Thursday April 13 2017, Daily News Digest

small business fintech lenders

News Comments Today’s main news: Small businesses hate fintech lenders more than big banks. All is not well in the world of student loans. UK equity crowdfunding investments set new record in March 2017. Lending Works registers 8.8M GBP in ISA since launch. Today’s main analysis:  VC funding report. Small biz lending approval rates. Today’s thought-provoking articles: Portfolio review – […]

small business fintech lenders

News Comments

United States

  • All is not well in the world of student loans. GP: “There are many parallels between credit crisis in general: investors wrong feel of safety is, I think, the main one. And in this case student debt can only be releaved in bankruptcy in very exceptional cases, in short, nearly never. So investors feel that student debt is safe. The same way as mortgages perhaps? I think we are far away from a crisis or bubble. However student debt is growing and questions have to be asked of where this is going and why. Brian from BlueElephant told me one day that any market that is being skewed by government intervention from its normal equilibrium should be avoided as the price doesn’t reflect the risk. Is the government skewing the student debt market? Certainly. I have no issue with the risk in the student debt market, I am worried about the price pressure from non-profit participants. ”  AT: “Lenders need to get better at judging risk and cutting down on defaults.”
  • Small biz lending approval rates. GP: “We now see for a few quarters an improvement in small bank’s approval rate for small business loans.”AT: “Small banks and institutional investors are doing better at approving loans than big banks and alt lenders. I wonder what this means. Could be a trust issue.”
  • Small businesses hate fintech lenders more than big banks. GP:”As a small business you have a choice to borrow money below 10% from a bank, a product you will not qualify for, or to borrow moey from MCAs and fintech at rates often above 20%, a product you will nearly always qualify for. Who do you have more? The people who have a great product they don’t want to sell to you or the ones who have an expensive product you have no choice but to buy? To me this is a huge issue for the SME fintech lending sector. This means that as soon as credit from any other institution is anywhere close to being competitive the small businesses will not use a fintech offering. The second question is why are fintechs ranked so low? My personal believe is that it’s due to the onerous terms fintech usually charge small businesses especially in comparison to banks.  “AT: “This is interesting. Significant is the fact that this data comes from successful applicants, not non-borrowers. Driving this data could be the varied nature of borrower profiles. Small banks are likely lending to prime borrowers whereas online lenders are heavily weighted toward sub-prime borrower who likely expect to be treated like prime borrowers and can’t get a loan from a bank. This requires further investigation.”
  • VC funding report Q1 2017. GP:”Unaccredited investors had no scalable legal way to invest in private stocks before. The money inventory for unaccredited investors is fixed or at best stable given the wage stagnation, and the small inflation. And I think crowdfunding also includes more entertainment thant the stock market with the benefit of often also receiving a product. “AT: “I think it’s interesting that fewer people in the U.S. are investing in stocks? Does that mean they are investing in crowdfunding asset classes?”
  • Elevate Credit not trading at elevated price. GP:” I would compare them to Yirendai more. “AT: “The comparison to Square is interesting.”
  • Should fintech startups buy banks? GP:”If you want a bank, there is rent, buy or build. These approaches are standard business questions. The real question is should you work with a bank or not. Why not an insurance company? Why not with another deposit taking structure that is not a bank? ”  AT: “I don’t see why not. The most likely targets would be community banks, if they can get there before the big banks swallow them up.”
  • Diversification 101 in MPL. AT: “Basic investing advice.”
  • Podcast: Economic analysis of real estate, Part 2.
  • Redfin vets raise pre-seed round, launch digital mortgage platform.
  • Opus releases new version of OpusNotes.

United Kingdom

European Union

International

Asia

News Summary

United States

All is Not Well in the World of Student Loans (Lend Academy), Rated: AAA

It is clear that burdensome student debt is now holding many people back financially. Student loan debt now stands at a staggering $1.3 trillion (as of the end of 2016) an increase of 170 percent over the preceding 10 years. There are three contributing factors to this increase:

  1. More students are taking out loans.
  2. The loans are for larger amounts.
  3. Borrower repayments have slowed down.

Borrowers are now leaving school with over $30,000 in student loan debt and they are defaulting more. This is particularly true of those borrowers with balances of $100,000 or more. Over 20% of borrowers who left school in 2010 or 2011 owing that amount have already defaulted on this debt (a default means they are at least 270 days past due). That is an astonishingly bad default rate.

Small Biz Lending Approval Rates Improve at Institutional Investors and Small Banks, Stall at Big Banks in March 2017 (Biz2Credit), Rated: AAA

Loan approval rates at institutional investors and small banks improved in March 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Big banks’ ($10 billion-plus in assets) loan approval were stagnant in the last month, but remained at an all-time Index high. Meanwhile, loan approval rates at credit unions and alternative lenders continues to falter.

Small businesses hate fintech lenders more than big banks (Financial Times), Rated: AAA

On Tuesday, the Federal Reserve Bank of New York released its 2016 small business credit survey, which gives us an idea of the experiences of over 10,000 firms across the US. As Matt highlighted yesterday, one of the things we learn from the research is that small business expectations doesn’t tell us much about the economy. But we also get some information on how small business owners view various sources of credit. The results for fintech startups, specifically online lenders, are not as great as you might expect:

So, the hype about streamlining processes and building better customer experiences is not all hype, though they do just slightly worse in terms of transparency.

But there is something going on with the cost of credit provided by online lenders, and the terms they demand. The survey defines ‘online lenders’ as “nonbank alternative and marketplace lenders, including Lending Club, OnDeck, CAN Capital, and PayPal Working Capital”, so there are potentially two things going on here.

One is that online lenders typically have a higher cost of capital than banks, and so they also charge higher interest rates, which is what drives the dissatisfaction. The second is that online lenders are targeting riskier businesses, who wouldn’t be able to borrow from a bank. That would suggest the higher level of dissatisfaction about repayment terms and interest rates arises from the fact they are lending to businesses that generally encounter high borrowing costs, no matter who they are borrowing from.

Venture Capital Funding Report Q1 2017 (CB Insights), Rated: AAA

US VC-backed companies saw $13.9B in total financing across 1,104 deals in Q1’17, up 15% and 2% from Q4’16, respectively.

While Asia saw an increase in unicorn births from Q4’16, North America remained flat with a total of 3 new unicorns. Notably, Europe has not seen a new VC-backed unicorn since the first quarter of 2016.

Source: Gallup

Elevate Credit: Not Trading At An Elevated Price (Seeking Alpha), Rated: A

The fintech has funded more than $4 billion in loans for 1.6 million customers by using machine learning to lower fraud scores while providing quick lending decisions based on data inputs for a high-risk borrowing group.

Revenues grew 34% to $580 million last year while operating income expanded to $48 million, up from $9 million in 2015. The fintech is still losing money; that typically is a large negative in the recent IPO market, though other offerings have rallied despite large losses.

In total, Elevate sold 14.26 million shares at $6.50 including the over allotment amount. The company raised about $81 million after fees.

The company has a fully diluted market cap of only $350 million using a share count of 41 million and nearly 4 million of outstanding stock options.

The reality is that Square had a very subdued IPO similar to Elevate Credit. The initial price range target was $11 to $13 while the actual offer price dipped to only $9, though Square jumped back to that original price range trading around $12 for most of the first month as a public company.

Should fintech startups buy banks? (Tearsheet), Rated: A

Banks buying startups isn’t anything new. But for financial tech startups, looking for scale at any cost, perhaps the solution would actually be to buy a bank, according to a growing number of observers and experts in the industry.

There are almost 6,000 FDIC-insured banking institutions in the U.S. as of the end of 2016 and 1,541 of them have less than $100 million in assets, including a sliver of failing banks that need saving. With average common equity around $12.5 million for a healthy bank of that size, a well-established startup could pay $25 million and get fully licensed to be deposit taking.

Part of the reason startups haven’t been able to scale, at least in the retail banking world, is that so-called innovations are usually just different ways for people to interface with their banks, while core banking transactions – deposits, loans, mortgages and payments – generally remain the same on the backend. In other words, there hasn’t truly been an Uber for banking, said Pascal Bouvier, a venture partner at Santander Innoventures. Most fintech startups operate at the thin outer layer of banking.

The valuation gap between fintech startups and banks makes it difficult to structure a deal, he said. Banks tend to be valued more through historical earnings and the price of tangible book value, whereas fintech startups, because of their perceived high growth potential, often tend to have higher earnings multiples.

Diversification 101 in Marketplace Lending (LendingClub), Rated: A

While loans are issued in amounts between $1,000 and $40,000, Notes can be purchased for as little as $25.

If you invested $2,500 in only one borrower and that borrower becomes late and the loan eventually charges off, you could potentially lose 100% of your total investment amount. If you invested $25 in 100 different borrowers your potential loss on any single Note would be limited to 1% of your total investment amount.

 

Episode 6 – Economic Analysis of Real Estate, Part 2 (RealCrowd), Rated: A

In this episode listeners will learn about:
– How rising household income impacts multifamily investments
– How property tax factors into decision making
– Where to access data on real estate markets
– What asset class RealSource is pursuing in this current economic climate 

Redfin Veterans Raise Pre-Seed Round and Launch Digital Mortgage Platform “Approved” (Yahoo! Finance), Rated: A

Approved launched its digital mortgage platform today, aimed at radically simplifying the home loan experience for lenders and borrowers nationwide. The company raised $1 Million in pre-seed funding led by Social Capital and Precursor Ventures to support the launch.

Lenders in the pilot saw an average 50% reduction in the time it took to get those documents.

Approved technology includes:

  • DocCast™: Automatically collect original bank statements, W2s, 1099s, 1040s and paystubs.
  • DocVision™ Camera Scanning: Allows borrowers to securely “scan” documents using their mobile devices.
  • White-labeled Dashboards: A delightful and frictionless platform for borrower and lender collaboration.
  • Digital Document Library: Support for all popular loan programs.

Opus releases new version of OpusNotes (Hedgeweek), Rated: B

Opus Fund Services, a provider of hedge fund administration services, has launched new release of the OpusNotes loan accounting platform for marketplace lending vehicles.

United Kingdom

Latest OFF3R Index Data Reveals Significant Increase in Equity Crowdfunding Investments in March 2017 (PR Web), Rated: AAA

This record breaking figure smashed the previous monthly high, set back in July 2015, by over £13 Million. This made March 2017 the most successful month for the total amount raised via equity crowdfunding platforms in the young life of the asset class in the UK.

According to the data from OFF3R, equity crowdfunding had a very strong finish to 2016 but had so far had a slow start to the year.

The data revealed that March 2017 was a strong month for the sector. Just over £300 Million was lent in March via the platforms that form the P2P element of the OFF3R Index, including Zopa, Ratesetter and Funding Circle. This was marginally higher than February’s data but slightly down from January’s year to date high.

Lending Works Announcement: £8.8 Million Has Been Invested In ISA Account Since February 2017 Launch (Crowdfund Insider), Rated: AAA

UK-based peer-to-peer lending platform Lending Works announced on Wednesday £8.8 million has been invested into the company’s Individual Savings Account (ISA) since its launch on February 8th.

Lending Works reported given that there are no limits on transfers of ISA funds accumulated in previous financial years, the largest individual investment to date within a Lending Works ISA stands at £154,190, while the average amount invested among the 815 ISA investors currently stands at £10,769.

Fintech founder: I would not set up in London today (Financial News), Rated: A

The founder of one of London’s best-known fintech startups has said that he would not choose London as a location to set up his business today, as he has “no idea what Brexit will mean”.

Taavet Hinrikus, the chief executive and co-founder of online FX service TransferWise, urged the UK government to quickly secure access to talent and trade with Europe in a post-Brexit world.

Funding Circle’s Desai: use P2P for monetary stimulus (P2P Finance News), Rated: A

UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.

The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.

Boost Capital Secures New £15m Credit Line (Boost Capital Email), Rated: A

No end to Boost Capital’s growth spurt as the business funding specialist secures new £15m credit line to meet small business loan demand.

An extra £15m will now be available to UK small businesses, after alternative business lender Boost Capital secured a new credit line from American Investment Firm Atalaya Capital Management.

Ex-Aldermore director joins SME lending platform (Bridging and Commercial), Rated: B

SME lending platform Growth Street has announced the appointment of a new commercial director and general counsel.

Chris Weller will serve as commercial director, having formerly held the role at Aldermore Bank from 2013-14 before becoming sales director for invoice finance until 2015.

Meanwhile, general counsel April Nardulli joins from P2P platform RateSetter, having served as senior regulatory counsel, regulatory lawyer and interim compliance manager since her appointment in 2015.

European Union

Finbee Experiences – My Portfolio Review (P2P-Banking), Rated: AAA

A year has passed since I last wrote about the portfolio I built on Finbee. Currently I have invested 1,027 Euro in 35 loans. 32 are current (965 Euro), 2 are late (23 Euro) and one is in default (38 Euro), but rates for this loan are paid to me by Finbee’s compensation fund. The average interest rate of my loan parts is 31%.

My self calculated yield (XIRR) is 31.5%. This is the highest I achieved on any p2p lending marketplace over a longer duration of time. Calculating the result again, this time with assuming a full write-off of the defaulted loan gives a yield of 29.4%.

Why banks are reluctant to enter the roller coaster of FinTech (JAXenter), Rated: AAA

Blockchain, NFC, Peer to peer lending are just a few of the options traditional banking could have fully adopted. This would have had a tremendous impact on the way we exchange transactions, do business and live our lives. However, I cannot name a big bank that has jumped on the bandwagon and delivered a fully-fledged product in this area. Just the opposite — the stories I hear are, for example, about two of the top executives of BNP Paribas in Bulgaria leaving the company to start their own Peer to peer lending platform called Klear. Why didn’t they initiate this project inside the organization?

I think there are two factors causing this:

  • Internal factor: Company culture in the traditional banking
  • External factor: The public image of banks is all about security, while innovation relates to risk.

Usually, new banking products need a lot of IT involvement — for each new type of deposit/loan you need someone to implement tens of forms and wizards.

How to enable innovation in banking

We have a good example of consortium of banks coming up with a radical move to start a joint blockchain project. This way none of the big players risks their own reputation.

Another way to announce innovative projects is by strongly focusing on the physical design and digital UX of the innovation because, believe it or not, the mass client judges how reliable something is by the external look of it.

Former HSBC banker Lake joins fintech revolution (Financial News), Rated: B

Spencer Lake, a former HSBC banker who led the group’s global capital financing business, has joined a fintech firm that boasts the UK bank as one of its main clients.

Lake has been named vice-chairman of Fenergo, a Dublin-based firm that makes what it calls client lifecycle management software, according to a statement from the company on April 12.

International

How fintech startups are helping SMEs choose who they do business with (Daily Fintech), Rated: A

According to Xero, 38 percent of small business owners indicate late payments cause them to delay payments to their suppliers, while 15 percent claim this often sees them delaying wage payments to staff, along with other benefits.

62 percent of businesses would not survive more than three months if all invoices went unpaid, while nearly 25 percent wouldn’t last a month.

Xero’s Live Contacts, a partnership with the local arm of credit bureau Equifax (formerly Veda) is one such data driven solution. As part of a paid-up Xero subscription, businesses can now see a credit risk indicator against a contact in their database, helping them to better assess whether to do business or not, or even risk adjust payment terms.

At the other end of the data spectrum, CreditMonk in India allows businesses to add a review of a creditor’s payment behaviour via its platform.

Asia

SINGAPORE-based Marvelstone Capital, which is a data-driven asset management company, is planning to launch its robo advisor platform for family offices in Asia in the third quarter of this year.

According to Cho, the robo advisor platform is being developed with Singaporean fintech startup Smartfolios, which is focused on building next-generation advisory and thematic investment technologies. The robo advisor will be available on desktop and mobile for Marvelstone Capital’s clients.

To give an idea of the market size of family offices in Asia, Cho cites a report that says that overall, the billionaires in the Asian market have about US$400 billion of assets at their disposal, which equates to an average of about US$3.6 billion per individual, which in turn makes all of them potential clients of family office solutions or even owners of single family offices. (Source:

Cho explains that family offices with below US$1 billion assets under management are the underserved family offices.

He adds that second priority countries will be Korea, China, Taiwan and Japan and that the third priority will be emerging markets such as Myanmar and Vietnam.

30 Under 30 Asia 2017: The Top Young Venture Capitalists And Fintech Entrepreneurs (Forbes), Rated: AAA

Val Yap founded PolicyPal — a Singapore-based smartphone app that helps users never miss a premium by tracking all their insurance on one dashboard.

MoolahSense Adds Invoice Financing to List of Services (Crowdfund Insider), Rated: A

Singapore-based MoolahSense, a marketplace lending platform, has added invoice financing as a new product line. The new service will allow SMEs to access financing to address short-term capital needs of up to $15,000. For investors, a nominal interest rate of up to 12% may be earned. An invoice backed loan would mature in 15 to 90 days’ time and investors would be able to receive returns in a relatively shorter period of time.

Authors:

George Popescu
Allen Taylor

Monday November 14 2016, Daily News Digest

lc marketplace loan originations

News Comments Today’s main news: Orchard weekly online lending snapshot. U.S. Small business borrowing falls while delinquencies rise Today’s main analysis : LC loan volume stabilizes. AltFi Data sees equity crowdfunding market shrinking. Today’s thought-provoking articles: OCC considers FinTech charters. Singapore hosts world’s largest FinTech event. Future of FinTech. United States Orchard Weekly Online Lending Snapshot. AT: “Note the […]

lc marketplace loan originations

News Comments

United States

United Kingdom

European Union

Australia

China

India

Singapore

Africa

Israel

International

News Summary

United States

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

This year saw the launch of the first online lending-focused, registered closed-end funds (or ’40 Act funds) in the U.S. It is a significant step that further legitimizes the industry to U.S. investors by providing a way to gain exposure to the loans of multiple originators via professionally managed, SEC-registered investment vehicles. RiverNorth Capital Management, LLC, the investment manager that launched the

LendingClub Loan Volume Stabilizes (The Wall Street Journal), Ratd: A

LendingClub Corp. said its loan volume stabilized after the surprise ouster of its chief executive six months ago, sending shares climbing 15% to their biggest one-day percentage gain ever.

The San Francisco-based loan-marketplace operator reported Monday third-quarter revenue and adjusted per-share earnings that exceeded analysts’ expectations, in addition to a large, new loan-sale arrangement with a unit of one of Canada’s largest banks.

Third Quarter 2016 Results (Lending Club)





Fundrise Launches RSE Capital as Stand-Alone Company (Multi-Housing News), Rated: AAA
Crowdfunding real estate platform Fundrise is spinning off its real estate investment branch, RSE Capital Partners, into a stand-alone company. The new firm will focus on origination, underwriting, investment and management for the company’s eREIT platform. RSE will collaborate with top brokers and real estate firms nationwide, focusing on institutional-level assets, primarily multifamily acquisitions,multifamily development and infill bridge lending.

RSE has already closed several deals, including three with one its first partners, Arlington-basedInsight Property Group. The two companies aim to invest $200 million in D.C. real estate annually.

Five Issues to Watch as OCC Mulls Fintech Charters (Bloomberg BNA), Rated: AAA

The Office of the Comptroller of the Currency could soon decide whether to offer national charters to financial technology companies, and as a Magic 8 Ball might say, “Signs point to yes.”

More concrete signals come from a couple of arcane regulatory moves by the agency in September: A Sept. 13 proposed rule that deals with receiverships for insured national banks, and a Sept. 28 revision of its charters booklet for the Comptroller’s Licensing Manual that addresses possible trust and special-purpose charters for charter-holders lacking deposit insurance.

If and when the OCC unveils its proposal for a fintech charter, here are five things to look for:

One: Who Will Be Covered?
The OCC exercises charter-granting authority for ventures that engage in at least one of the typical banking functions of taking deposits, lending money or paying checks. The lending criterion would take in online platform lenders, for example, but how wide is the “paying checks” qualification?

Two: Capital Requirements
It remains to be seen how the OCC will set capital and liquidity requirements for companies to receive a fintech charter.

Three: Leveling the Playing Field
Banks are worried that fintech companies may gain an advantage if they’re not held to the same standards as the banks.

Four: Application Process
How long will it take to apply for and receive a charter?

Five: Partnerships With Banks
The OCC will be looking to strike a balance between its primary duty to preserve the safety and soundness of the national banks it supervises and its stated intention to promote what it calls responsible innovation.

Will They Use It?
Some fintech companies look to national charters as a way to simplify their operations by, for example, pre-empting the patchwork of state laws that govern lending. But others are skeptical, viewing the concept as just another layer of government regulation.

Marketplace Lending as a Service Startup Blackmoon Secures $ 2.5 Million in Equity Funding (Fintech Finance), Rated: A

Blackmoon Financial Group has secured $2.5 million in an equity funding round that includes Target Global, A&NN Group, Flint Capital, and several private investors. The valuation of the company and the structure of the investment are not disclosed.

Blackmoon will use the funds for the further development of its technological platform and front-end solutions, and for further expanding its presence in the U.S. market, which will be a key growth area in the next year and a half.

Blackmoon makes money by charging investors for getting access to the unique supply of loans that can not be found on other platforms. According to its own data, monthly transaction volume has grown by a multiple of 2.5 since June 2016 and exceeded $5 million in September 2016.

Four Lessons as Rating Firms Look at Marketplace Lenders (American Banker), Rated: A

Whether we like it or not, independent oversight and regulations exist in financial services for a reason: to protect borrowers, lenders and society’s greater economic health. In other words, they help make industries viable. Therefore, as the marketplace lending industry continues to mature, it needs the oversight equivalent of Standard & Poor’s, Moody’s Investor Services and Fitch Ratings.

In 2008, the credit ratings agencies had clear profit incentives. The agencies were paid by the companies issuing debt — a revenue model that often resulted in ratings agencies bending standards in order to gain business. As we contemplate rating agencies for marketplace lenders, we must avoid repeating this past mistake. Marketplace lenders should not pay the agencies in any way.

Rating agencies for marketplace lender-originated loans need IT solutions that calculate and recalculate, automatically and continuously, consumer and small-business loan ratings. At any moment in time, these ratings should take into account all available information on particular loans and bundles of loans in order to deliver the most accurate risk assessments based on real-time market conditions.

While ratings agencies are very valuable, investors should not over-rely on them, as they often did in 2008.

U.S. small business borrowing falls, delinquencies rise (Reuters), Rated: AAA

Nov 1 Borrowing by small U.S. firms slipped in September, and the percentage of firms late on repaying existing loans rose to its highest in nearly four years, data released on Tuesday showed.

The Thomson Reuters/PayNet Small Business Lending Index fell to 128.9 from a downwardly revised 132.8 in August. Measured from a year earlier, it was the fourth straight monthly decline, with the index at its lowest point since January.

Credible Expands Student Loan Marketplace & Announces Partnership With Massachusetts Educational Financing Authority (Crowdfund Insider), Rated: A

Student loan marketplace Credible announced on Wednesday it has formed a partnership with the Massachusetts Educational Financing Authority (MEFA).  The organization will now be offering student loan refinancing to borrowers nationwide through Credible’s multi-lender platform.

Credible users may now be able to access student loan refinancing options provided by six lenders, which are Citizens Bank, College Ave, CommonBond, iHELP, MEFA, and the Rhode Island Student Loan Authority (RISLA).

Fintech’s Most Powerful Dealmakers of 2016 (Institutional Investor), Rated: A

General Atlantic also stressed partnership in leading a $325 million Series E funding late last year for marketplace lending platform Avant, with Korngold joining the company’s board.

Although there is, by definition, a collaborative element in any investment or advisory relationship, the sector that has come to be known as fintech has special needs. The culture of a start-up is very different from that of an established financial institution; even if the latter wishes to be more nimble and embrace new ideas and technologies, its procurement and compliance bureaucracy can get in the way. Hence the emergence of ecosystems designed to lower such barriers. Eighteen-year-old FTV Capital (<a href=” Bernstein and Richard Garman</a>, No. 7) pioneered in this regard with its Global Partner Network, which includes major financial companies that invest in FTV funds and thereby gain insight into new developments.

Citi Opens APIs to Third-Party Fintech Developers (American Banker), Rated: A

The API Developer Hub was launched Thursday to foster collaboration and partnerships between fintech companies and consumer brands. Such portals allow developers to build their own financial services applications and client solutions that easily connect to Citi. Mastercard, Virgin Money and others are already leveraging Citi APIs to create customer solutions.

There are four APIs currently available to developers: one that allows Citi customers to access their account summaries; an authorization API that gives customers secure access to their account data for more streamlined transactions; one that approves access to shared Citi customer profile information for deeper engagement; and the Pay with Points API, which allows an app to accept a customer’s Citi rewards points to pay for their purchases.

10 reasons fintech startups fail (Banking Exchange), Rated: A

My employer, William Mills Agency, has represented hundreds of fintech companies. We’ve seen startups with (in our opinion) marginally acceptable products or services thrive. And we’ve also witnessed companies with (again, in our opinion) incredible ideas fail—miserably.

Here are 10 deadly mistakes fintech startups make, as well as some simple solutions to avoid them.

  1. Mistake 1. Underfunding the startup. Solution: Before I start any do-it-myself project I’ve learned (the hard way) that it’s going to cost me twice as much and take three times as long.
  2. Mistake 2. Underestimating the length of the sales cycle. Solution: If you’re selling fintech to any financial institution— be it small community or money center bank—expect a long, arduous sales cycle with multiple setbacks and delays.
  3. Mistake 3. Not understanding the market. Solution: Too many startups are blinded by their own arrogance. They’ve sold themselves into believing their solution will completely change the way the financial world operates, and that they don’t need to work within existing parameters.
  4. Mistake 4. Failing to devise a sound sales strategy.
  5. Mistake 5. Don’t put all your sales chips on “Bob.”
  6. Mistake 6. Don’t blow your shot with a poor start. Solution: If your organization is still trying to figure out what it is and to whom you’re selling, don’t make it up on the fly.

Read the rest at Banking Exchange.

Nead.co to Release Open Fintech Platform for Investment Banking (Eries News Now), Rated: A

Nead.co, provider of middle market finance and technology consulting solutions will soon be launching a dedicated fintech platform for mergers, acquisitions and investment banking. In preparation for the launch, the company is inviting independent software developers with a keen interest in financial technology engineering to join the company’s ever-growing ecosystem.

Fintech developers are encouraged to join by submitting detailed information regarding the types of applications they intend on building into the platform. If accepted, Nead & Co. management will open up the firm’s API tools for access by engineers who wish to develop into a growing ecosystem of expert financial and technology experts.

The War Between Fintech And Traditional Finance Reaches A Crossroads (News BTC), Rated: A

To put this into perspective, the financial sector has an annual revenue of roughly US$5tn. As is always the case, they want that number to keep growing. To do so, they partner with fintech startups to realise new ideas and improve existing infrastructure. Combining the US$5tn market with a US$20bn fintech industry can lead to exciting developments.

Change is inevitable at this stage. The sooner banks and financial institutions realise this inconvenient truth, the better for everybody. Fintech should not be ignored, and various subsectors of this industry are making waves. Blockchain, Bitcoin, robo advising, and AI are just a few examples of what the future holds. Exciting times are ahead of us, even though we are all cogs in the global financial war machine.

Kabbage Hires Chief Technology Officer and Chief Data Officer (PRWeb), Rated: B

Kabbage®, a pioneering financial services technology and data platform, today announced Amala Duggirala has been appointed Chief Technology Officer, and Rama Rao has joined Kabbage as Chief Data Officer.

Amala Duggirala is highly accomplished in building large-scale, high-performing systems with a keen eye toward exponential business growth. Bringing nearly two decades of experience to Kabbage, she is responsible for advancing the automation and growth of the Kabbage Platform and for implementing strategic information technology and product initiatives to power financial services for organizations worldwide.

NYU Stern Hosts Inaugural FinTech Conference Featuring President and CEO of PayPal (BusinessWire), Rated: B

New York University’s Stern School of Business, the first business school to establish aFinTech specialization for MBA students, held its inaugural FinTech Conference on November 9, 2016. Featuring keynote speaker Dan Schulman (MBA ‘86), president and CEO of PayPal, the conference addressed many critical issues in the industry, ranging from regulation to public policy, equity crowdfunding, marketplace investing and blockchain technologies

81% OF NONPRIME AMERICANS DO NOT OVERSPEND: STUDY FROM ELEVATE’S CENTER FOR THE NEW MIDDLE CLASS (Elevate Email), Rated: A

In the wake of last week’s seismic election, Elevate’s Center for the New Middle Class today issued new research on how underserved Americans maintain their financial health, showing that 81% of nonprime Americans – those with credit scores lower than 700 – spend only what they earn, or less on everyday expenses.

Elevate’s Center for the New Middle Class is a research-focused body that engages and educates the public about the growing needs of individuals who do not have access to traditional credit options. In this study, the Center outlines how nonprime Americans are financially savvy in a number of ways, especially in comparison to their prime counterparts. Additional key findings from the study include:

  • Nonprime Americans check their bank account balances 50% more often than prime
  • Nonprime consumers check their credit scores 40% more often than prime
  • Two-thirds of this group plan for major expenses
  • 67% consider themselves “careful spenders”
  • 72% say they know how to create a budget

“Our research shows the narrative about the New Middle Class being less engaged in their finances is just not the case. In fact, it’s the opposite in many situations,” said Jonathan Walker, executive director of the Center. “Because they have fewer financial options, the New Middle Class clearly recognizes and appreciates the need to be fully aware of their financial position at any given moment.”

“Although most nonprimes spend what they earn or less, little room is left for unexpected expenses. When you are one car repair away from a significant financial problem, you have every incentive to know exactly where you stand financially,” concluded Walker.

United Kingdom

AltFi Data sees UK equity crowdfunding market shrinking in 2016 for first time (SMN Weekly), Rated: AAA

The UK equity crowdfunding market is set to close 2016 with more than £130 million new equity issuance, posting a slowdown in momentum for the first time, according to a report of financial markets analytics provider AltFi Data. The segment is expected to facilitate young companies in the UK raise more than £130 million growth capital in 2016.

The report includes data for all equity crowdfunding in the UK from 2011 (when when the industry was started), covering a total of 955 equity crowdfunding rounds and 751 companies. The data refers to six platforms that offer equity crowdfunding services – Crowdcube, Seedrs, SyndicateRoom, Venture Founders, Code Investing(previously CrowdBnk), and Angels Den, the last one of which was new addition for 2016.

Following are details about the funded volume for first nine months of 2016 (and 2015) of the six UK equity crowdfuning platforms included in the report:

Financial Stability Board: Fintech Firms Not Posing a Risk to Financial System (Crowdfund Insider), Rated: AAA

Secretary General of the Financial Stability Board (FSB) Svein Andresen announced at a Chatham House conference in London earlier this month that Fintech firms looking to disrupt traditional banking and financial systems are not yet posing an immediate threat, according to Reuters.

The FSB’s mission is to promote global financial stability, conduct outreach to non-member countries, and monitor implementation of agreed policies.  Members include the G20 countries and key financial centers — Hong Kong, Singapore, Spain, and Switzerland.

UK FinTech Bridge to China (Finextra), Rated: AAA

Today it is another significant milestone for the UK FinTech ecosystem as the Financial Conduct Authority (FCA) signed the Co-operation Agreement with the People’s Bank of China.

The purpose of this agreement is to provide a framework for co-operation between the parties with respect to promoting innovation in financial services. The Agreement sets out how the parties plan to share and use information to promote innovation in their respective markets.

Bank of England: We Set Up the Fintech Accelerator to Develop Our Practical Experience of Fintech (Crowdfund Insider), Rated: A

In a speech this past week by Charlotte Hogg, Chief Operating Office of the Bank of England, she welcomed the launch of the Bank’s Fintech Accelerator while explaining their mission.

The Bank of England is currently working with the following Fintech firms:

  • BMLL: This machine learning platform provides access to historic full depth limit order book data. The BMLL platform aims to facilitate analysis and anomaly detection. We have agreed to test their alpha version for this Proof of Concept.
  • Threat intelligence: As part of the Bank’s wider information security and threat intelligence work we have partnered with two firms – Anomali and ThreatConnect– that provide innovative technologies to collect, correlate, categorise and integrate security threat data. For this project, we have asked them to offer a solution to consolidate threat intelligence into a searchable repository that can optimise information collation, enrichment and sharing in support of a proactive intelligence-led defence strategy.
  • Enforcd: In this proof of concept, we are using an analytic platform designed specifically to assess and draw out trends on regulatory enforcement action using publicly available information.

UK’s FCA fully licenses crowdfunding platform UK Bond Network (SMN Weekly), Rated: A

Bond crowdfunding platform UK Bond Network said on Wednesday it has obtained a license from the UK Financial Conduct Authority (FCA). Prior to getting fully licensed, the platform operated under an Appointed Representative temporary authorization.

The platform seeks to grow its business and expand its investment solutions. It considers launching new offering investments which would qualify for the Innovative Finance ISA (IFISA), a program for tax-free peer-to-peer (P2P) lending.

Investor Views: “Peer-to-Peer Lending Boosts my Income” (Morningstar), Rated: A

Harman, who lives in West Sussex with his wife, has built up a portfolio of using pension and ISA wrappers over a number of years. More recently he has also invested in peer-to-peer lending.

Harman says: “It certainly isn’t for everyone but I am comfortable with the risks. I get a steady income stream from the money I’ve lent out, currently around 5 to 6% a year.”

Crowdfunding might make you money but it’s not an alternative to savings (Herald Scotland), Rated: A

For one thing, investors have so far not received any return on their capital and, with BrewDog’s exit route not yet articulated, it is unclear when they will.

For Adam Tavener, chair of both Clifton Asset Management and funding platform Alternative Business Finance, it is for this reason that equity crowdfunding should never be seen as an alternative savings vehicle.

European Union

Fintech Golem’s ‘Airbnb’ For Computing Crowdsale Scores $ 8.6M In Minutes (Forbes), Rated: AAA

Golem Network, the first decentralized global market for computing power, raised more than $8.6 million (m) in just 29 minutes on Friday for its Golem Network Token (GNT) and in so doing became the third largest platform ICO (Initial Coin Offering) ever.

Acting and dubbed as an ‘Airbnb for computers’, Polish-based Golem Network is a peer-to-peer (P2P) network with no central server that allows both application owners and individual users (‘requestors’) to rent the resources of other users’ (‘providers’) machines, and be paid in cryptocurrency.

As the third largest ICO for a platform behind Ethereum, a public blockchain-based distributed computing platform ($18m in 42 days) and Waves, a blockchain-powered tokens platform ($16m in 30 days), Golem claims it “substantially lowers” the price of computations to make applications more accessible to everyone.

Denmark establishes FinTech hub (FS Tech), Rated: A

The Financial Services Union Denmark, the City of Copenhagen and the Danish Bankers Association have collaborated to form Copenhagen FinTech – a new association that will develop an ecosystem for FinTech entrepreneurs in the city.

Copenhagen is currently home to a range of FinTech companies, but many believe it needs investment if the city is to establish itself as a hub for innovation. The City of Copenhagen hopes to see growth and jobs as a result of the new efforts – following a study which showed that FinTech has the potential to create 10,000 new jobs in Denmark.

The association is launching, amongst other things, a co-working space under the name Copenhagen FinTech Lab, where entrepreneurs take lodgings and become part of a FinTech environment with sparring from established companies and other entrepreneurs.

Australia

Australian Treasurer Promotes the Benefits of Fintech & Regtech (Crowdfund Insider), Rated: A

At the inaugural Fintech Australia Summit this month, Scott Morrison MP, the Treasurer of Australia, delivered a speech that addressed this “collision” between Regtech and financial innovation.

Regtech, in Morrison’s opinion, can seamlessly integrate into financial firms creating a “compliance by design” environment where risks can be mitigated as everything is monitored in real-time.

Applying Regtech to Fintech  may ease the burden of the highly regulated industry;

“…we cannot allow our financial regulatory framework to act as a handbrake to this innovation. Excessively stringent rules and obligations result in less business, less competition and ultimately worse outcomes for consumers. RegTech can equip us to avoid these outcomes.”

China

Two banks trialling biometric technology under Hong Kong fintech ‘sandbox’ (Reuters), Rated: A

Hong Kong’s banking regulator received applications from two banks to test emerging biometric technologies under a new regulatory regime, Hong Kong Monetary Authority Chief Executive Norman Chan said on Friday.

The banks have applied to test the use of biometric authentication of securities trading, Chan said at the regulator’s first ever financial technology or “fintech” day on Friday.

India

Authors:

George Popescu
Allen Taylor

July 20st 2016, Daily News Digest

News Comments United States A very interesting risk that has not been clearly described so far: the risk that small SMB loans end up being regulated like personal loans. A fascinating read on politics and regulators. Goldman announcing their p2p lender will be live in the fall with $16bil in lending capital from depositors. Goldman […]

News Comments

United States

United Kingdom

India

Singapore

China

  • The take away from Lendit China per Orchard and Lendit Organizer Jason Jones :
    • There continues to be strong interest from Chinese Wealth Management firms to invest in US Online Lending loans
    • Investor interest is focused on making strategic equity investments in all types of global FinTech firms within Online Lending
    • Chinese Marketplace Lenders continue to increase their focus on offering more diversified products to clients including wealth management, insurance, and other financial services
    • Implementing a robust operational infrastructure is widely understood as a necessity required to successfully invest in the US Online Lending industry
United States

Small-Biz Online Lenders Aim to Dodge Consumer-Loan ‘Nightmare’, (Bloomberg DNA), Rated: AAA

Online marketplace lenders would face significantly higher regulatory hurdles if most of their loans to small businesses were reclassified as consumer loans, as the Treasury Department has recommended, an industry representative and a legal expert told Bloomberg BNA.

Officials discussed the need for greater transparency and noted that small-business loans under $100,000 “share common characteristics with consumer loans, yet do not enjoy the same consumer protections.”

The industry is pushing hard to head off the suggestion.

“They’re very smart in being concerned about that,” said Richard Eckman, a partner at Pepper Hamilton LLP in Wilmington, Del. “There are a whole host of consumer laws that apply to loans that are for personal, family and household purposes; that’s sort of the definition of a consumer loan.”

The federal consumer protection law that ranks as the biggest concern of marketplace lenders such as CAN Capital, which cater exclusively to small businesses, is the Truth in Lending Act (TILA).

“TILA, in particular, is onerous,” Eckman, a specialist in marketplace-lending law, said in an e-mail.

On May 3, 16 members of the committee’s Republican majority and three of its minority Democrats, along with House Small Business Committee Chairman Steve Chabot (R-Ohio), sent a letter to Treasury Secretary Jack Lew sounding themes that foreshadowed Sanz’s testimony. The Treasury Department at that time was preparing its report on marketplace lending, and the House members wrote that they wished “to raise concerns with recent comments by public officials that seem to indicate a preference to regulate lending to small businesses and consumers similarly.”

“[W]e believe it is important for the Department to carefully study and understand key distinctions between commercial and consumer lending markets,” the letter said. “Mistaken efforts to conflate these categories would restrict the availability of capital to small business owners.”

“There’s no reason why small businesses shouldn’t have the same protection as consumers,” Lauren Saunders, associate director of the nonprofit National Consumer Law Center, in Washington, told Bloomberg BNA.

“The research has shown that these small-business owners who borrow smaller loans, under $100,000, are not that sophisticated and at times they really don’t understand the fine print, the hidden terms and conditions that we see in the typical fintech loans to small businesses,” she said. “These contracts are very opaque. The fees and terms are hidden in a way that really makes it impossible for the borrower to do any kind of comparison shopping.”

Goldman’s Shot Across LendingClub’s Bow, (Bloomberg), Rated: AAA

There wasn’t a ton to get excited about in Goldman Sachs’searnings report on Tuesday.

Sure, per-share earnings beat analysts’ estimates, but how excited can you get over beating an estimate that dropped like this?

However, there was a tantalizing detail or two offered on the conference call by Chief Financial Officer Harvey Schwartz about the firm’s intriguing efforts to tap into the Main Street customer base. Schwartz said that the bank would roll out its consumer lending platform this fall after surveying thousands of consumers on what they would look for in such a thing. The bank developed one product involving unsecured loans, Schwartz said as way of teaser, telling analysts to standby for more information in the fall.

This may not end up being a big enough business alone to return Goldman’s revenue to record highs, at least not in the short term. Rather, the intrigue lies in its potential to disrupt the disruptors — the online startups that have pioneered the brave new world of peer-to-peer or marketplace lending.

With 20,000 customers opening up new savings accounts on top of the $16 billion in deposits it acquired from General Electric’s online bank in the second quarter, Goldman theoretically should be able to fill in the gaps easily at times when investor demand gets skittish.

Will deposit accounts be the next wave of fintech innovation?, (DailyFintech), Rated: AAA

There’s one sector of finance that really doesn’t get a lot of airtime when it comes to fintech – deposits. Checking accounts, savings accounts, transaction accounts – while they’re the bread and butter of banking, they’ve been relatively untouched since they were first invented. You put money in, and, if you’re lucky, earn a little interest before you take the money out.

Is there an opportunity here for a fintech startup to slice away this part of a bank’s core business, by adding a little flavour to the whole deposit experience?

Serial fintech investor and entrepreneur Peter Thiel certainly thinks there are opportunity in deposits. In January of this year he invested €1M into a German fintech startup Deposit Solutions.

Deposit Solutions is the first open architecture platform for retail deposits in Europe. Among many things, it solves one of the central problems for account holders related to accessing great deposit products – it eliminates the need to switch banks. Instead, a saver requires just one master account with Deposit Solutions and can then pick and choose their deposit product of choice from the Deposit Solutions marketplace.

There are a number of other fintech startups playing in this space, either building the deposits piece from scratch or interfacing into an existing authorized deposit-taking institution. Digit,SmartyPig and Qapital are a notable few. With lending having taken most of the glory to date, opportunities here are getting thin on the ground. Maybe the humble bank account is the next big fintech play.

Bridging the Great Divide: Collaboration Considerations for Banks and Marketplace Lenders, (Lexology), Rated: A

Online Platforms as Chartered Banks

The increasingly close relationship between banks and marketplace-lending platforms, as well as the uncertainty surrounding the “rent-a-charter” model to avoid state usury limits described above, have led to speculation that marketplace lenders may ultimately obtain bank charters. A fundamental issue is whether the equity and institutional investment markets will provide a stable long-term source of funding for the industry. This issue has garnered attention in recent months as leading marketplace-lending platforms have experienced steep declines in their stock prices and as questions have been raised about how lending platforms interact with fund investors and about weak secondary-market trading of asset-backed securities. The question may acquire renewed urgency in light of the governance issues at a leading marketplace lender that recently made headlines, along with its disclosure that the DOJ is now investigating. [5]

An important prudential regulatory concern with acquisitions of bank charters by marketplace lenders is a desire to avoid making the marketplace-lending industry an attractive supplier of brokered deposits, which are an unstable source of capital and may be particularly risky where a bank has inadequate anti-money-laundering controls or is undercapitalized. Regulators also anticipate grappling with the activities of many lending platforms that may be incompatible with partner banks that have charters limiting their activities to those activities that are considered “incidental to the business of banking”—typically insurance and securities work. The edgy innovations of marketplace-lending platforms that use technology in creative ways to marry finance with social media offerings are a particular challenge in this regard.

Will Madden v Midland Disrupt Loan Sales and Platform Lending?, ( National Law Review), Rated: AAA

Although Madden v. Midland applies directly only to cases where a national bank is selling or assigning a loan, the policy underlying the decision to limit the exporting authority under the NBA might also be applied to a state bank’s rate exportation powers under Section 27 of the Federal Deposit Insurance Act (the state bank equivalent to section 85 of the National Bank Act). Secondary market participants and marketplace lenders now wait for the decision from the District Court on remand.  If the court upholds the Delaware choice of law provision, market participants may manage the impact of the Madden v. Midlanddecision by electing a favorable choice of law provision in the underlying debt contract.  That at least will provide an option for continuing to work with national banks despite the Madden case.

Unfortunately, that solution will not work for buyers and sellers of existing loans, although presumably such parties are not too inconvenienced by a limit on the post-assignment interest that can be charged on a loan after substantial interest has already accrued, particularly if they have purchased the debt at a substantial discount.   Other lenders may continue to rely on the state banks’ ability to export interest rates.  In that situation, lenders should choose state banks whose state has a generous interest rate cap and is outside the Second Circuit.

The group impacted most by the Madden v. Midland decision appear to be marketplace lenders who acquire a loan shortly after origination and therefore have essentially all accruing interest at risk of challenge.  One alternative option  adopted by one on-line marketplace lender picking up on the “substantial interest” distinction in the Madden decision, is to require the bank loan originator to maintain an on-going economic interest in all loans after sale and receive certain payments on the loans only when borrowers made payments.

What remains following the Supreme Court’s refusal to hear Madden v. Midland is an outlier Second Circuit on the issue of the “valid-when-made” rule, and the blueprint for how to apply preemption under the National Bank Act as provided by the Solicitor General in its brief, a brief that as noted above clearly considers theMadden v. Midland decision to be wrong.  Unfortunately, until such time as the right case comes along, market participants will have to make adjustments to accommodate the decision as necessary to address its impact on their particular situation.

The Outlook for Fixed Income: Stagnant Prices, Tighter Money, (Enterprising Investor), Rated: AAA

The start of a new credit cycle means that income investors will have to adjust to stagnant bond prices, and new opportunities in credit markets from peer-to-peer lending will be tested by tighter monetary policy, according to David Schawel, CFA.

Returns for fixed-income investors consist of the coupon; the shortening of the bond, known as the roll; and price appreciation. Since the 1980s, falling interest rates have caused existing bonds to appreciate, as their prices increased to match the yields of bonds issued at lower interest rates. Schawel, a portfolio manager for New River Investments, thinks interest rates are nearing a lower bound.

“Most likely we’re not going to be in a 30-year bull market for interest rates falling again,” Schawel told Will Ortel during a recent Take 15 interview.

Schawel cautions fixed-income investors against assuming that bonds will continue to appreciate. Instead, the coupon and the roll will drive returns from bonds. With the roll becoming more important, investors need to pay close attention to the yield curve. Much of the return from bonds will come from the roll while the bond is on the steep part of the curve. Recently, the curve has flattened, reducing the yield premium, as the US Federal Reserve moved to tighten monetary policy.

Schawel sees the rise of marketplace or peer-to-peer lending as indicative of inefficiencies in yield.

30 Best Workplaces sin Finance and Insurance, (Fortune), Rated: B

#23: OnDeck Capital

# of work sites 3
U.S. employees 625
Global employees 638

United Kingdom

Fintech MarketInvoice Attracts m In First ‘P2P Lender’ Major Fundraise Post Brexit, (Forbes), Rated: AAA

MarketInvoice, a 100-strong firm based on the edge of The City in the confines of London’s Silicon Roundabout, has just announced a multi-million investment totalling £7.2 million (c.$9.5m) led by MCI.TechVentures Fund of MCI Capital, a listed Polish private equity group. Sylwester Janik, a senior partner of MCI Capital, a multi-stage private equity group based in Warsaw with nearly two decades of expertise of investing in digital economy companies, has at the same time joined MarketInvoice’s board.

To date the platform has provided £850m (c.$1.11bn at current exchange rate) worth of funding to UK businesses, and the firm is set on path to reach the £1bn mark before the end of 2016. At present the firm provides over £1.5m (c.$2m) per day in cash flow finance to UK businesses via its platform. At present MarketInvoice has a current market share of around 13% in its P2P alternative financing segment.

MarketInvoice, which has seem 100% year-on-year growth over the last three years, typically charges between 2%-3% on invoices handled for clients depending on the amount of the invoice. Businesses can select those invoices they want to finance, unlocking tied-up cash in 24 hours.

“In the wake of Brexit, we think the coming months present a big opportunity for MarketInvoice. Recent intervention by the Bank of England suggests that we might see significant reductions in bank lending.”

Funding Circle SME Income Fund Raises GBP14.5 Million In Placing, (London South East), Rated: AAA

Funding Circle SME Income Fund Ltd on Wednesday said it has raised GBP14.5 million via a share placing.

The London-listed closed-ended fund, set up to invest in loans originated through peer-to-peer lending marketplace Funding Circle, said it had issued 14.3 million shares at 101.53 pence per share.

Shares in Funding Circle SME were untraded on Wednesday, having last traded at 98.00p.

The new funds from the share placing will be used to back investment plans.

Can it really be “business as usual”, (Alt Fi), Rated: AAA

Funding Circle co-founder James Meekings said “the process of leaving the European Union will take two years and there will be no immediate change to Funding Circle’s day to day operations”.

A few weeks ago, AltFi Data cut its projection for 2016 UK origination by 14%, after the £840m originated in Q2 2016 became the first quarterly volume figure ever to fail to eclipse the sum originated in the preceding quarter.

Matthias Knecht quit Funding Circle Continental Europe at the end of June. Knecht was a member of Funding Circle’s global leadership team and a former co-founder of Zencap, a peer-to-peer lending outfit which Funding Circle acquired in October 2015. An article in Gründerszene suggested that a conflict had arisen between Knecht and Funding Circle CEO Samir Desai over the allocation of resources.

LendInvest, the UK’s largest marketplace for real estate loans, has also been making changes. In the immediate aftermath of the Leave vote, LendInvest tightened its lending criteria for loans worth more than £3m, adjusting the cap on LTVs for these loans to 65%. The company has also temporarily paused lending on new second charge applications.

Funding Circle CEO Samir Desai described 2015 as the year in which “it looked like we were turning water into wine”. He described 2016, by contrast, as a year for getting heads down, and for getting on with building business.

Lately the Wall Street Journal has been set to attack mode. Its coverage of the US marketplace lending sector has become almost exclusively cynical. The Times, The Telegraph and This is Money covered the recent insolvency and subsequent acquisition of the business lender FundingKnight. How many other news items in the history of the peer-to-peer lending industry have enjoyed that level of attention in the national press? Not many!

Ben McLannahan, US Banking Editor at the FT, aptly summed the whole thing up when he posted on Twitter saying “#LendingClub = have we hit the trough of disillusionment?” He was referring to something called the Gartner Hype Cycle, which is an attempt to chart the typical growth trajectory of disruptive technology companies.

UK firm claims largest ever P2P loan, (Finextra), Rated: A

UK-based Nucleus Commercial Finance claims it has made the largest ever P2P loan to date following a £14.5 million financing facility offered to UK steel stockholder Industrial Metal Services (IMS). The company has lent more than £400m to date and Shah claims that 90% of this has already been pad back with just £5,800 incurred in bad debts.

P2P lender launches new website, (Bridging and Commercial), Rated: A

The new BridgeCrowd website features a fully online view of the current live and historic loan book, a loan performance update system and an E-Wallet, where investors can place capital into loans and manage their account and interest.

The BridgeCrowd has launched a new website with added features following strong growth over the last 18 months.

Bridge Crowd offers 68% LTVs across residential owner occupied and buy-to-let properties.

Zopa names Ronen Benchetrit CTO, (Finextra), Rated: B

The UK’s oldest peer-to-peer lending service Zopa, has today announced that Ronen Benchetrit will become the company’s new Chief Technology Officer (CTO) in a strategic hire for the fintech business.

Most recently, Ronen served as CTO for leading online gaming operator PokerStars. In this role, Ronen was responsible for the provision of the areas of technology and for management of the company’s product roadmap, ensuring the quality, reliability and security of external and internal systems, networks and platforms.

India

LenDenClub Launches Automated P2P Lending Platform Adhering to Proposed RBI Guidelines, (PR Newswire), Rated: A

LenDenClub has launched its new version of P2P lending platform with features such as end-to-end automation of lender-borrower transaction cycle right from registration, document verification, credit analysis, transaction matching to report generation. An algorithmic-based program, built based on artificial intelligence, will be used for reviewing borrower’s creditworthiness. For the company, the upgradation of P2P platform will accomplish a major milestone and prepare them for payment and digital signature automation to bring 100% automation in lending process through right technology for borrower identification, data collection, digital signature usage, payment automation, etc.
The company had successfully raised seed funding recently.

Singapore

Overview of the Regulatory Framework for P2P Lending and Equity-based Crowdfunding in Singapore, ( P2P Banking), Rated: AAA

From the document published by the MAS on Lending-based Crowdfunding – Frequently Asked Questions (FAQs)[11], generally, the operation of P2P lending is restricted by MAS under the Securities and Futures Act (Cap. 289) (SFA) and the Financial Advisers Act (Cap. 110) (FFA).

Specifically, the P2P lending business needs to prepare and register a prospectus with MAS in accordance with Section 239(3) of the SFA. In addition, not only the registration of the prospectus but also the P2P lending platform need to follow the licensing requirements, particularly, the P2P lending business which fall within the scope provided by MAS needs to hold a Capital Market Services (CMS) license.

From the document, MAS states in paragraph 10 that “ …Platform operators should now ensure that the participants on their platforms are aware that each lender has to lend at least $100,000 if the borrower is to fall within the Promissory Note Exclusion. Offers of consolidated promissory notes commenced after the date of these FAQs must comply with the Prospectus Requirements” This means, that the P2P lending platforms, which previously used a single promissory note issued by the borrowers, need to apply for a license, if they still want to proceed their lending business; however, as provided in the MAS document, the removal of the Promissory Note Exclusion will be effected after the amendment of SFA.

This will affect many of existing P2P lending platforms such as MoolahSense and Capital Match which have the main function to help businesses to find loan from investors because some of P2P lending platforms are using a promissory note exemption without a Capital Market Services (CMS) license; however, MAS will make it easier for licensed P2P platforms. Therefore, a small offer exemption in accordance with the aforementioned law might be used by many P2P lending platforms.

China

Orchard Platform’s Jeremy Todd Shares Lang Di Fintech Experience Highlights, (Crowdfund Insider), Rated: AAA

  • There continues to be strong interest from Chinese Wealth Management firms to invest in US Online Lending loans
  • Investor interest is focused on making strategic equity investments in all types of global FinTech firms within Online Lending
  • Chinese Marketplace Lenders continue to increase their focus on offering more diversified products to clients including wealth management, insurance, and other financial services
  • Implementing a robust operational infrastructure is widely understood as a necessity required to successfully invest in the US Online Lending industry

Increased interest in US Online Lenders from Chinese investors and notable US-Chinese partnerships such as those between DriveWealth and CreditEase, Robinhood and Baidu, and Saxo Bank and Lufax — that further emphasize the importance of this series of events.

Author:

George Popescu
George Popescu