News Comments Today’s main news: Ron Suber joins MoneyLion board. Prosper reports full year results. Orca launches P2P investment platform. Santander, Ripple partner on money transfer app. Cash Suvidha raises $1M. China opens payment market to foreign companies. Today’s main analysis: The cost of bankruptcy. Today’s thought-provoking articles: LendingTree studies the cost of bankruptcy. Liwwa creates big impact in MENA. The lowdown […]
The cost of bankruptcy. “Mortgage borrowers with scores between 720 and 739 three years after bankruptcy were offered similar APRs to those without bankruptcy, indicating a strong credit score can counteract the effects of a prior bankruptcy.”
Prosper today reported full year results for 2017. Loan originations and transaction fee revenue were up 31% and 37% year-over-year to $2.9 billion and $130 million, respectively. Prosper also generated cash from operations for three consecutive quarters, starting in Q2 2017.
Summary of Key 2017 Financial Highlights:
Surpassed $11 billion in cumulative personal loan originations through the platform since inception
Increased loan originations 31% and transaction fee revenue 37% year-over-year
Net loss of $115 million included $89 million of non-cash charges related to warrants to purchase preferred stock that were issued to a consortium of investors and a third party in connection with a settlement agreement
Adjusted EBITDA(1) of $5 million increased $43 million year-over-year
Generated cash from operations for three consecutive quarters, starting in Q2 2017
Closed $50 million Series G funding, ending 2017 with approximately $100 million of liquidity
LendingTree today released the findings of its study on the cost of bankruptcy. The findings show that while a prior bankruptcy can make it more expensive to borrow, it’s certainly not impossible to qualify for credit. If borrowers wait to apply for new loans even just a few years after bankruptcy, they may find rates that aren’t too far off from what other borrowers are being offered.
Forty-three percent of people with a bankruptcy on their credit file have a credit score of 640 or higher within a year of the bankruptcy. Within two years of bankruptcy, 65 percent have a credit score above 640.
A typical $15,000 auto loan incurs an extra $2,171 in borrowing costs for those seeking offers less than a year after bankruptcy, but just $799 for those who wait at least two years after bankruptcy.
Borrowers who have a 3-year-old bankruptcy and apply for a mortgage see an offered APR that is 19 basis points higher than those without a bankruptcy. The higher the APR, the higher borrowing costs will be.
Mortgage borrowers with scores between 720 and 739 three years after bankruptcy were offered similar APRs to those without bankruptcy, indicating a strong credit score can counteract the effects of a prior bankruptcy.
Despite becoming a bank holding company, Goldman’s business remained focused on corporations and the wealthy. That changed a few years ago as it began plotting new strategies, says Omer Ismail, chief commercial officer for Marcus. The Wall Street Journal recently published an in-depth account of the creation of Marcus, including juicy tidbits like conversations over lunch in the Hamptons.
Goldman decided to tackle the unsecured personal loan space first.
Marcus has found its particular angle in making its loans highly customizable. Rather than setting traditional loan terms, like three years or five years, it asks you how much you can afford to pay each month in addition to asking you how much you need to borrow. So, you might end up with a 31-month installment loan, which is not a conventional loan term.
Synthetic identity fraud usually involves creating an entirely new identity composed of information with no ties to a known consumer. This identity is then used to apply for credit and services. Synthetic identities are one of the most difficult fraud threats institutions face today and their prevalence has exploded over the past several years. Synthetic identity fraud is arguably the perfect crime because there is no consumer victim.
Put yourself in the shoes of a fraudster. As you consider your many nefarious options for committing a crime and getting away with it, you decide that the best crime is one where there is no clear victim. Sure, robbing a bank using a synthetic identity victimizes the enterprise, its shareholders, its employees and taxes its customers. However, no one individual is intentionally, directly hurt. Therefore, the non-existent victim does not alert authorities and the fact that a crime has been committed is lost to history. There is a “credit loss” and the debtholder is impossible to locate. The debt is written off, or sold, and the fraud is perpetuated yet again. Like I said, the perfect crime.
The average borrower in Hawaii spends 36.2 percent of their monthly paycheck on credit card, student loan, and housing payments, according to a study by Credible.com, making Hawaii the state with the highest average debt-to-income ratio.
According to the online lender marketplace, the average monthly credit card payment for a Hawaii resident is $238, the average monthly student loan payment is $385, and the average monthly housing payment is $1,091, for a total of $1,714.
With average annual income in Hawaii at $56,889, the state’s average debt-to-income ratio is 43 percent more than residents of Michigan, the state with the lowest debt-to-income ratio.
On average, Michigan residents in the dataset spent 25.3 percent of their monthly income on credit card, student loan and housing payments.
Nationwide, the study found the average American in the dataset paid $207 on credit card debt, $370 on student loans and $906 on housing each month, while taking home an average salary of $60,671.
When fund managers choose experienced service providers, including custodians, auditors, accountants, attorneys and administrators, they can increase transparency in the fund, which can in turn promote investor confidence. Service providers can be much more than just an added expense; they can be valuable partners that can help position the fund for success.
Orca, an independent data, research and analysis provider targeting the the UK peer-to-peer (P2P) lending market, has launched its premier investment platform. The new platform will allow investors to easily diversify across multiple P2P lending platforms from a single P2P investment portfolio.
Orca seeks to provide their new service to the retail investor market.
Total cumulative lending is £13 billion since the asset class was created in 2005. Orca’s secondary service, Orca Analytics, has 2016 to 2017 growth at 18%, with £4 billion lent in 2017 alone. The estimated customer-base stands at approximately 200,000-250,000 retail investors.
The Orca Investment Platform Features include exposure to both consumer, business and property lenders. Investors may expect a return of 5% net of Orca’s cut which is a 0.65% fee.
Khosla said his firm is already in “open conversations” with multiple countries about its global expansion plans, including the U.S., Canada, Spain, Italy, Germany, Singapore, South Africa and Australia. The company has already established offices in some of those countries, he added.
OakNorth is expanding abroad by licensing its technology platform, ACORN, to banks in other countries. The platform uses big data and machine learning to optimize credit for small-to-medium sized enterprises (SMEs).
OakNorth offers loans between £500 and £30 million to SMEs. It was granted a banking license by U.K. regulators in 2015.
‘No firm views’ on IPO
OakNorth is currently valued at $1.4 billion, which puts it in the ranks of the U.K.’s “unicorn” companies — firms valued at $1 billion or more.
IFISAs are also a way for investors to do something interesting with their savings. For example, Oaksmore has recently launched an Isa which allows investors to capitalise on historic renovation.
This particular IFISA, specialising in historical building renovation, offers a tax-free return of up to 7.5 per cent each year.
Another lender trying to do some- thing different is Folk2Folk, a peer-to- peer platform for rural and local businesses. It is offering an IFISA which gives lenders the opportunity to earn 6.5 per cent interest a year, while supporting British businesses within their local area.
Banco BNI Europa launched an online account opening process through videoconference. This new process also introduces an innovative system of documents signature with a qualified digital certificate and is available for Portuguese citizens who want to open an individual current account. The process is simple, fast and intuitive, without the usual bureaucracies associated with account opening.
This product is offered in partnership with DigitalSign, a Portuguese Certifying Entity specialized in the issuance of qualified digital certificates, registered in the National Security Office as an accredited entity. The partnership with Digital Sign allows, in addition to the online account opening, the issue of a digital certificate, with similar strength to a physical signature, which may be used by the client in the context of other contractual relations with the Bank.
Santander is on track to launch an international money transfer app in partnership with fintech startup Ripple in the next few months, the bank’s UK CEO has confirmed.
Nathan Bostock told the International Fintech conference in London on Thursday: “This spring, if not one beats us to it, we will be the first large retail bank to carry out cross-border payments at scale with blockchain technology.”
Peoples Trust Company of Saint Albans has selected Finastra to provide a single, end-to-end lending solution for commercial and consumer lending. Using Finastra’s Total Lending solution, which packages the power of the Fusion LaserPro, Fusion DecisionPro and Fusion CreditQuest products, the bank will be able to manage its lending process from origination through to booking and thus increase efficiency and customer service.
FintruXNetwork is a global P2P lending blockchain-based ecosystem, powered by Ethereum. FintruX Network aims to connect borrowers, lenders, and rated service agencies. FintruX facilitates marketplace lending in a true peer-to-peer network to ease the cash-flow issues of small businesses and startups. The startup announced today it has successfully raised over 22,000 ETH ($25 million) in token sale from contributors around the world. The proceeds of the sale will be used to build an Ethereum-based platform that will fundamentally enhance the P2P loan experience for small businesses and startups.
Delhi-based fintech startup, Cash Suvidha, has raised $1 million in its pre-series A round of investment from Initia Holdings Ltd., Vipin Agarwal, Partner in India Industrial Growth Fund and others. The company plans to use the newly secured funds to increase customer base and to further strengthen its technological infrastructure.
The company claims to receive 15,000 loan applications every month and disbursement of loans in another 2 working days. The company has raised a total of $5.2 million and claims to have disbursed over Rs 152 crore.
Further, Cash Suvidha has disbursed loans to over 35,000 borrowers with an average ticket size between Rs 20,000 – Rs 5,00,000.
Reportedly, India’s largest public sector bank, State Bank of India is looking to create a blockchain-based exchange for Non-Performing Assets (NPA’s).
To be launched in association with 30 banks, this platform will assist the banks in data-driven price discovery.
SBI is said to have assets over $460 Bn and offers services in areas such as retail, corporate banking, financing, and insurance. The Indian banks are said to have to battle with NPA’s worth $210 Bn of which $30 Bn resides with SBI alone.
Broadly, there are three types of software systems that enterprises employ. These include:
a)Systems that help in running a business process
b)Those that help companies to grow their businesses
c)Systems that transform businesses
In the year 2013, China reported an eight-fold rise in the total number of borrowers that touched 1,49,300. The growth continued through 2014, with total borrowers reaching 630,000 by the year’s end.
Traditionally, lenders considered credit score as the key parameter in defining a borrower’s creditworthiness. In case of digital lending, a borrower’s risk profile is defined based on aspects such as Aadhaar for identification, salary slips for working professionals, and the applicant’s financial behavioral patterns determined based on information curated from online sources such as social media channels.
Boston Consulting Group estimates that by 2020, 48% of India’s internet users will be rural and of that, 21% will be women.
QARASoft’s now-defunct platform, called “QARA,” connected individual asset managers with funds pooled — or borrowed — from peer-to-peer investors, in part by making use of the venture firm’s artificial intelligence-powered robo adviser.
The “decentralized” platform collected some 100 retail investor loans in the first two weeks. But they were retrieved after the Financial Supervisory Service banned its operation, despite a patent earned the previous year for the pooling scheme of the fund and the platform’s three-year operation of its beta version.
The service will primarily target retail investors in overseas markets in the United States, the United Kingdom and Singapore, and the English version will be launched prior to a Korean version.
SMALL business executives who took part in the AmBank BizRACE gained a new perspective in managing their operations, allowing them to bring the business further.
The top 15 finalists in the programme recently completed two, out of four, executive development programmes at Menara AmBank.
Peoplender Sdn Bhd chief executive officer Kristine Ng, a participant in the programme, said she was inspired with a new structure for her business after the first day itself. Ng recalled one of the trainers talking about constraints that one would face in growing businesses – if it doesn’t fit the business model, then change must occur.
According to the World Bank, 63 per cent of Mena SMEs do not have access to capital.
In Jordan, SMEs represent 97 per cent of companies and create 70 per cent of new jobs in the kingdom, according to Oxford Business Group, Jordan: Finding Financing for SMEs.
Liwwa is a peer-to-peer lending platform in the Mena region that provides SMEs with trade and asset financing. Liwwa’s target audience is divided into borrowers and investors, also referred to as lenders. To date, liwwa has maintained a solid portfolio and delivered annual returns of 10.6 per cent.
The liwwa index delivered 9.45 per cent over the last 12 months, which is attractive.
Liwwa has raised $5.55 million from investors and $6 million in debt to date. Their investors include Silicon Badia, Bank Al Etihad, DASH Ventures and Mena Venture Investments. Their debt partners include Bank Al Etihad, Capital Bank, Arab Bank and the Dutch Good Growth Fund.
News Comments Today’s main news: Affirm intros in-store capabilities. SoFi prices first student loan ABS with medical residency refis. Experian targets non-prime borrowers with new credit score. RateSetter CEO warns of collaboration risk. Today’s main analysis: Hui Ying Financial Holdings’ 2017 financial results. Today’s thought-provoking articles: What the Senate Banking Committee bill means. Key Chinese technology players. What Europe’s investors […]
Experian targets non-prime borrowers with new credit score. AT: “Experian has proven itself to be an innovator that walks alongside the alternative lending industry. It’s important that the credit bureaus keep updating their services and their business models or they will become irrelevant.
RateSetter CEO warns of collaboration risks. AT: There certainly are risks involved in collaboration, and there are risks involved in competition. Alternative lenders, and banks, must weigh the risks against the benefits for partnerships and choose the path that will best serve their own businesses and customers.
Affirm will partner with merchants to make Affirm financing available in-store. Now shoppers can use Affirm InStore in brick-and-mortar locations, securing credit in just seconds before they even get to the cash register, and can pay for their purchase over time in simple, fixed monthly installments. Additionally, the company announced that consumers will have the ability to instantly add a newly issued Affirm virtual card to Apple Pay, the easy, secure and private way to pay, via the Affirm mobile app.
Affirm InStore brings the same easy experience shoppers and retailers have come to expect online to the point-of-sale in brick-and-mortar locations. Affirm gives merchants two flexible options: they can integrate the Affirm InStore API (application programming interface) with their Point Of Sale (POS) system or use Affirm’s expanded virtual card experience.
According to a survey conducted by Affirm, this can impact a retailer’s brand even if the financing product is offered by a third party. Fifty-five percent of respondents said they would think less favorably of a brand that offers a financial product that can be harmful to consumers.
Affirm’s platform makes it possible for shoppers to pay for purchases over multiple-month terms with simple interest loans that don’t charge compounding interest or late fees. And, unlike most credit lenders that base loan decisions on a consumer’s credit score and income alone, Affirm takes a more sophisticated approach, using data science in credit-scoring algorithms that combine credit history and other relevant factors to assess creditworthiness.
Affirm now has more than 1,000 merchants using its service.
The company is going after the millennials with a new type of credit card, without plastic and only available online. The company announced today the launch of Affirm virtual card to Apple Pay Credit Card without the plastic. With Affirm Virtual Card, consumers will have the ability to instantly add a newly issued Affirm virtual card to Apple Pay, via the Affirm mobile app. With the virtual card, Affirm is reinventing credit with alternative to traditional credit cards and making its micro-lending program available through Apple Pay and letting customers use their iPhones to pay in brick-and-mortar stores.
Social Finance’s second private student loan securitization of the year, which priced Friday, is also its first to include loans refinancing the debt of medical residents.
Loans refinancing the debt of medical residents and fellows account for approximately 5% of the collateral for the original collateral for the transaction, SoFi Professional Loan Program 2018-B Trust, according to rating agency presale reports. The collateral for the deal was upsized, to $900 million from $700 million originally, in response to strong demand, though investors demanded slightly higher spreads on the senior notes compared to SoFi’s previous student loan securitization, completed in January.
The ranks of thin file consumers continues to grow in this country. According to Experian these consumers now number 25% of the total U.S. population. These are people with five or fewer items in their traditional credit history.
Since the acquisition they have worked with the Clarity Services team to build a new score specifically for the non-prime segment. They are calling it the Clear Early Risk Score. As the name implies this new score is designed to give lenders a clearer view of the risk of these thin file consumers, many of whom should not be categorized as subprime.
When I asked Alex how this new score will be used in conjunction with their traditional FICO score he said it will be used in two ways:
1. When the consumer has no traditional file and therefore no credit score it will be used as an independent score.
2. The consumer may be originally scored as subprime and this new score could provide new information that may lead to a different conclusion regarding risk.
A bill that the Senate Banking Committee has been drafting for several years, designed to reduce the regulatory burden for small- and mid-sized US lenders, received bipartisan approval in the Senate on Wednesday with a 61-38 vote.
The bill’s proposals include raising the threshold for the Dodd-Frank definition of a “systemically important” lender from $50 billion in assets to $250 billion, thus absolving smaller banks from strictures like annual stress tests; absolving banks with under $10 billion in assets from the Volcker Rule; and allowing small banks and credit unions to report less of their mortgage loan data, among other things.
Online merchants in the U.S. are increasingly recognizing the importance of offering instant financing to shoppers, according to a new online e-commerce survey. Nearly two-thirds of retailers polled (64 percent) believe providing online financing options through their store is important to driving new and increased sales. Forty-six percent indicate it would decrease cart abandonment – still one of the most critical challenges for online retailers today.
The merchant survey, which recognizes the importance of instant financing among online retailers, corresponds with consumer attitudes as revealed in a Klarna-sponsored survey last year that showed:
Three quarters of consumers (75 percent) indicate preference for online merchants offering instant financing
39 percent said they would spend more money if given instant credit options when purchasing goods and services online
28 percent would be very likely or completely likely to change merchants in order to use instant financing
Nearly half of respondents (47 percent) would like to be presented with an instant financing option while shopping online
In the forthcoming paper he contendsthat with only “a tiny handful of exceptions” (read “Renaissance”) such trading doesn’t produce exceptional results. The problem goes far beyond what one addresses by saying that the field is new and still developing, that machine learning will get better, that Big Data will get even bigger, and so forth.
Heaton asks us to contemplate Citadel LLC. This huge hedge fund “returned only about 13 percent in 2017,” which was short of the S&P 500 gain. Yet the S&P gain would have been “available quite inexpensively to anyone with the money to open an account at Vanguard Group.”
Does Citadel compensate for underperformance in bull markets by preserving capital in bear markets? Heaton says that it does not, “Citadel fell nearly 60 percent in 2008, far more than the S&P 500 index.”
The same technology that is influencing this change is also making it possible to deliver that experience at a fraction of the time and cost it would take with older technology.
This ‘right’ technology means embracing cloud-based services and an API-enabled composable architecture. Today, building an architecture is quick and cost effective, particularly through the use of cloud technology. Rather than having to buy, build, and maintain a collection of poorly-connected systems, an API-enabled composable architecture lets institutions leverage services built on a flexible yet secure infrastructure.
A composable API-driven architecture is necessary to tap into the full potential of cloud technology. The traditional approach is all or nothing, build an end-to-end solution which relies on a single vendor which would be responsible for the implementation. But the composable approach embraces thinking that one company cannot focus on everything and be the best at it. The architecture can be divided in small pieces and managed through life cycles separately and tested, removed or replaced without risk.
“I was making $267 a week at the pawn shop and I was having to ask friends to help me pay my rent for a room,” Feinberg said. “So at that point, I realized that something needed to change.”
That question prompted Feinberg to present to his brother and Murphy the idea to start a finance company. Feinberg said he drew up a business plan in a day and a half and his brother and Murphy agreed to give him $3,000 to start the company. That was November of 2012.
And it did. After a year, Feinberg’s company, Everlasting Capital, made $110,000 in commissions and $3.5 million in volume. Within that first year, he also hired three people and moved from the basement of the pawn shop in Rochester, NH to a 600 square foot office in the same town.
This lightning fast trajectory is by no means common. That’s why Everlasting Capital made it onto 2017’s Inc. 500 list, the iconic list of America’s fastest growing private companies. By year two, Everlasting Capital earned $640,000 in commissions, generating $14 million in volume, and by year three it earned $1.6 million in commissions with $18 million in volume.
We were happy to connect with LendUp’s co-founder and CEO Sasha Orloff and Jotaka Eaddy, the company’s vice president of policy, strategic engagement and impact. Orloff, Eaddy and the rest of the LendUp team are clearly mission-driven professionals who want to put borrowers on the pathway to better financial health.
The Financial Revolutionist: Sasha and Jotaka, it’s great to see you again. Sasha, I know you started the company in 2011 with your step brother, Jake. When did you start making loans?
Sasha Orloff: Thanks Gregg. We recently hit our six-year anniversary of our first loan. Although Jake and I “started” the company in 2011, LendUp was really born after coming out of Y Combinator’s Winter 2012 class.
FR: Is access to credit a civil rights issue that needs more attention?
JE: Absolutely. It’s just that some of the blatant racism that’s confronting our nation these days takes center stage on TV and social media. But historically, race has played a major role in accessing credit and how people are marginalized when trying to access it. Plus, when you look at the predatory products across this country, they are heavily marketed to poor communities. So yes, safe access to credit is an important issue for me — and should be for everyone — and LendUp is on the right side of it.
More than a decade has passed since federal regulators cracked down on partnerships between payday lenders and banks that had been designed to circumvent state interest rate caps.
Now the Office of the Comptroller of the Currency, operating under newly installed leadership, has taken a notable step in the opposite direction.
The agency said Friday that it has terminated a 2002 consent order with Ace Cash Express.
South Dakota is an example of a state that could be impacted. Sixteen months ago, the state’s voters approved a 36% interest rate cap. Critics of payday lending worry that federal banking regulators may effectively overturn such laws, and that last week’s decision by the OCC is a step down that path.
Goldman Sachs Group Inc has signed LPL Financial Holdings, the largest U.S. independent broker-dealer by revenue, to its securities-based lending platform, the bank said on Tuesday.
Called GS Select, the platform was launched last year as a way for the Wall Street bank to target borrowers who have less than $10 million in investable assets. GS Select issues loans worth $75,000 to $25 million that are collateralized by the borrowers’ investment portfolios.
Goldman’s typical wealth clients have at least $50 million in assets.
Cerberus Capital Management, L.P. today announced the completion of the previously announced acquisition of Cyanco Holding Corp. by a Cerberus affiliate from funds managed by Oaktree Capital Management, L.P. The transaction closed on March 16, 2018.
Cyanco will continue to be led by its current management team. As part of its investment, Cerberus will be putting in place a new board of directors for Cyanco. The new board will be chaired by Daniel Ajamian, an executive who has been Chairman of several other Cerberus portfolio companies.
Kabbage, a FinTech company that connects small businesses with capital they need,is sitting pretty at $1.6 billion in total funding acquired since its debut on the Atlanta credit scene in 2009. Kabbage was recently in the news after the lending startup announced that, in the wake of the Parkland shooting, it would stop processing loans to assault-style weapons manufacturers.
Greensky, a consumer lending company which offers paperless solutions and financial services to businesses, secured a total of $350 million in funding in just two rounds.
At the Innovate Finance Global Summit at London’s Guildhall, Lewis warned that if the two cohorts solely collaborate, there would be little visible change from the viewpoint of the consumer.
“The technological advances being made are unstoppable; the question is who is going to take them to market,” he said on Monday.
There have been an increasing number of partnerships between fintech firms and the very incumbents that they are trying to disrupt. US investment bank Goldman Sachs has acquired a number of innovative start-ups through its online lending platform Marcus.
A report released last month from consulting firm Capgemini and corporate networking website LinkedIn found that more than 75 per cent of fintech firms cite collaborating with incumbent firms as their primary business objective.
The online platform for property finance has issued a five-and-a-half year 5.375% fixed rate retail bond due October 2023.
Payments under the bond will be guaranteed by LendInvest and the bond will be secured by way of a floating charge over the whole of the undertaking and all property, assets and rights, both present and future, of the issuer.
LendInvest’s first retail bond – which trades on the London Stock Exchange – raised £50m from a broad base of retail and institutional investors.
As of 31st December 2017, the bond was 99.6% utilised, with an interest coverage ratio of 192% and a weighted average LTV ratio of 57%.
My suggestion was Funding Circle, which enables businesses to access finance independent of their banks and allows them to receive funds within a couple of weeks, compared to up to three months with a traditional bank loan.
It’s been a tried and tested investment since August 2010 and there are currently 18 councils investing through the Funding Circle platform, and the amounts invested vary from £1,000 to £2 million.
The Funding Circle minimum a council could lend to a business is £20, so Funding Circle suggests lending £2,000 would allow a council to lend to at least 100 businesses, lend no more than 1 per cent of the portfolio to each business.
Over the last week or so we’ve seen not one but two fintech focused venture capital style listed funds list on the London market: Augmentum Fintech raised £94m while TruFin hit the market with a £70m valuation. Both of these funds have their own unique characteristics although perhaps the most interesting information from the listings is what they reveal about the likely worth of the alternative finance space in the UK.
The fund’s 15 per cent stake in Zopa, by contrast, seems a little more tangential though it’s also the single most valuable asset in the fund.
The City of London Corporation and Innovate Finance have jointly announced the launch of the Fintech Strategy Group (FSG) to help continue the success of the UK Fintech sector. According to Innovate Finance, the group will combine senior industry leaders across the sector including banks, regulators, and innovative Fintech startups.
The purpose of the FSG is to foster a collaborative dialogue on the future of UK Fintech – a vital issue as Brexit weighs on the financial services industry.
China’s government is intent on upgrading its manufacturing sector and leading the world in a range of advanced technologies. Implicit in its “Made in China 2025” 10-year plan is the notion that China will displace the US as the world’s dominant technological power.
The US is likely to remain a leader in all major advanced technologies over the next decade, with Baidu the only Chinese player equipped to challenge the US’s lead in next generation technologies such as AI. There are signs though, that China is closing the overall gap faster than we expected.
This report researches the state and thrust of Chinese technology over the next two to five years and what it implies for global technology investors.
Revenues increased by 88.4% to $46.5 million and loans facilitated through platform increased 59.9% to over $1.3 Billion
Total loans facilitated through our platform increased by 59.9% to $1,308.7 million for the year ended 2017 from $818.5 million in 2016, as China’s online peer-to-peer lending platform industry continued to grow significantly during 2017, coupled with an increased marketing campaign, promotion activities on our platform as well as increased brand awareness of our online marketplace. This led to accumulated value of loans facilitated through our platform in the aggregate amount of $2.87 billion since the launch of our marketplace in December 2013 through the end of 2017.
We had 8,047 borrowers and 69,232 investors participated in an aggregate of 23,263 loans during 2017, compared to 1,067 borrowers, 39,999 investors and 8,739 loans during 2016. As of the end of 2017, we had 367, 893 registered investors and 24 cooperative partners who frequently serve as guarantors of loans on our platform.
Total revenues increased by 88.4% to $46.50 million for the year ended 2017 from $24.68 million in 2016, as a result of an increase in loans facilitated through our platform and the contribution from the newly launched entrusted loan business. Revenues from loan origination service fees, loan repayment management fees and financing income from entrusted loans were $26.70 million, $18.21 million and $1.58 million, respectively, for the year ended 2017 compared to $17.49 million, $7.19 million and nil, respectively, in 2016.
Net income increased by 344.1% to $15.27 million for the year ended 2017 from $3.44 million in 2016. Diluted earnings per share was $0.21 for the year ended 2017, compared to $0.05 for 2016.
Lendix is one of the leading European players in the crowdlending sector for SMEs and although it is not yet active in the UK or outside of Europe, it sure is expanding fast.
So what are investors’ preferences?
– The French investor prefers grade A projects with a duration of 37 to 48 months.
– Spaniards are the most risk-averse and tend to invest more in projects with A and A + grades, but are not opposed to longer durations.
– Italian investors are the most risk-prone: they prefer B rated projects but with shorter durations (0-24 months).
This data shows that the Lendix community invests 11% more on A, A + and B + projects than on B or C ratings. Moreover, the duration seems to have a relative impact in terms of amounts invested, even if investors are more attentive to this parameter in the case of small projects (amounts up to 100,000 euros). In general, the community invests 32% more in long-term projects.
Sweden’s mortgage industry is today worth around 3 trillion krona ($370 bn), according to Statistics Sweden, and most of the interest on these loans end up in the pockets of big banks.
A new fintech venture called enkla.com has today launched a potentially game-changing service. The Swedish online lender offers consumers a 0.95% fixed mortgage rate for three years, which is considerably less than the 1,6% average for similar loans among Sweden’s major banks, according to Di Digital.
Enkla’s self-stated goal is to borrow 100 billion SEK ($12,2 billion) worth of mortgages in the next 18 months by issuing mortgage bonds on the international markets, Di Digital writes. If the target is met, Enkla.com would be looking at a 3 percent share of the Swedish mortgage market.
The service enters a market where Sweden’s household debt has exploded from 66 percent to 87 percent of GDP in the past decade, driven by soaring housing prices. Consumers are evidently hungry for a cheaper deal than what banks can offer. Currently, Sweden’s four biggest banks – Swedbank, Nordea, Handelsbanken and SEB – have 75 percent of the country’s mortgage market, Breakit reports.
In Europe the move to open banking has been driven by regulations such as the revised Payment Services Directive PSD2 and General Data Protection Regulation (GDPR), which compel banks to open their core systems to allow customers to control and release their data to third parties delivering added value services.
In other territories with no regulatory imperative, the drive towards open banking is led by the desire to provide the best customer experience, with added value services, new business models and connected marketplace products from third parties and vice versa. To do this, the application programming interfaces (APIs) of the bank will need to be open and connected to external providers. And cloud technologies will be fundamental in enabling this to become a reality.
Digital disruptors such as peer-to-peer lending services, mobile apps and blockchain have shifted the market, offering borderless accounts combined with speed and transparency.
Powering these disruptors are new technologies like artificial intelligence, big data and robotics, which are changing the customer experience; providing unprecedented insights into customer behaviour that help deliver a more seamless money transfer experience.
The World Bank predicts the value of global remittances will grow by 3.4% to USD$616 billion in 2018. In order for the industry to continue to thrive, businesses will be better served by coming together to redefine the future of money transfers.
Bitcoin might be in a bit of a slump, but one brand new bitcoin business is going gangbusters.
Genesis Capital, the recently launched subsidiary of market making firm Genesis Trading, has close to $100 million in loans outstanding, a person familiar with the company’s operations told Business Insider. That’s a striking milestone, considering the business was launched two weeks ago.
It gives out loans worth $100,000 or more in cryptocurrencies including bitcoin, ether, and bitcoin cash. BlockTower Capital, a cryptocurrency hedge fund, and DV Chain, a crypto trading firm, are some of Genesis’ clients, according to people familiar with the matter.
One key trend at the forefront of the digital space is artificial intelligence (AI). Some estimates predict that the AI market could grow from $5bn to $120bn by 2025.
A report from digital consultancy Juniper Research, has found that annual cost savings derived from the adoption of ‘chatbots’ in healthcare will reach $3.6bn globally by 2022, up from an estimated $2.8m in 2017.
The UK is leading the way when it comes to peer-to-peer lending, and is one of Europe’s largest alternative finance markets at £4.9bn, according to the University of Cambridge’s Judge Business School.
“Fintech” covers many things, but is often used to refer to nonbank firms that leverage cutting-edge technology to deliver financial services directly to consumers and businesses. In that sense, banks initially viewed fintechs as competition, as they compete for lending, personal finance, payments, and other consumer services.
1. What’s the problem to be solved?
Sounds like common sense, but a fintech partnership should necessitate an extensive evaluation of the underlying need, such as filling in product or service gaps, or, in this bank example, offering borrowers a digital channel for applying and getting to closing quicker on a commercial loan as their primary competitors offered. Clear objectives help the bank and fintech determine if the match is on solid ground from the start.
A fintech partnership should offer the bank an upside—quantitative and qualitative—that simply isn’t available at more favorable cost, risk, and performance measures under the build or buy options.
2. What’s the difference between buying vs. partnering with a fintech?
Is it a shared risk and shared reward? Does the reward justify the risk? Or is it just the innovation culture of the third party? The definition is critical as the process of evaluating a fintech’s performance, costs, and risks entails unique considerations from a typical vendor evaluation.
Many partnerships are really just vendor relationships. That’s okay. In many cases, banks with extremely low risk appetites prefer the typically lower risk of a vendor relationship. One fintech exec noted how impossible it is to run many banks’ risk gauntlets because they don’t understand what they are getting into.
liwwa is a marketplace lending platform that provides funding to small and medium businesses in Jordan. Our mission is to support job and income growth in the region. To date we have underwritten about 10 million USD in loans. This has helped to create 475 jobs in Jordan, 1.77 million USD in income, and 13.05 million USD in economic output.
What are the three main advantages for investors?
The type of investors we target are financially-savvy professionals who already have a portfolio of investments. They are attracted to our service because it is a way for them to further diversify their existing portfolio. The other advantage is that there are no big barriers to testing out the platform – provided he meets certain basic criteria, anyone can register and there is no minimum amount required in order to start lending.
What are the three main advantages for borrowers?
There is a 240 billion USD capital access gap in the MENA region. For borrowers, we provide a much-needed alternative to bank financing.
News Comments Today’s main news: RateSetter receives full FCA approval. PayPal’s market value eclipses American Express’s. Lending Club files 8-K entry into material definitive agreement. Some of Zopa’s loans are up for sale by P2PGI. Hexindai sets terms for U.S. IPO. PolicyBazaar becomes most-funded insurance aggregator worldwide. Today’s main analysis: Big bank earnings, IMF global growth forecast. Betterment vs. Wealthfront. Today’s […]
Its market capitalization stands at about $83 billion, nearly double the $47 billion value it had when it spun off from eBay Inc. a little over two years ago.
PayPal is even gaining ground on Wall Street titans. Its market value is now about $6 billion less than Morgan Stanley’s and about $10 billion less than that of Goldman Sachs GroupInc.
PayPal, which reports earnings on Thursday, now trades at a multiple of about 32 times forward earnings, according to FactSet. So although its market value is about half that of MastercardInc. and about two-fifths that of VisaInc., its earnings multiple is far dearer. Visa trades around 27 times forward earnings and Mastercard is around 29 times. AmEx, meanwhile, trades just shy of 15 times.
Ron Suber: Innovation cycles take 50 years. PayPal started it in 1998, Lending Club and Prosper accelerated it in 2006 by giving people reasons to borrow and lend online … similar to how AOL and EBay gave people reasons to go on the World Wide Web in the early internet days. And now we are in the Golden Age of Fintech which is the middle 10 years of the 50 year innovation cycle.
How does this fit with the online lending space? Can early MPL/Online Lenders remain competitive? And what do they need to do to remain competitive?
Ron Suber: Yes, The keys (KPI’s = key performance indicators) continue to be:
A) Loan Performance
B) Equilibrium between capital and borrowers
C) Committed Long term, low cost of capital
D) Unique, diversified and low cost methods of acquiring borrowers
E) Increasing Life Time Value (LTV) with multiple loans and additional products
F) Platform efficiency, customer experience and profitability
G) Scale and Brand.
What is next for you? Was Lend360 really your final appearance as the “Godfather of Fintech”? Or is this the intermission before the next act?
Ron Suber: Lend360 was my last presentation in North America … I am heading back to Australia and Southeast Asia for the remainder of the year … then to Patagonia for a Q1 vacation and then onto Africa to do some teaching about lending and entrepreneurship with Opportunity International (OI). OI provides entrepreneurs around the world with access to loans, savings, insurance and training – tools that empower them to work their way out of poverty…..a hand up, not a handout.
On October 10, 2017, LendingClub Warehouse I LLC (“Warehouse”), a wholly-owned subsidiary of LendingClub Corporation (the “Company” or “Lending Club”), entered into a Warehouse Credit Agreement (the “Warehouse Agreement”) with certain lenders from time to time party thereto (the “Lenders”), a large commercial bank as administrative agent (the “Administrative Agent”), and a national banking association as the collateral trustee (in such capacity, the “Collateral Trustee”) and as paying agent. to the Warehouse Agreement, the Lenders agree to provide a $250 million secured revolving credit facility (the “Credit Facility”) to Warehouse, which Warehouse may draw upon from the Credit Facility closing date until the earlier of October 10, 2019 or another event that constitutes a “Commitment Terminate Date” under the Warehouse Agreement. Proceeds under the Credit Facility may only be used to purchase certain unsecured consumer loans from the Company and related rights and documents and pay fees and expenses related to the Credit Facility.
During an unusual period of global synchronized growth, the IMF raised its Global Growth Forecast for 2017 and 2018 by 10 bps to 3.6% and 3.7%, respectively. The IMF also named nine banks that will struggle to achieve profitability.
In securitization news, Marlette Funding Trust 2017-3 is expected to close at the end of October with $298 Mn in loans. MFT 2017-3 is the fifth ABS from this platform and the fourth on the MFT shelf (the first was on Citi’s CHAI shelf).
In this week’s newsletter, PeerIQ dives into the earnings and loan loss provisions for the major money center banks.
The big money center banks released earnings this week to a mixed reception although YTD stock performance is strong. FICC trading revenues were down year-over-year across the board. ROE levels for the big banks remain mired in the low double-digit area or lower.
JP Morgan is currently the largest US Bank ranked by total US Deposits, which has grown 9% year over year.
JP Morgan credit card costs were up about $200 Mn year-on-year driven by the successful Sapphire launch, and higher net charge-offs.
Q3 2017 provision for credit losses was $1.5 Bn, up from $1.3 Bn in the prior year. Currently at 3.3%, credit card allowance to total loans rose every quarter this year.
Citi built approximately $500 Mn in card loan loss reserves this quarter:
$150 Mn from regular seasoning and volume growth.
$50 Mn from hurricanes and other natural disasters.
$300 Mn attributable to forward-looking NCL expectations.
Citi expects NCL rate on branded cards to increase 10 bps in 2018 to 295 bps.
Citi shifted away from rewards oriented products and more towards value products due to heavy competition in rewards products (see Chase Sapphire Reserve). These cards typically have non-yielding promotional balances in the near term.
Bank of America
Quarterly profit rose 13% year over year.
Provision for loan losses increased by nearly 15% quarter over quarter while allowance for loan losses decreased 1.7% over the same period.
Allowance for loan losses as a percentage of total loans decreased to 1.15% from 1.19% last quarter and from 1.29% last year.
Wells Fargo was the only reporting bank that had decreasing negative returns YTD and a ROE decline YOY.
Revenue fell 2% year over year, and Wells is the only reporting bank to have falling revenues.
Traditional Wall Street firms are keeping financial technology humming as they set their sights on developing technologies of their own. The third-quarter saw the second highest financing deal count ever, with 412 total transactions, according to a report from investment bank FT Partners.
Still, some areas are hotter than others. Banking — which includes peer-to-peer lending — and payments reported the most deals in the period. The largest was Softbank Group Corp.’s $250 million investment in online lending startup Kabbage Inc. Payments startups Toast Inc. and Raise Marketplace Inc. were also in the top 10 deals with $101 million and $60 million investments, respectively.
In the battle for assets under management (AUM), incumbent wealth management firms have faced significant pressure from insurgent robo-advisors, as investors have poured over $1.6B into robo-advisors across 151 investments since 2013.
The two largest of these robo-advisors, Betterment and Wealthfront, have collectively raised $405M in aggregate funding to date and have both voiced the long-term goal of going public. Nearly a decade after launch, Betterment and Wealthfront together manage approximately $15.9B of assets for over 495K client accounts.
Some of the key takeaways from our analysis include:
Betterment continues to outpace Wealthfront in client accounts. As of Q1’17, Betterment managed approximately 330K accounts, nearly 2X as many accounts as Wealthfront (at 165K accounts).
Wealthfront has a higher growth rate than Betterment. As of their respective filings in Q1’17 and Q2’17, Wealthfront had added 65K accounts, representing 65% growth, while Betterment added 52K accounts and grew 19%.
Betterment has raised more than 2X the amount of funding as Wealthfront. Betterment has raised $275M total as of its latest investment (a $70M Series E – II round in Q3’17), while Wealthfront has raised $129.5M as of its last funding (a $64M Series D in Q3’14).
Betterment has taken the lead over Wealthfront for total AUM since 2015.
Wealthfront has consistently had a higher AUM per client. Wealthfront clients average $40.9K per account, compared to Betterment’s account average of $27.4K.
CLIENT ACCOUNTS: WEALTHFRONT COULD SURPASS BETTERMENT IN 3 YEARS
An analysis of the data shows that while Betterment leads Wealthfront in number of client accounts today, Wealthfront’s higher growth rate suggests that Wealthfront could surpass Betterment within 3 years. Wealthfront added 65K accounts in H1’17, representing 65% growth, while Betterment added 52K accounts and grew only 19% over the same period.
Comparing average AUM per client, Wealthfront has consistently had a higher AUM per client ($40.9K invested per account, vs. Betterment’s average of $27.4K), and as it continues to add additional services like PATH and the portfolio line of credit, that average could grow over time.
ASSETS UNDER MANAGEMENT (AUM): BETTERMENT GROWTH SLOWS
Betterment grew AUM by approximately 13% since their last filing, their slowest quarter for growth. Again, this comes on the heels of the backlash against changes in Betterment’s fee structure in Q1’17. In contrast, Wealthfront set a new record for AUM growth in Q2’17, adding approximately $1.76B in AUM since the previous quarter. This was Wealthfront’s largest quarterly dollar increase in AUM.
Marketplace lending is, in many respects, an evolution of the privately funded mortgage market, which has co-existed with mainstream lenders without posing much threat for years.
Technology used by marketplace lenders offers deeper insights and transparency into transactions, while more easily connecting investors and borrowers in disparate locations.
LendingHome has raised $110 million in venture capital since it was founded in 2013 and is looking for more. It’s done six bridge-loan securitizations totaling $183 million and has a marketplace lending vehicle where accredited investors can purchase fractional interests in loans.
This suggests that the legacy of fintech and marketplace lenders will not be defined by drawing lines between this new breed of lenders and mainstream incumbents, but rather by how those lines are blurred.
Income&, while reaching out directly to investors, is working to serve retirees potentially more interested in accessing the mainstream mortgage market’s lower-risk cash-flows than taking on more risk in order to reach for yield the way marketplace lenders’ investor bases tend to.
The company structures the investments through a twist on traditional securitization.
“With SoFi’s leadership in transition, we’re withdrawing our application with the FDIC for now,” SoFi spokesman Jim Prosser said in a statement to Reuters. “A bank charter remains an attractive option when the time is right. This decision does not change our plans to make deposit accounts available through partner banks in the near future.”
Barclays Plc will need to defend its advantages in the payments business from encroachment by technology companies including Amazon.com Inc. and Apple Inc., according to Chief Executive Officer Jes Staley.
A fund LendingHome began setting up earlier this year raised $100 million in commitments and established a $300 million credit facility that brings its total potential assets to $400 million.
LendingHome Opportunity Fund II is committed to buying more than $1 billion in high-yield bridge loans over a two-year period, but the company also will continue to sell loans to other investors through other existing channels.
A: Pefin understands a user’s complete financial situation, including their current spending patterns, their debt and investments and their goals. An interactive chat experience helps users plan for life events that matter to them- like buying a home, having kids, sending them to college, and retiring in comfort. Pefin then incorporates the economy, markets, social security rules, federal and state taxes and much more to craft a thorough financial plan tailored to each user, showing the affordability of their plans. It provides ongoing advice on how they can save to achieve their plans, when they should repay debt, and whether investing is appropriate. If it is, Pefin also offers investment advice and portfolio management services through its SEC regulated subsidiary, Pefin Advisors. Pefin does not require that users invest through its platform, but if they choose to do so, it tailors each portfolio to help users achieve their plans.
Q: Who are the primary users of Pefin and what are some of the key challenges you are helping them solve?
The typical human advisor charges between $2,000 – $,5000 for a one-time financial plan and being static, it is obsolete moments after it is created. Robo-Advisors, while affordable, are unable to offer a comprehensive financial plan, instead focusing on recommending a generic portfolio (one of 10 or so static investment portfolios), primarily based on a risk level the user picks. Pefin’s AI stays on top of 2-5 million data points per user and updates plans real-time, ensuring the advice users receive is current and anything but generic. And Pefin does all this, for $10 a month. As for investments, Pefin requires no minimum investment size, and fees are 0.25% of assets under management, with the first $5,000 managed for free.
Q: Can you give us more insights into your Artificial Intelligence powered solution?
The neural network understands these financial rules and relationships, and propagates them forward in time, up to 80 years depending on the age of the client. The network starts with a user’s current finances and projects how they change over time with market conditions, inflation, taxes, government rules, and their plans. For any given user, the network evaluates anywhere from 2-5 million data points, depending on the complexity of their financial situation and financial plans are available 24/7.
BlueVine is expanding its reach in online business lending with new debt financing of up to $130 million and a new additional line of credit product that allows business owners to make monthly, instead of weekly, payments, over 12 months.
BlueVine secured major funding as the company rolls out a 12-month business line of credit based on monthly payments, a new offering that would make it easier for business owners to meet their everyday funding needs.
BlueVine introduced the new product in response to client requests for a longer-term business line of credit with monthly payment plans. The new financing underscores the fintech pioneer’s commitment to innovation based on customer needs.
The new product gives business owners 12 months to repay each withdrawal in full, meaning lower payments each month.
Goldman Sachs, arguably the world’s leading investment bank, has not been the greatest success story of recent times. After all the challenges of the 2008 financial crisis and the post-crisis regulatory glut, its profitability has declined sharply.
Today its stock market valuation, though far stronger than most banks, puts it on a so-called price-to-book valuation of 1.1 times. That is to say, its shares are worth 10 per cent more than the value of its net assets.
Compare that with the market’s view of Lending Club, the upstart peer-to-peer lender. Despite a scandal last year founded in slipshod controls, and a fall in the group’s share price from a 2015 high of more than $25 to barely a fifth of that today, it is relatively far more valuable than the Wall Street titan, with a price-to-book multiple of 2.6 times.
All that has yet to follow is a re-rating of Goldman stock — from bank to fintech. Though with barely $1bn of Goldman’s near $1tn balance sheet so far devoted to online lending, it may have a while to wait.
In a sign that the fintech business is maturing into more sophisticated areas, “regtech” is among the fastest-growing areas, accounting for a chunk of applications to the Future of Fintech awards.
Community banks are typically a better bet for small businesses in search of a loan, with approval rates higher than those at larger financial institutions. But the latest data on SMB lending in the U.S. suggests a shift is ahead.
Earlier this month, Biz2Credit released its monthly Small Business Lending Index and found that approval rates at large banks increased more than they did at smaller community banks. And while community banks’ SMB loan approval rates are still higher than those at large banks (49.1 percent compared to 24.8 percent, respectively), separate analysis from the Federal Reserve, also published earlier this month, concluded that community banks are beginning to reexamine how small businesses fit into their broader loan portfolios.
The Fed found that small business lending at community banks actually declined in 2016, while SMB lending at big banks increased over the same period.
SIX SENATE DEMOCRATS have asked the Treasury Department’s inspector general to investigate whether Keith Noreika, head of the Office of the Comptroller of the Currency, is illegally serving in office.
Noreika planned to serve temporarily until Joseph Otting, former CEO of OneWest Bank and Trump’s nominee for the OCC, was confirmed. But that hasn’t happened yet; Otting’s nomination has sat on the Senate calendar for over a month.
Special government employees are limited to 130 days of service over a 365-day period. The OCC contends that the number only refers to business days, meaning weekends can be taken off and Noreika still has until November to go. But “business days” appears nowhere in the statute.
I’ve seen a lot of folks passing around that article about how Trello failed to build a billion dollar business. It’s stunningly obtuse.
The premise is that the software that was sold for a $400m acquisition was a failure because it wasn’t worth $1b.
When Fog Creek spun Trello off as its own entity, the amount of money they raised was $10m. That was the only money they ever raised, and it was all they needed to raise.
For almost anyone with a sincere connection to reality, a $400,000,000 exit is an amazing win.
The “Trello Failed” take is not only wrong…
Really, what is the issue with an exit that large, after a fundraise that small? I believe there’s a level of unicorn fetishism at play here that’s more than a little depressing. To think that on any level a company either reaches a billion dollars or has “failed” is to denigrate the work of entrepreneurs building amazing products and achieving amazing things.
I have no real interest in billion dollar companies. I’m interested in companies that serve their customers, build amazing products and make money. If they happen to reach a billion, that’s great. But getting to a billion is not a goal that keeps me up at night.
So, what are we doing in a world where less (stuff) is becoming more (valuable) and access is trumping ownership?
First, we are lightening our balance sheets, both personal and corporate. People are carefully considering which assets they actually need to own, and what stuff actually creates more value than its cost of ownership.
Second, we are using our intangible assets, like skills, ideas, technology, and particularly relationships, to serve us in ways never before possible.
Third, we are identifying our own professional skills and differentiators for the gig economy.
Nonbank Fintech lenders are not currently chartered at the federal level. Instead, each Fintech lender is required to charter in each the state in which it originates loans. Each state sets its own regulations with regards to interest rates. Such a patchwork of different regulations means that Fintech lenders often cannot lend to customers in other states at the same interest rates that they lend to their in-state clients. This puts Fintech lenders at a competitive disadvantage, as solely state-chartered firms cannot offer consistent products nationwide that can provide benefits from economies of scale.
Over the last decade, fintech companies have launched robo-advisers, digitized lending, improved fraud detection and created virtual currencies. In short, fintech firms have helped change our understanding of what is possible in financial services.
However, the fintech revolution has largely ignored the financial needs of the bottom third of the U.S. population. For instance, fintech companies have so far failed to successfully create an alternative to credit scores for the 51% of people with subprime scores. Secondly, fintech firms have yet to help move our national savings rate in a positive direction. Thirdly, the amount of money that lower-income households have left over every month after paying their expenses is still declining despite fintech apps’ promise to help people budget. According to data from the Pew Charitable Trusts, the typical low-income household had $1,500 of income left over after expenses in 2004. In 2014, they were $2,300 in the red after expenses.
One explanation: Consumer spending dictates the preponderance of innovation and investment, and spending by 5% of households with the highest income now directs one-fifth of gross domestic product.
A fintech company could use artificial intelligence to identify patterns in someone’s past family financial behavior — both successful and unsuccessful — to recommend an easy-to-follow budget, send reminders or prompts, and eventually, say, help someone consistently lower expenditures and increase savings. Digit, for instance, is one example of a fintech company paving the way to do just that. The digital service mines someone’s checking account data to determine what he or she can afford to save and then Digit automatically transfers that amount into someone’s savings account.
Improve government-issued benefit cards
Each month, 52.2 million Americans receive government benefits — and most of them receive the benefits on a payment card. Most of these payment cards lack associated mobile apps that could make it easier for someone to check balances, track spending or fund savings. The cards also fail to let someone pay utility or phone bills directly.
Peer-to-peer platforms that enable lending between friends and family
PeerStreet, an award-winning platform for investing in real estate backed loans, is excited to announce the appointment of Louis Nees as Head of Capital Markets. He will be based in the firm’s headquarters in Los Angeles, California.
In this role, Nees is responsible for leading PeerStreet’s Capital Markets team, which plays a crucial part in interfacing with the growing number of investors seeking to invest in loans on PeerStreet. The company recently surpassed half a billion in cumulative loans funded, all with zero losses to investors, and monthly origination volumes now reach above $50 million.
With his deep Wall Street background, Nees will provide key guidance on multiple and varied capital sources for PeerStreet.
Centana Growth Partners (Centana), a unique growth equity firm focused on the future of financial services, today announced an expansion of its investment team with the hiring of Tom Davis, Principal, and Matthew Alfieri, Vice President. Mr. Davis and Mr. Alfieri join the firm after the successful close of its $250 million fund earlier this year.
Mr. Alfieri joins Centana from Goldman Sachs where he spent nine years, most recently as a Vice President with the Principal Strategic Investments team, where he invested in financial technology and enterprise technology companies.
NEW analysis by investment and financial planning group Tilney has revealed that the wealthiest households have experienced a much higher rate of inflation over the last two decades than everyone else.
In its household inflation index report, Tilney calculated that the top 10 per cent of households – those with incomes above £78,500 a year – have seen overall inflation of 64 per cent since 1997. That’s compared to 50.7 per cent for typical households (those with incomes of £26,900 to £30,000 a year) and 53.8 per cent for the lowest income families (less than £10,400).
Inflation has grown sharply in recent months, hitting a higher-than-expected 2.9 per cent in August, making it ever more difficult to savers to find an inflation-beating return from conventional savings accounts, adding to the allure of the peer-to-peer lending market.
WELENDUS, the peer-to-peer payday lender, has received full authorisation from the Financial Conduct Authority (FCA.)
The milestone comes a year after the company was formed.
The platform, which wants to shake-up the payday lending market by offering more reasonable interest rates than its competitors, launched a crowdfunding campaign on Seedrs in January to raise £300,000, but closed that campaign two weeks ago and instead started a new one to raise £100,000.
Moneyfarm is one of the new kids on the block. Founders Giovanni Dapra and Paolo Galvani left behind their City careers to set it up in 2011. It’s an app-based digital wealth management platform, which expanded into the UK from Italy last year. Dapra, the firm’s chief executive, is on a mission.
Since moving to London, the business has doubled its user base, now managing £260m in assets across the UK and Italy.
As well as a partnership with Allianz Global Investors, and launching separate partnerships with Uberand Revolut, Moneyfarm is in the process of launching a pension product.
Fewer people are saving into a private pension plan than at any point for the past 60 years. Auto-enrolment has gone some of the way to curing this ill, yet still there is a reluctance to think ahead.
One banking leader said that the rise of fintech and challenger banks had forced his and other large scale banks to collaborate more widely while all assembled agreed that universities and business leaders should work together more closely for the benefit of students as well as their respective organisations.
Pete Sumners, director of corporate structure finance at Clydesdale Yorkshire Bank, said that recent innovations in disruptive lending technology has meant that the banking sector at large had had to admit it did not have the technology to offer certain services and as such was forced to work with fintech companies: “In terms of banking, not just CYBG, collaboration has been forced on us by competition.
Simon Pilling, partner at Bond Dickinson, agreed that the rise of artificial intelligence had meant professional services had needed to change their business model but that there was still a need for skilled lawyers in all ends of the process.
There are two categories; the Impact Award is for larger and more established fintech companies, which are starting to have an effect on the financial services industry, while the Innovation Award is for newer fintech companies that are bringing out novel solutions.
Funding Circle, a direct lending platform that connects investors to borrowers, is shortlisted for the second year running for our Impact Award. With valuation of more than $1bn it is one of the UK’s “unicorns” and the largest British online “peer-to-peer” company by cumulative amount lent. More than £3bn has now been lent through the platform, with £1.1bn of that in 2016.
THE JUDGES SAID:
“The company is big enough to be making an impact in small business lending now.”
“This is clearly one of the most innovative and impactful fintech companies of the moment, changing the landscape completely.”
California based Ripple, founded in 2012, has grown to be one of the world’s biggest blockchain networks. It allows businesses to transfer money globally at low cost using its own cryptocurrency XRP.
THE JUDGES SAID:
“This is no longer a prototype. Ripple is actually sending blockchain payments through. Many of these are still test payments but it is further than a lot of others.”
EFL Global provides alternative credit scoring for people who have previously been outside the banking system.
THE JUDGES SAID:
“There were many credit scoring entries and we liked what many of these were doing in terms of giving more people access to finance. However, we particularly liked the way EFL went beyond traditional credit score information.”
Digital Reasoning uses cognitive computing techniques to detect rogue traders at financial services companies.
THE JUDGES SAID:
“We thought this idea was cool. Cutting rogue trader activity and fraud at banks is a serious issue with consequences beyond just the banks themselves.”
Micro finance lending platform QCash Financial was founded by the Washington State Employee Credit Union as an alternative to expensive payday loans.
THE JUDGES SAID:
“We liked this because it was an alternative to payday lending and an instance of an established financial institution doing something innovative.”
Token is creating an open banking platform aimed at making it easier for people, businesses and financial institutions to move money around. Using digital identity and smart tokens it offers a way for people to give third parties access to their account details in a secure and simple way.
THE JUDGES SAID:
“This is solving the problem that PSD2 brings, where banks need to provide APIs to authorised third parties. Token simplifies the many APIs and is already integrating 10 banks into the system.
RSRCHXchange was founded in 2014 as a one-stop-shop for asset management firms to purchase research services from banks, brokers and boutique providers. It will be particularly useful in helping banks comply with the EU’s new Mifid II rules, which come into force at the start of 2018.
THE JUDGES SAID:
This is solving a problem that comes with Mifid II. A more sophisticated solution than others in the market.
Bricklane.com is an online property ISA allowing anyone to participate in the housing market with an initial investment of as little as £100.
THE JUDGES SAID:
“We liked this because it is creating a new product. The founders say the main competitor is cash, with most of their funds coming from people transferring their ISAs.”
Castlight Financial is aiming to prevent another credit crunch by providing a more accurate way to assess what a consumer can afford to borrow. It collects data in real time from customers’ banks accounts, including income and expenditure, and uses these to build a clear picture of a their monthly disposable income. People who may have previously been refused loans because banks had too little data about them may become eligible for credit. Castlight says it can also speed up the mortgage decision process from six weeks to 10 minutes.
THE JUDGES SAID:
“The idea of better credit scoring is attractive and it is significant that the company has made a profit from the first year and has not had to take any financing.”
ALMOST half (44 per cent) of small- and medium-sized enterprises (SMEs) have never checked their credit score, new research from RateSetter Business Finance shows.
The study, released on Monday, found that a further six per cent have opted against checking their score in the last year, while less than one in five (18 per cent) have checked the score in the last six months.
The peer-to-peer lender pointed out that credit scores are an integral part of establishing whether a business has a decent record of repaying debt, and have a significant impact on their chances of getting further finance.
Leeds search specialist Epiphany has been appointed to help improve the brand perception of payday loan company Wonga.
Epiphany will work in partnership with Wonga’s content agency, Cedar, on brand perception and delivering a customer-first multi-channel content strategy. The agency will also be responsible for driving traffic and enquiries from organic search.
Hexindai, a Chinese marketplace for peer-to-peer lending, announced terms for its min-max US IPO on Monday. The offering is being made on a best-efforts, min-max basis and therefore will not be included in our IPO stats.
The Beijing, China-based company plans to raise at least $30,000,000 by offering a minimum of 2.7 million ADSs and a maximum of 8.9 million ADSs at a price range of $9 to $11. At the midpoint of the proposed range, Hexindai would command a fully diluted market value of $487 million.
Credimi: four asset management funds renovate and increase the commitment up to €72.5 million (Credimi Email), Rated: AAA
Barely a year after the launch, Credimi – the digital financing platform for SMEs that makes liquid the working capital in short time at low costs – has renewed the agreement with the four primary investment funds. They committed up to 72,5M€ to purchase the entire portfolio of commercial credits originated by the fintech platform.
Credimi is a fintech company officially authorized by the Bank of Italy to the public financing activity according to the dispositions contained in the new art.106 of the Banking Consolidated Law. The company will be able to provide funding to SMEs up to €300 million in the next months .
The four partners previously involved, Anima Sgr, Anthilia Capital Partner Sgr, BG Fund Management Luxembourg S.A. and Tikehau Capital, have decided to renew the agreement. Credimi is therefore reinforcing the attractiveness of its notes, which are the among the most profitable and diversified asset class among investments with a comparable risk profile. In fact, the notes combine an average life of the underlying invoices of less than 3 months with a spread around 450 base points and credit losses of 0.3%. Credimi finances hundreds of SMEs with average ticket of 20,000€, creating a low risk, diversified portfolio.
The portfolio subscribed by the four noteholders is untranched and pays a quarterly coupon. Additionally, Credimi continues to keep a stake of around 5% (as fifth noteholder alongside with the other four) to have ‘skin in the game’. This is not requested by law as the note is untranched and is ensured by Credimi to the noteholders on a voluntary basis.
Since launch on the market, Credimi has achieved outstanding results, exceeding initial expectations: €40million of loans have been delivered to Italian SMEs and more than 2.000 invoices have been financed. The same strong results have been obtained with the Supply Chain financing: by signing deals with corporations – such as Ariston Thermo, Jab group (Jimmy Choo and Bally), Pittarosso and few others – Credimi helps large enterprises to finance their suppliers at competitive prices and with an unmatched flexibility.
Lenddo and EFL Team Up to Lead Financial Inclusion Revolution (Lenddo Email), Rated: A
Lenddo and EFL have individually facilitated over 5 million credit assessments since inception, allowing more than 50 financial institutions to disburse over $2 billion USD in credit to people with limited information. The combined company will work directly with banks, telcos, retailers, microfinance institutions and insurers to serve individuals and small businesses.
The first joint product offering goes live in Asia and Latin America today, with additional products and features scheduled for release in the coming months.
A leading member of Australia’s fintech community has backed the view of veteran bankers that technology giants will be dissuaded from setting up shop in Australia and taking on the big four. But the disrupters see different reasons for Google’s absence.
SocietyOne CEO Jason Yetton said for the tech companies with the resources it wasn’t a question of whether they could disrupt the incumbents but whether they should do so.
In Australia there is a raft of smaller companies looking to carve out their own share of the financial services market including personal loans company Ratesetter, layby purchases Afterpay and online lender Zipmoney.
Tyro is a payments and technology company that also lends to small businesses. It also has Australia’s newest banking licence and is therefore subject to the same oversight as other authorised deposit taking institutions (ADIs).
Prospa, an Australian online lender for small businesses, has formed a partnership with Gandel-backed retail marketplace MyDeal, which will allow retailers on its platform to apply for loans of up to $250,000.
Senvirtne and his MyDeal team will be receiving a 1-2% small commission for every loan that comes through the marketplace.
On Monday, Bengaluru-based micro-lending startup KrazyBee said it had raised $8 million in a Series A round led by Xiaomi Technologies and Chinese venture capital fund Shunwei Capital. The funding raised was a combination of equity and debt, with participation from Essel Group’s E-City Ventures and RK Group.
The funding announcement comes within a year of the firm raising $3 million pre-Series A round in January from Plum Ventures. Prior to this, KrazyBee had raised a seed round of $2 million in May 2016.
Until July this year, the company claimed they had disbursed 80,000 loans and processed close to 170,000 loan applications. As of October 2017, the company had disbursed close to 150,000 loans and processed above 200,000 loan applications. The founder claims that of this number, 75,000 loans have already matured with steady settlement.
The average size of loans by KrazyBee is around Rs 15,000 with the maximum tenure being 12 months.
Many lenders find P2P platforms attractive because of their potential for giving higher returns, compared to fixed and savings bank deposits. In fact, these platforms also market their services by comparing the returns from P2P lending with returns from mutual funds. It is important to note here that these platforms cannot guarantee any return.
Thus, the RBI imposed limits on how much can be lent and how much can be borrowed by individuals from these platforms—to limit the risk exposure of individuals.
If such a person was to take a personal loan from a bank, it would come at 16-17%. Through P2P lending they can get that loan at around 14%. Those with low credit scores typically go to other NBFCs, and get loans at 22-23%.
No borrower can have loans of more than Rs10 lakh, from all the P2P platforms combined; and no more than Rs50,000 from one lender. All loans through P2P platforms come with a payback period that cannot be more than 36 months.
Markel International, the specialist insurer, has unveiled a fintech policy offering comprehensive protection for businesses in the financial technology sector in Asia, having successfully launched it in the UK early last year.
Coverage also extends to the costs involved when sensitive documents or data are lost.
On top of the professional indemnity core cover, the policy offers protection for three additional perils to protect clients against their key exposures:
Directors’ and officers’ liability cover protects against claims of mismanagement, which could be brought by shareholders, employees, creditors or regulators.
Theft option covers the insured against the stealing of money or other financial instruments, through both electronic and non-electronic means, including through extortion. It will also cover the cost of rectifying computer systems following a theft.
Cyber liability and loss cover provides protection if the insured suffers a network security incident, such as a hack, denial of service attack, or a computer virus, and will also cover business interruption losses arising from such an incident. This section includes cover for the cost of rectifying computer systems following a network security incident.
In addition to his knowledge in DCM matters, McGrath brings to Baker McKenzie a practice that covers a wide range of areas, including securitisation, leveraged and general finance, peer-to-peer lending, insolvency and restructuring, blockchain, and smart contracts.
News Comments Today’s main news: Finastra inks agreement with IBM. One number Elevate Credit shareholders are worried about. Zopa makes IFISA available to existing customers. Yirendai ready to include wealth management. Klarna wins Europe’s biggest fintech banking license. Today’s main analysis: Online lenders do a good job of identifying fraud. Today’s thought-provoking articles: Bloomberg report is critical of online […]
One number Elevate Credit shareholders are worried about. AT: “Charge offs can be a huge intrusion into profits. Net charge-off-rate as a percentage of revenues, however, measures principles and interest beyond 60 days past due minus recoveries from prior periods. In other words, it can mean an increase or decrease in currently profits depending on how much is recovered from prior charge-offs. The longer loans are not paid off, the less likely they are not going to be paid off, so this is an important measure for shareholders to determine the likelihood of future profit increases. This doesn’t necessarily mean trouble for Elevate Credit. An aggressive collections posture could decrease this number and make shareholders happy.”
Elevate Credit, Inc.(NYSE:ELVT) the newly public subprime fintech lender, delivered its first quarterly earnings report as a public company on May 8, and the results were impressive. Loan originations grew almost 40%, while revenue grew by a smaller 20%, due to the lowering of interest rates on Elevate’s high-rate loan products. Elevate’s IPO was unusual — most tech IPOs sport high growth rates but negative earnings. In the first quarter, Elevate actually delivered a net profit of $1.7 million. Adjusted EBITDA margin expanded to 16%, above the 10% margin posted in 2016 and the 4% in 2015.
The big blemish on the quarter was a high net charge-off rate as a percentage of revenues. Net charge-offs measure the amount of principal and interest more than 60 days past due, minus recoveries from prior periods. That number shot up to 59% in the quarter, above the company’s target range of 45-55%, and up 600 basis points year over year. While the company was still profitable, the $1.7 million in net earnings was down from $6 million in the year-ago quarter.
Management explained that the rise in loan loss provisions was partially related to a new credit score the company tested on lots of new customers at the end of 2016. As is the case with many financial companies, when new customers increase, there is often an initial uptick in defaults or loss ratios.
A report from Bloomberg this week takes certain online lending platforms to task regarding the fact that some online lenders are not verifying income status. The report also says that even if there are errors in loan applications the loan may still be approved. More specifically, apparently Prosper does not verify income and employment in about a quarter of the loans. Lending Club is said to verify income in about one third of the loans.
Risk is always part of the investment equation and Orchard Platform perhaps provides the best perspective into affiliated risk of investing in loans originated online.
Recently there was an article in Bloomberg (Article Link) that talked about how online lenders are not always verifying the basic borrower information like Income.
We at Croudify have been analyzing the loan data for more than 2 years and wanted to shed some light on the article and show that while the headline is true the devil is in the details and actually the platforms have been doing a very good job in identifying the fraud.
Once we had concluded that the non-verified loans are not growing as percent of population the logical next step was to check if these loans are performing worse than before. Is there a possibility that the loans without income verification have deteriorated over time and hence the red flag.
This points to a very important finding that the preliminary indicators that Lending Club is using in identifying the fraudulent behavior is not only working it is working great and is providing a performance lift to loans.
So Newman, 61, turned instead to an online lending company called OnDeck. After submitting a handful of bank statements, he was quickly approved for a $65,000 loan, which allowed Newman to cover his wine shipments and keep his business running.
“These loans are predatory by nature,” he told me. Think payday loans for small businesses, he said, with interest rates well over 30%.
And there’s something to that. Loans with a higher degree of risk would naturally come with higher interest rates. The question is whether such loans are being marketed honestly and fairly, and whether customers are able to make informed decisions about financial obligations.
Fairness in lending means clear and straightforward disclosure of terms and conditions. On that score, OnDeck seems to come up short.
For example, the company’s website boasts that term loans of up to $500,000 can be obtained with annual interest rates as low as 5.99%. Newman said that when he contacted OnDeck, he was hoping to get a loan at such a rate. But it didn’t work out that way.
What he got was a 12-month, $65,000 loan, plus nearly $17,500 in interest and an origination fee of $1,625. That translated to an annual percentage rate of 55%.
In fact, OnDeck told me its average annual interest rate for term loans, excluding fees, is 38%. If that’s the case, I asked why the rate most prominently displayed on their website is 5.99%.
China Merchants Bank is considered the largest industry player currently, but still its assets under management in its private banking division are worth just 1.66 trillion yuan.
First: There will be fewer advisers, possibly many fewer. The trend line points down, and there’s nothing in the three- to five-year outlook to change that.
The future leaders of this profession see advisers serving far more clients with a greater assist from technology, as well as more reliance on outsourcing.
But those requiring expert financial advice will undoubtedly seek a more complete look at all areas where money touches their lives — and how those areas intersect. Who will need it most? A large population that isn’t necessarily today’s prime prospect pool, at least for advisers paid based on a percentage of assets: the HENRYs (high-earner, not rich yet). As investment advisers move beyond mere investments, and the field becomes a profession, compensation surely will evolve to ensure those who most need advice can get it and those giving advice can still run a profitable business.
In financial advice this will take the form of a planning quarterback who strategizes the entire financial game plan and keeps clients on track largely through automated accountability programs.
If you find this hard to believe, just wait until Google or Amazon moves full throttle into the asset management business.
In April, 2017, Pew Charitable Trusts published the results of a national survey of payday loan borrowers. The top three responses to what is most important to these borrowers in choosing where to get a payday loan were:
76% – How quickly they can get the money
74% – The fee charged
73% – The certainty that they would be approved for the loan
The survey reveals other important consumer attitudes about payday loans. Most respondents believe that there should be more regulation of lenders, and lower interest charges. They would also prefer almost any other borrowing option or loan type to the payday solution.
Chuck Wait Tire, located in the small rural community of Mowrystown, Ohio, had never cleared more than $100,000 in monthly revenue, until they implemented Acima. The next month, they not only beat the $100,000 threshold, they killed it with a 33% monthly increase in sales from $90,000 to $120,000.
Online commercial real estate company ArborCrowd announced on Thursday it is now offering a new $69.7 million commercial real estate deal to investors. The Lago Paradiso property is described as a multifamily complex located in Miami, Florida.
According to ArborCrowd, investors now have the opportunity to own a piece of a $4 million stake in Lago Paradiso. The property now has a targeted 13 percent to 17 percent Internal Rate of Return (IRR) and a projected hold period of four to seven years.
Zopa announced on Thursday its IFISA is now available for all existing Zopa customers. Along with the IFISA, the online lender unveiled its latest peer-to-peer investment product, Zopa Core.
Zopa then explained that the Zopa Core product has a target return of 3.9% and by December will replace its products, Access and Classic, without Safeguard coverage. IFISA and Zopa Core features include:
At last count OFF3R hosts offers from 36 different UK platforms. Today in a report on P2PFinanceNews, OFF3R is revealing it is raising £5 million to become the “Money Supermarket” for investments. Essentially OFF3R wants to integrate today’s alternative investments with yesterday’s more traditional types.
U.S. financial technology provider Fiserv said on Tuesday it had agreed to buy British financial services technology firm Monitise Plc for about 70 million pounds ($88.72 million).
AIM-listed Monetise, worth about 2 billion pounds at its peak in early 2014, blazed a trail by linking banks and mobile operators to build a business capable of handling billions of dollars in mobile payments, purchases and money transfers.
“The key thing is making sure that you’re looking for the right type of finance,” explains Paul Marston, managing director of commercial finance at peer-to-peer lending platform RateSetter.
A survey by the British Business Bank for 2015/16 found that 100,00 small businesses were rejected for loans by mainstream lenders – equating to £4bn of potential finance.
“If you’re an SME and go to the bank for an unsecured loan, there’s a cap of around £50,000, whereas Funding Circle will offer up to £350,000.
Funding Circle explains that it offers four key benefits for SME borrowers: speed, flexibility, efficiency and transparency.
As P2P platforms are purely online, busy business owners can apply for finance outside of working hours. “More than 50 per cent of loan applications are made outside of working hours, when a bank branch would be closed,” says Funding Circle.
While criteria varies from platform to platform, P2P loans are often more suitable for businesses that are slightly more established. For example, RateSetter offers loans to businesses that have been trading for at least three years and has at least two years of either audited accounts or formally prepared management accounts. And Funding Circle only lends to businesses that have been trading for more than two years, have a turnover of more than £50,000 and are a UK limited company.
However, there are still options for start-ups. Crowd2Fund has recently launched a ‘venture debt’ product which enables early-stage companies that are not cash-flow positive to access debt finance. Crowd2Fund argues that this can be simpler than raising equity and enables founders to keep control of their company.
Funding Xchange claims that a business using its platform can expect an average saving of £2,000 by comparing pricing from multiple providers – representing 10 per cent of the value of the average loan.
LendInvest has appointed its second BDM for Northern England to satisfy growing demand in the region.
Sophie Mitchell-Charman joins the team from Mint where she worked as a Bridging BDM. Based in York, she will travel extensively throughout northern England, with a particular focus on deals in the North East.
Yirendai, China’s largest peer-to-peer lending platform, is looking to raise its profile even higher, with an expanded product offering, the company’s chief executive Fang Yihan has told the South China Morning Post, shrugging off any worries about a regulation-induced slowdown in the industry.
New rules governing the industry will come into force in August, and according to available drafts, these will impose a limit of 200 000 yuan (US$29,400) on lending to individual borrowers, require the lenders to carry out stricter background checks on all clients, and establish strong contractual relations with custodian banks.
Double digit returns for investors were commonplace last year, but will become harder to find.
But with its scale, larger players such as Yirendai that will be the most likely to gain a competitive advantage from the tighter rules.
China’s retail wealth management market was worth 120 trillion yuan last year, according to a report by Boston Consulting Group, which expects growth of 12 per cent annually for the next five years.
China Merchants Bank is considered the largest industry player currently, but still its assets under management in its private banking division are worth just 1.66 trillion yuan.
Yirendai is also experimenting with allowing partners to sell services other lending services via its platforms.
Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced that it was awarded the Best P2P Lending Platform in China Award at The Future of Finance Summit (the “Summit”) held in Singapore on June 8-9, 2017. Yirendai is the first FinTech company in China to receive this prestigious reward.
According to a latest monthly report issued by P2P001.com, the total volume of P2P lending in China hit a new record to $53billion on May, with the month-on-month growth of 11.32%.
On May, the average annual interest rate for P2P loans was 8.34%, which has been slowly rising for three months in a row. However, the financial “deleveraging” and tighter monetary policy are still undergoing, it is unlikely that P2P lending rates will continue to rise.
By the end of May, the accumulated P2P loan balance in China has reached to $213billion, with the month-on-month growth of 6.72%. Among them, the loans outstanding on P2P loans of more than $29,850 reached to $152 billion, accounting for 71.46% of the total; the loans outstanding on P2P loans of more than $149,253 reached to $101billion, accounting for 47.43%.
In addition, there are 672 P2P lending institutions assigned depository agreement with banks up to the late May, involving 59 banks and 28 provincial and municipal lending platforms, and 286 of them have been already launched online.
Recently, the China Banking Regulatory Commission, the Ministry of Education, Ministry of Human Resources and Social Security issued the Notice on Further Strengthening the Management of Campus Credit.
It is pointed out that commercial banks and policy banks should provide customized products for college students, training, consumption and entrepreneurship under the premise of risk control while strengthening the rectification of campus loan problems. And the standardization of financial services, together set the credit line and interest rates.
Ning Tang, CEO and founder of Chinese fintech major Creditease, believes that the current landscape will require players in the finance sector to evolve their approach amid a highly disruptive technology landscape with substantial opportunity.
What’re the assets under management and the role of the Singapore office?
Every year we help clients deploy over $100 billion of capital and the idea of coming to Singapore in 2014 was that this city was one of the bases for our internationalisation strategy.
You’ve got different entrepreneurial hubs in China – Hangzhou, Shanghai, Hong Kong, Beijing – which is the fintech capital of China?
I’d like to say Beijing because that’s Creditease’s base. But in terms of technology innovation, not just in financial services, I think Beijing and Shenzhen are the leading cities, while some say Hangzhou as well.
Why do so many Chinese firms want to list in New York when Chinese entrepreneurs have access to very liquid stock markets in cities like Shanghai, Shenzhen and Hong Kong?
In our experience, the US capital markets are more advanced in terms of welcoming innovative business models and companies at the growth stage despite being a pre-profit stock.
Recently, Beijing has been implementing capital controls and kerbing capital outflows from China. How has this affected Creditease’s business?
We’re largely unaffected by these controls, as many of our wealth management clients have assets outside of China, and we help them manage those. However, with our Creditease Fintech Investment Fund, we had some of our partners who were able to invest overseas.
There’s been a lot of movement in the Bitcoin and Ethereum markets. What’s the view of Creditease on digital currencies as an asset class and its use in marketplace lending?
We remain interested but it’s too early at this stage. The regulatory framework and security issues around such models…I think we’d like to see more things get worked out before this asset class becomes appealing to our investor base. We help our investors do asset allocation and any asset class going into the portfolio should be a major asset class. Otherwise, it’s quite speculative and not helpful to our investors
Looking at the future of fintech in China, you have Beijing where the regulators are based. With all these centres like Shenzhen, Hangzhou, Beijing, Shanghai and Hong Kong, what is the future of all these different ecosystems?
Quite interestingly, you’re talking about cities. I’m thinking about nations.
So different cities and nations have to assess the unique attributes they work and work on refining and enhancing those. I’m quite hopeful that Beijing will continue to be the fintech hub and with Creditease, we’ve got a presence in various places like Israel, Singapore, New York and Hong Kong, so we can access this innovation everywhere!
As the plan summaries, from 2011 to 2015, over 96 regulations and guidelines for the financial sector have been issued. In the next five years, another 110 regulatory updates or new regulations or guidelines will be released.
Alibaba Group Holding Limited hosted an Investor Day on June 8-9 at Alibaba Xixi Headquarters. Speakers included Jack Ma (Executive Chairman), Daniel Zhang (CEO) and other members of the senior management team.
To safeguard the interests and property rights of college students and maintain financial stability for P2P online lending market, China Banking Regulatory Commission (CBRC), Ministry of Education and Ministry of Human Resources and Social Security have jointly issued a paper to regulate the student loans market. The paper encourages commercial banks and policy banks to develop student loans business and provide standardized financial services to college students.
Ant Financial’s virtual credit card service Ant Check Later (also known as “Huabei” in Mandarin) is eyeing to link up to 4 million online and offline merchants to help them grow businesses and attract consumers who have little access to physical credit cards.
At present, third party payment service license has become an essential equipment for any Chinese company who wants to expand into financial services. On June 7, GOME Finance announced to acquire a payment service company Easy Bonus Card. GOME Finance paid up to CNY 720 million, mainly for the license, which could make the company complement the payment capabilities and accelerate the process of technological innovation.
Klarna has become the largest European fintech company to get a banking licence, with the Swedish group saying it wants to become the Ryanair of the sector, attacking lenders across the continent.
Valued at more than $2bn, Klarna has already captured much of the market for online payments in the Nordics and Germany, and on Monday received a banking licence from the Swedish Financial Supervisory Authority 20 months after filing for one.
The Swedish group – which had revenues of SKr3.6bn last year and was valued at $2.25bn in a fundraising in 2015 – is looking at offering customers across Europe services such as bank cards and salary accounts as well as eyeing the US for future expansion.
According to EY’s Fintech Adoption Index report last year, although Russian online adoption is lower in comparison to major financial centers like London, New York or Hong Kong, the market in this area is growing at a rapid rate. Online payments and money transfers are booming Russia, as are Moscow and St Petersburg are becoming hubs for this form of technology.
David Waroquier, Partner at Mangrove Capital Partners also highlighted that access to funding in Russia is more limited. ‘This means Russian fintech companies must have a tighter control on costs and be very efficient operationally.’
As said before, one of the trends that has exploded in Russia is mobile payments, as the EY report states that 57.6% of Russians used this service in comparison to the 17.6% globally. There are currently 56 million online mobile users over 16 in the country and according to Gfk, 53% of online users in Russia made at least one mobile payment in the last 6 months, as Dunaev said.
The European Crowdfunding Network (ECN) has launched a survey dedicated to addressing the challenges of cross border transactions in the investment space. More specifically, the ECN is seeking input on cross border crowdfunding and online lending, including peer to peer / marketplace lending.
The ECN explains:
We will focus solely on crowdfunding models that entail a financial return, notably:
Investment-based crowdfunding (where companies issue equity or debt instruments to crowd-investors through a platform) and
Lending-based crowdfunding (where companies or individuals seek to obtain funds from the public through platforms in the form of a loan agreement)
Finastra, created by the merging of Misys and D+H, and IBM (NYSE: IBM) have reached an agreement to explore how Finastra can transform their banking operations with IBM Cloud and Cognitive technologies. The two companies plan to bring IBM technology into the Finastra open architecture to enrich the digital retail banking experience and bring new innovations to market.
Cross-border money transfer service WorldRemit is enabling its immigrant customer base to send money home using Android Pay, making it the first international remittance firm to run on the Google payments system, the company said on Tuesday.
Connecting with Android Pay will enable WorldRemit customers in developed markets like Europe or North America to make instant international money transfers to reach the 112 million accounts available via WorldRemit’s network of payment channels.
London-based WorldRemit says it handles about three-quarters of mobile phone-based international money transfers, a small but fast-growing segment of the global $575 billion worldwide remittance market. Recipients using WorldRemit can up pick cash or deposit money in banks or mobile money accounts or top up mobile accounts.
Paul Rogan, the former chief executive of distribution, marketing and research who stepped out of the role in February after 12 years at Australia’s largest annuities providers, is now readying to launch Retirement Essentials, an online platform that educates and assists those who are already in retirement on how to manage their money.
Wadhawan Global Capital (WGC), which owns 38% of DHFL and is the controlling lever for the group’s financial businesses, has set up a London unit that opened its account through undisclosed -but sizeable-investments in 12-year-old Zopa.
While the overall internet-based alternative finance industry registered transactions worth more than $57 million between 2013 and 2015, online peer-to-peer or marketplace lending saw loans with a cumulative value of over $2 million disbursed during the same period. The total loan value in the corresponding two years has grown by around $2 million, with an estimated $4.5 million worth of loans disbursed through online peer-to-peer lending platforms by the end of 2016.
But even as industry projections predict the market for peer-to-peer loans to be worth $4-5 billion by the end of 2023, this promising segment is still a long way off from achieving its true potential as a highly viable alternative investment class.
The launch of India’s Digital Stack that includes Aadhar, eKYC and digital payments is paving the way for the country’s shift towards a cashless economy.
The year 2017 is expected to be the year of financial technology, with alternative lending and investment products like peer-to-peer lending set to be driving forces for the latest iteration of the fintech revolution in India.
Faircent.com, for example, has consistently delivered net returns upwards of 18% per annum to its majority of lenders.
About a year ago, Crowdfund Insider connected with Julian Kwan, CEO and co-founder of Investacrowd, a real estate crowdfunding platform that was established in Singapore. Kwan was born in Australia but has spent the last 17 years in Asia – most recently Singapore. Having founded multiple companies, Kwan is a longtime real estate investor, developer, and manager. InvestaCrowd was envisioned as a vehicle to provide access to real estate investments in select markets like New York City, Sydney or London. As with many real estate platforms, by using technology much of the process may be completed online.
A report by Cushman & Wakefield from earlier this year highlighted this fact. In a publication, Cushman & Wakefield explained;
“Compared to other countries, China ranked No. 1 among foreign investors in commercial real estate within the U.S. in 2016. China inbound investment deal volumes have grown rapidly, reaching $19.2 billion USD in 2016, a record high. Sixty-two percent of the investments, which equated to $11.9 billion USD, were deals over $1 billion USD. The five largest Chinese investment transactions were among the top ten largest transactions in the U.S. in 2016.”
Kwan told us InvestaCrowd was in the process of obtaining a capital markets license from the Monetary Authority of Singapore (MAS) – now a requirement.
But current investors are turning into repeat investors. InvestaCrowd does not focus on Southeast Asian real estate which brings better quality deals but adds a different challenge to the mix. While he likes the Singapore market it is in a bit of a pause. On the other side, he is very cautious on deals in countries like Vietnam, Indonesia or China – a country where he spent many years in the real estate sector.
Kwan said they are looking to set up a line of credit too, so as to be able to pre-fund deals.
Singapore is one of the leading hotspots for financial tech thanks to flexible regulation plus national initiatives to fund startups and integrate blockchain innovation into the local economy. American venture capitalists at the Ethereal Summit in New York praised Singapore as a ripe market, teeming with collaboration between entrepreneurs, regulators, banks and investors. The small island nation wants more than a high-tech economy: Singapore aims to become a global fintech hub.
Haotanto is a self-made millionaire determined to make fintech more accessible for Asian women. Her online media startup, the New Savvy, targets women investors by providing 30,000 Asian subscribers with finance and career guidance. This is no ordinary women’s publication. Forbes reported her team partners with the Monetary Authority of Singapore, the Singapore Exchange (SGX) and Far East Organization to produce pragmatic content.
So her company organized the Future Is Female conference in April, along with SGX, attended by 250 women.
P2P Cash, a Georgia-based digital financial services company, has opened a new money transfer service from the US states of Georgia and South Carolina to Nigeria. P2P Cash now offers cross-border money transfers at competitive exchange rates without any transfer fees. Nigerians and Nigerian-Americans in Georgia and South Carolina can find this new service at . Customers may also download the mobile app from the Google Play or Apple Stores.
P2P Cash’s aggressive no-fee pricing position is possible because of its proprietary Smart Token technology and global disbursement network.
News Comments Today’s main news: Earnest is looking for a buyer. SoFi gets into wealth management. DBRS assigns provisional ratings to SoFi Professional Loan Program 2017-C LLC. Prosper issues new securitization backed by George Soros. Lending Club hires PayPal exec as new president. TransferWise reaches profitability. Renren announces 2016 results, unaudited. Today’s main analysis: Capital One forays into digital ID. Today’s […]
SoFi gets into wealth management. GP:”Offering multiple financial products will help with branding and with creating a customer reflex to contact SoFi for all their financial needs.” AT: “SoFi is getting into more and more areas of financial services. A part of me applauds all of the efforts, but there is a part of me that wonders if expansion is happening too rapidly. One thing is for sure, they know how to earn media attention.”
Capital One forays into digital ID. AT: “Capital One has long been a leader in banking services. Banks in general are way behind on digital services. I’m glad to see a big national bank approaching this.”
Lending Club hires PayPal global credit head as new president. GP:”Very impressive hire from Scott Sanborn to continue building up the team. Credibility continues to improve. If only origination was closer to $3bil /quarter, I think all indicators would be in the green. “AT: “When startups snag top talent from established companies, it’s time to stop calling them startups. This is a great talent acquisition for Lending Club.”
Earnest is looking for a buyer. GP:”This is going to be a hard sale. We have published a few articles (here is one from Frank Rotman) trying to understand the value of an online lender to banks or potential purchasers and it is not clear. “AT: “This is interesting. Last November, Earnest announced helping to refinance $1 billion in student loans. This would be a good buy for an online lender, or a bank, that wants to tap into this market. It could be one way for a legacy bank to get into online lending without building its own platform.”
TransferWise reaches profitability, planning new financial services. GP:”Profitability is over rated in the UK and underrated in the US. This is a great milestone at a good time in the company life. Well done. IPO next? “AT: “Congratulations. This is a boon to online lending in general and UK P2P lending in particular. The more firms that achieve profitability, the better it is for all.”
SoFi wants to be at the center of its members’ financial lives, and believes the best way to do so is to provide new products that complement its existing portfolio of student loan, mortgage and other loans. Today the company is announcing the launch of SoFi Wealth, a product it believes will compete with Wealthfront, Betterment and other low-cost wealth management platforms.
But the company is looking to go a step further than just creating yet another roboadvisor. SoFi Wealth will offer access to non-commissioned, licensed financial advisors that members can reach by phone or by chat to answer investment questions or just help them improve their overall financial health.
Wealth management customers will get the same benefits as other members, including access to community events, career coaching and discounts on other SoFi products. Management fees will be waived for SoFi loan borrowers, but otherwise are just 0.25 percent and will be waived for the first $10,000 invested.
People interested can sign up with as little as a $500 initial investment or monthly recurring deposit of $100 for access to any of its low-cost ETFs.
Capital One Financial is trying to turn the expense of thoroughly vetting bank customers into a moneymaker with new digital identity products.
In so doing, Capital One is one of the first in the U.S. to test if businesses will pay banks to check users’ identities, and if consumers will sign into websites through their banks the way they use social media accounts. Since banks already have to collect and verify sensitive information, to comply with know-your-customer regulations and to prevent fraud, they theoretically could leverage this work and expertise for other businesses. Consumers, in turn, would have fewer passwords and usernames to remember and would not have to give out sensitive information such as Social Security numbers quite as often. Banks in Europe and Canada have begun to offer such services.
DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of Post-Graduate Loan Asset-Backed Notes (the Notes) issued by SoFi Professional Loan Program 2017-C LLC (SoFi 2017-C):
— $96,069,000 Class A-1 rated AAA (sf)
— $230,156,000 Class A-2A rated AAA (sf)
— $175,653,000 Class A-2B rated AAA (sf)
— $41,000,000 Class B rated AA (sf)
— $18,000,000 Class C rated A (sf)
Lending Club has hired the head of Paypal’s global credit business as its new president, amid efforts to get on the front foot after last year’s loan mis-selling scandal.
Steve Allocca, PayPal’s vice-president of global credit, will start work at Lending Club next week, the company said in a statement on Tuesday, reporting to Scott Sanborn, chief executive. He will lead Lending Club’s efforts to deliver credit to more people across an expanding range of product categories, the company said.
PayPal Credit is the successor to BillMeLater, which PayPal’s then-parent, eBay, bought in 2008. The idea was to expand the company’s financial offerings, help merchants get more business and beef up its fraud detection tools.
Before joining PayPal in 2013, Mr Allocca had various consumer-facing roles at Wells Fargo after training as a banker at First Chicago, a bank bought by Bank One and then JPMorgan Chase.
According to a report by Bloomberg, Earnest is up for sale. The San Francisco based online lender is said to have an asking price of $100 million. Founded in 2013, Crunchbase reports Earnest has raised over $99 million not including an undisclosed sum in a VC round in January 2016 and $200 million of debt financing.
DBRS, Inc. (DBRS) has today conducted a review of the outstanding public ratings of five securities from three structured finance asset-backed securities transactions: OnDeck Asset Securitization Trust II LLC, Series 2016-1; OnDeck Account Receivables Trust 2013-1 LLC; and Prime OnDeck Receivables Trust II, LLC. Of the five ratings reviewed, all were confirmed at their current rating levels.
SoFi was founded on the business of helping high-earning graduates refinance their student loans. But perhaps ironically, CEO Michael Cagney thinks today’s record amount of student loan debt is a bad thing.
“When you go to a school and take a loan out, no one explains what you can afford, how much money you’re going to make when you graduate and how much you’re able to pay back,” he explained.
Meanwhile, universities aren’t incentivized to provide that education because it’s in their interest to have students matriculate, and there’s no downside to the college when a graduate is unable to pay back their loans.
Money360, a commercial real estate marketplace lending platform, closed more than $45 million in loans in April, the company announced today. This brings the company’s total production to over $250 million in closed loans, with an expected $500 million in transactions by year-end. Money360’s recent loan closings span properties nationwide and provide a variety of borrowers with quick funding to purchase or refinance income-producing properties.
The more than $45 million in loan closings, all of which have loan-to-value ratios of not more than 75 percent, include:
A $9.70 million bridge loan for a two-story, 198-room hotel property in Fayetteville, North Carolina. The 131,000 square foot property was built in 1983 and renovated in 2011.
A $7.70 million bridge loan for a multi-tenant, medical office building in San Jose, California containing 20,341 square feet of rentable space.
An $8.50 million bridge loan for a five-story, multi-tenant office property in Orange County, California containing 58,755 square feet of rentable space.
A $4.90 million bridge loan for a two-tenant, 19,107 square-foot anchored retail property in Ocean County, New Jersey.
A $6.00 million permanent loan for a one-story, 10-tenant retail property in Johnson County, Kansas containing 39,483 square feet of rentable space.
A $3.48 million permanent loan for a one-story, four-tenant retail property in Johnson County, Kansas containing 21,450 square feet of rentable space.
A $5.00 million permanent loan for an anchored retail center containing 202,219 square feet of rentable space, located in San Bernardino County, California.
Financial advisors may want to pay closer attention to automation in retirement savings accounts. Auto-escalation and auto-enrollment played major roles in how Fidelity retirement savings accounts reached new highs this year, Bloomberg writes.
Among the 27% of employees who raised their contribution, 50% did so in such auto-escalation accounts, Jeanne Thompson, a senior vice president at Fidelity, tells the news service. And for workers under 30, automated increases accounted for a whopping 68% of the rise in savings rates, according to Fidelity’s analysis.
CBC National Bank, headquartered in Fernandina Beach and with branches in Fernandina Beach, Ocala and The Villages, Fla., and Beaufort and Port Royal, S.C., today announced that it has been named by LendingTree as the 3rd highest customer-rated mortgage lender in the first quarter of 2017.
Online loan marketplace LendingTree said its rankings feature top lenders in multiple loan product categories, including mortgages, personal loans, business loans, and auto loans. CBC National Bank earned the 3rd highest ranking in the mortgage category.
Last year, the Office of the Comptroller of the Currency (OCC) set a course for the future of financial services. Now it appears that the agency is adrift without a captain, and a storm is upon it.
The fintech charter proposal may not survive legal challenge. The OCC has said that it has authority to issue fintech charters to non-depository companies if they engage in other “core banking activities,” such as paying checks or lending money. But that position is based only on the OCC’s own 2003 regulation, which the state regulators are also challenging. And, as Sens. Merkley and Brown noted, other SPNBs that do not accept deposits (bankers’ banks, credit card banks, and trust banks) are specifically authorized by Congress under the National Bank Act.
Congressional Republicans and Democrats have both recognized the importance of the issue, and Congress is the right institution to explore the implications for the burgeoning fintech industry and the federal-state banking system. And unlike the highly partisan warfare over the Dodd-Frank Act, the SPNB charter provides a rare opportunity for members of both parties to work together to fully examine the risks and benefits of providing a national bank charter to fintech companies.
Finra chairman John J. Brennan said on Tuesday that even if the Labor Department’s fiduciary rule is repealed, it has elevated and put into plain language the idea of providing investment advice that’s better for clients’ returns than for financial advisers’ revenue.
The DOL regulation, which would require financial advisers to act in the best interests of their clients in retirement accounts, was supposed to be implemented on April 10. That date was pushed back to June 9 so that the agency can reassess the measure under a directive from President Donald J. Trump that could lead to its modification or repeal.
If the DOL rule meets its demise, the concept will live on at the Securities and Exchange Commission and at Finra, the broker-dealer self-regulator, Mr. Brennan said.
Finra president and CEO Robert Cook said he supports the concept of raising advice requirements for brokers.
The SEC’s new chief is likely to focus on well-functioning capital markets and capital formation rather than enforcement, Todd Cipperman writes in the Hill.
But Clayton’s “Wall Street pedigree” and his opening statement to the Senate Banking Committee suggests that he will not spearhead enforcement to the same extent as his predecessor, Mary Jo White, Cipperman writes.
As a securities lawyer to Wall Street firms, Clayton will likely focus on broader policy goals and regulations vetted by the financial industry, in part by putting more emphasis on the Division of Investment Management and the Division of Trading and Markets rather than enforcement, according to Cipperman.
But Clayton’s reign isn’t likely to result in unregulated markets. Clayton cites as role models former SEC chairmen Arthur Levitt and William Donaldson, both of whom were tough on the industry despite being insiders, according to Cipperman. Because of that — and because regulatory change occurs slowly — advice firms should stay focused on compliance, he writes.
A local startup that uses crowdfunding to invest in residential real estate is starting to make bigger acquisitions by progressing from rental homes to apartment complexes.
Jacob Blackett and Sterling White launched Holdfolio in October 2014 by attracting investors to collectively purchase run-down rental houses that the company could renovate with hopes of turning a profit.
Now the company has acquired its first apartment property, in the Garfield Park neighborhood on the city’s near-south side, and has another under contract in Beech Grove.
Holdfolio buys properties and bundles them into a portfolio. The residential properties are renovated, and outside investors can buy equity stakes in the properties via an online platform. They receive returns from rents paid for the properties.
The company so far has drawn about 100 investors who have forked over a minimum of $10,000 each. Holdfolio says they have reaped an 8 percent average annual return on their contributions.
The company targets properties that are considered distressed and in areas of the city that can benefit from the company’s investment. Holdfolio typically purchases the homes it targets for roughly $25,000.
Elevate Credit, Inc. (“Elevate”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced the appointment of Denise Russell as Chief Risk Officer, effective immediately.
As Chief Risk Officer, Russell will oversee internal audit, regulatory compliance and enterprise risk management operations including risk identification and mitigation activities. She will work closely with the Elevate executive and legal teams to identify opportunities for enterprise risk reduction in support of the company’s strategic plan. Russell will lead a team of more than 15 compliance, audit and risk management professionals.
Six years after launch, TransferWise, the London-headquartered international money transfer startup, which was most recently valued at a reported $1.1 billion, has announced that it has finally reached profitability this calendar year and is “cash-generating”.
Breaking this down a little, the company says it’s currently seeing £8 million per month in revenue, which extrapolates to a £100 million revenue run-rate, and is growing 150 per cent year-on-year and expecting to do the same this year. It also says over £1 billion is being moved every month, saving its customers what it claims to be over £1.5 million per day in foreign exchange fees.
With that said, let me speculate on what products I think the company could quite easily move into, should it choose to do so. Friend-to-friend or P2P payments within the same country, along the lines of Paypal’s Venmo or Barclays Pingit, doesn’t seem a stretch, given that TransferWise already has much of that infrastructure already in place. It also seems odd that the company doesn’t offer its own debit card with low cost currency exchange when spending abroad, for example.
Were TransferWise to do the latter, that would see it go up against Revolut, and a ton of other much more recent fintech startups that utilise MasterCard’s low exchange rate, including all-your-cards-in-one app Curve, of which Hinrikus himself is an investor.
Peer to peer property lender Lendy has surpassed £310 million in originations with £50 million coming in last 100 days. The P2P lender states that investors and developers are responding to post-Brexit slowdown in bank lending. Lendy adds that quick turnaround, security and low Loan to Value (LTVs) are key to their growth. Lendy says there are over 16,000 registered users on their site.
Lendy highlighted several UK property investments recently listed on their platform:
£7.5 million for the purchase and redevelopment of a commercial building in Marylebone, central London
£5.7 million for the development of a major residential building at Liverpool waterfront
£2.4 million for the development of a major student accommodation complex in Huddersfield
CreditEase announces today that its founder and CEO Ning Tang has been appointed to the University of Oxford’s Said Business School’s (“Oxford Said”) new Global Leadership Council. This council of senior global leaders will provide independent advice and guidance to the school.
Said Business School is a vibrant and innovative business school embedded in the historic and prestigious University of Oxford. The school offers programs and research opportunities that have global impact and help individuals and organizations find ideas and valuable network to tackle world-wide problems. As one of the fastest growing business schools in the world, the school is ranked 1st in the UK in the FT’s ranking of open enrollment programs in 2016, and 2nd globally for aims achieved in the FT ranking of MBA programs in 2017.
PEER-TO-PEER investment manager BondMason is increasing its exposure to non-P2P lenders to broaden its offering.
The firm aims to get its clients a seven per cent return by selecting P2P loans across approved platforms on their behalf, but chief executive Stephen Findlay says he is now looking outside the industry to provide more diversification for investors.
BondMason is also working to increase awareness among financial advisers and recently partnered with professional body the Chartered Institute of Securities and Investment (CISI) to compile a report on the P2P sector.
Revolut has quietly allowed users to make international money transfers in roughly 3-5 days for some time. These transfers are free for amounts of up to £5,000, with a 0.5 per cent charge applying for larger amounts.
Now there is a new Turbo option, which will see international transfers delivered in 1-2 business days, for a flat rate fee of £5 for amounts of up to £5,000, again with a 0.5 per cent fee applied for larger sums.
China Development Bank Capital, an investment unit under China Development Bank, has led a US$42 million strategic investment in Chinese financial technology firm Wacai.
Chinese investment firms CBC Capital, New Horizon Capital, Qiming Venture Partners and Ally Bridge Group also participated in the financing round, the company announced today. Today’s investment brings the company’s total fundraising to over US$200 million cumulatively.
The company has cumulative users of 160 million and has facilitated wealth management product transactions in the range of RMB100 billion (US$14.5 billion) annually, it says.
TWINO, Europe’s fastest growing peer-to-peer (P2P) lending platform, has today released the first ever Alternative Lending Index (ALI) in conjunction with KPMG.
The report compares lending environments across Europe over the period 2010- 2016.
· Highest ranked countries for alternative lending in Europe are: Hungary, Slovenia, Latvia, Poland, Romania, Greece and Ireland
· Countries with largest potential in terms of overall lending market size and alternative lending environment are: Poland, Greece and Ireland
· In 2010-2016 total density of credit institutions per 1 million inhabitants decreased from 19 to 15
· Aggregate European credit gap has increased from close to breakeven in 2010 to 12 percentage points of GDP
· Significant differences in availability of financing for household and corporate borrowers across countries:
· UK significantly higher for corporate borrowers than for households
· Credit gap for the UK and France is negative, indicating lending demand is met with a surplus
· Germany is lending market leader – total outstanding loans reach EUR 2.5 trillion, followed by France, where outstanding loans are EUR 2.1 trillion
· Ireland top country by number of credit institutions per 1 million inhabitants, followed by Austria and Finland
Currently the countries ranked as the most favourable for the expansion of alternative lending are Hungary, Slovenia, Latvia, Poland, Romania, Greece and Ireland whilst France, Germany, Netherlands, Austria, Finland and Sweden show highly efficient lending markets and therefore the lowest ALI.
Potential investment risks for investors are well-balanced and brought to minimum: all loans are secured with a BuyBack guarantee. If the borrower doesn’t pay back the loan, you don’t have to wait for an extra 30 days (after the investment due date) to get your funds back – your money is available right away;
You have access to your money at any time – if you decide to withdraw invested money before the due date, you can receive your money starting from 14 to 28 days after your request with (or without) accumulated interest, depending on your chosen investment plan and preferred withdrawal term;
Your money never sits still; it is always earning. Auto Invest program on DoFinance reinvests funds the moment the borrower returns the loan and the investor’s money becomes available.
According to the press release Alfa Finance Group has invested 2 million Euro in launching DoFinance. Can you please describe what the money was used for?
The money was invested in technologies to create the platform and in building our loan portfolio.
What was the greatest challenge so far in the course of launching DoFinance?
The greatest challenge was to develop a risk assessment tool that would minimize the risk of failure to repay the loan, be effective and secure. Risk assessment and management is our strength, and all our loans are secured with a BuyBack guarantee. If the borrower doesn’t pay back the loan, you don’t have to wait for an extra 30 days (after the investment due date) to get your funds back – your money is available right away.
Another challenge was becoming available also to Asian investors. DoFinance is the first European-based P2P lending platform to open customer center in Indonesia, bringing together European customer centered approach and Asian investors. We are happy to be the first ones to offer such individual approach to all our customers and give the chance to Asian investors to invest in Europe.
Is DoFinance open to international investors?
Yes, DoFinance is available to private individuals holding a bank account in EU, EEA countries as well as Asian countries which are not included in the lists of high-risk and non-cooperative jurisdictions and international sanctions (Indonesia, Singapore, Vietnam etc.).
What is your opinion on the planned upcoming regulation in Latvia for p2p lending?
Fintech industry has a potential to become Latvia’s success story which would contribute to both image and prosperity of the country, thus there must be healthy balance between industry regulation and its self-regulation. The entire financial industry and eventually the consumer will benefit from the development of FinTech as banks and FinTech companies will start cooperating when it comes down to providing financial services, customer service etc. Therefore, it is the state’s responsibility to create environment where these companies will stand and where intellectual capacity of labor will increase and taxes will be paid. At the same time, the regulation must ensure transparency and monitoring – simply because then dishonest entrepreneurs wouldn’t be able to harm investors.
U.S. stocks are strong; developed world stocks are rallying, but still uncertain; and despite some investors’ fears, emerging markets are still appealing. Here’s what’s been happening in the market over the past few weeks.
U.S. equities remain strong
United States equities are continuing to look very attractive after a positive jobs report and an impressive earnings season. The hiring report in early May was more positive than expected with 211,000 jobs added in April, bringing unemployment to a 10-year low. There was also continued wage growth, meaning that, on average, households were getting a bump in income. This increased spending power in the economy bodes well for U.S. equities (stocks).
Earnings season has also revealed impressive corporate earnings growth. While it’s relatively easy to have nowhere to go but up after negative earnings growth in the first two quarters of last year, it’s still reassuring to see higher company earnings and sales growth pushing stock prices up.
Developed world equities still uncertain despite rally
Over the past two weeks, stocks of companies in the developed world outside the U.S. are catching up after lagging behind for much of the post-U.S. election rally. This is largely because European equities were held back due to uncertainty about which way the French election would go. With Macron’s victory and a smooth election in the Netherlands back in March, developed world (excluding U.S.) equities have begun to close the gap.
In Japan, equities remain reliant on Japanese policy makers to lead the country out of its current disinflationary state, but current efforts inspire little confidence based on the failure of similar policies in the past.
Emerging markets hold potential
The cyclical recovery story in emerging markets is still holding our attention. After years of lagging behind the developed world with recessions in Brazil and Russia, we are finally seeing growth at a faster pace. Global trade is accelerating once more, and the positive growth in the U.S. and E.U. is expected to further boost emerging market economies as demand for exports increases.
There have been some recent signs of slowed growth in China. This is mostly due to the fact that China recently raised interest rates in order to curb property price inflation.
European and U.S.-based tech ‘scale-ups’ with Asia ambitions, rejoice. Outing today is a new $500 million VC fund from Silk Ventures, and backed in part by the Chinese government.
It plans to invest across all stages from Series-A upwards, and says that, although it will remain open to tech startups from any sector, a key focus will be “deep tech and science, industry 4.0 technologies, such as Internet of Things and robotics, fintech and medtech companies”. I’m told that the first investments from the fund will be announced in July.
Headquartered in London but with offices in Menlo Park, Beijing and Shenzhen, too, Silk Ventures took its tentative first steps as what it describes as a “digital accelerator,” consisting of an online platform connecting startups to corporates, thus facilitating links to Asia.
Meanwhile, the new $500 million fund is backed 50 per cent by the Chinese state-owned Assets Supervision and Administration Commission (SASAC) Shenzhen, who is acting as both an LP and Strategic Partner.
Ever ubiquitous, in 2016 the term ‘fintech’ appeared in the global print media 90,000 times and multiple times that in social media. In a study conducted by Citigroup in 2015, they found that fintech investments topped $19 billion, which represents a tenfold increase from 2010.
The argument towards fintech being perceived as a disruptor is largely due to the fact that fintech start-ups have the freedom to be a lot more nimble. They are not burdened down with legacy technology systems and restrictive regulations.
For example mobile-based banks have emerged in the past year, such as Monzo, Starling, Tandem and Atom, all of which offer accounts that allow customers to manage their money and lifestyle.
Yet, there are many who are of the contrasting opinion that fintech developments are set to be an enabler for established financial service companies. In possession of enormous capital, they are in a position to invest in these technologies and take a more innovative approach towards attracting new customers, cut costs and boost profits.
The emergence of fintech has motivated banks to consider their pain points, in ways which may be solved through technological innovation.
Additionally, banks can look to fintech as a means to enable their revenue growth with higher margin and through less capital-intensive programs, such as insurance or wealth management. By incorporating fintech applications such as robo-advisers and automation into their operational model, they then have the means to scale their business more rapidly to provide services to clients that beforehand were not profitable or were too taxing on their customer service systems.
The campaign, which is already running on radio in Sydney, Melbourne and Brisbane, is scheduled to run across outdoor, social (LinkedIn and Facebook) and digital media to encapsulate an integrated multi-channel outreach.
With the #turnthatNOaround campaign, OnDeck aims to reach small business owners who have experienced a “no” from their banks, giving them an opportunity to secure a loan that is much faster than the banks – taking just one business day.
The founder of an Australia’s robo-advice business says a law change may not be enough to allow such companies to operate in New Zealand.
Under the current law only “natural persons” may give financial advice in New Zealand but a change to the Financial Advisers Act is expected to make robo-advice legal here by 2019.
In New Zealand there are growing concerns about an advice gap after research by the Financial Markets Authority found most people who got professional financial advice had assets of more than $200k, leaving question marks over how people with less money, including those with savings in KiwiSaver, get advice.
Chris Brycki, who founded robo-advice business Stockspot in 2014 and now has several thousand customers, said he was keen to enter the New Zealand market but could not do so because the company could not find a suitable banking partner.
A Singapore central bank-backed fintech firm, CCRManager Pte Ltd, on Tuesday launched what it says is the first digital platform for the distribution of international trade financing, transactions now handled mainly by phone and email. CCRManager Pte Ltd, which received a grant from the Monetary Authority of Singapore’s Financial Sector Development Fund, is supported by 16 financial institutions, including Bank of China, DBS Bank, Standard Chartered Bank, Mitsubishi UFJ Financial Group, Spain’s BBVA and the commercial insurance arm of Swiss Re.
CCRManager charges a transaction fee on every successful deal. The Singapore-based company said its users will be able to list assets for distribution, negotiate deals, and manage supporting documentation in a secure environment. The web-based platform will enable members to manage the entire process of distributing trade finance internationally to other banks, credit insurers, and fund managers.
The Central Bank of Brazil is eyeing regulations for the FinTech sector this year to help industry startups and companies to enter and expand in the country currently reeling from a recession.
According to a Reuters report today, the Banco Central do Brasil (BCB) – the country’s monetary authority- is looking at implementing these regulations within this year to fuel the growth of FinTech firms and services in Latin America’s biggest economy.
As of March 2017, Brazil’s economy was 8% smaller than it was in December 2014.
While details are scarce, some of the new regulations will help financial technology companies and startups in areas including:
Financing via peer-to-peer lending platforms connecting borrowers directly with individual investors
A wider playground, by facilitating foreign banks to enter Brazilian shores without the need for a presidential decree
Diversification, by helping financial technology companies team up with banks to offer loans or ‘securitized credit from institutional investors.’
College dropouts either make it in life or end up under a bridge while the MBAs rule the world. Ben Milne has made it, and what’s more, he created a company that has made a spectacular splash in the fintech pool. Dwolla. Once an early money transfer tool, Dwolla has transformed into a SaaS product its […]
College dropouts either make it in life or end up under a bridge while the MBAs rule the world. Ben Milne has made it, and what’s more, he created a company that has made a spectacular splash in the fintech pool. Dwolla.
Once an early money transfer tool, Dwolla has transformed into a SaaS product its creator could only have dreamed of. Here’s the story from start to finish.
Dwolla as a Consumer-Facing Mobile App
Milne owned a manufacturing company while working his way through college. In 2010, he came upon the concept of Dwolla, a consumer-facing mobile app that allowed users to quickly and easily send and receive money without exchange fees. He built the app himself as far as he could then hired a development team to take it the rest of the way. He figured he could monetize it later. Eighteen months in, however, and he began getting requests from customers to take the Dwolla name off of the product. That’s when he came upon the idea of white labeling the app to meet customer demand.
Banks are the primary target. They access Dwolla through an API that connects to the customer software solution.
“We found that companies were facilitating B2B transactions through the app, making disbursements, and making other transfers,” Milne said. “They wanted their name on it instead of Dwolla’s. So we changed the technology to allow software developers to build into the application.”
To get off the ground, Milne raised $40 million of venture capital funding from top investors such as Union Square Ventures, Founders Group, and Andreessen Horowitz.
How Businesses Use Dwolla to Move Money
One of Dwolla’s top customers is real estate marketplace lender Patch of Land. Real estate project managers, investors, and other professionals use the platform to borrow money from lenders who provide the funding for their deals. Because Patch of Land funds millions of dollars worth of deals each year, they needed a way to move that money from the lender through the platform to the borrower and move returns back to the various investors. Patch of Land uses Dwolla’s APIs to make those money transfers.
“Some customers can use the APIs to authorize automated payments,” Milne said. “There is a range of money being transferred during a certain period of time.”
With a product like Dwolla, companies don’t have to build out their own money transfer platforms, which saves them in development costs. Some of Dwolla’s customers build their own admin panels into the system. Dwolla provides the integration support for those companies. Others want real-time chat rooms. Dwolla can make that happen, too. Through Dwolla’s analytical interface, companies can see how much money is going through their software, how many customers are transferring money, and what’s trending.
Companies using ACH have to negotiate their terms. If you want same day transfers, you’ll pay more. With Dwolla, you get a little piece of text, Milne said, that allows you to designate same-day transfer, same window, and other parameters. The time to market is much faster for the money movement.
So what kind of business can benefit from Dwolla’s transfer access APIs? Virtually any kind of business that makes transfers. That can include backend treasury systems, mobile app developers, governments, big businesses, banks, and more. Even online lenders.
How Dwolla Maintains a Competitive Edge
Dwolla was a pioneer in money transfers. That gives them an edge over most of the competition. Milne said it’s not the cheapest solution on the market, but he’s accustomed to working with well-funded companies trying to improve on execution. At that stage of development, they’re wondering if they should build it themselves, partner with a bank, or work with stand-up technology infrastructure like Dwolla. He’s hoping many of them will choose the latter.
“If you do it yourself,” he said, “you’re looking at a six to 12 month commitment. If you work with us, it’s a couple of weeks. It’s much cheaper in the short-term.”
That’s good news for companies that need to watch their cash flow.
Another selling point for Milne is the track record his company brings to the table. He believes his company can teach businesses the best practices of money transfers based on his seven-year history of doing it. That too can save companies a lot of money in trial-and-error expenses.
Dwolla has a dedicated account management protocol as well as dedicated software support. And they have a financial crime unit that combats fraud and other cybercrimes. Customers are given options in how to manage fraud if it’s found, which can then be extended into their own applications. Dwolla also has a variety of specialty teams to service its customers, which include FIU, BSA, in-house legal, information security, marketing, sales, and more.
Dwolla’s Growth and Expectations
Dwolla’s revenue has grown substantially over time. They have a few more than 100 customers currently using their access APIs while Milne and his team focus on onboarding the next 100. They’ve got billions of dollars flowing through their platform with no charges. Milne said that’s proof his technology works and will continue to work.
Service fees fees begin at $1,500 and go up from there. Rather than charge per transaction, they opted for the flat fee model and offer instant account verification as well as three different account types. Customers choose the features they want and Dwolla negotiates the final price for the customized package.
“This approach allows us to get engineering support if necessary,” Milne said. “We ask if the client wants to build their own or have us help. We want to make sure we approach the problem the right way for every customer.”
When Dwolla was an upstart money transfer app, they were infused with 50,000 small businesses signing on to send money. Many of those are still using the product in some capacity, Milne said. That’s a testament to the company’s staying power.
Where Do We Go From Here?
The Fed is making a lot of functional improvements to payment systems, Milne said. Along with that, ACH is doing a lot to keep the economy going. But new payment systems are coming along and making things faster. Technically, Dwolla looks like a private ACH system.
“Functionally, the idea of sending money to a private company instead of the Fed is a big deal.” He sees technology moving into the future having a compound effect, but he’s not sure how to measure it.
One thing Milne has noticed is that companies want to grow their businesses. Many of them want to move beyond their core competencies. Dwolla wants to be there to grow with them. To do that, Milne and his team need to focus on their core competency—moving money.
“There’s no silver bullet,” he said. “We can’t get distracted. It’s time to execute our mission rigorously.”
News Comments Today’s main news: Banks pull back on car loans as used-auto prices plummet. Trump’s expected OCC pick, a banker, signals paradigm shift. Elevate Credit rated a buy. RateSetter rejigs relationships with former wholesale lending partners. China Rapid Ffinance raises $60M in IPO. Today’s main analysis: Goldman Sachs embraces banking’s bland side. Global money transfer. Today’s thought-provoking articles: German […]
Mimecast Limited vs. Yirendai Ltd. GP:”I am not very familiar with Mimecast. Mimecast is an international company specializing in cloud-based email management for Microsoft Exchange and Microsoft Office 365. Not sure why they are being compared to Yirendai. “AT: “Interesting head-to-head comparison.”
Goldman Sachs embraces banking’s bland side: Lending money. AT: “Instead of funding the lenders, GS is beginning to lend money to business itself. I think the most interesting part of this is extending credit to consumers to make online purchases. If that is true, Goldman could be positioning itself to compete directly with Klarna, Amazon, and other big online retailers and software companies. A good example of a bank trying to make the most of the 21st century.”
Colorado vs. Fintech. AT: “This is mostly a rehash of the developments in the Colorado vs. Avant, Best Egg and WebBank, CRB vs. Colorado lawsuits. The most interesting parts are where OLPI sheds some light on parts of the briefs filed in court, particularly regarding whether Avant or WebBank is the true lender.”
Wells Fargo & Co., one of the largest U.S. auto lenders, last month reported a 29% fall in its auto loan originations for the first quarter from a year earlier. The decline, the biggest for the San Francisco-based bank in at least five years, was part of a common refrain in quarterly announcements from lenders including J.P. Morgan Chase & Co.,Ally FinancialInc. and Santander Consumer USA HoldingsInc.
Bankers’ caution is increasingly showing up in car sales, which Tuesday came in worse than expected for April. The declines are mostly occurring in lending to riskier borrowers, in particular those with low credit scores, where lending had ramped up for years.
When lenders repossess cars, they resell the vehicles and use the proceeds from the sale to recover as much of the unpaid balance as possible. Declining values mean that lenders are recouping a smaller share of those balances. Lenders who are repossessing cars tied to prime auto loans that were securitized in 2015 are recovering about 51% of the unpaid loan balances on average, down from 56% for 2014 loans and 65% for 2011 loans, according to S&P Global Ratings.
Car loans have been among the fastest-growing consumer lending categories since the last recession.
The firm has been opening its checkbook for the past several years to finance corporate takeovers, lend against mansions and art, and make personal loans for things such as kitchen remodels and fixing broken windshields.
It is exploring new credit businesses such as trade finance, equipment leasing and extending credit that consumers use for online purchases, according to people familiar with the discussions.
Loans outstanding across Goldman have doubled to $95 billion since 2011, filings show. Real-estate loans are up 10-fold. Business lending has tripled, while loans in its private-wealth division, secured by everything from stock portfolios to rare artwork, have quadrupled. Goldman doesn’t report revenues tied to lending, which remains a small part of its overall business.
They set a “buy” rating and a $12.00 price objective for the company. Compass Point reissued a “neutral” rating and set a $9.00 price objective on shares of Elevate Credit in a report on Tuesday, April 18th. One analyst has rated the stock with a hold rating and four have assigned a buy rating to the stock. The company has an average rating of “Buy” and a consensus price target of $11.00.
Shares of Elevate Credit (NASDAQ:ELVT) opened at 7.64 on Monday. Elevate Credit has a one year low of $7.00 and a one year high of $8.86. The firm’s 50 day moving average is $8.05 and its 200-day moving average is $8.05. The firm’s market capitalization is $99.33 million.
Clearly, CSBS is mounting a legal counter-offensive to the OCC’s attempt to license entities historically regulated by the states. While state and federal regulators currently are arguing as to who should control the regulatory sandbox, the true focus of regulatory concern should be on the development of innovative financial services, consistent with safe and sound operations, with viable and effective consumer protections. While, historically, payments companies and lenders have been regulated by the states, the OCC’s SPNB Charter has sparked a dialogue as to whether the current regulatory system for fintech operations is viable. Innovation of financial services may also require innovation of financial services regulation. Rather than trying to pigeon-hole financial services into traditional regulatory models, perhaps it is time for regulators, at both the federal and state level, to act in concert to develop a system of licensing, regulation, and enforcement for financial products and services that is efficient, not redundant, and minimizes the regulatory burden on financial institutions while it provides for the continued protection of consumers. Setting aside the merits of the pending suit, the right policy prescription will likely involve the federal and state governments working together to minimize the regulatory burden while appropriately protecting the safety and soundness of FinTechs and provide necessary consumer protection.
President Donald Trump’s expected move to replace the Comptroller of the Currency signals a change in direction at the bank regulator that could ripple through the financial markets, from private-equity buyouts to financial technology—and even municipal securities.
Comptroller Thomas Curry, whom people familiar with the matter say could be replaced as soon as this week, is a career regulator appointed by President Barack Obama. Mr. Curry used his office to tamp down on what he viewed as overly risky lending practices in the banking industry.
His expected replacement—Joseph Otting, a former chief executive of OneWest Bank—would be the first former banker to hold the comptroller’s job since the 1990s.
A committee of Wall Street advisers is pouring cold water on a proposal by U.S. Treasury Secretary Steven Mnuchin to issue superlong 50-year and 100-year U.S. government bonds, arguing that the big pension funds and insurers expected to buy the securities won’t have much interest.
The committee meets quarterly, in advance of a regular release by the Treasury on its plans for financing the U.S. debt. Currently, the U.S. Treasury issues no debt longer than 30 years. Mr. Mnuchin has argued that ultralong bonds could be a useful tool for locking in today’s low borrowing costs for a very long time. Last month, the Treasury requested the advisory committee analyze the viability of bonds longer than 30 years.
The 30-year bond strengthened Wednesday, after the advisory committee cast doubt on the idea 50- and 100-year bonds. The yield on the 30-year Treasury dropped to 2.963% from 2.982% on Tuesday, according to Tradeweb. Yields fall as bond prices rise.
A key question for the Treasury is what types of investors would buy ultralong bonds, especially if the members of its advisory committee aren’t interested. Relatively few individual investors have 100-year or even 50-year investing horizons.
Crowd Invest Summit, the country’s largest crowdfunding investment conference, taking place on September 6 th and 7th at the Los Angeles Convention Center, has today announced that it will be expanding its focus on Real Estate crowdfunding.
Since the signing of the JOBS Act in 2012, Real Estate Investing has been the fastest growing segment of the new Crowdfunding Industry. According to Fundingtree.com, over $3 Billion Dollars has been raised so far.
Crowd Invest Summit is the largest investment focused crowdfunding event in the country. It was founded by pioneers in the equity crowdfunding sector Josef Holm and Alon Goren. The conference was developed with the vision that every American – whether accredited or not – can now become equity investors.
Goldman Sachs is leading a $13 million investment in Nav, a startup that helps small businesses with financial advice and credit scores. Billionaire Steven Cohen’s Point72 Ventures is also investing, along with Clocktower Ventures and the CreditEase Fintech Investment Fund.
This follows $25 million that was invested in the company last year, and is considered part of the same Series B round, bringing the total to $38 million.
Characterizing Nav as a Credit Karma for small businesses, King believes his startup will “materially decrease the death rate of small businesses in the U.S.” They currently have over 200,000 customers, most of whom don’t pay anything for their credit score, but can opt to pay about $20 per month for added financial advice.
68% of mobile payments users are using Venmo most often.
Venmo processed $6.8B in mobile payments in Q1.
Rapid smartphone adoption, alongside a large unbanked population, makes the theme of mobile payments an attractive investment.
In the days leading up to the quarter, a new survey of 2,170 Millennials found that Venmo is leading the category. The researchers asked the following question: “Which of the following mobile payment apps do you use most often?”
Researchers found that 44% of respondents answered “Venmo”, 1% of respondents answered “Square Cash”, 14% of respondents answered “My bank’s mobile payment app”,and 4% of respondents answered “Other”. However surprisingly, 35% of respondents answered “I don’t use a mobile payment app”.
On February 15, 2017, the Administrator of the Uniform Consumer Credit Code for the State of Colorado (“Colorado”) sued Avant and Best Egg (in separate actions), claiming in both actions that they violated Colorado’s usury rate and entered into loan agreements containing a governing law provision other than Colorado.
Shortly after, WebBank and Cross River separately sued Colorado seeking Declaratory Judgement and Injunctive Relief.
On April 25, 2017, Colorado filed a Motion to Dismiss both Complaints for Declaratory Judgment and Injunctive Relief.
Colorado initially argues that WebBank’s action for declaratory judgement should be dismissed based on the well-pleaded complaint rule. There seems to be two issues with this position: (1) WebBank was purposely left out of Colorado’s initial complaint (although this theory might apply if Avant brought the federal action for declaratory judgment), and (2) diversity jurisdiction does apply as to Avant and WebBank vis-a-vis Colorado.
Second, Colorado argues that WebBank’s action should be dismissed because WebBank’s injury is too attenuated. Colorado does not directly address WebBank’s contention that the suit challenges WebBank’s overall business model.
Finally, Colorado argues that “interest exportation does not preempt the application of state usury laws to non-banks as a matter of law.” Colorado seems to acknowledge WebBank’s right to preempt Colorado’s usury rate based on DIDA (the Depository Institutions Deregulation and Monetary Control Act of 1980 – extending the National Bank Act’s preemption to FDIC-insured state banks). Colorado argues that WebBank is trying to assign its preemption to Avant – that Avant is the lender.
Colorado also argues that the valid when made doctrine is not applicable because “there is no ‘subsequent usurious transaction’ between WebBank and Avant that is alleged to invalidate a consumer’s loan obligation. Instead, Avant merely purchased the subject consumer loans from WebBank.” This is a difficult argument to follow. Colorado sued Avant claiming that Avant loans are usurious and Avant, and not WebBank, is the true lender. Colorado points out that Avant buys the loans from WeBank within two business days of the loans being made. Relying on Midland in the Avant action, Colorado states that Avant cannot “enforce a bank’s federal interest rate exportation rights when they purchase loans from banks (or purchase loan receivables) because banks cannot validly assign such rights to non-banks.” It seems to imply that Colorado is not saying the loans are invalid (due to Avant having a Supervised Lender’s License), but rather the loans just need to be limited to the Colorado usury rate –yet, as noted, the argument is difficult to follow.
Fintech is ultimately about taking away frictions.
I guessed that there was a 25 or 30 per cent chance that 10 years from now, there was about a 25 per cent chance that there would be a fintech company with the kind of $250bn market cap that some big American banks have. I do not expect that in the foreseeable future fintech will have the kind of existential impact on banks that Netflix has had on Blockbuster. But I do think in some areas fintech companies are likely to have the kind of effect Skype has had on the big telephone companies — forcing drastic reductions in pricing and profit margins on some key products.
I was quite serene about the impact of fintech on financial stability.
By providing for faster settlements, more transparency, and diversification, fintech is likely to have as many stabilising as destabilising effects.
If the large banks of today are not as large five or 10 years from now, I think it is more likely to be because of bad lending, heavy regulation or market pressures to break up because the whole is valued less than the sum of the parts than because of disruption from fintech. I say this because much of what fintech does depends on the banking system and because I doubt that over this horizon banks can be completely disrupted.
In the report from data provider CB Insights, The Global FinTech Report: Q1 ’17, it found that during the first three months of the year, fintech funding to venture capital-backed New York companies dropped by 35 percent on a quarterly basis. However, while financial technology deals in the state rose by 26 percent from Q4 ’16, it registered a 33 percent drop below the same quarter last year.
During the first three months there were three New York City companies – Namely, Trumid, and Payfone – who were among the top ten U.S. financial technology backed deals.
Namely raised $50 million in Series D funding from Altimeter Capital, Scale Venture Partners, Sequoia Capital, Four Rivers Group, Matrix Partners, and Greenspring Associates.
Trumid raised $27.6 million in Series D funding from Thiel Capital, and Payfone raised $23.5 million in Series E funding from BlueCross Blue Shield and Andrew Prozes.
First Associates has announced today that it has implemented A.I. enabled speech analytics as part of its third-party loan and lease servicing. The speech analytics platform facilitates higher quality customer interactions while ensuring compliance with financial industry regulations.
Using speech analytics, First Associates monitors, scores and provides agent feedback on 100% of voice interactions with consumers using data-driven benchmarking. Traditional loan servicing management techniques call for a 1% sample size of voice interactions using human quality assurance agents to assess quality and effectiveness. The company has already seen significant improvements across quality and performance metrics from the implementation.
Adams Business Credit, a national asset-based lender, will rebrand as Context Business Lending, bringing the firm in unison with the family of businesses and affiliates under Context Capital Partners, an alternative investment firm. The newly named Context Business Lending will continue to focus on providing flexible working capital solutions for businesses that do not qualify for traditional bank financing.
Context Business Lending typically provides loans of up to $15 million for lower middle-market businesses that may be experiencing some type of challenge, which may include: rapid growth; seasonal fluctuations; supply chain and vendor pressure; operating losses/negative net worth; turnaround and restructuring; merger or acquisition and debtor-in-possession financing. The firm is sector agnostic and works with businesses in the manufacturing, distribution, wholesaling and service sectors.
Usage of MoneyLion’s app nearly quadrupled in the second half of 2016, allowing them to track $12bn in transactions from more than one million users. To date, users have saved over $5 million in rate reductions through MoneyLion.
RealtyShares, a leading online marketplace for real estate investing, has just announced an $800,000 commercial equity investment in Mesa, Arizona, funded through the company’s network of accredited investors. The deal is sponsored by De Rito Partners, one of Arizona’s largest retail investment and brokerage firms.
De Rito Partners acquired the property in 2016, and is seeking to capitalize on a temporary tenant turnover in a formerly fully-leased retail property. The firm intends to use the funds raised through RealtyShares to invest in tenant improvements and implement a leasing strategy to achieve market-level rents.
The property is shadow-anchored by a Fry’s Marketplace, one of the largest grocers by sales in the Phoenix metropolitan area according to Chain Stores Guide. The shopping center is comprised of more than 20,000 square feet of rentable retail space, and is currently leased to tenants including Starbucks, H&R Block and Subway. It is located at the intersection of two major thoroughfares, four miles from downtown Mesa.
De Rito Partners owns 20 properties, manages approximately 1.9 million square feet of retail space, represents 180 shopping centers in a leasing agency capacity, and is currently developing a Fry’s Marketplace-anchored shopping center and a strip center located in Chandler, AZ.
The acquired motor finance companies are Vehicle Stocking Limited and Vehicle Credit Limited. Both firms were acquired out of their parent company’s administration, and both have previously received wholesale funding from RateSetter. RateSetter will now lend directly to these companies’ customers.
The size of these two motor finance firms’ combined loanbooks is roughly £30m. These portfolios are said to be “performing well”, and we’re told they would have continued to be serviced had RateSetter not stepped in.
Another of RateSetter’s former wholesale lending partners is George Banco, a guarantor lender with a representative APR of 49.7 per cent. RateSetter has now taken an equity stake in the company, and will lend directly to its 10,000 customers.
Lendy, a UK based peer to peer lending platform in the secured property sector, believes 2017 is the year for P2P lending to finally mature. Management says that P2P will shift from alternative finance to “main challenger to the traditional banks.” But to accomplish this goal, P2P lending platforms must build upon best practices and operate more like mainstream lenders while providing rigorous due diligence and superlative service.
Lendy advocates on four key steps in providing a better service than traditional financial firms:
Initial due diligence – carry out an extensive ‘know your customer’ (“KYC”) process when they first source a loan.
Legal panel – after the loan has passed the first stage it is then reviewed by a legal panel. Solicitors ensure that a legal charge is properly made against each security property, and that each of the security properties has good title.
Valuation – use a highly rated independent firm to value security properties.
Credit checks – put each lending proposition under extensive scrutiny to determine its viability.
Robo-advice has become a widely-known concept in the financial advice community over the past 12 months, as more and more firms launch their own proposition.
In addition, it is important to have someone understanding the algorithm from the client experience, and for advisers to grasp the inputs into the algorithms.
One of the areas that needs to be tackled, according to Mr Strachan, is the grey area between fully automated guidance and full-on advice.
The report, The Next Frontier: The Future of Automated Financial Advice, outlines the amount people will be prepared to pay for the use of a robo-adviser. By the far the largest cohort said they would be prepared to pay £125, with popularity rapidly declining the more the price goes up.
Automated advice on investing £11,000 charged at £225 only received support from 16 per cent of people, while a £360 fee saw support from 6 per cent.
London fintech startup Curve has made its first PR and comms hire with the appointment of Burson-Marsteller’s Callum McCaig, as the business prepares to scale out of ‘beta’ and launch its digital banking platform to the mass market.
Curve has raised £3m in seed funding from investors, including Seedcamp and the founders of Transferwise, Betfair, Azimo and Google Wallet, and plans to announce a Series A funding round later this year.
MarketInvoice, the world’s largest peer-to-peer online invoice finance marketplace, has joined the UK FinTech Financial Crime Exchange (FFE), a joint initiative by think tank RUSI and risk consultancy FINTRAIL, launched today.
The FFE brings together FinTech firms who have agreed to collaborate, by sharing best practice and pooling information on financial crime typologies to protect their customers and strengthen their sector’s ability to detect and counter the global threat of financial crime, including money laundering, terrorist financing, bribery and corruption, tax evasion and market manipulation.
The UK FinTech sector is at the forefront of the global FinTech revolution, contributing £7b to the UK economy.
Invited to defend their views vis-à-vis the financial commission of the parliament, representatives of the German Crowdfunding Association have challenged the government’s position and presented substantial counterarguments.
As a reminder: crowdfunding regulation at European Union (EU) level was so far deemed “premature” by EU authorities and is therefore not included in the Capital Markets Union, the EU’s effort to harmonize capital market regulations at EU level. Hence, each EU country currently issues its own regulation which creates a legal patchwork and hinders cross border deals.
The German government’s report firstly notes that German real estate projects represent 10% of the successful projects and 33% of the capital raised through crowdinvesting, that is €36 million. Projects are typically residential property development, mostly construction, the reminder being renovations. German real estate crowdinvesting nearly doubled in size last year while the growth of startup crowdfunding slumped.
The government finds this trend negative. It justifies its proposal to exclude real estate from the scope of the crowdfunding exemptions as follows:
The large share of real estate in crowdinvesting represents a deviation from the intention of the legislator which was to foster the funding of high-growth startups.
There is no lack of funding for real estate projects. Social real estate, for example, can be funded through schemes that are specific to social housing.
Real estate crowdinvesting could be considered as a form of deregulation of real estate finance which could, bearing in mind the role played by real estate in the 2008 financial crisis, create a price bubble, and ultimately pose a threat to financial stability.
The Crowdfunding Association and crowdinvesting platform leaders found many of the government’s arguments “incomprehensible” and offered point-by-point rebuttals:
Crowdfunding counters price bubbles and real estate overheating. The current real estate market boom is in no way due to crowdfunding, which is much too small to influence market prices, but rather to macroeconomic factors such as the currently low interest rates.
Crowdfunding helps finance real estate SMEs and innovative entrepreneurs. There is no sensible criterion for distinguishing real estate financing from other types of business financing.
The risk of subordinated debt instruments is not specific to real estate. It would therefore be more appropriate to open crowdinvesting to all securities, including profit sharing securities, rather than to exclude real estate from crowdinvesting.
Currently, the German crowdfunding market is disproportionately small. It is surpassed on the Continent by the French market (28% smaller GDP) and dwarfed by the UK market (15% smaller GDP).
Johan Tjärnberg is quietly building a fintech business that may prove as successful as Klarna. During 2016, his payments company, Bambora, grew 20% to revenues of SEK 2 billion.
Bambora is a platform that aggregates hundreds of payments services, and it’s currently available in 65 markets. Bambora’s clients can even choose to use Klarna as their payment service.
During 2017 the business will expand to North America, where the number of merchants using the service will increase by 10,000 over the year. That will boost the sales of the group by 30% to EUR 260 million, Johan Tjärnberg said to Bloomberg News.
Currently, the company has about 100,000 clients, of which 30,000 are located in the US and Canada.
In 2010, Klaus Regling, the head of the euro-area rescue fund for the European Stability Mechanism (ESM), asked me to join the board. I agreed, and said that I wanted to build the Google of the public sector. He looked at me and asked: “Why Google? We can be better than that.” And of course, he was right.
The ESM provides financial assistance to Eurozone countries that have lost market access. It was set up at the height of the euro crisis. Without the ESM, countries such as Greece would have defaulted, and the euro would have broken up. The ESM is the institution that kept the euro together during the crisis. Our total lending capacity is $742 billion. We have provided assistance to five countries: Greece, Ireland, Spain, Portugal and Cyprus. In all, we have provided $281 billion in loans, which is three times as much as the IMF over the same period of time.
Here is how we are planning to move forward to build a modern public institution.
Digital at Heart
First of all, we wanted a lean model, and so we kept only the strategic functions in-house, like funding, economics and investments. We outsourced support functions and non-strategic functions as much as we could. We were the first financial institution worldwide to use a fully cloud-based trading system.
Secondly, we wanted to leverage new technology where possible.
Finally, our workforce of tomorrow, made up of millennials, is the first in our field to consist almost entirely of technology natives.
A Public Sector-driven Fintech solution
Europe has launched the capital markets union, an ambitious effort to harmonize corporate, tax, and bankruptcy laws across the countries of Europe. The differences between these laws are vast because of centuries of history in the 28 members of the European Union. Now we hope to make the laws more similar, because it would create a truly pan-European financial market. For example, the union would break down borders for private equity investment and venture capital, and open up an alternative channel of funding for small- and mid-sized enterprises. Thus, it would reduce Europe’s heavy reliance on bank lending.
The ECB idea is about the centralization of settlement and payment processes for securities. This is a very important initiative, and one that could be complemented by a similar initiative for the primary issuance of securities. It is worth considering a European public sector issuance platform to help distribute debt more efficiently: a fintech solution, driven by the public sector.
One could even think of using new technologies, such as blockchain, to set up the new issuance platform.
A new study by Juniper Research has found the value of digital payments will approach $3.9 trillion this year, representing an increase of more than 14% on last year’s total. While the bulk of transaction value (55%) will be accounted for by online retail purchases for physical goods, P2P (Person to Person) money transfers will see the largest year-on-year net increase in value ($200 million).
The research also emphasised that the demonetisation policies employed by India’s government had encouraged a surge in mobile wallet adoption and, with it, sharp increases in both P2P and mobile retail transactions.
The CFA Institute believes artificial intelligence, fintech and robo-advice will have the greatest impact on the financial services industry – to the extent it is considering including such topics in its examinations.
An overwhelming majority (70%) of CFA members globally who took part in a study said affluent investors will be positively affected by automated financial advice tools in the form of reduced costs, improved access to advice product choices.
Respondents (46%) however, were concerned about automated financial advice algorithms being the biggest risk emanating from robo-advice, followed by mis-selling (30%) and data protection concerns (12%).
India’s P2P Lending sector is poised to grow at a rapid pace thanks to favourable demographics, rising computer literacy, internet connectivity and the ongoing wave of digitalisation among others. With the higher economic growth, the credit-backed consumption growth may jump too.These could be the possible triggers for the growth of P2P Lending Industry.
There is no official assessment suggesting the size of the market in India. But it is estimated to be around Rs 200 Cr. The P2P lending industry may grow 25 to 30 times over next 5-6 years. Talking about the interest rate, the yield on 10-Year Sovereign benchmark bond hovers in the range of 6.45% to 6.95%.
However, it is also important to note that the P2P Lending sector is unregulated.
On the other hand, in P2P lending projects, investors can earn in the range of 14% p.a. to 30% p.a. on a reducing balance method. In P2P Lending, interest rates are decided depending upon the creditworthiness of borrowers.
Korean fintech startup company Honest Fund is a P2P crowdfunding company that raised over $6 million in funding led by KB Investments, Shinhan Capital, Hanwha Investment, and others. It is a peer to peer personal loan lending service that connects borrowers and lenders directly without the need of banks. These funds will not impact the borrower’s credit rating and will charge between 5% to 15%with the average being 9%. They offer a different personal credit review model compared to the banks that only look at a person’s credit rating.
PeopleFund is the first Peer-to-Peer lending platform through a Bank in Korea focused on unsecured personal loans. In 2015 alone PeopleFund has processed over $13 million in loans.
8 percent is a P2P lending company that raised over $13 million. Their APR is set at 8 percent which is why the company is called 8 percent. Established in late 2014 this P2P lending company has become the pioneer in this industry. 8 percent reviews an application and based on credit score and other measures. It is cheaper for clients to use 8 percent than a bank and therefore 8 percent has been able to grow every month. Loans for startup employees and a bridge for big companies have been their new model in 2016. They made news in 2016 for getting funding of $10 million from KG Inicis, one of the leading payment gateway companies in Korea. Bringing together investors and creditworthy borrowers are what 8 percent brings to the table.
Viva Republica runs a money transferring service called TOSS which raised over $48 million in funding from Altos Ventures, Goodwater Capital, Paypal, and KTB Network. They are known for Toss, which is a financial services platform that makes payment system easier by only asking users for 1 password to go along with three easy steps. The max they can transfer per transaction is $430 which makes everyday payments easy. Now they have over 6 million registered users in Korea and Toss has already processed over $3 billion in transactions. Toss now does credit scoring as well as micro-loans and is looking into cross-border money transfers and loan brokerages.
Despite the fact that investments in world fintech amounted to almost $25 billion last year, even in the US, the ratio of digital business models in the financial sector to the classical does not exceed 1 to 100. It becomes a surprise, however, for those who find this out first, because the buzz around the […]
Despite the fact that investments in world fintech amounted to almost $25 billion last year, even in the US, the ratio of digital business models in the financial sector to the classical does not exceed 1 to 100. It becomes a surprise, however, for those who find this out first, because the buzz around the industry is indecently large.
Fintech is a capacious term for designating companies that introduce advanced technologies in the finance industry. The world’s number of startups presently is several thousand. However, only a small share of them excel. Nevertheless, CB Insights informs that, in 2016, venture investments in fintech startups in the world were $12.7 billion. What areas does fintech deal with, who heads this movement, and in what areas do institutional investors invest their funds?
For users, this is the most graspable market segment. It concentrates over half of the profits of today’s banks, and assimilates half of venture fintech investments. Its progressive development started after the 2008 crisis when, due to regulation changes, it was less profitable for banks to lend to certain groups of borrowers. The first big stories in this segment were those of companies who did not compete directly with banks, but rather embraced customers whom the banks had failed to engage (worldwide, roughly two billion people have no access to banking services). A striking example is Ferratum Group from Finland with a focus on short- and mid-term consumer lending. As early as in 2015, this company demonstrated a revenue of over $111m. Today the company’s capitalization is estimated at $423m — and this is in a fintech market dominated so far by startups who rarely operate at least without loss.
Balance sheet lending is growing fast in developing markets. We are seeing a huge market potential in Eastern Europe, Transcaucasia, South-East Asia, but especially, in Latin America. Therefore, ID Finance was the first among the competition to launch a consumer-lending platform in Brazil. Our office in São Paulo is a gate to a market with a population of 470 million speaking only two languages and sharing about the same cultural field. We managed to create a foothold in a region, from which inroads into the continent will start. For this purpose, ID Finance managed to attract $50 mln of debt funding.
Lending, as a division of fintech, is dominated by American players. Their aggregate capitalisation is about one-third of the value of all other fintech in the world. Another third belongs to Chinese companies, with Ant Financial as their leader. Lending to small enterprises has also been growing extensively because banks see many risks here. Generally, I believe that everyone understands that money is concentrated here, i.e. in the lending industry.
A story of its own is peer-to-peer (P2P) lending when the service provides a platform for bringing together borrowers and lenders who can be represented by retail investors. This model is being used advantageously for lending to enterprises. The major player in this area, the British platform Funding Circle, promises investors who invest in it a 5-8% annual net income, whereas the deposit interest rate in Europe rarely exceeds 1.5%.
The P2P segment witnessed the biggest uproar in the fintech history with the downfall of the Ezubao pyramid operating in China. The company forged 95% of loan applications, with about a million of Chinese investors losing $7.6 bln on their investments in these loans. The P2P loan boom in China is a unique phenomenon in the world: About 4,000 P2P platforms are operating in the country. The second uproar related to LendingClub, whose top management deliberately sold bad loans as those with an acceptable or low-level risk.
Do not forget about POS-lending, where Klarna, Affirm, and Divido are considered prominent players in Western Europe. In Eastern Europe, AmmoPay is more commonly known, and it’s geographic expansion is only to be started.
Payments and money transfers
This segment joins wallets, money transfer services, online payment gateways, and so forth. It accounts for up to one-third of all fintech investments, with major national fintech companies having been set up in the payment segment. The margin in this segment rarely exceeds 2%–3%, and one can earn only by involving big volumes. This is why major payment companies PayPal and Ant Financial (an Alipay brand), who conduct transactions to about $100 billion monthly, have been growing due to close links with eBay and Alibaba – major worldwide e-commerce platforms.
Money transfers are another rapidly growing subcategory of this segment. Investors are attracted by a market turnover of $500 billion and the presence therein of niches and of huge areas for development. The cost of international transfers in some cases is 10% and even more. To reduce this cost by winning over customers is the objective of the technological automation of processes.
The insurance industry with a value of about $5 trillion was one of the most technologically unfeasible ones to date. In the first place, this was owing to stringent requirements imposed by regulatory agencies and the passivity of existing players (for instance, the average age of a major American insurance company is about 100 years). Until present, the major innovations in insurance were in the distribution segment. This is of little wonder because the majority of insurance companies so far have been distributing their products by relying on their huge agency networks that collect up to 20% as commission fees.
A recent trend is creating a digital insurer from the ground up. However, such projects are costly. For instance, the American startup Bright Health, whose official launching date has been slated for 2017, has raised over $80 million to create a new-generation insurance company.
Asset and Investment Management
The existing asset management mechanisms and the available methods of investing funds are often customised to a narrow circle of customers: Either professional investors or high net worth individuals serviced by professional financial advisors. However, with developing technologies, this has enabled automating many processes and making them cheaper. This is often the business of companies in this segment. A part of Asset and Investment Management is robo-advising – an online investment advising service.
In essence, the robo-adviser performs the functions of a portfolio manager who buys and sells securities according to “host” preferences. The robo-adviser helps shape a market strategy and implements it consistently. Mobile applications or a computer program are used to communicate with a robo-adviser. Automated counsellors for stock exchange speculation are gaining popularity due to their effectiveness. According to experts’ estimates, in June 2016 the global volume of assets controlled by robots was $50 billion. According to projections, this volume in the long term can grow to $13.5 trillion. Services cut annual service costs from the industry-established average 2% to sometimes less than 0.4%. The underpinning of fintech startups is namely cost saving, product ease of use and democratisation of access.
The multitude of crowdsourcing platforms can also be related to this segment. And if many people have already got accustomed to investing in pre-order of projects in platforms such as Indiegogo or Kickstarter (crowdfunding), investment in shares of private companies in the same manner (crowdinvesting) is only starting to gain momentum.
Personal Financial Management
Startups for personal financial management are another important fintech category. For instance, American Credit Karma enables users to gain free-of-charge access to their credit rating and credit history (earlier users had to pay up to $100 for this option), and maintains a record of all financial products the customer uses.
In the fintech world, a customer’s current account is something like a Holy Grail because this account is often the image of the organisation with which one interacts. Actually, the current account on its own is monetised not so well, and pays only if it is linked to other products, including payments, loans and investments. This is how most of today’s banks operate, and this is the area where more so-called neobanks – new-generation digital banks – are emerging. But if the first attempts to create a digital bank were focused on the provision of a convenient service built around an existing bank infrastructure, new startups are developing an infrastructure from the ground up. The flexibility of regulatory agencies as to digital banking models also helps startups to create full-fledged banks. Thus, in Great Britain, after the banking legislation had been changed in 2014, several new banks were granted licenses, and during this period London became the world fintech capital.
Simply stated, Neobanks are banks that provide the majority of services via mobile applications and web sites. As a rule, such credit organisations have no distributed system of offices, and the bulk of communication with a customer is carried out online.
Obviously, neobanks function by tapping into the potentialities of online banking, distance personality identification, online payments, and other fintech instruments. The most well-known European neobanks are the British Atombank, German Number26 and Russian Tinkoff, one of the largest digital banks in Europe.
There is also a big segment of B2В services for fintech or traditional financial companies. These are both point solutions related to ensuring security, managing big data arrays, borrowers’ scoring mechanisms, and full-fledged platforms.
In particular, Payment Initiation Services is one of them. They are set up for fast online payments without a bankcard and the need to register an e-wallet. The providers of these services offer a fast and convenient way of payment by standard access to online banking via a login and password, but with an extra functional.
The service providers offer their customers a payment method that is faster than conventional online banking without the need for registration and creating new passwords.
Payment initiation services are focused primarily on those users who often make purchases in e-shops, and to those who simply have no bankcard (in Europe, about 60% of the population have no bank cards). In Europe, the major providers of the payment initiation service are Sofort in Germany, Ideal in the Netherlands, and Trustly in Sweden.
Voice Recognition is worth mentioning as a niche in B2B fintech. Voice recognition is used for identifying bank customers by their voice when they contact the call centre. This method of identification saves about 40-60 seconds on the time of each customer’s turning to a bank (required for validating passport data and the code word).
Online voice recognition systems are built around machine learning technologies. This method of identification is deemed more secure than validating personal data by hand.
Yet another method of identification of a bank customer is Face Recognition. As distinct to voice and speech recognition, it has been so far not during a customer’s regular turning to the bank (the bank’s call centre), but mostly when a photo has to be validated.
As a rule, this technology is used when taking out a loan. When validating documents submitted online (or received by the bank’s central office from field operators), a computer algorithm determines whether a photo is genuine and confirms absence of photo editing. In a broader sense, the facial recognition technology can be used for distance identification of customers by banks and nonbank credit institutions.
Biometric authentication – hi tech or a high risk? This is not my question but the title of an article in Phys.org. Indeed, the security of our data is a core problem, especially when we consider access to our money. Security and ease of access are on the opposite sides of the discussion. Debates on Biometric authentication are not subsiding, but the hottest ones concern scanning the eye retina and fingerprint scanning.
Obviously, fintech includes a great variety of business models and approaches. Part of them, such as payments, are already on an advanced level, whilst others are just emerging. Financial organisations, in spite of their sluggishness, have started considering fintech with growing interest. They are starting to understand that new technologies, jointly with their established customer base, capabilities of attracting cheap loans and a well-developed regulatory base can be the foundation of a new-generation digital financial institution. Telecom operators are looking along the same lines because they have been for long merely “pipes” for data transmission, and are keen to learn how to earn money with customers’ services. Needless to say, this is a gravitation point for companies with huge databases, such as Google or Amazon.
Today fintechs are finding their niches with relative ease. But the bigger they grow the more they start to overlap with traditional financial companies. Here a new dilemma appears – either fintechs will start integrating with banks and share the cake, or traditional financial institutions will vanish as a class to clear the ground for companies of new types. This can occur along the same lines as in the case when Uber eliminated the majority of taxi companies. And do not be hasty in giving an answer; in fact, it is not as obvious as it may seem offhand.