Office and Panera Brea. The center was constructed in 2004 in the heart of Mobile’s dominant retail corridor, commonly referred to as the “Miracle Mile.”

Online lender SoFi makes its move to Meatpacking District (New York Post), Rated: B

Social Finance, the online lender better known as SoFi, is the newest tenant at 860 Washington St., the gleaming new office project in the Meatpacking District.

SoFi signed for 6,500 square feet. It will relocate from Union Square. Cushman & Wakefield repped the landlord; JLL repped the tenant.

United Kingdom

A Record Breaking Year for Seedrs: A Discussion with CEO Jeff Lynn (Crowdfund Insider), Rated: AAA

Seedrs delivered a record year of crowdfunding. In an end of the year recap, Seedrs quantified their accomplishments including:

  • £85 million invested in 159 different deals
  • 45,000 individual investments were made during 2016 from 65 different countries
  • FreeAgent, a company that raised £1.2 million Seedrs in 2015, IPOed on LSE’s AIM
  • Since platform launch 4 1/2 years ago, Seedrs has raised £190 million for 450 listed investment opportunities

Jeff Lynn: While Brexit was a disappointment at a personal and political level, it hasn’t hindered our business or our expansion. We opened new offices in Amsterdam and Berlin last year shortly after the referendum, and we haven’t seen any slowdown from entrepreneurs looking to raise or investors looking to invest into early stage equity.

Jeff Lynn: But if you’re an international business, or thinking about expanding internationally, we give you the opportunity to build an investor base across Europe and get all of the commercial and marketing advantages that come with that. And it’s the same principle for investors: if you want to find the most interesting deals across multiple countries, then we can offer you something that national platforms can’t.

Jeff Lynn: We have always been supporters of regulation in this space: we were the first regulated platform, and much of the UK regulatory regime is based on the model we designed. So broadly speaking, we welcome the ongoing regulatory review, and where there are improvements that can be made to the current system, we fully support them.

Jeff Lynn: For the industry more broadly, this will be the year in which institutional capital begins to play a meaningful role in equity crowdfunding.

None of this should come as a surprise: in many ways, equity crowdfunding has tracked the growth of peer-to-peer lending but is about four to five years behind it.

P2P Lender Landbay Granted ISA Manager Status By HMRC (Crowdfund Insider), Rated: A

Peer-to-peer lending platform Landbay announced on Monday it was granted ISA Manager Status by HMRC. This news comes less than a month after the lender received full authorization from the FCA for peer to peer lending.

The Landbay team stated that status will clear the way for the launch of their Innovative Finance ISA before the end of this tax year.

Wellesley Suspends Seedrs Campaign to Attract City Investors (Crowdfund Insider), Rated: A

Just a few weeks after launching its equity crowdfunding campaign on Seedrs, peer-to-peer lending platform Wellesley has reportedly decided to suspend the initiative as it seeks to attract city investors. As previously reportedWellesley sought to raise £1.5 million though the funding portal to continue operations.

Age of enlightenment (Credit Strategy), Rated: A

The business has also been described as the first peer-to-peer unicorn – Funding Circle – which is valued at $1bn.

The firm’s CRO Rahul Pakrashi revealed to Marcel Le Gouais how the business approaches relationship management with its micro SME customers.

MLG: Would you describe collections as sitting in first line here?

“Collections is very different from how banks manage it, because within the banks, there is a balance sheet to absorb any losses. For us, it’s most important that the borrower survives – because these are micro SMEs. The borrower might have only one supplier, so very small movements may make or break them. But if you work with them, understand them and support them, you can default them but have a view on how they can overcome their situation.”

MLG: How would you describe a typical customer?

“These types of firms don’t have many assets and they don’t have many borrowings. If you look at how they borrow from the banks, they don’t have classic SME loans, they don’t do things like hire purchase for example. Everyone has a current account but a lot of their borrowing is on credit cards.”

“So the closure rate is high but many of these are family-run businesses – perhaps just a husband and wife partnership. They basically do it to feed their families and they just want a stable income. They don’t necessarily have big expansion dreams; they don’t necessarily want to be the next Tesco.”

MLG: There’s a lot of cynical industry talk about defaults and loan loss coverage at peer-to-peer lenders, can you tell me about how that works here?

We are writing new business of about £100m each month in the UK and our default rate in the UK is six percent.

“The good thing is that in terms of coverage, investors are receiving net returns of about seven percent after all fees and losses. The loss rate is about two percent. But if you look at the gross yield, it’s about 10 percent minus one percent in fees, so nine percent.”

China

The authentication system of first P2P lending platform raises concerns (iWIN), Rated: A

The first online Debit and credit platform in Taiwan was established on March 24th, 2016. FSC and banks were deeply concerned about it. iWIN called for the people to pay attention to the identification authentication mechanism of the platform. Because the provider doesn’t prohibit minors from using the service, parents should pay attention to children’s financial condition, and ask children to protect their personal information.

Authors:

George Popescu
Allen Taylor

August 23rd 2016, Daily News Digest

August 23rd 2016, Daily News Digest

News Comments Today’s most interesting piece of news are LendUp’s $47m raise;  how the new fiduciary retirement rules will help the robo-advisor industry; how the Dodd Frank securitization risk-retention rules already affect Lending Club , Prosper and Web Bank; Financeit leveraging merchants for consumer loans; and last but not least how Australian banks are fighting […]

August 23rd 2016, Daily News Digest

News Comments

  • Today’s most interesting piece of news are LendUp’s $47m raise;  how the new fiduciary retirement rules will help the robo-advisor industry; how the Dodd Frank securitization risk-retention rules already affect Lending Club , Prosper and Web Bank; Financeit leveraging merchants for consumer loans; and last but not least how Australian banks are fighting an open-data APIs mandate.

United States

Canada

United Kingdom

China

Australia

United States

LendUp fights big banks with $ 47 M for compassionate credit cards, (TechCrunch), Rated: AAA

Banks win when the poor lose. Credit cards can trap people in debt and bleed them dry with late fees. But it’s this exploitative experience that makes banks vulnerable to fintech startups like LendUp that are willing to undercut them and make up margin with software efficiency.

It’s that strategy of building an enduring consumer banking brand on the principle of compassion that let LendUp raise a new $47.5 million round led by Y Combinator’s growth fund. This Series C values LendUp “substantially higher than the last time” it raised in January 2016, says CEO Sasha Orloff. That’s an impressive feat during a rough season for late-stage fundraising.

LendUp will apply the cash toward scaling out its L Card, a credit card with no hidden fees and a flexible payback schedule.

LendUp was founded in 2011, and first attacked the scammy payday-loan business. It stole customers from the cash-advance storefronts that blanket low-income neighborhoods, and retained them by providing financial education.

Credit cards are 100X larger market, though, so earlier this year it raised $100 million in debt to fund the lending, and $50 million in a Series B.

Even though it still had plenty of money left from that, LendUp chose to accelerate its plan with today’s $47.5 million led by Y Combinator Continuity and joined by Google Ventures, Thomvest Ventures, QED Investors, Data Collective, Susa Ventures, Radicle Impact, Bronze Investments, SV Angel and some angels.

Luckily, LendUp is doing one thing to make it more nimble than its competitors: It’s building its whole tech stack in-house. “Everyone else outsources their tech,” Orloff notes.

Technology’s rising role under DoL fiduciary, (Tradestreaming), Rated: A

In April 2017, retirement guidance over 401(k)s and IRAs will need to be given under a fiduciary responsibility. The DoL rule, meant to protect common investors, requires financial advice and retirement guidance over 401(k) and IRAs to be given under a fiduciary responsibility. This means advisors must put the interests of clients first, before the advisors’ own interests or those of the advisors’ firms.

About 50% of 401(k) rollovers to IRAs can be attributed to a decision by an advisor, a sum totaling about $320 billion each year, according to Yuval Zurel, CEO of FeeX, a company that uses big data to determine whether a 401(k) rollover is compliant with the new DoL fiduciary rule.

Large firms surveyed by Deloitte estimate their costs of becoming compliant to be over $38 million, with additional ongoing expenses to vendors and suppliers to manage the duplicate systems at $9.5 million.

One concern raised by opponents to the rule package is that smaller retirement accounts may be orphaned, as lower fees will make them unprofitable for brokers. Technology consultancy CGI recommends that firms handle smaller accounts through roboadvisors, which will lower the cost of managing those accounts.

Issuers Flummoxed by Risk-Retention Rule, (Anonymous tip), Rated: AAA

A swat of asset-backed bond issuers have fallen behind schedule in their preparations to comply with the Dodd-Frank Act’s risk-retention rule.

Securitization attorneys initially expected the process to be straightforward, with most sponsors keeping the required 5% stakes in their deals via either “horizontal” interest in a single class or “vertical” positions in each tranche. But a number of unforeseen complications have sent them back to the drawing board.

The obstacles appear largest for issuers of securities backed by auto loans, equipment cash-flows and personal loans.

WebBank, which serves as the originator of record for Lending Club and Prosper loans, apparently has received inquiries about acting as a sponsor but has turned down any such proposals. One option, at least for Lending Club, would be to create a new sponsor entity through a hedge fund that the company already uses to fund some of its loans.

How Wise Are Crowd? A Comparative Study of Crowd and Institutions in Peer-to-Business Online Lending Markets, (Social Science Research Network), Rated: A

This paper examines the performance of crowd to screen the creditworthiness of small and medium sized enterprises (SMEs) compared with institutions in the context of new online peer-to-business lending markets. Exploiting the randomized assignment of originated loans to institutions and the crowd, we find that crowd underperform institutions in screening SMEs, thereby failing to lend at interest rates that adjust for the likelihood of defaulting on a loan. Moreover, the underperformance gap of crowd compared with institutions widens with risky and small loans, suggesting that crowd lack the expertise to assess the risks or the incentive to expend resources to perform due diligence. Overall, our findings highlight when crowd face limitations in screening SMEs.

THE REGTECH REPORT: Global regulatory requirements are creating a huge opportunity for regtech firms, (Business Insider), Rated: A

Here are some of the key takeaways:

  • Regtechs can help in many areas of compliance. This goes beyond automating legacy processes and can include interpreting legislation, designing new compliance processes, and managing and processing data.
  • Large financial firms represent the biggest opportunity for regtechs, but they’re also well suited to help fintech startups.
  • Regtechs face a number of hurdles to achieving significant scale and success. These include competition in the industry, the challenges of international growth, and building trust with customers.
  • Implementation of regtech solutions will result in staff reduction. These technologies will augment compliance teams in the short term, but could lead to job losses among compliance professionals in the longer term.

 In full, the report:

  • Defines what regtech is and the problems regtechs are trying to solve.
  • Highlights the advantages regtechs have over legacy compliance solutions.
  • Provides regtech company case studies.
  • Details the outlook for regtechs globally and the impact they will have on compliance teams.

 Canada

Businesses and consumers win as Financeit launches Canada’s next-generation point-of-sale financing platform, (Email from Financeit), Rated: A

Financeit, Canada’s leading cloud-based point-of-sale financing platform, has launched Financeit Direct, a direct-to-consumer tool geared towards merchants looking to offer financing solutions to customers for big-ticket purchases, such as home renovations.

Financeit is a free-to-use platform that makes it easy for businesses to offer powerful financing options to their customers from any device. The company provides financing solutions through a safe and secure platform that traditionally were only available to big box retailers.

Since launching in 2011, Financeit has worked with over 6,000 retail, vehicle, home improvement and healthcare businesses to process more than $1.5 billion in loans in Canada and the United States.  Financeit is a private company and has raised money from a variety of shareholders, including Goldman Sachs and FIS Global.

With Financeit Direct, service providers retain control of the sale but can invite their customers –by email or text– to participate in the application anytime, anywhere. For example, merchants may ask their customers to upload a picture of a void cheque or pay stub directly to Financeit via their mobiles phones, thereby avoiding awkward financial discussions and making the application process smoother and faster. Consumers get instant credit decisions, fair rates and full transparency during the financing process via their own devices, and are then able to work directly with Financeit throughout the loan period.

United Kingdom

Misys eyes £5.5bn IPO – Sunday Times, (Finextra), Rated: A

Core banking supplier Misys has appointed advisors ahead of a possible £5.5 billion London initial public offering, according to the Sunday Times.

The float would prove a boon for Vista Equity Partners, which acquired Misys in 2012 for just £1.27 billion after merger talks between the core banking vendor and Swiss rival Temenos collapsed.

Vista is understood to have been looking for a buyer since late 2014, with Singapore’s state-owned investment fund Temasek Holdings and Canadian pension funds among those rumoured to have shown interest.

Bank of England may cut rates again in September: BAML, (Markets), Rated: A

The Old Lady of Threadneedle street could reduce rates even closer to zero if UK data prints don’t start improving, according to one American investment bank, and that may still not be enough to boost the ailing economy.

China

China Lending Corporation Reports 2016 Six-Month Financial Results, (Business Wire), Rated: AAA

China Lending Corporation (NASDAQ:CLDC; CLDCW) (“China Lending” or the “Company”), a leading non-bank direct lending corporation servicing micro, small and medium sized enterprises (MSME), currently underserved by commercial banks in China, today reported its financial results for the six-month period ending June 30, 2016.

Founded in 2009, China Lending is a non-bank direct lending corporation and provides services to micro, small and medium sized enterprises, farmers, and individuals, who are currently underserved by commercial banks in China. Headquartered in Urumqi, the capital of Xinjiang Autonomous Region, with a registered capital of $94.7 million as of June 30, 2016, China Lending is one of the largest direct lending companies in the region in terms of registered capital.

First Half 2016 vs. First Half 2015

Total interest and fee income (revenue) increased 30% to $17.8 million from $13.8 million;
Interest expense was $2.4 million compared to $1.6 million;
Net interest income increased 18% to $13.8 million, compared to $11.6 million; and
Net income increased 30% to $9.9 million, compared to $7.6 million.

As of June 30, 2016

Registered capital was $94.7 million
Total assets were $147.8 million
Total liabilities were $37.1 million

Jingping Li, Co-Founder & CEO of China Lending, stated, “The 30% increase in revenue and net income for the 2016 six-month period as compared to same period of last year is due to the sustained growth in funding demand in the region, higher interest lending rates supported by China’s government policies, and also revenue generated from our newly established consulting and credit risk analysis business segment, which we launched in August of 2015. This segment generated approximately 23% of total revenue for the first six months of 2016 as compared to zero in the same period of last year. Our average interest rate was 22.77% in the first six-months of 2016 vs. 21.24% in the same period of last year.

Currently, China Lending is one of the largest direct lending companies in Xinjiang, in terms of registered capital which reached $94.7 million at June 30, 2016.

Australia

Banks resist fintech push for open data regime, ( AFR), Rated: A

The issue of start-up access to data is a global one. The Competition and Markets Authority in the UK said last week that banks should be required to implement open banking by early 2018 and to share their data securely with other banks and with third parties, enabling them to manage their accounts with multiple providers through a single digital ‘app’, to take more control of their funds (for example to avoid overdraft charges and manage cashflow) and to compare products on the basis of their own requirements.

The Productivity Commission’s review into ‘Data availability and use’ is looking at whether a system of “open APIs” [application programming interfaces] could be created along the lines of a new regime in Britain to allow competitors to plug directly into data sets held by banks, such as transaction account activity.

Fintech Australia has asked the commission to recommend an “open banking API” regime be mandated within two years.

In its submission to the commission, the Australian Bankers’ Association acknowledges that increasing access to data could create more targeted and tailored products but said this should be allowed to occur organically.

But Fintech Australia, on behalf of 25 start-ups, data aggregators and venture capital investors, says an “open banking API” standard would increase productivity, reduce the cost, time and effort required to switch banks, and would “empower consumers to use their data to be able to make better financial decisions”.

Separate submissions by the ABA, Commonwealth Bank of Australia, ANZ Banking Group, Insurance Australia Group and the Australian Securities Exchange all urge the government to not regulate to mandate open-data sharing.

The ABA said building an open banking standard was “likely to be a very costly exercise for banks” and would provide competitors with access to a valuable commercial asset. “The banking industry notes that business and customer relationship data are a valuable commercial asset and are subject to extensive investment, privacy and other obligations,” the ABA said. “Changes should not be made that may affect the ability of businesses to manage their data in the interests of customers and owners.”

Author:

George Popescu