Tuesday June 20 2017, Daily News Digest

fintech unicorns

News Comments Today’s main news: US lenders gang up on SoFi for banking play. RealtyShares closes largest commercial debt transaction to date. RateSetter launching IFISA. BlackRock invests in European robo. DCB Bank launches biometric ATM in India. Today’s main analysis: SoFi, Upstart, Lending Club and their sponsored deals. Today’s thought-provoking articles: 10 real estate investing fintech startups. Victoria making a […]

fintech unicorns

News Comments

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International

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India

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Philippines

  • Poor Filipino farmers get alternative to predatory lending with Cropital. AT: “I wonder how many other countries could benefit from this kind of platform? Kiva has had a good run with helping small businesses in a lot of small third-world countries get the funding they need to expand and grow. With farming such a big part of the economy in a lot of these countries, there is much room for other Cropital-like platforms, some of which could go cross-border.”

Africa

Kazakhstan

News Summary

United States

US lenders rally to oppose SoFi banking move (Financial Times), Rated: AAA

A powerful lobby group for US banks is circling the wagons against SoFi, the biggest of a new breed of online lenders, urging the Federal Deposit Insurance Corporation to reject its application to launch a banking unit.

But the move should be resisted, said Chris Cole, senior regulatory counsel at the Independent Community Bankers of America, a trade group representing about 6,000 small banks holding almost $5tn in assets. He argued that SoFi is trying to take advantage of a “loophole” that would allow it access to the federal safety net, but without having to comply with all the laws a regular bank faces.

“We want these fintech companies to be subject to the same kind of regulations as banks are,” said Mr Cole of the ICBA.

Last year the student-loans specialist generated just over $8bn of loans, according to S&P Global Market Intelligence, more than any other online lender in America.

SoFi Bank, Upstart and Lending Club’s Inaugural Sponsored Deals (PeerIQ), Rated: AAA

The past week was a seminal one for SoFi, Lending Club, and Upstart.

SoFi filed for an ILC bank charter in the state of Utah. The application indicates SoFi seeks to offer deposits and a credit card product. SoFi Bank, led by Arkadi Kuhlman, would be capitalized with $166 Mn in equity. Kuhlman was the Former CEO of ING Direct (and money transfer service Zenbanx). ING Direct pioneered online deposit-banking and may provide a glimpse into SoFi’s mobile banking aspirations. SoFi’s focus on community, a credit card offering, and a rewards program reminds us of another highly successful mass affluent brand–American Express.

Collateral Comparison Benchmarks

Source: PeerIQ; Kroll Bond Ratings Agency

We find that:

  • Lending Club’s CLUB 2017-NP1 has among the highest excess spread among its peer group – indicating an exceptional return for whole loan investors in the seven party multi-seller group under the base case scenario.
  • Lending Club’s closest comp may be OneMain’s OMFIT 2016-3. Both deals have comparable credit scores, loan balances, and collateral interest rate.
    • OMFIT has approximately 50% of loss estimate as compared to CLUB 2017-NP1. This is driven primarily by channel effects (e.g., retail branch vs. online origination), other forms of security attached to the loan, and potentially a conservative ratings approach in evaluating CLUB 2017-NP1.
  • Upstart has the lowest loss range estimate across the cohort of marketplace lenders, and the lowest coupons. Upstart also has a greater mix of longer-term loans. Upstart’s closest comp is Prosper’s PMIT 2017-1.
  • PMIT 2017-1 has a comparable loss-range as UPST 2017-1 but picks up two points in excess spread due to higher WAC.

Capital Structure and Pricing

CLUB 2017-NP1 and UPST 2017-1 both secured an A- rating on the senior class.

However, CLUB 2017-NP1 has one notch higher ratings on its Class B and Class C tranches, at BB and BBB respectively, despite a 7% higher loss estimate as compared to UPST 2017-1.

Pricing Tighter 

In a notable milestone, the Class A tranche of CLUB 2017-NP1 priced at L+110 bps – the tightest pricing of any consumer loan securitization tracked by PeerIQ’s Securitization Tracker. From a funding cost perspective, the rate is competitive with term CD rates offered by GS Bank.

Source: PeerIQ

Trigger Talk

Source: PeerIQ

Although the equity tranche investors in CLUB 2017-NP1 are providing greater subordination to bond investors, they benefit from a less restrictive CNL trigger. CLUB 2017-NP1 has the highest starting CNL profile (MOB=1) vs. its peer group, starting at 7% and peaking at 29%.

By contrast, UPST 2017-1, structured and led by Goldman Sachs, has the lowest loss estimate amongst its peers, has a tighter initial trigger at 4% and peaks at 18% (a similar CNL profile to its closest comp PMIT 2017-1). UPST also benefits from somewhat higher structural leverage for equity tranche participants.

RealtyShares Closes Largest Commercial Debt Transaction to Date (BusinessWire), Rated: AAA

RealtyShares, a leading online marketplace for real estate investing, today announced the close of the company’s largest commercial real estate debt transaction to date. The deal was innovatively structured to include capital sourced from RealtyShares’ institutional investor network as well as its real estate crowdfunding marketplace.

A total of $11.9 million was sourced via RealtyShares for the acquisition and partial recapitalization of a 10-property portfolio of student housing in Seattle, WA. The properties are located within 1.5 miles of the University of Washington, a campus of 54,000 students. Entirely within the city of Seattle, this student housing portfolio is attractively located in one of the highest growth housing markets in the United States.

Will Amazon become a force in fintech? (TechCrunch), Rated: A

Amazon is the tech giant most likely to become a dominant player in fintech, predicted James Lloyd, Ernst & Young’s fintech leader, when speaking on stage at TechCrunch and TechNode’s event in Shenzhen, China on Monday.

Lloyd told TechCrunch that he expects Amazon to expand further into payments, lending and credit scoring.

Why Amazon’s Growth in Small Business Lending Threatens the Banking System (Inc.), Rated: A

Meanwhile, Amazon also recently announced that it had surpassed $1 billion in small-business loans to more than 20,000 merchants involved in its Amazon Marketplace in the U.S. UK, and Japan during the past year. In fact, since Amazon Lending began in 2011, it has surpassed $3 billion in loans to small businesses. The company is making money from both the sales of products via its online platform and by charging interest on the loans.

Amazon could disrupt small business finance in the same manner that it forever changed retail.

Currently, the company only offers short-term business loans ranging from $1,000 to $750,000 for up to 12 months to micro, small and medium businesses that sell on Amazon. It has the potential to expand into retail banking. Amazon could begin setting up deposit accounts or lending to small business borrowers outside of its own network. This could help Amazon grow its core business of online sales as well as establish the company as one of the leading online lenders to small companies. Eventually, Amazon could expand such operations to the other countries across the globe where it operates marketplaces. Think about the potential of moving into markets such as India and China.

Banks and other lenders should be nervous.

Amazon And The Future Of FinTech (Seeking Alpha), Rated: A

Can you imagine people that are accustomed to this kind of retail shopping are going to be comfortable with commercial banking, with financial institutions, as we know them now?

Furthermore, Amazon has already been in serious discussions with PayPal.

Here the essence of the banking system is not holding money for customers, but transferring funds from one place to another place. That is, the banking system of the future will work through the payments system.

And, this payments system will not necessarily be tied into where you hold your assets, just how your assets might be connected to the payments system.

The experimenting of Mr. Bezos is bringing him over the edge into the realm of the banking industry. The payments system is crucial. There is no telling how his experimentation might change the whole banking industry.

Blankfein talks up Goldman Sachs’ consumer lending business (Financial Times), Rated: A

Lloyd Blankfein, chairman and chief executive of the Wall Street bank, took to CNBC on Monday evening to talk about Marcus, the consumer lending business that the bank launched with some fanfare last October.

Quizzed by Jim Cramer, the host of Mad Money, Mr Blankfein said that the venture had so far been a big success, crashing through $1bn in loans originated and on course to hit $2bn by the end of this year. People had responded well to Goldman’s promise to save them “three, four, five hundred basis points” on the interest rates they were paying on credit card balances, Mr Blankfein said, while charging no fees of any description – ever.

Kroll Bond Rating Agency Assigns Preliminary Ratings to Marlette Funding Trust 2017-2 (Crowdfund Insider), Rated: A

Kroll Bond Rating Agency (KBRA) announced on Monday it has assigned preliminary ratings to three classes of notes issued by Marlette Funding Trust 2017-2. This is a $322.7 million consumer loan ABS transaction that is expected to close on June 29th.

MPL spigot on full blast with latest Marlette deal (Global Capital), Rated: A

Marketplace loan originator Marlette Funding is marketing its latest securitization following the pricing of breakout deals from Lending Club and Upstart last week.

The Marlette offering marks the second time the lender has tapped the securitization this year. The deal is structured as a club style offering similar to last week’s Lending Club securitization, which was the first time the lender issued a club deal. Marlette originates loans through Cross River.

Chinese P2P Lender Yirendai Beats Investor Suit, For Now (Law360), Rated: AAA

A California federal judge on Monday dismissed a securities fraud suit brought against Chinese peer-to-peer lending company Yirendai Ltd., giving leave to amend while warning the investors to tell him if “you’ve taken your best shot.”

At the onset of Monday’s hearing, U.S. District Judge Michael W. Fitzgerald issued a tentative ruling granting Yirendai’s motion to dismiss, but giving permission for a revised suit to be submitted to the court.

Samsung and Diebold Nixdorf in biometric ATM tie-up (Telecompaper), Rated: A

Samsung SDS America has teamed up with US payment technology specialist Diebold Nixdorf to develop a mobile-based biometric authentication system for cardless ATM transactions. The system allows customers to stage a withdrawal via their mobile banking app prior to arrival at the ATM. They then need to simply tap their mobile device to the near field communications (NFC) reader on the ATM, confirm their transaction and instantly receive a prompt to complete authentication via facial recognition on their mobile device.

Specialty Finance: Examining Fintechs’ New Approach to Growth (ABL Advisor), Rated: A

In this year’s keynote address at the Lendit USA conference, held during the first week of March in New York City, OnDeck’s Noah Breslow highlighted the four phases that tend to characterize the evolution of any new market. He also observed that the marketplace lending industry has already progressed past the first three phases – growing awareness, initial skepticism, and the ensuing stampede among new customers and providers. Today, Breslow emphasized, lenders are now adjusting to the fourth phase, which he predicted will see the strongest players thrive amid a still-rationalizing peer set.

To be sure, marketplace lending has grown rapidly over the past three years. To wit, originations of unsecured online loans jumped from $5.57 billion in 2014 to $11.99 billion in 2015, according to Orchard Market Data. After peaking in the fourth quarter of 2015, however, originations have since receded, pulling back roughly 18% last year. At the same time, Orchard documented that the 2014- and 2015-vintage loans experienced higher and faster charge-off rates than previous years, attributable at least in part to a higher proportion of subprime originations during those two years.

As a result, online lenders have transitioned from acquiring customers at any and all costs to focusing very intently on unit-level profitability. Gone are the days when a new, tech-enabled lender would look to prove out their business model by quickly accumulating customers with little or no regard to the bottom line.

While investments in the segment hit a peak in 2015, when there were 132 new investments in the space worth a combined $5.2 billion, according to PitchBook Data, new capital has continued to pour into the market.

This $ 130 Million Fund Is Leading The Way In Real Estate Crowdfunding (Forbes), Rated: A

The real estate crowdfunding industry is projected to be valued at more than $300 billion by 2025The global crowdfunding industry has gone from $880 million in 2010 to $34.4 billion.

In real estate, especially, this has allowed companies like Origin Investments, a private equity real estate company, to raise more than $130 million for a fund — its third fund, to be exact. To date, this is the largest fund raised by a single U.S. real estate crowdfunding platform, ranking it alongside the backing that tends to launch hot tech startups into the limelight.

In fact, their expertise in asset management is what allowed them to raise $10 million in the first week of opening their third fund.

Money360 Secures Top Talent to Support Company Growth (Marketwired), Rated: B

Money360, the leading commercial real estate marketplace lending platform, recently announced the addition of eight new hires to support the company’s rapid expansion. The hires include five seasoned commercial real estate executives and three industry specialists, who were brought on to support the increased deal flow and expanding base of borrowers and capital partners in the U.S. and around the world.

The new hires include:

  • Paul Cleary, Chief Operating Officer: Cleary was Executive Vice President of Cherrywood Commercial Lending, LLC, where he helped found the company and oversaw loan production and marketing. Prior to that, he was the First Vice President of the Business Services division at Kinecta Federal Credit Union. He earned his MBA from University of California, Irvine, his JD from the University of San Diego School of Law and his Bachelor of Arts from University of California, Santa Barbara.
  • John Calder, Director of Credit Administration: Calder has worked as a commercial real estate operator and executor for more than 20 years at companies including SABAL Financial Group, Mir, Mitchell & Company, LLP and Sterling Bank & Trust. He earned his bachelor’s degree in business at University of Colorado, Boulder.
  • Stratos Athanassiades, Regional Director – Midwest Region: With more than 20 years of experience, Athanassiades has held a number of managerial roles for Alliant Credit Union, Business Partners, LLC, MetLife and Wachovia Securities. He earned his bachelor’s degree in political science and international relations from Northwestern University.
  • Nick Jans, Regional Director – Southwest Region: Jans has originated and produced more than $2.1 billion in commercial real estate financings. His background includes positions as principal at Willow Bend Commercial Capital, Vice President at New York Life Investment Management and Investment Director at Massachusetts Mutual Life Insurance Company. He earned his bachelor’s degree in business administration from Saint Louis University in Missouri.
  • Craig Brown, CRE Loan Underwriter: With nearly 30 years of experience, Brown has held a number of executive and managerial positions at real estate consulting companies, mortgage firms and major banks. His wide range of experience includes positions at Security Pacific Bank, CORE Realty Holdings, LLC and Wells Fargo Bank. Brown earned his Bachelor of Arts from Stanford University and his JD from Western State University.

In addition to the new executives, the new hires also include three support specialists: Jared Wright, CRE Loan Analyst; Annie Chantaduly, CRE Loan Expeditor; and Joel McRae, CRE Customer Service specialist.

OCC Office of Innovation Schedules Open Office Hours for Fintech & Traditional Finance Firms (Crowdfund Insider), Rated: B

The Office of the Comptroller of the Currency (OCC) is opening up its doors at its Office of Innovation.  Announced today, the OCC will host office hours for its Office of Innovation at the OCC’s district office in New York City. The OCC is welcoming national banks, federal savings associations and Fintech companies to stop by and visit from July 24 to 26.

If you are interested, you may contact the OCC and request a slot through July 5.

You may schedule time for the Office of Innovation here.

United Kingdom

UK P2P Lending Platform to Launch Innovative Finance ISA (National law Review), Rated: AAA

RateSetter, a UK P2P lending platform, has raised £13 million in its latest round of fundraising as it prepares to launch its “innovative finance” ISA (IF-ISA).  The IF-ISA allows investors, or lenders, to earn interest free of income tax.  Before a P2P platform can offer its own ISA, it must be fully authorised by the Financial Conduct Authority (FCA).

Ranger Direct Lending fund updates on loan write-off (AltFi), Rated: AAA

Investors in the £250m Ranger Direct Lending investment trust have had a bumpy 2017 after a stellar run in 2016 where the portfolio outperformed nearly all its rivals as well as the broader marketplace, as shown in the graph below.

Source: AltFi

Currency exchange fintech launches partnership API (AltFi), Rated: A

Peer-to-peer money exchange firm WeSwap has launched a new service called “WeSwap Connect”. The B2B platform is designed to allow other firms to offer WeSwap’s travel money services alongside their own, via a “one-click” API integration.

WeSwap has named peer-to-peer lender Zopa as one of 18 new partners to sign up to the new service in the last 12 months, alongside such firms as SIXT, Perkbox and Secret Escapes.

WeSwap allows holidaymakers to swap currency with people travelling in the opposite direction. That currency is then loaded onto a Mastercard capable of holding 18 currencies simultaneously. WeSwap Connect allows partner firms to offer their customers a co-branded version of that Mastercard to take on holiday.

Nuance says that biometrics have reached their “coming of age” (SC Magazine), Rated: A

Biometrics firm Nuance has said that biometrics have reached their “coming of age” in terms of usefulness to enterprises in mitigating fraud.

The company recognises biometrics’ inherent flaws: struggling to identify people in noisy environments who are using voice recognition, or failing to authenticate someone using a finger scanner thanks to dirt in the device, when used as a stack of defences, can be used as a case to dismiss biometrics.

There are a few examples of the media misrepresenting biometrics too. Prime example: the BBC using twin brothers to evade detection of HSBCs “my voice is my password” voice recognition system.

What further exacerbates the problem is that there are numerous examples of where a failure to authenticate might lead to ‘cart abandonment’ in the e-commerce space, for example, and consequently lead to lost revenue for the company.

For context, the UK’s Annual Fraud Indicator says the cost per year of fraud to the UK is stood at £193 billion. An extra 21 percent would push that figure up to £233.53 billion.

This is where Nuance says biometrics could help. Internal research from the company claims 74 percent of tier-one financial institutions and 76 percent of telcos still exclusively use knowledge-based authentication to secure transactions in contact centres.

More than 1,500 cases of fraud totalling almost £4 million were stopped in just the first eight months of voice biometrics being deployed.

RateSetter and Al Rayan CEOs named in Queen’s honours list (Financial Reporter), Rated: B

Al Rayan Bank CEO, Sultan Choudhury, and RateSetter founder and CEO, Rhydian Lewis, have both received an OBE in the Queen’s Birthday Honours list.

Lewis was named in the list as a ‘Peer to Peer and Financial Inclusion Innovator’ and was honoured for services to Financial Services.

Choudhury was honoured in recognition of his services to the UK Market for Islamic Finance.

China

Ping An Group Yao Bo: is actively promoting the listing of Lu Jin (01caijing), Rated: A

On the afternoon of June 16, at the shareholders’ meeting of Ping An Group, Yao Bo, executive vice president and chief financial officer of Ping An Group, said that in addition to the listing of the land, the shareholders also mentioned the listing of Ping An Securities, Is: if you can enhance the overall value, will be actively considered.

European Union

BlackRock gets into European ‘robo advice (Business Insider), Rated: AAA

BlackRock, the world’s biggest asset manager, made its first push into Europe’s “robo-advice” market on Tuesday after taking a stake in Anglo-German digital investment manager Scalable Capital.

BlackRock, which manages $5.4 trillion across a range of actively managed and index-tracking funds, led a €30 million (£26.2 million, $33.6 million) funding round for Scalable alongside its two existing German venture capital backers, a joint statement said.

The funding will help Scalable expand its robo-advice business — which uses low-cost exchange-based funds and online distribution — with financial institutions and corporates to help grow assets past the €250 million raised in the 16 months since launch from more than 6,000 retail clients.

Patrick Olson, BlackRock’s chief operating officer for Europe, the Middle East and Africa, and who will join Scalable’s supervisory board, said the decision to invest came as investors increasingly wanted to access their holdings using technology.

Wealth managers’ alternatives exposure reaches record high in 2017 (AltFi), Rated: A

Seven Investment Management (7IM) has increased its exposure to alternative strategies to the firm’s highest ever levels as it seeks defensive returns away from traditional fixed income and equities.

This has prompted its investment management team to look to new strategies, for example, the £1.6bn 7IM AAP Balanced fund has seen alternative strategies exposure increase from 2.5 per cent at the start of 2016, moving to 5.5 per cent a year ago, and up to 8 per cent in May 2017.

The previous peak was 7 per cent in October 2011 during the Eurozone crisis and US debt ceiling crisis.

International

10 Real Estate Investing Fintech Startups (Nanalyze), Rated: AAA

One asset class that’s just begging to be reinvented these days is that of realty. What’s the matter with realty and why does it need to be reinvented? A few problems:

  • The traditional way to invest in property is to buy a single house which offers zero diversification to the buyer
  • Commercial property is not very accessible for retail investors due to higher price points
  • Real estate has very, very low liquidity. You can’t buy or sell it very fast.

Founded in 2014, New York startup Cadre has taken in $133 million in funding so far from investors that include some big names like Alibaba’s Jack Ma, Goldman Sachs, Khosla Ventures, and Peter Thiel’s Founders fund to name a few. Just last week, Cadre closed their Series C round of $65 million led by Andreessen Horowitz.

Over the past 9 years, LendInvest has lent $1.28 billion in loans to developers that have bought, built, or renovated 3,000 properties across the UK.

Founded in 2012, Los Angeles startup RealtyMogul.com has taken in $45 million in funding so far to develop an “online market for real estate investing”. More than 120,000 investors are using the platform to invest $270 million into commercial real estate deals.

Founded in 2013, San Francisco startup RealtyShares is a crowdfunding platform for both commercial and residential real estate financing which has taken in $35.7 million in funding so far (think Lending Club for real estate).

New York startup Knock has taken in $34.5 million in funding to solve the problem of poor liquidity in residential real estate. Their online home selling platform provides a guaranteed way to sell their home in six weeks. The fees are 6% which also includes a 3% commission to the agent representing the buyer. Why we still need “agents” in this day and age is mind boggling.

Oakland California startup Roofstock has taken in $33.25 million in funding to develop an online marketplace that lets you invest in leased single-family rental homes. Essentially, you can become a landlord by purchasing homes that already have tenants.

London England startup Property Partner has taken in $32.26 million in funding so far to develop a platform that offers residential real estate crowdfunding with a secondary exchange for investors to trade holdings on.

Arizona startup Offerpad has taken in $30 million in funding so far to offer solutions that make the online buying and selling of homes more efficient. In the case of Offerpad, that offer to buy can close in as little as 5 days and up to 90 days.

Los Angeles startup Peerstreet has taken in $21.1 million in funding so far to develop a crowdfunding platform for investors to easily access high yielding loans, collateralized with real estate.

Hamburg startup Exporo has taken in $18.03 million in funding so far to build a real estate crowdfunding platform specifically for zee Germans.

Most valuable venture-backed fintech unicorns (Reuters), Rated: A

Australia

Victoria making a play to be Australia’s FinTech capital (Omny.fm), Rated: AAA

Victoria is creating a FinTech hub and will host the first FinTech festival in Australia. The Victorian Minister for Small Business, Innovation and Trade, Philip Dalidakis chats to Trevor Long and Nick Bennett on Talking Technology about making a play to be Australia’s FinTech capital and the joys of dial-up internet.

India

DCB Bank launches first biometric ATM (India Info Online), Rated: AAA

Edging over competitors, DCB Bank launched first of its kind ATM, that will not require a debit card to dispense cash as the machine will instead verify the customer’s Aadhar card details including the iris and the fingerprint of the customer.

However, the ATM will also accept debit cards swipes for the purpose of cash withdrawal.

The high-tech ATM was installed in the capital of Telangana, said a press release issued by the bank.

How this #1 Global Conglomerate Is Engulfing Indian Market (Entrepreneur.com), Rated: A

China’s Alibaba Group Holding Ltd. has already made a foothold in India with its ticketing operations, cloud computing and news agency.

The company has also invested in digital wallet Paytm for the launch of Paytm Mall, a mobile shopping app which offers a mixed experience of a mall and bazaar to Indian customers.

In September 2015, Alibaba Group and Ant Financial invested about $680 million in the online payment platform.

Alibaba-Paytm Deal

In March 2015, Paytm received a $575 million investment from Alibaba Group after Ant Financial Services Group, an Alibaba Group affiliate, bought a 25% stake in One97(the parent company of Paytm), as part of a strategic agreement. Ant Financial Services Group, which operates Alipay the biggest online payment platform, will help Paytm improve user experience and continue doing good in competitive digital wallet space.

Wodehouse Capital Advisors launches exclusive investment network (Forbes India), Rated: A

Wodehouse Capital Advisors, a multi-family office and mid-market focussed investment bank has launched an investment network for high net worth individuals (HNIs).

The platform also seeks to be an “impartial peer-to-peer networking forum”. According to Manmohan Tiwana, managing director and CEO, Wodehouse Capital Advisors, “WIN is a great way to invest, as it allows you to do so in a social environment and also earns you profits at the same time.” Aside from offering investment opportunities, WIN will offer its members “various luxuries and lifestyle-related products” such as access to high-end event and conferences organised by Wodehouse Capital Advisors.

Asia

Sedania expects earnings boost with Islamic FinTech platform from 2H17 (The Edge Markets), Rated: A

Technology empowerment company Sedania Innovator Bhd expects income to start coming from recently acquired Islamic FinTech platform provider Sedania As-Salam Capital (SASC) as early as the second half of financial year ending Dec 31, 2017 (FY17).

According to the independent market research report, the personal financing market under the Islamic banking system in Malaysia was valued at RM28.8 billion in 2016, amounting to 41.7% of the total personal financing market, it said.

Philippines

For Poor Filipino Farmers Reliant On Predatory Lending, This Startup Offers An Alternative (Forbes), Rated: AAA

For Cropital cofounder Rachel de Villa, her company’s mission is rooted in personal experience. After seeing her grandmother lose her pineapple farm, she became determined to prevent other farmers from losing their livelihoods due to financial hardship.

To date, Cropital has facilitated loans for 600 farmers in six provinces throughout the Philippines. The team vets potential borrowers based on the types of crops they’re growing (or livestock they’re raising) and suitability to the region. Once a farmer successfully repays a loan, he or she can recommend other local farmers to the platform, who will also go through the vetting process.

Investments begin at 5,000 Philippine pesos (about $100 USD) and increase by increments of the same. Cropital built a custom virtual wallet for its platform, and users must transfer money through that system.

Africa

TechPrenuer Africa signs fintech MoU with Abu Dhabi Global Market (Finextra), Rated: AAA

TechPreneur Africa, a social impact firm focused on harnessing innovation and entrepreneurship to achieve real economic impact across Africa has signed a memorandum of understanding (MOU) with Abu Dhabi Global Market (ADGM), an international financial centre in Abu Dhabi, to foster and support the growth and activities of FinTech in the Middle East and African regions.

ADGM is the first in the MEA region to have a FinTech regulatory laboratory (RegLab) regime to foster innovation in financial services.

Techpreneur Africa who officially launched operations in the African Market in 2015, are delighted at the potential the opportunity presents to African Fintech entrepreneurs, firms and the financial services industry in its drive towards 30% financial inclusion growth by 2020.

Africa’s payments and remittances space becoming crowded (How We Made It In Africa), Rated: A

We asked Tom Jackson, co-founder of Disrupt Africa, about the report’s major takeaways. We asked Tom Jackson, co-founder of Disrupt Africa, about the report’s major takeaways.

According to Disrupt Africa’s recent report, there are over 300 fintech start-ups active in the continent. I assume some of them are high-potential, fast-growing enterprises, while others are struggling for survival?

The extent to which Africans are lacking access to formal financial services means there is an innate potential in fintech on the continent, as evidenced by the fact there are more than 300 companies working in the space. However, there is a danger of saturation, especially in segments such as payments and remittances, and we would hope to see some consolidation over the coming years as there is not room for so many individual companies to all scale and succeed.

What, according to you, have been some of the more noteworthy fintech investments over the past year?

Zoona’s $15m round last August was major, with Nomanini also raising [funding]. In the payments space, Nigeria’s Flutterwave raised a sizeable round. It has also been interesting to see so many blockchain start-ups raising funding – notably BitPesa, Custos Media, The Sun Exchange and BitFinance. In fact, our data suggests that blockchain start-ups stand a greater chance of securing investment than any other type, with almost 40% of African blockchain start-ups backed so far.

According to your report, the payments and remittances market is the most popular sub-category within the fintech space. Why do you think that is?

Moving money between African countries, and in and out of Africa, is an expensive business – with transaction fees charged by banks and traditional remittance firms, such as Western Union, starting as high as 10%. Tech-enabled payments and remittances start-ups can bring these prices right down – often to around 2% or 3% – and open up new economic opportunities for Africans.

Kazakhstan

ID Finance awarded Microfinance Company status from the National Bank of Kazakhstan (ID Finance Email), Rated: AAA

George Popescu
Allen Taylor

Monday May 22 2017, Daily News Digest

cumulative net trigger loss

News Comments Today’s main news: DBRS confirms SoFi professional loan program 2016-B LLC.  Bond buyers return to online lenders. RateSetter acquires Vehicle Trading Group. Linked Finance receives full FCA authorization. Australian banks have paid $60M in forced refunds. StashAway raises $2.2M. Today’s main analysis: Prosper Marketplace Issuance Trust PMIT 2017-1. Today’s thought-provoking articles: Bond buyers return to online lenders. China, […]

cumulative net trigger loss

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Canada

Barbados

News Summary

United States

DBRS Confirms SoFi Professional Loan Program 2016-B LLC (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today reviewed and confirmed the four outstanding publicly rated classes from SoFi Professional Loan Program 2016-B LLC. All four classes were confirmed because performance trends are such that credit enhancement levels are sufficient to cover DBRS’s expected losses at their current respective rating levels.

RATINGS

Issuer Debt Rated Rating Action Rating Trend Notes Published Issued
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-1 Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2A Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class A-2B Confirmed AAA (sf) May 19, 2017 US
SoFi Professional Loan Program 2016-B LLC Post-Graduate Loan Asset-Backed Notes, Class B Confirmed A (high) (sf) May 19, 2017  US

Weekly Industry Update: Prosper Marketplace Issuance Trust (PMIT 2017-1) (PeerIQ), Rated: AAA

Prosper priced its first unsecured consumer deal of 2017 on May 19th, representing the sixth deal consisting of Prosper collateral, and the first deal backed by Prosper’s consortium of institutional investors. The deal was structured by Credit Suisse and co-led by Jefferies.

The Consortium appears on track to deliver the $5 Bn loan purchasing commitment to Prosper as evidenced by i) size of the deal size ($470.8 Mn), ii) average age of the portfolio (two months), and speed to marketing th deal. The deal generates incremental revenue for Prosper which holds unrestricted cash and cash equivalents of $22.3 MM.

We note that Kroll has added 4.5% points for base case loss range reflecting the somewhat higher path of losses on CHAI 2016-PM1 than initially expected. (CHAI 2016 PM-1 has a revised base case loss range of 12 to 14% from 10.61% initially). 

 The deal’s excess spread is substantially tighter, reflecting higher coupons, improved market conditions, and stronger investor appetite for MPL ABS bonds. The attractive excess spread of ~10% implies a significant return for residual tranche investors assuming base case loss estimates are borne out.

Improved Predictive Risk Model PMI-7 

Prosper made a significant change in the in the credit underwriting by switching from Experian to TransUnion, the dominant credit bureau in the FinTech sector. The switch to TransUnion affords Prosper access to trended bureau data, more diverse credit attributes, and alternative data. Trended data provides lenders with a longitudinal view rather than merely a snapshot into a borrower’s credit behavior.

Prosper rolled out a new proprietary credit risk model PMI-7 on December 20th based on the TransUnion dataset. Although the trended bureau data is a significant long-term enhancement, it will take some time for Prosper to re-calibrate models based on new performance data. Investors and Prosper will be monitoring the vintage performance from PMI-7 closely to assess the smoothness of the transition.

Source: PeerIQ

Bond investors in the deal benefit from credit enhancement consisting of over-collateralization, subordination, reserve accounts, and excess spread. For PMIT 2017-1, the A, B, and C tranche has a total credit enhancement of 43.9%, 31.1%, and 10.4%.

Pricing Tighter

The Prosper deal priced tighter than a recent LendingClub prime deal ARCT 2017-1, in part due to the much higher initial credit enhancement in PMIT as compared to other recent deals.

We observe a parallel shift in the credit curve: For instance, PMIT 2017-1 A (A-rated) has about 44% credit enhancement and 0.8 year WAL; ARCT 2017-1 A (BBB-rated) has about 29% credit enhancement with a similar WAL. PMIT 2017-1 A was priced 95 basis points tighter than the senior class in ARCT 2017-A.

Walking down to lower junior tranches, PMIT 2017-1 C (B-rated) was priced about 40 basis points wider than ARCT 2017-1 B (BB- -rated). The steepening in the pricing curve again reflects demand for senior rather than equity-like risk profile.

Trigger Talk

We continue to observe a pattern of higher CNL triggers in recent deals, reflecting conservative outlook from market participants. Exhibit 4 shows several cumulative net loss (CNL) trigger profiles in recent personal loan ABS deals. Here, we summarize the cumulative loss trigger profiles from recent deals and contextualize the CNL triggers of the new Prosper deal with those of CHAI 2015-PM1.

All Is Forgiven? The Bond Buyers Return To Online Lenders (PYMNTS), Rated: AAA

After the rather spectacular fireworks display that Lending Club had going on this time last year, it was not great surprise when the bond buyers who had been snapping up P2P marketplace debt suddenly got a case of cold feet and starting fleeing those marketplace lending platforms.

Since April of this year, over $2 billion in securities backed by loans have either been sold or are being prepared for an imminent sale, according to credit-rating firms and people familiar with the matter.

That is some much needed good news for the segment, as it represents more than was issued in the entire second quarter of 2016, according to data tracker PeerIQ.

And it seems to be a continuation of recent activity that saw $3 billion in bonds backed by online loans that were issued in the first quarter of 2017, double the amount from the same period a year earlier.

Bonds backed by online loans is a small part of the securitization market — as of 2016, $7.8 billion of bonds backed by online loans were issued, compared with $191 billion in total issuance of asset-backed securities, according to S&P Global Ratings.

New Fed Mortgage rolls out the “Fast Track Mortgage” (PRWeb), Rated: A

NewFed Mortgage Corp., a multi-state residential mortgage lender is excited to announce their “Fast Track Mortgage” loan origination technology integration with BeSmartee, an online mortgage automation company based in Huntington Beach, California. This smart technology platform utilizes intuitive artificial intelligence targeting the specific needs and qualification of borrowers.

Fast Track is an online self- serve platform offering mortgage shoppers the convenience of 24/7 access to obtain a personalized rate and cost quote with the option to continue to apply and obtain a conditional loan approval in less than 15 minutes. Fast Track streamlines the application process by allowing the borrower online to pull their own credit report, calculate costs, obtain loan disclosures on the spot and receive an automated loan approval and along with the option to order their home appraisal. The ease of Fast Track Technology allows borrower to send documents right through their specially created account.

Nuance Strengthens Biometrics Security Portfolio and Attacks Fraud with Advanced, Multi-Modal Offering (NASDAQ), Rated: A

Nuance Communications, Inc. (NASDAQ:NUAN) today took a major step towards reducing the risk of consumer fraud by announcing a new suite of biometric security solutions, driven by the latest in artificial intelligence (AI) innovations.  The new Nuance Security Suite includes not only the company’s award-winning voice biometrics technology, but also new advances in facial and behavioral biometrics that combine to provide advanced protection against fraud, across customer service channels.

Applying deep neural networks (DNN) as well as advanced algorithms to detect synthetic speech attacks, and integrating facial and behavioral biometrics means the Nuance Security Suite takes fraud prevention to new levels.  By combining a range of physical, behavioral, and digital characteristics to provide secure authentication and more accurately detect fraud across multiple channels – from the phone to the Web, mobile apps and more – Nuance’s new Security Suite allows enterprises to attack fraud head-on, while at the same time offering an improved customer experience.

With its latest Security Suite, Nuance can equip an organization with one or more of the following options to fight fraud, improve security and boost the customer experience:

  • Voice biometrics – authenticates the customer when they say a predetermined phrase like “My voice is my password,” or during the course of normal conversation with an agent to determine if the customer is indeed who they say they are.
  • Facial biometrics – utilizes the camera on a smart phone to verify the person in real time.
  • Behavioral biometrics – tracks how users interact with Web and mobile applications, (e.g. scrolling, mousing, or tapping), creating a pattern against which to compare.
  • Additional biometric modalities – In addition to offering support for voice, facial, and behavioral biometrics, the Nuance Security Suite can also accept plug-ins for other emerging authentication technologies such as retinal scans.

The mortgage search goes digital (American Banker), Rated: A

Interest rates on the rise and a lower inventory of homes on the market are tightening access to the housing market. At the same time, nonbank, online-only lenders have boomed, accounting for 73% of loans originated, according to the Federal Housing Authority.

This trend is likely to continue in the coming years. And members of the digital-native Millennial generation, who rely on online search to find home loans–and everything else–are taking over as the primary home-purchasing segment of the population–Millennials accounted for 84% of closed home loans in January 2017, according to the Ellie Mae Millennial Tracker™ report. In this environment, an effective organic local search strategy is no longer just beneficial for traditional mortgage lenders; it’s existential.

Of 5,849 loan officers whose online presence Yext studied across the online ecosystem (including sites like Google, Facebook, Bing, Yelp, and many others), 64% of their business listings contained incorrect addresses, 42% had phone number errors, and 46% had errors in business names. 9.25% of loan officer listings were duplicates, and 57.8% of loan officers studied had no online presence at all.

CFPB Explores Ways to Assess the Availability of Credit for Small Business (CFPB), Rated: A

The Consumer Financial Protection Bureau today launched an inquiry into ways to gather and use new and existing information to identify the financing needs of small businesses, especially those owned by women and minorities. Small businesses typically need access to credit to take advantage of growth opportunities, yet public information on this lending market is inconsistent and incomplete. The Request for Information asks for public feedback to help the Bureau better understand how to bridge this information gap. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFPB to collect data about small business lending to help identify needs and opportunities in the market and to facilitate enforcement of fair lending laws.

500 Startups Creates Pooled Investment Fund for Fintech (Crowdfund Insider), Rated: A

500 Startups has filed a Form D 506(c) for a pooled investment fund targeting Fintech. The 500 Fintech LP is seeking $25 million according to a filing with the Securities and Exchange Commission.

The Silicon Valley based operation has committed over $350 million in early stage investments. Over 1,800 companies have benefited from both funding and support around the world since the global seed fund was launched in 2010.  Some of the better known investments include Twilio, Credit Karma, Maker Bot and more.

TSB offers online consumer lending (The Mountain Press), Rated: A

PIGEON FORGE — Tennessee State Bank is excited to announce online consumer lending, powered by Lending Club, the world’s largest online credit marketplace, is now available.

These loans range from $1,000 to $40,000, are unsecured (which means no collateral is required), and can be used to eliminate high interest debt, kick-off a home improvement project, or make a major purchase.

JPMorgan formally quits R3 (LinkedIn), Rated: A

Not subscribing to a consortium like R3 is not the same as banks not leveraging blockchain/DL. Here is a link to an excerpt from a report we did on a bankers perspective (former head of digital banking at Deutsche Bank) on blockchain which may provide some insights:

At the same time, Ripple is posting amssive gains, overtaking Etherium on market cap:

First Federal Lakewood invests in Boston startup Numerated Growth Technologies (Cleveland Business), Rated: B

The mutual bank, with $1.6 billion in assets, has announced an investment partnership with Boston’s Numerated Growth Technologies Inc., a fintech (the term ascribed to programs and technology that support financial services) startup spun out of Boston-based mutual Eastern Bank own in-house fintech accelerator, Eastern Labs.

Numerated’s platform focuses on small-dollar loans, allowing the loan process to be managed in real-time — reportedly conducting the process in as quick as five minutes, according to the firm — in addition to automating marketing to existing and prospective bank customers, which helps feed the loan pipeline as fewer consumers visit brick-and-mortar bank branches.

Nicki Minaj Is Starting An ‘Official Charity’ To Pay Off Student Loans (Huffington Post), Rated: B

Last weekend, hip-hop living legend Nicki Minaj made waveswhen she decided ― seemingly spontaneously ― to start making tuition and student payments for straight-A students who reached out to her via Twitter.

Most notably, Minaj announced that she was in the process of launching an “official charity for Student Loans/Tuition Payments,” meaning kids who are having trouble paying their way through school could soon get some much-needed help.

United Kingdom

HSBC tech chief on digital challenger banks: ‘We are building similar stuff ourselves’ (Business Insider), Rated: AAA

One of HSBC’s most senior technology executives says that the big bank is not far behind digital-only challenger banks when it comes to consumers offerings.

Raman Bhatia, HSBC’s head of digital for retail banking and wealth management in the UK and Europe, told Business Insider that while startups enjoy a technological advantage, HSBC is working hard to catch up.

Bhatia pointed to HSBC’s SmartSave app as an example of how the bank is keeping pace with digital rivals. The app helps people automatically put money into savings based on pre-set rules. It evolved from Nudge, an internally developed and trialled savings app HSBC worked on last year. SmartSave was trialled with around 2,000 HSBC customers in December.

Assetz Capital reaches quarter of a billion lending milestone (P2P Finance News), Rated: AAA

ASSETZ Capital announced that it has now lent £250m to UK businesses.

The peer-to-peer lender said it has provided up to £25m of secured loans a month since its launch in 2013, with more than £55m lent so far this year.

Stuart Law (pictured), chief executive of Assetz Capital, said investors have earned more than £21m with actual rates of between 3.75 per cent and 18 per cent.

Sub-prime vehicle finance provider bought out of administration (AM Online), Rated: AAA

Peer-to-peer lending company RateSetter has acquired sub-prime vehicle finance provider Vehicle Trading Group out of administration.

The Leicester-based operation has now been sold to RateSetter, which is planning to rebrand the business, but Insider Media reported that the deal “will not impact its day-to-day operations”.

Linked Finance receives full authorisation from UK regulator (The Irish Times), Rated: AAA

Linked Finance, a peer-to-peer lending platform, has received full authorisation by the UK’s financial conduct authority to enter the UK lending market.

Figures from the first quarter of 2017 show that the company’s Irish platform increased lending activity by more than 326 per cent on the same period a year earlier.

Since its launch in 2013, Linked Finance has facilitated more than 870 loans and more than €25 million in funding for Irish small to medium enterprises.

Deloitte Launches Enhanced Digital Banking Offering (PR Newswire), Rated: A

Deloitte today announced the launch of its enhanced Digital Bank offering to further accelerate a bank’s digital transformation. Based on the Salesforce Intelligent Customer Success Platform and utilizing the Salesforce Financial Services Cloud, Digital Bank helps banks create exceptional experiences by providing tailored banking capabilities with accelerated implementation and realization of value.

Digital Bank’s capabilities and potential benefits include:

  • Augmented Salesforce Platform with many technologies, fintech solutions and AppExchange partners, as well as personalized channel engagement through automated marketing using Salesforce Marketing Cloud
  • Ability to expand relationships by having full visibility into bank relationships across business units
  • Established customer trust through multifactor secured cloud banking platforms and improved onboarding for customers through a fully mobile process enabled by many technologies
  • Increased speed and agility to meet customer needs, as well as the regulatory needs of the banking industry, using predictive analytics based on account behavior to recommend next best offers and next best actions
  • Accelerated implementation allowing banks to generate ROI faster, including linking newly created accounts in Salesforce to a blockchain secured digital identity

The job creation contradiction in fintech (AltFi), Rated: A

It got me thinking about the broader impact of fintech lenders in the UK, especially those built to fund businesses. Companies like Funding Circle – the country’s largest marketplace lender for SMEs – regularly reference their impact on job creation in corporate updates. The logic is that the loans that Funding Circle and other platforms like it facilitate help small businesses to grow, and so too to hire more staff.

Leading US firm OnDeck released a report in late 2015 analysing the economic impact of the first $3bn lent through the platform. The report found that OnDeck loans had powered $11bn in business activity, creating 74,000 jobs across the country. Similarly, Funding Circle published findings last summer suggesting that its lending had supported the creation of 40,000 jobs in the UK since 2010, boosting the economy by £2.7bn.

In this way, they are unquestionably killing jobs, as well as creating them – but nobody ever talks about that.

Barely a month goes by without news of a fresh round of bank branch closures. In March, for example, we learnt that RBS and NatWest would be cutting 158 branches and 400 jobs across the country.

Welsh start-ups can become unicorns with a $ 1bn plus valuation (Wales Online), Rated: A

As a result, Improbable has become one of the few UK start-ups to achieve the so-called ‘unicorn’ status, namely having a valuation of over $1bn.

Since then, their numbers have grown to nearly 200 firms globally and that are collectively valued at £523bn. The most valuable is Uber, the online taxi company that, in only four years, has reached a valuation of over £50bn.

A recent article in Forbes Magazine suggested that investors, with few places to put their money during an era of near zero interest rates, are fuelling the growth in unicorns as they look for better returns.

Property is top pick less than a year after funds gated (FT Adviser), Rated: A

According to research from peer-to-peer lending platform Kuflink, conducted in the first week of May, nearly a third of UK investors are planning to direct their attention to traditional asset classes such as property over the course of the financial year.

This comes after some of the largest property funds in the UK temporarily stopped investors from cashing-in their money last summer when thousands of people panicked after the European Union referendum and pulled out of the asset class.

The Kuflink survey, which questioned 1,100 investors across the UK, also found that Brexit and the snap election have impacted UK investment decisions more than any other political event in their lifetime.

Almost 40 per cent of investors are taking a more cautious approach by favouring ‘safe-haven’ asset classes, while 38 per cent are waiting until after the 8 June election to make any further investment decisions.

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA

Belt and Road Forum for International Cooperation, also known as the Belt and Road Initiative, was held in Beijing on May 14-15.

On May 12, the State Council Information Office of China announced that China has reached a series of agreements with U.S. related to agriculture, investment, energy and especially in financial service area.

Key points of the Initial Agreements of the China – US Economic Cooperation 100-Day Plan in financial service area:

  1. By July 16, 2017, China is to allow wholly foreign-owned financial services firms to provide credit rating services in China, and to begin the licensing process for credit investigation.
  2. The People’s Bank of China and The U.S. Commodity Futures Trading Commission (CFTC) are to work towards a Memorandum of Understanding (MOU) concerning the cooperation and the exchange of information related to the oversight of cross-border clearing organizations.
  3. By July 16, 2017, China is to issue further necessary guidelines and allow wholly U.S.-owned suppliers of electronic payment services (EPS) to begin the licensing process.

The hotly anticipated initial public offering of Alibaba’s finance arm, Ant Financial, has reportedly been delayed until at least the end of 2018 because of the need to secure regulatory approval and to focus on building the business.

E-commerce giant Alibaba Group and affiliated online payment service Alipay are aiming to use facial recognition technology to help retirees simplify pension authentication. Shenzhen is chosen to be the first pilot city.

The Peoples Bank of China (PBOC), the country’s central bank, announced that it has set up a Fintech committee to enhance research, planning and coordination of work on financial technology.

Happigo Home Shopping Co. Ltd., a leading Chinese multichannel e-retailer, announced that the company had the local government approval to build a small loan company.

The new micro-credit company will be named “Happy Tongbao”, which has about RMB 300 million in registered capital. It will focus on online micro-credit and expects to start its business in Hunan Province, lending to merchants in desperate need of a loan, then gradually expand to the entire Chinese market. Entrusted loans, bill business, financial advisory and other online business models is said to be covered in its future development.

To reduce lending risks, Happigo said it had developed a cloud system for tracking merchants on its online shopping platform to help it keep a record of the business of would-be borrowers’ cash flow.

IFRM: A Risk Control Model keeping No Bad Debt! (Xing Ping She Email), Rated: A

IFRM ( Internal Financal Risk Management) is a unique method created by Xeenho, focusing on the operation modes of platforms. In the IFRM Solution, the risks of P2P lenders are evaluated through three indicators: FOW (qualitative indication system), TOS (quantitative indication system) ,O2O Due Diligence, and Big Data Supervision. By using the model, Xeenho has been keeping the Zero Bad Debt since 2014 with a business volume up to $400M.

FOW ——qualitative indication system
FOW means Forbidden, Observation and Warning. FOW detects and prevents P2P fraud, if a platform is categorized as Forbidden, Observation or Warning then it won’t proceed to the next step.

TOS ——quantitative indication system
TOS means Transparency, Operation and Safety. TOS thoroughly evaluates a platform, from its basic information to its UX, and the risk is ranked thereafter.

O2O ——due diligence from online to offline
O2O means making due diligence from online to offline, in order to ensure a platform that passed FOW and TOS is as good as it seemed to be.

Big Data——Analytics & Observation System
This dynamic surveillance system continuously over watches the performance of a platform, and adjusts the rating accordingly.

The Business Model of Xeenho
European Union

Alternative Lending Index Unveils European Cross-Border Lending Opportunities (Crowdfund Insider), Rated: AAA

Twino, one of the leading Baltic lending marketplace, has produced in conjunction with KPMG Baltics a report called Alternative Lending Index which assesses the potential of alternative finance in 23 European countries based on a set of economic credit data. While the report does not pretend to exhaust the analysis of the drivers and hurdles of alternative finance across Europe, it presents a very useful snapshot of the Pan-European credit landscape that should help support international strategies.

The first platform to tackle cross-border lending was Estonian pioneer Bondora in 2009. Since then, and particularly in the past two years, international lending marketplaces have mushroomed in the Baltics. There are now more than a dozen of them, with a strong dominance of consumer lending platforms. Leaders such as Mintos and Twino have long passed the €100 million mark in cumulated loan funding. They currently grow at a rate of between €10 to €20 million worth of new loans funded a month. If you operate a lending marketplace in the UK, France or Germany you should know these platforms because they are targeting your smartest investors:

Together, these platforms have funded over €500 million in cumulated loan volume – which would make the Baltics, if it were a single country, the 4th largest online alternative lending market in Europe after the UK, France, and Germany.

Together, these platforms have funded over €500 million in cumulated loan volume – which would make the Baltics, if it were a single country, the 4th largest online alternative lending market in Europe after the UK, France, and Germany.

The ALI ranks 23 European countries. It concludes that countries with the highest gaps and inefficiencies in traditional lending, hence the highest potential for alternative lending in Europe are, in that order:

  • Hungary, Slovenia, Latvia, Poland, Romania, Greece and Ireland.

Conversely, the countries where the existing sources of financing available to households and corporate borrowers are sufficient and the potential for the development of alternative lending is therefore considered low, leaving little room for alternative lenders are:

  • France, Germany, Netherlands, Austria, Finland and Sweden.

Read the full report.

International

US Anniversary and the (Possible) Regulation of Crowdfunding in Ireland (Lexology), Rated: AAA

The US has just celebrated the first anniversary of its regulated crowdfunding regime, known as “Regulation Crowdfunding”. It was by all accounts a very happy anniversary for many US start-ups, as Regulation Crowdfunding reportedly raised $40 million in its first year. US advisory and education firm, Crowdfund Capital Advisors report that the average successful crowdfunding campaign raised around $282,000 from around 312 investors. Regulation Crowdfunding allows companies to raise up to $1,070,000 over a 12-month period.

An unregulated environment brings with it its own set of benefits and drawbacks:

  • On the positive side, the absence of a regulatory framework means there are no restrictions on who can invest, or on the amounts that can be raised or invested. In contrast, the Regulation Crowdfunding regime in the US has strict limits on the amount which a person may invest through crowdfunding each year. These limits are determined by an individual’s annual income and net worth.
  • On the negative side, the lack of regulation means that many investor-protection mechanisms are simply not available. For example, the Central Bank’s codes of conduct and client asset rules do not apply to crowdfunding platforms.

The Department of Finance (the “Department”) and the SME State Bodies Group have issued a public consultation paper on the possible ‘Regulation of Crowdfunding in Ireland’. They are considering how to facilitate the development of crowdfunding in Ireland for the benefit of the economy while also ensuring adequate protection for small investors and consumers.

The objective of this consultation is to invite the views of interested parties on whether a regulatory regime would be appropriate for the crowdfunding sector.

Breaking Banks: Small-business fintech around the globe (American Banker), Rated: A

How do we get money to small businesses that make the economy work for most people around the world? What kind of systems do we need to create? And how do we make them flexible so multiple cultures can utilize them?


A ‘paradigm shift’ is taking place in financial technology (Business Insider), Rated: A

Venture capital firms, which poured $117 billion into fintech startups from 2012 to 2016, have been pulling back on their investments.

Financial technology companies experienced a surge in funding from 2012 to 2015, during which time venture capital firms poured $92 billion into the space.

In 2016, global venture capital investment in fintech companies dipped to $25 billion, from $47 billion in 2015.

According to Morgan Stanley, there are a number of factors that will push legacy financial firms to step up their investments in fintech companies. The most obvious factor is the fear of disruption.

Deregulation is another trigger. If the Trump administration follows through on its promises of Wall Street deregulation, then incumbent firms won’t have to spend as much cash on regulatory compliance. That would free up money for fintech investment initiatives. Legacy firms’ focus on lowering cost also provides an incentive to invest in fintech.

Online Financial Advice Lacks The Human Touch (iexpats.com), Rated: B

Robo-advisers can do more or less the same job, but without the human touch and the expensive fees that go with it.

Now, anyone can find financial advice 24/7 as long as they have an internet connection, cash to invest and a smartphone or other gadget to access the web.

The recommendations that come out of the robo-advice process should be similar to those suggested by a human adviser.

Some would argue robo-advisers are less likely to make mistakes, but if a consumer keys the wrong information the ‘rubbish in, rubbish out’ rules applies.

Australia/New Zealand

Big banks pay $ 60m in advice refunds (Financial Standard), Rated: AAA

AMP, ANZ, CBA, NAB and Westpac have to-date repaid $60 million out of an estimated $204 million for charging clients for financial advice that was not provided.

On a per-institution basis, AMP has paid $3.8 million out of an estimated $4.4 million; ANZ paid $43 million out of an estimated $52 million; CBA paid $5.8 million out of an estimated $105 million; NAB paid $4.4 million out fan estimated $5 million; and Westpac has paid its estimated total compensation of $2.6 million in full.

Robo adviser to get access to Westpac’s Panorama platform (Financial Review), Rated: AAA

Small-balance investors that financial advisers usually avoid will now get a chance to use BT Panorama, Westpac’s $500 million integrated banking and wealth operating system, after the bank inked a deal with Barry Lambert-backed robo adviser Ignition Wealth.

Currently the platform has about $110 billion under administration and 800 advisers are using it.

Via Ignition Wealth, which rich lister Mr Lambert took a minority stake in in 2016, customers can go fully advised, use a hybrid model where they control their investments with an adviser, or go fully DIY. Fees slide up and down depending on how it’s used.

Ignition Wealth has announced it is partnering with BT Panorama to offer its digital advice solution to accountants, advisers, and investors using the BT Panorama platform.

The digital advice provider said its 360 advice offering would offer a post-Future of Financial Advice (FOFA) compliant solution for accountants and financial industry professionals who did not hold an Australian financial services licence (AFSL) but were looking to source financial advice for their clients in a post-FOFA environment.

Advisers, accountants, and investors using BT Panorama would have access to digital and full service financial advice powered by Ignition Wealth from Q3 of 2017.

DIY investors reject advice, says ASX study (ifa), Rated: A

The main reason some Australian investors do not use financial advice is because they prefer “to be in control” and are not convinced that advice adds value, recent research from the ASX has shown.

According to the 2017 ASX Australian Investor Study report, which looked at the behaviour and attitudes of 4,000 Australian investors, around 60 per cent of all investors use some form of professional financial advice.

For those not using advice, 90 per cent said it is because they “prefer to be in control”, while 56 per cent said they were “not convinced advice adds value”. Close to 40 per cent said advice was “too expensive” while around 30 per cent said their “investment is too small to need advice”.

Borrowers could save more than $ 3000 a year by switching to an online lender (News.com.au), Rated: A

AUSSIE borrowers could save up to $3184 a year by switching to an online lender, but unfamiliarity and lack of face-to-face customer service are keeping them away, according to Mozo.

The financial comparison website examined 504 home loans from 89 providers, finding nearly two thirds of the best-value home loans on the market are from online lenders, which were 0.7 per cent cheaper on average than the big four for a typical 25-year, $350,000 loan.

Online lenders iMortgage, loans.com.au and UBank scored the highest marks in Mozo’s Experts Choice Awards, while Homestar was named Non-Bank Home Lender of the Year.

But according to a survey of 1000 consumers, Australians are less likely to apply for a home loan online than other financial products despite the huge savings on offer. Australians are twice as likely to purchase car insurance online versus a home loan.

The biggest barrier for applying for a home loan online was lack of familiarity with online lenders, with 56 per cent of respondents saying they simply don’t know enough about them, while 43 per cent said they would prefer to discuss their needs face-to-face with a mortgage expert.

More men than women would consider applying for a home loan online. Of those who said they would, half were aged between 25-44.

OnDeck business loans help franchise businesses get on with it (Professional Planner), Rated: B

Small business loan specialist OnDeck announced a partnership with the Franchise Council of Australia (FCA), the peak body for the franchise sector in Australia. The agreement underscores OnDeck’s go-to-market approach for its joint flagship product with partner MYOB – ‘MYOB Loans Powered by OnDeck’.

By partnering with the FCA, OnDeck aims to reach the thriving $146 billion franchise sector as a supplier of choice for small business loans, which can be approved online in as fast as one business day with minimal paperwork. OnDeck aims to fill a serious gap in the market for franchise owners by satisfying more of their unsecured lending requirements that go beyond equipment financing to renovation, relocation and working capital needs.

India

Fintechs to drive financial inclusion or will banks save the day? (India Times), Rated: AAA

Disintermediation of the lending value chain – Banks would traditionally source, acquire, underwrite, onboard, collect and service customers. Most would do some parts well, and a few parts not so well. This is increasingly now being solved by the entry of new ‘customer owning’ entities into the game, who will acquire, owners of data who can underwrite, and the lenders who can lend and collect. This makes partnerships key.

Alternate data – Lending to the bottom of the pyramid and micro SMEs has always been the problem to solve for financial institutions, due to lack of documented income and collateral. Non-traditional data promises to come in and provide an alternative.

However, most such data algorithms do not seem to be working out. Many fintechs across India, Africa etc, are running NPAs upwards of 8-10%, including some of the flagbearers of the phenomenon, but that is not out in the public domain, and typically shoved under the carpet. The main reason for this is that the algorithms are raw and untested. They have not run their credit cycles yet.
Payments – Payments as an innovation is done. It’s commodity now. Fintechs who continue to invest in incremental experiences will find it difficult to scale. The trend to watch for will be digital ecosystems. What I mean is digital marketplaces, the likes of Ping-an and Alipay, serving the integrated needs of the digital consumer a.k.a the millennials, enabled through digital payments and leveraging financial services cross-sell sitting on top of all of this, as the revenue driver.

Fintech firm Telr gets $ 3 million funding (The Hindu), Rated: A

Financial technology start-up Telr said that it had received an investment worth $3 million from Innovations East fund as part of its series-B funding round.

Telr, which is a payment gateway aggregator of multiple payment methods such as cards and online banking, has operations in West Asia, South East-Asia and India.

The Rainmakers (Business Today), Rated: A

Year ago, Captain Pankaj Kumar, owner of a New Delhi-based shipping solutions company, was looking to raise Rs 20 lakh. He approached banks for a loan, but soon realised it would be anything but smooth sailing. Then, his former banker suggested that he approach CoinTribe, a Gurgaon-based online lending platform that connects creditworthy micro and small enterprises (the company helps individuals as well) with potential lenders such as banks and non-banking financial companies (NBFCs). This time, paperwork was minimal, and the entire process moved fast.

Then, his former banker suggested that he approach CoinTribe, a Gurgaon-based online lending platform that connects creditworthy micro and small enterprises (the company helps individuals as well) with potential lenders such as banks and non-banking financial companies (NBFCs). This time, paperwork was minimal, and the entire process moved fast.

At present, the company caters to small businesses with Rs1-50 crore turnover; anything below that is treated as a micro business. The ticket size varies from Rs5-30 lakh (the company also offers unsecured loans starting from Rs20,000 to cement dealers, for shorter tenure) with interest rate pegged at 18-20 per cent. So far, it has helped disburse close to Rs170 crore loans, servicing over 500 customers and 250-odd dealers through its marketplace.

Harnessing the power of data, CoinTribe has come up with a three-step screening process that ascertains an applicant’s identity, analyses its ability to repay and gauges its intent to pay. To determine a borrower’s identity, the company checks all available online data and social media footprint. To analyse any given applicant’s ability to pay, it has identified 180 sub-industries and places the potential client in the right category to run it past all relevant data points.

Asia

Singapore Fintech Startup StashAway Raises US $ 2.2 Million in Series A (Crowdfund Insider), Rated: A

According to TechinAsia, StashAway, a Fintech startup based in Singapore focused on providing wealth management, announced it had secured US $2.15 million in funding for its Series A round.

StashAway is a software solution for individual investors to manage their investment portfolio.

Why should security professionals pay attention to the rise of fintech? (MIS Asia), Rated: A

The rise of financial technology (fintech) may result in increased cybersecurity threats and attacks, said Chia Hock Lai, President, Singapore Fintech Association, at the Computerworld Singapore Security Summit 2017.

He highlighted the five areas of fintech that introduce cybersecurity risks:

  1. According to a report by Accenture and CB Insights, global investments in fintech rose from 2012 to 2016 to reach US23 billion.
  2. More than a third (34 percent) of banks globally said they are open to collaborating with a fintech company, according to a study IDC did on behalf of SAP last year.
  3. According to the World Bank Group, only 50 percent of adults in ASEAN have bank accounts. The availability of mobile or peer-to-peer payments from fintech startups will thus enable more underserved to access financial services, said Lai.
  4. “[Gartner predicts that] in the next four years, the number of IoT devices [that will be in use in the consumer sector] will reach 13.5 billion,” said Lai. With every device generating data, machine learning will be required to analyse the large amounts of data generated to churn meaningful insights.
  5. According to Aite Group, banks will increase their investment on blockchain over the next few years to reach US$400 million in 2019.
Canada

futureshare Launches to Help Canadian Homeowners Unlock Their Real Estate Wealth (Marketwired), Rated: A

There is more than $2.9 trillion in unmortgaged real estate equity in Canada (CREA), and today fintech platform futureshare launches to help Canadians unlock that real estate wealth without taking on new debt. The company was founded in 2016 as an alternative to home equity loans, home equity lines of credit (HELOCs) and reverse mortgages and gives homeowners a lump sum free of ongoing payments and interest rates in exchange for a percentage of the home’s appreciation, which can be paid out without penalty at any time or once the property is sold. futureshare’s online platform is the first of its kind in Canada and is now live in beta and accepting online applications for homes within Ontario with plans to launch in Alberta, Manitoba and British Columbia by the end of 2017.

The average Canadian owes $1.67 for every dollar in income (StatsCan), and futureshare is designed to help homeowners access the equity tied up in their home without adding to their ongoing debt burden. Unlike a reverse mortgage or HELOC, futureshare doesn’t require homeowners to have perfect credit scores or to fall within a specific income bracket, and it doesn’t increase monthly payments. A homeowner’s eligibility is based primarily on their home value and whether they have at least 25 per cent equity ownership in their home. Homeowners will be able to access on average up to 10-20 per cent of their home equity using futureshare’s platform, and unlike a loan, there’s no ongoing payments or interest rates.

Barbados

COMPANY AIMING TO PUT IDLE MONEY TO USE (Barbados Advocate), Rated: A

SOME of the $3 billion sitting idle at commercial banks in Barbados will soon be better utilised so as to earn higher returns for depositors and to help grow this country’s economy.

Those funds will be utilised under a new facility known as Peer-to-Peer lending, which was officially launched by finance company Carilend on Thursday night, at the Limegrove Lifestyle Centre, Holetown, St. James.

Authors:

George Popescu
Allen Taylor