Tuesday July 25 2017, Daily News Digest

SEC enforcement results

News Comments Today’s main news: ICBA letter opposing SoFi as a bank. Moody’s upgrades 7 Prosper ABS MPL tranches. UBS invests in iCapital Network. TenX processes Bitcoin with Visa transactions. BNI Europa reaches profitability. Today’s main analysis: SEC focus on capital formation, enforcement in direct lending. Today’s thought-provoking articles: Will U.S. banks dominate consumer lending again? China needs a bigger […]

SEC enforcement results

News Comments

United States

United Kingdom

China

European Union

International

Asia

News Summary

United States

Here is the Letter by the ICBA Slamming SoFi’s Effort to Become a Bank (Crowdfund Insider), Rated: AAA

Last week, the Independent Community Bankers of America  (ICBA) sent a letter to the attention of Kathy Moe, Regional Director of the FDIC in San Francisco. The subject of the letter was the ICBA’s vehement opposition to Fintech darling SoFi’s effort to become a licensed bank.

The ICBA asked that Congress close the alleged “ILC loophole” because it not only threatens the financial system but creates an uneven playing field for community banks.

Read the full letter here.

SEC Focus on Capital Formation & Enforcement, and What it Means for Direct Lending (PeerIQ), Rated: AAA

What might a focus on the SEC’s capital formation mandate mean for investors?

  • Retail investors may have greater access to alternative investments typically reserved for accredited investors. For instance, Piwowar questioned the premise of a distinction between accredited vs. non-accredited investors.
  • Small businesses may see a reduction in disclosure obligations to encourage small businesses to tap the public capital markets. SEC Chair Clayton identified the reduction of US IPOs (in the wake of SOX and post-Enron regulations) as a serious issue.
  • ABS investors may have a reduction in the disclosure and liability requirements for publicly registered securitizations. ABS issuance has shifted to Rule 144A private placements – in fact 100% of deals in the marketplace lending market are privately placed – in part, due to the higher disclosure and attestation burdens for public deals.

SEC Enforcement Actions & Investor Protection

After the late-2008 Madoff scandal, the SEC dialed up enforcement activities with the goal of improving investor confidence and market integrity.

Not surprisingly, enforcement actions on direct lending strategies has increased substantially as the sector continues to grow. (We refer reader’s to Harvard Law School’s SEC Enforcement Actions Against Investment Advisors for more information.)

Direct Lending is Prone to Valuation Negligence

A pool of unsecured personal loans may contain thousands of loans with differing and constantly shifting loan and borrower attributes. Unlike, say, a CMBS transaction where a valuation agent can visit a property, speak to an owner, and evaluate a tenant – the sheer volume of hundreds of thousands of loans requires advanced analytics to value a portfolio.

Below we share below our principles for valuation:

  • Transparency: A well-documented valuation methodology, with clear exposition of prepayment, default, credit spread, and other assumptions.
  • Auditable: A repeatable and testable valuation framework.
  • Fair value: Fair value based on a consistent modeling framework that factors in both unobservable and observable valuation inputs from similar assets or adjacent capital markets.
  • Accounts for major risk factors: The pricing framework accounts for risk factors including default risk, prepayment risk, and credit spread risk.
  • Forward looking: Loan valuations must be driven off of expected future cashflows, where cashflows are a function of the borrower’s current credit attributes, macro conditions, payment performance, and seasoning.
  • Loan-level: The pricing framework operates on a loan-level to address granularity in credit risk of loan rather than coarse replines.

Moody’s upgrades seven tranches from four Prosper marketplace lending ABS securitizations (Moody’s), Rated: AAA

The complete rating actions are as follows:

  • Issuer: Citi Held For Asset Issuance 2015-PM1
    • Class B Notes, Upgraded to A1 (sf); previously on Aug 6, 2015 Definitive Rating Assigned Baa3 (sf)
    • Class C Notes, Upgraded to Ba2 (sf); previously on Jul 14, 2016 Confirmed at Ba3 (sf)
  • Issuer: Citi Held For Asset Issuance 2015-PM2
    • Class B Notes, Upgraded to A1 (sf); previously on Oct 23, 2015 Definitive Rating Assigned Baa3 (sf)
    • Class C Notes, Upgraded to Ba2 (sf); previously on Jul 14, 2016 Confirmed at Ba3 (sf)
  • Issuer: Citi Held For Asset Issuance 2015-PM3
    • Class B Notes, Upgraded to A1 (sf); previously on Dec 18, 2015 Definitive Rating Assigned Baa3 (sf)
    • Class C Notes, Upgraded to Ba2 (sf); previously on Jul 14, 2016 Confirmed at Ba3 (sf)
  • Issuer: Consumer Credit Origination Loan Trust 2015-1
    • Class B Notes, Upgraded to A1 (sf); previously on Feb 11, 2016 Upgraded to Ba2 (sf)

Will banks in the US dominate consumer lending once again? (AltFi), Rated: AAA

SunTrust Bank is an interesting case in point. They are a large 125-year-old bank headquartered in Atlanta. They had total assets on their balance sheet of $204 billion as of December 31, 2016 which makes them a top 25 bank in the US.

From our perspective, what is most interesting about SunTrust is they have an online consumer lending platform. They actually acquired a small online lending platform called FirstAgain a few years ago and relaunched it as LightStream in 2013. They are starting to get some real traction, having done $1.5 billion in loans in 2015 and over $2.3 billion in 2016. Their average interest rate is lower than the marketplace lenders and their biggest categories are auto lending and home improvement.

Discover Bank is most well known in the US for their credit cards but they also have a robust personal loan business. In 2016 they originated $4 billion in new personal loans making them the second largest online lender in the category behind Lending Club. Unlike Lightstream, Discover’s personal loans are focused on debt consolidation so they are going directly after Lending Club and Prosper in this space. I find this a curious decision given that they have a $62 billion dollar credit card loan book (as of December 31, 2016).

The four biggest US banks are still mostly on the sidelines

JPMorgan Chase is the largest credit card issuer in the US with $142 billion in balances outstanding. Possibly because of their dominance in credit cards, they do not offer a personal loan product beyond student loans and a Home Equity Line of Credit.

Bank of America is very much like Chase in their offerings towards personal loans – they offer home equity loans and student loans. Nowhere on their website can you find an offering for personal loans.

Even though Citi is the second largest credit card issuer it does actually offer personal loans. You can apply on Citi’s website for a personal loan up to $30,000 (up to $50,000 if you apply by phone). Rates range from 7.99% to 17.99%.

Robo giant Betterment raises m in new funding round (AltFi), Rated: A

Robo-advice giant Betterment continues to grow. The platform raised a $70m (£54m) funding round, an extension of last year’s Series E.

The firm has raised nearly $300m in total since it was founded in 2008, as some question the business model of robo-advisers. The company was valued at $700m in 2016.

The funding round was led by Swedish investment company Kinnevik and included investments from Bassemer Venture Partners, Menlo Ventures and Francisco Partners.

PayPal to partner with JPMorgan (Reuters), Rated: A

PayPal Inc (PYPL.O) said on Thursday it would partner with JPMorgan Chase & Co (JPM.N), allowing the bank’s customers to link their Chase Pay and PayPal accounts.

Fintech faithful put payments on a pedestal (Reuters), Rated: A

Fintech’s faithful are putting payments on a pedestal. Square and PayPal shares are near all-time highs – as are those of venerable outfits like Visa, MasterCard and First Data. They’re each chasing what could be a $2.3 trillion revenue business by 2019, according to McKinsey. But they can’t all be winners.

Privately held Stripe kicked off the frenzy last November when it raised $150 million in its fourth funding round. That doubled to $9.2 billion the valuation of the seven-year-old company, which builds software to allow companies to quickly set up and track digital payments.

Quarterly InsurTech Briefing Q2 2017 (CB Insights), Rated: A

In this report we focus on one of the insurance industry value chain’s most underestimated modules – claims management. It is a $170 billion global industry currently controlled approximately 90% by incumbents. And it is booming with innovation.

Download the full report here.

Catching Up with Michael Koenitzer of Global Debt Registry (Crowdfund Insider), Rated: A

Erin: How is GDR optimising the demand for its loan level diligence solutions?  How does the platform source partnerships?

Mike: Most online loans underwriting already undergoes some form of validation. Up until recently, however, most of the industry has relied on manual document validation — it’s taken awhile for the industry to wake up to digital data validation. That’s where we come in – we offer a more efficient and a trusted method of validation than what’s been used in the lending space in the past.

Erin: Leveraging blockchain technology is becoming integral in fintech.  Please describe GDR’s new multi-party blockchain proof of concept (POC) that is designed specifically for the online lending industry. What initial issues did/do you face and how did/do you and your team resolve them?

Mike: We see blockchain as perfectly suited to the online lending space and more specifically, the set of solutions we offer our clients, because it offers a single source of data that enables clients to access an immutable audit trail. They can see the state of a given loan across its entire lifetime and that builds confidence and trust.  The more certainty investors have, the more likely they are to invest capital in the online lending space.

Erin: Distributed ledger technology is another key fintech innovation. Why has GDR initiated partnerships with the Wall Street Blockchain Alliance and Structured Finance Industry Group (SFIG) Blockchain Task Force for its strategy development?

Mike: Both organizations are naturally aligned with our role in shaping the broader conversation around blockchain adoption and what this technology can do for the online lending sector specifically. Through the Wall Street Blockchain Alliance, we’re connecting with many of the banks we’ve been working with through our portfolio of loan validation tools, and with SFIG, we’re sharing and developing best practices around securitizing those loans, working with the underwriters.

Erin: How do you see marketplace lending evolving overall?

Mike: The space is going to continue growing, but it is also going to consolidate as any industry does during the process of maturation. I also think that there will also be a reality check on how well the online lending platforms underwrote the loans and what was missed if anything in the underwriting process.  We have seen and I think we will continue to see a shift from rivalry to increased cooperation and joint ventures between traditional banks and online lenders.

MPOWER Financing Extends Student Loan Program to All 50 States Through Partnership with Bank of Lake Mills (PR Newswire), Rated: A

MPOWER Financing, an innovative fintech company and provider of educational loans to high-potential international students, has entered a new partnership with Wisconsin-based Bank of Lake Mills, which enables MPOWER Financing to offer its online lending program to students in all 50 U.S. states.

As a result, MPOWER Financing is now available to thousands more students looking to secure financing across an expanded roster of 223 universities across the nation.

MPOWER Financing is a public benefit corporation whose mission is to remove the financial barriers to higher education in the U.S. by providing the financial resources necessary for students to attend schools and complete their undergraduate or graduate studies. Founded in 2014, MPOWER Financing provides financial resources to domestic students, DACA students and international students who are often undervalued and do not fit traditional credit criteria.

Older Women Flunk Financial Literacy Quiz (Forbes), Rated: A

In a survey released today, the 2017 RICP Retirement Income Literacy Gender Differences Report, from The American College of Financial Services, only 18% of women age 60 to 75 passed. By contrast, 35% of men did (also pretty shabby, if you ask me).

Most of the women surveyed (55%) said they were extremely confident they would have enough money to live comfortably in retirement. Only a quarter of those women passed the financial literacy quiz, however.

Also, the women surveyed were less likely than the men to get financial advice and information from friends: only 27% of women consulted friends vs. 39% of men.

Some 55% of women with advisers said it is extremely important that their money pro educate them about the risks of running out of money in retirement; just 42% of men felt this way. And 60% of women said it’s important to receive education from an adviser about investment management, as opposed to only 47% of men.

S.F. real estate fintech Opendoor to expand into Florida (Biz Journals), Rated: B

The move reflects just how fast the so-called iBuyer market is expanding, as some homeowners opt for a quick sale to Opendoor or its rival OfferPad to forego the time and expense involved in a traditional home sale.

United Kingdom

How does P2P stack up against other investments? (P2P Finance News), Rated: A

But as P2P enjoys its moment in the sun, it is worth looking at how the sector stacks up against investment and savings products.

  • P2P vs Exchange Traded Funds (ETFs)

Over the past year, the FTSE 100 has broken a number of records, ending last month 12.43 per cent higher than 30 June 2016.

While the majority of P2P platforms have not been able to beat the unusually strong performance of the FTSE 100, a few have come very close. LandlordInvest and Lendy are both offering up to 12 per cent on a variety of property loans, and Ablrate has listed asset-backed loans on its site for 14 per cent.

  • P2P vs cash ISAs

As a result, the returns offered by cash ISAs have reached historic lows. By December 2016, there was not a single cash ISA offering more than one per cent, and by May 2017, P2P platforms were noticing a surge of ISA transferswhich they credited in part to low-paying cash ISAs.

Funding Circle is offering a maximum return of 7.2 per cent on its SME loans, while Zopa is offering 6.1 per cent to Zopa Plus account holders, and RateSetter is offering five-year loans at a fixed rate of 4.6 per cent.

investUP Identifies Opportunities for P2P Lenders (Bob’s Guide), Rated: B

The peer-to-peer lending industry is maturing, with the market growing at over 30% per annum, and figures suggesting it will be worth over £5 billion by the end of 2017; as such, the sector is now regulated by the FCA.

investUP is a peer-to-peer lending aggregation platform with the ability to automatically place investments for time-conscious investors. Investors enable a lending robot, driven from criteria provided by the investor, to create a bespoke algorithm which works for them. investUP is authorised and regulated by the FCA.

China

China’s shadow banking crackdown needs a bigger stick (Enterprise Innovation), Rated: AAA

For non-bankers, shadow banking leaves this perception of illicit financial services that harms economies if not the financial services industry. The reality is that shadow banking, and the non-banks that offer the service, is a welcome source of diversification of the credit supply from the banking system, and provides healthy competition for banks. At least that is what is stated in the Global Shadow Banking Monitoring Report 2016 published by the Financial Stability Board, the Swiss-based international body that monitors and recommends on the global financial system.

Mid-tier banks bear the highest risk as WMPs now account for close to 50% of their deposits, increasing their liquidity vulnerability.

Cash loans platform-2345, realized $ 14.93million profit during the first half year. (Xing Ping She), Rated: A

Cash loans platforms-2345 revealed its semi annual report last night. The revenue of the company was $159million during the first half year, increased by 127.1%.
The company’s original businesses were soft and hard ware developement. The huge increse this time due to the popular of internet finance(cash loans).

Tencent Internet insurance layout (Wall Street China), Rated: A

July 18, Taiwan Fubon gold control vice chairman Cai Mingxing said the company is working with Tencent to set up a joint venture in Shenzhen, the future of Fubon products or other company’s policy, will be in Tencent’s WeChat and other platforms. At the same time, Fubon Financial Control has received the approval of the management of robot management services, and hope that as soon as possible in the domestic launch of no one branch. This cooperation with Tencent, headquartered in Xiamen, Fubon Insurance will be through the WeChat sales insurance business.

CITIC Bank on the line of the first domestic block chain letter of credit information transmission system (01caijing.com), Rated: A

Recently, CITIC Bank on the block chain based on the domestic credit information transmission system (BCC) (BCLC) (a), which is the first time the domestic banking sector block technology will be applied to the settlement of credit. As of July 21, CITIC Bank has used BCLC to carry out real domestic letter of credit business, trading volume of more than 100 million yuan.

European Union

BNI Europa reaches profitability on its 3rd year anniversary (BNI Europa Email), Rated: AAA

Banco BNI Europa (“BNI Europa”) grew its total assets 36,7% reaching almost 500M€ in June this year. Total revenue grew 146,2% reaching 6,6M€ and the net profit was 2,7M€ allowing the bank to recover losses from 2016.

One year and half after its opening and with a new management team, the bank decided to completely change its strategy and focus on innovative products. Due to its limited resources, it also decided to create several partnerships with Fintech’s to accelerate its growth and product offering.

BNI Europa has been known for its customer centric digital platform and its attractive terms deposits and remunerated accounts. This year it launched with great success “Cereja” the reverse mortgage product for the senior consumer segment and the digital consumer credit platform “Puzzle” focused on independent workers.

The bank has also specialised in the management of alternative lending. So far, BNI Europa established twelve partnerships with European Fintech’s providing funding and credit to Banco BNI Europa across several European countries. Those credit products include consumer loans, student lending, SME medium term lending, SME revolving credit, invoice discounting and bridge lending.

Managing the fraud risk of frictionless payments (Finextra), Rated: A

Andrew Davies, VP, Global Market Strategy, Financial Crime Risk Management, Fiserv, talks about how increased speed and convenience in payments increase fraud risk, how financial institutions can address financial crime threats through technology and processes, and how firms can derive further benefits from their investment in fraud prevention – including by leveraging customer transaction information to identify new opportunities.

Watch the video interview with Davies here.

International

UBS Follows Credit Suisse Fintech Move (Finews), Rated: AAA

Zurich-based UBS has invested in New York-based fintech iCapital Network, «Crowdfund Insider» reported, without disclosing financial details of the deal.

iCapital is a digital distribution platform which provides access to private equity and hedge funds for wealthy clients and their private bankers.

UK vs. US: Liberalization of Fintech vs. More Regulation (Coin Telegraph), Rated: A

Based on the policies involving cryptocurrencies and Blockchain technologies, UK moves to liberalization of cryptocurrencies while the US looks into more regulations.

Bitcoin Foundation warns that the US is moving backwards in terms of accepting cryptocurrencies and other peer to peer banking models, which could result in the US Banking system being left behind.

Meanwhile, Britain’s new system will give fintech corporations more freedom allowing them to compete on the world stage.

FinTech and RegTech – What Next for Financial Crime’s International Standard Setter? (RUSI), Rated: A

The Financial Action Task Force (FATF), the global standard-setter for anti-money laundering (AML) and counterterrorist finance (CTF), in May brought together more than 150 delegates for its most in-depth discussion to-date on FinTech and RegTech.

There are, however, potential vulnerabilities inherent in the sector. RUSI’s FinTech FinCrime Exchange (FFE), run in partnership with FINTRAIL, a financial crime risk management consultancy, presented on both the risks and opportunities observed during six months of industry engagement.

The most significant fintech acquisitions of 2017 so far (Bob’s Guide), Rated: A

According to KPMG’s Pulse of Fintech report, fintech VC activity in Europe has hit a historically high level for successive quarters. In Q1 2017, global investment in fintech companies hit $3.2bn across 260 deals. Q1 2017’s total capital invested soared to $610m, which was noted as the highest tally in years.

  • Broadridge Financial Solutions acquires Message Automation: Amount undisclosed
  • First Data acquires CardConnect for $750m
  • AntFinancial buys MoneyGram for $1.2bn
  • Paypal acquires TIO Networks for $233m
  • D+H and Misys merge in $4.8bn acquisition and form Finastra
  • Mastercard closes acquisition of Vocalink for $920m
  • Worldpay agrees to $10bn acquisition by Vintav
  • Klarna acquires Billpay for $75m

Time for fintechs to shine – nominations for 2017 Fintech 100 open (BizEDGE), Rated: B

Nominations are now open for the 2017 KPMG & H2 Ventures Fintech 100, the annual list designed to recognise leading fintech innovators.

Companies or any fintech that deserve to be considered for the 2017 Fintech 100 need to be nominated by Thursday, August 31.

Asia

Singapore Startup Takes Bitcoin Into Real World With Visa (Bloomberg Technology, Rated: AAA

TenX is pitching its debit card as an instant converter of multiple digital currencies into fiat money: the dollars, yen and euros that power most everyday commerce. The company said it takes a 2 percent cut from each transaction and has received orders for more than 10,000 cards. While transactions are capped at $2,000 a year, users can apply to increase the limit if they undergo identify verification procedures.

TenX currently processes about $100,000 of transactions a month. By the end of 2018, it’s targeting $100 million in monthly transactions and a million users.

Ant Financial invests in Shanghai-based fintech startup VFinance (e27), Rated: A

Ant Financial, the financial services affiliate of Alibaba, has made a strategic investment in VFinance (维金), a Shanghai-based startup providing digital financial infrastructure solutions to enterprises in China, according to VFinance’s announcement.

At a press conference on July 18, VFinance also signed strategic cooperation with MyBank (网商银行), an online bank launched by Ant Financial in 2015.

Authors:

George Popescu
Allen Taylor

Thursday June 29 2017, Daily News Digest

U.S. venture capital exits

News Comments Today’s main news: PayPal invests in LendUp. KBRA upgrades SoFi Consumer Loan Program 2016-1. Revolut spent 7M GBP on incredible sales growth. Today’s main analysis: VCs may face cash crunch as more tech startups stay private longer. Today’s thought-provoking articles: FSB issues report on fintech. Inside Ping An’s massive expansion. Chinese players pursue $3.4T international digital payments opportunity. Auto manufacturers leverage […]

U.S. venture capital exits

News Comments

United States

  • PayPal invests in LendUp. GP:”An outstanding partner to have for LendUp. With a little luck maybe Paypal and LendUp can also partner on customer acquisition.”AT: “I wonder why PayPal isn’t in the top 25 largest Internet companies. They’ve always had such great potential, but they never make the lists. Perhaps they aren’t diversified enough.”
  • KBRA upgrades SoFi Consumer Loan Program 2016-1. GP:”SoFi seems to go from high to even higher. “
  • Venture capitalists may face cash crunch, tech startups stay private longer. GP:”This could also be a hint that the companies private VC-driven valuations are not in line with the general public’s perception of their value”AT: “Not specific to online lending or fintech companies, but there is certainly an application to the alternative lending space. I can’t help but wonder if this is a long-term or shorter-term trend, but it seems to have started in the middle of last year some time.”
  • Global Debt Registry develops blockchain-based proof of concept for online lending. GP:”Slowly but surely we are starting to see the first blockchain applications that make sense.”AT: “There hasn’t been a single public ledger make a breakout, so these kinds of initiatives make me wonder if developments are based on demand or high hopes. I like this particular one, it’s interesting and innovative, but how many online lenders are asking for it?”
  • Home Point Financial grows third-party origination channel.
  • SEC’s robos handling is a big charade. GP:”The workings of a government are often obscure. I would call it politics. Perhaps one shoudl watch House of Cards TV series more often.”
  • Better Mortgage empowers consumers with a better price guarantee. GP:”I am not sure if this was necessary in order to convince people that a simpler and faster application is needed. In fact I usually advise companies not to price cheapest but to price as expensive as they can get away with as long as they provide real value to the users. Cheap has many issues: low margins, no profits, perceived lack of value, etc.”
  • Why Square is the ‘Tesla of payments’. GP:”I personally am not convinced that a Tesla car makes sense economically or practically over a gas or hybrid car at this time. There is a lot of hype and fashion into Tesla. I do have to recognize the Tesla cars look great though. I don’t think there is a hype behind Square, as it offers a really easy solution to accept credit card payments. Setting up credit card payments has always been a nightmare for all small businesses for no aparent reason. I am glad Square solved that.”
  • Which payment app is best? AT: “A pros/cons look at Venmo, Apple, and Zelle.”
  • Veem integrates with Intuit QuickBooks.

United Kingdom

  • Revolut spent 7M GBP last year to fuel growth. GP:”What one needs to look at is not how much money was spent but what was gained and built through that. I am happy with a company spending 100mil GBP if they build 200mil GBP in revenue per year. A ration of spending 7mil for a revenue of 2.3mil is not impressive, however lets see the impact of this spent the following year.”AT: “Customer acquisition costs money. Remember, it took Amazon 10 years to make a profit. Now they’re the largest Internet company on the planet. While Revolut’s sales went up more than 500% in one year, they spent over half of their equity capital to do it. I see another funding round on its way.”
  • Financial Stability Board issues report on fintech.
  • Are alt lenders ready to publish APRs? GP:”Many of them already are publishing APRs on their websites. I am not sure why this is a question. While it is not a requirement I think it’s good practice and the serious ones are publishing it.”
  • Building a bank is not easy. GP:”Nobody ever said building a company , a startup , or a bank was easy. This is why often people with no experience and who don’t know what it takes are better position to take such a project. They are not afraid of what they don’t know and often they even find new solutions and innovate withotu being constrained of the existing established solutions to known problems. Many VCs, because of this reason, invest in inexperienced CEOs seeing it as a strenght. “
  • Hargreaves scraps P2P lending plans.
  • How to save cash, make more using P2P lending.

China

International

European Union

India

Asia

Canada

News Summary

United States

PayPal invests in online lender LendUp (Reuters), Rated: AAA

PayPal Holdings Inc has invested in LendUp, a San Francisco-based startup that offers loans online to consumers who have been traditionally overlooked by banks because they are considered too risky.

LendUp said it had secured a strategic investment from the payments company on Wednesday. It did not disclose terms of the deal. PayPal confirmed in a statement that it had made an investment.

PayPal has been expanding partnerships and acquiring new services to gain advantage over rivals in a highly competitive digital payments market.

KBRA Upgrades the Ratings on SoFi Consumer Loan Program 2016-1 (KBRA Email), Rated: AAA

Kroll Bond Rating Agency (KBRA) upgrades the rating on the Class A notes issued under the SoFi Consumer Loan Program (SCLP 2016-1), a consumer loan ABS transaction which closed on June 27, 2016. The credit enhancement has built for the Class A notes since closing. While cumulative net losses are slightly above KBRA’s initial loss expectations, the transaction has breakeven loss multiples which are sufficient for an upgrade of the Class A rating.

The collateral in the SCLP 2016-1 deal currently includes $382.3 million of loans, as of May 31, 2017. The collateral in the transaction has amortized from the initial pool balance of $506.4 million at closing. The current credit enhancement levels are 31.66% for the Class A notes. Credit enhancement consists of overcollateralization, cash reserves, and excess spread.

Please click on the link below to access the report:

Venture capitalists may face a cash crunch as more technology startups stay private longer (Quartz), Rated: AAA

Private equity research firm Pitchbook reports startup exits—sales or mergers of companies delivering returns to shareholders—has fallen in recent years. The number and value of startup exits were down about 70% last year from their 2014 peak. Despite big IPOs of companies such as Snap, 2017 has yet to yield a bumper crop of new exits as companies stay private longer.

It’s not a new problem, says Scott Jordon, managing director at Glynn Capital, but it’s now more acute. The time it takes for technology firms time to IPO has stretched (pdf) from around five to eight years in 2000 to about 11 years today. Pitchbook’s Nizar Tarhuni says they’re seeing venture firms extend funds or negotiate longer periods than the standard 10 years to return money to their limited partners such as pension funds.

A resurgence in IPOs is still possible. Public investors extended a (mostly) warm welcome to the 11 or so tech companies that have gone public so far this year, including Appian, Carvana, Cloudera, Elevate Credit, Netshoes, Okta, Veritone, and Yext.

Global Debt Registry Develops Blockchain-Based Proof Of Concept For Online Lending (Fin Alternatives), Rated: A

Loan data specialist Global Debt Registry has completed a proof-of-concept that utilizes the blockchain to provide investors with an immutable audit trail and a single source of core loan data.

The firm’s inaugural blockchain proof-of-concept (POC) lays the groundwork for providing investors and senior lenders in the online lending space with a safe and secure way to confirm loan ownership and collateral interests across companies within the ecosystem, GDR said.

In developing the blockchain POC, GDR worked with three leading blockchain platforms – Hyperledger, Ethereum and Chain.

Home Point Financial grows third-party origination channel (Housingwire), Rated: A

Shortly after wrapping up its acquisition of Stonegate Mortgage Corp.Home Point Financial Corp. already announced it’s expanding its third-party origination channel.

The lender plans to increase its wholesale client base by expanding the geographic reach and number of third-party originators the channel will serve.

Home Point finalized its $211 million acquisition of Stonegate Mortgage back at the beginning of the month.

‘Big Charade’ Seen in SEC’s Handling of Robos (Financial Advisor IQ), Rated: A

The rising popularity of robo-advisors is bringing increased scrutiny by regulators. At the same time, industry lawyers say they don’t foresee any substantive changes coming in the form of new rules.

This year for the first time, the SEC put online advice-giving on its list of examination priorities, raising concerns about “heightened risk to investors and/or the integrity of the U.S. capital markets.”

A key issue securities lawyers like Fein raises is that if the SEC insists its current rules adequately apply to robos – yet there seem to be shortcomings in how some robos execute their fiduciary duty – then any perceived enforcement gap will only widen.

But MacKillop, whose startup indie RIA manages about $50 million, scoffs at notions that computer-based investing can live up to the same sort of “best interest” standards for individual clients as brick-and-mortar advisors.

Better Mortgage Empowers Consumers with the Better Price Guarantee (BusinessWire), Rated: A

Better Mortgage officially rolled out the Better Price Guarantee — a promise to all of its borrowers that it will beat any competitor’s loan estimate by $1,000. If not, Better will actually give the borrower $1,000.

Better’s mission is to embolden consumers to confidently shop around while also de-risking one of the largest financial transactions they’ll ever make. According to a report published by Oliver Wyman, 71% of customers only get a loan estimate from one lender, which could mean that many home buyers aren’t actually getting the best price on their mortgage.

How the Better Price Guarantee works:

  • If the customer thinks another lender has a more competitive price, they can send Better the competitor’s Loan Estimate(LE) within three business days from the date on the loan estimate. If Better can’t beat the competitor’s LE by at least $1,000, Better will give the borrower $1,000 in cash when they fund with the other lender.
  • An LE is a standard form that all lenders are required to provide a consumer.
  • Better Mortgage may extend this guarantee to non-standard rate sheets.

Why This FinTech Firm Reminds One Analyst of Tesla (Barron’s Next), Rated: A

What do you call a financial-technology company whose stock is up 75% this year as investors bank on its ability to bring a disruptive product into the mainstream? The “ Tesla of Payments,” apparently.

That’s the way to describe Square, according to Mizuho analyst Thomas McCrohan, who began covering the company on Tuesday. The key question for Square is whether it can scale its business up to serve larger customers, and McCrohan is optimistic about the payment processor’s ability to do so while still making money.

Tesla happens to be up 74% this year. Tesla and Square are the top two performers in the Barron’s Next 50 index.

Which Payment App Is Best for You: Venmo, Apple or ‘Zelle’? (WSJ), Rated: A

Venmo

Pros: Works across several types of mobile devices and bank accounts. Funds can immediately be used to shop with Venmo.

Apple

Pros: Service works with Apple’s iMessage, so users don’t need to download a separate app.

Zelle

Pros: Will work within the apps of the biggest banks such as J.P. Morgan Chase, Bank of America and Wells Fargo. Funds are deposited directly into bank accounts within minutes.

Blockchain Payments Startup Veem Integrates with Intuit QuickBooks (Coindesk), Rated: B

Intuit QuickBooks customers can now send international payments via blockchain payment provider Veem as an alternative to traditional wire transfers.

United Kingdom

Hot foreign exchange app Revolut burned through £7 million fuelling its growth last year (Business Insider), Rated: AAA

London-based Revolut, which offers a pre-paid international currency card, made a pre-tax loss of £7.1 million in 2016, its first full year of operations. Revenue was £2.3 million in the year to December 31, accounts filed with Companies House show.

The loss was largely down to “card scheme costs, acquiring costs, and user acquisition costs,” the company’s directors write in the accounts. In plain English, that means the cost of processing payments done on its cards, and the cost of getting people to sign up for the cards in the first place. The cost of sales jumped from £1.5 million to £7.8 million.

Staff numbers jumped from 7 in 2015 to 32, with staffing costs climbing from just under £300,000 to £1.5 million.

The startup has raised £12.1 million in equity capital to date.

Financial Stability Board Issues Report on Fintech: “Regulators Need to Understand the Impact” (Crowdfund Insider), Rated: AAA

The Financial Stability Board (FSB) has weighed in on the burgeoning Fintech sector of finance. The FSB has been analyzing “financial stability implications” potentially created by Fintech innovation. The FSB says it is specifically seeking to identify “supervisory and regulatory issues that merit authorities’ attention”.

The FSB stated there are currently no compelling financial stability risks from emerging Fintech innovations.

According to the FSB, ten areas of interest have been identified of which the following three are seen as priorities for international collaboration. These three priorities are viewed as “essential” to supporting financial stability “while fostering more inclusive and sustainable finance.” The three priorities are:

  • The need to manage operational risk from third-party service providers;
  • Mitigating cyber risks; and
  • Monitoring macro financial risks that could emerge as Fintech activities increase.

The other areas that merit attention include:

  • Cross-border legal issues and regulatory arrangements.
  • Governance and disclosure frameworks for big data analytics.
  • Assessing the regulatory perimeter and updating it on a timely basis.
  • Shared learning with a diverse set of private sector parties.
  • Further developing open lines of communication across relevant authorities.
  • Building staff capacity in new areas of required expertise.
  • Studying alternative configurations of digital currencies.

Are the UK’s alternative lenders ready to publish APRs? (AltFi), Rated: A

In May of last year, the Competition & Markets Authority (CMA) published its rather hefty “Retail banking market investigation” report. Buried among its “proposed remedies” was a provisional decision to require lenders specialising in unsecured loans and overdrafts of up to £25k for SMEs to use annual percentage rates (APRs) to show the cost of these products. The proposed measure is set to become a reality in August, according to multiple sources. But are the UK’s alternative lenders ready?

The impending APR directive will not affect merchant cash advance firms, such as Liberis, because merchant cash advance is not technically considered lending. Nor will it affect asset-backed finance firms like MarketInvoice.

GrowthStreet is another business lending platform that would be affected by the directive, had it not taken the decision some time ago to publish APRs of its own accord.

One group that will presumably take a keen interest in the upcoming APR directive is the Association of Alternative Business Finance. The trade association, which launched in February, represents ten of the UK’s small business-focused direct lenders.

Building A Bank Is Not Easy (Forbes), Rated: A

UK Challenger banks, like AtomStarlingTandem and Monzo, are building from the ground up to do things differently.

But building a bank is not easy. Sophisticated and diverse product offerings, consumer trust, and security are three vital components. And in this regard, the incumbents often have a head start.

In our portfolio, we have seen AukaPay partnering with Sparebank1 in Norway to provide a white label payments app, MarketInvoice joining forces with BNI Europa to enable SMEs to access more working capital on its platform, Crosslend working with institutions to provide investment opportunities in consumer loans, and iZettle in successful partnership with Santander.

And when talking challenger banks, we can’t forget to mention BBVA’s acquisition of Holvi last year.

While P2P lending still represents a small proportion of total lending volumes, in the UK, origination grew 36% year on year in 2016.

Zopa is approaching bank building from a different base to the other challenger banks, and a case in point of collaboration with the incumbents.

Hargreaves scraps peer-to-peer lending plans (Money Marketing), Rated: A

Hargreaves Lansdown has dropped its plans to set up a peer-to-peer lending platform.

The company, which was expected to launch both a P2P lending platform and a cash management service to clients this year, has now decided it will solely focus on the cash management service.

Hargreaves Lansdown chief executive Chris Hill tells Money Marketing that despite P2P being “interesting”, the firm would rather focus on the new savings proposition because it is “a much bigger market”.

How to save your cash and make some more using P2P lending (Born2Invest), Rated: B

P2P lending seems to be a novel and definitely, profitable investment opportunity. It is becoming more and more popular and so there is a constant boost in the number of lenders who are getting profitable returns from this investment option. Here are a few essential steps for making money from the P2P investment.

Step No.1: P2P investment should be treated as an extra element in the overall financial portfolio

You must do ample research, deliberate and then come to a decision about what all should be included in your financial portfolio. You must possess a diversified and comprehensive financial portfolio. P2P lending seems to be a wonderful addition to this portfolio.

Step No. 2: Set a target and attain it

A profit of 2 percent over a 12-month deposit seems to be realistic. The two percent would be paying for the risk factors including investment in time.

Step No.3: Fortify your financial foundation

In order to make an impressive profit in your P2P investment, you must have a fantastic and truly solid financial foundation. This is certainly not a getting rich fast scheme but eventually, you could expect good returns.

Step No.4: Create a comprehensive system

Create a comprehensive system for investing in borrowers that is based on important information which is available, and is relating to the borrower.

China

Inside Ping An’s Massive Expansion (Institutional Investor), Rated: AAA

Almost 30 years after founding Ping An, Ma is ambitiously broadening his supermarket of financial products, much like U.S. financier Sandy Weill did as chief executive officer of Citigroup from 1998 to 2003.

Ma founded Ping An in 1988 in Shenzhen, the financial hub of southern China, which lies just north of Hong Kong’s border with the mainland. Over the past five years, the company has climbed onto the list of the world’s ten largest insurers, now ranking No. 4 behind France’s AXA, Germany’s Allianz, and U.S.-based MetLife in terms of assets, according to Relbanks.com. Though Ping An’s insurance assets rose 17 percent in 2016, to $802 billion, the company’s double-digit profit growth is benefiting in part from a diverse group of revenue streams, including banking, securities, asset management, wealth management, private equity, and, more recently, China’s booming arena of Internet finance.

Ping An saw 11.7 percent revenue growth, with gross earnings reaching a record high of 774 billion yuan ($112 billion), and a 15 percent growth in profits; net earnings rose to 62 billion yuan. About 56 percent of the group’s profits were derived from insurance, down from more than 80 percent a decade ago. The rest came from banking (20.6 percent), asset management (15.5 percent), and Internet finance (8.3 percent).

Among the company’s most touted technology successes is the 2011 founding of peer-to-peer lender Shanghai Lujiazui International Financial Asset Exchange Co. Lufax, as the company is known, has become an e-commerce giant for finance in China, the world’s second-largest economy. It’s the country’s biggest online marketplace for wealth management products: Last year more than 7.4 million individual and corporate investors used Lufax to purchase 6 trillion yuan worth of investment products from Ping An and thousands of other Chinese financial institutions.

Chinese Players Pursue $ 3.4 Trillion International Digital Payments Opportunity (PR Newswire), Rated: AAA

A new study from Juniper Research highlights the increasing dominance of Chinese companies in digital payments, with players such as Alibaba, Tencent and UnionPay seeking to bolster their revenues through international expansion.

According to the research, Strategies for Payment Providers: Opportunities, Risks & Competition 2017-2021, digital payment transaction values are expected to reach $5 trillion by 2021, up from $3.6 trillion this year, of which $3.4 trillion will come from sales outside mainland China.

The research includes the latest Juniper Leaderboards, highlighting best-in-class players in key payments arenas, including PayPal (for eWallets), Worldpay (for payment service providers) and Vodafone (for telco payments in emerging markets).

The complimentary whitepaper, Who will Own the Digital Payments Sector in 2021?, is available to download from the Juniper website together with further details of the full research and the attendant IFxl (Interactive Forecast Excel).

Hong Kong’s future is in learning new words: fintech, regtech, wealthtech (SCMP), Rated: A

Hong Kong’s role as a global financial hub may be under threat unless the city can embrace technology and adapt quickly to the tectonic changes that have taken place in the financial landscape in the two decade since its return to Chinese rule, experts say.

Hong Kong’s greatest moment of innovation was in 1997 with the Octopus card, a smart-card payment system that is now a ubiquitous part of daily life. Two decades since, the city has not made further progress and has lagged mainland China in exploring new forms of electronic payment such as Tencent Holdings’ WePay or Alibaba Group Holding’s Alipay.

Hong Kong’s existing banking model would change dramatically with the rise of fintech, similar to how Amazon.com revolutionised America’s retail industry, he said.

For Hong Kong to succeed as a fintech hub, regulators should license more companies to handle clients’ money to accelerate innovations in fintech and wealthtech, or the use of technology for wealth management and investing, he said.

“More than 70 of the world’s largest 100 banks are in Hong Kong, and this gives the city a big advantage because in fintech, the majority of the customers are going to be banks,” he said.

As many as 82 per cent of incumbent banks and financial institutions plan to increase partnerships with fintech companies in the next three to five years, according to a fintech survey in Hong Kong by PwC this year.

 

China’s Central Bank Vows to Push for Blockchain in Five-Year Plan (Coindesk), Rated: A

The People’s Bank of China (PBoC) is releasing new details about a forthcoming five-year development plan focused on its strategy for advancing technology use in the country’s domestic financial industry.

According to the announcement by the central bank, the PBoC intends to actively push forward the development of new technologies such as blockchain and AI. It also plans to strengthen its research on applications of fintech in regulation, cloud computing and big data.

Hong Kong Asserts Its FinTech Prowess (Financial Technologies Forum), Rated: B

In fact, the FinTech Association of Hong Kong (FTAHK) had its official launch on June 28, underscoring the point that financial IT innovation is no longer restricted to New York City and its concrete canyons or Silicon Valley in Northern California.

There will be committees taking on key sectors such as:

  • Blockchain/DLT;
  • Artificial intelligence;
  • Big data;
  • Payments;
  • Regulatory tech;
  • and financial literacy.
International

Automotive Manufacturers Leverage Fintech through Partners to Deliver a Differentiated In-vehicle Experience (Cision), Rated: AAA

The thinning margins in the automotive industry are making a strong case for vehicle original equipment manufacturers (OEMs) to explore revenue streams beyond sales and periodic maintenance. As customers become accustomed to digital transactions, OEMs will look to tap the hitherto underutilised fintechservices segment to generate additional revenues. Active partnerships with fintech companies will enable OEMs to offer multiple use cases that enrich in-vehicle experience, which will ultimately influence customers’ purchase decisions.

Fintech in the Global Automotive Industry, Forecast to 2025 is part of Frost & Sullivan’s Automotive & TransportationGrowth Partnership Subscription. The study examines key application areas of fintech in the automotive industry: leasing and finance, insurance, digital retailing, digital payments, and automotive services. Europe, followed by North America, is anticipated to lead in digitising finance, and North America, followed by Europe, in automotive service investments. The average investment in fintech is estimated to grow from $16 million in 2016 to $230 million by 2025with the emergence of digital car retailing and new business models in insurance.

The synergies between automakers and technology companies will power next-generation financial service infrastructure. Even though fintech partnerships with big banks slow down transactions, it is important to note that banks manage almost 32% all new vehicle financing in North America. Besides:

  • The competition for market share between banks and captives finance companies is expected to digitise new car sales and result in a $1 trillion auto financing market; and
  • Fintech will monetise services based on subscription models and on-demand vehicle features.
European Union

Fintonic Closes €25M Funding Round (Finsmes), Rated: A

Fintonic, a Madrid, Spain-based provider of a mobile app to optimize personal finances, closed a €25m round of funding.

Backers included ING Group and insurance group PSN, amongst other investors.

The company intends to use the funds to drive its growth in Spain and LatAm and increase its value proposition.

Luxembourg and Singapore fintech hubs connect (Finextra), Rated: A

The LHoFT, Luxembourg House of Financial Technology, and LATTICE80, the world’s largest Fintech Hub located in Singapore, are excited to have signed a Memorandum of Understanding (“MOU”) at Money 2020 Europe, setting a foundation for collaboration between the two centres.

This Memorandum of Understanding provides a framework to intensify the cooperation between two leading financial centres with a specific focus on Fintech and driving digital transformation in financial services.

Swiss Crowdlending Fintech Opts for Blockchain (Finews), Rated: A

Splendit is a Swiss fintech firm dedicated to broker loans to students paid for by financiers.

The company has decided to link up with Blockchain-fintech Lykke, Splendit said in a statement today.

Thanks to the deal with Lykke, Splendit henceforth will be able to finance foreign students by sending them their loans via the Lykke Wallet. Florian Kuebler, the co-founder of Splendit, says that this will save transaction costs and enable crowdlending across the globe.

Agreement between Willis Towers Watson and Workinvoice to support companies on the commercial credit market (Intermedia Channel), Rated: A

Willis Towers Watson (WTW) and Workinvoice have signed a collaboration agreement exclusively with the aim of bringing more and more Italian companies on the commercial credit market run by the Italian Fintech company.

The Workinvoice activities enable companies ‘ access to a particular market to obtain immediate liquidity, and to protect themselves from payment risks through the sale of its trade receivables to Italian and international institutional investors “ .

India

Rohan Tibrawalla Takes On Country Director-India Role for MPOWER Financing (PRWeb), Rated: B

MPOWER Financing (), an innovative fintech company and provider of educational loans to high-potential, international students, recently appointed Rohan Tibrawalla to the position of Country Director-India to oversee the company’s operations in the region from its soon-to-be-opened office in Bangalore.

In his new position, Tibrawalla is responsible for expanding and executing MPOWER Financing’s operations, marketing and business development strategies as well as for managing the loan portfolio and debt and equity capital sourcing.

MPOWER Financing is a public benefit corporation whose mission is to remove the financial barriers to higher education in the U.S. by providing loans and other resources necessary for students to complete their undergraduate or graduate studies.

Asia

Challenge is to navigate global fintech regulations and scale: Finastra’s Nadeem Syed (Deal Street Asia), Rated: AAA

Nadeem Syed, who heads mega fintech firm Finastra, believes regulators worldwide will need to evolve guidelines for the emerging sector  (fintech) but the challenge for many financial services firms would be to navigate the new environment and also scale services.

What are your plans in Asia Pacific in terms of expansion and growth after the merger and how has the journey been in Asia so far in terms of revenues and capturing markets?

We have long been committed to Asia Pacific and continue to see great opportunity across the region with double-digit growth rates. Developed and growth markets of Asia Pacific are successfully riding the digital wave especially with the tremendous opportunities that lie ahead of us in Indonesia, Myanmar, Thailand and China to name a few.

Misys has over 400 customers that cut across from Japan to Australia and we see tremendous opportunity to leverage our strength in the region to bring the D+H products to market, especially payments and cash.

Over the years, how have you seen Asia’s competitiveness in fintech being transformed? Has that been affected by the rivalry between region’s financial centres – Singapore and Hong Kong?

The financial services landscape, not just in Asia but globally, has seen a lot of regulators becoming more and more receptive to new technologies – distributed ledger technology, artificial intelligence, P2P lending and so on.

The challenge for all financial services companies is to navigate each jurisdiction’s new or upcoming regulations on fintech while translating their various innovations into services that can be scaled up and rolled out in a safe and reliable manner.

What kind of competition do you see from the internet giants like Baidu or Alibaba are fast emerging as fintech players worth noticing. What future do you see for Chinese fintech industry?

China’s internet giants are increasingly looking at fintech as it is a complementary sector that helps create a tighter online ecosystem for their customers. They are mostly focused on personal banking and payments solutions, which means traditional banks need to concentrate on evolving their own digital and online presence.

As the fastest growing region, do you see Asia emerging as a digital champion anytime soon. If yes, what will help to bring it and where are the major challenges?

Many countries in Asia are seeing exponential growth in the number of Internet and mobile device users – this has a direct correlation to the boom in digital or online banking, as well as other services being carried out online. Digital platforms mean that rural populations now have easy access to services previously unavailable to them, but the challenge is always how to ensure these platforms are safe and secure as cyber criminals get more sophisticated.

Fujitsu Starts Sales of Cloud-based Lending and Leasing Services from Cloud Lending Solutions (Fujitsu), Rated: A

Fujitsu today announced it is commencing sales in Japan of cloud-based solutions for lending and leasing businesses. Developed by US-based Cloud Lending Solutions and known as the CL Series, the solutions will be deployed and operated as Software as a Service (SaaS) with the support and operations services of Fujitsu technicians with expertise in financial systems. This is the first time services from Cloud Lending Solutions will be available in Japan.

ALT Corporation, a subsidiary of Yayoi Co., Ltd., Japan’s largest accounting software company, has decided to become the first Japanese customer for these solutions. ALT is using these solutions to set up a unique online lending business, with plans to begin trial lending in October 2017.

With the goal of offering solutions to transform business using Fintech to customers at financial institutions around the world, on July 12, 2016, Fujitsu signed a Memorandum of Understanding (MOU) with Cloud Lending Solutions for a strategic partnership.

The CL Series is a set of cutting-edge cloud services offered as SaaS, which digitize a suite of business processes for lending and leasing businesses, from applications to reviews, contracts and collections.

Canada

WEALTHSIMPLE, TRULIOO AMONG CANADIAN COMPANIES IN CB INSIGHTS FINTECH 250 (Betakit), Rated: A

Canadian FinTechs that made the list include Wealthsimple, which recently announced its UK expansion and raised a $50 million Series B; Montreal-based Blockstream, which raised a $55 millionSeries A in February 2016; and Toronto-based Wave, which raised $32 millionfinancing round from RBC, Portag3, and other investors in May.

The list also includes Vancouver-based Trulioo, which produces ID verification software for compliance and to fraud risk mitigation; Toronto-based Financeit, a cloud-based point-of-sale platform; and Toronto-based Street Contxt, which raised a fresh round of funding from 8VC, Point72 Ventures, Palm Drive Capital, and Portag3 Ventures in April.

Authors:

George Popescu
Allen Taylor