News Comments Today’s main news: One student saved $20K on a SoFi student loan. PayPal, Google deepen partnership. Zopa to hire a social media strategist. Ant Financial is a top 10 global bank. Today’s main analysis: Improved MPL pools are no guarantee of ABS performance. Today’s thought-provoking articles: A deeper look at GreenSky. Quants and fundamentalists. Ways to impress a lead investor. Helping […]
Is it clear skies ahead for GreenSky? GreenSky is exiting the gate looking good. To raise this kind of money on an IPO and be profitable for the past five years is a startup’s dream, and they’re living it.
Millennials are leading an investment revolution. I’m all for making an impact and being socially responsible, but if it isn’t profitable, then don’t count on retirement. That said, the millennial generation is definitely a different generation, and it’s quite refreshing to keep reading about them.
Student debt is growing in the US and looming as a major ongoing issue. With a total of $1.48 trillion in student loan debt in the US, spread among 44 million borrowers, Americans now have more student loan debt than credit card debt, according to Student Loan Hero.
Interest rates, meanwhile, are punishing, even more so depending on the type of loan you get, and the level of education you’re paying for. According to data from the Department of Education, rates range from around 3.5% to as high as 8.5% — with most types of loans floating in the 5-7% range. That’s extraordinarily high when you consider that many auto loan rates and even mortgages are lower.
The company offered 38.0 million shares to the public that priced at the upper end of the range at $23. The over allotment grant added another 5.7 million shares to the total offering. Selling shareholders offered all of the shares with gross proceeds of $1 billion.
GreenSky ended the day virtually unchanged at $23.26 at a time when most IPOs trade in more volatile ranges. The stock only had a range of $22.05 to $23.36 suggesting minimal initial interest by traders.
At the current price of $26.70, GreenSky has a market value of over $5.1 billion on 190 million shares outstanding (including the 5.7 million over-allotment option) with sales on pace to likely top $400 million this year.
The numbers though suggest anything but a boring company. Transaction volume jumped 47% to $1.0 billion during the March quarter and active merchants grew equally impressive at 52%. The fintech is even profitable.
PayPal and Google are extending their payments relationship across Google’s entire ecosystem, according to Finextra and TechCrunch. The two firms have worked together for awhile, as customers are able to integrate their PayPal accounts directly into Google Pay, Google’s mobile wallet.
But now, they’re taking the partnership a step further, allowing customers to enter their PayPal credentials once and then have them available for various types of payments, including bill pay and peer-to-peer (P2P) payments, across Google offerings such as Gmail, Google Play, Google Store, and YouTube. The partnership is expected to roll out in full later this year.
Marketplace lenders such as LendingClub and Prosper have made strides in improving underwriting standards in the past year.
In a report issued Thursday, Fitch said investors should still be wary of assuming new-issue MPL securitizations are a step up in quality over previous ABS deals, even though firms such as LendingClub and Prosper have taken steps to tighten lending standards as well as pool greater concentrations of borrowers with higher credit scores into their recent ABS deals.
LendingClub (NYSE:LC), for instance, boosted the weighted average FICO of its most recent prime/near-prime consumer-loan securitizations in December to 703, compared with 692 in its first asset-backed transaction of 2017.
LendingClub’s most recent self-sponsored transaction, Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1, had its base-case loss range tightened to 13.25%-15.25% by Kroll Bond Rating Agency, compared with 14%-16% in its CLUB 2017-P2 transaction. (In December, LendingClub pooled a collection of subprime loans with credit scores below 660, with a base-case loss range of 19.65%-21.65%.)
But the Bloomberg Professional Services Blog has run a piece recently on “quantamental” investing, indicating that a merger of the two approaches is underway. Darwinian pressures aren’t kind to presuppositions or to the purity of paradigms. And it is survival of the fittest that is at work here, because fitness requires on the one hand that the quants use good (human) judgment to monitor and adjust the investment process to the prevailing market conditions, while it also requires that any workable fundamental approach employ “promising aspects of technology … to reduce bias and random noise.”
“Alternative data” means what it sounds like it means: every sort of datumthat one would not traditionally have expected to come up in a discussion of trades, investments, or portfolio allocations.
These sources can include (Bloomberg’s list), “social media posts, credit card accounts, online browsing activity, foot traffic and weather patterns.” Any and all of these can include clues to ongoing and future trends. The use of any such source, or any cross-referencing of sources that can produce patterns, may be novel this week, customary next week, and a bare minimum for survival in the trading jungle the week after that.
Some 92% of millennials agreed with the statement “I care more about having a positive impact on society than doing well financially” compared to 52% of nonmillennials.
We interviewed a handful of millennials, asking them what makes their generation different. They answered: access to information, aligning themselves with brands on social media, and growing up in more comfortable economic circumstances than their parents and grandparents.
Most of us are aware of the importance of small businesses in the US economy. Small businesses employ over half of private-sector workers in the US, so access to capital for small businesses is critical to their success. Fortunately, online lenders such as the ones mentioned in the report have focused on serving the needs of businesses and activity has picked up over the last few years. Both awareness of these alternative options and the amount lent on these platforms is increasing. Originations at five leading online small business lenders increased by 50% in three years, from $2.6 billion in 2015 to $3.9 billion in 2017.
Nearly $10 billion of funding was provided to 180,000 small businesses from 2015 to 2017 according to data which included leading platforms OnDeck, Kabbage and Lendio. This activity has generated $37.7 billion in gross output, created 358,911 jobs and $12.6 billion in wages.
Despite fears of trade wars and increased protectionism, foreign investment in the United States remains robust. In fact, the U.S. continues to be the single largest recipient of foreign direct investment (FDI) in the world: more than
The AI and algo game is nothing new really. A couple decades ago many called it neural networks and neural computing, and that has evolved into today’s version of AI. But what is different today and so disruptive are three elements that were not there in the early days of machine learning: computing power and cloud-based systems, a growing and global population of computer and data scientists and data. Lots of lots of data.
Those three are increasingly working together in the alternative investments markets space, enabling firms to make much more accurate, and potentially, more profitable investments. The AI topic, discussed at Lendit Fintech USA 2018 conference in San Francisco in April, revealed just how integrated it is already and where it is going in the coming months and years. Listen to the full recording HERE.
The former American Express chief Ken Chenault is backing a start-up company that provides credit scores for immigrants who struggle to rent apartments and access other basic services upon their arrival in the US.
Workers on overseas postings, international students and other newcomers have long struggled to secure credit cards and other loans because American institutions hold no records on them.
Nova Credit, which is among a new breed of Silicon Valley companies seeking to shake up the financial system, aims to address the problem. It has secured funding from General Catalyst, the venture capital group that has stood behind companies including Snap, Stripe and Warby Parker.
For online lenders, small business lending continues to grow into big business. Online lenders continue to grow their originations of small business loans, according to a new study released today by Washington D.C.-based economic research firm NDP.
Alternative financing in the form of crowdfunding may be a trending topic, but it’s hardly new. Mozart used the idea in the 1780s to finance the composition of one of his early piano concertos, offering prospective backers copies of his manuscript in exchange for their financial support.
Why choose alternative financing? Because a lot of great deals may never get done without it. Many banks and other traditional lenders won’t finance transactions valued under $50 million because there’s simply not enough profit in it for them. And, because of the late stage of the current real estate cycle, many other lenders are feeling skittish or are simply tapped out. That leaves a big gap in the financing market — and a big opportunity for nontraditional sources of capital.
Layered Insight announced today that Tim McKnight, EVP & Chief Information Security Officer at Thomson Reuters, and Richard Seiersen, SVP & Chief Information Security Officer at Lending Club, have joined Layered Insight’s Advisory Board.
Renew Financial, the inventor of Property Assessed Clean Energy (PACE) financing and a leading provider of financing for home improvements, today announced that Kirk Inglis, currently Renew Financial’s Chief Financial Officer (CFO), will succeed Cisco DeVries as Chief Executive Officer (CEO) of the company. Mr. Inglis brings more than 20 years of experience in financial services and technology with a deep expertise in consumer lending. His career includes senior finance and operating roles with Calypso Technology, Prosper Marketplace and Providian Financial Corporation. Mr. DeVries will become the company’s Chief Innovation Officer to focus on key growth opportunities and to help innovate new financing tools for clean energy. DeVries will continue to serve on Renew Financial’s board of directors.
ZOPA is hiring its first-ever social media executive in an effort to broaden its customer base.
The peer-to-peer lending platform is currently advertising for a person who can “translate the brand and social media strategy into tangible plans which encompass day to day content, product content and campaign content”.
The role will involve working with the wider marketing and product team, as well as analysing and optimising performance by channel.
LendInvest announced on Thursday it has named firms JMW Solicitors LLP and Lightfoots Solicitors as its first official panel of solicitors for its Buy-to-Let product. According to the online lender, JMW Solicitors is one of the North West’s leading full-service law firms, with significant experience in handling a range of real estate finance cases for both institutional and private lenders. Lightfoots are experts in complex property finance cases and have over 30 years experience providing legal services to mortgage lenders. Both firms are experienced in dealing with introducer-led business, offering dual representation and coverage across England and Wales.
Digital wealth manager Moneyfarm has got £40 million in a Series B funding round – meaning it has secured close to £60 million in capital so far.
Moneyfarm calls this the “largest funding round by a European digital wealth manager to date” and the company, which launched a personal pension (SIPP) in March this year, will use the capital to launch solutions and expand its investment strategy.
The round was led by Allianz Asset Management, the investment arm of global insurer Allianz, which first invested in Moneyfarm in September 2016.
It had been rumored for some time now. Ant Financial, the Chinese financial behemoth, was raising a very large funding round that would value the company at $150 billion. It has been reported extensively today that this funding round has in fact closed. Ant Financial has raised $10 billion at a $150 billion valuation.
For a brief primer on Ant Financial there is a decent summary on their English language websitebut for a deeper understanding I recommend you read Chris Skinner’s new book, Digital Human (the Kindle version is available now). This has a 30,000 word case study that not only shares the history of Ant Financial but also why they are one of the world’s most forward thinking companies. And if you think they are just a Chinese story, think again. Ant Financial embodies the future of financial services and they will, in my opinion, shape the future of financial services more than any other fintech company on the planet.
Dianrong (点融), a leading Chinese online P2P lending service provider today announced cooperation with R3, a global platform specializing in distributed data technology. The Chinese fintech company’s supply chain finance solutions will land on Corda, R3’s open-source distributed ledger.
Dianrong hopes the cooperation will enable the company’s end-to-end service through a comprehensive supply chain and increase efficiency by ensuring transparency. The company’s initiative is to allow micro and small businesses to access credit and financial services.
As of this week, Wisr will increase its personal loan limit from $35,000 up to $50,000, with a comparative interest rate up to 5% p.a. lower than the four major banks.
Loans will be available for any worthwhile purpose over three or five years, with a comparison rate of 9.36% p.a. for borrowers with a strong credit rating. The neo-lender also offers no early repayment or exit fees.
The report analyses the number of mortgages taken out in the 12 month periods to the end of March from 2014 to March 2018, and breaks them into borrower types – first home buyers, investors, people moving house, those staying put but refinancing and those buying a second home.
According to Real Estate Institute of New Zealand figures, Auckland property sales peaked in their current cycle in the 12 months to March 2016, when 30,631 homes were sold.
That number has steadily declined and in the 12 months to March this year had slumped to 21,628, a decline of 29.4%.
Today’s investors are undoubtedly looking at technology-driven startups with a difference. The best illustration here is Flipkart which managed to introduce the right technology-driven models at a time when people had to wait endlessly to buy products of their choice. With Walmart now having acquired majority stakes in Flipkart, more technology-driven models could potentially come to the fore.
The digital wallet company finally integrated its platform with government-owned unified payment interface (UPI) last week. A week later, numbers related to UPI have popped up that has reached a 5 million mark via @ikwik handles, a VPA (Virtual payment address) handle for UPI, according to an ET report.
The platform is also planning to partner with NBFCs to disburse loans to small businesses in the range of Rs 20,000 up to Rs 5 lakh.
South African investment fund Crossfin has concluded a deal with banking and asset management group Investec that will see the two companies identify early-stage fintech startups in which to invest through Crossfin’s angel funding arm Blue Garnet Investments.
The Crossfin fund, which has a particular focus on fintech startups, was formed in June of last year after South Africa-based private equity and venture capital firm Capital Eye and the Multiply Group signed a strategic investment partnership.
Capital Eye manages a portfolio of investments spread primarily across Sub-Saharan Africa, including South African fintech company wiGroup, which Investec has also invested in.
Today, Fundbox, the small business growth company, announced that the company has won the coveted Israeli Atlas Award for Best Fintech Start-Up. For a third year in a row, the 2018 Israeli Atlas Award event was held in cooperation with the Ayn Rand Center, The Marker and such leading partners as, BDI, IVC, Bank Hapoalim and Israel Aerospace Industries. The prize is awarded to those Israeli startups that have created a technology, idea or product of exceptional value in Israel over the past year.
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: LendingClub completes second self-sponsored securitization. Pennsylvania AG sues Navient. Federal regulator clamps down on payday lending. Elevate supports rule on small dollar lending. RateSetter expected to profit next year. China’s pyramid schemes double in 2017. KBRA opens first European office. LendIt leadership changes. Today’s main analysis: Funding Circle’s October review. Today’s thought-provoking articles: Payday lending’s tough restrictions. Cordray’s […]
Federal regulator clamps down on payday lending. AT: “There apparently is no distinction between online and brick-and-mortar payday lenders. Critics say the rules could lead to payday lenders going out of business. They could also lead to payday borrowers defaulting on short-term small-dollar loans thereby making their financial woes even worse.”
LendingClub Corp (NYSE:LC), America’s leading web marketplace connecting investors and borrowers, has contributed to and sponsored its second securitization contract. The Consumer Loan Underlying Bond Credit Trust 2017-P1 released $323.1 million in prime notes supported by consumer loan assets enabled through the LendingClub platform. It marks as the sixth securitization sponsored or supported by company, and the fourth rated securitization of company facilitated loans overall.
This deal was backed by around $350 million of collateral and comprises $217.3 million of Class ‘A’ notes rated “A-(sf)”, $51 million of Class ‘B’ notes rated “BBB (sf)” and Class ‘C’ notes worth $54.7 million rated “BB (sf)”. All ratings were given by Kroll Bond Rating Agency, Inc.
The Pennsylvania Attorney General’s Office filed suit Thursday against Navient, the largest U.S. student-loan servicer, alleging widespread abuses and deceptive acts involving its administration of student loans.
That includes anyone who received private student loans from Sallie Mae or who has had federal or private student loans serviced by Navient and has had problems with repayment.
The Wilmington-based company, which has a large servicing center in Wilkes-Barre, already is the subject of a federal lawsuit filed this year by the Consumer Financial Protection Bureau (CFPB). Washington state and Illinois also have sued the company.
Pennsylvania residents have filed 1,059 complaints against Navient with the CFPB as of September, the Attorney General’s Office said.
Earnest, a well-funded fintech startup with bold ambitions to create a modern financial institution, is selling to the student-loan company Navient for $155 million in cash.
The exit isn’t so great for Earnest’s investors. They’d plugged roughly $320 million in cash and debt into the company, which was initially centered around providing small loans to people based on their earning potential and evolved over time to provide personal loans to a broader base of customers, as well as lend money to coding academies, as it told TechCrunch in late 2015.
Everything old is new again in finance. Navient, which services debt, is buying startup student-loan refinancer Earnest for less than half its 2015 valuation. Even then, it’ll eat into the new owner’s earnings and share buybacks. Worse, Navient faces a fresh lawsuit over dodgy practices.
The Pennsylvania attorney general’s office filed charges on Thursday that follow ones from the U.S. Consumer Financial Protection Bureau in January with Illinois and Washington. All allege that Navient in some way or other cheated borrowers paying for college, which the company denies.
Earnest’s $155 million price tag suggests most in the industry have downgraded their expectations about profitable growth.
Navient shares tumbled 12 percent, erasing market value more than three times the value of the acquisition.
Ken Rees, CEO of Elevate Credit, Inc. (“Elevate”), a tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, issued the following statement in response to the final “small dollar lending” rule issued today by the Consumer Financial Protection Bureau (CFPB):
“We applaud the CFPB, and we fully support this rule. We believe this rule is good for consumers and for the business we have built to better serve them. The small dollar rule protects consumers from the cycle of debt inherent in payday loans, short-term auto title loans, and certain balloon payment loans, and it encourages the kind of innovation we’re doing in underwriting, pricing and product development. We are heartened that regulatory uncertainty has been lifted with today’s announcement. Our current view is that the rule requires minimal or no changes to our business.”
Payday and auto title lenders will have to adhere to stricter rules that could significantly curtail their business under rules finalized Thursday by a federal regulator. But the first nationwide regulation of the industry is still likely to face resistance from Congress.
The Consumer Financial Protection Bureau’s rules largely reflect what the agency proposed last year for an industry where the annual interest rate on a payday loan can be 300 percent or more. The cornerstone is that lenders must now determine before giving a loan whether a borrower can afford to repay it in full with interest within 30 days.
Because studies by the CFPB have found that about 60 percent of all loans are renewed at least once and that 22 percent of all loans are renewed at least seven times, this cap is likely to severely wound the industry’s business model. In California, the largest payday loan market, repeat borrowers made up 83 percent of the industry’s loan volume.
The CFPB estimated that loan volume in the payday lending industry could fall by 55 percent under the new rules.
Roughly 12 million people took out a payday loan in 2010, according to the Pew Charitable Trusts.
In addition to the “full payment test” and the limits on loan renewals, the CFPB rules would also restrict the number of times a payday lender can attempt to debit a borrowers’ account for the full amount without getting additional authorization.
The Consumer Financial Protection Bureau (CFPB) has a mission: to protect consumers from unfair, deceptive, or abusive practices. According to a new national poll by the Cato Institute in collaboration with YouGov, protection from deceptive practices is just what the American public wants. Asked to prioritize regulatory goals, the majority of respondents put “protect consumers from fraud” front and center.
Unfortunately, the CFPB continually misses the mark, issuing rules that make splashy headlines but in practice do little to stop bad behavior. Its latest proposed rule, expected to become final soon, doesn’t target fraud itself. Instead, it goes after an entire industry and will significantly reduce consumers’ access to credit at the exact moments they need it most.
As the Cato poll finds, the majority of payday borrowers say they receive good information about rates and fees from their payday lenders.
The operators of those stores make around $46 billion a year in loans, collecting $7 billion in fees. Some 12 million people, many of whom lack other access to credit, take out the short-term loans each year, researchers estimate.
Industry officials said on Thursday that they would file lawsuits to block the rules from taking effect in 2019 as scheduled.
Under the new rules, lenders would be allowed to make a single loan of up to $500 with few restrictions, but only to borrowers with no other outstanding payday loans.
A dropoff of that magnitude would push many small lending operations out of business, lenders have said. The $37,000 annual profit generated by the average storefront lender would become a $28,000 loss, according to an economic studypaid for by an industry trade association.
After a long process of research, outreach, and review of over one million public comments, the Consumer Bureau today has issued a rule aimed at stopping debt traps on payday and auto title loans. The rule is guided by the basic principle of requiring lenders to determine upfront whether people can afford to repay their loans. These strong protections cover loans that require consumers to pay all or most of the debt at once, including payday loans, auto title loans, deposit advance products, and longer-term loans with large “balloon” payments. The new rule also curtails repeated attempts to debit checking accounts that rack up fees and make it harder for consumers to get out of debt. This provision applies to the same kinds of loans and to high-cost installment loans as well. These protections bring needed reform to a market where far too often lenders have succeeded by setting up borrowers to fail.
Loans like these are heavily marketed to financially vulnerable consumers. Though they offer cash-strapped consumers access to credit, the full-payment requirement can make these loans unaffordable.
More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or soon thereafter. In fact, about one-in-four initial payday loans are re-borrowed nine times or more, as consumers pay far more in fees than they borrowed in the first place. Just like payday loans, the vast majority of single-payment auto title loans are rolled over or re-borrowed on the day they come due or soon thereafter. And one-in-five borrowers end up having their car or truck seized by the lender because they cannot repay the debt.
Our research has shown that the business model for payday and auto title lenders is built on miring people in debt.
The new rule also addresses how lenders extract loan payments from consumers’ accounts. This part of the rule covers short-term loans, balloon loans, and high-cost longer-term loans where the lender has account access. After two straight unsuccessful attempts, the lender cannot debit the account again unless it gets a new authorization from the borrower. In addition, lenders must notify consumers in writing before attempting to debit an account at an irregular time or for an irregular amount.
The final rule issued today applies the underwriting requirements only to lenders of short-term and balloon-payment loans. This is a change from our proposal, which would have required underwriting for a wider swathe of longer-term loans. We want to take more time to consider how the longer-term market is evolving and the best ways to address practices that are currently of concern and others that may arise as the market responds to the reforms prompted by this new rule.
The Bureau has spent five years developing this rule.
Short-term, high-interest debt known as payday loans are illegal inside New York borders. But that hasn’t stopped state and city retirement funds from investing more than $40 million in payday lenders that operate in other states.
This environment presents challenges to introducing technologies, products, or services. If we have an issue, we can’t advance the products or services. A zero-tolerance regulatory environment puts constraints on products and services that we may like to get into the marketplace. For instance, small dollar lending has been problematic. As you know, Jim, small-dollar lending is a very important product for our customers. Many customers are regularly going out to payday lenders, title loans, and pawn shops to get short-term access to dollars.
When you look at the amount of capital you have to hold, and the underwriting requirements for a small business loan versus a larger loan, the cost is the same. It makes it more difficult to serve small businesses, and you see small business lending by banks being significantly reduced over what you saw pre-crisis.
This partnership has already helped us form relationships with companies like GreenSky, ApplePie Capital, Transactis, and AvidXchange. This has enabled Fifth Third to accelerate our innovation in those different areas, whether it is unsecured lending, small business franchise lending, or accounts payable automation.
Well, the interesting thing with FinTechs is that most of them need a bank as a partner to be successful.
GreenSky doesn’t exist, Lending Club doesn’t exist, OnDeck doesn’t exist without liquidity and the safe harbor banks provide for the asset. Partnerships between a bank and a FinTechs are a potential strong win for our customers and a win for our banking shareholders because we’re more efficient in how we deliver innovative products and services.
Our $30 billion community commitment focuses on supporting low- to moderate-income borrowers. $11 billion of our five-year commitment is dedicated to mortgage lending; $10 billion is for small business lending; and $9 billion is for community development lending and investments.
Balance Credit, a leading online lender whose analytics and technology-driven solutions have enabled nearly $100 million in credit access for underserved Americans, has expanded its personal loan offering to residents of California. The expansion will allow Balance to assist the estimated 26 percent of Californians who are currently underserved by mainstream banking products. With the launch in California, Balance has expanded its geographic coverage from 19% to 31% of US consumers.
With today’s news, California marks the 9th state where Balance Credit operates, including Delaware, Missouri, New Mexico, Ohio, South Carolina, Texas, Utah, and Wisconsin.
What do you do if you don’t have 20% lying around?
SoFi. SoFi is new to the mortgage lending space, but it’s setting itself apart in a big way. It accepts borrowers with a 10 percent down payment, but they primarily target borrowers with higher FICO Scores — think 700+. On the bright side, they do not charge mortgage insurance. In fact, SoFi doesn’t charge any loan origination, application or broker commission fees.
House lawmakers on Thursday sharply questioned the former chairman and chief executive of Equifax Inc. over a massive data breach that left more than 145 million Americans’ personal information exposed, raising questions about why he had appeared to testify as opposed to current executives.
Appearing in his fourth congressional hearing over a three-day span, former Equifax Chairman and CEO Richard Smith faced a flurry of questions over the details of the breach, including over curious stock trades by top company executives just before the breach was made….
Pennsylvania federal prosecutors Thursday filed an indictment charging a Philadelphia man with using PayPal to embezzle $1.6 million from his former employer, a New Jersey company that sells products for the cellular phone industry.
Peter Goodchild, 54, who was a bookkeeper at the Florham Park, New Jersey-based QwikSource LLC, allegedly pilfered the funds over a 10-year period. He also faces charges of money laundering, aggravated identity theft and filing false income tax returns.
Barclays US is dipping its toe into the financial health business, testing a personal financial management tool that aggregates all of a customer’s Barclays credit cards, personal loans and savings products – as well as accounts with other banks – in one place, reports Banking Technology‘s sister publication Paybefore.
This new service, My Personal Bank, which will be announced soon, is embedded in the bank’s credit card mobile app.
In September 2017, Tennessee businessman and CEO of Hardwick Clothes Allan Jones withdrew all NFL-related advertising for his companies, in response to “unpatriotic” national anthem protests.
On 26 September 2017, Jones, who also owns Buy Here Pay Here U.S.A. and U.S. Money Shops, posted a screenshot to his Facebook page showing an email instructing his ad-buyer to stop any commercials for his companies from being broadcast during NFL games.
RATESETTER will return to profit next year, its chief executive and co-founder has said.
The peer-to-peer lender was profitable in the financial years ended 2014 and 2015, but has fallen into the red since then, as it has invested heavily into scaling up the business.
The ‘big three’ platform published a recording of a recent speech by Rhydian Lewis (pictured) on its website on Thursday, in which he underlined his belief that RateSetter is a “sustainable and profitable model”.
Zopa is the world’s original peer-to-peer lending platform and the biggest consumer-focused platform in the UK. It has also been closed to new investors for the better part of eight months. The reason is explicitly that it cannot find enough new borrowers. Demand for its loans among existing investors is more than sufficient to match demand on the other side of the marketplace. For this reason, Zopa‘s Innovative Finance ISA has largely been an exercise in tax efficiently wrapping money that it already had on the platform.
A more meaningful initiative in the platform’s ongoing plight to attract borrowers might be its latest partnership with Saffron Building Society. This, for the first time in Zopa’s 12 year history, brings it into branches. Its loans will now be made available to Saffron’s 90,000 customers in any of its 11 branches across Hertfordshire, Essex and Suffolk, as well as via the building society’s website. Applicants can expect a quote within minutes.
Zopa may well have a bright future, but in the short-term it seems to me that it has three core issues that it must iron out:
Finding new origination channels in order to open to new customers once more, capitalise on the IFISA opportunity and take advantage of the cost benefits of deposit funding.
Meaningfully speed up whatever is delaying loan sales on the platform.
Find a way to maintain an attractive risk-premium for its P2P investors.
“There are five times fewer small scale developers today than in the last housebuilding boom and not a single one of today’s top ten housebuilders was created before 1990. There is a clear monopoly in the sector,” clarified LendInvest Co-Founder & CEO Christian Faes.
UK-based peer-to-peer property platform Lendy is currently seeking permission to launch an innovative finance ISA (IFISA). This news comes just after the online lender announced its 2016 earnings and additional growth plans.
Meanwhile, Lendy also announced the repayment of its largest p2p loan. Bridge and Commercial reported that the loan, which was secured against former the Kentish Town Studios building in North London, has been repaid in full 21-days ahead of schedule and even returned a gross 12% per annum in interest.
Moneyfarm, the U.K.-headquartered “digital wealth manager” has acquired the technology behind personal finance chatbot Ernest. Terms of the deal aren’t being disclosed, though I understand that, along with the tech, this is an acqui-hire of sorts, seeing London-based Ernest’s CTO Lorenzo Sicilia join Moneyfarm to oversee technology integration.
Starling Bank, one of the first banking challengers to offer a mobile-only current account in the UK, is expanding into the business market.
The Starling for Business account will initially be for entrepreneurs, sole-traders, and small business owners. The aim is to offer “fast, secure, and flexible” ways of managing business finance from mobile.
New guidance setting out how artificial intelligence services can give streamlined financial advice has been published by the Financial Conduct Authority (FCA).
Some of the most popular include:
Nutmeg: an online service that suggests a diversified investment portfolio tailored to the personal information you provide. Nutmeg will continually rebalance your portfolio in line with your risk profile, unless you change your preferences.
BestInvest: a platform to manage your investments online, offering research and analysis tools. Further advice is provided via phone by advisers.
RPlan: a tool for DIY investors, with the choice to choose, track and review investments online.
Barclays Financial Personality Assessment: this tool helps you identify your attitude towards risk and your composure levels. Users can then work with an adviser to build a portfolio.
Robo-advice on mortgages
Aside from investing advice, online services are also helping people make another major financial decision – applying for a mortgage.
A handful of robo-advisers for mortgages are currently operating in the UK market – Trussle and Habito are both up and running, while MortgageGym was granted a license from the FCA earlier this year.
Saving by app
Chip is a smartphone app which analyses your spending patterns and automatically transfers your money into a savings account, based on what it thinks you can add afford to save. While its standard interest rate is 1% AER, users can earn up to 5% AER by referring friends to the app.
Plum operates in a similar way, analysing your transactions and recommending savings, though it communicates via Facebook Messenger.
Cleo analyses your spending and suggests improvements to help you save more, but it won’t move your money for you.
The number of pyramid schemes investigated by Chinese police more than doubled in the first nine months of the year, with cases involving nearly 30 billion yuan ($4.5 billion), the official Xinhua News Agency said on Thursday.
Police investigated 5,983 schemes from January through September, an increase of 118 percent, with internet-based pyramid schemes on the rise, many involving virtual currencies, according to the report which cited the Ministry of Public Security.
KBRA has opened its first European office, located in Dublin, Ireland, and intends to expand into further jurisdictions (SCI passim). Several new hires and some existing staff will support the European effort, which will have a concerted focus on infrastructure and aviation securitisation, along with traditional core business areas.
Luxembourg-based and Frankfurt-listed fintech, MyBucks S.A., was announced as the winner of the Award for ‘Best European Financial Inclusion Company’ at the European Fintech Awards 2017 taking place in Brussels, Belgium.
LendIt events today look and feel very different from our early events. Along with that LendIt as an organization has grown and matured. Last month we made some internal changes that I want to share with you here.
My partner Jason Jones, who has been the driving force in the growth of our business, took over the CEO role some time ago as the business became more complex.
As of early September, Jason has transitioned out of the CEO role and is now Co-Chairman along with me. This allows him to focus his entrepreneurial drive on areas of our business where he can make the most impact. He is turning his attention to become more client focused as major global financial services and technology companies become more involved in our business.
Bo Brustkern, who has until recently stayed in the background, is now taking on the mantle of CEO of LendIt.
Similarly, we have promoted Joy Schwartz, our longtime head of operations, to become President of LendIt.
Underpinned by Corda, R3’s distributed ledger technology (DLT) based platform, Fusion LenderComm exposes real-time credit agreement, accrual balances, position information and transaction data to lenders, from agent bank loan servicing platforms such as Finastra’s Fusion Banking Loan IQ.
Determined to boost her business skills and gain more international exposure, Argentinian Amelia Martinez decided to pursue an MBA at London Business School (LBS).
Coming from a developing country with high levels of inflation and currency fluctuations, she faced many hurdles funding her MBA, particularly when new government restrictions were imposed preventing her from taking money out of her country to pay for the last instalment of her tuition.
With a Prodigy Finance loan however, she was able to pay for and complete her degree. Having completed her MBA at LBS, she’s since gone on to work for the company that helped her do it.
A group of banks are teaming up with IBM to build a new global system for trade finance using blockchain technology that is designed to track goods and automatically release payments as they move around the world by plane, ship or truck.
Bank of Montreal, Caixabank, Erste Bank and Commerzbank are joining the project called Batavia, which was launched by UBS and IBM last year and aims to start testing the technology using real transactions by early next year.
A 2014 survey by global investment banking company UBS found millennials preferred to seek advice from their friends rather than a professional.
Most millennials, like older generations, first looked to a spouse or partner for financial advice. Their next choice is their parents, followed by friends and other family members.
Non-millennials were much bigger champions of financial advisors: 40 per cent of non-millennial respondents reported seeking advice from one as their first port of call on a financial decision, while only 14 per cent of millennials said the same.
LoanBit is a lending platform created by an Australian startup called LoanBit Proprietary Limited. The platform is designed to work as a mediator between bitcoin lenders and businesses looking for short-term loans in bitcoin.
LoanBit promises to offer you a guaranteed daily interest rate of 2% to 5%, which adds up to triple or quadruple digit guaranteed returns per year. You can invest in LoanBit for as little as 0.01 BTC.
LoanBit claims to be a legitimately registered Australian company. The company lists an address in Canberra (17/7-17 Bunda St). They also have an Australian company number (610 418 794).
In any case, the LoanBit.net website was registered on February 16, 2017. The latest version of the website, which features the HYIP scam, only appeared online on September 10, 2017 – so it’s brand new.
Yes, LoanBit appears to be a scam, based on all of the information we can find online today.
India’s P2P lending market, which is predicted to be worth $4-5 billion by 2023 according to community loan exchange platform Faircent, has several players operating in the space, such as LenDenClub, Monexo, BillionLoans, i-Lend, LoanMeet, i2iFunding and FinMomenta. However, so far, P2P lending had been operating in a regulatory grey area. As such, the rollout of these guidelines gives legitimacy to the business.
FinMomenta co-founder and CEO Brahma Mahesh Khaderbad believes it paves the way for P2P platforms to gain legality, transparency and credibility.
The RBI has said that every company seeking registration should have a net-owned fund of not less than Rs 2 crore.
The guidelines say that any fund transfer between participants on a P2P lending platform shall be through an escrow account, which will be operated by a trustee. At least two escrow accounts, one for funds received from lenders and pending disbursal, and the other for collections from borrowers, shall be maintained.
The central bank has said that the aggregate exposure of a lender to all his/her borrowers at any point, across all P2Ps, should be capped at Rs 10 lakh. The aggregate loans taken by a borrower at any point of time, across all P2Ps, has also been capped at the same amount. The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000.
The norms on peer-to-peer (P2P) lending platforms issued by the Reserve Bank of India (RBI) will help make them more transparent and also safer for customers. “The regulations ensure that P2P platforms will protect the interests of lenders and borrowers will get faster access to credit,” says Shankar Vaddadi, founder and director of i-lend.
The RBI said P2P lending, even though of no significant in value, yet can “disrupt the financial sector and throw up surprises” in future, and the associated risks to the financial system are “too important to be ignored”.
The RBI has laid down following criteria for registering under Non-Banking Financial Companies (NBFC) :
P2Ps should have a minimum Rs 2 crore capital
P2Ps cannot take any loan exposure themselves
P2P will undertake credit assessment and risk profiling of the borrowers and lenders
P2P will maintain documents related to loan agreements
P2P will provide assistance in disbursement and repayments of loan amount
P2Ps cannot hold balance sheet or funds
P2Ps cannot cross-sell products except for some insurance products
“This is an extremely positive step for the P2P lending business. The retail millennial lenders, an investor demographic which has been focussed on extensively in the regulations will be leveraging the power of the crowd for the benefit of small
borrowers,” Vinay Mathews, Founder & COO, Faircent.com said.
SlicePay, a digital payment platform catering to college students, has raised $2 million (about Rs 13 crore) in a Series A round from Japanese investment fund Das Capital and Russian early-stage investor Simile Venture Partners, its co-founder told VCCircle.
Existing investor Blume Ventures also participated in the round.
YES BANK, India’s fifth-largest private sector bank, has been significantly contributing to the fintech space by collaborating with and mentoring more than 100 fintech startups to co-create innovative financial solutions for its Corporate, SME, and retail customer base. In March this year, they launched a business accelerator programme for fintech startups called YES FINTECH, in association with T-Hub, Anthill, and LetsTalkPayments.
YES BANK is all set to launch the second cohort of YES FINTECH, which will kick off on November 13.
The YES FINTECH roadshow in Mumbai will include a Fireside Discussion on GES (Global Entrepreneurship Summit) and its impact on Fintech and Mumbai as India’s Fintech Hub. In conversation will be Amit Goel, Founder LTP, Puneet Shukla, NITI Aayog and Vivek Belgavi, Partner, PwC. After this, Rajeev Chari, COO, Numberz and Arpit Ratan, Founder, Signzy, both startups that graduated from the Summer Cohort of YES FINTECH, will share their experience of being a part of the programme.
When: 6th October
Where: ISME Ace, One India Bulls, Lower Parel, Mumbai
Time: 2 pm-5pm
The YES FINTECH roadshow in Bengaluru will begin with a GES lead-up panel discussion on ‘Women in Fintech. Panellists will include Lizzie Chapman from Zestmoney, Prashanthi Reddy from YES BANK and Dr. Anna Roy of NITI Aayog. Following this, Shankar, Founder, FRS Labs, and Ankit Ratan, Founder, Signzy, both startups that graduated from the Summer Cohort of YES FINTECH, will share their experience of what it was to participate in the programme.
News Comments Today’s main news: SoFi Ventures to support financial services startups. Prosper’s valuation dives 70%. Fundrise drops minimum investment to $500 for New Starter Portfolio Offering. UK P2P lenders asked to reveal past defaults. Hargreaves Lansdown cancels special dividend. FinMason expands into Prague. PledgeMe close to profitability. Today’s main analysis: LendingClub is looking beleaguered. Australian fintech update. Today’s thought-provoking articles: Surge […]
For PeerIQ, it means continuing to execute upon the vision we shared at our seed financing just over two years ago. This fall, we will be launching our first products uniting TransUnion’s dataset with the PeerIQ analytics platform.
Along with its investment, Hearst brings several major holding companies, including auto data provider, BlackBook, and Fitch Ratings, the global ratings provider, which opens up many new value propositions for our customers. Finally, we are working hand in hand with Macquarie, a major provider of capital to the fintech space, to improve tools for warehouse lenders and their borrowers alike.
Fast forward to Monday. That’s when Lending Club is expected to log another progressive quarter, cranking revenue up to $136.2 million, and whittle the per-share loss back to only one cent; the company lost nine cents per share on $103.4 million in sales for the same quarter a year earlier. Not only is revenue expected to keep growing beyond that, Lending Club is expected to swing back to a profit in Q3, of two cents per share.
The Fundrise Starter Portfolio starts with a $500 minimum and includes a 9.25% annual dividend yield and zero advisory fees through the end of the year. If you want to try it out the Starter Portfolio comes with a 90 day guarantee. If you have a change of heart, Fundrise will purchase your investment back at the original investment amount. Not a bad deal to test the waters.
Prosper Marketplace Inc. is in talks to sell a roughly 10% stake to a Chinese conglomerate in a deal that could reduce the online lender’s valuation by more than two-thirds, according to people familiar with the matter.
Under the terms of the proposed transaction, Linca would invest $50 million in Prosper at a valuation of about $550 million. No deal has been finalized, however, and there was no guarantee the parties would come to an agreement, the people said.
David Kimball, who took over as Prosper’s CEO last December, has been focused on making the company profitable. In February, to ensure a funding source for the company’s loans, Mr. Kimball agreed to sell $5 billion worth of Prosper’s loans to a consortium of investors over the next two years along with warrants to purchase shares representing 35% of the company, The Wall Street Journal previously reported.
Real estate investment crowdfunding site Small Change has closed its first real estate offering available to everyone – not just accredited investors.
Small Change reports that investors have funded projects via their platform in cities including Pittsburgh, Los Angeles, New Orleans, and Washington D.C. These projects are as diverse as the cities in which they’ve been built. They include Pittsburgh’s first tiny house, a historic main street mixed-use conversion, and affordable housing in Washington, D.C. with the largest residential solar install in the country.
WSFS Financial Corporation (Nasdaq:WSFS), the parent company of WSFS Bank, today announced that it is now offering Private Student Lending Solutions, expanding its consumer lending product line to bridge the funding gap that exists between the actual cost of higher education and the federal aid, grants and scholarships available.
Social Finance, better known as SoFi, first teased it would file for an initial public offering nearly three years ago.
SoFi CEO Mike Cagney appears to be interested in filing for an IPO again.
If SoFi did file for an IPO, it would mark the second major IPO for a housing-related company after a dry spell the last few years.
According to an article in Reuters by Lisa Lambert, “Last year IPOs in the United States fell by more than a third from 2015, and many of those 102 share offerings ended up trading below their debut price.”
Fintech and adtech startup Fluid announced a strategic partnership with Nomad Credit, a financial marketplace for international students in the US; the partnership looks to offer better credit options to this underserved market; together the companies will deliver better financial literacy, credit building tools and more cost effective financial products.
Fledgling businesses rarely command seed or venture funding right out of the gate. But they still need cash to get started.
In reality, there’s a big difference between securing a loan for your business and winning over backers on a site like Kickstarter. Meanwhile, equity crowdfunding, enabled by sites like AngelList,CircleUp and SeedInvest, is generally for businesses that are further along.
Here are the real ways that most entrepreneurs get money at the very start.
Nine of the 15 United States financial technology “unicorns” — companies worth $1 billion or more, as tracked by CB Insights — are in the San Francisco area. These Bay Area companies, which are not public, include the online payments processor Stripe, the online lender Social Finance and the finance website Credit Karma.
For the last seven years, a New York business-backed program — the FinTech Innovation Lab — has been working to stem that West Coast tide by helping financial services start-ups sell their services in New York in an industry where the city clearly dominates: big banks and other finance companies.
One such “industry of the future” that Delaware should be working to attract is the financial technology sector, or what some affectionately call “FinTech. Empowered by mobile computing, these companies use technology to bring better, cheaper, more efficient financial services to citizens. Mobile apps that allow you to send money quickly to friends or family are examples of FinTech products.
For a number of reasons, Delaware is well-suited to become the nation’s FinTech capital. First, the financial services industry has served as a core portion of Delaware’s economy for over 40 years. Individuals with skills and expertise are ready and waiting.
Second, banks, of which many call Delaware home, are leading the way in partnering with startups large and small to develop new solutions and businesses in the space.
Third, Delaware’s nimble government and business community make it a flexible, attractive place for innovation.
There should be no surprise that with the growth of the internet and online banking that online lending would be close to follow. Over time, banks began to accept loan applications online and eventually began to offer full-service lending through the web.
While online loans may be tempting, it is important to consider every option when borrowing a large sum. Comparison shopping is your friend. There are more than 44 different kinds of business financing — that’s a large ocean to navigate before finding the lowest-cost option that fits your business profile and approval chances.
Nonbank lenders typically lend from their own funds or look to the financial markets to raise millions or billions of dollars to lend in smaller increments.
Here are some questions to ask yourself to get started:
How much money do you need to borrow?
Do you need an in-person experience or are you comfortable online?
The FCA is expected to announce new measures later this year, including forcing P2P groups to give extra information on the past performance of loans and on how much due diligence they have done on the borrowers’ past performance.
P2P lenders — which had collectively facilitated loans of £7.3bn in the UK by the end of last year, according to research from the Peer-to-Peer Finance Association (P2PFA) — have had plenty of time to prepare for tighter regulation.
The FCA’s latest review is the second in two years, and any measures are unlikely to come in before mid-2018, since the industry will be given between three and six months to respond to the proposals the authority puts forward later this year.
Fund supermarket Hargreaves Lansdown cancelled a planned special dividend on Friday after Britain’s financial regulator said the company needed to shore up its capital base, sending its shares lower.
The company plans to launch its HL Savings product later in the year, a cash deposit service supported by marketplace lending, and this year also launched Lifetime ISAs, or individual savings accounts eligible for a government bonus.
A recent survey revealed a third of SMEs in the IT sector have missed out on business opportunities because of a lack of finance. Distributors have long been a major source of credit for SME resellers but with consolidation taking place in distribution through mergers and acquisitions, the sources of credit available to resellers are being reduced.
One distributor that has publicly taken the initiative on credit is Exertis. The company recently introduced a programme called Credit Xtra with the intention of doubling the credit limit for more than 1,650 of its SMB accounts. There is also the option to increase the limit further if resellers remain within the distributor’s credit terms.
Dow believes that it is especially important to offer extra credit at this time of year, when resellers are targeting the peak summertime buying period in education.
NEW pricing rules on business loans will not apply to peer-to-peer lenders, the Competition and Markets Authority (CMA) has confirmed.
From today, all providers of unsecured loans and overdrafts worth up to £25,000 to small- and medium-sized enterprises (SMEs), will have to publish and clearly display the annual percentage rates (APRs.)
It had previously been unclear if this would apply to P2P and alternative finance lenders but the CMA confirmed to Peer2Peer Finance News this morning that it would not.
While NBFCs mostly deal with the unbanked population, P2P concentrate on the businesses that are usually locked out by traditional lenders and also on the tech-savvy individuals.
While P2P platforms have embraced the use of modern technology, NBFCs have failed in the use of technology. This has really affected their growth as they cannot really compete efficiently in the modern world.
The returns available to investors aren’t as high as they used to be, but they’re still much, much more than you’d get putting your money in a deposit account. But there’s a very good reason for that. It’s an awful lot riskier too. You’re not covered by the financial services compensation scheme – which safeguards up to £85,000 of your savings if your bank goes bust. That means you cold lose everything.
Hexindai Inc. (“Hexindai” or “the Company”), a fast-growing consumer lending marketplace in China, today announced that it has partnered with China UnionPay to launch its “Quick Pass” app on Hexindai’s mobile platform. The app will allow investors on the Company’s platform to use surplus funds that have not been lent out to pay for goods and services provided by stores partnered with China UnionPay by scanning a QR code created by the app.
CHINA will explore methods to include large Internet financial businesses of systemic importance in its macro prudential assessment, said a central bank report issued late Friday.
The first peer-to-peer lending platform opened in 2007, and exploded in popularity, with the number of such platforms increasing 18-fold between 2012 and 2015 and the combined transaction volume jumping about 40 times over the period, said the State Information Center.
Financial technology or fintech companies, particularly those focused on credit analysis, will greatly reduce cost of lending and also reduce credit risks. So, they are likely to experience fast growth on market demand as commercial banks are joining the inclusive finance market.
That market is currently dominated by smaller, private financial institutions, such as peer-to-peer or P2P lending platforms and consumer finance platforms.
In China, only 30 percent of citizens are covered by existing credit reporting system, while in mature markets the percentage could be 70 percent or higher.
By the end of July, the five biggest banks in China-Industrial & Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications and Bank of China－had launched inclusive finance arms, just two months after the authorities concerned called for better financial services for a wider group of people across China.
Boston-based fintech and investment analytics firm, FinMason, announced its international expansion plans and the opening of a new operations center based in Prague. The company stated the initial expansion will include the hiring of twenty software engineers to keep pace with the rapid growth and development needs of the company.
The company shared that FinMason Europe, s.r.o., opened August 1st and the first employees have already started.
Vendorly, an innovative vendor oversight platform for financial institutions, today announced the continued expansion of its platform through the addition of three new third-party oversight integrations available on the Vendorly™ platform. These additions further enable our customers to enhance their compliance management framework and help them maintain the high oversight standards required in today’s marketplace.
Continuing this momentum, the new vendor oversight additions to the Vendorly platform include:
Dun & Bradstreet (NYSE: DNB)— Vendorly customers now have access to Dun & Bradstreet data to help make smarter decisions about their current and prospective vendor network.
The ID Co. — With DirectID, Vendorly customers now have the ability to conduct bank verification for current and prospective vendors in their network, to reduce fraud and misrepresentation prior to payment.
TINCheck — Vendorly customers now have the ability to validate the tax ID of all organizations in their current and prospective vendor network.
A new entrant in German online real estate lending, iFunded wants to address the market of larger property development projects that lie beyond the scope of real estate crowdfunding. Partnering with umbrella investment bank NFS Netfonds Financial Service, the platform is launching its first €10 million real estate bond issue, to be listed on the open market of the Frankfurt Stock Exchange. With this, iFunded leads, for the real estate online funding segment, the Fintech startup trend that consists in moving from exemption/sandbox status to a fully regulated financial environment.
According to Crowdfunding.de, in the first half of 2017, German online real estate crowdlending platforms raised €58 million, 45% more than in the entire year of 2016.
In July 2017, iFunded launched its first public bond offering, what motivated you as a company to add the classical fundraising channel to your online real estate platform?
Real estate crowdfunding in Germany has grown very significantly recently and will reach between €100 and €120 million by the end of 2017. However, it still is small.
Our first project Eisenzahnstrasse Berlin is a €10 million bond issue (ISIN: DE000A2E4FQ5) with a 3.5-year maturity and 5.5% interest rate. It is destined to transform an exi property into 281 flats, including a penthouse, and 2,400 sqm commercial space. The total estimated budget is €49.6 million and the expected income €67 million.
European robo-adviser Moneyfarm expects to become profitable by 2019 as it looks to bring to market new products in the coming months.
The Italian firm filed its 2016 financial statements this morning, announcing expansion to 10,000 customers in the UK and £260 million in global assets under management (AUM), which renders it the second largest robo-adviser in Europe.
The firm has reported total losses of £6.4 million in 2016, but claims this was in line with its agreed targets.
Linked Finance, Ireland’s leading peer-to-peer (P2P) lending company has raised over €1m for Kildare-based businesses.
36 Kildare businesses including well-known businesses Kelly’s Mountain Brew, Celbridge Playzone, and The Academy Barber, have used the Linked Finance platform to raise funds and facilitate business growth.
Mueller notes that Singapore and the UK were the early leaders in Fintech innovation as the respective governments determined it was of strategic importance. With government backing, Fintech flourished.
But there are many challenges for this transformation that is occurring at a breakneck speed. And as Mueller says;
“analog regulations built for the traditional banking space are not conducive to fostering innovation in a financial services industry turned digital.”
Mueller bullets out intrinsic challenges to the existing regulatory ecosystem:
Fear of failure has resulted in some regulators taking a go slow approach instead of being proactive. When things go wrong – who gets the blame?
Complexity in Fintech requires new skills. Regulatory agencies are typically populated with people entrenched in well defined processes. There is a lack of proper skills and staffing.
Internal culture may not be willing to adapt. Changing processes is always a challenge. A cohesive policy strategy is missing.
Fintech innovators may struggle to engage and communicate with a regulator. Fear of engagement harms us all
Yes, some countries are blazing trails in Fintech and the list of countries pursuing a Fintech Hub status is growing. Without acknowledging the elephant in the room that the US is not at the top of this list (even though it is the leading global financial center) is telling about the regulatory morass elected officials have allowed to persist.
Global banks and investment banks are far more complex creatures than their high street counterparts, which is why we’ve seen far less disruption in corporate, commercial and wholesale banking that we are seeing in retail, but don’t be complacent or closed here. There are things happening in the more complex areas too.
While fintech covers a diverse array of companies, business models, and technologies, companies generally fall into several key verticals, including:
Lending tech: Lending companies on the list include primarily peer-to-peer lending platforms as well as underwriter and lending platforms using machine learning technologies and algorithms to assess creditworthiness.
Payments/billing tech: Payments and billing tech companies span from solutions to facilitate payments processing to payment card developers to subscription billing software tools.
Personal finance/wealth management: Tech companies that help individuals manage their personal bills, accounts and/or credit, as well as manage their personal assets and investments.
Money transfer/remittance: Money transfer companies include primarily peer-to-peer platforms to transfer money between individuals across countries.
Blockchain/bitcoin: Companies here span key software or technology firms in the distributed ledger space, ranging from bitcoin wallets to security providers to sidechains.
Institutional/capital markets tech: Companies either providing tools to financial institutions such as banks, hedge funds, mutual funds, or other institutional investors. These range from alternative trading systems to financial modelling and analysis software.
Equity crowdfunding: Platforms that allow a collection of individuals to provide monetary contributions for projects or companies provisioned in the form of equity.
Meantime, rather than ignoring these changes, the biggest banks are investing in them. Since 2012, the ten largest US banks by assets participated in 72 rounds of investment totalling $3.6 billion in 56 FinTech companies whilst, in Europe, Banco Santander leads with the most number of unique investments to FinTech startups. The firm has made 13 investments to 12 unique fintech startups. The largest investment was a $135 million in Q3 2015 to small business lender Kabbage, that also included participation from ING among other investors.
Alternative lending was the golden child among investors around 2015, but lately, the industry seems to have fallen out of favor thanks to regulatory uncertainty and questions over the viability of some business models.
This week alone saw two examples of those concerns in action: One U.S. lawmaker, Rep. Emanuel Cleaver II (D-Mo.) sent a letter to five alternative small business lenders operating in the country, inquiring about their business practices.
PledgeMe came within cooee of turning a profit in the 2017 financial year, boosting revenue from fees to use its equity crowdfunding and peer-to-peer lending platform while also clamping down on costs, and is considering adding another string to its bow which that could need another capital injection.
The Wellington-based company narrowed its annual loss to $11,228 in the 12 months ended March 31 from $398,611 a year earlier as revenue climbed 55 per cent to $268,473 and operating costs were slashed 48 per cent to $288,502.
We have seen demand for construction loans between $10 million and $30 million spike 20 per cent per cent over the last six months as Tier 1 banks are quickly tightening both pre-sales thresholds and loan-to-valuation ratios on new developments.
One area of the greatest demand for non-bank finance is coming from Chinese property developers, who do not have the track record or Australian assets to provide comfort to the major lenders.
Peer-to-peer lending models, like that of Chifley Securities, allow us to access investor funds to progress these developments, as we are applying different, more nuanced assessment of the risks associated with these loans.
Braam Lowies, the study’s lead researcher, noted that while the concept was relatively new in Australia, it had been successful in the United States and United Kingdom for approximately seven years.
Wadhawan Global Capital (WGC), which owns 38% of Dewan Housing FinanceBSE 0.07 %, has invested Rs 175 crore in London-based mortgage financer Neyber, marking it’s second investment through the newly set up UK arm as it seeks to expand its global footprint.
Those who do not back the idea of PPF believe investors should carry the risk of loss as the principal idea of P2P Lending is to offer investors an “alternative investment route”. The P2P Lending platform, at best, can try to strengthen the risk-assessment processes by making the optimal use of technological innovations.
While the other camp which is in favour of PPF opines that it is not a luxury but a necessity at the moment as it will only instill confidence among the investors. And, it’s not about disbelieving one’s capabilities.
A summary of the proposals put forward by MAS in the Consultation Paper is set out below.
Expansion of licensing exemptions
(a) Expansion of licensing exemption for dealings in securities other than CIS
(b) Expansion of licensing exemption for provision of fund management services incidental to advisory activities
Dispensation with prior client approval for each and every rebalancing transaction
Case-by-case exemption from collecting full information on the financial circumstances of clients
Relaxation of criteria for CMS licences in fund management for digital advisers
Development, monitoring and testing of client-facing tools
Provision of information on algorithms and conflicts of interest
Responsibility of the board and senior management
MAS Establishes Payments Council (LATTICE80 Email), Rated: A
The Monetary Authority of Singapore (MAS) announced on 2 August that it will establish a Payments Council, comprising 20 leaders from banks, payment service providers, businesses,and trade associations. Members are appointed for a two-year term and chaired by Mr Ravi Menon, Managing Director, MAS. The Payment Council marks the vision of an e-payments society, fostering collaboration between providers and users of payment services in Singapore.
Communication and technology services company Green Packet Bhd is eyeing an expansion into a new growth area – the mobile payment solutions segment, an area poised for disruptions through technology.
According to the 2016 Visa Consumer Payment Attitudes survey, 74% of Malaysians prefer to make electronic payments instead of cash, an increase of 8% compared with 2015. In fact, Visa indicated in a separate study that seven in ten Malaysians are willing to use mobile wallets.
Such is the case of American banking giant Citi, which sees itself as a technology company with a banking license, having introduced video banking recently in India.
Video banking is seen suitable especially in wealth management, which is part of the regional consumer business led by Selva. This is a segment where customers need trust and constant advice.
Citi receives 70 million calls a year, almost half of which are answered by a phone agent. The bank usually spends about 30 to 45 seconds validating the call, asking the client his or her mother’s maiden name, date of birth and details about the last transaction.
In the Philippines, Citi now implements voice-enabled biometrics for easier client verification. Citi is likewise moving toward facial recognition.
GSX, which owns and operates the Gibraltar Stock Exchange, said on Friday that Cyberhub Fintech Holdings Limited is a new strategic shareholder. Cyberhub is a unit of Broctagon, a derivatives trading technology provider.
The stock exchange also wants to become the world’s first to fully integrate blockchain technology.
According to the 2017 Old Mutual Savings & Investment Monitor, working South Africans allocate only 15% of their incometowards savings.
Naidoo explained that these statistics emphasise the extent of the national savings deficit and the large gap that exists between targeted economic growth of 5.4% per year, as per the NDP, and the ability of the South African economy to fund that growth.
Naidoo believes that financial services providers and advisers have a vital responsibility to promote a savings culture via collaborative advice and financial literacy efforts.
Just three months in and Barbados’ sole peer-to-peer lending company, Carilend, is seeing tremendous success with 100 percent of its loans.
With over 900 registered users on the site to date, the team at Carilend has been amazed at the response they have received.
Carilend reported their “average” Borrower is borrowing $8,617 for 43 months at an average interest rate of 11.34%. Whilst all applications receive an answer in one working day, Carilend recently approved a brand new Borrower in 2 hours; 22 minutes from receipt of their initial application.