Monday August 14 2017, Daily News Digest

OnDeck net interest margin

News Comments Today’s main news: Varo Money applies for a bank charter. This news could blight SoFi for a time. MPOWER Financing launches $100M debt funding round. Zopa updates on IT glitch, disappearing money. JD Finance opens VC fund for early-stage projects.SoftBank invests in Flipkart.Money Forward to IPO in Tokyo. Today’s main analysis: PeerIQ on PayPal, LendingClub, and OnDeck. Today’s […]

OnDeck net interest margin

News Comments

United States

United Kingdom

China

European Union

International

India

APAC

Middle East

News Summary

United States

Fintech Firm Backed by Warburg Pincus Files for Bank Charter (WSJ), Rated: AAA

Varo Money Inc., a digital banking startup backed by private-equity firm Warburg Pincus LLC, last week formally applied for a national banking charter and deposit insurance, the company said. The filings aren’t public yet.

Taking those steps could put Varo—which now partners with banks to provide services for its mobile banking application—on the path to becoming a full-fledged, regulated bank. That means it would take deposits, pay interest, make loans in any state, and issue cards, all through smartphone apps.

Social Finance Inc., known as SoFi, is seeking to become a Utah industrial bank. A group of Silicon Valley venture-capital firms recently bought stakes in a New Jersey bank, CRB Group Inc., that partners with fintech software firms.

Varo is going a step further, seeking a national banking charter from the Office of the Comptroller of the Currency, as well as the ability to take deposits from the Federal Deposit Insurance Corp.

Another Silicon Valley Start-Up Faces Sexual Harassment Claims (The New York Times), Rated: AAA

Social Finance, a hot financial start-up, is the latest prominent Silicon Valley company to face accusations that it turned a blind eye to sexual harassment.

The former employee who filed the suit, Brandon Charles, worked at SoFi for only a few months this year. But the lawyer handling the case, Robert Ottinger, said that he expected to file another lawsuit next week claiming broader mistreatment of other SoFi employees and seek class-action status.

A spokesman for SoFi, Jim Prosser, said that the claims by Mr. Charles were “investigated in depth by the company and found to have no merit. We will vigorously defend ourselves against any claims otherwise.”

PayPal acquires Swift; Lending Club and OnDeck Q2 Earnings (PeerIQ), Rated: AAA

PayPal acquired Swift Capital, a provider of working capital to small business owners. PayPal cited Swift’s talent and capabilities as rationale for the transaction, as well as a desire to strengthen PayPal’s overall merchant value proposition. We note that PayPal invested in LendUp just a few weeks ago. The payment processor appears keen on bulking up its lending footprint to compete with rivals Square, Affirm, and Amazon Lending.

On Thursday, it was announced that KKR agreed to buy Australian non-bank lender Pepper Group for $518 Mn. Vyze, which offers a tech solution for point-of-sale financing, announced a $13 Mn investment led by Austin Ventures. Lastly, Coinbase, the cryptocurrency brokerage and exchange, has raised $100 Mn at a $1.5 Bn valuation.

Lending Club Beats Estimates

After a rough 2016, Lending Club has regained investor confidence with net revenue and originations at their highest levels since Q1 2016. As of Friday’s close, Lending Club’s share price was at $5.90, up 20% from its recent low of $4.92. A key success in Lending Club exceeding expectations was the CLUB securitization which netted $3.7 Mn–a key driver of Lending Club’s $4.5 Mn in Adjusted EBITDA this past quarter.

  • New revenue stream: Lending Club plans to continue with one securitization per quarter, with expectations of a prime deal in Q3. They plan to contribute approximately $100 Mn in prime loans off the balance sheet for Q3’s deal. 
  • The CLUB securitization netted $3.7 Mn and was highly oversubscribed: Through sponsoring the security, Lending Club earned ~$600k, via a combination of selling servicing rights, pricing above book value, and netting out costs. The other $3.1 Mn came from $4.6 Mn in interest income earned while accumulating near-prime loans, less $1.4 Mn in write downs as principal was paid off.
  • Increased bank participation: Lending Club saw 44% participation from banks in Q2 which decreases its “effective funding cost” and shows confidence in their loans.

OnDeck

OnDeck moved to a positive adjusted Net Income ($1.5 Mn) and generated gross revenue of $86.7 Mn (up 25% year-over-year). OnDeck has focused on tightening credit underwriting and cost rationalization; consequently, originations were down for the quarter to $464 Mn (from $590 Mn last year). OnDeck has successfully executed its $45 Mn cost rationalization plan and expects operating expenses of ~$40 Mn for each of the next two quarters.  

Net Interest Margin and Net Interest Margin after Losses have fallen to their lowest points in recent times. A large contributing factor to this is Net Charge-Offs by quarter which has hit a recent high of 18.5%. We would expect charge-offs to decline in future quarters and NIM to expand due to management actions to tighten credit underwriting and cost rationalization.

Source: PeerIQ, Bloomberg
Source: PeerIQ, Bloomberg

MPOWER Financing Launches $ 100 Million Debt Funding Round (Markets Insider), Rated: AAA

MPOWER Financing (www.mpowerfinancing.com), an innovative fintech company and provider of educational loans to high-potential, international students, has launched a $100 million debt financing round to meet its growing pipeline of loan applications.

MPOWER Financing also announced that Mike Davis, the company’s co-founder, has assumed the position of chief investment officer, replacing Alonso Garza, who will become a member of the company’s board of advisors and will serve as consultant for LATAM business and capital development out of Mexico City.

Initial coin offerings have raised $ 1.2 billion and now surpass early stage VC funding (CNBC), Rated: AAA

The amount of money raised by cryptocurrency and blockchain start-ups via so-called initial coin offerings (ICOs) has surpassed early stage venture capital (VC) funding for internet companies for the past two months.

The total amount of money raised via ICOs in April was just under $100 million, but by May this had more than doubled to almost $250 million, according to Coinschedule, a website that tracks such data. In June, ICO funding had hit over $550 million and it was the first month ever that it surpassed angel and seed VC funding.

Angel and early VC funding in June was just under $300 million, Goldman noted, according to CB Insights data. In July, ICOs were just over $300 million, while angel and early VC funding was just over $200 million.

 

Fundrise Adds National For Sale Housing eFund to Growing List of Investment Options (Crowdfund Insider), Rated: A

Fundrise, an online investment platform for real estate, has filed for a National For Sale House eFund. Fundrise has previously announced targeted eFunds dedicated to specific metro markets. Fundrise will be offering up to $50 million in common shares to the public at $10.00 per share. The minimum investment in our common shares for initial purchases is 100 shares, or $1,000 based on the current per share price. The offering circular has all the information you may want to review and this specific eFund is not yet available on the Fundrise real estate investing platform.

Fundrise National For-Sale Housing eFund, LLC was formed to acquire property for the development of for-sale housing in metro areas other than Los Angeles and Washington, DC – where Fundrise currently has targeted eFunds.

LendingClub CIO: Delinquencies Decline as Marketplace Lending Model Continues to Improve (Crowdfund Insider), Rated: A

The executive explains that part of the power of the marketplace lending model is the iterative nature of the loan making process. Over time, data generated from lending provides a Kaizen like process of continuous improvement. This allows LendingClub to anticipate and adapt faster on behalf of both borrowers and lenders.

Projected investor returns are also largely unchanged from the first quarter ranging from approximately 4% to 9%.

Source: Crowdfund Insider

RealtyMogul Update: Over $ 290 Million has Been Invested via the Real Estate Crowdfunding Platform (Crowdfund Insider), Rated: A

RealtyMogul has now raised over $290 million online from over 135,000 investors.  RealtyMogul has returned more than $65 million to investors with zero principle lost, according to management. RealtyMogul also operates a 1031 exchange that allows current investors in real estate to defer capital gains tax on the sale of a property if they reinvest the proceeds in another qualifying property.

Jilliene Helman: The are currently 11 investments in MogulREIT I, which recently declared its twelfth consecutive month of 8% annualized returns on investment.

Jilliene Helman: With increasing demand for housing across the country, we see a huge opportunity in the multifamily marketplace. As millennials and Gen Z enter the workforce, they are of prime age and income for renting, and their preference to maintain a flexible lifestyle supports renting instead of buying a home.

Opportunities exist in many geographies around the country, and while the underwriting process is very complicated, some factors we look for are favorable business climates, an upward trending influx of young people and strong job growth in key industries. Markets that meet these criteria include Atlanta, Dallas, Nashville, Raleigh and Salt Lake City.

Application fraud continues to escalate, causing more and more companies to seek biometric solutions (PR Newswire), Rated: A

LexisNexis® Risk Solutions, a part of RELX Group, and BioCatch, the behavioral biometrics industry leader, announced today that they are working together to help companies in all industries bolster efforts to stymie fraud scenarios, like application fraud, a rapidly-growing issue. According to the LexisNexis Risk Solutions card issuer fraud study, application and account takeover fraud represents 40 percent of total fraud losses.

As a result of this new relationship, companies will receive additional risk scores through the LexisNexis® Risk Defense Platform that expand on the data typically provided by the customer (which can be compromised) by analyzing how the user behaves (which is innate). During the application process, this solution monitors behavior and is able to discern between a real user and an impostor. This approach is achieved by recognizing normal user behavior and fraudster behavior, which includes Application Fluency, how well a user knows the site; Navigational Fluency, how well a user knows various computer functions, and Data Familiarity, how well a user knows the information they are entering.

Integrating behavioral biometrics to detect criminal behavior has proven to be very successful and has already prevented major financial losses. For example, BioCatch was able to save a major Latin American e-commerce retailer more than $200,000 a month against new account fraud, with nearly $2 million saved in the last Black Friday weekend alone.

Online lender expanding into Utah, plans to hire 500 in 5 years (KSL.com), Rated: A

In a move announced Thursday, San Francisco-based financial-tech company Earnest will expand into Utah, with plans to spend $5.6 million on a new office and hire 500 employees over the next five years.

Marketplace lending sobering needs more time. (The Financial Revolutionist), Rated: A

The fact that OnDeck and Lending Club posted upbeat Q2 earnings this past week is a constructive step. But in the wake of Goldman’s growing Marcus juggernaut, Affirm’s point-of-sale traction, Softbank’s $250-million infusion into Kabbage and ongoing rescue financings courtesy of Asian conglomerates and US credit hedge funds, it’s premature to suggest that the good times are back for the publicly traded former wunderkinds. And for that, we blame the 2014-15 fintech hype machine, which led the consumer and small business marketplace lending sector to achieve skyscraper technology multiples in the first place. Cleaning up after a wild party is never fun, and given the former frenzy of online lending start-ups, it’ll take more than a decent quarter to make things right.

A road map for reclaiming the digital customer experience (American Banker), Rated: A

The rapid pace of upheaval in banking and payments today is leading to many innovative non-banking customer experience ecosystems, with banks largely serving a utility function.

The payments process is increasingly a minor, hidden step in the chain. With ongoing digital innovations, nonbanks could take over more of the payments space, too, as well as other financial services. But more importantly, banks stand to lose the all-important customer engagement layer entirely unless they reinsert themselves into the customer experience.

Not only can banks easily orchestrate and field transactions across various industries that the customer interacts with, but banks are best-positioned to provide insights that help customers move closer to their overall goal of financial wellness. For example, in addition to offering card-linked retail promotions, banks can help customers control or channel their spending in the context of their financial status and goals.

Customer experiences pertaining to payments, retail and financial health still operate to a large degree independently of each other. Each interaction in these ecosystems builds on a distinct silo from the customer’s overall financial profile. A fragmented customer experience means that our financial goals are fragmented, our shopping wish lists are fragmented and our planning is fragmented. As a result, customers have unmet needs in terms of maximizing their financial well-being, and must regularly look for reinforcement from external sources to validate the personal finance recommendations of walled-off ecosystems.

Meet Brittany Laughlin, ‎Partner at Lattice Ventures (Vator.TV), Rated: A

Brittany Laughlin is a ‎Partner at Lattice Ventures.

Laughlin served as General Manager at Union Square Ventures, an early stage venture capital firm with $1B+ under management. Some portfolio companies include Etsy, Twitter, SoundCloud, Tumblr, Lending Club, and Kickstarter.

VatorNews: What is your investment philosophy or methodology?

Brittany Laughlin: So my perspective, even before staring Lattice, which was over a year ago, was just on how companies can successfully scale and grow.

The philosophy at Lattice is making sure that the early stage entrepreneurs get the support, the connections, the talent, and the long-term perspective that they need to be successful over a long period of time.

VN: What do you look for in companies that you put money in? What are the most important qualities?

BL: In terms of the entrepreneurs, we look for people who have some attachment to the problem. We look for a kind of obsession with the problem because it’s going to be a long road ahead and if they don’t have that passion early on for what they’re solving then it’s really hard to keep them motivated as times get harder as they grow.

We look for entrepreneurs that are able to build a team, because that’s such a key component: no business grows without a team. If the entrepreneur doesn’t have a certain skill, they can show that there are people around the table that do. We want them to be smart, hardworking, passionate, things that are required in any entrepreneur, but those are things we specifically hone in on and make sure they have.

VN: These days a seed round is yesterday’s Series A, meaning today a company raises a $3M seed and no one blinks. But 10 years ago, $3M was a Series A. So what are the attributes of a seed round vs a Series A round?

BL: That’s a question we’ve been asking ourselves too. As seed investors, we’re speaking to our companies about what they need to raise the next round.

If you’re a SaaS-based business, they’re going to compare your revenue multiples to try to come up with a valuation that way. The rumored metrics for SaaS business, it used to be $100,000 MRR and now that’s creeping to $200,000. I think the reason you’re seeing the larger A rounds is that the businesses have a lot more traction than they did a few years ago so the bar is higher to meet those traction goals, and that’s why the funding reflects that.

I think sometimes taking on too much money too early creates an artificial hurdle for that company where, if they don’t need it, they’re in a worse place than if they took less money, proved some traction, and then returned to market. They can always raise more if they had good growth versus trying to get a big lump sum at the beginning and then, only when they’re out of runway, really looking hard at where their numbers are or where they’re going. They can sometimes get stuck in between.

Can Investors Profit From Peer-To-Peer Lending? (Stock Investor), Rated: A

The question is whether LC could become a buying opportunity for investors anytime soon.

As a result, P2P lenders are able to provide their services more cheaply than banks and other traditional financial institutions. P2P lenders therefore have the ability to achieve higher returns compared to what might be offered by banks. Borrowers can borrow at reduced interest rates even when a P2P lending company’s fee is included.

However, P2P lending is not without its risks. There is a greater risk that the borrower defaults on his loan, since the lower interest rates of P2P lending appeal greatly to those who have low credit scores.

PolicyGenius’ road to traction. (The Financial Revolutionist), Rated: A

Today, Fitzgerald doesn’t get shown the door so abruptly by investors or major insurance incumbents, now that PolicyGenius has become a significant force in introducing life and other types of insurance to consumers eager to comparison shop. However, the “Kayak for insurance” metaphor that is sometimes attributed to PolicyGenius isn’t welcomed by Fitzgerald. That’s because shopping for insurance can be a complicated process with no hard and fast rules.

Alternative Investing Platforms Partner with VIA Folio to Gain Access to Investors and Online Brokerage, Clearing and Custody (PR Newswire), Rated: A

Alternative investing platforms now use VIA Folio’s fully integrated, online offering and brokerage platform to improve investor engagement and access to alternative assets, such as Reg A+ IPOs, Reg D private debt and equity and unlisted REITs.

The alternative investing platforms working with VIA Folio include:

  • ALTZ Investment Strategies – enables access to alternative equity and debt investments, with offerings for Reg D-accredited investors that include real estate, renewable energy, private equity, Reg A+ IPOs and liquid alternative investment opportunities.
  • BANQ® – an electronic investment banking platform for small cap IPOs, public offerings and Reg A+ offerings and placements. It gives advisors exposure to rapidly growing sectors and new technologies, and provides investors with liquidity through dividends or the public markets.
  • Boustead Securities, LLC – an investment banking firm that executes and advises on IPOs, mergers and acquisitions, capital raises and restructuring assignments in a wide array of industries, geographies and transactions, for a broad client base.
  • Cambria Capital – a technology-driven investment bank that uses its institutional investor relationships, and high-net-worth and retail investor accounts, to raise capital for growth-stage companies throughReg A+ and other types of public and private offerings.

Marketplace Lending News Roundup – August 12 (Lend Academy), Rated: A

Lending Startup Earnest Is Working With Barclays to Find Buyer from Bloomberg – It will be very interesting to see who ends up buying online lending platform Earnest.

LendingClub CEO Sanborn ‘Looking Ahead’ After Scandal from Bloomberg – Emily Chang interviews LendingClub CEO Scott Sanborn to discuss credit card debt, the economic cycle and more.

Big banks kick small-business lending into high gear from American Banker – Banks have been steadily increasing their approval rates for small business loans.

What JPMorgan’s latest moves reveal about online lending’s future from American Banker – Good piece by Kevin Wack giving more details of the Chase OnDeck partnership.

ETHLend preparing for ICO (Bankless Times), Rated: A

A decentralized peer-to-peer lending application built on top of the Ethereum Network is preparing for its initial coin offering.

ETHLend uses blockchain technology to provide secure and transparent lending for people across the world, with the goal of eliminating interest rate differences by injecting liquidity into local markets by using blockchain technology to enable secure and transparent lending.

Best Fintech Reports of 2017 (Crowd Valley), Rated: A

According to Bloomberg, more than $8 Billion has been raised in Fintech so far in 2017. Also, 5 companies have already joined the “Unicorn” status with values over $1 Billion. We have compiled a list of best Fintech reports for 2017, from some of the leading names in the industry.

  1. Capgemini – The World Fintech Report 2017
  2. PwC – Global Fintech Report 2017
  3. EY – Fintech Adoption Index
  4. KPMG – The Pulse of Fintech Q1 2017 | The Pulse of Fintech Q2 2017
  5. CBInsights – Global Fintech Report Q1 2017 | Global Fintech Report Q2 2017

Insurtech Reports:

  1. PwC – Global Insurtech Report 2017
  2. Capgemini – Top Ten Trends in Insurance 2017
  3. Accenture – The Rise of Insurtech 

Payments Reports:

  1. Capgemini – World Payments Report 2017
  2. Nordea – Future of Payments 

Peer to Peer Roundtables can help your small business grow (The Shreveport Times), Rated: A

LED’s Peer to Peer Roundtable is a 10-month series of roundtable sessions where 15-18 small business owners meet to share their experiences and learn from one another in a supportive environment. Each roundtable is a problem-solving session that addresses the issues impacting your business right now.

Applications are currently open for small businesses and we invite your business to apply today.

Robo advisors look beyond wealth creation to automated personal financial advice (AITopics.org), Rated: B

In addition to building an investment strategy based upon investment and risk preferences, the next generation of automated financial advisor would need to fully understand customers’ goals and how they prioritise some over others; an emotional dislike of being in debt may see the client seek to pay off cheaper debt and eschew potentially higher yielding investment opportunities, just to get it off their back.

Introducing… Fintech Insider News (LinkedIn), Rated: B

We at 11:FS and Fintech Insider have launched Fintech Insider News – a dedicated news and commentary platform for our people to come together and discuss what’s new and interesting in the financial services industry.

FHA Slips a Little With Millennials (National Mortgage Professional), Rated: B

Several months ago Ellie Mae started tracking loans made by millennials.  When they started, 36% of millennials chose an FHA loan.  That has dipped to 32% in the latest survey.  Conventional loans are now at 63% for that age group.  When one considers the skimpy loan limits in many areas and the cost of FHA insurance vs. PMI when you have a high score, this is not surprising.

United Kingdom

Zopa provides update on ‘disappearing money’ IT glitch (P2P Finance News), Rated: AAA

OPA has said that it has fixed a technical issue that resulted in a small amount of money seeming to have disappeared from some investors’ accounts.

The peer-to-peer consumer lender said in a blog post on its website on Friday that the glitch had occurred due to recent changes to how they value loans on the secondary market.

Update on loan sale pricing (Zopa), Rated: AAA

One of the ways investors can access their money early is by selling active loans to other investors on the secondary market. When investors sell their loans we work out their value, and compare them to new loans.  If the loans being sold are worth less than new loans, the seller compensates the buyer for the difference, which is reflected in the loan’s price. This happens as part of the loan sale process, which we manage for you.

Due to a technical issue, some investors may have paid too much when buying or selling loans.

Positive Lending to join Landbay’s panel of distribution partners (LendIt), Rated: AAA

Landbay, the specialist buy to let mortgage lender, is today announcing a new partnership with Positive Lending, the latest specialist distributor to join its panel of distribution partners.

Landbay will help Positive Lending service its professional buy-to-let landlord clients with bespoke mortgage offers, including products for HMOs, Multi Unit Freehold Blocks and expat borrowers.

The partnership will also give Positive Lending access to Landbay’s online intermediary portal. This includes features such as case tracking and a property portfolio key, which will allow brokers to enter detailed analysis of a landlord’s full portfolio in advance of September’s PRA portfolio landlord changes. Once brokers have completed the online application process, Landbay issues an Offer in Principle within 48 hours and typically completes loans within 21 days.

Flender looks to raise £2m from institutional friends (P2P Finance News), Rated: A

SOCIAL lending peer-to-peer platform Flender is planning a funding round to prepare for its launch in the UK.

The business and consumer lender, which lets borrowers share their fundraising campaigns on social media, is raising £2M in equity funding and looking for more in debt funding.

Borrowers can create and share a personalised link to their campaigns on social networks, or invite selected individuals to contribute to their loans directly by email.

Ablrate Receives Rapid Response to Recently Launched IFISA (Crowdfund Insider), Rated: A

Asset-backed lending platform Ablrate announced it has received a rapid response following the launch of its new flexible IFISA. The online lender revealed the exciting news on Twitter.

The launch of Ablrate’s flexible IFISA comes less than six months after the online lender received full authorisation from the Financial Conduct Authority (FCA).

Prior to the IFISA, the company revealed it saw an 850% increase in loan volume within the last year.

Mandatory bank referral scheme has delivered £4m to small businesses so far (AltFi), Rated: A

At inception, the mandatory bank referral scheme was terribly exciting. The plan was simple enough. Big banks would direct small business loan applicants which they had rejected to neutral finance platforms, which would then find a more suitable funding solution for the applicant, using matchmaking technology. Those solutions were to come from a whole host of potential providers: from peer-to-peer lenders, to building societies, to challenger banks.

The scheme took a long time to put together. Announced by government in August 2014, it wasn’t until November last year that the scheme finally went live. Initially there were three designated finance platforms: Funding Options, Funding Xchange and Bizfitech.

New opportunities in P2P buy-to-let (MoneyWeek), Rated: A

The big story for the UK’s alternative-finance sector is how many platforms are beginning to look less than “alternative”: Zopa is getting a banking licence, while Funding Circle’s deal with fast-food titan JustEat – to supply lending capital to takeaway food businesses – feels very much like the commercial banking relationships of old. But what has most caught my eye is peer-to-peer (P2P)  property-lender Landbay: more than £30m of its buy-to-let mortgages have been included in a large securitisation of loans with an AAA rating. 

Digital Micro-Lender Oakam Announces Julie Haugen as Chief Product & Marketing Officer (CCR Magazine), Rated: B

Oakam, a digital micro-lender for the UK’s unbanked and underbanked consumers, has appointed Julie Haugen to Chief Product & Marketing Officer. Most recently, she was Oakam’s Head of Digital Strategy & Customer Experience, playing an instrumental role in the digital transformation of the business. In her new position, Julie will drive customer-led digital product innovation through closer alignment of Oakam’s marketing and product teams.

Julie has played a central role in Oakam’s digital growth over the past two years, including the launch of its award-winning mobile app in 2015, and the subsequent rollout of Oakam Grow in 2017.

Firm advises on significant retail bond issuance by LendInvest (Simmons&Simmons), Rated: B

International law firm Simmons & Simmons has advised LendInvest Limited on the establishment of a £500m Euro Medium Term Note Programme for its subsidiary LendInvest Secured Income plc, and on the issuance of £50 million 5.25 per cent Notes due 2022.

China

Jingdong Finance also do the investment? Grilled a Pa “1000 tree capital” past lives (Huxun), Rated: AAA

On the Thousand Tree Capital, Jingdong Financial said, Thousand-tree capital investment target for the angel turn round A start-up company, the core idea is the data for the investment decision-making engine to the public ecological and financial technology for the post-support, through investment A small proportion of the shares, not too much in the strategic and operational restrictions and interference with the investment enterprises, and ultimately to be invested with enterprises to grow together to share the long-term growth in China’s consumption of the purpose of the dividend.

Online lenders limit the withdrawals in the name of rectification, Is that normal? (Xing Ping She), Rated: A

Recently, there have been a number of online lenders having long-term restrictions on withdrawals in the name of wed site upgrades and the bank depository connection. Many industry insiders said that it is abnormal , and investors need to be vigilant.

Industry insiders also warned that the centralized release of compliance pressure lead the industry to the “detonation” risk period. If the period of delay in payment is over one week, you should be extremely vigilant about the risk of running.

51 announced the launch of one billion credit card industry investment funds (epaper), Rated: A

The new 51 billion credit card industry investment fund, will continue to focus on the Internet financial industry chain data, assets, traffic and other high-quality companies (51 credit card industry investment funds), will continue to focus on the Internet financial industry chain data, assets, traffic and other high-quality companies Expand the layout of ecological investment. As early as the beginning of 2016, 51 credit card has been in the Internet financial industry upstream and downstream layout of a number of projects. As of the press conference, has accumulated 15 investment projects, of which three in the investment projects have been recognized by other capital, access to follow-up financing.

China preps central clearing house for mobile payments providers (Finextra), Rated: A

The People’s Bank of China is set to make digital payment firms such as Ant Financial and Tencent use a new central clearing house, a move which will see companies forced to share transaction data with rivals.

China has become the world’s mobile payments leader, with non-bank providers handling nearly $15 trillion in transactions last year, according to a central bank unit.

China Sets up Centralized Clearing Platform for Online Payments (Crowdfund Insider), Rated: A

The People’s Bank of China, the country’s central bank, has required all banks and third-party payment institutions to connect to a unified platform by June 30 of 2018 to ensure effective regulation and transaction security.

The new platform, dubbed Nets Union Clearing Corp., is aimed at enhancing supervision of the country’s expanding online payment market. The platform was set up by 45 companies, including the PBOC which own a 12% stake in the platform.

European Union

German Fintech Startup Acquires Rival as Dealmaking Heats Up (Bloomberg), Rated: AAA

Deposit Solutions GmbH, a Hamburg-based company that enables consumers to move their savings around a network of 15 European banks to find the best interest rate, today acquired Savedo GmbH, a Berlin startup in the same field. The terms of the deal, which Deposit Solutions announced in a statement, were not disclosed.

Lenders and other corporations participated in almost a third of the funding rounds for European financial technology startups in the second quarter, a 31 percent jump from the same period in 2016, according to CB Insights, a New York-based research firm.

In an April report produced by PricewaterhouseCoopers, half the banks surveyed worldwide said they’re planning outright acquisitions of fintech firms. That same month, BNP Paribas SA purchased Compte Nickel, a digital bank in France, for 200 million euros ($236 million).

EU FINTECH REGULATION, MOBIZ PRESIDENT & OLAMOBILE (Delano), Rated: B

  • The European Banking Authority (EBA) has called for fintech regulation to be harmonised across Europe. A report published on its website from an analysis exercise carried out on 282 fintech operators in 24 member states in spring found 31% of companies reviewed were not subject to any regulatory regime.
International

10 MOST DEMANDED SECTORS FOR A FINTECH DEVELOPER (Mobil Unity), Rated: AAA

In 2015, fintech hit $19 billion in total, and by mid-August 2016 global fintech funding had already reached $15 billion. Later, by September 2016, there were over 1,000 fintech firms worldwide and their value made $867 billion. PaymentGenes predicts that already by 2019, 5 billion people will be making digital payments. Moreover, 72% of the consumers of the financial services already use digital channels to open checking accounts, so banking technology in this case plays a major role. The article on Business Insider outlines that major fintech startups on modern market appear in such areas as investment and financial management, banking payments, currency and exchange, insurance, financing and lending.

According to PaymentGenes, at the moment the most popular and in-demand fintech sectors are the following:

  • Mobile banking
  • Internet banking
  • Blockchain
  • Insurtech
  • Predictive analytics
  • Crowdfunding
  • Peer-to-peer landing
  • Smart finance management
  • Innovative payments
  • Robo-advisors

At the same time, Efinancial Careers outlines seven most demanded skills fintech developers should have:

  • Machine learning expertise
  • Target data analysis
  • Domain (industry) expertise
  • Cyber-security
  • Business and sales expertise
  • Blockchain and distributed ledger expertise

India

SoftBank Fund Is Said to Invest $ 2.5 Billion in Flipkart (Bloomberg Quint), Rated: AAA

SoftBank Vision Fund will invest about $2.5 billion in Flipkart Group, swelling the Indian e-commerce players’ cash hoard as it vies with Amazon.com Inc., people familiar familiar with the matter said.

The investment includes approximately $1.5 billion directly into Flipkart and $1 billion for part of Tiger Global Management’s stake, the people said, asking not to be identified discussing the details. The deal will make the fund created by SoftBank Group Corp. Chairman Masayoshi Son the biggest shareholder of Flipkart, the people said.

Fintech firm Payworld focuses on insurance, loans for growth (DNA India), Rated: A

Digital transaction facilitator Payworld is now focusing on insurance and small ticket loan disbursal as next phase of growth story and has tied-up with a few insurers and NBFCs to tap potential customers, a company official said.

Payworld, a nine-year old fintech firm, provides digital transaction services like mobile recharge, e-payment, railway reservation and remittances facilities.

It aims to bring about 10 lakh lives under insurance cover in next one year through this tie-up.

FinTech Impacts Financial Services: Journey of Fintech from Present to the Future (BW Disrupt), Rated: A

Whether it is the portfolio management process or offering individual financial advice, digital disruption has impacted across every part of the industry. For example, a digital financial services company can now provide investment recommendations while leveraging machine learning to conduct on-going portfolio performance updates sent to customers via a smartphone. The impact of this will be felt increasingly as millennials gives way to even more tech-savvy generations in future for which digital will become the norm.

Many banks will attempt to remodel themselves as technology companies, ȧ la Goldman Sachs, in an attempt to conduct “capital lite” activities that are more reliant on a technological or intellectual competitive advantage and less impacted by regulatory capital and size of balance sheet. For example, UBS Prime Brokerage claims to have a return on assets twice as a high as some of its competitors by using technology to reduce its costs to serve hedge fund clients.

As a consequence of FinTech’s impact we will see the emergence of commercially viable digital businesses that have a sustainable economic advantage. They will not need to extract economic rents due to their privileged position as market intermediaries, providers of capital or holders of an asymmetric informational advantage.

APAC

Fintech startup Money Forward IPO expected September (Nikkei), Rated: AAA

Fintech startup Money Forward could go public on the Tokyo Stock Exchange’s Mothers market by September.

The funds raised from the initial public offering will be spent on boosting sales offices and expanding operations and the company’s market capitalization is expected to be between 10 billion yen to 20 billion yen.

Philippines’ PBCOM participation in Lendr affirms FINTQ regional ambitions (EnterpriseInnovation.net), Rated: A

Philippine Bank of Communications (PBCOM) will make available its consumer lending business including home, auto and personal loan products on the Lendr platform following the bank’s signing the agreement with FINTQ in late July 2017.

By offering these products via a seamless, telco-agnostic digital platform like Lendr, PBCOM is extending the reach of its financial products and offering potential borrowers the convenience of applying for a loan, submitting their requirements, and getting notified about the status of their application all at the tap of their smartphones.

PBCOM’s 2016 earnings grew on the back of a 28% expansion of its loan book to P44.3 billion, with focus on secured consumer loans as well as bankable large and middle market corporate accounts. It also provided credit worth P9.6 billion to clients in the same period, resulting in an 11.61% increase in net interest income.

Middle East

New FinTech Partnership in Abu Dhabi (The National Law Review), Rated: AAA

On 7 August, Abu Dhabi Global Market (ADGM), the International Financial Centre (IFC) in Abu Dhabi, and the Responsible Finance & Investment Foundation (RFI), a think tank for responsible finance, announced their entry into a partnership to help the growth and sustainability of the FinTech ecosystem through financial inclusion and ethical and responsible finance practices.

They will highlight emerging FinTech trends and support the development of innovative Shari’ah-compliant FinTech companies seeking to participate in the Middle East and African markets.

Bahrain woos Indian fintech startups (The Hindu Business Line), Rated: A

Bahrain plans to set up a Fintech Centre next year to provide accelerators and co-working spaces for fintech companies, Simon Galpin, Managing Director, Bahrain Economic Development Board (EDB) has said.

The Fintech Centre, which is likely to be opened in February or March 2018, would also provide networking opportunities for both startups and big banks interested in the fintech area, Galpin told BusinessLine.

Authors:

George Popescu
Allen Taylor

Wednesday April 5 2017, Daily News Digest

Wednesday April 5 2017, Daily News Digest

News Comments Today’s main news: Colorado targets Marlette, Avant on ‘True Lender’ grounds. CRB sues Colorado. SoFi raises variable student loan refi rates. Kabbage extends $3B in funding to over 100K small biz customers. RateSetter adds expected losses committee. P2P Global Investments considers change of loan fund manager. Dango RECF platform celebrates 1M investors. Today’s main analysis: International P2P lending statistics. […]

Wednesday April 5 2017, Daily News Digest

News Comments

United States

United Kingdom

European Union

International

Australia

China

Asia

News Summary

United States

Colorado Attorney General Pursues ‘True Lender’ and ‘Madden’ Actions Against Major Non-Bank Online Lenders (JD Supra), Rated: AAA

On February 15, the Colorado Attorney General filed substantially similar, separate amended complaints in the U.S. District Court of Colorado against Marlette Funding LLC and Avant of Colorado LLC, alleging violations of Colorado’s Uniform Consumer Credit Code based on “true lender” and loan assignment cases. Both actions were originally filed in state court on January 27, 2017, and both were subsequently removed to federal court — on March 3, 2017 and March 9, 2017, respectively. In each instance, the complaint cites CashCall, Inc. v. Morrisey, 2014 W. Va LEXIS (W. Va. May 30, 2014), and Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015), as legal authority for claims alleging usury and other violations of Colorado’s Uniform Consumer Credit Code.

The amended complaint filed in Mead v. Marlette Funding LLC d/b/a Best Egg asserts that Marlette paid all costs, including legal, marketing and other expenses, incurred by Cross River Bank in originating Best Egg loans. In addition, the complaint asserts that Cross River “bears no risk that it will lose its principal in the event consumers default on the Best Egg Loans that it sells to Marlette or to Marlette’s non-bank designees” because: (i) Marlette maintains a bank account in favor of Cross River in the amount of Marlette’s anticipated purchases; (ii) Best Egg loans originated by Cross River are sold to Marlette within two business days; (iii) the parties’ contract specifies that Cross River has no liability to Marlette for sold loans, and (iv) Marlette is obligated to indemnify Cross River “against any claim that any aspect of the Best Egg lending program violates the law.”

The amended complaint filed in Mead v. Avant of Colorado LLC, in turn, similarly asserts that Avant and not WebBank, which originated the subject loans, bears all cost and expenses, including the costs of evaluating loan applications and credit reports and the costs associated with dispersals of loan proceeds.

Cross River Bank Sues State of Colorado (Over the Transom), Rated: AAA

News Summary:

  • On April 3rd, Cross River Bank filed a Declaratory Judgment Action (Federal District Court) against the State of Colorado to protect its federal statutory and contractual rights to freely extend credit and to freely sell those loans on a nationwide basis
  • Previously (in January 2017), the Colorado Attorney General sued Marlette Funding in an attempt to prohibit Marlette from enforcing loans validly made by Cross River and validly sold by Cross River to Marlette
  • Cross River filed the declaratory judgment action in support of Marlette Funding (an MPL partner), and the broader bank-platform model
  • According to Cross River General Counsel, Arlen Gelbard, “the Colorado Attorney General is attempting to undermine the concept of federal preemption, and with it 150-years of established banking law.”
  • More specifically, Colorado’s action violates Federal Deposit Insurance Act (Section 27) and National Bank Act, as well as the “valid when made” doctrine
  • “It is clear to us that Colorado’s lawsuit against Marlette intentionally did not name Cross River as a party because Colorado knows that Cross River’s actions are protected by its status as a state-chartered, federally regulated Bank, which affords complete preemption over state law”

The Issue – Federal preemption/uncertainty:

  • The federal preemption provisions which allow small banks like Cross River to compete with larger entities, have come under attack by several states and in some recent court cases such as Madden v. Midland Funding and other so-called “True Lender” cases.
  • While we believe these cases were wrongly decided as a legal matter, the broader impact has been to encourage states and other plaintiffs to disregard or undermine key legal doctrines of federal preemption and loans as being “valid when made”, leading to market uncertainty.
  • The characteristics of the Cross River model are very different from many others in the marketplace, where the named lender has little to no involvement in the origination process and retains no “skin in the game”
  • This lack of certainty about what loan terms apply to subsequent purchasers has broad, adverse ramifications for US banking and financial markets. Specifically, certain investors have moved away from this asset class, which has reduced liquidity in the market.
  • “Although the action taken by the Colorado Attorney General is being positioned as one to protect the consumer, the actual result will likely have a negative impact on consumers and small businesses, as their access to this important source of credit is significantly reduced.”

SOFI RAISES THE VARIABLE STUDENT LOAN REFINANCING RATES (lendedu), Rated: AAA

The Federal Reserve’s interest rate increase last month is starting to show up in some loan products including student loan refinancing. Fixed rate borrowers are safe for now, but those with variable interest can expect to pay more.

As of April 1st the interest rate on a variable student loan at SoFi increased both on the low and high ends of the range. Borrowers will now pay anywhere from 2.565 percent to 6.490 percent interest on a variable refinance loan. That compares with 2.365 percent to 6.29 percent interest just a month ago. The interest rate on SoFi’s fixed rate products held steady at 3.375 percent to 6.74 percent from March to April.

Kabbage Extends $ 3 Billion in Funding to over 100,000 Small Business Customers (IT Business Net), Rated: AAA

Kabbage®, a pioneering financial services, technology and data platform, announced it has extended more than $3 billion to small businesses across all 50 U.S. states, covering every industry. The company has also now served over 100,000 small businesses through its platform, representing the largest customer base of any online small business lender.

ApplePie Capital CEO & Co-Founder Denise Thomas Makes Marketplace Lending Success Look Easy (Crowdfund Insider), Rated: A

“We have gained a foothold within the industry by partnering with 42 brands to date. Moving forward we will continue to innovate…”

Erin: You recently signed new investors plus funding capital, thus standing out in a challenging market. Please share details about your MO. How long did it take to raise the money?

Denise: It took five months. The two main sources of funding we closed were new strategic partners and existing investors. Our strategy was to continue to tell our story and educate investors about franchise debt as an asset.

Erin: Please share your experience about dealing with a prominent Bay Area VC saying, “You don’t look like Fintech.”

Denise: Statistically, there are far more men running fintech companies, clearly there are some biases out there around that. A study released by Peterson Institute for International Economics in 2016 found that “An increase in the share [on executive teams and boards] of women would be associated with a 15% rise in profitability.” At the end of the day, you want people in your board room who are supportive.

Erin: You have spoken quite positively about your relationship with Fifth Third. How and why does ApplePie’s relationship with this bank differ from others?

Denise: As opposed to our other loan purchasers, Fifth Third has made a strategic investment in our company and holds a stake in the growth of our business. They co-led our B round with QED Investors, with whom they have now also partnered to make strategic investments in VC-backed fintech companies. They have a long term vision for our industry and provide their expertise to create better financial solutions and a superior experience for our borrowers.

Erin: ApplePie Capital’s loans are backed by personal guarantee and unsecured. Personal assets are not required to back loans. Tell me more…

Denise: In franchising, there is a blueprint for the business owners to follow, in terms of cost analysis and every other aspect. This is measurable and people have a path to multi-unit ownership. We look at each brand and evaluate the sustainability of the business model, which has proven itself over the last 25 years through historical SBA data.

5W Public Relations Named Agency of Record for Sharestates (Yahoo! Finance), Rated: A

5W Public Relations, one of the 15 largest independently owned PR firms in the US, has been named PR Agency of Record by Sharestates, an online real estate investment marketplace that is an industry leader in crowdfunding for individual and institutional investors.

Could Real Estate Crowdfunding Help Millennials Retire Sooner? (Realty Biz), Rated: A

Real estate crowdfunding has proven a popular choice for one of the most fickle investing groups in the marketplace: Millennials.

On the surface, it seems improbable. Millennials investing in real estate? This is a group that has been loathe to purchase homes, with less than a third of Millennials becoming homeowners compared to 64 percent of the general population. After a little analysis, however, there are powerful reasons why real estate crowdfunding appeals to Millennials—enough that more are certain to join the crowd of investors in the coming years.

The stereotype, of course, is that Millennials are all underpaid with limited skills and few opportunities. That’s not reality, but even if it were, real estate crowdfunding has very low barriers to entry. Some of the best and most successful crowdfunding portals allow for investment minimums as low as $5,000. That lets Millennials get into the real estate investment game much earlier than previous generations.

Second, real estate crowdfunding is an investment option that allows Millennials to bypass banks. Having come of age during the Great Recession, many Millennials don’t trust financial institutions or Wall Street firms. They do, however, see the need to protect their money from the kind of financial breakdowns that hurt their parents’ retirement plans nine years ago by investing in hard assets. Real estate crowdfunding offers the chance to do just that.

PayPal Directors Hit With Class Action Suit from Shareholders Over Venmo (Crowdfund Insider), Rated: A

On March 24, 2017, shareholders of PayPal Holdings Inc., the parent company of mobile-payment provider Venmo, filed a derivative suit against its directors in the District Court of Delaware. A derivative suit is a form of class action in which shareholders can sue company officers or directors on behalf of the company.

The plaintiff shareholders claim in the suit that the directors of PayPal willfully or recklessly caused PayPal to make false or misleading statements which led to direct damages against PayPal. The false and misleading statements are alleged to have been made in PayPal’s quarterly reports, annual reports, and proxy statements which failed to disclose any of the alleged unfair and deceptive business practice or the fact that those practices would lead to increased regulatory scrutiny.

View the filing here.

Over 250,000 Shoppers And 1,400 Dealers Turn To AutoGravity (PR Newswire), Rated: A

AutoGravity, the FinTech pioneer transforming car shopping and finance with advanced mobile technology, today revealed that over a quarter million users – more than half of whom are millennials – have downloaded AutoGravity iOS and Android apps for car shopping and financing. AutoGravity also confirmed that its network of partner car dealerships has grown to more than 1,400 franchise dealers.

Since launching in 2016, AutoGravity has achieved significant growth across the United States, securing partnerships with the nation’s top automotive lenders, as well as four of the top five national dealer groups, representing all new and used car brands available in the country.

  • New cars remain popular with boomers. AutoGravity data shows two-thirds of car shoppers ages 50+ who pursue financing do so for new vehicles. In contrast, only half of AutoGravity car shoppers ages 18 to 25 who pursue financing do so for new vehicles
  • Japanese brands perform in California. Japanese economy and luxury car brands are more searched relative to American brands in California (as compared to the US overall)
  • Economy cars continue to be a popular choice. Economy brands rank in the top four most searched for vehicles across the US – luxury car brands round out the top seven
  • Millennials more cost sensitive than Gen X. Among car shoppers seeking financing on AutoGravity, millennials look to borrow ~15% less (finance amount requested) and seek to contribute ~25% less (cash down payment) relative to car shoppers ages 36+

Why FutureAdvisor orphaned its B2C book of business and other learnings at CFA Society’s robo-panel in San Francisco (RIABiz), Rated: A

The bad news: Selling robo financial advice to millennials — at least until they grow up and start acting like boomers — is a fool’s game.

Cianciolo provided the fullest update yet on FutureAdvisor since the firm’s eye-popping sale to BlackRock in 2015. See: Why BlackRock’s purchase of FutureAdvisor for $152 million could be a deal of destiny.

The robo — once the No. 3 retail player behind only Wealthfront and Betterment — no longer takes assets to millennials.

Standing up for retail and millennials was Zhang, a millennial herself, who questioned whether Roy and Ciancolo were being unduly pessimistic in capitulating to established players.

Jemstep had a brief period where it went for retail business but veered quickly to the B-to-B market.  “Can somebody [create a viable B-to-C robo advisor]?” Cianciolo asked. “Sure but you’re taking double and triple risks.”

Jamie Dimon Pushes for Simpler, More Coordinated Bank Regulations (WSJ), Rated: A

J.P. Morgan Chase JPM 0.33% & Co. Chief James Dimon laid out his wishlist of regulatory changes in his annual shareholder letter Tuesday, calling for simpler and better coordinated rules that could help to spur more lending and in turn economic growth.

Any changes are likely to help the bank. Mr. Dimon wrote that the “anticipated reversal of many negatives and the expectation of a more business-friendly environment” in addition to the bank’s results are among the reasons its stock price jumped about 30% in 2016.

Mr.. Dimon has previously said that rules should be coordinated among agencies, simplified and consistent, but in Tuesday’s letter spelled out what that meant for the first time.

He said banks have too much capital and that could be used instead to safely finance the economy.

Mr. Dimon reiterated that the so-called “gold plating” of international standards by U.S. regulators should be eliminated. Making U.S. rules stronger than international rules was in some cases a priority of Federal Reserve Governor Daniel Tarullo, who was the central bank’s regulatory point person but is stepping down this week.

Mr. Dimon also suggested reforms to the mortgage market since the housing sector has been “unusually slow to recover.”

Bond Street Partners With NerdWallet (Bond Street), Rated: A

Today, we are thrilled to announce that we’re partnering with NerdWallet to help more small business owners access fair and affordable financing. According to the Federal Reserve Bank, only 1 in 5 businesses that apply for a loan from a big bank are approved.

Together, we’ll create resources, guides and webinars to support the growth of businesses. In addition, entrepreneurs will now be able to access financing from Bond Street via NerdWallet’s Small Business Loan Tool.

Prominent Fintech Marketing Firm Leverage PR Sold to Caliber Corporate Advisors (Crowdfund Insider), Rated: B

Leverage PR, a prominent marketing firm engaged in the crowdfunding and Fintech sector, has been sold to Caliber Corporate Advisors.  Founded by Joy Schoffler, a well-known and highly visible participant in the emerging industry of financial innovation, shared the news with Crowdfund Insider, explaining she expects to remain engaged with the firm but in a different role.

Leverage PR was founded in 2010 and was the first marketing firm to recognize the potential of alternative finance.

United Kingdom

RateSetter continues to boost transparency with new expected losses committee (P2P Finance News), Rated: AAA

RATESETTER has set up a new committee on expected losses as part of a review of the way it monitors and reports on credit risk.

The panel, which will come into effect later this month, comprises the peer-to-peer lender’s chief executive Rhydian Lewis, its chief finance officer Harry Russell and various heads of consumer and commercial credit risk.

Boosting expected losses data is the latest of a batch of strategic changes RateSetter has put in place to price risk more accurately following higher-than-expected losses on its 2014 and 2015 loans.

Peer-to-peer loan fund considers change of manager (Financial Times), Rated: AAA

The UK’s first peer-to-peer loan fund is to review its investment manager as a swath of funds struggle to generate returns from the emerging asset class.

The listed fund, P2P Global Investments, buys loans from websites matching interest-paying borrowers with lenders in the UK, US, Europe and Australia, as well as holding stakes in the platforms.

It is currently managed by MW Eaglewood Europe, an asset manager majority-owned by UK hedge fund Marshall Wace. In a short announcement to the stock market on Tuesday, the board said it would review the arrangement following discussions with Eaglewood and “significant shareholders” and would update the market in due course.

Oakam Brings Gamification and Rewards to Consumer Finance with New Mobile App Feature (BusinessWire), Rated: A

Oakam has enhanced its mobile app with the launch of Oakam Grow, a new feature that uses gamification to make consumer finance more engaging, rewarding and inclusive. Oakam Grow builds on the UK-based consumer lender’s application of behavioural science to encourage the development of positive credit habits, and supports its strategy to bring digital disruption to the largely analogue micro-credit industry.

Oakam Grow gamifies the experience for Oakam’s mobile app users through the application of social currency theory, which enables customers to share in the financial upside of their responsible credit behaviour. Customers earn points when making repayments via the app or referring friends, redeemable for loan repayments, cash-back, store vouchers, lower rates on future loans, or to socially vouch for friends in the loan application process. Oakam’s award-winning mobile app first launched in 2015, and today more than 55 per cent of its customers are regular users. The addition of Oakam Grow will further drive app downloads and engagement.

Oakam has seized on the opportunity to disrupt the £1.8 tn global micro-lending industry through the use of AI, machine learning and cognitive science. The century-old industry has seen little innovation since its founding and today relies on the same analogue processes that keep cost-to-income ratios above 50 per cent, and prices high for consumers. The industry’s network of around 200,000 doorstep loan agents globally also leaves consumers with poor or no credit history, vulnerable to misleading offers and predatory practices.

Oakam’s omni-channel model, comprising its digital properties and UK retail network, confronts both the issues of inefficiency and consumer protection.

RateSetter Business Finance Adds Relationship Manager Amanda Sharp (Crowdfund Insider), Rated: A

RateSetter has appointed Amanda Sharp as Regional Relationship Manager for London and the South East. Sharp previously spent 35 years with RBS Group.

How to navigate the P2P maze (FT Adviser), Rated: A

Against a backdrop of rising inflation and continued low interest rates, it is no surprise that a growing number of the UK’s financial advisers are looking for ways to make their client’s money work harder.

And there is one solution in particular that has caught the attention of eagle-eyed advisers: peer-to-peer (P2P) lending.

Assuming current Bank of England inflation at 2.3 per cent, according to latest figures, and interest rate forecasts, money deposited in the average high street savings account today will shrink in real terms after both one and two years.

In fact, some high street bank cash savings accounts are offering just 0.01 per cent in savings – less even than the current Bank Base Rate of 0.25 per cent.

Even in its slowest year yet, 2015, the sector grew by over 80 per cent according to one report (Nesta, Pushing Boundaries: the 2015 UK alternative finance industry report).

P2P lending is likely to grow even faster as more and more P2P lenders receive their full FCA authorisation – heralding the arrival of the ‘Innovative Finance ISA’ (IFISA), which will almost certainly add to the momentum the sector is experiencing.

European Union

Why Stockholm is creating more unicorns than London per capita (elite business magazine), Rated: AAA

The result of the Swedish government’s tech drive of the 1990s is that while Silicon Valley may be the undisputed champion of the world when it comes to producing unicorns, Stockholm comes a close second. According to SparkLabs, the seed-stage fund, the Californian city has produced 10.7 unicorns per million inhabitants, the Nordic city produced three and Tel Aviv, which came third, birthed 1.2. So it’s no wonder the European Digital City Index ranked the metropolis as Europe’s second best city after London when it comes to supporting its digital entrepreneurs. “In Stockholm, we’re really freaking good,” says Stark.

But even though access to a solid infrastructure has proven vital in fostering this thriving entrepreneurial community, it isn’t the only factor. Equally important for the success of Sweden’s startups is the fact that that the nation has a population of just under ten million, which means new enterprises have to be thinking about international expansion from the get-go.

‘Shadow banks’ step into the spotlight (Financial Times), Rated: A

The growing influence of alternative capital is most evident in the US — in April 2015, nonbank lenders accounted for more than half of new government-backed mortgages. Banks are still the biggest lenders in Europe, but rivals are emerging. Many of the new players are linked to the securitisation industry, where loans are packaged up and sold on as bonds to capital markets investors.

Private equity-funded upstarts have quietly taken a more active role in the UK’s securitisation market, which used to be dominated by big banks.

Today one of the largest users of securitisation in the UK is not a bank. The Northview Group, which writes mortgages under the Kensington brand and is funded through securitisation, describes itself as a nonbank challenger lender.

A wave of nonbank lenders, including companies such as Munt and Dynamic Credit, have appeared in the past few years. These players now account for close to a fifth of new Dutch mortgages, according to IG&H, a consultancy. This is up from almost nothing just a few years ago. The companies take capital from institutions and lend to homeowners.

Technology companies that facilitate lending between investors and businesses make up another area of growth in shadow banking, and they are becoming more adventurous in the services they offer.

Funding Circle is one of Europe’s best known peer-to-peer lending platforms, where retail users can invest in loans made online. It lends £100m a month in the UK and is expanding in Europe.

As with other forms of shadow banking, European P2P lending lags far behind the US market. Investors who use Funding Circle, which is also active in North America, said they were disappointed last summer with the performance of US loans written by the company. The concerns followed losses that investors made on P2P loans securitised by OnDeck, a nonbank lender.

International

Statistic of International P2P Lending Services March 2017 (P2P-Banking), Rated: AAA

The total volume for the reported marketplaces adds up to 532 million Euro.

Milestones reached this month are:

  • Mintos crossed 150 million EUR in originations since launch
  • Moneything reached 50 million GBP since inception

Australia

Agri-lending helped drive SocietyOne to a new loan record (Finder), Rated: AAA

Peer-to-peer (P2P) lender SocietyOne has announced a new lending record, passing the $250 million lending mark in March of this year. Part of the lender’s success is due to increased demand for its two agri-lending products, which, combined with a surge in personal loans over the post-Christmas and New Year period, saw an additional $45 million lent to customers.

China

China P2P industry lending nears Rmb1tn despite crackdown, new regulations (Financial Time), Rated: AAA

Growth in China’s peer-to-peer lending sector has proven resilient in the face of new regulations and a year-long crackdown by authorities on online financing, with total P2P loans blowing past the Rmb900bn ($130.7bn) mark last month.

Outstanding P2P loans came to Rmb920bn at the end of March, according to new figures released today by lending platform Wangdaizhijia.

Month-on-month growth in outstanding loans slowed compared to before the new regulations were introduced in August, from 5.7 per cent in July 2016 to 4 per cent last month.But when viewed in renminbi terms, growth has ratcheted up, with the industry tacking on an average Rmb35.6bn a month in the seven months since regulations were introduced, compared to an average rise of Rmb29.1bn in the seven months ended August.

China curbs ‘Wild West’ P2P loan sector (Financial Times), Rated: AAA

Peer-to-peer lending in China is at an inflection point as state regulators aim to transform it from a “Wild West” industry rife with fraudsters into a respectable market in which legitimate lenders can offer funds to willing borrowers.

With their offer of attractive fixed returns over short periods, P2P investments appear similar to saving products that reputable commercial banks offer as an alternative to low rates available for deposits. P2P yields are typically higher than those available from banks, making them an easy sell to investors.

Since 2011, 3,556 platforms have collapsed, according to Online Lending House, a website that tracks the sector. In a third of the cases, law enforcement agencies closed the platforms or their owners or managers simply disappeared.

Asia

Dangoestate.com Real Estate Crowdfunding Platform Celebrates 1,000,000 Investors (Digital Journal), Rated: AAA

Dango estate, the now five months old Singapore based investment platform is growing by leaps and bounds. The mood at their three offices around the world was very high yesterday as they celebrated the 1,000,000’th investor on the platform.

Dango estate has achieved great success in the crowdfunding industry in the shortest time, the platform has already funded more than $500,000,000 in loans worldwide and delivered over $350,000,000 in principal and interest to investors, with yields as high as 10%.

Authors:

George Popescu
Allen Taylor