Thursday February 15 2018, Daily News Digest

Growth of asset-backed securities

News Comments Today’s main news: SmallBiz Loans top lender for SBA 7(A) loans under $350K. University of Huddersfield lens to over 2K small businesses through Funding Circle. Assetz Capital has over 2K IFISA investors, more than 10M GBP in ISAs. Mintos surpasses $500M in three years. Monzo approved to bank in Republic of Ireland. Today’s main analysis: The growth […]

Growth of asset-backed securities

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United States

SmartBiz Loans Surpasses JP Morgan Chase as Number One Provider for SBA 7(a) Loans Under 0,000 (BusinessWire), Rated: AAA

SmartBiz Loans, the #1 SBA marketplace and bank-enabling technology platform, is pleased to announce it has outpaced a number of national banks, including JP Morgan Chase, to become the top facilitator of SBA 7(a) loans $350,000 and less for the 2017 calendar year. Previously, SmartBiz was number one excluding 7(a) Express loans. SmartBiz provides for SBA 7(a) loans through its network of eight partner banks that participate in the SmartBiz marketplace and license software from SmartBiz to automate their underwriting and origination of SBA loans referred from SmartBiz. The SmartBiz Loans SBA marketplace matches small business customers with the right partner bank to increase the likelihood of approval, while also making small business lending more efficient for banks.

Through its various SBA-preferred lending bank partners, SmartBiz facilitated $329 million in funded SBA 7(a) loans $350,000 and less for the 2017 calendar year, a 1.5x increase over calendar year 2016. The data used is based on SBA quarterly lending data for calendar year 2017 (data from October 2017 through December 2017 was released in January 2018). During calendar year 2017, JP Morgan Chase generated $322 million in SBA 7(a) loans $350,000 and less, ranking second on the list. In SBA FY 2016, SmartBiz became the first technology marketplace to claim the number one spot for SBA 7(a) loans $350,000 and less excluding 7(a) Express loans.

MARKETPLACE LENDING (Diamond Hill), Rated: AAA

According to the Securities Industry and Financial Markets Association (SIFMA), ABS is a $1.4 trillion market as of September 30, 2017 which has grown substantially since its emergence in the mid-1980s (see chart below). The size of the market peaked in 2007 leading up to the Financial Crisis and subsequently began a decline post-Crisis as issuance was greatly reduced and outstanding deals continue to pay down. Only more recently has the market begun to rebound as it expands beyond the traditional categories.

Source: Diamond Hill

One of the newer categories of securitization is marketplace lending, which originated with a British firm, Zopa, in 2005.

Source: Diamond Hill

The marketplace lending industry offers a significant yield advantage for a variety of reasons. First, some issuers opt not to pay a Nationally Recognized Statistical Rating Organization (NRSRO) such as S&P, Moody’s, or Fitch for an official rating, which can drive yields higher to compensate for the lack of official rating that some investors require. For managers willing to conduct internal research and apply their own internal rating methodology, the excess yield offered from these non-rated securities can be quite attractive. Additionally, a large percentage of marketplace lending deals are coming to the market issued under Rule 144a, which provides a mechanism for the sale of privately placed securities that do not have, and are not required to have, an SEC registration. These bonds traditionally come with a higher level of yield compensation since they are not permissible for some investors.

 

Are feds slow followers? (Banking Exchange), Rated: A

Can banks stay up with changing times if their regulators don’t?

In a recent survey, nearly eight out of ten bankers said they need new strategies, lines of business, or methods to remain competitive in a rapidly changing environment. That finding was reported in the first of three articles, of which this is the third, covering results from the Future Forces in Banking 2018 survey, conducted by CenterState Bank Correspondent Division, CS Consulting Group, and Banking Exchange.

Source: Future Forces in Banking 2018
Source: Future Forces in Banking 2018

LendingClub IRAs: What You Need to Know (LendingClub), Rated: AAA

Did you know that half of households age 55 and older have no retirement savings at all?

Q: What is the initial investment?

A: There is a required initial deposit of at least $1,000. Once an account is funded, there is a $25 minimum investment per Note.

5 money mistakes that can kill the love (CBS News), Rated: B

One place to start: your potential partner’s credit score. Americans with higher credit scores are 14 percent more likely to find love within the next year compared with singles who have scores 100 points lower, the Federal Reserve found in a 2015 study.

Perhaps more important for long-lasting love, couples with similar credit scores are more likely to stick together, the Fed found. That could reflect a shared outlook about financial management and obligations.

Having a lousy credit score. Men and women agree that a low credit score is a turnoff, according to Affirm. A majority of those with scores above 750 — considered to be a good score — take responsibility for paying bills, compared with only 37 percent of those in the subprime range.

Mobile-First Mortgage Solution StreamLoan Secures $ 2MM Seed Capital Round to Re-Imagine the Home Purchase Process (PR Newswire), Rated: A

StreamLoan, a tech innovator focused on bringing mortgage lenders into the mobile-first era, has secured a $2 Million seed capital round of funding to continue to drive change with its enterprise lending customers and partners.

Fannie taps Blend to expand Day 1 Certainty’s digital mortgage options (National Mortgage News), Rated: A

Fannie Mae is doing more to expand its list of Day 1 Certainty report suppliers, naming Blend as the first online point of sale system to supply asset validations.

More could follow. Point of sale system Roostify, for example, is on Fannie’s list of prospective report suppliers, and its approval as a supplier of asset verification reports is “coming soon.” Three other vendors — BankVOD, LendSnap and Quovo — have the same status. In addition, technology vendors FinLocker, Plaid and PointServ are working on asset validation pilots with Fannie.

 

Using a 401(k) loan for a home down payment (Bankrate), Rated: A

While the vast majority of Americans would like to own a home, nearly 70 percent of potential buyers feel that a down payment is the greatest obstacle to making that a dream a reality.

According to the Employee Benefits Research Institute, 53 percent of 401(k) plans include a loan provision that allows participants to borrow against their savings. With a 401(k) loan, you can borrow up to half of your account balance or $50,000, whichever value is smaller. So if you had a balance of $70,000 you could borrow up to $35,000; with a balance of $170,000, you could borrow up to $50,000.

‘Am I about to overdraft?’ Wells app predicts consumer behavior (American Banker), Rated: A

The bank’s new feature, which mines account information, will let mobile bank deposit customers take action with their accounts, such as transfer money from savings to checking if an overdraft fee seems likely. The bank said there are 50 different messages a customer can receive.

If someone wants to know where he’s standing before a negative outcome happens, the mobile app seems to be the best bet for easy access to the information.

House Backs Bill That Would Benefit Fintech Partnerships With Banks (WSJ), Rated: A

The House on Wednesday approved a bill that would make the resale of high-interest loans more attractive to third-party buyers such as debt collectors—and bolster fintech firms’ partnerships with banks.

The bill passed 245-171. Nearly all Republicans voted for the measure, while Democrats were divided.

The legislation would ensure that loans retain the original interest rate issued by a bank, even if they are sold to nonbanks, which unlike nationally chartered banks are bound by state interest-rate caps. The bill is a response to a 2015 ruling by the Second U.S. Circuit Court of Appeals that affects loans taken out by residents of New York, Vermont and Connecticut, the three states within the court’s jurisdiction. The Supreme Court had declined to review the case.

iCapital Network Named Top Fintech Firm by Forbes (Business Insider), Rated: B

iCapital Network, the financial technology platform democratizing alternative investments for high-net-worth individuals and their advisors, announced it has been selected as a top fintech firm in the 2018 Forbes Fintech 50 list.

Virginia Attorney General Announces Settlement with Online Lender (JD Supra), Rated: B

Under the terms of the settlement, the lender has agreed to pay back $359,811 in refunds to 1,161 Virginia consumers, and to forgive $2.3 million in outstanding interest charged to over 2,600 consumers.  The defendant also agreed to pay Virginia a $10,000 civil penalty and $20,000 for its costs of investigation and enforcement.  The settlement also permanently​ enjoins the online lender from misrepresenting its license status, interest rates, and fees.

United Kingdom

University of Huddersfield Lends to More Than 2,000 UK Small Businesses through Funding Circle Partnership (Crowdfund Insider), Rated: AAA

Could more banks team up with P2P platforms? (Specialist Banking), Rated: A

Portuguese bank Banco BNI Europa recently partnered with crowdfunding platform Fellow Finance to invest in the European SME loan market.

Last year, mobile banking platform Revolut teamed up with Lending Works to offer instant credit through P2P finance.

Government-backed British Business Bank has supported P2P finance since March 2014, when it announced a partnership with lender Funding Circle.

The alliance saw £40m of investment to support further lending to SMEs via the P2P platform.

In 2015, Zopa announced a partnership with Metro Bank, whereby the challenger bank could lend to UK consumers via the platform.

Frazer Fearnhead, CEO at the House Crowd, believed that as the P2P market matured, there would be more institutional and alternative lender partnerships.

Assetz Capital Reports Over 2,000 Investors Have Registered For An IFISA, More Than £10 million Invested in ISAs (Crowdfund Insider), Rated: AAA

UK-based online lending platform Assetz Capital announced on Wednesday that over 2,000 investors have registered for an Assetz Capital Innovative Finance ISA (IFISA) since its launch, surpassing the 2,000 accounts opened across the entire peer-to-peer (P2P) industry in the 2016/17 tax year. The online lender explained more than £10 million has already been invested in those Assetz Capital ISAs.

Open Banking: Opportunity or Dead on Arrival? (The Financial Brand), Rated: AAA

The consumer always decides: the potential of Open Banking will only be realized if it is understood and used by the consumer.

Security or scare-mongering?

It’s about security, various surveys say. In a post-Equifax data breech world, the thought of a third party accessing financial data simply won’t fly. Therefore, we need strong authentication to combat these concerns. All true – this will play valuable a role and help reassure the public that serious thought has gone into how new services will be delivered.

Communication of Benefits Needed

This reinforces that any new service created will need to provide a benefit not already received and will need to clearly communicate those benefits. Users will need to be incentivized and inspired to use these services.

Not Just in the UK: Open Banking Globally

While Open Banking is a UK phenomenon now, it is a concept that will spread globally. As in the UK, regulators will be playing catch-up, but have an important role of setting guardrails around data-sharing and helping with communication.

More fintech firms embrace Starling’s Marketplace (Fintech Futures), Rated: A

UK challenger Starling Bank’s in-app Marketplace has got more love and attention with a brace of new partners.

The new group of partners includes the digital pension provider PensionBee, digital investing service Wealthsimple, mortgage broker Habito and Kasko travel insurance in partnership with AXA.

The moment of truth for marketplace lending (Deloitte), Rated: A

Marketplace lenders (MPLs) have emerged in a unique environment of depressed interest rates.

In fact, well into the second decade of marketplace lending, the price advantage of MPLs is highly debatable.

As interest rates rise, we might find that MPLs true advantage over incumbents lies not in price, but in user experience, and their ability to serve previously unserved parts of the market.

Rising interest rates could begin to place more strain on loan books, and so it’s time for MPLs to start thinking hard about loan book management. One route could be to use supply chain partnerships to become more sophisticated at managing a scaled loan book.

Another fintech sector could be succumbing to profitability struggles (Business Insider), Rated: A

Despite the level of innovation in fintech, startups in many sectors of the industry — from digital wealth management to alt lending — have been discovering that finding the right business model to attain profitability is a major, and for some insurmountable, challenge.

Now, this hurdle seems to have struck a relatively nascent, and to all appearances, booming sector — mortgage tech — as news this week showed. Burrow, a UK-based mortgage tech startup, told TechCrunch that it’s pivoting from a B2C to a B2B model in the face of high customer acquisition costs.

Source: Business Insider

How to safeguard your money from inflation (The Telegraph), Rated: B

The Consumer Prices Index (CPI) measure of inflation fell from 3.1% in November to 3.0% in December but remains well above the government’s 2% target. According to research by financial website Moneyfacts.co.uk CPI averaged out at 2.74% in 2017, which means it was three times as high as the average cash individual savings account (ISA) rate of 0.93%. Despite the fact that real returns on cash ISAs are negative, more than £270 billion was languishing in these accounts at the end of last tax year.  This lack of return on traditional savings has resulted in many individuals seeking out professional financial advice by attending wealth seminars, to stay fully informed on all available ways to manage their money and make beneficial financial decisions.

The average stocks and shares ISA returned growth of 11.75% in 2017, according to Lipper data, more than 10 times the return provided by the average cash ISA.

China

‘Self-inspection’ campaign looms for China’s online lenders (Financial Times), Rated: AAA

Among the data not displayed, however, is the amount the group is borrowing on China’s Rmb1.53tn asset-backed securities market, where it is the largest borrower, accounting for 13.7 per cent of the total, according to UBS data.

Only 40 per cent of 1bn Chinese adults have a credit history with a traditional financial institution, says Jason Bedford, an analyst at UBS in Hong Kong. At the end of October, peer-to-peer lenders accounted for Rmb 1.2tn in outstanding loans, up from almost zero in 2014, he adds.

Despite Rapid Growth, Hexindai Fails to Thrill Investors (Capital Watch), Rated: A

With headquarters in Beijing, Hexindai (Nasdaq: HX) said its revenue grew to $43.3 million during the third fiscal quarter ended Dec. 31, representing an increase of 576 percent from the third quarter a year earlier. Net income was $26.9 million, or 52 cents per American depositary share, from $929,762, or 4 cents per share, in the year-ago period.

The company’s total loan volume that it facilitated rose 187 percent to $388.7 million and the number of borrowers reached 32,417, an increase of 285 percent compared with the year before, the company said. In addition, the gross billing ratio of unsecured loans, which made up for 100 percent of loans in the period, rose to 12.1 percent from 7.4 percent a year earlier.

Looking ahead, Hexindai said it expected to report total loans facilitated between $1.22 billion and $1.24 billion for its fiscal year ended March 31. Net revenue was expected come in between $107 million and $109 million, with adjusted net income ranging from $62 million to $64 million, the company said.

Source: Capital Watch
European Union

Mintos Online Lending Marketplace Surpasses $ 500 Million in Just Three Years (Crowdfund Insider), Rated: AAA

Mintos, an online marketplace that provides individuals with a simplified way to invest in loans originated by a variety of alternative lending companies around the world, has announced a new milestone having topped the half a billion euro mark in cumulative investments by investors.

Mintos is the leading player in the peer-to-peer lending market in continental Europe with 39% of market share. About € 45 million is funded every month.

Monzo given go-ahead to ‘passport’ banking licence to Republic of Ireland (TechCrunch), Rated: AAA

Monzo, one of a number of “challenger” banks in the U.K. aiming to re-invent the current account, has announced the first step in its plans for international expansion with news that it has regulatory approval to operate in the Republic of Ireland.

Fintech Won’t Keep the Loan Sharks from the Door (Bloomberg Gadfly), Rated: A

“There can’t be all this smoke without some fire,” lawmaker Andrew Tyrie complained at a 2014 hearing into whether Royal Bank of Scotland Group Plc mistreated 5,900 business customers. For incendiary material, how about a leaked internal memo suggesting clients should be given enough rope to “hang themselves?”

International

Terrified Of Bitcoin, Banks Forced To Innovate For The First Time In 40+ Years (ValueWalk), Rated: AAA

Yesterday morning, several banks in Australia started rolling out a new payment system they’re calling NPP, or “New Payments Platform.”

And rather than funds transfers being restricted to the banks’ normal business hours, payments via NPP can be scheduled and sent 24/7.

You can also send money via NPP to mobile phones and email addresses. So it’s a pretty robust system.

Starting late last year, though, US banks very slowly began to roll out something called the Real-time Payment system (RTP), which is similar to what Australian banks launched yesterday.

And beyond the US and Australia, there are other examples of banking systems around the world joining the 21st century and making major leaps forward in their payment system technologies.

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Top Innovators in Digital Banking (LendIt), Rated: A

Thank you for downloading The Top 19 Innovators in Digital Banking e-book. You can view your copy here.

Why Investors Shouldn’t Miss Genie ICO (Global Coin Report), Rated: A

According to the second largest professional services firm PwC, citing Morgan Stanley, there are currently more than 200 lenders in the US that provide their services online. The volume of this marketplace at the global level is expected to reach $290 billion by 2021, with Asia being an emerging market. It means that people want alternative lending channels besides traditional banks.

Australia/New Zealand

Cryptocurrency education not regulation the way to go (scoop), Rated: A

CEO of New Zealand’s largest peer-to-peer mortgage lender Southern Cross Partners, Luke Jackson, says that despite what some governments and regulatory bodies may say or do, cryptocurrencies are a technological marvel which, like peer-to-peer lending, is providing a fintech alternative to bank dominance and trying to resist it is probably futile.

India

 

Spice Mobility’s devices business losses increase 53.8% to Rs 10 crore in Q3FY18 (Medianama), Rated: A

Last month, Spice Digital, a subsidiary of Spice Mobility, invested Rs 25 crore in peer-to-peer (P2P) lending company AnyTimeLoan, which provides unsecured personal loans, K12 education loans (for primary & secondary school tuition fees), and MSME business loans.

Note that currently, Spice Mobility holds a wallet license, a license to set up as an operating unit under the Bharat Bill Payment System, license to operate as a GST Suvidha Provider, and Aadhaar Enabled Payment System (AEPS) provider. Given that Spice Mobility’s services revenue has been on a steady decline, it will interesting to keep a watch on how the company decides to proceed from here on.

P2P Platform IndiaMoneyMart Empowers Borrowers to Pay Off High (BW Business World), Rated: A

Unpaid credit card dues are one of the costliest loans an individual can take and if one doesn’t have the ability to clear these dues, the hefty interest rates charged accumulate, putting stress on the ability to pay back and also affects the borrowers’ credit card score. So, what does one do when they do not have a great credit score of 750 or more but are in need of an unsecured loan? What’s the best offer they can opt for to secure themselves? Is there a way they can come out of this debt trap?

To help manage the financial crisis, P2P lending platform allows the prospective borrower to list their loan requirement to its lenders. They offer collateral free personal loans up to INR 10 Lakh for a period of 3 years or less at affordable interest rates. Unlike credit cards, which charge exorbitant interest rates of up to 50% annually, the loans at such digital P2P platforms are quite affordable and empower the borrowers to avail loans at interest rates of their choice.

Recent recognition of P2P lending platforms as NBFC-P2P by RBI’s regulation has further instilled the confidence in the lending community to disburse loans and receive fixed monthly returns to earn 20-25% or more annually.

Asia

Thailand’s First ICO … But The Next Will Have To Wait (ICO Examiner), Rated: AAA

Cryptocurrency enthusiasts in Thailand have mixed feelings today as their first homegrown initial coin offering, JFin coin, is enjoying a successful pre-sale but, at the same time regulators, have put the brakes on any further ICOs.

While JFin have already achieved over 80% of hard cap in pre-sale, which was originally due to last until the end of the month, the central bank of Thailand has now requested all financial organisations to cease facilitating cryptocurrency transactions.

JFin is a decentralised peer to peer lending system and comes under the umbrella of companies run by Jay Mart PCL who are listed on Thailand’s Stock Exchange.

Canada

Inside Paytm’s international expansion plans (Tearsheet), Rated: AAA

The startup, whose peer-to-peer and consumer-to-business mobile payments app currently boasts 300 million customers in India, aims to onboard millions more around the world. As a first step, it’s using Canada as a testing ground.

The startup, whose peer-to-peer and consumer-to-business mobile payments app currently boasts 300 million customers in India, aims to onboard millions more around the world. As a first step, it’s using Canada as a testing ground. The startup, which has had a Toronto-based tech team for three years, has been getting to know its Canadian demographic for the past year. Now, it’s zeroing in on digital utility payments.

To rectify this, Paytm has signed on thousands of Canadian bill payers, and it incentivizes customers with cashback offers of up to 3 percent. In addition, Sharma said he hopes to bring on board consumers who don’t make digital bill payments — which he said is as much as 30 percent of Canadian consumers. Paytm currently has 100,000 Canadian customers, according to the company.

Blockchain and Cryptocurrency Feature at Fintech and Funding Conference (Investor Ideas), Rated: B

The National Crowdfunding & Fintech Association of Canada announces Canada’s leading financial technology and funding conference, FFCON18. The conference will be held March 5-6, 2018 at the Design Exchange in Toronto.

Authors:

George Popescu
Allen Taylor

Friday December 15 2017, Daily News Digest

mortgage tech

News Comments Today’s main news: Walmart partners with Even, PayActiv on employee financial wellness. Moody’s says some consumer ABS sectors will be weaker next year. LendInvest has $1B in funds under management. Yirendai’s investment in Lion Rock amounts to $50M. LexinFintech kicked off IPO yesterday. Crowd Genie to launch ICO. Today’s main analysis: Why mortgage tech is finally taking off. Australian […]

mortgage tech

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United States

Walmart Teams Up With Fintech Startups Even & PayActiv to Launch Financial Wellness Services For Associates (Crowdfund Insider), Rated: AAA

On Wednesday, retail giant Walmart announced it has teamed up with fintech startups Even and PayActiv to provide a suite of new financial wellness services for its more than 1.4 million associates nationwide.

Goldman Sachs’ and Morgan Stanley’s Big Growth Opportunities (The Motley Fool), Rated: AAA

Goldman Sachs (NYSE:GS) and Morgan Stanley(NYSE:MS) are both trying to expand their businesses into more traditional areas of consumer banking, such as consumer loans and mortgages.

Matt Frankel: Out of all the major unsecured lending platforms — Lending Club, things like that — Marcus was the quickest one to get to $1 billion in loan volume.

The interest rates people have gotten are more competitive than the others, because they can afford to run it at slightly more compressed margins than, say, a Lending Club.

Frankel: Morgan Stanley’s robo-advisory platform just launched. So that’s one way they’re trying to branch out into more traditional areas of banking and investing.

Just to throw a couple of figures out there, Morgan Stanley’s wealth management business, which is not the highest-margin business, which is why they’re not as efficient as Goldman, their wealth management business, they’re margin has gone from 9% to 22% since 2010.

Morgan Stanley estimates that their clients still have about over $2 trillion worth of assets with other asset managers, and they’re trying to bring some of that in.

Nearly 5 Million Americans in Default on Student Loans (WSJ), Rated: AAA

The number of Americans severely behind on payments on federal student loans reached roughly 4.6 million in the third quarter, a doubling from four years ago, despite a historically long stretch of U.S. job creation and steady economic growth.

In the third quarter alone, the count of such defaulted borrowers—defined by the government as those who haven’t made a payment in at least a year—grew by nearly 274,000, according to Education Department data released Tuesday.

The total number of defaulted borrowers represents about 22% of the Americans who were required to be paying down their federal student loans as of Sept. 30. That figure has increased from 17% four years earlier.

 

Mortgage Tech 101: What It Is & Why It’s Taking Off Now (CB Insights), Rated: AAA

By the end of 2017, nearly $1.8T worth of mortgages will have been originated in the United States this year, according to government-backed mortgage lender Freddie Mac.

Yet, despite the size of the mortgage industry, the space still hasn’t digitized. Originating, processing, and underwriting a home loan with a large bank lender still requires faxes and snail mail and take almost as long as it did 20 years.

Source: CB Insights

Driver 1: New lenders increase the competition

Non-bank lenders are becoming much bigger players in mortgages. In 2011, three banks accounted for half of new mortgage loans, according to the Washington Post. As of September 2016, that share dropped to 21%.

In 2011, just two of the top 10 biggest lenders were non-bank lenders. In 2016, non-bank lenders like Quicken Loans accounted for six of the top 10.

Driver 2: Incumbents are looking to improve their technology

At an average cost of $7,000, originating and processing a loan takes over 400 pages and more than 25 humans working hundreds of hours across 50 days. Of the total, approximately $5,000 can be attributed to human processing costs.

Driver 3: Individuals’ debt burden forces them to find alternative lenders

Eighty percent of millennial renters want to buy a single-family home or apartment, but 72% cannot afford to, according to survey data from Apartment List.

Source: CB Insights

Although total US homeownership has risen to 64% as of Q3’17, when examined by age group, the percentage of homeowners under 35 years old is only 36%. This is down from 44% in 2004.

Some consumer ABS sectors to have weaker collateral performance due to pockets of borrower stress and weaker underwriting (Moody’s), Rated: AAA

The anticipated continued expansion of the US economy into 2018 will support overall collateral performance of consumer asset-backed securities (ABS), according to Moody’s Investors Service. However, growing financial strains among some pockets of borrowers and loosening of underwriting by lenders will result in slightly weaker collateral performance for several categories of consumer ABS, including transactions backed by auto loans, credit cards and unsecured personal loans.

Amid further declines in automobile sales and used vehicle prices, Moody’s says issuers will generally maintain the steady collateral quality in their 2018 auto loan and lease deals, with incremental weakening in certain collateral attributes such as loan terms. New private student loan ABS, meanwhile, will likely continue to have strong credit quality and performance.

An Open Internet is Essential for Financial Inclusion (Huffington Post), Rated: AAA

The Federal Communications Commission (FCC) voted today to dismantle internet “net” neutrality: a vote that determined whether the internet should be treated like a public good or service or whether it should be treated like a product.

Another consequence of dismantling net neutrality has to do with undermining financial inclusion and the impending technological revolution of financial services. An array of financial technologies—online and mobile technologies referred to by their shorthand “fintech”—is heralded with the potential to expand access to financial services to underserved households and in underserved communities.

Internet connectivity is required for online and mobile transactions and many lower-income households alreadycannot afford internet service capable of making these transactions.

Online and mobile banking could become less reliable if internet service companies adjust connectivity speeds. Banks are increasingly shifting their products and services online and the number of bank branches is projected to decline by 20% over the next decade.

Prosper brings on JPM Chase veteran as board member (GlobalCapital), Rated: A

Online lender Prosper announced the appointment of Claire Huang as a board member this week as the company looks to enhance its product offerings in 2018.

Huang’s appointment was effective as of Tuesday, according to a company statement. Prior to joining the San Francisco-based lender’s board of directors, Huang was the first ever chief marketing officer at JP Morgan Chase.

INSIKT raises $ 50 million to lend to low-income communities (TechCrunch), Rated: A

An estimated 45 million Americans don’t have a credit score and others have trouble bringing up their scores, even if they are in a better financial position than in years past.

And after facilitating 125,000 loans in three years, INSIKT is raising $50 million to expand. The round is led by Grupo Coppel, with participation from FirstMark Capital, Revolution Ventures and Colchis Capital. INSIKT has raised $100 million to date.

INSIKT has built what they believe is a better alternative to payday loans, breaking up payments into smaller installments. Its white-label loan processing service is used in over 600 banks and credit union locations across California, Texas, Illinois and Arizona.

Kasisto Raises $ 17M in Series B Funding (Finsmes), Rated: A

Kasisto, the NYC-based creator of a conversational AI platform for finance, raised $17m in Series B funding.

The round was led by Oak HC/FT with participation from existing investors Propel Venture Partners, Two Sigma Ventures, Commerce Ventures, Mastercard and Partnership Fund for New York City.

Consumer lending 2017: Bold bets and strategic exits (American Banker), Rated: A

With the economy continuing to improve and household wealth growing, total consumer debt has increased in 12 consecutive quarters and hit a record $12.8 trillion in the second quarter, according to the Federal Reserve Bank of New York. And, for the most part, consumers are staying on top of their bills. The American Bankers Association said recently that the midyear consumer delinquency rate held steady around 1.56%, which is below the 15-year average of 2.16%.

Banks searching for growth pushed and pulled on a variety of consumer lending levers this year. Personal loans, particularly those offered through digital channels, were especially popular as banks aimed to emulate online lenders’ speed and efficiency.

How Twine, John Hancock’s robo-adviser tool, keeps a startup feel (Tearsheet), Rated: A

John Hancock wants to change that narrative with Twine, its robo-adviser and personal finance tool it released last month.  Twine emphasizes simplicity in its look and feel — a user interface similar to many startup-developed apps out there.

John Hancock looked outside, buying San Francisco-based financial services AI startup Guide Financial in 2015.

Twine operates as a separate organizational unit based in San Francisco, while most of John Hancock’s offices are in Boston. The team of around 25 employees includes engineers, product managers, user experience designers and marketing staff. But despite being organizationally separate, Goose said the team stays in contact with the mother ship through travel and video conferencing.

41% of households mix digital, human financial advice (InvestmentNews), Rated: A

But this isn’t a return to the way things used to be, said Hearts & Wallets, the Rye, N.Y.-based research firm that conducted the study of 40,000 individuals.

Today’s investors are what the firm calls “hybrids,” who use a mix of paid and free live professional advice, digital advice and their own insights. They now account for 41% of all U.S. households, the firm said.

Blenders of digital and live advice include 68% of consumers ages 35 to 44 with investable assets between $100,000 and $250,000, and 85% of consumers under age 35 who have over $1 million in assets. In all, over 75% of consumers under age 45 with assets of over $250,000 are “hybrids,” the firm said.

USAA’s Heather Cox is blurring the lines between business and technology (Tearsheet), Rated: A

In hiring Cox, the San Antonio bank, which has a longstanding reputation for being innovative, effectively agreed to restructure the entire company. She has plans to “levelize” the business and technology teams and morph them into “business technologists,” who are empathetic and understand that technology is the enabling function of their entire business — not the checking account or the insurance policy.

The new model will make USAA look more like one of the technology “greats” — the usual suspects like Apple, Amazon, Facebook and Google — instead of an old bank or insurance company, Cox said.

 

Despite court win, OCC still faces legal ‘landmine’ over fintech charter (American Banker), Rated: A

Comptroller of the Currency Joseph Otting has not weighed in on the fate of a fintech charter yet, but the ball is now squarely in his court.

The agency that Otting was just appointed to run scored a victory earlier week when a judge dismissed a lawsuit from the New York Department of Financial Services, which had challenged the Office of the Comptroller of the Currency’s authority to create a charter for fintech firms.

Jax small businesses turn to site to find lenders (Jacksonville Business Journal), Rated: B

New York-based Fundera has made a splash in Jacksonville with companies looking to find lenders.

Regions Bank Increases Prime Lending Rate (BusinessWire), Rated: B

Regions Bank today announced it is increasing its prime lending rate to 4.50 percent from 4.25 percent, effective Thursday, Dec. 14.

United Kingdom

LendInvest hits $ 1bn in funds under management (AltFi), Rated: AAA

Cutting out retail P2P investors doesn’t seem to have slowed LendInvest down. The UK’s leading fintech property lender now holds £765m (approximately $1bn) under management. Its capital base has more than doubled in 2017, up 104 per cent since the start of the year.

Manchester tops the buy to let index for England and Wales (PropertyWire), Rated: A

The highest yields for landlords are in Manchester at 5.55% and the city is also top in terms of rental growth at 5.76% and has a reasonable capital gains growth at 8.34%, the buy to let index from specialist lender LendInvest.

When it comes to capital gains the top city is Colchester at 11.96%, followed by Southall at 11.09%, Hemel Hempstead at 10.27%, Slough at 10.19%, Harrow at 9.89% and Ipswich at 9.44%.

Millennials will spend £1.1MILLION on rent over their lifetimes if they don’t get onto the property ladder (DailyMail), Rated: AAA

Millennials who began renting at 21-years-old and live in an average-sized property outside of London will spend an average of £110,830 in household rent before buying their first home – typically at an age of 32, according to research by peer-to-peer lending platform Landbay.

For those living in the capital – where property prices and rents are significantly higher – the amount increases to £273,210.

Source: DailyMail

Mortgage write-offs fall 79% in one year (Bridging&Commercial), Rated: A

The value of residential mortgages written off by banks and building societies has dropped by 79% in the past year, according to the latest research.
Data from the Bank of England revealed that UK lenders wrote off £72m of residential loans in the year end 30th September 2017, 79% lower than the same period in 2015/2016 – when £348m was written off – and even lower than pre-credit crunch levels.

Developer secures £1.9m from P2P platform for Merseyside projects (Development Finance), Rated: B

Mitty Group has secured £1.98m worth of funding from Assetz Capital to develop two new residential and leisure sites in Merseyside.

UK consumers ditching banks for digital loan alternatives (Finextra), Rated: A

UK consumers looking for personal loans are increasingly shifting away from traditional banks towards digital loan providers according to Zopa, the pioneering financial services company.

Research on the price comparison sector* shows loan sales obtained via price comparison sites have doubled in the last two years.
The data highlighted by Zopa shows that over 113,000 loans were sold through price comparison sites in the 6 months to April 30 2017, representing a 139% increase compared to the same period in 2015, whereas the overall unsecured personal loan market grew only by approximately 20% in the same period.

Gibraltar launches world’s first licence for fintech firms using blockchain (Independent), Rated: A

Gibraltar’s financial services watchdog will introduce the world’s first bespoke licence for “fintech” firms using blockchain distributed ledger technology from next month in a bid to attract start-ups to the British overseas territory as it prepares for Brexit.

Twenty-two of the world’s biggest banks and fintech firm R3 have just developed an international payments system using blockchain.

Gibraltar expects firms numbering well into “double digits” to seek authorisation after the new rules come into force on January 1, Gomez said.

China

Yirendai Makes $ 50 Million Strategic Investment in Finance Services Platform Lion Rock (Crowdfund Insider), Rated: AAA

China-based fintech Yirendai announced on Wednesday it has made a $50 million strategic investment in Lion Rock through the financial service platform’s Series A funding round.

LexinFintech starts IPO amid sector crackdown (Finance Asia), Rated: AAA

The Shenzhen-headquartered online micro lender, which launched the deal on Thursday, joins a flurry of other Chinese internet finance companies, including Qudian, PPDai and Hexindai, in their rush to  raise capital with a New York listing…with a US share sale worth up to $132 million.

Chinese fintech company PPDAI Group inks partnership deal with Sun Hung Kai (SNL.com), Rated: B

The move comes after Sun Hung Kai became a strategic investor in PPDAI Group through a private placement concurrent with the latter’s U.S. IPO.

European Union

Belgian crowdlending company expands in Europe (The Brussels Times), Rated: AAA

Look & Fin, the largest Belgian player in the field of crowdlending, plans to expand again in Europe.

On average, more than one million euros is invested monthly via Look & Fin. Loans vary between €50,000 euros and €1 million, with an average term of 38 months. Individuals invest on average €2,400 and can count on an average return of 7.6%.

Can a BBVA spinoff crack the digital ID code? (American Banker), Rated: A

Governments, banks and startups have been trying for years to solve the problems associated with identifying people in a digital world. The challenges are only getting harder thanks to identity thieves, data breaches that have exposed the personal information of hundreds of millions of consumers, and the fact that some folks want to avoid having to register face-to-face.

The latest entrant, a recent BBVA spinoff called Covault, is a bit different.

Its app lets consumers store their digital identity documents, passwords and (potentially) digital currency in a secure cloud, and then share pieces of that information with others as they see fit.

Regtech insights from Suade CEO, Diana Parades (Holland Fintech), Rated: A

Diana is the CEO and co-founder of Suade, a software platform which allows financial institutions to better understand and meet their regulatory requirements.

At SIBOS2017, Paredes encouraged financial institutions to think of regulation as being at the centre of their business. More education and research for implementation is needed, suggested Paredes in our interview. Smaller companies like startups offer more agile  implementation as they are technology driven companies. Meanwhile, the big machine of a bank is becoming better at agile acceptance of new technology.

‘Regtech will prevent the next financial crisis.’

Paredes explained this quote saying that while regulation is trying to prevent another crisis, it has no implementation guide. As such, regtech will be needed to give effect to the regulation.

Saxo Payments Banking Circle Nabs Prestigious Award (Holland Fintech), Rated: B

The Banking Technology Awards 2017 has named the organisation’s Banking Circle Virtual IBAN as the Best Corporate Payments Initiative.

International

Exclusive Interview with Celsius CEO Alex Mashinsky (ChipIn), Rated: A

Celsius is a peer-to-peer (P2P) and blockchain-powered global lending and borrowing network designed to enable coin holders to earn interest.

First off, why did you decide to use the blockchain to build Celsius?

The blockchain is the first real technology threat that the large banks have faced for the past 100 years. It has the potential to spur a new financial revolution from which they cannot adjust. We decided to build Celsius using blockchain to leverage the technology’s global presence and decentralized design to extract the bank’s profits and distribute them to our members.

What was your thought process behind it?

We want to find the best way to add the next 100M crypto users to the market, and we came to the conclusion that offering coin holders 5-7% in interest on their coins would be the best way to get there.

Did you face a problem within the consumer credit industry or do you think there is a gap in the market for Celsius to fill?

Unfortunately, the continued concentration in the banking sector has allowed banks to pay people less than 2% interest but charge our credit cards 25% interest when lending us the same dollars.

THE TRANSFORMATION OF THE GLOBAL REINSURANCE INDUSTRY (All About Alpha), Rated: A

A new paper from Milliman, a consultant to the insurance and financial services industries, discusses the ongoing transformation in and of the global reinsurance industry that alternative investment has created.

By the end of 2016, Milliman says, alternative capital in the catastrophe space consisted of around $76 billion, which breaks down as follows:

  • Collateralized reinsurance $39 billion
  • CAT bonds, $25 billion
  • Sidecars $8 billion, and
  • Industry loss warranties $4 billion.

As a proportion of the whole: alternative capital now represents roughly 13% of the available capital in global reinsurance.

Since 2011 the percentage of bonds with indemnity triggers has increased from 30% to roughly 70%.

Australia

Behind the 500% increase in small businesses using marketplace lending (SmartCompany), Rated: AAA

The number of small business customers signing onto loans through marketplace lenders has increased more than 500% over the past year, but experts say scrutiny must be put on the alternative finance sector now to ensure smaller operators get the best deal.

In 2015-16, ASIC’s survey of the sector put the total value of loans through this kind of model at $156 million, but that figure has doubled over the past year to now sit at $300 million. Total borrowers for the year jumped from 7,448 last year to 18,746 this year.

Australian Securities & Investment Commission Publishes Report on Marketplace Lending, Shows Double the Loans (Crowdfund Insider), Rated: AAA

Earlier today, the Australian Securities and Investments Commission (ASIC) published a report on the marketplace lending industry (peer to peer lending).  ASIC believes that by monitoring Fintech they are better positioned to assess any risk as the industry develops.

The survey covers marketplace lending activities of 12 platforms that are regulated by ASIC – so it is not comprehensive of the entire online lending sector.

In summary, there were 353 incidents or suspected incidents of fraud , compared to 126 incidents or suspected incidents of fraud during the 2015 – 16 survey. There was one cyber security incident, compared to zero during the 2015– 16 survey. There were reports of some borrower complaints but most appeared to be minor. The average default rate was 2.2%.

Source: Australian Securities and Investments Commission
Source: Australian Securities and Investments Commission

Read the full report here.

India

Impanix Fuels Loans Marketplace Finbucket With $ 1.87 Mn Funding (Inc42), Rated: AAA

New Delhi-based online loans and investments marketplace FinBucket has raised $1.87 Mn (INR 12 Cr) from Impanix Capital.

As evident from her statement, the online loans marketplace aims to use the newly raised funds in the growth of business and infuse new technology to scale further.

Asia

CROWD GENIE ASSET EXCHANGE TO HOLD ICO (Bitcoinist), Rated: AAA

Crowd Genie, a fully operational Singapore-based peer-to-peer digital lending platform licensed by the Monetary Authority of Singapore (MAS), has been selected by the token holders of the ICOS platform as the latest promising project to hold its own ICO.

Unlike most projects contemplating an ICO, Crowd Genie is not a startup but rather a debt-based lending platform that has been in operation for more than 12 months. It is one of only four P2P lending platforms licensed by the MAS. The project’s vision is to build a tokenized Pan-Asian lending exchange based on smart contracts, to ensure cost-effective, safe and efficient cashflows between lenders and borrowers.

The public ICO will begin on January 15, 2018, and will run until February 15, 2018. On offer will be 50,000,000 CGCOINs, a utility token which can be used to trade on the Crowd Genie platform.

Credit Suisse Snaps Up Fintech Stake (FiNews), Rated: A

Singapore-based fintech Canopy announced it has raised fresh funding of $3.4 million from investors including Switzerland’s second-largest bank Credit Suisse as well as Lionrock Capital.

Canopy, formerly known as Mesitis, is a Singapore-based anonymous account aggregation and analytics platform for financial institutions, wealth management professionals, and high net worth individuals.

Authors:

George Popescu
Allen Taylor