Wednesday April 4 2018, Daily News Digest

Wednesday April 4 2018, Daily News Digest

News Comments Today’s main news: OnDeck files first ABS in two years. Funding Circle opens second Denver office. LendingClub settles with Massachusetts regulator. OFF3R founder to launch personal investment assistant. China Rapid Finance reports unaudited Q4, full year results. Today’s main analysis: Strengthen your fraud prevention strategy. (A MUST-READ REPORT FROM LexisNexis) Today’s thought-provoking articles: True lender litigation is […]

Wednesday April 4 2018, Daily News Digest

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United States

United Kingdom

China

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India

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News Summary

United States

OnDeck makes ABS return (Global Capital), Rated: AAA

The lender filed documents with the Securities and Exchange Commission for the upcoming deal on Tuesday. Deutsche Bank, Credit Suisse and SunTrust are leading the deal, according to the deal documents.

OnDeck spent the last two years holding a greater percentage of its loans.

Funding Circle Expands U.S. Operations with New Office in Denver (PR NEwswire), Rated: AAA

Funding Circle today announced it is expanding its U.S. operations with a second office in Denver, Colorado. With the move Funding Circle will look to hire around 290 new employees in the Denver area over the next two years to support the company’s growth.

LendingClub settles with Mass. banking regulator for $ 2M (American Banker), Rated: AAA

LendingClub has settled with the Massachusetts banking regulator to the tune of $2 million over claims that the company made unlicensed loans in the state.

The state division of banks said that the San Francisco-based LendingClub made over 46,000 loans to Massachusetts consumers without a license since 2011, when it surrendered its small loan company license as a condition of a consent order. The division also said that it found additional unlicensed lending activity at Springstone Financial, a wholly owned subsidiary of LendingClub that has its main office in Westborough, Mass.

“True Lender” Litigation on the Rise: Recent Litigation and Enforcement Actions (JDSupra), Rated: AAA

Over the last two years the financial industry has seen an uptick in litigation and enforcement actions aimed at banks and their non-bank lending partners. These actions have primarily challenged the validity of the bank partnership model that is used by many non-bank lenders to generate consumer and small dollar business loans.

Bank and Non-Bank Lender Partnerships

Although the structure of a bank and their non-bank lending partners can take many forms, the typical relationship involves the non-bank lender identifying loan opportunities for the bank, which then originates the loan and either immediately assigns the loan to their non-bank partner or another third-party. By partnering with banks, non-bank lenders avoid certain regulatory and licensing requirements in states where their bank partners operate.  In return, banks are able to utilize their relationships with their non-bank lending partners to generate leads for additional loans.

Colorado’s Uniform Consumer Credit Code Administrator Takes Action

In January 2017, the Colorado’s Uniform Consumer Credit Code (“UCCC”) Administrator, Julie Meade, filed two substantially similar complaints in Colorado state court against Marlette Funding, LLC, and Avant of Colorado, LLC. The complaints alleged violations of the UCCC based on the theory that Marlette and Avant were the “true lender,” not their bank partners, in a series of loans made to Colorado consumers, which loans contained interest rates that exceeded Colorado’s usury laws.

Broad Reaching Implications

The CashCallMadden, and other related actions threaten the traditional bank partnership model that the financial industry relies on to originate, buy, sell, and transfer loans.

Legislative Fix Coming?

There is currently at least one bill pending in the House and Senate that, if passed, would address both the “true lender” issue and the consequences of the Madden decision.

Why It’s No Surprise That Online Lender GreenSky Would Weigh An IPO (Forbes), Rated: AAA

Now, the company is challenging a near-sacred belief in Silicon Valley these days that staying private for longer is better. GreenSky has filed confidentially for an IPO, according to 

Strengthen Your Fraud Prevention Strategy (LexisNexis), Rated: AAA

Key Findings

  • The cost of fraud is sizeable for retail, eCommerce, financial services and lending organizations. Every $1 of fraud costs organizations in these industries between $2.48 and $2.82 – that means that fraud costs them more than roughly 2 ½ times the actual loss itself. Fraud cost as a percent of revenues ranges between 1.58% and 2.39%.
  • The eCommerce, financial services and credit (rather than mortgage) lending sectors are getting hit somewhat harder.
  • The digital space, either as a transaction channel or type of good being sold, is a high risk for even more negative fraud impact. Regardless of industry segment, the percent of average monthly fraud attempts is higher for these types of organizations. For those using the online channel, this is the result of more fraudster focus on the anonymous purchasing environment, particularly leveraging the nocard-present opportunities compared to EMV chip barriers at physical points of sale.
  • Yet, digital channel / digital goods selling organizations are not fully leveraging the value of risk mitigation solutions. Identity verification remains a challenge and common type of fraud; there is only moderate use of advanced identity verification solutions among these  organizations.
  • These issues will only increase as more firms adopt the mobile channel. Larger merchants / firms tend to be the pioneers of the mobile channel.
  • Findings show that retailers, eCommerce merchants and financial services and lending firms which layer solutions by identity and fraud transaction solutions
Source: LexisNexis

Read the full report here.

U.S. Insurtech Oscar Secures $ 165 Million Through Latest Investment Round Led By Brian Singerman & Founders Fund (Crowdfund Insider), Rated: A

Oscar Health, a U.S.-based insurtech, announced last week it has raised $165 million through its latest investment round led by Brian Singerman and Founders Fund. Founded in 2013, the company stated it is focused on utilizing technology, design, and data to humanize healthcare.

5 Major Ways Banks Are Getting Disrupted (The Motley Fool), Rated: A

The peer to peer lending term is kind of a loose term nowadays. Like Michael said, a lot of the bigger banks have started to copy this business model, so it’s not exactly peers loaning to peers anymore. But, at its heart, Prosper was actually the first mover on this. A lot of people think it was Lending Club but Prosper actually got there a little bit earlier. But, Lending Club was definitely the big one that got the banking industry on its toes in terms of peer to peer lending.

Marcus by Goldman Sachs is one of the newest ones. Goldman is getting into consumer banking a little bit. On the business side, you have companies like Funding Circle, which is a really interesting concept, because business lending is a big pain in the neck, especially in certain industries.

The Lending Game: Streamlining Customer Experience (Lendit), Rated: A

Lending, much like dating, has been brought online in the past decade with the aim of streamlining the process and dramatically reducing the time spent for both parties. But as the backend systems involved become more complicated to include more data and decisioning points, how do lenders continue to create a simplified customer experience that will bring good customers back for that “second date”?

New Fintech IPO on the Horizon with GreenSky (Lend Academy), Rated: A

So who is GreenSky exactly and what do they do? We wrote about the company earlier this year when we learned of their $200 million funding round from PIMCO which made them the most valuable company in the online lending space. The company has a unique model where they partner with merchants and contractors to offer financing at the point of sale. They view themselves as more of a tech company since they do not actually lend any money. This capital light business model has likely led to much of the success they have seen. Instead of lending their own money GreenSky has relationships with about 15 banks. On the tech side, the process is paperless and all done through a mobile device.

What Borrowers Do When Payday Loans Go Away (Lend EDU), Rated: A

For South Dakota consumers, payday loans used to be available at storefronts, but since late 2016, this access and annual interest rates have been cut.

 

Although South Dakota limited payday lending, it didn’t outlaw it. And some borrowers are hitting online lending agencies found through Google searches under “payday loans”—a familiar option for South Dakota consumers, according to KELO. This alternative carries risks such as a lack of oversight and inconsistent regulation; however, this is a national issue with these lenders.

It may be too early to write off robo start-ups (Investment News), Rated: A

News that robo-adviser Wealthfront’s valuation dropped was read by many in the financial advice industry as the writing on the wall for direct-to-consumer digital advice startups.

Scott Smith, the director of advice relationships at research firm Cerulli Associates, said the stories surrounding Wealthfront are proof that the market is favoring a hybrid advice approach. While the number of people who want a purely digital advice platform could grow over time, the majority of assets are still held by people over the age of 40 who want human assistance with their financial decisions.

As for Betterment, the company says it isn’t experiencing any headwinds at all.

Why banks have trouble selling real-time payments (Tearsheet), Rated: A

Real-time payments have landed in the U.S., but banks are still figuring out how to sell them to corporate clients. BNY Mellon, U.S. Bank, Citi, JPMorgan, PNC and SunTrust are the only banks using the Clearing House’s new real-time payments system.

One challenge is simply the legacy infrastructure on which most financial services companies today are built. Companies that provide ERP systems like SAP or Oracle have built their systems in a batch processing world and need to also become real-time.

In the age of PayPal, Venmo and Square Cash, it’s easy to forget that most transactions that take place day-to-day aren’t happening in real time. They feel like they are, but they really just move money from one PayPal user’s balance to another. Moving that balance from PayPal’s banking partner to the customer’s own bank account is still a multiday process.

U.S. banks are not that far away from ubiquitous real-time payments, according to Ward, who said he thinks 90 percent of banks will have implemented real-time payments by the middle of 2019. PNC hasn’t met too many challenges itself trying to sell RTP, Ward said, but clients are still figuring out the best way to take advantage of it and whether they prioritize the needs of customers or suppliers.

MetaBank Announces Partnership with Health Credit Services to Originate Personal Healthcare Loans (Markets Insider), Rated: B

MetaBank; a wholly-owned subsidiary of Meta Financial Group, Inc. (NASDAQ: CASH) (“Meta”) today announced a new, three-year agreement with Health Credit Services (“HCS”), a technology driven, patient financing company. MetaBank will approve and originate loans for elective procedures for HCS provider offices throughout the country. HCS will work with its provider partners to market the loans, as well as provide servicing for them. Over the course of this relationship, MetaBank expects to originate at least several hundred million dollars in personal loans.

 

Amber Baldet Leaving JPMorgan Blockchain Team to Start New Venture (CoinDesk), Rated: B

Amber Baldet, who oversaw development of JPMorgan’s permissioned blockchain platform, Quorum, is leaving the financial institution, according to an internal memo sent Monday by the bank’s head of blockchain initiatives, Umar Farooq.

United Kingdom

The robo-adviser of robo-advisers (Fn London), Rated: AAA

The story of robo-advisers is an old one, or so thinks Lex Deak, serial entrepreneur and creator of a new breed of online wealth management tool. Deak, who was the brains behind the launch of peer-to-peer lending aggregator Off3r, is rolling out a new online service that he claims will bring web-based investment to the masses and “battle the bias and bullshit that has dogged the investment sector for decades”. The new service, called Personal Investment Assistant — or Your Pia — uses artificial intelligence to help investors sift through a range of robo-advisers, wealth management platforms and IFA networks.

Big names on the board
Todd Ruppert, the former president and chief executive of T Rowe Price — who is no stranger to backing fintech start-ups — is taking a seat on the Pia board. He will be joined by Daniel Sauva, head of creative and buzz at money transfer service TransferWise, and Nigel Webber, who was global chief investment officer at HSBC Private Banking. Gayle Schumacher, a Coutts executive, is taking a seat, too.

 

A new Innovative Finance Isa (IF Isa) has launched offering a whopping 7.28% annual interest rate. The easyMoney ‘Balanced’ IF Isa allows you to invest in peer-to-peer lending – where your money is lent to individuals or small businesses – within an Isa wrapper, so your returns are tax-free.

The target rate of 7.28% is a guide to what return you can expect from investing in multiple property-backed loans, all of which have a maximum 75% loan to value.

The firm offers two different IF Isas: its ‘Conservative’ IF Isa, has a 4.05% targeted annual return with a minimum investment of £1,000. It is “aimed at investors who are looking for something more than the paltry rates offered by cash ISAs”, says Mr Candole.

 

China

China Rapid Finance Reports Unaudited Fourth Quarter and Full Year 2017 Results (Benzinga), Rated: AAA

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE:XRF), operator of one of China’s largest consumer lending marketplaces, today reported its unaudited financial results for the fourth quarter and full year ended December 31, 2017.

Fourth Quarter 2017 Highlights:

  • Positive operating cash flow of $15.8 million
  • Total gross billings up 186% year-over-year
  • Facilitated 6.2 million loans with total loan volume of $1.03 billion
  • Added 627 thousand new borrowers, up 17% from the end of Q3 2017
  • Added approximately 10 thousand new investors to reach over 23 thousand investors
  • GAAP net loss of $3.9 million
  • Non-GAAP adjusted profit before income tax expense of $1.1 million

Full Year 2017 Highlights:

  • Year-end cash balance of $94.9 million, up from $74 million immediately after the IPO
  • Total gross billings up 102%
  • Added 2.9 million new borrowers, up 202% from the end of 2016
  • Facilitated over 23 million loans with total loan volume of $3.3 billion

Chinese P2P lenders get confidence boost with protection plan (Enterprise Innovation), Rated: AAA

China’s marketplace lending is bracing for regulation around “record filing” systems that kicks into effect this month (April 2018). However, said new regulations may not be addressing altogether the problem of runaway credit that is growing on the back of cash loans and microlending market.

Source: Enterprise Innovation

Technological Innovation and Anti-Fraud Technology in a Maturing Fintech Sector (Lendit), Rated: A

The current most prominent methods of financial fraud are organized fraud, regional fraud, and targeted-occupation fraud. Various criminal and fraudulent organizations, including organizations developing illegal software, hacking databases for sale, and batch registration, have been working together to increase profits. However, their golden times are over now.

An insider once commented, “Certain P2P platforms only have a user retention rate of 20% following promotional events due to malicious users while the remaining 80% became inactive. Platforms spend a lot of money on marketing which has directly led to continually rising costs in customer acquisition.”

  1. Hexindai’s risk control technology has laid a solid foundation for anti-fraud progress
  2. Introducing new technologies to enhance anti-fraud capabilities

 

International

HSBC partners with FinTech and asset managers for cloud-based data platform (Global Custodian), Rated: A

HSBC Securities Services has partnered with FinTech firm FINBOURNE, asset manager Fidelity International and hedge fund Altana Wealth to design a new cloud-based investment management platform.

The four organisations will collaborate to design a shared, cloud-based data utility that aims to reduce operating cost and improve the quality of information for in-house and client use.

The platform, named LUSID, is aimed at replacing existing in-house software and hardware, and achieve advanced standards of data handling for institutional clients.

 

Australia

SME lender gives insight on changing landscape (Broker News), Rated: AAA

Small business lender OnDeck Group is hosting an event centred on SMEs and the changing lending landscape in Australia.

Taking place on 17 April, CEO Noah Breslow, will host a select group of brokers, aggregators and finance partners, with special guest Stephen Koukoulas, Managing Director of Market Economics, and Economic Advisor to illion (formerly Dun & Bradstreet).

OnDeck has now loaned over $8 billion to 80,000 small businesses across the United States, Canada and Australia, making it one of the largest online SME lenders globally.

India

Cryptocurrency-backed Lending Startup BlockFi Eyeing Indian Market, CEO Reveals in Interview (Crypto-News), Rated: AAA

Borrowing against cryptocurrencies is becoming a big new trend in the industry. A number of startups have sprung in crypto-backed lending space, which include SALT, CoinLoan, Ethlend, Unchained Capital and most recently Nuo Bank. Now a new startup with similar offering is eyeing the Indian market from New York. The startup, called BlockFi, offers cryptocurrency backed loans to individuals and companies both in 35 states of USA as of now. However, it’s planning to expand internationally very soon, and in that expansion it sees India as a major opportunity. This was revealed by none other than company’s CEO Zac Prince in a recent interview to Bitcoin Magazine.

SME loans marketplace Namaste Credit raises $ 3.8 million (Fortune), Rated: AAA

Namaste Credit, a digital marketplace and technology platform for SME loans, has raised $3.8 million in a Series A investment round from Nexus Venture Partners.

The company intends to use the corpus raised to grow its geographic footprint, enhance its technology and data analytics platform, and further scale its business.  The company also plans to significantly increase its channel partner program across India and further expand its technology licensing partnerships with lenders globally.

 

 

Namaste Credit raises $ 3.8 million from Nexus Venture Partners (LiveMint), Rated: A

Owned by Delhi-based Opendoors Fintech Pvt Ltd, Namaste Credit is a digital platform which serves as a marketplace for borrowers and lenders. It focuses exclusively on small and medium enterprise (SME) customers.

“SME credit is seriously constrained due to lack of reach and relevant data to assess credit-worthiness of borrowers. Namaste Credit’s technology, combined with its channel partners and lender network, is already making a significant impact on facilitating credit to SMEs in a win-win manner for all,” said Anup Gupta, managing director at Nexus Venture Partners, in a statement.

Asia

3 Fintech Companies Answers Jokowi`s Challenge on Student Loans (Tempo.Co), Rated: A

Last month, state-owned banks was not up for President Joko Widodo’s (Jokowi) challenge to provide students with the option of student loans. However, companies of Fintech (technology-based financial services providers) responded positively to the president’s challenge.

Danacita and Koinworks are Fintech peer-to-peer lending companies that focus on funding the education sector. Meanwhile, Danadidik is an academic funds provider that is on crowdfunding as its main financial backing.

The three platforms also provide a long-term loan for university students with a tenor from four to six years. Each of these companies applies varying methods of repayments from 9 percent- 20 percent low installments up to profit sharing a student’s wage once they have found jobs.

Authors:

George Popescu
Allen Taylor

Friday August 25 2017, Daily News Digest

alternative investing

News Comments Today’s main news: Ellevest raises $32M to target women investors. eOriginal, Notarize close first digital mortgage closing. OFF3R launches SIPPS portal. Zopa reduces higher-risk lending. China issues draft rules on illegal fundraising. TWINO adds second Russian originator. African university to offer fintech degree. Today’s main analysis: Should P2P lending investors worry about default rates?Early-stage fintech investment in UK, Germany. Today’s […]

alternative investing

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United States

Wall Street alum Sallie Krawcheck just raised $ 32 million for her investing platform (Business Insider), Rated: AAA

But the uncertainty and risk that comes with the markets is very often a major deterrent, especially for women, who invest at a much lower rate than men in the US.

To combat this, former Wall Street executive Sallie Krawcheck launched Ellevest in 2016, a digital investing platform that puts female investors’ money in low-cost ETFs based on a pick-and-choose set of goals, like starting a business, buying a home, having children, and retiring comfortably.

This week, the startup raised $32.5 million in its latest round of funding, according to CNBC. Tennis superstar Venus Williams, who is a champion of equal pay and opportunity for women both on and off the court, was among Ellevest’s first investors.

Just 28% of women are willing to take on high risk to get a good return on their investment, compared to 45% of men, according to a 2015 report by BlackRock.

Man finds it can be hard to return $ 6,000 (WoodTV), Rated: AAA

When 53-year-old Wyoming resident Duane La Varier found $6,180 had mysteriously appeared in his bank account, he never dreamed how hard it could be just trying to give money away.

He said he and his wife never filled out any applications and never sought any kind of loan.

The deposit a week ago had come from a company called LendingClub.

“I said, ‘I did not apply for this loan. Just take it back, just take it all out of my account.’ They said no.”

LendingClub is not the actual lender — it represents lenders — but Dudum said the company will take the hit for the $6,000 loan and its fees.

eOriginal and Notarize Make Digital Mortgage the New Reality (Broadway World), Rated: AAA

With its launch of Notarize for Mortgage, the company’s proprietary signing and remote notarization platform, Notarize recently completed the first-ever online mortgage closing. By integrating directly with eOriginal’s electronic vault, they enable lenders to leverage a joint solution that takes only a few short days to set up and launch before borrowers can start closing loans online. Together, Notarize and eOriginal allow lenders to quickly provide a seamless digital experience spanning the entire closing process all the way through registration with MERS (Mortgage Electronic Registration System, Inc.) and sale into the secondary market.

Connecting lenders, title agents, borrowers and notaries online 24 x 7 to digitize the closing process, the Notarize for Mortgage platform is approved by both Fannie Mae and Freddie Mac, underwritten by national title underwriters, and was launched with five lender customers and numerous warehouse lender and mortgage servicer partners. The platform is available to lenders online or via modern APIs that allow them to integrate an online closing process directly into their existing tools, automating their closing operations entirely.

eOriginal’s platform of integrated solutions delivers a fully digital mortgage and supports every type of digital closing strategy.

TRANSPARENCY IN ALTERNATIVE INVESTING (All About Alpha), Rated: AAA

In February of this year, the Economist Intelligence Unit surveyed 200 senior asset managers and institutional investor executives to learn what factors are most important in the way they make their decisions. Several different types of institution were involved, including hedge funds, private equity firms, insurance companies, and nonprofits.

New Business Models – and Transparency

The 2008 global financial crisis of course had a negative impact on the alternative investments industry.

New business models have arisen to supply demand across the spectrum of investors, including those investors eligible for and interested in alternatives. Publicly traded limited partners are one important example.

Who will win the robo advisor IPO race? (Financial-Planning), Rated: AAA

It’s been a decade since the launch of the industry’s leading independent digital advice platforms — Betterment, Wealthfront and Personal Capital.

The question that now remains for all three: who will cross the IPO finish line first?

In terms of assets, the trio has kept their positions in the market respectively, with Betterment leading all independents with over $10 billion in AUM, followed by Wealthfront’s $7.4 billion and Personal Capital’s $4.9 billion.

Collectively, the three count just over 420,000 clients and over 548,000 accounts, according to SEC filings and company statements.

Personal Capital, which always tailored its services for HNW clients before lowering its account minimums (and then raising them up again) claims its average client account size is roughly $380,000; users with more than $1 million in investable assets, the company says, comprise about 40% of its AUM.

Source: Financial-Planning.com

Online Lenders Featured in the Inc. 5000 (Lend Academy), Rated: A

Every year Inc. pulls together a list of the top 5000 fastest growing private companies in the United States. This year there were around 250 companies that made it in the financial services category and there are several familiar names on the list.

Other lenders readers may recognize are Lighter Capital (634), FastPay (1653), National Funding (2030), and ZestFinance (2202).

How Debit Activity Can Benefit Lenders in a Cashless Society (Clarity Services), Rated: A

With nearly half the American population carrying a subprime credit score, rent-to-own companies, online installment, storefronts and others are embracing new tools to intelligently navigate a market that has been largely overlooked.

  • Cash is only 14 percent of the share of transactions by value of payments (The Federal Reserve System Cash Product Office).
  • While the average American spends roughly $100 per day – not counting the purchase of a home, motor vehicle or normal household bills (Gallop), half of us are walking around with less than $20 cash (Bankrate.com).
  • If given the choice between a cashless and cash-only shop, most consumers in the wealthiest countries prefer the cashless option (ING Group/eZonomics).
  • Nearly 40 percent of Americans said that they would be happy to go completely without cash. (ING Group/eZonomics).

The top 7 startups from Y Combinator S’17 Demo Day 2 (TechCrunch), Rated: A

Standard Cognition is using machine vision to build the checkout of the future. Called autonomous checkout, the technology will allow shoppers to grab what they want and walk out of a store without having to go to a cashier. Standard Cognition believes it tech will enable those companies to save money and reduce theft.

Dharma Labs is building what it calls the first “protocol for debt on blockchains.” Citing the popularity of ICOs, the startup believes there’s a “proven demand for cryptoassets that look and act much like equity.” So Dharma has built a mechanism for decentralized peer-to-peer lending. “Anyone in the world can borrow and anyone in the world can lend.”

Emailage Raises $ 10m in Growth Equity Funding (Finsmes), Rated: A

Emailage, a Chandler, AZ-based provider of global fraud prevention and identity verification using email address scoring, raised $10m in growth equity funding.

The round was led by Anthos Capital, with participation from Radian Capital, Wipro Ventures, Mucker Capital and Tallwave Capital.

The company intends to use the funds to expand existing partnerships, further advance its email address-based predictive scoring system, and accelerate growth in North America, EMEA, LATAM and other key markets.

How to Expand Your Business Online by Offering More Products or Services (Kabbage), Rated: A

Hopefully, increased revenues will help ease cash flow problems and in the end, improve profits. Other advantages of growing business may include the chance to bring in more qualified employees, acquiring more customers and improving credit scores.

Expand service areas

Companies that provide services to homes or other businesses may find that their hometown or neighborhood has a limited customer base.

Expanding to nearby locations is one of the most common ways that local businesses grow into regional businesses. This also allows the company to add some more geographic areas to a business website, directories, and social pages to show up in more local searches.

Expand services

Most small business owners have to work to manage cash flow, and this task is much tougher when revenues are only high for a few months but operational costs last all year.

These are some ways to expand services both offline and online:

  • One good way to promote this kind of service online could be through holding webinars with tax tips for small businesses or even individuals. Some tax preparers might also produce books or videos for sale to help startups and small businesses manage tax planning better.
  • Some of these plucky entrepreneurs have learned to keep business flowing by offering holiday specials for getaways. Others have opened their facilities up to host seminars or workshops for organizations.
  • He kept his local business website to attract repair customers, but he also added an online store to sell products to the DIY crowd all over the country. He promoted this online store by creating some how-to videos.

This credit card alternative could be bad for your wallet (WSBTV.com), Rated: B

The problem is that these instant loans encourage impulse spending — and it doesn’t have to be a pricey vacation! Affirm will spread payments over a period of 12 months for loans of $100 or more.

To put that in perspective, you could easily pay more than $15 in interest on just a $100 loan!

LENDINGCLUB INVESTOR REVIEW: THE BEST PEER TO PEER LENDING SOLUTION (The College Investor), Rated: B

Over the last 8 years, 150,000 investors have lent over $26 Billion in personal loans through the peer to peer LendingClub platfrom. On average, investors in the top grade loans earned 5-7% annualized with strong cash flow.

As an added bonus, LendingClub allows you to invest as little as $25 per note. That means it’s easy to spread your risk across dozens or even hundreds of loans.

First, you need to meet some strict investor requirements.

  •  Income requirements: Must earn $70,000 annually ($85,000 in California)
  • Net Worth Requirements: Must have a net worth (exclusive of your home value) of $70,000 ($85,000 in California). People with a $250,000 net worth do not have to abide by the income requirements ($200,000 in California).
  •  Kentucky residents must be accredited investors (earn $200,000 annually or have a net worth of $1 million)
  •  Residents of Alaska, New Mexico, North Carolina, Ohio, Pennsylvania cannot invest in LendingClub
  •  No more than 10% of your net worth can be investing in lending club notes
  •  $1,000 minimum investment

LendingClub charges $100 per year for their self directed IRA accounts, but they waive that if you maintain $5,000 of investments in your first year or $10,000 in subsequent years.

Once you select your loans, LendingClub will help you evaluate the risk on your portfolio of loans. They will even provide a projected rate of returns based off of history.

Source: The College Investor

TD Auto Monitors Fintech Startups (Auto Finance News), Rated: B

TD Auto Finance is keeping a close eye on fintech startups as it evaluates “opportunities that might exist” for auto refinance and private-party transactions, President and Chief Executive Andrew Stuart told Auto Finance News.

TD Auto is already “in discussions” with several fintech players to evaluate “where that might go,” Stuart said.

5 Things To Know Before Taking A Loan Online (ValueWalk), Rated: B

If you’ve considered taking a personal loan online here’s what you need to know:

  1. More accessible – Smaller, newer financial firms have stepped in to fill the gaps left behind by traditional banks since the crisis.
  2. Tailored products – You can tailor the specifics of the loan, such as the timeline for payback and the purpose of the loan. Businesses can use everything from inventory to invoices without the need for a personal guarantee.
  3. Pricing Variety – Whether the payments are amortized monthly or weekly. Whether the effective annual rate is as attractive as you expected.
  4. Less Regulation – Alternative lenders and online loan providers are not regulated by the FDIC the same way as traditional banks.
  5. More awareness – The lack of regulation means alternative online lenders have more flexibility to provide custom lending solutions. They can be as innovative as they want with these financial products. However, you need to be more careful when dealing with an online lender. Look into their history, get assurances from the company, and do your best to educate yourself about their business.
United Kingdom

OFF3R launches new SIPPS portal (P2P Finance News), Rated: AAA

OFF3R has launched a new channel dedicated to Self Invested Personal Pensions (SIPPs), the tax-free vehicle for pension savings.

The investment aggregator’s SIPPs portal launched on Tuesday 22 August with an initial list of three pension providers: Hargreaves Lansdown, IG, and True Potential Investor. It details the various fees and investment thresholds of each platform, as well as information on the different management styles.

Zopa reduces higher-risk lending (Bridging and Commercial), Rated: AAA

Zopa has revealed it is taking steps to attract more lower-risk customers as it continues its reduction in higher-risk lending.

Zopa has reduced the amount of lending in its higher return D-E markets, which are included in its Plus product.

The Plus product was designed for investors who were willing to accept more risk for higher returns, with rates of between 6-7%.

Zopa expects that the lower-risk approach will mean the targeted returns for new investments in the Plus product will be 4.5%.

“For example, the proportion of D and E loans in the Plus product would go from 30% until now, to 10-15% in the future.”

Peer-to-peer lending: should you worry about default rates? (Your Money), Rated: AAA

Neil Faulkner, managing director of peer-to-peer research and ratings agency 4thWay, explains that investors should pay close attention to published bad-debt figures (which cover loan write-offs as well as simple defaults) of the different platforms.

Zopa

When a loan is approved, Zopa makes an assumption about its likelihood of falling into default over the lifetime of the loan, and then revises this default expectation over the lifetime of the loan.

Source: YourMoney.com

Zopa divides up investor money between many borrowers matching the risk profile specified at the outset by the investor, to spread the risk. If a borrower misses four months of repayments, then a recovery process begins.

RateSetter

The headline rate to note is that over its lifetime, 98.31% of loans are up-to-date – in order words, around 1.7% are in some form of arrears.

Funding Circle

Funding Circle is a little different in that you are lending to businesses rather than people. Over the lifetime of the site, it says that around 2% of loans have turned bad.

Lending Works

To date, Lending Works has an actual bad debt rate of 1.1%.

Assetz Capital Update: Investors Have Earned £25 Million to Date (Crowdfund Insider), Rated: A

Assetz Capital has shared that investors in aggregate have earned gross returns of more than £25 million on their investments in approximately four years. Assetz Capital says lenders earned an average of 8% gross interest across all Assetz Capital loans since platform launch, before allowances for tax or any losses not covered by a provision fund.

Currently, Assetz Capital has about 20,000 registered and active investors. The returns since the launch of the platform were generated from over £309 million lent to UK businesses from a range of industries looking to raise funds, including SME, bridging and development sectors.

ThinCats plans staggered IFISA roll-out before end of 2017 (P2P Finance News), Rated: A

Earlier this month, ThinCats received full authorisation from the Financial Conduct Authority (FCA), which allowed the firm to apply for ISA manager status from the HMRC. While a launch date has not been officially set, Stewart Cazier, head of retail, told Peer2Peer Finance News: “I’m definitely thinking 2017. I’d be very disappointed if it didn’t happen this year.”

Innovate Finance CEO steps down (AltFi), Rated: B

After two and half years at the helm of the fintech member association, Innovate Finance, Lawrence Wintermeyer has stepped down.

Wintermeyer is leaving to pursue other opportunities, he said.

China

China issues draft rules in crackdown on illegal fundraising (Reuters), Rated: AAA

China issued draft rules targeting illegal fundraising on Thursday, as the authorities step up a campaign to crack down on risky and illicit behavior in the country’s financial sector.

The draft rules, issued by the law office of China’s State Council, call for participants engaged in illegal fundraising to cover the losses stemming from those activities.

Regulators will guide financial institutions and non-bank payment service providers on tightening up their supervision of suspicious fund flows, the draft rules said.

Financial institutions and non-bank payment service providers, if found to be negligent, will be subject to having their illegal income forfeited. They will also be subject to a fine of more than 1 time but less than five times of the illegal income, the draft rules said.

The executives responsible for the illegal activity will be removed and banned from entering the financial industry for a certain period of time and could be subject to fines of between 50,000 yuan and 500,000 yuan each ($7,507-$75,072), the rules said.

China Rapid Finance Posted a $ 13.5M Net Loss in Q2, but Very Close to Profitability (Xing Ping She), Rated: A

Recently, China Rapid Finance (NYSE:XRF) released an unaudited financial report for the second quarter of 2017. In the second quarter, the company reported a gross income of $24.5 million, up 59% from a year earlier, and their net income was $15.2 million, up 9 percent year on year. The company posted a net loss of $13.5 million in the second quarter, compared with $5.9 million in the same period last year, as the cost of including customer incentives increased.

However, the company still held the “Low and Grow” business strategy. Compared to the profitability, there are more concerned about gross income. Through analysis of the company’s financial and business data, we can find that some business data is changing and the potential for profit is increasing.

Better Buy: SINA vs. Weibo (The Motley Fool), Rated: A

Chinese internet companies SINA (NASDAQ:SINA) and Weibo(NASDAQ:WB) are closely tied to each other. SINA holds a 46% stake in Weibo, deriving 72% of its top line from the Chinese Twitter clone (as Weibo is referred to by some).

Weibo’s greater gains have made it more expensive with a trailing price-to-earnings (P/E) ratio of 132 as compared to SINA’s 30.

SINA relies on Weibo for 70% of its revenue, which means that investors can still enjoy the latter’s rapid growth via a stock with a lower valuation. Additionally, SINA’s non-Weibo business has started gaining some traction of late, with the company witnessing 8% year-over-year growth from this segment in the latest quarter.

While there is no denying that Weibo’s growth is still impressive — as the 28% year-over-year jump in its monthly active users boosted its advertising revenue by 72% last quarter — at the same time, there will be a limit to the company’s growth given its negligible presence outside China and the competition from the likes of Tencent‘s (NASDAQOTH:TCEHY) WeChat.

Fluid Wins LendIt Choice Award – Aug 2017 (FluidFi), Rated: B

Fluid, a California based FinTech & AdTech startup announces today that it received LendIt LangDi Fintech Choice Award from LendIt Conference in Shanghai, China.

European Union

Latvian P2P Lender TWINO Adds Second Russian Originator (Crowdfund Insider), Rated: AAA

Latvian peer-to-peer lending platform TWINO has reportedly added a second Russian originator to its platform since its December 2016 launch.

According to P2P Finance News, over 40% of TWINO’s investors have funded Russian loans.

Early-Stage Fintech Investment In The UK & Germany Goes To Insurtech, Banking (CB Insights), Rated: AAA

Year-to-date, European fintech companies have raised close to $2.6B across 295 deals, meaning that at the current run rate 2017 could see 500 deals and $4.5B in total funding by year end. For perspective, funding to European fintech companies is already 30% higher in 2017 YTD than the 2016 total.

 

UNITED KINGDOM

UK early-stage fintech financing has remained above 15 deals quarterly since Q2’14. Total disclosed funding has been a bit choppier: at $27M, Q4’16 was the lowest quarter since Q2’14, while the following quarter (Q1’17) saw the third-highest total funding at $81M and the largest number of deals at 33. Most recently, Q2’17 figures fell to $41M across 16 deals.

For example, Monese, which provides banking services for immigrants and expats, raised a $10M Series A in Q1’17, while Wirex, which allows for the holding of fiat currencies and cryptocurrencies in a single account on its personal banking platform, raised a $3M Series A in the same quarter.

Insurance is trending up across Europe at large, with more than 20 early-stage deals closing for approximately $50M year-to-date.

GERMANY

Funding hit its peak in 2016 as well, at $135M, well above the previous high-water mark of $46M in 2013 and more than 4X the $31M total for 2015. 2017 is on pace to surpass 2016 early-stage fintech financing figures, with 22 deals and $83M year-to-date.

Germany has also seen an increase in early-stage deals to small business banking and API-focused mobile banking platforms. Financing rounds to this group have increased steadily since 2015, which saw 5 deals close for $17M and was followed by 7 deals in 2016 (for a much smaller $6M).

Klarna (Hortonworks), Rated: A

Klarna uses Hortonworks Data Platform (HDP) and Hortonworks DataFlow (HDF) to help drive its deep data mining and AI, and to thus mitigate risk for buyers and sellers.

International

San Francisco and Berlin have new competition for the capital of ‘fintech’ (CNBC), Rated: AAA

Dubai has seen a surge of interest from fintech startups and banking assets over the last three years, according to the emirate’s financial center’s management body.

It’s fast becoming a destination for financial technology startups because of its location, private investment and innovation.

He told CNBC that the financial services industry contributes about 12 percent to Dubai’s total gross domestic product and it is expected to increase to 18 percent by 2024.

Increased appetite for fintech investment in Dubai from CNBC.

AXIS Capital Partners with Plug and Play Tech Center (BusinessWire), Rated: A

AXIS Capital Holdings Limited and its operating subsidiaries (“AXIS Capital”) (NYSE:AXS) today announced it has partnered with Plug and Play, a global digital startup innovation platform headquartered in Silicon Valley. By joining Plug and Play’s InsurTech platform, AXIS will gain access to world-class digital insurance startups and will provide mentorship and technical support, along with underwriting and actuarial expertise, to help turn their ideas into products or services.

To help address the rapid and transformative changes underway within the (re)insurance industry, AXIS will work with property and casualty, life/health and general InsurTech startups that have been accepted to Plug and Play’s InsurTech program. This 12-week program attracts applications from hundreds of startups from around the world that utilize technology, data and analytics to develop innovative new business models, products and services.

AXIS will focus on the areas of Insurance, Reinsurance, Health, IoT (Internet of Things), FinTech and Mobility, with leaders from different business areas serving as program mentors and technical advisors.

Australia

Digital advice embraced by all ages (Financial Standard), Rated: AAA

Superannuation fund member engagement via Decimal’s digital financial advice software increased 37% in the past year, latest quarterly statistics show.

Decimal’s digital insights report for the June quarter shows 2366 members in its superannuation client base decided to engage with super via the digital advice channel over a 12 month period, up from 1731 the year prior.

Total funds under advice increased to $8.4 billion, up 72% year-on-year, and Decimal Software chief executive Nick Pollock said compound growth is stimulating for the super sector.

“The insights show that 43% of all logins were by women, 28% of logins took place outside of business hours, with 31% of those logins happening between 10pm and 6am,” Pollock said.

Australian fintech launches industry census (AltFi), Rated: A

Australian fintech has launched an expanded industry census, which will seek to unpack key issues like how to expand overseas and gender diversity and help set lobbying and policy priorities.

Working on the census, consultancy firm EY, and industry group FinTech Australia, have asked Aussie fintechs to complete it by 3 September.

FinTech Australia Reveals Initial Speaker Line Up for Inaugural Fintech Fest (Crowdfund Insider), Rated: B

FinTech Australia and Next Money, along with the State Government of Victoria, a gearing up for their inaugural week long Fintech event –  Intersekt. The Fintech festival will be taking place in Melbourne, Australia from October 27 to November 3rd if you happen to be in Australia.

Confirmed speakers for Intersekt so far include:

  • Anthony Thomson, founder of the UK’s Metro and Atom Banks (and the current chairman of Atom Bank). Atom Bank is one of the leading UK Challenger banks.
  • Ron Suber, called the “godfather of Fintech” due to his globe-trotting reputation for promoting online lending and all things Fintech. Suber recently joined the leadership team at Credible, the multi-lender marketplace for student loans. Suber is also President Emeritus of Prosper Marketplace and holds a broad portfolio of Fintech investments.
  • Megan Caywood, chief platform officer for the UK’s mobile only Starling Bank, who has delivered a range of major customer experience improvements.
  • David Birch, an international thought leader in digital identity and digital money and author of “Before Babylon, Beyond Bitcoin”
  • Van Le, who is the co-founder of Xinja, which is on track to be Australia’s first independent, 100% digital bank made for mobile.
    Lucy Liu, co-founder and chief operating officer of Melbourne-based payments company Airwallex who was this year named as one of Forbes’ 30 Under 30
  • Emma Weston, CEO and co-founder of AgriDigital, which provides a blockchain-enabled, integrated commodity management solution for the global grains industry
India

Over 40% Indians act on financial advice given by spouse, RBI report shows (Zeebiz), Rated: AAA

Key Highlights:

  • Over 50% Indians think that their children will take care of them financially after retirement
  • 44% Indians do not think they will ever retire from work 
  • An average of 66% of randomly selected adult household members have a bank account.
Source: Zeebiz

The report found that the average Indian household holds 84% of its wealth in real estate and other physical goods, 11% in gold and the residual 5% in financial assets.

Source: Zeebiz

The report said that 44% Indians have not thought of retirement as “people like me cannot retire from work,” they said.

Only 13% people surveyed were actively saving for their retirement while 33% had absolutely no planning for retirement.

Only around 5% people had money invested in financial assets for their retirement planning while gold formed nearly 10% of this fund.

India’s Domestic Workers Have A New Ally In This Innovative FinTech Startup (Forbes), Rated: A

The team at SERV’D has a simple but ambitious goal: to organize India’s unorganized domestic workforce. That means bringing financial inclusion to millions of unregistered workers via a mobile contract and payment app.

The lack of written contracts also makes it difficult for low-income domestic workers to build a financial history. Without that, they struggle to save money or obtain insurance, which all but guarantees they will remain in poverty. Exclusion from formal financial services bars people from accessing health insurance, bank accounts, and can even inhibit them from finding affordable housing.

SERV’D seeks to replace the verbal work agreements made between customers and their hired help. Instead of tenuous oral contracts, the fintech startup wants employers and employees to create digital agreements on the SERV’D app. The platform also allows them to make digital payment transfers so neither party has to worry about dealing with cash.

Most importantly, the online payment trail creates traceable income records for poor, unbanked workers. With enough proof of income built up, they will eventually be able to open bank accounts and access financial products that are currently beyond reach.

Ezetap’s fresh funds are the latest VC dollars flowing to Indian fintech (PitchBook), Rated: A

Mobile payments startup Ezetap is the latest Indian fintech company to pull in new equity financing. The company has raised $16 million from investors including JS Capital Management, Social Capital and Horizons Ventures.

Fintech NBFC “Prest Loans” Forays Its Operations In Rajasthan (BusinessWorld), Rated: B

Prest Loans the new age FinTech NBFC, providing online loans to small businesses and MSME segment has expanded its operations by opening new office in Rajasthan.

Asia

LATTICE80 & FINOLAB Sign MOU on Fintech (Crowdfund Insider), Rated: AAA

LATTICE80, a Singapore based non profit Fintech hub backed by Marvelstone Group, has signed a Memorandum of Understanding (MOU) with FINOLAB in Japan to mutually boost their Fintech ecosystems and global networks. Marvelstone is a global VC group based in Singapore.

This Fintech bridge will seek to create a passporting system for Fintech’s in each country to expand into new markets.

PH startups urged: Aspire to be unicorns (Cebu Daily News), Rated: AAA

Aldo Carrascoso, founder and chief executive officer of GlycoProX Biosciences, Veem, and Jukin Media & Verego, said that focusing on becoming “unicorns” detracts the purpose of why people launch startups in the first place.

Lee argued that the first unicorns were founded in the 1990s, Google Inc. being the clear “super unicorn” of the group with a valuation of more than $100 billion. Many unicorns were also born in the 2000s, although Facebook Inc. is the decade’s only super unicorn.

Other prominent unicorns today include Uber, Airbnb, Dropbox, Spotify, Pinterest, and Lazada, to name a few.

Treading the path toward that level takes mindfulness of revenue, a good business model, addressable market, and a product-market fit, said Carrascoso.

Benjamin cited Xoom, a San Francisco-based digital money transfer or remittance provider, which traces its foundations to serving clients between the Philippines and the US.

Since then the company has expanded to India and Mexico, among others, and was bought by PayPal for $890 million. Today, they do $9.1 billion in money transmissions and are operating in 18 countries with a demand for money remittance services.

The search for a unicorn is on (Sunstar), Rated: A

THE Philippines may have its own “tech unicorns” or technology businesses valued at $1 billion in the future. But experts says more work and collaboration is needed to achieve this dream.

To date, no Philippine tech startup has managed to meet the goal of being a billion-dollar company.

Globally, the US and China lead in numbers, having produced the most number of unicorns like Facebook, Uber, Airbnb as well as Xiaomi and Alibaba. Meanwhile, Malaysia in Southeast Asia has produced two unicorns in Grab and the Lazada Group.

First, he said Philippine startups need to know how to be fundable. Instead of aiming to be a unicorn, he advised local startups to become a “cockroach” instead, one that characterizes strong survival skills, or a rhino, “big and realistic.”

Getting payments to pay off (The Edge Markets), Rated: A

“A key advantage of e-wallets is the low cost. You can make payments and transfer money at much cheaper rates than in conventional payment systems,” explains Gunther Zhen, the founder and CEO of iPayLinks Financial Information Service (Shanghai) Co Ltd.

For China, this is certainly the case. While incumbent payment systems that rely on Visa, Mastercard and UnionPay charge merchants an estimated 2.5% to 3% MDR (merchant discount rate), new rivals like Alipay charge between 0.7% and 1.2%.

In Malaysia, however, the landscape could be different as the current MDRs are already quite low. Bank Negara Malaysia’s Payment Card Reform Framework has slashed the MDR on debit and credit cards since July 2015 when it took effect.

Today, domestic debit cards have an MDR of only 0.56% while for international debit cards, it is 0.96%. Credit cards are still relatively expensive with an MDR of 1.35%, but that is expected to drop drastically by 2021 when Bank Negara will cap interchange fees (the largest component of MDR) at 0.48% — less than half the 1.1% ceiling imposed today.

Just look at Touch ’n Go Sdn Bhd, which booked RM15.3 million of interest income in 2015 on RM429.3 million worth of deposits in card balances. And this is merely from the relatively small balance in each card.

Alipay creation, Yu’E Bao, is one of China’s most popular internet-based funds. It had amassed RMB1.43 trillion as at end-June. By comparison, Bank of China, one of the four major commercial banks in the country, had total deposits of RMB1.6 trillion as at end-2016.

Pundi-Pundi Raises $ 4M in Pre-A Funding (Finsmes), Rated: A

Pundi-Pundi, a Jakarta, Indonesia-based mobile payments and micro-loan startup aiming to create a cashless environment in South East Asia, closed a $4M pre-A round of funding.

Africa

UCT to offer fintech-focused degree from 2018 (BusinessDay), Rated: AAA

The University of Cape Town (UCT) has become one of the first tertiary institutions in Africa to offer a degree specifically designed to equip students with the critical skills and knowledge to embrace the technological revolution in the financial services sector.

One of its key focus areas will be blockchain technology, or the distributed ledger system, that has given rise to new crypto-currencies such as bitcoin and ether.

The crypto-currency market is reportedly now worth more than $50bn and the use of virtual currencies is gaining traction in SA.

UCT has sought to tackle this problem by offering a new master’s degree in data science with a specialisation in financial technology, said Georg, who is also the course convener. The programme is due to commence in 2018.

Authors:

George Popescu
Allen Taylor

Wednesday July 19 2017, Daily News Digest

UK financial services

News Comments Today’s main news: Goldman’s traders have worst first half of Blankfein’s reign. RateSetter hit hard by struggling loans. RateSetter offers investors free sell out option. LandlordInvest hits 1M GBP lending milestone. Revolut offers free personal accounts for Europeans. Today’s main analysis: Goldman has worst first half in Blankfein era. Today’s thought-provoking articles: 35 institutional investors raise stakes in Yirendai. A […]

UK financial services

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Africa

News Summary

United States

Goldman’s Traders Turn In Worst First Half of Blankfein’s Reign (Bloomberg), Rated: AAA

Goldman Sachs Group Inc. traders turned in their worst first-half performance since Lloyd Blankfein rose from that business to become chief executive officer in 2006.

Investment-banking revenue fell 3 percent to $1.73 billion from a year earlier, better than the $1.59 billion prediction. Investment management as well as the Investing and Lending business also surpassed expectations.

35 INSTITUTIONAL INVESTORS ARE RAISING STAKES IN YIRENDAI LTD. (YRD) (Post Analyst), Rated: AAA

(NYSE:YRD) enjoyed a 74.75% run-up in share price since hitting record low of $18.3. The stock managed 3.53% rise and now stands at $31.98 as of July 17, 2017.

Institutional investors currently hold around $143 million or 7.7% in YRD stock.

Yirendai Ltd. 13F Filings

At the end of Mar reporting period, 35 institutional holders increased their position in Yirendai Ltd. (NYSE:YRD) by some 1,343,454 shares, 22 decreased positions by 2,144,331 and 5 held positions by 1,150,551. That puts total institutional holdings at 4,638,336 shares, according to SEC filings. The stock grabbed 21 new institutional investments totaling 973,854 shares while 12 institutional investors sold out their entire positions totaling 1,445,115 shares.

For Millennials, It’s Hip To Have A Traditional Bank (PYMNTS), Rated: A

In a survey held from the end of June into early July and conducted by SurveyMonkey, the web-based survey firm queried more than 1,000 adults above the age of 18, 290 of which were defined as 18- to 34-year-olds: millennials.

Among the findings in the How We Will Pay study: 83 percent of respondents wanted to be able to use an ever-burgeoning roster of new devices to conduct commerce. But, interestingly, when it came to actually transacting, 77 percent of those surveyed said trust remained a key factor when deciding who they want enabling those transactions.

People tend to trust the banks, financial institutions and bank card networks where payments relationships are already in place and already are known to consumers, according to the data.

Most Americans, at 63 percent, have used peer-to-peer payments, said SurveyMonkey. PayPal claimed the lion’s share there at about 80 percent across all demographics. Venmo remains a distant second, at 11 percent, with even greater adoption among millennials at 30 percent. Peer use also mattered to those surveyed, as 28 percent of millennials used the platform because their friends and family members did.

Eighty percent of surveyed millennials wanted the option to visit a brick-and-mortar bank branch based near their towns. In fact, the banks without a tangible footprint in a millennial-centric town lose out, as members of that demographic claimed they would be less likely to open an account with a bank were it not to have a physical branch nearby, said SurveyMonkey.

A new fintech startup wants to democratize trust funds (Business Insider), Rated: A

Now, app-only fintech Tomorrow, which launched services across the US this week, wants to help this group access inheritance products: In the US, 74% of millennials don’t have a will, and 50% of millennial households would struggle to pay their bills without their primary wage earner, according to studies Tomorrow cites. The company’s raised $2.6 million in Seed funding from backers including Plug and Play, Allianz Life, and Curious Capital. It’s now available for iPhone, and will release an Android version later.

Tomorrow aims to show that 

Urban FT Acquires iParse To Bridge The Mobile Banking Gap (PYMNTS), Rated: A

When it comes to mobile banking, there’s often a massive gap between the consumer’s experience with a big bank and with a smaller regional operator or credit union. The big banks have embraced mobile as a critical part of their overall delivery experience — with custom mobile banking apps, proprietary mobile wallets, biometric-authentication, cardless ATMs and more.

But when it comes to the smaller players serving more local populations, the well of mobile innovation can run dry rather quickly and for many reasons.

“A staggering statistic I came across recently really gave me pause. A full 42 percent of credit unions still don’t have mobile banking apps — and it’s not because they don’t want them or don’t think they need them,” Steggall remarked, “but because they don’t have the ability or the resources to do the technical integrations, and they can’t justify the cost.”

While Urban FT’s new products with iParse are for smaller FIs, Steggall told Webster the company also sees a profitable future working with existing payments processors in the market today. Steggall said the iParse solution will help those players — including larger processors already offering their own mobile banking services — better serve their smaller bank and credit union partners.

4 Tips for Developing a Product Around an Unknown Concept (Entrepreneur.com), Rated: A

Being an innovator always comes with the huge challenge of educating potential investors, developers and end users on the significance of a totally new product or service. When bitcoin hit the market, its leaders struggled to answer the same question: “Why is this necessary?”

When you’re building something new, your mistakes form the blueprints future entrepreneurs will study. If you’re a trailblazer in a novel space, here are four ways to forge ahead.

1. Don’t sell — educate.

YieldStreet, an online alternative investments platform, created YieldStreet University, which combines video content, infographics and other visuals to help simplify complex concepts about alternative investing for its customers.

2. Slow your roll.

Faster isn’t always better. When you’re dealing with an unknown concept, speed kills the sales process. If your service or product is new to the market, resist the temptation to immediately convert cold traffic. First, take time to make sure your clients or customers understand what they’re working with and how to utilize your product or service to its fullest potential.

3. Be open about swings and misses.

Honesty builds trust. One study from Label Insight showed 73 percent of participants were willing pay more for more transparent brands.

4. Focus on your mission, not personas.

Don’t concern yourself with selling to anyone in Box X or Box Y. If you do, you’ll end up tailoring your product to suit demographics instead of your vision. Identify your mission and purpose, and sell that.

Recent IPO Movers of the Week (July 10-14, 2017) (Money Morning), Rated: B

China Rapid Finance Ltd. (NYSE: XRF) soared 20.6% for the week. The online consumer-lending marketplace announced on Monday that it had reached the 20 million-loan milestone on its platform.

United Kingdom

Peer-to-peer lender Ratesetter hit by £80m of struggling loans (The Guardian), Rated: AAA

The peer-to-peer lender Ratesetter has been hit by £80m of struggling loans in the first major setback for the nascent online lending sector.

The company said it would use its own funds to prevent losses being taken by its 50,000 users, who are mostly small investors using the website in order to lend their savings to other individuals and benefit from higher interest rates than are available at high street banks.

The company admitted that it had made £36m of loans to a company called Vehicle Trading Group Limited (VTG), a motor finance holding company that then fell into administration because it had taken on too much debt.

It also loaned a further £12m to an advertising company called Adpod, which during 2015 became 50% owned by VTG. The website admits that the loans, of which £8.5m are still outstanding, should not have cleared its own credit policy.

RateSetter gives investors option to sell out free due to wholesale “interventions” (P2P Finance News), Rated: AAA

RATESETTER is giving all its lenders an option to sell out of their investment free of charges, as part of its wind-down of exposure to its wholesale lending portfolio.

The peer-to-peer platform wrote to investors on Tuesday to outline “interventions” it has made on three former wholesale lending partners.

LandlordInvest reaches £1m lending milestone (P2P Finance News), Rated: AAA

BUY-TO-LET peer-to-peer platform LandlordInvest has passed the £1m lending milestone.

The property lender, which launched in December 2016, has amassed 700 investors and completed six loans over the past seven months.

A vision for a transformed, world-leading industry (The City UK), Rated: AAA

TheCityUK and PwC’s Strategy& have developed a vision for the future of the industry, drawing on extensive engagement with leaders across the industry and a rigorous fact-based assessment. By 2025:

1) The industry will have transformed itself to be highly digitised, innovative and customer-centric. It will be a leader in cyber security, using data in a secure and sophisticated way. This will be alongside new technologies, to drive forward significant improvements in the way services are delivered. Firms will be consistently and relentlessly doing what is right for their customers.

2) London will still be one of the most important and attractive international centres for financial services and global business, retaining the full ecosystem of financial and related professional services. It will continue to play an important domestic role and be a leading FinTech centre that keeps the UK at the forefront of financial innovation.

3) Regional and national financial centres will have become more important within the UK industry. There must be a strong supply of local talent with the relevant skills, competitive costs and high productivity. Banking, insurance and asset management centres outside of London will continue to develop, hosting more headquarters of major companies. While other regional and national hubs will focus on enhancing specialist roles which serve both UK and global markets.

Access the full report here.

The peer-to-peer lending model involves a fair bit of intervention in the market (FT Alphaville), Rated: A

While Funding Circle (and Zopa, for the most part) allow the losses from loans to fall onto lenders, Ratesetter has built a loss reserve to protect investors from bad debts. This “Provision Fund” is funded by taking a fee when a loan is extended and, in times of stress, can be topped up by diverting interest payments and capital away from investors. This means lenders on Ratesetter need to pay attention to the risk in the overall loan book, rather than any individual borrower.

At the moment, the Provision Fund has a 119 per cent coverage ratio, so there is enough money in the fund — if you include expected future fees — to cover losses 1.19 times higher than currently expected. Ratesetter’s target ratio is 125 per cent to 150 per cent.

The important thing here is that the Provision Fund currently has £12.9m in cash and £8.9m of expected future income, versus £18.2m of expected losses. If Ratesetter had let £12m of bad debts suddenly wash into the fund, it would have resulted in a big knock to its coverage ratio. We don’t know what that would do to investor confidence, but it’s fair to say it wouldn’t have helped.

OFF3R Report Says Equity Crowdfunding Defies Brexit Uncertainty in First 6 Months (Crowdfund Insider), Rated: A

OFF3R is out with a report today on the status of equity crowdfunding in the UK. According to their numbers, the UK investment crowdfunding sector is booming. In fact the OFF3R Index states that UK crowdfunding platforms raised a record £130 million during the first half of 2017.

Additionally, the report states that March of 2017 was a record breaking month as well. Over £40 million was raised with several large crowdfunding rounds on the big three platforms; CrowdcubeSeedrs and SyndicateRoom.

Retail Banking IT – giving customers what they want (IT ProPortal), Rated: A

Peru Consulting asked 1000 consumers and 100 Senior IT Leaders in the banking sector.  The results, published in our report – Retail Banking IT: Turn to Face the Change – offer a startling insight into the scale and speed of change and the challenges faced by traditional banking’s IT leaders.

For example, when asked about the specifics of banking transactions using mobile phones, nearly two thirds (63%) of consumers in the 18-44 age group stated this was important to them, while only 14% of the 55-64 age group felt the same.

More generally, the next 12 months holds little comfort for the retail banks when it comes to customer loyalty, with 38% of 18-24 year olds and 41% of 25-34 year olds set to change the bank that provides their main account.

We asked the Senior IT Leaders why they though their customers would be likely to switch banks. Strangely, while 64% recognised that challenger banks are taking their market share, less than 5% recognised that customers might be tempted by new technology such as mobile apps. Given the strength of the GAFA companies and fintechs, this is a dangerous blind spot for the traditional banks.

Guru Appointed to Head Up Comparison Site (Fintech Finance), Rated: B

CONSUMER credit comparison site MoneyGuru.com has appointed an experienced channel director to lead its rapid expansion after a successful launch period.

The site has signalled its intention to disrupt the big four in the comparison market by appointing expert Deborah Vickers who has helped some of the biggest names in the market with optimisation and product development.

Deborah, 35, from Northwich brings 13 years of experience in technology and IT to the role, many of these within the financial services sector. She started her career at industry leader MoneySupermarket.com as a service desk manager before working her way up to IT delivery manager during her eight year tenure.

China

China Is Leapfrogging U.S. In Payments Technology, Ex-Ambassador Max Baucus Says (Forbes), Rated: AAA

Former U.S. Ambassador to China Max Baucus on Saturday lauded China’s can-do spirit and cited the country’s rush to online payments as an area where the country was overtaking the United States.

Baucus was speaking at an annual LendIt fintech conference held in Shanghai that attracted more than 2,000 participants.

“Apple Pay is trying to be an accepted mode of payment in the United States but it is catching up very slowly,” he said. “It’s disadvantaged, I think, compared with China and other Asian countries’ emerging payment systems. Why? Because established legacy institutions such as banks and credit card companies, while still useful, will soon be overtaken by the new innovative technology being developed here and in other Asian countries.”

China’s Internet Sector Grows Up (Institutional Investor), Rated: A

Leading investors who specialize in financial technologies and are taking stakes in new technology startups in the country say China is no longer an innovation laggard and in fact is taking a commanding lead in specific areas.

Take online payments. Two Chinese Internet giants, Alibaba Group Holding and Tencent Holdings, already hold strong leads over their U.S. counterparts in this area. Alipay, for instance, is Alibaba’s online escrow payment system that now counts more than 630 million users globally, of which 450 million are in China. Tencent’s messaging app, WeChat, boasts 900 million users, and its WeChat Pay service has about 600 million active users. Both Alipay and WeChat Pay allow their users to make transactions all over the world using their mobile phones, notes Jones, adding that at present not a single U.S. rival can offer a similar global product.

Lufax international platform starts up in Singapore (Xing Ping She), Rated: A

On 17th July, Ping An Insurance announced the affiliate Lufax started a international business platform, Lu International Financial Asset Exchange in Singapore. Lu International was known to have got the capital market service licence(CMS) approved by MAS. It is also the first Chinese fintech company  to have a CMS in Singapore, and will start for operation in the third quarter of 2017.

Lu International was registered in Singapore in January 2017, after licensed it will provide a series of wealth management services including securities trading, asset management and custody for investors with overseas bank accounts or assets.

Lu International aim to provide pure online banking services for the Asian middle class, and the investment amount will be among $10 thousand to $1 million,according to Gregory D Gibb, the CEO of LufaxHoldingLtd. The initial product line of Lu International is relatively simple, mainly including monetary fund, fixed income products, bond fund, REITs fund and ETF.

European Union

Revolut Introduces Free Personal Euro Accounts Following $ 66 Million Raise (Crowdfund Insider), Rated: AAA

Just days after announcing it secured $66 million through its Series B funding round, digital challenger bank Revolutintroduced free personal euro accounts. The company revealed this new feature enables all its customers, across 42 European countries, to open a free Euro account straight from their smartphone in as little as 60 seconds.

Getting Paid to Run Up Debt (Handelsblatt.com), Rated: AAA

It used to be clear: borrowing cost money. But now Smava, a Berlin-based fintech, has broken new ground by offering loans at a negative rate of interest. In other words, paying consumers to borrow. “Anyone borrowing €1,000 ($1150) will only pay back €994,” says Smava boss Alexander Artopé. That translates to a cool -0.4 percent.

Unsurprisingly, there’s a catch: The largest amount a Smava consumer can borrow at these enviable terms is €1,000, and each person is restricted to a single loan.

Citi to set up a ‘major new trading operation’ in German city after Brexit (Business Insider), Rated: A

American banking giant Citi is set to become the latest major financial firm to choose Frankfurt for its post-Brexit EU hub, reports late on Monday suggested.

Financial centres across the EU — including Frankfurt, Paris, Dublin, and Luxembourg — are battling to attract financial services work moving out of London as a result of Brexit as a result of expected legal changes that will make operating in the EU out of London tricky.

Frankfurt is emerging as a popular destination for many international firms choosing a post-Brexit base. Three Japanese lenders, Daiwa, Sumitomo Mitsui Financial Group, and Nomura, have all confirmed in recent weeks that they will set up new post-Brexit bases in Frankfurt.

Cyprus fintech startup Capital.com raises $ 25 million (Tech.eu), Rated: A

Cyprian fintech startup Capital.com has raised $25 million from Larnabel Enterprises and VP Capital and launched its mobile trading app.

The Capital.com app allows investors to trade financial products and receive updates from its patent-pending Smart Feed with news, analysis, and research based on user behaviour. The app, the company claims, uses AI to detect common trading biases and patterns.

International

What The SoftBank Vision Fund Means For Tech Investing (CB Insights), Rated: AAA

The SoftBank Vision Fund, first announced in October 2016, has now closed at least $93B of a target $100B to invest in global technology companies – making it the largest tech investment fund in history.

$100B is an unprecedented sum for a single fund, totaling almost exactly the same amount that all VC-backed companies received in 2016 ($100.8B across 8,372 deals globally, per CB Insights data). Yet the fund’s massive size is raising concerns among some investors, who fear that an influx of high-dollar rounds could overinflate the market and prolong exits while crowding out competing investors.

With both Saudi Arabia and the UAE — which have contributed a combined $60M of sovereign capital to the fund — counting on the Vision Fund’s investments to diversify their national economies, the stakes are high. Other high-profile investors are also placing bets with the Vision Fund: The Vision Fund has closed contributions of $1B or less from Apple, Qualcomm, Sharp, Foxconn, and Larry Ellison’s family office. (SoftBank’s own $25B rounds out the $93B secured so far.)

Australia/New Zealand

Cyber-attacks significant threat but RBNZ says no need for prescriptive requirements (NBR), Rated: AAA

Cyber-attack poses a significant threat to the global financial system but the Reserve Bank has decided not to introduce more prescriptive requirements at this stage due to the swiftly changing nature of both the threats and the technology, said Reserve Bank head of prudential supervision Toby Fiennes.

Fiennes said the central bank did not believe prescriptive regulations would appreciably improve the outcome, when the technology and threat landscape are both changing so rapidly.

VicSuper has launched a digital advice suite called Beeline to strengthen member engagement.

The digital advice service would act as an online coach to provide members with access to financial advice 24 hours a day, seven days a week, free of cost to members, with the fund saying it would provide super advice at scale.

Areas of financial advice would include additional contributions and investment asset allocation in their superannuation. The service would also provide general advice to members on retirement adequacy and budgeting goals.

Surging investor confidence in clean energy drives record $ 2 billion investment from CEFC (Mozo), Rated: B

The CEFC assisted in a number of clean energy projects in 2016-17 including the establishment of a green loan marketplacewith peer-to-peer lender RateSetter, 500 new energy efficient homes for low income families in New South Wales and ten large-scale solar projects in regional Queensland, New South Wales and Victoria.

India

RentoMojo raises $ 10 mn from Bain Capital Ventures, Renaud Laplanche (The Hindu Business Line), Rated: AAA

RentoMojo, a consumer product leasing start-up, has raised $10 million (over Rs. 64 crore) from Bain Capital Ventures and Renaud Laplanche.

The series B funding also saw participation from existing investors, Accel Partners and IDG Ventures, Rentomojo said in a statement today.

The funds raised will be used to further strengthen the product, finish building a stellar leadership team, and expand into new categories and geographies, it added.

Asia

Indonesia: P2P app Julo raises seed funding from Skystar Capital, others (Deal Street Asia), Rated: AAA

Indonesian peer-to-peer (P2P) lending startup Julo has raised an undisclosed amount of investment in a seed round led by Skystar Capital, along with East Ventures, Convergence Ventures, according to an announcement. A few notable angel investors also participated in the round.

Julo is focussed on financial inclusion in Indonesia by helping over 100 million people obtain loans for their various personal use.

Loan applicants can carry out the process from their phones through Julo’s app, where they submit pictures of personal documents and then receive their loan within 24 hours upon successful verification.

How Singapore-based P2P lending platform Crowd Genie aims to help underbanked SMEs grow (e27), Rated: A

One of the recipients of the CMS is Singapore-based P2P lending platform Crowd Genie. Like many of its ilk, Crowd Genie was founded by entrepreneurs who saw that certain traditional financial services were rigid and could not serve certain profiles of clients.

Ideally, the profile of borrowers would be SMEs turning over about S$1 million (US$731,000) to S$5 million (US$3.66 million) in revenue yearly, and would have had a bank loan and a corporate bank account; they would also have to be in operation for about two to four years, and need a short-term funding gap that the banks are not able to extend.

In place of just traditional financial metrics, Mehra and his co-director Bikash Saha, who has experience in a credit rating agency and retail banking, leverage a hybrid of machine-based learning algorithms combined with hands-on groundwork to assess the credit risk profile of potential borrowers.

Part of the reason Crowd Genie is still heavily reliant on human input is that its machine-learning algorithm is currently a work-in-progress. Accurate data analytics can only be achieved once there are enough actionable data points.

Mehra says the next review of the algorithm will take place at the end of the year, when Crowd Genie has accumulated about 300 – 400 cases.

Currently, institutional investors are qualified to be lenders on Crowd Genie; retail investors are barred.

Africa

Will robots narrow the financial advice gap? (Biz Community), Rated: A

Interestingly, however, a study by international investment house, Legg Mason, personal interaction is still important for these younger investors – 53% of participants in this group indicated that technology can never truly replace personal customer service. This was particularly relevant when it came to retirement and tax planning, but was of less importance when it came to tracking the stock market.

Furthermore, humans can remove irrelevant data from their memory, which allows for increased learning. Robots, however, store all data, which begs the question around the long-term competency of robo-advice.

Authors:

George Popescu
Allen Taylor

Monday June 19 2017, Daily News Digest

Lending Club default rates

News Comments Today’s main news: Finastra inks agreement with IBM. One number Elevate Credit shareholders are worried about. Zopa makes IFISA available to existing customers. Yirendai ready to include wealth management. Klarna wins Europe’s biggest fintech banking license. Today’s main analysis: Online lenders do a good job of identifying fraud. Today’s thought-provoking articles: Bloomberg report is critical of online […]

Lending Club default rates

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

Africa

News Summary

United States

One Number Elevate Credit Shareholders Are Worried About (The Motley Fool), Rated: AAA

Elevate Credit, Inc. (NYSE:ELVT) the newly public subprime fintech lender, delivered its first quarterly earnings report as a public company on May 8, and the results were impressive. Loan originations grew almost 40%, while revenue grew by a smaller 20%, due to the lowering of interest rates on Elevate’s high-rate loan products. Elevate’s IPO was unusual — most tech IPOs sport high growth rates but negative earnings. In the first quarter, Elevate actually delivered a net profit of $1.7 million. Adjusted EBITDA margin expanded to 16%, above the 10% margin posted in 2016 and the 4% in 2015.

The big blemish on the quarter was a high net charge-off rate  as a percentage of revenues. Net charge-offs measure the amount of principal and interest more than 60 days past due, minus recoveries from prior periods. That number shot up to 59% in the quarter, above the company’s target range of 45-55%,  and up 600 basis points year over year. While the company was still profitable, the $1.7 million in net earnings was down from $6 million in the year-ago quarter.

Management explained that the rise in loan loss provisions was partially related to a new credit score the company tested on lots of new customers at the end of 2016. As is the case with many financial companies, when new customers increase, there is often an initial uptick in defaults or loss ratios.

Bloomberg Report is Critical of Online Lenders (Crowdfund Insider), Rated: AAA

A report from Bloomberg this week takes certain online lending platforms to task regarding the fact that some online lenders are not verifying income status.  The report also says that even if there are errors in loan applications the loan may still be approved. More specifically, apparently Prosper does not verify income and employment in about a quarter of the loans. Lending Club is said to verify income in about one third of the loans.

Risk is always part of the investment equation and Orchard Platform perhaps provides the best perspective into affiliated risk of investing in loans originated online.

Online Lenders are doing a good job of identifying the frauds (even without hard income verification) (Croudify), Rated: AAA

Recently there was an article in Bloomberg (Article Link) that talked about how online lenders are not always verifying the basic borrower information like Income.

We at Croudify have been analyzing the loan data for more than 2 years and wanted to shed some light on the article and show that while the headline is true the devil is in the details and actually the platforms have been doing a very good job in identifying the fraud.

Once we had concluded that the non-verified loans are not growing as percent of population the logical next step was to check if these loans are performing worse than before. Is there a possibility that the loans without income verification have deteriorated over time and hence the red flag.

This points to a very important finding that the preliminary indicators that Lending Club is using in identifying the fraudulent behavior is not only working it is working great and is providing a performance lift to loans.

Pricey ‘fintech’ lenders put the squeeze on cash-strapped small businesses (L.A. Times), Rated: A

So Newman, 61, turned instead to an online lending company called OnDeck. After submitting a handful of bank statements, he was quickly approved for a $65,000 loan, which allowed Newman to cover his wine shipments and keep his business running.

“These loans are predatory by nature,” he told me. Think payday loans for small businesses, he said, with interest rates well over 30%.

And there’s something to that. Loans with a higher degree of risk would naturally come with higher interest rates. The question is whether such loans are being marketed honestly and fairly, and whether customers are able to make informed decisions about financial obligations.

Fairness in lending means clear and straightforward disclosure of terms and conditions. On that score, OnDeck seems to come up short.

For example, the company’s website boasts that term loans of up to $500,000 can be obtained with annual interest rates as low as 5.99%. Newman said that when he contacted OnDeck, he was hoping to get a loan at such a rate. But it didn’t work out that way.

What he got was a 12-month, $65,000 loan, plus nearly $17,500 in interest and an origination fee of $1,625. That translated to an annual percentage rate of 55%.

In fact, OnDeck told me its average annual interest rate for term loans, excluding fees, is 38%. If that’s the case, I asked why the rate most prominently displayed on their website is 5.99%.

China Merchants Bank is considered the largest industry player currently, but still its assets under management in its private banking division are worth just 1.66 trillion yuan.

Assessing the future of the financial advice industry (InvestmentNews), Rated: A

First: There will be fewer advisers, possibly many fewer. The trend line points down, and there’s nothing in the three- to five-year outlook to change that.

The future leaders of this profession see advisers serving far more clients with a greater assist from technology, as well as more reliance on outsourcing.

But those requiring expert financial advice will undoubtedly seek a more complete look at all areas where money touches their lives — and how those areas intersect. Who will need it most? A large population that isn’t necessarily today’s prime prospect pool, at least for advisers paid based on a percentage of assets: the HENRYs (high-earner, not rich yet). As investment advisers move beyond mere investments, and the field becomes a profession, compensation surely will evolve to ensure those who most need advice can get it and those giving advice can still run a profitable business.

In financial advice this will take the form of a planning quarterback who strategizes the entire financial game plan and keeps clients on track largely through automated accountability programs.

If you find this hard to believe, just wait until Google or Amazon moves full throttle into the asset management business.

Offer B2B Fintech Solutions To Help Clients Grow Their Sales (Forbes), Rated: A

In April, 2017, Pew Charitable Trusts published the results of a national survey of payday loan borrowers. The top three responses to what is most important to these borrowers in choosing where to get a payday loan were:

  • 76% – How quickly they can get the money
  • 74% – The fee charged
  • 73% – The certainty that they would be approved for the loan

The survey reveals other important consumer attitudes about payday loans. Most respondents believe that there should be more regulation of lenders, and lower interest charges. They would also prefer almost any other borrowing option or loan type to the payday solution.

Chuck Wait Tire, located in the small rural community of Mowrystown, Ohio, had never cleared more than $100,000 in monthly revenue, until they implemented Acima. The next month, they not only beat the $100,000 threshold, they killed it with a 33% monthly increase in sales from $90,000 to $120,000.

Podcast 105: Robert Morgan of the American Bankers Association (Lend Academy), Rated: A

In this podcast you will learn:

  • The core purpose of the ABA.
  • What is in the ABA Fintech Playbook and why they published it.
  • How the bank of  the future will be different to today.
  • How the ABA select their Endorsed Solutions providers.
  • The attitude of banks today regarding partnering with fintech platforms.
  • How large banks differ to small banks when it comes to partnering.
  • The needs of banks today when it comes to new technologies.
  • The official stance of the ABA on the OCC Fintech Charter.
  • The ABA’s view on the data sharing initiatives taking hold in Europe.
  • How banks, data aggregators and fintech companies are working together on data sharing.
  • How open banking could work in a similar way to Facebook logins.
  • Some of the other new technologies that are on Rob’s radar.
  • How banks of the future will be similar to banks of today.

ArborCrowd Now Offering $ 69.7 Million Commercial Real Estate Deal to Investors in Miami (Crowdfund Insider), Rated: B

Online commercial real estate company ArborCrowd announced on Thursday it is now offering a new $69.7 million commercial real estate deal to investors. The Lago Paradiso property is described as a multifamily complex located in Miami, Florida. 

According to ArborCrowd, investors now have the opportunity to own a piece of a $4 million stake in Lago Paradiso. The property now has a targeted 13 percent to 17 percent Internal Rate of Return (IRR) and a projected hold period of four to seven years.

United Kingdom

Zopa Announcement: IFISA Is Now Available to Existing Customers (Crowdfund Insider), Rated: AAA

Zopa announced on Thursday its IFISA is now available for all existing Zopa customers. Along with the IFISA, the online lender unveiled its latest peer-to-peer investment product, Zopa Core.

Zopa then explained that the Zopa Core product has a target return of 3.9% and by December will replace its products, Access and Classic, without Safeguard coverage. IFISA and Zopa Core features include:

Funding Circle SME Income fund holds steady on dividend (AltFi), Rated: AAA

The £406m Funding Circle SME Income fund has paid out its fifth dividend, the fourth consecutive quarter at the same 1.625p level, holding pay-outs in line with targets.

OFF3R Wants to Become “Money Supermarket” (Crowdfund Insider), Rated: A

At last count OFF3R hosts offers from 36 different UK platforms. Today in a report on P2PFinanceNews, OFF3R is revealing it is raising £5 million to become the “Money Supermarket” for investments. Essentially OFF3R wants to integrate today’s alternative investments with yesterday’s more traditional types.

Fiserv to buy UK mobile payments pioneer Monitise for 70 million pounds (Reuters), Rated: A

U.S. financial technology provider Fiserv said on Tuesday it had agreed to buy British financial services technology firm Monitise Plc for about 70 million pounds ($88.72 million).

AIM-listed Monetise, worth about 2 billion pounds at its peak in early 2014, blazed a trail by linking banks and mobile operators to build a business capable of handling billions of dollars in mobile payments, purchases and money transfers.

The SME’s guide to P2P (P2P Finance News), Rated: A

“The key thing is making sure that you’re looking for the right type of finance,” explains Paul Marston, managing director of commercial finance at peer-to-peer lending platform RateSetter.

A survey by the British Business Bank for 2015/16 found that 100,00 small businesses were rejected for loans by mainstream lenders – equating to £4bn of potential finance.

“If you’re an SME and go to the bank for an unsecured loan, there’s a cap of around £50,000, whereas Funding Circle will offer up to £350,000.

Funding Circle explains that it offers four key benefits for SME borrowers: speed, flexibility, efficiency and transparency.

As P2P platforms are purely online, busy business owners can apply for finance outside of working hours. “More than 50 per cent of loan applications are made outside of working hours, when a bank branch would be closed,” says Funding Circle.

While criteria varies from platform to platform, P2P loans are often more suitable for businesses that are slightly more established. For example, RateSetter offers loans to businesses that have been trading for at least three years and has at least two years of either audited accounts or formally prepared management accounts. And Funding Circle only lends to businesses that have been trading for more than two years, have a turnover of more than £50,000 and are a UK limited company.

However, there are still options for start-ups. Crowd2Fund has recently launched a ‘venture debt’ product which enables early-stage companies that are not cash-flow positive to access debt finance. Crowd2Fund argues that this can be simpler than raising equity and enables founders to keep control of their company.

Funding Xchange claims that a business using its platform can expect an average saving of £2,000 by comparing pricing from multiple providers – representing 10 per cent of the value of the average loan.

LendInvest hires second Northern BDM (Financial Reporter), Rated: B

LendInvest has appointed its second BDM for Northern England to satisfy growing demand in the region.

Sophie Mitchell-Charman joins the team from Mint where she worked as a Bridging BDM. Based in York, she will travel extensively throughout northern England, with a particular focus on deals in the North East.

China

P2P platform Yirendai ready to move up a financial league or two, including into wealth management (SCMP), Rated: AAA

Yirendai, China’s largest peer-to-peer lending platform, is looking to raise its profile even higher, with an expanded product offering, the company’s chief executive Fang Yihan has told the South China Morning Post, shrugging off any worries about a regulation-induced slowdown in the industry.

New rules governing the industry will come into force in August, and according to available drafts, these will impose a limit of 200 000 yuan (US$29,400) on lending to individual borrowers, require the lenders to carry out stricter background checks on all clients, and establish strong contractual relations with custodian banks.

Double digit returns for investors were commonplace last year, but will become harder to find.

But with its scale, larger players such as Yirendai that will be the most likely to gain a competitive advantage from the tighter rules.

China’s retail wealth management market was worth 120 trillion yuan last year, according to a report by Boston Consulting Group, which expects growth of 12 per cent annually for the next five years.

China Merchants Bank is considered the largest industry player currently, but still its assets under management in its private banking division are worth just 1.66 trillion yuan.

Yirendai is also experimenting with allowing partners to sell services other lending services via its platforms.

Yirendai Recognized as Best P2P Lending Platform in China at the Future of Finance Summit (IT Business Net), Rated: A

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced that it was awarded the Best P2P Lending Platform in China Award at The Future of Finance Summit (the “Summit”) held in Singapore on June 8-9, 2017. Yirendai is the first FinTech company in China to receive this prestigious reward.

China’s P2P Lending business volume of May reached to $ 53billion, keeping another new record. (Xing Ping She Email), Rated: A

According to a latest monthly report issued by P2P001.com, the total volume of P2P lending in China hit a new record to $53billion on May, with the month-on-month growth of 11.32%.

On May, the average annual interest rate for P2P loans was 8.34%, which has been slowly rising for three months in a row. However, the financial “deleveraging” and tighter monetary policy are still undergoing, it is unlikely that P2P lending rates will continue to rise.

By the end of May, the accumulated P2P loan balance in China has reached to $213billion, with the month-on-month growth of 6.72%. Among them, the loans outstanding on P2P loans of more than $29,850 reached to $152 billion, accounting for 71.46% of the total; the loans outstanding on P2P loans of more than $149,253 reached to $101billion, accounting for 47.43%.

In addition, there are 672 P2P lending institutions assigned depository agreement with banks up to the late May, involving 59 banks and 28 provincial and municipal lending platforms, and 286 of them have been already launched online.

China Banking Regulatory Commission issued a standard campus loan requirements (01Caijing), Rated: A

Recently, the China Banking Regulatory Commission, the Ministry of Education, Ministry of Human Resources and Social Security issued the Notice on Further Strengthening the Management of Campus Credit.

It is pointed out that commercial banks and policy banks should provide customized products for college students, training, consumption and entrepreneurship under the premise of risk control while strengthening the rectification of campus loan problems. And the standardization of financial services, together set the credit line and interest rates.

Beijing and Shenzhen drive Chinese fintech (Deal Street Asia), Rated: A

Ning Tang, CEO and founder of Chinese fintech major Creditease, believes that the current landscape will require players in the finance sector to evolve their approach amid a highly disruptive technology landscape with substantial opportunity.

What’re the assets under management and the role of the Singapore office?

Every year we help clients deploy over $100 billion of capital and the idea of coming to Singapore in 2014 was that this city was one of the bases for our internationalisation strategy.

You’ve got different entrepreneurial hubs in China – Hangzhou, Shanghai, Hong Kong, Beijing – which is the fintech capital of China? 

I’d like to say Beijing because that’s Creditease’s base. But in terms of technology innovation, not just in financial services, I think Beijing and Shenzhen are the leading cities, while some say Hangzhou as well.

Why do so many Chinese firms want to list in New York when Chinese entrepreneurs have access to very liquid stock markets in cities like Shanghai, Shenzhen and Hong Kong? 

In our experience, the US capital markets are more advanced in terms of welcoming innovative business models and companies at the growth stage despite being a pre-profit stock.

Recently, Beijing has been implementing capital controls and kerbing capital outflows from China. How has this affected Creditease’s business?  

We’re largely unaffected by these controls, as many of our wealth management clients have assets outside of China, and we help them manage those. However, with our Creditease Fintech Investment Fund,  we had some of our partners who were able to invest overseas.

There’s been a lot of movement in the Bitcoin and Ethereum markets. What’s the view of Creditease on digital currencies as an asset class and its use in marketplace lending? 

We remain interested but it’s too early at this stage. The regulatory framework and security issues around such models…I think we’d like to see more things get worked out before this asset class becomes appealing to our investor base. We help our investors do asset allocation and any asset class going into the portfolio should be a major asset class. Otherwise, it’s quite speculative and not helpful to our investors

Looking at the future of fintech in China, you have Beijing where the regulators are based. With all these centres like Shenzhen, Hangzhou, Beijing, Shanghai and Hong Kong, what is the future of all these different ecosystems? 

Quite interestingly, you’re talking about cities. I’m thinking about nations.

So different cities and nations have to assess the unique attributes they work and work on refining and enhancing those. I’m quite hopeful that Beijing will continue to be the fintech hub and with Creditease, we’ve got a presence in various places like Israel, Singapore, New York and Hong Kong, so we can access this innovation everywhere!

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: B

As the plan summaries, from 2011 to 2015, over 96 regulations and guidelines for the financial sector have been issued. In the next five years, another 110 regulatory updates or new regulations or guidelines will be released.

Alibaba Group Holding Limited hosted an Investor Day on June 8-9 at Alibaba Xixi Headquarters. Speakers included Jack Ma (Executive Chairman), Daniel Zhang (CEO) and other members of the senior management team.

To safeguard the interests and property rights of college students and maintain financial stability for P2P online lending market, China Banking Regulatory Commission (CBRC), Ministry of Education and Ministry of Human Resources and Social Security have jointly issued a paper to regulate the student loans market. The paper encourages commercial banks and policy banks to develop student loans business and provide standardized financial services to college students.

Ant Financial’s virtual credit card service Ant Check Later (also known as “Huabei” in Mandarin) is eyeing to link up to 4 million online and offline merchants to help them grow businesses and attract consumers who have little access to physical credit cards.

At present, third party payment service license has become an essential equipment for any Chinese company who wants to expand into financial services. On June 7, GOME Finance announced to acquire a payment service company Easy Bonus Card. GOME Finance paid up to CNY 720 million, mainly for the license, which could make the company complement the payment capabilities and accelerate the process of technological innovation.

European Union

Sweden’s Klarna wins Europe’s biggest fintech banking licence (Financial Times), Rated: AAA

Klarna has become the largest European fintech company to get a banking licence, with the Swedish group saying it wants to become the Ryanair of the sector, attacking lenders across the continent.

Valued at more than $2bn, Klarna has already captured much of the market for online payments in the Nordics and Germany, and on Monday received a banking licence from the Swedish Financial Supervisory Authority 20 months after filing for one.

The Swedish group – which had revenues of SKr3.6bn last year and was valued at $2.25bn in a fundraising in 2015 – is looking at offering customers across Europe services such as bank cards and salary accounts as well as eyeing the US for future expansion.

Crowdfunding Platform BrickVest Makes First Exit At 31% Return (Bisnow), Rated: A

BrickVest, the real estate investment crowdfunding platform, has announced that some of its investors have exited an investment for the first time, at a sizzling return.

BrickVest, the real estate investment crowdfunding platform, has announced that some of its investors have exited an investment for the first time, at a sizzling return.

The BrickVest fund invested in a portfolio of 23 retail assets in a joint venture alongside Corestate Capital.

Russian Fintech And Their Fight Against Geopolitics (Forbes), Rated: A

According to EY’s Fintech Adoption Index report last year, although Russian online adoption is lower in comparison to major financial centers like London, New York or Hong Kong, the market in this area is growing at a rapid rate. Online payments and money transfers are booming Russia, as are Moscow and St Petersburg are becoming hubs for this form of technology.

David Waroquier, Partner at Mangrove Capital Partners also highlighted that access to funding in Russia is more limited. ‘This means Russian fintech companies must have a tighter control on costs and be very efficient operationally.’

As said before, one of the trends that has exploded in Russia is mobile payments, as the EY report states that 57.6% of Russians used this service in comparison to the 17.6% globally. There are currently 56 million online mobile users over 16 in the country and according to Gfk, 53% of online users in Russia made at least one mobile payment in the last 6 months, as Dunaev said.

European Crowdfunding Network Launches Survey on Cross-border Crowdfunding & Online Lending (Crowdfund Insider), Rated: A

The European Crowdfunding Network (ECN) has launched a survey dedicated to addressing the challenges of cross border transactions in the investment space. More specifically, the ECN is seeking input on cross border crowdfunding and online lending, including peer to peer / marketplace lending.

The ECN explains:

We will focus solely on crowdfunding models that entail a financial return, notably:

  • Investment-based crowdfunding (where companies issue equity or debt instruments to crowd-investors through a platform) and
  • Lending-based crowdfunding (where companies or individuals seek to obtain funds from the public through platforms in the form of a loan agreement)

The survey is available here. 

International

Newly Formed Finastra Signs Agreement with IBM on Banking Technology, Fintech (Crowdfund Insider), Rated: AAA

Finastra, created by the merging of Misys and D+H, and IBM (NYSE: IBM) have reached an agreement to explore how Finastra can transform their banking operations with IBM Cloud and Cognitive technologies. The two companies plan to bring IBM technology into the Finastra open architecture to enrich the digital retail banking experience and bring new innovations to market.

WorldRemit adds Android Pay as secure option for migrant remittances (Reuters), Rated: A

Cross-border money transfer service WorldRemit is enabling its immigrant customer base to send money home using Android Pay, making it the first international remittance firm to run on the Google payments system, the company said on Tuesday.

Connecting with Android Pay will enable WorldRemit customers in developed markets like Europe or North America to make instant international money transfers to reach the 112 million accounts available via WorldRemit’s network of payment channels.

London-based WorldRemit says it handles about three-quarters of mobile phone-based international money transfers, a small but fast-growing segment of the global $575 billion worldwide remittance market. Recipients using WorldRemit can up pick cash or deposit money in banks or mobile money accounts or top up mobile accounts.

Traydstream launches fintech solution for paperless trade (Global Trade Review), Rated: B

New fintech player, Traydstream, has launched a solution to digitalise trade documents and automate regulatory compliance screening using artificial intelligence.

In short, Traydstream’s new solution digitalises the whole trade transaction – from invoice to Swift – and is targeted at banks as well as corporates.

Australia

Big banks and fintech start-ups face up to Jack Ma’s mobile payments juggernaut Ant Financial (abc.net.au), Rated: A

While Ant Financial says it wants to work with our banks, not against them, some are warning disruption from a global digital giant is inevitable, even if it doesn’t come from China.

Former Challenger exec Paul Rogan makes robo-advice play (Australian Financial Review), Rated: A

Paul Rogan, the former chief executive of distribution, marketing and research who stepped out of the role in February after 12 years at Australia’s largest annuities providers, is now readying to launch Retirement Essentials, an online platform that educates and assists those who are already in retirement on how to manage their money.

Mr Rogan has invested an undisclosed sum in SuperEd, the the robo-adviser co-founded in 2012 by Vanguard Australia founder Jeremy Duffield and Westpac executive and technology entrepreneur Hugh Morrow.

India

Wadhawans opens UK unit, buys stake in Zopa (India Times), Rated: AAA

Wadhawan Global Capital (WGC), which owns 38% of DHFL and is the controlling lever for the group’s financial businesses, has set up a London unit that opened its account through undisclosed -but sizeable-investments in 12-year-old Zopa.

What the future holds for the P2P lending market in India and the world (My Big Plunge), Rated: A

While the overall internet-based alternative finance industry registered transactions worth more than $57 million between 2013 and 2015, online peer-to-peer or marketplace lending saw loans with a cumulative value of over $2 million disbursed during the same period. The total loan value in the corresponding two years has grown by around $2 million, with an estimated $4.5 million worth of loans disbursed through online peer-to-peer lending platforms by the end of 2016.

But even as industry projections predict the market for peer-to-peer loans to be worth $4-5 billion by the end of 2023, this promising segment is still a long way off from achieving its true potential as a highly viable alternative investment class.

The launch of India’s Digital Stack that includes Aadhar, eKYC and digital payments is paving the way for the country’s shift towards a cashless economy.

The year 2017 is expected to be the year of financial technology, with alternative lending and investment products like peer-to-peer lending set to be driving forces for the latest iteration of the fintech revolution in India.

Faircent.com, for example, has consistently delivered net returns upwards of 18% per annum to its majority of lenders.

Asia

InvestaCrowd Updates on Real Estate Crowdfunding in Asia (Crowdfund Insider), Rated: A

About a year ago, Crowdfund Insider connected with Julian Kwan, CEO and co-founder of Investacrowd, a real estate crowdfunding platform that was established in Singapore. Kwan was born in Australia but has spent the last 17 years in Asia – most recently Singapore. Having founded multiple companies, Kwan is a longtime real estate investor, developer, and manager.  InvestaCrowd was envisioned as a vehicle to provide access to real estate investments in select markets like New York City, Sydney or London.  As with many real estate platforms, by using technology much of the process may be completed online.

A report by Cushman & Wakefield from earlier this year highlighted this fact. In a publication, Cushman & Wakefield explained;

“Compared to other countries, China ranked No. 1 among foreign investors in commercial real estate within the U.S. in 2016. China inbound investment deal volumes have grown rapidly, reaching $19.2 billion USD in 2016, a record high. Sixty-two percent of the investments, which equated to $11.9 billion USD, were deals over $1 billion USD. The five largest Chinese investment transactions were among the top ten largest transactions in the U.S. in 2016.”

Kwan told us InvestaCrowd was in the process of obtaining a capital markets license from the Monetary Authority of Singapore (MAS) – now a requirement.

But current investors are turning into repeat investors. InvestaCrowd does not focus on Southeast Asian real estate which brings better quality deals but adds a different challenge to the mix. While he likes the Singapore market it is in a bit of a pause. On the other side, he is very cautious on deals in countries like Vietnam, Indonesia or China – a country where he spent many years in the real estate sector.

Kwan said they are looking to set up a line of credit too, so as to be able to pre-fund deals.

Meet Anna Haotanto, The Fintech Queen of Singapore (IB Times), Rated: A

Singapore is one of the leading hotspots for financial tech thanks to flexible regulation plus national initiatives to fund startups and integrate blockchain innovation into the local economy. American venture capitalists at the Ethereal Summit in New York praised Singapore as a ripe market, teeming with collaboration between entrepreneurs, regulators, banks and investors. The small island nation wants more than a high-tech economy: Singapore aims to become a global fintech hub.

Haotanto is a self-made millionaire determined to make fintech more accessible for Asian women. Her online media startup, the New Savvy, targets women investors by providing 30,000 Asian subscribers with finance and career guidance. This is no ordinary women’s publication. Forbes reported her team partners with the Monetary Authority of Singapore, the Singapore Exchange (SGX) and Far East Organization to produce pragmatic content.

So her company organized the Future Is Female conference in April, along with SGX, attended by 250 women.

Africa

P2P Cash Launches Money Transfer Service to Nigeria With No Transfer Fees (Press Release Rocket), Rated: A

P2P Cash, a Georgia-based digital financial services company, has opened a new money transfer service from the US states of Georgia and South Carolina to Nigeria. P2P Cash now offers cross-border money transfers at competitive exchange rates without any transfer fees. Nigerians and Nigerian-Americans in Georgia and South Carolina can find this new service at . Customers may also download the mobile app from the Google Play or Apple Stores.

P2P Cash’s aggressive no-fee pricing position is possible because of its proprietary Smart Token technology and global disbursement network.

Authors:

George Popescu
Allen Taylor

Thursday April 13 2017, Daily News Digest

small business fintech lenders

News Comments Today’s main news: Small businesses hate fintech lenders more than big banks. All is not well in the world of student loans. UK equity crowdfunding investments set new record in March 2017. Lending Works registers 8.8M GBP in ISA since launch. Today’s main analysis:  VC funding report. Small biz lending approval rates. Today’s thought-provoking articles: Portfolio review – […]

small business fintech lenders

News Comments

United States

  • All is not well in the world of student loans. GP: “There are many parallels between credit crisis in general: investors wrong feel of safety is, I think, the main one. And in this case student debt can only be releaved in bankruptcy in very exceptional cases, in short, nearly never. So investors feel that student debt is safe. The same way as mortgages perhaps? I think we are far away from a crisis or bubble. However student debt is growing and questions have to be asked of where this is going and why. Brian from BlueElephant told me one day that any market that is being skewed by government intervention from its normal equilibrium should be avoided as the price doesn’t reflect the risk. Is the government skewing the student debt market? Certainly. I have no issue with the risk in the student debt market, I am worried about the price pressure from non-profit participants. ”  AT: “Lenders need to get better at judging risk and cutting down on defaults.”
  • Small biz lending approval rates. GP: “We now see for a few quarters an improvement in small bank’s approval rate for small business loans.”AT: “Small banks and institutional investors are doing better at approving loans than big banks and alt lenders. I wonder what this means. Could be a trust issue.”
  • Small businesses hate fintech lenders more than big banks. GP:”As a small business you have a choice to borrow money below 10% from a bank, a product you will not qualify for, or to borrow moey from MCAs and fintech at rates often above 20%, a product you will nearly always qualify for. Who do you have more? The people who have a great product they don’t want to sell to you or the ones who have an expensive product you have no choice but to buy? To me this is a huge issue for the SME fintech lending sector. This means that as soon as credit from any other institution is anywhere close to being competitive the small businesses will not use a fintech offering. The second question is why are fintechs ranked so low? My personal believe is that it’s due to the onerous terms fintech usually charge small businesses especially in comparison to banks.  “AT: “This is interesting. Significant is the fact that this data comes from successful applicants, not non-borrowers. Driving this data could be the varied nature of borrower profiles. Small banks are likely lending to prime borrowers whereas online lenders are heavily weighted toward sub-prime borrower who likely expect to be treated like prime borrowers and can’t get a loan from a bank. This requires further investigation.”
  • VC funding report Q1 2017. GP:”Unaccredited investors had no scalable legal way to invest in private stocks before. The money inventory for unaccredited investors is fixed or at best stable given the wage stagnation, and the small inflation. And I think crowdfunding also includes more entertainment thant the stock market with the benefit of often also receiving a product. “AT: “I think it’s interesting that fewer people in the U.S. are investing in stocks? Does that mean they are investing in crowdfunding asset classes?”
  • Elevate Credit not trading at elevated price. GP:” I would compare them to Yirendai more. “AT: “The comparison to Square is interesting.”
  • Should fintech startups buy banks? GP:”If you want a bank, there is rent, buy or build. These approaches are standard business questions. The real question is should you work with a bank or not. Why not an insurance company? Why not with another deposit taking structure that is not a bank? ”  AT: “I don’t see why not. The most likely targets would be community banks, if they can get there before the big banks swallow them up.”
  • Diversification 101 in MPL. AT: “Basic investing advice.”
  • Podcast: Economic analysis of real estate, Part 2.
  • Redfin vets raise pre-seed round, launch digital mortgage platform.
  • Opus releases new version of OpusNotes.

United Kingdom

European Union

International

Asia

News Summary

United States

All is Not Well in the World of Student Loans (Lend Academy), Rated: AAA

It is clear that burdensome student debt is now holding many people back financially. Student loan debt now stands at a staggering $1.3 trillion (as of the end of 2016) an increase of 170 percent over the preceding 10 years. There are three contributing factors to this increase:

  1. More students are taking out loans.
  2. The loans are for larger amounts.
  3. Borrower repayments have slowed down.

Borrowers are now leaving school with over $30,000 in student loan debt and they are defaulting more. This is particularly true of those borrowers with balances of $100,000 or more. Over 20% of borrowers who left school in 2010 or 2011 owing that amount have already defaulted on this debt (a default means they are at least 270 days past due). That is an astonishingly bad default rate.

Small Biz Lending Approval Rates Improve at Institutional Investors and Small Banks, Stall at Big Banks in March 2017 (Biz2Credit), Rated: AAA

Loan approval rates at institutional investors and small banks improved in March 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Big banks’ ($10 billion-plus in assets) loan approval were stagnant in the last month, but remained at an all-time Index high. Meanwhile, loan approval rates at credit unions and alternative lenders continues to falter.

Small businesses hate fintech lenders more than big banks (Financial Times), Rated: AAA

On Tuesday, the Federal Reserve Bank of New York released its 2016 small business credit survey, which gives us an idea of the experiences of over 10,000 firms across the US. As Matt highlighted yesterday, one of the things we learn from the research is that small business expectations doesn’t tell us much about the economy. But we also get some information on how small business owners view various sources of credit. The results for fintech startups, specifically online lenders, are not as great as you might expect:

So, the hype about streamlining processes and building better customer experiences is not all hype, though they do just slightly worse in terms of transparency.

But there is something going on with the cost of credit provided by online lenders, and the terms they demand. The survey defines ‘online lenders’ as “nonbank alternative and marketplace lenders, including Lending Club, OnDeck, CAN Capital, and PayPal Working Capital”, so there are potentially two things going on here.

One is that online lenders typically have a higher cost of capital than banks, and so they also charge higher interest rates, which is what drives the dissatisfaction. The second is that online lenders are targeting riskier businesses, who wouldn’t be able to borrow from a bank. That would suggest the higher level of dissatisfaction about repayment terms and interest rates arises from the fact they are lending to businesses that generally encounter high borrowing costs, no matter who they are borrowing from.

Venture Capital Funding Report Q1 2017 (CB Insights), Rated: AAA

US VC-backed companies saw $13.9B in total financing across 1,104 deals in Q1’17, up 15% and 2% from Q4’16, respectively.

While Asia saw an increase in unicorn births from Q4’16, North America remained flat with a total of 3 new unicorns. Notably, Europe has not seen a new VC-backed unicorn since the first quarter of 2016.

Source: Gallup

Elevate Credit: Not Trading At An Elevated Price (Seeking Alpha), Rated: A

The fintech has funded more than $4 billion in loans for 1.6 million customers by using machine learning to lower fraud scores while providing quick lending decisions based on data inputs for a high-risk borrowing group.

Revenues grew 34% to $580 million last year while operating income expanded to $48 million, up from $9 million in 2015. The fintech is still losing money; that typically is a large negative in the recent IPO market, though other offerings have rallied despite large losses.

In total, Elevate sold 14.26 million shares at $6.50 including the over allotment amount. The company raised about $81 million after fees.

The company has a fully diluted market cap of only $350 million using a share count of 41 million and nearly 4 million of outstanding stock options.

The reality is that Square had a very subdued IPO similar to Elevate Credit. The initial price range target was $11 to $13 while the actual offer price dipped to only $9, though Square jumped back to that original price range trading around $12 for most of the first month as a public company.

Should fintech startups buy banks? (Tearsheet), Rated: A

Banks buying startups isn’t anything new. But for financial tech startups, looking for scale at any cost, perhaps the solution would actually be to buy a bank, according to a growing number of observers and experts in the industry.

There are almost 6,000 FDIC-insured banking institutions in the U.S. as of the end of 2016 and 1,541 of them have less than $100 million in assets, including a sliver of failing banks that need saving. With average common equity around $12.5 million for a healthy bank of that size, a well-established startup could pay $25 million and get fully licensed to be deposit taking.

Part of the reason startups haven’t been able to scale, at least in the retail banking world, is that so-called innovations are usually just different ways for people to interface with their banks, while core banking transactions – deposits, loans, mortgages and payments – generally remain the same on the backend. In other words, there hasn’t truly been an Uber for banking, said Pascal Bouvier, a venture partner at Santander Innoventures. Most fintech startups operate at the thin outer layer of banking.

The valuation gap between fintech startups and banks makes it difficult to structure a deal, he said. Banks tend to be valued more through historical earnings and the price of tangible book value, whereas fintech startups, because of their perceived high growth potential, often tend to have higher earnings multiples.

Diversification 101 in Marketplace Lending (LendingClub), Rated: A

While loans are issued in amounts between $1,000 and $40,000, Notes can be purchased for as little as $25.

If you invested $2,500 in only one borrower and that borrower becomes late and the loan eventually charges off, you could potentially lose 100% of your total investment amount. If you invested $25 in 100 different borrowers your potential loss on any single Note would be limited to 1% of your total investment amount.

 

Episode 6 – Economic Analysis of Real Estate, Part 2 (RealCrowd), Rated: A

In this episode listeners will learn about:
– How rising household income impacts multifamily investments
– How property tax factors into decision making
– Where to access data on real estate markets
– What asset class RealSource is pursuing in this current economic climate 

Redfin Veterans Raise Pre-Seed Round and Launch Digital Mortgage Platform “Approved” (Yahoo! Finance), Rated: A

Approved launched its digital mortgage platform today, aimed at radically simplifying the home loan experience for lenders and borrowers nationwide. The company raised $1 Million in pre-seed funding led by Social Capital and Precursor Ventures to support the launch.

Lenders in the pilot saw an average 50% reduction in the time it took to get those documents.

Approved technology includes:

  • DocCast™: Automatically collect original bank statements, W2s, 1099s, 1040s and paystubs.
  • DocVision™ Camera Scanning: Allows borrowers to securely “scan” documents using their mobile devices.
  • White-labeled Dashboards: A delightful and frictionless platform for borrower and lender collaboration.
  • Digital Document Library: Support for all popular loan programs.

Opus releases new version of OpusNotes (Hedgeweek), Rated: B

Opus Fund Services, a provider of hedge fund administration services, has launched new release of the OpusNotes loan accounting platform for marketplace lending vehicles.

United Kingdom

Latest OFF3R Index Data Reveals Significant Increase in Equity Crowdfunding Investments in March 2017 (PR Web), Rated: AAA

This record breaking figure smashed the previous monthly high, set back in July 2015, by over £13 Million. This made March 2017 the most successful month for the total amount raised via equity crowdfunding platforms in the young life of the asset class in the UK.

According to the data from OFF3R, equity crowdfunding had a very strong finish to 2016 but had so far had a slow start to the year.

The data revealed that March 2017 was a strong month for the sector. Just over £300 Million was lent in March via the platforms that form the P2P element of the OFF3R Index, including Zopa, Ratesetter and Funding Circle. This was marginally higher than February’s data but slightly down from January’s year to date high.

Lending Works Announcement: £8.8 Million Has Been Invested In ISA Account Since February 2017 Launch (Crowdfund Insider), Rated: AAA

UK-based peer-to-peer lending platform Lending Works announced on Wednesday £8.8 million has been invested into the company’s Individual Savings Account (ISA) since its launch on February 8th.

Lending Works reported given that there are no limits on transfers of ISA funds accumulated in previous financial years, the largest individual investment to date within a Lending Works ISA stands at £154,190, while the average amount invested among the 815 ISA investors currently stands at £10,769.

Fintech founder: I would not set up in London today (Financial News), Rated: A

The founder of one of London’s best-known fintech startups has said that he would not choose London as a location to set up his business today, as he has “no idea what Brexit will mean”.

Taavet Hinrikus, the chief executive and co-founder of online FX service TransferWise, urged the UK government to quickly secure access to talent and trade with Europe in a post-Brexit world.

Funding Circle’s Desai: use P2P for monetary stimulus (P2P Finance News), Rated: A

UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.

The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.

Boost Capital Secures New £15m Credit Line (Boost Capital Email), Rated: A

No end to Boost Capital’s growth spurt as the business funding specialist secures new £15m credit line to meet small business loan demand.

An extra £15m will now be available to UK small businesses, after alternative business lender Boost Capital secured a new credit line from American Investment Firm Atalaya Capital Management.

Ex-Aldermore director joins SME lending platform (Bridging and Commercial), Rated: B

SME lending platform Growth Street has announced the appointment of a new commercial director and general counsel.

Chris Weller will serve as commercial director, having formerly held the role at Aldermore Bank from 2013-14 before becoming sales director for invoice finance until 2015.

Meanwhile, general counsel April Nardulli joins from P2P platform RateSetter, having served as senior regulatory counsel, regulatory lawyer and interim compliance manager since her appointment in 2015.

European Union

Finbee Experiences – My Portfolio Review (P2P-Banking), Rated: AAA

A year has passed since I last wrote about the portfolio I built on Finbee. Currently I have invested 1,027 Euro in 35 loans. 32 are current (965 Euro), 2 are late (23 Euro) and one is in default (38 Euro), but rates for this loan are paid to me by Finbee’s compensation fund. The average interest rate of my loan parts is 31%.

My self calculated yield (XIRR) is 31.5%. This is the highest I achieved on any p2p lending marketplace over a longer duration of time. Calculating the result again, this time with assuming a full write-off of the defaulted loan gives a yield of 29.4%.

Why banks are reluctant to enter the roller coaster of FinTech (JAXenter), Rated: AAA

Blockchain, NFC, Peer to peer lending are just a few of the options traditional banking could have fully adopted. This would have had a tremendous impact on the way we exchange transactions, do business and live our lives. However, I cannot name a big bank that has jumped on the bandwagon and delivered a fully-fledged product in this area. Just the opposite — the stories I hear are, for example, about two of the top executives of BNP Paribas in Bulgaria leaving the company to start their own Peer to peer lending platform called Klear. Why didn’t they initiate this project inside the organization?

I think there are two factors causing this:

  • Internal factor: Company culture in the traditional banking
  • External factor: The public image of banks is all about security, while innovation relates to risk.

Usually, new banking products need a lot of IT involvement — for each new type of deposit/loan you need someone to implement tens of forms and wizards.

How to enable innovation in banking

We have a good example of consortium of banks coming up with a radical move to start a joint blockchain project. This way none of the big players risks their own reputation.

Another way to announce innovative projects is by strongly focusing on the physical design and digital UX of the innovation because, believe it or not, the mass client judges how reliable something is by the external look of it.

Former HSBC banker Lake joins fintech revolution (Financial News), Rated: B

Spencer Lake, a former HSBC banker who led the group’s global capital financing business, has joined a fintech firm that boasts the UK bank as one of its main clients.

Lake has been named vice-chairman of Fenergo, a Dublin-based firm that makes what it calls client lifecycle management software, according to a statement from the company on April 12.

International

How fintech startups are helping SMEs choose who they do business with (Daily Fintech), Rated: A

According to Xero, 38 percent of small business owners indicate late payments cause them to delay payments to their suppliers, while 15 percent claim this often sees them delaying wage payments to staff, along with other benefits.

62 percent of businesses would not survive more than three months if all invoices went unpaid, while nearly 25 percent wouldn’t last a month.

Xero’s Live Contacts, a partnership with the local arm of credit bureau Equifax (formerly Veda) is one such data driven solution. As part of a paid-up Xero subscription, businesses can now see a credit risk indicator against a contact in their database, helping them to better assess whether to do business or not, or even risk adjust payment terms.

At the other end of the data spectrum, CreditMonk in India allows businesses to add a review of a creditor’s payment behaviour via its platform.

Asia

SINGAPORE-based Marvelstone Capital, which is a data-driven asset management company, is planning to launch its robo advisor platform for family offices in Asia in the third quarter of this year.

According to Cho, the robo advisor platform is being developed with Singaporean fintech startup Smartfolios, which is focused on building next-generation advisory and thematic investment technologies. The robo advisor will be available on desktop and mobile for Marvelstone Capital’s clients.

To give an idea of the market size of family offices in Asia, Cho cites a report that says that overall, the billionaires in the Asian market have about US$400 billion of assets at their disposal, which equates to an average of about US$3.6 billion per individual, which in turn makes all of them potential clients of family office solutions or even owners of single family offices. (Source:

Cho explains that family offices with below US$1 billion assets under management are the underserved family offices.

He adds that second priority countries will be Korea, China, Taiwan and Japan and that the third priority will be emerging markets such as Myanmar and Vietnam.

30 Under 30 Asia 2017: The Top Young Venture Capitalists And Fintech Entrepreneurs (Forbes), Rated: AAA

Val Yap founded PolicyPal — a Singapore-based smartphone app that helps users never miss a premium by tracking all their insurance on one dashboard.

MoolahSense Adds Invoice Financing to List of Services (Crowdfund Insider), Rated: A

Singapore-based MoolahSense, a marketplace lending platform, has added invoice financing as a new product line. The new service will allow SMEs to access financing to address short-term capital needs of up to $15,000. For investors, a nominal interest rate of up to 12% may be earned. An invoice backed loan would mature in 15 to 90 days’ time and investors would be able to receive returns in a relatively shorter period of time.

Authors:

George Popescu
Allen Taylor

Tuesday February 21 2017, Daily News Digest

Tuesday February 21 2017, Daily News Digest

News Comments Today’s main news: Defaults Slash Returns for Online Loan Investors Colchis and P2P GI. Banks warm to alt finance providers. Anaxago opens up French RECF to institutional investors. Alibaba to invest $200mil in Korea’s Kakao Pay. Today’s main analysis: OFF3R Index: Strong P2P lending growth continues. Today’s thought-provoking articles: Midsized companies turn to MPL. Consumer confidence at 10-year high. P2P […]

Tuesday February 21 2017, Daily News Digest

News Comments

United States

  • Defaults Slash Returns for Online Loan Investors GP:”Very interesting data from Colchis and P2P GI. A must read. Defaults are a real problem that has to be taken seriously.”
  • PeerIQ’s weekly industry update. GP: “Lending Club is showing stronger interest in balance-sheet risk throught building securitization shelf in-house. Other platforms may want to take note. And a very interesting reminder that all debt indicators are in the green.” AT: “With consumer confidence high, wage growth strong, and other economic indicators improving, we should see a rise in consumer loans. The outlook for MPL has never been better.”
  • High rate of defaults hit P2P lending sector. GP:” Finextra is mentioning this article. AT: “This is truly one of the biggest problems the industry faces. On the flip side, defaults are bound to happen. They are a critical part of the lending business.”

United Kingdom

European Union

Australia

Asia

India

United States

Defaults Slash Returns for Online Loan Investors, (WSJ), Rated: AAA

LendingClub unit, Colchis Capital record lowest returns in their main funds since each launched in 2011.

At LC Advisors, the Broad Based Consumer Credit (Q) Fund returned 1.83% in 2016, down from 5.76% in 2015 and 8.02% in 2014, according to the investor documents. That was worse than the 2.65% return of the Bloomberg Barclays U.S. Aggregate Index, a broad measure of performance of various fixed-income securities that LC Advisors uses as a benchmark.

LendingClub said in a securities filing in January that it was seeing signs of a stabilization in delinquencies after it raised rates on borrowers by a weighted average of 1.18 percentage points over the course of several months. And the Broad Based Consumer Credit (Q) Fund has outperformed its benchmark by more than 2 percentage points over the past three years. “The holistic performance of the Fund tells an important story,” LC Advisors said in a letter to investors.

Colchis’s P2P Income Funds, which have $1.3 billion in assets under management, posted a 2016 return of 6.2%, according to investor documents.

Colchis’s returns exceeded 9% in each of the preceding four years but were weighed down in 2016 in part because of weak debt-collection efforts at LendingClub and Prosper and a new accounting regime introduced earlier in the year, according to the documents.

Meanwhile, P2P Global Investments, which is managed by a unit of U.K. hedge-fund firm Marshall Wace LLP and listed on the London Stock Exchange, returned 4.1% in 2016, down from 6.6% the year prior.

At the end of the year, the fund’s shares traded at a roughly 20% discount to its net asset value.

Weekly Industry Update: February 20, 2017 (PeerIQ), Rated: AAA

In a major shift, Lending Club unveiled in their

High rate of defaults hit P2P lending sector (Finextra), Rated: AAA

Investors in the peer to peer (P2P) lending sector have seen their returns suffer due to a high rate of borrower defaults among start-ups, reports the Wall Street Journal (WSJ).

Shares in a number of P2P lending platforms have dropped as high profile players like US-based LendingClub and On Deck Capital have faced numerous difficulties. Investors previously attracted to the sector are now rethinking their approach, reports the WSJ.

The lending platforms are finding it difficult to bring down the default rates of their borrowers – insisting on more stringent credit standards and a more thorough application process would make the challenger lenders less attractive in comparison to the incumbent, traditinal lenders.

 

United Kingdom

Midsized Companies Turn to Marketplace Lending at Lendix & Creditshelf (Crowdfund Insider), Rated: AAA

At the onset of the marketplace lending market, lending to businesses was equated with lending to small and very small businesses: businesses at the low end of the small and medium-size enterprise (SME) market who were borrowing on average under €100,000. However, as the alternative lending market matures, it seems to attract larger SMEs borrowing bigger tickets, north of €400,000.

Olivier Goy is the founder and CEO of Lendix, an international business lending marketplace launched 2 years ago in France which has since then expanded into Spain and Italy. Tim Thabe is the co-founder and Managing Director of creditshelf, a German B2B lending marketplace for SME corporate borrowers and professional investors which launched in 2015.

Olivier GoyAt the onset, we did not plan to serve bigger tickets.

To give you an idea: the average loan size projected in our business plan was €50,000. The actual loan size in our first year of operation was €200,000. Now it is €400,000.

Of course, our funding mix, the fact that 80% of our funding comes from institutional investors was key to achieving this.

Tim Thabe: Indeed, we have deliberately targeted larger tickets. Our motivation was twofold. Firstly, we believed that we needed larger tickets to justify the expense of in-depth credit risk analysis. Secondly, the larger SMEs have more history and substance, and therefore more material to which we can apply this risk analysis in a meaningful way.

Currently, our average loan size is between €500,000 and €600,000. We expect it to grow towards between €800,000 and €1 million.

Olivier Goy: Bigger tickets are less expensive to recruit than small SME borrowers. However, the structure of larger SMEs is more complex, therefore is takes more time to analyze them and assess their credit risk. So far, we have not noticed a major difference in default rate, even though we know for a fact that there is a negative correlation between company size and credit default rate.

Olivier Goy:  European alternative investment funds (ELTIFs) now make it easier to invest in larger tickets. We are voluntarily limiting ourselves to €2.5 – €3 million because don’t want to be exposed to a few big tickets.

Tim Thabe: At creditshelf, we don’t have a regulatory loan size limit because we use a fronting bank and because we raise funds for each project from a small number of accredited investors; 20 or fewer.

The main issue with regulation is that it is not consistent throughout Europe.

Tim Thabe: We believe that there is a gap in the private debt market reaching from very small tickets all the way up to ticket sizes of €10 million or €15 million where private debt funds are starting to operate and traditional private placements can be arranged economically.

OFF3R Index: Strong P2P Lending Growth Continues (Crowdfund Insider), Rated: AAA

OFF3R, an online marketplace for alternative investments, published a report on P2P lending and crowdfunding last week. OFF3R said that while equity crowdfunding sagged in January – dropping 65% from December – P2P lending remained strong.

Regarding P2P lending, OFF3R covers nine UK platforms in their Index. According to their numbers, these nine platforms lent a total of £294 million in January 2017, an increase of 6% versus December 2016.

OFF3R stated that historically low-interest rates are helping to drive investor interest in P2P lending assets as their risk-adjusted returns are appealing. OFF3R said this is highlighted by the fact that the Index platforms lent 50% more money in January 2017 compared to the same month in 2016.

Banks warm to alternative finance providers (Bridging&Commercial), Rated: AAA

Speaking at Fintech Fortnight on 16th February, Angus Dent, CEO of P2P business lender ArchOver, revealed that some banks were now directing borrowers they cannot serve to alternative finance providers rather than rejecting them outright.

Angus suggested that by recommending borrowers to platforms such as ArchOver or RateSetter, banks could maintain a relationship with the client rather than risk losing them to a competitor in future.

P2P lending discovers new pitfalls in the construction sector (Financial Times), Rated: AAA

A couple of years ago, a little-known civil engineering company called Elimco UK got into trouble.

Pressed for money, the company did what a small but growing number of businesses are doing today. It turned to the “peer-to-peer” lending sector. In June 2015, Elimco began using MarketInvoice, a startup backed by the government-owned British Business Bank. Cash flowed again, but not for long. Eight months later, Elimco was in administration and MarketInvoice’s investors were looking at losses of almost £800,000.

When MarketInvoice first took on Elimco as a customer in June 2015, the firm was assigned a high risk rating, seven out of 10, even though it had a guarantee from its Spanish parent company. But Elimco’s risk rating soon improved dramatically. By August, just two months later, it was selling invoices with a risk rating of two out of 10, in part because it had made payments on time.

To-date, MarketInvoice has financed around £1bn in invoices and plans to double that number this year alone. The construction sector accounts for about 16 per cent of invoices* sold through the seven-year old startup.

One of the factors investors are unable to filter by with MarketInvoice’s autobid function, however, is sector. An investor can’t decide to avoid construction companies, for example. Last year, in an email to an investor seen by FT Alphaville, a MarketInvoice employee said this was because it would be harder for businesses to get financing if investors could engage in sector by sector “cherry picking”.

In construction, you have ‘set off’ rights, which give a customer the right to withhold payments due on one contract in order to compensate for costs incurred on another contract. It’s basically a form of security for the customer.

Set off rights proved to be an issue in the case of Elimco. When it went into administration, it was owed £1.4m by Scottish Power, which in turn claimed around £2m for costs it would have to incur to complete other work Elimco was contracted to do. Elimco UK had little in the way of assets, so the only money available to be distributed to MarketInvoice was the money owed by Scottish Power, which had effectively said it wouldn’t pay because of its ‘set off’ rights.

BondMason CEO Stephen Findlay Comments on RBS Move into Online Lending via NatWest (Crowdfund Insider), Rated: A

Last week, NatWest – part of the Royal Bank of Scotland (RBS) – announced a new online platform designed to simplify the loan making process for UK SMEs.

Stephen Findlay, CEO of BondMason – Robo-Advisor for investors in P2P loans, shared his thoughts on RBS’s strategic move challenging peer to peer lending.

“… we don’t view this as negative competition to the P2P platforms already in this space, or vice versa. Rather, we think these different offerings will complement the industry and encourage improved standards and better self-regulation as more participants enter the market – a ‘flight to quality’ which we certainly welcome. The move by the banks also supports the growth of what is becoming a mainstream asset class, demonstrating that P2P lending is now recognized and being embraced by the traditional banking and finance sector.”

European Union

Anaxago Opens Up French Real Estate Crowdfunding to Institutional Investors (Crowdfund Insider), Rated: AAA

Anaxago Immobilier, the real estate arm of leading French equity crowdfunding platform announced last Saturday that it has secured € 10 million of funding pledged by a group of French institutional investors, qualified investors, and family offices to finance real estate development projects alongside retail investors. With this move, the firm departs from its 100% retail investor-funded model.

The French real estate crowdfunding market emerged only in 2015. It is almost entirely dedicated to the short-term (average 17 months) debt-funding of real estate development, as opposed to funding buy-to-let.

This FinTech CEO Is Making Money Instantly Available Anywhere In The World (Forbes), Rated: A

The mission of Creamfinance is to become the first one-click consumer loan provider in the world; making money available anytime, anywhere. The startup has raised over $7.3 million in funding to date, and has grown to over 200 employees expanding across 7 countries. In 2014, the data-driven consumer lending company raised 5 million Euros from the leading international venture capital fund, Flint Capital, which invests across the U.S., Israel and Europe.

Creamfinance currently offers consumers rapid credit solutions in several global markets, including Poland, Latvia, Czech Republic, Georgia, Denmark, and Mexico.

Matiss Ansviesulis: We focus on Smart Data scoring, otherwise known as behavioral pattern recognitions tools focusing on relevant, value-adding data.

We all know that big data is defined around four core aspects – data volume, velocity, veracity, and value. Whereas volume and velocity aspects refer to data generation and storage process, veracity and value deal with the usefulness of the data. In Big Data, due to the large number of data points, a lot of noise is being created, which challenges the value of data. Instead, we focus on smart data — well-defined, meaningful information that can expedite information processing and offer more privacy, stability. This is way more economical and creates less noise.

In 3-5 years, I hope to have initiated more discussion and action towards FinTech and banks cooperation. Also, in 3-5 years, I expect other companies to put emphasis on smart data scoring that leads to quicker decision making, and therefore more speedy loans for the customer.

Australia

Federal Treasurer Scott Morrison recently told a G20 conference in Germany of his plans to encourage more robo-adviser start-ups to launch in Australia.

But his comments highlight a general lack of understanding of the differences between “robo-advisers” and the digital advice needs of the majority of Australians.

However this leads to a common misunderstanding that pure B2C robo-advice start-ups address the everyday person, they don’t. In fact, we estimate they will only represent 5 per cent of the market.

It is broadly accepted that 15 per cent of the Australian population utilises traditional financial advisers (about 2.4 million people currently see planners according to Investment Trends— and typically that is the wealthiest 15 per cent of the population seeking to enhance investment opportunities.

The fact is robo-advisers are geared towards people making non-super investments. Ordinary working Australians – the other 85 per cent of the market – are accumulating wealth into superannuation and their homes.

Advising the remaining 80 per cent of the population is what the banks and super funds are striving for.

Asia

Alibaba Unit to Invest $ 200 Million in Korea’s Kakao Pay (Cryptocoins News), Rated: AAA

China’s Ant Financial, the financial investment arm of Alibaba Group and the world’s most valuable Fintech company, will invest $200 million in the mobile payment subsidiary of Kakao Corp, a major South Korean messaging platform.

Ant Financial announced the investment to be a part of a ‘larger strategic partnership agreement’ which will see Kakao Pay gain access to Ant Financial’s tremendously popular Alipay platform, allowing subscribers of both platforms to use each other’s services. Fundamentally, the move is to bridge Ant’s 450 million global users with Kakao Pay, which has over 14 million members in South Korea.

Further, the new partnership will benefit some 7.5 annual Chinese tourists visiting South Korea. Alipay users will be able to use their payments app with Kakao’s network of 34,000 South Korean merchants, both online and offline.

New platform revolutionizes the way Cambodian businesses borrow money (Southeast Asia Globe), Rated: A

Frustrated by limited funding options for small businesses, Chansamrach Lem launched the country’s first online peer-to-peer lending platform

Securing funding is a significant challenge for small- and medium-sized enterprises (SMEs) everywhere, but it is an even bigger obstacle in Cambodia, where banks, by and large, only accept real estate as loan collateral and few alternative financing solutions exist beyond friends and family.

While other P2P lending platforms are already in use in Cambodia, Komchey is the first such software to be designed and owned by a Cambodian company.

India

RBI asks banks to collaborate with fintech cos (India Times), Rated: A

The RBI deputy governor has said that in view of the competition from fintech companies, banks should reorient their business model and look at collaborating with more efficient players after assessing the likely impact of disruption.

The deputy governor said that SME lending, being a hugely underserved market, is a major opportunity for fintech startups to build and scale up sustainable businesses by offering services such as credit underwriting, and marketplace lending.

With around 51 million units throughout the geographical expanse of the country, MSMEs contribute around 8% of GDP, 40% of the total exports and around 45% of the manufacturing output.

South America

Interview with the CEO of Brazil Fintech Company, IOUU (TechBullion), Rated: A

Bruno Sayão: Our inspirations are Funding Circle (Europe) and Prosper (USA) and like them, we are passionate about micro and small companies, so we want to revolutionize the way they access financing. For this, we want to build a marketplace and make financing fair, simple and fast.

Bruno Sayão: IOUU charges only a credit origination fee after the company is able to capture the desired loan amount.

Bruno Sayão: In IOUU we try within 48 hours to inform if the company is going to be able to take loan with us, we created an extremely efficient process, whereas in the banks these processes are inefficient.

In addition, the interest rates charged are much lower than the banks, since our spread is extremely low because the whole process is done 100% online and we do not hide tariffs, the borrower knows exactly how much to pay in interest, IOF and Rate.

Bruno Sayão : Currently our biggest challenge is to get a partner financial institution interested in backing our operations, because in Brazil we can only operate being within the norms of the Central Bank of Brazil, since we act as banking correspondent;

Bruno Sayão : For the Brazilian to invest is still difficult and complex. People can not really understand the types of investments that are available and how they can do them. Estimates indicate that 55 million people over the age of 18 do not have a bank account and that 40% of micro and small enterprises in Brazil are debtors.

Bruno Sayão : Peer to peer lending is a risky investment made to diversify the investor’s portfolio. To mitigate risk to the maximum for the investor, our technology can verify in more than 500 public and private databases the credit history of the companies that will be published for capture in the platform. In addition, we recommend never investing the entire value in a single company, but rather diversify the investment into a pool of companies.

Authors:

George Popescu
Allen Taylor

Friday January 20 2017, Daily News Digest

loan principal outstanding uk

News Comments Today’s main news: LendIt announces finalists to first annual industry awards. OFF3R reports strong growth in UK P2P lending (38%growth in 2016 to £2.653 billion) Today’s main analysis: You can’t keep a good crowd down. Today’s thought-provoking articles: LendingRobot introduces robo-fund for alt lending. France sees first big loss in RECF. United States LendIt announces finalists for […]

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News Comments

United States

United Kingdom

European Union

India

United States

Finalists Announced for First Annual LendIt Industry Awards (PR Newswire), Rated: AAA

LendIt, the world’s largest show in lending and Fintech, today announced finalists for its first annual LendIt Industry Awards. Out of hundreds of applicants worldwide, the selected finalists are all vying for top honors within 18 categories, which celebrate Fintech market leaders, emerging innovators, and top talent. Finalists were chosen based on innovation, emerging talent and top performers.

The finalists will be evaluated by more than 30 renowned Fintech industry experts including CEOs, investors and media. The winners will be announced during the LendIt Industry Awards Show & Dinner taking place on March 7th at the Edison Ballroom in the heart of New York City. In addition to the ceremony, the LendIt Industry Awards evening will include a cocktail reception, a 3-course dinner and live entertainment.

Below are the finalists, per category:

Innovator of the Year

  • Fundbox
  • Lemonade
  • LendKey
  • XOR Data Exchange
  • Zopa

Top Consumer Lending Platform

  • Avant
  • LightStream
  • Marlette Funding
  • SoFi
  • Upstart
  • Zopa

Top Small Business Lending Platform

  • Ascentium Capital
  • Iwoca
  • Kabbage
  • OnDeck
  • StreetShares
  • SmartBiz

Most Innovative Bank

  • Cross River Bank
  • Goldman Sachs
  • ICICI Bank
  • Santander Bank
  • UBS
  • WebBank

Best Journalist Coverage

  • George Popescu, Editor in Chief, Lending Times
  • Anna Irrera, Fintech Correspondent, Reuters
  • Zack Miller, Founder and Editor, Tradestreaming
  • Sean Murray, President and Chief Editor, deBanked
  • Oscar Williams-Grut, Senior Reporter, Business Insider UK
  • Tony Zerucha, Managing Editor, Bankless Times

See the full list of finalists in every category here.

The First Robo-Fund for Alternative Lending (LendingRobot Email), Rated: AAA

LendingRobot clients can enjoy both superior returns and low volatility, thanks to the combined benefits of the asset class and our machine-learning algorithms, but we think now is the time to move to the next level. This is why, next week, we will launch ‘LendingRobot Series’, the first combined robo-advisor/investment fund ever created for Alternative Lending.

Like a fund, LendingRobot Series will offer automated diversification on multiple origination platforms. Unlike a traditional fund, LendingRobot will improve liquidity, be flexible, and be completely transparent. Uniquely, you will decide how you want your portfolio to be constructed: conservative vs aggressive, short term vs long term.

I highly recommend you to visit to learn more and secure a spot immediately, as we are initially limited by regulatory and business constraints to only 99 accredited investors.

Lending Robot for Advisors Launches Connecting to Lending Club Platform (Crowdfund Insider), Rated: A

Lending Robot, the robo-advisor that connects retail investors to P2P loans, has launched a new product: LendingRobot for Advisors. This new service will help connect registered investment advisors to invest in Lending Club loans.

TD Bank to sponsor MIT’s first fintech hackathon (Finextra), Rated: A

MIT has recruited TD Bank and Prudential to sponsor its first-ever fintech hackathon.

The two-day event in February is challenging students and young professionals to create an interdisciplinary team and compete for a $10,000 prize pot.
The 30-hour hack will culminate with a demo to a panel of judges and mentors, with the winning team pocketing a $4k grand prize and the four runners up walking away with $2k bonuses.

How Fintech Can Disrupt the $ 14T Mortgage Market (Investopedia), Rated: A

Fintech, which has already disrupted the payments, banking and financial advisory markets, is beginning to enter the $14 trillion mortgage market.

Non-bank mortgage lending is expanding as commercial banking declines. In fact, mortgage lending by type of institution shifted dramatically between 2007 and 2014. Recently, commercial banks provided 52% of mortgage lending, down from 74% in 2007. In 2014, mortgage lending by non-banks almost doubled to 43% from 23% in 2007.

Radius Financial Group cracked the fully paperless mortgage code in 2016.

Clara, a California startup, aims to solve some of the mortgage problems that plague consumers seeking to buy a home. Founded by engineer Lukasz Strozek and Jeff Foster, a former policy advisor at the U.S. Treasury Department, Clara strives to smooth out the inefficiencies that accompany the mortgage lending industry. Clara differentiates itself by educating lenders and offering an online portal for completing paperwork.

Lenda, a home-loan provider, also offers a digital mortgage solution. Other digital mortgage lending services include Quicken Loans’ Rocket Mortgage. Then there’s SoFi, the fintech firm known for student and personal loan services, which is also gaining ground in the digital mortgage lending sphere.

A recent JD Power survey found that 62% of respondents under 35 who bought a home this year stated that they’d use a mobile app to complete a mortgage application, if available from their lender.

United Kingdom

You can’t keep a good crowd down – the rise of alternative finance (altfi), Rated: AAA

As the graphic clearly illustrates, the past three years have been a period of very strong growth for the sector, and business has grown six- to seven-fold for market leaders Funding Circle and Zopa in that time.

As one might expect, net lending (i.e. originations less redemptions), has been positive and gathering pace over time – a clear sign that investors have slowly but surely embraced P2P lending and Crowdfunding as genuine alternatives to conventional forms of finance.

However, the blip that should be immediately obvious to everyone is the six-month lull around the EU referendum vote in June 2016. While total net lending remained in positive territory (i.e. the industry was growing overall), volumes halved to an average of c.£40m/mth in the months leading up to and immediately after Brexit (versus c.£80m in the six month period prior).

Nonetheless, volumes have rebounded quickly and strongly, and by November 2016, monthly net lending across the four largest P2P platforms had reached a new record of over £100m.

OFF3R Index: Very Strong Growth for UK P2P Lending in 2016 (Crowdfund Insider), Rated: AAA

Today we have numbers from OFF3R that captures the activity of 9 UK peer to peer lending platforms.

According to the OFF3R Index, p2p lending grew by 38% in 2016 increasing by £732 million during the year topping £2.653 billion.

  • The European Parliament announced towards the end of 2016 that the Equity Crowdfunding limit for raises on platforms without an investment prospectus would increase from €5million to €8million.
  • Greater consistency of financial performance data and clearer vetting of investors may impact the industry.

Assetz Capital Hurdles £200 Million in Lending to SMEs (Crowdfund Insider), Rated: A

Assetz Capital, a peer-to-peer lending platforms, has announced having originated £200 million in loans since launching in 2013. The alternative finance platform targets small and medium-sized UK businesses and also helps property developers acquire funding. Assetz Capital says it is now originating secured loans totaling up to £26 million per month. In Q4 of 2016, Assetz Capital lent over £45 million.

The milestone caps a record year for Assetz Capital, in which over £108 million was lent in 2016. Investors earned a total of £17 million of interest since the platform launched.

‘Socially useful’ finance and the regulation of peer-to-peer lending in the United Kingdom (LSE), Rated: A

These appeals to socially useful finance occurred at a time in which there was also a large-scale expansion of forms of financial activity that could lay claim to meeting some of these criteria.  A sub-section of these emerging financial activities—peer-to-peer lending, in which various platforms focus on brokering direct lending agreements between counterparties—has seen particularly impressive growth, with statistics from Altfi showing lending volume across the sector totalling over £7.8bn by January 2017, rising from just £400m in January 2013.

The regulation of the peer-to-peer lending marketplace is therefore of considerable significance, because regulation by the state represents an explicit endorsement that an activity is legitimate and credible as well as providing reassurance that adequate protections are in place.

In sum, then, P2P lenders were successful in lobbying for regulation, providing the industry with reputational legitimacy without stifling industry practices.   In contrast to mainstream finance were such appearances of capture have led to accusations of rent-seeking, the case of P2P lending appears to have facilitated financial activities that meet some regulators’ (admittedly modest) understandings of ‘socially useful’ finance.

European Union

Tout Perdu: First Big Loss Hits French Real Estate Crowdfunding Sector (Crowdfund Insider), Rated: AAA

According to a report in Capital, real estate developer Terlat has used two crowdfunding platforms to finance projects. Terlat has leveraged both WiSeed and Anaxago – two prominent online marketplaces – to raise capital for six different projects. The report states the company is now at risk of bankruptcy placing approximately €2.6 million raised on crowdfunding platforms at risk.

“[WiSeed] has already received from Terlat a reimbursement of €300,000 out of the €560,000 loaned as part of the project Le Passage.”

Lender Linked Finance agrees funding deal with Eiffel (Irish Times), Rated: A

Irish peer-to-peer lender Linked Finance has agreed a deal with Paris-based Eiffel Investment Group that will boost its access to funding as it seeks to become the biggest non-bank lender to SMEs here.

Eiffel has agreed to contribute up to 20 per cent of funding for new loans listed on Linked Finance’s platform.

India

Govt should allocate funds for infrastructure projects in order to sustain demand (India Info Online), Rated: A

India’s economic growth is likely to decelerate by 1% to 6.6% this year as per IMF recent release. Government is therefore expected to allocate funds for infrastructure projects in order to sustain demand during the year 2017.

Hence, we expect government to provide tax exemption upto Rs 1,00,000 on investment in alternative investment sources and make provisions towards adjusting loss / non recoverable debt against the respective head.

The move shall encourage individuals to invest in alternative investment platform namely P2P lending which is a high return, medium risk avenue facilitating better returns for the common men at one end and funding support for SME on the other.

Authors:

George Popescu
Allen Taylor

Thursday November 17 2016, Daily News Digest

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News Comments Today’s main news: Zopa plans to start a digital-only bank. Renaud Laplanche kicks off a rival to Lending Club. Two Avant securitization break triggers. Today’s main analysis : Surge of online loan defaults. Today’s thought-provoking articles: Yirendai’s CFO Dennis Cong discusses P2P rules in China. Indonesian P2P companies seek regulatory clarity. Fundbox reveals volume of small […]

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News Comments

United States

  • Fired Lending Club CEO starts another online lending company. GP:” I strongly believe that Renaud didn’t do anything really wrong and that he demonstrated his unbelievable accumen in building Lending Club. I would back him any day of the week to build a new company in the space. Yes, he did round some corners, but who has never made any mistakes ? And I think one learnes from past experiences. I am very bullish on Credify ” AT: “Anyone who didn’t see this coming is blind. There was no non-compete in place. What else would a pioneer of an industry do?”
  • A surge of online loan defaults rocks the industry. GP:” There are 2 extremes in the industry. On one side companies like SoFi who have outstanding performance and on the other side companies like Circle Back who demonstrated a track record of poor underwriting. Underwriting is the foundation of all online lenders and some understood it and some have not. I don’t think that online lending has any particular correlation with underwriting quality. However, because hundreds of new companies debuted in online lending, of course some of them will do a poor job at it.” AT: “Critics have been warning aboout a P2P bubble for quite a while now. Is this evidence of it? Or perhaps online lenders have simply taken too many risks and this is a self-correcting hurdle the industry must get through to move on to higher mountains. I favor the latter.”
  • Fundbox analysis shows $ 825 billion in small business unpaid invoices. AT: “There have been an untold number of small businesses tank due to cash flow issues caused by big businesses paying invoices late, slowly, or not at all. While interesting, and not really news to small business owners, this PR looks like an attempt at free publicity.”
  • U.S. consumers increasingly default on marketplace loans. GP: ” 2 Avant securitizations, done by Jefferies, and 1 done by Morgan Stanley, breached triggers. The 2 Jefferies ones did so this month. In addition, a CircleBack securitization done by Jefferies is expected to do so as well. The common points ? Loans made to sub-prime borrowers on average, and 3 out of 4 securitized by Jefferies.”
  • Jefferies files for second LC ABS. GP:” Jefferies securitizations have a poor reputation in general in p2p lending. However, Lending Club has all interest for this second securitization to go well. We think Lending Club has the expertise and means to do a good evaluation of what they are selling. In all cases, we are curious to see how this package will sell.”
  • Blockchain investment declines with few exceptions.
  • Baltimore-based eOriginal raises $ 26.5 million.

United Kingdom

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United States

Fired LendingClub CEO Sets Up Rival Lender Nearby (The Wall Street Journal), Rated: AAA

A few blocks from the San Francisco headquarters of LendingClub Corp., its ousted chief executive is plotting a comeback to the industry he pioneered.

Renaud Laplanche has started a company called Credify Finance Corp. that will make loans via the internet just like LendingClub, according to corporate filings in several states.

Credify is still in the early stages of development. The company hopes to start extending credit to consumers in 2017, according to people familiar with the firm’s plans. It estimates it will generate $50 million in revenue next year, according to one state filing.

Credify was incorporated in Delaware on May 31, less than a month after Mr. Laplanche left LendingClub, according to state records. He didn’t sign a noncompete agreement with LendingClub that likely would have prevented him from starting a rival firm, according to people familiar with the matter.

Over the summer, Mr. Laplanche’s new company set up offices in a high-rise in San Francisco’s financial district and started the process of registering to do business in more than a dozen states, according to filings in those states.

Credify is being funded with Mr. Laplanche’s money and that of outside investors, people familiar with the matter said.

Surge In Online Loan Defaults Sends Shockwaves Through The Industry (Zero Hedge), Rated: AAA

Online lenders were supposed to revolutionize the consumer loan industry. Instead, they are rapidly becoming yet another “the next subprime.”

We first started writing about the P2P sector in early 2015 with cautionary pieces like and “Presenting The $77 Billion P2P Bubble” and “What Bubble? Wall Street To Turn P2P Loans Into CDOs.” Things accelerated in February of this yearwhen we first noted that substantial cracks were starting to show in the world of P2P lending, and more specifically, with LendingClub’s inability to assess credit risk of its borrowers that were causing the company to experience higher write-off rates than forecast.

Until today, that is, when we learned that – as expected – there has been a spike in online loan defaults by US consumers, sending a shockwave through the online lending industry: a group of online loans that were packaged into bonds is going bad faster than lenders and bond underwriters had expected even after the recent volatility in the P2P market, in what Bloomberg dubbed was “the latest sign that some startups that aimed to revolutionize the banking industry underestimated the risk they were taking.”


However, that was a linear deterioration which had no impact on mandatory cash covenants, at least not yet. With the breach of trigger points, online lenders have officially entered the world of binary outcomes, where the accumulation of enough bad loans will have implications on the underlying business and its use of cash.

And while P2P may be the “next” subrpime, there is always the “old” subprime to fall back on to get a sense of the true state of the US consumer :as Bloomberg adds, the percentage of subprime car loan borrowers that were past due reached a six-year high in August according to S&P Global Ratings’ analysis of debts bundled into bonds.

Fundbox Reveals How $ 825B In Unpaid Invoices Stagnates U.S. Small Businesses (PR Newswire), Rated: A

Fundbox, the leading cash flow optimization platform for small businesses (SMBs), today released findings from its customer data on invoice payments. The study, designed to better understand the overall financial health of SMBs, revealed the huge economic impact of unpaid invoices. Over the last 12 months, the total amount in unpaid invoices across all U.S. SMBs is approximately $825 billion.

Cash flow gaps from unpaid invoices are often cited as the most challenging hurdle for SMBs. Looking back at 12 months of data, Fundbox analysis found that 22 percent of invoices are unpaid at any given time. This equates to $84,000 per small business in unpaid invoices. In some cases they never receive payment.

U.S. Consumers Are Increasingly Defaulting on Loans Made Online (Bloomberg), Rated: A

Delinquencies and defaults are reaching key levels known as “triggers” for at least four different sets of bonds. Breaching those levels will force lenders or underwriters to start paying down the bonds early. Avant Inc. and its underwriters, for example, are going to have to begin to repay three of its asset-backed notes, according to a person with knowledge of the matter.

Online loans have shown other signs of weakening.

LendingClub’s founder, Renaud Laplanche, wanted to change banking as we know it, but many online lenders are now finding themselves in uncharted territory. Steve Eisman, a money manager who famously predicted the collapse of subprime mortgage securities, said some firms have been careless and that Silicon Valley is “clueless” about the work involved in making loans to consumers. Non-bank startups arranged more than $36 billion of loans in 2015, mainly for consumers, up from $11 billion the year before, according to a report from KPMG.

Lenders themselves are talking about the heavy competition for customers. Jay Levine, the chief executive officer of OneMain Holdings Inc., one of America’s largest subprime lenders, said last week that “the availability of unsecured credit is currently the greatest that has been in recent years,” although he said much of the most intense competition is coming from credit card lenders. OneMain, formerly part of Citigroup, is taking steps to curb potential losses by requiring the weakest borrowers to pledge collateral.

Jefferies arranges second Lending Club ABS (Global Capital), Rated: A

Jefferies filed deal documents with the US Securities and Exchange Commission (SEC) on Tuesday for Lending Club Issuance Trust Series 2016-NP2. The transacation will be backed by near-prime unsecured consumer loans from Lending Club. Jefferies previously debuted a $105m unrated private offering from the same shelf in August.

Blockchain Capital Dries Up as Big FinTech Deals Decline (CoinDesk), Rated: B

Cash is drying up for bitcoin and blockchain startups amid a broader decline in FinTech funding, according to new research from KPMG and CB Insights.

The report, published today, shows that for the third straight quarter, VC investment in startups using distributed ledgers declined.

While enthusiasm for the technology remains, the report said that companies shouldn’t expect additional funds until countless proofs-of-concept emerge on the market.

But while venture capital for blockchain innovation is on the decline, different regions tell different stories.

The US and Denmark are listed as the top countries participating in blockchain investment, while a particularly slow quarter for Europe is blamed in part on uncertainly following Britain’s decision to leave the European Union.

An “uptick” in Asian investment in blockchain and financial technology more generally speaking is credited with the region’s interest in its potential to help it expand beyond its traditional borders.

Fintech company eOriginal raises $ 26.5 million (Technical.ly), Rated: B

A Baltimore fintech company closed a $26.5 million transaction of its own this week.

The equity round for eOriginal was led by Philadelphia-based private equity firm LLR Partners. eOriginal was founded in 1996, and has offices in the Camden Yards warehouse.

With the new funding eOriginal is looking to expand its digital transaction management offerings, which help companies execute businesses transactions with electronic signatures and document verification. The tools are used for marketplace lending, as well as vehicle and equipment banking.

United Kingdom

Peer-to-peer giant Zopa to launch digital bank (The Telegraph), Rated: AAA

Zopa, Britain’s biggest peer-to-peer website, has applied for a banking licence to launch a “next generation bank”, which will sit alongside its existing investments business.

When launched, the platform says it will offer term-deposit accounts for savers and revolving lines of credit for borrowers, although a spokesman admitted the company does not yet know “exactly what they will look like”.

By applying for a banking licence Zopa says its customers will receive protection through the Financial Services Compensation Scheme. However, it expects this will only apply to banking customers and not to its peer-to-peer customers.

It expects the licence approval to take up to two years.

A year of growth for online lending. October industry news (Funding Circle), Rated: AAA

Last month our team was the lead sponsor at LendIt, the largest conference dedicated to connecting the global online lending community. The conference, which took place over two days in London, had more than 900 attendees from across the world. Samir Desai, Funding Circle CEO and co-founder, delivered the keynote speech where he discussed the importance of being good at both the ‘fin’ and the ‘tech’. Watch the video to learn about the three ‘mega-trends’ that make online lending an unstoppable force and read this piece to hear why Samir believes our sector is about to enter a ‘golden age’.

Another way for investors to diversify their online lending portfolio is to look at the various investment trusts that are now in this space. These funds allow investors to diversify either across regions or platforms. Learn more about the opportunities and risks involved with these investments in This is Money. Remember, when you lend, your capital is at risk.

Where is the most profitable area in the UK for buy-to-let landlords? (Home.co.uk), Rated: A

According to Lendinvest’s latest buy-to-let index, Luton in Bedfordshire is currently the most profitable area in the UK for buy-to-let landlords, with rental prices increasing by almost 10%, the largest increase in the country.

On an annual basis landlords in Luton generated a 4.81% yield, while home prices rose by 13.63% and experienced rental price growth of 9.58%.

The top 10 buy-to-let postcodes

Yield Capital gains Rental price growth Transaction volume growth
Luton 4.81% 13.63% 9.58% -4.71%
Stevenage 4.31% 14.78% 8.95% -9.81%
Enfield 4.76% 17.36% 2.21% -4.35%
Northampton 4.87% 8.11% 8.33% 4.38%
Dartford 4.78% 13.02% 7.98% -10.22%
Southend-on-Sea 4.56% 11.79% 5.95% -4.63%
Romford 5.26% 13.47% 2.48% -1.55%
Chelmsford 4.26% 12.15% 5.29% -3.96%
Southall 4.88% 14.01% 3.97% -10.36%
Twickenham 4.48% 15.49% 2.34% -9.16%

OFF3R launches index for AIM (Every Investor), Rated: A

OFF3R analysed major equity crowdfunding platforms including Seedrs, Crowdcube, Syndicate Room, Angels Den, Envestors and The House Crowd. The P2P lending platforms examined were Zopa, Landbay, RateSetter, ArchOver, Marketinvoice, Lending Works, Funding Circle and Thin Cats.

The Index shows that equity crowdfunding raised a combined total of £216.25m and P2P facilitated a combined lending of £2.6bn.

The Index shows that the average amount lent per month was £197m across the eight platforms. April 2016 showed a 7% drop due to a number of factors, such as Lord Turner’s negative comments about the P2P market and Lending Club’s loan book discrepancies.

China

Yirendai’s Cong: China’s P2P Rules a Great Step Forward (Bloomberg), Rated: AAA

P2P Industry Struggles to Conform to New Restrictions (Caixin Online), Rated: A

Three months after Beijing imposed strict rules on the peer-to-peer (P2P) lending industry, many firms have made little progress in meeting some of the key requirements.

One major problem they have is ensuring borrowers don’t exceed newly imposed credit limits, industry experts said. Another is that many P2P firms haven’t met the new requirement to find a bank to be the custodian of the funds they get from their client investors, who are essentially the lenders.

Among the many restrictions the policy introduced was a ceiling on how much a person can borrow through P2P platforms. The limit for each individual through one website was set at 200,000 yuan ($29,200). A person cannot borrow more than a combined 1 million yuan from P2P lenders regardless of how many platforms they use.

The policy gave all P2P firms until the end of August 2017 to ensure compliance.

Even with the grace period, however, about 90% of the existing platforms will likely have to shut down, primarily because of the loan-size requirement, said Xu Jianwen, founder and CEO of rrjc.com. Xu’s P2P lending website is ranked by industry data provider wdzj.com as among the country’s top 50 such sites.

India

SRS Fin Tech launches alternative lending platform OxyLoans (Business Standard), Rated: AAA

City-based financial technology startup SRS Fin Tech Labs today announced the launch of ‘OxyLoans’, an alternative lending platform, and said it aimed to disburse USD 1 billion by 2024.

Armed with proprietary algorithms showcasing credit score, underwriting and agreement preparation, OxyLoans enables investors and lenders to assess borrowers and offer them the option of accepting or rejecting an application, he said, adding that it also provides business as usual loans in partnership with banks.

Asia

Indonesian P2P industry seeks regulatory clarity (Nikkei Asian Review), Rated: AAA

Peer-to-peer (P2P) online lending is surging in Indonesia, prompting regulators to prioritize the establishment of a legal framework to protect the industry — a move that participants say is essential to fulfil its potential.

The market is growing rapidly, driven in part by the 65% of the population of 250 million that is excluded from the banking system. The value of online transactions will reach $14.8 billion in 2016 from $8 billion in 2013, according to Bank Indonesia, and is expected to grow to $130 billion by 2020.

The Financial Services Authority, known by its Indonesian initials OJK, has made financial technology regulation a priority, and is focusing on the payment services industry, which is seen as the sector with the highest growth potential.

The OJK has said that security and consumer protection are its main concerns, given Indonesia’s history of fraud in various business sectors. It has also taken heed of a large P2P scandal in China, in which Ezubao, one of China’s highest profile P2P lending sites, cheated more than 900,000 investors of $7.6 billion.

While the OJK’s move has been viewed positively by the market, there are still concerns that the regulator lacks sufficient financial technology knowledge to be able to establish an effective legal framework. Some P2P companies have described the agency as inexperienced in financial technology matters, urging it to involve the industry in discussions about regulations and laws.

Indonesia also lacks a secondary market in which P2P lenders and investors can offload risk to secondary buyers, which is regarded as crucial for P2P businesses in profitable but risky emerging markets.

Authors:

George Popescu
Allen Taylor

Tuesday November 15 2016, Daily News Digest

Tuesday November 15 2016, Daily News Digest

News Comments Today’s main news: Prosper has new CEO. Today’s main analysis : 7 critical changes of the maturing FinTech sector. Today’s thought-provoking articles: UK’s FinTech sector is nervously waiting for the final Brexit outcome. Will EU regulate FinTech? Bank of Indonesia sets up a FinTech office. United States Prosper has new CEO GP:” This is a huge […]

Tuesday November 15 2016, Daily News Digest

News Comments

United States

United Kingdom

European Union

China

India

Asia

News Summary

United States

Prosper Marketplace Names David Kimball Chief Executive Officer (BusinessWire), Rated: AAA

Prosper Marketplace, a leading online marketplace for consumer credit, today announced that the company’s board of directors has named David Kimball Chief Executive Officer. Kimball succeeds Aaron Vermut and the appointment is effective December 1, 2016. Vermut has served as the CEO of Prosper Marketplace since March 2014 and will retain his seat on the company’s board of directors.

Bracing for seven critical changes as fintech matures (McKinsey&Company), Rated: AAA

For the past decade, fintech companies—technology firms that focus on financial products and services—have moved quickly, forcing incumbents to rethink their core business models and embrace digital innovations. But now, the fintech industry is itself maturing and entering a period of rapid change. Companies wondering how they will fit into this new era must first understand the forces that are pushing the changes.

While the industry will undoubtedly continue to expand as its customer base grows and investor appetite remains unsated, changes are imminent. Indeed, the very concept of what comprises fintech will shift. As the industry evolves, it will play a role well beyond financial products and services, individual companies will vie to become undisputed leaders by size and breadth, and ecosystems will develop that have a tight grip on customer loyalty.

This new fintech era is being shaped by changes in market conditions, new regulations, and shifts in consumer demands and behaviors.

Expanding scope

The scope of products and services offered by fintechs is expanding rapidly. The shift brings fintechs away from a focus on frontline activities to a broad engagement throughout the value chain.

 

Increasing diversity

The fintech industry is also becoming more diversified, with a wide variety of business models seen across geographies, segments, and technologies.

Improving collaboration

Collaborative partnerships will become increasingly important as fintechs seek scale and traditional financial institutions seek digital expertise.

Impending consolidation

As the industry continues to mature, fintechs will likely enter a period of consolidation, with larger players turning to mergers and acquisitions to satisfy their expansion goals.

Normalizing valuations

Valuations of fintechs are also normalizing as investors become more cautious and start favoring companies with proven track records.

Shifting regulations

Not surprising for a new industry, the regulatory regimes affecting fintechs are also evolving swiftly and will significantly influence how the industry develops. In many markets, regulators are playing a more proactive role in overseeing the industry, often encouraging its development, for instance by following a sandbox—or test and learn—approach that allows fintechs to experiment without impacting the entire financial system.

Emerging ecosystems

As digital offerings become more mature and interconnected, vast ecosystems will develop that span multiple industries. In many instances, fintechs will become submerged in these ecosystems, representing, like many others, a component of a much broader digital network.

StreetShares Foundation and JPMorgan Chase Partner to Give Veterans $ 10,000 in Monthly Business Awards (PR Newswire), Rated: AAA

StreetShares, the lending and investing community for veterans and their supporters and creators of the Veteran Business Bond, recently announced the formation of the StreetShares Foundation. The goal of the StreetShares Foundation is to inspire, educate, and support veteran small business owners. JPMorgan Chase & Co. is partnering with the StreetShares Foundation to provide up to $10,000 each month in Veteran Small Business Awards.

The StreetShares Foundation plans to give three Veteran Small Business Awardseach month to eligible veteran and military-spouse small business owners:

  • First Place – $5,000
  • Second Place – $3,000
  • Third Place – $2,000

One unique feature of the new Veteran Small Business Award program is the focus on public participation. StreetShares Foundation encourages everyone who supports veterans and entrepreneurship to participate in voting for their favorite veteran business at StreetShares.com/Foundation. Finalists will be presented for public vote each month.

SEC Should Take Lead on Regulating Fintech, GOP Commissioner Says (Morning Consult), Rated: A

The Securities and Exchange Commission should play the leading role in regulating financial technology, said Commissioner Michael Piwowar, the lone Republican on the panel.

The statement, made at the agency’s fintech forum on Monday, could set the stage for a turf battle among agencies like the SEC, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau as they grapple with how to police the emerging industry. The OCC is weighing a national charter for fintech firms and said it will release a paper on the matter by the end of the year.

Real Estate Marketplace Roofstock Raises $ 20m Series B (Biz Journals), Rated: A

Roofstock (www.roofstock.com), the leading online marketplace and transaction platform in the $2 trillion single-family rental (SFR) sector, today announced $20 million in Series B financing led by Lightspeed Venture Partners, with substantial participation from existing investors including Khosla Ventures, Bain Capital Ventures, Nyca Partners, QED Investors and SV Angel. Roofstock has raised a total of $33.25 million in equity since the company’s formation in May of 2015.

The company has developed a proprietary marketplace for investors to find, evaluate and invest in single-family rentals online with tools and transparency never before available to either retail or institutional investors. Since its public launch in March of this year, the company has expanded to serve 10 markets, engaged thousands of registered users, grown its transaction volume by 400% from Q2 to Q3, and significantly expanded its inventory and seller network.

Robo-advisers sound off to SEC about rule changes for automated advice (Investment News), Rated: A

The SEC hosted a forum of financial technology experts Monday to discuss the impact of innovations in investment advice and other financial services. SEC staff is considering whether further guidance or even new rules are needed to protect investors.

Automated-advice providers, often called robo-advisers, register with the Securities and Exchange Commission as investment advisers and are subject to the Investment Advisers Act, which requires clients’ interests to come first when providing recommendations, among other standards.

Regulators have questions about how that happens when recommendations are generated by algorithms, and in May the SEC and the Financial Industry Regulatory Authority Inc. alerted investors to the risks associated with using a digital provider over a human.

iCapital Network Marks Two Year Anniversary of Platform Launch (Yahoo! Sports), Rated: B

iCapital Network today announced it has surpassed $2 billion in platform assets since the launch of its online alternative investment platform two years ago. The firm’s proprietary technology has helped to rapidly democratize private investments such as private equity and hedge funds by connecting individual investors and their advisors to asset managers through a streamlined and secure digital interface.

1031 Crowdfunding, LLC Ranked Among Top 10 Real Estate Crowdfunding Sites (PR Newswire), Rated: B

1031 Crowdfunding, LLC announced today that the Company moved up in the rankings for the 2016 Top 100+ Real Estate Crowdfunding Sites to #10 overall and maintained its position as #1 ranked Real Estate Crowdfunding site for 1031 Exchanges.

United Kingdom

THE U.K.’S FINTECH SECTOR IS WAITING NERVOUSLY FOR THE BREXIT OUTCOME (Newsweek), Rated: AAA

This week, one arm of the British government’s post-Brexit outreach strategy extends to Singapore. A mission organized by the Department for International Trade, one of two new bodies set up by Theresa May to handle the U.K.’s post-Brexit future, is heading to the Asian city-state, bringing in tow nine companies from Britain’s booming FinTech (financial technology) sector, as well as Simon Kirby, a Treasury minister.

The government is pitching it as a landmark event. But this is just the first round in a long fight.  Brexit could well mean an end to the free movement of people from Europe—something highly prized by talent-hungry technology businesses—and could threaten the “passporting” rights that allow British financial services businesses to ply their trade throughout the bloc. It has some work to do to keep the sector strong.

But now, like everybody else, FinTech businesses are waiting to find out what Brexit means for Britain. They do so with some trepidation: of 12 leading FinTech companies that Newsweek surveyed for this piece, all but one were concerned about the referendum vote’s impact on their business, and 10 rated the continuation of passporting rights as either vital or important for their future success.

Fintech Platform Revenues for Lending & Financing to Exceed $ 10bn by 2020 (PR Newswire), Rated: A

Juniper Research has found that Fintech platform revenues to support lending and financing are set to reach $10.5 billion globally by 2020, doubling the $5.2 billionexpected this year. The analyst house claimed that growth would be driven by a combination of factors including:

  • an acceleration in P2P (peer to peer) lending;
  • crowdfunding becoming a viable alternative to traditional lending mechanisms;
  • the deployment of next generation analytics platforms.

The new study, Fintech Futures: Market Disruption, Leading Innovators & Emerging Opportunities 2016-2021, argued that, in the absence of credit checking bureaus in emerging markets, applicants’ social media activity will be a deciding factor for their loan applications, with suppliers developing equivalents to credit scores so that lenders can gauge their risk exposure.

OFF3R Relaunches Alternative Asset Investment App with Majority of UK Platforms (Crowdfund Insider), Rated: A

OFF3R has relaunched its updated site that allows investors to access peer to peer lending, property / equity crowdfunding and managed investment platforms in a single application. The multi-channel platform was said to have received a “total overhaul” for both its desktop and mobile version.

OFF3R was initially focussed on the equity crowdfunding sector. The new marketplace will allow investors to sign up for free and subsequently discover 100’s of investment opportunities from some of the leading alternative investment platforms in the UK and Europe.

Lossmaking online wealth manager Nutmeg raises £30m (Financial Times), Rated: A

Nutmeg, the lossmaking online wealth manager, has raised £30m from international investors in a deal that underscores the belief that low-cost “robo-advisers” will reshape financial advice even though firms have had limited success so far.

The London-based company, which posted pre-tax lossesof £9m this year, has attracted £24m from Convoy, Hong Kong’s largest listed financial advisory firm, as well as £6m from its existing backers. Nutmeg said it was considering using the funds to expand into Asia.

The funding round is the largest in a UK fintech company since the country voted to leave the EU. It doubles the total investment in Nutmeg, which offers low-cost automated online advice and was launched in 2011.

Alternative investment ops gaining pace, OFF3R (IBS Intelligence), Rated: A

Equity crowdfunding platforms raised £216.25 million and P2P facilitated a combined lending of £2.6 billion over the last year, according to OFF3R research. The marketplace for alternative investments has launched an index outlining month-on-month performances of equity crowdfunding and P2P lending platforms. It analysed the likes of Seedrs, Crowdcube, Syndicate Room, Angels Den, Envestors and The House Crowd. The P2P lending platforms examined were Zopa, Landbay, RateSetter, ArchOver, Marketinvoice, Lending Works, Funding Circle and Thin Cats.

Sharia-compliant P2P lenders could enter market, banker reveals (Bridging & Commercial), Rated: A

Speaking to Bridging & Commercial, Maisam Fazal, head of commercial finance at Al Rayan Bank, admitted that there may be a gap in the market for alternative finance such as P2P lending.

“I know I have a lot of contacts working on [Sharia-compliant P2P] right now, trying to get this on the market.

Despite welcoming more firms to the Islamic finance market, Maisam suggested that rates as low as Al Rayan’s could make it off-putting for potential new entrants.

Finstar appoints CEO to oversee new fintech investment unit (Finextra), Rated: B

Private equity outfit Finstar Financial has appointed Mark Ruddock from Wonga to oversee a new corporate venture group that will look for opportunities in the fintech space.

Ruddock has been appointed as CEO of FinstarLabs, a special-purpose investment vehicle aimed at expanding the PE firm’s fintech portfolio.

European Union

EU Commission Puts Fintech Review on Agenda for 2017 (Fortune), Rated: AAA

The European Commission aims to propose recommendations for financial technology firms early next year, taking a first step towards assessing the risks and rewards presented by a sector that is shaking up traditional banking.

Announcing an internal task force meant to propose recommendations for the sector in the first half of next year, EU financial services commissioner Valdis Dombrovskis said technological innovation in finance was a development to be encouraged.

The Commission did not clarify whether fully-fledged regulation is on the cards, but some regulatory changes appear likely.

Vattenfall: Anna Borg Appointed Senior Vice President for Business Area Markets (BusinessWire), Rated: A

Anna Borg, currently Senior Vice President and head of Klarna’s commercial operations in the Nordics, has been appointed Senior Vice President of Vattenfall’s Business Area Markets. Anna Borg will be a member of Vattenfall’s Executive Group Management and report directly to President and CEO Magnus Hall. She will take up her new position 1 April, 2017.

During the past two years Anna Borg has headed Klarna’s, a leading European fin tech player, online buying and payment solutions business in the Nordics. Before that she spent 18 years at Vattenfall, holding numerous management positions, including heading the business development of the market and trading operations.

Manage your own property portfolio with Housers (The Olive Press), Rated: A

3. In what way is real estate crowdfunding and Housers different?
In regular real-estate investment, your money is invested in either one or a very few properties and you need large amounts to be able to participate in this market. Via Housers, everybody can participate in the real estate market for a minimum investment of just €50, and in up to as many properties as they like.

5. Why should people choose this way to invest?
It allows them to diversify their investment, thus reducing the risks. Because Housers manages the whole process, from purchase to lease to sale, the customer doesn’t have to worry about paperwork, tenants etc.

8. How do people make money?
Housers make money every month when dividends are paid, based on the rental income of each property; or, when the projected sales price is reached, they also share in the capital gains that the property has generated.

China

The Fintech Files: Will P2P Disrupt the Banks? (CFA Institute), Rated: A

Lu.com (陆金所) is one of the world’s largest players in the P2P market. Recently, I sat down with Gregory Gibb, CEO and chairman of Lu.com, in his office in Shanghai to discuss how the industry will evolve.

Is P2P a big enough market for financial institutions to enter?

They differ a lot by location. In the United States, the consumer market’s already been dominated by the banks. Lending Club and the like are eight or nine years into the business but still not very big.

If you go to places like India, Indonesia, or China, where . . . there’s a huge amount of consumer-borrowing need, there’s also a huge amount of retail investing need — and in the case of China, where the banks are 80%–90% non-retail because there are easier places to make money and it’s more socially rewarding to be a corporate banker than a retail banker — the market’s going to be big because the traditional players aren’t going to grab the consumer lending as fast. So the answer differs a lot in terms of scale in different countries.

Sounds like P2P can grow to be quite big in markets like China if it simply captures a slice of the pie.

The peer-to-peer market in China today is just north of USD$100 billion in loans outstanding. To say that the market will be a trillion US dollars within the next seven to 10 years is not a crazy number.

So why aren’t the banks going into P2P?

There is absolutely nothing stopping a bank from doing this. But why would a bank do P2P?

The funding cost is 1%, 2%, 3% on the deposit side and the credit card APR is 18%. Then they are making 15–16 points in gross margin. And if they went into a peer-to-peer model, they may have to give the investors 5% or 6%. So they’ve lost a couple hundred basis points of profit.

Fintech advances prompt lenders to become start up friendly (South China Morning Post), Rated: A

Finding the right partners with which to work and fostering an environment for fintech collaboration are posing challenges for lenders, as the relationship between big global banks and emerging financial technology companies shifts away from competition to more of collaboration.

Many large global banks in their current form are not easily compatible with agile and innovative financial technology start ups, due to their complex existing systems and legacy issues. Some managers responsible for working with fintech companies at financial institutions, speaking privately, bewailed their more senior colleagues’ inability to make the necessary changes to the way in which they operate.

“Most of the fintech companies are trying to sell their services to or partner with existing institutions,” said James Lloyd, fintech leader at EY. “But that does not mean that banks can forget the 5 per cent that are trying to compete with them,” he said.

It is for both this reason, and doubts about what their rivals might be doing, that banks are still concerned about fintech.

India

Here’s why India’s fintech sector could boom (Business Insider), Rated: A

The government made the surprise move in a bid to combat “black money,” or currency that is unaccounted for, and counterfeit currency. Consumers have until December 30 to exchange their R500 notes for new editions with enhanced security features, while limited numbers of new R2,000 ($39.70) notes have been issued. A replacement R1,000 note will be introduced in “due course,”

Asia

BI’s new ‘fintech office’ to ensure both innovation, security (The Jakarta Post), Rated: AAA

Bank Indonesia (BI) on Monday officially launched a financial technology (fintech) office to monitor the services offered by the young and thriving industry so as to ensure innovation continues and consumers simultaneously enjoy security.

BI governor Agus Martowardojo described the new office as an advisory hub for all fintech companies operating in Indonesia and as a facilitator to help the industry expand further and ensure greater financial inclusion in a country where half the population does not have access to banks.

As part of its office, BI plans to monitor the development of fintech companies through its regulatory sandbox, a sort of laboratory where ideas on innovation are shared between regulators and fintech players so they can be tested and evaluated with the central bank’s supervision before they go commercial.

B2B FinTech Startup MC Payment Grabs Funding (PYMNTS), Rated: B

Singapore-based B2B FinTech firm MC Payment announced a new funding round, as well as global expansion, late last week.

Reports Friday (Nov. 11) said MC Payment raised $3.5 million from an investment firm in Thailand, as well as participation from Aura Funds Management, tryb Capital and Perle Ventures. The funds have also allowed the company to enter the Thailand market, reports said.

Authors:

George Popescu
Allen Taylor