Thursday April 5 2018, Daily News Digest

Thursday April 5 2018, Daily News Digest

News Comments Today’s main news: KBRA assigns preliminary ratings to SoFi Consumer Loan Program 2018-2. dv01’s Q1 securitization volume hits $2.58B. Revolut releases open API. RainFin acquires stake in 4AX. Today’s main analysis: International P2P lending volumes for March 2018. Today’s thought-provoking articles: Trends on millennials and money. A tale of two fintech sectors. Amazon could become the third largest […]

Thursday April 5 2018, Daily News Digest

News Comments

United States

United Kingdom

European Union

International

India

Africa

News Summary

United States

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2018-2 (Business Wire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by SoFi Consumer Loan Program 2018-2 (“SCLP 2018-2”). This is a $544.6 million consumer loan ABS transaction.

This transaction represents SoFi Lending Corp.’s (“SoFi” or the “Company”) 14th rated securitization collateralized by a portfolio of unsecured consumer loans. SoFi currently originates personal loans through its state licenses or complies with certain requirements where a state lending license is not required.

Preliminary Ratings Assigned: SoFi Consumer Loan Program 2018-2

Class Preliminary Rating Initial Class Principal
A-1 AA (sf) $277,700,000
A-2 AA (sf) $127,900,000
B A (sf) $75,000,000
C BBB (sf) $64,000,000

DV01’S Q1 SECURITIZATION VOLUME TOPS $ 2.58B, ENCOMPASSING NINE DEALS FROM SIX ORIGINATORS (DV01), Rated: AAA

dv01 closed out Q1 with nine new securitizations, totaling $2.58 billion in total issuance. This represents a 141% increase from last year’s Q1 volume, which totaled $1.07 billion.

Deals were originated by six different lenders, including Prosper, Upgrade, LendingClub, CommmonBond, SoFi, and Marlette. Three of the deals (UPT I 2018-1, UPT I 2018-2, and CLUBC 2018-2) were trust certificates. dv01 was loan data agent on eight of the nine deals; loan level data and reporting tools for all the deals are accessible through dv01’s Securitizations portal.

Millennials and Money: 30+ Trends Financial Marketers Need to Know (The Financial Brand), Rated: AAA

Here are over 30 facts, statistics and insights about Millennials banks and credit unions need to know to serve this essential market segment more effectively.

  •  Millennials want to learn how to feel financially empowered. Nearly three quarters say they feel confident in their ability to make financial decisions, but they still want to learn more. 92% believe that being educated on personal finances is important. (Source: CSpace)
  • Millennials are so serious about their financial health that more than a third (34%) have a written financial plan, much higher than the 21% of Gen X and 18% of Baby Boomers who have done the same. However, 78% rarely or never make spreadsheets for their finances, and 35% say they’d rather vomit than make a spreadsheet to help them manage their finances. (Sources: Schwab, Varo Money)
  • Maybe Millennials don’t need help from real human beings. With 85% saying artificial intelligence could help them better manage their finances, banks and credit unions should use digital tools and AI to deliver the financial insights they crave. Nearly half of Millennials say they want their bank to be able to anticipate their financial needs and offer them timely advice (Sources: Varo Money, Segmint).
  • Millennials’ top savings priorities are emergency funds (64%), retirement (49%), and buying a house (33%). Nearly half already have $15,000 or more in savings, and 16% have a whopping $100,000 or more in savings. (Source: Bank of America)
  • When it comes to saving, Millennials still have significant headwinds: three in four college graduates today will have a heavy student debt load. (Source: ABA)
  • The average graduate from the university class of 2016 has $37,172 in student loan debt, up 6% from the prior year. (Source: Student Loan Hero)
  • Student loan debt is such a burden that 70% of Millennials say that financial circumstances were a key consideration in deciding whether or not to go to college. (Source: Harvard)

Publicly Listed Fintech Companies – a Tale of Two Sectors (Lend Academy), Rated: AAA

(KFTX) is a good place to start.

Since inception in June 2016, the index has returned 46%, outperforming the broad market S&P 500 by a whopping 24%, and even the tech-heavy NASDAQ by a meaningful 9%.

Source: Lend Academy

Amazon could become the third-biggest US bank if it wants to: Bain study (CNBC), Rated: AAA

Amazon could rival the nation’s big banks in as few as five years, capitalizing off its digital prowess and massive consumer base, according to a Bain & Company report.

Pushing customers toward a co-branded banking account also allows Amazon to cut down on transaction costs, Bain said.

Amazon could – according to Bain calculations – avoid more than $250,000,000 in credit card interchange fees every year if finds a bank willing to partner on checking accounts.

Source: Bain & Company

Why Amazon won’t enter the advice market (Investment News), Rated: A

Despite what many see as the inevitability of tech giants entering the financial advice business, the economics of doing so — as well as the intensely regulated nature of the business — make their entry unlikely, according to a new report from Cerulli.

The Boston-based research firm says that “companies like Facebook, Amazon, Apple, Netflix and Google (FAANGs) have the tools and data to excel, but face significant obstacles that will likely preclude their entry,”

One major obstacle, Cerulli says, is the relatively small size of the market. The firm estimates that the “digital advice opportunity segment” represents only about 12% of investors, or a segment “that would be difficult to scale to be of strategic interest to the world’s largest technology providers.”

The Credit Junction Secures $ 150 Million Credit Facility from MidCap Financial (Business Wire), Rated: A

The Credit Junction, the first data-driven, asset-based lender for small and mid-sized businesses, has secured a $150 million credit facility from MidCap Financial, a leading capital provider to the middle market specialty finance industry. The facility strengthens and expands The Credit Junction’s ability to deliver comprehensive capital solutions to businesses across the United States.

The Credit Junction combines traditional credit metrics with data intelligence and partners with business owners to deliver asset-based financing alternatives unique to the needs of each borrower. Since its launch in May 2015, The Credit Junction has helped businesses across the country achieve their growth objectives while supporting job creation and development in the communities they serve.

Real Estate Investment Platform, Sharestates, Changes the Game with User Experience (UX) (PR Newswire), Rated: A

Sharestates, an online real estate investment platform, announced today the launch of new online user portals that fully optimize the real estate investment process from beginning to end, providing investors with the first ever UX solutions in the real estate investment industry.

Sharestates’ unique solution was designed by the company’s development team alongside CEO and Co-Founder Allen Shayanfekr with UX and functionality in mind – now offering investors a streamlined “one stop shop” in real estate financing.

Banking Disruptors: Peer-to-Peer Lending and Payments (The Motley Fool), Rated: A

Peer-to-peer lending platforms such as Prosper and LendingClub (NYSE:LC) have changed the way people can borrow money, and apps such as Venmo and Zelle have made it easier and cheaper to send money.

In this segment from Industry Focus: Financials, analyst Michael Douglass and Motley Fool contributor Matt Frankel talk about the ways that technology is disrupting big banks, and what this trend could mean to the banking industry.

How Affirm Personal Loans Can Help You Finance Smaller Purchases (Student Loan Hero), Rated: A

The average student loan payment is $351. Between such a high monthly payment and rent, finding the money to furnish your home or buy a new computer can seem daunting.

If approved, you can now shop. When you’re ready to make a purchase, you can enter the total from your online shopping cart on Affirm’s site. You then choose an amount between $50 and $10,000. You’ll be provided virtual card information to complete the purchase. With some partner retailers, you might select Affirm at checkout instead.

LendingTree Launches Credit Analyzer, a Free Credit and Debt Analysis Tool (Lending Tree), Rated: A

LendingTree, the nation’s leading online loan marketplace, today announced the launch of its Credit Analyzer, a free credit and debt analyzer tool, which was created to help consumers avoid common credit mistakes, improve debt management skills and find the right financial products for their needs.

Credit Analyzer is a free tool that provides a deeper, instant analysis of consumers’ credit and debt situations and offers personalized recommendations based on individuals’ financial goals. The user experience is designed to make it easier for consumers to understand the most important factors that impact credit scores.

 

What will the financial services industry look like in five years? (Lend Academy), Rated: A

This article briefly touches on many of the themes being explored at our LendIt Fintech USA 2018 conference, which is now just days away:

Audits Will Go the Way of the Dodo Bird

The protocol of trust is here to stay, and it’s going to disrupt everything.

While the blockchain has not rendered audits unnecessary yet, I believe we’ll see it happen within the next five years.

Smart Contracts Are In, Long, Paper-Intensive Financial Processes Are Out

As I write this, Lending Robot is raising a private round of growth capital. The closing process, called “papering” for very obvious reasons, is just as onerous and Microsoft Word-oriented as I remember it back in the early 2000s when I was a young VC.

Fintech is Everywhere

Fintechs are enhancing the customer experience along four axes: choice, price, convenience, and predictability. They are meeting the needs of educated, aware, demanding consumers and they are attacking traditional financial institutions at every angle.

 

Five Things Fintech Startups Must Do In 2018 To Get Noticed, Adopted And Funded (Forbes), Rated: A

Here are five things the winners nailed that newcomers must do to compete:

  1. Build a seamless digital customer experience (CX) customized to each set of eyeballs, across platforms — plus, make financial services ubiquitous, instead of an unfortunate necessity.
  2. Streamline their lead generation and nurturing through automation, machine learning and AI, plus intelligent CRM throughout the customer journey. This powers faster, more accurate processes like loan origination, mortgage underwriting and credit application decisions, among others.
  3. Instead of being scared of increased regulation, embrace it as a driver of innovation.
  4. Upend an established Wall Street business model both by undercutting fees and over-delivering on performance.
  5. Find novel, values-driven ways to increase millennial participation in financial services.

Financing Small Businesses- 6 Tips For Finding An Online Loan (Bizztor), Rated: A

Online business loans are a popular option for financing small businesses. Over the years more small business owners have been turning to online lenders as banks have cut down on loans to smaller businesses.

With the assistance of technology and algorithm, online lenders are able to assess conventional credit standards like cash flow and personal credit score.

DriveWealth Raises $ 21M in Series B Funding (Finsmes), Rated: A

DriveWealth Holdings, Inc., a Chatam, N.J.-based fintech company, closed a $21m Series B funding.

The round was led by Raptor Group Holdings, SBI Holdings, Inc, and Point72 Ventures, LLC, as weel as existing investors Route 66 Ventures.

The company intends to use the funds to develop its technologies and scale its business.

Mosaic Readies New Solar Loan Deal (Global Capital), Rated: A

The San Diego-based company filed documents with the Securities and Exchange Commission on Monday for Mosaic Solar Loans 2018-1. The ABS-15G forms name Deutsche Bank and BNP Paribas as banks on the deal.

The transaction, Mosaic Solar Loans 2017-2, was priced at 185bp over interpolated swaps for the senior class, yielding 3.854%. Energy related ABS such as solar and Property Assessed Clean Energy (Pace) deals were heavily subscribed throughout last year, with strong issuance of residential Pace bonds and the first ever issuance of commercial Pace ABS from Greenworks Lending.

Laurel Road And Darien Rowayton Bank Officially Rebrand Under Integrated Laurel Road Name (PR Newswire), Rated: B

Laurel Road, an online lender and FDIC-insured bank, officially announced today that Darien Rowayton Bank and its national online lending division will rebrand under the integrated national Laurel Road brand. The new, unified Laurel Road brand represents a deep understanding of its customer base, best-in-class technology and industry-leading compliance and risk management.

Bankrupt Payday Lender Can’t Move Pa. AG’s Suit To Texas (Law 360), Rated: B

Think Finance LLC, a financial technology firm that critics say uses Native American tribes to skirt payday lending laws, failed to convince a Pennsylvania federal judge on Tuesday to move an action brought by the state’s attorney general to Texas, where it has filed for bankruptcy.

The company has been hit with lawsuits over its alleged role in several “rent-a-tribe” schemes, where a high-interest lender affiliates itself with a Native American tribe to shield itself from legal challenges.

Sarasota-Manatee ranks last for millennials buying homes (Sarasota Herald-Tribune), Rated: B

Millennials rank as the key target in the economic development world setting sights on future prosperity. A new study casts a pall over efforts to build the Sarasota and Manatee population of this prized demographic. Out of the largest 100 U.S. metropolitan statistical areas in the country, Sarasota-Manatee ranked dead last among cities favored by millennial homebuyers.

The study, conducted by LendingTree, focused on the percentages of all loan requests to the online loan marketplace that came from millennials. That figure for Sarasota fell far from top-ranked Des Moines, Iowa — 17.9 percent versus 42.4 percent. Fort Myers ranked just above Sarasota, with 19.8 percent.

The Online Lending Policy Institute (OLPI) Appoints Deputy Director (Lendit), Rated: B

Robert J. (Bob) Mullenbach, CRCM, Managing Director – Compliance Division Deputy at ProBank Austin – has been appointed as the Online Lending Policy Institute’s (OLPI) new Deputy Director. Mr. Mullenbach brings 25 years of regulatory compliance experience in billion-dollar financial institutions, regional and community banks, fintech’s, and leading consulting firms. In his current position, Bob audits clients on the myriad of regulatory requirements associated with consumer/commercial lending, bank secrecy act/anti-money laundering, privacy, and non-deposit investment products.

Microloans offer needy a better alternative (The Columbus Dispatch), Rated: B

Central Ohio chapters of the St. Vincent dePaul Society, an international charity run by Roman Catholic volunteers, give needy folks a better option through the society’s microloan program. Information is available through the organization’s website at svdpcolumbus.org.

Anyone of any faith who needs up to $500 for car repairs, school, home repairs or medical bills, can apply for a quick loan with a low interest rate and 12 to 15 months to pay it off.

Contrast that with the typical payday-loan operation, which loans a couple-hundred dollars and demands payment in two weeks. Many borrowers who are strapped enough to go to such a lender in the first place can’t pay it back that quickly. This leads to loans on top of loans, with tacked-on fees that can lead to an effective interest rate of nearly 600 percent.

SunTrust teams with fintech to offer loans for HVAC upgrades (American Banker), Rated: B

SunTrust Banks in Atlanta is teaming up with another fintech upstart to expand its reach in consumer lending.

The $202 billion-asset company said Wednesday that it has struck a partnership with the online lender Microf to offer point-of-sale loans to homeowners looking to replace aging residential heating, ventilation and air conditioning systems.

SunTrust will hold the loans on its books and a pay a fee to Microf for the referrals. Microf, based in Albany, Ga., offers the loans through its nationwide network of HVAC contractors.

United Kingdom

Revolut unleashes open API to all customers (Fintech Futures), Rated: AAA

APIs and open banking are hotter than a freshly tarmacked road in summer, and Revolut joins the mad-for-it crowd.

On its blog, the bank, which was launched in mid-2015 and offers a money transfer app, says account owners can generate sandbox and production keys, and set whitelisted IPs as an “extra layer of security”.

Away from these API days, the firm adds that over the last few months it’s been making updates to its business accounts.

New fintech fund could boost P2P sector (Peer2Peer Finance), Rated: A

At a time when investment trusts such as Victory Park Capital Specialty Lending have signalled a shift away from P2P opportunities, Augmentum Fintech’s investment adviser has hinted that P2P lenders could be included in the portfolio.

Augmentum Fintech was launched by Augmentum Capital, a venture capital (VC) firm backed by Lord Rothschild’s RIT Capital Partners, last month. The VC firm already had a 7.4 per cent holding in P2P giant Zopa worth £18.5m that has been transferred into the investment company portfolio and its founder Tim Levene, who is acting as investment adviser to Augmentum Fintech, said that the firm is well geared to the P2P sector.

FCA reveals it intervened in Collateral administration to protect investors (Peer2Peer Finance News) Rated: A

THE FINANCIAL Conduct Authority (FCA) has revealed that it intervened in the administration of Collateral because the peer-to-peer lender failed to seek its approval when it appointed an insolvency practitioner.

Wigan-based Refresh Recovery was selected by Collateral when the company shut down in February but it was revealed on Tuesday that the City watchdog was looking to appoint a different administrator.

“The Collateral companies were required to obtain the approval of the FCA when appointing an administrator,” the FCA said in a statement on Wednesday.

ISA countdown: The latest IFISAs on the market (Peer2Peer Finance News), Rated: A

March saw the introduction of tax wrappers from peer-to-peer property platforms The House Crowd and Safe as Houses, while EasyMoney, part of Sir Stelios Haji-Ioannou’s easy family of brands, launched its second IFISA offering.

Safe as Houses

The Safe As Houses ISA, which invests in loans made to Safe as Houses Group to develop, regenerate and sell on distressed properties, offers investors a return of six per cent.

The IFISA has a five-year term and requires a minimum investment of £5,000.

The House Crowd

The House Crowd’s IFISA invests in secured P2P loans and property development investments and offers a target return of seven per cent.

The House Crowd requires a minimum investment of £1,000, and new investments can be added to the IFISA in £1,000 increments, up to a maximum of £20,000 across an investor’s entire ISA portfolio.

Investors will get a fixed return paid in twice a year in October and April.

EasyMoney

The latest IFISA to hit the market before the deadline came from EasyMoney, offering target returns of 7.28 per cent. This eclipses the 4.03 per cent returns offered by its first product that launched in February.

The P2P lending platform said its new ‘balanced’ IFISA allows individuals to invest in a broader range of property-backed loans, limited to 75 per cent loan-to-value (LTV).

MINOR INVESTOR: An Innovative Finance Isa with a 7% rate is a tempting idea but tread carefully in the investing Wild West (This is Money), Rated: A

Only the peer to peer lending element can be included in an innovative Isa, not the equity version where investors take a stake in a company.

Obviously, innovative Isas don’t qualify for the savings element of the Financial Services Compensation Scheme that protects up to £85,000 per licensed bank.

Crucially, however, neither do they get the FSCS investing element that covers up to £50,000 in case your investing platform goes bust and hasn’t done what it is meant to with your money.

European Union

Robo advisors and the Data Revolution (GDPR) (AltFiNews), Rated: AAA

With just a month to go until the General Data Protection Regulation (GDPR) is implemented throughout Europe in May. We look at how the new regulatory regime will affect the nascent Digital Advice industry. Some of the upcoming regulatory changes issued from the EU and its commissioners should be positive for fintech asset managers.

With a clear focus on transparency, robo-advisors should look forward to the new era of information portability and openness.

The digital advice sector has from inception attempted to gain a competitive edge with clear transparent product engineering and pricing, but it won’t all be plain sailing and there may be headwinds ahead.

BANCO BNI EUROPA grows significantly in 2017 and attracts equity investor (Fintech Finance), Rated: A

2017 was once again characterized by the significant growth of Banco BNI Europa’s activity, increasing 41% in assets (from € 362M in 2016 to € 509M in 2017), 16% in customer deposits (from € 262M in 2016 to € 305M in 2017) and 379% in banking income (€ 2,8M in 2016 to € 13,2M in 2017). 

Net income reached € 2.3M, increasing regulatory capital to € 23.3M and the solvency ratio comfortably above the statutory limit at 13%.

International

International P2P Lending Volumes March 2018 (P2P Banking), Rated: AAA

Milestones achieved this month (overall volume since launch):

  • Landbay reached 100M GBP
  • Estateguru reached 50M EUR
  • Linked Finance reached 50M EUR
Source P2P Banking

Banking at a Tipping Point as Fintech Drives Change (Cash Lady News), Rated: AAA

According to Citigroup consumer banking currently generates around $870bn in revenues across Europe and North America, with digital innovators accounting for just 5% of that total. But if the report’s predictions are correct, by 2023, disruption by fintech companies will account for 17% of a total earnings pot of $1.200bn

Follow the Money

CitiGroup cites figures showing that global investment has risen from around $0.5bn in 2019 to just under $20bn today. And most of that investment – Citigroup puts it at 70% is focused on the key areas of personal and SME banking.

Read the full report here.

ROSCAcoin: A Self-Regulating, Autonomous and Decentralized Financial Platform for the Unbanked (BTC Manager), Rated: A

ROSCAcoin is a new decentralised autonomous and self-regulating platform built on the Ethereum blockchain. The project aims to develop an innovative financial infrastructure that allows creating solutions for people with little or no access to financial services. ROSCAcoin is set upon an ancient model of borrowing very popular in third world countries.

ROSCA, or Rotating and Saving Credit Association, is defined by a method of borrowing where a group of individuals agree to cooperate for saving and borrowing purposes within a pre-established period; is also a form of peer-to-peer banking and peer-to-peer lending. ROSCAcoin strives to introduce this method using the blockchain technology.

The platform is powered by its own currency RCA, which will be the engine of the whole ecosystem. By using smart contracts, ROSCAcoin is trying to build the ultimate financial solution for the unbanked.

“Stars are Aligned” for an Higher US Dollar Against the Swiss Franc (PoundSterling Live), Rated: B

The Dollar has risen 4.4% versus the Swiss Franc since mid-February and could be about to accelarate the move suggest analysts; this despite the sizeable global stock market sell-off which would normally be expected to support the safe-haven Franc.

Safe-haven currencies usually strengthen in times of fear, such as the present, however this does not appear to be the case with USD/CHF which has risen due to the USD outperforming CHF – not the other way round.

White Oak Signs Agreement to Acquire LDF Group (Globe Newswire), Rated: B

White Oak Global Advisors, LLC on behalf of its institutional clients (collectively “White Oak” or the “Company”), announced today that White Oak has agreed to expand its asset-based lending platform to serve clients in the U.K. and Europe through the acquisition of LDF Group (“LDF”), a U.K.-based finance company providing asset finance, business loans, commercial mortgages and education leases to small and middle-market companies.  Established in 1986, LDF is an industry leader and one of the largest independent finance providers for small businesses in the U.K.

India

Faircent brings Shalabh Gupta on-board as national sales head – lending (The Siasat Daily), Rated: A

Leading Peer-to-peer (P2P) lending company Faircent on Thursday announced that the company has hired Shalabh Gupta as national sales head – lending.

As an industry veteran with over 17 years of extensive sales experience with brands like the Times Group, Reliance Capital, HDFC Bank, and ITC Limited, Shalabh will play a crucial role in furthering the company’s impressive growth plans and vision as a part of its leadership team.

Aadhaar-Based EKYC Limitations Cause Trouble For Fintech Startups (Ink 42), Rated: AAA

Since the Supreme Court extended the deadline for linking of Aadhaar to host of services, the fintech segment has been riddled with burdens of limited Aadhaar-based eKYC. The companies have been unable to access Aadhaar database for verification of their customers.

Impact Of Aadhaar KYC On Fintech Startups

According to reports, fintech startups across the insurance, lending and broking sectors are being denied access to authentication agencies for eKYC to verify customer antecedents on the Aadhaar database amidst rising concern over data privacy.

UIDAI revokes e-KYC services for some e-wallets, online lenders (The Times Of India), Rated: A

In a move that seems to have left fintech players scrambling, the Unique Identification Authority of India (UIDAI) revoked on Tuesday their access to a dozen agencies that provide e-KYC verification and authentication services. Some of these agencies – KUAs (e-KYC user agencies) and AUAs (authorised user agencies) – will no longer be able to provide e-KYC verification to onboard new customers or authenticate financial transactions affecting e-wallets, online lenders, NFBCs and smaller fintech players.

Africa

RainFin acquires stake in 4AX (Business Tech), Rated: AAA

Fintech company RainFin has announced the conclusion of a transaction with 4 Africa Exchange Proprietary Limited (4AX), which will see the company sell to 4AX its corporate debt marketplace, in exchange for a strategic shareholding in 4AX.

RainFin’s credit marketplace technology has been utilised by companies to raise debt funding from both tradition and non-traditional sources since its formation in 2002.

Accra, Ghana to Host 2018 Startupbootcamp Africa (Tech in Africa), Rated: B

Accra, Ghana’s capital city will host the forthcoming Startupbootcamp (SBC) Africa Accelerator program. The SBC sponsors include the Old Mutual, BNP Paribas, RCS, PwC, and Nedbank. During the event, startups present to the panelists for about two hours.

Authors:

George Popescu
Allen Taylor

Monday October 23 2017, Daily News Digest

Mosaic

News Comments Today’s main news: SoFi discussed acquisition with Schwab. Victory Park Capital dumps Avant loans, moves away from MPL. Banco BNI Europa partners with Parcela Já on payments solution. Skystar Capital to raise third fund in 2018. Today’s main analysis: Mosaic prices, Nelnet, and Avant. Today’s thought-provoking articles: Asian stocks outpace U.S. since Alibaba IPO. When payday loans […]

Mosaic

News Comments

United States

United Kingdom

Chin

European Union

International

India

Asia

MENA

Africa

News Summary

United States

SoFi held talks for possible $ 8bn sale this year (Financial Times), Rated: AAA

SoFi, the highly valued online lender, explored a sale earlier this year, holding talks with companies including Schwab, the San Francisco-based broker, according to people familiar with the matter.

The sale discussions at SoFi, which has since been rocked by sexual harassment allegations, were triggered by an indicative offer of $6bn from a foreign bank, according to two people familiar with the matter. That offer came soon after SoFi raised $500m in a fundraising round led by Silver Lake, which valued it at more than $4bn.

After the initial approach, SoFi held talks with other possible acquirers with a targeted price of $8bn-$10bn. Several US companies, including Schwab, discussed a possible deal but none matched the desired price. SoFi decided to wait for an initial public offering, tentatively scheduled for 2019.

Mosaic Prices, Nelnet Acquires Great Lakes, FinTech Financings (PeerIQ), Rated: AAA

Earlier this week, Mosaic priced MSAIC 2017-2, their second solar ABS. The deal was heavily oversubscribed, with over $1.7 Bn in orders for a $307.5 Mn deal.

On Thursday, Nelnet announced it would acquire Great Lakes Education Loan Services for $150 Mn in cash.

In other securitization news this week Avant filed ABS 15-G for is AVNT 2017-B deal. KBRA assigned preliminary ratings to three classes of notes issued by Avant Loans Funding Trust 2017-B (“AVNT 2017-B”). The transaction is a $232.648 Mn consumer loan ABS transaction that is expected to close on October 31, 2017. We took a close look at Avant’s first deal of 2017 in a prior newsletter.

Mosaic Background
With over $1.1 Bn loans funded, Mosaic maintains a proprietary origination channel consisting of a high-quality network of approved solar installers. These installers are carefully screened as Mosaic must rely on these partners to refer quality borrowers because the loans are secured by the installed solar systems.

Last month, Mosaic inked a deal with Goldman Sachs for a $300 Mn forward purchase agreement. In addition to the ~$450 Mn the company has raised through securitizations, other significant sources of financing include a $220 Mn series C equity raise led by Warburg Pincus in 2016 and $650 Mn in warehouse commitments from a diverse mix of banks.

Source: PeerIQ

Asian Companies Sell Most Stock in U.S. Since Alibaba’s IPO (Bloomberg), Rated: AAA

Fifteen Asian companies have raised $3.2 billion in U.S.-listed IPOs and seen their shares climb 46 percent since their listings this year, according to weighted-average share price data compiled by Bloomberg. That compares to an 11 percent climb for the 105 U.S. businesses that listed domestically and raised a combined $23.6 billion.

Combined with other listings, those three have put October on track to be the biggest month of the year for U.S. IPOs. The $29 billion raised in 2017 has already outpaced the $15.2 billion in stock offered by new U.S.-listed companies through this time last year, according to data compiled by Bloomberg.

The 13 Asian companies that raised a combined $1 billion in 2015 are up 117 percent, beating the 19 percent rise for U.S.-based companies that had domestic listings that year. In 2014, 20 Asian companies including Alibaba raised a combined $30 billion. Those stocks are up 152 percent on average. The $50 billion in U.S.-based companies’ shares sold that year have climbed only 35 percent.

When Payday Loans Die, Something Else Is Going to Replace Them (The Atlantic), Rated: AAA

But the regulations will do little to address the other side of the problem: consumers’ demand for small, fast, easy-to-obtain loans. Solving that problem, while ensuring that new predatory loans options don’t pop up, will fall to the financial industry and state legislators—who’ve struggled in the past to protect financially vulnerable Americans.

Some of those options are already out there, and won’t be covered by the CFPB’s new rule, says Nick Bourke, the director of the consumer-finance program at Pew Charitable Trusts. According to Bourke, many of the same payday and auto-title lenders that will be shelving shorter-term loans ahead of the CFPB’s onerous new rules already have other loan options available. And they’re available in about half of all states.

To prevent that, Bourke says, states could mandate that small and installment loan options include affordable repayment structures, reasonable repayment times, and lower fees. That’s an option that has already been implemented in some states such as Colorado, and one that might work elsewhere.

There are few places for poor, underbanked Americans to turn when they’re in need of a couple hundred dollars in a pinch. In the past, many traditional banks have said that the risk and cost of underwriting small-dollar loans simply isn’t worth it: Small loans, coupled with borrowers with low incomes and spotty or nonexistent credit history, don’t really appeal to large, profit-seeking banks.

One of the main alternatives provided by credit unions is the Payday Alternative Loan—which allows federally backed credit unions to provide their members with small loans in amounts ranging from $200 to $1,000, with repayment terms of one to six months. But when you compare the accessibility of PAL loans to the demand for payday products, it’s clear that they can’t meet the need. In 2016, only about 20 percent of the country’s fewer than 4,000 federal credit unions offered the loans. And to get one, a borrower must be a member of a credit union for at least a month, and sometimes complete a financial-education requirement in order to fulfill a loan application. That’s an imperfect swap for many of the 12 million Americans who use payday loans each year to receive an instant cash infusion.

How Often Do Mortgage Lenders Follow-Up via Calls And E-mails? (Tenfold), Rated: A

I conducted a study where I applied for home loans with nine different lenders and then tracked their follow-up attempts over two weeks. During this time, I also did not respond to their follow-up calls and e-mails.

  • Over the course of two weeks, Quicken Loans made the most follow-up attempts. 18 to be exact.
  • Lenders at Citigroup came second with 17 follow-up attempts.
  • loanDepot, in third place, attempted 13 follow-ups.
  • During the same period, Chase Mortgage and PennyMac Loan Services tied for fourth with 11 follow-up attempts.
  • Sales reps at Bank of America only followed-up on the home loan application five times.
  • U.S. Bancorp followed-up twice, and CapitalOne and HSBC Mortgage Services tied for last with just a single follow-up attempt.
Source: Tenfold
Source: Tenfold

Varo Money Announces New Product Features to Help Customers Save More Money (Varo Money Email), Rated: A

SmartBiz Loans brings banks back to SBA lending (Biz Journals), Rated: A

The company, which offers an online Small Business Administration loan marketplace, was the top facilitator of traditional SBA 7(a) loans under $350,000 in fiscal 2016.

As S&P Global Ratings noticed collateral performance in the U.S. subprime auto loan asset-backed securities (ABS) market deteriorated moderately on a sequential basis in August, Davis & Gilbert’s Insolvency, Creditors’ Rights & Financial Products Practice Group fears investors could be in for a surprise if that market segment makes a more notable move.

S&P Global Ratings indicated the subprime net loss rate increased to 7.95 percent in August 2017 from 7.38 percent in July but decreased year-over-year from 8.35 percent.

Between August of last year and the same month this year, analysts noted about 35 new deals with a total collateral amount of approximately $17 billion were added to their index. These additions pushed the outstanding collateral amount up to approximately $35.6 billion compared to $32.0 billion a year earlier.

Fundera Report: The Traditional SME Lending Process Pretty Much Sucks (Crowdfund Insider), Rated: A

Fundera, an online lending comparison site, has partnered with Oliver Wyman on a report about SME lending. Entitled, “Great Expectations: Improving the loan application process for small business borrowers, the document effectively labels the traditional borrowing process as broken.

On the flip side, banks still have an advantage in a lower cost of capital so if you can suffer through the frustration you loan (if ever approved) may come at a lower cost.

So what is the big takeaway from all of this?

The report explains that alternative lenders have a higher cost of capital because they lack access to low cost deposits that banks and credit unions use to fund their loans. The average cost of funds for a bank is around 0.06%. In comparison, OnDeck reported a cost of funds in Q1 2017 of 5.9%.

This App Will Loan You $ 75 Interest Free to Avoid Overdraft Fees (Lifehacker), Rated: A

Another solid solution: Dave. Not your buddy from college, the app.

Once it’s tied to your bank account (using the same military-grade 128-bit SSL encryption technology used by big banks), the app will monitor your finances and reoccurring expenses and then let you know when you’re running at risk of overdrafting your account.

Within the app you can ask to borrow $25, $50, or $75 to get you through until your next paycheck comes. Loans are free, but when you pay them back you’re given the option to leave a 5-15% tip. For every % of tip you give, the app will plant a tree.

Using the app costs $1 per month.

Real Estate Crowdfunding Firm Targets Institutional Investors (InstitionalInvestor.com), Rated: A

First RealFund will offer property investments in high-growth neighborhoods such as Brooklyn.

The New York-based firm will provide short-term real-estate investments in high-growth neighborhoods, according to co-founder and Chief Executive Officer Dan Drew. First RealFund will offer opportunities to co-invest alongside the firm in residential and commercial real-estate deals.

He projects returns of 12 percent to 24 percent on investments lasting one to three years.

First RealFund has a $5 million pipeline of deals and plans to co-invest $100,000 in each of its first two offerings, according to Drew. He said investors can allocate between $500,000 and $3 million in each of the real estate assets offered by First RealFund.

Rory Eakin of CircleUp (Lend Academy), Rated: A

In this podcast you will learn:

  • The circuitous route Rory took through South Africa before founding CircleUp.
  • The huge untapped opportunity that Rory and his co-founder discovered.
  • Some examples of consumer goods companies that have raised capital on CircleUp.
  • How they approach the due diligence process.
  • How and why they are tracking 1.2 million companies in the consumer sector.
  • Why building their own data analysis tools has been a key ingredient in their success.
  • The typical size of the companies that are raising money and the typical equity rounds.
  • The number of companies that have raised money on the platform.
  • The average revenue CAGR for those companies.
  • Their current mix of investors and the average investment on the platform.
  • Why they decided to launch a loan product earlier this year.
  • The typical loan terms they are offering.
  • Who is providing the capital for their loan product.
  • Why they remain focused on the consumer goods vertical for this loan product.
  • What the future holds for CircleUp.

OneMain Increases eSignLive E-Signatures Roll-Out to 1,700 Branches (Globe Newswire), Rated: A

VASCO Data Security International, Inc. today announced that longtime customer OneMain Financial, the largest responsible personal loan company in the U.S., has extended its use of eSignLive e-signatures for loan applications to more than 1,700 U.S. branches in 44 states. The lender has seen 99 percent adoption of the technology, which translates into an annual savings of approximately 500,000 administrative hours and $500,000 in toner costs alone, and enables OneMain to deliver an omni channel experience to improve the customer experience while reducing in-branch costs.

OneMain selected eSignLive in 2012 to enable virtual personal lending, including unsecured loans across online and call center channels.

Real Estate Crowdfunders Turn to Auto-Invest (Patch of Land), Rated: A

Automatic investment tools are gaining traction with real estate crowdfunding platforms as a way for investors to obtain greater access to transactions that meet their investing criteria.

The benefits of automatic investing to the real estate investor are multifold:

  1. It levels the playing field.
  2. It improves flexibility.
  3. It may allow for higher investments.
  4. It increases portfolio diversity. 
  5. Investors gain access even when demand is high.

How auto investing helps lenders

While the multiple benefits of automatic investing are fairly obvious to investors, real estate crowdfunding lenders stand to benefit as well. Using data gathered from investor parameters selected in a respective platform’s auto invest feature, the lender is able to see if a loan will fully fund or by what percentage it will fund before the loan documents are ever signed or approved.

This data helps determine whether an appetite exists on a particular real estate crowdfunding platform for a specific loan. If there’s a huge appetite for a particular loan type, then more of those types of loans may be offered.

Lenders who have built-out this type of auto-investing technology in an intelligent way will have an audit history to see how investing parameters have changed over time, which will help to make smarter lending decisions now and into the future.

Lenders, armed with auto-investing data, will be able to draw trend lines on how investors are or are not changing their investing parameters.

This could mean making a decision to deny a loan application because “crowd” investors have no appetite to fund it while prioritizing another loan through the approval and funding process because of high demand from investors.

Fears of commercially owned banks are unfounded: OCC’s Noreika (American Banker), Rated: A

Acting Comptroller of the Currency Keith Noreika on Thursday pushed back against concerns that his agency’s proposed fintech charter will unduly benefit nonfinancial firms.

Why Fintechs Want More Access to State Banking Regulators (Law.com), Rated: A

This week, the Conference of State Bank Supervisors (CSBS) announced more than 30 companieswill participate in its newly formed Fintech Industry Advisory Panel. The panel is part of the CSBS’s Vision 2020 initiative, which seeks to “modernize state regulation of non-banks, including financial technology firms.”

At financial startup Social Finance Inc. (SoFi), general counsel Rob Lavet, who oversees compliance professionals and is used to interacting with state and federal regulators, will be the one to serve on the panel. Kabbage’s head of global privacy, Sam Taussig, will represent the Atlanta-based small-business lending company.

Some companies have chosen other executives to participate in the regulatory conversation. At CommonBond, for instance, CEO and co-founder David Klein will represent the student loan company.

Judge OKs LendingClub Investor Class, Competing State Suit (Law360), Rated: B

Investors in LendingClub Corp. who accused the online lender of stock fraud were recognized as a class in California federal court on Friday, but the judge allowed a competing state-court case to advance despite his skepticism that it would result in a better outcome for investors.

Payments M&A, deals and financings all happened (The Financial Revolutionist), Rated: B

First Data accidentally let it slip that it was thinking about buying payments processing partner BluePay and 

Lendio Joins Innovative Lending Platform Association (OnDeck), Rated: B

The Innovative Lending Platform Association (ILPA), consisting of the nation’s leading online small business lending platforms, today announced that small business platform Lendio has joined the trade organization as an associate member. Lendio will work with other ILPA members to advance online small business lending education, advocacy, and best practices.

United Kingdom

VPC offloads Avant loans as part of shift from marketplace lending (P2P Finance News), Rated: AAA

VICTORY Park Capital (VPC) Specialty Lending Investments has offloaded the majority of its loans from US personal loans platform Avant.

The alternative lending investment trust said in a portfolio update on Monday that the move is part of its strategy of shifting from marketplace to balance sheet lending.

The investments sold represent 7.6 per cent of the company’s net asset value as at 31 August 2017.

Why investing in your neighbour is the new finance revolution and Cornwall’s leading it (CornwallLive), Rated: A

Crowd sourced funding has transformed the way we do business, whipping up a sense of entrepreneurship and encouraging all of us to think about investing more locally.

According to SWIG Finance which has a base in Truro, more than £10billion has been loaned to UK businesses and consumers by the alternative finance sector as a whole since 2005.

Crowdfunder’s growth has been meteoric with 25,000 members joining the platform every month and raising some £2m a month for UK projects.

ThinCats Expands in Midlands By Appointing Ravi Bagri As New Origination Manager (Crowfund Insider), Rated: B

Peer-to-peer lending platform ThinCats announced on Friday it has appointed Ravi Bagri as its new Origination Manager, who will cover the Midlands region. According to the online lender, Bagri is considered one of the most well-established names in the Midlands finance sector and has nearly 30 years of experience in retail and commercial banking.

Debt collector Cabot plans to float on London Stock Exchange (Financial Times), Rated: B

Cabot has also appointed Andy Haste, chairman of payday lender Wonga, as independent chairman-elect, to help oversee the debt management group’s transition to a public company.

China

Third-quarter funding for China’s fintech hits a speed bump as state tightened reins on capital outflow (SCMP), Rated: AAA

Total funding raised by China’s venture capital-backed financial technology start-ups fell to US$800 million across 26 deals between July and September, a drop of 27 per cent from last year, as the central government kept a tight rein on capital outflows from this sector.

That amount was down from US$1.1 billion in the same period last year and below the US$1 billion recorded in the quarter to June, according to a recent online briefing by Lindsay Davis, an intelligence analyst at venture capital research firm CB Insights.

Davis said deal activity of mainland fintech start-ups in the third quarter dropped 19 per cent from 32 transactions recorded in the second quarter.

Dianrong, the Shanghai-based operator of a popular online lending marketplace, recorded the region’s largest fintech deal last quarter – a US$220 million Series D funding round led by China Minsheng Investment, Singapore sovereign wealth fund GIC and South Korean private equity firm Simone Investment Managers.

That was followed by the US$200 million Series C financing round of Shenzhen Suishou Technology, which runs a personal finance management platform on the mainland. Its investors included Hong Kong-listed conglomerate Fosun International, global investment firm KKR & Co, Sequoia Capital China and Beijing-based venture capital company Source Code Capital.

Source: SCMP
European Union

BANCO BNI EUROPA AND PARCELA JÁ SIGN STRATEGIC PARTNERSHIP TO LAUNCH SOLUTION FOR PAYMENT OF PURCHASES (Global Bnking & Finance), Rated: AAA

Banco BNI Europa and Parcela Já, Portuguese Fintech, have entered into a partnership to launch an innovative solution for the Portuguese market, which aims to enable any retailer to offer its customers the instalment of any purchase without costs to the consumer.

This product is open to all consumers with a credit card. To benefit from this service, the final customer will only have to make the purchase with his usual credit card, deciding at the terminal, at the time of purchase, the instalment he intends to make, between 2 and 12.

PayKey Launches Smart Mobile Payments Keyboard (PYMNTS), Rated: A

Mobile banking startup PayKey, which offers a smartphone keyboard designed for millennial banking customers, has raised $10 million in Series B funding, bringing its total raised to $16 million.

According to news from TechCrunch, this latest round was led by MizMaa Ventures, with participation from other investors that include SBI Group, Siam Commercial Bank’s financial tech subsidiary Digital Ventures, SixThirty and Fintech71.

PSD2 signals a return to relationship banking, says Temenos (AltFi), Rated: A

Jeroen Broekema, online lender Funding Circle’s lead in the Netherlands, recently told us that PSD2 “has the potential to be a game-changer”, but that its success in the short-term will depend on the willingness of the big banks to engage.

Temenos is a software provider to banks and other financial services firms, helping them to keep pace with a rapidly changing market. It’s the fourth largest software company in Europe, with profits of over $185m and a market capitalisation of more than $5bn. (Clearly, selling technology to banks is big business.)

ENEMY TURNED INTO BROTHER: CRYPROCURRENCIES AND BANKS TO INTEGRATE IN JUST ONE YEAR (Bitcoinist), Rated: A

Two factions have formed on their own – people who stay loyal to banks and observe the cryptocurrency market from afar, only dreaming about 30–60% p.a. deposit rates. And then there are those who have switched over to cryptocurrencies and are happy with the state of things but shudder every time they hear about the latest hacking of cryptocurrency wallets. Why make this choice? The market needs a service at the intersection of these factions.

We are finally solving the issue of debit card linkage to cryptocurrency wallets. About 10 companies promise to issue their Master Card or VISA cards – all to no avail… Our marketplace will solve the problem of online lending, including p2p lending, as well as deposits in cryptocurrency assets. Sure, the market may offer similar services, however only Narbonne has the team with that much experience in finance.

Many microfinance companies like to mention that 2–3 billion people are currently unable to get a loan in a bank.

International

The ECN Updates Review of Crowdfunding Regulation in the EU, Israel & the USA (Crowdfund Insider), Rated: AAA

On October 20, at its 6th Convention in Vilnius, Lithuania, the European Crowdfunding Network (ECN), the European association of alternative finance platforms, released its Third Edition of the Review of Existing Regulations of crowdfunding and related alternative financing in the 28 countries of Europe, as well as in North America and Israel.

The 720-page long report was written by local offices of law firms in each country coordinated by international law firm Osborne Clarke under the direction of Tanja Aschenbeck-Florange and her colleague Thorge Drefke.

In response to the new alternative financing models, some 11 EU countries have implemented national level regulations for securities-based and lending-based crowdfunding:

Belgium, Finland, France, Germany, Greece, Italy, Lithuania, The Netherlands, Portugal, Spain, and The United Kingdom.

A few other countries, such as Romania and Ireland, are preparing to issue such crowd-funding-specific regulations.

The result of this lack of regulatory harmonization is a market fragmentation which clearly hampers the development of the industry.

A Call for Action

The aim of the report, in addition to providing a reference document for the platforms and their partners, is to present the European and national regulators and legislators with a clear picture of the fragmented regulatory landscape and to suggest directions for improvements inspired from the best practices observed in each country.

Sovereign funds’ corporate deals halve in Q3, Asians stay active (The Star), Rated: A

The value of corporate deals with sovereign wealth fund (SWF) participation halved in the third quarter as oil-driven funds continued to take a back seat.

GIC participated in the top three deals, the largest being a US$6.4bil offer for Danish payments processor Nets by newly-formed company Evergood 5. The deal was backed by a consortium that included GIC, led by private equity firm Hellman & Friedman.

The second largest was the US$1.6bil acquisition of Hong Kong-based insurer MassMutual Asia by another investor group that included GIC.

GIC also led a US$220mil funding round for Chinese peer-to-peer lending platform Dianrong.

Fintech startup, Trade Ledger, launches world-first tech to help banks fight off global tech giants (Business Insider), Rated: A

Career technologists, Martin McCann and Dr. Matthias Born, are launching a world-first lending tech for banks and traditional lenders that will help to equip them against competition from tech giants such as Facebook, Tencent, and eBay wanting to enter financial services.

Trade Ledger is the world’s first business lending platform that transforms digital data from business supply chains in real time, allowing banks to assess and regularly update credit and default risk of businesses they lend to. Currently this is only done on a one-off or infrequent basis on a very small sample of invoices, and not on any other trade documents.

How Cryptocurrency Loans Are Reinventing Credit (International Business Times), Rated: A

The blockchain nonprofit Celsius, headquartered in New York, now has an initial coin offering to fund the launch of its beta loan platform for Americans in January.

One of the biggest barriers for taking out a loan is credit worthiness. The traditional way banks and lenders assess credit is widely considered outdated in the modern economy.

Users will download the app and log in through Facebook or LinkedIn to authenticate their identities. Ebay or Amazon sellers can upload their transaction histories to show their reliability. Borrowers can even have a guarantor, say a friend anywhere in the world with a cryptocurrency wallet, put up her digital assets to boost your Celsius credit limit.

Borrowers receive their credit in dollars even though lenders are giving them ether.

The plan is to eventually go global. Meanwhile, a Buenos Aires-based startup called the Ripio Credit Network will soon offer similar cryptocurrency services in Latin America. Ripio will focus on short-term microloans, ranging in value from $20 to $2,000. Ripio founder and CEO Sebastian Serrano told IBT the bitcoin wallet platform already has 140,000 users, mostly in Argentina and Brazil.

According to the World Bank, around 2 billion people still doesn’t have any type of bank account.

Like Nubank in Brazil and the fintech startup Tala in Africa and Asia, Ripio will also use cellphone data to help bolster the user’s credit score.

NerdWallet reported the average credit card rate was around 12.3 percent in 2016, accounting for inflation.

Salt has a KeepKey hardware wallet and a digital lending platform set to launch near the end of this year, altogether bringing in more than $45 million in revenue thanks to 25,0000 users.

The Cambridge study estimated there are between 5.8 to 11.5 million active cryptocurrency wallets worldwide.

India

How alternative financial services ecosystem has become big boon for India (Financial Express), Rated: AAA

J Venkatesh had always wanted to gift his college-going daughter a phone. But the machine operator, who works in a tobacco-manufacturing unit in Secunderabad, could never save enough money to buy a smartphone. Though he had a savings account in a large nationalised bank, he wasn’t able to procure a personal loan due to poor credit score. That’s when Home Credit India, a consumer finance provider, came into the picture. Last year, the company gave Venkatesh a small-ticket loan of Rs 10,000 to buy a smartphone. The small-ticket loan boosted his credit score, following which he was able to avail two personal loans of Rs 1 lakh and Rs 73,000 within a gap of less than six months between the two loans.

“With less than 20 million consumers in this country having credit cards and 70% of the formal consumer credit availed by only 24 million households, the opportunity for fintechs is immense,” says Lizzie Chapman, co-founder and CEO, ZestMoney, a fintech firm. At ZestMoney, the ticket size of loans ranges from Rs 3,000 to Rs 3 lakh. “But our sweet spot is in the Rs 20,000-Rs 50,000 space. These are purchases that are too small to warrant taking a personal loan for, but too big to put in one lumpsum for most people,” Chapman adds.

Today, nearly one-third of the customers availing loans through these financial institutions are new to credit.

As per data released in 2016 from the finance ministry, only 28-32% of Indians have access to financial institutions, including post offices and banks.

Online lending startups thrive as banks with bad loans become cautious (Deal Street Asia), Rated: A

Online lending start-ups such as Faircent, Wishfin and Loantap as well as large e-commerce firms are helping expand consumer credit at a time when banks burdened by bad loans have become cautious about lending.

Personal loans advanced by banks grew 15.7% in August, slower than the 18.1% growth that the segment reported a year ago, according to the Reserve Bank of India (RBI) data.

Faircent (Fairassets Technologies Pvt. Ltd) is now processing around 300 loans per month, with an average loan size of Rs1.5 lakh on a monthly basis, compared with 130 loans given in November and December last year.

Wishfin (Mywish Marketplaces Pvt. Ltd), a company which aggregates loan and credit products from banks, has also experienced a huge increase in loans after demonetisation. The firm claims to get around 300,000 applications every month for various financial and credit products, up 2.75 times from a year ago.

LazyPay (owned by PayU) and Simpl (owned by Get Simpl Technologies Pvt. Ltd) also provide a buy-now, pay-later option to customers on their platforms by tying up with online vendors.

Loantap (LoanTap Financial Technologies Pvt. Ltd) is one such platform that provides instant finance to salaried consumers. It has categorized loans for specific-use cases including weddings, holidays, car/bike loans and credit card re-financing, among others.

Now, a safer marketplace for loans (The Hindu Business Line), Rated: A

If you want to raise money quickly for business or personal use, the peer-to-peer (P2P) lending platform has now become more transparent and safer. The RBI last week laid down directions that bring more credibility to the online platform.What is it ?A P2P lending platform brings lenders and borrowers together.

FundPitch to cater to SMEs (The Hindu), Rated: B

While Bodhtree Consulting Limited will launch its operations in the Fintech Valley-Vizag within a few days, two other companies Lycos Internet Ltd (erstwhile Ybrant Digitals) and Kissht will also invest in the city.

The three companies have given the commitment to start their operations in Fintech Valley-Vizag with a total job opportunity for 600.

Besides Bodhtree, its subsidiary FundPitch would also facilitate funding for SMEs — a long needed requirement for innovative entrepreneurs in Andhra Pradesh — J.A. Chowdary, Special Chief Secretary and IT Advisor to Chief Minister, told The Hindu.

Asia

Indonesia’s Skystar Capital to raise third fund in 2018, to target late-stage funding (Deal Street Asia), Rated: AAA

Indonesian early-stage venture capital firm Skystar Capital is expected to hit the fundraising course for its third fund by the second half of next year, a top executive told DEALSTREETASIA.

The VC is now deploying its second fund – which it closed mid-2016 – with check sizes ranging between $100,000 and $1 million. It plans to start the fundraising process when it has utilized at least 50-60 per cent of the current fund.

Lifestyle inflation could be the reason you’re struggling (The Star), Rated: A

WHAT is lifestyle inflation? Quite simply it’s when you increase your spending when your income level goes up, for instance, each time you get a salary increment. It’s a simple idea that when you make more, you spend more.

But aside from that, did you know the Malaysia Employers Federation (MEF) has reported that the average salary increase in 2017 is estimated at 5.3% for executives and 5.43% for non-executives.

Inflation is floating between 3.6% to 3.9%, that only gives you a salary increase of 1%-2%.

Propelling Singaporean SMEs to greater heights with fintech (SBR.com.sg), Rated: A

According to the January 2017 report by Hootsuite and We Are Social Singapore, there are currently 644.1 million people in Southeast Asia. Of which, 53% are internet users making the region ripe for growth and expansion for Fintech adoption.

Paired with the Smart Financial Centre, with funding of $225 million, this has reduced the barriers to entry for fledgling startups and SMEs.

Payments
As a sector that contributes between 23 and 58 percent of the Gross Domestic Product of the region’s various countries, many transactions arise from SMEs. These may include the use of paper money or cheques, processes that are labour-intensive and time-consuming. However, with the rise of payment services like Omise in Thailand, M_Service in Vietnam, and Doku in Indonesia, SMEs can now reach customers without credit cards to transact on an e-commerce platform.

In Singapore, the introduction of PayNow, a payment service that allows transactions to be made to the user’s mobile number on mobile banking apps, has made banking transactions more convenient than ever.

Lending & Financing
Whilst SMEs are key to driving economic growth in Southeast Asia, the fact that they are small and medium enterprises also mean that they encounter difficulties in securing loans from traditional financial institutions. A report by Deloitte states that less than 60% of SMEs in five countries the region have access to bank loans.

Finance Management 
Another key issue SMEs face is the lack of financial literacy or financial literacy tools available to managers.

Improve policy framework to promote consumer finance (Viet Nam News), Rated: A

Experts agreed that the consumer lending market has high potential in Việt Nam, given the low penetration and significant size of the population that remained unbanked and unserved despite increasing income.

Statistics of the State Bank of Việt Nam revealed that total outstanding consumer loans were at VNĐ960 trillion (US$42.1 billion), or 15.7 per cent of the total outstanding loans in the economy, in 2016, of which VNĐ74 trillion was provided by finance companies.

She cited the World Bank’s statistics according to which the population with loans accounted for 46.84 per cent in Việt Nam, but the percentage of population with loan at financial institutions was much smaller at 18.45 per cent.

MENA

Brace yourselves for the future of finance (Khaleej Times), Rated: A

The financial services industry is experiencing a time of unprecedented change. And the principal driver for this change is fintech.

Investment in fintech in the Middle East alone for 2017 was forecast to increase by 270 per cent at the beginning of the year, with this figure expected to rise exponentially in the short to medium-term.

With the number of people owning at least one smartphone in the UAE – forecast to reach 789 million by 2019 – mobile banking plays a large and very important part in our everyday lives. Indeed, research leading up to the annual Gitex Technology Week in Dubai shows substantial growth in the banking habits of the high-earning, always-connected under-35s who require and expect constant mobile banking access.

In addition to mobile banking apps – robo-advisers, peer-to-peer lending and cryptocurrencies such as bitcoin and Ethereum – have all played a role in this colossal upheaval of the financial services industry.

HONEST FINANCING FOR TURKISH FARMS (Delano.lu), Rated: A

Tackling the challenges of the underbanked, the EFSE Fund and the SANAD Fund for MSME, advised by Finance in Motion, have partnered with Village Capital and the LHoFT to develop the Fincluders Bootcamp 2017, unique investment readiness program designed for entrepreneurs offering inclusive financial products.

We caught up with founders from each of the 12 selected startups, this time with Mehmet Memecan, founder of Tarfin:

What does ​’financial inclusion’ mean to you?

In farming, you achieve higher profitability by either planting more value-added crops, or plant more acres of the same crop. Both of these options require additional to capital.

Could you describe the mission of Tarfin?

Tarfin uses technology and its vast retailer network to deliver competitive financing options for farmers’ purchases of farm inputs. Farmers can buy fertilisers, seeds and chemicals today, and only pay after harvest. We bridge the financing gap, and we do it at a cheaper rate than what’s otherwise available to the farmer.

What are the unique challenges and opportunities of your home market?

Unfortunately, we have very low financial literacy in Turkish agriculture.

Africa

Ghanian FinTech Bloom Impact attracts Canadian investment (CFO), Rated: AAA

Ghana’s Bloom Impact, a machine learning loans marketplace accessible from smartphones has raised undisclosed funding from Engineers Without Borders Canada, EWB Ventures, an early-stage investor in innovative Africa-based social enterprises.

Authors:

George Popescu
Allen Taylor

Friday September 15 2017, Daily News Digest

ZhongAn Chinese fintech

News Comments Today’s main news: CFPB issues first no-action letter to online lender. SoFi defends its mortgage underwriting standards. Was SoFi’s FICO-free zone really FICO-free? RealtyShares raises $28M for commercial real estate investing. Betterment partners with Goldman Sachs, BlackRock. JustUs receives full FCA authorization. Raisin offers term deposits to businesses. Earthport partners with Cross River Bank. Reserve Bank of India waiting for government […]

ZhongAn Chinese fintech

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United States

CFPB Issues First No-Action Letter To Online Lender (Law360), Rated: AAA

The Consumer Financial Protection Bureau on Thursday issued its first no-action letter to online lender Upstart Network Inc., allowing the company to continue using alternative credit data to evaluate borrowers in exchange for providing data to the federal consumer finance watchdog.

SoFi defends mortgage standards, denies Fast Company allegations (Housingwire), Rated: AAA

SoFi, also known as Social Finance, adamantly said it doesn’t shy from criticism, stepping up to defend itself amid the recent negative news coverage on the company’s alleged toxic workplace environment.

Included in Fast Company’s coverage of the fintech company is a bold claim that “in the first round of SoFi mortgages, some homes lacked appraisals.”

According to a SoFi spokesperson:

In late 2014, we tested a simplified version of our home mortgage product that used paystubs for income verification and did not require home appraisal. The test did not proceed into a launched product, and we launched our mortgage product with requirements for full income verification and home appraisal, which is still the case today. All of these mortgages met the ability-to-repay standards promulgated by Dodd-Frank and none of these pilot mortgages were ever sold to investors, and we continue to hold those loans on our balance sheet.

SoFi’s “FICO-Free Zone” Loan Process Was Maybe Actually Rather Full Of FICO (Dealbreaker), Rated: AAA

It turns out that when SoFi executives and employees weren’t banging the “collateral” out of each other in parked cars or office bathrooms, they were being less than honest with loan applicants about how their loan applications were being evaluated.

According to conversations with numerous former SoFi employees, the company’s “FICO-Free Zone” loan product actually relied quite heavily on evaluating applicants by their FICO score. After very publicly announcing in early 2016 that SoFi would no longer use FICO scores to evaluate loans, sources tell Dealbreaker that the company saw defaults tick up and made the internal to decision to reintegrate FICO data. No announcement of the shift back was ever made, the “FICO-Free” language disappeared from the website and some evidence of the SoFi’s move away from FICO was even scrubbed from the company’s blog.

Eager to please, did SoFi close early mortgages without appraisals? (Housingwire), Rated: A

I’ve sat on panels that discuss all the benefits the aforementioned Silicon Valley approach brings to housing. Having SoFi around isn’t one of them, if their underwriting standards are as bad as some claim.

If this article at Fast Company proves true, this explosive headline is correct: At SoFi, The Problems Go Way Beyond Its Toxic Workplace.

Ainsley Harris writes: “In the first round of SoFi mortgages, some homes lacked appraisals.”

Why on earth would a lender not get the value of the collateral it was lending to? Did SoFi think in-depth valuations where unnecessary? Do investors know that SoFi doesn’t know how much these homes are worth in the event of an REO?

Let me say this, whatever the reason to potentially forego appraisals, SoFi’s investors will disagree with that decision. The Fast Company revelation is so baffling that SoFi’s plan for an IPO will be delayed, perhaps indefinitely.

Let’s hope so. A company that plays fast and loose with its own people is shameful. A company that plays fast and loose with prudent lending practices is downright dangerous.

Here is SoFi’s Response to NYT Article that Criticized Operations & Culture at Fintech Firm (Crowdfund Insider), Rated: A

SoFi has published a public letter addressing the allegations leveled by NYT.com earlier this week.

The letter is republished in its entirety below. (Ed. Note: Excerpted by Lending-Times)

Mortgage: The story cites unnamed sources saying there was some period where we were “not doing enough” to validate income for mortgage borrowers. This is an incredibly vague claim, and we have no idea what this means. We underwrite our mortgage loans consistent with market standards, which includes rigorous income verification, and consistent with the ability to repay requirements put in place by Dodd-Frank.

Personal Loans: The story implies that our personal loans business grew in part because of a change in the way loans were approved: that customer service reps were approving loans rather than underwriters. That view reflects a lack of understanding of our business. We underwrite loans using a highly automated platform where all credit decisions are made by a pre-defined algorithm that analyzes each applicant’s credit profile and ability to pay.

A Thriving Business: The story did mention our business performance, and indeed, SoFi is thriving. Since inception, we have funded more than $20 billion in loans, $3.1 billion in the second quarter alone. In Q2, we had $134 million in revenue, up 67% year over year, with adjusted EBITDA of $61.6 million, up 60% year over year. We have more than 350,000 members, and they like what we do – our products run Net Promoter Scores in the 60-80 range, among the highest in financial services.

RealtyShares raises $ 28 million for commercial real estate investing (TechCrunch), Rated: AAA

RealtyShares is raising a $28 million Series C round led by Cross Creek Advisors, with participation from existing investors including Union Square Ventures, General Catalyst Partners, and Menlo Ventures.

Founder and CEO Nav Athwal says that RealtyShares has over 120,000 users on the platform. The startup says it has deployed over $500 million across more than 1,000 properties since it was founded in 2013.

Credit markets need legislative guidance after Madden decision (American Banker), Rated: AAA

In a recent op-ed in American Banker (derived from a longer blog post), professor Adam Levitin argues that the recent legislative proposals to “fix” the repercussions of the United States Court of Appeals for the Second Circuit’s Madden v. Midland Funding decision are “overly broad and unnecessary and will facilitate predatory lending.” The legislation Levitin opposes would restore the ability of banks to sell loans to nonbanks and have the loans remain valid on their original terms, the type of transaction on which the Madden decision has cast doubt. I disagree, at least with regard to marketplace lending. There are compelling legal and policy arguments to undo the Madden decision that Congress should consider.

Levitin is certainly right that the Nichols case and the similar 19th-century cases reflect a different fact pattern than was presented in Madden. It does not necessarily follow, however, that the principle of valid-when-made should not also apply under the Madden facts.

The issue at question in Madden, the interest charged on the loan, was set by the bank at the loan’s inception. The borrower got the benefit of the federal regulatory regime, which includes the incorporation of the bank’s home state usury law, when the loan was created, and the relevant characteristics did not change. So why is there suddenly a problem?

The impact of Madden on innovative credit is harmful to borrowers

Madden also appears, as would be expected, to be reducing access from marketplace lenders to credit for borrowers with lower credit scores. Contrary to Levitin’s argument, a recent study shows a reduction in credit availability not just for borrowers with FICO scores under 625 (though that is where the reduction is most pronounced). The study indicates that borrowers in New York and Connecticut with FICO scores under 700 saw a reduction in availability relative to comparable borrowers outside the Second Circuit.

For example, it is important to keep in mind that the majority of marketplace loans are used to pay off bank-issued credit cards (which are not subject to borrower state usury laws) or consolidate existing debt. Denying borrowers access to these loans does not leave the borrowers unencumbered by debt; it leaves them in the situation they view as worse than taking out this new loan. This is especially true given that there is evidence that marketplace lenders can help provide expanded access and competition, services in areas that have few banks, and better pricing for some borrowers than they would receive from banks. Cutting off access isn’t protecting borrowers, it is leaving them with fewer, perhaps inferior, tools to protect themselves.

Usury caps can lead to loan arrangements being distorted in ways that make the loans legal but worse for the borrower. We see examples of this in the shift from payday to “payday installment” and subprime auto loans, where lenders bound by interest rate caps change the loan principal amount or repayment schedule to make the loans viable. These loans can actually be more expensive in total because the lower interest rate is applied to a higher principal over a longer time period. Larger loans also can be more expensive for borrowers if they pay them off early or go into default. Borrowers also could be forced into using suboptimal options like pawn shops or illegal loans, or find themselves without credit altogether.

Betterment struck a deal with 2 Wall Street giants to provide its 270,000 users more investment options (Business Insider), Rated: AAA

Betterment, the largest roboadviser with $10 billion under management, has enlisted the support of financial juggernauts Goldman Sachs and BlackRock for two new portfolio options.

The portfolio managed by Goldman Sachs is a smart-beta option, providing users with a more aggressive alternative to Betterment’s core portfolio, which allocates money to stocks and bonds, according to Arielle Sobel, a spokeswoman for the firm. It will be more exposed to emerging markets and REITs, according to a press release.

Wealthfront, Betterment’s San Francisco rival, announced an in-house-built smart-beta portfolio in June, according to a company spokeswoman.

The other portfolio option is an income-based portfolio, managed by BlackRock, the largest fund manager in the world with $5.7 trillion under management. It provides investors a more conservative option and delivers target income.

The imperative for self-sovereign identification (get lost Equifax) (TheFinanser.com), Rated: AAA

As we have known for a long time now, it is no longer good enough to use customer’s personal information for account access. After Ashley Madison and so many other incidents (Tesco Bank, Lloyds Bank, JPMorgan Chase, SWIFT, the Federal Reserve, the IRS, the Department of Homeland Security eBay, Yahoo, Google, Adobe, Target, Neiman Marcus, Home Depot …), surely we should be moving away from this antiquated system. Bear in mind it’s been used for almost two decades, it’s no wonder the system is no longer working.

So the banks add second-factor authentication (2FA) with secure entry pads and PINs, but they still rely on personal information for account access when you ring their call centres, and this is just annoying.

Is there a solution?

First is biometrics and TouchID, voice, eyes and more can easily be used for authentication via a smartphone. Why banks aren’t incorporating these into their onboarding and access mechanisms beggars belief …. or maybe not, as banks would need modern systems to use such radical authentication techniques, and that’s a big ask. Far easier to rely on name, address, date of birth and all the information the hackers stole from Equifax.

Source: TheFinanser.com

Emerging technologies (particularly blockchain, although not exclusively) are making the development of “self-sovereign identity” a real possibility.

The basic idea behind self-sovereign identity is that rather than have our information held by third parties (often without us even knowing what that information is) and used to guarantee our identity and make decisions that affect us; we could turn the entire model on its head and give each individual control over their own digital identity.

With self-sovereign identity, you would hold all of the different elements of your online identity in a “box” or “wallet”, and would then be able to choose which of those elements to reveal in any given context.

Anuj Nayar Leaves PayPal For Lending Club (Holmes Report), Rated: A

PayPal’s global head of product communications Anuj Nayar has left to become head of communications at peer-to-peer investment company Lending Club.

In his new role that starts on Monday, Nayar will be in charge of the team running all internal and external communications, as well as social media, for the $2.5 billion publicly-traded fintech company.

A recap of Goldman’s summer siege on fintech lending (AltFi), Rated: A

Last night we learned that Goldman Sachs is poaching roughly 20 employees from online lender Bond Street, which seems to have paused making new loans, according to The Wall Street Journal.

It is indicative of Goldman’s strategy that the bank has forced its way onto the AltFi (“Alternative Finance”) homepage three times this week. Those incursions were tied to its £100m investment in UK employee benefit lender Neyber, its $300m deal with home solar financing firm Mosaic, and the announcement that it plans to launch an online bank in the UK.

So its latest decision, to nab 20 workers from the dormant Bond Street, is not without precedent. But Bond Street is not a consumer lender. It offers term loans of up to $1m to small businesses. Could Goldman, then, be sizing up an expansion into small business lending for Marcus?

Open the door to new loan opportunities without sacrificing security (CUInsight), Rated: A

Year-to-year, community financial institutions have become more conservative about consumer lending. So as to not open themselves up to additional risks, many of these institutions tend to only service consumers with prime and super prime credit. However, consumers with non-prime credit make up a solid portion of the consumer lending market, so this desire to stick with “safer” loans leaves quite a few loan opportunities on the table. And when many community financial institutions are dropping their rates to as low as 0% in order to compete with large national lenders for prime and super prime consumers, missing additional revenue opportunities for your loan portfolio is not a small matter.

Market disruptors like retail lenders (i.e. Costco), mobile lenders (i.e. AutoGravity), and peer-to-peer lenders (i.e. Lending Club) are finding ways to bypass the existing banking system, credit bureaus and financing requirements to lend to this highly sought after demographic.

Got Student Debt? Soon Your Employer Might Help With That (Buzzfeed), Rated: A

Fidelity Investments introduced a program Thursday that will let employers make regular payments to their employees’ student loan accounts, much the way companies already pay into their workers’ 401(k)s or health care savings accounts.

Some smaller financial services companies already facilitate this type of benefit program, such as First Republic Bank and startups like Student Loan Genius and SoFi.

But the entry into the market of Fidelity Investments — one of the country’s biggest mutual fund, money management and financial planning companies — is a sign that student debt relief may soon become a mainstream benefit that employers will have to offer to remain competitive.

This Startup Is an ATM for the Money You Haven’t Been Paid Yet (Inc.), Rated: A

If you’re living paycheck to paycheck, on the other hand, even small unexpected expenses can put you in the red. The two weeks between paychecks is an eternity for an hourly worker whose credit card is already maxed out, or who doesn’t have one to begin with. Every parking ticket and hospital co-pay is a potential crisis. By the time payday comes, it’s too late — the next crisis has already arrived.

Financial technology startup DailyPay thinks giving people in this situation more frequent access to wages would go a long way toward solving this problem and putting them on the path to financial security.

DailyPay’s solution works like this:

1) The startup integrates with a company’s established payroll and time-tracking systems. Instead of going directly to an employee’s bank account, paycheck deposits are set up to go through DailyPay first.

2) An employee can withdraw wages he or she has earned but not yet received throughout the two weeks or month before formally getting the paycheck. DailyPay fronts the money for a small fee, and keeps the expense on its balance sheet.

3) Come payday, DailyPay deducts whatever money the employee has already withdrawn, and sends the rest of the paycheck through to the employee’s bank account.

Perhaps Lee likens his service to an ATM because the more obvious comparison — a payday loan provider — is often considered predatory.

One key difference is that DailyPay interfaces directly with employers, positioning itself as an HR benefit. DailyPay’s pitch to other companies is that flexible payroll reduces turnover, which is good for the bottom line, and the service is free to implement. One internal study of 20 DailyPay clients found that turnover shrank by 40 percent on average after they adopted it.

Mosaic Will Sell $ 300 Million Worth of Solar Loans to Goldman Sachs (GreenTechMedia), Rated: A

Solar loan provider Mosaic reached an agreement with Goldman Sachs in which the bank will buy $300 million in loans over time.

This deal will clear up space on Mosaic’s balance sheet to finance more loans, and signals a prestigious bank’s willingness to buy and own solar loans for itself.

Market Overheated? Not These Sub-Sectors (Seeking Alpha), Rated: A

Since I run an opportunistic portfolio that seeks out high upside “Fat Pitches” (soon to be a subscription service), it may seem as though I, too, would be stumped; however, I continue to find opportunities, albeit in sectors a bit off the beaten path.

While “value” and “high-growth tech,” may seem anathema to each other (wait till you see the next section), the three public fintech companies – Lending Club, Ondeck, and Elevate Credit – all seem undervalued today relative to their potential, and each have posted strong results in the recent quarter.

Ondeck, which lends to small and medium businesses, also recently decided to scale back its growth, raise rates, and cut staff. The company lowered orginations last quarter by 19% sequentially last quarter, but loss provisions as a percentage of revenues also fell from 8.7% to 7.2%. After implementing a $45 million cost reduction program, the company’s losses declined to only $1.5 million, down from $16 million in losses a year ago.

Speaking of acceptance, it may seem on the that the company that serves the subprime market – thought to be the riskiest of all – is the most profitable of the three. Elevate Credit has been doing everything right – though you wouldn’t know it by its languishing stock price. Last quarter, Elevate grew originations 29% and revenues by almost 19% (due to a higher mix of lower rate, but higher-quality loans), expanded its core RISE product to the state of Kansas—its 16th state, and was able to lower its interest rate on its high-cost funding from Victory Park Capital.

How A Bank And A FinTechs Are Jointly Cracking The Code On Financial Inclusion (PYMNTS), Rated: A

The teams at FinTech startup LendUp and Oakland-based Beneficial State Bank think very differently about that relationship. As LendUpCEO Sasha Orloff and Beneficial State Bank Co-CEO Kat Taylor told PYMNTS in a recent interview, banks and FinTechs need each other, and a very large segment of the population living on the margins of financial services in the United States need these two groups to work together as well.

That constituency, Orloff noted, isn’t always easy to serve – or to serve profitably – without relying on a business model that counts on its customers to fail and then charging sky-high fees for those failures. LendUp and Beneficial State Bank have a different approach: They want to invest and make money on their customers who are succeeding financially and are able to participate in the full spectrum of the financial system.

Fifty-six percent of Americans have a sub-prime credit score, meaning mainstream banks likely can’t approve them for their products; more than half of all Americans could not find $400 in the event of an emergency; and two-thirds of millennials have not started building any kind of credit score, in a system in which having no score or a poor score can cost a person $250,000 over their lifetime.

Lending money beyond what people can bear is the hallmark of predatory lending, she emphasized, and that’s not going to help the customer.

That alternative – the L Card, issued by Beneficial State Bank in partnership with LendUp – is a low annual fee card (starting at $0 and capped at $5 per month or $60 per year) that offers consumers a grace period for payments and even caps late fees (at $7). It has a higher interest rate – 19.99 percent to 29.99 percent – for a credit card than the national average, but according to The PEW Charitable Trusts, is a fraction of the payday lending rate, which is around 400%. Credit limits range from $300 to $1,000 based on credit score, and a year of timely payments and responsible behavior allow customers to double the limits.

CommonBond gets new CFO from Deutsche Bank (India Times), Rated: A

Jay Coleman, a Wall Street banker focused on equity raises and initial public offerings, has joined online lender CommonBondas chief financial officer, according to the company’s co-founder David Klein.

While still small, the company had lent about US$1bn to 12,000 borrowers as of May 1, according to Moody‘s Investors Service.

Coleman was poached from Deutsche Bank where he was head of private capital and equity capital markets execution, according to a CommonBond spokesperson. Prior to that he worked at Barclays, Lehman Brothers and Morgan Stanley.

eOriginal Appoints Timothy Wall Chief Revenue Officer (Broadway World), Rated: B

eOriginal, Inc., a rapidly growing financial services technology company, has named Timothy Wall Chief Revenue Officer (CRO).

As CRO at eOriginal, Wall will be responsible for all aspects of the company’s sales organization and revenue development, including direct sales, channel sales, sales engineering and customer success.

Ex-U.S. Representative Nussle: credit unions are the ‘original disrupters’ in financial services (Radio Iowa), Rated: B

Former Iowa Congressman Jim Nussle today said Iowa’s 94 not-for-profit credit unions have filled a void as banks throughout the country and in Iowa continue to consolidate.

More than 1.1 million Iowans are members of a credit union and the state’s credit unions have about $16 billion in assets, according to Nussle.

Nussle indicated the “speed of change” and stress in the industry has been rather dramatic, not only because of the “Great Recession,” but because of incidents like Wells Fargo’s admission that its employees created fake accounts without customers’ permission. The recent growth of on-line “peer to peer” lending presents credit unions with an opportunity rather than a challenge, according to Nussle, because credit unions are member-driven.

GDS Link Welcomes 2017 LEND360 to Dallas (PR Web), Rated: B

GDS Link, a global provider of credit risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business leasing, announced its role in bringing the fourth annual LEND360 to Dallas.

“The LEND360 Dallas host committee, co-chaired by Ken Rees, Chief Executive Officer of Elevate Credit, Inc. and Paul Greenwood, President and Co-founder of GDS Link, and supported by other influential members of the fintech community, has been meeting since late 2016 to ensure a valuable attendee experience for the upcoming conference, assist with speaker development and engage innovative industry leaders to take part in the event,” according to a LEND360 press release.

Hear from Both Sides of the Aisle on the Future of Fintech (Business Insider), Rated: B

The Online Lending Policy Institute (OLPI), the leading voice for policy analysis, in-depth research, and education for the online lending industry, today announced its roster of speakers for the Second Annual Summit on Sept. 25 at the Renaissance Hotel in Washington D.C. The Online Lending Policy Summit provides an opportunity for industry participants to share insights, propose standards, and have an open dialogue with regulators and policymakers to build consensus viewpoints on the regulation of online lending. Keynote addresses will be delivered by the following four policy leaders:

  • Keith Noreika, Acting Comptroller of the Currency. Mr. Noreika advocates for the need to embrace innovation while ensuring that new products and services do not present undue risk to the financial system. He will discuss how regulators and industry can work together on “responsible innovation” and with principles for governing the rapidly growing financial technology sector.
  • Congressman Gregory W. Meeks (D-NY-5), now in his tenth term, serves one of the most diverse constituencies in the nation. Mr. Meeks is known for being an effective, principled, and commonsense leader. Congressman Meeks is a senior member of the U.S. House Financial Services Committee, and is the lead Democratic sponsor of important legislation dealing with the Madden v Midland Funding court case.
  • Congressman Tom Emmer (R-MN-6) represents Minnesota’s 6thDistrict in the U.S. House of Representatives. He began his congressional career on January 6, 2015 and serves as a key member of the U.S. House Committee on Financial Services. Prior to his congressional service, Mr. Emmer practiced law for several years, and followed his entrepreneurial calling and opened his own law firm.  In 2004, he was elected to the Minnesota House of Representatives and re-elected by overwhelming majorities in 2006 and 2008.  After a narrow loss in the 2010 gubernatorial race, Tom entered the radio business as a conservative radio host.
United Kingdom

JustUs Receives Full Authorization From the Financial Conduct Authority (Crowdfund Insider), Rated: AAA

Peer-to-peer lending platform JustUs announced this week it has received full authorization by the Financial Conduct Authority (FCA). The online lender revealed that the full authorization is a pre-requisite to offer the JustUs Innovative Finance ISA (IFISA) and registration forms have been submitted to HMRC with a planned launch of the ISA in October.

A Battle For The Soul of Peer-To-Peer Lending (Forbes), Rated: AAA

Crowd2Fund, a relative newcomer to the alternative finance industry, is accusing Funding Circle, one of the market leaders, of turning its back on the whole ethos of peer-to-peer lending.

The row follows an announcement last month by Funding Circle that it will no longer allow investors on its platform to choose which specific companies they want to lend their money to. Instead, the platform will automatically spread investors’ cash across a group of businesses looking for funds – much as a professional collective fund manager in any other asset class chooses investments on behalf of its investors.

Crowd2Fund said Funding Circle’s move reflected the larger platform’s increasing focus on large institutional investors in peer-to-peer lending, as well as concern about the growing regulatory scrutiny of the sector.

36% of UK adults did not save or invest last quarter (Bridging&Commercial), Rated: A

Over a third of UK adults (36%) have not saved or invested any money in the last three months, according to the second instalment of RateSetter’s quarterly tracker.

On average, people saved or invested £232 each month in the last quarter.

The research also revealed:

  • men saved significantly more than women over the period (£296 a month, compared with £170)
  • 25- to 34-year-olds put away the most over the period (averaging £278 a month), followed by those aged between 35 and 44 (£260 a month)
  • young adults, aged between 18 and 24, put away the least (£154 a month).

ArchOver CEO: SMEs have “wrong attitude” in eschewing finance (P2P Finance News), Rated: A

ARCHOVER’S chief executive Angus Dent (pictured) has urged small business owners to be more confident in taking on debt, after new figures showed that 80 per cent of small- and medium-sized enterprises (SMEs) are refusing to apply for new finance.

The boss of the peer-to-peer business lender said that while their caution was understandable, it is the “wrong attitude” for SMEs that want to scale up.

LendInvest property academy receives public support (Mortgage Introducer), Rated: A

LendInvest  has received public support from three major industry bodies for its property development academy.

The Centre for Entrepreneurs, Homes for Scotland, and the Home Builders Federation have each praised the academy, which was established in 2016 to help develop the skills of aspiring and new small-scale housing developers.

ASTL conference: FCA praises regulated bridging market’s ‘rosy picture’ (Mortgage Solutions), Rated: A

Data from the FCA showed regulated bridging customers contrasted strongly with the stereotypical version, with just 3.3% of bridging loans going to credit impaired clients.

The regulator found bridging customers ware typically wealthier, older, more likely to be self-employed and bought bigger houses than standard mortgage customers.

The FCA data revealed:

  • Bridging is much more concentrated in London and the South East – around 40% of loans are in these regions compared to 26% for standard mortgage lending;
  • Significantly less bridging lending takes place in the north of England, Scotland, Wales and Northern Ireland;
  • Median bridging loan value is around £208,000, compared to £143,000 for a standard mortgage;
  • Median property value is significantly higher at around £550,000 compared with a normal mortgaged property value of £230,000;
  • Significantly more bridging loans are on detached houses – 51% compared with 23%;
  • Average bridging customer age is 56, compared to 37 for a normal mortgage;
  • Bridging customer are more likely to be self-employed – 31% vs 11%;
  • Bridging customers are also significantly more likely to be retired at 28% vs 1% standard mortgage customers.

Why Investors are Excited about Birmingham (Landlord News), Rated: A

Birmingham, the site of LendInvest’s latest Property Development Academy, is a perfect example of this. Time and again we heard from attendees of just how exciting the city is for property development currently, and why they are so desperate to get cracking with their own development projects.

It’s notable that in last year’s Emerging Trends in Real Estate report from PwC and the Urban Land Institute, which looked specifically at which European cities present the best opportunities for investors, Birmingham was the best performing UK city. It ranked 22nd, ahead of cities like Manchester, Edinburgh, London, Brussels and Rome.

All of this has led to a thriving rental sector. Our most recent Buy-to-Let Index found that the city currently boasts a rental yield of a very strong 5.03%, with capital gains of 4.97% over the last year.

The latest UK Economic Outlook report from PwC named the West Midlands as one of the housing hotspots, predicted to see house price growth of 4.5% this year, compared to a UK average of 3.7%.

China

Lawmaker urges FSC to curb online lending bad debt (Taipei Times), Rated: AAA

Democratic Progressive Party Legislator Lin Chun-hsien (林俊憲) yesterday urged the Financial Supervisory Commission (FSC) to curb bad debts stemming from fraud and loan sharking on Internet-based peer-to-peer lending platforms.

Online lending platforms have existed for years in other nations and have caused many problems, Lin said, adding that in China they are blamed for generating an estimated 60 billion yuan (US$9.2 billion) of bad debt.

ZhongAn Plants a Fintech Acorn for China (Bloomberg), Rated: AAA

Like electric cars, whose era of global dominance has yet to arrive, the app-driven insurance industry is more of a concept than reality. That doesn’t mean investors should dismiss the Hong Kong initial public offering of ZhongAn Online P&C Insurance Co., despite its hefty price tag.

Bankers are currently sounding out investors for an IPO that could raise as much as $1.5 billion, giving ZhongAn a valuation of $11 billion. That’s well above CLSA’s $8 billion estimate, which already ranks the online insurer as China’s third-most valuable fintech company after Ant Financial, an affiliate of Ma’s Alibaba Group Holding Ltd., and Lufax, the peer-to-peer lender owned by Ping An Insurance (Group) Co.

ZhongAn is the world’s sixth-most-valuable e-finance company, at about $8 billion.

So here’s the bad news. ZhongAn is tiny. Its net written premiums were a mere 3.4 billion yuan ($520 million) last year, or 0.5 percent of China’s insurance industry, according to Bernstein Research analyst Linda Sun-Mattison.

Source: Bloomberg

It’s also expensive. The $11 billion valuation implies an adjusted price-to-book level of 4.3 times, Smartkarma analyst Ke Yan estimates.

European Union

Wealth Products Marketplace Raisin Takes a Leap Forward with Term Deposits for Businesses (Crowdfund Insider), Rated: AAA

Pan-European marketplace Raisin continues its trailblazing expansion. Having penetrated new geographies with international and localized services in 2016, the Berlin-headquartered startup is now broadening its offering to address a new customer segment: small and medium-sized enterprises (SMEs). Starting September 14, businesses can open term deposit accounts on Raisin’s German site www.weltsparen.de, or more precisely, on www.weltsparen.de/geschaeftskunden.

International

Earthport strengthens US network with Cross River partnership (Finextra), Rated: AAA

Earthport (AIM: EPO), the leading payment network for cross-border transactions, is pleased to announce its partnership with Cross River, a US-based bank, to provide inbound cross-border payment services across the US market, adding to its existing capabilities to process payments in the US.

The partnership will facilitate the execution of inbound ACH payments through Cross River, and further strengthen Earthport’s global payment network, enabling high volumes of low-value payments originating outside the US to be serviced more efficiently.

Fintech to the rescue for the world’s unbanked (City A.M.), Rated: A

Half the world is unbanked. That’s the provocative title of a 2009 research paper published by the Financial Access Initiative (FAI), a consortium of researchers from New York University, Harvard, Yale and Innovators of Poverty Action.

Their study also provided an empirical grounding that, although it is possible to serve low-income communities at scale with financial services, there are still billions left to reach. According to figures from the World Bank, as of 2015 there are still 2bn people who lacked access to any formal financial services.

The advent of mobile technology along with increasing smartphone penetration, especially in developing countries, has opened up a new portal of possibilities.

This newfound access in countries across South East Asia and Africa has provided the perfect ecosystem to initiate financial inclusion.

Top Fintech Innovations To Look Out For in 2018 (Finovate), Rated: A

Nick Ogden – founder and Executive Chairman, ClearBank

The number one thing that’s going to occur in 2018 is fragmentation of the marketplace as we know it today. The days of big banks delivering everything and being specialists in everything are over. Some of them might still not accept that but the reality is that it’s happened.

Karen Kerrigan – Chief Legal Officer, Seedrs

Rather than looking at a specific technology, have a look at a particular sector. There are a lot of challenger banks out there at the moment – Starling Bank, ClearBank, Monzo, Tandem – and they’re all vying for the same space. They’re all doing things slightly differently, but  ultimately are taking on the banks.

Lol a FoHFs ICO, srsly (FT Alphaville), Rated: A

Tokens may not be available to all persons in all jurisdictions as certain offering restrictions may apply. In particular, no tokens will be available in the US, Singapore or the EEA. Offering and trade restrictions, as well as the rights of holders of FundCoin, will be set out in further detail in the offering memorandum.

That little snippet is from the last page of the “whitepaper” for FundCoin, which deserves a spot in the pantheon of initial coin offerings (ICOs) to which regulators should be paying more attention. FundCoin is “the first private equity token ICO” and is the creation of Finles, a 40-year-old Dutch fund of hedge funds manager that has decided to turn to the crypto markets to raise money.

Virtual money shifting global trading trends (BusinessDay), Rated: A

Cryptocurrencies are the most undervalued asset class in the world, says Farzam Ehsani, leader of Rand Merchant Bank’s blockchain initiative.

The combined market capitalisation of all cryptocurrencies was only about $120bn, Ehsani said on Thursday at the Business Day/Financial Mail Investment Summit, held in partnership with Old Mutual Wealth.

By comparison, the market capitalisation of all stock markets is about $68.5-trillion, according to figures from the World Federation of Exchanges.

The price of a single bitcoin has surged from $605 to $3,487 over the past year, leading sceptics to label it a “bubble”.

India

‘RBI AWAITING GOVT NOTIFICATION FOR COMING OUT WITH P2P LENDING NORMS’ (Daily Pioneer), Rated: AAA

The Reserve Bank is waiting for a gazette notification from the Government on getting the peer-to-peer lenders under its regulatory ambit before coming out with guidelines on the sector, a senior official said on Wednesday. “Following up on the consultation paper we did last year, we are shortly going to come up with guidelines on peer to peer lending,” RBI’s executive director Sudarshan Sen said at an industry event here.

According to the official, the P2P lending interface will come under the purview of RBIs regulation by defining these platforms as NBFCs under the RBI Act by issuing a notification in consultation with the Government.

Investree to develop online transaction system of state securities for retail investors (e27), Rated: AAA

Indonesian peer-to-peer (P2P) lending platform Investree announced that it has been appointed by the country’s Ministry of Finance to run a pilot project that aims to develop online transaction system of state securities for retail investors.

According to a DailySocial report, through the project, users will be able to purchase state securities through the Investree platform.

Demonetization in India shines a light on the digital future (The Asset), Rated: A

India’s demonetization experiment has been declared a failure by economic pundits. However, it has expanded India’s tax base and fast-tracked the digitization of payments, which is a good thing.

Some nine-million-odd new taxpayers came into the fold thanks to the scheme. Around 20 million new bank accounts were created by Indians panicked by the possibility of having their cash holdings voided.

Second, the scheme accelerated the digitization of payments in India, with a vast swathe of merchants forced to accept digital payments in lieu of cash.

Types of crowdfunding and why it is beneficial for real estate sector (Moneycontrol), Rated: A

The global crowd-funding industry generated about USD 34.4 billion in 2015.

Apart from raising capital, crowdfunding is also a way to create awareness among the masses and support for a project from the people around you.

Crowdfunding has exploded new ways to raise funds for start-ups, social sector, real estate, inventions and so on.

In India, transaction value in the “Crowd-funding” segment amounts to a meagre USD 6 million in 2017.

Transaction value is expected to show an annual growth rate (CAGR 2017-2021) of 24.8 percent resulting in the total amount of USD 16 million in 2021.

The most used method for real estate crowdfunding is “equity crowdfunding” which helps individual become partial owners in distinct properties, allowing them to participate alongside real-estate companies who acquire, redevelop, or build.

Another type of crowdfunding used for real estate is syndicated debt crowdfunding. This fast growing platform takes some or all of an existing real-estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return.

Canada

IOU Financial Ranked Fourth Fastest-Growing Company in Canada (Business Insider), Rated: AAA

IOU FINANCIAL INC. (“IOU” or “the Company”; TSX-V:IOU), a leading online lender to small businesses (IOUFinancial.com), announces today that Canadian Business and PROFIT ranks IOU Financial as the fourth-fastest growing company on the 29th annual PROFIT 500, the definitive ranking of Canada’s Fastest-Growing Companies. Published in the October issue of Maclean’s magazine and at CanadianBusiness.com, the PROFIT500 ranks Canadian businesses by their five-year revenue growth.

IOU Financial makes the 2017 PROFIT 500 list as the fourth fastest growing company with five-year revenue growth of 8,600%.

Authors:

George Popescu
Allen Taylor

August 8th 2016, Daily News Digest

August 8th 2016, Daily News Digest

News Comments Today’s news pour some cold water on P2P SME lending : SME securitizations and SME yield performance seem to be less than expected. See 1st article in US section and 1st article in UK section. Finova raised $52.5 mil , Mosaic $220 mil. And today’s the day : Lending Club and OnDeck release […]

August 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

Australia

News Summary

United States

Funding Circle, and other online lenders, falter in America, (Financial Times), Rated: AAA

“Our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.” [ Comment: see the complete VPC Q2 2016 letter in the UK section below].

That’s from VPC Specialty Lending (VSL) Investments’ second quarter letter, released earlier this week (mea culpa, we didn’t spot it at first).

VSL’s disclosure forced Funding Circle’s listed fund to issue its own filing to the market yesterday, sort of but not outright rejecting the suggestion that loans were underperforming:

The Company’s US Credit Assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

But that might be downplaying the historic performance a little. When Funding Circle floated its fund last year, this is the US loan performance it revealed in its November prospectus (note the numbers didn’t include expected future losses and showed the to-date performance at that time):

Sachin Patel, Funding Circle’s global co-head of capital markets, said that loans originated in the first half of 2015 had underperformed and are expected to return 7.25 per cent to its large, accredited investors, rather than the 8 per cent or more that it targets.

Funding Circle launched in the US in late 2013 and is run out of San Francisco by Sam Hodges. According to the 2015 prospectus for Funding Circle’s fund, US loans originated in early 2014 also “experienced higher than expected annualised loss rates”.

Similar missteps were seen in Funding Circle’s first years of operation in the UK too:

But Funding Circle isn’t the only online lender to small businesses in the US that is disappointing investors. According to a Morgan Stanley note last month, a second securitisation of loans originated by OnDeck, which is listed, breached its loss trigger in June:

MPLT 2015-OD3 from OnDeck breached triggers in June, joining the 3 deals we had previously highlighted – MPLT 2015- CB1 (Circleback), MPLT 2015-OD1 (OnDeck) and GLCII 2014-A (Lending Club).

That makes four online lending securitisation deals that have hit their loss trigger, meaning that cashflows are diverted to senior bondholders at the expense of the lower tranche investors. Three of those four deals, as far as we can tell, were arranged by Jefferies.

It’s also worth keeping an eye on securitisations of loans from Avant, a US consumer lender that also gets a dishonourable mention in VSL’s letter (note that Victory Park is an equity investor in Avant):

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value. These markdowns, which flow through capital, reflect loss curves coming in slightly higher than in the first quarter. While the capital markets have recently begun to re-open for marketplace lending loans, we have no current plans to pursue additional securitizations.

FTC Announces FinTech Forum on Crowdfunding, Peer-to-Peer Payments, (JD Supra Business Advisor), Rated: AAA

The FTC announced it will be hosting the next event in the FinTech Forum series on October 26, 2016.

BNY Mellon sees possible rise of P2P collateral lending, (Global Custodian), Rated: A

Peer-to-peer lending among buy-siders could emerge due to a challenging regulatory environment for sourcing and optimising collateral, according to BNY Mellon.

In the report, BNY Mellon states that institutional investors may also find further opportunities in a peer-to-peer relationship, where buy-side firms are both the collateral provider and receiver.

The report can be found here.

 Income: any Fintech to fill-in the supply shortage?, ( Daily Fintech), Rated: AAA

The world still needs current [Comment: I believe most people use the word fixed instead of current] income for a variety of reasons: wage stagnation, tax overburdening, and the usual cash flows needs that are not at all well managed.

Source: Pension Partners

Challenger banks in the UK have been offering bonds (3yrs or less) to entice customers to sign up on their platforms.

Source: Daily Finance

There are two Alternative finance options that can generate income, much like high yield bonds or publicly traded REITS have been doing in normal conditions.

Investors in the UK can invest in the LE listed

Finova Financial Raises $ 52.5 M First Round For Car Equity Loans, (Wall Street Journal), Rated: A

Finova Financial has raised $52.5 million in its first institutional funding—much of it in the form of debt—for its consumer lending service that provides car owners with a line of credit.

The funding was led by MHS Capital, with participation from Refactor Capital; CoVenture; Metamorphic Ventures; 500 Startups; Funding Circle co-founder Sam Hodges; NerdWallet co-founder Jake Gibson; and Al Hamra Group, a company owned by a ruling family in the United Arab Emirates.

A “large percentage” of the round was the credit facility, the company said, but declined to give specifics.

Founded in January 2015, Finova provides loans in exchange for liens on consumers’ cars, which the company calls a “car-equity line of credit,” which resembles a home equity credit line. Its loans are typically $1,500 to $1,700.

Finova charges about 70% less than the industry average, according to Mr. Keough said.

In contrast to typical paper applications, with Finova people can apply on a website or mobile device by providing information about their cars and driver’s licenses and receive decisions quickly, Mr. Keough said. About 65% of customers apply via phones.

The car equity loan is Finova’s first product, and the company intends to launch other products for “unbanked” consumers, as the company describes its target market.

“My investment thesis is: financial services for the rest of us,” said Sheel Mohnot, the partner at 500 Startups who leads the firm’s fintech investments. “There could not be a better fit (than Finova) for working with a population who is unbanked.”

Warburg Pincus Leads $ 220 Million Round for Solar Lender Mosaic, ( Wall Street Journal), Rated : A

Private-equity firm Warburg Pincus is leading a $220 million equity investment in energy-financing startup Solar Mosaic Inc., according to two people familiar with the situation. The company, known as Mosaic, provides loans for solar installations for homeowners. It is starting to finance other energy-efficiency upgrades that are meant to reduce utility bills.

Warburg Pincus will have a slight majority control of Mosaic through its $200 million investment, one person said. Other investors in the round include financial technology venture firm Core Innovation Capital and Obvious Ventures, a firm, co-founded by Ev Williams, that seeks to invest in startups that offer a positive social impact. Andrew Beebe, managing director at Obvious Ventures, has had a long career in solar energy.

Mosaic has said that it plans to originate about $1 billion in residential-solar loans in the coming 12 months. It secured $200 million in credit from DZ Bank as the lead lender earlier this year. NY Green Bank also participated.

The company’s business model is built around allowing people to own their own solar systems. That contrasts against the predominant model of financing residential solar under lease programs in which homeowners rent the solar power their properties generate.

Privately held GreenSky LLC and Spruce Finance Inc., backed by Kleiner Perkins Caufield & Byers, also operate in the category. Earlier Mosaic investors include Spring Ventures, Serious Change, Blue Haven Initiative and Bronze Investments.

Colorado Inquiry Prompts Avant to Rejig Bonds, Kroll Says, (PeerIQ), Rated: AAA

Avant Inc., the online lending marketplace, removed unsecured consumer loans made to Colorado residents from a securitization deal after a state regulator sought information about its lending policies, according to Kroll Bond Rating Agency. Colorado concluded that loans mad to its residents must comply with its lending statutes, even if the debts originate through partner banks in another state, as Avant does in Utah, Kroll said in an Aug. 2 report. Such statutes include usury laws and restrictions on late fees and other charges, Kroll said in its evaluation of an upcoming $200 million securitization to be sold by Avant. “In light of the letters from the Colorado regulator, Avant has removed all loans made to Colorado residents,” Kroll said. Carolyn Blackman Gasbarra, a spokeswoman for Chicago-based Avant, declined via e-mail to comment while the deal is pending. Kroll said Avant is “proactively addressing any regulator concerns.” Sheila Bair, the former head of the Federal Deposit Insurance Corp. and a frequent proponent of tougher regulation, was added to the company’s board earlier this year.

Inside CommonBond’s 401(k) platform for student loan debt, (Tradestreaming), Rated: AAA

In July 2016, student loan platform CommonBond acquired online loan repayment advisor Gradible. The acquisition of Gradible, which uses an algorithm to recommend what the best repayment options are for student loan borrowers, has enabled CommonBond to roll out a new platform that it’s calling the 401(k) for student loans.

The 401(k) platform will enable employers to contribute to their employees student loans just as they contribute to their employees’ retirement. “What the acquisition of Gradible allows us to do is to marry up certain technologies that they’ve built with technologies that we’ve already built to accelerate the platform,” said David Klein, co-founder and CEO of CommonBond.

Gradible’s merger with CommonBond was two years in the works. A personal connection lead CommonBond to partner with the software company, becoming one of the refinance options Gradible offered on its platform. Eventually, CommonBond’s desire to expand its reach together with Gradible’s intention to accelerate its vision led to the merger.

Klein believes that bringing Gradible in-house will enable CommonBond to reach and meaningfully impact every one of the over 40 million Americans saddled with student debt, and to a certain extent this is true. As a student loan reassessment tool, Gradible can help students discover alternative ways to manage their debt, such as income-based repayment and public service loan forgiveness.

But the 401(k) will ultimately serve the “top talent”, who are the most likely to make it out of student debt in the first place.

CommonBond had one company ask it to implement the platform for them, and Klein has also piloted the 401(k) at CommonBond itself – much to its employees’ delight.

While the CommonBond-Gradible marriage can’t fix what’s broken with the student loan industry at large, its 401(k) product is opening up the traditional closed lender-borrower relationship to employers. So far, this threesome has benefited the entire loan ecosystem: lenders are getting repaid faster, employees are happier, and employers are meaningfully participating in their employees’ financial lives.

Online Lenders Have a Tough Job Ahead, (Wall Street Journal), Rated: AAA

LendingClub Corp. and OnDeck Capital Inc. have suffered through growing pains this year.

They each report second-quarter results Monday [Comment: today].

Jefferies closes Lending Club bonds sale, (Financial Times), Rated: A

Comment: our readers are familiar with this information from last week’s Monday Lending Times. I believe a reminder is a good idea though.

Jefferies has closed a private sale of bonds backed by personal loans originated by Lending Club, marking a step in the rehabilitation of the scandal-hit online lender ahead of its second-quarter earnings. Meanwhile, the Jefferies-led deal is “very positive” for the online-lending industry, said James Gutierrez, chief executive of Insikt, a platform that has sold bundles of Lending Club and Prosper loans to wealthy individuals.

Three months on, Jefferies has sold $105m of bonds backed by Lending Club loans, offering yields of 3.75 to 6.5 per cent.

Offers of unsecured personal loans sent out in the mail dropped 19 per cent in the second quarter from the first quarter, to 507m, according to Mintel Comperemedia, a market intelligence agency. All told, the industry has sent out 4.44bn loan offers to consumers over the past two years, peaking at 749m in the fourth quarter last year.

Goldman Sachs, which had been preparing a securitisation of prime loans from Lending Club before the scandal blew up in May, is prepared to bide its time, according to a person briefed on the bank’s plans.

MPOWER Brings on SoFi and Student-Lending Veteran Renee Suryan as Director of University Relations, (PR Web), Rated: A

Comment: Please see the Lending Times article on MPOWER here.

MPOWER Financing is pleased to formally announce the addition of Renee Suryan to its team. With more than 20 years of experience in student lending, including 10 years as a financial aid administrator, she joins MPOWER as Director of University Relations. Currently growing at a rate of 40 percent month-over-month in loan volume, MPOWER projects it will have more than 200 school partnerships and 21 state licenses by the end of 2016.

MPOWER Partners with FUTR to Support Domestic and International Student Loans, (PR Web), Rated: B

MPOWER Financing today announced that it is partnering with FUTR Corporation to provide superior loan servicing and support to MPOWER borrowers.

FUTR is a privately held and venture-backed higher education finance provider headquartered in San Francisco, with an operational hub in Bryan, Texas. FUTR is focused on bringing together modern technology and quality service to provide new levels of transparency and insight that borrowers need to optimally manage their financial future.

The Time To Start Thinking About Repaying Student Loans Is When You Take Them Out, (Forbes), Rated: B

Comment: article written for borrowers. Probably not useful to our readers.

Credible.com is a multi-lender student loan marketplace. One issue that’s underappreciated is that the time to start thinking about repaying your student loans is not when you graduate, but when you take them out.

The 27 fintech unicorns from around the world, ranked by value, (Business Insider), Rated: AAA

Comment: Article would have deserved to be in an international section. However it is only marginally relevant to our readers and we prefer not focus our newsletter on this article. Hence we located it at the end of our US section.

An interesting list. Many of our own industry participants are present. However I had not heard of a few of them. Worth a read.

United Kingdom

VPC Specialty Lending Investments PLC, (VPC Specialty Lending), Rated: AAA

Comment: There is a disclaimer the readers must read and agree to before accessing this article.

In the second quarter of 2016, VPC Speciality Lending Investments PLC (“VSL” or the “Company”) delivered a net return of 0.33%. Although the return wasbelow expectations, it does not reflect what we believe will be the level of long-term returns for our shareholders given our existing portfolio and pipeline. There are several reasons for the decline in short-term performance, which are outlined below along with the steps we are taking to mitigate these factors in the near term.

The decision by U.K. voters to leave the European Union (“EU”) and the subsequent depreciation of the GBP had a negative impact on the Company’s performance as we had to maintain an outsized cash balance related to our currency hedge. Leading up to the EU Referendum, we took a conservative approach to our cash management and credit allocations. A substantial portion of our assets are held in USD and other currencies, which are hedged to GBP via forward currency swaps. The hedging program was put in place when the investments were made following the Company’s March 2015 IPO and September 2015 C share offering. Since then, due to the substantial depreciation of GBP against USD, the Company has had to deposit in cash up to 11.5% of the Company’s NAV. While the direct effect of the currency swings on our income has been limited because our non-GBP exposure is largely hedged, the obligation to settle the hedges upon expiration and the need to maintain additional liquidity in the event the GBP depreciates further has limited our ability to be largely fully invested, as we strive to be. The outlook for the GBP continues to be uncertain – several economists have set target prices for USD/GBP at $1.20 or below with a one-year time horizon – leaving us to remain conservative. We are reviewing all available options to reduce the cash drag related to the margin requirement, including a revolving credit facility for the Company.

The majority of our whole loan portfolio performed in line with our expectations, although certain positions did experience higher than expected losses.

Accordingly, we believe we are now in the period of peak losses for our portfolios (assuming static economic conditions), leading to muted NAV returns in the near term but we expect the returns to even out over the life of the investments.

As previously announced, our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value.

On a more positive note, our balance sheet loan portfolio continued to show excellent performance with no impairments and coupons ranging from 12% to 16%.

  • On 26 May 2016, the Company made initial investments in West Creek Financial, Inc., a provider of point-of-sale lease-to-own financing to underserved customers enabling purchases of durable goods such as furniture, mattresses, and appliances.
  • On 30 June 2016, the Company made initial investments in Fundbox Ltd., a provider of short-term working capital advances to small and medium-sized businesses in the U.S. and the Company funded a new tranche of senior secured debt to Elevate Credit, Inc. Elevate is a provider of cash advances and installment loans to U.S. consumers.

While cash drag as a result of the currency hedge and the performance of certain whole loan investments were disappointing, we are encouraged by the performance of our existing balance sheet investments as well as the attractive terms of newer deals. In order to further demonstrate our commitment to the Company and our confidence in achieving returns of 8% or greater, we have agreed with the Company’s Board of Directors to modify our management agreement such that we will apply 20% of our monthly management fee to purchase shares of the Company at the prevailing market price on an ongoing basis, whilst the shares are trading at a discount to net asset value.

Understanding of risk remains a central issue for P2P industry, (Alt Fi), Rated: A

Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the outgoing and incoming heads of the FCA – Tracey McDermott and Andrew Bailey respectively.

“Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the small to medium enterprise lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products.”

The problem of a perceived lack of understanding of risk by investing consumers has been a common sector theme of late.

Analysis from AltFi Data illustrates that, to date, the lending performance of the largest UK platforms has delivered consistently positive net returns. Zopa, Funding Circle, Ratesetter and MarketInvoice together make up over 65% of the sector’s origination volume and lead the way when it comes to disclosure of their lending track record. 10 years of data representing that track record demonstrates that net returns have remained positive in a range of 5-6.5%. Bad debt performance has also been impressive, coming in at 5% for the worst ever annual cohort i.e. less than 1.7% annualized, and at no worse than 1.66%, i.e. less than 0.55% annualized, over the past 5 years.

Liberum Alt Fi Index. Source: AltFi.com

Assetz Capital Reports: Peer-to-Peer Lending Expected to Thrive As Bank of England Slashes Interest Rates, (Crowdfunding Insider), Rated: A

On Thursday, Assetz Capital one of the UK’s largest peer-to-peer lenders, announced it is predicting that both savers and borrowers will continue to turn to alternative finance companies in increasing numbers as Bank of England slashes interest rates from 0.5% to 0.25%.

Assetz Capital revealed, since launching in 2013, around £130 million has flown through its platform to credit-worthy borrowers, earning investors a total gross interest of more than £12 million to date and this lending is predicted to continue to rise rapidly.

Assetz Capital also predicted the number of business borrowers will also rise as a result of the cut interest rate.

Australia

Fintech B2B small business lending marketplace Bigstone raises million, (Financial Review), Rated: A

Fintech start-up Bigstone has raised $3 million from a range of investors, including ASX-listed diversified investments and venture capital firm CVC, to grow its small business lending marketplace and offer an alternative to the big banks.

Other major investors in the round were the founders of Bangkok-based fund Lighthouse Venture Partners Paniti Junhasavasdikul and Narith Phadungchai, in addition to private investors.

By the end of the year, Bigstone is hoping to have financed $10 million worth of loans to more than 200 small businesses.

A University of Sydney and KPMG study released earlier this year found that Australia’s online alternative finance market grew by 320 per cent in 2015 to $460 million, making it the third largest market in the Asia Pacific behind China and Japan.

Author:

George Popescu

August 8th 2016, Daily News Digest

August 8th 2016, Daily News Digest

News Comments Today’s news pour some cold water on P2P SME lending : SME securitizations and SME yield performance seem to be less than expected. See 1st article in US section and 1st article in UK section. Finova raised $52.5 mil , Mosaic $220 mil. And today’s the day : Lending Club and OnDeck release […]

August 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

Australia

News Summary

United States

Funding Circle, and other online lenders, falter in America, (Financial Times), Rated: AAA

“Our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.” [ Comment: see the complete VPC Q2 2016 letter in the UK section below].

That’s from VPC Specialty Lending (VSL) Investments’ second quarter letter, released earlier this week (mea culpa, we didn’t spot it at first).

VSL’s disclosure forced Funding Circle’s listed fund to issue its own filing to the market yesterday, sort of but not outright rejecting the suggestion that loans were underperforming:

The Company’s US Credit Assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

But that might be downplaying the historic performance a little. When Funding Circle floated its fund last year, this is the US loan performance it revealed in its November prospectus (note the numbers didn’t include expected future losses and showed the to-date performance at that time):

Sachin Patel, Funding Circle’s global co-head of capital markets, said that loans originated in the first half of 2015 had underperformed and are expected to return 7.25 per cent to its large, accredited investors, rather than the 8 per cent or more that it targets.

Funding Circle launched in the US in late 2013 and is run out of San Francisco by Sam Hodges. According to the 2015 prospectus for Funding Circle’s fund, US loans originated in early 2014 also “experienced higher than expected annualised loss rates”.

Similar missteps were seen in Funding Circle’s first years of operation in the UK too:

But Funding Circle isn’t the only online lender to small businesses in the US that is disappointing investors. According to a Morgan Stanley note last month, a second securitisation of loans originated by OnDeck, which is listed, breached its loss trigger in June:

MPLT 2015-OD3 from OnDeck breached triggers in June, joining the 3 deals we had previously highlighted – MPLT 2015- CB1 (Circleback), MPLT 2015-OD1 (OnDeck) and GLCII 2014-A (Lending Club).

That makes four online lending securitisation deals that have hit their loss trigger, meaning that cashflows are diverted to senior bondholders at the expense of the lower tranche investors. Three of those four deals, as far as we can tell, were arranged by Jefferies.

It’s also worth keeping an eye on securitisations of loans from Avant, a US consumer lender that also gets a dishonourable mention in VSL’s letter (note that Victory Park is an equity investor in Avant):

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value. These markdowns, which flow through capital, reflect loss curves coming in slightly higher than in the first quarter. While the capital markets have recently begun to re-open for marketplace lending loans, we have no current plans to pursue additional securitizations.

FTC Announces FinTech Forum on Crowdfunding, Peer-to-Peer Payments, (JD Supra Business Advisor), Rated: AAA

The FTC announced it will be hosting the next event in the FinTech Forum series on October 26, 2016.

BNY Mellon sees possible rise of P2P collateral lending, (Global Custodian), Rated: A

Peer-to-peer lending among buy-siders could emerge due to a challenging regulatory environment for sourcing and optimising collateral, according to BNY Mellon.

In the report, BNY Mellon states that institutional investors may also find further opportunities in a peer-to-peer relationship, where buy-side firms are both the collateral provider and receiver.

The report can be found here.

 Income: any Fintech to fill-in the supply shortage?, ( Daily Fintech), Rated: AAA

The world still needs current [Comment: I believe most people use the word fixed instead of current] income for a variety of reasons: wage stagnation, tax overburdening, and the usual cash flows needs that are not at all well managed.

Source: Pension Partners

Challenger banks in the UK have been offering bonds (3yrs or less) to entice customers to sign up on their platforms.

Source: Daily Finance

There are two Alternative finance options that can generate income, much like high yield bonds or publicly traded REITS have been doing in normal conditions.

Investors in the UK can invest in the LE listed

Finova Financial Raises $ 52.5 M First Round For Car Equity Loans, (Wall Street Journal), Rated: A

Finova Financial has raised $52.5 million in its first institutional funding—much of it in the form of debt—for its consumer lending service that provides car owners with a line of credit.

The funding was led by MHS Capital, with participation from Refactor Capital; CoVenture; Metamorphic Ventures; 500 Startups; Funding Circle co-founder Sam Hodges; NerdWallet co-founder Jake Gibson; and Al Hamra Group, a company owned by a ruling family in the United Arab Emirates.

A “large percentage” of the round was the credit facility, the company said, but declined to give specifics.

Founded in January 2015, Finova provides loans in exchange for liens on consumers’ cars, which the company calls a “car-equity line of credit,” which resembles a home equity credit line. Its loans are typically $1,500 to $1,700.

Finova charges about 70% less than the industry average, according to Mr. Keough said.

In contrast to typical paper applications, with Finova people can apply on a website or mobile device by providing information about their cars and driver’s licenses and receive decisions quickly, Mr. Keough said. About 65% of customers apply via phones.

The car equity loan is Finova’s first product, and the company intends to launch other products for “unbanked” consumers, as the company describes its target market.

“My investment thesis is: financial services for the rest of us,” said Sheel Mohnot, the partner at 500 Startups who leads the firm’s fintech investments. “There could not be a better fit (than Finova) for working with a population who is unbanked.”

Warburg Pincus Leads $ 220 Million Round for Solar Lender Mosaic, ( Wall Street Journal), Rated : A

Private-equity firm Warburg Pincus is leading a $220 million equity investment in energy-financing startup Solar Mosaic Inc., according to two people familiar with the situation. The company, known as Mosaic, provides loans for solar installations for homeowners. It is starting to finance other energy-efficiency upgrades that are meant to reduce utility bills.

Warburg Pincus will have a slight majority control of Mosaic through its $200 million investment, one person said. Other investors in the round include financial technology venture firm Core Innovation Capital and Obvious Ventures, a firm, co-founded by Ev Williams, that seeks to invest in startups that offer a positive social impact. Andrew Beebe, managing director at Obvious Ventures, has had a long career in solar energy.

Mosaic has said that it plans to originate about $1 billion in residential-solar loans in the coming 12 months. It secured $200 million in credit from DZ Bank as the lead lender earlier this year. NY Green Bank also participated.

The company’s business model is built around allowing people to own their own solar systems. That contrasts against the predominant model of financing residential solar under lease programs in which homeowners rent the solar power their properties generate.

Privately held GreenSky LLC and Spruce Finance Inc., backed by Kleiner Perkins Caufield & Byers, also operate in the category. Earlier Mosaic investors include Spring Ventures, Serious Change, Blue Haven Initiative and Bronze Investments.

Colorado Inquiry Prompts Avant to Rejig Bonds, Kroll Says, (PeerIQ), Rated: AAA

Avant Inc., the online lending marketplace, removed unsecured consumer loans made to Colorado residents from a securitization deal after a state regulator sought information about its lending policies, according to Kroll Bond Rating Agency. Colorado concluded that loans mad to its residents must comply with its lending statutes, even if the debts originate through partner banks in another state, as Avant does in Utah, Kroll said in an Aug. 2 report. Such statutes include usury laws and restrictions on late fees and other charges, Kroll said in its evaluation of an upcoming $200 million securitization to be sold by Avant. “In light of the letters from the Colorado regulator, Avant has removed all loans made to Colorado residents,” Kroll said. Carolyn Blackman Gasbarra, a spokeswoman for Chicago-based Avant, declined via e-mail to comment while the deal is pending. Kroll said Avant is “proactively addressing any regulator concerns.” Sheila Bair, the former head of the Federal Deposit Insurance Corp. and a frequent proponent of tougher regulation, was added to the company’s board earlier this year.

Inside CommonBond’s 401(k) platform for student loan debt, (Tradestreaming), Rated: AAA

In July 2016, student loan platform CommonBond acquired online loan repayment advisor Gradible. The acquisition of Gradible, which uses an algorithm to recommend what the best repayment options are for student loan borrowers, has enabled CommonBond to roll out a new platform that it’s calling the 401(k) for student loans.

The 401(k) platform will enable employers to contribute to their employees student loans just as they contribute to their employees’ retirement. “What the acquisition of Gradible allows us to do is to marry up certain technologies that they’ve built with technologies that we’ve already built to accelerate the platform,” said David Klein, co-founder and CEO of CommonBond.

Gradible’s merger with CommonBond was two years in the works. A personal connection lead CommonBond to partner with the software company, becoming one of the refinance options Gradible offered on its platform. Eventually, CommonBond’s desire to expand its reach together with Gradible’s intention to accelerate its vision led to the merger.

Klein believes that bringing Gradible in-house will enable CommonBond to reach and meaningfully impact every one of the over 40 million Americans saddled with student debt, and to a certain extent this is true. As a student loan reassessment tool, Gradible can help students discover alternative ways to manage their debt, such as income-based repayment and public service loan forgiveness.

But the 401(k) will ultimately serve the “top talent”, who are the most likely to make it out of student debt in the first place.

CommonBond had one company ask it to implement the platform for them, and Klein has also piloted the 401(k) at CommonBond itself – much to its employees’ delight.

While the CommonBond-Gradible marriage can’t fix what’s broken with the student loan industry at large, its 401(k) product is opening up the traditional closed lender-borrower relationship to employers. So far, this threesome has benefited the entire loan ecosystem: lenders are getting repaid faster, employees are happier, and employers are meaningfully participating in their employees’ financial lives.

Online Lenders Have a Tough Job Ahead, (Wall Street Journal), Rated: AAA

LendingClub Corp. and OnDeck Capital Inc. have suffered through growing pains this year.

They each report second-quarter results Monday [Comment: today].

Jefferies closes Lending Club bonds sale, (Financial Times), Rated: A

Comment: our readers are familiar with this information from last week’s Monday Lending Times. I believe a reminder is a good idea though.

Jefferies has closed a private sale of bonds backed by personal loans originated by Lending Club, marking a step in the rehabilitation of the scandal-hit online lender ahead of its second-quarter earnings. Meanwhile, the Jefferies-led deal is “very positive” for the online-lending industry, said James Gutierrez, chief executive of Insikt, a platform that has sold bundles of Lending Club and Prosper loans to wealthy individuals.

Three months on, Jefferies has sold $105m of bonds backed by Lending Club loans, offering yields of 3.75 to 6.5 per cent.

Offers of unsecured personal loans sent out in the mail dropped 19 per cent in the second quarter from the first quarter, to 507m, according to Mintel Comperemedia, a market intelligence agency. All told, the industry has sent out 4.44bn loan offers to consumers over the past two years, peaking at 749m in the fourth quarter last year.

Goldman Sachs, which had been preparing a securitisation of prime loans from Lending Club before the scandal blew up in May, is prepared to bide its time, according to a person briefed on the bank’s plans.

MPOWER Brings on SoFi and Student-Lending Veteran Renee Suryan as Director of University Relations, (PR Web), Rated: A

Comment: Please see the Lending Times article on MPOWER here.

MPOWER Financing is pleased to formally announce the addition of Renee Suryan to its team. With more than 20 years of experience in student lending, including 10 years as a financial aid administrator, she joins MPOWER as Director of University Relations. Currently growing at a rate of 40 percent month-over-month in loan volume, MPOWER projects it will have more than 200 school partnerships and 21 state licenses by the end of 2016.

MPOWER Partners with FUTR to Support Domestic and International Student Loans, (PR Web), Rated: B

MPOWER Financing today announced that it is partnering with FUTR Corporation to provide superior loan servicing and support to MPOWER borrowers.

FUTR is a privately held and venture-backed higher education finance provider headquartered in San Francisco, with an operational hub in Bryan, Texas. FUTR is focused on bringing together modern technology and quality service to provide new levels of transparency and insight that borrowers need to optimally manage their financial future.

The Time To Start Thinking About Repaying Student Loans Is When You Take Them Out, (Forbes), Rated: B

Comment: article written for borrowers. Probably not useful to our readers.

Credible.com is a multi-lender student loan marketplace. One issue that’s underappreciated is that the time to start thinking about repaying your student loans is not when you graduate, but when you take them out.

The 27 fintech unicorns from around the world, ranked by value, (Business Insider), Rated: AAA

Comment: Article would have deserved to be in an international section. However it is only marginally relevant to our readers and we prefer not focus our newsletter on this article. Hence we located it at the end of our US section.

An interesting list. Many of our own industry participants are present. However I had not heard of a few of them. Worth a read.

United Kingdom

VPC Specialty Lending Investments PLC, (VPC Specialty Lending), Rated: AAA

Comment: There is a disclaimer the readers must read and agree to before accessing this article.

In the second quarter of 2016, VPC Speciality Lending Investments PLC (“VSL” or the “Company”) delivered a net return of 0.33%. Although the return wasbelow expectations, it does not reflect what we believe will be the level of long-term returns for our shareholders given our existing portfolio and pipeline. There are several reasons for the decline in short-term performance, which are outlined below along with the steps we are taking to mitigate these factors in the near term.

The decision by U.K. voters to leave the European Union (“EU”) and the subsequent depreciation of the GBP had a negative impact on the Company’s performance as we had to maintain an outsized cash balance related to our currency hedge. Leading up to the EU Referendum, we took a conservative approach to our cash management and credit allocations. A substantial portion of our assets are held in USD and other currencies, which are hedged to GBP via forward currency swaps. The hedging program was put in place when the investments were made following the Company’s March 2015 IPO and September 2015 C share offering. Since then, due to the substantial depreciation of GBP against USD, the Company has had to deposit in cash up to 11.5% of the Company’s NAV. While the direct effect of the currency swings on our income has been limited because our non-GBP exposure is largely hedged, the obligation to settle the hedges upon expiration and the need to maintain additional liquidity in the event the GBP depreciates further has limited our ability to be largely fully invested, as we strive to be. The outlook for the GBP continues to be uncertain – several economists have set target prices for USD/GBP at $1.20 or below with a one-year time horizon – leaving us to remain conservative. We are reviewing all available options to reduce the cash drag related to the margin requirement, including a revolving credit facility for the Company.

The majority of our whole loan portfolio performed in line with our expectations, although certain positions did experience higher than expected losses.

Accordingly, we believe we are now in the period of peak losses for our portfolios (assuming static economic conditions), leading to muted NAV returns in the near term but we expect the returns to even out over the life of the investments.

As previously announced, our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value.

On a more positive note, our balance sheet loan portfolio continued to show excellent performance with no impairments and coupons ranging from 12% to 16%.

  • On 26 May 2016, the Company made initial investments in West Creek Financial, Inc., a provider of point-of-sale lease-to-own financing to underserved customers enabling purchases of durable goods such as furniture, mattresses, and appliances.
  • On 30 June 2016, the Company made initial investments in Fundbox Ltd., a provider of short-term working capital advances to small and medium-sized businesses in the U.S. and the Company funded a new tranche of senior secured debt to Elevate Credit, Inc. Elevate is a provider of cash advances and installment loans to U.S. consumers.

While cash drag as a result of the currency hedge and the performance of certain whole loan investments were disappointing, we are encouraged by the performance of our existing balance sheet investments as well as the attractive terms of newer deals. In order to further demonstrate our commitment to the Company and our confidence in achieving returns of 8% or greater, we have agreed with the Company’s Board of Directors to modify our management agreement such that we will apply 20% of our monthly management fee to purchase shares of the Company at the prevailing market price on an ongoing basis, whilst the shares are trading at a discount to net asset value.

Understanding of risk remains a central issue for P2P industry, (Alt Fi), Rated: A

Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the outgoing and incoming heads of the FCA – Tracey McDermott and Andrew Bailey respectively.

“Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the small to medium enterprise lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products.”

The problem of a perceived lack of understanding of risk by investing consumers has been a common sector theme of late.

Analysis from AltFi Data illustrates that, to date, the lending performance of the largest UK platforms has delivered consistently positive net returns. Zopa, Funding Circle, Ratesetter and MarketInvoice together make up over 65% of the sector’s origination volume and lead the way when it comes to disclosure of their lending track record. 10 years of data representing that track record demonstrates that net returns have remained positive in a range of 5-6.5%. Bad debt performance has also been impressive, coming in at 5% for the worst ever annual cohort i.e. less than 1.7% annualized, and at no worse than 1.66%, i.e. less than 0.55% annualized, over the past 5 years.

Liberum Alt Fi Index. Source: AltFi.com

Assetz Capital Reports: Peer-to-Peer Lending Expected to Thrive As Bank of England Slashes Interest Rates, (Crowdfunding Insider), Rated: A

On Thursday, Assetz Capital one of the UK’s largest peer-to-peer lenders, announced it is predicting that both savers and borrowers will continue to turn to alternative finance companies in increasing numbers as Bank of England slashes interest rates from 0.5% to 0.25%.

Assetz Capital revealed, since launching in 2013, around £130 million has flown through its platform to credit-worthy borrowers, earning investors a total gross interest of more than £12 million to date and this lending is predicted to continue to rise rapidly.

Assetz Capital also predicted the number of business borrowers will also rise as a result of the cut interest rate.

Australia

Fintech B2B small business lending marketplace Bigstone raises million, (Financial Review), Rated: A

Fintech start-up Bigstone has raised $3 million from a range of investors, including ASX-listed diversified investments and venture capital firm CVC, to grow its small business lending marketplace and offer an alternative to the big banks.

Other major investors in the round were the founders of Bangkok-based fund Lighthouse Venture Partners Paniti Junhasavasdikul and Narith Phadungchai, in addition to private investors.

By the end of the year, Bigstone is hoping to have financed $10 million worth of loans to more than 200 small businesses.

A University of Sydney and KPMG study released earlier this year found that Australia’s online alternative finance market grew by 320 per cent in 2015 to $460 million, making it the third largest market in the Asia Pacific behind China and Japan.

Author:

George Popescu