After the Great Recession from 2007-2009, income growth nearly flattened for the average American while prices have been continuously rising. Almost half of America is unable to raise $400 for an emergency. With payday loans turning out to be predatory debt traps, it is almost impossible to raise a small loan for a short period […]
After the Great Recession from 2007-2009, income growth nearly flattened for the average American while prices have been continuously rising. Almost half of America is unable to raise $400 for an emergency. With payday loans turning out to be predatory debt traps, it is almost impossible to raise a small loan for a short period of time.
Realizing the fact that almost two thirds of the country is under a non-prime credit risk, Hundy wanted to reduce the grievances of the new middle class. The idea was to build a true peer-to-peer lending marketplace which would serve as a platform for raising loans of up to a few hundred dollars at a low interest rate. The platform is open to everyone and is easy to access. It is a friendly, convenient, and transparent way to borrow money from peers.
The mobile application is a community-based model which facilitates interaction between the borrower and lender. The company’s long term goal is to build a network where people can borrow, save and invest, all at the same place.
Focused on small dollar loans in the marketplace lending market, Hundy is based out of San Francisco. The mobile native platform was launched in 2016 and focuses on providing loans to the underserved at a fair price. It has raised over $400,000 in a friends and family round. In a conversation, Pete Budlong, the founder and CEO of the company, discussed how instability has become the new normal after 10 years of recession and how Hundy addresses this issue.
How Hundy Works
Getting a loan over the Hundy application is a very simple process. Users sign up using Facebook. After signing up, they sign agreements and link bank accounts. After a credit approval process, their profile is ready and they can start applying for loans. The company offers the option of hard and soft credit pulls so as not to adversely affect the user’s credit score.
On getting credit approval, users can immediately request their first loan of up to $100. However, if not approved automatically, they’ll get approved based upon their participation in the community over time. Once approved and a request for a loan has been made, the user’s application is processed within minutes and the loan amount transferred into their bank account by the next business day.
Loan payments, along with a repayment fee, will be withdrawn from the user’s bank account on the selected date of repayment, which can be up to four weeks after the date of loan issuance. If the user can’t pay off the loan on time, there is an option to convert the loan into a 60-day installment loan with no penalty. Every time a loan is paid off, the borrower’s credit limit will go up until it reaches the maximum of $250. The borrower is updated throughout the process via e-mails and text messages, making all transactions over the platform transparent and fair.
The company has originated over 1,000 loans and has an APR of 180% as compared to 350% for traditional payday lenders. Its main competitor in the online space is LendUp, and it competes with payday lenders in the offline market.
Hundy’s Reach and Market Stats
Currently holding a full lending license in California, Hundy is planning to expand its services to other states in the US. The app will be launched in Texas and Florida by the end of this year. The mobile application was ranked as high as 89 in the app store under the finance category with about 70K registered installs. Around 60,000 downloads are wait-listed. This is a massive reach considering that the company is not engaged in any kind of advertising activity. Another co-founder of the company, Ram Hegde has been operating a developer team in India, and a team of two in the US is helping Pete with the marketing.
The community currently has a monthly growth rate of 30%, which is doubling every two to three months. Most of its traffic, about 95%, comes from iOS devices.
Hundy’s Future Plans
The company’s goals are structured into three milestones. The first leg constitutes the launch of the social feed, which is already finished. Almost one-third of Hundy’s borrowers participate on this social feed. The second leg accounts for a non-profit lending product. The company made a formal announcement for the non-profit product at the Money 20/20 startup academy. The third leg involves for-profit crowdfunding, and the company aims to accomplish this by the end of this year.
As of now, the company is not looking to raise money but to originate borrowers. Once the application manages to strengthen its hold on the borrower side, it will focus on engaging lenders. The aim is to build a community-based lending platform where borrowers and lenders can directly interact with each other. These communications between various stakeholders also help create a database for developing machine learning- and artificial intelligence-driven algorithms for the platform. Currently, the company is serving accredited investors through a Reg D exemption but will soon leverage Reg CF and Reg A+ for allowing unaccredited investors to pool their money for loaning to potential borrowers.
People find it difficult to take out small loans at a reasonable rate of interest. The Hundy application proves to be a great platform in such scenarios, offering short-term loans at a fair price. It is aiming to provide affordable loans, not just in California but all across the US, by building a community where borrowers and lenders can communicate directly with each other through the app.
Steve Polsky has a simple vision: Take financial inclusion to the world’s unbanked and underbanked by extending short-term microloans through their smartphones so they can stay connected on those devices longer and more conveniently. “We have an opportunity to walk hundreds of millions of people up the pathway of financial services through their mobile phones,” […]
Steve Polsky has a simple vision: Take financial inclusion to the world’s unbanked and underbanked by extending short-term microloans through their smartphones so they can stay connected on those devices longer and more conveniently.
“We have an opportunity to walk hundreds of millions of people up the pathway of financial services through their mobile phones,” he said. “Nearly 80 percent of the world is on prepaid phone, but their usage is very different than in the United States.”
To that end, prepaid phone users spend trillions of dollars every year on transactions related to those devices. In fact, Polsky said, the most frequent financial transactions for a large number of smartphone users are done on their mobile phones. Many smartphone users prepay for their service by the day, but Juvo allows them to extend their service by borrowing the money to pay for it while building a credit history that can then be used for future credit. After starting in Latin America three years ago, he has taken his brainchild into 25 countries with 500 million downloads.
Juvo’s Explosive Launch
Chief Executive Officer Polsky founded Juvo in 2014, but the actual launch of the app didn’t take place until September 2016. Out of the gate, the company saw 100 million downloads. Growth since that time has quintupled, a big stretch of business from the launchpad of Guatamala and El Salvador where the first users logged in.
“Today, 43 percent of Guatamalan smartphones transact with us multiple times and 47 percent of smartphones in El Salvador transact with us multiple times,” he said.
From these countries, Juvo expanded quickly into Southeast Asia and Eastern Europe. To get to the users in those countries, however, the company had to establish relationships with the mobile operators that provide the service to smartphone users. He spent two years setting up the infrastructure in order to do business and get the reach that he has. Currently, Juvo partners with Millicom, Cable & Wireless, and Tune Talk in the countries where they are operational. In the U.S., they work with Sprint. Every three months, the number of transactions processed through the mobile app doubles putting them on pace to register half a billion transactions by the end of this year.
Financial Identities in the Developing World
In essence, what Juvo is attempting to do is help people in developing countries establish a financial identity. According to World Bank figures, two billion people worldwide in 2014 didn’t have bank accounts. That was down from 2.5 billion three years earlier. At that pace, it will be 12 years before the entire world has a bank account. Juvo wants to make that happen more quickly.
“We call it identity scoring,” Polsky said. “In 83 percent of the world, there is no underlying credit scoring, no signals about financial capabilities, and we can reach a broad number of people to help them gain access to more financial services.”
Those services include checking and savings accounts, credit and debit cards, mortgage products, personal and consumer loans, business financing, investment vehicles, insurance products, credit scores, and more—services that many of us in Western societies take for granted. By bringing the world’s unbanked and underbanked into the financial ecosystem, they’ll have access to more buying power and consumers, and it has the potential to increase the service clout of companies with the ability to service them, such as online lenders. In short, a rising tide raises all ships.
Juvo’s Financial Clout
Recently, the company closed a B Series funding round with $40 million led by New Enterprise Associates and Wing Venture Capital. That takes their total funding up to $54 million including the Series A round completed in September 2016. On top of that, in May, Juvo appointed Ron Suber to its board of advisors.
They’ve also got backers across a broad spectrum of telecom and fintech sectors, Polsky said.
“We partner with these big mobile operators and help them with the way they service their customers,” Polsky said. “And we do it without charging the end customer.”
Instead, they provide the funding to extend mobile service for those consumers without charging fees or interest. A person in Africa, for instance, may be paying for mobile service by the day because that is all they can afford. But they can download the Juvo app and get an extension on their service for one day. After paying for that day’s service on their own timetable (no late fees) they are able to move up to a larger commitment and get funded for two days of service.
“So the consumer can move up as they pay off the previous commitment to bronze, then silver, then gold, then diamond,” Polsky said. “And we do it without ever using the words ‘bank,’ ‘loan’, or ‘credit’.”
This benefit is provided at the expense of the mobile operators, who pay Juvo a percentage of the extra business they gain by extended longer mobile service agreements with their customers. Everyone wins.
Polsky said the worldwide average revenue per user (ARPU) per month is about $12, but it varies in different parts of the world. In the U.S., it’s $30. In other parts of the world, the ARPU is $2.
Communication is a Basic Human Need
Consumers in various parts of the world download Juvo at Google Play, the Apple store, and anywhere mobile apps are available. Most users, Polsky said, are on Android devices because they tend to be more affordable, but the company wants to be available anywhere customers may download the app.
Worldwide, the smartphone is the most important device for most people because communication is a basic human need. And because computers are so much more expensive compared to smartphones, the smartphone is an entry-level device to access of much of what the developing world has to offer. Still, Juvo is a unique company even in Silicon Valley where it is located because of the global nature of its business and the channels through which they reach their customers.
“The idea of someone being out of data and needing to get more minutes on their phone and being able to borrow the money for that, that actually started in Africa,” Polsky said. “But we take it to another level. We’re willing to go up to a full month.”
In Africa, everyone is familiar with M-Pesa, a mobile-based money transfer and microfinancing service. That company is popular in Tanzania and Kenya. Nevertheless, Polsky doesn’t see anyone competing directly with Juvo at this point in the company’s lifecycle. That doesn’t mean there won’t be competition at some point in the future.
“Any time you’re doing something well, you’re going to have competition,” he said.
Right now, though, he’s focused on expansion.
“We’re hoping to partner with upstream financial services and with more big mobile operators,” he said. “That’s how we’ll grow.”
Ron Suber Joins Credible as Executive Vice-Chairman (Credible), Rated: AAA
Renowned fintech executive, advisor and investor Ron Suber has joined personal finance marketplace Credible.com as executive vice-chairman and a member of the board of directors.
“It’s been extremely exciting to see the Credible team turn a startup with a promising business model into a fast-growing company that’s respected by consumers, lenders and the industry” Suber said. “I have decided that now is the right time to help Credible seize their broader opportunity in the fintech ecosystem.”
The older vintages have longer lines, as they have more months of history. Using this data, we can examine how loans booked at different times compare to each other at equivalent periods in their life-cycle. This can help an investor evaluate their current portfolio and help them make comparative judgments about its performance.
Factors to Consider Within Vintage Analysis
Vintage analysis can also help us to see how loans within a particular credit grade perform over time. In our prior analysis, we examined the performance of the top graded loans (A for Lending Club and AA for Prosper). However, as time has passed, these two platforms have increasingly been lending to borrowers with credit just below the top grades.
FICO Score and Debt-to-Income Ratio
From the data below we can see how loans from Lending Club charge-off over time controlling for the debt-to-income ratio of the borrower.
Nearly 20% year-over-year revenue growth: Revenues totaled $150.5 million, an 18.7% increase from $126.8 million for the prior-year period.
Almost 29% year-over-year growth in loans receivable: Combined loans receivable – principal, totaled $481.1 million, a 28.7% increase from $373.7 million for the prior-year period.
Stable credit quality: Loan loss provision was 48.0% of revenues and within our targeted range of 45%- 55%. The ending combined loan loss reserve, as a percentage of combined loans receivable, was 13.8%, lower than the 15.7% reported for the prior-year period.
Customer acquisition costs within targeted range: The total number of new customer loans for the quarter was approximately 66,000 with an average customer acquisition cost of $294, within our targeted range of $250-$300.
Second consecutive quarter of net income: Net income of $3.0 million, or $0.08 per diluted share, versus a net loss of $7.5 million, or $(0.59) per diluted share, for the second quarter of 2016.
Adjusted EBITDA margin: Adjusted EBITDA totaled $19.8 million, up from $7.3 million in the second quarter of 2016. The Adjusted EBITDA margin increased to 13.2% from 5.8% for the prior-year period.
Second Quarter 2017 Business Highlights
Elevate IPO. On April 6, Elevate began trading on the New York Stock Exchange under the “ELVT” ticker symbol.
$200 Million in Outstandings for Elastic. Just a year after achieving $100 million in outstandings, Elastic surpassed $200 million in total principal outstandings, with more than 120,000 open accounts.
Elevate Labs Launched. The Company launched Elevate Labs, including its new San Diego-based Advanced Analytics Center, underscoring its approximately $40 million annual investment in state-of-the art technology and data science.
RISE Enters Kansas with Line of Credit Product. Bringing additional responsible loan opportunities to non-prime consumers and expanding its product offering, RISE entered its 16th state, Kansas, the first state where RISE offers a line of credit product.
Savings for Customers. The average effective APR of its products for the quarter was 131%, down from 148% in the same quarter last year. The Company estimates indicate that Elevate’s products – Rise, Elastic and Sunny – saved customers approximately $304 million in the three months ended June 30, 2017 versus payday loans.
According to the company, revenues for the quarter totaled $150.5 million – an 18.7% increase versus year prior where Elevate delivered $126.8 million in revenue. Elevate reported net income of $3.0 million, or $0.08 per diluted share, versus a net loss of $7.5 million, or $(0.59) per diluted share, for the second quarter of 2016.
Combined loans received were said to total $481.1 million, an increase of 28.7% from $373.7 from year prior quarter.
To be a digital lender, banks and credit unions must do more than provide a digital app. Internal lending processes must be transformed to eliminate friction and unneeded steps, with artificial intelligence (AI) supporting proactive loan decisions.
According to PwC, a financial organization must initially define what is desired from both a customer experience and operational efficiency basis around consumer lending. Next, banks and credit unions must build a digital lending strategy around the following organizational competencies. The path to becoming a true digital lending organization involves five steps.
Data-Driven Decision Making
Effective Development Approach
Digital Borrower Expectations
The expectations of the digital borrower have increased over the past several years, mostly based on marketplace offerings and digital experiences in other industries. While the interest rate and closing costs on loans are still primary considerations, the speed, simplicity, transparency and customer service of the entire process is important.
While some lender apps offer the higher-ranking features – such as the ability to calculate the loan amount that the borrower can afford and the ability to lock in an interest rate on a loan, most of the other features are still not offered by most organizations.
Being a Digital Lender is More Than Just Fewer Clicks
To become a digital bank, organizations need to think beyond ‘minimizing the number of clicks’, reducing manual data entry, and improving the speed of decisions.
The process of becoming a digital lender for the long-term moves investments from ‘digital features’ to a ‘digital mentality’ and process that can support changing digital lending options. It is a major move from investing in just digital output to investing in the digital input that works behind the scenes. It is a strategic framework for the future of digital lending.
PeerStreet Integrates with Personal Capital to Provide More Detailed Investment Overview (PeerStreet Email), Rated: A
PeerStreet, an award-winning platform for investing in real estate backed loans, has announced an integration with Personal Capital, powered by the Envestnet | Yodlee Data Aggregation Platform. Customers of both Personal Capital, an automated investment service with more than $4.8 billion assets under management, and PeerStreet can now view their PeerStreet positions within the context of their investment portfolio on Personal Capital.
Realty Mogul’s REIT Turns One (Realty Mogul Email), Rated: A
Celebrating its one year anniversary, MogulREIT I recently declared its twelfth consecutive month of 8% annualized return on investment. With ten assets across the country, MogulREIT I is a diversified portfolio of commercial real estate investments designed to provide consistent cash distributions, while protecting and returning capital contributions.
Money360, a direct marketplace lender focused on commercial real estate, today announced that the company closed $143 million in loans in the second quarter, marking the lender’s best quarter to date. Money360 has now closed more than $350 million in total loans and is on pace to close more than $500 million by the end of the year. On average, the company is now closing $50 million in loans each month.
A few of the $143 million in loans closed in the second quarter include:
A $15.6 million bridge loan for a three-tenant medical office property in Grand Forks County, North Dakota.
A $11.1 million bridge loan for the acquisition of a multi-tenant retail property in Wayne County, Michigan.
A $9.7 million bridge loan for a two-story, 198-room hotel property in Cumberland County, North Carolina.
The assault on the Wells Fargo brand continues, with a lawsuit accusing the bank of pushing almost 250,000 of its clients into delinquency by forcing them into auto insurance they didn’t need — or even ask for, Bloomberg reports.
The bank allegedly made millions of dollars off unsuspecting clients, according to the proposed class-action lawsuit filed in San Francisco federal court and cited by the newswire.
Wells Fargo allegedly didn’t check whether its clients taking out auto loans already had auto insurance, or ignored the fact that they did, Bloomberg reports.
Markel co-CEO Richard Whitt III on the $919M acquisition of State National
We, like a lot of people, are starting to look at the insurtech space. And State National, I think they are ideally situated to sort of be the go between the insurtech folks and sort of your standard insurance carrier types. It’s a clash of cultures there, I would say.
The insurtech folks are used to things happening lightening fast and with minimal regulatory issues and all that and that’s not insurance. So there almost needs to be a translator between insurtech folks and standard insurance folks. And that is a role that State National plays…And we see them helping us with our insurtech initiatives sort of being that translator between us and those folks.
Chubb CEO Evan Greenberg: “Change is coming”
But with that said, change is coming. And we are not alone in terms of carriers improving their capabilities, because of what technology brings that will lead that change. It’s around data, it’s around straight through process, it’s around data that improves the customer experience, while at the same time improving your ability to select risk and to do it quickly i.e. in seconds and to be able to then straight through process business.
You taking out a loan for your business and technology enables those other forms of distribution. The customer will buy it from a desktop, the customer will buy it from a mobile device, they will buy it any time anywhere and they will service it anytime anywhere.
Into this void steps Fluid, the brainchild of Timothy Li, our next guest on the Lend Academy Podcast. He has found a unique way to provide students access to credit and consequently a way to start building their credit while they are in college. Fluid provides small loans of up to $500 at 0% interest. It is a fascinating idea that we explore in some depth on the show.
Financial system regulatory costs continue to climb in part due to it being rife with problems that led to 45% of financial intermediaries, such as money transfer services and stock exchanges, experiencing economic crime. Blockchain increases transparency and decentralizes the financial system with encrypted, unforgeable records embedded in a secure network. By reducing transaction costs and removing intermediaries, blockchain technology is poised to increase mass peer-to-peer collaboration, which could make existing financial organizations unnecessary.
Automated investment services, sometimes referred to as robo-advisors, are emerging as an easily accessible, cost-efficient solution to managing assets with 24/7 availability and annual fees of .2% to .5%, making it substantially less than typical rates.
The financial technology upsurge is bringing accessibility and availability to the forefront, making existing banking options resemble archaic institutions. With apps that let you make quick, feeless transactions (such as Venmo) and peer-to-peer lending platforms (such as Lending Club), customers and millennials are welcoming these innovative platforms. According to a 2015 report, 75% of millennials visit bank branches either once a month or less than that, and 38% of them don’t use a branch to perform banking activities.
Dallas- based 2020 REI Group has announced the creation of a data services and technology division to further their mission of providing products and services to real estate investors nationwide.
The new division will be labeled as REI Data Systems and will be led by Mike Inman, Vice President of Technology for 2020 REI Group. Inman was most recently IT Manager of Application Development for the City of Grand Prairie and has a vast background in cloud based applications, GIS mapping, mobile applications, and data analytics.
The official launch for InvestorWell will be mid-August. The platform will help real estate investors find funding for their projects based on eight simple questions.
Long-term saving is a classic case study in behavioural biases. These must be managed and mitigated – whether it is through digital or face-to-face advice.
Inertia is one such bias. While people will generally put off taking action, research has shown that if they are intimately involved in preparing a plan, they are more likely to stick to it. The most committed planners also tend to be the most financially literate.
While robo-advisors are getting lots of press at the moment, they are mostly just a delivery mechanism. A nice user interface should not be a substitute for solid advice that ultimately addresses a key financial and behavioural problem. Digital poor advice is still poor advice.
Users should be asked, in non-misleading terms, whether they want a basic, average or luxury retirement lifestyle.
The language should be free of jargon and go to the heart of the users’ problem.
The tool should allow users to be actively involved in making the trade-offs based on their unique needs, wants and circumstances.
In the real world, however, insurance coverage hasn’t kept up with the social and economic changes of recent years. Sharing economies have gained scale. Jobs have gone from full-time to gig-based. And the vast millennial generation has entered adulthood intent on completing any complex transaction in a couple of minutes online.
So far this year, insurance-focused startups have raised more than $700 million in venture funding, according to Crunchbase data, with significant backing from both traditional VCs and large insurers. The lion’s share of investment has gone to companies pioneering and popularizing coverage categories and delivery models, with a particular focus on millennial customers.
One of the most richly funded players in this space is Trōv, which has an app for quickly insuring personal and work items like laptops, smartphones and high-end cameras. The five-year-old company raised a $45 million Series D round in April led by reinsurer Munich Re, bringing total funding to nearly $90 million.
Cover, which just closed an $8 million Series A, offers a similar service. Customers take a picture of the item they want to insure and Cover offers a policy, underwritten by a partner insurance firm.
One of the most richly funded insurance startups over the past few years is Metromile, which insures based on how much customers drive. Rack up few miles, and pay little beyond a small monthly base rate. Drive more, and it goes up. U.K.-based Cuvva, meanwhile, has raised seed funding to build out insurance offerings for short-term use of a car, for people learning to drive and for people who drive very little.
Silicon Valley-based Hippo is also marketing itself as a new kind of homeowners insurance company, with policies that offer stronger protections for common valuables like home electronics.
For short-term rentals, meanwhile, Slice Labs is partitioning off a space.
Next Insurance, founded last year, sells coverage for yoga instructors, photographers, home contractors and others whose needs don’t always fit with standard insurance policies. The Silicon Valley company raised $48 million to date from VC and insurance industry backers. Bunker, which bills itself as an insurer for freelancers and independent contractors, is also scaling up. The San Francisco company closed a $6 million Series A round in May.
One is Ladder, which has raised $16 million to build out a platform for offering direct-to-consumer term life insurance online. Another, Brooklyn-based Fabric, has raised $2.5 million for its digital platform offering instant quotes on accidental death coverage, as well as broader life insurance policies.