Tuesday August 29 2017, Daily News Digest

Global fintech

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

Global fintech

News Comments

United States

United Kingdom

China

European Union

International

Australia

Asia

Middle East

News Summary

United States

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: All About Alpha

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chicago

Los Angeles

New York

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

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

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

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

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

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

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

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

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

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

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

  1. Enhance Your IRA with P2P

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

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

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

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

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

United Kingdom

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

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

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

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

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

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

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

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

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

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

China

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

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

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

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

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

Source: Bloomberg

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

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

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

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

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

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

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

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

European Union

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

International

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

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

Key points:

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

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

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

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

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

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

Source: CB Insights

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

Source: CB Insights
Australia

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

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

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

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

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

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

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

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

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

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

Source: LendIt
Asia

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

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

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

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

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

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

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

Source” CB Insights

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

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

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

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

Middle East

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

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

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

Source: Khaleej Times

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

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

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

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

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

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

Authors:

George Popescu
Allen Taylor

Friday February 17 2017, Daily News Digest

P2P Global Investments

News Comments Today’s main news: OnDeck Capital struggles. SoFi in talks with Silver Lake for $500M funding. UK FinTech funding bounces back Today’s main analysis: FinTech deal sizes are shrinking. The alternative income source top managers are buying. Today’s thought-provoking articles: Starling CEO says EU law is good for UK FinTech. United States OnDeck Capital struggling. GP:” […]

P2P Global Investments

News Comments

United States

United Kingdom

European Union

Asia

Africa

News Summary

United States

OnDeck Capital shares plunge on downbeat outlook (Reuters), Rated: AAA

OnDeck Capital Inc (ONDK.N) shares fell as much as 24 percent on Thursday after the online lender posted its fifth straight quarterly loss and set aside more money for future losses after determining its calculations were askew.

Like its digital lending peers, OnDeck has been struggling with investor’ concerns over the quality of its underwriting and ability to maintain a rapid pace of growth.

As a result, OnDeck’s provision for loan losses more than doubled during the fourth quarter, to $55.7 million.

Amid all the changes, OnDeck’s originations of $2.4 billion in 2016 were up 26 percent from the prior year, less than half the pace of growth it posted in 2015.

The company is taking several steps to slash costs by $20 million a year, including cutting 11 percent of its staff and reducing marketing and technology expenses, Breslow said.

SoFi Is in Talks for $ 500 Million Funding Led by Silver Lake (Bloomberg), Rated: AAA

Social Finance Inc. is close to raising about $500 million in a funding round expected to be led by private equity firm Silver Lake Partners to bolster the expansion of its online-lending businesses and personal financial services, according to people familiar with the matter.

The fundraising round values SoFi at $4.3 billion, higher than its previous valuation of $3.2 billion, one of the people said. The deal isn’t finalized and could still fall through, the people said.

Why Online Lenders Keep Disappointing (The Wall Street Journal), Rated: A

Online lenders LendingClub and On Deck Capital took some nasty tumbles in 2016. Now, just as it began to look like they had regained their footing, they are getting tripped up again.

LendingClub shares fell 4.7% on Wednesday after the company gave disappointing guidance for 2017. Then, on Thursday morning, On Deck shares tanked by around 15% on a fourth-quarter net loss that was much bigger than expected. LendingClub’s stock fell again by around 6%.

The company’s fourth-quarter results show progress on all these fronts, but also the costs. Banks, which had shied away from buying the company’s loans after last year’s revelations, have largely returned, funding 31% of loan originations in the fourth quarter, up from 13% the previous quarter.

But LendingClub still disappointed investors by forecasting a bigger-than-expected net loss in 2017. Higher expenses are one reason, with stock-based compensation rising by 35% last year to $69.2 million. This likely has to do with the need to retain and attract talent in the wake of last year’s turmoil, says KBW analyst Jefferson Harralson. The company’s loan originations also have been basically flat for three quarters in a row, making it harder to grow revenue enough to overcome the higher expenses.

ArborCrowd Announces $ 22.4 Million Commercial Real Estate Deal (Crowdfund Insider), Rated: A

ArborCrowd announced on Thursday the launch of its latest real estate investment opportunity that is open to accredited investors. According to the portal, the “Southern States Multifamily Portfolio” features three multifamily properties in both Alabama and Mississippi.

Since its debut, ArborCrowd has provided the public with exclusive multifamily investment properties in New York City.

According to ArborCrowd, the $24.4 million Southern States Multifamily Portfolio was acquired in November 2016 by Varden Capital Properties, LLC as a value-add repositioning. ArborCrowd investors have the opportunity to own a piece of a $2 million equity stake in the Portfolio with a targeted 17 percent to 20 percent Internal Rate of Return (IRR) and a targeted investment hold period of two to three years.

Fintech deal sizes are shrinking (Business Insider), Rated: A

Global VC-backed fintech funding reached $12.7 billion in 2016, down 13% year-over-year (YoY) from $14.6 billion in 2015. However, deal numbers held firm at 836, down just 1% YoY from 848 in 2015. That suggests the decline in funding was the result of smaller deal sizes, and that’s backed up by a couple of other key pieces of data.

  • Fewer mega-rounds. There were 38 mega-rounds ($50 million+) in 2016, down from 63 in 2015.
  • Two deals in China accounted for $2.2 billion. Lending platform LU.com raised $1.2 billion, while JD Finance, a subsidiary of e-commerce giant JD.com, raised $1.0 billion.

OCC fintech charter: Something Ds and Rs can both love (American Banker), Rated: A

As the Office of the Comptroller of the Currency moves forward to grant national bank charters to fintech companies, unity of purpose could be achieved by stepping back to consider the broad policy goals that Democrats and Republicans typically seek in regulating and supervising financial services markets and businesses.

Both Democrats and Republicans want to address the financial needs of smaller Main Street businesses. Both parties understand that small and midsize businesses are the ones creating the jobs of the future. Both Republicans and Democrats prefer simplicity over complexity.

Concern for abuse of this charter by unscrupulous actors is legitimate and is best addressed by continuing to allow state regulators and attorneys general to enforce civil and criminal laws against fraud and unfair and deceptive practices, while consolidating supervision in a single strong agency at the federal level.

A charter is a perfect example of retaining significant state authority made possible by clear and simple federal rules. This federal-state partnership will produce strong governance and controls on a national scale through the supervisory process. It is the only way to achieve uniform requirements across all 50 states. Maintaining a costly, complex and time-consuming state licensing process while at the same time requiring companies to satisfy federal mandates will kill off a job-creating pro-consumer innovation.

US regulatory environment threatens the rise of fintech (TechCrunch), Rated: A

Fintech companies earned approximately ₤6.6 ($8.15) billion in revenue globally in 2015, according to a report commissioned by the Treasury of the U.K. government. Recent data on the sector from KPMG shows that while North America has fallen behind Asia in terms of regional investments in fintech, companies in North America still received $900 million of $2.4 billion, or more than 37.5 percent of funds, in the third quarter of 2016. KPMG notes that both the number of deals and total amount invested in American fintech companies has dropped significantly, while Asia continues to see growth in fintech investments.

The U.S. is producing many fintech startups attractive to investors — just not as attractive as the less numerous Asian startups. The third quarter of 2016 was the second of the year in which Asian fintech companies attracted more venture capital funding than North America, and pending fourth quarter results, total investment for the year by venture capital in Asian fintech outstrips that in North American fintech $4.7 billion to $4.5 billion. America remains a fintech leader, but its position is being challenged.

Not just the Treasury report, but investors themselves, as well as founders, have identified regulation as a main concern, and European regulators have responded by overhauling EU laws related to payment services to benefit fintech startups. In Asia, numerous countries have already adjusted regulations to promote fintech growth, including the largest consumer markets, China and India.

The problem with fintech regulation in the U.S. is not just what those regulations are, but persistent confusion about what those regulations are, and deep uncertainty about how they are evolving.

Marketplace Lending, The Crowdfunding Alternative? (GlobeSt.com), Rated: A

We sat down with Gary Bechtel, president of Money360, to talk about the growth in the market and the acceptance of marketplace lending platforms.

GlobeSt.com: What are the benefits of marketplace lending?

Bechtel: Speed, flexibility and creativity are huge competitive advantages, especially in the bridge lending arena, where the ability to react and close loans quickly is key. The ability to operate under reasonable regulatory oversight, and without the multiple layers of approvals and regulation that govern more traditional lenders, helps us speed up the process dramatically.

GlobeSt.com: What opportunities has this created for Money 360?  

Bechtel: We are seeing more and more transactions that otherwise would have gone to traditional lending sources because of our ability to react quickly and be more creative with deal structures. We have grown to accommodate larger transactions, filling a void left by banks, credit unions, life companies and CMBS lenders. We see this opportunity as an ongoing trend and are building our business accordingly.

The Whaley Report: Peer-to-peer pressure (Market Intelligence Center), Rated: A

I read an article last week, “How Investors Can Earn 7% Returns in a 2.5% World” and  I’m convinced it’s the beginning of the end for some unsuspecting investors.

The author, Stephen McBride, discusses the benefits of peer to peer lending as an asset class for investors who want to enhance the yield on their portfolios in light of the current low yield environment.

P2P lending may not wipe out wealth like a good old fashioned financial crisis but there are certainly less risky situations. Bungee jumping in Mexico or “investing” your paycheck in lottery scratchers comes to mind.

Size Matters

First, the average loan amount on various P2P platforms, like Lending Club, is $25. Let’s be conservative and say that you have decided to “invest” $20K of your hard-earned shekels in P2P lending to enhance your investment yield. Your $20K would be lent out to approximately 800 people, to fund everything from movie screenplays to food trucks specializing in cuisine from New Caledonia.

Fees

Just like any other investment opportunity, you pay to play. Lending club charges 1% on all monthly payments that you receive from your peers to whom you’ve lent money. They also take a healthy amount of fees for any collections process they go through for delinquent payments. On that basis alone, if your return starts out at 7%, like this article suggests, you are already down to a 6% net return before you ever transfer the money to your bank account.

Loan Shark Says What?

This is going to shock you but not all 800 of your peers are going to repay you the $25 you lent them to start their new Cat Tattoo Parlor. Based on data from Lending Club, the default risk of your peer group is not to be trifled with.

Similar to corporate bond ratings, people seeking to borrow money through a P2P platform are rated from “A” to “G.” An “A” rating is lower risk and a “G” is the guy who has 10 credit cards maxed out, no income but somehow manages to buy lottery scratchers every week.

No rational person is carving out a percentage of their portfolio for peer to peer lending. The risk-adjusted reward of this type of investing just doesn’t warrant it.

5 Common Misconceptions About Alternative Lending (Business2Community), Rated: B

Today, businesses have learned that alternative lending, which includes commercial business loans, factoring, peer-to-peer lending and crowdfunding, can solve many problems quickly and efficiently without a lot of the delay and paperwork associated with bank loans.

Only bank-rejects apply to alternative lenders:

While it’s true that many businesses find it easier to qualify for a loan from an alternative source than from a bank, many owners prefer dealing with alternative lenders, as they tend to be more flexible, less judgmental and faster to respond. Many alternative lenders do not require collateral, can process an application in a few hours, and fund a loan within a day or two.

You have to be desperate to seek an alternative loan:

Alternative lenders assess the risk of each loan and assign an interest rate that makes sense. Any good alternative lender wants to see its borrowers succeed, not fail, and will usually work with business owners to come up with solutions with the right fit.

You can hurt your credit score by borrowing from an alternative lender:

If you pay back your loan responsibly, your business’ credit score should increase.

You need high margins to make alternative loans work:

IOU Financial has only four funding requirements, and none have anything to do with margins. We require that you own and operate your own business, have been in business for at least a year, make 10 or more deposits per month and have average daily balance of $3,000 per month.

Alternative lending is unregulated:

The business model and cost structure of alternative lenders are much different from those of banks. Nonetheless, alternative lenders must adhere to federal and state lending regulations that require truthfulness and disclosure. There is also the whole area of contract law that governs alternative loans.

SoFi hires Condé Nast’s Danika Owsley for consumer comms (PR Week), Rated: B

Financial technology company SoFi has hired media specialist Danika Owsley as its first director of consumer comms.

Owsley will report to SoFi’s comms leader, VP of communications and policy Jim Prosser, when she starts in the role on February 28.

The San Francisco-based company hired Owsley to work in New York, home to most media outlets that are relevant to SoFi’s operations. SoFi bills itself as a “modern finance company” and many of its services are focused on millennials.

United Kingdom

P2P Lender Folk2Folk Joins Peer to Peer Finance Association (Crowdfund Insider), Rated: AAA

Peer to peer lender Folk2Folk has joined the UK Peer to Peer Finance Association (P2PFA).  The P2PFA is acknowledged as a stamp of quality operations as members are held to a high standard and required to follow certain transparency guidelines.

Founded in 2011 as a self-regulatory entity for the sector, the largest UK peer to peer lending platforms are members of the P2PFA and represent more than 75% of the UK P2P lending market. P2PFA members operate a diverse range of business models within this segment of finance and collectively lent almost £3 billion during 2016.

The alternative income source the top managers are buying (Trustnet), Rated: AAA

Industry powerhouses Invesco, Woodford, M&G, Aviva and AXA are among those turning to peer-to-peer lending for alternative streams of income, according to industry experts.

Indeed, over the past 18 months, UK gilts have performed particularly strongly, returning 8.59 per cent – though this has fallen back from highs in August 2016 where the index was up 17.23 per cent.

In fact, if not for a strong run for UK equities at the start of the year, gilts would still be outperforming the FTSE 100, which has returned 14.51 per cent over the period.

The industry brings a stable pool of capital to an industry that craves that stability of capital as knowing that the lender is there enables a much more attractive and reliable borrowing rhetoric, he adds.

His company runs the £682m P2P Global Investments PLC trust, which buys higher-quality loans (grade A, B and C) from the platform providers from across the market cap spectrum, though it currently focuses on the developed markets only.

Since its launch in 2014, the fund has grown its dividend in each year and currently pays out 5.48 per cent.

Over its lifetime, had an investors paid in £10,000 on the day of its launch, the trust would have paid £1,158, according to FE Analytics.

However, Sachin Patel, chief capital officer at peer-to-peer platform provider Funding Circle says delinquency rates are currently at historic lows.

While the sector will likely be hit by a financial crisis – such as the one seen in 2008 – as borrowers will be more likely to default, he says they are not seeing any signs of stress among their borrowers.

Indeed, with delinquency rates so low, the platform released the SME Income fund at the end of 2015 with the aim of giving investors a passive option to the asset class.

UK FinTech Funding Bounces Back in Q4 2016 (Cryptocoins News), Rated: A

U.K. FinTech startups raised $173 million across 16 deals in Q4 2016, an increase of $95 million from Q3, according to a report from CB Insights.

Despite an increase in U.K. financial technology investment during Q4 2016, across the whole year the amount raised only amounted to $494 million compared to $962 million in 2015. During Q4 2015, U.K. FinTech funding reached $275 million.

CB Insights found that in 2016, European venture capital funding reached $1.2 billion across 179 deals, down from $1.6 billion during 2015.

Uber launching financial advice sessions and appeals panel for UK workers (Belfast Telegraph), Rated: A

Uber is offering English courses, financial advice and introducing an appeals panel for its UK workers after facing criticism over lack of support and rights for its drivers.

It is now launching earnings advice sessions on how to best take advantage of the app, flexible pay options that allow drivers to cash out their fares before the end of the week and discounted online investment advice for products like ISAs and pensions.

European Union

The CEO of startup bank Starling says EU law is ‘important and good’ for UK fintech (Business Insider), Rated: A

The founder and CEO of digital-only, startup bank Starling says EU law has been good for fostering Britain’s flourishing fintech — financial technology — sector and says she fears Brexit may set it back.

However, Boden is worried that Brexit will cause the UK to miss out on laws such as the Payment Service Directive Two (PSD2), which forces banks to open up their data to new entrants. This will allow third parties to help people manage their accounts and loosen banks’ stranglehold of customer relationships. PSD2 comes into force in 2018.

Boden, a former executive of Allied Irish Bank, told the FT it is “disappointing” that Starling will be unable to launch across Europe using passporting rules. Theresa May has made clear that her government plans to sacrifice EU passporting rules, which let financial firms sell services across the EU from London, in order to regain control over immigration.

Starling has yet to launch but has gained its banking licence.

REAL ESTATE LESS THAN 10.000 EUROS, IT IS POSSIBLE! (The Quebec Telegram), Rated: A

Note: it is possible to lodge the shares in a PEA, to erase taxation. “However, we advise against investing below 5,000 euros, because the tax savings will be absorbed by bank charges , ” says Cyril Benchimol, CEO of Immovesting.

Asia

Experian Partners With Lenddo to use its Solution in Financial Inclusion efforts (Benzinga), Rated: AAA

Experian, the leader in global information services, will partner with Lenddo, a leader in non-traditional data solutions, as part of Experian’s Consumer Financial Inclusion Indexing platform in Indonesia and Vietnam.Using Experian’s global expertise and knowledge, the introduction of Lenddo’s technology into Experian’s platform will provide financial firms with more information to offer appropriate financial services. Consumers who are unbanked or underserved by major financial institutions will gain access to a gamut of financial services including remittances, savings, credit and wealth management services.

Southeast Asia is poised to remain one of the fastest groups of economies in the world, with an unbanked population of about 438 million people. With the wealth of alternative data and innovative technology available, financial access for the unbanked has seen a rapid rise and many opportunities created to serve this new and underserved market.

Africa

Investment group buys into SA peer-to-peer lending firm RainFin (BusinessTech), Rated: AAA

RainFin and the LeBashe Investment Group have concluded a transaction for the latter to acquire a 30% stake in RainFin, for an undisclosed amount.

Barclays Africa (Absa) originally acquired a 49% stake in the peer-to-peer lending firm in 2014, however, in late 2016, the company’s founders and directors said that they would buy that stake back.

Authors:

George Popescu
Allen Taylor

Friday February 17 2017, Daily News Digest

P2P Global Investments

News Comments Today’s main news: OnDeck Capital struggles. SoFi in talks with Silver Lake for $500M funding. UK FinTech funding bounces back Today’s main analysis: FinTech deal sizes are shrinking. The alternative income source top managers are buying. Today’s thought-provoking articles: Starling CEO says EU law is good for UK FinTech. United States OnDeck Capital struggling. GP:” […]

P2P Global Investments

News Comments

United States

United Kingdom

European Union

Asia

Africa

News Summary

United States

OnDeck Capital shares plunge on downbeat outlook (Reuters), Rated: AAA

OnDeck Capital Inc (ONDK.N) shares fell as much as 24 percent on Thursday after the online lender posted its fifth straight quarterly loss and set aside more money for future losses after determining its calculations were askew.

Like its digital lending peers, OnDeck has been struggling with investor’ concerns over the quality of its underwriting and ability to maintain a rapid pace of growth.

As a result, OnDeck’s provision for loan losses more than doubled during the fourth quarter, to $55.7 million.

Amid all the changes, OnDeck’s originations of $2.4 billion in 2016 were up 26 percent from the prior year, less than half the pace of growth it posted in 2015.

The company is taking several steps to slash costs by $20 million a year, including cutting 11 percent of its staff and reducing marketing and technology expenses, Breslow said.

SoFi Is in Talks for $ 500 Million Funding Led by Silver Lake (Bloomberg), Rated: AAA

Social Finance Inc. is close to raising about $500 million in a funding round expected to be led by private equity firm Silver Lake Partners to bolster the expansion of its online-lending businesses and personal financial services, according to people familiar with the matter.

The fundraising round values SoFi at $4.3 billion, higher than its previous valuation of $3.2 billion, one of the people said. The deal isn’t finalized and could still fall through, the people said.

Why Online Lenders Keep Disappointing (The Wall Street Journal), Rated: A

Online lenders LendingClub and On Deck Capital took some nasty tumbles in 2016. Now, just as it began to look like they had regained their footing, they are getting tripped up again.

LendingClub shares fell 4.7% on Wednesday after the company gave disappointing guidance for 2017. Then, on Thursday morning, On Deck shares tanked by around 15% on a fourth-quarter net loss that was much bigger than expected. LendingClub’s stock fell again by around 6%.

The company’s fourth-quarter results show progress on all these fronts, but also the costs. Banks, which had shied away from buying the company’s loans after last year’s revelations, have largely returned, funding 31% of loan originations in the fourth quarter, up from 13% the previous quarter.

But LendingClub still disappointed investors by forecasting a bigger-than-expected net loss in 2017. Higher expenses are one reason, with stock-based compensation rising by 35% last year to $69.2 million. This likely has to do with the need to retain and attract talent in the wake of last year’s turmoil, says KBW analyst Jefferson Harralson. The company’s loan originations also have been basically flat for three quarters in a row, making it harder to grow revenue enough to overcome the higher expenses.

ArborCrowd Announces $ 22.4 Million Commercial Real Estate Deal (Crowdfund Insider), Rated: A

ArborCrowd announced on Thursday the launch of its latest real estate investment opportunity that is open to accredited investors. According to the portal, the “Southern States Multifamily Portfolio” features three multifamily properties in both Alabama and Mississippi.

Since its debut, ArborCrowd has provided the public with exclusive multifamily investment properties in New York City.

According to ArborCrowd, the $24.4 million Southern States Multifamily Portfolio was acquired in November 2016 by Varden Capital Properties, LLC as a value-add repositioning. ArborCrowd investors have the opportunity to own a piece of a $2 million equity stake in the Portfolio with a targeted 17 percent to 20 percent Internal Rate of Return (IRR) and a targeted investment hold period of two to three years.

Fintech deal sizes are shrinking (Business Insider), Rated: A

Global VC-backed fintech funding reached $12.7 billion in 2016, down 13% year-over-year (YoY) from $14.6 billion in 2015. However, deal numbers held firm at 836, down just 1% YoY from 848 in 2015. That suggests the decline in funding was the result of smaller deal sizes, and that’s backed up by a couple of other key pieces of data.

  • Fewer mega-rounds. There were 38 mega-rounds ($50 million+) in 2016, down from 63 in 2015.
  • Two deals in China accounted for $2.2 billion. Lending platform LU.com raised $1.2 billion, while JD Finance, a subsidiary of e-commerce giant JD.com, raised $1.0 billion.

OCC fintech charter: Something Ds and Rs can both love (American Banker), Rated: A

As the Office of the Comptroller of the Currency moves forward to grant national bank charters to fintech companies, unity of purpose could be achieved by stepping back to consider the broad policy goals that Democrats and Republicans typically seek in regulating and supervising financial services markets and businesses.

Both Democrats and Republicans want to address the financial needs of smaller Main Street businesses. Both parties understand that small and midsize businesses are the ones creating the jobs of the future. Both Republicans and Democrats prefer simplicity over complexity.

Concern for abuse of this charter by unscrupulous actors is legitimate and is best addressed by continuing to allow state regulators and attorneys general to enforce civil and criminal laws against fraud and unfair and deceptive practices, while consolidating supervision in a single strong agency at the federal level.

A charter is a perfect example of retaining significant state authority made possible by clear and simple federal rules. This federal-state partnership will produce strong governance and controls on a national scale through the supervisory process. It is the only way to achieve uniform requirements across all 50 states. Maintaining a costly, complex and time-consuming state licensing process while at the same time requiring companies to satisfy federal mandates will kill off a job-creating pro-consumer innovation.

US regulatory environment threatens the rise of fintech (TechCrunch), Rated: A

Fintech companies earned approximately ₤6.6 ($8.15) billion in revenue globally in 2015, according to a report commissioned by the Treasury of the U.K. government. Recent data on the sector from KPMG shows that while North America has fallen behind Asia in terms of regional investments in fintech, companies in North America still received $900 million of $2.4 billion, or more than 37.5 percent of funds, in the third quarter of 2016. KPMG notes that both the number of deals and total amount invested in American fintech companies has dropped significantly, while Asia continues to see growth in fintech investments.

The U.S. is producing many fintech startups attractive to investors — just not as attractive as the less numerous Asian startups. The third quarter of 2016 was the second of the year in which Asian fintech companies attracted more venture capital funding than North America, and pending fourth quarter results, total investment for the year by venture capital in Asian fintech outstrips that in North American fintech $4.7 billion to $4.5 billion. America remains a fintech leader, but its position is being challenged.

Not just the Treasury report, but investors themselves, as well as founders, have identified regulation as a main concern, and European regulators have responded by overhauling EU laws related to payment services to benefit fintech startups. In Asia, numerous countries have already adjusted regulations to promote fintech growth, including the largest consumer markets, China and India.

The problem with fintech regulation in the U.S. is not just what those regulations are, but persistent confusion about what those regulations are, and deep uncertainty about how they are evolving.

Marketplace Lending, The Crowdfunding Alternative? (GlobeSt.com), Rated: A

We sat down with Gary Bechtel, president of Money360, to talk about the growth in the market and the acceptance of marketplace lending platforms.

GlobeSt.com: What are the benefits of marketplace lending?

Bechtel: Speed, flexibility and creativity are huge competitive advantages, especially in the bridge lending arena, where the ability to react and close loans quickly is key. The ability to operate under reasonable regulatory oversight, and without the multiple layers of approvals and regulation that govern more traditional lenders, helps us speed up the process dramatically.

GlobeSt.com: What opportunities has this created for Money 360?  

Bechtel: We are seeing more and more transactions that otherwise would have gone to traditional lending sources because of our ability to react quickly and be more creative with deal structures. We have grown to accommodate larger transactions, filling a void left by banks, credit unions, life companies and CMBS lenders. We see this opportunity as an ongoing trend and are building our business accordingly.

The Whaley Report: Peer-to-peer pressure (Market Intelligence Center), Rated: A

I read an article last week, “How Investors Can Earn 7% Returns in a 2.5% World” and  I’m convinced it’s the beginning of the end for some unsuspecting investors.

The author, Stephen McBride, discusses the benefits of peer to peer lending as an asset class for investors who want to enhance the yield on their portfolios in light of the current low yield environment.

P2P lending may not wipe out wealth like a good old fashioned financial crisis but there are certainly less risky situations. Bungee jumping in Mexico or “investing” your paycheck in lottery scratchers comes to mind.

Size Matters

First, the average loan amount on various P2P platforms, like Lending Club, is $25. Let’s be conservative and say that you have decided to “invest” $20K of your hard-earned shekels in P2P lending to enhance your investment yield. Your $20K would be lent out to approximately 800 people, to fund everything from movie screenplays to food trucks specializing in cuisine from New Caledonia.

Fees

Just like any other investment opportunity, you pay to play. Lending club charges 1% on all monthly payments that you receive from your peers to whom you’ve lent money. They also take a healthy amount of fees for any collections process they go through for delinquent payments. On that basis alone, if your return starts out at 7%, like this article suggests, you are already down to a 6% net return before you ever transfer the money to your bank account.

Loan Shark Says What?

This is going to shock you but not all 800 of your peers are going to repay you the $25 you lent them to start their new Cat Tattoo Parlor. Based on data from Lending Club, the default risk of your peer group is not to be trifled with.

Similar to corporate bond ratings, people seeking to borrow money through a P2P platform are rated from “A” to “G.” An “A” rating is lower risk and a “G” is the guy who has 10 credit cards maxed out, no income but somehow manages to buy lottery scratchers every week.

No rational person is carving out a percentage of their portfolio for peer to peer lending. The risk-adjusted reward of this type of investing just doesn’t warrant it.

5 Common Misconceptions About Alternative Lending (Business2Community), Rated: B

Today, businesses have learned that alternative lending, which includes commercial business loans, factoring, peer-to-peer lending and crowdfunding, can solve many problems quickly and efficiently without a lot of the delay and paperwork associated with bank loans.

Only bank-rejects apply to alternative lenders:

While it’s true that many businesses find it easier to qualify for a loan from an alternative source than from a bank, many owners prefer dealing with alternative lenders, as they tend to be more flexible, less judgmental and faster to respond. Many alternative lenders do not require collateral, can process an application in a few hours, and fund a loan within a day or two.

You have to be desperate to seek an alternative loan:

Alternative lenders assess the risk of each loan and assign an interest rate that makes sense. Any good alternative lender wants to see its borrowers succeed, not fail, and will usually work with business owners to come up with solutions with the right fit.

You can hurt your credit score by borrowing from an alternative lender:

If you pay back your loan responsibly, your business’ credit score should increase.

You need high margins to make alternative loans work:

IOU Financial has only four funding requirements, and none have anything to do with margins. We require that you own and operate your own business, have been in business for at least a year, make 10 or more deposits per month and have average daily balance of $3,000 per month.

Alternative lending is unregulated:

The business model and cost structure of alternative lenders are much different from those of banks. Nonetheless, alternative lenders must adhere to federal and state lending regulations that require truthfulness and disclosure. There is also the whole area of contract law that governs alternative loans.

SoFi hires Condé Nast’s Danika Owsley for consumer comms (PR Week), Rated: B

Financial technology company SoFi has hired media specialist Danika Owsley as its first director of consumer comms.

Owsley will report to SoFi’s comms leader, VP of communications and policy Jim Prosser, when she starts in the role on February 28.

The San Francisco-based company hired Owsley to work in New York, home to most media outlets that are relevant to SoFi’s operations. SoFi bills itself as a “modern finance company” and many of its services are focused on millennials.

United Kingdom

P2P Lender Folk2Folk Joins Peer to Peer Finance Association (Crowdfund Insider), Rated: AAA

Peer to peer lender Folk2Folk has joined the UK Peer to Peer Finance Association (P2PFA).  The P2PFA is acknowledged as a stamp of quality operations as members are held to a high standard and required to follow certain transparency guidelines.

Founded in 2011 as a self-regulatory entity for the sector, the largest UK peer to peer lending platforms are members of the P2PFA and represent more than 75% of the UK P2P lending market. P2PFA members operate a diverse range of business models within this segment of finance and collectively lent almost £3 billion during 2016.

The alternative income source the top managers are buying (Trustnet), Rated: AAA

Industry powerhouses Invesco, Woodford, M&G, Aviva and AXA are among those turning to peer-to-peer lending for alternative streams of income, according to industry experts.

Indeed, over the past 18 months, UK gilts have performed particularly strongly, returning 8.59 per cent – though this has fallen back from highs in August 2016 where the index was up 17.23 per cent.

In fact, if not for a strong run for UK equities at the start of the year, gilts would still be outperforming the FTSE 100, which has returned 14.51 per cent over the period.

The industry brings a stable pool of capital to an industry that craves that stability of capital as knowing that the lender is there enables a much more attractive and reliable borrowing rhetoric, he adds.

His company runs the £682m P2P Global Investments PLC trust, which buys higher-quality loans (grade A, B and C) from the platform providers from across the market cap spectrum, though it currently focuses on the developed markets only.

Since its launch in 2014, the fund has grown its dividend in each year and currently pays out 5.48 per cent.

Over its lifetime, had an investors paid in £10,000 on the day of its launch, the trust would have paid £1,158, according to FE Analytics.

However, Sachin Patel, chief capital officer at peer-to-peer platform provider Funding Circle says delinquency rates are currently at historic lows.

While the sector will likely be hit by a financial crisis – such as the one seen in 2008 – as borrowers will be more likely to default, he says they are not seeing any signs of stress among their borrowers.

Indeed, with delinquency rates so low, the platform released the SME Income fund at the end of 2015 with the aim of giving investors a passive option to the asset class.

UK FinTech Funding Bounces Back in Q4 2016 (Cryptocoins News), Rated: A

U.K. FinTech startups raised $173 million across 16 deals in Q4 2016, an increase of $95 million from Q3, according to a report from CB Insights.

Despite an increase in U.K. financial technology investment during Q4 2016, across the whole year the amount raised only amounted to $494 million compared to $962 million in 2015. During Q4 2015, U.K. FinTech funding reached $275 million.

CB Insights found that in 2016, European venture capital funding reached $1.2 billion across 179 deals, down from $1.6 billion during 2015.

Uber launching financial advice sessions and appeals panel for UK workers (Belfast Telegraph), Rated: A

Uber is offering English courses, financial advice and introducing an appeals panel for its UK workers after facing criticism over lack of support and rights for its drivers.

It is now launching earnings advice sessions on how to best take advantage of the app, flexible pay options that allow drivers to cash out their fares before the end of the week and discounted online investment advice for products like ISAs and pensions.

European Union

The CEO of startup bank Starling says EU law is ‘important and good’ for UK fintech (Business Insider), Rated: A

The founder and CEO of digital-only, startup bank Starling says EU law has been good for fostering Britain’s flourishing fintech — financial technology — sector and says she fears Brexit may set it back.

However, Boden is worried that Brexit will cause the UK to miss out on laws such as the Payment Service Directive Two (PSD2), which forces banks to open up their data to new entrants. This will allow third parties to help people manage their accounts and loosen banks’ stranglehold of customer relationships. PSD2 comes into force in 2018.

Boden, a former executive of Allied Irish Bank, told the FT it is “disappointing” that Starling will be unable to launch across Europe using passporting rules. Theresa May has made clear that her government plans to sacrifice EU passporting rules, which let financial firms sell services across the EU from London, in order to regain control over immigration.

Starling has yet to launch but has gained its banking licence.

REAL ESTATE LESS THAN 10.000 EUROS, IT IS POSSIBLE! (The Quebec Telegram), Rated: A

Note: it is possible to lodge the shares in a PEA, to erase taxation. “However, we advise against investing below 5,000 euros, because the tax savings will be absorbed by bank charges , ” says Cyril Benchimol, CEO of Immovesting.

Asia

Experian Partners With Lenddo to use its Solution in Financial Inclusion efforts (Benzinga), Rated: AAA

Experian, the leader in global information services, will partner with Lenddo, a leader in non-traditional data solutions, as part of Experian’s Consumer Financial Inclusion Indexing platform in Indonesia and Vietnam.Using Experian’s global expertise and knowledge, the introduction of Lenddo’s technology into Experian’s platform will provide financial firms with more information to offer appropriate financial services. Consumers who are unbanked or underserved by major financial institutions will gain access to a gamut of financial services including remittances, savings, credit and wealth management services.

Southeast Asia is poised to remain one of the fastest groups of economies in the world, with an unbanked population of about 438 million people. With the wealth of alternative data and innovative technology available, financial access for the unbanked has seen a rapid rise and many opportunities created to serve this new and underserved market.

Africa

Investment group buys into SA peer-to-peer lending firm RainFin (BusinessTech), Rated: AAA

RainFin and the LeBashe Investment Group have concluded a transaction for the latter to acquire a 30% stake in RainFin, for an undisclosed amount.

Barclays Africa (Absa) originally acquired a 49% stake in the peer-to-peer lending firm in 2014, however, in late 2016, the company’s founders and directors said that they would buy that stake back.

Authors:

George Popescu
Allen Taylor