Thursday February 16 2017, Daily News Digest

Lending Club investors

News Comments Today’s main news:  Lending Club Q4 results: the banks are back. NatWest and  Royal Bank of Scotland set to launch digital lending platform. Auswide Banks takes control of MoneyPlace. Indonesia allows on-balance-sheet lending for FinTech startups. Today’s main analysis: Lending Club Grows Auto Refinance. Lend Academy proud to have banks back at LC. Today’s thought-provoking articles: BondMason responds to […]

Lending Club investors

News Comments

United States

  • LC Q4 earnings review — the banks are back. GP:” Lending Club’s banks being back on the platform are a great sign of trust and comfort. I think everybody can now claim the Lending Club crisis was over. So now that the crisis was over, it wasn’t that bad, wasn’t it? If this is the types of crisis our industry will face I would be comfortable saying that it is safe to invest in our industry.” AT: “Lending Club has made a nice comeback. 2017 looks very promising, as Lend Academy points out.”
  • How the CFP Board is court next generation of planners. AT: “Since Millennials are the largest living generation and have very different attitudes about saving and investing than previous generations, it only makes sense to encourage more of them to enter into the financial planning field.”
  • How investors can cash in on soaring student debt. AT: “Not a whole lot new here, this article is geared toward investors not familiar with student loan investing.”
  • Why lending startups like Float want to ditch FICO. GP:” The only reason not to look at FICO in my eyes is cost. Otherwise why not use an indicator that is correlated? Perhaps once can use more then FICO but ignoring it completely all the time seems unwise.” AT: “As the article points out, not all alternative lenders are ditching FICO, but those that are do so for practical reasons.”
  • Lending Club grows auto refinance gradually. GP: “We continue to look for ways for Lending Club to resume growth. Auto Lending was their best bet until the crisis hit. I hope this turns into a valid channel and it allows them to diversify beyond credit card debt refinancing. As we learned with the capital sources it’s not healthy to be concentrated in one market segment.”

United Kingdom

European Union

Australia

Asia

News Summary

United States

Lending Club Q4 Earnings Results Review – The Banks Are Back (Lend Academy), Rated: AAA

Lending Club has released their Q4 2016 and 2016 year-end results. The company originated $1.987 billion in loans, up 1% from Q3 2016 of $1.972 billion. The most significant news of the earnings release was that bank participation totaled 31% of the platform in Q4 2016, up 18% from the previous quarter which shows that the banks are back. In the Q & A section of the earnings call, CEO Scott Sanborn stated, “We’ve got back on a bank by bank level all of the people we were hoping to have back.” This also happened quicker than Scott had expected. Also worth noting is that the company achieved this goal without investor incentives in Q4 unlike in Q2 and Q3 2016 where loans were offered to investors at a discount.

What you’ll also notice looking at the chart below is that the Other Institutional category dropped 5% sequentially, from 18% to 13%. This category of investor includes investment banks, hedge funds and fund managers who typically seek higher yields. Lending Club has tightened credit and adjusted pricing which has had an effect on these investors.

Now the question is whether they can spur some growth in 2017 on the borrower side of the equation. The company also provided guidance for the first time in several quarters which should give investors some idea of what to expect going into 2017.

How the CFP Board is courting the next generation of planners (On Wall Street), Rated: AAA

Amid growing worries that there are not enough new advisers to replace those who are retiring, the CFP Board’s Center for Financial Planning is rolling out a host of new initiatives aimed at expanding and diversifying the workforce.

In the coming weeks, the center will launch an internship program aiming to place workforce re-entrants at planning firms, and a social media campaign geared for students highlighting the diversity of the profession.

The center is also looking expand and solidify financial planning as an academic discipline.

How Investors Can Cash In On Soaring Student Debt (Forbes), Rated: A

In Q4 2016, total outstanding student loans topped $1.4 trillion—that’s more than auto loans or credit card debt. The student loan debt market is now only second to the mortgage market in terms of size.

While the consumer price index climbed 44% since 2000, tuition has soared 151%. Students now graduate with an average of $33,000 in student loan debt.

SoFi and CommonBond, the two-main P2P platforms that service students, have issued $8.5 billion in loans. Around $6 billion of that has been securitized by the likes of Goldman Sachs and Morgan Stanley.

It’s worth noting that the total potential refinance market for P2P student loans is really about $480 billion. The headline $1.4 trillion is reduced because around 40% of loans are too small, and 42% have rates that are too low to be refinanced using P2P.

Students who refinance with SoFi save an average of $288 per month and $22,359 in total. Variable rates range from 2.35%–6.28% and fixed rates from 3.37%–6.74%.

CommonBond offers variable rates from 2.35%–6.27% and fixed rates from 3.37%–7.74%. Borrowers enjoy average savings of $15,114 when they refinance loans through the platform.

In comparison, the interest rate on Federal Direct Loans for undergraduates is currently at 3.76%. Borrowers also pay an additional 1.069% on each disbursement they receive. While this rate is below those offered by P2P lenders, the majority of student loans were made when interest rates were higher, with many students paying up to 8.25%.

Why Lending Startups Like Float Want To Ditch The FICO Score (Fast Company), Rated: A

Last year Social Finance, or SoFi, started using its own proprietary underwriting score in place of FICO when evaluating applications for its student loan, personal loan, and mortgage products.

And now they’re joined by Float, a Los Angeles-based lending startup, whose founders also say they have no plans to use FICO. The platform is launching today, and a look at its business model reveals why it thinks it can survive without it. Float is an app designed for lending small amounts of cash to customers in a pinch. If you’re facing the possibility of an overdraft, for example, a Float credit line, ranging from $50 to $1,000, can help you stay in the black. As with a classic American Express charge card, repayment is due in full the following month. Float also levies a flat 5% transfer fee.

Instead of pulling a FICO score, Float looks at two years’ worth of transaction history in an applicant’s bank account.

It’s also cheaper: Pulling credit reports adds enormous expense to the underwriting process.

Float has also noticed that customers who arrive via Instagram are better borrowers than those who arrive via Facebook.

Lending Club Grows Auto Refinance Gradually (Auto Finance News), Rated: A

Lending Club continues to grow its newly-launched auto refinance product and is investing $5 to $10 million in its expansion, Chief Financial Officer Tom Casey said during the company’s fourth quarter earnings call yesterday.

Early customer feedback has been positive, and refinancing is saving consumers an average of 2.5% off of their rate, or $1,200 in savings over the life of the loan, Sanborn added.

United Kingdom

NatWest unveils online lending platform for SMEs (Finextra), Rated: AAA

UK bank NatWest has launched a digital platform that lets small and medium sized businesses quickly apply for and obtain unsecured loans of up to £150,000.

The platform, dubbed Esme Loans, has been developed by the bank at is innovation unit with fintech firm Ezbob as a direct response to the emergence of specialist direct and P2P lending platforms, says NatWest.

LendInvest completes its first official auction finance loan in five days (Bridging&Commercial), Rated: AAA

It is the first loan that has been completed since the online mortgage lender launched its auction finance proposition in December last year after a significant proportion of the deals that brokers brought to LendInvest were for purchases agreed at auction.

LendInvest’s loan is based on 75% gross LTV and lasts for nine months with an interest rate of 0.94% per month.

Five Steps To Manage Business Borrowing (Minute Hack), Rated: B

Our advice at Hudson Weir is:

  1. Releasing equity – Selling a stake in your business is an effective, yet often overlooked, method of raising cash.
  2. Alternative methods of finance – Asset-based lending or invoice factoring can be helpful ways to release funds and gain a cash injection. Peer-to-peer lending has also gained momentum and popularity and gives business owners a way of raising funds on their own terms. Platforms like Funding Circle also allow SMEs access to loans and funding from a marketplace of investors – and the process is quick and simple.
  3. Talking to your suppliers – Even if the price your supplier charges looks competitive, never be afraid to ask if they can do better.
  4. Looking into your lease – Do not be afraid to negotiate with your landlord as they’re unlikely to want a vacant property – they may accept a reduced offer on the rent.
  5. Keeping on top of your payments – As obvious as it sounds, this is the difference between successfully financing your business in order to see it grow and becoming entrenched in a level of borrowing you can no longer afford to honour. Once you have found ways to keep your outgoings to a minimum during lean times, you must make sure that your monthly repayments are a priority.
European Union

RBS offers fast lending (Herald Scotland), Rated: AAA

ROYAL Bank of Scotland is set to launch a digital platform that it said would allow small and medium sized businesses to quickly obtain unsecured loans of up to £150,000.

Market response to RBS direct lending launch (BondMason), Rated: AAA

by Stephen Findlay, BondMason CEO

It is encouraging to see that banks are rolling out direct lending services to their customers, whether it be via an in-house offering or through a collaboration with an established P2P platform. This is especially good news for borrowers, particularly SMEs as it enables them to access much-needed investment more easily.

We’ve seen the direct lending market grow in leaps and bounds since its inception, as volatile stock markets and declining returns on ‘go-to’ investment products has led to an influx of investors looking for the middle ground between high risk and low returns.

Banks are responding to this investor demand and evolving their traditional models so they can take advantage of the direct lending space. We see this as the continuation of a trend towards the blurring of boundaries across the direct lending landscape – encompassing both traditional financial companies and more recent start-ups.

At BondMason, we don’t view this as negative competition to the P2P platforms already in this space, or vice versa. Rather, we think these different offerings will complement the industry and encourage improved standards and better self-regulation as more participants enter the market – a ‘flight to quality’ which we certainly welcome.

The move by the banks also supports the growth of what is becoming a mainstream asset class, demonstrating that P2P lending is now recognised and being embraced by the traditional banking and finance sector.

As this move by the banks comes some 10 years after the commencement of P2P lending, it is a great example of how innovation in established industries, such as banking, is often best done by smaller, new entrants. This further supports the requirement of the regulator to ensure, through its programmes such as the Innovation Hub and Regulatory sandbox, that SMEs and innovative companies are supported and fostered, and that barriers to entry are kept low for new, emerging business models.

Interview with Frédéric Dujeux, Co-Founder of Mozzeno (P2P-Banking), Rated: A

mozzeno is a Belgian fintech founded in December 2015. We have just launched the first digital platform to enable private individuals to participate indirectly in the funding of loans to other private individuals. Loans are granted by mozzeno, acting as a regulated lender. mozzeno then finances or refinances these loans thanks to the issuance of Notes (financial instruments).

The company has been initially founded and funded by my partner, Xavier Laoureux, and me.

Some fintech business angels and W.IN.G (a Belgian seed fund) have taken part to a seed round in Q2 2016. A further funding round should take place in the course of 2017.

Well, actually p2p lending as such is forbidden by law in Belgium. On one hand, the European prospectus law has been adapted locally very strictly, preventing individuals to raise funds publicly, even through an intermediary platform. This means that a borrower candidate cannot invite other people publicly to lend him money. On the other hand, one needs to be a regulated lender to grant loans and to get access to the Central Individual Credit Register. There is a new regulation as from November 2015, this regulated lender status now being supervised by FSMA.

Our regulatory model is then two-sided. We were the first Belgian regulated lender approved by the FSMA as per the new regulation, and this allows us to grant loans for Belgian residents. We also published a base prospectus, also approved by the regulator, allowing us to issue Notes on a continuous basis. These Notes are the financial instruments subscribed by the investors, similar to bonds, and mimicking the repayment behaviour of the underlying loan.

Crowdlending, a trend among large companies (Impulsando Pymes Digital), Rated: A

The profile of companies that rely on crowdlending to obtain financing has been changing considerably since this alternative financing method landed in Spain in 2013. The companies financed by Arboribus are solvent companies that could be financed with other banking entities, on average have about 20 years of life and most have experienced sales growth in recent years. We are talking about the segment of audited companies that resort to crowdlending to finance and that has grown 160% in 2016.

Not only is the profile of companies looking for financing alternatives changing, but there is also a growth in the volume of companies financed and their volume of loans requested. This is indicated by data provided by Arboribus, a crowdlending platform pioneering companies in Spain, which has financed 90 companies with more than 130 loans in 2016, reaching a total of 5.8 million euros funded in a year, 65% More than in 2015.

However, the most relevant data linked to these figures is the increase in audited companies with invoices in excess of 10 million euros, a figure that reaches 15 percentage points of the total portfolio of the platform, including some invoicing more than 20 Million and have a team of more than 200 workers.

Australia

Auswide Bank Takes Over Controlling Majority of P2P Lending Service MoneyPlace in Australia (P2P-Banking), Rated: AAA

Auswide Bank Ltd (ASX:ABA) is increasing its equity stake in peer-to-peer lender MoneyPlace Holdings Pty Ltd (MoneyPlace). Auswide Bank will have a controlling interest of at least 51% in MoneyPlace with the prospect of increasing that interest up to 75% dependent on the final take up of other MoneyPlace shareholders in a capital raising initiative being undertaken by MoneyPlace.

Business lender narrows in on brokers (TheAdviser), Rated: A

The appointment of Michael Burke as national sales manager this week coincides with OnDeck announcing a partnership with the Commercial Asset Finance Brokers Association of Australia (CAFBA).

Mr Burke joins OnDeck with over 20 years of sales and leadership experience in the banking and financial services industry. Most recently, he held the position of general manager – consumer and commercial finance at Flexigroup.

Asia

Indonesia authority to allow on-balance-sheet lending for fintech startups (e27), Rated: AAA

Senior officials at the Indonesian financial services authority (OJK) announced on Tuesday that the agency is preparing a regulation that would allow local fintech companies to lend money directly to their customers, a practice known as on-balance-sheet model.

Fintech companies offering on-balance-sheet model are required by regulation to convert into the P2P lending scheme.

M360 Advisors Registers Fund with South Korea Financial-Industry Regulator (Benzinga), Rated: AAA

A commercial real estate debt fund managed by Money360-affiliate, M360 Advisors, successfully registered with the South Korea Financial Supervisory Service (FSS), Money360 announced today.

FSS registration allows South Korean hedge funds, corporations, pension funds, insurance companies and other institutional investors to participate in the fund. Since becoming registered, the fund has received more than $65 million to date from one of South Korea’s oldest and largest financial institutions, and M360 anticipates receiving more than $250 million in aggregate throughout the first half of 2017.

“FSS registration opens M360 Advisors to an entirely new country of institutional investors, which will allow us to substantially increase our assets under management,” said Evan Gentry, M360 Advisors CEO. “This gives us a considerable competitive advantage that has been heightened significantly with an anticipated $250 million investment in our fund from one of South Korea’s most reputable financial institutions.”

M360 Advisors currently works with foreign investors from South Korea, China, Singapore, South Africa, Europe, Canada, the Netherlands and Kuwait, with further expansion underway.

South Korea is the latest in the company’s strategic business plan to bolster its global reach, with an intensified push into South Africa and China planned in the near future.

The fund provides investors with a short-duration, high-yield fixed-income alternative to traditional fixed-income investments. The fund invests in bridge loans collateralized by U.S. commercial real estate property secured with a first-priority lien at conservative loan-to-value ratios.

Gentry said the level of scrutiny going into the application process for FSS registration is high, and Money360 is one of the only marketplace lending platforms with an affiliated private debt fund to be sanctioned by the FSS.

“The registration of the fund with the FSS speaks to its institutional caliber,” Gentry added.

“The fund was designed for universal appeal to various types of investors throughout the world with significant consideration given to international tax efficiency,” added Money360 COO and M360 Advisors President Dan Vetter.

Vetter cited the extended period of low interest rates throughout the world caused by unprecedented central bank intervention as an impetus for launching the fund.

“Equity markets are overvalued and traditional fixed income investments offer minimal yield, making this type of private debt fund attractive relative to more traditional asset classes,” he added.

P2P LENDING: PEAKS TO PITFALLS (BFM), Rated: A

P2P lending has emerged as a new source of financing and may soon emerge as its own asset class. We speak to Kristine Ng, CEO of Fundaztic, about the pitfalls of the P2P system and how Securities Commission-approved lenders could help you enhance your short-term returns.

 

Cambridge Centre for Alternative Finance, Monash Business School & Tsinghua University Partner On Asia Pacific Alt Finance Study (Crowdfund Insider), Rated: B

The Cambridge Centre for Alternative Finance at University of Cambridge Judge Business School, Australian Centre for Financial Studies at Monash University and Tsinghua University Graduate School at Shenzhen have teamed up to launch the 2016-2017 Asia-Pacific Region Alternative Finance Industry Survey.  The consortium has gained the support of more than 20 major industry organizations across the region. The Cambridge Centre for Alternative Finance (CCAF) says this is the largest regional study to date focused on crowdfunding, peer-to-peer lending & other forms of alternative finance.

This benchmarking survey, opening today (February 15, 2017) aims to capture the key trends including the development, size, transaction volume and growth of alternative finance. The study will also gauge the impact of changing regulations on innovative finance in markets across Asia in 2016 – building on last year’s inaugural study.

The research will be made publicly available in Q2 of this year.

Authors:

George Popescu
Allen Taylor

Wednesday February 1 2017, Daily News Digest

Zopa loan originations

News Comments Today’s main news: Betterment to offer human advice. Dubai to open to crowdfunding. Today’s main analysis: Zopa provides insight into borrowers. Today’s thought-provoking articles: Why Yirendai is not a good investment. i-lend expands across India. United States Betterment to offer human advice. AT: “If there was ever evidence that robots won’t kill human financial advisors, […]

Zopa loan originations

News Comments

United States

United Kingdom

European Union

China

  • Investors should be leery of Yirendai. AT: “This is a very long, detailed analysis of Yirendai from an investment standpoint, however, there are some great insights into the Chinese P2P lending market from a business standoint, as well. Could the Chinese be headed toward an LC-style crisis?”

India

Middle East

United States

Betterment now offering human advice with its robo (InvestmentNews), Rated: AAA

The New York-based firm has hired about a dozen financial advisers, half of them certified financial planners, whom Betterment’s retail clients can now reach out to for help via phone or email for an additional cost, the firm said Tuesday. It’s offering two tiers of service, with the initial digital-plus-adviser service requiring clients have a $100,000 minimum.

The Betterment Plus service will give clients with at least $100,000 in assets an annual planning call with an adviser and unlimited advice via email for 40 basis points, while Betterment Premium will provide unlimited calls and emails for clients with $250,000 in assets for 50 basis points.

For its core digital-only clients, Betterment recently changed its pricing from a tiered system based on assets to a 25 basis point annual fee no matter the account size. As a result, clients who have less than $10,000 in their accounts will see their fee decline from 35 basis points, and clients with $100,000 or more will see it increase from 15 basis points.

Former CIO of the CFPB and FinTech Entrepreneur Joins FinMkt’s Advisory Board (deBanked), Rated: A

New York City-based FinMkt, a leading provider of marketplace technology solutions for the financial services industry, today announced the addition of Tim Duncan, a seasoned financial technology entrepreneur and innovative leader, to its Advisory Board. Tim brings an impressive roster of experience, including serving on the executive launch team for the U.S. Consumer Financial Protection Bureau as its Head of Technology and CIO. Tim will advise FinMkt’s management team on strategy and product development.

Tim was recruited by Elizabeth Warren, then Special Assistant to the President of the United States, to join the executive team tasked with launching the CFPB on time and on budget. As Head of Technology and CIO, Tim led technology strategy, planning, and implementation for this inaugural federal agency in the digital age with a budget of $500 million. Under his leadership, the agency implemented an agile, lean process to document, budget, approve, and prioritize technology projects and also became the first federal agency to utilize scalable commercial cloud services while increasing staff from 50 to 500 in an 18-month period.

PeerIQ Announces Agreement with Freedom Financial Network (Yahoo! Finance), Rated: A

PeerIQ, a leading provider of data and analytics for the online lending sector, today announced that Freedom Financial Asset Management, a subsidiary of Freedom Financial Network and one of the fastest growing marketplace lending platforms offering unsecured consumer debt, has adopted the PeerIQ Analytics Platform for enhanced loan data management, reporting, and portfolio analysis—for use by both Freedom’s capital markets team and institutional buyers of Freedom loans.

By adopting PeerIQ’s platform, Freedom Financial will leverage PeerIQ’s full suite of tools: investor dashboards, loan surveillance, portfolio benchmarking, automated reporting, credit facility monitoring, ca­­­­­sh flow analytics, and loan performance modeling.   Moreover, PeerIQ will offer the same tools for institutional investors to streamline diligence of Freedom’s loan data and monitor existing loan portfolios.

Finally, Freedom has tapped PeerIQ to serve as the independent “fair value” valuation provider for its asset management arm.  Drawing upon its deep experience in credit and lending, including its strategic data partnership with TransUnion, PeerIQ launched its valuation service last year.

Braintree hires former Lending Club exec as chief technology officer (Chicago Tribune), Rated: A

Braintree, the Chicago-based mobile payments company, has hired Lending Club’s former chief technology officer.

In his role at Braintree, John MacIlwaine will lead all aspects of product development, the company’s general manager, Juan Benitez, wrote in a blog post announcing the move Tuesday.

FT Partners’ CEO Monthly FinTech Market (FT Partners), Rated: A

FinTech M&A
* 

Industries Where FinTech Is Changing The Game (NASDAQ), Rated: B

The first area where FinTech has made a serious impact is lending.

Loans are happening faster than ever before and the use of technology has improved both business efficiencies and is making headway on lowering risk, thereby also lowering rates for borrowers while still maintaining healthy profit margins.

RedFin has taken a stand against inefficient real estate transactions and the traditional 6% fees. They understand that most of the home search process now takes place online and by streamlining the transaction process with technology, they can lower costs.

Taking changes a step further, startups like RealtyShares are taking the marketplace lending model to real estate investors. Now real estate developers and project managers can look to the marketplace for lending instead of banks.

The payments industry is another area where startups are disrupting the norm.

Due is working to make business payments and digital wallets easier and cheaper for freelancers and other business owners around the world.

SoFi Ranks Fordham Law Graduates No. 15 In Average Salary (The Fordham Ram), Rated: B

Fordham University claimed a spot on SoFi.com’s released 2017 rankings of highest average graduate salary rates. At No. 15 with an average graduate salary of $160,590, Fordham comfortably ranks in the top 20 law schools for graduate salaries. Average debt of Fordham Law graduates is $151,406, giving Fordham a 1.1 salary to debt ratio, according to SoFi.

United Kingdom

Zopa gives insight into its borrowers (Business Insider), Rated: AAA

The numbers point to a solid borrower base. The press release indicated that the top three types of loans on Zopa’s platform are car loans at 34% of the total origination volume; debt consolidation at 31%; and home improvement at 20%. This indicates that debt consolidation loans, the

Lewis: Peer-to-Peer Lenders Expect Higher UK Rates (Bloomberg), Rated: A

The Bank of England would want to get ahead of spiking inflation, says Rhydian Lewis, CEO of peer-to-peer lender RateSetter. He told Daybreak Europe’s Markus Karlsson that customers on his platform expect interest rates to rise.

Listen to the podcast.

Anthony Hilton: Let’s be positive as peer-to-peer pain looms (EveningStandard), Rated: A

However, even in these benign conditions and despite Zopa’s obvious progress, some peer-to-peer firms are showing signs of strain. And most of those that appear successful have moved a long way from the original concept, under which people with surplus funds met via a platform on the internet people looking to borrow. Superficially, the industry still strives to be swanlike in its grace and stability, but under the water the paddling is in some cases increasingly frenzied.

Even big firms such as RateSetter have had pause for thought. From the beginning, it has used a small levy on borrowers’ interest payments to endow a compensation fund to be used to reimburse any lenders whose loans go sour. The problem that emerged last year was that RateSetter’s bad-debt experience was significantly worse than expected even in these good times. This briefly threatened to overwhelm the fund and, although some neat juggling meant disaster did not materialise, it did prompt a rethink about the scheme.

What all this means is that the honeymoon is over, the shake-out is beginning and what survives may bear little relationship to what set out on this journey. The bigger firms are gaining market share at the expense of the smaller, the venture capitalists are becoming much more choosy about whom they back, and a lot of the smaller poorly branded businesses will wither away.

This is inevitable and part of the usual cycle. Rather than be negative about it, it is worth remembering that — even if peer-to-peer lending is less innovative than originally hoped — it has still changed ideas about what is possible and how customers can be served.

So would you invest in Folk-2-Folk for 6.5% interest? (This is Money), Rated: A

Almost every other peer-to-peer firm is online only, but Folk2Folk is slightly unusual in that it has high street branches. Currently these are just in the West Country, but the firm is set to open a branch in Harrogate in February 2017, with others planned around the country.

Folk2Folk is also authorised by the Financial Conduct Authority. This is a good sign as it means that they have met a strict set of lending criteria and will be allowed to provide an innovative finance Isa in the future, meaning investors can earn interest tax-free on up to £15,240 in the tax year 2016/17.

Some peer-to-peer lenders let you invest with as little as £10 but Folk2Folk currently has a minimum investment level of £25,000 – this means the type of investors it would be suitable for are more likely to be reasonably wealthy.

All of its loans are backed by property, which can be repossessed and sold by Folk2Folk if a borrower were to default, helping creditors to recover at least part of the loan.

European Union

Belgian P2P lending startup Mozzeno launches (Finextra), Rated: A

The Belgian fintech startup mozzeno is launching the first digital platform to enable private individuals to participate indirectly in financing loans to other private individuals.

For investors, an accessible investment with returns of up to 5.79% gross and 3.91% net.

Investment Protection: mozzeno works with the loan insurer Atradius ICP which insures loans granted via mozzeno. Depending on the class of risk, this insurance covers from 60% to 100% of the payment of three late instalments and of the remaining amount of the loan.

China

Yirendai: Leaked Internal Emails Raise Much Deeper Concerns (Seeking Alpha), Rated: AAA

The P2P lending space in China is something akin to a Ponzi scheme which is rife with fraud. This is NOT an overstatement.

During 2016, YRD continued to report loan growth which was downright explosive. (But so did every other P2P player in China’s rapidly booming P2P space). Accordingly, the headline metrics for YRD looked temptingly good. YRD appeared to present a low P/E ratio, strong revenue growth, huge return on equity, etc. This began to attract a number of US quant funds (shown below) to take numerous small positions based on their “factor models”.

Ahead of the Ppdai IPO, the SCMP article quite clearly comes across as a warning to US investors who might be tempted to invest in a Chinese P2P. The SCMP makes clear what Chinese investors have known all along. Here are a few quotes from SCMP, which again came out just last week:

  • In China, “P2P lending… has been mired in a slew of scandals amid runaway investment and fraud since late 2015.”
  • “Beijing will heighten requirements for P2P players… The intention of the heightened regulation is partly to shut down some firms that purport to be P2P lenders.”
  • “dozens of unscrupulous players raised funds from depositors and then channeled the loans to corporate clients such as property developers.”
  • “In 2015, Beijing-based Ezubao was found to have defrauded more than 1 million investors of about 100 billion yuan.”

A large number of small Chinese retail investors (in this case, it was around 13,000 investors) log on with their smartphones and opt to make small investments in some sort of P2P loan product. There is no research and no due diligence. They just click on their smartphone and then “poof” they have invested in something which is supposed to provide some attractive level of returns. Their money is transferred out of their bank account immediately and automatically.

The reality as I see it is that YRD has largely been set up as a dumping ground for terrible subprime paper, foisting the future losses on oblivious US investors who are relying on superficial factor models.

India

P2P platform i-lend eyes pan-India expansion, fresh capital (India Times), Rated: AAA

Online peer-to-peer lending platform i-lend is preparing itself for a pan-India expansion and looks to raise Rs 4-5 crore from investors to finance it, founder director Shankar Vaddadi told ET.

Vaddadi said that the company is waiting for Reserve Bank of India to announce the final peer-to-peer lending norms before it takes steps towards building presence across the country.
India has about 30 online P2P marketplaces including Faircent, i2iFunding and LenDenClub.
Vaddadi said i-lend has processed 380 loans so far for Rs 3 crore.
Middle East

Dubai To Open Up To Crowdfunding Platforms, As Part Of Fintech Push (Forbes), Rated: AAA

The regulator of offshore financial hub the Dubai International Financial Centre (DIFC) is preparing to license loan-based crowdfunding platforms for the first time.

The consultation, which was launched on January 31, is the first in what is promised to be a series of initiatives covering crowdfunding and the financial technology (fintech) industry more broadly.

According to the local Khalifa Fund, around 70% of SMEs in the UAE have had their applications for funding from conventional banks rejected and loans to SMEs account for just 4% of outstanding bank credit in the country.

Authors:

George Popescu
Allen Taylor