Wednesday February 14 2018, Daily News Digest

OnDeck gross revenue

News Comments Today’s main news: OnDeck becomes profitable. NepFin launches first online commercial lending platform for U.S. market. MoneyLion has 2 million customers. Sequoia China leads $40M DataVisor Series C. Moody’s reviews CommonBond for upgrade. Today’s main analysis: Review of OnDeck Q4 2017 earnings results. Today’s thought-provoking articles: The Future of Lending. Is investing RateSetter Isa worth it? Genie ICO: The […]

OnDeck gross revenue

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United States

OnDeck swings to profit, eyes second bank partnership (American Banker), Rated: AAA

The New York-based small-business lender recorded net income of $5.1 million in the quarter that ended Dec. 31, which compared with a $35.9 million loss in the fourth quarter of 2016.

OnDeck, which has recorded $94.5 million losses over the last two years, is cutting costs in an effort to achieve profitability.

Review of OnDeck Q4 2017 Earnings Results (Lend Academy), Rated: AAA

In the fourth quarter they generated $5 million of GAAP profit. To put this in perspective, this is $41 million better than the prior year period. This puts them on solid footing as they look towards priorities for 2018. Originations for the quarter were $546 million, up 3% from the prior quarter.

Source: Lend Academy

Gross revenue came in at $87.7 million, up 7% year over year. Gain on sale revenue or revenue from loans sold on OnDeck’s marketplace to investors totaled $0.6 million. Other income totaled $3.5 million, up slightly from $3.4 million in the previous quarter.

Source: Lend Academy
Source: Lend Academy

Full Year 2018

  • Gross revenue between $370 million and $382 million.
  • GAAP Net income (loss) attributable to OnDeck between $(2) million and $10 million.
  • Adjusted Net income between $16 million and $28 million.

First Quarter 2018

  • Gross revenue between $86 million and $90 million.
  • GAAP Net income (loss) attributable to OnDeck between $(5.5) million and $(1.5) million.
  • Adjusted Net income between $1 million and $5 million.

OnDeck Flips To Profitability Much To The Market’s Delight (PYMNTS), Rated: A

Originations were up 3 percent over the previous quarter to $546 million.

Loans sold or designated as held for sale through OnDeck Marketplace represented 3.9 percent of term loan originations. Provision for loan losses was $34.4 million and the Provision Rate was 6.4 percent, down from Q3’s 7.5 percent.

Gross revenue increased to $87.7 million, up 7 percent year-over-year, while net revenue was $42.1 million, up 159 percent year-on-year.

The cost of funds rate was 6.5 percent, which was a slight increase over Q3. OnDeck noted that figure will likely continue to tick up during 2018, as the Fed is forecast to keep raising short-term interest rates.

Online lender OnDeck’s profit beats on lower costs, shares soar (Reuters), Rated: B

Shares of OnDeck Capital Inc (ONDK.N) soared on Tuesday after the online lender reported better-than-expected quarterly profit as it set aside less money for bad loans, and managed to keep costs lower.

NepFin Launches First Online Commercial Lending Platform for -Trillion U.S. Market (Digital Journal), Rated: AAA

Neptune Financial Inc., or NepFin, a financial services firm, announced today that it has launched the first online commercial lending platform for mid-sized U.S. businesses, creating a new source of credit as well as business software solutions for a large, thriving sector of the economy whose borrowing options are limited.

NepFin also announced that it has raised a $10-million Series A round led by Sands Capital Ventures with participation from its existing investors. Michael Raab, Partner at Sands Capital, will join NepFin’s board, which already includes Third Point’s David Bonanno, currently a board member of SoFi, as well as Robert Schwartz, Managing Partner at Third Point Ventures. This round brings NepFin’s total capital raised to $13 million.

NepFin, whose platform has digital solutions built from the team’s years of experience in online lending and traditional finance, says that its focus is on one of the most underserved sectors of the broader U.S. economy – businesses with between $10 million and $100 million in revenue. NepFin provides loans of up to $60 million.

LendingClub at the Watermark Conference for Women (LendingClub), Rated: A

LendingClub is excited and proud to be a sponsor of the Watermark Conference for Women being held on February 23rd in San Jose, California. As part of the agenda, two of our Client Advisors from the Business Loans team, Mana and Somie, will be leading roundtable discussions with women entrepreneurs on the core elements to consider when exploring small business financing options.

Forbes Fintech 50 2018: The Future Of Lending (Forbes), Rated: AAA

Affirm, San Francisco

Makes instant three, six and 12 month loans for purchases from 1,500 online merchants. A handful of sellers subsidize 0% rates, but most loans carry annual interest rates of 10% to 30%.

Bona fides: More than 1 million loans issued. Partners include Wayfair and Expedia.

Better Mortgage

Digital-only mortgage originator estimates the loan an applicant qualifies for within three minutes using stated income and a credit score check.

Bona fides: Fannie Mae and five of nation’s six largest banks buy its loans.

Blend

Speeds up the mortgage approval process at the nation’s largest lenders with its cloud based white label software.

Bona fides: Wells Fargo and U.S. Bancorp are already onboard

CommonBond

Online lender refinances and finances undergraduate and graduate student loans.

Bona fidesCommonBond has made $1.5 billion in loans, but says just two have gone into default.

GreenSky

Provides on-the-spot financing for home improvement projects (with loans up to $65,000) via a network of contractors and bank partners — without itself taking on the risk of defaults. Most borrowers don’t pay a dime in interest thanks to zero-interest promotional periods that last from 6 to 60 months. Recently began offering financing at doctor, dentist and veterinary offices.

Bona fides: Has facilitated over $10 billion in loans

Kabbage

Lending platform offers nearly instantaneous small business loans. Uses creative alternative data to underwrite loans–such as the number of UPS packages a business sends and receives over time.

Bona fides: Over $4 billion in originations to 130,000 small businesses

LendingHome

Four year-old online lender started out providing bridge loans to fix and flip housing investors, a historically underserved segment. With original product now available in 25 states, LendingHome has expanded into personal mortgages in 14.

Bona fides: $2 billion in loans made; 10,000 homes financed

Tala

Approves developing-world borrowers who lack a credit history for micro-loans of between $10 and $500 by crunching 10,000 data points—from financial transactions to mobile games played—from an applicant’s smartphone.

Bona fidesHas made more than 4.5 million loans, with a repayment rate above 90%.

Upstart, San Carlos, CA

Uses alternative data such as education, employment history and whether applicants know their own credit score to underwrite and price loans. After five years of training its algorithms, it now approves 47% of loans without human intervention and with some of the lowest default rates in the industry.

Bona fides: $1.5 billion in loans originated to 120,000 borrowers

MoneyLion Reaches 2 Million Customer Milestone As Growth Accelerates (BusinessWire), Rated: AAA

MoneyLion, the digital personal finance platform for the financial middle class, today announced that it now empowers over 2 million customers to better their borrowing, saving and investing through personalized, AI-driven solutions. The growth of MoneyLion’s community is a reflection of the positive financial outcomes its customers have achieved and the platform’s unique approach to money management for everyday Americans.

The momentum behind MoneyLion’s customer growth follows a number of recent milestones for the company, including:

  • The December launch of MoneyLion Plus, a first-of-its-kind membership that combines guided savings, simple investing, access to low-cost loans, and personalized daily financial tips to help consumers build their credit, financial resilience, and first $2,000 in savings. MoneyLion Plus has democratized access to private banking-like services typically reserved for high net worth consumers, providing an opportunity for first-time investors to begin building wealth.
  • Completion of a successful $42 million Series B equity round in January, bringing MoneyLion’s total funds raised to $67 million. This financing accelerates MoneyLion’s continued development of innovative, inclusive financial products and services for America’s financial middle class.

Student lending platform on review for ratings boost (AltFi), Rated: AAA

Moody’s puts six tranches issued by CommonBond on review for upgrade.

Moody’s Investor Services has placed six tranches issued by CommonBond Student Loan Trust 2016-B, 2017-A-GS and 2017-B-GS on review for upgrade. The tranches are comprised of loans to students, and $488m of asset backed securities are affected by the review.

Dwolla Lands $ 12 Million (Finovate), Rated: A

In a short, three-sentence blog post, Dwolla CEO Ben Milne announced that the company closed a $12 million round of funding. The investment, which brings the Iowa-based company’s total to $51.4 million, was led by Foundry Group with participation from Union Square Ventures, Next Level Ventures, Ludlow Ventures, High Alpha, and Firebrand– all existing investors.

Fortress Balance Sheet: Goldman Sachs’ Online Lender Marcus Has Access to $ 17 Billion in Deposits (Crowdfund Insider), Rated: A

But today, Blankfein shared that Marcus now has access to over $17 billion in deposits representing a huge amount of credit firepower at an unbeatable cost to lend.

In a savvy move, Goldman acquired GE Capital’s retail deposits prior to launching Marcus. Since the acquisition, these deposits have grown an impressive 90%.

Secured Lender BlockFi Secures $ 1.55M Funding to Build Cryptoasset Ecosystem (Crowdfund Insider), Rated: A

BlockFi, a New York-based non-bank lender that offers USD loans to cryptoasset owners, announced a $1.55 million raise from ConsenSys Ventures, Kenetic Capital, PJC, SoFi,  Purple Arch Ventures and Lumenary. The new capital injection will be used to bridge the gap between traditional debt capital markets and the cryptoasset ecosystem.

Five credit unions sign with new text messaging platform in January to enhance lending and operations (CUInsights), Rated: A

Shastic, a SaaS company specializing in banking-specific technology services, has signed on five new customers in the first month of 2018. The recent growth follows the fintech company’s early launch of Elle, the conversational text messaging platform built for credit unions. Elle is an expansion of their automation services to deliver efficient, real-time message communication between a credit unions and their members.

Data-sharing spec revised to encourage open banking (American Banker), Rated: A

The Financial Services Information Sharing and Analysis Center announced Tuesday an attempt to move the ball forward on data sharing and open banking in the U.S.

The FS-ISAC on Tuesday released a new version of its technical recommendations for data sharing, the Durable Data API specification. This could become the standard banks and third parties adopt for PSD2-style data sharing and open banking. In fact, the new standard meets all of PSD2’s requirements, according to the security data-sharing organization. (However, PSD2 also requires third parties to register and agree to be overseen by a regulator, something unlikely to happen here.)

What We Talk About When We Talk About Finances (With Alexa) (PYMNTS), Rated: A

As anyone who has used an Alexa skill might know, the movement toward conversational finance, or financial conversations, is a tricky one, as specific instructions or questions (okay, they are commands, really) have traditionally been needed to spur the assistant to retrieve information.

To that end, USAA has sought to bring a natural cadence and flow to the conversation, one that builds, and built, on its experience in the PYMNTS Voice Challenge last year.

In play for customer data, TD Ameritrade rolls out Twitter trading bot (Tearsheet), Rated: B

The brokerage firm released a Twitter bot Thursday, allowing stock investors to execute trades, get market updates and browse educational content through direct messages. For the brokerage, encouraging traders who use Twitter to transact will give it, the hope is, a rich source of user data to offer personalized customer experiences and product recommendations.

Millennial entrepreneur strives to provide affordable financial advice to all (NewsOK), Rated: A

How to go about repairing your credit, reducing your student loan debt or obtaining the best mortgage loan now is available to you through a locally produced app.

The answers are among the widespread financial advice available to consumers nationwide through a new app called Coinmast launched by an Oklahoma City-based millennial entrepreneur.

At $11 a call, the tech startup offers such help from certified financial counselors, certified financial planners and certified public accountants whom Haller contracts nationwide. Experts, he said, offer advice on almost anything, excluding on individual securities, insurance and taxes.

Robo advice app Stash raises .5m Series D, releases investing for kids (AltFi), Rated: A

US-based micro investments app Stash has announced a $37.5m raise in Series D funding, led by Union Square Ventures. Existing investors Breyer Capital, Coatue Management, Entree Capital, as well as fintech familiars Goodwater Capital and Valar Ventures, also joined in on the round.

My Financial Advisor is a Robot (Direct Industry), Rated: A

Fintech company Moneyfarm uses cutting-edge technology as well as human financial expertise to help make investing simple, easy and cost-effective. The company also invests in artificial intelligence and machine learning and recently bought AI-driven chatbot Ernest. 

DirectIndustry e-magazine: What is the technology behind it?

Paolo Galvani: We use technology to match investors with investment portfolios that are specifically built for their investor profiles. Each new customer completes a survey during the sign-up process. The algorithms we have developed in-house match each investor to an investor profile that reflects their tolerance for risk. Investors are then paired with a portfoliothat is specifically built and managed by our team of investment experts to reflect the customer’s investor profile.

LPL rolls out robo-adviser to regional bank (InvesmentNews), Rated: A

Webster Bank, a $26.4 billion financial institution with branches in Connecticut, Rhode Island, Massachusetts and New York, announced that it would start offering access to Guided Wealth Portfolios, a digital advice platform developed by LPL Financial and BlackRock Inc.‘s FutureAdvisor.

Interest Doesn’t Always Bring Adoption of Robo-Adviser Tech (PlanAdviser), Rated: A

A new report published by Cerulli Associates examines the growth trajectory of the digital financial advice market that has occurred since 2015, finding there remains a clear inverse relationship between an investor’s age and their willingness to engage with purely digital financial advice platforms.

Scott Smith, director at Cerulli, notes that as of the third quarter of 2017, there is “greater openness to digital advice relationships, but a strongly negative correlation between age and interest remains.”

Cetera Financial Group Enhance Delivery of Advice-Centric Experience for Financial Advisors, Clients (PR Newswire), Rated: B

Cetera Financial Group (“Cetera”)*, a network of independent firms supporting the delivery of professional financial advice, today announced that the six firms comprising its network will be organized under its newly-created Traditional and Specialty Channels. The formation of these two channels is expected to accelerate the ability of each network firm to support Cetera’s Advice-Centric Experience for advisors and clients, which envisions a financial advice profession driven by goals-based planning and solutions that help clients achieve more predictable outcomes on their journey to financial well-being.

Looking for Credit Union Student Loans? Here’s How to Find and Apply for Them (Student Loan Hero), Rated: B

MyCreditUnion.gov provides a map that makes it easy to locate credit unions in your area. Input your address to find a list of credit unions, directions to each location, and available member services. You can then contact local credit unions to find out about membership requirements and student loan options.

One of the best ways to research your options is to use LendKey. LendKey offers easy access to hundreds of different credit unions and community banks that provide private student loans.

You have the option of applying directly through a credit union that allows people to join from anywhere in the United States. Some examples of credit unions open to individuals nationwide include Alliant Credit UnionDigital Federal Credit Union, and First Tech Federal Credit Union.

United Kingdom

New Isa from RateSetter offers 6% return: is it worth investing? (Which?), Rated: AAA

With the new product form RateSetter, you could earn 3-6% interest on your investment, depending on how long you lock your money away.

RateSetter’s Innovative finance Isa allows you to invest up to £20,000 in a tax year.

It is a flexible Isa product, meaning you can withdraw money and replace it without using up your £20,000 tax-free savings allowance.

Say, for example, you put £10,000 into your innovative finance Isa and then withdrew £5,000. Under the rules, you could still deposit £15,000 without incurring tax.

The shortest duration investment rolls over monthly with an interest rate of 3.1%. The longest is a five-year investment, which currently has an interest rate of 5.8%.

Money goes to… Minimum investment Projected rate
Abundance Green energy projects £5 6-9% over lifetime of investment (3-5 years)
Advancr Public and private businesses £1,000 5-6% depending on length of bond
Basset & Gold Fixed income bonds £1,000 3-7% depending on product
CapitalRise Property development projects £1,000 10% or more depending on the project
Crowd2Fund Businesses £10 9%
Crowd for Angels Crowd bonds funding small businesses £25, but companies can increase that 12%
Crowdstacker Businesses £500, but set by borrowers 5-7%
Downing Crowd Fixed-term bonds for small businesses £100 4-7%
Folk2Folk Asset-backed loans to small, mostly rural businesses £20,000 5.5-6.5% depending on product
Funding Circle* Businesses £1,000 4.8-7.5% depending on selected risk level
FundingSecure Asset-backed sub-prime loans to individuals £25 Up to 16%
Goji P2P Consumer, business and property loans £5,000 5%
HNW Lending Asset-backed loans to individuals and businesses £10,000 6-15% depending on term and risk
Kuflink Property loans £100 5%
LandlordInvest Asset-backed loans to landlords £100 5-12%
Landbay Buy-to-let mortgages £5,000 4%
LendingCrowd Business loans £1,000 6%
Lending Works Individuals £10 3-5% depending on term
Money&Co. Businesses £100 8%
Mongoose Crowd Community energy projects £100-200, but can vary by project 4-7%
Property Crowd Commercial and residential developments £5,000 10%
Proplend Property of varying types £1,000 5-12%
Ratesetter Businesses, individuals and property developers £10 3-6% depending on product
Rebuildingsociety Small and medium-sized businesses £10 9.7%
Relendex Commercial and residential property loans £500 10%
UK Bond Network Businesses £5,000 11%
Zopa** Individuals £1,000 4-4.6% dep

Fintech group TruFin raises £70m (Finextra), Rated: A

TruFin, a British fintech and banking business with fingers in various niche lending pies, has raised £70 million through a listing on the LSE’s AIM market.

LendInvest unveils product transition process (BestAdvice), Rated: A

The Product Transition process allows existing borrowers to transfer between specialised loans that are tailored to support them at each stage in their development project.

Lendy returns £2.1m loan repayment from luxury property in Chelsea (Mortgage Introducer), Rated: A

Peer-to-peer lending platform Lendy returned a £2.1m loan repayment to P2P investors from a luxury apartment in Chelsea, on an investment made through Lendy.

Lendy appoints new head of finance (Bridging&Commercial), Rated: B

Andrew Wawrzyniak has joined the peer-to-peer lending platform from Fund Partners, a fund manager whose clients include Octopus Investments, Pictet Asset Management and Russell Investments.

China

Sequoia China leads $ 40M DataVisor Series C (Bankless Times), Rated: AAA

DataVisor, a provider of fraud detection solutions using unsupervised machine learning, today announced a $40 million Series C round of financing led by Sequoia China, with participation from existing investors New Enterprise Associates and GSR Ventures.

Rock Wang, managing director at Sequoia China, will join DataVisor’s board of directors. With this new round of financing, DataVisor will expand its global footprint in the fraud detection and prevention market, which is estimated to reach $41.6 billion by year 2022 according to research firm MarketsandMarkets.

European Union

Swedish Online Payments Company Klarna Shuts Down Tel Aviv Development Center (CTech), Rated: AAA

Swedish online payments company Klarna Bank AB (publ) will be shutting down its Tel Aviv development center during the next few months, the company announced Tuesday. All 31 of its employees in Tel Aviv were offered the opportunity to remain with the company and relocate to one of its Swedish or German offices.

Banco BNI Europa to invest with CrossLend (Finextra), Rated: A

Banco BNI Europa and CrossLend have launched a cooperation whereby Banco BNI Europa invests into notes issued by CrossLend Securities SA.

International

Barclays faces new charge, Triodos innovates and outlook for Citizens Bank in the US (Financial Times), Rated: A

Martin Arnold and guests discuss the latest charges against Barclays, Bevis Watts of the ethically-focused bank Triodos talks about his new UK peer-to-peer lending model and Bruce van Saun explains what US rate rises will mean for Citizens Bank.


 

Australia

DirectMoney Secures New Strategic Investment From Alceon For Growth & Innovation Initiatives (Crowdfund Insider), Rated: AAA

Australian marketplace lending platform DirectMoney announced on Tuesday it secured a strategic investment from alternative investment manager Alceon to fund growth and innovation initiatives.

According to DirectMoney, the investment will be structured through an initial placement of $600,000 at $0.042 per share (being 14,285,715 new shares), a 56% premium to the price at close of trading on February 9th and equivalent to a 3.1% shareholding.

India

Why just rent when RentoMojo also gives you the option of renting and owning (YourStory), Rated: AAA

Online rental and financing marketplace RentoMojo, which lets consumers in eight cities lease furniture, two-wheelers and home appliances, has launched an additional  rent-to-own model. 

PE AND VC OPPORTUNITIES IN 21ST CENTURY INDIA (AllAboutAlpha), Rated: AAA

ARA Law, a firm based in Mumbai and Bangalore, India, has issued a paper on private equity and venture capital in that country.

The main text of the paper begins with sectoral analysis and market behavior. PE and VC investments in India declined in the early months of 2017, but they had started to pick up already before the end of the first quarter and in the third quarter investments by such vehicles “surprised the market with a tremendous jump in deal volume as well as value.”

In August of that year the deal value reached US$5 billion. The third quarter as a whole saw 129 deals of value greater than US$100 million, aggregating to about US$7 billion.

The most lucrative sector last year was e-Commerce, “in spite of the sharp fall in investments by the end of AY 2016,” followed by real estate. In the 3d quarter, e-Commerce recorded roughly US$2.6 billion in deals across 18 deals. Real estate?  US$2.3 billion across 13 deals. Banking and Financial Services? Third place in the league table with US $1.4 billion across 25 deals.

MoneyOnMobile Raises $ 5 Mn Funding From S7 Group (Inc42), Rated: A

Mumbai-based fintech startup MoneyOnMobile has raised $5 Mn in Series H funding from Russia-based private aviation and aerospace holding company S7 Group. The development comes just two weeks after the startup secured $7.6 Mn Series F funding from undisclosed investors.

Asia

Genie ICO: A Blockchain Network For Decentralized Business Loans (Global Coin Report), Rated: AAA

Genie was created to provide individuals based in Asia with a unique way to borrow and lend money for their business using a peer-to-peer system that is based on a blockchain network. The Genie ICO has been created by an experienced team after observing the rapidly changing Asian financial landscape ever since cryptocurrencies, ICOs, and blockchain technology grew to prominence in 2017.

The platform will also have its very own token Crowd Genie Coin (CGC) which will be generated via an ICO. There will be a limited supply of 120,000,000 tokens available. Of this amount, only 50 million will be available for purchase during the token sale. The rest of the tokens will be used for facilitating transactions on the platform, will be given to the founders, used for distribution, etc. All tokens that are not bought during the token sale, however, will be destroyed to increase the value of a single CGC.

The Genie team hopes to raise a total of $35,000,000 throughout the ICO and the value of 400 CGC tokens has been estimated to be of equal value of 1 ether, which at the time of writing equates to $858. This means that a single CGC is worth $2.15. However, the interested investor can invest a minimum of 0.1, which will attract a wide variety of investors.

Authors:

George Popescu
Allen Tayl

Tuesday November 19 2017, Daily News Digest

Moody's wage growth

News Comments Today’s main news: Clarity Services integrates with Experian. Octopus Choice passes 100M GBP AUM. Funding Circle hits 100M Euro in German lending. Younited Credit tops 100K loans. Square Peg invests $8M in Airwallex. Silver Bullion hits $50M in loans. Today’s main analysis: The deteriorating auto loan quality. Today’s thought-provoking articles: China’s startup investors are a bunch of “cashed-up […]

Moody's wage growth

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United States

Integration of Clarity Services by Experian (Clarity Services Email), Rated: AAA

As a supplier to Clarity Services Inc, we are writing to formally notify you that as of October 6, 2017, Clarity Services Inc has been purchased by Experian Holdings, Inc.

Effective January 1, 2018, purchases and invoice payments will be processed by Experian’s centralized Procurement and Accounting departments.

Source: Clarity Services

PayPal Co-Founder Max Levchin Gave a Remarkably Honest Response to Accusations About His New Startup (Inc.), Rated: AAA

To its critics, though, Affirm, which recently raised $200 million in a growth round, is engaged in something sinister, luring people into a financial trap by enticing them to buy things they can’t afford. CEO Max Levchindoesn’t agree with that interpretation at all, but he does accept some of the blame for not creating a more accurate perception.

Here’s how Affirm works: You can borrow money to make a purchase at any store that integrates with Affirm (or any store at all if you use the mobile “virtual card”). If Affirm’s proprietary credit model judges that you’ll be able to pay back the sum, then you’re offered a loan. During the next several months — up to a year — you’re expected to make monthly payments, which include interest. The APRs range from 10 to 30 percent.

The key things that differentiate Affirm from other credit options are that you get all of the information up front, stated plainly, and the interest charged by the startup is simple rather than compounding. When you make the initial purchasing decision, you know exactly how much extra you will end up paying to buy the product right now, instead of saving up over several months. There are no additional fees.

Moodys Warns Of Deteriorating Auto Loan Quality (ValueWalk), Rated: AAA

The economy is expected to expand in 2018, with projections for stock market performance clocking in at 8% basis Goldman Sachs. But not all is well –  a Moody’s report notes that specific asset sectors are struggling, particularly when it comes to  car loan quality worsening.

ValueWalk

Moody’s anticipates that US GDP growth will strengthen slightly to 2.3% in 2018 from 2.2% in 2017, with unemployment also continuing to move lower to 4.0% from 4.4%.

Auto loan quality is worst, but pockets of “challenged” loans exist across the board

Auto loan ABS issuers will likely securitize pools with attributes broadly similar overall to those in the pools backing their 2017 securitizations, even as a further decline in US auto sales pressures lenders to loosen underwriting to support volumes. We project sales will slip another 0.6% after an estimated 3.6% drop in 2017, following eight consecutive years of annual increases.

Auto loans appear to be on the front-lines of credit issues. Household debt, for instance, has increased to $13 trillion, with a significant part of that increase in auto loans. Sub-prime auto loans, in particular, are showing signs of weakness.

When looking at investment in asset-backed securities, the originator makes a difference. ABS backed by loans from online lenders such as SoFi, Lending Club Corporation, Prosper Marketplace Inc. and Marlette Funding have correlated with “prime credit quality.” But that is not the case across the board.

Source: ValueWalk

Square to small banks: Don’t lump us in with Amazon and Facebook (American Banker), Rated: A

Square, the Silicon Valley payment processor that is at the center of the fight over the tech industry’s ambitions in banking, is firing back at its small-bank critics, while also taking steps to placate community activists.

Advocacy groups that once expressed concern about the adequacy of Square’s plan to satisfy its obligations to low- and middle-income customers are now sounding more supportive of the fintech’s bid to open a bank.

Levi King of Nav (Lend Academy), Rated: A

In this podcast you will learn:

  • Levi’s background that led to the founding of Nav.
  • The products that Nav offers today.
  • How their business model works.
  • How they get small business owners interested in finance.
  • How Nav saves their customers money.
  • Why Levi thinks that small business owners may not need to be educated on finances in the future.
  • Their approach to producing content on their site.
  • The marketing channels they use to attract small business owners.
  • Levi’s thoughts on the entry on Amazon, PayPal and Square into small business lending.
  • Why proprietary data sets are going to be so important going forward.
  • The story behind the Nav brand and why they rebranded a couple of years ago.
  • The big name equity investors they have and how they closed their funding rounds.
  • What the future holds for Nav.

Traditional FAs Shouldn’t Fear AI (Financial Advisor IQ), Rated: A

Traditional wealth managers are convinced the advent of robo-advisors and artificial intelligence threatens the jobs of financial services professionals, Wendy Spires writes on WealthBriefing. But the reality is that the high-touch business of financial advice stands to benefit from AI, as do its traditional practitioners, she writes.

For example, while 71% of wealth managers believe financial advice clients are prepared to accept advice from robo-advisors, the reality is different, she writes. Self-directed investing, for example, dropped from 45% in 2010 to 38% in 2016 — during a time when the number of robos and the services they offer expanded significantly, according to Spires.

 

Working in America’s gig economy (Multibriefs), Rated: A

“The gig economy … is now estimated to be about 34 percent of the workforce and is expected to be 43 percent by the year 2020,” notes Intuit CEO Brad Smith. “We think this points to a lot of growth as we look ahead.”

Based on the most recent demographic data available from the Bureau of Labor Statistics, it appears the gig workforce is fairly evenly distributed across the age spectrum, but the highest percentages are seen at opposite ends of the scale. Individuals 65 years and older had the highest level of self-employment at 24.1 percent, while those under 35 (the so-called millennial generation) made up 18 percent.

BLS data reveals a few more interesting statistics concerning the gig workforce:

  • Men are almost twice as likely as women to be self-employed.
  • More than 30 percent of gig workers possess professional or advanced degrees.
  • Whites and Asians are marginally more engaged in gig work than are other racial or ethic groups.

In fact, data crunched by online lender Earnest and reported by Priceonomics indicates that about 85 percent of gig workers make less than $500 per month.

Consumer board seeks $ 287 million in restitution over CashCall case (Northern California Record), Rated: A

A Nov. 20 hearing featured the Consumer Financial Protection Bureau calling CashCall a purveyor of “financial snake oil” and arguing the online lender should pay as much as $287 million because they deceived customers.

How To Build The Best B2B Customer Experience (Forbes), Rated: A

In order to build the best B2B customer experience, companies should focus their effort on four principles:

  1. Invest in digital systems. Financial technology start-up Kabbage leverages new technology to approve small business loans in just seven minutes—a huge improvement over the 20 days it takes a typical bank. By simplifying the loan application process for web and mobile, Kabbage allows customers to apply for loans within minutes from anywhere in the world, which relieves a huge pain point for small businesses.
  2. Leverage data.
  3. Customize the experience.
  4. Use omnichannel to see the big picture. In fact, the average B2B customer uses six different channels as they make a decision. Customer experience happens in many places, which means companies need to create a consistent omnichannel experience.

Interesting Investments: Peer-to-Peer Lending (Equities.com), Rated: A

Peer-to-peer (P2P) lending, also known as peer lending, crowdlending, or social lending, is essentially what it says on the tin: lending money to another in an unsecured loan.

Prosper, one of the bigger companies managing P2P lending, has seen a fairly consistent return of about 9 percent through 2014, with a dip to 6.6 percent in 2012. Lending Club has seen a rise from 4.9 percent in 2009 to about 8 percent in 2014. All told, not bad ROIs.

First, you must be at least 18 years old, with a Social Security number, and live in an eligible state to even consider investing. Then, some states require that you have a minimum $70,000 gross income ($85,000 for California), and a minimum net worth of $70,000. You may not be able to invest more than 10 percent of your net worth. However, if your net worth is at least $250,000, there is no minimum income requirement.

Prosper, for example, has an annual default rate 3 to 4 percent higher across all grades. Lending Club has a 6 to 7 percent default rate.

Boston Fintech Company Cayan Is Getting Acquired for $ 1.05B (Bostinno), Rated: B

Cayan, a payment processing company that has been around the Boston fintech scene for the last 19 years, is in the process of getting acquired by Total System Services in an all-cash transaction valued at approximately $1.05 billion. The transaction is expected to close in the first quarter of 2018.

United Kingdom

Octopus Choice passes £100m AUM (AltFi), Rated: AAA

Octopus Choice has passed £100m of assets under management, following on from the launch of its Innovative Finance ISA in the summer.

Assetz Capital Makes Changes to the Great British Business & Green Energy Accounts (Crowdfund Insider), Rated: A

On Monday, online lending platform Assetz Capital announced it is doing away with the Great British Business Account (GBBA) and the Green Energy Account (GEA).

Ranger Direct Lending makes further $ 9.1m provision for Argon Credit (AltFi), Rated: A

The £232m Ranger Direct Lending fund has made a further $9.1m provision against its indirect investment in the collapsed Argon Credit lending platform.

ThinCats Reveals New Branding, Launches Updated Website (Crowdfund Insider), Rated: B

SME peer to peer lender ThinCats has launched a new website and branding designed to position itself for its next phase of growth in 2018.

Goji – Empowering Direct Lending (LinkedIn), Rated: B

Paul McMahon, former group marketing director of Aegon and UK CEO of FNZ, and Vincent Bordes, Founding Partner of Vestigo, the credit risk consultancy, will comprise the advisory board. Elizabeth McCallum joins as Goji’s Head of Marketing,  David Beacham as our Head of Distribution, and Rehan Islam as Head of Investments.

China

China’s Wild Bunch: Startup Investors Are Cashed-Up Cowboys (WSJ), Rated: AAA

In the first 11 months of this year, 3,418 new venture-capital and private-equity funds in China raised 1.6 trillion yuan ($241.76 billion), more than double the amount of 2015 and more than 10 times that of 2006, according to consultancy Zero2IPO Group. It estimates about 12,000 investment firms manage 8.5 trillion yuan in capital, an increase from 8,000 firms managing 5 trillion yuan in 2015.

Out of 221 unicorns in the world, 59 are in China, according to CB Insights. While that may lag behind the 127 from the U.S., it’s ahead of the U.K.’s 12 and India’s nine. Many Chinese investors want to invest in Silicon Valley because they think the valuations there are more reasonable.

Government agencies and local governments have announced 1,040 venture funds since 2015 aiming to raise about 8 trillion yuan, according to Zero2IPO. Much of the money is used to lure businesses to set up local offices, to help boost employment and tax revenues. The Hubei Province’s 200 billion yuan fund is believed to the largest of its kind.

Source: The Wall Street Journal

Borrowing From Multiple Online Lenders Remains Prevalent (Caixin), Rated: AAA

In China, online lenders or peer-to-peer (P2P) platforms that only facilitate lending do not have full access to borrowers’ credit information as there is no such centralized platform that shares the data.

Some borrowers take advantage of this information asymmetry to apply for loans from multiple lenders so they can roll over previous debts elsewhere, or to take out cheaper loans to repay the ones that charge higher interest rates and profit from the difference, or even become lenders on other P2P platforms themselves, according to a study by the Beijing Internet Finance Industry Association.

The association’s recent report found that among the 61 online lenders surveyed, 44% of their customers on average had borrowed from multiple sources.

The survey found that nearly 500,000 borrowers tried to profit from arbitrage by taking advantage of the different interest rates charged by different online lenders. On average, each of them borrowed from 2.36 online lenders, the survey said.

China’s war on risk hands US$ 121b loan market to big firms (The Malay Mail Online), Rated: AAA

China’s whac-a-mole approach to risk — hit it everywhere it pops up — is set to hand control of the surging US$121 billion technology-driven lending market to a small group of leaders such as Lufax Holding and the finance affiliate of Jack Ma’s Alibaba Group Holding Ltd.

Macquarie estimates credit extended by China’s fintech firms will jump more than seven-fold by 2022 to 6.2 trillion yuan (RM3.8 trillion) to pay for things like luxury and household goods or training and education. About half that market is micro-lending — typically small, short-term loans with high interest rates, Macquarie says.

China’s 10 biggest fintech companies account for 36 percent of all loans, said Dexter Hsu, a Taipeh-based Macquarie analyst. Tighter regulation could erode China’s more than 2,000 online micro-lenders and so-called P2P platforms, which directly match borrowers with investors, to less than 200, he said.

Chinese FinTech IPOs Don’t Dazzle Wall Street (PYMNTS), Rated: A

Newly listed Chinese FinTech companies in the U.S. are struggling on Wall Street, leaving investors with unexpected losses and posing as a setback to other Chinese firms hoping to go public.

“The quality of the businesses were either too early [to go public], untested or just poor,” said Anh Lu, an equities portfolio manager at T. Rowe Price in Hong Kong. “And they were asking for very high valuations on top of that.”

European Union

Funding Circle hits €100m lending milestone in Germany (P2P Finance News), Rated: AAA

FUNDING Circle has hit the €100m (£88.2m) loans milestone in Germany just two years after launch in the country.

The business lending platform says 3,000 investors have backed 1,100 German businesses and created more than 2,000 jobs since 2015.

The platform entered the European market following its acquisition of German platform Zencap in 2015. It now has operations in the UK, US, Germany and the Netherlands.

Earlier this month it said it had passed £3bn of lending in the UK and $5bn globally across all its platforms.

C’est Génial! Younited CREDIT Tops 100,000 Loans (Crowdfund Insider), Rated: AAA

Younited Credit has just surpassed 100,000 in loans since platform inception. The Paris based online lender (formerly named Pret d’Union) reported an accelerating rate of loan originations as the number has doubled since September 2016 when total loans stood at 50,000. The platform provides loans from €1000 to € 40,000. To date, Younited Credit has originated over € 650 million in loans.

BorsadelCredito.it Raises €1.6M in Funding (FinsSMEs), Rated: A

BorsadelCredito.it, a Milan, Italy-based fintech startup, raised €1.6m in funding.

The round was led by P101 Ventures, with participation from Azimut Enterprises Holding, GC Holding, Banca Popolare di Fondi and private investors.

DreamQuark wins the 2017 Fintech of the Year (Digital Journal), Rated: B

A startup company called DreamQuark, which produces Artificial Intelligence applications for financial services, has been awarded the Finance Innovation ‘Fintech of the Year’ prize.

National Personal Credit Platform Appoints Chairman (Caixin), Rated: B

The chairman of a wholly-owned central bank subsidiary, Zhu Huanqi, has been appointed chairman of a planned national personal credit-information platform, Caixin has learned from sources familiar with the matter.

International

Online Banking and Payments: Innovative Solutions on the Horizon (FinsSMEs), Rated: AAA

In the near future, online banking and payments will go through some fascinating changes beyond what has already happened over the past several years.

Advanced Mobile Payments

Today, there is increasing demand for biometric authentication apps. To ensure that consumers get what they want, MasterCard is going a step further by developing facial identification, voice recognition, and even cardiac rhythm programs. These innovative solutions will enhance the mobile payment experience for customers and retailers alike.

Growing Opportunities for Mobile Wallets

Back in 2014, Apple was the only real contender for mobile wallets. Within just one year, others followed their lead, including Samsung and Google. Then, in just a short amount of time, more big-name players joined in, such as Chase, Amazon, and Walmart. However, that was not the end. Even social media platforms started offering online payment options. With sites like Facebook that have mobile wallet solutions, people can send money and make payments.

Another prediction is that by 2025, 75 percent of all transactions will be made using mobile wallets rather than actual cash.

Greater Demand for Digital Remittances

For instance, a San Francisco-based company founded in 2001 called Xoom has experienced amazing growth because of digital remittances. In fact, it passed up MoneyGram, which speaks volumes.

Growth Potential with Peer-to-Peer Lending

For instance, having originated loans over $20 million since being founded, Lending Club ranks as one of the fiercest competitors in this arena.

How Banks Are Leveraging Chatbots for Customer Service (Crowdfund Insider), Rated: A

Bank of America: Erica

In October of 2016, Bank of America unveiled Erica, their new AI chatbot. Available in the bank’s mobile app, Erica can work with voice and text commands.

Erica uses machine learning and specially-designed algorithms to provide Bank of America services that were typically reserved for the bank’s top-tier customers. As an example, it could recommend a way to pay down more on your credit card debt to save on interest payments. Or if your checking account is close to being overdrawn, it could contact you to recommend a transfer from your savings account.

Swedbank: Nina

Customers can access Nina from the bank’s website, and it can understand a wide range of text requests using specially designed Natural Language Understanding technology.

In the first three months after Nina’s release, the software was handling an average of 30,000 customer interactions per month.  Of those early interactions, Nina was able to provide a resolution rate of 78%.

Capital One: Eno

Eno from Capital One is a chatbot program that works through SMS messaging.

You can use this AI chatbot to check the balance on your accounts, see your available credit, track recent transactions, pay bills, and more.

Wells Fargo

The Wells Fargo virtual assistant is a chatbot that the bank recently released for use with Facebook Messenger. Once a customer enrolls their account, they can then use Messenger to contact the virtual assistant for basic tasks like tracking recent transactions, balance inquiries, and finding the nearest ATM.

Digital investments: Modern ways to invest in the digital age (Bankless Times), Rated: A

The internet has brought about all kinds of new ways to invest one’s money.

  • Bitcoin
  • Peer-to-peer lending – You’re best off using a well-established site such as Ratesetter.
  • Micro-investment apps – Some apps round up all of your expenses to the nearest dollar and then put the leftover change into an account (for example, if a cup of coffee costs $3.14, this will be rounded up to $4 and the $0.86 extra change will be put into the account).
  • Social media shares
Australia/New Zealand

Australian Fintech Airwallex Secures $ 8 Million Investment From Square Peg (Crowdfund Insider), Rated: AAA

Less than one year after securing $13 million during its Series A funding round, Aussie fintech startup Airwallex announced it has received an $8 million investment from Paul Bassat’s Square Peg.

Testing a chatbot’s home loan advice gives a range of outcomes (Stuff), Rated: A

A mortgage broking firm is offering an AI chatbot to help first-home buyers understand some of the basics – but an experiment shows you shouldn’t put too much faith in any online calculators’ estimates of how much you might be able to borrow.

Squirrel has launched Alan, an online tool that answers questions like “how much deposit do I need”, “what’s an auction” and “how much can I borrow?”

Regulatory Pathway for Challenger Banks Just OK, Could be Improved (Crowdfund Insider), Rated: A

FinTech Australia has provided a comment onthe consultation paper published in August regarding authorising new entrants into the banking industry. The creation of digital challenger banks in Australia is a welcomed move but, according to FinTech Australia, needs some improvement.

India

5 Consumer Lending Trends To Look Forward To In 2018 (Inc42), Rated: AAA

This amendment to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 is a step towards standardisation and providing a visible digital identity, thereby promoting transparency in financial transactions. Another factor that is pushing financial transparency is the rise of Fintech and the subsequent new-age companies that are offering digital avenues for finance such as payment platforms, blockchain companies, alternative financers like P2P lenders and so on.

Consumer Lending Trends To Look Forward To In 2018

Alternative Lending Boom

New service providers will serve the underserved and unserved, meeting the unmet demand. We will continue to see the rise of direct lending as well as P2P lending, marketplaces, crowdfunding platforms etc.

Ease Of Access To Credit

Credit will continue to grow, thanks to the alternative lending boom. One such burgeoning space is the Line of Credit. It has gained momentum in 2017 with the metros being early adopters and is expected to expand into tier 2 & tier 3 cities in 2018.

The Rise Of InsurTech

Investment In Emerging Technologies

Blockchain will expand in putting together smart contracts, and digital identification. Already, FinTech investments in Asia increased to $5.4 billion in 2016, up 12.5% from $4.8 billion in 2015, driven mainly by China and India.

Government And Regulatory Push For Fintech

Asia

Unique Secured P2P Lender Silver Bullion Reaches $ 50 Million in Loans (Crowdfund Insider), Rated: AAA

Silver Bullion, a peer to peer lending platform based in Singapore, has reached $50 million in loan originations. The unique platform that provides secured lending based off of bullion saw more than double the lending volume in 2017 versus year prior.

Amartha Powers Micro Peer to Peer Lending in Indonesia, Focuses on Women Entrepreneurs (Crowdfund Insider), Rated: A

Amartha Founder & CEO, Garuda Typhoon Andi Putra recently commented;

“Since its establishment, Amartha has been committed to connecting the unbanked micro entrepreneurs, and investors who want to add this asset investment in a sector that is more profitable and socially valuable. The uniqueness lies in the micro-entrepreneurs or Amartha Partners, all of which are women. Today, more than 72,000 women micro entrepreneurs throughout Indonesia have enjoyed our services, with a total fund distributed more than 200 billion rupiah (US $ 15 million). “

Affin Islamic Bank lists latest sponsored venture on IAP (New Straits Times), Rated: A

KUALA LUMPUR: Affin Bank Bhd’s wholly owned subsidiary, Affin Islamic Bank Bhd, has today listed its latest sponsored venture with Segi Seri Sdn Bhd on Investment Account Platform (IAP), a shariah-compliant platform similar to crowdfunding and peer-to-peer lending platforms.

Affin Islamic said the venture plans to raise RM3.3 million on IAP to part-finance contract awarded to them recently, which is related to preparation and serving of dietetic food to an established government hospital in Malaysia for a duration of three years.

 

Canada

Another challenge is the new technology. Instant Financial Inc., a Vancouver-based startup, released an app this year that lets workers paid by the hour get their day’s earnings after a shift. It’s free for employees. Employers pay a fee. The focus so far is the hospitality industry, and includes companies such as McDonald’s and Outback Steakhouse in the United States. Instant has about 175,000 people on the service in the United States and about 5,000 in Canada. Wal-Mart has a similar product, which it sourced from another company.

Africa

A mobile banking service is transforming how the poor transfer money — here’s how it works (Business Insider), Rated: AAA

In 11 countries around the world, some 30 million people use a mobile money service that is transforming how people handle their finances.

It’s called M-Pesa, and it has lifted hundreds of thousands of people out of poverty in Kenya.

Krispo, 40, is enrolled in GiveDirectly’s experiment in basic income, a system of wealth distribution in which people receive a standard salary just for being alive.

The money comes with no strings attached. Krispo and the other villagers have received $22 a month since October 2016, and they’ll continue getting it until October 2028.

Scattered around town are M-Pesa stands, outfitted with live agents who can dispense money — essentially an ATM with a human teller.

There is a small fee for each transaction. For the amount given to GiveDirectly recipients, this fee is 30 shillings. (GiveDirectly actually wires 2,280 shillings each month — 30 shillings above the 2,250 recipients can spend — to cover the cost.)

Authors:

George Popescu
Allen Taylor

July 18th 2016, Daily News Digest

July 18th 2016, Daily News Digest

News Comments United States Moody’s decides against downgrading Prosper’s previous securitizations. Our readers may remember that back in February the news that Moody’s may downgrade a Prosper/Citi securitization bond started the whole p2p loan quality uncertainty media blitz. While that was just the spark, it is nice to see that Moody’s has reconsidered and feels […]

July 18th 2016, Daily News Digest

News Comments

United States

United Kingdom

Indonesia

Sweden

News Summary

 

United States

Moody’s Decides Against Downgrade for Prosper Marketplace Loan Deal, (Wall Street Journal), Rated: AAA

The ratings firm said in February that it was watching a Citigroup Inc. securitization of Prosper loans for the possibility that the loans might go bad at rates higher than initially expected, which could force it to lower its rating on some of the notes. It raised its forecast of future losses to around 12% from as low as 8% of the money lent.

But on Thursday, Moody’s said “the absence of substantial deterioration” of the loans was a major reason it decided not to downgrade the notes. It said this “reduces the likelihood of extreme underperformance.” The notes in question will keep their initial rating of Ba3, or three levels below investment grade. Higher-grade parts of the deal weren’t on review for downgrade.

In recent weeks, however, there have been signs of a thaw in the market’s reticence. Social Finance Inc., known as SoFi, completed its first rated sale of bonds tied to personal loans. Marlette Funding LLC this week launched its own sale of bonds tied to loans, the first for the platform since the winter.

An analysis of the online-lending bonds by PeerIQ, which tracks the industry, shows the prices of bonds tied to Prosper loans have risen in recent weeks. Investors had been demanding yields on some Prosper-linked bonds in April of nearly 10 percentage points above benchmark bonds. That spread fell to just roughly 4 percentage points as of the most recent trades in July, PeerIQ data show.

Installment Lender Using Bank Partner Model Needs Maryland License, Court of Appeals Rules, (JD Supra Business Advisor), Rated: AAA

Comment: This could be a really big deal for all the alt lenders who are originating through banks.

The Maryland Court of Appeals, the state’s highest court, in CashCall, Inc. et al. v. Maryland Commissioner of Financial Regulation, recently affirmed the judgment of the Court of Special Appeals (MCSA) directing CashCall to cease doing business in Maryland without a Credit Services Business Act (MCSBA) license and to pay $5.6 million in penalties in connection with loans already made.

While much attention has been focused on the risks created by Madden v. Midland Funding, LLC and the so-called “true lender” issue, the CashCall decision illustrates how the bank partner structure used by many lenders can be threatened by state licensing statutes as well.

The case arose out of CashCall advertising on its website to consumers and offering them a method to apply for loans online. The loans were made by out-of-state, state-chartered banks at interest rates significantly in excess of the maximum rate permitted by Maryland law, and the banks also charged loan origination fees. Shortly after origination, the banks sold the loans to CashCall, which collected all payments on the loans.

The Commissioner contended that CashCall was a “credit services business” as defined by state law, because it assisted consumers in obtaining an extension of credit “in return for the payment of money or other valuable consideration.” CashCall argued that, in the absence of a direct payment to it from the consumer, it could not be properly classified as a credit services business.

According to the court, CashCall was a “credit services business” because it received compensation “in return for” assisting consumers in obtaining loans.

The Court of Appeals reached an ominous conclusion regarding the impact of federal preemption on the CashCall program. As the court noted, the MCSBA prohibits a credit services business from assisting a consumer in obtaining a loan at an interest rate that exceeds the maximum rate permitted by Maryland law “except for federal preemption of State law.” However, according to the court, “[a]lthough federal law allows federally insured banks to charge out-of-state consumers the same interest rate permitted by the bank’s home state, regardless of the interest rate caps imposed by the law of the consumer’s resident state,” the MCSBA does not permit a credit services business to “assist a consumer in obtaining a loan from any in-state or out-of-state bank, at an interest rate prohibited by Maryland law.”

Under the court’s reading, the MCBSA would effectively prohibit CashCall from assisting a bank in the origination of loans at rates expressly authorized by federal law.

Why online lenders should become banks, (Financial Times), Rated: AAA

Comment: In my personal view they shouldn’t become banks as that equals having 1 hand tied behind your back. Instead they should find a depositer-like source of capital, maybe in partnership with banks.

Even last year, online lenders more than doubled the size of their loan books on average — wildly outpacing even the raciest bank — and many were still valued on three-digit earnings multiples. But much has since changed in the sector and — believe me — they aren’t jeering now.

If lenders want the sector to be more than a specialist backwater, or a technologically-enabled version of the old finance company model (think Household or GE Capital), platforms need to rethink how they do business. One way off the hamster wheel might be to put more of their loans on their own balance sheets. While that would expose them directly to losses, with consequences for capital requirements and regulatory oversight, it would also provide a more stable income base, making it easier to survive lending downturns. The snag is that it would not get round the problem of having to rely on fickle market funding for support.

Solving that requires online lenders to take a step that many a year ago would have scorned: joining the banking deadbeats to tap regular deposit funding.

Many platforms have been considering whether or not this might be in their interest. But the US regulators aren’t that keen on issuing bank charters to young and flighty marketplace firms.

Which leaves takeovers. Valuations no longer make it totally impossible for an established bank to consider snapping up a marketplace platform. Lending Club is valued at around two times its book, and OnDeck Capital, the other listed platform, at about one times.

LendingClub Names BlackRock’s Dunne Chief Capital Officer, (Bloomberg),Rated: A

Dunne, who previously led BlackRock Inc.’s San Francisco office, will work with LendingClub investors and retail distribution partners, the company said Monday in a statement. “Patrick’s wealth of experience and diverse background across capital markets, strategy, portfolio management, product development and client service will help us drive the next phase of Lending Club’s growth,” Sanborn said in the statement. “Patrick will play a key role in reaffirming our continued commitment to our investors.”

Jefferies Group is again considering selling bonds tied to LendingClub consumer loans after scuttling an effort amid the shakeup there. Many investors are conducting due-diligence checks and have said they may purchase more loans, although maybe initially at muted levels, the CEO said in June.

Dunne’s plan to depart from BlackRock was announced earlier this year. He had worked for Barclays Global Investors before BlackRock acquired it. Dunne has a bachelor’s degree from the University of California at Berkeley and a master’s in management from the Stanford Graduate School of Business, according to the statement from the San Francisco-based company.

LendingClub advanced 3.6 percent to $4.65 in early trading at 8:21 a.m. in New York.

Should investors look at investing in P2P lending?, (CNBC Video), Rated: A

Comment: Ron Suber on CNBC explaining what Prosper does and how they do it. Video covering the basics of Prosper which will not be news for our readers. However worth a watch as it’s well articulated and well presented.

Delinquencies numbers shared: Blended average advertised at 7.4% blended net return. A great yield for fixed income for sure.

Millennials are ditching financial advisors for apps, (New York Post), Rated: AAA

It’s time for many technophobic 50-something financial pros to look for another job. That’s because millennials, many of whom are about to inherit considerable assets, are not looking for a sit-down meeting in a downtown office to discuss investment options.

“Before, change was happening, but it was generational. You could adjust to it. And a business model was, in essence, immortal,” says Bill Hortz, founder of the Institute for
Innovation Development. In the 1950s, he noted, the average company stayed in the S&P 500 for 75 years.

“Today it is 14 years and dropping rapidly,” he says. Change is feeding on itself, and the effects of analytics and artificial intelligence will be expanding. They will dramatically change “client experiences and client interfaces,” Hortz says.

The new client has expectations of “24/7 access to information that is readily available via a smartphone, tablet or computer. Financial issues and questions that once required the advice of a certified professional can now be answered with a click on any digitally enabled device,” according to “The Advisor of the Future,” a 2015 report by Hearsay Social, a company that advises financial firms.

This represents “a potential sales opportunity of almost $2 trillion,” the report said. “In addition, customers will soon be able to search for products via additional technologies, including voice and gesture commands.”

“What’s more important isn’t the initial amount, but that someone makes a commitment to invest on a regular basis.”

“They need an easy way to communicate with advisers, be it on the computer or text messaging,” Raznick says. “They need to see visuals on how investing is more lucrative with an adviser as opposed to an automated solution.”

The top honchos at Andreessen Horowitz sat down for a podcast after raising .5bil ( The financial revolutionist), Rated: AAA

They asserted that with $10 trillion of debt trading with a negative yield throughout the world (now $13 trillion, actually), there’s a limitless abundance of capital sitting on the sidelines just waiting to finance innovation.

Someone should buy Lending Club.

These days, Lending Club’s prestigious board is probably sick of seeing critical articles like this one in The Wall Street Journal. And while Scott Sanborn is doing about as good a job as possible in trying to clean up the mess, he’s constrained by the realities of having to please his badly burned shareholders. Adding to his headaches is the fact that charge-off rates are now rising fast (a bad sign no matter how it’s spun). The article didn’t even mention the industry’s ongoing problem with “loan stacking,” whereby a borrower takes out multiple loans before the loans can be reported to the credit bureaus. That could be the next shoe to drop. Some fund or some company with vision, patience and an appreciation of credit cycles should buy Lending Club and fix it before time runs out.

“Fintech is the new normal,” says Nicols. He also adds that fintech is moving from its “pie-in-the-sky” phase to the application phase where “real companies are learning real lessons.” We couldn’t have said it better. See more here.

Morgan Stanley states the obvious regarding roboadvisors. “Roboadvisers aren’t going away any time soon, and the wealth management industry needs to make some changes if it wants to beat them and a host of other threats it is facing.”

Deloitte backs uber cool microinsurance initiative. The accounting and consulting giant has partnered with two start-ups (Statumn and Lemonway) to launch a proof of concept project named LenderBot. Billed as the first microinsurance solution for the sharing economy, the product aims to allow people to use Facebook’s messenger platform to create a peer-to-peer microinsurance contract for borrowed goods.

Twitter and Bloomberg deepen link.  As Bloomberg continues to fend off a challenge by Blackrock and Goldman-sponsored competitor Symphony, it’s turning to Twitter as a new distribution partner for selected live markets coverage and three of its regular shows.

Paypal gets even more P2P company. Early Warning is not a home alarm company. It’s a P2P solutions provider for banks that recently announced (see its press release) that Chase, Capital One and Wells Fargo are now using its pipes to facilitate P2P money transfers.

Big banks prepare to crush p2p startups with clearXchange, (TradeStreaming), Rated: A

Quietly over the past few months, some of the largest US banks have rolled out P2P payment functionality in their banking apps. Now, 5 of the largest US banking institutions, including Chase and Bank America, enable their customers to send money to one another and eventually, to friends and family who hold accounts at other banks.

Instead of building their own solutions, participating banks have signed up to the clearXchange network, a white label P2P payment platform for financial institutions. After inking deals with leading banks, P2P payments on the clearXchange network are now available to more than 100 million online banking and 70 million mobile banking users in the U.S.

In the first quarter of 2016, customers at banks in the clearXchange network completed more than 46 million P2P transfers, accounting for over $16 billion in combined transaction volume. That number is expected to grow as banks already on the network ramp their marketing of p2p capabilities, and more banks sign up for the service.

Before clearXchange, it wasn’t easy to send payments across banks. A whole industry of P2P payment players has sprung up to help bridge this gap by putting a transaction layer on top of existing banking infrastructure. As a workaround to directly moving money between bank accounts, technologies like PayPal and its faster growing service, Venmo move money between stored value accounts. So, while payments may be instantaneous, it can take days for the receiving party to be able to access that cash directly from her bank account, as money moves from the P2P platforms into the banking system.

clearXchange changes all that. Banks on the network are active participants this time, enabling payments to move freely between banks at the account level. clearXchange’s parent, Early Warning, is owned in part by seven of the largest banks in the U.S. Early Warning has been around for 25 years, providing thousands of banks and credit unions across the country with risk, fraud prevention, and authentication solutions.

clearXchange is a network and joining the network becomes more valuable when they’re more banks on the network.

Consortium efforts can pay off massively, but they’re hard to pull off. Just look at the Merchant Customer Exchange, or MCX, a retail industry consortium that wanted to do an end-around of the credit card networks. Tired of paying interchange fees, companies like Walmart and Target worked for years to roll out a mobile payments solution, dubbed CurrentC. Walmart ended up launching its own payments, Walmart Pay. MCX announced layoffs in May and its future is uncertain.

Why Brexit and Other World Events Have Not Seriously Hurt U.S. Small Business Lending, (Forbes), Rated:A

Loan approval rates at banks increased slightly in June 2016, according to the most recent Biz2Credit Small Business Lending Index, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. The research shows that loan approval rates at big banks ($10 billion+ in assets) hit 23.3%, a post-recession high, last month. Regional banks are granting nearly half (48.8%) of the funding requests they get. Additionally, institutional lenders continue to grow in force and are approving more than six-in-ten funding requests from small businesses.

So far, the Brexit has not seriously threatened the American economy, nor has it tightened U.S. small business lending. In fact, in some ways, the uncertainty will benefit U.S. small business borrowers:

  1. Foreign money is being invested in the U.S. as the dollar has gotten stronger while the British pound dropped substantially.
  2. Institutional investors from overseas will look to the small business credit markets for yields.
  3. The stability of the U.S. economy eases the minds of bankers, who are traditionally risk averse.
  4. The Federal Reserve has delayed further its long anticipated interest rate hike, which is now unlikely to happen anytime soon.

Following the shakeup of the European Union, the terror attack in Nice, France, and political turmoil in Turkey, more money is likely to flow into the small business lending marketplace from foreign investors.

Orchard is Getting Bigger, (Crowdfund Insider), Rated: B

Orchard Platform is growing. So much so they have leased a lot more Manhattan space. Announced this week, Orchard is upgrading from the 7,000 square foot office space at 101 Fifth Avenue, to a 26,242 square foot space by taking over two floors of 386 Park Avenue South.

“At Orchard over the past 6 months, we have seen an uptick in demand from international investors for U.S. credit, including from clients in China, the U.K., continental Europe, Israel, Argentina, and Canada.”

United Kingdom

BoE holds rates, P2P “not linked”?, (Alt Fi News), Rated: AAA

The Bank of England yesterday announced that the base rate would be held at 0.5%, despite widespread claims to the contrary. The markets had priced in an 80% chance of the Bank cutting rates, but the Monetary Policy Committee ended up voting 8-1 against the move.

The effect of movements in the base rate on alternative lenders has been the subject of much discussion over the lifetime of the industry.

Giles Andrews, Executive Chairman of Zopa, responded at the time by arguing that a rise in the base rate would only serve to widen bank spreads, which would be paid for by consumers – making the peer-to-peer lending proposition “even more compelling”.

The Bank of England said yesterday that “most members of the committee expect monetary policy to be loosened in August”. One option could be to cut rates, possibly to 0.25%, which would be a record low.

If rates were indeed cut, then there may be some adjustment to the rates charged by peer-to-peer lending platforms. A number of the big US marketplace lenders have raised rates over the past few months. Prosper raised rates for the second time this year in late May, by an average of 0.29% across its loanbook. The platform’s chief risk officer Brad Pennington said that the rate hike came “in anticipation of action by the Fed to raise rates”.

But Pete Behrens, co-founder and chief commercial officer at RateSetter, says that the cost of funding for his platform is not linked to the Bank of England, and that it finds its own equilibrium.

Zopa’s head of risk Sharvan Selvam posted a column this morning on the potential impact of a shift in interest rates. Selvam first highlights the stable returns that were delivered by Zopa during the last recession, using the graph below.

Selvam also points to the predictability of the platform’s returns over the past decade. As can be seen from the graphic below, 2008 is the only year on record in which Zopa’s actual returns dropped below its expected returns.

UK P2P lender raises £7.2m, (Finextra), Rated: A

MarketInvoice, a UK-based P2P lender has secured more than £7m in its latest round of fundraising, defying the economic uncertainty around startups following the UK’s controversial vote to leave the European Union.

The funding was led by Polish private equity group MCI Capital which has also invested in Azimo, an online money transfer startup. Other investors included existing backer Northzone.

“Recent intervention by the Bank of England suggests we might see a significant reductions in bank lending. As in the aftermath of 2008, P2P lenders can once again step in to provide that funding.”

Lenders to maintain or increase P2P investments post-Referendum, (Financial Reporeter), Rated: A

Lending Works asked around 1,600 active lenders how the Brexit vote and subsequent economic volatility would affect their levels of investment in P2P lending as a relative share of their investment portfolios.

Just over 62% confirmed that they would be leaving it unchanged in the short-term, while 19% said they would be looking to increase their portfolio allocation to P2P.

‘Do investors understand alternative finance risks?’, (Financial Times), Rated: A

The Financial Conduct Authority launched a review of both peer-to-peer lending and equity crowdfunding, two different kinds of investments that are together labelled “alternative finance”.

The FCA review has not come as a surprise to the industry — it had been planned since 2014 — and it was broadly welcomed by all of the lenders and funders.

Cormac Leech, a peer-to-peer analyst at investment bank Liberum, said part of the reason for P2P’s popularity was the perceived “safety” of debt investments compared to volatility in the equities market. Mr Leech said that lumping the different sectors together may lead to confusion. “There’s a huge risk that P2P gets tarred with the same brush [as equity crowdfunding],” he said, believing the latter to have much higher levels of risk.

While the major peer-to-peer lenders have agreed on common definitions and standards, allowing investment returns to be meaningfully calculated and compared with each other, AltFi says the crowdfunding platforms have not.

The government’s Innovative Finance Isa, designed to hold alternative investments in a tax-efficient wrapper, was introduced in April but so far none of the major companies have been given full regulatory permission to launch one.

Although there have only been a handful of successful investor exits over 1,200 crowdfunded deals Mr Zheng has tracked between 2012 and 2015, he said it was too early to make any assumptions.

Asset managers run risks in the rush into peer-to-peer loans, (Financial Times), Rated: A

Asset managers such as Invesco Perpetual, Woodford Investment Management, BNY Mellon, Vanguard, Baillie Gifford and Schroders have been early adopters — but in doing so they are investing in a fledgling and divisive industry.

Cormac Leech, alternative finance analyst at Liberum, says he still considers “fraud risk” the biggest threat to the sector’s growth.

Aside from these incidents, analysts of peer-to-peer lending platforms are quick to point out that their loan books have not come under any significant pressure, and that the asset class remains untested through the credit cycle.[ Comment: everybody always forgets of Zopa and Prosper which were around in 2008 in fact ].

The effects of the UK’s decision to leave the EU may also test the platforms’ robustness. Data provider AltFi has said it will add to a “list of headwinds” for the UK’s alternative finance industry.

Doubts over P2P loans’ credit quality are most keenly expressed in the depressed share prices of the handful of investment trusts specialising in buying them. For the most part, it is through these trusts that mainstream asset managers have looked to gain their P2P exposure, rather than buying loans directly from the platforms as a retail investor would.

Two of the biggest of these funds — VPC Speciality Lending and P2P Global Investments, from US hedge funds Victory Park Capital and Eaglewood Capital respectively — have both proved popular.

Invesco Perpetual, the UK arm of the $790bn US manager, owns a third of both trusts, holding the shares within its retail funds. It also owns half of another trust — UK P2P lender Funding Circle’s SME Income fund, which invests solely in Funding Circle loans to small and medium-sized UK businesses. Woodford Investment Management, run by renowned fund manager Neil Woodford, is the second-largest holder of both the VPC and P2P trusts.

BlackRock, the world’s largest asset manager, owns an undisclosed part of an £150m stake in Funding Circle, while Vanguard holds a 5 per cent stake in Lending Club, a company that Baillie Gifford also had a 9 per cent stake in until May this year.

Peer-to-peer’s popularity was in part down to the sector’s ability to “weave a beautiful story”. “We think [the lenders] will come into trouble,” he says. “We like to own the loans, not the equity. We think we’re being better paid here than in many parts of the equity and bond markets.

But doubts over how robust their credit-checking models are remain.

“There’s a complete spectrum — it goes from people who ostensibly use an absolutely classic bank credit model [and] there are others who say they scour the internet and pick up different points [to the banks],” Mr Foottit says.

“We genuinely don’t know. We’ve all got to wait and see, and make a valid judgment.”

Can London remain a fintech hub post-Brexit?, (Growth Business), Rated: A

Given the uncertainty over whether the UK will keep its passporting rights despite Brexit, many tech giants have vocalised their interest in relocating their European headquarters from our capital. Earlier this week, London-based online money transfer firm Azimo told Reuters it was considering moving its HQ to the continent, fearing Brexit would knock London off its pedestal as a fintech capital.

“It is perfectly possible that financial stress in the short term funding markets could cause the banks to slow down or delay lending to SMEs – a repeat of what we witnessed following the financial crisis in 2008,” he tells GrowthBusiness.

Davies believes this post-Brexit uncertainty presents a two-way challenge. “Alternative lenders, like ourselves, have to make businesses more aware of what they have to offer, and SMEs have to be prepared to look at other (non-bank) options,” he says. A recent survey of UK SMEs carried out by his firm revealed that almost one in three entrepreneurs would shelve investment plans if their traditional bank turned them down for finance, which may be indicative of a slow-to-change bank-first mindset.

The post-Brexit environment may also help thin the herd, according to Nucleus Commercial Finance CEO Chirag Shah. “Any AltFi company struggling for lending volumes will be affected by the EU referendum– they were suffering pre-Brexit; Funding Knight’s near collapse is a clear example of this. Post-Brexit, these platforms will struggle even more to attract capital,” he says.

“Post-Brexit, there is the definite potential for losses to increase for funding platforms with lax underwriting standards.  However, there are also lots of opportunities: indeed a medium term lower interest rate environment will entice more investors to platforms. I believe businesses specialising in crowdfunding and property lending will have opportunities for growth.”

Peer-to-peer platforms will be paying much more attention to default risks in certain sectors if our economy does slide into recession, MarketInvoice’s Stocker warns.

While preparing for economic uncertainty may be wise in general, sounding the doom-and-gloom horn post-Brexit may be premature., says Stephen Archer, business analyst and director of Spring Partnerships.

Veteran tech entrepreneur Rupert Lee-Browne is no stranger to uncertain macroeconomic conditions, having braved the Dot.com bubble of the early noughties and the volatility of the 2008 recession at the helm of CaxtonFX. “Secure your funding,” he advises. “The chances of investors backing early or mid-stage British tech business from here on in is slim.”

Indonesia

Indonesian P2P lending KoinWorks seeks new funding round, (Deal Street Asia), Rated: B

Peer-to-peer (P2P) lending platform KoinWorks is looking for a new investment round that will be used for activities expansion. KoinWorks connects lenders and small to medium-sized business owners. According to the company’s website, KoinWorks aims to democratize finance in Indonesia by reducing costs and making it easier for everyone to access capital.

P2P lending platforms – namely Modalku, Investree, UangTeman, GandengTangan, Amartha, and many others – are enjoying a steady increase of popularity in Indonesia, despite only 25 per cent of the population (60 million people) to have bank accounts.

Currently, fintech startups do not clearly fall under the purview of any single authority. While technology startups are regulated by the communication ministry, those engaged in financial services are governed by the Indonesian Financial Services Authority (OJK).

Sweden

How having zero experience in finance helped this founder build a .25 billion payments company, (Business Insider), Rated: A

Swedish payments startup Klarna is now a $2.25 billion company, but when CEO Sebastian Siemiatkowski cofounded the company a decade ago, none of the three founders had any experience in finance whatsoever.

That was, he tells Business Insider, actually a blessing.

The cofounders were naive 23-year-olds, who didn’t think the same way that traditional bank and finance executives did, and that gave them an advantage.

One of Klarna’s earliest ideas was to try and separate “buying” and “paying” for online purchases. Everyone knows how annoying it is to input card information when you are trying to check out. The Klarna dream was to have you just input an email address, one click, and then pay later. Klarna would guarantee the payment, and customers would have a week or two to pay up.

The problem was Klarna didn’t have any money to speak of, beyond some seed capital, which was certainly not enough to cover the money during the in-between period. How were they going to get the money to pay the merchants while they waited for customers to make a payment?

Klarna’s solution was to just ask the merchants if they would be ok with waiting to get their money. “Banks would never have dreamed of asking that,” Siemiatkowski laughs. It simply wouldn’t have occurred to them that any merchants would ever agree to that. But the merchants Klarna talked with wanted to grow their online sales, badly, and were willing to experiment.

A decade later “pay after delivery” has become a cornerstone of Klarna. Klarna’s technology instantly assesses whether an online shopper is trustworthy for a particular transaction, taking up to 140 factors into account, and then assumes the risk. The customer puts in his or her email and zip code, and then gets to examine the product before paying 14 days later.

Klarna had $330 million in revenue in 2015, and is profitable, according to Siemiatkowski. It’s also in the midst of a big US push, and has been integrated with retailers like Shoes.com andOverstock.com.

Author:

George Popescu