Thursday July 11 2019, Weekly News Digest

Asset-backed securities

News Comments Today’s main news: Morningstar completes DBRS purchase. Figure issues $85M in loans per month. Zopa chief says banks are trying to put fintech lenders in a box. DBRS praises Funding Circle. Yirendai’s Q1 results. Octopus expands into Germany. Today’s main analysis: Over 60% of purchase borrowers received mortgage rates under 4.5% last week (A […]

The post Thursday July 11 2019, Weekly News Digest appeared first on Lending Times.

Asset-backed securities

News Comments

United States

United Kingdom

China/Hong Kong

European Union

International

Other

News Summary

United States

Former SoFi CEO Mike Cagney’s New Blockchain Startup Is Issuing $ 85 Million In Loans A Month (Forbes), Rated: AAA

Since the streamlined HELOC Mike Cagney, the co-founder and former CEO of fintech unicorn Social Finance (SoFi), knows that it is essential to focus on customer experience to build a loyal client base. Today, he is using that knowledge to create a platform aimed at driving mainstream adoption of blockchain technology in the financial sector.

Over 60% of Purchase Borrowers Received Mortgage Rates Under 4.25% Last Week (LendingTree), Rated: AAA

Mortgage Rate Distribution

  • For 30-year, fixed-rate mortgages, approximately 60.1% of purchase borrowers received offers of 4.25% or less. That is up from 57% of borrowers the previous week. A year ago, 0.06% of offers were under 4.25%.
  • Across all 30-year, fixed-rate mortgage purchase applications on LendingTree, 4.125% was the most common interest rate. This rate was offered to 14.3% of borrowers.
  • Of 30-year, fixed-rate mortgage refinance borrowers, 72.8% received offers of 4.25% or less, which is up from 70.4% the previous week. A year ago, no refinance offers were under 4.25%.
  • Across all 30-year, fixed-rate mortgage refinance applications, the most common interest rate was 3.875%, offered to 18.9% of borrowers.

Mortgage Rate Competition Index

  • Across all 30-year, fixed-rate mortgage purchase applications on LendingTree, the index was 1.19, down from 1.22 the previous week.
  • How big of a deal is it to get a mortgage APR that’s 1.19 percentage points lower than the competition? Over 30 years, that could translate to $56,826 in savings on a $300,000 loan (see Mortgage Savings Tracker graphic below).
  • The index was wider in the refinance market at 1.35, up from 1.34 the previous week. Refinance borrowers could have saved $65,108 by shopping for the lowest rate.
Source: LendingTree

It’s Taking Less Time to Close on a Mortgage in 2019 (LendingTree), Rated: AAA

  • The time to close in new purchase transactions has been steadily declining, from 74 days in 2017 to 51 days in 2018 and just 40 days thus far in 2019.
  • For refinances, the decline has been less dramatic: from 55 days in 2017 to 43 days in 2018 and just 38 days so far in 2019.
  • Some of the decline can be attributed to lower mortgage volumes, as refinancings have been on a downward trend. But increased digitization is also playing a major role.
  • Closing times vary based on the characteristics of the mortgage type and borrower. Having a higher credit score can knock a few days off: Purchase borrowers with scores above 760 averaged 38 days in 2019 compared with 45 days for those below 720. Refinancings did not show much variation by credit score.
  • Loan-to-value ratios below 80% had shorter closing times for refinances, at 37 days compared with 42 days on mortgages with a ratio above 95% in 2019.
  • Loan amounts also affect closing times, with lower amounts, perhaps surprisingly, taking the most time. Loans under $150,000 averaged 47 days compared with 39 days for those above the conforming limit ($484,350 in 2019). Why? Higher loan amounts are typically being made to more credit-worthy borrowers. Lower-priced homes may be in some form of distress or have some type of damage; lenders thus may require more extensive appraisals to better estimate the home’s value and this adds time to the process.

Mortgage Fintech Innovation (PeerIQ), Rated: AAA

In broad-brush strokes, mortgage innovation centers on:

  • Customer experience (Better, Roostify, Blend, HomeCaptain) solutions are re-inventing the onerous mortgage with a digital experience, speeding decision times and opening up the lending buy box in the process.
  • Intermediation (OpenDoor, HomeLight, Zillow) – Some platforms are stepping in between buyers and sellers to provide liquidity, capturing transaction fees in the process
  • Data (House Canary, Zillow, Atom Data) – are amassing large data sets to providing accurate, standardized pricing models for investment decisioning
  • Banking 2.0 (SoFi, ZeroDown) – seek to provide a range of banking or investing services to consumers
Source: PeerIQ

Guaranteed Rate Companies Breaks 15 Company Records with Exceptional June Production Volume (Yahoo! Finance), Rated: A

Guaranteed Rate Companies, one of the largest retail mortgage lenders in the nation, announces 15 new company milestones—breaking its monthly total locked volume for the fourth consecutive month in June.

Breaks its record of total locked volume with $5.31 Billion earned across more than 15,000 units

Can Commercial Real Estate Investment Truly Be Democratized? (Commercial Observer), Rated: AAA

Most real estate crowdfunding sites continue to highlight the equalizing benefits of the model. Fundrise provides “access to a once-unattainable investment class,” and Rich Uncles, which has a minimum of $5, wants to “level the playing field” for the average investor. The sites offer investments in funds that focus on income-producing assets, like single-tenant office, multifamily housing and convenience centers nationwide.

Jeff Holzmann, the former COO of crowdfunding site iintoo, says the definition of an accredited investor is very divisive: “You can have an economics degree, and if you make $199,000 a year, you can’t invest, but Kim Kardashian can walk right on up and buy a multifamily building for $200 million. Should our bar be set by how much money you make?”

Ryan Williams Is Bringing the ‘Proptech’ Revolution to Real Estate Investing (Fortune), Rated: A

Real estate is an industry notoriously stuck in its ways and slow to change. Cash-generating, bricks-and-mortar assets are at the very heart of the enterprise, and in many ways, business is conducted the same way it was 100 years ago. Until recently, real estate owners, investors and brokers had little patience for the kinds of technological advances that have swept through myriad other industries.

But that’s all changing now. Just as there’s fintech, medtech, edtech and regtech, so is there proptech—and there are few companies in the realm of real estate technology as closely watched as Cadre, led by a 31-year-old Blackstone Group and Goldman Sachs alum named Ryan Williams.

7 Reasons Why Long Distance Investing Isn’t As Risky As You Think (Forbes), Rated: A

In 2019 we have many ways we can verify the information we are provided when we invest outside of our own market. These methods will be the focus of this article. By the time you’re done with this, I think you’ll have a much better understanding of how to conduct due diligence, why out out state investing isn’t as risky as you thought, and why I’m such a big proponent of it

1.The Internet

There is very little you can’t find out with a little online searching.

2. You Can Find Rent Estimates Easily

Websites like Rentometer and Craigslist make a preliminary rent search fast and easy.

7. You Can Find Comps Yourself Online

BlueVine Reaches $ 2 Billion In Total Funded Volume (Bluevine), Rated: A

This past month, BlueVine achieved a major milestone, having provided access to more than $2 billion in total working capital to businesses across the nation.

Finitive Announces $ 100 Million Credit Facility For Platinum Auto (Crowdfund Insider), Rated: A

Finitive announced on Monday its client Platinum Auto of Tampa Bay secured a $100 million credit facility through its platform. Platinum notably purchases auto loan contracts from a network of over 300 auto dealers in the southeast region of the U.S.

Affirm lets you pay off a large online purchase over time — here are 35 stores that accept it (Business Insider), Rated: A

You can apply for a loan as you’re shopping at one of many Affirm’s partner stores, which include women’s and men’s fashion, furniture, sports and fitness, electronics, jewelry, and watch brands.

You can see which online retailers accept Affirm below.

They’re divided by category and we’ve also designated which ones offer loans starting at 0% APR with an asterisk.

Will Abercrombie & Fitch’s “Buy Now, Pay Later” Plan Lock in Gen Z Shoppers? (The Motley Fool), Rated: AAA

Abercrombie & Fitch (NYSE:ANF) recently partnered with payment solutions provider Klarna to let U.S. shoppers split purchases into up to four interest-free payments over two months. A&F is aiming this “buy now, pay later” system — which its rival Urban Outfitters (NASDAQ:URBN) has also adopted — at younger shoppers with less spending power.

But will “buy now, pay later” work?

Only a third of millennials have credit cards according to Bankrate. The average millennial in the U.S. also has a net worth of just $8,000 according to Deloitte, which gives them significantly less spending power than previous generations. Most Gen Z shoppers don’t have credit cards yet. They mostly use debit cards or linked payment apps, which restrict purchases to the amount of cash in their bank accounts.

rue21 is Totally on Trend with the Addition of Klarna (Yahoo! Finance), Rated: A

Klarna, the global alternative payments provider, is getting trendy with the Millennial favorite fashion brand rue21. Customers can choose to pay with four equal payments collected bi-weekly – with no interest or fees. With Klarna, these cool customers get the ability to stay ahead of trends even faster with a smooth checkout and a payment option that boosts flexibility and purchase power.

The necessity for businesses to keep up with the customer is increasingly important considering that U.S. shoppers admit to buying clothes and accessories online an average of 10 times a year. For Gen Z shoppers, aged 16-24, this number increases to 18 times per year, with nearly a quarter (23%) of them admitting to shopping online 1-3 times per month. Millennials are shown to shop online 14 times per year and the 55+ age group, 8 times per year. Considering these Millennial and Gen Z demographics are credit card averse and debt conscious, Klarna delivers an appealing and accessible method for shoppers to take control of their finances in a manageable way.

Metro Denver businesses mostly seeing green, not red (Denver Post), Rated: A

Of 42,610 businesses in metro Denver, 29,560 or 69.4 percent reported turning a profit, according to an analysis from online lender LendingTree.

That placed fifth out of the 50 metro areas that LendingTree ranked based on Census Bureau data. Seattle had a business profitability rate of 70.9 percent, making it the leader nationally. The only other cities ahead of Denver were Louisville, Ky.; Indianapolis and Portland, Ore.

U.S. Consumer Borrowing Climbs on Bigger Credit Card Balances (Bloomberg), Rated: A

U.S. consumer debt climbed in May at about the same pace as a month earlier, led by the largest advance in revolving debt outstanding since October, suggesting Americans’ favorable economic outlook is underpinning continued spending.

Total credit rose $17.1 billion from the prior month, in line with the median estimate of economists, following a $17.5 billion gain in April, Federal Reserve figures showed Monday. While credit card and other revolving debt outstanding increased at a faster rate, non-revolving credit posted the smallest increase in almost a year.

Small Business Loan Approvals at Big Banks Hit Record Highs (Yahoo! Finance), Rated: A

Approval rates for small business loan applications inched up to yet another record high of 27.6% at big banks ($10 billion+ in assets) in June, while the approval percentage also climbed at small banks, hitting 50% for the first time in 2019, according to the Biz2Credit Small Business Lending Indexreleased today.

Small bank approvals of small business loan applications climbed one-tenth of a percent from 49.9% in May to 50% in June.

Small business loan approval rates among alternative lenders dropped one-tenth of a percent to 57.0% in June, down a notch from 57.1% in May.

LendingTree Survey Finds 45% of Newlyweds Went into Debt for Their Wedding (PR Newswire), Rated: A

Approximately 45% of newlyweds between the ages of 18 and 53 went into debt to pay for their wedding. And once married, nearly half of the newlyweds who obtained wedding-related debt said money has caused them to consider divorce. On the flip side, only 9% of couples without wedding-related debt contemplate divorce.

LendingTree released its study on newlyweds and wedding expenses.

How Using Fintech Can Help Pay Off Student Loans (Yahoo! Finance), Rated: A

Companies like SoFi, Laurel Road and Splash Financial are just a few of the fintech industry names that have made their way into the student lending world.

Credible. This is a platform that allows you to compare student loan refinance rates from eight different lenders.

LendKey. Similar to Credible, Lendkey is a platform that allows the borrower to compare refinance rates side by side.

CommonBond. CommonBond for Business offers a flex contribution program that includes an option to directly contribute to paying down employee student loans, or to work with employees on financial literacy techniques for reducing their debt.

Gradifi. Gradifi is another fintech offering refinance options, bundled with employee benefits packages called SLP, or “student loan paydown”.

Earnest. This fintech offers refinance options to individuals with a more limited credit history that may not qualify for other traditional options.

FutureFuel. FutureFuel uses behavioral economics, which is the study of human behavior to explain economic decisions people make.

3 Alternative Financing Options for Small Businesses in 2019 (Digital Journal), Rated: B

Online finance is a very popular option to emerge of late. A few click on the website can bring about quick processing and loan approval.

Another alternative financing option is that of merchant cash advance.

Crowdfunding is an innovative and extremely popular way to raise money for new ideas, concepts, prototypes and creative products.

New Study on Digital Identity Shows Changing Consumer Behaviors (Lend Academy), Rated: A

Today, according to Pew Research Center more than 50 million American adults are mobile-only consumers.

Each year, IDology publishes a Consumer Digital Identity Study aimed at giving businesses visibility into how consumer preferences and opinions related to identity and fraud are shifting. This year’s study confirms the continued movement toward mobile, finding that in the last 12 months, for the first time, consumers opened more new accounts online with their mobile devices than on computers. A closer look at the data shows that 50 million American consumers (20% of all online adults) registered for new accounts exclusively on a mobile phone, up 10% from last year. This growing number has implications for financial service providers as they strive to keep fraud out while giving consumers a seamless digital experience.

Online Lending Startup Tries To Push Usury Suit To Arbitration (Law360), Rated: B

Online lending startup MoneyLion told a North Carolina federal court Tuesday that a suit over alleged unlicensed payday lending belongs in arbitration, arguing the proposed class of borrowers had signed valid arbitration agreements when taking out their loans.

United Kingdom

Zopa boss Jaidev Janardana: big banks are trying to ‘put fintech lenders in a box’ (The Telegraph), Rated: AAA

In just a few months, a string of Zopa’s rivals in peer-to-peer lending have collapsed. Others have exited the sector altogether.

The latest company to fall into administration, Lendy, resulted in £165m of customer cash being put on the line and affected more than 20,000 investors.

Zopa survey finds Brits are more open about bank balance than Netflix password (P2P Finance News), Rated: A

A survey of 2,000 adults by the peer-to-peer lender found that 47 per cent of respondents felt more comfortable revealing details about their bank accounts with their partner than their most intimate secret, while the same percentage would prefer to give an insight into their finances over their Netflix password.

Zopa looks to grow secured car finance offering (P2P Finance News), Rated: B

ZOPA is readying to launch its secured car finance product as a direct offer on its website, as it looks to expand this segment of the business.

Ratings agency backs Funding Circle strategy to tighten lending (AltFi), Rated: AAA

SME focused peer-to-peer lender Funding Circle was correct to proactively take the decision to tighten its lending criteria in pulling back from higher-yielding lower-quality loans, according to ratings agency DBRS.

Investor fintech demand drives record six months for Crowdcube (AltFi), Rated: A

Crowdcube saw revenues soar 39 per cent to £3.72m in the first half of 2019, compared to the same period in 2018, with £103.4m pledged to companies through the platform.

NatWest-backed Esme hits £60m lending milestone (AltFi), Rated: A

Esme Loans said it has hit over £60m of lending to UK small businesses just two years after its launch.

The small business lender unit said its loans have leapt 20 per cent since the end of April.

Habito launches buy-to-let mortgages (Which), Rated: A

Online mortgage broker Habito has launched a comprehensive range of buy-to-let mortgages, as it makes its first foray into lending.

The brokers offers a range of two and five-year loans for landlords, as well as more niche three, seven and 10-year fixed terms.

FCA misconduct probes into retail financial services firms increase by a third (P2P Finance News), Rated: A

THE NUMBER of Financial Conduct Authority (FCA) cases opened into misconduct in retail financial services has increased by 29 per cent in the past year.

The number of cases has increased to 101 for the 12 months ended 31 March, up from 78 the previous year, the FCA said in its annual report on Tuesday.

The regulator also said that the overall number of enforcement cases it is undertaking is up by 31 per cent over the past year – rising to 650 from 496 at the beginning of the year.

OakNorth lends £19.5m to Care Concern Group (Fintech Finance), Rated: B

Klarna teams up with UK festival We Out Here (Retail Tech Innovation Hub), Rated: B

PayTech venture Klarna has announced a partnership with new jazz and electric festival We Out Here.

It will unveil a ‘Smoooth Sanctuary’ at the event, which will be held in Cambridgeshire in August.

China/Hong Kong

Yirendai Reports First Quarter 2019 Financial Results, Closing of Business Realignment Transactions with CreditEase (GlobeNewswire), Rated: AAA

First Quarter 2019 Operational Highlights

Consumer Credit—Yiren Credit

  • Total loan originations in the first quarter of 2019 reached RMB 10.9 billion (US$1.6 billion), representing a decrease of 45% from RMB 19.8 billion in the first quarter of 2018.
  • Cumulative number of borrowers served reached 4,404,812, representing an increase of 15% from 3,824,341 in the first quarter of 2018.
  • Number of borrowers in the first quarter of 2019 was 149,715, representing a decrease of 48% from 287,166 in the first quarter of 2018.
  • The percentage of loan volume generated by repeat borrowers was 38.8% in the first quarter of 2019.
  • Total outstanding principal balance of loans reached RMB 63,213.8 million (US$9,419.2 million) as of March 31, 2019, representing a decrease of 16% from RMB 75,271.5 million March 31, 2018.

Reviewing China Rapid Finance Limited (XRF)’s and X Financial (NYSE:XYF)’s results (NBO News), Rated: A

This is a contrast between China Rapid Finance Limited (NYSE:XRF) and X Financial (NYSE:XYF) based on their analyst recommendations, profitability, institutional ownership, risk, dividends, earnings and valuation. The two companies are Credit Services and they also compete with each other.

Earnings & Valuation

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
China Rapid Finance Limited 1 0.27 N/A -0.85 0.00
X Financial 5 0.00 N/A 0.85 6.34

Table 1 shows the top-line revenue, earnings per share (EPS) and valuation for China Rapid Finance Limited and X Financial.

Court Upholds Ruling That Sent Two Peer-to-Peer Lending Executives to Prison for Life (Caixin Global), Rated: AAA

Shanghai Kuailu Investment Group Co. Ltd., along with two affiliated companies, and 15 defendants were convicted of fraudulent fundraising or illegal fundraising or both, according to the final ruling (link in Chinese) made by the Shanghai High People’s Court on Tuesday.

Kuailu, along with its affiliates, illegally raised more than 43.4 billion yuan ($6.3 billion) from the public, causing 40,000 people to take financial losses, the court said.

Foreign Investment Restrictions in P2P Lending Intermediaries (Lexology), Rated: A

The Interim Administrative Measures for the Business Activities of Peer-to-Peer Lending Information Intermediaries define “peer-to-peer lending” as direct lending/borrowing realized between peers on an internet platform. Peers include natural persons, legal persons and other organizations.

Bitmain’s Affluent Co-Founder Establishes the New Crypto Startup Matrixport (All Stocks), Rated: A

With the hope of capitalizing on the recent rise of the Bitcoin price, the co-founder of the mining giant Bitmain, Wu Jihan, has organized a group to develop “Matrixport,” a financial services startup for cryptocurrencies. According to its CEO Ge Yuesheng, Matrixport will function as a one-stop-shop for not just safekeeping of digital assets but also for crypto lending and over-the-counter trading.

European Union

Online Lender October Pushes into Germany as it Continues Expansion (Crowdfund Insider), Rated: AAA

Marketplace lending platform October, which is based in France, has expanded in Germany, according to a blog post by CEO and founder Oliver Goy.

October has selected Thorsten Seeger, a Funding Circle veteran, as CEO of October Deutschland as its plots its ongoing expansion across Europe. October currently operates in France, Spain, Italy, and the Netherlands.

Investors are putting £9bn to work in P2P Lending across Europe, UK still dominating (AltFi), Rated: A

The peer-to-peer lending market is now funding more than £9bn of loans across Europe each year with two thirds (67 per cent) of this funding coming through UK platforms.

Revolut brings the fintech battle to Berlin with a new hub (Yahoo! Finance), Rated: A

British fintech startup Revolut is opening a new European tech centre in Berlin, the home turf of its online-banking rival N26.

Lagan Investments takes 10% stake in Property Bridges (Irish Times), Rated: A

Lagan Investments, a fund founded by the North’s biggest house-builder, Kevin Lagan, has taken a 10 per cent stake in peer-to-peer lender Property Bridges and is to supply it with €5 million in lending capital.

International

Morningstar Names Detlef Scholz President of Expanded Credit Ratings Organization (Morningstar), Rated: AAA

Morningstar, Inc. (Nasdaq: MORN) has named Detlef Scholz as president of its expanded, global ratings organization. The leadership announcement comes as Morningstar today completes its previously announced acquisition of DBRS, the world’s fourth largest credit ratings agency, for a purchase price of US$669 million.

Scholz will assume his new role Aug. 1, 2019 and report to Morningstar Chief Executive Officer Kunal Kapoor.

Source: Morningstar

View the Morningstar/DBRS overlapping ratings.

Deutsche Bank in partnership talks with SoftBank-backed OakNorth (Reuters), Rated: A

Deutsche Bank (DBKGn.DE) is in talks with SoftBank-backed (9984.T) British fintech firm OakNorth to use the latter’s credit analysis and monitoring platform, a source with knowledge of the discussions told Reuters.

CoVEX Exchange — A Single Platform to Complete the Entire Crypto Lifecycle (Coinfomania), Rated: B

P2P loan: The CoVEX platform also implementing a decentralized p2p lending service. This allows users across the world to receive loans in lesser time and even reduces the repayment fee while at the same time protecting the interests of the lender.

Australia/New Zealand

An alternative loan scheme could help 2.1 million Australians in financial distress (UNSW Sydney), Rated: AAA

A social lending scheme could help bridge the gap between traditional lenders and government welfare for the 2.1 million Australians under high levels of financial stress.

Alexa Chung partners with Klarna challenger Laybuy (AltFi), Rated: A

Payments platform Laybuy has struck a new retail partnership with fashion brand of Alex Chung  – called ALEXACHUNG – allowing customers to spread the cost of purchases over six equal weekly payments.

New Zealand’s largest digital buy now, pay later app launched in March with its first partnership with Footasylum.

The true role of the SME broker (Australian Broker), Rated: A

Yet SMEs are being stiffed by traditional lending practices: 44% of small businesses have been knocked back for finance in the last 12 months. Put simply, SMEs are being underserved and ignored by the banks.

India

‘NiYO’ Raises US$ 35 Mn in Series B Round led by Horizons Ventures & Tencent (Yahoo! Finance), Rated: AAA

Indian new-age digital banking start-up NiYO Solutions has raised US$ 35 million in Series B funding round from Horizons Ventures, Tencent and existing investor, JS Capital. NiYO is founded by banking veteran Vinay Bagri and technology veteran Virender Bisht. NiYO had previously raised US$ 14 million in funding rounds led by Prime Venture Partners. With the current round the total fund raised by NiYO is US$ 49 million.
Authors:

George Popescu
Allen Taylor

The post Thursday July 11 2019, Weekly News Digest appeared first on Lending Times.

Wednesday August 9 2017, Daily News Digest

SoFi mortgages

News Comments Today’s main news: U.S. credit-card debt hits new record. LendingClub raises its outlook. OnDeck shares rise 17%. Zopa’s disappearing capital from IFISA. Ping An to invest in AI. Blackstone assumes majority stake in Banco Popular’s real estate portfolio. Securities and Exchange Board of India to study impact of fintech on financial markets. Today’s main analysis: SoFi bank charter could […]

SoFi mortgages

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

CARICOM

News Summary

United States

U.S. Credit-Card Debt Surpasses Record Set at Brink of Crisis (Bloomberg), Rated: AAA

U.S. consumer credit-card debt just passed an ominous milestone, beating a record set just before the global financial system almost collapsed in 2008.

Outstanding card loans reached $1.02 trillion in June, data from the Federal Reserve show, as lenders including Citigroup Inc. and JPMorgan Chase & Co. compete to sign up cardholders who may carry balances — a relatively lucrative business in a prolonged period of low interest rates.

 

The tide may be turning for LendingClub (LC) (Markets Insider), Rated: AAA

LendingClub on Monday posted its second highest quarterly revenues in its history. And Wall Street has responded.

Net revenue spiked 35% to $139.6 million in the second quarter, beating Wall Street’s average estimate of $136.4 million, according to Thomson Reuters.

Loan originations were up 10%.

Credit Suisse sent out a note to clients Tuesday morning outlining its case for a 25% boost in LendingClub’s stock price.

Lending Club Beats The Street And Raises Its Outlook (PYMNTS), Rated: AAA

By the numbers, the performance was also in line with what investors wanted to see — revenue was up 35 percent to $139.6 million during Q2, a solid beat on the analysts’ consensus estimate of $136.4 million. Originations returned to growth in the second quarter, up 10 percent to $2.15 billion. Meanwhile, operating expenses fell by 12.5 percent to $165.1 million in the quarter.

Revenue for the year — on the strength of that big performance — got an upward revision to the range of $585 million to $600 million, a reasonable pick-up on the previous forecast of $575 million to $595 million.

Has Lending Club Reached A Turning Point? (Benzinga), Rated: AAA

Following a beat-and-raise quarter from LendingClub Corp LC, analysts surmised the company may have reached an inflection point.

Credit Suisse analysts Stephen Ju and Christopher Ford noted this is the first quarter in about a year in which the company reported year-over-year growth in loan originations. The analysts expect ongoing acceleration throughout the next four quarters, as the company continues to recover.

Canaccord Genuity expects originations to grow sequentially in the third quarter or fourth quarter, aiding revenue growth acceleration in the second half of 2017 and notable sequential margin expansion.

The firm maintains its 2017 earnings per share estimate at 3 cents but nudged up its 2018 earnings per share estimate from 19 cents to 20 cents.

OnDeck shares rise on sunny outlook for loan growth, profitability (Reuters), Rated: AAA

Shares of OnDeck Capital Inc (ONDK.N) rose as much as 17 percent on Monday after the online lender said it had made progress on a plan to cut costs and improve the credit profile of its borrowers, and expects to reach double-digit loan growth again by next year.

SoFi Bank charter could test CRA status quo (Market Intelligence), Rated: AAA

Social Finance Inc., or SoFi, on June 6 applied for a bank charter with the Federal Deposit Insurance Corp.

S&P Global Market Intelligence research shows SoFi originated 1,160 mortgages in 2016, with only two of those mortgages, or 0.2%, made in distressed or underserved tracts, a CRA measure. Across the U.S., 2.0% of all mortgages were in underserved areas that year.

Of the $8 billion in total loans that SoFi said it originated in 2016, about $810 million were property loans, according to S&P Global Market Intelligence data. None of the mortgages issued by the parent company were in SoFi Bank’s proposed CRA assessment area of Salt Lake City and nearby areas.

Fewer than 1.00% of SoFi’s consumer loans are made to borrowers in Utah, according to reports for the company’s asset-backed securities issued in 2015, 2016 and 2017. The securitization documents cover $4.6 billion in principal loan balances.

SoFi’s CRA strategy will revolve around financial literacy, education and scholarships, according to its application. SoFi stated it will measure the success of its CRA plan in terms of employee hours devoted to community service, the number of scholarships awarded and the percent of its investment pool that goes into Utah Housing Bonds.

The 10 Biggest Fintech Companies In America (Forbes), Rated: AAA

Financial technology companies in the U.S. raised $3.5 billion in the first half of 2017, according to KPMG, as investors rushed to place bets in buzzy sectors like insurance and digital currencies.

The U.S. is now home to 13 fintech unicorns who have scored valuations of at least $1 billion.

  1. Stripe – Value: $9.2 billion
  2. SoFi – Value: $4.3 billion
  3. GreenSky  Value: $3.6 billion
  4. Credit Karma  Value: $3.5 billion
  5. Oscar  Value: $2.7 billion
  6. Avant  Value: $2 billion
  7. Zenefits Value: $2 billion
  8. Prosper  Value: $1.9 billion
  9. AvidXchange  Value: $1.4 billion
  10. Robinhood  Value: $1.3 billion

Betterment Introduces New Features And Pricing Plans (Forbes), Rated: A

Betterment’s three new features went live in late July. The features are:

  • Financial Advice Via App: Through Betterment’s mobile app, clients can now message a licensed financial expert. Experts can answer questions like how to set goals, which tax features to use, and how much risk to take in investing.
  • Socially Responsible Investing (SRI) Portfolio Options: These options give customers a way to invest in a globally diversified portfolio of companies considered socially responsible.
  • Combining Plus and Premium Plans: Betterment is now combining its Plus and Premium plans, which allow customers to now make unlimited phone calls to certified financial professionals. The new, combined plan charges a .4% annual fee.

The first feature, the ability to get financial advice through an app, attempts to address a big issue with robo advisors. Many investors want a human touch. They want to talk to an advisor from time to time. This will no doubt be true during the next bear market. Betterment’s new feature attempts to address this need.

The new pricing plan will benefit investors who were already using the higher-level Betterment plans. Those who were Plus customers can now get more personalized advice for the same fee and those who were Premium customers are paying less for the same service–always a good thing.

The Premium plan now gives customers access to more holistic investing advice. This advice can run the full scope of your investments, from your 401(k) to real estate to individual stocks to your Betterment portfolio.

Fed study finds expanded credit access resulting from fintech lending (Ballard Spahr), Rated: A

The study’s key findings include:

  • The fintech lender’s consumer lending activities penetrated into areas that could benefit from additional credit supply, such as areas that have lost a disproportionate number of bank branches and highly concentrated banking markets.
  • Consumers presenting the same credit risk could obtain credit at lower rates through the fintech lender than through traditional credit cards offered by banks.
  • The lender’s use of alternative credit data allowed consumers with few or inaccurate credit records (based on FICO scores) to access credit at lower prices, thereby resulting in enhanced financial inclusion.

SMARTPHONES MAY BECOME SMART ATM’S WITH NEAR FIELD COMMUNICATION (Fintech Today), Rated: A

You may no longer need to worry about carrying your ATM card with you everywhere as long as your bank’s ATM and smartphone are equipped with near field communication technology (NFC). NFC, a method of wireless data transfer that detects and enables technology to communicate, is reportedly being rolled out at banks across the country. Financial institutions believe that cardless or “Smart ATM’s” are the wave of the future and they are enabled as long as ATM’s and customers have a smartphone or mobile device equipped with NFC.

It’s been estimated that 2.2 billion smartphones will be equipped with NFC by 2020.

Robos, digital platforms and human financial advice: What investors really want (Investment News), Rated: A

The emergence of robo-advice and robo-investing platforms in recent years has led many traditional advisory firms to place a greater emphasis on their digital footprints. A growing number, in fact, are moving to offer digital versions of their “human” services. The 2017 InvestmentNews Adviser Technology Study, for example, showed that 7% of independent advisory firms offered a robo-advice option at the end of 2016, compared with just 3% two years earlier. At the same time, 19% of the firms that do not offer a robo-advice option intend to introduce one in 2017—nearly double the number that indicated that intention in 2015.

Only about 4% of the mass affluent and high-net-worth individuals in our survey reported that they use an automated investing or robo-advice tool.

Source: Investment News

For context, some 49% of individuals in our study currently use a financial adviser; the balance are self-directed investors.

Online Lender Better Mortgage Now Available in 13 States as it Expands into Florida (Crowdfund Insider), Rated: A

Better Mortgage is now available in 13 different states as it has received a license to lend to house hunters in Florida.  The Sunshine state is an important addition to the online lenders services as Florida is a popular vacation home state.

Better Mortgage says it is continuing to expand its footprint in the US. The lender is now available and improving access to homeownership in 13 markets including; Arizona, California, Colorado, Connecticut, Washington, DC, Florida, Georgia, Illinois, New Jersey, North Carolina, Oregon, Pennsylvania and Washington. Better Mortgage says that it is seeing particularly strong uptake in Seattle, Washington, San Francisco, California, and Washington, D.C.

Real Estate Crowdfunding Platforms: What to Look For (Equities.com), Rated: A

While each offers a unique focus and value proposition to investors, platforms have now consolidated into several main categories of business model:

  • eREITs: Fundrise and RealtyMogul, two of the original players the real estate crowdfunding space, have pivoted to offering semi-blind funds that aggregate properties throughout the country.
  • Commercial equity investing: probably the closest to the original ideal of real estate crowdfunding, these platforms offer CRE equity opportunities to accredited investors, allowing them to participate in high-upside, larger commercial projects. While the return potential is often great, these tend to be the longer term and riskier than other RECF investments.
  • Debt investing: Some platforms take some or all of an existing real estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return.

Some platforms (like EquityMultiple, see below) perform their own diligence on investments, which should give you some comfort as an investor. Even so, you’ll want to understand some key components of any deal you consider, and be sure it aligns with your investing objectives before pulling the trigger. Here are some of the main things to consider:

  • Risk Factors – Examples of risk factors are tight construction timelines, a precarious labor market in the area, an unsubstantial track record or aggressive leverage on the part of the Sponsor who originated the deal.
  • Payout Structure – Be sure to understand where your investments fits in the capital stack, and what order you will be repaid principal and profits relative to the Sponsor and other LP investors.
  • Cash Flow and Liquidity – Simply looking at how many dollars you’re expected to receive over the lifetime of a deal (the simple return) or even a time-weighted return (IRR – internal rate of return), won’t give a complete picture of the timing and magnitude of returns.

Developer of Vacant Lots in New Orleans Has Crowdfunding Success (Next City), Rated: A

Small Change, a real estate crowdfunding portal, recently completed the sale of its first-ever offering open to all investors — and raised $95,000. Thirty-nine investors put in an average of $2,435. The minimum investment was $500. The money will help OJT (Office of Jonathan Tate), a New Orleans-based developer, finance the construction of two affordable single-family homes, on vacant lots.

The homes will be in New Orleans’ Milan neighborhood, which is two-thirds black and one-third white, and has a median income around $33,000.

Mixing technology and old fashioned salesmanship, Voya expands (Financial-Planning.com), Rated: A

So it has to move beyond the perception that it is a singular service provider, says Voya Financial Advisors’s Tom Halloran, president of its broker-dealer. One way the firm is doing that is by tying together its institutional businesses with retail, mixing technological innovation with old fashioned salesmanship, even considering the deployment of a robo advice platform.

A former Microsoft and Yahoo exec explains how treating your job like a report card can help you get a raise (Business Insider), Rated: B

In fact, it’s up to you to track your performance and ensure that your compensation reflects it, said Joanne Bradford, chief marketing officer of online lender SoFi, on a recent episode of the “So Money” podcast.

Clark County Common Pleas Court cases (Springfield News-Sun), Rated: B

Velocity Investments, LLC, assignee of Lending Club Corp., v. Joshua R. Hawk, judgment for $17,947.

United Kingdom

Investors remark on “disappearing capital” from Zopa IFISA due to IT glitch (P2P Finance News), Rated: AAA

SEVERAL lenders who invested through Zopa’s Innovative Finance ISA (IFISA) have complained that small amounts of money were disappearing from their account.

The issue occurred when funds were invested in the ISA Plus product and appeared to be missing capital rather than negative interest, investors on the P2P Independent Forum said.

Zopa is understood to be rectifying the technical issue.

Report proposes new ways to get people investing (AltFi), Rated: AAA

A new report on savings and investment suggests that savers are missing out on billions of pounds by spurning investment opportunities, including peer-to-peer lending. The report is supported by RateSetter, one of the UK’s largest P2P operators, and was produced by the Social Market Foundation think tank.

The report found that savers are holding more than £200bn in cash above and beyond what is referred to as the “rainy day” level. “Rainy day” funds – which are held in cash in case of emergency – are defined by the report as three months’ worth of income. The Social Market Foundation says that this idle pot of £200bn could have generated returns of £94bn over the past five years, had it been invested in the FTSE 100, or £40bn, if invested via P2P lending.

Ranger Direct Lending fund’s woes continue (AltFi), Rated: A

The £240m Ranger Direct Lending fund was announced its latest dividend of 24.26 pence per ordinary share for the 3-month period to 30 June 2017, its lowest in more than a year.

Its latest numbers show returns were again comparable to the last few months. This was due to a combination of expenses such as legal fees and higher than expected cash levels. In 2017, excluding the estimated dividend mentioned above, a total of 55.44 pence per share has been paid in dividends to ordinary shareholders. In 2016, a total of 89.61 pence per share was paid in dividends to ordinary shareholders.

 

Octopus the latest firm to offer the peer-to-peer Innovative Finance Isa, promises investors interest before Octopus (City A.M.), Rated: A

Investment firm Octopus seems to have its tentacles in all the pies, as it has today become the latest business to offer an Innovative Finance Isa.

Octopus is also aiming to dismiss the risks associated with peer-to-peer lending by contributing five per cent of every loan from its own pocket. Any losses suffered will come out of this sum first, meaning investors can get their initial investment back plus any interest due to them before Octopus earns anything.

Investors will be able to put as little as £10 in the tax-free product, and up to their annual Isa allowance which currently stands at £20,000.

ThinCats Receives Full Authorization By the Financial Conduct Authority (Crowdfund Insider), Rated: A

ThinCats, an alternative lending industry leader, announced on Tuesday it has received full authorization by the Financial Conduct Authority (FCA). According to the online lender, the approval highlights its commitment to protecting consumers and also developing the alternative finance industry as a vital source of capital for businesses and income for investors.

China

With $ 1b war chest, Ping An set to become AI innovation giant (China Daily), Rated: AAA

Chinese financial giant Ping An Insurance (Group) Co will spend more than 7.77 billion yuan ($1.16 billion) on technology research and development this year, and artificial intelligence will be the focus of that R&D, according to a senior executive of the company.

Established in 2008, Ping An Technology has about 4,000 technology workers and has paid attention to R&D in cognition, robot advisory and cloud businesses. Their applications are mainly used in finance and healthcare industries; up to now, there have been more than 200 application scenarios.

Micro-bank micro-credit balance of over 100 billion, has launched the enterprise loan products “micro-credit” (01Caijing), Rated: A

On the evening of August 7, the public bankers issued a friend said that the balance of micro-loan loans over 100 billion. According to the public bank in 2016 annual report, the balance of micro-loan loans 7 months increase of nearly 300%.

In addition, July 16, the public bank retail credit director Fang Zhenyu Lundi summit speech revealed that the balance of microfinance loans 76 billion yuan, which means that the balance of 72 days of microfluice increased by 24 billion yuan. At the same time, he also revealed that the daily loan loans to 150,000 pen, up to 20 to 300,000 pen, the daily repayment of the number of 200,000 pen, a single loan approval time is 0.3 seconds, almost real-time approval. In the allocation of talent, the public bank IT department staff accounted for 57%, background managers accounted for 6%, business and support staff accounted for 37%.

LangDi FinTech Conference in Shanghai. The Biggest Fintech Meetup In The World! (Crowdfund Insider), Rated: A

Last year, the conference had a massive showing of over 1,300 attendees. This year, the conference nearly doubled to 2,400 attendees. There was hardly any place to stand when Soul Htite of DianRong and Renaud Laplache of Upgrade took the main stage to talk about Fintech entrepreneurship.

Gopher Asset Management had investment associates in just about every session at the conference looking for the next investment opportunity. Gopher is a subsidiary of Noah Holding Limited (NOAH:NYSE), one of the biggest wealth management companies in China with a current market cap of USD $1.7 billion.

Galaxy Internet, another Chinese venture capital firm is actively seeking investment opportunities in the area of finance, ecommerce, payments and big data. 

Borrowell is owning the Canadian market in a big way. They just raised a $12 million round. Borrowell is helping Canadian’s to build credit starting with affordable loans. In a short amount of time, Borrowell has amassed over 300,000 borrowers and is looking to expand into other markets.

Jack Quigley, Founder and CEO of CrowdFundUp. He’s probably the hardest working man in Fintech. He’s constantly making deals and connecting dots. He’s 100% committed to China and recently moved to Shanghai and I think he’s not leaving until he brings home the trophy. I visited his office in Shanghai, overlooking a bustling city. CrowdFundUp will be China’s gateway into commercial real estate in Australia.

European Union

Blackstone to take majority stake in Banco Popular’s real estate portfolio (PE Hub Network), Rated: AAA

Banco Popular S.A. (‘Popular’) has today approved the sale of a majority stake in its real estate portfolio to Blackstone Real Estate Partners Europe V (‘Blackstone’). The agreement has been reached following a competitive process in which three international companies with long track records in the management of real estate assets presented offers. Blackstone was selected as the successful bidder after submitting the best offer in terms of both its value and management plan.

The agreement was confirmed after the European Union Directorate General for Competition today approved the acquisition of Popular by Banco Santander S.A. (‘Santander’) with no restrictions.

The transaction will involve the creation of a company to which Banco Popular will transfer assets with an aggregate gross book value of approximately €30 billion, as well as 100% of the share capital of Banco Popular’s real estate management company, Aliseda.

The valuation attributed to the Spanish assets of the business (e.g. properties, loans and tax assets, not including Aliseda) is approximately €10 billion. This is consistent with the valuation and provisions made by Santander during the acquisition of Popular and does not, therefore, result in any material capital gain or loss for Santander or Popular. The final valuation is subject to change depending on the assets remaining within the business at closure and following the integration of Aliseda.

Blackstone will own a majority 51% stake in the new company while also assuming management responsibilities, while Banco Popular will own the remaining 49% stake. As a result, the aforementioned assets will no longer be consolidated on Banco Popular’s balance sheet.

VC’s behind Zopa, Revolut, Transferwise & Clear Score confirmed for judging panel for PitchIt event (London Loves Business), Rated: A

Representatives from Venture Capitalists: Seedcamp, Blenheim Chalcot, CommerzVentures, and Balderton Capital will form the judging panel of experienced VCs from and around Europe.

Collectively, these four firms are some of the most active investors in the European fintech category and have played key roles in the success of several of the largest fintech successes in Europe.

Lithuania Seeks to Become Fintech Center as Bank of Lithuania Looks to Launch Regulatory Sandbox (Crowdfund Insider), Rated: B

Lithuania is the latest country joining the Fintech revolution by recognizing the importance of fostering a regulatory environment that is conducive to change and challenges established norms. The Bank of Lithuania is out with a statement regarding the launch of a sponsored Fintech Sandbox.

The following measures are will apply:

  • Relatively easy and low-cost authorization process: following submission of all necessary documents, it takes only 3 months for the Bank of Lithuania to take a decision on the issuance of an electronic money or payment institution license. In other EU countries, the process may take 12 months and more.
  • Access to the Bank of Lithuania payment infrastructure for non-banking sector companies planning to provide payment services, thus avoiding a middleman.
  • Newcomer program. The Bank of Lithuania applies a one-stop shop principle for meetings and consultations with potential financial market participants.
  • Specialized banking license. In order to establish a bank in Lithuania that would provide usual banking services, the lowest initial capital requirement in the entire euro area – EUR 1 million – is applied. This is five times less than the requirement applied to banks that provide the full range of services, including investment ones.
International

The Russian Connection (To Alt Lending Globally) (PYMNTS), Rated: AAA

ID Finance Co-Founders Boris Batine and Alexander Dunaev were far from newcomers to the world of finance when they started up their business in 2012. Long before founding a data science, credit scoring and digital finance company, the Russian-born and U.K.-educated entrepreneurs met while working abroad at Renaissance Capital and Deutsche Bank.

And so, in 2012, with only a few hundred thousand of their own dollars to get up and running, ID Finance launched in one of those underserved markets — their home market of Russia.

By 2015, the firm was profitable, and in 2016, it officially relocated it headquarters to Barcelona, Spain, one of three nations outside Russia ID Finance has expanded its efforts into — Belarus and Brazil being the other two.

These days, the firm originates 50,000 new loans a month — loans that it mostly finances off its own balance sheet, as opposed to selling them off on a marketplace. As of February of this year, the firm raised $50 million in debt from a consortium of banks to fund further expansion in South America.

A New $200 Million Fund

As ID Finance has expanded around the world — and partnered with various FIs — its founders realized that there are a host of small businesses that are simply being underdeveloped because they are almost invisible to investors.

Working with Elbrus Capital Fund Manager Yury Popov and asset management company Da Vinci Capital, the FinTech Credit Fund is being jointly offered as a $200 million debt finance fund aimed at FinTech companies focused on alt lending innovation. The funding from the credit fund, according to Batine, is aimed at helping up-and-coming FinTech lenders fund their own loans — and finance their loan portfolios.

“The alternative lending market is worth a potential $2 trillion, and we see a huge opportunity to back the billion dollar companies of tomorrow focused on digital lending,” Dunaev said.

How this social entrepreneur is bringing banks to the fingertips of the unbanked (Huffington Post), Rated: A

Humaniq was launched in 2016 with a vision to build a world where the unbanked and underbanked around the world also have access to the banking and financial transactions. An estimated 2 billion people can be brought under the umbrella of financial inclusion with Humaniq’s services.

Tell us more about Humaniq and the problem you solve?

Humaniq is on a mission to bring new mobile digital services and financial inclusion solutions to the 3.5 billion unbanked / under banked globally who have no access to the digital economy.

How does Humaniq work, especially with respect to privacy and security?

Humaniq offers a biometric blockchain app that can be used in any simple smartphone device.

The Humaniq LITE app is part of a broader humanitarian capitalism venture. Humaniq has a digital currency tied to it, known as HMQ.

Who’s your target audience and how exactly do you help?

We are working with emergent economies – where people live on USD$2.50 a day. Many of them do not have documentation and have had little or no education.

Our first big pilot will be in Ghana with local and international organisations, targeting 18 to 40-year-old low-income smartphone users and merchants in suburban areas including the capital city of Accra.

How did you acquire your first customer and how long did that take?

We did various test in India and Africa with previous test versions of our app. We are also working with Brazilian organizations.

With regards to funding, how did you fund your business? How hard was it and how much time did it take to acquire those funds?

Our business model has thrived on the P2P innovation and blockchain driven crypto economics. We built our model on the back of a crypto, Ethereum driven smart contract Initial Coin Offering(ICO).

Australia/New Zealand

New Zealand advice industry to be overhauled (Financial Standard), Rated: AAA

The New Zealand government is looking to remove the distinction between class and personal advice, as well as allow the provision of digital advice as it seeks to overhaul the country’s regulatory regime for financial advisers.

Unlike the FA Act, the new Bill enables the provision of more types of advice by being technology-neutral, lifting the existing restrictions around advice needing to be provided by a human adviser.

In turn, this allows for the provision of robo-advice and works to future-proof the legislation for technological developments. It also serves to increase the New Zealand population’s access to quality financial advice.

‘Non-bank’ status drives IOOF results (IFA.com.au), Rated: A

IOOF has credited the structure of its “non-bank-aligned” dealer groups and “open architecture” culture with a dramatic increase in revenue inflows from its financial advice business.

The results reflect a 131 per cent year-on-year increase in advice net inflows, according to a statement from IOOF, with $3.0 billion in total advice net inflows for the 2017 year.

India

SEBI Constitutes CFRT Committee To Study Impact Of Fintech On Financial Markets (Inc42), Rated: AAA

The Securities and Exchange Board of India (SEBI) has formed a Committee on Financial and Regulatory Technologies (CFRT) to examine ongoing and medium-term trends related to fintech in the securities and financial markets worldwide.

Thus, regulators are faced with the challenges as well as opportunities to evolve their functioning more effectively through the adoption of new technology solutions. It is in this context that the CFRT committee will help the SEBI deal with relevant risks and challenges.

The Committee would examine, deliberate and advise the SEBI on an ongoing basis on the following issues:

  • Recent and medium term trends (within next 5 years) in fintech developments in securities market worldwide.
  • Opportunities and challenges from new fintech solutions and its impact on Indian Securities Market.
  • Fintech solutions for further widening and deepening of Indian securities market.
  • Approach and framework for the regulatory sandbox in Indian market conditions to facilitate the adoption of fintech and promote financial innovations.
  • Preparing the Indian securities market and regulatory framework to adapt to new fintech solutions while promoting market integrity, market development, consumer protection and managing change, business models and market disruptions.
  • Assessing technological solutions for SEBI regulatory functions viz. information management and data mining, risk management including cyber security, intermediary supervision, consumer protection, etc., through the application of new technological solutions like applying distributed ledger technology, Big Data, data analytics, Artificial Intelligence, machine learning etc.
  • Technology capacity building by Indian securities market in general and SEBI in particular.

Start-up funding may come under SEBI lens (The Hindu), Rated: A

The Committee on Financial and Regulatory Technologies will, among other things, deliberate on financial technology solutions for “further widening and deepening of the Indian securities market” through traditional and alternative platforms, including peer to peer lending and equity crowd-funding.

While questioning the manner in which these entities help start-ups raise funds, the regulator has said that any violation would be “construed as organising an unrecognised stock exchange” and that SEBI would be “constrained to initiate action.”

Under the current legal framework, issue of shares to more than 200 persons constitutes a public issue and needs SEBI approval.

Rubique Appoints Vodafone Ex- M-Pesa CEO Suresh Sethi & Alexia Yannopoulos of Apis Partners as Directors (PR Newswire), Rated: A

Rubique, the one-stop online marketplace providing technology-enabled end-to-end solutions to financing needs of individuals & SMEs has announced the appointment of two directors- Suresh Sethi, EX-CEO & Managing Director of Vodafone M-Pesa and Alexia Yannopoulos Director at Apis Partners LLP.

Asia

CFTE is Helping MAS Assist ASEAN Finance Professionals Gain FinTech Skills (Cryptocoins News), Rated: AAA

The Centre for Finance, Technology and Entrepreneurship (CFTE) has revealed that it is setting up an international hub in Singapore designed to aid finance professionals gain the necessary skills in FinTech.

Working closely with the Monetary Authority of Singapore (MAS), CFTE has been formalizing plans to expand its education platform to the Association of Southeast Asian Nations (ASEAN), according to a report from FinTech Finance.

CFTE is to deliver courses that cover a range of areas in the finance industry. These include artificial intelligence, application programming interfaces (APIs), coding, blockchain, and RegTech. They will either be delivered online or via in-class training.

P2P lending growth slows in July (Yonhap News), Rated: AAA

South Korea’s peer-to-peer lending growth slowed in July after financial regulators asked lenders to tighten guidelines for individual investors, industry data showed Tuesday.

According to data compiled by the Korea P2P Financial Association, lending between peers grew by 104.7 billion won (US$93.1 million) in July to a cumulative 1.2 trillion won.

In comparison, P2P lending grew by 172.8 billion won in June.

P2P financing industry to absorb investors’ demands (Korea Herald), Rated: A

It is especially likely to absorb the investor cluster who, under the government’s new restrictive measures on real estate transactions, are swiftly turning away from banks and seeking for an alternative source of investment income, according to industry watchers.

In late May, the association enforced a set of guidelines, setting a 10 million won ceiling on the investment per business unit, responding to the government’s gesture to protect investors from potential dangers of the new investment platform.

INDONESIAN peer-to-peer (P2P) lending marketplace PT Amartha Mikro Fintek (Amartha) encourages and targets “millenials” to invest in micro-businesses and SMEs through the Amartha Short Movie Festival.

The Amartha Short Movie Festival is a competition divided into two categories which are short documentaries with the theme empowering micro-businesses and short fiction movies with online peer-to-peer lending as the theme. Applications are open from August 8 to October 9, 2017.

CARICOM

Vincentian Set to Launch the Region’s First Equity Crowdfuning Startup Company (St. Lucia Times), Rated: AAA

Global Domination Capital is set to be the regions’ first fintech startup company, offering equity crowdfunding and peer-to-peer lending solutions to the OECS countries and  the CARICOM member states. This includes Barbados, Jamaica, The Bahamas, Trinidad and Tobago and The Turks and Caicos Islands.

Global Domination Capital is expected go live and accept both new investors and borrowers to the platform by late September.

Authors:

George Popescu
Allen Taylor

Friday May 5 2017, Daily News Digest

Friday May 5 2017, Daily News Digest

News Comments Today’s main news: Lending Club’s Q1 2017 results: a little disappointing. SmartFinance to IPO in U.S. Prosper says system error overstated returns. Details on NAV’s raise of $38mil Series B. Next Insurance secures $29M during Series A. Metro Bank hits 1 million accounts. LendIt Europe to meet in London this year. Mexican fintech raises $4M in Series A. Today’s main […]

Friday May 5 2017, Daily News Digest

News Comments

United States

United Kingdom

  • Metro Bank hits one million accounts. GP:”This is a very large number of accounts. I am very impressed.”AT: “Great achievement. Congratulations.”
  • Sand. Meet Head. GP:”Certainly worth a read.”AT: “I love Anand’s sense of humor, but his insights are prescient, as well. I’m always amazed at the hubris of incumbents in any industry. Any time there is market disruption, the surest path to survival is humility, not boasting.”
  • LendIt Europe returns to London. GP:”I think there was no doubt it will be in London and stay in London. “
  • Robo-advisor to provide full retirement advice in two hours. GP:”I am not sure why it takes 2 hours to compute such a simple algortihmic solution. “AT: “This sounds like a joke, but I know it isn’t. I think most people will want the robot’s advice checked by a human until they are 100% comfortable with the technology.”
  • Octopus-backed Moola goes live.
  • What is fintech and why Google and Facebook will be the banks of the future. GP:”Google is already struggling to defent against monopole attacks and Facebook is avoiding carefully to be turned into a credit bureau. I doubt they will move in that direction. Also banks don’t have a good image with the public and aren’t that profitable so I see no reason for Google or Facebook to come even close to being banks.”AT: “The headline is misleading and somewhat overstated.”
  • Fintech: What will bring the most change? AT: “A poll indicates that blockchain may be the most disruptive fintech technology in fintech. I think it certainly has the potential to be, but we haven’t seen it yet.”
  • What does rising inflation mean for your money? AT: “A blog post at Funding Circle.”

China

European Union

India

Middle East

Central America

News Summary

United States

Lending Club Reports First Quarter 2017 Results (Crossroads Today), Rated: AAA

($ in millions)

March 31,
2017

December 31,
2016

March 31,
2016

Originations

$

1,958.7

$

1,987.3

$

2,750.0

Net Revenue

$

124.5

$

130.5

$

152.3

Net Income (Loss)

$

(29.8)

$

(32.3)

$

4.1

Adjusted EBITDA (1) (2)

$

0.2

$

(0.9)

$

26.3

Key accomplishments and developments in the first quarter across the Lending Club platform include:

Investors

  • Banks further increased their purchasing, funding 40% of total originations for the quarter, up from 31% in the fourth quarter, and retail investors expanded to 15%, up from 13% in the prior quarter
  • Developed a retail investor mobile application, now available in the App Store
  • Lending Club initiated activities to support the securitization of Lending Club loans with external partners

Borrowers

  • Achieved another nearly $2 billion originations, surpassing $26 billion in total loans since inception almost ten years ago
  • Continued the Company’s lead as the largest personal loan provider in the U.S. with a borrower base of almost 2 million individuals
  • Introduced an enhanced version of our Joint Application loan program, giving borrowers the ability to jointly apply for a personal loan

Adjusted EBITDA (3) Adjusted EBITDA was $0.2 million in the first quarter of 2017, improving $1.0 million from the fourth quarter of 2016, resulting from the decrease in revenue noted above, and a decrease of $10.3 million in other general and administrative expenses. The decrease in other general and administrative expenses was primarily driven by an insurance recovery of $9.6 million. Adjusted EBITDA also includes $10.6 million of expenses primarily associated with the Board Review that was disclosed in 2016.

Lending Club’s $ 30M quarterly loss is its smallest in the last year (American Banker), Rated: AAA

Lending Club, the online consumer lender whose fortunes were hurt by scandal last year, lost $29.8 million in the first quarter amid lower revenues and rising expenses.

BRIEF-Lending Club reports Q1 adjusted loss per share $ 0.02 (Reuters), Rated: AAA

  • LendingClub corp – qtrly originations $1,958.7 million versus $2,750.0 million
  • Q1 adjusted loss per share $0.02
  • Q1 loss per share $0.07
  • Q1 earnings per share view $-0.03 — Thomson Reuters I/B/E/S
  • Q1 revenue $124.5 million versus i/b/e/s view $122.8 million

Here is the Lending Club Q1 Earnings Deck (Crowdfund Insider), Rated: AAA

Below is the Lending Club Q1 earnings deck. The company is predicted Q2 growth of 6% to 10%. Full year sequential growth is expected to be 15% to 19%.

See the Lending Club Q1 2017 results in full here.

Lending Club slowly woos investors back after last year’s scandal (Financial Times), Rated: AAA

In the first quarter the San Francisco-based company originated $1.96bn of loans, it said on Thursday, down slightly from the $1.99bn of the fourth quarter. Banks bought 40 per cent of the loans, up from 31 per cent in the fourth quarter, indicating that many are now satisfied that the company has ironed out its problems.

But net revenues for the quarter were $125m, down 5 per cent from the fourth quarter. The quarterly net loss was $29.8m, slightly less than the previous period.

According to data from Orchard, a technology provider to the industry, total returns from an index of US consumer loans came to 3.95 per cent last year, down from 8.71 per cent in 2014.

Online Lender Prosper Says System Error Overstated Returns (Bloomberg), Rated: AAA

Prosper Marketplace Inc., one of the largest U.S. online-lending platforms, notified the majority of the investors that buy its loans that it had overstated their annual returns due to a system error, a spokeswoman said.

The error has been fixed, according to spokeswoman Sarah Cain. Some of the investors that were affected saw their annual returns fall in half, but in most cases returns fell less than 2 percentage points, Cain said. The issue has been going for “several quarters,” she said.

The glitch didn’t affect the cash that investors received, tax documents, expected future returns, or any other information the startup provided to loan buyers. In a small number of cases, returns were understated, Cain said.

Q1 2017 Shareholder Letter (Square), Rated: AAA

Our first-quarter results demonstrate our continued ability to grow the business at scale while balancing investment and margin expansion. Improvements in net loss and Adjusted EBITDA reflect strong top-line growth, coupled with ongoing operating leverage and improvements in transaction loss rates. Similar to previous quarters, we saw strong momentum across our products, with revenue growth driven by both transaction-based and subscription and services-based monetization.

We launched in the UK, our fourth international market, where small and medium businesses (SMBs) generated £1.8 trillion of revenue in 2016.

Square is a great fit for the UK market, which has 5.5 million SMBs2 and a thriving entrepreneurial scene. The annual revenue of SMBs in 2016 was £1.8 trillion, which is 47% of all private sector UK revenue. In the UK, the average adult now carries less than £25 in cash and 70% of shoppers prefer to pay by card, yet industry research estimates that half of UK small businesses still do not take card payments. Our contactless and chip reader aims to meet the needs of the UK market, where there are more than 100 million contactless cards.

See Square’s full Q1 2017 report.

FT Partners Advises NAV on Series B Financing (FT Partners), Rated: AAA

Read the full announcement here.

PeerStreet Hits New Milestone: $ 300 Million in Loans Funded (PeerStreet), Rated: A

Under a year ago, we announced PeerStreet had funded $75 Million, October we rounded $150 Million and now, thanks to the ongoing support from our investors and lenders, we’ve just surpassed $300 Million with zero losses to date.

The number of lenders PeerStreet works with has grown from 25 to 89. The loans we’ve recently made available for investment are more diverse than ever, with 11 new states added since this time last year, now totaling coverage across 28 states and Washington D.C. Currently, we are publishing triple the number of loans we did a year ago. To support this growth, our underwriting and portfolio management teams have doubled since last year.

Next Insurance Secures $ 29 Million During Series A Funding Round (Crowdfund Insider), Rated: A

Next Insurance, an insurtech company that specializes in small to medium businesses, announced on Wednesday it secured $29 million during its Series A funding round, which was led by Munich Re/HSB Ventures with participation from  Markel, Nationwide, and other existing investors.

The funding from the Series A funding round will go towards continuing to grow Next Insurance’s insurance products and expand the company’s offering to new business sectors. The announcement follows Next Insurance’s recent release of the first ever Facebook chatbot for small business insurance.

CAN ALTERNATIVE DATA SOLVE ONLINE LENDERS’ ‘ALGORACISM’ PROBLEM? (The Alternative Lending Report), Rated: A

A March 2017 letter written by Congressman Emanuel Cleaver, II (D-Mo.), to Consumer Financial Protection Bureau Director Richard Cordray raises fresh concerns about “algoracism” tainting the creditrisk-scoring models used by online lenders.

Cleaver’s letter highlighted five predatory practices cited by the HBS paper as pervasive in the “Wild West” of online lending and alleges that risk-scoring algorithms may be designed to discriminate against minorityowned, small business borrowers.

Minority-owned businesses comprise roughly 15% of the 28.8 million small businesses in the United States, according to a 2016 Small Business Administration report.

Biased algorithm design can occur if engineers code data correlation parameters with attributes that make inadvertently discriminatory assumptions, which could be violating the Equal Credit Opportunity Act. ECOA prohibits creditors from discriminating against borrowers on the basis of race, color, religion, national origin, sex, marital status, age or because they receive income from a public assistance program.

In fact, FastPay’s loan algorithm is over 80% weighted towards the credit risk of the brand counterparties, which typically average 90-days sales outstanding before they pay their creative and advertising technology vendors. Despite prolonged payment terms, Proctor & Gamble and other Fortune 500 brands pose extremely low credit-default risks to invoice financiers like FastPay.

Ultimately, Arora attributes flawed credit-risk modeling in fintech to the big banks that refuse to share data. But banks in the U.S., unlike in Singapore and the UK, where lenders are opensourcing their loan algorithms, see no incentive to make accountholder data available to third parties.

Regardless, Mills said Kabbage, which charges an annual percentage rate, ranging from 24% to 99%, is an interesting fintech small business lender because they factor variables like borrower credit card data and the company’s Facebook page into their risk scoring models.

Source: The Alternative Lending Report

See the full report at SmallBusinessLending.io.

How Lending Club Is Differentiating Itself From Other Online Lenders (Forbes), Rated: A

In less than a year, Sanborn cut and rehired 179 jobs and hired a new CFO, COO, general counsel and chief capital officer. In addition, the company launched a new auto refinance product and an investor mobile application, Lending Club Invest.

Sanborn: Nearly 75% of borrowers also say that their FICO score has increased by 19 points after consolidating debt or paying off credit cards, which can help put them on a better financial track.

Sanborn: Today we have more than 148,000 retail investors – more than any other online lender. Part of the evolution of our marketplace is growing and balancing the mix of investors – having the right mix of investors strengthens our marketplace and makes us more resilient, scalable, and better able to serve a wide range of borrowers of all credit profiles.

Sanborn: Our mission has been to transform the banking system to make credit more affordable and investing more rewarding. So, everything that we do comes from this goal and with the intention of delivering a great experience for everyone who comes to our marketplace. With 10 years of experience and incredibly powerful data and insight that informs us on our customers’ behaviors, choices and needs. We’re also able to calibrate this data into our models to price credit risk and better manage our marketplace and the success of both our borrowers and investors.

A traditional bank uses government-guaranteed deposits to lend to make a spread and can only give loans to a narrow spectrum of borrowers. Our credit marketplace attracts investors that span retail, asset managers, funds and banks, all with different risk appetites, to invest in loans across the credit spectrum so we can say yes to more borrowers. Our diverse investor base also means we’re not reliant on any one type of investor to fund our loans, so we have the agility to pivot funding channels to meet changing market conditions.

OCC fintech charter plans in jeopardy as Curry departs (Finextra), Rated: A

Proposals by the US Office of the Comptroller of the Currency to issue special purpose banking charters to fintech firms are up in the air following the departure of leading advocate Thomas Curry and his replacement as acting head of the Federal agency by Simpson Thacher & Bartlett partner Keith Noreika

Curry completed his five-year term as Comptroller last month but planned to stay on and push through his controversial fintech charter.
Noreika, a member of the Trump transition team, has extensive experience advising banks on regulatory issues, although his views on Curry’s fintech plans are not known.

Crowdfunding Real Estate Isn’t Just For Millionaires Anymore. (Yes Magazine), Rated: A

In up-and-coming neighborhoods, it’s not uncommon for developers to swoop in and alter historic buildings beyond recognition, or tear them down completely to make way for new projects. But when Eve Picker, president and founder of the real estate crowdfunding portal Small Change, came across a three-story property called the Buvinger Building in Pittsburgh’s Lawrenceville neighborhood, she saw a way to both preserve history and add much-needed housing units in a thriving area.

Luckily for Picker, the funding process is easier than it used to be. She posted a detailed project overview on Small Change’s website, which included information about the building’s history and aesthetics, the financial returns and risk factors, and a link to invest. Small Change met their investment goal of about $240,000 in just under three months, and construction on the project began in late Feb. 2017.

Though the internet paved the way for Title III crowdfunding, it solves a problem that existed long before the digital revolution. When securities regulations were put in place to protect non-wealthy investors after the stock market crash of 1929, one unintended consequence was that those very same investors were frozen out of a broader range of investment opportunities. It took years for the SEC to approve the Title III regulations in the JOBS Act, Roderick explains, because of the challenge inherent in striking a balance between protecting investors and making it easier for developers to raise money.

Small Change, however, is raising more than just capital. It’s a crowdfunding platform that backs real estate development projects only if they benefit underserved communities.

It also means that, in addition to financial returns, many Small Change investors are seeking investments that align with their values. It’s not something easy to quantify—and that’s where the Change Index comes in. The index is Small Change’s proprietary system for measuring a project’s viability in terms of transportation, the environment, and economic inclusiveness.

The Index also provides a metric for potential partners and investors to gauge their compatibility with a particular project.

Small Change plans to launch its first Reg CF offerings later this spring. It’s still one of only about 25 Title III electronic crowdfunding portals that the SEC has approved. While most Title III portals are focused on startup and small business financing, Small Change deals exclusively with real estate, which makes it even more of an outlier.

Major Credit Unions Will Unveil New Blockchain Tech Next Week (Coindesk), Rated: A

CULedger, a consortium project unveiled late last summer, is supported by more than 50 credit unions and four of the biggest credit union service organizations in the US. Spearheading the project are the Credit Union National Association and Mountain West Credit Union Association (MWCUA).

Those involved in the initiative say they want to utilize the tech in a bid to improve how credit unions function – while also making them more competitive in an increasingly tough environment for financial institutions. The idea is to create a blockchain-powered utility through which credit unions could send money or exchange other types of information.

FinTech and Digital Wallets are the Core of Financial Inclusion (Due), Rated: B

In a FDIC survey released in 2016, the Federal organization found the roughly 7% of American households are unbanked. That is 9 million households with no checking account or savings account. No direct deposit. No credit cards. These families utilize virtually no mainstream financial services. In some parts of the country, as much as 40% of the population is unbanked!

With no bank relationship, these individuals have little if any credit history and poor credit scores. There is a lack of trust and understanding of how banks and mainstream financial services work. This is a serious problem the entire financial industry needs to overcome.

Instead, less savory businesses are often chomping at the bit for this demographic’s financial business. Payday loans, title loans, and other expensive, low-quality financial products are all these people have had access to.

In many ways, digital wallets work like a bank account. You can store funds, make payments, and transfer to other financial accounts. In the case of Bluebird, you can even write checks!

Digital wallets look a lot like a regular checking account to outsiders, but there are some important technical differences between bank accounts and digital wallet accounts.

Financial technology startups are not encumbered by those sentiments. While the rules of the game are the same, startups can quickly adapt to new market trends, customer feedback, and more.

Unlike a giant bank where you have to navigate a series of annoying phone menus to reach a live human, startups are right on the pulse of what their customers are saying and doing. That is a major advantage.

United Kingdom

Challenger bank hits one million accounts (AltFi), Rated: AAA

Metro Bank surpasses one million customer accounts less than seven years removed from launch.

Metro Bank, which became the first new high street bank in the UK for over one hundred years in 2010, now has more than a million customer accounts. The milestone was reached, fittingly, on the bank holiday Monday, when the majority of incumbent banks are closed.

Some stats from the last seven years include: being open 75 per cent longer than the average bank, saving customers over 4 million days by printing over 1 million cards instantly in-store, and preventing over 20,000 cards from being cancelled unnecessarily.

Sand. Meet head. (CB Insights), Rated: AAA

Source: CB Insights
Source: CB Insights

It goes by many names.

Hubris.
Arrogance.
Cluelessness.

It’s also worth understanding that there is no upside to saying stuff like this.

Cuz more often than not, you’ll find yourself on the wrong side of history like so many of these CEOs.

And then we’ll make slides to immortalize your cluelessness.

Europe’s largest lending and fintech event, LendIt Europe, returns to London this autumn (LendIt Email), Rated: AAA

LendIt Europe 2017 launched last night with a cocktail reception for 75 of London’s fintech elite at the Dion in St. Paul’s. The 2017 event is set to be Europe’s largest lending and fintech event, with over 1,000 participants from the UK and Continental Europe as well as North America and Asia. Taking place at the Intercontinental O2 Hotel on October 9-10, this year’s conference is expanding with the industry to cover the hottest topics in fintech including blockchain, insurtech, digital banking, and much more.

Early confirmed keynote speakers are Jaidev Janardana, CEO of Zopa, Francesco Brenna, Partner at IBM Global Business Services, and Shane Williams, co-founder of UBS Smartwealth. With six tracks of content including Digital Banking, Credit & Underwriting, Policy & Regulation, The Cutting Edge in Fintech, Innovations in Lending, and Investor Insights, this year’s LendIt Europe agenda will be the most comprehensive yet, with more details being released on www.lendit.com/europe in the coming months.

A featured component to this year’s conference, and back for its second year running, is the PitchIt startup competition. PitchIt allows innovative fintech startups from across EMEA to present their solution in front of the LendIt audience of international investors and industry leaders. The PitchIt programme has been an exciting part of the LendIt series of events, with past winners and finalists going on to secure significant investment and publicity.

Robo-adviser to provide full retirement advice in 2 hours (FT Adviser), Rated: A

Robo-adviser Wealth Wizards has launched a new automated paraplanner tool to help firms provide retirement advice in less than two hours.

Wealth Wizards said the tool generates a “regulated advice solution” made up of an annuity, drawdown or a blend of the two.

The report could then be edited by an adviser to make sure it suited the client’s needs.

Octopus-backed robo advisor Moola goes live (AltFi), Rated: A

Investors have a new robo advisor to choose from following the soft launch of Moola.

The firm, which is backed by private equity specialist asset manager Octopus, announced back in December that it had received full regulatory approval from the Financial Conduct Authority (FCA) as well that it had arranged a tie-up with Blackrock-owned ETF provider iShares.

The passive only portfolios are risk targeted and cost just 0.75 per cent per year.

What is FinTech and why Google and Facebook could be the banks of the future (Manchester Evening News), Rated: A

In total, the sector generated almost £7bn revenue last year and now employs more than 60,000 people.

Not only that, but the big players are wising up to this need for disruption with Barclays opening a flagship FinTech accelerator in May, offering 500 workspaces for start-up innovators.

HSBC and Tradeshift have also confirmed that their new ‘procure-to-pay’ product will go live in summer allowing businesses to manage their entire supply chain and working capital requirements in one place, from any device.

The innovation specialist at SoftwareONE said: “Back in the 80s, when ATMs came into play, people thought it would be the end of bank branches and jobs, but instead it freed up clerks to perform other tasks, like mortgage advice, which actually added value to the customer.

“Moving on to the current day and bank branches have now become mobile phones – or apps – people can access their accounts and information at a touch of the screen.”

AccessPay, which moved from London to Manchester, is flying after a recent £2m funding boost.

Based in City Tower, the fast-growing firm is looking to recruit 60 new staff and expand into the US after securing funds from Clydesdale and Yorkshire Banks’ Growth Finance team.

The specialist in cloud-based payments and cash products has been driving innovation in the sector since it was founded in 2012.

Fintech: What Will Bring the Most Change? (City A.M.), Rated: A

Finance professionals have two basic questions about fintech and what it means for them:

  • How will fintech positively affect their careers?
  • How will fintech negatively affect their careers? For example, will peer-to-peer (P2P) lenders replace banks as the preferred platform or intermediary for borrowing and lending? If the answer is yes, then bank loan officers and credit risk analysts should start looking for alternative careers. The particular areas of fintech that evoke this sort of existential concern include blockchain, mobile payment, P2P lending, and robo-advisers.

 

The responses of our 333 poll participants suggest that interest in blockchain technology has risen to an all-time high, with four out of 10 readers opting for that choice. Another 22% are believers in robo-advisers.

Read between the lines: What does rising inflation mean for your money? (Funding Circle), Rated: B

Inflation is rising – and is set to climb even higher by the end of the year. Official figures revealed a surprise jump in the headline rate of inflation to 2.3% in March, its highest rate for four years. And it is estimated to climb to 2.8% by the end of the year.

But there’s one area where inflation is hitting hard right now – our savings. If you can’t get a savings return higher than inflation, you’re losing money. The cash in your nest egg will be worth less and less as inflation outstrips the returns you get. And right now, no-one can get an inflation-beating rate from traditional banks and building societies with even the much-heralded new Government-backed savings bond paying less than inflation at 2.2%.

China

Chinese online lender SmartFinance targets IPO in US (Deal Street Asia), Rated: AAA

SmartFinance, a Chinese internet loans business that judges borrowers on factors including how often they charge their phones, has consulted banks about a possible U.S. listing that could happen as soon as this year.

The rapidly expanding company, which anticipates it will reach a $1 billion valuation by the end of 2017, has hired former Cheetah Mobile Chief Financial Officer Andy Yeung to help better manage investor relations and smooth the path to an eventual listing.

Jiao, who is known to colleagues by his English name UBee, told Bloomberg the company’s next step is an initial public offering, probably in the U.S. By the end of 2017, he expects to have more than 2,000 staff and facilitate as many as 4 million loans a month.

SmartFinance is more commonly known as Yongqianbao, which translates as “need money pal,” and taps into as many as 1,200 data points collected by its smartphone app to assign credit ratings for would-be customers. Making calls that go unanswered or failing to frequently charge your phone are all potential signs of a problematic borrower.

China’s Ping An to launch first overseas fintech and healthcare fund of $ 1 bln (Reuters), Rated: A

Ping An Insurance Group Co of China Ltd, the country’s largest insurer by market value, is launching its first overseas fund to primarily invest in financial and healthcare technology worldwide, underscoring its push beyond its home market.

The initial size of the so-called Ping An Global Voyager Fund will be $1 billion, the insurer said in a statement on Thursday. It will be managed from Hong Kong and led by Jonathan Larsen, an 18-year stalwart of Citigroup who joined Ping An as its chief innovation officer.

P2P Industry News (Xing Ping She Email), Rated: A

IPO boom of P2P Lending platforms is coming!
China Rapid Finance (CRF) has gone public in the US and it is also the second P2P Lender listed successfully in America, which may bring an IPO boom of Internet finance industry.

It was revealed that Qudian, a P2P lender focusing on providing consumer finance products for young people, has already submitted their IPO prospectus to the SEC, expecting to finish IPO process by the second quarter of this year. Fintech companies such as PPDAI, Lego Group Inc. Are also actively preparing for US IPO. Several giants are among the long waiting list of IPO candidates, including Ant Financial, Lufax, Zhongan Insurance and Jingdong Finance etc. In fact, the assessment value of Ant Financial has already reached to $60 billion, and once the IPO could be successful, the director Jack Ma may become the China’s richest person again with holding at least 5% shares.

Ant Financial planning to buy MoneyGram with $3.5 billion Loan
Recently, an insider revealed that Ant Financial is going to sign a loan contract valued $3.5 billion for the acquisition of an American company MoneyGram International.

The loan application has attracted 14 providers, including ANZ, Barclays, Citi, Credit Suisse, DBS, Goldman Sachs, HSBC, ING, J.P. Morgan, Mizuho Bank and Morgan Stanley. With Deutsche Bank and Societe Generale participated as leading banks, and BNP Paribas SA is the sponsor. Ant Financial has got the Green Light for the acquisition by raising the biding price by 1/3 and surpassed its rivals.

European Union

Altisource Launches Enhanced Vendor Oversight Platform to the Market (Yahoo! Finance), Rated: AAA

Altisource Portfolio Solutions S.A. (“Altisource”) (ASPS), a leading provider of real estate, mortgage and technology services, today announced the expansion of the Vendorly™ platform, an innovative vendor oversight platform for financial institutions. The platform launched last year exclusively for members of the Lenders One® Cooperative, a national alliance of independent mortgage bankers, and is now available to the broader mortgage and community bankers market outside of the Lenders One network. The Vendorly platform is designed to help streamline vendor due diligence, document maintenance, monitoring and audits.

The scrutiny of vendor oversight practices continues to be a focus of regulators. It’s important for mortgage and community bankers to have a multifaceted vendor oversight program. Through the Vendorly platform, and its vendor oversight offerings, Vendorly can help strengthen its customers’ compliance management framework and increase their operational efficiencies. Vendorly offers managed vendor oversight services, including due diligence, document management, annual assessments, information security assessments, financial condition reviews and on-site audits.

Vendorly is announcing collaboration with Secure Insight, an innovator in the mortgage industry in providing settlement agent risk evaluation, rating, monitoring and database reporting on fully vetted mortgage closing professionals. Currently servicing close to 100 clients nationwide, Secure Insight will deliver real-time risk ratings and related settlement agent data to clients through the Vendorly platform. Together, Secure Insight and Vendorly intend to develop a platform that produces a transaction-based tool with risk data on each transaction prior to a closing (and just before the proceeds are wired). It is expected that this process will provide data in a more efficient, streamlined manner and give lenders greater comfort in the protection of their money, documents and consumer data at each closing.

India

i-lend plans to venture out with funds from 50K  (India Times), Rated: A

Peer-to-peer lending startup i-lend has raised an undisclosed amount in a pre-series A round from early-stage venture capital firm, 50K Ventures. It plans to spend the money on marketing, scaling up and expanding its core team.

The Hyderabad-based company recently started operations in Bengaluru and plans to expand to a few more cities in the coming months. It is also looking to raise Series-A funds later this year.

The company has disbursed more than 600 loans since its inception in Ventures is thinking 2013 and 50K Ventures is thinking about expanding i-lend to other verticals.

Why Nomura, Google, IBM and Amazon are Investing in Indian Fintech (Edgy Labs), Rated: A

In a press release, Nomura Holdings, Inc. unveiled its initiative, called the “Voyager-Nomura FinTech Partnership in India.” Through the Voyager Program, the company invites startups and entrepreneurs with innovative Fintech solutions for the financial industry, especially capital markets and investment banking.

To further consolidate the Voyager Program, Nomura Holdings has recruited the expertise of many authoritative partners, including Google, Amazon, IBM, PwC and Internet Services Pvt. Ltd.

Middle East

Responsible finance summit focus on Islamic fintech (Middle East Association), Rated: AAA

With the retail share of responsible investment doubling to 26 per cent in 2016, ethical, responsible and Islamic fintech can support further growth to deliver the financial products, experts said at a summit in Zurich, Switzerland.

The Responsible Finance & Investment (RFI) Summit opened yesterday (May 3) with leaders from across the responsible investment, impact investment and Islamic finance sectors gathering to discuss how to promote greater awareness of and engagement within responsible finance.

The first day’s sessions focused on ethical, responsible and Islamic fintech and the power they harness which can disrupt financial services and in doing so address the inequities in society and support equitable, inclusive and sustainable economic growth.

Central America

Sr. Pago raises 4 million dollars in its Series A investment round (Crossroads Today), Rated: AAA

Sr. Pago, the first 100% Mexican financial integrator for acceptance of credit and debit cards provided for the country’s non-banking population, through the placement of its Series A has successfully raised four million dollars in capital, thus ensuring the acceleration of its operations and underpinning its long-term vision.

This raising of capital is taking place thanks to the confidence of three recognized investment funds: IGNIA and EB Capital, with headquarters in Mexico City, and an international fund with its headquarters in Miami, FL, which through this capitalization have become strategic partners of Sr. Pago, supporting the business model of this Mexican Fintech company as the only one that has the country’s non-banking economically active population as its primary market and main consumer.

Authors:

George Popescu
Allen Taylor

Tuesday January 24 2017, Daily News Digest

SMB loan borrower satisfaction

News Comments Today’s main news: Trigger breaches may magnify reputational risk for originators. LendingTree announces top customer-rated lenders for Q3 2016. Landbay, Octopus Choice receive HMRC ISA approval. Ppdai.com plans US IPO. Today’s main analysis: The state of online SMB lending. Is China’s FinTech sector just another knockoff? Today’s thought-provoking articles: Risk assets enter short-term […]

SMB loan borrower satisfaction

News Comments

United States

United Kingdom

European Union

Australia

China

News Summary

United States

Trigger Breaches May Magnify Reputational Risk for Originators (PeerIQ Email), Rated: AAA

Triggers are a structural feature that provide senior bondholders with protection against a reduction in credit support. Triggers applying pre-defined tests (e.g., minimum excess spread, cumulative loss levels, delinquency rates, violations of reps & warranties, etc.) and may re-direct cashflows to senior noteholders if one or more tests are violated.

A trigger breach may force originators/sponsors to divert capital to repay noteholders rather than re-invest precious capital into revenue-generating origination activities. Such a “double whammy” is associated with headline risk, which can leader to reputation damage, and negatively impact future financing activities, either in a warehouse facility setting or during ABS transactions.

Trigger breaches are a manifestation of unexpected credit performance, poor credit modeling, or unguarded structuring practice.

The average time to breach performance triggers for consumer MPL ABS deals was approximately 11 months as collateral losses ramped up within the deal.

The negative headlines associated with trigger breaches increases the cost of capital for originators, and reduces the availability of funding.

If an early amortization trigger is violated, excess spread (e.g., collateral cashflows less financing costs payable to noteholders) are diverted from equity investors to senior noteholders with the goal de-risking the senior noteholders as quickly as possible. Therefore, although senior noteholders may be structurally insulated from first loss-risk, senior noteholders are nevertheless exposed to high levels of prepayment and reinvestment risk.

From the equity investor’s perspective, tighter triggers allow higher potential equity returns in the absence of any collateral losses. However, if losses exceed the available cushion before the triggers are breached, cashflows to the equity investors will be cut off faster and cause a reduction in the expected equity returns.

Conversely, less restrictive triggers allow more cushion for losses before the coverage tests are breached.

Cumulative Net Loss (CNL) Rate Trigger Example: This prevalent trigger can be defined in a number of ways as issuers and originators work together in the deal structuring phase. Exhibit 2 illustrates a contrived trigger threshold profile. The trigger breach level is defined and increases with respect to the deal age. A trigger event occurs if the realized cumulative net loss rate exceeds the trigger threshold of the collateral.

The state of online SMB lending in 4 charts (Tradestreaming), Rated: AAA

It’s no wonder that SMBs aren’t optimistic about their futures. The median SMB holds 27 buffer days of cash in reserve, according to the JPMorgan Chase and Co. Institute. And when they look to access small working capital loans to improve their cash flows, they aren’t finding a lot of lenders willing to work with them.

It’s not like the average SMB has a major appetite for cash, either. 76 percent of loans that SMBs apply for are less than $250,000 and amost half of them are under $50,000, according to a paper co-written by authors at the Harvard Business School and business loan marketplace, Fundera.

As more SMBs turn to online lenders, they’re not always coming back happy. That’s mostly due to the high costs of some of these early loans.

Approximately one-in-six small businesses considering a loan will apply to an online lender this year. But because there’s a lack of data collection on overall loan originations in the U.S., it’s tough to accurately size the effect of new entrants in the SMB lending space.

LendingTree Announces Top Customer-Rated Lenders for Q3 2016 (Yahoo! Finance), Rated: AAA

LendingTree®, a leading online loan marketplace, released today its quarterly list of the top customer-rated network lenders for the third quarter of 2016. Winners were based on a five-star quality review system for overall customer experience as determined by actual LendingTree users. The list features the top lenders in LendingTree’s core financial marketplace categories: Home Lending, Personal Loans, Auto Loans, and Business Loans.

The top lenders of Q3 2016 by rank are:

Home Lending Category

1.    Veterans United Home Loans
2.    Triumph Lending
3.    Royal United Mortgage
4.    HomePlus Mortgage
5.    Wyndham Capital Mortgage
6.    North American Savings Bank
7.    Pulaski Bank Home Lending
8.    AmeriSave Mortgage Corporation
9.    ConsumerDirect Mortgage, A Division of FirstBank
10.  Insight Loans (tie)
10.  Seckel Capital, LLC (tie)

Personal Loans Category

1.    Lending Club
2.    OppLoans
3.    First Midwest Bank

Auto Loans Category

1.    rateGenius
2.    up2drive – a division of BMW of North America
3.    iLendingDIRECT

Business Loans Category

1.    Credibly
2.    RapidAdvance

Risk Assets Enter a Short-Term Holding Pattern (Morningstar Email), Rated: A

Between the uncertainty driven by the change in the administration and the arrival of fourth-quarter earnings season, risk assets entered into a short-term holding pattern last week. The average corporate credit spread of the Morningstar Corporate Bond Index, our proxy for the investment-grade bond market, was unchanged at +127 last week. In the high-yield market, the credit spread of the Bank of America Merrill Lynch High Yield Master Index was also unchanged at +402. In the equity markets, the S&P 500 was essentially unchanged for the week, declining 0.10%. Price action in the commodity markets was mixed, but overall price changes were modest.

A significant portion of investors’ caution toward the corporate bond market is the acknowledgment that corporate credit spreads are trading at very tight levels compared with recent and historical averages. The current level is the tightest that credit spreads have registered since late 2014 and significantly tighter than long-term averages. The average spread of the Morningstar Corporate Bond Index is 41 basis points tighter than the long-term average of +168 since the end of 1998. The average spread of the Bank of America Merrill Lynch High Yield Master Index is currently 178 basis points tighter than its longterm average of +580 basis points since the end of 1996.

In addition to the volatility that earnings can generate, with the change in the administration, many investors are treading cautiously in the market until there is greater clarity regarding the policies that President Donald Trump will pursue in the near term. As such, defensive issuers generally traded better last week, although there did not appear to be a significant sector rotation toward a defensive portfolio posture.

Diversification Strategies for Investors of P2P Lending (Equities.com), Rated: A

Peer-to-peer lending is gaining a momentum among investors. P2P loans have less volatility, a low correlation, and yield much higher returns compared to other fixed-yield investments. Median adjusted returns average 7% on a 36-month loan.

And this is not an asset basket into which you put too many of your investment eggs.

The low minimum investment at these services makes diversification easy. However, loan selection takes time, and speed is key to getting the best loans.

Although default rates are higher on grades D–G at Lending Club, and grades D–HR at Prosper, the ROI is higher too. Loan filtering can mean successful investing in these lower grades.

Beyond robo-compliance: How bots will soon permeate banking (American Banker), Rated: A

As banks become more comfortable with the relying on software robots to replicate the actions of a human interacting with machines to handle rote tasks, experts say they will be quick to deploy the technology companywide as a way to trim expenses and redirect employees to more crucial tasks.

This could include areas in finance departments that are heavily manual, such as accruals and managing and clearing payments. Human resources and administrative functions is also an area where robotics can be deployed.

Austria’s Raiffeisen Bank International AG is among the first to work with Accenture and Blue Prism to automate various business functions. Additionally, it is in the process of creating an in-house robotics center dedicated to experimenting with how the technology can be used in different functions at the bank.

The bank started out with four pilots implementing robotic process automation in tasks that had “low-to-medium complexity; rule-based processes with a logical order of steps, repetitive process patterns with clearly defined process options,” said Markus Stanek, head of group efficiency management at the bank.

With the center, Raiffeisen will experiment with how to implement robotics in in a whole host of banking functions.

FORD CREDIT, AUTOFI DEBUT PLATFORM FOR DIGITAL VEHICLE BUYING AND FINANCING (Ford), Rated: A

There’s a new way for customers to purchase or finance a new Ford vehicle in minutes – right from a dealership website from anywhere, on any device – through a new platform from Ford Motor Credit Company and financial technology company AutoFi.

In addition, Ford Credit has made an investment in AutoFi as Ford Credit continues pursuing technological advances to make the financing experience better.

The AutoFi platform can be used now at Ricart Ford in Groveport, Ohio, and will roll out over time to more Ford and Lincoln dealerships across the United States. The introduction comes as 83 percent of Americans say they would like to spend as little time at the dealership as possible when shopping for or buying a car, according to a new survey of more than 1,000 U.S. adults conducted online by Harris Poll on behalf of Ford Motor Company. Many of those same people, however, still want to touch and feel their new vehicle before signing on the dotted line. The new platform provides the best of both worlds.

Through the dealer website, customers have a transparent and seamless purchase and finance experience from anywhere on their mobile phone, tablet or computer. Once the online part of the transaction is complete, all customers need to do is sign the paperwork when they collect their new Ford.

Consumers may shop for a new Ford in the showroom or from anywhere via the Ricart Ford website. After selecting a vehicle, they can apply for credit and receive a decision, choose the financing terms that make sense for them, and then review and select optional vehicle protection products – completely online on their own time. Customers then can review a final summary of the financing terms and schedule time to complete the transaction and pick up the vehicle.

Why Banks and Alternative Lenders Will Play Ball in 2017 (deBanked), Rated: A

According to the Wall Street Journal last year, big banks have decreased the number of loans to small businesses by more than 38 percent since 2006.

But the recession helped pave way for another industry – alternative lending – which has significantly improved access to capital for small businesses. According to the Small Business Administration (SBA), the 2016 fiscal year was a record setting year for loans, with more than 70,000 approved that totaled $28.9 billion and supported nearly 694,000 jobs.

More and more headlines show that banks are shifting their strategies to keep up with America’s technology and alternative lending habits, making 2017 the year banks finally get back into the fray and play ball with alternative lenders to improve the lending process.

No longer content to be sidelined, banks are starting to play ball, and they will continue to do so at an even faster pace. The fact that banks are moving in now and increasing small business loans validates alternative lending.

Real Estate as an Alternative Investment for Non-Accredited Investors (Crowdfund Insider), Rated: A

So what are some of the options for both non-accredited, as well as accredited, investors today. Below we have highlighted several opportunities to invest in real estate assets online.

Today Fundrise has moved away from single property crowdfunding having trailblazed a new fund structure labeled the eREIT.  Using Title IV of the JOBS Act which updated old Reg to a more flexible security exemption called Reg A+, their eREITs have grown from one to now five (2 of them are sold out).

Small Change is on a mission to become the first real estate funding portal to utilize Reg CF. Created by Title III of the JOBS Act, Reg CF allows issuers the ability to raise up to $1 million online from both accredited and non-accredited investors.

Originally only for accredited investors, this changed when RealtyMogul.com created their MogulREIT (using Reg A+) to offer non-accredited investors the chance to join in on the real estate offers listed on their platform. Minimum investments used to be $2500 but have since been lowered to $1000 to facilitated a wider audience.

American Home Preservation or AHP purchases distressed mortgages at a discount. The platform reports the discount can be up to 50%. They then try to work out a sustainable solution for the home-owners in a win-win scenario.  The people keep their home and investors earn some income. AHP strives to pay a return 12% per year on invested capital in the fund (Reg A+). AHP not only has a unique approach to real estate investing but also has probably the lowest investment minimum at just $100.

2017 Americas Alternative Finance Industry Study (Crowdfund Insider), Rated: B

The Polsky Center and the Booth School of Business at the University of Chicago and the University of Cambridge Judge Business School are working together once again on their benchmark research on alternative finance.  The America’s study, first completed in 2016, will be reviewing sector growth in North, Central and South America.  Widely cited as the very best data available on the growth of Fintech, the study will quantify marketplace/peer to peer lending, crowdfunding and other forms of alternative finance.

While the research has been described as industry leading, there is a question as to how policymakers are using the data. Ziegler believes that regulators have recognized the value in academic and evidence based research that is unbiased.

Last year’s alternative finance report found that the Americas online alternative finance industry grew to $36.49 billion, a 212% annual increase from the $11.68 billion in 2014.

United Kingdom

Landbay and Octopus Choice Receive HMRC ISA Approval (Invezz), Rated: AAA

On Monday, the buy-to-let mortgage specialist Landbay announced that it had passed the 2nd step in regulatory proceedings allowing the P2P lender to offer IFISAs to its investors. Landbay was granted full FCA authorisation in December, making it a member of a niche, but growing, group of peer-to-peer platforms with full permissions – a necessity if a platform wishes to offer the IFISA. The P2P platform has facilitated over £42million worth of investments, in over 421 loans to UK property borrowers, since its inception.

Octopus Choice, a recent entrant into the UK P2P market (early 2016 launch), announced that it’s also been approved as an ISA manager by the Board of HM Revenue and Customs (HMRC).The product of Octopus Investments, the Choice platform has made waves in the P2P lending industry since inception, facilitating more than £45m worth of loans to asset-backed property borrowers, inside one year.

Goji Selected to Launch IFISA for Landbay, Downing, Peer Funding and UK Bond Network (Crowdfund Insider), Rated: A

Specialist provider of P2P and marketplace lending products and services, Goji, has announced that Landbay, bond investment platform UK Bond Network, crowd bond provider Downing, and SME-focused P2P platform Peer Funding have each selected their platform to offer the Innovative Finance ISA (IFISA). Goji said expectations were to launch the IFISAs before tax year deadline.

In an increasingly competitive crowdfunding market, Goji says that firms offering the new investment vehicle are finding themselves a step ahead of the competition as the IFISA quickly becomes an easy differentiator in the eyes of investors.

A peer-to-peer puzzle (Financial Times), Rated: A

Saving Stream is a “peer-to-peer” lending startup that provides “short-term bridging loans, secured against UK property” and is waiting to be fully authorised by the Financial Conduct Authority*.

Late last year, the P2P lender started to borrow money by issuing unsecured mini-bonds with three or five year fixed terms. The proceeds of the mini-bonds are used to fund the same loans that P2P investors snap up through its marketplace. But while P2P investors earn 12 per cent per year, mini-bond investors earn half that, six per cent.

But the question is still bothering us: why would anyone buy the bond? After all, passive management is meant to be cheaper, not more expensive.

A Whole Generation May Never Be Able To Retire From Work (Voice Online), Rated: A

Peer-to-peer lending platform Lending Works surveyed 1,500 non-retired adults in the UK (YouGov) and made some worrying discoveries.

Firstly, over 1 in 5 of those who aren’t yet retired – 22% – gloomily believe that they’ll never be financially secure enough to retire. This suggests they have visions of working until they drop, as they won’t be able to afford to stop earning money. This pessimistic view is highest in the 35-44 year old category, with 25% of them not seeing themselves as ever being financially secure enough to retire, although only 17% of 18-24 year olds, who technically have more time to start saving, agree. Countrywide, the outlook is bleakest in the West Midlands (27%), perhaps due to relatively high unemployment, compared to only 19% in London, where there are, theoretically, more jobs.

The main reason, of course, that we can’t see ourselves retiring is because we can’t afford to. Over a third of non-retired adults – 34% – don’t save a single penny towards retirement each month. Women are proving to be worse at saving than men, with 41% of non-retired females not saving towards retirement, compared to 26% of men.

Why investors are likely to see more robo-input from their financial adviser (Money Observer), Rated: A

The Treasury consultation highlighted that many people rely on digital services for information and guidance on key financial decisions and the new body will have a ‘well optimised’ website as well as telephone, webchat and face-to-face guidance.

We strongly believe that digital communications can help streamline the financial advice process and allow people to choose how they consume information, and are pleased to hear that the new guidance body will recognise this.

There is no question that there is a role for automated advice. To make advice more inclusive the industry needs to develop alternative distribution channels that potentially appeal to a new generation of customers.

In its current guise automated advice is perfectly positioned for those people who have simple investment needs, or who are not looking for a holistic financial review. It can offer a personal recommendation, which differentiates it from self-select or execution-only strategies.

European Union

ASOS partners with Klarna to launch pay after delivery in Nordics (Retail Times), Rated: A

Klarna’s pay after delivery allows retailers to bridge the gap between the online and offline shopping experience. When making a purchase on desktop or mobile, customers in the Nordics will now have the option to pay for their products up to 14 days after delivery – giving them the chance to try on their purchases before paying.

Australia

New Year’s gift for SMEs: Lending to small business in Australia looks set to improve (Australian Anthill), Rated: A

Until relatively recently, a bank rejection meant a business had to forsake growth, stretch its own payments or extend terms to the ATO. But more recently, business owners are being referred to a bank’s lending “partner” of choice, which typically charge interest rates of at least 20 per cent, and in some cases can even reach triple digits.

Luckily a new group of non-bank intermediaries is emerging to provide direct access to the extremely profitable asset classes that have long been solely the domain of banks. The combination of huge volumes of new data, virtually unlimited computing power, and omnipresent networks is enabling innovations like robo-advisers and marketplace lenders to provide lower cost, highly diversified investments for generating reliable, robust and lower capital risk returns.

Business owners and investors are beginning to take notice of the opportunity this represents. In 2014, there was $0 marketplace lending for business conducted in Australia, but according to Morgan Stanley, in 2015 the market reached $25million, and by 2020 it is forecast to grow to $11.4billion, representing 12 per cent of the total addressable market.

Marketplace lending addresses the concerns small business has with banks, and the needs for investors for stable fixed-income returns. Businesses can gain access to funding without the need for collateral, being subject to outdated models of risk, or enduring application processes spanning weeks. Sophisticated investors are empowered to take control of their own portfolios, choose the risks they are willing to take, and effectively “be the bank”.

China

Chinese Peer-to-peer lender Ppdai.com plans US IPO (South China Morning Post), Rated: AAA

Ppdai.com, one of the mainland’s largest online lending platforms, is reportedly planning to raise US$200 million in a US initial public offering (IPO) ahead of Beijing’s tightened regulation on the peer-to-peer (P2P) lending sector.

It would become the second mainland P2P firm to go public in the United States, following Yirendai.com’s US$75 million IPO in late 2015.

Is China’s FinTech Sector Just Another Knockoff? (TheStreet), Rated: AAA

The number of counterfeit products pumped out of China is unprecedented. Their total value adds up to $1.2 trillion, which accounts for 63.2% of the world’s total. Chinese make fake Gucci clothing and Cartier watches, open Apple stores that aren’t authorized retailers and have even duplicated global investment bank Goldman Sachs.

So whether China’s technology sector is another pirated import is a fair question. And the answer isn’t black and white.

Eight of the 27 fintech outliers in the world are located in China and are valued at more than $96 billion combined. The four largest outliers are Chinese. Antfinancial, which operates the payment affiliate of Chinese online retailer Alibaba, is the largest by a big margin. Meanwhile, the U.S. is home to 14 fintech outliers that are collectively worth $31 billion.

What’s Driving China’s Rise?

First, over the past few years, central banks have worked to develop digital finance in China by providing a supportive regulatory framework.

Surpassing the U.S. in 2013, China now makes up 47% of the world’s digital retail sales, and demographics suggest that share will continue to rise. The country has 721 million internet users (around 52% of the population). In comparison, 89% of the U.S. population uses the internet.

Third, a large segment of China’s population remains underserved by traditional banks.

Two Groups Are Accelerating the Process

As we can see below, 20% of Chinese adults do not have access to banking services. China has 8.1 commercial bank branches (and 55 ATMs) per 100,000 people. This is much less than the 28.2 branches (222 ATMs) in the U.S. and Canada, and the 28 branches (81 ATMs) in Europe.

Despite accounting for 60% of GDP and 80% of employment in urban areas, small and medium-sized enterprises (SMEs) get less than one-quarter of loans in China. In growing numbers they are seeking online finance solutions for their payments, credit, investments and insurance needs. Peer-to-peer lending networks make it possible for businesses to receive loans far faster than they could through a bank.

China’s fintech sector is particularly dependent on payment solutions. Currently, about 40% of China’s banking services customers use fintech platforms for domestic and international payments. Almost 58% of all internet users use fintech payment applications, meaning that 380 million Chinese people shop on the internet with their phones. Slightly less than 200 million people substitute their phones for a wallet for in-store payments.

China Rapid Finance Named a Finalist for LendIt “Innovator of the Year” Award (Yahoo! Finance), Rated: B

China Rapid Finance Limited (“CRF” or “the company”), China’s largest consumer lending marketplace in terms of number of loans facilitated, was named a finalist for “Innovator of the Year” honor at the first annual LendIt Industry Awards.

CRF is the only Chinese company nominated in this top category, which will honor the company that has demonstrated a strong culture of innovation, producing groundbreaking changes in the industry. CRF was selected as one of seven finalists, out of hundreds of applicants worldwide, by more than 30 industry experts who judged finalists representing innovation, emerging talent and top performers.

The company will compete for the honor at the LendIt Awards Ceremony on March 7, 2017, at the LendIt conference in New York City. LendIt is the world’s largest show in lending and fintech.

Authors:

George Popescu
Allen Taylor

Tuesday January 10 2017, Daily News Digest

Global VC FinTech investment

News Comments Today’s main news: Wellesley aims to raise 1.5M BP on Seedrs. China cracks down on P2P lending. Today’s main analysis: It doesn’t take much to put nonprime Americans into financial crisis. Today’s thought-provoking articles: Why France will steal the UK FinTech crown. Indonesia releases new P2P regulations. United States What it will take to put […]

Global VC FinTech investment

News Comments

United States

United Kingdom

European Union

China

India

Asia

News Summary

United States

UNEXPECTED EXPENSES: IT DOESN’T TAKE MUCH TO PUT NONPRIME AMERICANS INTO FINANCIAL CRISIS (Elevate email), Rated: AAA

Unexpected expenses are more likely to hit nonprime Americans much sooner and harder than their counterparts with prime credit scores, according to research released today by Elevate’s Center for the New Middle Class. For example, the research shows that the 160 million Americans who are nonprime, can only weather an unexpected expense of 31 percent of their monthly income, as opposed to 53 percent for their prime counterparts.

The Center’s latest study explores the impact of unexpected expenses on nonprime Americans, defined as those who have credit scores below 700. Key findings include:

  • A bill becomes a crisis for nonprime Americans at $1,400; for prime, it’s $2,900
  • Many common expenses such as a vehicle transmission, broken arm, or apartment security deposit are above the $1,400 threshold for nonprime Americans, but below the $2,900 threshold for prime Americans
  • Almost half of nonprime Americans have more than three disrupting expense events per year compared to approximately one-quarter of primes
  • Nonprime Americans can survive only half as long as prime Americans after a drop in income
  • Half of nonprime Americans have an income that fluctuates month-to-month

Additionally, based on geographic location, purchasing power can create large disparities in threshold amounts. For example, local purchasing power adjusted for $100 in Tulsa, OK, acts more like $131 in Kansas City, MO, and a mere $77 in New York, NY.

What to Watch For in Marketplace Lending During 2017 (Crowdfund Insider), Rated: A

While surprises are undoubtedly in store for 2017, indications are that certain trends—the growth of bank partnerships and industry consolidation—will continue and accelerate as some legal certainty is achieved, legal cases which absorbed the industry’s attention in 2016 will be resolved and the focus will shift to Capitol Hill, as marketplace lenders step up lobbying activities given the new administration’s presumed predilection to assist the expansion of credit.

Taking a Look Back at 2016

From the start of the year through mid-May we witnessed what can be described as “rational exuberance” as market participants continued to look optimistically at opportunities, tempered by a recognition that regulatory scrutiny was increasing and demanded careful attention.

The mid-May developments at Lending Club, with the abrupt resignation of its CEO Renaud Laplanche, one of the most prominent figures in the industry who had just a few weeks before regaled the LendIt crowd with a keynote address, marked the start of the second distinct period.

With the end of the summer, the market entered its third phase, as parties again waded back into the water, cautiously optimistic about the outlook. By the end of the year, things had come nearly full-circle, as Lending Club tapped investor demand and completed its first rated securitization of consumer loans.

What’s Ahead for 2017

Increased Bank Partnerships. One theme likely to continue in 2017 is the increasing focus on partnerships between lending platforms and traditional banks.

While the Office of the Comptroller of the Currency’s December announcement to move forward with limited purpose national bank charters for fintech companies represents a measured and beneficial step for the industry, it is relatively unlikely that any final developments occur before the end of 2017.

Further Industry Consolidation. Expect the industry consolidation that started in 2016 to continue and grow in 2017.

Lastly, expect M&A activity in the marketplace arena to accelerate in 2017.

Morningstar Corporate Credit Research Highlights (Morningstar Email), Rated: A

Money360 Closes Record $ 35.6 Million in Loans in December (Yahoo! Finance), Rated: A

Money360, the leading commercial real estate marketplace lending platform, announced today that it closed a record $35.6 million in commercial real estate loans in December 2016 — the result of ongoing growth of the company.

December’s transactions reflect short-term bridge loans for a mix of property types, including retail, office and industrial in California, Florida and Illinois. A total of five properties were financed including a one-story suburban office building in Irvine, California; a three-building industrial complex in Richmond, California; a seven-building anchored retail property in Orlando, Florida; a three-story suburban office building in Palm Harbor, Florida; and a three-story office property in Rosemont, Illinois.

December’s loans were for terms of between one and two years, and all were collateralized with a first-lien positions on the properties. They include:

  • Irvine, California: $5.4 Million to Refinance an Office Property Currently Being Re-entitled for Multifamily Development: Money360 provided a 12-month, $5.4 million bridge loan to the owner of a one-story, suburban office building to pay off two maturing loans, taxes and to provide cash out to afford the borrower sufficient time to continue processing land entitlements for a 45-unit condominium project planned on the site. The borrower brought in equity of $548,000 to close with a loan-to-value of 75 percent.
  • Richmond, California: $5.7 Million to Purchase a Three-Building Industrial Complex: Money360 provided a $5.7 million 24-month bridge loan to allow the borrower to purchase Adel Park, consisting of three contiguous industrial buildings containing a total of 159,156 square feet. The borrower was processing an SBA loan, but due to a hard closing date, opted for the bridge loan to consummate the purchase.
  • Orlando, Florida: $9.53 Million to Refinance a Seven-Building Anchored Retail Property: Money360 provided $9.53 million in bridge financing to pay off two current maturing loans and to finance tenant improvements and leasing commissions associated with re-tenanting the anchor space. The first-lien mortgage loan has a term of 24 months, with a loan-to-value ratio of 73.9 percent.
  • Palm Harbor, Florida: $2.5 Million to Refinance a Three-Story Office Building: Money360 provided a $2.5 million bridge loan to pay off a maturing CMBS loan for the three-story Palm Harbor office building in Palm Harbor, Florida. The first mortgage loan is for a term of 24 months with a loan-to-value ratio of 71.43 percent. The subject property is 84.6 percent occupied and professionally managed.
  • Rosemont, Illinois: $12.5 Million to Refinance a Suburban Office Property: Money360 provided a $12.5 million bridge loan for a single-tenant, suburban property in Rosemont, Illinois, allowing the borrower to pay off a maturing loan and buy out existing partners. The 24-month loan is secured by 71,132 square foot property, broken down as 60,207 square feet of office space and 10,925 square feet of warehouse space.
United Kingdom

Wellesley Aims to Raise £1.5M on Seedrs for Further Expansion (Crowdfund Insider), Rated: AAA

Peer to peer lending platform Wellesley has been crowdfunding on Seedrs for almost a month to raise £1.5M (approximately $1.82M). The campaign is currently restricted to Wellesley customers so it is hard to track.

Wellesley, like many other young firms, needs additional capital to continue operations.

Wellesley told P2P Banking that the platform’s campaign on Seedrs stands out because over 15,000 people have already invested in the company, the firm has a social issue of building Britain, and the company has been running for three years while remaining less speculative than other startups in this space.

Advisor Focused P2P Platform Octopus Choice Receives FCA Approval (Crowdfund Insider), Rated: A

Peer to peer lending platform Octopus Choice has received full authorisation from the Financial Conduct Authority. Octopus Choice is part of Octopus Investments. The company said the FCA approval was a first for an advisor focused P2P platform.

Octopus Choice was launched in April 2016, to coincide with the FCA’s decision to broaden the scope of advisers’ permissions to include P2P lending.  The company now claims to be one of the fastest growing P2P platforms having facilitated approximately £45 million in loans for 75 deals since launch.

James Hay bans non-standard investment purchases through platform (Money Marketing), Rated: A

From today, new customers will no longer be able to buy non-standard investments through James Hay’s platform except for in SSASs.

James Hay lists the following investments as non-standard: intellectual property, land banking, overseas commercial property, peer-to-peer lending, unconnected loans, carbon credits, storage pods, UK unquoted shares, overseas unquoted shares, unquoted loan notes and bonds, second-hand endowment policies, and fractional property investments.

Gold bullion will no longer be treated as a non-standard investment in James Hay products, however, and will still be allowed for new investments.

InvestCloud acquires UK fintech Babel for $ 20M (EconoTimes), Rated: A

Californian fintech firm InvestCloud has announced a strategic acquisition of London fintech company Babel Systems for $20 million in a deal.

The strategic acquisition connects InvestCloud’s digital platform with Babel’s trading and accounting capabilities in a move to provide a unique solution for fintech companies. InvestCloud will carry on supporting clients using other accounting solutions and also serve as an open supplier to the market, the release stated.

The client base of Babel includes the market leader in Robo-Advice ‘Nutmeg’ and other progressive Wealth Managers and Family Offices. The fintech company is the modern trade and accounting firm that addresses the needs of a regulated and international marketplace. The modular Babel’s solution is API based and enables the company to be integrated with any client platform.

Getting to know you: Tarlochan Garcha (Business Matters Magazine), Rated: A

Kuflink Ltd is our entry into the peer-to-peer world.  This business is about to go live and compliments Kuflink Bridging, as it will be facilitating lenders and borrowers on UK property.

The conclusion of those findings was clear and this complemented Kuflink Bridging.  Whilst the peer-to-peer sector is highly regulated, the barriers to entry are very high and this appeals to us given our knowledge of the industry, niche offering and desire to build a successful business.  Just nine months later, we are ready to launch our unique peer-to-peer lending platform.

Survival guide to personal loans (Independent), Rated: B

When we asked Moneysupermarket.com what the best buy deals were on personal loans from £1,000 – £1,999, £2,000 – £2,999, and £3,000 – £4,999 – enough for a modest car purchase or an affordable kitchen, the cheapest deal each time was from Zopa, the original peer-to-peer lender.

The advent of peer-to-peer lending has revolutionised the loan market by cutting out middle men and matching up savers looking for a better than average deal with would-be borrows hoping the beat the high street loan rates. When peer-to-peer (also known as P2P) started out it wasn’t regulated in the way as the banks and customers were initially nervous about both lending and borrowing. That’s all changed, with Uk registered P2P lenders falling under the same policing as traditional banks by the Financial Conduct Authority (FCA). From April 2017 they’ll also have to have at least a £50,000 cash buffer to bail out their customers if one side of the deal fails for some reason.

AlliedCrowds: Here’s 2016 Recap & 2017 Priorities (Crowdfund Insider), Rated: B

AlliedCrowds’ 2016 highlights include:

  • Building its database, the Capital Finder: Offers information for crowdfunding, VCs, angel networks, impact investors, and public/semi-public firms.
  • Consulting Service Expansion: AlliedCrowd invested more time in running a number of consulting projects for developing organizations and private sector firm.

  • Created Ecuador’s First Crowdfunding Platform: Known as GreenCrowds.

AlliedCrowds’ 2017 priorities will be to finalize Capital Finder, publish a new alternative report, and appoint a new MD for its debt platform.

European Union

Here’s why France might steal the UK’s fintech crown (Business Insider), Rated: A

The UK’s fintech sector overwhelmingly supported remaining in the EU in the runup to June’s referendum.

Now, as Brexit looms

€2 billion has been invested over German fintech platform Raisin (Business Insider), Rated: A

German fintech Raisin has passed €2 billion (£1.7 billion, $2.1 billion) of investment over its platform three years after launching.

Raisin announced in a press release on Tuesday that it had passed the milestone, just three months after announcing €1.7 billion had been invested over its platform. The fintech said the money comes from 60,00 customers, up from 50,000 in September.

Entrepreneur behind a $ 180M watch brand quietly invested in Klarna (Business Insider), Rated: A

Filip Tysander, the founder of the Daniel Wellington watch brand, quietly bought millions of pounds worth of shares in payments startup Klarna, according to Swedish tech site Breakit.

Klarna has raised over $290 million (£238 million) and is worth $2.25 billion (£1.85 billion), making it one of Sweden’s few billion dollar tech companies.

China

China Cracking Down On P2P Lending (PYMNTS.com), Rated: AAA

The first nationwide crackdown on P2P lending in China is underway — and expected to eliminate many of the 2,400 or so leading platforms in the nation.

The crackdown comes following a series of multi-billion dollar scams in the Chinese P2P lending space, as well as governance issues in U.S. segment leader LendingClub.  Chinese regulatory authorities have officially released new guidelines and sent inspection teams to companies to make sure said guidelines are being following. Those that do not comply by August of this year will be shut down.

The new regulations will block lenders from guaranteeing principal or interest on loans they facilitate as well as cap the size of loans for individuals at Rmb1m and at Rmb5m for companies. Lenders going forward will also be required to use custodian banks — which the vast, vast majority do not.

CreditEase Boosts Customer Experiences with Verint Customer Engagement Optimization Solutions (BusinessWire), Rated: A

Verint® Systems Inc. (Nasdaq: VRNT) today announced that CreditEase—a leading FinTech company in China, specializing in small business and consumer lending as well as wealth management for high net worth and mass affluent investors—is leveraging Verint Speech Analytics, along with Call Recording and Quality Management, to support the transformation of its customer engagement platform.

Since implementing the Verint software solutions, CreditEase has experienced improvements in operational performance and reports an increase in the use of digital channels through omnichannel service strategies. The ability to assess larger data samples, focus on important interactions, gain customer intelligence and target coaching to employees also has helped the organization enhance service delivery and the customer experience.

CreditEase also reports that it has saved operating costs of 45 percent on an annual basis by reducing print and mailed financial statements as customers have migrated to the use of digital channels and self-service e-statements. Its quality assurance initiatives also have yielded benefits in terms of generating an additional 30 percent savings by helping personnel become even more effective in their roles. The organization’s customer satisfaction ratings also have increased, in part due to a sharp reduction (by 80 percent) in billing-related complaints.

India

FSA Support Service Fintech Peer to Peer Lending (Tempo.co), Rated: AAA

the Financial Services Authority (FSA) shows its commitment to support the development of technology-based financial services orfinancial technology (fintech) in Indonesia.

Deputy Commissioner Strategy Management IA FSA, Imansyah said that regulation provides an opportunity for offenders fintech in Indonesia in order to grow.

Faith added the FSA will set up a special website page to facilitate it. The process of setting up a website to ready access would require at least six months after the regulation is published.

InstaEMI expands to more metro cities (India Times), Rated: B

Hyderabad-based financial services platform InstaEMI today announced its plans to expand its presence in metro cities across the country including New Delhi, Mumbai, Pune and Kolkata.

While peer-to-peer lending is another area of their focus, marginal size of the business constitutes of big ticket investments.

Asia

Indonesia: New Fintech, P2P Regulations Released (Crowdfund Insider), Rated: AAA

According to a report in Deal Street Asia, the Indonesian Financial Services Authority (OJK) laid out the following rules:

  • Registration – P2P lending (pinjam meminjam) startups must register and obtain their business license before operating.
  • Foreign ownership – Foreign businesses have to find a local partner because foreign ownership is limited to 85 percent of a company, and they can only act as lenders.
  • Minimum capital requirements – A company must have access to a little over $260,000 in order to carry out its business.  It must have at least approximately $74,000 in capital by the time it registers, and it must also have at least approximately $188,000 to obtain its operating license.
  • Interest rate provision – There is no limit on the interest rate, but loans cannot exceed $150,000.
  • Consumer protection – Fintech firms must only “advise” lenders and borrowers of its selected interest rates, which take “into account fairness and developments in the economy”.  They must also use escrow and virtual accounts in order to prevent operators from directly accessing the capital flowing between the lenders and borrowers.

CoAssets Launches New Real Estate Subsidiary for Full Spectrum of Real Estate Services (Crowdfund Insider), Rated: A

CoAssets Limited, a Singapore-founded Fintech firm that is listed on the ASX (ASX:CA8), has launched a newly incorporated subsidiary, CoAssets Real Estate (Care) Pte Ltd.

“As a crowdfunding platform, user protection is one of our key focus. We are now looking at crowdfunding deals that are backed by assets as a way to protect our users amidst economic uncertainty. Given this move towards secured crowdfunding and our market position as a real estate crowdfunding platform, having a real estate agency fits in well into our overall business strategy,” said Getty Goh, CEO of CoAssets.

CoAssets also shared that all deal listed on the crowdfunding platform undergo a proprietary risk assesment model labeled CoAssets Risk Assessment Model or CRAM.  This process was said to be developed with the assistance of one of the top auditing firms.  The CRAM score is used to help decide whether crowdfunding or other forms of financing could be offered to companies that are looking for funding.

RE/MAX Malaysia Crowdfunding Campaign Raises Over MYR 300,000 (Crowdfund Insider), Rated: A

Kellerhhof International Sdn Bhd led RE/MAX Malaysia‘s equity crowdfunding campaign over the past month to aim to raise MYR 200,000 (approximately $45,000).  The campaign on CrowdPlus.asia finished yesterday and resulted in RE/MAX Malaysia successfully surpassing its minimum goal, raising MYR 322,888 (approximately $72,000).

Yesterday our Equity Crowdfunding was closed. An amazing 161% funded, what gives us great appreciation.

 

Authors:

George Popescu
Allen Taylor

Wednesday November 30 2016, Daily News Digest

uk personal loan effective annual returns

News Comments Today’s main news: Ron Suber joins eOriginal advisory board. Why most P2P lenders have not offered IFISAS. Today’s main analysis : The value of P2P lending to investors. Today’s thought-provoking articles: LendingTree launches small business grant contest. LendInvest reduces minimum loan size. Meet the new Chinese middle class investor. Malaysia is ready to […]

uk personal loan effective annual returns

News Comments

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United Kingdom

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China

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United States

Prosper Marketplace President Ron Suber Joins eOriginal Advisory Board (PR Web), Rated: AAA

Ron Suber, president of Prosper Marketplace, has joined the advisory board of eOriginal, Inc., the expert in digital transactions. Suber will leverage his deep-rooted relationships with banks, mortgage companies, marketplace lenders and other financial services leaders to accelerate eOriginal’s growth, while articulating the importance and necessity of digital transaction management and eOriginal’s unique solution.

Seen as a thought leader in the financial technology space, Suber joins eOriginal at its hyper growth phase. The company recently completed a funding cycle led by private equity firm, LLR Partners, to support the demand and expand its product development and customer services. In addition to Suber, Jon Barlow, founder and former CEO of Eaglewood Capital Management, also joined eOriginal’s advisory board as the company continues to expand its expertise in marketplace lending and financial services.

“The industry is seeing a convergence of marketplace lenders and traditional lenders moving toward digital lending environments and platforms,” said Stephen Bisbee, president and CEO of eOriginal. “Ron’s experience and knowledge of marketplace lending as well as his foresight of industry trends will be invaluable to eOriginal as we continue to scale and focus on bringing fully digital transactions to a variety of industries.”

LendingTree Launches $ 50,000 Small Business Grant Contest (Yahoo! Finance), Rated: AAA

Small business owners face a long list of challenges, and for many, the obstacle of securing financial resources needed to grow a business claims the top spot on the list. That’s the driving force behind LendingTree’s inaugural $50,000 Small Business Grant Contest, where LendingTree will present the winning small business a $50,000 grant to help fund future growth.

“Since LendingTree launched its small business loan marketplace, LendingTree has been committed to helping small businesses thrive by simplifying the loan shopping process and matching the right businesses with right lenders to meet their financial needs,” said Doug Lebda, founder and CEO of LendingTree. “We wanted to take our commitment one step farther by granting $50,000 to help one small business achieve even more success.”

The contest submission page, along with disclosures and details can be found here:

Small businesses interested in participating in LendingTree’s $50,000 Small Business Grant Contest can submit their registration online from November 29, 2016 through January 13, 2017. The registration form consists of 20 questions, collecting information on historical business performance, future plans, why the business deserves the $50,000 grant and how the grant money would enable future growth. Once the registration submission period closes (5:00pm EST on January 13, 2017), LendingTree’s team of small business experts will evaluate, select and notify the winning small business.

This Startup Is Changing The Way People Invest In Single Family Homes (Forbes), Rated: A

Omri Barzilay: For the ones who are not familiar with the company, what is Roofstock?

Gary Beasley: We believe every investor has a right to invest in real estate, and Roofstock is focused on making it broadly accessible to investors large and small.

Barzilay: Does Roofstockbuy the properties on the website itself?

Watson:  As a marketplace and transaction platform, Roofstock does not own any of the homes on the site.

Barzilay: Do you guarantee a certain yield to your investors?

Beasley: A yield guarantee is something we are considering and may offer in the future as we get more and more data and scale.  Since the homes we offer on Roofstock are already rented, and the tenants have been certified to ensure an acceptable income to rent ratio and payment history, this provides an additional level of comfort for investors not available on other platforms. We do selectively offer rent guarantees, however, which gets investors part of the way there, and continue to evaluate and consider other guarantees and insurance products that could reduce investor risk.

Barzilay: We have seen many crowdsourcing solutions in recent years, including Fundrise, Realtyshares and others which raised a lot of capital. How are you different from them and from other, more traditional, turnkey companies?

Watson: We do one thing, which is rental homes, and we do it very well.  Roofstock allows investors multiple ways to invest in this sector.  The majority of our transactions today have been whole ownership, but we also offer fractional ownership in a basket of homes.

Barzilay: Gary, what opportunities do you see in the real estate technology market?

Beasley: The real estate sector is perhaps the largest financial services vertical that has yet to be transformed by technology.  In my opinion, this is inevitable, although structural inertia makes adoption a bit slower in real estate than many sectors.  Given the high fees, Byzantine processes and long timelines for closing, the sector is ripe for innovation.

Barzilay: What should we expect from Roofstock in the near future?

Watson: We recently launched two new markets and will be launching others in the near future. We are also very excited about the asset management app which is in development and combines machine learning and market analytics to provide a powerful tool for the retail investor.

Financial Poise™ Webinars Announces “INVESTING IN REAL ESTATE THROUGH CROWDFUNDING,” Premiering December 14th, 2pm CST (Benzinga), Rated: A

Investors considering making an investment in real estate have a variety of choices: retail, office buildings, industrial, raw land, and, of course residential. More and more investors are turning to the real estate market to invest their funds. This Financial Poise webinar series will cover several types of real estate classes that one may choose to invest in, explaining where to look for opportunities; how to diligence them; and best practice for execution.

Episode #4 of the REAL ESTATE INVESTING 2016 series is “Investing in Real Estate through Crowdfunding” airing on December 14, 2016 at 2pm CST (Register Here). Moderator Bill McGuinn of Sugar Felsenthal Grais & Hammer will be joined by Elizabeth Braman of RealtyMogul.com, Jessica Healy of Syndicated Equities, and Allen Shayanfekr of Sharestates. Episodes 1-3 are also available On Demand through West LegalEdcenter.

Sold Out: Fundrise’s Income eREIT Nears $ 50 Million Cap (Crowdfund Insider), Rated: A

Fundrise has announced that is Income eREIT is “almost sold out” with less than 10% of the $50 million cap available for investors.  The debt based real estate crowdfunding vehicle has recently declared a dividend of 11.25% through December 2016.

Fundrise’s eREIT approach has replaced its single-property crowdfunding strategy.

GDS Link to Exhibit at Marketplace Lending & Alternative Financing Summit 2016 (IT Business Net), Rated: B

GDS Link, a global provider of risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business leasing, will be exhibiting at the upcoming conference at Marketplace Lending & Alternative Financing Summit 2016 in Dana Point, Calif., Dec 4-6, 2016.

United Kingdom

The value of P2P lending to investors (Altus Consulting Email), Rated: AAA

The image of a meteorite approaching awaiting dinosaurs is the cover art which illustrates a new report from UK-based Altus Consulting. The report asks how traditional financial service firms can “benefit from the change rather than risk extinction.” The change here is the rapid expansion of P2P lending with close to 100 firms and business volumes growing at 70% per annum (1). Clearly, an obvious attraction for investors is the high return, especially in the current low interest rate climate. The report underlines this by showing a 5.37% average growth in P2P lending since 2006 (2) and noting the positive stimulus offered by the recent introduction of tax free Individual Saving’s Accounts for the P2P market (3). At the heart of the report, is the prediction on how development through to 2020 will affect investment in the P2P lending market.

But first, to underline the longer run investment potential of P2P lending, the report looks beyond the current economic cycle, back to 1995, using UK personal loan effective annual returns net of servicing fees. It finds that on this basis “the Liberum data shows that, since 1995, not only is the yield an average of 6%, but, even through two major economic crises, there has not been a single year of negative net returns. Lending has performed more consistently through recent economic stress tests than either equities or bricks and mortar”.

With the historic value of P2P lending established, the report takes a clear-sighted look at what are the possible obstacles blocking further growth, before considering what form future development might take. The key blockers to growth identified by the report are:

  • Economic: with typical loan sizes in the tens of thousands and spread across hundreds of borrowers, it means the cost of advising a client on individual P2P loans is likely to outweigh the scale and returns on the investment.
  • Regulation: currently, many firms are operating on interim permissions pending full approval, which may be putting off advisors recommending them.
  • Operational standards: given the relative youth of the P2P industry, there is a lack of tried and tested operational standards.
  • Potential conflict of interests: due to having institutional and retail investors, there are potential conflict of interests.
  • Client underwriting and recovery: the majority of platforms don’t have standard or optimised processes; this is therefore “an area of concern for intermediaries who find it difficult to assess whether one P2P platform is better or worse than another”.
  • Standard risk definitions: the P2P lending industry lacks common risk definitions, which makes it difficult for retail investors to compare performance of loans of the same ‘risk’ type across different platforms.
  • Data feeds: the normal data feeds used by financial advisers such as FE and MorningStar do not currently include P2P data.
  • Risk rating vs established asset classes: as P2P loans are regarded as ‘non-correlated’ assets, this means an adviser has a challenge if they’re to analyse the risk of a client’s portfolio, if it includes P2P assets.
  • Over-complicated marketplace: the P2P sector has yet to see the emergence of a convenient ‘supermarket’ for purchasing its financial products

Putting these impediments aside the P2P market currently has two main sources of capital; namely individual investors looking for a better rate of return on their investments, and institutional investors, “predominantly the investment trusts and British Business Bank”. Currently, up to 60% of investment into P2P lending comes from individual investors.

As indicated in the introduction, at the core of this report aimed at financial advisers, is the prediction on how development through 2020 will affect investment in the P2P lending market. Firstly, Altus expect to see “new open ended funds enter the market encouraging new pools of capital, especially from the corporate pensions sector”. Shifting from the current status quo, the report believes institutional investors, with fewer restrictions than retail investors, allowing them to adopt P2P “relatively easily”.

Secondly, the report sees a major development in the emergence of ‘aggregators’ providing a one-stop-shop with access to multiple P2P services. The report’s authors predict that it’s probable “the majority of P2P business, both retail and institutional, will be transacted through them by 2020”.

While the FT’s Khadim Shubber ponders whether this will mean that “maybe the P2P lenders are the dinosaurs after all?” (4) for founder and CEO of Welendus Nadeem Siam, the future for P2P lending is still at its growth stage: “There are still gaps in the credit market that peer-to-peer lending haven’t exploited, which mean the peer-to-peer sector will continue growing over the next few years. This is in addition to the general public awareness of peer-to-peer lending, which is still very low. Bring these two factors together and you can get an idea of the scale of growth the peer-to-peer lending sector will face.”

References

(1) AltFi, 28th July 2016.
(2) AltFi Data shows the average returns since 2006 for P2P loans is 5.37%.
(3) From April 2016, lenders in the UK enjoy tax-free interest thanks to the Innovative Finance ISA (IFISA), which includes loans arranged through peer-to-peer (P2P) platforms that have full FCA authorisation, and ISA management approval from the UK’s tax authority, HMRC.
(4) ‘P2P will destroy the world, and soon’

Download the ‘Peer to peer: the meteorite approaches an Altus Consulting whitepaper’.

Why Most P2P Lenders Have Not Yet Offered IFISAS (Crowdfund Insider), Rated: AAA

P2P lending rating agency 4thWay is highlighting that 77 IFISA applications are in limbo at the Financial Conduct Authority waiting for full authorisation.  Within this group, ten of the largest UK P2P lenders are still in the queue.  In what was expected to be a big boost for P2P lenders has ended up being a slow-paced process. So what gives?

After many months of the new Innovative Finance ISA (IFISA) being approved there are only several leading peer to peer lenders participating in the savings program. Crowd2Fund and Crowdstacker were approved in April 2016. Another 15 have received the authorisation required to offer IFISAs, two significant ones being Lending Works and Downing. Lending Works has confirmed it will start offering its IFISA soon.

Some, but apparently not all, P2P lending providers that lend their own money on their own platforms might have to change their structure or desist in doing this. Funding Circle and RateSetter are among those that have lent their own money. We do not know if they too have been told to stop.

Funding Circle, RateSetter and Zopa – may not be approved until the regulator is just about ready to give all three of them the nod, in order to ensure none of them get an unfair advantage. So there’s a wait for the lowest common denominator.

The providers have to show that lending is demonstrably directly between a lender and a borrower, and not between the P2P lending platform and the borrower. Otherwise, they need to change their contracts. Growth Street is just one example of an already convincing platform that changed its contracts recently in order to make this direct relationship clearer.

LendInvest reduces minimum loan size (Mortgage Strategy), Rated: AAA

LendInvest has cut its minimum loan size to £75,000 from £100,000 as it expands to become a nationwide lender.

The lender says it is making the change after launching into both Northern England and Scotland, with lower average property values.

Why financial health apps are natural allies for marketplace lenders (alt fi), Rated: A

It’s no surprise, then, that we’re now hearing rumours of further collaborations between financial health tools and online lenders. Nothing signed and sealed yet, but certainly there are conversations going on.

You’d be forgiven for thinking that these firms sound a lot like robo-advisors, but my opinion is that they sit more comfortably within the “financial health” sub-sector of fintech, because they’re as much interested in creating savings as they are in the distribution of them.

The apps could well refer their users to the marketplace lending sector as either borrowers or as investors, and my conversations with some of those in the financial health space would suggest that they already understand the appeal of marketplace lending as an asset class.

So what’s the hold up? Scale, primarily. The apps themselves are fairly early stage, and while they’re growing fast and raising capital, they have some way to go in terms of establishing a solid foundation of users.

EIGHT years to buy a turkey – how to fight back against the banks stuffing savers (Mirror), Rated: A

A new study from peer-to-peer lending firm Octopus Choice has highlighted the pitiful returns on offer from high street savings accounts.

It looked at how long it would take to pay for a range of Christmas staples, using only the interest earned from £1,000 saved in one-year accounts with a range of high street lenders, including HSBC, Royal Bank of Scotland and Barclays.

Octopus found that savers would have to wait a whopping eight years before they could afford a turkey from Marks & Spencer, seven years to buy a Christmas tree, and almost TWO DECADES to cover the cost of a kid’s mountain bike from Halfords.

European Union

French Real Estate Crowdfunding Platform Immovesting is Now Prefunding Deals (Crowdfund Insider), Rated: A

Immovesting, a Paris-based real estate crowdfunding platform, has initiated pre-funding of deals to help support developers / sponsors listing projects on their platform. The “garantie de collecte” or collection guarantee program assures that funds are received on-time regardless of the funding status. This was said to be a first for the French real estate crowdfunding market.

The pre-funding will be utilized on two new listings: The first is for the construction of a luxury residence in Fréjus (83) by IPGest, a specialist developer for the region of Fréjus Saint-Raphaël. The second involves the creation of a commercial complex of 3,200 m2 in the center of Jouy-le-Moutier (95) by the SOPPEC group.

China

CreditEase Wealth Management Releases Survey of Chinese New Middle Class Investment Habits (PR Newswire), Rated: AAA

CreditEase Wealth Management, the wealth management unit of CreditEase, one of China’s largest fintech Companies, announced the results of a report conducted jointly with Bloomberg Businessweek China surveying Chinese new middle class investment habits. Among the results, the report showed that:

  • 76% of new middle class investors are willing to accept investment advice through digital channels
  • 73% prefer low volatility products
  • 62% prefer personalized investment products
  • 61% prefer investment products with low service fees

China’s new middle class is an important contributor to the country’s RMB 50 trillion in total savings and nearly RMB 100 trillion of investable money — estimated to rise to RMB 200 trillion by 2020. However, with only 12% of Chinese investors using investment advisors, as compared to 67% of US investors, the need for reliable wealth management and investment advice is mushrooming. Combined with widespread use of the mobile internet for daily transactions, and relative lack of “traditional” investment advisors, there is a potentially enormous market opportunity for innovative new solutions.

CreditEase Wealth Management believes that “robo-advisors”, which provide automated, algorithm-based portfolio management advice, will play an increasingly important role in filling the “advice gap” for new middle class investors.

“In China’s dynamic investment environment, planning a long-term investment strategy has always been challenging,” said Mr. Tang Ning, CEO and Founder of CrediteEase. “And in recent years, the number of new investment products and options available to new middle class investors has expanded tremendously. By providing powerful, user-friendly tools to create intelligent and balanced portfolios, we believe that sophisticated robo-advisors will help guide investors towards realizing long-term, sustainable wealth creation.”

CreditEase Wealth Management recently launched Toumi RA, its own robo-advisor product to help investors build cross-regional, cross-border portfolios with diversified asset classes. Based on modern investment portfolio theory and advanced back-end algorithms, Toumi RA provides global ETF portfolio asset allocation by tracking stock, bond and property market indexes in China, the U.S. and other countries in real time.

China’s banking regulator asks peer-to-peer lenders to register (Reuters), Rated: A

China’s banking regulator has issued new guidance to tighten control over a fast-expanding peer-to-peer (P2P) lending sector, the regulator said in a statement to Reuters on Tuesday.

The guidance, which the China Banking Regulatory Commission (CBRC) said was aimed at building a comprehensive industry database to lay the foundation of future regulation, requires P2P lenders to register with the government, the commission said.

India

Disruptive Fintech Startups Lassoed (Business World), Rated: A

Financial transactions used to be the domain of behemoth banking institutions, till financial technology (fintech) startups began to disrupt the space. All of a sudden in 2013, fintech startups started leveraging the Internet, with the result that customers began paying for groceries through mobile phones, instead of cards or cash. They even started buying insurance policies with guidance from robo advisories instead of their friendly personal counsellor.

The regulators didn’t know what to make of it then. Was fintech a fad? Weren’t banks too conventional to run on virtual platforms? Banks and financial institutions had to concede, though, that fintech had led to savings on both operational costs and time.

The growth of Peer to Peer lending (P2P lending) has skyrocketed and fast. The past year alone spawned about 20 P2P lending platforms. The industry estimates about 57.7 million small businesses in India, which offer a huge market for P2P fintech startups.

To protect borrowers and lenders on these online platforms, the RBI now proposes that the insufficiently regulated P2P lenders register as non-banking financial companies (NBFCs).

In August, the Securities and Exchange Board of India (Sebi) cautioned investors against online platforms like GREX that raise funds. The market regulator said these platforms were “neither authorized nor recognized” by law. According to industry estimates, close to 200 companies have raised about Rs 350 crore to Rs 450 crore across online platforms in the past year and a half.

Asia

Malaysia: Ready to embrace alternative lending (Enterprise Innovation), Rated: AAA

On May 2016, Malaysia’s Securities Commission (SC) issued its guidelines on how peer-to-peer (P2P) lending is to operate in the country, including requirements for the registration and obligations of a P2P operator as provided in the revised Guidelines on Recognized Markets.

In 6 November 2016, the SC had registered six P2P lending platforms – B2B FinPAL, Ethis Capital, FundedByMe Malaysia, ManagePay Services, Modalku Ventures (aka Funding Societies Malaysia), and Peoplender.

Are the guidelines provided by the Securities Commission of Malaysia sufficient to drive growth in the P2P lending space?

Kevin Teo: The Securities Commission of Malaysia has established a fair set of guidelines to ensure not only consumer protection, but also sufficient room for innovation. As an applicant of the license, we found the selection process to be rigorous and frankly quite intimidating, especially given that there were more than 50 applicants for a handful of licenses.

This ensures that the selected licensees deliver quality service to the public and earn their trust. Consistent education from industry stakeholders is needed to tell the public about such services, and a stamp of approval from a regulatory body adds to the credibility and legitimacy of the budding industry.

Will P2P lending disrupt Islamic banking in Malaysia?

Kevin Teo: Nope, we don’t think so. In fact, we believe it would help Islamic banking, as P2P financing matures and platforms begin to structure their products to be Syariah-compliant, offering Muslim business owners an additional avenue to grow their business.

What is your prediction for P2P lending in Malaysia and Southeast Asia in 2016?

Kevin Teo: P2P financing is a capital-intensive business. Most platforms do not earn a single cent until years after.

To grow in an over-crowdfunded market, they would be tempted to slash interest rates below borrowers’ risk level to attract borrowers, approve loans recklessly and embark on a cycle of negative competition, ultimately resulting in huge loan defaults to investors. Hence in recent months, many smaller or poorly managed P2P financing platforms in other markets had shut down under the weight of loan defaults and economic downturn.

Malaysia is in a uniquely fortunate situation that the Securities Commission evaluated and limited the number of P2P financing platforms. This reduces the chance of poor management and insufficient resources for platforms in Malaysia.

Canada

Peer-to-Peer Pressure: Next Steps for Canadian Fintech (Mondaq), Rated: A

It’s likely we will see more legislation for fintech in 2017.

Like those countries, Canada is seen as being a global fintech hub – with renowned national financial institutions pioneering projects with blockchain technology and fintech startups increasingly popping up across major cities. Regulation, however, is not moving at quite the same pace.

There was something of a milestone in September of this year, when the Ontario Securities Commission (OSC) decided to grant an exempt market dealer registration to an online lender, Vault Circle Inc. This was a significant step forward for peer-to-peer lending platforms in Ontario, which are currently subject to strict securities legislation. The exempt market dealer licence for Vault Circle Inc. means it now has regulatory approval to participate in the accredited investor marketplace.

Authors:

George Popescu
Allen Taylor

Friday September 16th 2016, Daily News Digest

Friday September 16th 2016, Daily News Digest

News Comments Correspondence : On Wednesday, September 14th we wrote: “A great analysis by C2FO on the cost of capital , trends and more for SMEs. This report contradicts quite a few of the latest reports and surveys that claim the opposite ( SME optimism is on the rise, and borrowing is getting cheaper). This […]

Friday September 16th 2016, Daily News Digest

News Comments

  • Correspondence :
  • On Wednesday, September 14th we wrote: “A great analysis by C2FO on the cost of capital , trends and more for SMEs. This report contradicts quite a few of the latest reports and surveys that claim the opposite ( SME optimism is on the rise, and borrowing is getting cheaper). This survey looks more thorough but it is still hard to figure out who to believe. At least we can say that the trend is unclear.”
  • An anonymous reader comments:
  • “I really enjoy reading Lending Times – it’s a great source of information about developments in the alt fin space.  I’m writing because yesterday you published info about a survey by C2FO which states ‘An apparent higher cost of capital has caused some of these firms to look at other sources, such as peer-to-peer, or marketplace, lending that involves directly matching would-be borrowers with lenders. On average, 18 percent of respondents in each country reported using peer-to-peer lending at some point.
  • I have some comments.  First, this cannot be a representative sample of SMEs in the countries covered – I find it inconceivable that 18% of SMEs in the countries included in the survey have used P2P lending – unless there is a huge selection bias in the sample (in which case the findings should not be stated in a manner that implies they are representative of the SME population).  In Italy. for example, other sources estimate the 2015 P2P volume was less that EUR5m for both invoice factoring and lending combined.  A rare source of P2P info on the Italian market is Octopus, a £6bn asset manager, launched a P2P lender; RateSetter’s auto loan volume reaches £100m in partnership with 209 locations.
  • Today’s main analysis: An article on customer ownership in p2p lender-bank partnerships; Alt Fi’s conference take away;
  • Today’s main thought provocations: Twino’s geographical expansion; Lending Club and OnDeck’s stocks in August.

United States

United Kingdom

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India

 

United States

That Marketplace Lending ‘Partner’ Just Wants Your Customers, (American Banker), Rated: AAA

In October, Regions Bank announced a deal to let small-business owners access Fundation’s online application directly from the bank’s website. In April, JPMorgan Chase partnered with OnDeck to offer loans to the bank’s existing small-business customers. And most recently, Kabbage teamed up with Scotiabank to make small-business loans in Canada and Mexico.

The deals seem simple: the marketplace lender provides the backend technology and the bank provides the brand name. However, the reality for smaller banks is that making similar partnerships could be very dire to their business models.

The first conflict involves customer acquisition and retention. According to a Forbes blog, acquiring a new small-business customer costs an alternative lender between $2,000 and $3,000. Banks that partner with alternative lenders are essentially providing them free referrals, and marketplace lenders won’t want to let these new customers go.

The second potential conflict these partnerships pose involves regulatory issues. Currently, marketplace lenders operate outside the strict regulatory system for banks. Banks, which have spent decades carefully guarding their reputations, are now entrusting their reputations to unregulated partners. Regulators are very likely to view any loan that goes through a bank in any way as being a loan from that bank, and yet, the loans will not be up to the bank’s standards.

A deal with a business that’s actively competing for some of a community bank’s key customers can never be a true partnership.

Online Lending at AltFi: A New Phase for a Growing Industry, (Crowdfund Insider), Rated: AAA

Comment: post about the AltFi conference in New York that took place on Sept 14th 2016. 

When I realized the 2016 AltFi Conference was at the posh Pierre Hotel on the corner of Central Park, it immediately gave me pause. I remembered 2007 and 2008 when certain mortgage-backed security investment conferences were held at such addresses.

Noteworthy absentees from former years were SoFi, Dealstruck, OurCrowd, Symbid, LendKey, Biz2Credit, OneVest, Realty Mogul, Assetz Capital, CommonBond, Seedrs, Crowdcube, P2BInvestor, and Zopa.

Ron Suber, of Prosper Marketplace, presented the opening keynote.

He likened marketplace lending to Boeing in 2013 when it manufactured faulty batteries for its new Dreamliner aircraft. He noted that loan volumes are increasing [again], loan values are coming back and quality securitizations are back since the second quarter of this year.

He also noted that the industry needed to focus on developing a deep liquid secondary market, securitizations with a cusip and a rating so that institutions with certain investment criteria can invest, and properly executed derivatives and synthetic market.

Today he offered a new necessary nine, essential for funds looking to invest in this asset class, many of which were tested earlier this year. They are as follows:

  • Proper loan valuation – did they value them correctly?
  • Adequate accruals for defaults – in the second quarter, many didn’t set these correctly and had to true up accruals
  • Effective loan selection – obvious
  • Account for platform performance – many struggled with losses exceeding projections and this was felt by the funds that invested in them
  • Fund fees – are these billed and set up correctly?
    Manage use and cost of leverage
  • Manage use of cash – many funds stopped purchasing new loans and experienced a cash drag
  • Purchase price of loans (premium vs. origination fee) – borrowers prepaid and many funds never realized those premiums they anticipated
  • Currency hedge – Brexit affected many funds who did not hedge against currency fluctuations

As final thoughts, he left us with four things the industry needs to get right:

  • Risk management groups – meaning the industry needs to ensure that it has appropriate safeguards when it comes to legal, compliance, data and other risks
  • Sustainability/profitability
  • Equilibrium (between borrowers and investors) – platforms need to be able to balance supply and demand
  • Trust and transparency

The third keynote of the day was Albert Periu of Funding Circle US, whose focus was on the need for diversity of funding sources for platforms. He also shared that since formation in 2010, Funding Circle has lent over $2.5 billion to over 20,000 businesses. Periu conceded that diversification of funding sources is difficult to achieve but is the only way marketplace lenders can scale. Funding Circle has used retail investors as a source of capital in the UK and EU for some time, they will soon be utilizing such investors in the US as well.

In an online audience poll 44% agree that retail investors will become a more important source of capital to 56% feel that it will become less meaningful over time.

The final event of the morning session was a debate of sorts about the importance of retail investors to the future of marketplace lending between Peter Renton of LendAcademy and David Stevenson, of AltFi. Stevenson argued that accessing retail investors brings the ire of regulators and that the herd mentality of retail investors causes them to be less permanent. Renton countered that institutional investors are less sticky and move massive amounts of money at a time causing volatility, and further, that the financial crisis was driven by institutional investors and not retail investors.

Ron Suber on Marketplace Lending: Keep Calm & Lend On (Deck), (Crowdfund Insider), Rated: A

Comment: you can find here Ron Suber’s powerpoint presentation from the article just above.

Why LendingClub Corp. and OnDeck Capital Rocketed in August, (Motley Food), Rated: A

Lending Club and OnDeck Capital have taken a beating since their respective IPOs, as investors have generally tempered their expectations for the profitability and sustainability of online marketplace lending.

In August, the company’s share prices began to recover when Lending Club reported earnings and simultaneously announced the departure of its CFO and the addition of a banking veteran to its board of directors.

Shares of OnDeck Capital typically follow Lending Club, and vice versa. In August, OnDeck Capital showed that the problems plaguing its rivals had not affected its ability to originate new loans. Notably, OnDeck’s originations grew 41% year over year compared to just 2% growth in originations at Lending Club. Unlike Lending Club, which seeks to originate loans solely to resell them to investors, OnDeck funded about 75% of its total loans from its own balance sheet capital at the end of the second quarter.

OnDeck Capital and Lending Club regained some trust with their shareholders in August, but they also need to recapture the confidence of investors who buy loans from their marketplaces.

Options Heat Up As Lending Club (LC) Rallies, (Schaeffers Research), Rated: A

LendingClub Corp (NYSE:LC) is on pace for its highest finish since CEO Renaud Laplanche resigned amid a cloud of scandal in early May. Specifically, the stock is up 7.7% at $6.20, breaking out above the $5.80-5.90 region — which capped the shares’ rally in mid-August. Options traders have been quick to chime in, with contracts crossing the tape at four times the usual intraday pace.

While puts are changing hands at a particularly impressive eight times the expected rate for this point in the day, calls still lead puts more than 2-to-1, on an absolute basis. A large chunk of today’s action has come from one trader who appears to have rolled his block of 5,000 October 6 calls up and out to the January 8 call, per data from the International Securities Exchange (ISE). By doing so, the speculator is betting LC will extend its rally beyond the $8 level over the next four months.

Taking a step back, a preference for calls over puts is nothing new for LC, though options volume has generally been light. In fact, traders on the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have purchased 5,467 calls over the last 10 sessions, compared to just 78 puts. The resulting call/put volume ratio of 70.09 sits 2 percentage points from an annual peak.

Groundfloor Doubles Lending Footprint on One Year Anniversary of Qualification Under Regulation A+, (PR Web), Rated: A

GROUNDFLOOR, the first and only real estate P2P lending marketplace open to non-accredited investors, today announced that it is clarifying certain historical results included in its September 1 press release describing the expansion of its lending business to 12 additional states just one year after GROUNDFLOOR qualified under Regulation A+.

Since achieving qualification under Regulation A+ and commencing our multi-state offering program in late August 2015 and through September 7, 2016, GROUNDFLOOR has funded 111 loans. During this period, retail securities sales were $13.6 million. GROUNDFLOOR borrowers have fully repaid 39 loans under this program. This compares with retail securities sales of $1.9 million in the preceding 12-month period (with 36 loans funded via our intrastate offerings in Georgia). The average annualized rate of return for investors since inception of our business has been over 12%. As of September 7, 2016, no loans funded under our multi-state offering program or Georgia program have lost principal value.

GROUNDFLOOR’s Regulation A+ highlights (since commencement of our multi-state offering program):

  • Number of registered borrowers up 300%
  • Number of loans funded up 175%
  • Value of loans funded up 525%
  • Number of investors up 300%
  • Amount invested per investor up 300%

GROUNDFLOOR remains open to investors in 9 states. Upon qualifying under Regulation A+ one year ago, GROUNDFLOOR expanded its lending business beyond Georgia to 10 additional states. Now, 1 year later, they have expanded their lending business to 12 additional states, for a total of 23 states. The states being added are Rhode Island, Massachusetts, New Hampshire, Michigan, Missouri, Minnesota, Colorado, Arizona, Utah, Nevada, Oregon, and Washington.

United Kingdom

Peer-to-peer lender passes £100 million milestone for auto loans, (Asset Finance International), Rated: AAA

RateSetter, which was only launched in 2010, has now delivered more than £100 million in car financing, becoming “the first peer-to-peer lending platform to lend this amount through motor partnerships”.

RateSetter motor finance is available through more than 60 affiliated dealerships, car supermarkets and brokers at 209 locations across the UK. Separately, RateSetter also provides personal loans to car buyers, with an average car purchase price of £6,700; the £100 million figure does not include this.

Car finance is a very well-established form of lending which is traditionally difficult for new companies to enter. RateSetter has done this by starting small (in 2013, its first year providing car finance, RateSetter wrote £15 million of motor loans) and by focusing on a personal loan product, rather than hire purchase.

Octopus launches P2P lending platform, (FT Adviser), Rated: AAA

Octopus Investments has created a peer-to-peer lending platform, as it looks to give investors more choice through the Innovative Finance Isa.

The fund management company, which manages over £6bn of assets, has launched Octopus Choice, which targets a return of around 5 per cent through short-term residential property loans, typically between six and 18 months.

This announcement comes just months after the firm decided to launch a new online lending product, which sought to address the scepticism and scarce uptake of P2P products among the advice community.

The platform is powered by an underwriting team that has loaned over £2bn since 2009 and which had a default rate below 0.1 per cent. The minimum monthly investment is £10 and the maximum is £2m, and interest is paid monthly. Investor capital is secured against residential property assets with an average LTV of around 60 per cent, therefore providing a 40 per cent cushion against capital loss in the event of default

European Union

Twino Hits €300 Million Milestone for Loans Issued,(Crowdfund Insider), Rated: A

TWINO Group, a European consumer lender, has announced that it has reached a new funding milestone of €300 million in issued loans. TWINO also operates a peer to peer lending platform that has funded approximately €50 million in loans.

Interestingly, TWINO points out that 8% of its investors are based in the UK. The company, which has been operating since 2009 and its P2P lending commencing in 2015, provides unsecured consumer loans for private individuals in ten countries, including Poland, Russia and Georgia. TWINO’s peer-to-peer lending platform, offers European investors the opportunity to invest in consumer loans originated by TWINO Group’s lending companies. T

WINO is unique as it is currently offering a “BuyBack Guarantee”, which protects investors from the borrower default risk, the platform says it has attracted over 4,000 investors from 30 countries. TWINO states that investors earned on average a 12.3% return by investing through the platform.

India

Faircent Names Dr. Shakti Goel as Chief of Product and Technology, (Udaipur Kiran), Rated: B

Faircent.com, India’s [assumed] largest peer to peer lending marketplace, today announced the appointment of Dr. Shakti Goel as Chief of Product and Technology. Dr. Goel’s deep domain knowledge of Financial Markets and Banking would further accelerate the growth momentum of the largest player in the P2P lending space of India.

A doctorate from MIT (Massachusetts Institute of Technology), and an IIT Delhi graduate, Dr. Goel has worked across geographies in companies like Oracle Corp, Fidelity, Raytheon, State Street Corpand HCL Info-systems in US and India. He has deep domain knowledge of Financial Markets, Banking, Retail and Healthcare.

Startups ease process of obtaining education loans, (The Times of India), Rated: A

Gyan Dhan, founded by founded by two IIT alumni -Ankit Mehra and Jainesh Sinha, operates in the higher education segment for foreign universities. The startup, partnering with SBI and Axis Bank, facilitates loan disbursal to students who do not even have a collateral. ”

Over half the close to 100 loans have been processed without collateral,” said Jainesh Sinha, co-founder. The startup takes into consideration the employability quotient of the student. Sinha added that the startup has also help reduce unnecessary paper work. “In one case, the bank had asked an applicant to furnish the i20 form (which states that you are a non-immigrant student), which wasn’t required. We approached the bank and got the loans sanctioned.

The startup has processed loans worth 21 crore, with an average ticket size of 27 lakh across the country.

Facilitating loan disbursal towards of blue-collar workers, OpenTap, a peer-to-peer lending platform, does the vetting process before it connects loan borrowers and loan givers. The P2P platform says 40% of its loans are for educational purposes — for school and college-going students.

Author:

George Popescu

August 24th 2016, Daily News Digest

August 24th 2016, Daily News Digest

News Comments Today’s interesting articles are the thought provoking piece in American Banker; the fact that German fintech raised 80% more money than British ones in Q2; and a great article on banks key numbers, a must read. Also OnDeck’s marketing is on fire : new site, new smart marketing campaign and , less for […]

August 24th 2016, Daily News Digest

News Comments

 

United States

United Kingdom

European Union

China

Australia

News Summary

United States

It Should Be Obvious Now that Marketplace Lending Is Unsustainable, (American Banker), Rated: AAA

Comment: We would like to remind out readers that plenty of companies in marketplace lending have been profitable or are profitable.

The title is of course attention grabbing through its provocative message. Beyond the title, I think we need to really to company marketplace lending to the average startup which doesn’t make money.

Facebook was not profitable for a very long time. Tesla is not. ZipCars was never profitable. Uber still isn’t profitable. Not being profitable is not the only indicator of a company’s success for a given period of time.

Of course, never being able to be profitable is a reasonable indicator that a company is nonsustainable. But as I mentioned at first: Zopa, Lending Club, Lend Invest and other companies have been profitable at times and they made the conscient choice to trade profitability for growth. 

The company I’m pitching to you has revenues that rise and fall as much as 50% or more on a quarter-to-quarter basis. Its quarterly earnings and losses are equally volatile. Almost all its revenue comes from new product sales — it has very little continuing revenue. Operating expenses generally increase a little more slowly than revenue when sales are rising, but when sales fall, expenses keep increasing anyway because of accounting charges for layoffs and office closures when management downsizes.

Management can’t plan ahead because the company sells most of its products to a few large customers. Those customers dictate sales volume and product pricing and their purchases determine whether the company makes or loses money in any given period.

Management’s only lever for controlling the company’s earnings volatility is to try to guess how much and at what price those customers may buy in the future. The company increases or decreases personnel and marketing expenses based on that guess.

The company also has a large ongoing technology investment program that it can’t afford to cut much if it wants to compete. Oh, and the company isn’t growing — sales in the most recent quarter were flat compared to the same quarter two years earlier — and it is only marginally profitable even when things are going well. [Comment: The author is stating, to my knowledge true facts. However, the author is citing a single company out of 507 companies Lending Times keeps track of in this market. 

The company I just described is Prosper Marketplace, a fintech “unicorn” with a billion-plus private market valuation and the granddaddy of the marketplace lenders. [Comment: As an industry insider I believe that what we need to read here is “this is a lesson we all need to learn from”. I am not convinced that once can’t do P2P lending without avoiding these problems. All the problems described here are not must haves in order to enable P2P lending. ]  

Companies like Prosper and Lending Club have done a fantastic job revolutionizing the front end of the consumer lending experience — and in doing so have created real value for some borrowers — but their vision of a “disintermediated” loan marketplace is proving itself unable to handle even minor financial market bumps without running off the road.

There is another view on the viability of MPLs. Lending Club’s $2 billion-plus market capitalization shows that many people still believe that the sector’s recent problems are temporary and that the MPL model can work to create shareholder value.

Lending Club has lost a cumulative $115 million over the last four and a half years [Comment: Of which it lost $81m due to corporate procedures and not due to their business model. Losing $34m while growing at the pace they did over the last 4.5 years is in-fact outstanding results.]. (Prosper has lost a cumulative $125 million over the same period) and nothing suggests that will change anytime soon.

The path ahead is clear if boards, venture investors and management want to salvage something before the string runs out. Stable funding is everything for a lender,[Comment: entirely agreed]. and the best place to find that is to fund lending directly with bank deposits. [Comment: there are other sources of capital that behave like a depositor capital, like 401k, self-directed IRA, etc. ] .

While this won’t result in the type of equity valuation dreamed of by the MPLs’ tech boosters, it will provide something real for the venture and institutional investors who put up the equity to fund companies like Prosper. [Comment: the valuations indeed may have been a little unrealistic. But valuations are made by offer and demand. It takes 2 to make a valuation, the buyer and the seller. ]

[Final Comment: I find this article extremely helpful in sorting out what are real problems for the space and what is not. I also find the last 6 months are the best possible lesson on what works and what doesn’t work. That is an amazing amount of useful information. We now know what in which direction to build. And the fact that despite all its problems Lending Club still originated $2bil in volume approximatively means there is a real business, there is real demand. ]

Fintech’s License to Fail, (Bloomberg), Rated: AAA

Comment: one of the most interesting articles I’ve read this month.

Who would want to be a bank these days? Quite a few technology startups, it seems.

Mondo received a commercial banking license in the U.K. this month and plans to offer checking accounts next year. Atom Bank, backed by Spain’s BBVA, and Starling now have U.K. licenses. Germany’s Number26, received its own permit last month.

The apparent rush to enter a business that has destroyed shareholder capital and jobs over the past decade reflects a certain confidence that incumbent lenders are stuck in a rut.

It also reflects a desire to fully control the back-end plumbing of their offerings rather than just the funky user interface.

But that comes at a price: Mondo will need to raise as much as 20 million pounds ($26 million) of additional funding to make the transition to a full-fledged bank. That may sound like small beer for a startup that once crowd-funded 1 million pounds in 96 seconds. But the long-term picture is more troubling: with a license, these firms will have a larger cost base and a higher barrier to profit.

Lending is an expensive trade with high capital costs. For every 100 pounds of mortgage lending in the U.K., a new bank would have to have about 2.80 pounds of capital, according to regulators.

Present an entrepreneur with these realities and you’ll likely be told that their new banking model will involve less balance sheet and more data.

E-invoicing specialist Tungsten failed to deliver on its banking bet and agreed to sell its license in 2015.Tungsten, a U.K. electronic-invoicing specialist, sold its banking arm last year, saying regulatory approval was “incompatible with profitable growth”. Japanese network operator NTTDoCoMo sold its stake in a German private bank back in May.

Doubtless, a startup somewhere will find a way to profit from its banking license — but in the absence of a proven business model this will look less like a one-way street and more like a revolving door.

Goldman Signs 0 Million Credit Facility For Online Lender Fundation, (Wall Street Journal), Rated: A

Fundation Group LLC, which makes online business loans, this week completed a $100 million credit facility with Goldman Sachs Group Inc., according to the lender’s chief executive.

The new credit line will help the firm expand its recent partnerships, including those with traditional banks, such as Regions Financial Corp. and a network of community banks, to extend loans to the banks’ business customers.

Through its partners, Fundation offers term loans of up to $500,000 with annual rates under 30%.

In addition to banks, and a small amount via its own website, Fundation partners with business-service providers such as Wolters Kluwer N.V. to make loans. It also recently began working with the U.S. Department of Commerce’s Minority Business Development Agency to facilitate lending.

Fundation is majority owned by Garrison Investment Group, a credit investment firm.

On Deck Capital’s unit, Ondeck Asset Funding I, establishes new asset-backed revolving debt facility, (Reuters / SEC 8-k filing), Rated: AAA

Comment: I am not certain if this is a new structure OnDeck is setting up or a routine structure they have been using all along. More research is necessary.
On August 19, 2016, OnDeck Asset Funding I, LLC (“ODAF I”), a wholly-owned subsidiary of On Deck Capital, Inc. (the “Company”), established a new asset-backed revolving debt facility (the “ODAF I Facility”). On that date, ODAF I entered into that certain Credit Agreement (the “ODAF I Credit Agreement”) by and among ODAF I, as Borrower, the Lenders party thereto from time to time, Ares Agent Services, L.P., as Administrative Agent for the Lenders and Collateral Agent for the Secured Parties, and Wells Fargo Bank, N.A., as Paying Agent.
The Company may now obtain funding (subject to customary borrowing conditions) through the ODAF I Facility, including to finance certain of the Company’s loans not currently financeable by the Company’s other funding sources due to concentration limitations and to finance the Company’s larger term loans with a maximum original principal amount of up to $400,000.
The following table summarizes certain aspects of the ODAF I Facility:
Facility Size
$100 million
Borrowing Base Advance Rate
Up to 80%
Interest Rate
LIBOR (minimum of 0.0%) + 7.25%
Commitment Termination Date
August 19, 2018
Under the ODAF I Facility, the Lenders party thereto commit to make loans to ODAF I, the proceeds of which are used to finance ODAF I’s purchase of small business loans from the Company.
The revolving pool of small business loans purchased by ODAF I serves as collateral for the loans made to ODAF I under the ODAF I Facility. ODAF I is required to repay the borrowings from collections received on the loans.

Why banks refuse to upgrade core banking systems, (Tradestreaming), Rated: A

At the center of the bank are the core banking systems. This is the big book in which the bank writes who withdraws or deposits money. These systems, many of which were built when the 8-track tape was still around, is updated only once a day.

When you see a withdrawal instantly on your mobile phone, it’s done by a slew of mirror sites, or backend reconciliation to fake the system out. There is no such thing as real time banking. Sometimes, the system lags.

“Are you really going to build a Tesla from a Model T foundation?” asked Peter Olynick, senior practice lead for retail banking at NTT DATA, a business and IT services provider. Banks have done a good job in pimping out their Model T with ‘wrap around’ solutions, but this approach has limits.

Replacing the core system isn’t just costly, it’s also risky. A migration mistake might affect every service the bank provides.

  • Only 15 percent of bankers expect to build a new core deposit system in the next three years.

  • Banks find it increasingly difficult to launch advance products on top of aging core systems.

Yantra Financial Technologies Enable Disbursement of Loans in Real Time with BlastPay, (Business Wire), Rated: A

Yantra Financial Technologies, a financial technology firm specializing in designing, developing and managing electronic payment systems, has enabled lenders to deliver funds in real time with BlastPay, an FDIC insured business bank account that gives users complete control over disbursements.

Founded in 2012, Topeka, Kan.–based Yantra Financial Technologies is a financial technology firm specializing in designing, developing and managing electronic payment systems, and focuses on creating secure contextual and conditional ways of moving money.

OnDeck New Website and Brand Identity, (OnDeck), Rated: A

OnDeck’s brand new website which just launched.

The new site – www.ondeck.com –  marks an inflection point for the rapidly growing online lending industry as pioneers like OnDeck shift their brand voice to reflect the maturing industry and the fact that the company is no longer a start-up, but is now the largest online lender to small businesses, with almost a decade of experience and expertise in providing billions of dollars in capital that helps small businesses grow.

MoneyLion Offers Free Credit Monitoring Tools Through TransUnion, (Business Wire), Rated: AAA

MoneyLion, the mobile-first personal finance platform, is helping consumers gain a clearer picture of their credit health with free credit monitoring tools provided by credit bureau, TransUnion®. Data collected by MoneyLion since Q1 2016 has shown that loan takers that use their credit monitoring tools are 28 percent less likely to default.

MoneyLion’s credit monitoring tools allow users to:

  • View their individual credit report
  • Use a credit simulator to forecast the impact of financial decisions on their credit score
  • Set up real-time alerts informing users of critical changes to their credit report

Founded in 2013 by a team of leading technologists and financiers, MoneyLion uses superior analytics and machine learning-based risk technology to gain a 360-degree view of its users’ personal finances, enabling better underwriting and the development of tailored financial product offers.

LendIt Announces Partnership with Capital One to Co-Host their Annual Fintech Start-up Competition, (Press Release), Rated: A

LendIt, the largest conference series dedicated to connecting the global online lending community, today announced a partnership with information based lending company Capital One to co-host PitchIt @ LendIt, a competition to find a future star of the fintech world.

he competition is aimed at firms innovating within the online lending and fintech space. It provides a showcase for eight high growth fintech firms to pitch their business case to a panel of expert judges as well as some of the technology industry’s leading figures attending the forthcoming LendIt Europe 2016 conference in London. (

OnDeck Launches Initiative to Help Small Business Owners with Time Management, (PR Newswire), Rated: A

Half of the survey respondents agreed that: “As a business owner, work/life balance is an illusion,” with even more – 61 percent – saying that “they constantly feel like they are racing against the clock.”  When asked, “How many hours per week would you need to successfully run your business?” those surveyed felt they would need 69 hours on average.

“Our research shows that small business owners are pressed for time and need to find ways to free up more time in their day,”

According to a study from the Federal Reserve Bank of New York, small business owners spend an average of 33 hours searching and applying for a traditional bank loan.

OnDeck will provide time management tips to streamline common time-intensive areas of running a business, including marketing, customer service and people operations. The advice, which also includes work/life balance best practices, comes from OnDeck executives, SCORE President David Bobbitt, small business owners and other small business experts. SCORE is a non-profit organization comprised of 11,000+ volunteer mentors who provide free and confidential small business mentoring and advice :

Facebook Live Chat: 7 Ways Small Business Owners Can Be More Efficient Marketers

Quickbooks Online Essentials Contest: Streamline Your Accounting

Q&A: Kabbage CEO & Co-Founder Rob Frohwein, Originating B Loans & Growing, ( Crowdfund Insider), Rated: A

Before founding Kabbage,Rob Frohweinestablished, led and advised a number of successful businesses, including LAVA Group, U.S. Micro Corporation and Surgical Biologics. Additionally, he served in business development and legal capacities for ZapMedia and Security First Network Bank. The Villanova law and undergrad alum practiced law with Troutman Sanders LLP, co-authoredthree books on intellectual property including and co-hosted a career-centered radio program sponsored byUSA TODAY.

Kabbage is funded and backed by leading investors including Reverence Capital Partners, SoftBank Capital, Thomvest Ventures, Mohr Davidow Ventures, BlueRun Ventures, the UPS Strategic Enterprise Fund, ING, Santander InnoVentures, Scotiabank, and TCW/Craton. All Kabbage U.S.-based loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC. When did Kabbage gain traction and make good on its name?

The idea for Kabbage first came about when we recognized that many companies were offering automated access to data via APIs like eBay’s. There was a lot of rich transaction-level data that could be extremely useful for decision-making on underwriting.

In fact, we now work with some of the world’s largest banking institutions. ING in Spain, Santander in the U.K., Scotiabank in Canada and Mexico now leverage the Kabbage Platform to better serve their SMB customer base.

Kabbage is to FinTech what Amazon is to e-commerce. Just as Amazon powers e-commerce for thousands of merchants, Kabbage is the first fully-automated, data-driven platform that is scalable and easily adopted.

There are several difference between Kabbage and Marketplace Lenders. Kabbage partners with a federally insured, industrial bank to provide a line of credit to businesses. Unlike a marketplace platform, Kabbage and this bank retain all of the credit risk.

I would say that banks simply haven’t been equipped to serve businesses seeking smaller loan sizes under $250,000, even though they likely want to.

United Kingdom

UK peer-to-peer platforms are benefitting from government policies, (Business Insider), Rated: AAA

So far, only a handful of platforms have received authorization from the Financial Conduct Authority (FCA) to offer the Innovative Finance Savings Account (IFISA), due to regulatory holdups. But for those that have a live product, it has resulted in a significant uptick in business. We spoke to two P2P lenders that offer IFISAs about the impact it’s had on their businesses:  Crowd2Fund and Crowdstacker.

Here are some of the key takeaways:

Property lending will make up the largest share of P2P activity in the UK in 2020, followed by business lending and consumer loans.
Traditional lenders will reclaim some P2P lending volume by building or acquiring the technologies that are proving successful.
While the general concept of P2P lending is the same, there are major differences between the UK and US P2P lending markets.

VPC Specialty Lending Investments PLC Appointment of Principal at Victory Park Capital Advisors, LLC, (MoneyAM), Rated: AAA

Victory Park Capital Advisors, LLC, (“VPC”), the investment manager to the Company, has appointed Cormac Leech as Principal to the firm. Cormac will be based in London and act as the European representative for VPC and will be working across all aspects of its business including the London listed VPC Specialty Lending Investments PLC. He will start his role in September.

Cormac was previously a Director and Co-Founder of Alternative Finance at Liberum, the London based investment bank.

New head of HR for LendInvest, (Mortgage Introducer), Rated: B

LendInvest has appointed Erin Stewart to lead the company’s growing HR department. Stewart was most recently head of HR for EMEA and APAC at Essence, the global digital agency and the world’s largest independent buyer of digital media. During four years at Essence, Erin oversaw the launch of several of the agency’s Asian offices in cities including Singapore, Tokyo. In each location she established the HR functions to support the business’ fast expansion.

ErinStewart joins a growing team at LendInvest in the company’s central London headquarters. Since spring 2015, the LendInvest team has increased threefold from 30 employees to 105 full time members of staff. Other senior hires made in the past year have included specialists from OneSavings Bank, RBS, IG Group and CBRE. Today, 40% of the team works on technology and product development, with 30% committed to originating, underwriting and servicing property finance loans.

Financial Technology in the UK Gets a Boost From Octopus Investments, (Payment Week), Rated: A

A common model when it comes to technology investment is the “accelerator investment” model, which works with other strategies to help bring startup investment in technology to the mainstream. Organizations like Barclays have been said to use similar methods for some time now.

Octopus’ methods, meanwhile, are a little different, launching what’s known as Octopus Labs to help drive development, and not just investment.

One big example of this is the Octopus Choice system, a peer-to-peer (P2P) lending system that fills in the gap in P2P lending.

Jane Dumeresque: The adviser’s guide to P2P due diligence, (Professional Adviser), Rated: A

The peer-to-peer (P2P) market offers some excellent investment opportunities but before diving in, says Jane Dumeresque, advisers need to do thorough research and ensure they and their clients pick a quality provider.

Once the decision to invest in P2P has been taken, there are a whole host of criteria lenders and advisers should look for to evaluate which P2P provider to use. For starters, it is important to know who owns the business and whether they are looking to build a sustainable business or to quickly build market share and then exit before the loan book has gone through an economic cycle.

Does the business have the financial expertise to assess the loan risk and is this done by people or using algorithms?

These are the types of questions that should be answered before your client makes the decision to invest in a platform and some companies will be better equipped to answer them than others.

For years now we have all known there is no such thing as a free lunch and, not surprisingly, there is a correlation between risk and reward – invariably, if it looks too good to be true, then it probably is.

It is important for an investor to understand how long their money will be tied up, what return they are getting, when they are getting it and what security they have in the event the borrower is unable to pay? What processes are in place?

For those prepared to invest the time, there are some excellent investment opportunities in the peer-to-peer market, where investors can not only earn an attractive return with good security but can also help businesses gain access to capital they would otherwise not have.

European Union

German fintech startups raised 80% more than British ones in the second quarter, (Business Insider), Rated: AAA

Germany overtook Britain as the fintech funding capital of Europe in the second quarter of the year, with German startups pulling in $186 million (£142 million) compared to $103 million for British businesses.

The three largest fintech funding deals in Europe in the second quarter were all in Germany: marketplace lender Finanzcheck raised $46 million; digital-only bank N26 raised $40 million; and payment provider AEVI raised $34 million.

But the report adds: “Regardless of Brexit, the UK will not give up its role as Europe’s fintech leader easily, demonstrated by the country’s regulatory sandbox and its recent announcement of a fintech bridge with Singapore aimed at making it easier for UK-based fintech companies to operate in that country and vice versa.

Globally, KPMG and CB Insight’s “Pulse of Fintech, Q2 2016” report found fintech funding hit $9.4 billion, boosted by Ant Financial’s bumper $4.5 billion injection in China. Funding to VC-backed fintech firms fell by 49%.

Funding for fintech companies in North America saw the biggest drop off globally, declining 28% on the first quarter of the year.

The report also found a big increase in the number of corporate venture capital funds — mainly off-shoots of banks — getting involved in funding, while the number of VCs putting money on the table is in decline. A third of fintech funding deals globally involved some sort of corporate investment.

China

Is P2P Lending Out Of Control In China?, (China Tech News), Rated: A

Chinese regulators are considering new rules to cap P2P (peer-to-peer) lending ito control risk and protect investors, eight months after it initiated a campaign to “clean up” faulty P2P lenders, according to Chinese media reports.

An individual lender can provide loans of no more than RMB200,000 (US$29,976) on one P2P platform, and can lend no more than RMB1 million (US$150,000) in aggregate across different P2P channels.

For other non-individual legal entities, the cap is RMB1 million on a single platform and RMB5 million across all P2P channels, according to Chinese media reports citing an insider.

A total of 515 P2P lenders in China have closed doors or exited the sector during the first half of the year. There are 2,349 P2P lenders currently in operation in China, compared to over 4,000 P2P lenders that have been in existence, cumulatively.

Australia

Former Aussie CEO steps down as chairman of online lender, (The Adviser), Rated: A

In a trading update this week DirectMoney announced that Mr Nantes, a current director, replaces Stephen Porges who has stepped down from the chairman role and will remain as a non-executive director of the company.

DirectMoney has recently completed a $5.7 million capital raising which will fund further development of the company’s technology platform, the marketing of the DirectMoney Personal Loan Fund and underpin new institutional funding initiatives, which are currently in due diligence.

Mr Nantes has over 20 years of experience in financial services. Prior to being the CEO of Adcock Private Equity, he was group head of financial Services at Crowe Horwath, which held over $10 billion in funds under management and was Australia’s largest SMSF provider with over 10,000 funds.

Author:

George Popescu

July 14th 2016, Daily News Digest

July 14th 2016, Daily News Digest

News Comments Dear Readers, As you are probably aware Lending Times is organizing an event in New York on Monday August 15th titled “The future of Market Place Lending – Madden and beyond”. We would like to welcome our interested readers to participate in the panel. We have 1 seat available at this time. Please […]

July 14th 2016, Daily News Digest

News Comments

  • Dear Readers,
  • As you are probably aware Lending Times is organizing an event in New York on Monday August 15th titled “The future of Market Place Lending – Madden and beyond”. We would like to welcome our interested readers to participate in the panel. We have 1 seat available at this time. Please contact us if you are interested in participating in the panel.
  • Thank you.
  • George Popescu

United States

United Kingdom

European Union

China

New Zealand

  • Lending Crowd, the 4th licensed p2p lender in NZ,  is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes.  To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans.

 

United States

Personal loans are cheap, but can I get one?, (Bankrate.com), Rated: AAA

In Bankrate’s national survey of interest rates from banks and thrifts for July 13, 2016, the rate on personal loans remained unchanged for the 4th consecutive week at 10.94%. This week’s average rate is down four-tenths of a percentage point from its 2016 high. A year ago, interest on the average personal loan was 11.12%.

There are 3 types of places where you can look for a personal loan:

  1. Banks
  2. Credit unions
  3. Finance companies (including online lenders)

As recently as a few years ago, banks dominated this space, accounting for 40% of all personal loan originations, according to the credit bureau TransUnion.

“Even though Prosper and Avant and Lending Club to a certain extent have pulled back, there are other lenders that are filling the void,” Tarkan says. “So I don’t know if there’s going to be this massive decline in availability of credit because the marketplace lending sector is contracting.”

John Ulzheimer, a credit expert who formerly worked for FICO and Equifax, says “every mainstream lender” now issues personal loans, and there are many good options, particularly for people with good credit.

To give some examples, Wells Fargo branches throughout the country offer personal loans. In Los Angeles, the nation’s second-largest bank offers personal loans for as little as 9.25%, while Houston-based Integrity Bank — with 3 southeast Texas branches — charges 9%, according to the Bankrate survey.

Global M&A, PE and VC activity declines in the first half of 2016 after reaching record highs last year, (Bureau Van Dijk), Rated: AAA

View the full report here.

Both the volume and value of global mergers and acquisitions dropped significantly over the opening half of 2016, according to information collected by Zephyr, the leading global M&A database. Over the first six months this year, only 43,352 deals were announced for a combined $1.94 trillion. This is down nearly 20% in volume and over 40% in value compared to the 53,287 deals worth $3.27 trillion in the last half of 2015, and 52,637 deals worth $2.94 trillion in the first half of 2016.

The one exception was the Middle East and North Africa, where value climbed 23% to $15.7 billion over the six-month span, despite a small dip in volume. All other regions declined over the same time frame, with the steepest drop reserved for Central and Eastern Europe, which slipped 52% from $88.45 billion in H2 2015 to $42.58 billion this year. The top-performing countries by value for H1 2016 were the US, China, the UK, Switzerland, and Canada.

The Zephyr database also showed both the volume and value of global private equity and venture capital investment followed the same pattern as M&A in H1 2016, declining in the preceding six months and year-on-year. In all, there totaled 2,651 deals worth a combined $196 billion during H1 2016, a 20% decline in volume and 47% fall in value from the final six months of 2015.

Congressional Committee Reviews Marketplace Lending, (Crowdfund Insider), Rated: AAA

Comment: a more detailed article on the hearing from July 12th, 2 days ago.

The meeting saw the participation of several industry executives including representatives from Prosper, CAN Capital, the American Bankers Association, the law firm of O’Melveny & Myer and the National Community Reinvestment Coalition. The meeting was timely as multiple regulatory agencies are moving towards applying additional regulations on online lenders – an act that may place financial innovation at risk.

The “key takeaway” offered by the Committee was that online lending may deliver access to credit to underserved or underbanked communities. For both consumers and SMEs alike. Of course, advancement by online lenders may put traditional banks under additional pressure – something the ABA representative expressed by saying regulation should be based Rob Nichols ABAon activities – in other words, banks want similar rules to apply to online lenders.

Parris Sanz from CAN Capital struggled to explain away their avoidance of using an APR and what approximately CAN Capital was charging borrowers (Ms. Levi clarified it as 36% to 60%).

A FINRA survey of US consumer financial capability, (FINRA), Rated: AAA

The US household financial picture is improving.

Financial health

  • 18% spend more than they household income, 38% spend all their household income. ( in 2009 20% spent more than their household income)
  • 21% of households have medical debt vs 26% in 2012
  • 50% of households have no rainy-day fund , also a diminishing %
  • 26% of households have used non-bank borrowing vs 28% in 2012
  • 32% of households only pay the minimum payments on their credit cards vs 40$ in 2009
  • 9% are underwater in their home equity vs 14% in 2012

Literacy

Study participants were asked five questions covering aspects of economics and finance encountered in everyday life, such as compound interest, inflation, principles relating to risk and diversification, the relationship between bond prices and interest rates, and the impact that a shorter term can have on total interest payments over the life of a mortgage.

63% of individuals got 3 of fewer basic questions correct in 2015 vs 58% in 2009

Comparison

Most Americans do not compare offers or collect information from more than one company when shopping for credit cards. This practice suggests a gap in applying financial decision-making skills to real life situations.

58% of Americans do NOT compare credit card offers before choosing a credit card to use.

 Lendio Announces Support for SMART Box Initiative Focused on Enhancing Online Lending Disclosures, (Press Release), Rated: A

Lendio (www.lendio.com), a marketplace for small business loans, announced today that it will join industry leaders as an early engagement participant in supporting the model small business lending disclosure called the SMART (Straightforward Metrics Around Rate and Total cost) Box, developed by members of the Innovative Lending Platform Association (ILPA).

The SMART Box is a voluntary initiative to promote transparency through standardized pricing comparison tools and explanations, including both various total dollar cost and annual percentage rate (APR) metrics to further empower a small business to assess and compare financing options.

JPMorgan had a blowout quarter in fixed income, and it’s big news for Wall Street, (Business Insider), Rated: A

JPM had a particularly strong quarter was fixed income, currencies, and commodities, or FICC, trading, which produced revenues of $3.96 billion — up 385% from the same quarter last year. Analysts had forecast FICC revenues of $3.57 billion, according to Bloomberg estimates. Those are the highest quarterly FICC revenues for the firm since Q1 2015 ($4.1 billion). You’d have to go back to Q1 2013 to find significantly better results ($4.8 billion).

Many firms have been cutting FICC headcount, including Deutsche Bank, Credit Suisse, Goldman Sachs, and Morgan Stanley, which cut 25% of the division last year.

“We’re investing in it,” CEO Jamie Dimon said at the bank’s investor day in February. “We’re investing in it more on the technology side.”

Now the question is whether JPMorgan was the sole firm to smash expectations or whether we’ll see comparable results across the Street in the coming days.

Jefferies in June reported trading — and fixed income — revenues that were better than normal but not by much. Goldman Sachs has previously laid out a bull case for fixed income; we’ll have a window into its FICC business when that firm reports earnings on Tuesday.

OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B

.0.0.1.2.0.1.0.0.0.0.0.0.$SideTop-0-HeadComponentTitle-Proxy.$SideTop-0-HeadComponentTitle.0">OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B

OnDeck will report financial results for the second quarter ended June 30, 2016, on Monday, August 8, 2016, after the market close.

United Kingdom

How are the alternative finance industry and the .6 trillion wealth management market approaching each other?, (City A.M.), Rated: AAA

If you use an independent financial adviser or wealth manager, they’ve probably never mentioned P2P lending.

This might seem strange: there’s been a lot of talk of how the peer-to-peer industry is “moving mainstream”, and volumes reflect that. In 2015, the online alternative finance industry in the UK grew to £3.2bn – an 84 per cent increase from 2014 – and alternative finance lending accounted for around 14 per cent of new loans to small firms.

And at the same time, institutional money has flowed readily into the sector. In the last six months, according to AltFi Data, it accounted for 40 per cent of involvement in the UK market – from almost nothing prior to 2014. But most of this money comes from specialist funds, and institutional money is notoriously fickle.

Financial advisers, however, still seem reticent. “They have always been very interested, but what’s needed is conversations. When we get them in a room and speak to them – show them our processes and due diligence – they become more positive on the space. That can give them the confidence to promote P2P lending to consumers,” says James Meekings, co-founder of Funding Circle.

Most advisers will say that, while they’re not against P2P in principle – often far from it – they want to see the sector go through a cycle before seriously considering it. As wealth management veteran John Spiers says (see below), while Zopa was around during the crisis, other major players weren’t – and 2007 and 2009 were unusual anyway because the level of bankruptcies was so low, owing to interest rates being slashed so fast.

As Spiers also points out, plenty of IFAs have been burnt in the past. Now, they have to demonstrate that they’ve done a certain amount of due diligence on each product they’re recommending and, as has always been the case, they want a fee for those recommendations. As one industry analyst bluntly puts it: “if the IFA hasn’t got a product to sell, he’s not going to recommend P2P. It comes down to whether something has a metric next to it that he can understand, then he can sell it.”

For advisers “funds are the way forward,” says Meekings. They can buy stocks, shares, and funds and manage money on behalf of clients, and their existing tools mean they can buy a fund today. “It gives them diversification and global exposure – which is important, because diversifying across platforms [which can focus on just one area, like consumer credit], rather than assets, won’t necessarily do that,” he adds.

“The industry is working to create a scoring system for returns. This should be a function of the return and the shape, i.e. volatility, of that return. If advisers can study lending performance, based on meaningful and detailed data, they can begin to perform satisfactory due diligence,” says Rupert Taylor, co-founder of AltFi Data.

The Innovative Finance Isa is already giving retail investors the opportunity to hold P2P investments in the recognizable wrapper. While many investors wait for the largest platforms to get approval from the Financial Conduct Authority (currently, only three smaller platforms have been given the okay), it has enticed big players like Hargreaves Lansdown into the ring. And it’s worth noting that investors can, even without the dedicated vehicle, populate a stocks and shares Isa or a Sipp with P2P investments.

Moreover, alternative investments heavyweight Octopus Investments launched P2P product Octopus Choice in April, enabling customers to target higher interest rates than deposit accounts, but with less risk than stocks and shares.

Head of Octopus Choice Richard Wazz says that the reception from the hundreds of financial advisers introduced to the product has been “incredibly positive. Advisers are proving themselves to be not only comfortable but excited to recommend it to large numbers of their clients – seeing it as a new and welcome way of diversifying their portfolios.”

P2P body chief denies FCA delays damaged industry, (FT Adviser), Rated: A

By the time the new Isa had launched in April, just eight out of 86 peer-to-peer lending platforms had been granted the necessary permissions to offer the savings vehicle, according to the industry body. Kevin Caley, managing director of ThinCats, said he does not expect approval to happen before the end of August, adding he guessed it “may well take quite a bit longer”.

But speaking to FTAdviser, the P2P Finance Association’s chair Christine Farnish said the delays were not such a big deal because investors’ money can be put into the Isa at any point.

“It’s just a question of a small amount of time in the overall scheme of things,” she said, adding Isas are designed to be a long-term savings product.

The delays were partly a result of the FCA being made responsible for 30,000 consumer credit firms in 2014, and Ms. Farnish said the peer-to-peer sector got “put to the back of the queue”.

AngelsDen & Funding Circle’s Alum Verto Homes Launches £1M Funding Raise on Crowdcube, (Crowdfund Insider), Rated: A

Founded in 2010 by entrepreneurs, Tom Carr and Richard Pearce, Verto Homes stated it designs, builds, and sells intelligent, sustainable homes that produce and store clean energy from the sun. The company noted that none of their homes burn fossil fuels for lighting or heat and each is featured automation technology and  is controlled by a smartphone app, called Vesta, which was launched on iTunes in 2015.  The homes are available starting at £190,000.

Verto Homes, a London-based builder that creates sustainable homes, launched an equity crowdfunding campaign on Crowdcube to raise £1 million. Within just a few hours, the initiative successfully secured 41% of its targetted goal (£415,000) from 14 investors.

European Union

Leading German Crowdfunding Platform, P2P Lender Auxmoney Powers On, (Crowdfund Insider), Rated: AAA

Germany’s leading lending marketplace AuxMoney reports continued strong growth. Loan volume increased from €39.3 million in the first half of last year to €79.5 million in the first half of 2016 ‒ an increase of more than 100%.

Founded in 2007, by Raffael Johnen, Philip Kamp, and Philipp Kriependorf, Auxmoney is Germany’s largest crowdfunding platform and Continental Europe’s second largest P2P lender after French Younited Credit – with whom it is now competing neck and neck. According to research institute GfK, Auxmoney is also the most famous FinTech firm in Germany, which does not come as a surprise given its 1.5 million registered members.

In 2015, Auxmoney’s growth was fueled by a spectacular commitment by Dutch insurance company Aegon, as an Institutional Investor, to lend €150 million through the platform. As for its own capital needs, Auxmoney is backed by top venture-capital firms such as Seven Ventures, Index Ventures, Union Square, Foundation Capital and Partech.

Since its beginnings, Auxmoney has originated €268 million worth of loans, out of which nearly two-thirds were originated in the past 18 months alone. Both the number and the size of loans are increasing: the number of loans originated increased by 69% from 6,337 in the first half of 2015 to 10,688 loans in the first half of 2016; at the same time the average loan size increased from €6,196 to €7,439, a 20% increase.

China

264 Peer to Peer Lenders Shut Down in China During First Half of 2016, (Crowdfund Insider), Rated: A

During the first six months of 2016, at least 264 peer to peer lending platforms were shut down in China. This is a direct reaction to the tightening grip of Chinese regulators. The report published in ECNS, states that even tougher oversight is in store for the P2P lending industry as authorities become more vigilant in uncovering fraud and shutting down platforms that do not qualify under Chinese rules.

China published draft rules in 2015 but like many other government initiatives it was not completely clear as to how enforcement would proceed. There have been multiple high-profile P2P platforms that have collapsed. The best known is Ezubao that was described as a Ponzi-scheme months before regulators showed up to shutter the doors. Ezubao apparently fleeced investors of over $7 billion – an incredible amount. Allegedly over 95% of the projects listed in Ezubao were faked.

As of June, there were an estimated 2,349 P2P platforms in operation in China. Chinese is the largest P2P market in the world.

New Zealand

Peer-to-peer lender Lending Crowd seeking capital to help it grow, (Interest), Rated: A

Lending Crowd is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes. Co-founder Wayne Croad, who majority owns Lending Crowd’s major shareholder Finance Direct, told interest.co.nz the P2P lender has hired Greg Anderson of Northington Partners to raise up to $5 million dollars through a capital raise.

Funds raised will be used to “assist with growing loan volume by extending marketing and product development initiatives.”

Lending Crowd became New Zealand’s fourth licensed P2P lender last year, receiving its license from the Financial Markets Authority. At the time Croad said Lending Crowd would facilitate secured loans of between $2,000 and $200,000 through its website for small and medium sized businesses, vehicles and personal loans for three and five-year terms.

To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans. He said registered non-bank deposit taker Finance Direct has participated in $900,000 of the loans on the Lending Crowd platform on equal terms with retail investors. There are 220 registered retail investors, and 165 active investors. In terms of loan security, Croad said 30% of loans are secured by cars plus a property, 50% are secured by vehicles, and 20% are secured by property only.

“The average weighted return for investors to date has been 12.50% after fees,” Croad said.

Lending Crowd has just released its first financial statements. They show fee and commission income of $18,601 up to March 31, and operating expenses of $39,748, leaving a loss of $17,450.

Author:

George Popescu