Wednesday February 21 2018, Daily News Digest

LendingClub originations by funding source

News Comments Today’s main news: Lending Club losses extend to Q4 2017. LendingClub to settle lawsuit for $125M. Groundfloor launches online public offering. Even Financial gets backing from American Express. LendInvest launches buy-to-let calculator online. Today’s main analysis: Lend Academy reviews LendingClub’s Q4 2017 results. Today’s thought-provoking articles: Equity sharing and home ownership. How millennials move emerging markets. Why Australia needs […]

LendingClub originations by funding source

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Lending Club extends losses for fourth straight year (Financial Times), Rated: AAA

Lending Club lost money for a fourth year in a row last year, as it wrote a big cheque to settle class-action lawsuits connected to its governance glitches of 2016.

The San Francisco-based company, the biggest listed online lender in America, said on Tuesday that net losses for the fourth quarter almost tripled from a year earlier, to $92m, as it agreed a $125m settlement to resolve civil suits stemming from the loan-mis-selling scandal that blew up almost two years ago. About $48m of the sum would be covered by insurance, the company said, with the remainder to be paid from liquid assets of about $650m.

The loss for the full year came to $154m, wider than the previous year’s $146m.

LendingClub agrees to settle shareholder litigation for 5M (American Banker), Rated: AAA

Under the agreement, which was announced Tuesday, the San Francisco-based online lender expects to pay $77.25 million. An additional $47.75 million is expected to be covered by LendingClub’s insurance, bringing the total payout to $125 million. The deal is subject to court approval.

LendingClub Corp (LC) Shares Sink on Q4 Earnings Miss (InvestorPlace), Rated: A

Lending Club also underwhelmed in its revenue as the company raked in $156.5 million during its fourth quarter, below Wall Street’s consensus estimate of $157.6 million, according to FactSet. The figure did increase 20% compared to the year-ago quarter.

On an adjusted basis, the company posted earnings of a penny per share, compared to a loss of 2 cents in the year-ago quarter.

The company also experienced a 23% annual growth in originations, which reached over $2.4 billion.

LendingClub Q4 2017 Earnings Results Review (Lend Academy), Rated: AAA

LendingClub delivered another record quarter of $156.5 million in revenue up slightly from their previous quarter. Originations were slightly down from the third quarter at $2.436 billion. They reported a GAAP net loss of $92.1 million in the fourth quarter which was affected by the class action litigation settlement expense.

Source: Lend Academy
Source: Lend Academy

LendingClub provided the below guidance for Q1 2018 and reaffirmed their guidance for 2018:

First Quarter 2018

  • Total Net Revenue in the range of $145 million to $155 million
  • Net Income (Loss) in the range of $(25) million to $(20) million
  • Adjusted EBITDA in the range of $5 million to $10 million
  • Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $19 million, and depreciation and amortization and other net adjustments of approximately $11 million

Full Year 2018

  • Total Net Revenue in the range of $680 million to $705 million
  • Net Income (Loss) in the range of $(53) million to $(38) million
  • Adjusted EBITDA in the range of $75 million to $90 million
  • Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $77 million, and depreciation and amortization and other net adjustments of approximately $51 million

Stocks making the biggest moves after hours (CNBC), Rated: B

LendingClub stock plunged 10 percent after the bell. The peer-to-peer lending company reported earnings and revenues that missed Wall Street estimates.

Groundfloor Launches Online Public Offering Amidst Increased Stock Market Volatility (PR Newswire), Rated: AAA

Groundfloor, the first issuer qualified by the U.S. Securities & Exchange Commission to offer real estate based payment dependent notes that are available to non-accredited investors, today announced that it has raised a total of $4.3 million from 687 participating investors in a combination of two recent financings, a private online bridge note closed late last year and an initial closing of its online public offering of equity. In each case, the company kicked off the invitation-only raises to customers and friends of the company with a $1M target, surpassing that in under 48 hours. Due to increased growth opportunities and strong demand, the company has today expanded the equity raise to the public.

Groundfloor is offering a total of up to 530,000 shares of Common Stock at $10 per share in its online public offering. Investor benefits include: no investor fees for life2; access to regular shareholder-only loan offerings; and invitations to attend annual Groundfloor shareholder events.

Recently increased expectations that the Fed may raise interest rates in the future has investors rebalancing their portfolios, with a shift out of equity into debt, as bond yields are expected to increase. Twelve-month bond yields have recently inched up to 1.97 percent.

By comparison, Groundfloor investors have earned an average of 13.6 percent per year over the past three years, which represents over 6x the yield of a current one year Treasury note, and over 1,000 percent more than they would have made if their money had been in a CD or savings account over this period.1 Groundfloor’s retail investors create their own portfolios of real estate debt investments in the fix and flip residential housing market, and the loans on which the investments are based are secured by a first lien position against the underlying real asset.

Real Estate Equity Crowdfunding: A New Investment Opportunity for the Investors (EIN News), Rated: A

Talking in context of real estate, there are 3 ways to invest in a crowdfunded real-estate property:

• Equity crowdfunding
• Syndicated debt crowdfunding
• Platform-issued (‘pre-filled’) debt crowdfunding

Following are the pros and cons of going for equity crowdfunding in real estate:

Pros

• High yield potential
• Lower barrier to entry: Even if you have a very less amount of money, you can still invest even in large commercial real estate projects through equity crowdfunding and enjoy the benefits of the real estate i.e., strong returns and lower volatility.
• No self-employment taxes
• Higher returns

Cons

• The risks. An investor should know how to evaluate the risk factors like local economy volatility and chances of higher than expected construction costs. Due diligence is what is required.
• Liquidity constraint: These investments need to be held up for a period of five years or so, and hence one should go for this option if this much bandwidth is available, lack of liquidity is not there, and an investor is comfortable with the invested amount to be tied up for several years.
• It’s still an early option: It is still an early option to be considered as the performance track record and validation is still not complete and individual investors are still trying to figure it out.
• Lack of control: Since it is a passive investment, the investors are not involved in the day to day activities and therefore have limited ability and control over the operations required.

RealyInvest App Empowers Beginners to Invest in Commercial Real Estate (PR Newswire), Rated: A

In a rising tide of fintech apps, RealyInvest is emerging as a new way for beginning investors to access the high-priced world of premier commercial real estate right from their smartphones.

RealyInvestors can purchase fractional shares of REITs (Real Estate Investment Trusts) for as little as $5. Investors can also own shares of commercial real estate NNN Assets, such as a building long-term leased to Starbucks, for as little as $20.

All investments, rental income and dividend earnings can be managed right on your smartphone. Fees range from $1 to $3 per month, depending on investment options.

Silicon Valley Explores a New Investment: Your Home (WSJ), Rated: AAA

A handful of companies, including those backed by marquee Silicon Valley names such as Andreessen Horowitz and Mark Zuckerberg’s philanthropic organization, are experimenting with a product that essentially lets them take an ownership position in a house along with the homeowner. The agreements, called shared-equity contracts, provide a new way for investors to get exposure to rising home prices across the U.S.

Shared-equity products are aimed at new buyers who need help with a down payment, or current homeowners looking for an alternative to a cash-out mortgage refinancing or a home-equity loan. The first use has caught the attention of mortgage-finance giant Freddie Mac ,which recently agreed to buy loans on properties where one firm,Unison Agreement Corp. , contributes to the down payment.

Landed Inc. offers these down-payment contracts to teachers and other educators. Last year, the Chan Zuckerberg Initiative , a philanthropy co-founded by Facebook Inc.’s chief executive, gave Landed $5 million to start a new fund.

The length of the contracts can vary from a few years to 30. Homeowners can repay early, including if they sell their house before the term ends. How much they end up owing depends on how the value of their home changes. Because the funds are equity, not a borrowing, they don’t require monthly payments.

Even Financial inks $ 3 mln (PE Hub Network), Rated: AAA

Even Financial, the technology platform powering financial services online, has secured a strategic investment round totaling $3 million. The round includes an investment from American Express Ventures, the strategic investment unit of American Express, as well as Plug & Play and Arab Angels.

With this investment, Even Financial will expand its team and advance its proprietary technology, which allows financial institutions and other partners to scale customer acquisition and remain competitive in the growing online financial services industry.

Fundrise Reports 2017 Performance. Total Return for the Year Stands at 11.44% (Crowdfund Insider), Rated: A

In brief, this is what Fundrise reported;

“In 2017, Fundrise investments earned an 11.44%* total return on investment, including over $16 million in dividends paid out to investors. Delivering attractive, consistent cash flow is a core part of our mission to offer you a better way to invest.”

Online SMB lending platform Yalber closes $ 20M senior credit facility (Bankless Times), Rated: A

SMB lending platform Yalber closed a $20 million senior credit facility this week, the company announced today.

Blinker Joins With Ally To Enhance The Auto Industry’s Only Peer-To-Peer E-Commerce Platform (PR Newswire), Rated: A

South by Southwest Interactive Innovation Award winner and 2018 LendIt Fintech Industry Award finalist Blinker, the only peer-to-peer e-commerce platform that provides an end-to-end solution for anyone buying, selling or financing cars, announced two major milestones for its business today:

  • Blinker is now available in the largest car markets in the US – Beginning today, Blinker is expanding its proprietary e-commerce and loan origination platform from Texas and Colorado to California and Florida, allowing millions of customers to buy, sell and finance vehicles easier, quicker and safer with other people. Thirty percent of vehicle sales across the US every year are between people, yet private-party marketplaces including Craigslist, Letgo, Autotrader, Cars.com and Facebook Marketplace don’t have services such as integrated financing or lien payoff support. Leveraging artificial intelligence and machine learning, Blinker customers get guidance and tools to complete the entire purchase process themselves, from instant vehicle valuation to real-time auto loan approval to e-signing documents to secure funds transfer, all for free within Blinker’s mobile app.
  • Blinker joins with Ally to offer best-in-class auto protection products – Blinker will now give customers the option to add Ally’s vehicle protection coverage, including Ally Guaranteed Asset Protection (GAP) and Ally Premier Protection vehicle service contracts, for their vehicle purchases in the app. GAP covers the difference between the cash value of a vehicle and what Blinker customers still owe on their loan if the vehicle is totaled or stolen. Ally vehicle service contracts cover the repair cost for over 7,400 mechanical, electrical, safety or digital components, as well as some related expenses like trip interruption, rental car coverage, towing and 24/7 roadside assistance.

Zelle users are finding out the hard way there’s no fraud protection (TechCrunch), Rated: A

Scammers have taken to Zelle, the Venmo alternative backed by U.S. banks, to defraud consumers who believe the service includes the same protections they’ve come to expect from PayPal. A number of customers report having lost hundreds, or even thousands of dollars, over Zelle, when they used it for transactions with people they didn’t know – like tickets bought off a Craigslist posting, for example.

Cyberattacks took $ 56B from U.S. economy in ’16 (American Banker), Rated: A

Malicious cyber activity cost the U.S. economy between $57 billion and $109 billion in 2016, the White House said Friday.

The estimate comes in a Council of Economic Advisers report on the impact of cyberattacks on U.S. government and industry. The report details the range of threats that U.S. entities face from actors including corporations and countries such as Russia, China, Iran and North Korea.

The council’s estimate represents between 0.31% and 0.58% of the 2016 U.S. gross domestic product. For comparison, the report cites a Center for Strategic and International Studies report that estimated the cost of malicious cyber activities against U.S. entities at $107 billion in 2013, 0.64% of GDP that year.

BlockFi Raises 1.55M in Seed Funding (Finsmes), Rated: A

BlockFi, a New York-based fintech company whose first product is a loan for cryptoasset owners, raised $1.55m in seed funding.

Backers included ConsenSys Ventures, Kenetic Capital, PJC, SoFi, Purple Arch Ventures and Lumenary.

The 2018 World’s Most Innovative Companies (Fast Company), Rated: A

03 Square

For extending the benefits of banking

19 Social Capital

For putting values into its ventures

26 Kakao Bank

For marrying social messaging with banking

31 Paytm

For pioneering the cashless economy

42 Stripe

For writing the new startup manual

47 CommonBond

For offering payback

‘Pinterest will get even bigger for us’ says fintech lender Elevate Credit (The Drum), Rated: A

Speaking to The Drum in the final instalment of a four-part video series with Falcon.io exploring social media strategies, she admitted that while it can be a challenge, using data to understand her audience’s wants and needs has helped her shape content which is likely to resonate.

Fox says she has been finding success on the unlikeliest of social media platforms – Pinterest.

“All our content is more lifestyle focused than finance focused,” she explained.

OpenClose Bolsters Software Integration and Support Teams (Send2Press), Rated: B

OpenClose, an industry-leading multi-channel loan origination system (LOS) and mortgage fintech provider, announced that it has added staff to its integration and customer support departments. The new hires will help enhance OpenClose’s existing software products, facilitate digital mortgage processes, produce fintech-level innovation and provide excellence in customer support. The company also recently added three senior software engineers to its development team.

3 Loans for Students You Should Avoid Like the Plague (Student Loan Hero), Rated: B

1. Payday loans

You usually have only a couple of weeks to repay the loan, and the typical APR is almost 400.00%, according to the Consumer Financial Protection Bureau. If you can’t pay it back and have to take out a new payday loan to pay off the first, you could end up stuck in a vicious cycle of predatory debt.

What you should try instead: payday alternative loan (PAL).

2. Auto title loans

The reality is these short-term loans also have three-digit APRs, and you typically have between 15 and 30 days to repay the loan.

What you should try instead: A short-term campus loan.

$20 / $2,000 = 1%
1% x 365 days = 3.65
3.65 / 60 = 6.08% APR

3. Cash advances

This type of loan isn’t as costly as a payday loan or an auto title loan, but it’s not ideal for two reasons:

  1. Credit cards charge a fee, typically 5% of the advance amount. So, if you withdraw $500, you’ll have to pay $25 upfront.
  2. There’s no grace period with cash advances, so interest starts accruing immediately.

What you should try instead: A 0% APR promotion. Some credit cards offer a 0% APR promotion on new purchases for a period.

United Kingdom

Funding Circle to launch two new mobile apps this year (P2P Finance News), Rated: AAA

The business lender, which currently only has an iPhone app for investors to access, monitor and manage their accounts, is now advertising for a global mobile apps product manager and for an Android developer.

Both positions are based in the UK.

“We have an ambitious roadmap for this year and want to launch two new apps (Android and iOS) for our investors,” the job advert on the Funding Circle website said.

LendInvest Announces Launch of Buy-to-Let Online Calculator for Intermediaries (Crowdfund Insider), Rated: AAA

On Tuesday, LendInvest announced the launch of its new buy-to-let (BTL) online calculator for intermediaries.

 

P2P business lending up 51% (Bridging&Commercial), Rated: A

The value of P2P business lending grew by 51% during 2017, according to new research from the British Business Bank (BBB).

The report also found that the value of SME asset finance deals was up 12%.

Although net bank lending volumes remained positive (£700m in 2017), it was weaker than in both 2016 (£3bn) and 2015 (£2bn).

The BBB found that there had been a significant increase in both the value and number of SME equity deals, up 79% and 12% respectively.

Online lenders and banks may operate as ‘joint ventures’ (P2P Finance News), Rated: A

ONLINE lending platforms may partner with banks to fund and market credit products in the future, even sharing the approval process and compliance, in one scenario outlined by global banking regulators.

A number of peer-to-peer lenders have already partnered with banks on a smaller scale. For example, Metro Bank has lent through Zopa’s platform and Santander has referred borrowers to Funding Circle. However, these tie-ups have not gone as far as the report’s scenario suggests in terms of becoming a joint venture.

Crowdfund sites ‘are not explaining the dangers’ (The Times), Rated: A

Square Pie, which started life as a stall in London’s Old Spitalfields Market, expanded with the help of a “pie bond” that promised 8% annual interest over four years. The bond was offered through one of Britain’s biggest crowdfunding platforms, Crowdcube.

A total of 324 investors signed up, lending more than £650,000 to fund Square Pie restaurants and its efforts to improve supermarket sales. Square Pie has gone into administration — the first failure of a business that issued a mini bond on a crowdfunding site.…

Crypto lending platform nears launch (AltFi), Rated: A

Lendingblock is one such business. The soon-to-launch platform is, in its founder Steve Swain’s words, “an open exchange for cryptocurrency loans”.

Lendingblock is in the middle of a three-stage Initial Coin Offering that will conclude in March. The first phase has already been completed, raising the equivalent of $500,000. The offering has a hard cap of $10m.

Number of farming building conversions falls 20 percent in a year (FarmingUK), Rated: B

The number of conversions of farm buildings into new homes dropped 20% in the last year, denting hopes that these conversions could help solve the rural housing crisis.

According to Lendy, one of Europe’s largest peer-to-peer lending platforms, only 1,511 agricultural-to-residential conversion applications were approved in 2016/17.

China

The New Year to Bring a New Flood of IPOs (CapitalWatch), Rated: A

Golden Bull Ltd., an online peer-to-peer lending platform in China, plans to offer up to $9 million in shares on Nasdaq under the ticker symbol “DNJR.” The Shanghai-based company, which was founded in 2015, provides borrowers access to short-term loans.
European Union

Finnest Expands Online Financing to Larger Corporations, Adds Institutional Investors (Crowdfund Insider), Rated: AAA

Finnest is an interesting online lender operating in the DACH countries. The peer to peer platform was launched to provide SME funding supported by individual investors but the company is now expanding by providing loans of €10 million and higher. Institutional investors such as insurance companies, funds, family offices and banks will now be able to invest in large SMEs on “FinnestPro.”

Why it’s OK that the majority of consumers don’t know about Open Banking – for now (AltFi), Rated: A

The new EU legislation on payment services – PSD2 – and the introduction of Open Banking in the UK seem to have passed the vast majority of people in the country by, according to an AltFi News article last month.

This referred to a report by Which saying that 92 per cent of consumers hadn’t even heard of Open Banking.

International

How Millennials are Moving Emerging Markets (Morningstar), Rated: AAA

Millennials in advanced economies have come under pressure in recent years, thanks to stagnating wages, rising house prices and escalating student debt. But an altogether different trend is taking place in many emerging markets where millennials are seeing their prospects rapidly improve. This in turn is creating an investment opportunity, as millennials in these countries are becoming hugely influential on the prospects for emerging market equities.

Millennials will account for half of the global workforce by 2020, meaning they will be one of the most influential groups in shaping the economy and society, including consumption habits, policy and how companies may want to market and brand themselves. They are disrupting traditional industries and companies are having to adapt. This presents investment opportunities, but it also presents new investment risks.

Latest ICO Updates on VLR Token – Valorem Foundation ICO is LIVE! (TechBullion), Rated: A

Based on ERC-20, the multilayered cryptocurrency platform will host a marketplace that allows developmental phases. The first phase focuses on micro loans (small loans), rent payments, student loans and peer-to-peer payment processing.

As trust grows on the platform, phase 2 will be implemented to cater to sales distribution, global small business investing and global commercial and residential real estate crowdfunding while the third stage will serve charity and insurance. The final phase will be dedicated to maintenance and future developments that may include additional currency adoption, feature adding etc.

Valorem (VLR) is the token offered. The exchange rate stands at 1 ETH= 1000 VLR. There is a total supply of 200 million tokens of which 150 million are available during the ICO and 50 million will be kept in reserve. Valorem will not be mined.

Wealth managers must go digital (Raconteur), Rated: B

People born between roughly 1982 and 2002 are set to receive the biggest inheritance boom of any post-war generation. The Royal Bank of Canada (RBC) estimated the figure will be around $4 trillion in the UK, Canada and United States.

An Interview with Kirill Suslov – The CEO at Finom and TabTrader Founder (NewsBTC), Rated: B

NewsBTC: Now it seems that you have no experience with banking services yet. How do you plan to cover this area?

Now I can say we understand confidently how banking works and how it should work in the crypto industry. By 2020, we’re going to have a licensed bank and transform it into a crypto one with a network of crypto terminals.

A bit sooner, in 2018, we plan to release crypto e-wallets with linked debit cards. Miners will be able to use recently mined coins right away, transferring them to their wallets immediately. We’re also designing a platform for peer-to-peer lending.

Australia

Peer To Peer Lending Increasingly Popular In Australia (compare dinkum), Rated: AAA

Australian investors and borrowers are increasingly adopting peer to peer lending platforms according to the results of survey undertaken by ASIC. The results of the survey suggest that as much as $300 million of personal and business loans were underwritten by peer to peer lenders over the course of the last fiscal year. That represents a doubling in the amount that was lent on such platforms during the 2015/2016 financial year.

Why Australia needs a better system for credit scores (The Converstion), Rated: AAA

Australia’s credit rating system is failing both borrowers and lenders. Many borrowers are unaware of their own credit scores and our research shows they have trouble applying for suitable loans. Lenders are also struggling with too little information, causing them to extend loans to those they shouldn’t and restrict loans to worthy borrowers.

Upcoming changes to Australia’s credit reporting system could remedy these issues.

Under the new credit reporting regime, both lenders and borrowers will have access to more data, such as monthly payment histories on loans and credit cards.

More innovation ahead in mortgage lending

For higher-risk borrowers, novel techniques to assess credit risk (such as analysis of social media accounts) may be the answer to distinguish good borrowers from bad.

But prior experience from an over-reliance on credit scores in the United States shows that careful assessment of borrowers remains vital.

India

Refer to these fintech startups for range of medical loans (Business Standard), Rated: A

Among all the personal the medical loan is the most crucial one which is often required on an urgent basis by the applicants.

Recently a host of Financial technology(Fintech) and Non-financing related start-ups have been launched in providing a variety of medical to the clients.

Canada

They couldn’t get loans from their banks so turned to a legitimate-looking lender online (The Star), Rated: AAA

Unable to qualify for a loan from her bank, Johnston searched online for private lenders and found a website for what appeared to be a legitimate company calling itself North Clear Credit.

Everything about it — the variety of loans offered, the glowing testimonials, the company description — seemed professional. In fact, a customer who later reported North Clear Credit to police says an officer told her the website looked legitimate.

For Johnston and Mood, the terms were appealing. The money could be paid back monthly over five years at an interest rate substantially lower than what they would be charged elsewhere.

Johnston completed an online application and was approved for a $20,000 loan.

Within a few days, Johnston and Mood had lost $3,500, and two North Clear Credit “representatives” with whom Johnston had been corresponding had disappeared.

Blackchain Announces Private Placement (Stockhouse), Rated: A

Blackchain Solutions Inc. (the “Company” or “Blackchain”) (CSE: BIS), announces a private placement of up to 3,400,000 units at a price of $0.18 per unit, for gross proceeds of $612,000.  Each unit consists of one common share and one share purchase warrant.  Each warrant is exercisable at a price of $0.22 per share for a term of two years.

Proceeds generated from this financing will be used to initiate and support the filing of multiple patents and trademarks related to the Blackchain Crypto Credit Rating API and P2P Lending Platform.

Authors:

George Popescu
Allen Taylor

2018 Predictions for MPL, SMB Lending, and Other Alternatives

Lending Club

In just over a decade, alternative lending has evolved from a niche fintech play into a hundred billion dollar industry. 2017 was somewhat of a bumpy ride. Growing competition, shrinking bottom lines, stringent regulations, and traditional banks’ willingness to take on alt-lending using their financial muscle were the key trends that emerged last year. It […]

Lending Club

In just over a decade, alternative lending has evolved from a niche fintech play into a hundred billion dollar industry. 2017 was somewhat of a bumpy ride. Growing competition, shrinking bottom lines, stringent regulations, and traditional banks’ willingness to take on alt-lending using their financial muscle were the key trends that emerged last year. It is difficult to be sure what 2018 will bring, but here is what experts and pundits are predicting.

Marketplace Lending

Ron Suber (Founder and former president, Prosper & chairman of the board, Credible) believes the marketplace lending industry has finally grown up. Companies will focus more on cash flow, profitability, and EBITDA. He encouraged online lenders to look for a lower cost of capital if they want to compete with the like of Marcus. He is also predicting the entrance of big technology companies like Amazon, Apple, Facebook, and Google.

Peter Renton (Lend Academy) believes five of the top 25 banks will launch their own platforms. He also believes Congress will pass a Madden fix and the IRS will modernize with its own API. One startling prediction he makes that one of the top online lenders (Lending Club, SoFi, Prosper, OnDeck, or Avant) will be acquired, and he believes a major platform will be hit by a cyber attack. Like everyone else, he believes the tech giants will solidify their positions in alternative lending, and more interestingly, he says messaging apps will integrate with online lending platforms.

Krista Morgan (CEO, P2Binvestor) makes predictions for MPL sector:

  • Companies will shift their focus on business models and unit profitability as hiring and spending decrease.
  • Mergers and shutdowns will continue as equity investors remain absent. She thinks it will be a tough year.
  • Investors believe the market is set for a correction; therefore, they will be looking at short duration assets for deploying their capital. Platforms will have to shift their focus to product development.
  • 2018 will be the year of increased diversity.

Adam Stettner (Founder and CEO, Reliant Funding) predicts a year of instability. He also believes market variables will counterbalance themselves this year. The Fed is expected to increase interest rates, which will have a ripple effect in terms of rates for various types of loans. If unemployment levels remain low, it will lead to wage inflation. So the order of the day for alternative finance and small business funding companies will be adaptability, he says.

Additionally, Stettner sees a year of increased fraud, and companies will have to invest in identification tools and fraud detection techniques.

Two more predictions he points to are increased consolidation as companies overextend themselves and more disruption from big business names entering the space.

The Motley Fool is predicting a Lending Club stock price turnaround.

Juan Tavares (LendingPoint) predicts balance sheet lenders will take over, there will be more collaboration, and payments and credit will intersect more.

Small Business Lending

Trevor Dryer (Co-founder and CEO, Mirador) made predictions on small business lending:

  • Banks will continue to increase small business lending and alternative lenders will struggle.
  • Crowdfunding got a boost last year when Title III of The Jumpstart Our Business Startups Act (JOBS Act) was implemented, opening the gates for crowdfunding. Dryer believes this sector will thrive in 2018.
  • Alternative lending has removed physical barriers that makes the lending process faster and more convenient. Alternative lending will continue to be more inclusive and encourage more people to start businesses.
  • Legislative barriers will continue to fall.
  • Alternative lenders will focus on experience and relationship building. Companies able to streamline and automate the application processes will thrive.

Alternative Lending in India

Rajesh Gupta (Founder and CEO, Cash Suvidha) made the following predictions for the Indian alternative lending market.

  • A significant increase in alternative lending market share.
  • Favorable regulations, cash benefits, ease of usage, and increased internet and smartphone penetration.
  • Investors and venture capitalists will remain optimistic about the Indian alternative lending industry since it is the second most funded segment in Indian fintech.

“2018 will witness a transformation in the Indian financial landscape, all thanks to alternative lending,” he writes.

Traditional Financial Services and Alternative Investing

Kevin McPartland (Greenwich Associates) says 2018 will be the year of digital. He believes product-agnostic investing will be huge, and passive investing will gain on active investing. 2018 will also be the year that alternative data goes mainstream, he believes while data will be more important than trading. He also believes wealth management will “come out of retirement” and, finally, a ton of innovation in the financial markets as banks focus on crypto.

Chris Skinner (The Finanser Blog) writes a lot about banking’s reaction to alternative lending. He believes 2018 will be the year of artificial intelligence for banks and that banks will continue to drive digital technology deeper into their core systems. Not surprisingly, he also predicts that banks will develop more proof-of-concept operations for distributed ledger technology. Finally, he predicts the banks will develop an Enterprise Data Architecture this year to clean up their fragmented systems.

Alexander Prokhorov (FinSight Ventures) made some general predictions for fintech that apply just as well to alternative lending:

  • Software will converge with financial products in the U.S. and Europe
  • Insurtech will be more prominent
  • Artificial intelligence will transform financial services
  • There will be a lot of innovation in emerging economies such as Africa, Latin America, and Asia
  • Wealth management will pick up speed
  • Crypo assets and blockchain will take center stage for retail investing

Mitek believes 2018 will be the year of the cyber criminal and predicts there will be 150 million attempts to set up fraud accounts this year.

Don Steinbrugge, CFA (Founder and CEO, Agecroft Partners) is predicting a banner year for the hedge fund industry. He believes hedge fund assets will reach an all-time high for the 10th straight year. He also believes there will be an increase in hedge funds shutting down. And there will be an increase in cryptocurrency funds. Strategies that will gain assets, he believes, include:

  • Asia long/short equity
  • Reinsurance
  • Those that blur the lines between private equity and hedge funds

The Lending-Times Prediction

Allen Taylor (Editor, Lending-Times) believes more U.S. platforms will open the doors to non-accredited investors. Blockchain will feature more prominently in alternative lending with more platforms focused on crypto-lending including a prominent alternative lender adding cryptocurrency to its list of core services. He also believes increased specialization will lead to platforms targeting specific industries, regions/states, and other narrow target markets.

Conclusion

2018 will surely see the alternative lending industry enter a consolidation phase to withstand the changes in market dynamics, and companies best able to cope with these headwinds would emerge bigger and stronger.

Authors:

Written by Heena Dhir and Allen Taylor.

Allen Taylor

Tuesday January 9 2018, Daily News Digest

LendingTree purchase APR

News Comments Today’s main news: IEG Holdings wants to turn Lending Club into a balance sheet lender. Groundfloor launches nationwide. Crowd2Fund launches 30M GBP fundraise. China may get a second consumer credit bureau. Klarna expands e-commerce footprint. Today’s main analysis: LendingTree releases mortgage offer report for December. Today’s thought-provoking articles: Are corporations posting fake comments on government regulatory websites? History […]

LendingTree purchase APR

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United States

IEG HOLDINGS (IEGH) LAUNCHES TENDER OFFER FOR UP TO 4.99% OF LENDINGCLUB (LC) (Zacks.com), Rated: AAA

On January 5, 2017, IEG Holdings (OTC:IEGH) launched a tender offer for up to 4.99% of LendingClub (NYSE:LC).
– Management believes it can convert LendingClub from a broker of loans into a balance sheet lender

Groundfloor Expands Historic Qualification Under Regulation A To Launch Nationwide (Business Insider), Rated: AAA

Non-accredited and accredited investors in all 50 states can now participate in real estate crowdfunding investment opportunities with Groundfloor. Groundfloor, the first issuer qualified by the U.S. Securities & Exchange Commission to offer real estate debt investments via Regulation A that are available to non-accredited investors, today announced that it has received qualification as an issuer under Tier 2 of Regulation A. The qualification allows over 150 million additional investors to access real estate investment opportunities that have been previously unavailable to them, tripling Groundfloor’s addressable market.

In 2017, Groundfloor saw tremendous growth of over 380% in origination volume and 786% in revenue, prior to announcing a partnership with its first institutional investor, Direct Access Capital (DAC).2 Groundfloor lends in 27 states, and has self-originated over $50 million in loans for 398 real estate projects earning individual investor portfolios average annualized returns of 11.74 percent to date. Groundfloor has also raised $9.1M in venture capital from leading fintech VCs and angel investors.

LendingTree Releases Monthly Mortgage Offer Report for December (PR Newswire), Rated: AAA

LendingTree®, the online loan marketplace, today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.

Source: Purchase APR by Credit Score Range (PRNewsfoto/LendingTree)
  • December’s best offers for borrowers with the best profiles had an average APR of 3.80% for conforming 30-year fixed purchase loans, up from 3.75% in November. Refinance loan offers were up 1 bps to 3.70%.
  • For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were up 12 bps to 4.42%, the highest since July 2016. The loan note rate hit the highest since March 2016 at 4.32% and was up 14 bps from November.
  • Consumers with the highest credit scores (760+) saw offered APRs of 4.26% in December, vs 4.56% for consumers with scores of 680-719. The APR spread of 30 bps between these score ranges was 3 bps wider than in November and the widest since this data series began in April 2016. The spread represents nearly $15,000 in additional costs for borrowers with lower credit scores over 30-years for the average purchase loan amount of $233,586. The additional costs are due to higher interest rates, larger fees or a combination of the two.
  • Refinance APRs for conforming 30-yr fixed loans were up 7 bps to 4.31%. The credit score bracket spread widened to 24 from 20 bps, amounting to $12,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $241,973.
  • Average proposed purchase down payments have been rising for 8 months and reached $63,740.
Source: Purchase Mortgage Offers by Credit Score (PRNewsfoto/LendingTree)

Many Comments Critical of ‘Fiduciary’ Rule Are Fake (WSJ), Rated: AAA

A significant number of fake comments appear among thousands criticizing a proposed federal rule meant to prevent conflicts of interest in retirement advice, according to a Wall Street Journal analysis.

Consider the experience of Robert Schubert, a Devon, Pa., salesperson. A comment posted in his name on the Labor Department website opposed the rule, saying: “I do not need, do not want and object to any federal interference in my retirement planning.”

In an interview, Mr. Schubert said the comment was a fraud. He didn’t post it and doesn’t agree with it. “I am disgusted that people can post comments using my name,” Mr. Schubert said.

Mr. Schubert is among 50 people who responded to a survey last week conducted by research firm Mercury Analytics for The Journal—40%, or 20 of whom said they didn’t post the comment listed under their name, address, phone number and email.

The Journal previously found fraudulent postings under names and email addresses at the Consumer Financial Protection Bureau, Federal Energy Regulatory Commission and Securities and Exchange Commission and the Federal Communications Commission. The Journal’s findings were cited by calls from Congress to delay the repeal of the FCC’s net-neutrality rule.

Corporate Powers Are Stealing Online Identities, Posting Fake Comments to Push for Consumer Law Repeals (Alternet), Rated: A

A pattern of cyber deception is appearing across the federal government in the nooks and crannies of the process where White House directives or Congress’ laws are turned into the rules Americans must abide by—or in the Trump era, are repealed.

Hundreds of thousands of comments, purportedly made by Americans, have come in over the electronic transom to at least five different federal agencies calling for an end to Obama-era consumer protections and other regulations that impede profits, a series of investigative reports by the Wall Street Journal found. Except, the people who supposedly sent these comments never did.

Wrapping up 2017 (PeerIQ), Rated: A

The US economy added 148k jobs in December and the unemployment rate held steady at 4.1%. The jobs number was below economists’ estimates of 190k, but average hourly earnings rose 2.5%, a strong increase, and a metric that market participants are watching as a precursor to higher inflation.

In regulatory news, Indiana is planning legislation that would cap the interest rate on personal loans at 36%, down from the current cap of 391% on payday loans. If passed, this legislation would affect the payday lending industry and some experts have expressed concerns that this may crimp credit availability to the neediest individuals. The US government is also considering updating the credit scoring methodology used in evaluating mortgage applications, to use competitors to FICO score like VantageScore, with the hope that the new scores would expand mortgage credit access to borrowers.

Apollo Global Management and Värde Partners have agreed to acquire a 40.5% stake in OneMain Financial, the non-prime lender spun off by Citigroup after the financial crisis, from Fortress Investment Group.

 

 

Edison Partners makes $ 15M investment in fintech (ROI-NJ), Rated: A

Growth equity investment firm Edison Partners has invested $15 million into MoneyLion, a digital personal finance platform based in New York City.

Student Loan Startup Frank Secures $ 10 Million During Series A Funding Round (Crowdfund Insider), Rated: A

Frank, a New York-based student loan startup, announced this week that it has secured $10 million through its Series A  Funding Round, which was led by Apollo Global Management, with participation from Reach Capital, and Aleph. This funding round brought its total funding amount to $15.5 million.

Digital financial advice startup SuperEd raises $ 5 million from key investors and staff (Smart Company), Rated: A

Digital superannuation advice startup SuperEd has completed a $5 million capital raise from both external investors and staff members to ramp up its expansion, with the 2012-founded company betting on digital advice being a big deal for fund managers going forward.

Credit Karma Teams with American Express to Offer Advance Tax Refund (Finovate), Rated: A

Earlybird Advance is a no-fee, no-interest loan from MetaBank that allows users who file through Credit Karma to claim from $500 to $1,000 of their tax refund as soon as 24 hours after the IRS accepts their tax return. This is a step up from the three-to-four week time period it generally takes for taxpayers to receive their funds.

Testimonial Tree Partners With J4 Mortgage Solutions to Offer Online Review Software to Mortgage Lenders and Title Companies (PR Newswire), Rated: B

Testimonial Tree announces its new alliance with J4 Mortgage Solutions, LLC, a mortgage technology consulting firm, to add online reviews and automated feedback to its suite of tech services.

The Future Of Financial Advice Requires AI With A Human Touch (FA-Magazine), Rated: A

“Digital leaders report an 8.6 percent increase in revenue, an 11.3 percent rise in productivity, and a 6.3 percent improvement in market share. Advanced firms now generate 32 percent of their revenue through digital channels, and expect that amount to rise to 48 percent by 2022,” the study pointed out.

Digital leaders acknowledge what will be the growing importance of AI in the digital transformation of industry from the front office to the back office over the next five years. According to the study, while more than half of the digital leaders are already using AI to increase productivity, some 40 percent are extending AI applications to investment management as well.

Community Reinvestment Fund, USA and U.S. Bank Partner to Expand Access to Credit for Small Businesses (BusinessWire), Rated: A

Community Reinvestment Fund, USA (CRF) – a mission-driven non-profit lender dedicated to improving communities and transforming lives – announced today that it has partnered with U.S. Bank to deliver a new solution for connecting small business borrowers with responsible lending options from community-based lenders across the country.

There are approximately 28.8 million small businesses in the U.S., accounting for more than 63 percent of the net new jobs created between 1993 and 2013. However, the Federal Reserve Bank’s 2016 Small Business Credit Surveyfound the most common challenge facing small businesses was “credit availability or securing funds for expansion.”

Predicting Comptroller Otting’s Impact on Fintech (Lend360), Rated: A

Second, Comptroller Otting may be helpful to Fintech companies in addressing important issues such as the Second Circuit’s decision in Madden v. Midland Funding and the so-called “true lender” issue.  For example, the OCC could adopt a rule or issue interpretative guidance: (1) providing that loans funded by a bank in its own name as creditor are fully subject to Section 85 and other provisions of the National Bank Act for their entire term; and (2) emphasizing that banks that make loans are expected to manage and supervise the lending process in accordance with OCC guidance and will be subject to regulatory consequences if and to the extent that loan programs are unsafe or unsound or fail to comply with applicable law.  (The rule should apply in the same way to federal savings banks and their governing statute, the Home Owners’ Loan Act.)  In other words, it is the origination of the loan by a supervised bank (and the attendant legal consequences if the loans are improperly originated), and not whether the bank retains the predominant economic interest in the loan, that should govern the regulatory treatment of the loan under federal law.

 

Consider Alternative Funds to Hedge Against a Market Downturn (NASDAQ), Rated: A

To ease your anxiety, you might consider adding a small dose of alternative investments–things that zig when the stock market zags–to your portfolio, even if it means giving up some potential returns.

Wells Fargo Investment Institute, the research and strategy arm of the giant bank, recommends a 23% allotment to various alternative investments for moderate-risk investors, for example, up from 16% two years ago. At Altfest Personal Wealth Management, in New York, 15% of client assets are invested in alternatives, up from 10% last year.

Market-neutral funds. If your goal is to invest in an asset that doesn’t move in sync with the S&P 500, consider a market-neutral fund, such as a merger-arbitrage fund.

Options-based funds allow you to maintain your stock exposure–or even put new money in the market–with some degree of safety.

Long-short stock funds. These funds bet on some stocks and against others with the goal of delivering respectable returns with low volatility. The funds have been 15% to 25% less volatile than an S&P 500-stock index fund over the past decade.

CLSA Top Three Books For 2018 (ValueWalk), Rated: A

What do an undocumented immigrant in the South Bronx, a high-net-worth entrepreneur, and a twenty-something graduate student have in common? All three are victims of our dysfunctional mainstream bank and credit system. Today nearly half of all Americans live from paycheck to paycheck, and income volatility has doubled over the past thirty years. Banks, with their high monthly fees and overdraft charges, are gouging their low- and middle-income customers, while serving only the wealthiest Americans.

“The Unbanking of America”

Why I Joined MetaProp As An EIR (LinkedIn), Rated: A

I recently left RealtyShares, the online marketplace for real estate investing, as CEO after founding the company in my living room back in 2013.

When Zach realized I was leaving the CEO role at RealtyShares, he reached out and asked if I wanted to get involved with MetaProp, the first real estate technology incubator based out of NYC.

This opportunity would give me a chance to pursue my passion in real estate technology through a different lens while mentoring startup founders and CEOs and helping them as they embark on the same journey I embarked on four years ago.

AlphaFlow Appoints Chris Woida As Co-Chief Investment Officer (AlphaFlow), Rated: A

AlphaFlow, the first automated alternative investment platform for real estate, announced today that Chris Woida has joined the company as co-Chief Investment Officer. Woida will serve as co-CIO alongside the firm’s CEO Ray Sturm, who will act as both CEO and co-CIO.

Woida brings over 10 years of experience in the financial services industry, previously helping build BlackRock’s smart beta and factor-based platforms and serving as the lead investment strategist for its flagship style-factor hedge fund during his seven years with the company. Most recently, he served as Managing Director, Head of Index Solutions at Axioma, a provider of enterprise market risk and portfolio analytics solutions. In this role, Woida helped the index business expand into derivatives, fixed income and alternative data sources, including AI and ESG.

MPOWER Financing Hires Lutz Braum, Fintech and Higher Ed Marketing Veteran (Cleveland19), Rated: B

MPOWER Financing, a public benefit corporation focused on removing financial barriers to higher education in the U.S., has appointed Lutz Braum as its vice president of marketing and business development.

Finova Financial’s New Fundraising Process Leverages Cryptocurrency to Serve Non-Accredited Investors (Finovate), Rated: B

Alternative lender Finova Financial introduced a new product this week that will offer non-accredited investors access to regulated public securities offerings.

The new offering is called the JOBS Crypto Offering (JCO) and will allow investors to use cryptocurrency to invest in equity ownership of previously privately-held companies.

Read more about Finova’s JCO offering here.

Is it possible to land a car loan with no down payment? (Bankrate), Rated: B

Buying a car is a significant investment, with the average new car costing $34,968 in 2017.

The average down payment for a used car is generally 10 percent of the purchase price; if you’re buying a new car, you can expect to pay slightly more, probably between 12 and 20 percent.

LENDINGTREE, LEADSCON ANNOUNCE $ 25,000 INNOVATION CHALLENGE IN LAS VEGAS (Business Insider), Rated: B

LendingTree®, the online loan marketplace, and Access Intelligence, a business information and marketing company, today announced a new initiative to showcase the top innovations in financial technology (fintech) lead generation at LeadsCon Las Vegas this March.

Startups and established businesses from around the world can apply today for a chance to receive exposure, bragging rights and $25,000 in cash.

United Kingdom

IFISA first-mover Crowd2Fund kicks off £30m fundraise, eyes £1bn valuation by 2022 (AltFi), Rated: AAA

Crowd2Fund has embarked on an ambitious series of fundraises that it hopes will see £30m raised within the next 24 months.

The peer-to-peer lender, one of the first to launch an Innovative Finance ISA, has already raised £1.5m from 113 of its own investors (all of whom are either sophisticated or high net worth individuals). More shares were made available after demand exceeded the initial target of £1m. These investors have bought shares in the company at a valuation of £33m. The capital is being raised through Crowd2Fund’s platform.

UK consumer lending not driven by subprime borrowers, regulators say (Daily Mail), Rated: A

Rapid growth in Britain’s consumer credit has been driven by borrowing by people with good credit scores, not subprime lending, according to research from regulators on Monday.

Unsecured consumer lending grew at near double-digit rates in 2016 and 2017, and concern that lenders had overestimated their borrowers’ creditworthiness led the Bank of England to tell them in September to hold 10 billion pounds ($13.54 billion) of extra capital.

However, research jointly published by Britain’s Financial Conduct Authority and a BoE blog showed that two-thirds of outstanding lending as of November 2016 was held by borrowers with credit scores in the top 30 percent.

Here’s everything you need to know about business finance (UKTech.news), Rated: A

Wherever you are on your life cycle, knowing the financing options available to you is a crucial part of growing and running your business.

Equity Funding

Equity finance can be used at various stages of your business life cycle and giving up equity can be a big decision.

Private equity

Private equity focuses on more medium to long term investment and will usually involve the development of the product and a new management structure to improve the performance of the business.

Crowdfunding

Crowdfunding aims to connect businesses with a large number of potential investors via a shared online platform.

Debt Funding

Debt finance is usually used as a means of long term investment or funding working capital.

Peer to Peer (P2P) lending

P2P lending brings individual borrowers and lenders together via an online platform by by-passing traditional banks with the aim of achieving better rates for all.

Asset finance

Assets can be purchased via leasing or hire purchase agreements which can assist the cash flow of the business. The asset is not fully paid for upfront but over a fixed period of time and the lease or hire purchase agreement is secured on the asset being financed.

Debt factoring

A debt factor will take on the sales ledger of the business and chase money owed by your customers. The factor will advance most of the value of the outstanding sales invoices to the business with the balance being paid once the customers have fully repaid their debt.

China

China Fintech: 2nd consumer credit bureau in sight now (EJ Insight), Rated: AAA

Last week, on January 4, the People’s Bank of China (PBoC) accepted a license application for consumer credit bureau led by the National Internet Finance Association of China. As of now, the Credit Reference Center of the central bank is the only consumer credit bureau in China.

Consumer loan securitization boom put on hold as China clamps down on leverage (Reuters), Rated: A

A boom in asset-backed securities issued by micro-lenders aiming to expand in China’s fast-growing online credit market looks set to slow this year amid growing regulatory scrutiny.

Rules announced on Dec. 1 limited the amount of lending backed by the products the companies can make. They were also required to consolidate them on their balance sheets.

Ant Financial is the largest issuer of consumer loan securities, accounting for 60 percent of all issues in 2017, according to Reuters calculations based on data from China Securitisation Analytics.

Its two Chongqing-based micro-loan companies had total net capital of 10.6 billion yuan, but issued 265.1 billion yuan in loans by the end of June, according to CIB Research, a unit of Industrial Bank Co (601166.SS). Outstanding loan securities issued by the two units have exceeded 250 billion yuan, it said.

Growth in China’s financial technology has only just begun, CEO says (CNBC), Rated: A

China’s burgeoning financial technology industry went through plenty of ups and downs last year, but growing pains experienced in the sector aren’t fazing one local player.

But increased competition in the space doesn’t suggest the sector is overcrowded, according to David Ye, the co-founder and CEO of Jianpu Technology.

“In China, we have close to 9,000 microfinance companies, we have close to 2,000 peer-to-peer companies. Only four of them got listed … It’s just a tiny drop of water in the big blue ocean,” he said.

This firm’s fintech play is connecting financial services in China from CNBC.

European Union

Klarna Payments Expands eCommerce Footprint with ACI Worldwide (BusinessWire), Rated: AAA

ACI Worldwide (NASDAQ: ACIW), a global provider of real-time electronic payment and banking solutions, today announced an extended partnership with Klarna, leveraging ACI’s UP eCommerce Payments solution. This will enable online businesses in 10 major markets, including the U.S. and U.K., to easily integrate Klarna’s payment products, and offer shoppers a fast and frictionless checkout process that can improve conversion rates immediately.

International

History of Ripple (BuyRipple.com), Rated: AAA

Source: BuyRipple.com

Cryptocurrency markets: Top 10 coins with greatest 24-hour change 8 Jan 2018 (finder), Rated: A

3. ETHLend (LEND) +32%

The peer to peer lending platform has seen a decent spike after it featured heavily across exchange Coinspot’s Facebook page as they look too soon be listed on the exchange. That exposure has also highlighted the achievements the Estonian company has made recently, including launching its fiat based loans at the end of 2017.

Crypto cards just suffered a major setback (Financial Times), Rated: A

Strict terms and conditions usually govern the circumstances in which prepay cards can be issued by unlicensed (non-bank) institutions due to their popularity with the unbanked or low-credit community as well as their propensity to be taken advantage of for money laundering reasons. These T&Cs tend to be jurisdiction dependent, and can in some cases restrict the types of funds that can be loaded onto cards by source (for example the source of funds might be restricted to welfare payments and/or employer compensation for services rendered).

Take as an example the following condition attached to a card brought to market by an outfit called TenX:

LOADING FUNDS TO YOUR ACCOUNT

Five.1 Your Card is a payout card tied to an account directly or indirectly established by an employer or other such corporate payor (each, a “Payor”) on behalf of a consumer to which electronic funds transfers of the consumer’s wages or other compensation are made on a recurring basis, whether the account is operated or managed by the employer, a third party payout processor, or a depository institution. Only funds from a Payor may be loaded to your Account In case of errors or questions about the funds loaded to your Account, contact your payout provider.

How will lenders meet identity verification challenges in 2018? (Bankless Times), Rated: A

Online lenders will start to move away from the social security number (SSN) as a personal identifier.

Big data and machine learning will take centre stage in the drive for better identity verification.

Larger online lenders will bring more of their fraud-fighting efforts in-house.

Online financial institutions will begin to adopt blockchain.

Cybersecurity startups raked in $ 7.6 billion in VC money in 2017 — twice as much as the year before (Business Insider), Rated: B

Globally, venture investors put $7.6 billion in cybersecurity companies last year, which was up from $3.8 billion in 2016, according to the research firm. The number of cybersecurity-related investments jumped to 548 in 2017 from 467 deals the year before.

Global spending on cybersecurity was estimated to reach $83.5 billion in 2017, and that number could hit $119.9 billion in 2021, according to an IDC report from October.

India

FinTech Trends That Will Shape The Industry In 2018 (BW Disrupt), Rated: A

Banks will increasingly start looking at startups in the FinTech, RegTech and InsurTech space as their extended innovation arms with a view to collaborate with them.

The BharatQR code, a unique interoperable payment acceptance solution developed by the NPCI (National Payments Corporation of India), Mastercard and Visa will enable point of sale (POS) transactions to be made more seamlessly. Along with banks, payment wallets like Paytm and MobiKwik will continue to make huge investments to leverage this new standard.

Startups in this space are likely to well as adoption by banks and other financial institutions rises in AI, ML, NLP (Natural Language Processing) and NLG (Natural Language Generation).

Asia

How one woman beat the odds to start-up success (Myanmar Times), Rated: AAA

In credit-scarce Myanmar, obstacles abound for budding entrepreneurs with bright ideas, big potential and dry pockets. With banks reluctant to lend to individuals without appropriate collateral and proven track records, many small businesses ultimately fail.

Ma Khin Yadana is among those with a success story behind her garment business, which she started from scratch around five years ago.

To get back on her feet, Ma Khin Yadana sought help from a small business group on Facebook, where she met with other garment shop owners across Myanmar who were willing to invest in start-up businesses like hers by extending credit via a peer-to-peer (P2P) lending system. In return, the funds would be paid back with interest within 15 days.

However, the constant pressure of having to repay loans has begun to take a toll on the young entrepreneur. “Most of the loans from investors are on six-month terms. So far, I have 70 investors to whom I must repay K100 million in total.

When the loans are due, I have to repay in full plus interest. The main problem is the 15pc interest rate, which is too high,” she said.

In mid-2017, with higher levels of debt coming due, Ma Khin Yadana negotiated with investors for lower interest rates of 10pc.

Canada

CIBC Innovation Banking unit launched to help grow startups (Finextra), Rated: A

Today, CIBC (TSX: CM) (NYSE: CM) introduced CIBC Innovation Banking, a full-service business that delivers strategic advice and funding to North American technology and innovation clients at each stage of their business cycle, from start up to IPO and beyond.

Authors:

George Popescu
Allen Taylor

Tuesday November 7 2017, Daily News Digest

fintech credit

News Comments Today’s main news: Review of OnDeck Q3 earnings. Wealthfront to be first robo to offer a mutual fund. ArchOver goes over 50M GBP lending milestone. Hexindai rises 27% on first day. NOT coming soon: Ant Financial IPO. EU to create Europe-wide crowdfunding framework. Ripio closes $37M ICO. Today’s main analysis: Marketplace lenders balance growth, quality. Today’s thought-provoking articles: Will […]

fintech credit

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OnDeck Q3 2017 Earnings Results Review (Lend Academy), Rated: AAA

With their latest financial results released today, the firm reiterated their plans to achieve GAAP profitability in the fourth quarter of 2017.

Originations in the quarter grew to $531 million, up 14% from the prior quarter. They also reported that operating expenses were at the lowest level in more than two years.

Revenue increased to $83.7 million, up 8% over the prior year period. Not surprisingly, loans sold or designated for sale continued to fall and represented just 1.3% of term loan originations. Other Revenue increased $0.7 million from the previous quarter to $3.4 million which reflected increased revenue from OnDeck-as-a-Service. Compared to the third quarter of 2016, the company improved bottom line performance by $12 million.

Source: Lend Academy

Online lender OnDeck posts surprise third-quarter loss (Reuters), Rated: A

Online lender OnDeck Capital Inc(ONDK.N) reported an unexpected third-quarter loss on Monday after the effects of Hurricanes Harvey and Irma offset higher interest income and lower expenses, and its shares fell nearly 4 percent.

Chief Executive Officer Noah Breslow said on a call with analysts that the company had increased its loss reserves by $3.5 million after the hurricanes hit some of its small-business clients in August and September.

Wealthfront set to be the first robo to offer its own mutual fund (FinancialPlanning), Rated: AAA

Now Wealthfront wants to return the favor, filing with the SEC on Wednesday for a mutual fund offering of its own. If approved, it would make Wealthfront the first major independent robo to offer its own fund.

Dubbed the Wealthfront Risk Parity Fund, the derivatives fund will invest in global developed and emerging market equities, global developed and emerging markets fixed income, real estate investment trusts and commodities, according to the filing.

The fund will carry a 51-basis point expense ratio. It will be made available to Wealthfront investors with no contribution limitations and to institutional investors with a $5 million investment minimum.

Marketplace lenders balance growth and quality (Banking Exchange), Rated: AAA

Fintech lenders now account for nearly a third of the personal unsecured loan market, from nearly 0% in 2010. The new players appear poised to not only continue building share there, but to begin gaining share in other credit types.

Rapid growth in personal loans

Wirth says TransUnion records indicate that there are over 100 fintech consumer lenders in the U.S. now—way beyond the usual companies mentioned in this area—and that new firms with new models continue to enter the market.

Source: TransUnion LLC. All rights reserved

TransUnion studied over 40 million personal loans originated by banks, credit unions, traditional finance companies, and fintech consumer lenders from 2014 to 2016. Among the findings of the research was that in spite of the perception that fintech personal loan borrowers skew towards the young end of the demographic spectrum, this is not the case. In fact, among the four categories of lenders, consumers 18-29 accounted for the smallest portion of borrowers from fintech lenders.

Source: TransUnion LLC. All rights reserved

Reviewing quality and return

A surprise for some in the TransUnion research is the fintechs’ choice of credit strata. Many see fintech consumer lenders chiefly as subprime creditors, but it turns out that six out of ten fintech personal loans are made to prime or near-prime borrowers. The latest figures indicate that 10% of fintech personal loan originations are subprime borrowers, while among all lenders the total is 14%.

Source: TransUnion LLC. All rights reserved

Using the risk-return methodology outlined above, TransUnion computes that the first-year effective portfolio risk-returns rank as follows: traditional finance companies, 11.5%; fintech lenders, 8.7%; banks, 6.7%; and credit unions, 6.3%.

Fintech will change more in the next 5 years than it has in the last 30 (CNBC), Rated: AAA

Today, Schulman said the person-to-person payment business is valued between $35 billion and $40 billion. In five years, its projected value is estimated to reach $335 billion.

Similarly, “online digital payments today are about $3 trillion,” the CEO said. “By 2020, three years from now, it’s supposed to be over $8 trillion. And we’re a leader in that market right now with 218 million people using the platform, so we just got to keep delivering on what customers want, merchants want and to stay that market leaders.”

PayPal CEO: Fintech will change more in the next 5 years than it has in the last 30 from CNBC.

Affirm Launches New Way to Pay For Holiday Travel (PR Newswire), Rated: A

Affirm, Inc., the company started by serial entrepreneur Max Levchin to provide fair and honest financial products, today introduced Travel with Affirm in time for the end-of-year holiday season. Travel with Affirm lets consumers book their travel plans, including airfare, hotel rooms, luxury suites, and more while splitting their purchases into manageable monthly payments. Charter partners in Travel with Affirm include Expedia, offering flight-and-hotel packages; CheapAir, offering low prices on airfare and more; and Suiteness, for those that want to treat themselves to an exclusive, luxury hotel suite.

According to a recent study conducted by Affirm, Inc. of 1,000 U.S. adults about holiday shopping habits, 61% of respondents said that holiday spending is a source of family strife. Over a third (34%) said they are worried about how they are going to cover their holiday spending costs this year.

Therefore, it’s not surprising that, according to another recent study conducted by Affirm of over 1,600 people, two of the top three reasons consumers use deferred interest products is for vacation and travel expenses along with holiday shopping. 67 percent of respondents also believe that some credit products are designed to purposefully cheat consumers.

“We know how tough traveling during the holiday season can be,” said Kyle Killion, co-founder and chief of product at Suiteness. “So, partnering with Affirm to offer as low as 0% APR on hotel suites with the ability to easily pay over time allows our customers to enjoy the holidays while knowing exactly what the final cost for their suite will be.”

In 2016 alone, U.S. consumers paid over $94 billion in fees. That doesn’t even include the $70.4 billion in interest fees credit card issuers made.

The simplest way to book travel
Using Travel with Affirm is quick and easy. All it takes is five pieces of personal information for a real-time credit decision. And then it’s up to the consumer to select the monthly payment plan—3, 6, or 12 months—that fits their budget.

Any U.S. resident 18 years or older (19 years old in Alabama or a ward of the state in Nebraska) is eligible to use Affirm.

And, paying Affirm bills is equally straightforward. After making their purchase, the consumer receives timely e-mail and SMS reminders on when their next payment is due. Alternatively, they can set up Autopay for recurring automatic payments.

“Credit cards are broken,” said Levchin. “If all Americans used Affirm instead of traditional revolving lines of credit, we could save people $90 billion a year in fees alone.”

CommonLoan Marketplace Milestone: Over $ 680 Million in Loans Processed (Crowdfund Insider), Rated: A

Commercial real estate lending platform CommLoan announced on Monday it has successfully processed more than $680 million in loans since its launch in 2014.

Impact Housing REIT Makes Top 14 Non-Accredited Real Estate Crowdfunding Sites (BusinessWire), Rated: A

Impact Housing REIT, LLC (ImpactHousing.com), today is pleased to announce that it has made The Real Estate Crowdfunding Review’s 2017-2018 Top 14 Nonaccredited Real Estate Crowdfunding Sites, receiving Industry Honors for Most Experienced Sponsors, and Most Socially Conscious, the only award given in the category.

Real Estate Issuers Need Online, Alternative Investing Processes to Thrive (PR Newswire), Rated: A

Blaine McLaughlin, chief operating officer of VIA Folio, says it’s time for real estate issuers to move away from the traditional capital raising process and use online brokerage technology. McLaughlin, who recently spoke at the IPA Vision 2017 Conference, said investors have embraced technology in every other aspect of their lives, so real estate issuers must now meet them on their own terms.

The additional benefits of using an online, alternative investing process include:

  • Meeting advisors and investors on their own turf. More advisors are using alternative investments to diversify client portfolios and differentiate their business.
  • Reaching accredited and non-accredited investors. Issuers that choose to raise capital under the JOBS Act have more flexibility when marketing to investors.
  • Offering different ways to invest. Advisors consider many factors, including security type, before making investment decisions. Issuers that use Folio’s online brokerage technology can choose to offer publicly registered or private securities, including Reg A+, Reg D, S-11 and small-cap Reg A+ IPOs.
  • Lowering investment minimums. For real estate securities issuers, high investment minimums are a necessary evil to keep expenses down. An online brokerage process – where subscription, closing, price reporting, statements and other services are done online – reduces administrative expenses, in turn enabling lower investment minimums.

CFX Markets Raises $ 2.17M Seed/Series A Funding (FINSMES), Rated: A

CFX Markets, a Chicago, IL-based secondary market trading platform for alternative assets, closed a $2.17M Seed/Series A funding round.

The round was led by West Loop Ventures, with participation from M25 Group, Origami Capital Partners, Harvard Business School Angels of Chicago, SixThirty Ventures, and angel investors David Schwartz of Waterton Capital and David Krell, founder of ISE.

Why banks are sub-branding new customer offerings (Tearsheet), Rated: A

Marcus by Goldman Sachs, for example, touts itself as the startup inside Goldman Sachs that built an entirely digital personal loan product for consumers — a new set of customers for the 148-year-old company. Two weeks ago JPMorgan Chase introduced Finn, an app for people who would rather skip the branches for completely mobile checking and savings accounts with personal finance tools. Last week, Wells Fargo announced a similar offering called Greenhouse, a standalone mobile banking app with digital-only accounts and personal finance features.

For large legacy institutions, it’s hard to make changes and scale them both across the company and the consumer base. For banks, it’s much easier to create and brand an entirely new experience, which is partly why they’re launching things like Marcus, Finn and Greenhouse. Doing so also ends up being a sort of innovation showcase for their peers and prospective employees.

“A sub-brand allows us a sandbox to rapidly innovate and learn from consumer preferences and behaviors, while maintaining the core Chase brand which our customers know and love,” she said.

Goldman Sachs plans rebranding of online consumer bank (American Banker), Rated: A

Last year Goldman Sachs found a warmer, fuzzier way to connect with the U.S. public, and now it’s doubling down on that approach.

Marcus by Goldman Sachs is the brand name for the Wall Street bank’s one-year-old digital consumer-lending business. The name is a reference to Marcus Goldman, who founded the company in 1869.

Digital investments give small banks deeper borrower pool (American Banker), Rated: A

With fewer customers showing up in branches for coffee and local gossip, some community banks are digitally transforming themselves to bring Main Street to people’s homes.

In July, SourceMedia Research surveyed 304 chief information officers from banks, credit unions and other financial institutions with assets ranging from less than $100 million to more than $10 billion, and nearly 70% said they planned to spend more on technology in 2017.

“Community banks don’t just compete against banks in their immediate community. We now compete with every bank, whether it be bricks-and-mortar or internet-based, credit unions, payment processors, credit card companies, investment houses, fintechs, peer-to-peer payments, you name it,” said Ryan James, Surety’s CEO.

Crawford noted customers have increased expectations when it comes to lending, in large part due to experiences with online lenders that tend to offer quick decisions and digital-first experiences.

Source: American Banker

Big banks target Venmo (CB Insights Email), Rated: A

Venmo, now owned by PayPal and acquired for a reported $26.2M, is certainly one of the best tech M&A transactions ever.

PayPal recently extended the “pay with Venmo” capability to 2 million online retailers with a focus on enabling e-commerce via mobile.

ReliaMax Selected to Service and Insure MetaBank’s Additional $ 73 Million Private Student Loan Portfolio (BusinessWire), Rated: A

ReliaMax, the leading private student lending platform for banks, credit unions and alternative lenders, announced today that the company is now servicing and insuring an additional $73 million in private student loans for MetaBank, the bank subsidiary of Meta Financial Group, Inc. (Nasdaq:CASH). In December 2016, ReliaMax was selected to service and insure MetaBank’s initial $151 million private student loan portfolio acquisition.

AI-driven finance app Douugh partners Choice Financial for checking account (Finextra), Rated: A

San Francisco-based fintech startup Douugh has teamed up with community bank Choice Financial to launch an app-based checking account and debit card that will lean heavily on AI to help users better manage their money.

Choice has also made an investment in Douugh, which has raised $2.5 million to date and is the brainchild of Andy Taylor, who previously founded Australia’s largest P2P lending platform, SocietyOne.

FinTech is the New Imperative that Lending Companies Need to Embrace (CIOReview), Rated: A

In today’s fast-paced life, where customers are short of patience and starved of time, an old-school retail lending organization doesn’t really make a compelling survival case. In the last couple of years, however, retail lending has witnessed a sudden surge in interest. Well, the reasons are a no-brainer; it is the optimization of financial technology that has worked as a catalyst and led to welcome changes in the landscape. Technology has enabled banks to get rid of sluggish loan management process, curbing the costs and delay predicament that has impeded the growth of many retail lending processes.

eMoney Advisor Announces Expanded Business Development Organization (Business Insider), Rated: B

eMoney Advisor (eMoney) announced today the hiring of Jeffrey Schwantz as SVP, Head of Enterprise Sales and Shannon Porro as VP, Strategic Partnerships. These two new roles report to eMoney’s Head of Business Development, Stephen Langlois, who joined the company in May.  The additions reflect eMoney’s commitment to expanding its presence with larger financial institutions and to better support its customers’ needs as the company evolves its planning-led wealth management platform to enable enhanced growth, profitability and risk management of its diverse customer base. Approximately 60 percent of eMoney’s nearly 50,000 users are affiliated with individual advisors while the remaining 40 percent are affiliated with firms, larger financial institutions and enterprises.

CFTC Commissioner Quintenz Names Margo Bailey Special Counsel (MondoVisione), Rated: B

Commodity Futures Trading Commission (CFTC) Commissioner Brian Quintenz announced today that Margo Bailey will serve as his Special Counsel.

Prior to joining Commissioner Quintenz’s office, Bailey worked as Counsel at the Office of the Comptroller of the Currency (OCC) where she reviewed the derivatives activities of national banks and supported the OCC’s Fintech initiative.

United Kingdom

ArchOver surpasses £50 million lending milestone (Finextra), Rated: AAA

ArchOver, the peer-to-peer (P2P) business lending platform, has facilitated over £50 million of lending with no losses or late payments.

The ArchOver platform produces average yields of 7.3% per annum, and comes with multiple security measures built in to protect investors.

PropTech Lending: High Tech vs. Old-School Underwriting (AltFi), Rated: AAA

Interestingly, it seems property lenders are disproportionately wary of the pitfalls in automating credit underwriting – more so than their colleagues in SME and consumer lending verticals, it seems. And rightly so.

Within SME and consumer loans, many sophisticated tech lenders principally rely on automated systems to perform their credit assessments. Many use a statistical approach; intelligent systems first gather borrower data, then smart algorithms interpret those to assess credit integrity and price the loans. Where the underlying loans are large in number and small in size, there is safety in numbers: the statistical approach is supported by the granularity and homogeneity of the underlying asset class. More often than not, the alternative approach – to manually underwrite each loan – is somewhere between too costly and impossible.

  • Limited digital availability of data is, and will remain, a key handicap for property lenders looking to scale with enhanced tech.
  • Portfolio risk tolerance is substantially lower for property lenders thanwithin consumer or SME lending. Consequently, a property lender’s attitude to resolving the tension between tech (to reach scale) and manual underwriting (to keep loan books robust) will remain different.
  • Even if all relevant data was digitally available, and even if property loan amounts were smaller, real estate assets cannot be classified in the way consumers can. A statistical approach to credit underwriting will miss important nuances and hence remains risky.

Could the rate rise boost returns for peer-to-peer lender Zopa? (AltFi), Rated: A

The Monetary Policy Committee has raised interest rates for the first time in ten years, from 0.25 per cent to 0.5 per cent.

More so than any other peer-to-peer lender, Zopa has been wrestling with the base rate, which was cut to its all-time low of 0.25 per cent in August 2016.

It opted for the latter course, several times dropping its interest rates, and so too its target returns for investors. In fact, Zopa has doubled down on that strategy in recent months, pledging in August to cut back on its riskiest loans, with losses growing beyond expectation.

Small businesses turn to alternative finance to fund growth (P2P Finance News), Rated: A

A poll of 1,000 small business owners by payments company Worldpay found 52 per cent are concerned that traditional routes to finance, including bank loans, might not be available at the same levels in the coming year.

Nearly a third (30 per cent) have already encountered difficulties securing funding through these traditional channels.

Meanwhile, 40 per cent of younger business owners claimed the growth of alternative finance options has made them less reliant on banks for funding.

Robo-advice responsibility (Lexology), Rated: B

The FCA identified two particular regulatory reasons why it considers that robo-advice presents a big opportunity:

  • since the FCA has a competition objective, they see that robo-advice can drive innovation, delivering economy and efficiency and reaching underserved consumers;
  • the final report of the Financial Advice Market Review which was published in 2016 and concluded that steps needed to be taken to make the provision of advice and guidance to the mass market more cost-effective as well as addressing consumers’ lack of confidence when making financial decisions.
China

Hexindai prices $ 50 million best-efforts IPO at $ 10 midpoint; up 27% on first day (NASDAQ), Rated: AAA

Hexindai, a Chinese marketplace for peer-to-peer lending, raised $50 million by offering 5 million ADSs at $10. The company had planned to offer 2.7 million to 8.9 million ADSs at a range of $9 to $11 in a min-max, best-efforts IPO. On Friday, Hexindai began trading on the Nasdaq under the symbol HX. The stock ended its first day at $12.66 (+27%) but traded down to $11.23 (-11%) on Monday.

Jack Ma says no Ant Financial IPO anytime soon (Tech in Asia), Rated: AAA

Speaking in front of media on Saturday, the billionaire Alibaba founder said that there’s no timeline for when Ant Financial will list, and they will only consider the IPO route – ie: the possibility of going ahead with it – two years later, reports Yicai.

“Regarding Ant Financial going public, we don’t have a time yet and we don’t know whether it will be in China, Hong Kong, or in the USA,” said Ma. “We will not really think about it in the next 12 or 18 months because there’s huge potential in inclusive financing and other tech-related opportunities. We will probably think about it two years later, but not now.”

Online Lender Fincera Announces 2 For 1 Stock Split (Crowdfund Insider), Rated: A

Fincera (OTCQB:YUANF) , a China based peer to peer online lender targeting small and medium-sized businesses and individuals in China, has announced that its Board of Directors has approved a 2 for 1 stock split of the Fincera’s outstanding shares of common stock in the form of a 100% stock dividend payable on or about November 8 , 2017 to shareholders of record on November 1 , 2017. Stockholders will receive one additional share for each share held on that date .

Chinese police to step up crackdown on financial crime (Reuters), Rated: A

Chinese police will intensity a crackdown on financial crime to safeguard national security and fend off financial risks, the public security ministry said in an online statement on Tuesday.

The ministry said it will focus on crimes involving illegal fundraising, the online finance industry, securities and futures markets, and financial institutions.

Is Technology About to Decimate White-Collar Work? (Technology Review), Rated: B

Lee pointed to several of the investments made by his company, Sinovation Ventures, as clear signs of how routine office work is already being transformed by AI. For example, Lee has backed Smart Finance Group, a company that uses machine learning to determine a person’s eligibility for a payday loan. Sinovation has also invested in companies that automate customer service, training, and other routine office services.

Lee identified four distinct but nonsequential waves of AI. The first wave is being fueled by the availability of large quantities of labeled data. This has given big Internet companies, both in China and in the U.S., an advantage in building their businesses and cementing AI expertise.

The second wave—which is more relevant to the kind of workplace disruption Lee sees coming—is based on the availability of company data, especially in industries such as law and accounting.

A third wave relies on companies generating data through new products or apps, or by paying for it to be created.

European Union

The European Commission Hopes to Scale Crowdfunding by Creating a European-Wide Framework (Crowdfund Insider), Rated: AAA

The European Commission has published an Inception Impact Assessment that pitches a legislative proposal for an EU framework for crowdfunding including peer to peer lending. The initiative is accepting feedback from interested parties until November 27, 2017. The expectation is the Commission will create a framework that is supportive of the policy for a Capital Market Union the heart of the mission of the EC. Thjs new framework is expected by Q1 of 2018.

Overall, the main policy objectives are as follows:

  • Enable platforms to scale cross-border: creating the required conditions such as licensing regimes that can be used across the EU without requiring further authorization in each EU country.
  • Provide platforms with a proportionate and effective risk management framework: cross-border activity requires a high level of trust.
International

Ripio Closes $ 37 Million ICO for Ethereum Lending Network (Coindesk), Rated: AAA

Blockchain startup Ripio has raised $37 million in an initial coin offering (ICO).

The RCN whitepaper indicates that 42.5 percent of the tokens would be dedicated to a pre-sale maximum, with 8.5 percent set aside for a public sale minimum. The remaining 49 percent were reserved for operational needs, such as incentives, marketing and expenses.

Millenials get finance advice from bots! (iAfrica.com), Rated: A

Forrester surveyed online adults in 20 markets to determine their need for and perception of financial services. The resulting report, “Millennials Want Financial Advice, With or Without Humans”, shows that Millennials:

  • Want financial advice: Results from the study showed that in Europe, 32% of online adults between the ages of 18 and 37 say they “rely on financial advice from professionals,” compared with 29% of older generations.
  • Are not afraid to share personal information in order to get the advice: At least two thirds of US Millennials were willing to share personal data in order to get improved service from their financial institution.
  • Are not confident in the current advice they are receiving: Only 38% of US Millennials are confident that a bank or credit union will offer them valuable financial advice, compared with 46% of their older counterparts. Moreover, just over two-thirds of US Millennials say, they don’t know who to approach in order to get reliable financial advice, compared with less than a third of older generations.

While 26% of US adults say they prefer to use mobile devices to access financial services and advice, almost half (46%) of Millennials say they would rather use their mobile phone for this.

China and Australia sign agreement on fintech cooperation (OpenGovAsia), Rated: B

The China Securities Regulatory Commission (‘CSRC’) and Australian Securities and Investments Commission (‘ASIC’) have entered into an agreement yesterday to promote innovation in financial services in their respective markets.

China is Australia’s largest two-way trading partner in goods and services (valued at AU$155.2 billion in 2016, up 3.7% on the previous year). China is also Australia’s largest export market (AU$93 billion in 2016) and Australia’s largest source of imports (AU$62.1 billion in 2016).

India

Top 10 Trends to Look Out in Fin-Tech Industry for Year 2018 (BW Disrupt), Rated: AAA

  1. ATMs will start disappearing
  2. Credit decisions will go beyond looking at CIBIL scores for individuals and SMEs – Credit providers will start leveraging other forms of digitized data to evaluate ability and willingness to pay of the borrower.
  3. Chat and payments platforms will start integrating
  4. Payments and lending platforms will start integrating – Payment platforms will see thin margins in their payments business and will start building or partnering with lending platforms. For lending platforms, a payment platform is a cheaper customer acquisition avenue and also a source for credit assessment data.
  5. Fraud Prevention solutions will start emerging
  6. Wealth platforms will go direct to consumer
  7. New themes will emerge in Insurtech
  8. Large institutions will consolidate credit: While I don’t predict the death of P2P lending entirely, as interest rates keep reducing and costs of capital for larger institutions keep reducing, it is difficult to see P2P lenders getting any scale. The only advantage that P2P lenders have is information asymmetry but with newer methods to collect data on the borrower, I see that advantage diminishing gradually.
  9. Regtech solutions becoming mature
  10. Greater localization of bots – Over 30 startups are working on bots for the fintech sector in India.

Why India’s Improved World Bank Ranking Will Boost Its Startups (Forbes), Rated: A

Following India’s meteoric rise to crack the top 100 in the World Bank’s Ease of Doing Business report, the country’s startup community is confident of attracting more foreign investments across sectors and emerging as a highly preferred investment destination in the region.

This year, India has improved its performance in six of those areas — specifically, there’s been a marked improvement in getting an electricity connection to start a new business, resolving insolvency, obtaining bank credit and tax reforms.

Rajat Gandhi, founder of P2P lending platform Faircent, said: “The ranking is a shot in the arm for the government, which has eased the way for fintechs to do business. It has become simpler for startups like mine to approach regulators for business. Moreover, this will boost the confidence of investors and allow more capital to come our way.” Prateek Mehta, cofounder of investment platform Upwardly.in agreed: “We are moving towards an entrepreneur-rich economy, so raising funds and scaling operations should be easier. With reforms like GST, the burden of compliance is greatly reduced, especially in cross-state businesses, which can simplify the operations of a startup. Compliance can be made even easier in the first three years of a startup.”

Wilful defaulters cannot bid for their companies: SBI chief (India Times), Rated: A

State Bank of India (SBI) chairman Rajnish Kumar on Monday said that promoters of defaulting companies are within their rights to bid for their businesses which are on the block following insolvency proceedings. However, wilful defaulters or those borrowers who have diverted funds will not find any place in the bidding process, he said.

Asia

Singapore’s Central Bank Chief Has a Warning for Fintech Investors (Bloomberg), Rated: AAA

While technological innovations such as blockchain and the area of big data analytics can result in powerful applications, people should be wary of some peer-to-peer lending platforms and the rapidly rising values of cryptocurrencies, Menon said in an interview with Bloomberg News late last month.

One potential area of concern for Menon is some examples of P2P lending, in which platforms connect investors with borrowers, and make money from charging both parties a fee.

Still, high-profile cases of malfeasance such as Ezubo — dubbed China’s biggest Ponzi scheme — have brought to light instances of how they can be used to defraud investors. In China, almost 4,000 P2P platforms have closed or run into difficulties since 2011, according to Yingcan Group, which tracks the data.

Another area of concern is in the use of big data, where increasing use of mobile phones, social media and the internet has given companies unprecedented access to customer data.

The MAS has set aside about $165 million for a five-year plan to nurture fintech and is spearheading Project Ubin, a blockchain-based project to facilitate cross-border payments. Last week, the regulator unveiled a so-called transformation map for financial services that aims to create 4,000 new jobs annually in the industry — a quarter of that in fintech alone.

Read a transcript of Ravi Menon’s comments on fintech

Kinerjapay Preparing to Launch Peer to Peer Lending Service (PR Newswire), Rated: A

KinerjaPay Corp., (OTCQB: KPAY), a digital payment and ecommerce platform (“KinerjaPay” or the “Company”), announced today that it is preparing to launch a peer-to-peer lending application to provide Indonesia’s largely underserved consumer sector with access to credit.

Indonesia’s Financial Services Authority estimates the country’s demand for consumer and small business financing at approximately US$125 billion. Domestic financial institutions are able to address an estimated US$50 billion, leaving a financing gap of about US$75 billion which is not being served by financial institutions.

KinerjaPay’s P2P application will offer loans in the range of $100 to $10,000 to individuals, and $5,000 to $500,000 to businesses over fixed periods of 12 to 60 months. The interest rate charged for borrowed funds falls between 8% and 18%, depending on the loan grade or creditworthiness of the borrowing entity. The Company will receive a fee of 1% of the amount of borrower payments received within 15 days of the due date of the loan.

Securities Commission Malaysia: Equity Crowdfunding, P2P Lending & DLT Gaining Traction as it Embraces Digital Innovation (Crowdfund Insider), Rated: A

According to SC, the equity crowdfunding and peer to peer financing platforms have funded 450 campaigns, raising a total of RM 50 million  (USD $11.8 million) to meet the financing needs of the Micro, Small and Medium Enterprises (MSMEs).

For equity crowdfunding in particular, more than 70% of the issuers have women or youth as founders, with 40% of the investors under the age of 35.

Canada

Report aims to enhance fintech innovation and competition (Investment Executive), Rated: A

Canadian investors should receive clear, upfront fee disclosure, and securities regulators should be working with robo-advisors to help facilitate the development of cheap alternatives to traditional advice, according to a draft report from the Competition Bureau.

On Monday, the federal agency released the draft report on its market study concerning technology‑led innovation in the Canadian financial services (fintech) sector in a variety of market segments, including payments, crowdfunding, and investment advice.

Authors:

George Popescu
Allen Taylor

Tuesday August 29 2017, Daily News Digest

Global fintech

News Comments Today’s main news: Has Float shut down? Ford to use alternative data for credit scoring. OnDeck Capital, Scale Operations Management finalize partnership. Money Dashboard raises 1.33M GBP. Mintos adds Georgian ID Finance loans. Today’s main analysis: HNA raises billions from shadow banks. Today’s thought-provoking articles: SoFi personal loans help people pay off over $5B in credit card […]

Global fintech

News Comments

United States

United Kingdom

China

European Union

International

Australia

Asia

Middle East

News Summary

United States

Rumor: Online Lender Float Has Shut Down (Crowdfund Insider), Rated: AAA

Online lending platform Float has allegedly shut down. Crowdfund Insider has heard from several different sources the digital platform has called it quits. Earlier today, Crowdfund Insider attempted to contact the platform but no response has been forthcoming.

Ford to Look Beyond Credit Scores in Sales Push (Fox Business), Rated: AAA

The company says it is looking at ways to increase loan and lease approvals for applicants with limited credit histories. These consumers are often denied credit because they lack a history of managing debt and as a result have low credit scores. Ford’s credit division plans to review new data to try to determine whether these customers, as well as those with more robust borrowing histories, are likely to repay their loans.

Ford’s U.S. sales are down 4.3% during the first seven months of the year compared with the same period a year prior, while total U.S. new auto sales are down 2.8%, according to Edmunds.com. Wells Fargo & Co.’s auto lending volume fell 45% in the second quarter from a year earlier due to tightening underwriting standards. Ally Financial Inc.’s auto loan originations fell 8.5% for the same period.

Ford Credit is among the largest U.S. lenders to say that it is looking at using alternative methods of underwriting, beyond the traditional factors that are mostly centered around credit reports.

SoFi Personal Loans Help People Pay Off More Than $ 5 Billion In Credit Card Debt (PR Newswire), Rated: AAA

Today SoFi announced its members have cumulatively paid off over $5 billion dollars in credit card debt using SoFi Personal Loans, getting them out of debt faster and at lower interest rates.

Members who used SoFi Personal Loans to pay off credit cards reduced their effective interest rate by 42% on average. They also saw their credit scores rise by 17 points on average due to reduced credit utilization, a key component of credit scores.

Credit card utilization has been steadily rising since the 2008 financial crisis. Americans’ credit card debt eclipsed $1 trillion this year, according to Federal Reserve data, and the average credit card APR inched up to an all-time high of 16.14 percent, according to CreditCards.com.

SoFi offers an array of options for Personal Loans, letting members find their rate, choose their loan amount (up to $100,000), and choose their term (three, five, or seven years) through a simple, fully-online application process. Loans are funded in less than a week on average. Though SoFi Personal Loans can be used for lots of purposes, more than 70 percent of SoFi members report using them for credit card refinancing and loan consolidation.

On Deck Capital Finalizes Funding Partnership with Scale Operations Management (Digital Journal), Rated: AAA

At one point in recent history – the internet was the wild west of commerce and industry. It seemed as if anyone with a computer and an idea could start a company from their home office. Two decades later, way after the dot com bubble burst; it is clear that the internet is becoming saturated and more competitive.

The competition for attention has led to increases in advertisement costs.

Doing business online went from a luxury to a necessity and budgets went from small to large.

Andrew Ukpabi, Founder of Scale Operations Management – a business management company with 15 Million in client assets under management; believes that this trend in the short term will only grow and he explains cheerfully how this has impacted the growth of his company:

“I’ve been on a signing spree lately. In the last week I’ve signed deals with CRMS’s, chargeback mitigation platforms, and processing companies.”

The partnership with On Deck Capital (ONDK) a NYSE listed company that boasts 4 Billion in funding to more than 40,000 small business customers in the US, Australia, and Canada; is the latest in his signing spree.

NEPC SURVEYS E&F MANAGERS ABOUT ALTERNATIVE INVESTMENTS (All About Alpha), Rated: A

NEPC, the investment consulting group that caters especially to endowments and foundations, has posted a survey about what such institutions think of marketable alternatives.

This broad category “marketable alternatives” includes direct hedge funds, funds of hedge funds, liquid alternatives, and global asset allocation.

Where are these allocations headed, near future? Not quite two-thirds of the respondents (65%) planned to maintain their current level of allocation in such investments. Sixteen percent plan to make a “modest change” increasing the allocation. Symmetrically, another 16% plan to make a “modest change” in the opposite direction. Only 3% plan to decrease the allocation “substantially,” and no respondents plan to increase it substantially.

As to what they have done over the past year: 18% have increased their allocation to such alternatives, 32% have decreased it, so the remaining half have kept it where it is.

Source: All About Alpha

There is a split on the question of the classification of marketable alternatives within a foundation or endowment’s portfolio, one that reflects a series of evenly divided binary choices. Not quite half (48%) of respondents say they have a dedicated allocation to this asset class, and that’s the end of the issue for them.

So that leaves 52% who do something else. A little more than half of them (about 28% of the whole) say that they have marketable alternatives both within a dedicated allocation and as part of an allocation to another class.

Should SoFi be granted a bank charter? Rep. Waters isn’t so sure (HousingWire), Rated: A

SoFi outlined in the application that the purpose of the charter is to provide its customers a FDIC insured NOW account and a credit card product. The bank will offer no other products or services.

In response to Waters’ comments, a SoFi spokesperson said, “We’re happy to discuss our application with Rep. Waters and other interested parties, and confident the FDIC will conduct its review of our application expeditiously and in accordance with the law.”

The Independent Community Bankers of America also sent a letter to the FDIC over the application, urging the FDIC to reject the application.

ICBA also stressed that Congress should close the ILC loophole, stating it not only threatens the financial system but creates an uneven playing field for community banks.

1 Popular Way Millennials Are Cutting Back on Living Expenses (and Why There’s Nothing Wrong With It) (CheatSheet), Rated: A

Co-living has been a popular option among young people just out of college. And now businesses are also jumping on the co-living bandwagon, hoping to make some quick cash from this idea.

The act of sharing housing, work, and commuting space is second nature to millennials. Co-living is just one more option young people have to stretch their resources and meet new people if they so choose.

Research shows more millennials are living with their parents than with a spouse. Living with parents is the No. 1 living arrangement among millennials, according to Census Bureau research. In 2016, 22.9 million (31%) young adults lived with their parents.

One company that joined the co-living movement is WeWork, which originally started out offering co-working spaces to individuals and companies. WeWork branched out to co-living spaces, called WeLive, in 2016.

Some co-living buildings, such as PodShare, even provide free food and fully furnished apartments, further helping their residents keep costs down.

Thinking of going the co-living route? Here are some of your options in three major cities.

Chicago

Los Angeles

New York

Malkiel Provides Investment Advice For IRA Allocations (Financial Advisor), Rated: A

Although the top leading robo-advisor firms grew by 65 percent in eight months to $19 billion assets under management in 2014, according to Financial Advice Market Review (FAMR), robo-advice is limited to assembling a group of stocks and bonds to avoid risk in a portfolio.

CAN WE ALL PARTICIPATE IN THE NEXT UNICORN? (All About Alpha), Rated: A

With the passage of the Title III portion of the JOBS Act, this paper tries to address a very critical question: can non-accredited investors find and invest in the next unicorn?

AltFi Data [2015], a data aggregator of equity crowdfunding, published a report on equity crowdfunding from 2011 through June 30, 2015 using the five most significant online platforms based on origination volume. These include Crowdcube, Seedrs, SyndicateRoom, CrowdBnk and Venture Funders. There were 431 investment crowdfunding rounds from 367 companies. The UK report indicates that crowdfunding has revolutionized the funding of small and medium sized enterprises involving both professional and small retail investors. It is reported that 62% of crowd funding investors describe themselves as retail investors with no previous investment experience.

3 Keys To Earning Up To 7% With Peer-To-Peer Lending (Forbes), Rated: A

Lending Club, the world’s largest P2P platform, has served over $55 billion in new loans in 2017. That’s a 40% growth in loan volume compared to last year.

Now, the likes of Goldman Sachs serve about 70% of all peer-to-peer loans.

P2P lending is still a place to earn market-beating yields of up to 7%. But private investors are now competing against the world’s biggest financial institutions.

  1. Spread Your Risk and Invest No Less Than $5,000
  2. Use Automated Rebalancing Tools – NSRInvest.com is a registered advisor that offers managed accounts to P2P investors. Investors can link their Lending Club and Prosper accounts to the website and have NSR experts invest for them based on their loan selection criteria.

Depending on the selected strategy, NSR users have outperformed the market by as much as 2.6% (average is 1.5%).

  1. Enhance Your IRA with P2P

Tell Us Who Your Favorite Fintech Companies Are: Forbes Fintech 50 Call For Nominations (Forbes), Rated: B

If you own or work at a fintech firm that you think is worthy — or if you’re a fan of one — please tell us about it. The only stipulations are that it be a venture-backed startup with operations in the United States. That means no publicly traded companies or their subsidiaries and no privately held established firms.

If you are submitting a company for which you’re an owner or employee, please use this form.

If you’re nominating a startup of whose inner workings you have no knowledge, please fill this out.

The deadline for both sets of submissions is Friday, September 15, 2017. If we have more specific questions, we will be in touch.

United Kingdom

Money Dashboard Raises £1.33M in Equity Crowdfunding (Finsmes), Rated: AAA

Money Dashboard, an Edinburgh, UK-based personal finance management app, raised £1.33M in equity crowdfunding.

1708 investors have participated in the campaign via Crowdcube acquiring an equity stake of 9.55% in the company.

The company had a target of £1m at a pre-money valuation of £12.6m.

Half of UK businesses lack confidence in government’s Brexit strategy (Consultancy.uk), Rated: A

Now, a recent survey conducted by peer-to-peer finance platform Market Invoice found that 54% of 3,000 businesses polled said the government had lost its way in talks with Brussels and that Brexit Secretary David Davis lacked preparedness, while only 5% felt he was doing a good job.

Maintaining stability in the sterling was meanwhile considered important by just 7%, reversing a KPMG study of businesses performed earlier in the year. In response to the falling pound however, the UK is projected to lose as many as 40,000 investment banking jobs post-Brexit.

A total of 20% of firms voted against further financial support spent on marketing, and aim to reduce it in the nearby future. A 54% majority of small businesses have not yet witnessed Brexit leaving a negative impact on the hiring plans, as only 2% are predicted to reduce exposure to EU nationals with a further 6% being more reluctant to hire from the bloc.

Startup Accelerator Level39 Launches Cyber39 (LendIt), Rated: B

Level39 has launched Cyber39, a program focused on fighting cyberthreats in London.

China

Chinese Dealmaker Raises Billions From Shadow Banks (Bloomberg), Rated: AAA

A Bloomberg News review of more than 100 investment documents and corporate filings sheds light on how HNA has financed its remarkable run of deal-making, which has included acquiring multi-billion dollar stakes in Deutsche Bank AG and Hilton Worldwide Holdings Inc.

The documents, pieced together from fund prospectuses and disclosures to China’s Administration for Industry and Commerce, show how HNA has employed a network of trusts and asset management products, in addition to more conventional financing, to fund everything from takeovers to day-to-day expenses. Among the key findings: Units of the group have pledged more than $10 billion of unlisted shares to non-bank lenders and, in some cases, have paid interest rates on shadow debt that far exceed China’s benchmark rates for bank loans and bond issuance.

The documents, pieced together from fund prospectuses and disclosures to China’s Administration for Industry and Commerce, show how HNA has employed a network of trusts and asset management products, in addition to more conventional financing, to fund everything from takeovers to day-to-day expenses. Among the key findings: Units of the group have pledged more than $10 billion of unlisted shares to non-bank lenders and, in some cases, have paid interest rates on shadow debt that far exceed China’s benchmark rates for bank loans and bond issuance.

HNA’s parent company said in a response to questions that financing from non-bank institutions makes up a “small” portion of the group’s overall funding and that its credit limit from Chinese banks has increased by more than 100 billion yuan ($15 billion) this year. The company said its debt-to-asset ratio has dropped for the past seven years and added that HNA Group’s profitability and asset quality have been improving.

Source: Bloomberg

Taken together, the documents suggest that HNA’s main units have increased their use of shadow financing in absolute terms over the past two years.

China’s regulators preparing new rules for digital coin offerings (Reuters), Rated: A

Chinese regulators are preparing new regulations on digital coin offerings and may ban them until the rules are in place, the financial magazine Caixin reported on Monday, as interest in the new fundraising channel grows rapidly in a regulatory grey area.

Digital currencies, also called cryptocurrencies, such as bitcoin and a growing stream of alternatives, allow anonymous peer-to-peer transactions without the need for banks or central banks.

China’s top insurers ploughing billions into fintech (SCMP), Rated: A

China Life and Ping An Insurance, the country’s two largest insurers, have both been focusing heavily on investment in technology, and now it appears artificial intelligence (AI) may becoming more important than sales agents across the sector, as premium income continues to soar.

The nation’s largest insurer China Life still has 1.58 million agents, while number two Ping An has over 1.1 million, and both have previously made much of the fact they plan to expand those sales forces in future.

China Life said last Thursday it had teamed up with internet search firm Baidu to form a fund to invest 7 billion yuan (US$1 billion) in AI-related technology companies and internet finance operations. China Life will plough 5.6 billion yuan into the venture, with Baidu covering the rest.

European Union

Mintos Marketplace Adds ID Finance Loans Issued in Georgia (Crowdfund Insider), Rated: AAA

ID Finance, an emerging markets focused Fintech company, is now listing investment opportunities on the Mintos marketplace incorporating prime personal loans issued under its Solva brand in Georgia. Solva is a fully owned ID Finance subsidiary in Georgia that has disbursed 28,000 personal loans worth €12 million since late 2016.

The loan originator will offer a buyback guarantee for loans that are delinquent for more than 60 days. The share of non-performing loans for Solva is said to currently be at approximately 4%. ID Finance will keep at least 10% of each loan available on the Mintos marketplace on its balance sheet so its interests are aligned with investors.

PSD2 – What will happen in January 2018? (AltFi), Rated: A

With the inception of financial digitalization, we’ve seen new firms such as Goldman Sachs adapt their strategy to cover retail and embrace fintech, firms such as Citi and BNY Mellon have ventured into open banking and finance APIs and Vanguard has created a digital behemoth of their robo-advisor.

Open Banking is still a new concept and, as new concepts go, it will be refined by trial and error. Some banks are farther along than others, with e.g. BBVA already in commercial use with several APIs. Yet the roll out of new “API Markets”, as they are often called, will see a learning experience from both the bank providers as well as those looking to utilize them.

Swiss fintech launches first-ever mobile app for alternative investments (Opalesque), Rated: A

Opalesque Industry Update – Fundbase has announced immediate availability of Fundbase Mobile, a revolutionary application for qualified investors to source alternative investment products. With Fundbase Mobile, investors will have access to a globally diversified universe of high quality alpha producing alternative investments at their fingertips.

The majority of Fundbase users expect to improve their fund sourcing process with Fundbase Mobile by spending more time logged in, searching funds. Pancho Vanhees, of TFAL Investments, a Luxembourg-based investor, believes the mobile app will improve their systematic processes and quickly identify top performing emerging hedge fund managers while on-the-go.

Why Only Initial? Worldcore Aims to Use ICO to Conquer Blockchain Competitors (Coin Telegraph), Rated: A

In the past week alone, prominent investor Mark Cuban and entrepreneur Kim Dotcom have both signalled their involvement in ICOs.

Worldcore aims to undercut banks, banking disruptors such as TransferWise and FairFX, and soon the technologically innovative operators heavily involved with cryptocurrencies.

Offering both payments and consumer spending options such as a prepaid debit card, the company is already accepting Bitcoin as a funding option, the first step in a Blockchain rollout which will occur incrementally over several years as the technology improves.

Biometric account access in the form of face and voice recognition replaces passwords, while Blockchain offerings themselves will take the form of a payment gateway reminiscent of Ripple.

Worldcore’s fee structure, for example, is noticeably more complex than that of Bitcoin-based prepaid cards from Bitwala, ANX and others.

Fintech Can Contribute to the Quality of Country’s Financial Center (Crowdfund Insider), Rated: B

The Federal Council of Switzerland is out with a note regarding Fintech. Federal Councillor Ueli Maurer is apparently doing a swing through the Swiss Fintech scene to improve awareness and relationships.

Maurer is expected to visit Fintechs in Zurich and Zug – a fact finding mission to garner updates on current tech topics, risks, opportunities and challenges.

The Federal Council believes that a dynamic Fintech ecosystem can contribute significantly to the quality of Switzerland’s financial center – something that is strategically important. It can also boost its competitiveness around the world.

Credissimo – Contender for European FinTech Awards 2017’s Title of ‘European Innovator 2017’ (Digital Journal), Rated: B

Credissimo is the only Bulgarian company featured in the European FinTech Awards 2017 where it is nominated for the “Alternative Finance” category.

This prestigious nomination places Credissimo amongst lead European companies where it will compete with the largest FinTech organizations for 2017’s European Innovator award.

International

Alternative finance market in robust health, despite slight summer downturn (Opalesque), Rated: AAA

Opalesque Industry Update – The world’s first global Crowdfunding and Marketplace Finance Index (CAMFI) shows that the industry exhibited a slight downturn in July, dropping from 94.11 in June to 90.32 in July.

Key points:

  • The global crowdfunding and marketplace finance industry exhibited a slight downturn in July
  • Segment-wise, the Reward Sub-Index was the major cause of the July decline
  • Attribute-wise, the main declining driver was the market Scale measures
  • Industry Scale continued to shrink, most evidently in the Reward segment
  • Industry Efficiency improved significantly, with both Debt and Reward segments demonstrating growth
  • Industry Transparency underwent no noticeable changes
  • Debt has stayed relatively stable, which is expected given it is such a large and diverse market
  • Equity has seen had a significant downturn in trading
  • Rewards has had the biggest downturn, with significantly fewer campaigns, backers and amounts of money raised for each campaign during the July period

Despite the slight downturn demonstrated in June and July, data from TAB shows that the industry is growing rapidly year on year:

  • In 2014, campaigners in the UK raised over $2 billion via crowdfunding platforms. In 2016, they raised over $3.96 billion.
  • China is demonstrating huge growth, with companies raising $134 million via crowdfunding platforms in 2014. In 2016, they raised $2billion.
  • France is also seeing significant growth, with companies raising $70 million in 2014, and $159 million in 2017 to date.
  • In 2014, companies raised $5.4 billion in debt finance globally, increasing to $12.7 billion in 2016.
  • In 2014, companies raised $345 million in equity finance globally, increasing to $766 million in 2017 to date.
  • Rewards finance raised via crowdfunding globally has increased from $680 million in 2014 to $1.1 billion in 2016.
  • The Real Estate industry raised $1.2 billion via crowdfunding in 2014. In 2016, it raised to $3.8 billion.
  • The Capital Goods industry raised $751 million in 2014. This year to date, it has raised $1.4 billion.

Funding & Deals On Pace For A Record Year (CB Insights), Rated: A

Last quarter set a record for funding to VC-backed fintech companies, which raised $5.2B across 251 deals (as highlighted in the CB Insights Q2 2017 Global Fintech report). At the current run rate, deals are on pace to increase 5% this year, while investment dollars are on pace to grow 19%.

The quarter also saw new unicorn births, with 5 companies reaching new valuations of $1B+: online lending site Tuandaiwang (valued at $1.5B at the time of its unicorn round), invoice and payment company AvidXchange ($1.4B), online investment platform Robinhood ($1.3B), health insurance startup  Clover Health ($1.2B), and cloud-based communication platform Symphony Communication Services ($1B).

Source: CB Insights

Funding to global VC-backed fintech companies set a quarterly record in Q2’17, rising 83% to reach $5.2B. Deals experienced less dramatic growth, but still increased 2% from the previous quarter, reaching a five-quarter high of 251.

Source: CB Insights
Australia

Car finance drives P2P growth in Australia (P2P Finance News), Rated: AAA

CAR finance is one of the driving forces behind the growth of P2P lending among brokers in Australia.

According to new research from RateSetter’s Australian business, one fifth (20 per cent) of all broker-led loans on the platform are used for car and vehicle finance, with an average loan value of AUS$13,186 (£8,077).

Meanwhile, home improvement loans account for 19 per cent of the platform’s broker-led activity, with an average loan value of $14,299, while 12 per cent of loans are used for debt consolidation, and seven per cent are used for education.

Business borrowing accounts for nine per cent of total broker loans, but has the highest loan values with an average of $28,094 per loan.

CARS AND RENOVATIONS DRIVING GROWTH OF P2P LOANS IN THE BROKER MARKET (LendIt), Rated: A

Peer-to-peer lending is gaining traction amongst Australian brokers, with RateSetter today announcing that it has reached the milestone of 2,000 brokers accredited with the peer-to-peer lending platform. Lending volumes through the broker channel, largely driven by car and home improvement loans, are doubling approximately every six months according to RateSetter.

Vehicle financing is the most popular reason brokers are choosing peer-to-peer loans for their clients, followed closely by funding for home improvements and loans to consolidate high-interest credit card or other bank debt.

The milestone also coincides with RateSetter passing $150 million in loans facilitated since launching in 2014. Across both the broker and direct channels, lending has grown 50% in the last 5 months alone, after passing the $100m milestone in March.

An analysis of RateSetter’s loan data found that brokers are helping their clients finance loans worth an average $16,871, with an average loan term of 44 months at an average interest rate of 8.37% p.a.

Source: LendIt
Asia

Here’s How Chinese Tech Giants Including Tencent And Ant Financial Are Plowing Into Southeast Asia (CB Insights), Rated: AAA

Here’s a summary of the investment and M&A moves of the five Chinese internet giants within Southeast Asia:

Didi Chuxing: Chinese ride-hailing startup Didi Chuxing was the first among the Chinese tech giants to enter Southeast Asia, when it invested in Singaporean ride-hailing startup Grab’s $350M Series E round in 2015. It invested again in Grab in 2017, in its $2B Series B round.

JD.comThe Chinese e-commerce giant made an investment in leading Indonesian travel booking platform Traveloka this past year as part of its ongoing fund-raise, participating in $150M of its ongoing $500M round, along with Sequoia Capital, Hillhouse Capital Group, and East Ventures. Expedia contributed $350M.

TencentTencent recently invested in Indonesia’s Go-Jek, a company most widely known for its on-demand motorbike service. But Go-Jek is strategically similar to Tencent in a notable way: Like Tencent’s WeChat, Go-Jek is also developing a “super app” of sorts, which includes the ability to order food, massages, and other services, in addition to the development of its own mobile payments product called Go-Pay. In 2013, Tencent launched MNC Tencent, a joint venture with Indonesia’s MNC Media (not pictured in timeline). According to media reports, this venture was launched with the intention of pushing Tencent’s WeChat in the country. More recent reports claim that this JV hasn’t seen much traction.

Alibaba: Alibaba’s most recent investment into Southeast Asia was a $1.1B investment into Indonesian consumer-to-consumer e-commerce site Tokopedia in August 2017. This investment comes after months of rumors that JD.com was planning an investment into the company. Alibaba has also invested twice into Tokopedia’s competitor, Singapore-headquartered e-commerce site Lazada. First, in April 2016, it invested $1B in Lazada, valuing it at $1.5B. In June 2017, it upped its existing 51% stake to 83%, giving Lazada a valuation of $3.15B. It announced that this investment would leave its investments into the e-commerce site at a little over $2B.

Ant Financial: Ant Financial, Alibaba’s financial investment arm, operates Alipay and has made its fair share of investments into the region, across different countries and on different terms. In 2015, it invested in Singaporean cross-border trading platform M-DAQ. In 2016, it put money into Thai fintech company Ascend Money to help grow its digital and offline payments and financial services business. 2017 brought an entrance into the Philippines, with an investment into Globe Telecom-owned fintech company Mynt, and into Malaysia, where Ant Financial set up a joint venture with CIMB Group-owned Touch ‘n Go, which operates a smart card that works on transportation payments, like tolls and public transportation. According to reports, the joint venture would allow Ant Financial to build an e-wallet for Malaysia.

Source” CB Insights

Thai proptech startup Seekster raises seed funding from Digital Ventures, 500 Tuk Tuks and dtac Accelerate (e27), Rated: A

Seekster, an alumni from the dtac Accelerate programme batch 5, announced today it has raised an undisclosed seed funding from Digital Ventures, 500 Tuk Tuks and dtac Accelerate.

The startup is a company that connects properties to cleaning and maintenance service providers. While there are many on-demand cleaning companies, Seekster targets the commercial sector and SMEs. The startup says it facilitates about 5,000 to 6,000 jobs per month in Thailand.

Furthermore, the startup also announced it has inked a deal with real estate company Ananda Development to provide maids and technicians for its condos.

Middle East

Robo-advisory: Show me the money (Khaleej Times), Rated: AAA

Robo-advisory services describes a range of algorithm driven models that help sift and select investment options for individuals based on the investors’ requirements and risk appetite. Similar to P2P lending, this technology platform brings the customer closer to the investment. It enriches the information available through graphic rich dashboards and content that allow the investor to see how the portfolio is performing over time as well as versus benchmarks.

Deloitte’s report, The Expansion of Robo-Advisory in Wealth Management suggests that by 2020, the assets-under-management or more simply the amount of money invested via robo-advisors will be somewhere between $2.2 trillion to $3.7 trillion. By 2025, the number is expected to rise to $16 trillion or roughly three times the amount handled by the world’s biggest asset management firm, BlackRock.

Source: Khaleej Times

What I Know about the right time to crowdinvest: Eureeca’s Chris Thomas (Wamda), Rated: A

Unlike other crowdfunding platforms, Eureeca specializes in equity investment. If crowdfunding is the umbrella term for debt funding or reward funding, crowdinvesting describes the equity side of crowdfunding. At Eureeca, entrepreneurs and investors are put through a stringent vetting process before it is determined who can join the platform. For its first class of companies, Eureeca chose 60 businesses out of 3,000 applicants. With more than 14,000 active investors, the average investment amount is $5,800.

As the first company to obtain a crowdfunding license from the Dubai International Finance Centre, Eureeca – in the person of Thomas – laid out for Wamda everything from the right time for entrepreneurs to crowdinvest to what they should expect from the process.

Crowdfunding should not be your second or third choice. It should be the first place you go to try and fix your funding requirement. In the Middle East, the concept is still being socialized. Crowdfunding is essentially the online mechanism for raising money. If you are raising $100,000 or $10 billion, join a platform to see what they can do and you’ll be surprised at the support. By bringing the fundraising online, you reduce the amount of time and effort you put in and increase your reach to potential investors, including access to crossborder investments.

It works best for businesses with a consumer-facing element. People need to have an emotional connection with your business. It’s not going to work for a steel factory in Ras al Khaimah [an outlying emirate in the UAE]. If you have a product that’s already being distributed and there are people who know and love your product, they are the ones that can be converted from lovers of your business to investors in your business.

Regular fundraising prep applies. Be sure that you have a strong network and that you are constantly building your contact list.

Authors:

George Popescu
Allen Taylor

Friday August 18 2017, Daily News Digest

Europe private equity real estate

News Comments Today’s main news: iFunding insolvent, SEC issues subpoena. DreamFunded now offers Reg CF investment opportunities. MarketInvoice integrates with Veritas. Raisin passes 4B Euro mark. Today’s main analysis: China Rapid Finance reports unaudited Q2 results. European real estate investment up post-Brexit. Today’s thought-provoking articles: Community banks refuse to step down on ILC battle. How Swift makes renminbi payment frictionless. Small lenders […]

Europe private equity real estate

News Comments

United States

United Kingdom

China

European Union

Australia

  • Small lenders offer biggest savings on $1M property loans. AT: “There could be any number of reasons for this. One is that large lenders have massive overhead expenses and therefore are forced to charge higher interest rates and fees. Smaller lenders can use technology and agile business practices to cut costs.”

India

Asia

Africa

News Summary

United States

iFunding Insolvent, SEC Issues Subpoena as Investor Jazco Looks to Step In (Crowdfund Insider), Rated: AAA

iFunding, a real estate crowdfunding platform, is insolvent according to several sources.

In recent days, information has cropped up that investors have been left holding the remains of the company that included properties with an estimated value of $20 million. One individual estimated the number of impacted investors at 400 individuals. These Investors are now looking at options to salvage what they can from the crowdfunding platform.

Crowdfund Insider has been told the SEC did issue a subpoena at some point regarding the operational questions regarding iFunding. Specific details have not been made available but one individual suggested it had to do with the platform operating as a Broker Dealer without having the appropriate license.

DreamFunded Now Offers Real Estate Investments Using Reg CF (Crowdfund Insider), Rated: AAA

DreamFunded Real Estate has launched its first real estate investment opportunity under Reg CF. DreamFunded is a FINRA approved crowdfunding platform that may offer securities the newest crowdfunding exemption. This iteration of crowdfunding allows any investor access to these opportunities – not just wealthier, accredited types. DreamFunded is one of only two real estate crowdfunding platforms using Reg CF.

In ILC fight, community banks will not stand down (American Banker), Rated: AAA

Commentators who say we should do away with that historic separation should be aware that the community banking industry will once again fight tooth and nail against such a move. We fiercely and successfully opposed Walmart’s 2006 bid. More than a decade later, the core principle remains the same.

Allowing nonbank corporate conglomerates to own banks not only violates the U.S. policy of maintaining the separation of banking and commerce. It also jeopardizes the impartial allocation of credit, creates egregious conflicts of interest, and results in a dangerous concentration of commercial and economic power. It also extends the federal safety net to commercial interests, which is counter to the principles upon which the Federal Deposit Insurance Corp. was created.

The Independent Community Bankers of America’s main objection to the SoFi application for federal deposit insurance is that the ILC charter would allow the fintech company to avoid the legal prohibitions and restrictions under the Bank Holding Company Act (BHCA).

iPayment, Inc. Introduces New Business Unit: iPayment Capital (PR Newswire), Rated: A

iPayment, Inc., a trusted provider of payment and processing solutions for small and medium-sized businesses (SMBs), introduces iPayment Capital, a new business unit focused exclusively on merchant cash advance services.

iPayment Capital will formally launch this fall with a focus on iPayment’s more than 137,000 SMB customers. Adding merchant cash advance as a direct offering, the Company will significantly streamline the process for its customers, offering a simplified application, expedited reviews and approvals, and a seamless re-payment process.

The Company recently hired Mr. Tomo Matsuo as Senior Vice President to lead this important initiative. Mr. Matsuo spent over six years with Bizfi, a premier fintech company combining aggregation, funding and a participation marketplace on a single platform for small businesses, where he held several senior level positions including Chief Operating Officer.

Morgan Stanley Advisor Charged with Insider Dealing (Financial Advisor IQ), Rated: A

Morgan Stanley financial advisor Michael Siva is among seven people charged with making about $5 million trading on illegal leaks made by a former Bank of America employee, Bloomberg writes.

Daniel Rivas, a former employee at Bank of America’s capital-markets technology group, allegedly passed dozens of tips about unannounced deals to two friends, including his girlfriend’s father, James Moodhe, an assistant controller at a brokerage that prosecutors didn’t identify, according to the news service.

Moodhe allegedly passed the tips on to Morgan Stanley’s Siva, whose trades on the leaked deals allegedly made his clients more than $880,000 and $8,000 for himself, Bloomberg writes.

10 bold predictions about the financial advice industry’s future (Investment News), Rated: A

“In 10 years, we’ll be in the midst of the largest wealth transfer in history, as more than $30 trillion is passed to millennials.”

Lowell Putnam, co-founder and CEO, Quovo

“Clients are going to want more technology that they can touch. I think there’s going to be more of a collaborative piece to planning.”

Rose Price, financial planner, VLP Financial Advisors

“The emerging influence and affluence of women — specific to income, education, entrepreneurship and wealth — will further demand comprehensive planning and financial independence.”

Sameer Somal, chief financial officer, Blue Ocean Global Wealth

“As the Gen X and millennial generations become more empowered to take charge of their financial future, they will demand advice in an ‘instant’ … whether through an app, online digitally or virtually with an adviser.”

Julia Carlson, CEO and wealth adviser, Financial Freedom Wealth Management Group

“There will be commoditization of financial planning advice in the same way we’ve seen in investment management in the past, that’s going to offer the opportunity for further specialization.”

Nicholas Crow, president, Motley Fool Wealth Management

Here’s what an uptick in the US IPO market could mean for fintechs (Business Insider), Rated: A

Initial public offerings (IPOs) have been 

Crowdfunded real-estate investments: 3 ways to do it (MarketWatch), Rated: A

In fact, investment crowdfunding (excluding community fundraising tools like Kickstarter) could top $300 billion annually by 2025, according to CFX Markets.

A typical crowdfunded real-estate project raises anywhere from $50,000 to $3 million from individual investors; the total project size can range up to $30 million or higher. For a $10,000 investment, return expectations range from $700 to $1,200 for a one-year debt investment to $5,000 to $15,000 for a longer-term (over three to five years) equity investment.

Equity crowdfunding

Pros

• Lower barrier to entry: For as little as $5,000, individuals can invest in large, commercial real-estate projects and enjoy the benefits of real estate: strong returns, a low degree of correlation with public markets and historically lower volatility.

• High yield potential: As equity investors, individuals can share in uncapped gains.

Cons

• Risk remains: These investments do carry risk, and some investors may not know how to evaluate risk factors, such as local economy volatility, or potential for higher-than-expected construction costs.

• Lack of liquidity: Many of these investments entail a hold period of up to five years. No prominent secondary markets have emerged yet.

• It’s early: While many platforms tout positive aggregate return figures, it’s inevitable that some projects won’t go well.

Syndicated debt crowdfunding

Pros

• Less risky than an equity investment: Debt investors are entitled to repayment before equity investors earn a return, so these investments carry less risk.

• Extra diligence: The loans upon which these investments are based were originated by professional real-estate lenders, who often have a physical presence and expertise in the markets where they issue loans.

• Short hold period: Relatively short terms (typically under two years) allow investor to reinvest sooner, and reduces liquidity risk.

Cons

• Less upside than an equity stake: Though debt investments are generally more secure, they carry less upside, as the investor’s yield is limited to the interest rate of the loan.

• A middleman: The experienced real estate lender is an additional layer of diligence, but it’s also another party between the investor and the original loan. This typically means a net annual percentage return of 0.5% to 1% lower than platform-issued debt offerings (see below).

Platform-issued (‘pre-filled’) debt crowdfunding

Pros

• Less risky: Debt investors are the first to be repaid, and the investment is secured by the underlying property.

• Short hold period: The individual typically recoups their money in six months to two years.

• One less middleman: With the platform acting as the lender, one less party takes a fee.

Cons

• Less upside than equity, for the same reason that syndicated debt does.

• Less diligence: Unlike syndication, the only loan underwriting is done by the platform (acting as lender). Some platforms practice conservative underwriting, but the companies themselves may have limited operating histories and minimal experience in all the markets where they issue loans.

KeyBank Partners with Billtrust to Deliver Best-in-Class, Automated Accounts Receivable Solution (PR Newswire), Rated: A

KeyBank (NYSE: KEY) announced today its strategic partnership with and equity investment in Billtrust, a pioneer of payment cycle management solutions. This collaboration, along with the launch of KeyTotal AR™, marks the most recent in a series of partnerships with emerging fintech providers, affirming Key’s commitment to bringing innovative solutions to market. Terms of the investment were not disclosed.

The KeyTotal AR™ platform allows KeyBank’s corporate clients to improve operational efficiency during the invoice-to-cash process using electronic invoicing and payments in a flexible, cloud-based solution. Powered by Billtrust’s Quantum Payment Cycle Management solution, the platform accelerates cash flow by automating invoice delivery and payment and cash application. Merging this innovation with KeyBank’s broad range of accounts receivable (AR) capabilities has created one of the highest-level product suites available in the market today.

Top 5 Emerging Fintech Hubs in The U.S. (Bank Innovation), Rated: A

Atlanta

Atlanta has enjoyed a position as a hub for financial services, if not necessarily fintech, for quite a while. The city, which is presently playing host to a number of fintech startups, incumbents, and technology accelerators (including the Techstars Atlanta Program) is the place to be for payments companies, to the point where some have nicknamed areas of the hub things like “Transaction Alley.”

For the older guard of digital payments, companies NCR and WorldPay are both currently headquartered here, and of course, it’s the birthplace of the Atlanta Automated ClearingHouse, or ACH.

Startups like First Performance Global are innovating the authorization side of payments, using data analytics, social media, and automation to make sure its businesses stay competitive.

Austin

The city is home to older fintech residents like banking technology provider Kasasa, mobile trendsetter Malauzai, and digital banking solutions provider Q2 Holdings.

Now, Austin is headquarters to newer entrants like Draft, which is using the venture funding it received from Plug and Play and Envestnet Yodlee in order to build insights based on data analytics to help financial advisors avoid poor portfolio performances and to further build trust with clients. Companies like Self Lender are focusing attention on the under-banked, using digital savings plans to help users build up the credit they are missing from lack of access to more traditional financial products. Other startups like Able are focusing on the increasingly competitive small business lending market, aiming to fund SMBs at all stages with help from friends and family.

Miami

Take for example the startup Waleteros, a banking app geared specifically to serve the underbanked U.S. Hispanic customer.

Then there’s ClassWallet, an app geared specifically to help schools. This virtual wallet streamlines the process of payments and reimbursements for teachers and schools alike.

Catering to Miami’s entrepreneur demography is a startup like InvestReady, formerly known as Accredify. This company uses API integration to allow crowdfunding portals to verify investors, thus simplifying the tedious compliance and verification process. The company, which was founded in 2014, has to date raised $120K in funding.

Omaha-Lincoln, Neb.

D3 Technology in Omaha has become a stalwart in the mobile banking scene, helping institutions replace their aging, first-generation mobile apps with data-driven solutions and modern UX’s. Lincoln’s Hip Pocket is a financial wellness tool that allows users to save money with a swipe.

Washington D.C.

Some companies like Wealthminder are using digitized financial planning tools and investment recommendations fueled by data analytics to help its users to achieve longer term financial goals, such as funding college, buying a home, or retirement.

Startups like FS Card are busy re-designing credit, offering new options for small dollar loan customers to move towards more traditional (more affordable) credit products. Others, like StreetShares are enabling “social finance” for small businesses, allowing like-minded investors to fund small businesses through auctions (businesses pitch themselves through a simple mobile application, and investors compete to fund; the lowest bids are consolidated into one single loan with a low interest rate).

Recent FinTech Partnerships Bode Well for GH Capital (KFM BFM), Rated: A

Using aggregators also allow retailers to instantly offer multiple payment methods to the customers leading to a higher conversion rate. That’s why we see digital payment processing companies like Wirecard AG (WRCDF) expanding at a quick rate. The company registered a transaction volume growthof ~34% during the first quarter of 2017.

GH Capital Inc (GHHC), a gateway provider for online banking electronics payments, can also benefitfrom this trend. The company already entered in several partnerships with multiple payment processors. It recently partnered with Allied Wallet and has taken a 23% equity stake in VMoney.

GH Capital is involved in the provision of IPO services for small corporations.

BFS Capital Appoints Michael Marrache as CEO (BusinessWire), Rated: B

BFS Capital Inc., a small business financing company, announced that it has appointed Michael Marrache as Chief Executive Officer to succeed outgoing CEO and co-founder Marc Glazer. Named President in September 2016, Marrache previously served for more than three years as the company’s Chief Operating Officer. He also will join the company’s Board of Directors. Marc Glazer will continue to serve as Chairman of the BFS Capital Board.

Washington Capital Partners Rewrites the Rules of Flip-to-Rent Real Estate Investing (Press Release Rocket), Rated: B

Today, Washington Capital Partners (WCP), a hard money lender operating in the Washington D.C., Virginia, and Maryland areas, announced their new Flip-to-Rent Hybrid Loan product. This 3-year hard money loan allows fix and flip investors to immediately roll their property into a long-term rental loan.

United Kingdom

Fintech lender MarketInvoice to tap 400,000 strong customer base (AltFi), Rated: AAA

MarketInvoice continues on its mission to extend its services to a broader range of businesses. The invoice finance platform, which recently launched a new longer term funding line (MarketInvoice Pro), has forged a strategic alliance with credit management specialists Veritas Commercial Services.

Veritas is a leading credit management firm with a digital sales ledger platform called VeritasVirtual. Its customers use this platform to monitor the status of outstanding payments. The MarketInvoice platform has now been seamlessly integrated into VeritasVirtual, offering small business users access to MarketInvoice Pro – a funding line which is secured against their outstanding invoices.

China

China Rapid Finance Reports Unaudited Second Quarter 2017 Financial Results (PR Newswire), Rated: AAA

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF) today reported its unaudited financial results for the second quarter ended June 30, 2017. The Company will hold a conference call on August 17, 2017 at 8:00 am Eastern Time (8:00 pm Beijing Time) to discuss the financial results for the second quarter of 2017. Dial-in details are provided at the end of this release.

Second Quarter 2017 Financial Highlights

  • Total gross billings on transaction and service fees[1] grew by 59% year over year to $24.5 million, or 46% over the previous quarter.
  • Gross billings from consumption loans exceeded gross billings from lifestyle loans, marking an important milestone. Gross billings from consumption loans increased by 642% year over year to $13.2 million, or 97% over the previous quarter. Gross billings from consumption loans represented 54% of total gross billings as compared with 12% in the prior year period, and 40% in the previous quarter. Gross billings from lifestyle loans were $11.3 million as compared with $13.7 million in the prior year period, or $10 million in the previous quarter. Gross billings from lifestyle loans were 46% of total gross billings, as compared with 88% in the prior year period, and 60% in the previous quarter.
  • Net revenue increased by 9% year over year to $15.2 million (after netting off customer acquisition incentives of $8.1 million) from $13.9 million (after netting off customer acquisition incentives of $0.6 million) in the prior year period, and 45% over the previous quarter from $10.5 million (after netting off customer acquisition incentives of $5.3 million) in the previous quarter.

Second Quarter 2017 Operating Highlights

  • Number of new borrowers added in the second quarter of 2017 was 760 thousand, increasing 39% over the previous quarter. As of June 30, 2017, the Company had 2.7 million unique borrowers.
  • Total number of loans facilitated grew by 354% year over year to 5.1 million, or on average 55 thousand loans facilitated per day. Total number of loans facilitated since inception reached 20 million.
  • Total loan volume facilitated increased by 244% year over year to $720.7 million. Consumption loans facilitated increased by 431% year over year to $637.5 million, with lifestyle loans facilitated totaling $83.2 million, as compared with $89.7 million in the prior year period.
  • Average cumulative loan volume per borrower of the Q4 2015 cohort increased to approximately $1,550 in their 18th month on our marketplace from approximately $1,300 in the 15th month. Average cumulative loan volume per borrower of the Q1 2016 cohort increased to approximately $1,340 in their 15th month on our marketplace from approximately $1,099 in the 12th month.
  • Repeat borrowers on the Company’s marketplace accounted for 72% of the total borrowers as of June 30, 2017.

Sohu’s Fox Fintech Group Approved to Obtain First Internet Micro-credit License Issued by Ningbo City Government (PR Newswire), Rated: A

Recently, the Finance Office of Ningbo City Government approved a subsidiary of Fox Financial Technology Group Limited (“Fox Fintech Group” or “the Company”), an affiliate of Sohu.com Limited (NASDAQ: SOHU), to obtain the city’s first internet micro-credit license. This is a milestone that shows Ningbo City Government’s positive stance towards leading internet companies to set up fintech-related businesses in the city.

European Union

Savings Marketplace Raisin Passes the €4 Billion Mark Faster than Any Wealth Management Fintech (Crowdfund Insider), Rated: AAA

Headquartered in Germany, Pan-European savings marketplace Raisin reports that in less than 4 years its customers have invested more than €4 billion in the platform’s savings products. As a result, Raisin is the leading marketplace for investments in Europe and one of the fastest growing Fintechs in the world.

Founded in 2013 as the first marketplace for investments in Europe, Raisin is now about twice the size of its next largest competitor.

Source: Crowdfund Insider

European real estate investment up on Brexit (Pensions&Investments), Rated: AAA

The immediate impact of 2016’s Brexit vote on private equity real estate investing in the second half of the year carried over into 2017, with reciprocal effects in mainland Europe. The first half of 2017 saw 201 deals closed, down from 315 and 302 in the first six months of 2016 and 2015, respectively. Continental Europe saw about 500 deals close between January and June 2017, as compared to about 400 halfway through 2016 and about 300 at 2015’s midpoint.

Source: Pensions&Investments
International

How Swift makes renminbi payment frictionless (The Asset), Rated: AAA

Swifts’s gpi enables banks to make cross-border renminbi payments to Chinese companies. By collaborating with China’s Cross-border Interbank Payment System they aim to make renminbi payments as fast as possible, Michael Moon, head of payments markets for Asia-Pacific at Swift, tells The Asset.

A recent Swift report shows that the renminbi only ranked sixth as a share of total global payments by volume.

Malaysia and Germany are the two countries which have had the highest growth in renminbi utilization for the past three years. For the first six months of 2017, Malaysia and Germany have seen a 551% and 436% growth respectively, compared to the same period in 2014.

SONM Advisory Board Onboards Digital Economist Paolo Tasca (Finance Magnates), Rated: B

Supercomputer Organized by Network Mining (SONM) has made an announcement regarding digital economist Paolo Tasca having joined the company’s board of advisors.

Tasca is the founder of the Centre for Blockchain Technologies at the University College London (UCL) and currently holds the role of Executive Director there. Prior to this position, Tasca acted as Lead Economist for digital currencies and peer-to-peer lending at Deutsche Bundesbank, which is located in Frankfurt, Germany.

Australia

Small lenders offer biggest savings on $ 1m property loans (Financial Review), Rated: AAA

Small lenders are offering the lowest rates on $1 million mortgages, with some products potentially lowering repayments by $500 a month, or $200,000 over a 30-year term.

The loan sizes have crept up as the median price of a property in Sydney hit $1.15m and about $850,000 in Melbourne.

Loans.com.au, an online lender, and Mortgage House Advantage offer the lowest variable, principal and interest rate for an owner-occupier of 3.64 per cent, or monthly repayments of about $4569.  That compares to an average rate of 4.27 per cent, a difference of 53 basis points, $362 a month or $130,000 over a 30-year term.

Australian Unity has a top rate for interest-only, owner occupiers of 3.79 per cent, or $3158 in monthly repayments. There is a $600 application fee. The average basic variable rate in the category is 4.73 per cent, a difference of 94 basis points, $551 a month or more than $198,000 over a 30-year loan.

Loans.com.au offers owner occupier, interest-only loans at 3.89 per cent, or $4711 in monthly repayments. That compares to an average rate of 4.53 per cent, a difference of 64 basis points, or $374 a month, or more than $134,000 over 30 years.

India

Online lending startup KNAB Finance raises funds from InCred, others (VC Circle), Rated: A

KNAB Finance Advisors Pvt. Ltd, a fin-tech firm that provides unsecured working capital loans to small and medium-sized enterprises (SMEs), has raised a little over Rs 2.5 crore in two funding rounds, a top company executive told VCCircle.

Non-banking financial company (NBFC) InCred, and over a dozen individual investors including Mindtree executive chairman Krishnakumar Natarajan and Sharjah Islamic Bank’s senior vice president Ravi Bhardwaj invested in the company.

The startup extends loans with an average ticket size of Rs 6 lakh, and it has disbursed Rs 10 crore worth of loans so far. It also offers short-term loans, allowing customers to close them within a month.

Asia

The potential impact of AI on trade finance (The Asset), Rated: A

HSBC announced that it was working with IBM to create a cognitive intelligence solution aimed at extracting key data from trade documents before entering the bank’s formal system. The bank typically processes over US$500 billion worth of trade documentation for customers and must manually review an estimated 100 million pages of documents annually.

In Singapore, financial technology firm Silent Eight has alternatively proposed using AI solutions to support bank analysts and investigators with their fight against AML violations and terrorism financing.

Africa

8 Zambian startups graduate from BongoHive accelerator (Disrupt Africa), Rated: A

The eight startups taking part in the programme were gaming startups LudoHuband Gamers Entertainment Meet (GEM), food startup InspireMe Trading, development and design startup Orbitrix Programming Solutions, flowers company Unforgettable Moments, real estate crowdfunding startup LCB Moguls, agri-tech startup eMsika, and interior design company Kreate Interiors.

Authors:

George Popescu
Allen Taylor

Monday August 7 2017, Daily News Digest

LendingClub

News Comments Today’s main news: SoFi Ventures to support financial services startups. Prosper’s valuation dives 70%. Fundrise drops minimum investment to $500 for New Starter Portfolio Offering. UK P2P lenders asked to reveal past defaults. Hargreaves Lansdown cancels special dividend. FinMason expands into Prague. PledgeMe close to profitability. Today’s main analysis: LendingClub is looking beleaguered. Australian fintech update. Today’s thought-provoking articles: Surge […]

LendingClub

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Africa

Barbados

News Summary

United States

SoFi Ventures to support financial services startups (Pitchbook), Rated: AAA

SoFi, a provider of online lending and wealth management services, has launched a strategic VC arm led by 

Surge in FinTech Financings; PeerIQ Closes Series A (PeerIQ), Rated: AAA

This past week featured a slate of fintech venture financings. Kabbage (Series F: $250M), Dianrong (Series D: $220M), Bread (Series B: $126M), and Juvo (Series B: $40M) all announced major financings.

And last, but not least, , led by TransUnion, Hearst Financial Venture Fund, and Macquarie Group.

For PeerIQ, it means continuing to execute upon the vision we shared at our seed financing just over two years ago. This fall, we will be launching our first products uniting TransUnion’s dataset with the PeerIQ analytics platform.

Along with its investment, Hearst brings several major holding companies, including auto data provider, BlackBook, and Fitch Ratings, the global ratings provider, which opens up many new value propositions for our customers. Finally, we are working hand in hand with Macquarie, a major provider of capital to the fintech space, to improve tools for warehouse lenders and their borrowers alike.

Lending Club Is Looking Beleaguered Heading Into Q2’s Do-Or-Die Earnings (Seeking Alpha), Rated: AAA

Source: Thomson Reuters Eikon, image made by James Brumley

Fast forward to Monday. That’s when Lending Club is expected to log another progressive quarter, cranking revenue up to $136.2 million, and whittle the per-share loss back to only one cent; the company lost nine cents per share on $103.4 million in sales for the same quarter a year earlier. Not only is revenue expected to keep growing beyond that, Lending Club is expected to swing back to a profit in Q3, of two cents per share.

Fintech lender Prosper’s valuation dives 70% in latest funding round (Biz Journals), Rated: AAA

San Francisco fintech Prosper is about to close on $50 million in funding, in a round that slashes its value 70 percent to $550 million, The Information reports .

That a steep decrease from the $1.9 billion valuation the second-largest online lender saw just last year.

Fundrise Drops Minimum Investment to $ 500 in New Starter Portfolio Offering (Crowdfund Insider), Rated: AAA

The Fundrise Starter Portfolio starts with a $500 minimum and includes a 9.25% annual dividend yield and zero advisory fees through the end of the year. If you want to try it out the Starter Portfolio comes with a 90 day guarantee. If you have a change of heart, Fundrise will purchase your investment back at the original investment amount. Not a bad deal to test the waters.

Online Lender Prosper in Talks on Deal That Would Slash Its Value (WSJ), Rated: AAA

Prosper Marketplace Inc. is in talks to sell a roughly 10% stake to a Chinese conglomerate in a deal that could reduce the online lender’s valuation by more than two-thirds, according to people familiar with the matter.

Under the terms of the proposed transaction, Linca would invest $50 million in Prosper at a valuation of about $550 million. No deal has been finalized, however, and there was no guarantee the parties would come to an agreement, the people said.

David Kimball, who took over as Prosper’s CEO last December, has been focused on making the company profitable. In February, to ensure a funding source for the company’s loans, Mr. Kimball agreed to sell $5 billion worth of Prosper’s loans to a consortium of investors over the next two years along with warrants to purchase shares representing 35% of the company, The Wall Street Journal previously reported.

Small Change Completes First Real Estate Crowdfunding Offer Under Reg CF (Crowdfund Insider), Rated: A

Real estate investment crowdfunding site Small Change has closed its first real estate offering available to everyone – not just accredited investors.

Small Change reports that investors have funded projects via their platform in cities including Pittsburgh, Los Angeles, New Orleans, and Washington D.C. These projects are as diverse as the cities in which they’ve been built. They include Pittsburgh’s first tiny house, a historic main street mixed-use conversion, and affordable housing in Washington, D.C. with the largest residential solar install in the country.

Small Change has now completed its first offering open to all investors — a Starter Home Two project by architect Jonathan Tate.

WSFS Introduces Private Student Lending Solutions (WSFS), Rated: A

WSFS Financial Corporation (Nasdaq:WSFS), the parent company of WSFS Bank, today announced that it is now offering Private Student Lending Solutions, expanding its consumer lending product line to bridge the funding gap that exists between the actual cost of higher education and the federal aid, grants and scholarships available.

WSFS is partnering with LendKey.

SoFi to finally file for IPO? (Housingwire), Rated: A

Social Finance, better known as SoFi, first teased it would file for an initial public offering nearly three years ago.

SoFi CEO Mike Cagney appears to be interested in filing for an IPO again.

If SoFi did file for an IPO, it would mark the second major IPO for a housing-related company after a dry spell the last few years.

According to an article in Reuters by Lisa Lambert, “Last year IPOs in the United States fell by more than a third from 2015, and many of those 102 share offerings ended up trading below their debut price.”

Renters Insurance: PolicyGenius vs. Lemonade (Coverager), Rated: A

Yesterday, NYC-based digital broker PolicyGenius announced its expansion to renters insurance. The product is delivered in collaboration with Stillwater.

Another thing happened yesterday. Lemonade announced its renters and homeowner’s insurance is now available to folks in NJ, joining those residing in CA, IL and NY.

The result: Stillwater was 40% more expensive than Lemonade, all else equal.

Fluid Strikes Strategic Partnership with Nomad Credit (LendIt), Rated: B

Fintech and adtech startup Fluid announced a strategic partnership with Nomad Credit, a financial marketplace for international students in the US; the partnership looks to offer better credit options to this underserved market; together the companies will deliver better financial literacy, credit building tools and more cost effective financial products.

Here’s how start-ups get funded before they’re ready for venture capital (CNBC), Rated: B

Fledgling businesses rarely command seed or venture funding right out of the gate. But they still need cash to get started.

In reality, there’s a big difference between securing a loan for your business and winning over backers on a site like Kickstarter. Meanwhile, equity crowdfunding, enabled by sites like AngelList, CircleUp and SeedInvest, is generally for businesses that are further along.

Here are the real ways that most entrepreneurs get money at the very start.

  • Personal savings
  • Wages
  • Credit cards
  • Loans
  • Crowdfunding

Countering West Coast Pull, by Helping Finance Start-Ups Sell in New York (The New York Times), Rated: A

Nine of the 15 United States financial technology “unicorns” — companies worth $1 billion or more, as tracked by CB Insights — are in the San Francisco area. These Bay Area companies, which are not public, include the online payments processor Stripe, the online lender Social Finance and the finance website Credit Karma.

For the last seven years, a New York business-backed program — the FinTech Innovation Lab — has been working to stem that West Coast tide by helping financial services start-ups sell their services in New York in an industry where the city clearly dominates: big banks and other finance companies.

Make Delaware the financial technology capital (Delaware Online), Rated: A

One such “industry of the future” that Delaware should be working to attract is the financial technology sector, or what some affectionately call “FinTech. Empowered by mobile computing, these companies use technology to bring better, cheaper, more efficient financial services to citizens. Mobile apps that allow you to send money quickly to friends or family are examples of FinTech products.

For a number of reasons, Delaware is well-suited to become the nation’s FinTech capital. First, the financial services industry has served as a core portion of Delaware’s economy for over 40 years. Individuals with skills and expertise are ready and waiting.

Second, banks, of which many call Delaware home, are leading the way in partnering with startups large and small to develop new solutions and businesses in the space.

Third, Delaware’s nimble government and business community make it a flexible, attractive place for innovation.

Is an Online Business Loan Your Best Option? (Nav), Rated: B

There should be no surprise that with the growth of the internet and online banking that online lending would be close to follow. Over time, banks began to accept loan applications online and eventually began to offer full-service lending through the web.

While online loans may be tempting, it is important to consider every option when borrowing a large sum. Comparison shopping is your friend. There are more than 44 different kinds of business financing — that’s a large ocean to navigate before finding the lowest-cost option that fits your business profile and approval chances.

Nonbank lenders typically lend from their own funds or look to the financial markets to raise millions or billions of dollars to lend in smaller increments.

Here are some questions to ask yourself to get started:

  • How much money do you need to borrow?
  • Do you need an in-person experience or are you comfortable online?
  • What are the best interest rates available today?
  • What origination fees are you willing to pay?
United Kingdom

UK’s peer-to-peer lenders to be asked to reveal past defaults (Financial Times), Rated: AAA

The FCA is expected to announce new measures later this year, including forcing P2P groups to give extra information on the past performance of loans and on how much due diligence they have done on the borrowers’ past performance.

P2P lenders — which had collectively facilitated loans of £7.3bn in the UK by the end of last year, according to research from the Peer-to-Peer Finance Association (P2PFA) — have had plenty of time to prepare for tighter regulation.

The FCA’s latest review is the second in two years, and any measures are unlikely to come in before mid-2018, since the industry will be given between three and six months to respond to the proposals the authority puts forward later this year.

Hargreaves Lansdown Cancels Special Dividend After Regulator Warns on Capital (The New York Times), Rated: AAA

Fund supermarket Hargreaves Lansdown cancelled a planned special dividend on Friday after Britain’s financial regulator said the company needed to shore up its capital base, sending its shares lower.

The company plans to launch its HL Savings product later in the year, a cash deposit service supported by marketplace lending, and this year also launched Lifetime ISAs, or individual savings accounts eligible for a government bonus.

Distribution still keeping the wheels of credit turning (Computer Weekly), Rated: A

A recent survey revealed a third of SMEs in the IT sector have missed out on business opportunities because of a lack of finance. Distributors have long been a major source of credit for SME resellers but with consolidation taking place in distribution through mergers and acquisitions, the sources of credit available to resellers are being reduced.

One distributor that has publicly taken the initiative on credit is Exertis. The company recently introduced a programme called Credit Xtra with the intention of doubling the credit limit for more than 1,650 of its SMB accounts. There is also the option to increase the limit further if resellers remain within the distributor’s credit terms.

Dow believes that it is especially important to offer extra credit at this time of year, when resellers are targeting the peak summertime buying period in education.

LendInvest closes retail bond offer early (P2P Finance News), Rated: A

LENDINVEST has closed its bond offer early, due to strong demand from both retail and institutional investors.

The online mortgage lender launched the five-year notes on 19 July and the offer was scheduled to close at noon on Friday. However, it closed the offer at 11.30am on Thursday.

It said estimated net proceeds from the offer would be just under £49m and confirmed that the issue date will be 10 August.

Kantox raises £4.6 million from investors as it targets profitability (Business Insider), Rated: A

Foreign exchange fintech company Kantox has raised £4.6 million from its existing investors as it aims for profitability.

Filings with Companies House show Kantox raised the sum at the end of July.

Kantox, founded in 2011, made an operating loss of £258,538 on revenues of £2.3 million in 2015, the most recent year accounts are available for.

LendingCrowd offers cashback incentive (P2P Finance News), Rated: A

LENDINGCROWD has launched a £150 cashback offer to investors when adding £2,500 or more amid surging demand from borrowers for business loans.

The offer, which runs until 31 August, is available to new and existing investors and can be used in its Innovative Finance ISA (IFISA.)

Competition regulator confirms P2P business lenders exempt from APR rules (P2P Finance News), Rated: A

NEW pricing rules on business loans will not apply to peer-to-peer lenders, the Competition and Markets Authority (CMA) has confirmed.

From today, all providers of unsecured loans and overdrafts worth up to £25,000 to small- and medium-sized enterprises (SMEs), will have to publish and clearly display the annual percentage rates (APRs.)

It had previously been unclear if this would apply to P2P and alternative finance lenders but the CMA confirmed to Peer2Peer Finance News this morning that it would not.

Can P2P Lending Kill NBFCs? (TechBullion), Rated: A

NBFCs, on the other hand, are the Non-Banking Financial Companies.

Does P2P lending offer such a serious threatto NBFCs and can P2P lending kill NBFCs? We write an informative review to let you know!

While NBFCs mostly deal with the unbanked population, P2P concentrate on the businesses that are usually locked out by traditional lenders and also on the tech-savvy individuals.

While P2P platforms have embraced the use of modern technology, NBFCs have failed in the use of technology. This has really affected their growth as they cannot really compete efficiently in the modern world.

Should you go with the crowd? (MoneyWeek), Rated: B

The returns available to investors aren’t as high as they used to be, but they’re still much, much more than you’d get putting your money in a deposit account. But there’s a very good reason for that. It’s an awful lot riskier too. You’re not covered by the financial services compensation scheme – which safeguards up to £85,000 of your savings if your bank goes bust. That means you cold lose everything.

China

Hexindai Partners with China UnionPay to Launch a Mobile Payment Function to Its App (PR Newswire), Rated: AAA

Hexindai Inc. (“Hexindai” or “the Company”), a fast-growing consumer lending marketplace in China, today announced that it has partnered with China UnionPay to launch its “Quick Pass” app on Hexindai’s mobile platform. The app will allow investors on the Company’s platform to use surplus funds that have not been lent out to pay for goods and services provided by stores partnered with China UnionPay by scanning a QR code created by the app.

Huge Internet finance firms to be assessed (Shanghai Daily), Rated: A

CHINA will explore methods to include large Internet financial businesses of systemic importance in its macro prudential assessment, said a central bank report issued late Friday.

The first peer-to-peer lending platform opened in 2007, and exploded in popularity, with the number of such platforms increasing 18-fold between 2012 and 2015 and the combined transaction volume jumping about 40 times over the period, said the State Information Center.

Inclusive finance to lift fintech firms (China Daily), Rated: A

Financial technology or fintech companies, particularly those focused on credit analysis, will greatly reduce cost of lending and also reduce credit risks. So, they are likely to experience fast growth on market demand as commercial banks are joining the inclusive finance market.

That market is currently dominated by smaller, private financial institutions, such as peer-to-peer or P2P lending platforms and consumer finance platforms.

In China, only 30 percent of citizens are covered by existing credit reporting system, while in mature markets the percentage could be 70 percent or higher.

By the end of July, the five biggest banks in China-Industrial & Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications and Bank of China-had launched inclusive finance arms, just two months after the authorities concerned called for better financial services for a wider group of people across China.

European Union

FinMason Announces International Expansion: Opens Operations in Prague (Crowdfund Insider), Rated: AAA

Boston-based fintech and investment analytics firm, FinMason, announced its international expansion plans and the opening of a new operations center based in Prague. The company stated the initial expansion will include the hiring of twenty software engineers to keep pace with the rapid growth and development needs of the company.

The company shared that FinMason Europe, s.r.o., opened August 1st and the first employees have already started.

Vendorly Adds Three New Companies to Vendor Oversight Platform (Markets Insider), Rated: AAA

Vendorly, an innovative vendor oversight platform for financial institutions, today announced the continued expansion of its platform through the addition of three new third-party oversight integrations available on the Vendorly™ platform. These additions further enable our customers to enhance their compliance management framework and help them maintain the high oversight standards required in today’s marketplace.

Continuing this momentum, the new vendor oversight additions to the Vendorly platform include:

  • Dun & Bradstreet (NYSE: DNB)— Vendorly customers now have access to Dun & Bradstreet data to help make smarter decisions about their current and prospective vendor network.
  • The ID Co. — With DirectID, Vendorly customers now have the ability to conduct bank verification for current and prospective vendors in their network, to reduce fraud and misrepresentation prior to payment.
  • TINCheck — Vendorly customers now have the ability to validate the tax ID of all organizations in their current and prospective vendor network.

iFunded Tackles Large Project With Bond Issue (Crowdfund Insider), Rated: A

A new entrant in German online real estate lending, iFunded wants to address the market of larger property development projects that lie beyond the scope of real estate crowdfunding. Partnering with umbrella investment bank NFS Netfonds Financial Service, the platform is launching its first €10 million real estate bond issue, to be listed on the open market of the Frankfurt Stock Exchange. With this, iFunded leads, for the real estate online funding segment, the Fintech startup trend that consists in moving from exemption/sandbox status to a fully regulated financial environment.

According to Crowdfunding.de, in the first half of 2017, German online real estate crowdlending platforms raised €58 million, 45% more than in the entire year of 2016.

In July 2017, iFunded launched its first public bond offering, what motivated you as a company to add the classical fundraising channel to your online real estate platform?

Real estate crowdfunding in Germany has grown very significantly recently and will reach between €100 and €120 million by the end of 2017. However, it still is small.

Our first project Eisenzahnstrasse Berlin is a €10 million bond issue (ISIN: DE000A2E4FQ5) with a 3.5-year maturity and 5.5% interest rate. It is destined to transform an exi property into 281 flats, including a penthouse, and 2,400 sqm commercial space. The total estimated budget is €49.6 million and the expected income €67 million.

Robo-adviser Moneyfarm expects profitability by 2019 (Citywire), Rated: A

European robo-adviser Moneyfarm expects to become profitable by 2019 as it looks to bring to market new products in the coming months.

The Italian firm filed its 2016 financial statements this morning, announcing expansion to 10,000 customers in the UK and £260 million in global assets under management (AUM), which renders it the second largest robo-adviser in Europe.

The firm has reported total losses of £6.4 million in 2016, but claims this was in line with its agreed targets.

Kildare businesses raise over €1m through Linked Finance (Leinster Leader), Rated: B

Linked Finance, Ireland’s leading peer-to-peer (P2P) lending company has raised over €1m for Kildare-based businesses.

36 Kildare businesses including well-known businesses Kelly’s Mountain Brew, Celbridge Playzone, and The Academy Barber, have used the Linked Finance platform to raise funds and facilitate business growth.

International

Analog Regulations Built for the Traditional Banking Space are not Conducive to Fostering Innovation in Financial Services (Crowdfund Insider), Rated: AAA

Mueller notes that Singapore and the UK were the early leaders in Fintech innovation as the respective governments determined it was of strategic importance. With government backing, Fintech flourished.

But there are many challenges for this transformation that is occurring at a breakneck speed. And as Mueller says;

“analog regulations built for the traditional banking space are not conducive to fostering innovation in a financial services industry turned digital.”

Mueller bullets out intrinsic challenges to the existing regulatory ecosystem:

  • Fear of failure has resulted in some regulators taking a go slow approach instead of being proactive. When things go wrong – who gets the blame?
  • Complexity in Fintech requires new skills. Regulatory agencies are typically populated with people entrenched in well defined processes. There is a lack of proper skills and staffing.
  • Internal culture may not be willing to adapt. Changing processes is always a challenge. A cohesive policy strategy is missing.
  • Fintech innovators may struggle to engage and communicate with a regulator. Fear of engagement harms us all

Yes, some countries are blazing trails in Fintech and the list of countries pursuing a Fintech Hub status is growing. Without acknowledging the elephant in the room that the US is not at the top of this list (even though it is the leading global financial center) is telling about the regulatory morass elected officials have allowed to persist.

Read the full report here.

FinTech and the world of investment banking (Brave New Coin), Rated: A

Global banks and investment banks are far more complex creatures than their high street counterparts, which is why we’ve seen far less disruption in corporate, commercial and wholesale banking that we are seeing in retail, but don’t be complacent or closed here. There are things happening in the more complex areas too.

While fintech covers a diverse array of companies, business models, and technologies, companies generally fall into several key verticals, including:

Lending tech: Lending companies on the list include primarily peer-to-peer lending platforms as well as underwriter and lending platforms using machine learning technologies and algorithms to assess creditworthiness.

Payments/billing tech: Payments and billing tech companies span from solutions to facilitate payments processing to payment card developers to subscription billing software tools.

Personal finance/wealth management: Tech companies that help individuals manage their personal bills, accounts and/or credit, as well as manage their personal assets and investments.

Money transfer/remittance: Money transfer companies include primarily peer-to-peer platforms to transfer money between individuals across countries.

Blockchain/bitcoin: Companies here span key software or technology firms in the distributed ledger space, ranging from bitcoin wallets to security providers to sidechains.

Institutional/capital markets tech: Companies either providing tools to financial institutions such as banks, hedge funds, mutual funds, or other institutional investors. These range from alternative trading systems to financial modelling and analysis software.

Equity crowdfunding: Platforms that allow a collection of individuals to provide monetary contributions for projects or companies provisioned in the form of equity.

Insurance tech: Companies creating new underwriting, claims, distribution and brokerage platforms, enhanced customer experience offerings, and software-as-a-service to help insurers deal with legacy IT issues

Source: Brave New Coin

Meantime, rather than ignoring these changes, the biggest banks are investing in them. Since 2012, the ten largest US banks by assets participated in 72 rounds of investment totalling $3.6 billion in 56 FinTech companies whilst, in Europe, Banco Santander leads with the most number of unique investments to FinTech startups. The firm has made 13 investments to 12 unique fintech startups. The largest investment was a $135 million in Q3 2015 to small business lender Kabbage, that also included participation from ING among other investors.

Alt-Lending Enjoys Sudden Investment Revival (PYMNTS), Rated: A

This week alone saw two examples of those concerns in action: One U.S. lawmaker, Rep. Emanuel Cleaver II (D-Mo.) sent a letter to five alternative small business lenders operating in the country, inquiring about their business practices.

This week also saw one alternative lender in the U.K., DueCourse, fall into administration.

All of this makes it even more surprising that alternative lending startups, by far, secured the greatest amount of investment this week – pushing half a billion dollars, in fact.

PYMNTS breaks down the major AltFin investment rounds, plus covers the other B2B FinTechs that were able to secure new funding.

Australia/New Zealand

PledgeMe closes in on profitability in 2017, weighs up new product development (NZ Herald), Rated: AAA

PledgeMe came within cooee of turning a profit in the 2017 financial year, boosting revenue from fees to use its equity crowdfunding and peer-to-peer lending platform while also clamping down on costs, and is considering adding another string to its bow which that could need another capital injection.

The Wellington-based company narrowed its annual loss to $11,228 in the 12 months ended March 31 from $398,611 a year earlier as revenue climbed 55 per cent to $268,473 and operating costs were slashed 48 per cent to $288,502.

Fintech Australia Shares 2017 Australian Fintech Update (Infographic) (Crowdfund Insider), Rated: AAA

On Saturday, Fintech Australia released a new infographic that revealed more details about the Australian fintech industry’s successes so far this year.

 

Non-bank loans gain momentum in tough lending regime (The Sydney Morning Herald), Rated: A

We have seen demand for construction loans between $10 million and $30 million spike 20 per cent per cent over the last six months as Tier 1 banks are quickly tightening both pre-sales thresholds and loan-to-valuation ratios on new developments.

One area of the greatest demand for non-bank finance is coming from Chinese property developers, who do not have the track record or Australian assets to provide comfort to the major lenders.

Peer-to-peer lending models, like that of Chifley Securities, allow us to access investor funds to progress these developments, as we are applying different, more nuanced assessment of the risks associated with these loans.

Will property crowdfunding take off in Australia? (Your Investment Property), Rated: A

A new study conducted by the University of South Australia (UniSA) in partnership with DomaCom, suggests that crowdfunding could become a viable new vehicle for investors trying to make headway into the country’s increasingly challenging property market.

Braam Lowies, the study’s lead researcher, noted that while the concept was relatively new in Australia, it had been successful in the United States and United Kingdom for approximately seven years.

India

Wadhawan Global takes second UK bet, invests Rs 175 crore (India Times), Rated: A

Wadhawan Global Capital (WGC), which owns 38% of Dewan Housing FinanceBSE 0.07 %, has invested Rs 175 crore in London-based mortgage financer Neyber, marking it’s second investment through the newly set up UK arm as it seeks to expand its global footprint.

Why PPF is like a safety jacket for investors of P2P lending (India Times), Rated: A

Those who do not back the idea of PPF believe investors should carry the risk of loss as the principal idea of P2P Lending is to offer investors an “alternative investment route”. The P2P Lending platform, at best, can try to strengthen the risk-assessment processes by making the optimal use of technological innovations.

While the other camp which is in favour of PPF opines that it is not a luxury but a necessity at the moment as it will only instill confidence among the investors. And, it’s not about disbelieving one’s capabilities.

Asia

Consultation by MAS on the provision of robo-advisory services in Singapore (Lexology), Rated: AAA

A summary of the proposals put forward by MAS in the Consultation Paper is set out below.

  1. Expansion of licensing exemptions

    (a) Expansion of licensing exemption for dealings in securities other than CIS

    (b) Expansion of licensing exemption for provision of fund management services incidental to advisory activities

  2. Dispensation with prior client approval for each and every rebalancing transaction
  3. Case-by-case exemption from collecting full information on the financial circumstances of clients
  4. Relaxation of criteria for CMS licences in fund management for digital advisers
  5. Development, monitoring and testing of client-facing tools
  6. Provision of information on algorithms and conflicts of interest
  7. Responsibility of the board and senior management

MAS Establishes Payments Council (LATTICE80 Email), Rated: A

The Monetary Authority of Singapore (MAS) announced on 2 August that it will establish a Payments Council, comprising 20 leaders from banks, payment service providers, businesses,and trade  associations. Members are appointed for a two-year term and chaired by Mr Ravi Menon, Managing Director, MAS. The Payment Council marks the vision of an e-payments society, fostering collaboration between providers and users of payment services in Singapore.

Green Packet an emerging fintech play (The Star), Rated: A

Communication and technology services company Green Packet Bhd is eyeing an expansion into a new growth area – the mobile payment solutions segment, an area poised for disruptions through technology.

According to the 2016 Visa Consumer Payment Attitudes survey, 74% of Malaysians prefer to make electronic payments instead of cash, an increase of 8% compared with 2015. In fact, Visa indicated in a separate study that seven in ten Malaysians are willing to use mobile wallets.

Hyperintelligent banking in the fickle era of social media (Inquirer.net), Rated: A

Such is the case of American banking giant Citi, which sees itself as a technology company with a banking license, having introduced video banking recently in India.

Video banking is seen suitable especially in wealth management, which is part of the regional consumer business led by Selva. This is a segment where customers need trust and constant advice.

Citi receives 70 million calls a year, almost half of which are answered by a phone agent. The bank usually spends about 30 to 45 seconds validating the call, asking the client his or her mother’s maiden name, date of birth and details about the last transaction.

In the Philippines, Citi now implements voice-enabled biometrics for easier client verification. Citi is likewise moving toward facial recognition.

Fintech Buys Stake in Exchange (finews), Rated: B

GSX, which owns and operates the Gibraltar Stock Exchange, said on Friday that Cyberhub Fintech Holdings Limited is a new strategic shareholder. Cyberhub is a unit of Broctagon, a derivatives trading technology provider.

The stock exchange also wants to become the world’s first to fully integrate blockchain technology.

Africa

The role of financial advisers in raising national savings levels (Biz Community), Rated: A

According to the 2017 Old Mutual Savings & Investment Monitor, working South Africans allocate only 15% of their incometowards savings.

Naidoo explained that these statistics emphasise the extent of the national savings deficit and the large gap that exists between targeted economic growth of 5.4% per year, as per the NDP, and the ability of the South African economy to fund that growth.

Naidoo believes that financial services providers and advisers have a vital responsibility to promote a savings culture via collaborative advice and financial literacy efforts.

Barbados

Carilend seeing ‘phenomenal’ growth (Loop News Barbados), Rated: AAA

Just three months in and Barbados’ sole peer-to-peer lending company, Carilend, is seeing tremendous success with 100 percent of its loans.

With over 900 registered users on the site to date, the team at Carilend has been amazed at the response they have received.

Carilend reported their “average” Borrower is borrowing $8,617 for 43 months at an average interest rate of 11.34%. Whilst all applications receive an answer in one working day, Carilend recently approved a brand new Borrower in 2 hours; 22 minutes from receipt of their initial application.

Authors:

George Popescu
Allen Taylor

May 23 2017, Daily News Digest

industrial bank charters declining

News Comments Today’s main news:  Yirendai reports Q1 results. Desai steps down from Funding Circle P2P fund. Yirendai reports Q1 results.  Klarna is changing its name. Uncertainty looms over SoFi’s bank charter. Today’s main analysis: Quarterly marketplace lending results. Today’s thought-provoking articles: What’s in Ron Suber’s portfolio. China Rapid Finance quiet period coming to an end. Online lenders dominate Mozo awards. Over […]

industrial bank charters declining

News Comments

United States

  • KBRA assigns prelim ratings to Oportun Funding VI, LLC, Series 2017-A. GP:”The flurry of bond sales continues.”
  • What’s in Ron Suber’s portfolio. GP:”Most angel investors lose money and they do it for the fun. A few have made it a carreer. I have always been very curious what Ron Suber invested in. Finally we get some very interesting insights. The real question is: why he said yes to these and no to probably 100x more companies.”AT: “Payments, online lending, and financial inclusion. None of this is surprising. I’d expect the leader of a disruptive finance industry to back financial inclusion. It’s not just decent humanity, it’s good business sense, especially if you believe in the technology doing the disrupting.”
  • Quarterly MPL results. GP:”The take away: An average ROI of 7.73%. A great number to remember.”AT: “Interesting portfolio mix, but it doesn’t seem very diversified.”
  • Uncertainty looms over SoFi’s plan to obtain bank charter. GP:”Of course uncertainty rules in any interaction with a regulator, judge, client. The take away from this article: the chart showing the number of industrial banks over time. “AT: “Obey this rule: Don’t believe it until you see it.”
  • U.S. startups fail to attract crowd of small investors. AT: “This is a misleading headline. There are any number of reasons why non-accredited investors may not be flocking to crowdfunding opportunities, one of which is they may not know about them. Most opportunities are still open only to accredited investors. The investment for the platforms to get in front of these investors is huge, and the potential ROI on the short term is thin, so long-term business sense is undoubtedly driving the current focus on accredited investors until cash flows reach a point to do otherwise. In time, the cost of meeting regulatory demands and marketing will decrease allowing platforms to built a real business model around the non-accredited investors. Plus, small investors themselves tend to be more cautious with their money simply because a loss can be much more devastating than an equal loss to a larger investor. The market will come around–in time.”
  • Goldman, Cohen bet on Nav. GP:”A few companies are always attracting a lot of attention from the public: Apple, Goldman, Google, Facebook due to their reputation of smart strategic visionaries who have made surprising bets in the past that paid off incredibly well. Is Nav such a bet?”
  • Thousands flock to Build credit card for credit repair. GP:”Beyond the sensational title: a few startups , and now banks, are selling the “improvide your FICO” by using our product. Some of them in fact even allow you to lend money to yourself in order to achieve this via a complex locked account structure. “
  • How fintech’s are beating credit unions. AT: “Credit unions typically are not innovators. They too will come around, eventually. It will take time.”
  • Podcast: Raul Vazquez of Oportun.
  • Why Wells Fargo is engaging fintech partnerships right now.
  • Lender expansion.
  • The top 10 players in Bay Area fintech.  GP:”The interesting story here given the share of the finance industry in the world and local economy: Why isn’t New York the hot bed of Fintech? A possible answer: because people experience in finance always see all the reasons why an idea won’t work and don’t even want to try. Young inexperienced people don’t know better and try, and sometimes they find a pocket of opportunity.”AT: “San Francisco is a hotbed for fintech companies.”
  • Fintech marketer on why you should simplify your message. AT: “Simplifying your marketing message is important, but clarifying your messaging is just as important. How you say what you say is as important as saying it.”

United Kingdom

China

European Union

  • Klarna is changing its name to include ‘Bank’. AT: “This is very interesting. If Klarna can entice consumers to open up digital bank accounts and fund their retail purchases through those accounts, the company should be able to corner the market on e-commerce payments. This would be a huge boon.”

International

Australian/New Zealand

India

Asia

News Summary

United States

KBRA Assigns Preliminary Ratings to Oportun Funding VI, LLC, Series 2017-A (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two classes of Oportun Funding VI, LLC, Series 2017-A (“Oportun 2017-A”), a consumer loan asset-backed securities transaction.

The collateral in the Oportun 2017-A deal includes approximately $188.24 million of loans, as of the April 12, 2017 statistical calculation date. The transaction includes a three year revolving period during which additional collateral may be funded in the transaction so long as it complies with certain eligibility criteria. The preliminary ratings reflect the initial credit enhancement levels ranging from 30.0% for the Class A notes and 15.0% for the Class B notes.

Preliminary Ratings Assigned: Oportun Funding VI, LLC, Series 2017-A

Class Preliminary Rating Expected Initial Class Principal
A A (sf) $131,766,000
B BBB (sf) $28,235,000

Here’s what’s in Ron Suber’s portfolio (Biz Journals), Rated: AAA

Digital signature company DocuSign and online lender SoFi, which have been valued at $3 billion and $4.3 billion respectively. His involvement with Prosper itself started out as an investment in the company back in 2013.Digital signature company DocuSign and online lender SoFi, which have been valued at $3 billion and $4.3 billion respectively.

He added that he focuses on five themes in his personal fintech investing: digital transactions, the payment rails of fintech, online lending, unlocking cash for assets and financial inclusion.

My Quarterly Marketplace Lending Results – Q1 2017 (Lend Academy), Rated: AAA

Overall Marketplace Lending Return at 7.73%

I complained last quarter that the annualized return, based just on the latest quarterly numbers, on my main Lending Club account had dropped to 2.1% in Q4. Well, this quarter it dipped further. The balance on this account on December 31, 2016 was $39,733, the balance on March 31, 2017 was $39,472 for a -2.6% annualized return according to Lending Club’s own statements.

When I look at where the recent defaults have been coming from the majority are in the D and E grade 36-month loans issued in 2015.

My TTM return according to my own calculations is 2.56% and Lending Club says my return is 8.32%.

Last month marked four years since I invested in the Direct Lending Investments fund. It has been my best performing investment by far over this time period. While yields have come down slightly from the initial 13-15% to 10-12% today I am still very happy with this investment. As the fund has grown, today it is closing in on $1 billion, it has changed focus from investing in high yield short-term small business loans to providing funding lines for a variety of consumer, small business and real estate lenders.

Peerstreet focuses on short term loans – typically 6-24 months with yield to investors in the mid to high single digits. I like the $1,000 minimum per investment at Peerstreet which has enabled me to feel comfortable starting with a relatively small investment. I have already almost cycled through my initial investment as 11 of my first 12 properties have already paid off in full.

Uncertainty looms over SoFi’s plan to obtain bank charter (SNL), Rated: AAA

Social Finance Inc. executives say the company is ready to be regulated more like a bank, but it is unclear how feasible it will be for SoFi to obtain the industrial bank charter it wants.

In his comments to TechCrunch, Cagney said that the goal of the charter is not to use deposits to fund loans.

SoFi has yet to submit an application for an industrial bank charter in Utah, according to Utah Department of Financial Institutions supervisor of industrial banks Shaun Berrett. As of May 19, the online lender had 28 job openings in its Cottonwood Heights location.

U.S. Startups Fail to Attract Crowd of Small Investors (Bloomberg), Rated: A

Investors sprinkled about $38 million across 142 companies since May 2016 when Title III of the JOBS Act allowed equity crowdfunding for non-accredited investors, according to data from industry tracker NextGen Crowdfunding LLC.

Swat said the practice is still in its infancy. Wefunder, StartEngine and SeedInvest are the primary crowdfunding platforms, and many founders aren’t aware that equity fundraising is an option. Of those who explore it, many decide it’s not worth the hassle and expense.

NextGen data show companies typically spend from $20,000 to $50,000 on legal, accounting and marketing — a serious outlay for a startup that’s only looking to raise a couple hundred thousand dollars.

Technology startups, quite understandably, have largely ignored the new fundraising option because they benefit more from the existing system.

Goldman, Cohen Bet on Nav (deBanked), Rated: AAA

Nav recently lifted the size of a Series B round by $13 million for lead investor Goldman Sachs Principal Strategic Investments as well as Cohen’s Point72 Ventures and others, bringing the tally for this round to $38 million.

King points out that bringing the startup’s vision to reality is a gamble. For instance, Nav’s current customer count is 215,000 and they aspire to have 28 million.

Also part of the vision is international expansion.

Thousands are flocking to a credit card that helps repair their bad FICO scores and avoid payday loans (Business Insider), Rated: A

Marla Blow thinks she can help. A card industry veteran who spent nearly a decade at Capital One and helped run the credit card and payments division at the Consumer Financial Protection Bureau, Blow recently helped launch a startup called FS Card, whose sole product at the moment is a credit card targeted toward those with tarnished credit histories.

The card, which is called “Build” and has MasterCard branding, enables customers to avoid the local payday lender’s sky-high rates and gradually mend their standing in the eyes of the almighty FICO.

FS Card’s strategy is to target “deep subprime customers” in the 550 to 600 credit score range, a group that’s largely been overlooked and forgotten by the big banks, according to Blow, the company’s CEO. By offering transparent rates and fees and low spending limits to start, Blow thinks she can carve out a profitable business that also helps people repair their financial bedrock.

There’s some evidence from the Federal Reserve Bank of New York that lending is returning for subprime borrowers with credit scores below 660.

The payday loan industry — wherein people take out a two-week loan for several hundred dollars that comes with a fee that amounts to a 400% interest rate on average — now serves 19 million households out of some 20,600 locations across the country, according to industry group the Community Financial Services Association of America.

The Build card, on the other hand, is unsecured and requires no deposit, providing a more flexible line of credit from the get-go.

The Build card comes with a $75 annual fee and a starting credit limit of about $500 — not incidentally, the same as the maximum payday loan amount in many states — which grows as the borrower proves responsible over time. The interest rate percentage starts in the upper 20s, on the high end for most credit cards. All the terms are laid out plainly to avoid any surprises.

In a year and a half on the market, the Build card has extended $25 million in credit to nearly 50,000 customers, according to Blow.

How fintech is beating credit unions at their own game (Credit Union Journal), Rated: A

One of the leaders in that effort is Acorns, an app that connects to a user’s credit or debit cards and rounds up purchases to the next dollar, holding the accumulated difference in escrow and investing it with a risk portfolio determined by the user. The service costs just $1 per month for balances of less than $5,000 and users can withdraw their funds at any time.

The bigger issue, said Habib, is that CUs are once again being cut out of the relationship with their members’ money. Saving a nickel here and a dime there may not seem like a significant threat, but if Acorns or similar fintechs eventually enter the lending space then credit unions could really begin to feel the pinch.

While most CUs don’t have a round-up offering, one credit union that has embraced the idea is Tampa’s GTE Financial, which in 2015 launched Future Change, an app that allows members to round up purchases and set aside money to pay off their loans at the credit union more quickly.

In the two years since GTE began offering Future Change, $1.3 million per year has been moved to roundup savings accounts, with members making more than 3,500 principal payments on their loans. The app has been downloaded more than 15,000 times and Burney said members log in about 14,000 times per month.

Podcast 101: Raul Vazquez of Oportun (Lend Academy), Rated: A

The CFPB estimates there are 45 million adults in the US today who have little or no credit history.

In this podcast you will learn:

  • What Raul did before he came to Oportun.
  • The three criteria Raul needed to consider when moving from Walmart to Oportun.
  • The core market of borrowers served by Oportun.
  • The percentage of Oportun borrowers who do not have a credit score.
  • The total loan volume they have done to date.
  • The typical loan terms they offer.
  • Why they base their interest rates on the size of the loan.
  • The marketing channels they use to find their customers.
  • Why they use physical locations in most of the states where they operate.
  • How they are able to do 100% automated underwriting.
  • What being a CDFI means and why it is important for Oportun.
  • The three ways Oportun gets the funding they need.
  • The work that Raul does with the CFPB Consumer Advisory Board.
  • How long Oportun has been profitable.
  • What they are working on for the future.

Why Wells Fargo is stepping up fintech partnerships now (American Banker), Rated: A

Wells Fargo is putting more focus and effort into its partnerships with tech companies — from giants like Apple, Samsung and PayPal to the smallest startups.

Lender Expansion; FHA, VA; Households Moving Toward Buying (Mortgage News Daily), Rated: A

Some originators will say that the FHA program is the “new” subprime channel – certainly the program appeals to lenders who like the profit margins, and it appeals to borrowers new to home ownership and who may not have the necessary down payment for other programs. Good LOs have a sense of demographics & population trends, and as it turns out, for the first time in a decade, more new U.S. households in the first quarter chose to buy homes than to rent, suggesting a long-term decline in home-ownership rates might be coming to an end.

Speaking of SoFi and other lenders that use computers (is there a definitive definition of “fintech?”), the WSJ discusses how investors are returning to bonds backed by online lending securitizations.

The top 10 players in fintech in the Bay Area (Biz Journals), Rated: A






See the entire presentation.

Fintech Marketer Tom Roberts On Why Simplifying Your Company’s Message Is Key (Hypepotamus), Rated: A

Regardless of how complex your product may seem, your company’s marketing message should be simple and straight-forward. A complicated, dense message could alienate customers unfamiliar with the technology and reduce your leads. Crafting a narrative around your company’s solution should translate to all sides of your target market — potential customers, investors and users.

You’ve worked on simplifying the PrimeRevenue brand and presenting the company in a more digestible way. How did you approach this?

But every marketing person should be so lucky to find a great story that is not being effectively told. That’s exactly what I discovered with PrimeRevenue. We work with some of the world’s largest brands to help them optimize their working capital, and we support their suppliers by giving them more visibility and control over what their customers owe them. I crafted the narrative around the immense ROI we deliver into a simple core messaging for both buyers and suppliers.

How did you approach the company when talking about the new brand message?

I’ve done a lot of work to simplify complicated messages for B2B audiences in the past. I find the key is putting together a logical story about what you are trying to achieve and how it will accelerate sales. Then you’ve got to be a great collaborative, internal seller of both your approach and your progress. I say collaborative since one mistake marketers seem to make is huddling with their team and then popping new “stuff” on an executive team. Unless you’re lucky, that can backfire.

Why was simplifying the brand so important for the marketing strategy?

A simplified brand message was key for us putting in place a sophisticated, multi-channel digital lead and demand generation program. Frankly, the company didn’t have much in the way of lead gen other than some field marketing at very small niche conferences.

United Kingdom

Funding Circle boss steps down from P2P fund (Citywire), Rated: AAA

Samir Desai, the founder and chief executive of Funding Circle, the peer-to-peer (P2P) lender to small businesses, has stepped down from the platform’s investment company.

FCIF is listed on the London Stock Exchange and invests in loans originated by Funding Circle. It is unusual in not levying a management fee, with the fund’s shareholders only paying the platform’s 1% annual charge. Last month it nearly doubled in size by raising £142 million from investors in a C-share issue.

Stepping back from FCIF allows Desai to concentrate on Funding Circle, whose backers include Baillie Gifford, manager of Scottish Mortgage Trust (SMT), which holds an investment in the private company in its unquoted portfolio. Funding Circle has lent over £2.2 billion in the UK having and attracted 61,000 private investors who the company estimates have made an average return f 7.2% lending through the platform.

UK Online Lender WiseAlpha Exceeds £627K During Second Crowdcube Run (Crowdfund Insider), Rated: AAA

WiseAlpha, a UK online lending platform that gives everyday investors access to high yield institutional bond and loan investments, has raised over £627,000 on its Crowdcube return in just 7 days, coming in at 125% over its original target. More than 433 investors have invested in return for 8.92% equity. The highest amount by a single investor was £150,000 for the platform pre-valued at £6,402,630.

UK P2P Lender RateSetter Announces Joanna Wright as New CRO (Crowdfund Insider), Rated: AAA

Peer-to-peer lending platform RateSetter has appointed Joanna Wright as Chief Risk Officer. Wright joins RateSetter from GE Capital where she was Chief Risk Officer for GE Capital Bank in the UK, leading a team of over 200 risk professionals with responsibility for prudential and enterprise risks across the bank.

HSBC voice recognition security system duped by customer’s twin brother (IB Times), Rated: A

HSBC’s much-touted voice recognition software, used by half a million customers to verify their identity and secure their bank accounts, has successfully been duped by the brother of one of its customers. In an investigation carried out by BBC Click reporter Dan Simmons and his non-identical twin, Joe, the brothers revealed that it was possible to breach an HSBC customer’s account by mimicking their voice.

After Dan Simmons set up his own HSBC voice-ID authenticated account, his twin Joe attempted to access the account by providing his account details, date of birth and saying the simple phrase. After seven repeated attempts to mimic his brother’s voice print, the bank granted him access on his eighth try.

Although Joe was not able to withdraw any money from the account, he was able to access balances, recent transactions and even transfer money between accounts, the BBC reports.

Lenders look to alternative asset classes and areas (Bridging&Commercial), Rated: A

Last week saw a mix of property developers and finance providers come together to discuss the state of the property market.

In the afternoon, the focus shifted towards the future of the property market with a look at new types of finance, such as crowdfunding, challenger banks and peer-to-peer lending.

Even though he admitted that banks and challenger banks still dominated the space, Ashley pointed out that the alternative finance sector was continuing to grow.

As a result of new lenders entering into the development finance space, Ashley added that some lenders have been looking to move away from ‘safer’ geographical areas, such as the South East, and are targeting places further north, including Scotland.

Fears grow over P2P trusts (FT Adviser), Rated: A

Recent months have seen problems return to the fore in the £2bn trust sub-sector, which has attracted investor interest in part because of yields well in excess of 5 per cent.

Winterflood also criticised certain P2P investment trusts over disclosure levels in its latest monthly report. Analyst Simon Elliott said Ranger Direct’s partial writedown of a 20 per cent exposure to the struggling Princeton Alternative Income fund was a “disheartening episode”. Princeton had previously said its NAV would not be affected by problems at firms in which it had invested.

Of the six funds in Winterflood’s P2P trust sector, three are trading on double-digit discounts, although one – Honeycomb – trades on a premium of 12.2 per cent.

Is There Still an Advice Gap? (Morningstar), Rated: A

Four years ago, sweeping reforms were introduced to the financial advice market, aiming to improve free transparency and professionalism.

However, one of the biggest unintended consequences has been what many describe as an ‘advice gap’. This has been caused by high street banks, investment management firms and financial advisers withdrawing services for those with less than £100,000 to invest. They argue the cost of servicing these clients has become too high.

A number of advisers also used the RDR as an opportunity to leave the industry, leaving many ‘orphaned’ clients behind.

Stephen Kavanagh, chief executive of financial advice firm Chase de Vere, believes the advice gap was not caused by the RDR, but rather the regulation exacerbated existing inefficiencies in the market.

According to AXA Wealth, there is only one adviser for every 2,700 people in the UK who require help with their finances. This compares to ratios of one adviser per 1,400 people in Australia and one per 156 savers in Hong Kong.

The good news is that the advice gap is on the agenda for the Financial Conduct Authority, the regulator, alongside the Treasury. The two organisations have launched the Financial Advice Market Review, which is ongoing and aims to ensure that affordable advice and guidance is available to everyone.

Since the RDR was introduced, robo-advisers have sought to address the issue, with new entrants and established firms offering online services for those with smaller sums to invest. Some deliver investment management online, while others provide automated financial advice. They are typically powered by computer models, known as algorithms, and involve little or no human interaction.

Although Kavanagh recognises that technology has the potential to plug the advice gap by offering lower-cost services to a wider range of people, he believes the robo-advice market still has much further to go before it reaches this point.

Tinder for businesses: Five things you need to know about Peer-to-Peer lending (Independent.ie), Rated: B

One – It was invented in Ireland!

Two – As the whole process is run online, overheads are lower and lending can therefore be provided more cheaply than in more traditional financial institutions.

Three – According to Linked Finance, lenders can earn between 8.5pc and 15pc interest on the loans that they issue, however any income earned on the lending will be subject to income tax.

Four – P2P is currently not regulated in Ireland, as a result of this certain protections do not apply to consumers of P2P products.

Five – Figures for the first three months of 2017, show that the Irish P2P platform increased lending activity by more than 326pc on the same period in 2016, according to Linked Finance, and the platform has now facilitated more than €25m in loans to Irish SMEs.

China

Yirendai Reports First Quarter 2017 Financial Results (PR Newswire), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the quarter ended March 31, 2017.

Starting from the second quarter of 2016, the Company changed its reporting currency from the U.S. dollar (“US$”) to the Renminbi (“RMB”), to reduce the impact of increased volatility of the RMB to US$ exchange rate on the Company’s reported operating results. The aligning of the reporting currency with the underlying operations will better depict the Company’s results of operations for each period. This release contains translations of certain RMB amounts into US$ for convenience. Prior period numbers have been recast into the new reporting currency.

For Three Months Ended

in RMB million

March 31,
2017

December 31,
2016

March 31,
2016

QoQ
Change

YoY

Change

Amount of Loans Facilitated

6,922.7

6,675.2

3,446.5

3.7%

100.9%

Total Net Revenue

1,021.6

1,071.1

556.4

-4.6%

83.6%

Total Fees Billed (non-GAAP)

1,583.5

1,630.4

847.4

-2.9%

86.9%

Net Income

350.9

379.8

131.7

-7.6%

166.4%

Adjusted EBITDA (non-GAAP)

400.3

401.1

206.6

-0.2%

93.7%


A Quick Buy For China Rapid Finance At Upcoming Quiet Period Expiration (Seeking Alpha), Rated: AAA

The 25-day quiet period on China Rapid Finance Ltd (NYSE: XRF) will end on May 23, allowing the firm’s IPO underwriters to publish reports and recommendations after this time.

China Rapid Finance acquires consumers through multiple channels, such as online travel agencies, social networks, e-commerce platforms, and payment service providers. Its business model offers smaller, shorter-term loans through its platform. The proprietary technology then analyzes the data and identifies borrowers who may qualify for larger, longer-term loans. In 2016, 89% of its total loan volume originated through this platform, and the borrowers were prime and near-prime consumers with creditworthiness closely comparable to FICO scores ranging from 660 to 720.

XRF’s principal loan amounts range from RMB500 (US$72) to RMB6,000 (US$865). Longer-term loans range from three months to three years, with principal amounts from RMB6,000 (US$865) to RMB100,000 (US$14,400).

The total number of loans has grown from 63,251 in 2014 to 6.0 million in 2016. The number of borrowers has increased from 101,384 in 2014 to 1.4 million in 2016. However, net losses reached US$131,000, US$(30.0) million and US$(33.4) million in 2014, 2015 and 2016, respectively.

The average annual investment return for investors in lifestyle loans was 11.9% in 2014, 11.5% in 2015, and 11.3% in 2016.

With a market cap of $1.475M, net income of $1.116M, and a P/E of 9.1; YRD appears to be more reasonably priced in general than XRF.

P2P Industry News (Xing Ping She Email), Rated: A

Zhongan Financial Holding Raised ¥220M in A Round
Zhongan Financial Holding (ZFH), an auto consumer financial services provider, announced that it has raised 220 million RMB in A round of financing at the end of 2016. This capital was led by Haitong Capital, followed by Huaxin Capital, YinDuhui, Promising Capital and the listed company Sunyard.

Founded in 2014, ZFH is focused in personal car consumer financial services across the country. It provides lifecycle service of car transactions for consumers and dealers, including marketing, customer acquiring, car sourcing, trading and financing.

In addition, ZFH cooperated with banks to use the way of interbank (credit card stage) for the car consumer finance business. In this way, the cooperative bank originates credit card loans to customers, and customers mortgage the vehicle to the bank, then after the loans are issued, customers will pay the monthly payment.

Alipay to launch ““Face Identifying Payment”
Alipay has recently tested for “Face Identifying Payment” inside. In this new way of paying, the process of face identifying takes only one second, if succeed, the customer should further input the last four digits of his phone number. After the two-step verification, the payment can be completed.

Shortly after that, Alipay confirmed the news, and announced they have finished the last step of bringing “Face Identifying Payment” from laboratory to commercial use, it will soon be available on the stores of partners.

European Union

Klarna is changing its name — revealing a bold challenge to incumbent banks (Business Insider), Rated: AAA

Swedish e-commerce company Klarna wants to change its name to Klarna Bank, reveals application documents received by the Swedish Companies Registration Office.

This implies that Klarna could soon be receiving its Swedish banking license, which it applied for in October 2015.

International

Should Real Estate Investors Go Global? (ETF Daily News), Rated: B

The FlexShares Global Quality Real Estate Index Fund (NYSE:GQRE) was trading at $59.44 per share on Monday afternoon, up $0.15 (+0.25%). Year-to-date, GQRE has gained 5.45%, versus a 7.10% rise in the benchmark S&P 500 index during the same period.

GQRE currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #5 of 11 ETFs in the Global Real Estate ETFs category.

Australia/New Zealand

Online lenders dominate 2017 Mozo Experts Choice Home Loan Awards (Mozo), Rated: AAA

The awards compared 504 home loans from 89 providers, and awarded the top 10% in each of the 8 categories.

This year, Mozo found that online lenders took out more awards for great value mortgage products than in previous years, accounting for approximately 41% of the winners overall, up from just over 25% last year.

Some of the major online bank winners included Non-Bank Home Loan Lender of the Year, Homestar, which took out awards across 5 of the 8 categories and Reduce Home Loans.

InvestmentLink launches goals-based advice platform (Financial Standard), Rated: A

Financial data feed provider InvestmentLink is launching a new cloud-based platform targeted at financial planners looking to provide outcomes-oriented advice to clients.

CashDeck uses InvestmentLink’s data repository to allow clients to manage all their financial information, while advisers can use the information to generate projections and insights around client goals.

Wellington ranks #2 in the world for sharing economy (IT Brief), Rated: A

Peer-to-peer motorhome rental platform SHAREaCAMPER recently released the 2017 Return on Investment Index. The study aims to identify which cities offer the highest return on asset investment via rental peer-to-peer (P2P) platforms.

The application Airbnb was used to collect data alongside a collection of other rental platforms.

Taking into account all five of the markets researched, Wellington is ranked in second place. Auckland placed in the fifth position in the ranking.

India

Over 90% lenders in P2P lending earn gross returns of 18-26% per annum (India Times), Rated: AAA

Promise of higher returns and faster adoption of digital disruption has pulled a large number of millennials towards P2P lending, according to a report by online P2P lending platform Faircent.com. In fact as per the report, nearly 60% of the lenders on the platform are less than 35 years old.

According to the report, lenders are investing more and those with investments worth more than Rs 5 lakh are earning gross returns upwards of 22% per annum with the lowest volatility of returns. Furthermore, it states that significant increase in timely repayment has led to increase in reinvestment of returns back on to the platform, leading to further increase in returns.

Meet the Analytics & Data Science Head at Kabbage, one of the hottest fintech companies (Analytics India Mag), Rated: A

This week we bring you a closer look at Kabbage, a Fintech company headquartered at Atlanta USA, through an interaction with Ratnakar Pandey. RP, as he is popularly known, heads the Analytics and Data Science portfolio at Kabbage India.

RP has more than 15 years of experience in analytics and data science fields. At Kabbage, RP is leading the machine and deep learning models development activity across customer lifecycle, from acquisition to customer engagement to fraud prevention to risk based underwriting policy development.

Analytics India Magazine- Could you tell us more about Kabbage and your data and analytics platform?

Most of the heavy lifting that happens in Kabbage is done by technology and data, which is one of the key differentiators. We like to call ourselves a data company rather than a typical finance company. So, data is the core competency of the company and we use that in our decision making every day.

AIM- Would you like to share some of the analytics solutions you have worked on?

We use several programming and data management tools for providing both tactical and strategic analytical solutions, some noteworthy tools are Python, R, SQL, Spark, Hadoop and Scala.  In terms of statistical techniques for machine learning, we routinely use regression techniques (linear, logistics) and classifiers such as Gradient Boosting Machines (GBM), Elastic Net Regression, Support Vector Machine (SVM), Ensemble Learning etc. For forecasting and anomaly detection we use ARIMA/X, k-NN and other similar techniques. We also heavily use Natural Language Processing (NLP) for drawing insights from text and unstructured data.

AIM- What kind of knowledge and skill-sets do you look for, while recruiting your workforce?

For the positions that we are currently hiring, we are looking for 8+ years of work experience in data science, preferably in the banking and lending industry. We are keen on hiring people who can lead a project from start to finish and take the full accountability and ownership of it. We generally hire from the premiere institutes, 90% of people we have right now are from tier 1 institutes.

AIM- What are the most significant challenges you face being at the forefront in analytics space?

Lack of machine learning and deep learning talent is the biggest challenge in the Indian market.

AIM- How do you think ‘Analytics’ as an industry is evolving today? Could you tell us the most important contemporary trends that you see emerging in the present analytics space across the globe?

We are generating more data than ever before- 90% of the data that we have today is generated in last 2 years alone. This data is coming from a variety of different sources such as voice, text, transaction, sensor, chat, images, videos etc.

At this rate, Fintech will slaughter India’s banks (India Times), Rated: A

India’s banks, which still dominate the country’s financial landscape, appear to have hardly a kick left in them. Stressed assets without any loan-loss cover now exceed $96 billion, McKinsey & Co. said last week. An overwhelming 91 percent, or $87 billion, of the provisioning gap is at state-run lenders, whose net worth would be wiped out if they took the hit on their capital.

Even as McKinsey was delivering this sobering reality check, fintech was running a victory lap of sorts. Paytm, a digital payments company announced a $1.4 billion investment by Masayoshi Son’s SoftBank Group Corp. on Thursday, the largest funding round by a single investor in an Indian startup.

Capital First’s retail assets have grown 24-fold in six years to about $3 billion. Its bad-loan ratio of less than 1 percent compares with almost 10 percent for banks. And the latter figure is an official estimate; the reality is probably a lot worse.

McKinsey has several suggestions on how Indian banks can deal with the mess: by quarantining assets that would eventually find their footing, liquidating those that won’t, and working with professional asset managers to turn around debtors that lie in between. But even if the delicate surgery is successful, banks — especially state-run ones — will end up ceding a lot of ground to fintech.
Asia

SoftBank’s massive Vision Fund raises $ 93 billion in its first close (TechCrunch), Rated: AAA

SoftBank’s huge $100 billion investment fund — the largest tech fund in history — announced its first close today… and it’s huge.

The Japanese telecom giant revealed that its VisionFund has closed an initial commitment of $93 billion from a bevy of high profile backers. They include Apple, Qualcomm, UAE-based Mubadala Investment Company, Saudi Arabia’s PID public fund, Foxconn, and Foxconn-owned Sharp. The plan is for the fund to reach its $100 billion target within the next six months through commitments from other investors.

Recent deals include Indian fintech unicorn Paytm, virtual reality Improbable Worlds, China’s Uber killer Didi Chuxing, and global connectivity company OneWeb. Beyond that, there’s been a steady flow of unconfirmed investments linking the fund to companies like WeWork.

Authors:

George Popescu
Allen Taylor

Real Estate Investing for Non-Accredited Investors

groundfloor marketplace lending

If you talk to almost anyone in marketplace lending, they’ll tell you’re in the business of “democratizing” investing. In the case of real estate crowdfunding (RECF), “it’s open to everyone.” But they’re usually not. They’re open only to accredited investors, which isn’t a lot different than the way real estate investments have always been done. […]

groundfloor marketplace lending

If you talk to almost anyone in marketplace lending, they’ll tell you’re in the business of “democratizing” investing. In the case of real estate crowdfunding (RECF), “it’s open to everyone.” But they’re usually not. They’re open only to accredited investors, which isn’t a lot different than the way real estate investments have always been done. Yes, the JOBS Act has allowed RECF platforms to advertise their opportunities to everyone, but opening them up to everyone is a different story. Groundfloor is on a mission to change that.

“We’re the only P2P lender in real estate only open to non-accredited investors,” said CEO Brian Dally. “The SEC has qualified us to sell to non-accredited investors. And offer returns in the 8% to 12% per month range. Last year, we had 14.4% returns.”

Those are awesome returns, and the fact that they’re open to non-accredited investors is even more remarkable. Groundfloor is four years old and offers investment opportunities starting at $10. That’s one cheap democracy.

Why There Needs to Be a Groundfloor

Accredited investors have never had a moment where opportunities were closed. Maybe some were out of certain investors’ range, or particular investment opportunities were closed only to a few insiders who knew about them. But accredited investors have always had access to opportunities. Non-accredited investors were shut out of most investments until the JOBS Act of 2012. What Groundfloor does is provide everyday people from all walks of life an opportunity to invest in real estate.

“We’re only the third company the SEC has qualified to do that in eight or nine years,” Dally said. “Prosper and Lending Club are the other two.”
But they don’t sell real estate.

Groundfloor got its SEC qualification to sell to non-accredited investors in 2015, but Dally sees the situation as even more bleak than that.

“Only one-third of Americans have saved for retirement,” he said. “Another 23 percent have less than $10,000 in liquid assets, and people don’t trust the system because it requires them to turn money over to a mediator.”

Dally went on to say that people are smart enough to know if they’re getting a good deal or not, and most people aren’t getting good deals.

“We all pay 3% or 4% to people who allocate our capital,” he said. “They take about half of the upside on the backend. The game is rigged. That’s why people don’t save or invest any more.”

What Groundfloor Brings to the Table

When 90 percent of money managers underperform the market average in any given year, it’s difficult to trust those managers enough to give them your money. Dally and his co-founder aren’t typical Wall Streeters. Only a handful of people were in on the discussions that led to the passing of Title III of the JOBS Act. Dally’s co-founder and Executive VP of Regulatory Affairs Nick Hargava was one of them.

“We use existing SEC law to create a product that allows people to make decisions about where their money is allocated,” Dally said. “Doing that has been a long process.”

In fact, it took one-and-a-half years and a million dollars to get SEC qualification to deal with non-accredited investors. That’s why most RECF platforms don’t pursue that path.
“We originate our loans and manage them,” Dally said. “We don’t buy from someone else and turn over money to be managed.”

Groundfloor provides investors at Prosper and Lending Club another investment channel, and Dally’s proud of that.

“The world doesn’t need another real estate lender,” Dally said. “What the world needs is an investment vehicle to help them save for retirement. At Groundfloor, you get to create your own eREIT.”

A Groundfloor eREIT will have eight properties in it, Dally said. No more and no less. Dally believes every investor should have their own self-made eREIT. At Groundfloor, that happens, and he invests in every loan personally.

Another point of differentiation is how Groundfloor earns its fees. It isn’t a percentage of the loan or dividends. Rather, they make their money from borrowers through origination and service fees.

“If we lend money at 12%, you earn 12%,” Dally said.

On the underwriting said, Groundfloor might consider lending 90% for property acquisition, but for renovation, they won’t go over 70% LTV. Most of the time, however, it’s closer to 60% or 65%.

“Those loans pay 14% or 15%,” Dally said. “We always have collateral and assess the borrower’s experience to make sure it’s a sound investment.”

Slow Steady Growth is What it Takes

While it would be nice to say that Groundfloor is open to every non-accredited investor in every state, that can’t be true. Some states don’t allow marketplace lending. But the list of them is smaller than it was a few years ago.

“We lent in only one state for a year-and-a-half,” Dally said.” Groundfloor was piloted in Georgia. The company spent $2 million to pilot the platform and market test it. “We were probably the smallest, slowest growing RECF in the country. Now we’re not so small and slow growing any more.”

In December 2016, Groundfloor originated 30 loans worth $4.5 million. When they started in 2013, they raised $7.6 million in early stage capital, and that included $5 million from Fintech Ventures during a Series A round. Later this year, they expect to pursue a Series B round.

The company has partnered with Custodian IRA Services to expand how they let people invest in real estate. Before settling on Custodian IRA Services as a partner, Dally and his team looked at a few other companies, but none of them had the technology to integrate efficiently with Groundfloor’s platform. Dally wants to move retirement investing out of the dark ages, and he believes Groundfloor is poised to make that happen.

The company’s core product is a short-term commercial loan for fix-and-flip properties. Borrowers can use the money to acquire a property and make the necessary renovations. When the property sells 6 to 12 months later, the loan is repaid.

Dally said they receive 300-400 applications per month. They put potential borrowers through a rigorous qualification process that screens out the majority of those. They look for borrowers with no foreclosures in their backgrounds and use a multi-factor grading algorithm to score the investment opportunities during the vetting process. Other due diligence factors include the post-renovation value of the property and the skill and experience of the borrower.

Groundfloor also underwrites its own loans.

Since opening, they’ve repaid 108 loans and had only one default. On that one default, they recovered 76% of the principle. They’ve threatened foreclosure on a dozen properties and followed through on half of those, Dally said. In most cases, the loans turn out to be good for investors and borrowers.

In the first year, the company originated 20 loans for a million dollars. In December 2015, they originated 30 loans in the month. Last year, they originated 120 loans. This year, they’re on track to originate $100 million in loans and grow by as much as five times. They’ve recently started offering hard money loans to house flippers for as low as 5.5% interest.

While the number of loans grew last year compared to the year before, another thing that changed was the number of institutional investors that used the platform. Many of them came from hedge funds, Dally said.

“We didn’t start with institutional capital,” he said. “But integrating in a conservative way. We’re not basing our growth on it.”

But Dally said the company is focused on retail investors. In fact, there is a wait list for retail investors who want in.

“Last year, we had too many investors for the number of loans we had,” he said. “Now, we can supply enough loans and are excited about double and tripling our investor base in the next year or two.”

Groundfloor has attracted 14,000 investors to date. They’re looking at where the next 14,000 are coming from.

While this RECF platform was built for non-accredited investors, they still attract accredited investors like other platforms. The attraction for accredited investors is the public nature of the business. Groundfloor is required to report to the SEC every month. Non-accredited investors just want access to the same opportunities as the rich old guys. Now they have it.

Authors:

Allen Taylor