Taking Over Where Banks Fall Short

Taking Over Where Banks Fall Short

Banks are not equipped to lend the way small platforms are, and a lot of platforms are hamstrung by the regulatory environment. Monroe Capital, LLC, launched their specialty lending vertical a couple of years ago to provide funding for other lending platforms. Aaron Peck, managing director and co-head of the Specialty Finance Vertical, said four years ago […]

Taking Over Where Banks Fall Short

Banks are not equipped to lend the way small platforms are, and a lot of platforms are hamstrung by the regulatory environment. Monroe Capital, LLC, launched their specialty lending vertical a couple of years ago to provide funding for other lending platforms. Aaron Peck, managing director and co-head of the Specialty Finance Vertical, said four years ago the company had two specialty finance vehicles designed to meet the needs of those platforms. Now, they have 11, and all of them are current yield.

“That’s rare for a fund,” Peck said, “but we look at performance. A publicly traded vehicle pays 90%, so we are trading quite well. All our funds pay hefty dividends.”

Since 2004, Monroe Capital has been a lower mid-market lender, providing funding for businesses with $3 million to $30 million in cash flow. Headquartered in Chicago, they’ve managed more than $4 billion in assets through origination offices in Boston, New York, Atlanta, Dallas, San Francisco, Los Angeles, and Toronto. Their specialty finance division, however, is not a typical marketplace lending platform; rather, they see themselves as a hybrid model looking for growth capital. Peck is one of nine partners.

How Specialty Finance Works at Monroe

Monroe’s typical customers are diverse: near-prime and sub-prime consumers, small businesses, pre-settlement litigation finance, medical receivables, sub-prime auto, structured settlements, and medical royalty. They usually look for platforms with a longer history and lower finance rate and can scale up to $200M for an individual company.

“Banks max out at 80%,” Peck said, “but we can go deeper, so the platforms have to raise less equity.”

For example, a small business looking for capital to put up a warehouse facility approached Monroe. They had a track record and could put up equity (in a pool of assets) enough to support the warehouse up to $100M. “We looked at loss rates to see what we thought was sustainable,” Peck said. “We did a detailed analysis of third-party data with our tech-enabled underwriting and became comfortable that full legal and regulatory due diligence were performed.”

Once Monroe does all that, they get back to the company and set up the SPV structure. This sets up unique criteria the platform needs to meet based on its business model. If it comes out of compliance, which is rare, they can take assets to get their money back because it traps cash in the vehicle to protect the loan.

“We don’t approve individual loans,” Peck said. “We support the platform and let them do what they do best.”

Looking for Platforms That Fund Their Own Assets

Monroe is very interested in the technology aspect of any platform they fund. That’s why they stick with those that can fund their own assets.

“If you don’t have tech, it challenges us to believe you can grow,” Peck said. “On our side, tech-enabled lending makes sense. It’s difficult to scale without it. It won’t completely replace the human underwriter, and key underwriting elements will always be key underwriting elements. But technology makes it quicker to provide data so good decisions can be made.”

Monroe has dedicated an entire team to this aspect of their business hoping it will grow. As the marketplace lending industry grows bigger, there will be more opportunities for Monroe to choose platforms that can meet their criteria.

Authors:

Written with Nicki Jacoby.

Allen Taylor

Friday March 10 2017, Daily News Digest

delinquency rates in u.s.

News Comments Today’s main news: China’s tech giants are pouring billions into U.S. startups. Zopa puts investors on waiting list. RateSetter investors embrace provision fund rules. Latvia breaks RE dev crowdfunding record. Ping An Bank to provide third-party depository service to P2P lenders. Carilend to open first P2P lending platform in Caribbean. Today’s main analysis: Marketplace Lending 2.0. How Brexit could […]

delinquency rates in u.s.

News Comments

United States

United Kingdom

  • Zopa introduces investor waiting list. GP:” Perhaps another way of doing this would be to have a waiting dollar list, not a waiting investor list: each investor can invest $x per month, depending on platform needs. This way you don’t lose clients who see no activity for some time and you take a token of their participation to have them commit and stay committed. ” AT: “Regulated growth is the best kind of growth.”
  • RateSetter investors embrace new provision fund rules. GP:” A very interesting change. We should evaluate these changes in depth.”

European Union

  • How Brexit could help Berlin take London’s fintech crown. AT: “I have to say, though I’m a firm believer that it will take a lot of mojo to overtake the UK as the world’s leader in P2P lending and fintech, there is a compelling argument that Berlin’s growth could be fueld by U.S. and Asian companies choosing Germany over the UK to gain access to European markets post-Brexit. Howevr, they’ll still need a presence in the UK if they want access to the UK market. Whether business interests lean toward Berlin over London in the aggregate and over the long haul, however, remain to be seen.”
  • Latvia’s largest crowdfunded RE dev project.
  • Fellow Finance P2P lending review.

China

Asia

Caribbean

  • Bid to change loan services. AT: “Barbados need no longer be known only for good music and sunny beaches. Fintech has reached so many new shores.”

News Summary

 

United States

China’s tech giants are pouring billions into US start-ups (CNBC), Rated: AAA

Joe Chen, CEO of Chinese social networking service Renren, first met SoFi CEO Mike Cagney in Palo Alto in 2011 and, over coffee, decided to invest in the fast-growth, disruptive online finance start-up. That initial $4 million investment helped SoFi get its start and led to two more financings within three years, with Renren contributing a major chunk of some $230 million raised.

Similarly to Renren, China’s tech titans Baidu, Alibaba and Tencent are leading a surge of Chinese investment in cutting-edge U.S. technology start-ups with bold ambitions to expand their footprint, attract top talent and gain an edge in innovation.

Collectively known as the BAT, China’s giant technology companies that dominate search, e-commerce and mobile messaging in their home market are going global. The United States is their primary shopping place to diversify and build out their brands.

China’s four largest internet companies — the BAT plus e-commerce company JD.com — have invested $5.6 billion in 48 U.S. tech deals over the past two years, according to CBI Insights data.

Last year Chinese investors put a record $45.6 billion in U.S. companies, triple the amount for 2015, according to research group Rhodium Group in New York City.

Besides its groundbreaking investment in SoFi, Renren has invested in a series of U.S. fintech start-ups, leading a $31 million lead investment in crowdfunding real estate site Fundrise in 2014 and leading a $40 million investment in U.S.-based stock-trading outfit Motif in 2015.

For the founders of U.S. tech start-ups, getting cozy with Chinese acquirers and investors can make good business sense. With a Chinese investor, their business gains a competitive edge in the exceedingly difficult-to-penetrate China market. Getting funds from China’s leading tech companies can help U.S. companies gain an entry point to China, an immediate on-the-ground presence and strategic insights such as how to best customize products for the local Chinese market.

Why ‘challenger banks’ haven’t taken off in the US (Tradestreaming), Rated: AAA

Digital banks, big in the U.K., have a trust problem in the States.

That model hasn’t really caught on in the U.S., though, where startups are mostly building technology-based solutions for payments, investing and lending – anything that doesn’t require opening a bank account with an unknown entity. Building that type of business profitably is hard: the cost of customer acquisition is high and complying with complex financial regulations can be a big undertaking.

BankMobile, a rare U.S. success story, offers a compelling case study. With about 2 million accounts since its 2015 launch, it has grown so quickly Customers is selling it to Flagship Community Bank in Clearwater, Florida. (The Durbin Amendment of the Dodd-Frank Act requires companies with more than $10 billion in assets cap their interchange fees at 44 cents, and Customers’ asset size is just below that. BankMobile’s revenue comes mostly from interchange fees on debit cards.) The $175 million deal is expected to close before the end of the third quarter.

Luvleen Sidhu, president and chief strategy officer, said one of the main reasons BankMobile has been so successful is it is acquiring new customers at a low cost – about $10 per account, she specified, compared to the roughly $300 she said it generally costs to acquire a customer returns come out to “maybe $85 a year” in revenue.

U.S. startups are joining banks, not challenging them.

However, it will take more than a better customer experience enabled by technology to motivate customers to open an account or switch from their current bank, despite their general dissatisfaction with the current financial system, Khan said. These new experiences need to focus more on customer behavior – something banks get but startups need to work on more. What will ultimately make a digital bank stand out from legacy banks that are improving digitally is the way it handles data.

That’s why it’s important to remember a tech giant like Facebook or Amazon could get into banking services before a digital bank even takes off, Khan said. If it’s a competition for customer trust, the tech company could beat out all the banks.

Marketplace Lending 2.0 (Deloitte), Rated: AAA

But 12 months later, we see a picture that is much bigger in scope than just MPL-bank convergence. Marketplace lending is an integral piece of a larger fintech puzzle that is transforming the financial services industry.  We expect that asset classes such as small business, student, and unsecured consumer will move almost completely to digital platforms in the medium term, while other asset classes, such as residential mortgages and auto lending will get there more slowly.

Further out, we see a technology platform-enabled lending environment moving from a predictive to a prescriptive analytics stage.

Download the report here.

Six ways Goldman Sachs’ online lender, Marcus, strives for an edge (American Banker), Rated: AAA

  1. It’s tackling a pain point for consumers: credit card debt.
  2. It’s kicking it old school with direct mail.
  3. It’s borrowing culture and office design strategies from startups.
  4. It’s light on fees.
  5. It’s turned off automated voice response.
  6. It lets people defer payments. This isn’t for everyone necessarily, but those who make 12 consecutive payments on time earn a pass. They can contact the bank to defer one payment with no fees or extra interest, so a 32 -month loan becomes a 33-month loan.

What Crowdfunding and ‘Democratizing Capital’ Could Mean for Minority Entrepreneurs (Equities.com), Rated: A

The digital crowdfunding trend in America started in 2003 when ArtistShare launched as the world’s first donation crowdfunding platform for creative artists. Crowdfunding has surely stimulated the national and global economy over the years, but equity crowdfunding is a federally regulated tool with the ability to shift power from large, robust institutions to the individual entrepreneur and investor.

Equity crowdfunding acts as a catalyst for individuals to collectively combat institutional discrimination along with the very real wealth and unemployment disparity between races in the country. While organizing a crowdfunding campaign strategy is complex in nature, leaders across the country are working hard to make this crowdfunding easier and more accessible to everyone.

Below are a few leaders making a difference in the minority community:

  • Dar’shun Kendrick at Minority Access to Capital– Securities lawyer with a focus on helping minorities access capital the legal way.
  • Maureen L. Murat, Crowdie Advisors– Future lawyer with a passion for immigration and securities law helping entrepreneurs raise capital via equity crowdfunding.
  • Kendrick Nguyen and Paul Menchov at Republic– Equity crowdfunding platform highlighting minority, female, and impact investing offerings.
  • Devin Thorpe, Champion of Social Good– Journalist, author, and avid speaker on a mission to solve some of the world’s biggest problems before 2045 by championing the work of change agents who will do it.
  • Lynn Da, Buy The Block– Advocate for minority investment education and access to real estate crowdfunding investments. Platform set to launch April, 2017.
  • StartingFive Partners and General Catalyst Partners, FundLatinos – These two groups came together to develop this donation crowdfunding platform to bring together with the vision to build the tools, technology and partnerships needed to foster a trusted environment for Latinos to raise money for personal and community causes that matter.
  • Charlie Jackson, CEO at Texas Diversity Fund– Equity crowdfunding platform with a focus on encouraging diversity in entrepreneurship.

Backed Secures First Institutional Debt Capital (PR Newswire), Rated: A

Backed, the online lending platform that has digitized co-signing of personal loans, today announced it has finalized its debt financing deal with Israel’s largest financial institution, Harel Insurance and Finance. Harel has also participated in Backed’s extended seed round, and has become a lead equity investor. Backed and Harel are setting up an independent special purpose funding vehicle for financing its growing loan portfolio.

Backed was founded with the mission of helping individuals with thin or no credit history gain access to fair loans. Its unique co-signing mechanism is fully digitized, and allows the Backer (co-signer) to keep track of the loan progress and to step in to cover missing payments if necessary. Backing is designed to help borrowers and Backers avoid defaults, rather than impose added risk on the co-signers. Simultaneously, the co-signing model allows Backed to offer competitive returns to its investors, with reduced risk due to its co-signing mechanism.

LendingHome Launches One-Stop Online Mortgage for Digital Natives, by Digital Natives (VentureBeat), Rated: A

LendingHome’s online mortgage is the first to prioritize the customer experience by putting control over the process into the hands of the homebuyer. While the first wave of digital lenders brought the old-school paper mortgage application online, retrofitting it to be accessed via the Internet, much of the process is still controlled by the lender offline and is opaque and confusing for the homebuyer. In contrast, LendingHome has created the next-generation digital mortgage that gives homebuyers confidence and control over the process with a dynamic, interactive online experience. It also offers a faster, simpler, and more transparent mortgage process than the outdated paper-laden methods still used by many lenders.

It gives homebuyers confidence and control over the process with a range of loan options, innovative features, and trustworthy resources to choose from. It includes the ability to:

  • Select the right loan for your needs anywhere, anytime: Borrowers can select from a range of loan products at competitive rates. Using LendingHome’s Trade Points tool, they can configure the loan that’s best for their needs without wasting time going back and forth with a loan officer.
  • Lock your rate with the click of a button: Online rate lock allows borrowers to capture available rates in real time without the worry of missing out because the market moved.
  • Get guidance right when you need it: An educational hub offers advice on complex topics like debt-to-income and loan types. Extensive in-product tips and education are available exactly at the time they’re needed to help throughout the application process. While it’s easy to complete the mortgage process online, LendingHome has personalized loan specialists available to talk to borrowers via phone or chat when needed.
  • Know what to expect and do at every step: A personalized dashboard lets borrowers know exactly what documentation they’ll need to provide, without the headache of fielding last-minute piecemeal requests via email and phone. A Milestone Tracker lets them know exactly where they stand in the mortgage process and what comes next.
  • Stay on the same page with your real estate agent: A Loan Tracker tool enables borrowers to seamlessly share the progress of their loan with their real estate agent or partner.

LendingHome’s home financing solution is available at www.lendinghome.com/home-loans to homebuyers in Arizona, California, Colorado, Florida, Georgia, Nevada, Oregon, Texas, and Washington, with more states to be added in the coming months.

There are 15.8 million homebuyers — many of whom are tech savvy — expected to enter the market from 2015 to 2025, according to research from the book. Today, forty-seven percent of homebuyers are first-time buyers, and half (50 percent) are under the age of 36. They have a median age of 33 and nearly six in 10 are Millennials (56 percent) per a recent survey by Zillow Group. Per the same survey, the majority of homebuyers, 87 percent, use online resources to search, shop and purchase their home.

Fueled by Rocket Mortgage, Detroit-Based Quicken Loans Achieves Record-Breaking Year (PR Newswire), Rated: A

One year after Quicken Loans’ Rocket Mortgage Super Bowl ad ignited a nationwide conversation about the power of the American homebuyer, the largest FinTech lender funded $7 billion of its record $96 billion in total closed loan volume in 2016 through Rocket Mortgage. In just 11 months Rocket Mortgage’s closed volume alone would already rank as a top-30 national mortgage lender, among the nearly 50,000 banks, credit unions, brokers and mortgage companies in the United States.

Monroe Capital Corporation BDC Announces Fourth Quarter Financial Results (NASDAQ), Rated: A

Monroe Capital Corporation (Nasdaq:MRCC) (“Monroe”) today announced its financial results for the fourth quarter and full year ended December 31, 2016.  The Board of Directors of Monroe also declared its first quarter dividend of $0.35 per share, payable on March 31, 2017 to stockholders of record on March 17, 2017.

Fourth Quarter 2016 Financial Highlights

  • Net investment income of $5.4 million, or $0.32 per share
  • Adjusted Net Investment Income (a non-GAAP measure described below) of $5.8 million, or $0.35 per share
  • Net increase in net assets resulting from operations of $7.5 million, or $0.45 per share
  • Net asset value (“NAV”) of $240.9 million, or $14.52 per share
  • Paid quarterly dividend of $0.35 per share on December 31, 2016

5 female founders shaping the future of fintech (Built in NYC), Rated: A

Alexa Van Tobel launched LearnVest in 2009 with the mission of making financial planning affordable and accessible.

Sallie Krawcheck, a former titan of finance at companies like Citigroup and Bank of America, launched Ellevest in 2016 with the mission of closing the gender investment gap. The robo-advisor works to help women secure their financial futures by taking women’s unique life attributes — such as longer lifespans, different salary curves and more frequent career breaks — into consideration.

A former McKinsey consultant, Jennifer Fitzgerald cofounded PolicyGenius to fill a  gap in the insurance industry.

Vicki Zhou, who previously held roles at Citigroup, SFC Associates and Archipelago Capital Management, launched the company in 2013 with Herbert Moore. WiseBanyan’s platform provides users with tailor-made financial plans by recommending and managing an assortment of bonds and stocks, which users can then track, add to or withdraw from.

Orchard Platform is a marketplace lending platform that helps institutional investors, investment managers and loan originators connect and transact. Angela Ceresnie co-founded the company in 2013 with Matt Burton, David Snitkof, Jonathan Kelfer and Phill Rosen.

Want to start a mortgage company? loanDepot CEO updates thoughts on barriers to entry (Housingwire), Rated: B

Hsieh said last year that regulation was a barrier to entry into the business. People are eye-balling entering the mortgage industry because of $9 billion of untapped potential market share, Hsieh said at the time.

Now a year later, Hsieh added to it, stating technology is now a new barrier to entry — no longer just capital and regulatory obstacles.

And there’s data to back his claim. The Mortgage Bankers Association forecasts$1.63 trillion in total mortgage originations in 2017. So it’s true that more people want in, but greater investment in technology is becoming an ever-increasing necessity.

Citi names Piazza permanent head of fintech unit (American Banker), Rated: B

Citigroup on Thursday announced that Yolande Piazza will serve as the permanent head of its fintech unit.

Piazza had been serving in that role on an interim basis since August, when the previous chief executive of Citi FinTech, Heather Cox, left for a role with USAA.

Kabbage, Arcadia price pair of MPL deals (Global Capital), Rated: B

Sole lead Guggenheim increased the deal size of the Kabbage offering from $500m to $525m before pricing on Wednesday.

The $388.8m ‘A’ notes were priced at 275bp over swaps, while the $83.3m ‘B’ notes were priced at 400bp over swaps. The $27.7m ‘C’ notes and the $25m ‘D’ …

East Bay real estate investor crowdfunds purchase of San Jose tech park (Biz Journals), Rated: B

The Hellyer Oaks Technology Park in San Jose has been acquired by Walnut Creek-based Vertical Ventures, but the sale was funded partially by a real estate crowdfunding tool called CrowdStreet.

United Kingdom

UK’s biggest peer-to-peer lender introduces investor waiting list (AltFi), Rated: AAA

Zopa, the oldest and largest peer-to-peer lending platform in the UK, has introduced a waiting list for new investors on the platform. The new setup applies to both institutional and individual investors, and follows on from the “platform limit” which was introduced in December.

The newly introduced waiting list is an attempt to place a greater weight of emphasis on existing investors, by moderating the on-boarding of new customers. Zopa doesn’t yet know how long the waiting list will be, but says that it will try to manage it such that it’s never too long.

Of course, this wouldn’t be an issue at all if originations were outstripping investments. It would appear that Zopa is overweight investment at the moment.

RateSetter’s investors embrace new provision fund rules (P2P Finance News), Rated: AAA

RATESETTER’S investors have widely endorsed changes introduced to the provision fund, as hardly any of them have used the one-month window to withdraw their funds without an exit fee.

The peer-to-peer finance firm updated its lender terms in early February, one month ahead of changes to its provision fund to address concerns that it was “too binary”.

The average amount invested has now ticked up to over £22,000 – a 0.6 per cent month-on-month increase that also confirms investors feel comfortable with the platform’s strategy.

European Union

How Brexit could help Berlin take London’s fintech crown (MarkeWatch), Rated: AAA

When it comes to Brexit’s winners and losers, Berlin looks set to snag a few victories — especially the city’s growing financial-technology sector.

A rolling billboard (“Keep calm and move to Berlin”) is one of the stunts that have ruffled British feathers.

But Berlin’s gains might not come from a Brexit-driven exodus — that is, from U.K.-based technology companies abandoning their homeland. Instead, its fintech scene will benefit from U.S. and Asian businesses actively choosing Berlin, and not London, as their EU base.

That at least is the prediction from Stefan Franzke, CEO at Berlin Partner, a business development agency. He estimates that Berlin is home to roughly 80 to 100 fintechs and expects that number to double by late 2018.

To be sure, Londoners have played down the Brexit threat to the U.K. capital’s fintech crown.

At the same time, Germany is already catching up, by some measures. Funding inflows for the country’s fintech sector totaled $421 million in last year’s first three quarters, topping the U.K.’s $375 million, as shown in the chart above from accounting giant EY.

But London’s fintech scene is going to be hard to overtake, given advantages like the U.K. capital being a top financial hub and the English language serving as the business world’s lingua franca nowadays.

Latvia’s largest crowdfunded RE dev project – 950,000 euros fully funded in less than 24 hours. (Crowdestate Email), Rated: AAA

A residential real estate project located at Saules Aleja 2A in Riga, Latvia was fully funded on Crowdestate.eu crowdfunding platform. This was the single largest crowdfunding campaign in Latvia for a real estate development. The project is managed by Crowdestate and advised by a leading Estonian residential developer Hepsor OÜ.

The development project will include the purchase of a land plot and the construction of a residential building next to a park and a beautiful pond in the highly sought after Agenskalns neighborhood. In less than 24 hours, 769 investors from 23 countries all over the world participated in funding this project, reaching the record breaking amount of 950 000 euros.

The investment opportunity offers an IRR of 20.46% per annum.

On crowdestate.eu platform anyone can be an investor, with the minimum investment starting from 100 euros. The largest amount invested into the Saules Aleja 2A project was 30 000 euros and the average investment per investor was 1 297 euros.

Fellow Finance P2P Lending – My Portfolio and Strategy (P2P-Banking), Rated: AAA

Fellow Finance is a p2p lending marketplace in Finland. It started 2013 with loans to Finnish consumers, and later added Polish consumer loans and loans to Finnish SME’s. Since launch more than 100 million EUR in loans were funded.

I currently invest only in Finnish consumer loans and concentrate on 3 and 4 star loans for which the market rates are currently 13% and 15%. The Finnish consumer loans are covered by a buyback guarantee of 70%, meaning in case they are 90 days overdue, they will be sold for 70% of outstanding principal to a collection agency.

The market rates do fluctate sometimes at +/- 1%, and I felt it necessary to tweak the rate of my allocator then to keep it bidding (at the best possible rate). Fellow Finance is one of the very few platforms, where investors can configure the autoinvest to buy on the secondary market, but I have not used that.

Overall the website – which is available in english language – is good, only sometimes a tad slow to respond.

 

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA

Last week, the National People’s Congress (NPC)and Chinese People’s Political Consultative Conference (CPPCC), the country’s top legislative and political advisory body, opened the 2017 sessions in Beijing.

And this year, “Fintech” was once again named as the top keywords of “Two Sessions”:

(15 Top Keywords of 2017: artificial intelligence, virtual reality, Internet+, sharing economy, blockchain, Fintech, content industry, Internet healthcare, automatic drive, platform era, innovation, institutional improvement for internet, information safety, digital economy and smart city)

Ping An Bank is planning to provide third party depository service for P2P online lending platforms.

Here are some main points of the measures:

  • Actual controllers of P2P online lending platforms must be government, large state-owned enterprises, main-board listed companies, small and medium enterprise board listed companies, or financial institutions with licenses from China Banking Regulatory Commission, China Securities Regulatory Commission, China Insurance Regulatory Commission or Ministry of Human Resources and Social Security;
  • Platforms must be in operation for more than a year without any negative press reports, and monthly turnover should exceed 100 million yuan;
  • Platforms should market their depository cooperation with Ping An Bank truly and objectively;

On March 2nd, Wanda Group and China UnionPay officially announced a strategic co-operation. The two sides will develop cutting-edge financial technology to promote the application of intelligent transaction and smart service in commercial scenarios.

On March 2nd, Fintech platform Xiaoying Financial secured 1 billion yuan in Series B funding. The new investors include Suzhou Goldmantis Group, the Industrial Fund of Jinke Entertainment, Shanghai Urban Real Estate Holdings Company, Bo Nian Kang Health Management Group and more.

On March 2nd, prepaid card company Jiangsu Ruixiang announced it had ceased cooperation with more than 50 Lotte Mart stores in Jiangsu provinces.

Asia

Dubai Regulator Signs FinTech Pact with Singapore’s Central Bank (Cryptocoins News), Rated: A

The Monetary Authority of Singapore (MAS) and the Abu Dhabi Global Market (ADGM) have signed a cooperation agreement to develop and nurture Fintech innovations and entrepreneurs in both countries.
Dubai is certain to benefit from the agreement with Singapore, the latter arguably established as Asia’s and one of the world’s leading Fintech hubs.
Notably, the two authorities will also collaborate on projects that explore the possibility of technologies such as blockchain and distributed ledger technology (DLT), digital and mobile payments, big data and more.

P2P lending changes the finance game (Manila Bulletin), Rated: B

First to be introduced and gained traction in the United States and Europe, this method called peer-to-peer or ‘person-to-person’ (P2P) lending paves the way to democratize the lending while keeping it credible and very secure.

There are less requirements needed compared to the traditional money-lending process. What attracts the borrowers are the low interest rates and the minimal requirements, while the convenience and safety attracts the lenders.

Caribbean

Bid to change loan services (Nation News), Rated: AAA

Carilend Ltd officially launched its peer-to-peer (P2P) lending website last week, introducing a process that matches lenders (who can lend from $2 500 up in $25 increments) directly with borrowers (who can borrow from $2 500 to $50 000 in $25 increments, subject to credit referencing and scoring).

Carilend officials said theirs was the first P2P lending site in the Caribbean “aiming to bring together borrowers and lenders to give a better deal and a better experience to both”.

Authors:

George Popescu
Allen Taylor

Thursday March 2 2017, Daily News Digest

alternative lending

News Comments Today’s main news: Funding Circle raises $100M . Upstart Raises $32.5M. Lendio offers MPL franchise program. Proplend gains FCA approval.  Monexo to start 1 min loan approval process. Today’s main analysis: FT Partners’ CEO Monthly Alt Lending Market Analysis. Today’s thought-provoking articles: International P2p lending statistics. China to regulate P2P lending platforms. United States FC receives extra $100M from […]

alternative lending

News Comments

United States

United Kingdom

European Union

China

India

Asia

News Summary

United States

Funding Circle Receives Additional $ 100 Million From CIM Through U.S. Business Multi-Year Agreement (Crowdfund Insider), Rated: AAA

SME lender Funding Circle announced on Wednesday that Community Investment Management (CIM), an investment firm focused on marketplace lending, will finance an additional $100 million in loans to businesses originated through Funding Circle in the U.S. According to the online lending platform, the multi-year agreement will allow it to provide further injection of capital into the country’s small business sector.

Since its launch in 2010, investors on Funding Circle, which includes 60,000 individuals, financial institutions, government, and the listed Funding Circle SME Income Fund, have helped more than 25,000 businesses globally access $3 billion in transparent and affordable financing.

Lendio Announces First-of-Its-Kind Marketplace Lending Franchise Program (Benzinga), Rated: AAA

Lendio, the nation’s leading marketplace for small business loans, today announced it is expanding the reach and availability of its small business lending options with the launch of a new franchise program.

The Lendio franchise program complements the company’s core value of helping small business owners fuel the American Dream. Through this program, franchise owners across the country can ease the financial hurdles for small businesses in their local community. Lendio franchisees get access to Lendio’s marketplace and technology, comprehensive training, branded marketing tools and national advertising, partnerships, and access to Lendio’s franchise support team to help coach small business owners through the lending process.

Lendio currently has franchisees in five territories, with significant interest in many others. Partners Kyle Bohrer and Bryan Gealy, in Erie, Pennsylvania, joined Lendio as the first franchise owners. Bohrer has been in the small/mid-sized business marketplace for over 10 years. Located in the Great Lakes region, Bohrer has been working on saving Erie small business owners money on their shipping.

FT Partners’ CEO Monthly Alternative Lending Market Analysis (March ’17) (FT Partners), Rated: AAA

Earlier this week, FT Partners announced one of the largest deals in 2017, Prosper’s $5 billion loan purchasing agreement with a consortium of investors that includes affiliates of Third Point, New Residential Investment and Soros, among others. This highly strategic transaction for Prosper aligns investor interest by including an equity structure tied to loan purchasing volumes. The transaction highlights FT Partners’ continued strong track record in advising on the most significant and complex deals across the FinTech ecosystem.

Introducing the First SaaS Lending Platform (Upstart Email), Rated: AAA

by Jeff Keltner, Head of Business Development, Upstart

Those that know my history at Google will understand why I’m excited to tell you about Powered by Upstart, a Software-as-a-Service offering derived from Upstart’s top-rated consumer lending platform. From rate requests through servicing and collections, this new service brings modern technology and data science to the entire lending lifecycle.

Our beginnings

Anna, Paul, and I founded Upstart to bring the best of Google to consumer lending. Upstart was the first platform to leverage modern data science and technology to power credit decisions, automate verification, and deliver a superior borrower experience. In 2014, we were first to launch next-day funding . As of today, more than 20% of our loans are fully automated and we expect this percentage to increase significantly through 2017. With more than 50,000 Upstart loans originated, we have the highest consumer ratings in the industry and have delivered industry-leading returns to loan investors. With Net Promoter Scores (NPS) in excess of 80, we’re excited about the impact we’re having.

Technology partner

FinTech is disrupting all areas of financial services. As a leading tech platform in marketplace lending, Upstart aims to partner with financial institutions rather than compete with them. Given the pace of change in lending, technology partnerships will be critical in the years to come, and Upstart aims to be a partner the industry can rely on.

But Powered by Upstart is not just software – it’s a turnkey solution that provides all necessary document review, verification phone calls, fraud analysis, and (optionally) customer service, loan servicing and collections.

Software-as-a-Service in lending

SaaS has grown exponentially in the last decade because of its obvious virtues: rather than buying, installing, configuring, hosting, and supporting software yourself, the software is delivered over the cloud. It’s more reliable and always up to date. Delivering cloud software can be challenging in any industry. Usability, reliability, and performance are the minimum to play, and effective change management is critical to success. As the team that delivered Google’s SaaS platform before it was called cloud, we understand these challenges.

Of course, the regulatory environment in lending raises the bar even higher. We’ve long demonstrated our commitment to trustful and compliant lending, and we’re likewise committed to delivering robust and compliant lending software. We’ll be at the LendIt show in New York City next week, so please come visit our booth to learn more about Powered by Upstart!

Klarna: Financing Better Customer Experiences (PYMNTS.com), Rated: A

Swedish payment processor Klarna has recently made news when it expanded the options and the channels that it makes its point of sale financing options available to.

Billingsley explained that in the case of GhostBed, the revolving credit product provided by Klarna helps turn a one-time mattress sale to its customers into a customer who comes back to purchase accessories.

According to Billingsley, that’s possible because it enables eligible consumers to make additional purchases with that same retailer without having to sign up for another loan or go through the financing process all over again for each subsequent transaction made.

Either the new purchases can be added to their existing credit account or they can simply use a different form of payment for the transaction.

Billingsley noted that the financing solution also works without any redirect to an external URL, so the consumer remains on the merchant site and within the brand experience when signing up.

Depending on the customer segment and even the merchant itself, utilizing Klarna’s full checkout solution isn’t exactly what they need. Which is why, Billingsley noted, the company is pushing its payment APIs, which allow merchants to add Klarna’s proprietary payment solutions directly into their existing checkout.

As for Klarna’s power users, the two biggest consumer populations are millennials and females in their mid-30s who are usually in charge of their family’s purchases.

Billingsley pointed out that many millennials today either don’t have a credit card or don’t like using one — their affinity for credit card brands and status is much different from previous generations. This makes millennials much more willing to use a payment option that allows them to break up payments over time for major purchases.

In the case of the young mother who manages her household’s income, also known as the Household CFO, she typically sees it as more convenient to make payments over time on a big purchase rather than putting a transaction on her debit or credit card.

Upstart Raises $ 32.5M (Upstart Email), Rated: A

It’s been three years since we launched the Upstart lending platform, and today we’re pleased to announce we’ve raised $32.5M to take our business to the next level. The funding round was lead by Rakuten, a global leader in internet services and global innovation headquartered in Japan, and by a large US-based asset manager. Existing investors Third Point Ventures, Khosla Ventures, and First Round Capital also participated. We’re particularly excited to have Oskar Mielczarek de la Miel, Oskar Miel, Managing Partner of the Rakuten FinTech Fund join Upstart’s Board of Directors.

With more than 50,000 loans originated, Upstart has the highest consumer ratings in the industry, has Net Promoter Scores (NPS) in excess of 80, and has delivered industry-leading returns to loan investors.

Prominent Fintech Investor & Prosper President Ron Suber Invests in Money360, Joins as Strategic Advisor (Crowdfund Insider), Rated: A

Ron Suber, Prosper Marketplace President and prominent Fintech investor, has taken a stake in Money360 – a fast growing real estate investment marketplace.  Suber will also play an active role as a Strategic Advisor to Money360 to help boost platform growth.

Suber explained;

“I have been investing in the loans from Money 360 for my personal family office for many months. I have enjoyed the risk-adjusted returns, investment structure and liquidity options. Upon completing additional due diligence, I have decided to personally buy equity in the company and become a strategic advisor to the management team/Board of Directors. 

Labor Dept proposes delaying new rule for financial advisers (Reuters), Rated: A

The U.S. Labor Department has taken a first step toward possible derailment or dilution of its controversial rule on retirement advice as it begins to re-examine it at the directive of President Donald Trump, according to a notice made public on Wednesday.

The department proposed a 60-day delay of the fiduciary rule, which requires retirement advisers to put the interests of clients ahead of their own. It was slated to take effect on April 10, but Trump asked the department to review the rule one more time for its impact on investors.

The proposed delay should have a “calming” effect on the marketplace, which had been “hanging in limbo” ahead of the April 10 effective date, said Denise Valentine, a senior analyst with Aite Group, which advises the financial services industry on regulatory issues.

California Hedge Fund Association (CHFA) Announces Rebrand to California Alternative Investments Association (CalALTs) (PRWeb), Rated: A

The California Hedge Fund Association (CHFA) announced that it has adopted CalALTs as its new brand name. The 1,200 member organization, which focuses on fostering growth and advancing the development of California’s alternative investment community, rebranded in response to the strong demand from a broader group of alternative investment managers and a new focus on bringing together and serving a wide range of alternative investment managers across the state of California and beyond.

The alternative investment community in California currently includes over 1,000 firms with approximately $1 trillion in assets under management.

Monroe Capital Selected as the 2016 Lower Mid-Market Lender of the Year by Private Debt Investor (BusinessWire), Rated: B

Monroe Capital LLC was selected as the recipient of the 2016 Lower Mid-Market Lender of the Year Award in the Americas region by Private Debt Investor, a global independent publication based in London covering the private debt and private equity industries. This is the fourth consecutive year that Monroe has been recognized by the Private Debt Investor Awards as a leader in the Lower Mid-Market, Unitranche and Senior Lender categories.

Monroe Capital provides “one-stop” financing solutions for buyout, recapitalization, growth, and refinance transactions in the form of senior and junior loans and equity co-investments, supporting both private equity sponsored and non-sponsored transactions and privately owned businesses. The Private Debt Investor Awards recognize firms in three geographic regions: the Americas; Europe, Middle East and Africa; and Asia-Pacific. Winners were selected by eligible voters among the private debt, private equity and institutional investor communities.

United Kingdom

Proplend gains FCA approval (P2P Finance News), Rated: AAA

COMMERCIAL property peer-to-peer lender Proplend is the latest platform to receive full authorisation from the Financial Conduct Authority (FCA).

Brian Bartaby, chief executive of Proplend, said the firm would now apply for ISA manager status from HMRC but said it was unlikely to have an Innovative Finance ISA (IFISA) ready this tax year.

The lowest risk is tranche A at zero to 50 per cent LTV, tranche B is 51 to 65 per cent LTV and tranche C is 66 to 75 per cent LTV.

Returns on the platform  currently range from five to 12 per cent and borrowers can access loans of between £250,000 to £5,000,000 for up to five years on an interest-only basis. The platform has funded £11.5m of loans so far and has recorded zero defaults.

LandBay, Proplend, & FundingSecure Named Top Three UK Property P2P Lending Platforms (Crowdfund Insider), Rated: AAA

On Tuesday, 4thWay writer, Matthew Howard released his very own assessment on the top three property P2P lending platforms are in the UK. The three he selected were LandBay, Proplend, and FundingSecure.

In his selection, Howard ranked the lenders based on their features and opportunities each platform can provide. He selected LandBay as his first pick because the lender has done over £10 million in P2P loans.

Proplend was selected as Howard’s second pick. He chose the lender due to the lender’s interest rates are even in the lowest-risk “tranche A” range from 5.5% to 7%; more than £10 million has been lent through Proplend; and users may easily identify loans that are for just 50% or less of the property valuation.

FundingSecure was Howard’s third pick. His selection was based on the lender’s record of doing around £100 million in P2P lending, more than half being property loans; offers bridging and property development loans; uses the current valuation, even on development loans; interest rate lenders earn is 12% on all these loans; the minimum that may be lent on each loan is £25.

Fintech startup Yielders becomes first to receive Sharia Compliance Certification in UK (EconoTimes), Rated: A

UK-based fintech startup Yielders announced that it has successfully completed independent Sharia Certification that was conducted by UKIFC and overseen by prominent scholars in the fintech sector.

Britain wants you to be banker, but are you ready for the risk? (The Memo), Rated: A

Plans to bring the risk and returns of peer-to-peer lending into one of Britain’s most popular investment products might provide some welcome relief for entrepreneurs … and some sleepless nights for those taking the plunge.

Following up on a Budget pledge, the government has now published a consultation on including peer-to-peer lending in individual savings accounts (ISAs).

Some 23m people in the UK have ISAs, which make the return from your savings and investments completely (or mainly) tax-free. But 16m people opt to hold just the safer version, cash ISAs, which are tax-free savings accounts with banks, building societies and National Savings & Investments.

Meanwhile, UK households, who hold around 60% of their financial wealth in cash, have borne the brunt of the Bank of England’s low-interest-rate policy. Before the financial crisis, in mid-2007, you could get a return of over 6% a year from a best-buy cash ISA. Today, the best is little over 2%.

However, peer-to-peer lending is more risky than putting your savings in a bank.

This is borne out by a recent poll. peer-to-peer firm Wellesley found that 47% of people surveyed said they would increase their investment in peer-to-peer lending if it could be included in an ISA and 44% if it offered better interest rates than traditional banks.

Another survey, by Opinium in 2012, found 49% of the population would be open to peer-to-peer lending as an alternative to traditional banking.

Advisers’ Robo Face Off (FT Adviser), Rated: B

So last week’s revelation that almost 6,000 people have used LV’s full automated financial advice service since it was launched in summer 2015, maybe shouldn’t be greeted with too much concern by advisers.

Also LV said it was “unable” to reveal how many of the 6,000 customers who paid the £199 for a full statement of advice went on to pay £499 to execute the statement of advice.

That is as maybe, but if our trip to the world of Back to the Future is anything to go by, human beings will – unless they become robotic themselves – still need face-to-face advice.

European Union

International P2P Lending Statistics February 2017 (P2P Banking), Rated: AAA

Funding Circle continues to lead ahead of Zopa and Ratesetter. The total volume for the reported marketplaces adds up to 408 million Euro.

  • Funding Circle reaches 2 billion GBP in originations since launch
  • Fellow Finance crosses 100 million EUR since inception
  • Geldvoorelkaar hits 100 million EUR since inception

China

China looks to better regulate online P2P lending platforms (Technode), Rated: AAA

To help regulate the online P2P lending industry plagued by fraud and embezzlement, the China Banking Regulatory Commission published the Guidelines on Depositing and Managing Online Lending Capital (in Chinese, Guidelines for short) on February 24. In January this year, 1.8 million registered users were unable to withdraw their funds from platform operated by Qiyuan (short for 北京起源财富网络科技有限公司 or “Beijing Qiyuan Wealth Online Technology Limited” in English). The owner of the company, Fang Fan, embezzled the funds invested in the company’s eight different online lending platforms.

The Guidelines is the latest effort by the government to regulate the online P2P lending market which handled RMB 204 billion worth of transactions this February alone. It sets out three major basic principles regarding the safekeeping of the capital gained from P2P lending platforms. The first is that funds invested into the platforms by users must be deposited into commercial banks. The second stipulates that any transaction and reconciliation of the invested funds must be expressly approved and verified by both the debtor and creditor. Lastly, banks and online lending companies must carry out daily reconciliations and keep clear records of the transactions.

India

P2P market place Monexo to start 1 min loan approval process (India times), Rated: AAA

Lending marketplace Monexo has become the first peer-to-peer lending company in India to introduce a 1-minute loan approval process.

The company will leverage its proprietary, self-learning analytics platform as well as its tie-up with CRIF to access credit scores and other relevant financial data to aid in the loan disbursement decision making process, Monexo said in a release.

The borrowers can avail a loan of Rs 50,000 to Rs 5 lakh for tenure of 6 months to 60 months. There is no origination fee or prepayment fee. But the borrower must just pay a success fee of 2.5 per cent if the loan to him is approved and he decides to avail it.

The potential of blockchain technology to eliminate physical currency by ushering in virtual currencies like Bitcoin might be overstated, said Reserve Bank of India (RBI) deputy governor R. Gandhi.

While speaking about currencies, the central banker pointed out that to be effective, a currency needs to uphold concepts of confidence and anonymity at all times. However, after the initial rounds of usage, these concepts cannot be sustained in virtual currencies.

Talking about another major innovation in the financial technology space, marketplace lending or crowdfunding, the central banker noted that after the first few rounds of funding and successes, as a larger number of people get attracted to the concept, the system is likely to collapse. This makes marketplace lending unsustainable for a large number of people or amounts.

Asia

Tera Funding loans grow to top 100 bln won in 2 yrs (Yonhap News Agency), Rated: AAA

The chief of Tera Funding, a peer-to-peer (P2P) property financial service provider, said Thursday that the company’s accumulated loans have surpassed 100 billion won (US$87.6 million) since its launch two years ago.

Authors:

George Popescu
Allen Taylor