Qudian, a pure online lender based in China dealing in micro-consumer loans to consumers, recently listed itself on the New York Stock Exchange. The IPO is touted to be the largest New York offering by a Chinese fintech company after Alibaba Group Holding Ltd made a record-breaking offering of US$25 billion in 2014. The company […]
Qudian, a pure online lender based in China dealing in micro-consumer loans to consumers, recently listed itself on the New York Stock Exchange. The IPO is touted to be the largest New York offering by a Chinese fintech company after Alibaba Group Holding Ltd made a record-breaking offering of US$25 billion in 2014. The company raised almost $900 million in its initial public offering. Qudian priced its IPO at $24 per share and the current price is around $33, implying a return of almost 40%. Let’s walk through a brief history of the company to understand its background.
Brief Overview and Insight
Founded in 2014, Qudian is a financial firm that started its life as a micro lender under the name Qufenqi. The founders Shuang Liu and Min Luo started Qufenqi as an online micro lending platform, issuing small amounts of credit to help college-going students to buy things like computers and smartphones. In order to reflect a broader focus on retail products and services, the company changed its name from Qufenqi to Qudian and started providing consumer loans of small amounts.
The company facilitates all its transactions through mobile devices. Borrowers can apply for loans from their mobile sets and receive approval within seconds. The funds are disbursed to borrowers through Alipay, the giant e-payment platform originally built by Alibaba Group and now operated by Ant Financial.
Qudian’s Investor Overview
Since its inception, Qudian has aggressively raised funds from multiple high-profile investors including Ant Financial, RMB Angel Investments, BlueRun Ventures, and Beijing Kunlun Tech Co Ltd, a Chinese online gaming firm. In 2016, Hangzhou Liaison Interactive Information Technology and Beijing Phoenix Wealth Holding Group made a pre-IPO investment of more than US$450 million. The company has raised almost $873 million in six rounds of private funding. Qudian’s principal shareholders include API controlling 12.8% shares and Qufenqi Holding controlling 21.6% shares. Other principal shareholders include Kunlun Group Ltd and Source Code Accelerate L.P. controlling 19.7% and 16.1% shares, respectively.
Numbers Revolving around Qudian
The company has facilitated approximately US$5.6 billion in transactions to 7 million active borrowers in the six months ended June30, 2017. In the first half of 2017, Qudian earned total revenue of US$270.4 million, an increase of 393.3% in comparison to the same period last year when the company earned total revenue of US$56.3 million. The company’s net income also grew to US$143.6 million from US$18.5 million, up by 695.2%. The cash credit products of the company had an average loan size of approximately US$136 and weighted average term of two months while the merchandise credit products had an average loan size of US$184 and weighted average term of approximately eight months in the six months ending June 30, 2017.
The charts below depict the growth of the business since the inception of the company in 2014.
Qudian’s US IPO
Qudian, which has been listed among the top 50 fintech companies of China, will trade under the ticker “QD.” The company was able to surprise analysts by pricing its shares at $24 as compared to the $19-$22 range earlier expected. It’s lead underwriters include marquee names like Morgan Stanley, Credit Suisse, Citigroup, China International Capital Corp., and UBS Investment Bank.
Qudian will utilize the proceeds from its IPO for strategic acquisitions, for marketing, and borrower engagement. The aim is to become the number one fintech lender by generating greater consumer awareness and by buying value-added assets. The question here arises as to why Qudian’s IPO has been welcomed given it is just a three-year-old company and is operating in an industry which was recently in the Chinese regulator’s cross hairs. The raison d’être is that the IPO gives access to one of the hottest investment plays in the world market — the rising Chinese consumer.
Qudian has been on a tearing growth spree and has been able to cultivate investors and strategic partnerships with players like Ant Financial. Qudian’s market leadership, partnership with Ant Financial, its profitability, ability to attract and retain potential borrowers, and revenue growth, are some of the reasons that made it one of the hottest IPOs of the year.
But the flip side of the story is the relative infancy of Qudian. Founded in 2014, Qudian’s limited operating history elevates the risk element associated with the Chinese micro lender.
Qudian has had blockbuster financial results. The IPO was the fourth biggest in the US this year and has emboldened other Chinese players to seek the prestigious US listing. Peer-to-peer lender Ppdai has already announced that it will look to raise almost $350 million in a US listing, and a FT article speculates that there are more than a dozen Chinese players firming up their plans for an American listing.
There are obvious reasons for this allure of a NYSE/NASDAQ IPO. Not only are these the largest pools of capital in the world, they represent the gold standard of corporate governance. Chinese companies looking to shed the overhang of the regulatory discount back in China and aiming to fill their war chest for the largest marketplace lending market in the world are looking to the US for that stamp of legitimacy. Qudian shows that American investors are ready to vote with their pockets for well-run profitable Chinese players.
News Comments Today’s main news: Marcus surpasses 2017 goal. LendInvest gets into buy-to-let. Top 3 spots on KPMG Fintech 100 list are all Chinese. Lendix launches SME bridge loans in France, Spain, and Italy. Mauritia issues draft P2P lending rules. Marlette closes fourth securitization in a year. Today’s main analysis: Rising challenges unlikely to deter U.S. securitizations. Today’s thought-provoking articles: […]
Online lenders should heed Fed criticism. AT: “I agree. All criticism should be weighed carefully and not dismissed outright. That doesn’t mean it is 100% correct, but there is always something new to learn.”
Martin Chavez, chief financial officer for Goldman Sachs, showed in a slideshow at a Bank of America Merrill Lynch event yesterday that Marcus had already surpassed $1.96 billion in originations as of Nov. 9.
What that means is that from Nov. 9 to Nov. 14, over a span of five days, Marcus originated more than $40 million in loans.
As a result, Fitch’s outlook for U.S. structured finance ratings is predominately stable for 2018. That said, given where we are in the credit cycle, Fitch is keeping a close watch on select asset types that could run into some issues over the next 12 months.
Entering 2018, Fitch has either Positive or Stable Outlook on over 90% of its rated securitized bonds.
Perhaps the most notable change that has manifested from risk retention is the shrinking universe of originators bringing new securitizations to market. This is particularly notable in the universe of CMBS originators, which has shrunk from a high of roughly 40 to now less than 20 due to a combination of risk retention and Reg A/B.
Competitive pressures, long in place for subprime autos, are escalating in a marketplace ABS environment that is struggling to find its footing by testing recent underwriting models, asset quality and, in some cases, business models. Delinquencies and chargeoffs of existing assets continue to increase as marginal borrowers increase their leverage. Not likely to help is the drive for growth among large marketplace lenders coupled with rising market pressure from competing banks like Goldman Sachs (Marcus), Discover, and Suntrust. And unless originators tighten their credit policies with discipline, the strain will intensify.
The consumer lending industry is abuzz about the Federal Reserve Bank of Cleveland’s recent report on debt consolidation and online lending. This excellent piece of research concludes that, on average, online installment loan borrowers fall into more debt after taking out a loan, experience hits to their credit score and history as a result, and take out online loans despite having access to traditional banking and credit channels.
The first two conclusions are damning, especially as these loans are often marketed as a way to help consumers consolidate credit card debt and improve their finances. At the end of the day, a lender’s duty is not merely to avoid losses. Any loan must be suitable for the customer — which means it should be made only if the lender believes it is improving the customer’s financial health. A lender not guided by that principle should be prepared for severe criticism as well as elevated losses down the road.
But it would be nonsensical to discredit or ignore the study because it includes online lenders beyond well-known fintech names.
While borrowers can get personal loans ranging in size between $2,000 and $35,000, investors can put as little as $25 toward funding those loans.
There is one exception, however. You cannot use loan proceeds for post-secondary educational expenses. That’s because some of the rules in federal law aren’t compatible with P2P lending. More specifically, with education loans, the borrower must have at least 30 days to accept or reject a loan offer.
Medical procedures available for financing under the PHL program include:
Stated income greater than $0 (you must have an income)
No bankruptcies filed within the previous 12 months
Fewer than seven credit bureau inquiries within the last six months
A minimum of three open trades reported on your credit report
Interest rates are between a minimum of 3.00% for the best AA rated borrowers to a maximum of 36.00% for the lowest rated HR borrower grades.
Prosper for Investors
Prosper advertises that the average rate of return by investors on the platform is 7.41% per year.
Loans rated HR have a much higher average return, at 11.73%.
You can open either a General Investment Account or an IRA. Available IRAs include traditional, Roth, SIMPLE, SEP and rollover IRAs (IRA accounts are held with Millennium Trust Company). At this time, Prosper has made only individual accounts available. You cannot hold an account jointly with someone else.
For regular investment accounts, the minimum is $25. For IRA accounts, the minimum is $5,000.
Similar to other P2P platforms, when you invest with Prosper, you don’t actually invest in whole loans. Instead, you invest in small slivers of those loans, referred to as “notes.” The notes are in denominations of $25. This means that you can spread an investment of $1,000 across as many as 40 different loans.
The servicing fee is 1% of the outstanding balance of a loan. That means that if the loan pays 8%, your net return will be 7%.
Last week, marketplace lender Marlette Funding announced the closing of its fourth proprietary securitization. The transaction was worth an estimated $312 million, and it is the fourth securitization announcement since August of 2016 from Marlette Funding.
eOriginal, Inc., today announced it has been named to Deloitte’s Technology Fast 500 list as one of North America’s fastest growing technology, media, telecommunications, life sciences, and energy companies. eOriginal earned the rank of 294 by more than doubling revenues during the evaluation period of FY 2013 through FY 2016.
Betterment, the New York-based roboadviser, announced Wednesday a charitable giving feature that’ll let users donate shares of their account to partnered charities.
The firm, which manages $11 billion for over 300,000 customers, partnered with 11 charities for Betterment Charitable Giving, including Big Brothers Big Sisters of NYC, UNICEF, and World Wildlife Fund, according to a news release. The new feature is set to go live November 28.
Despite signs of trouble in subprime auto lending, U.S. banks and credit unions are well positioned to ride out any market turbulence, a new report from the Federal Reserve Bank of New York suggests.
More than $435 billion in auto loans to borrowers with credit scores below 660 were outstanding during the third quarter of this year, the report found. That total has been climbing steadily since bottoming out at $249 billion in early 2011. Delinquency rates have also been rising as it has become easier to qualify for an auto loan.
Fidelity Investments is joining the ranks of financial firms sharing customer account data with others through an application programming interface.
The new service, called Fidelity Access, will give third parties access to Fidelity customers’ account data for use in apps and services like tax preparation, budgeting, financial planning, spending analysis and portfolio advice — provided the Fidelity customers give their OK. Customer data to be shared includes Fidelity account balances, securities holdings, and transactions.
And just to be clear, fintech startups are nowhere near close to catching up to the big banks. Wells Fargo & Co. has a market cap of more than $266 billion, and Bank of America Corp. has a market cap of more than $273 billion.
RealtyProfits (www.RealtyProfits.com) announces today an exciting and innovative investment opportunity, RealtyProfits IV, with a Preferred Return of 12 percent per annum, available exclusively to accredited high net-worth individuals and institutional investors. The private preferred equity securities, available for purchase at www.RealtyProfits.com, are being offered through WealthForge Securities, LLC, a registered broker/dealer and member of FINRA/SIPC.
The geographically diversified portfolio includes properties in 700 cities coast to coast, with a current estimated value of $1.73 billion and more than $700 million of equity in more than 5,900 portfolio properties. The properties include primarily single-family homes and condominiums ranging in value from $100,000 to more than $2,500,000.
Accredited investors can start investing with as little as $20,000. RealtyProfits IV offers monthly cash distributions. Preferred equity investors receive all distributions made by RealtyProfits IV until fully repaid. The Preferred Return is 12 percent per annum, with initial monthly Base Preferred Return payments at 6 percent per annum anticipated depending on cash flow during each of the first 24 months.
Reality Shares and Nasdaq announce the creation of the Reality Shares Nasdaq Blockchain Economy Index, a smart-beta index that tracks the growth and development of leading global companies creating and implementing blockchain solutions.
An ETF that will track the Index is already in the works, with Reality Shares filing for it on November 2, 2017.
Reality Shares and Nasdaq compiled the index by utilizing internal and external research and their proprietary Blockchain ScoreTM ranking system. The Index is comprised of global companies that seek to capitalize upon transformational blockchain technology that may potentially disrupt the markets in which they operate.
Shopping for a loan at a P2P provider is a two-step process. First, based on a credit score (or credit scores) and your answers to a few basic questions—your full name, address, date of birth and annual income—the lender determines which loan offer(s) to extend to you. (It’s possible at this juncture that the lender will decide not to extend any loan offers; if they do, they’ll explain why.)
Once you choose the loan you want, the lender does a more detailed credit check and may ask you to verify your income and to provide additional background information. Each P2P site has its own lending criteria, including minimum credit scores, and additional information requirements vary accordingly. Some P2P lenders want information on your educational background; others want work history or details about your financial assets. In most cases, you can submit the necessary documents electronically.
The first step in the P2P loan-approval process gets one or more of your credit scores by a method known as a soft inquiry—the same process you use when you check your own credit scores. Soft inquiries have no impact on your credit scores. However, the hard inquiries traditional lenders make when you apply for a credit cards or bank loans are reported to the national credit bureaus. They appear on your credit reports, and typically cause temporary credit-score drops of several points.
In the second step of P2P loan approval, the lender performs a hard inquiry to confirm your credit score and, likely, to review your full credit report.
Before you apply for a P2P loan
Take a look at the fine print on the bottom of each provider’s homepage, to get an overview of the loan amounts they offer and the rates and fees they charge.
Make sure the lender operates in your state.
Check your FICO Score and review your credit reports for any major negative entries. Accounts in collection, liens and civil judgments are among the items that could torpedo your loan application, even if you meet the credit-score requirements.
Determine the amount of money you need and watch out for tempting upsells.
Richard Cordray, an Obama appointee and head of the Consumer Financial Protection Bureau (CFPB) announced to staff in an email Wednesday his plans to resign. While he’s yet to confirm his plans, there’s speculation Cordray will return home to run for Ohio’s governorship.
Seven Signs That the Bond Bull Market is Over (INTL FCStone), Rated: A
The bond bear market is already here: short and medium-term treasuries have lost value in the past 5 years
Buybacks have fallen to a five-year low, and big repurchasers have underperformed
Oil prices are at a 30-month high, and the futures curve is in backwardation
The long and the short ends of the yield curve are moving together again
The Chinese trade surplus has shrunk from 10% of GDP to almost zero in the past ten years
The U.S. deficit is growing again, an unprecedented phenomenon in times of expansion and peace
Small bubbles are popping out: Auckland houses, Ethereum crypto coins, and collectible cars
Today on stage at Structure 2017, Atomist is formally launching and unveiling its Development Automation Platform with an Open Source client and API. As part of today’s launch, Atomist is announcing $22 million in Series A funding from Accel and Matrix Partners.
Bestow Inc., the company behind a revolutionary new approach to life insurance, today announced the early access roll out of its comprehensive, full-stack, digital life insurance solution in Texas. For the first time Bestow’s solution is available to the public, giving Texas residents primary access to apply for the only on-demand life insurance solution, instantly and without a medical exam.
Leveraging applied intelligence and algorithmic underwriting, Bestow redefines the way consumers research, buy and manage life insurance. Using data to calculate risk, Bestow removes the need for a medical exam and streamlines the entire process into a matter of minutes. The Texas launch gives consumers access to choice term life insurance plans, including a unique two year term policy never before available for life insurance. Additionally, customers can choose between ten or twenty year term life insurance.
Dallas-based insurance exchange and MGA MarketScout announced it has launched MarketScout InsurTech (MIT), which will make investments in tech-enabled insurance distribution. The initial funding of $25 million will come exclusively from MarketScout Corp., parent of MIT, according to the firm.
The House Financial Services Committee has approved HR 3299 or the “Protecting Consumers’ Access to Credit Act of 2017.” The bill “restores consistency” in lending laws across state boundaries. HR 3299 impacts the case of Midland Funding, LLC v. Madden – an ongoing law suit that has the potential to undermine online lenders. Sponsored by Congressman Patrick McHenry, includes an important statement that clarifies allowable interest rates on loans potentially ending the issue associated with the law suit.
“Technology by itself cannot create trust,” Robert C. Merton, a Nobel laureate in economics now teaching at MIT, recently told ThinkAdvisor. “The successful advisor must have the trust of their clients.”
Given the importance of trust in the advisor-client relationship, Merton recommends financial advisors (the breathing kind) should:
Check what they are doing to retain and enhance trust with their clients.
Make sure the business model being used supports the creation of trust.
Take advantage of technology to improve/enhance what the advisor does.
Do not view technology as a “competitor or substitute” for the advisor.
Understand and assess the financial technology they employ to certify trusting its use in client solutions.
The Hebrew Free Loan Association has launched its Looking to the Future Initiative with support from the St. Luke’s Foundation and the PNC Foundation. The initiative accounts for $73,000.
The initiative enables HFLA to increase its lending of interest-free loans to Cleveland’s underserved neighborhoods and grows the organization by expanding its reach, according to a news release. HFLA received a $63,000 grant from the St. Luke’s Foundation and a $10,000 grant from the PNC Foundation to launch the effort.
Fundation Group LLC, a digitally-enabled lender and credit solutions provider, today announced that it has acquired a variety of assets from online small business lender, Able Lending of Austin, Texas.
Victory Park Capital (VPC), an investment firm focused on middle-market debt and equity investments, announced today that Troy Jamison joins as chief risk officer for the firm’s nonbank financial services portfolio. Jamison is based in Chicago and reports directly to CEO and Co-Founder Richard Levy.
On Nov. 1, 2017, the President signed a joint resolution passed by Congress disapproving the Arbitration Agreements Rule under the Congressional Review Act (CRA). Pursuant to the joint resolution, the Arbitration Agreements Rule has no force or effect. The materials relating to the Arbitration Agreements Rule on the Bureau’s website are for reference only.
HOUSE FINANCIAL SERVICES COMMITTEE PASSES SMALL BUSINESS CREDIT ACT (Coalition for Small Business Growth Email), Rated: B
Squirrel, a personal finance app designed to help users have more control over their money, has launched an equity crowdfunding round on Crowdcube. This initiative debut comes less than one year after the company completed its SyndicateRoom funding round with £585,000 in funds. Squrriel is now seeking £400,000.
THE GOVERNMENT has given a £21m boost to a technology programme that has supported firms such as Zopa and Funding Circle as part of a range of measures to boost the tech sector.
The funding will make Tech City UK and Tech North one national organisation called Tech Nation and help grow government-backed startup support programmes such as Founders Network, Northern Stars, Future Fifty and Upscale.
Payday lending and pawnbroking business Cash Converters International Ltd(ASX:CCV) announced a cybersecurity breach in its UK operations last night.
Sadly, computer system integrity is becoming an increasingly relevant – and often overlooked – concern for investors, with a vast majority of companies relying in one way or another on computer systems.
Valorem Foundation, a Blockchain startup specializing in stabilized value-based exchange and transactions, has announced the launch of its new cryptocurrency platform. The company has developed a multi-layered platform to disrupt and expand the following services globally: microloans, car loans, student loans, rent payment, P2P networks, buying and selling of goods & services, business investing, real estate crowdfunding, and insurance.
Financial technology companies linked to China’s Alibaba Group Holding took over the podium in KPMG’s latest Fintech 100 list, announced on Wednesday.
Ant Financial, which runs Alibaba’s massive Alipay e-payments network, took the No. 1 spot on the list, which was compiled with fintech accelerator H2 Ventures. Online property insurer ZhongAn Insurance and microloan provider Qudian placed second and third; both have received investments from Ant.
Despite public criticism about a lack of transparency in some practices, Ant Financial is doing things the right way, a senior executive at the company said Wednesday.
“The demand for these securities is very healthy and continuing to expand,” Douglas Feagin, senior vice president and head of global business at Ant Financial, told CNBC’s “Street Signs.” “That, at the end of the day, is the ultimate barometer of whether you’re giving enough information to investors to invest.”
In the three months ending Sept. 30, Yirendai’s net income was down 12% to 303 million yuan ($45.7 million) from 344.3 million yuan a year ago, the company said Wednesday. Another Chinese microlender, China Rapid Finance Ltd., earlier reported a wider net loss of $4.4 million in the third quarter. Although Qudian Inc., a larger player that listed in New York last month, recently posted a four-fold increase in its third-quarter net profit from a year ago, citing better operational efficiency and its growing borrower base.
Beijing-based fintech company 9f Group has raised a massive new funding round from Cinda International Holding Ltd, a subsidiary of state-owned China Cinda Asset Management Co., Ltd., Focus Media Information Technology’s Chairman Jiang Nanchun, video game developer Youzu Interactive’s chairman Lin Qi and an unnamed Chinese industry fund.
The company did not disclose financial details except to say that it raised “hundreds of millions of U.S. dollars” in the latest financing deal, according to a company announcement. It is also unclear how the company is valued in the round, but 9f Group is listed on China Money Network’s China Unicorn List with a US$1 billion valuation when it last raised a US$110 million series B round in 2015.
Santander’s Openbank has changed a great deal since it was founded as Spain’s first telephone banking service in 1995. Now a fully digital operation, its mobile app allows users to temporarily disarm a lost credit card, as well as to check whether fellow Openbank customers are buying or selling a given stock at any moment. Currently, it has some 1.2m customers in Spain and more than €8bn ($9.3bn) in assets under management.
In recent years, Spain’s two biggest banks — Santander and BBVA — have increased their financial and managerial investment in fintech, digital banking and big data. Like their peers, they are convinced that the days of branch-based lending are drawing to a close.
Spanish banks average about €15m assets under management per employee, says Daragh Quinn, banks analyst at investment bank Keefe, Bruyette & Woods. At a digital operator like Openbank, that number is close to €60m.
The digital push is on two fronts: first, a mobile app that allows customers to access almost all of the bank’s products without going into a branch. Second, a venture capital approach whereby banks invest in or partner with fintech start-ups to add products.
Lendix, online lender for SMEs in continental Europe, has announced the launch of a new financing product: the Flexible Bridge Loan. This product is designed to will allow a greater number of French, Spanish and Italian SMEs to benefit from the speed of execution of Lendix’s lending platform while leaving them the possibility of setting up an overall refinancing solution with other financial institutions.
The Lendix Flexible Bridge Loan is a 5-year amortizable loan with a standard commitment for the first 9 months and the possibility of early repayment at no cost for the remainder of the loan term, even in the event of refinancing by other financial institutions.
As investors wonder whether Sweden’s housing market is headed for a correction, the country’s first mortgage fund is about to enter the $370 billion Swedish home-loan industry.
Stabelo plans to pool capital from Swedish institutional investors in exchange for fixed-income securities. That money will then be lent to home buyers. The fund starts offering its products this week and will work with Avanza Bank AB, Sweden’s largest online lender. Avanza, which owns just below 20 percent of Stabelo, will handle distribution and marketing.
Due to this issue, the original incarnation of peer-to-peer lending has not lasted. As the CEO of Zopa, a UK-based P2P lender said,
“As bad debts soared, the approach was abandoned and Zopa was moulded into a ‘big sausage machine’. Its technology now links lenders with a pool of borrowers without any direct contact or the need for investors to make credit decisions.”
Australia’s major peer-to-peer lender is SocietyOne. It currently has $350 million borrowed through its platform, and is growing rapidly. In fact, loan volumes in the first three quarters of this year have totalled $141 million so far, surpassing the $139 million in loans facilitated over the entire course of 2016, as shown below.
Following the FMA’s release of its second consultation paper on personalised robo-advice (now called digital advice), the leading law firm has published its tips for providers looking to develop digital advice platforms.
Head of Russell McVeagh’s Corporate Advisory group, Dan Jones, says the exemption is a necessary first step in putting the New Zealand financial advice regime on equal footing with overseas regimes, and may provide particular assistance to New Zealanders in KiwiSaver.
For years, banks have had a monopoly in lending money to businesses and individuals. However, the 2007-08 financial crisis created a havoc, rapidly-expanding the funding gap. This led to the advent of a niche fintech vertical, peer-to-peer (P2P) lending.
The geographical reach of a P2P lending platform is far superior, with the major differentiator being its online interface. Such digital financial services play an important role in supporting the objective of financial inclusion. Anybody, from the remotest areas, having access to internet, can be eligible to get/give a loan.
In the age of digitisation where almost everyone has access to internet, such platforms have the potential to change the financial graph of a country.
While banks and non-banking finance companies (NBFC) are the readily available sources for loans, who does the P2P platform cater to? “Unfortunately, banks in India follow mediocre credit assessment policies which are suited only for borrowers who can offer collateral or have an impeccable credit history. In practice, majority of the borrowers lie in between these extremes. Therefore, majority of Indians can borrow on P2P platforms,” says Raghavendra Pratap Singh, co-founder, i2ifunding, an online P2P lending marketplace.
RBI has put a cap on the amount that can be borrowed and lent. The aggregate exposure of a lender or the maximum that one may borrow at any point of time, across all P2Ps, shall be capped at Rs 10 lakh. Even the exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000 and the maturity of the loans shall not exceed 36 months. “More clarity from RBI is expected on how the regulator intends to monitor the compliance of this aspect and how it will fix the responsibility,” says Singh.
Risks for a lender
Since this is an unsecured loan where there is no face-to-face interaction, a P2P lender needs to be aware of the risks involved. Bubna says, “All investments involve risk. However, in comparison to equity or commodity market investments or real estate, P2P lending has lower risk as it is addressed by on-boarding high quality borrowers. Further, lenders are suggested to create a diversified portfolio of loans.”
Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding unveiled today its proprietary Artificial Intelligence driven due diligence system, Crowdo ACE, aimed at benefiting both their borrowers and investors. Crowdo ACE takes into account a few thousand unconventional and alternative attributes and represents a new way to perform due diligence versus traditional means used by conventional financial institutions. It has already been applied to process more than 3,000 loans.
Twenty-six people, four nationalities, 10 days. Travelling across Southeast Asia as a Startup AsiaBerlin Roadshow delegate to explore startup ecosystems was an experience unto itself.
Amartha has so far disbursed over $13 million to 60,000 women micro-entrepreneurs and aims to improve their income, and ultimately quality of life.
Aria: Amartha is an Indonesian financial technology startup that focuses on providing affordable financial access, and mentorship to the unbanked population living below the poverty line. Amartha operates much like a peer-to-peer lending platform, and so far, has disbursed more than $13 million to 60,000 borrowers. The borrowers are mostly women micro-entrepreneurs and Amartha aims to improve their income, and ultimately alleviate their status through financial inclusion.
Aria: When we started operations in April 2016, we disbursed $40,000 a month. By the end of 2016, we were disbursing $800,000. Today, on average, we disburse $2.5 million per month. So far, we have disbursed more than $13 million, across more than 60,000 borrowers. The average ticket size of a loan now is around $300.
We charge a fee based on the profit sharing principle. Of the 22-30 percent annual interest rate paid by borrowers, we collect 11-13 percent for our revenue.
Following the announcement of the Government on peer-to-peer lending and funding in the 2017-2018 Budget, the Mauritian Financial Services Commission (“Commission”) has issued draft rules on 10 November 2017 to regulate the peer-to-peer lending sector – as sector which has grown rapidly in other countries.
In the region, Kenya and Africa are leading in the peer-to-peer business lending market. According to a study conducted by the University of Cambridge, within Africa, South Africa had the largest number online alternative finance platforms, with $15 million raised in 2015 (The Africa and Middle East Alternative Finance Benchmarking Report, February, 2017).
Borrower and lender – a borrower must be a resident in Mauritius; however, there is no residency requirement for the lender.
Restrictions on amounts– Hence, a lender, who is a legal person, cannot lend more than MUR 500,000 (approx. GBP 11,000) in any 12 months’ period. A lender, who is a natural person, cannot lend an amount in excess of 10 per cent of his income or a maximum of MUR 300,000 (approx. GBP 6,600), whichever is lower, in any 12 months’ period.
Obligations of a P2P operator – the Peer-to-Peer operator must publish the following information on its website:
details of how the P2P lending will operate
measures to prevent money laundering and combatting terrorist financing
security measures to ensure data protection
dispute resolution mechanism.
Borrowell wins Deloitte Fast50 award (Borrowell Email), Rated: A
Borrowell has won a Companies to Watch award as part of the Deloitte Fast50 program. We are one of only eleven companies across Canada to win that award this year, and the only company from Toronto. Fast50 winners in the category for established companies include well-known names like Shopify, SkipTheDishes, Wave and Influitive. The list was announced an hour ago.
Its citizens and businesses are also quick to adopt the latest disruptive technologies such as fintech and cryptocurrencies. Moscow has a 35 percent fintech adoption rate, higher than New York’s 33.1 percent.
It can be argued that the same qualities that make Renaud Laplanche a world-class yachtsman are also those that make him the type of innovative thinker and driven doer to be a world-changing captain of finance. It can further be surmised that these qualities are what brought about the loan irregularities that led to Laplanche’s […]
It can be argued that the same qualities that make Renaud Laplanche a world-class yachtsman are also those that make him the type of innovative thinker and driven doer to be a world-changing captain of finance. It can further be surmised that these qualities are what brought about the loan irregularities that led to Laplanche’s resignation from Lending Club in 2016.
The thing about elephants in the room is that they are sometimes so large that we forget that there are other things in the room. In this case, those other things are Laplanche’s proven record as a pioneer in fintech.
From its beginnings in 2006, as one of Facebook’s first applications, Lending Club continuously set records. A peer-to-peer lender (P2P), Lending Club was designed to leverage existing connections among users. The idea paid off in spades.
It was the first P2P lender to register its offerings as securities with the SEC, which opened the door for it to become the first lender to offer loan trading on a secondary market. It is the world’s largest P2P lending platform with more than $20B in loans to Americans to refinance debt at lower rates and pay off credit card debt with personal loans with fixed and lower rates. It raised $1B in the largest tech IPO in the U.S. in 2014, and, as of April of this year, the company had raised nearly $400M through 14 funding rounds. The result of all of that was nothing short of this: Two million American families have access to more affordable credit due to the company’s efforts.
And when he speaks of the problems that brought about his exit from the company, Laplanche details just how a driven person of business, a proven winner who sometimes lets his gut get out in front of his reasoning, might be entangled by issues in a new world of thought and an ever-changing world of technology.
“What I learned was that we had a compliance issue, and it reinforced in my mind how critical compliance is when you run a financial service. With fintech companies, the balance is critical. We want technology attributes and to generate a culture of trying things that have never been done before. You have to balance that with discipline and compliance, risk management. That balance is really hard to strike. At Lending Club, we were trained to find the right balance, and we were very focused on compliance, but not sufficiently.”
Laplanche Launches Upgrade
And also like a winner of races, Laplanche couldn’t stay out of the game long, and thus we have Upgrade. Launched in April with co-founder, Jeff Bogan, who made the move from Lending Club as well, Upgrade is a Series A early stage venture, which offers a one-page application and a decision within seconds and causes no negative to the credit score, whatever the decision. The company sports an online lending platform that combines personal loans with free credit monitoring, helping the borrower to secure more affordable credit in the long run.
Offering loans up to $50,000 and with available repayment periods of 36 and 60 months, Upgrade offers low fixed rates, low monthly payments, and no prepayment fees.
Looking at those attributes, it’s evident why Laplanche and Bogan chose to call the company Upgrade. A lot of the information on the company resembles what Lending Club must have looked like a decade ago. It’s all similar except for the upgrade, of course. And what is the upgrade?
The upgrade is the use of technology for credit monitoring tools to give what Laplanche refers to as “a new standard of transparency.” By combining the credit monitoing features of a service like Credit Karma with a Blockchain protocol to protect data integrity—plus working on a process to create “an immutable timestamp record of every borrower transaction by committing each document to a public ledger”—Laplanche states the company goal of a “very strong record and the establishment of better data integrity.” He also says that he and his partners at Upgrade have taken their “experience and everything [they’ve] learned to design version two of online lending, technology that wasn’t available to them 10 years ago, which will make the company more efficient and valuable to customers.
Laplanche and Upgrade Look Into the Future
Things seemed off to a good start for the company in March when the initial funding round raised $60M from 10 investors including Union Square Ventures, Sands Capital Ventures, and Silicon Valley Bank. Things have been slow going since then, however, and Laplanche tells us that was because they “spent the first few months testing the compliance framework with management.” Having made some changes based on data in late July, he says the company then “felt ready to upscale and started ramping up.” When we asked if he could share with us the company’s main performance numbers he said the company has not reached the point when it is ready to start releasing performance data publicly.
Laplanche’s Thoughts on the Future of Online Lending
Experts project $200B in worldwide loan originations by 2020, and Laplanche doesn’t see Upgrade having any competition in the market in which online lenders continuing to capture market share; rather, he sees the company’s main competition coming from the inertia of consumers doing nothing about the trillion dollars in outstanding credit card balance that currently exists in the U.S. “We educate consumers on the fact that a credit card balance is essentially a loan, and since it is a loan, you can refinance at a lower rate.” We use “modern technology and online delivery to lower costs. We pass that on to consumers and help them save money on their credit card bills.”
Laplanche’s zeal may have caused him to move too fast and overlook some things he should have seen at Lending Club, but his caution and due diligence in these first few months of Upgrade indicate that he has seen his error and is focused on doing the things to not repeat it in the future. So, if there’s a race to see which fintech companies can grab a good share of this expanding market, Laplanche probably isn’t someone we should count out without serious consideration.
Magilla Loans is an online lending exchange founded in 2015 that connects borrowers to banks without requesting any personal information. The idea of building the “search engine” for loans was conceptualized by Chris Meyer, a graduate in BA Politics and history from Brandeis University, and Dean J. Sioukas, a graduate from the University of California […]
Magilla Loans is an online lending exchange founded in 2015 that connects borrowers to banks without requesting any personal information. The idea of building the “search engine” for loans was conceptualized by Chris Meyer, a graduate in BA Politics and history from Brandeis University, and Dean J. Sioukas, a graduate from the University of California in BA economics. They had first-hand experience of the struggle in applying for loans and getting the best deal possible. This motivated them to launch Magilla Loans and solve an important pain point for borrowers.
The Story Behind Magilla Loans
Confounded by the way traditional banks provide loans, Meyer and Sioukas wanted to create a search engine for providing multiple loan options to borrowers at one place. Meyer was tired of the providing private financial information to multiple banks and then working with them for two to three months to go through the entire process of underwriting and negotiation. In order to take the friction out of the process the founders envisioned creating a Kayak-like platform for borrowers and lenders. The marketplace is focused on the customer experience and the borrower gets to choose with which lender he wants to work.
Key Features of Magilla Loans
The key to Magilla Loans is that the borrower remains anonymous and does not have to provide any personal information such as name, phone number, or social security number while using the website. The only information the website asks the borrower for is their e-mail. The borrowers can compare the lender options without being spammed by banks or having their personal information sold to third parties, thereby providing complete anonymity while surfing the site.
Magilla Loans has concentrated on premium borrowers with credit scores of around 700. This focus has given good returns with an average loan size of $1.4 million for business loans and $500,000 for home loans. A high-ticket size instantly differentiates the platform from the hundreds of players fighting in the sub-$100,000 segment. The Magilla Loans platform has FDIC-insured lenders, commercial banks, and hard money lenders with nearly 130 lenders on its search engine. There are no concerns about any violation with regards to Real Estate Settlement Procedures Act or the Dodd-Frank Act, as Magilla Loans is simply a marketplace.
The fee structure of Magilla Loans is based on CMSAs (Combined Metropolitan Statistical Area). The company has divided the United States into four CMSAs. It’s a subscription model where the lender pays a monthly fee for access depending on the CMSA targeted. There are no add-on broker fees.
The company does not charge any kind of fee from the borrowers. Its larger plan is to become a one-stop provider for them. The founders understand that once the loan is approved, the borrower will need services of appraisal, environment inspection, insurance etc. If it can collate all of these ancillaries in one place, there is a good probability that the borrower will choose loans from Magilla. This allows the platform to earn supplementary revenue and enhances the perceived utility of the website in the eyes of the borrower.
Magilla’s Working Process
The website is unique in a way that it empowers the borrower to choose the lender and the terms and not the other way around where banks get to choose the borrower.
Magilla Loans helps borrowers by finding and comparing the best loan terms without having the borrower apply to scores of banks individually. Magilla Loans sends a comparison chart (called a MagChart) incorporating proposals of nearly five to 10 lenders along with the rate, terms, closing costs, and other metrics. After performing their due diligence, the borrower chooses his/her lender. The borrower’s personal information is disclosed only to the lender chosen by the borrower specifically.
Why Traditional Lenders are Partnering with Magilla
Traditional lenders have lost a lot of space to fintech alternatives. Bloated cost structures have made it difficult for banks to be nimble in their marketing and outreach programs. The top 15 banks spend at least a billion dollars a year on marketing and business development. The Magilla model allows for banks to concentrate on underwriting rather than competing for leads in the marketplace. The founders believe they can reduce the marketing and business development budget of a bank by 50% and 25%, respectively.
The platform also allows for fine tuning the lenders’ portfolio. If a lender is heavily bullish on industrials and wants to focus on that market in the short term, Magilla Loans will only offer them applicants looking for industrial loans. This micro-targeting saves a lot of time for all parties involved.
Magilla Loans has experienced exponential growth. Currently, it has 130 lenders on board with 200 loan officers. Rather than spending millions of dollars in marketing, the company focuses on creating relationships with professional associations, dental and medical practitioners, and real estate brokers. The model’s success can be seen from the fact that it has had loan requests of over $3 billion on its platform in less than two years of operations.
It is currently limited to California and is seeking Series-A to roll out the model nationwide. The simplicity of the model allows the founders to harbor ambitions for international expansion, as well.
The US alternative lending market has grown aggressively over the last decade. VC funding has allowed many me-too startups to proliferate. Magilla Loans is a breath of fresh air with its focus on high-ticket size and a search engine model that does not disclose the borrowers’ personal information to lenders. With $3 billion in loan requests, the company is poised to dominate its niche.
News Comments Today’s main news: Lending Club plots two ABS before end of year. Scott Sanborn speaks to Lending Club’s Q3 results. Alibaba funds WeLab. Aegon sees strong Q3. Prospa originates over $500M. Jumo wins Mastercard Foundation prize. Today’s main analysis: Top cities maxed out on credit card debt. Today’s thought-provoking articles: Did Lending Club just land another blow to […]
Cities maxed out on credit cards. AT: “LendingTree has some of the most interesting studies. This one looks at credit card balances. It appears folks in San Diego are maxed out to the max while Greenville, South Carolinians are looking pretty good.”
Lending Club is looking to price two more ABS deals this quarter, as the company plans to shrink its proportion of bank funding in the year ahead, executives said on a third quarter earnings call this week.
In Q3, we delivered $154 million in revenue, the highest in the company’s history, and up 34% year-over-year, and 10% sequentially. As importantly, we generated an EBITDA of $21 million. That’s almost 5x the level of last quarter. And we’ve narrowed our GAAP losses by almost $19 million, down to $6.7 million.
We processed a record number of applications, bringing the total borrowers served by Lending Club to over 2 million since launch and an improved efficiency from last quarter.
To put that into perspective, it took 8 years for us to reach our first 1 million, and we’ve helped an additional 1 million borrowers in just the last 2 years.
Although we anticipate some short-term volume effects as we calibrate our targeted marketing to the new model, the 58% annual growth in applications we saw in Q3, combined with the conversion efforts we now have in testing, give me confidence about our outlook in 2018.
Separately, we continue to broaden our mix of investors. As part of that, we delivered on our goal to complete a second securitization that included a total of 33 investors, 10 of which were new to the LendingClub platform.
Lenders should be judged not on how fast they grow during good times, but how they perform in periods like today when consumer defaults are ticking up. On that basis, LendingClubLC -15.93% looks unprepared and investors are right to be skeptical of the online lender.
LendingClub, the most prominent of the online lenders, said loans to certain borrowers at the low end of the prime credit spectrum “are not currently meeting our expectations.” It will start limiting these loans, which account for around 3% of total loans, and temporarily halt their sale to investors. It will also temporarily halt this lending, which accounts for around 3% of its total loans, and also adopt a new credit model that tightens criteria for these borrowers.
Online lenders’ credit models, which analyze various factors beyond traditional credit scores, are supposedly one of their core strengths. That loans are performing worse than expected at LendingClub is a sign the models might be flawed.
LendingTree®, the online loan marketplace personified by Lenny the little green guy who has the banks crawling to him, released on Wednesday the findings of its study on which cities have the dubious distinction of containing the most consumers with signs of being maxed-out with their credit cards.
#1 San Diego, California Maxed-out score: 98
San Diego residents carry $6,629 in credit card balances on average. Nearly one in five (18%) have at least one card maxed-out. That’s second only to Oklahoma City, where 18.5% of residents have a maxed-out card. San Diego residents also use more of their credit lines overall, with 32.8% utilization.
#2 Los Angeles, California Maxed-out score: 93
Los Angeles residents also push their credit further than most, with 17.5% of residents having at least one maxed-out card. Those that do have a maxed-out card have 1.33 maxed-out cards on average. Balances average $6,472, a touch lower than their neighbors to the South in San Diego, helping utilization come in at 32.0% versus San Diego’s 32.8%.
#3 San Antonio, Texas Maxed-out score: 92
San Antonio residents don’t face the same high cost of living that Southern Californians deal with, but they share an affinity for using their credit cards. The study findings revealed that 17.2% of San Antonio residents have a maxed-out credit card, and their total credit card balances average $6,474, similar to those among Southern Californians.
LendingClub is facing two parallel securities litigation cases stemming from alleged false statements it made in connection with its initial public offering (“IPO”).
With respect to the motion to intervene, the federal court granted the motion, for the limited purpose of allowing the state court case plaintiffs the opportunity to “set forth their argument for why they are the better representative” of the class. Additionally, the federal court granted the motion to intervene “on the condition that they remain under this Court’s jurisdiction so that the undersigned judge may coordinate their action with the federal action to avoid any prejudice to absent class members.”
The California state court plaintiff then argued that class certification should be denied in the federal court case because certain theories of recovery that were dismissed in the federal court case remained active in the California state court case, making the state court case “superior.”
The federal court plaintiffs responded that their proposed class was in fact superior because the price of LendingClub’s stock was lower on the day they brought the federal suit.
The federal court declined to enjoin the California state court case. However, it did express “concerns” with “the current form of state plaintiffs’ class notice, which fails to notify class members of the parallel federal action, the pendency of Cyan and its potential effect on their case, or the potential that the filing date of their suit could substantially limit damages.”
Lastly, the federal court addressed an issue of first impression raised by LendingClub and the individual defendants regarding the traceability of the federal plaintiffs shares.
Because of this trading pattern, the traceability of the lead plaintiffs shares turned on whether the court adopted a “last-in, first-out” (“LIFO”) or “first-in, first-out” (“FIFO”) method to calculate holdings.
If the lead plaintiff’s transactions were accounted for using LIFO, all of its holdings as of the end of the lock-out period would remain traceable to the lock-up period. If, however, the court adopted a FIFO calculation, the lead plaintiff would have been deemed to have owned no shares traceable to the IPO. First, the court noted that “[w]hether LIFO or FIFO applies is a matter of first impression in the Section 11 traceability context.” The court ultimately held that LIFO applied because the majority of courts use the LIFO method to estimate losses under the PSLRA when determining a putative lead plaintiff’s stake in the litigation, and “[i]t would be incongruous to measure losses by one method, yet measure traceability by the opposite method.”
Is Square considering a move into crowdfunding? A patent filed in March 2015 and granted in September 2017 suggests that might be the case.
The patent, titled “Mobile point-of-sale crowdfunding,” outlines a method for merchants to request crowdfunding from patrons based on their processing history.
The patent reads:
“Thus, the merchant has conveniently acquired a new espresso machine, customers may benefit from the new espresso machine, and investors have received a return on investment with the added security that the techniques described herein provides (e.g. underwriting of the crowdfunding project by the payment processing system and direct repayment to the investors from POS transactions processed for the merchant by the payment processing system).”
Wela today announces it has passed $1 million in annual recurring revenue (ARR), one of several achievements to mark 2017 as a record year of growth for the personal finance app. In the last two quarters, Wela doubled its total users and amount of linked accounts. Additionally, Wela Strategies, an extension of the app that manages investment accounts, passed $135 million in assets under management. Wela’s growth is evidence of a demand among millennials and young families for a personal finance solution that delivers advice in the way they want to receive it — through the convenience of an app that incorporates artificial intelligence (AI), through the skill provided by a human advisor, or a combination of the two offerings.
In 2017, Wela’s staff doubled in size, adding key management roles, including a chief technical officer, product manager and user experience manager. In an effort to better serve its rapidly growing user base, Wela plans to hire additional support for its customer experience, financial advisory and development teams in the next few months.
Death can be a frightening thought. But, according to a survey from financial-advice website Credible, there’s one thing that scares millennials even more: having credit-card debt.
Of the 500 Americans polled who are currently in credit card debt, more than 33 percent said debt is the scariest aspect of their daily lives.
The findings make sense, according to Credible. Americans hold more than $1 trillion in credit card debt and, among the respondents, the average debt is a whopping $5,290.
When asked how they got into debt, 34 percent said it was due to an emergency expense, 32 percent said their debt is due to a large one-time purchase and 4 percent said they choose not to pay their debt despite having the resources to do so.
Based on the latest research conducted at our annual ELEVATE fee-based advisory conference, one of the most important ways for independent firms to help advisers succeed in this kind of asset gathering is to help them lead with behavioral finance, and to complement that effort with client segmentation that captures qualitative and emotional factors for the adviser.
Aging pre-retirees and retirees need enhanced guidance in navigating the emotionally charged life planning decisions many of them increasingly face. Meanwhile, the highest long-term growth potential client segment, Millennials, generally opt for advice from individuals who build a truly personal connection with them, in a relationship that is as much social as it is professional.
Loans to small business owners backed by U.S. Small Business Administration guarantees increased 36 percent in number and 15 percent in dollar amount in the SBA’s New York district in the 2017 federal fiscal year, putting the district office over $1 billion in annual loan program lending for the first time.
In the seven-county lower Hudson Valley region, the SBA guaranteed 500 loans worth $191 million.
Goldberg said 36 percent of the region’s SBA loans were under $50,000; 42 percent went to minority-owned businesses; and 16 percent, or $160 million, went to women-owned businesses.
The top five lenders by dollar amount in the Hudson Valley were Empire Certified Development Corp. $40,726,000; Manufacturers and Traders Trust Co., $11,393,800; Noah Bank, a minority-owned bank headquartered in Elkins Park, Pennsylvania, $9.12 million; Celtic Bank Corp., based in Salt Lake City, $7,886,400; and Cross River Bank, based in Fort Lee, New Jersey, $7,768,100.
In Westchester County alone, the top five SBA lenders in number of loans were TD Bank, with 42; JPMorgan Chase Bank, 39; Wells Fargo, 14; Citibank and Manufacturers & Traders Trust Co., both with 11; and New Millennium Bank, headquartered in Fort Lee, with nine loans.
The top five lenders in Westchester County by dollar amount were Empire State Certified Development Co., $8,866,000; Newtek Small Business Finance Inc. in New York City, $5,917,400; Live Oak Banking Co., of Wilmington, North Carolina, $5,165,000; TCF National Bank, based in Wayzata, Minnesota, $4,995,500; and NewBank, $4,540,000.
There’s any number of reasons megabanks are rolling out mobile-first banking offerings, from evolving consumer demand to increased competition from fintechs to a significant generational transfer of wealth.
But the biggest motivation for banks like Wells Fargo to develop new smartphone apps may be to ensure they get clients early in their financial lives and keep them.
I’ve been saying for so long now that banks need to replace core legacy systems that I’m boring myself, but here I go again. The reason I’m talking about it again is that, even though some disagree and think they can fudge the issue with plug-ins, I believe that the new competition will decimate banks that don’t replace their core systems.
If you are tech first, your singular focus is on agility. It’s about fast change cycles in a microservices architecture using a SDK (software developer kit) network of APIs (Application Programming Interfaces). It’s about speed, change, service, updates, vision.
If you are finance first, your singular focus is on stability. It’s about slow change cycles in a monolithic architecture using control systems and sign-off structures that avoid any exposures. It’s about risk, security, stability, control, management.
Acting Comptroller of the Currency Keith Noreika delivered a speech today discussing the US banking industry. In the speech, Noreika makes an important point: US banks need more competition, not less. He also intimates that mixing commerce and banking can deliver benefits to consumers. Take this one step further, and Noreika is indicating big tech, like Amazon, Apple, Google, Facebook and more, should be allowed to become banks.
“Meaningful competition could have a number of other positive effects besides tempering the risk concentrated in having just a few mega banks. It could make more U.S. banks globally competitive and promote economic opportunity and growth domestically. For banking customers, particularly those underserved by traditional banks, more competition could result in better banking services, greater availability, and better pricing. If a commercial company can deliver banking services better than existing banks, we hurt consumers by making it hard for them to do so.”
Mr. Cooper, the nation’s largest non-bank mortgage servicer, today announced that it has led the Series A funding round in Matic Insurance, a digital insurance agency whose technology enables homebuyers to obtain homeowner’s insurance seamlessly during the mortgage process .
Matic’s insurance marketplace will enable Mr. Cooper to provide customers a convenient and modern way to shop for insurance while helping them obtain competitive insurance policy quotes and bind within minutes instead of days, all part of a digital mortgage application interface planned to launch in 2018.
LendUp Hires First Chief Financial Officer, Announces Significant Growth Milestones (PR Newswire), Rated: A
LendUp today announced that Bill Donnelly, former VP of Global Financial Services for Tesla, has joined as its first CFO. The company further strengthened its leadership team with the addition of a General Manager for its loans business and a Chief Data Scientist.
Donnelly is a 30-year consumer credit veteran with extensive experience in credit cards and loans products. Donnelly spent the last four years with Tesla as VP of Global Financial Services, responsible for providing financing solutions for Tesla’s customers across 29 countries. He also served as President of Tesla’s captive finance company, Tesla Finance LLC, which offered an industry-leading leasing program innovative for its consumer-friendly agreement and for being the first end-to-end electronic lease with the ability to execute contracts on a vehicle’s touchscreen.
In addition to Donnelly, Anu Shultes has joined as General Manager of the company’s loans business, which recently surpassed $1.25 billion in originations.
Dr. Leonard Roseman has joined LendUp as Chief Data Scientist, to lead a growing team that uses Machine Learning to improve financial inclusion through expanded credit access and lowering the cost of credit to borrowers.
Concord Servicing Corporation, a leading force in the financial portfolio servicing industry, has announced a strategic reorganization of its senior management team. Changes at Concord include the promotion of Executive Vice President Shaun O’Neill to President and Chief Operating Officer, and the addition of financial industry veteran Stephen Bertrand to serve as Chief Financial Officer.
The Economist reports that, nationally, banks have closed over 10,000 branches in the past decade. In the first six months of 2017, 869 branches closed across the U.S.
Mobile banking apps on phones have become the new ‘branches’ even as some brick-and-mortars have shuttered, continued Roger Shumway, EVP of Bank of Utah. “I don’t think branches have declined, they’re just in your hand,” he said. “For community banks, the niche you see in Utah is that they can talk to a real decision-[making] person. If they get into an issue, there’s a face, and [an app on] a phone that they love.”
“We see overall that there’s been a 30 percent drop in branch transactions, but if you look at the overall transactions including electronic, transactions are actually up,” said Zupon.
A combination of the rise of robo-advice and the habits of millenials could mean social media platforms such as Facebook could become major players in the financial advice market in the future, according to Coutts.
He noted that Facebook already has a service allowing individuals to make payments, and said financial advice may be a next step for the social media giant as it seeks to grow.
Analysis from IRN Consultants highlighted recent research which showed each new robo-advice customer signed up is losing the company £162.50 on average in the first year and only making £17.50 in subsequent years.
One of the companies the report pointed to was Nutmeg, whose accounts for 2014 showed revenues of £635,000 compared with operating expenses of £5.9m.
Under existing Financial Conduct Authority (FCA) guidelines, peer-to-peer (P2P) lenders operate within a virtually unregulated space. While this is not damaging in itself, it does create a number of risks, as the FCA has acknowledged. The most significant of these risks are that as companies become more sophisticated, their resemblance to traditional financial institutions increases, but their regulatory obligations do not.
Over the past year, there has been a noticeable rise in the number of P2P lenders using low rates as an advertising measure. Unlike credit card providers that must give 50 percent of all applicants the headline rate they advertise, P2P providers can simply pick a rate and then advertise it, as, unlike their counterparts, it is very difficult for the legitimacy of their offer to be checked.
It is clear that there is a requirement for greater industry guidelines, so it can sometimes seem mystifying that bespoke regulations have not already been put in place. Simply put, this is because the P2P industry is developing at a much faster rate than the regulatory bodies are acting.
The Fair By Design fund will invest in companies tackling the so-called “poverty premium” — the extra costs the poorest pay for essential goods and services, such as energy, credit and food. About 6m households pay an average of £500 a year in higher charges.
The £20m fund was launched on Wednesday and hopes to raise £11m from companies, charitable foundations and rich individuals.
It will invest in companies tackling four areas: energy, finance, insurance — where the poor pay more because they cannot get credit or live in high-crime areas — and so-called “geo-based premiums” based on location.
Fair for You, an online lender, is one business seeking investment. The not-for-profit company offers cheaper loans to those with bad credit records, who go to rent-to-own providers such as BrightHouse, which an independent survey found charged more than £1,000 over three years for its cheapest washing machine. The regulator in October forced it to pay £14.8m compensation to 249,000 customers.
COUNCILLOR Ros Kayes is calling on Bridport Town Council to support the local Citizens Advice Bureau as the roll out of Universal Credit in the town draws closer.
Cllr Kayes reported that Universal Credit would be rolled out in Bridport on December 4th and it is then when those claiming benefits will have to start the process of receiving the credit and will no longer receive any money from existing credit.
The committee will review a strategic plan of financial reforms; coordinate China’s monetary policy and financial regulation; and forge policies on financial risk management so as to maintain country’s financial stability, Xinhua said.
The outlook for reforming China’s developing financial markets and the banking system remains obscured, in part, by a lag in the timing for key appointments such as a successor for Zhou Xiaochuan, longtime head of the People’s Bank of China. Some newly appointed party leaders, including Xi’s close economic adviser Liu He, are thought to support more market-oriented reforms.
With the economy still growing at an annual pace of over 6% and financial markets seemingly on an even keel, Xi’s team can claim to have weathered the post-2008 financial crisis with few major hiccups. But rising levels of corporate, banking and government debt have prompted the International Monetary Fund to raise the alarm. Estimates of the ratio of non-performing loans to total lending in the banking sector range as high as 35%. Most economists and banking analysts say the real level is likely much lower.
The level of debt in the Chinese economy skyrocketed after Beijing unleashed record amounts of stimulus — at least 17.5 trillion yuan ($2.6 trillion) — to help fend off the worst impact of the 2008 financial crisis. That credit binge has not yet been fully digested. In the years since, the level of debt surged further, much of it as “off balance sheet” lending by so-called shadow banks that operate outside the state-dominated formal banking industry.
Moody’s Investor Service estimates that the size of shadow bank lending has more than doubled since 2012, growing more than 20% in 2016 to reach 64 trillion yuan ($10 trillion), or about 86.5% of China’s GDP.
On 8 November 2017, the French Crowdfunding Association Financement Participatif France released the common set of performance indicators that member platforms specializing in loans, mini-bonds (a debt instrument specific to SME lending marketplaces) and bonds are invited to publish.
Key indicators give a clear picture of crowdlending risk and its cost:
The share of borrowed capital already repaid. The older the loans, the higher the portion already repaid.
The portion of interest due already paid. The older the loans, the higher the share of interest already paid.
The net internal rate of return representing the annual profitability of the loans, net of known or proven losses at the date of calculation.
The maximum possible internal rate of return representing the annualized yield of loans if all loans were repaid in accordance with the original schedule.
The annual cost of risk represents the decrease in profitability caused by delays and defaults relative to the maximum possible rate of return. This is the difference between (4) and (3).
Growing restrictions imposed on foreign banks operating in developing countries since the 2007/9 global financial crisis are hampering better growth prospects by limiting the flow of much-needed financing to firms and households, a World Bank report warned on November 7.
Rise of Developing Economy Banks
As advanced economy banks retrenched after the crisis, developing country banks stepped into the void and expanded across borders, accounting for 60 percent of new bank entries since the downturn. The result has been an increase in banking relationships between developing countries and regionalization of international banking operations.
For example, Africa’s Ecobank started in Togo and now has operations in 33 countries across the continent. It also has offices in Paris, Beijing, Dubai, Johannesburg, and London, which allows it to attract capital from wealthy countries to invest across Africa.
At the same time, the total asset size of the world’s largest banks increased by 40 percent, raising concerns that regulatory efforts since the crisis have failed to address the risk of banks that are too big to fail. Nearly 30 percent of developing countries have put in place restrictions on foreign bank branches. These curbs are depriving many economies of opportunities to access global credit that could benefit businesses and households.
There is a long string of middlemen (think brokers, titling agencies, inspectors, etc.) who slow down the process, amplify human error, and drive up the costs of doing business.
A public, distributed blockchain ledger that acts as a living database for all deals, negotiations, and settlements in the industry can overcome many of these shortcomings and reduce the need for “trust managers.”
One of the most exciting companies in the space is REALISTO, who employs the Ethereum blockchain to overcome many of these inefficiencies. Every investment made via their crowdfunding platform is mirrored on their blockchain and verified via smart contracts.
With the formation of blockchain consortia – or groups of financial institutions that collaborate to develop blockchain solutions – blockchain is already set to affect the way financial institutions process payments and handle settlements.
Traditionally, settlements between merchants and banks can take up to days. As consumers, you would have to wait three to five days for your payments to be cleared and verified behind the scenes after swiping your debit card at a local merchant.
By digitizing payments on a secured network, blockchain can serve the 2 billion unbanked people ignored by institutional banks. To use cryptocurrencies, all you need is a smartphone – no minimum account balance, credit history, or banks.
Blockchain lending is a development that is growing in popularity and offering alternative and less stressful ways of acquiring loans quicker and more efficiently even at lower interest rates.
Lendoit offers a robust system which overlaps between blockchain technology and conventional verification systems. Therefore, prior to borrowing, intending borrowers are subjected to standard KYC verification during application, while other aspects of the loan acquisition and repayment processes are based on an Ethereum Smart Contract.
Prospa has claimed first in the race to originate over half a billion in small business loans. The online lender states that over the past 12 months, Prospa has experienced dramatic growth, doubling the size of its loan book. Prospa has now provided credit to more than 12,000 SMEs in Australia and is the number one online lender in the country. Prospa will provide loans of up to $250,000 with a term of 3 to 24 months.
Queenstown Lakes District Council’s (QLDC) announcement and vote to amend its District Plan, restricting the number of days some houses can be used for short term peer to peer lending through sites such as AirBnB, will go a long way to improving rental affordability and shortages for workers in the region.
The report commissioned by QLDC from Infometrics shows AirBnB occupied 14% of the District’s housing stock in the June 2017 quarter.
Asia experienced a solid increase in fintech investment in Q3 2017, with $1.21 billion raised across 41 deals. China accounted for more than 50 per cent of all Asian fintech investment at $745 million.
Notably, corporate participation in Asia fintech venture capital (VC) deals remained high at 22 per cent of overall round counts, although actual direct investment was minimal in 2017 with just $840 million invested YTD in associated deal value.
In Singapore, an Indo-Asia Pacific business hub, the fintech sector saw $25.3 million over six deals in Q3 2017, with the Monetary Authority of Singapore (MAS) continuing to be the key driver of the city-state’s fintech ecosystem.
Dubai-based investment company National Bonds is moving into the financial advisory space with a new digital app offering low-cost investment options, its chief executive has revealed.
The company plans to challenge poor advice, offered by UAE financial advisory firms, by launching an upgraded app in the second quarter of next year to offer customers access to a variety of investment choices – not just National Bonds, Mohammed Al Ali, its chief executive told The National.
The Mastercard Foundation today presented its third annual Clients at the Centre Prize to Jumo. The US$150,000 prize recognizes the innovative work of the South African-based company as a large-scale, low-cost financial services marketplace that serves poor people.
The Prize highlights best practices in financial services where client satisfaction is a priority. Close to 100 financial service companies around the world submitted entries to the competition.
The other two Prize finalists were ftcash, one of India’s fastest-growing financial technology ventures which aims to empower micro-merchants and small businesses with the power of digital payments and loans, and Destacame, a free online platform in Latin America that empowers users by giving them control over their data to build their financial capabilities and to access financial products.
The Mastercard Foundation is hosting its fifth annual and largest Symposium on Financial Inclusion (SoFI) in Accra, Ghana.
The symposium, which ends today, champions the idea that, to achieve greater financial inclusion, financial service providers in developing countries must do more to meet the needs and expectations of people living in poverty.
Uganda launched its National Financial Inclusion Strategy (NFIS) 2017 – 2022 which seeks to reduce financial exclusion from 15 to five per cent by 2022.
Borrowell wins Deloitte Fast50 award (Borrowell Email), Rated: A
Borrowell has won a Companies to Watch award as part of the Deloitte Fast50 program. We are one of only eleven companies across Canada to win that award this year, and the only company from Toronto. Fast50 winners in the category for established companies include well-known names like Shopify, SkipTheDishes, Wave and Influitive. The list was announced an hour ago. George Popescu
The US student debt load currently stands at $1.4 trillion, which roughly accounts for 10 percent of all outstanding debt. It has reached a crisis proportion with over 51% students having debt greater than $50,000. The growth in cost of tuition has outstripped any inflation metric and analysts believe this is holding back new generations […]
The US student debt load currently stands at $1.4 trillion, which roughly accounts for 10 percent of all outstanding debt. It has reached a crisis proportion with over 51% students having debt greater than $50,000. The growth in cost of tuition has outstripped any inflation metric and analysts believe this is holding back new generations from going to college.
This pain point is well understood by the fintech community with online lenders stealing a march over traditional banks in servicing the millennial generation. With a full suite of student loan products, CommonBond has emerged as one of the leaders of the student loans segment. Lending-Times got an opportunity to catch up with David Klein, Co-Founder and CEO of CommonBond, where he explained the vision behind the student loan juggernaut.
The Story Behind CommonBond
Klein went through the painful ordeal of funding his tuition for Wharton. The entire process was confusing, rates were excessive, and customer service was non-existent. He recognized the massive gap and launched the CommonBond platform with two co-founders he met at Wharton. Together, they created a pilot student loan program at the school. The positive response spurred them to expand and focus on providing the best student loan experience in the country. Within two years of launch, CommonBond became the No. 1 private lender in many schools. The comprehensive bouquet of products offered by the company has made them the go-to resource for students, graduates, and businesses.
The Founding Team
David Klein, Michael Taormina, and Jessup Shean founded CommonBond in November 2012 as an online lending platform to connect graduate students and investors. Prior to CommonBond, Klein worked as director of strategic planning and business in consumer finance sector at American Express. Taormina started his career with CommonBond and was associated with the company till January 2015 when he left to start another venture. Shean was associated with the company for one year and later on shifted to Greenhill as Vice President.
Funding and Securitization
CommonBond has raised around $1 billion in funding across equity and debt. It has raised around $78 million in equity with $30 million raised in Series C from a group of investors led by Neuberger Berman Group. It also managed to secure $300 million in debt financing in July 2016. The startup has been performing strongly on the securitization front, as well. Recently, the company closed $231 million in securitizations of refinanced student loans. The securitization received a rating of Aa3 by Moody’s in addition to AA from DBRS. The fourth issuance for CommonBond was its largest securitization and was oversubscribed by more than three times.
The CommonBond Product
CommonBond offers a full suite of student loan products including loans for current students, refinancing loans for graduates, and an enterprise solution. CommonBond for Business Platform, the enterprise solution, enables employers to offer student loan benefits to their employees. With 80% of millennials wanting to work for a company that helps them with their loans, this benefit has the chance to grow into the golden standard in the industry.
But the company is not all about innovation in products. It’s the right blend of advanced technology, competitive rates, and award-winning customer service that has made CommonBond a force to reckon with in the student loan segment.
CommonBond has also incorporated a “one-for-one” social mission: for every loan it funds, it also funds the education of a child in need. This social endeavor proves the company is connected to the community at large. The company has entered into a partnership with Pencils of Promise to this effect.
Acquisition of Gradible
In July 2016, CommonBond acquired Gradible, a personal finance platform. The acquisition was done largely to incorporate Gradible’s proprietary student loan evaluation technology into their CommonBond for Business platform. This integration will enable the online lender to expedite their new platform as the “401(k) for student loans.” The Gradible algorithm will assist borrowers in choosing the best repayment option for their student loans and will allow employers to make a contribution to the employee’s student debts, similar to their contribution towards the employee’s 401 (k).
Since its inception, the company has originated over $1 billion in loans. Its APR usually ranges from 2.87% for variable to 5.5% for fixed rate loans for students in schools. It offers multiple tenures and flexible repayment options so that borrowers can customize the loan as per his unique requirements. The company claims that the borrower can save over $24,000 by refinancing his loan from CommonBond. Its USP is its ability to analyze the creditworthiness of the borrower and offer them lower rates than traditional lenders.
Being a student is stressful enough, and adding the pressure of arranging funds for further studies can be a nerve-racking experience. CommonBond is the only company that helps a borrower at every stage of the student debt cycle. Its borrowers range from high school students looking for higher education loans, graduates who want to refinance their loans at lower rates, parents looking to refinance their children’s loans, and companies that wish to attract and retain the best talent by contributing towards their student loans.
Klein believes that the online lending industry has reached maturity in many ways. First, only the companies that possess both technologically innovative products and a loyal customer base can survive in the long-term. Second, more and more service providers are solely focusing on serving online lenders. This has created a positive ecosystem where the benefits accrue to the final customer. Third, with both fintech companies and traditional banks understanding each other’s importance in moving forward, the industry is now witnessing more collaboration between the two.
CommonBond is planning to stay focused on education finance with its refinancing loan options, loan options for current students and the CommonBond for Business platform as main product categories. Its razor focus on customer service differentiates it from not only traditional banks but also me-too online lenders. It has an in-house “Care Team” which even sends out cookies to students during their exams. CommonBond has created a niche for itself in the student loans category; its solution for businesses is the company’s trump card and a key differentiator.
News Comments Today’s main news: Kabbage sued over true lender doctrine. Orchard to launch online lending industry page on Bloomberg terminal. KBRA assigns preliminary ratings to SoFi Consumer Loan Program 2017-6. DBRS assigns provisional ratings to SoFi Consumer Loan Program 2017-6. RateSetter changes approach to property loan defaults. Lendy breaks another record. MarketInvoice enters business loan market. Today’s main analysis: FT Partners’ […]
A small business (SMB) in Massachusetts borrowing funds via marketplace lender Kabbage has sued the platform, igniting new debate in the conversation over the definition of a “true lender,” according to reports in the National Law Review on Tuesday (Oct. 31).
The small business that sued the parties is reportedly arguing that Celtic let Kabbage “rent” that bank charter to originate loans with excessive interest rates, despite Kabbage being the “true lender,” because Kabbage, not Celtic, bears the risk of loss. The plaintiffs are using state usury and consumer protection statutes, the publication said, as well as the federal RICO statute and Lanham Act.
Orchard Platform’s online lending industry data and insights will be made available to Bloomberg terminal subscribers, providing a wealth of information on an asset class that offers a number of potential investment opportunities.
FinTech lenders continue to gain market share in the personal loan space while maintaining their portfolio risk-return performance. Results from TransUnion’s “Fact versus Fiction: FinTech Lenders” study were released today during the Digital Lending + Investing Conference in New York.
To better understand the personal loan market, TransUnion studied unsecured personal loan originations over the past several years, as well as more detailed portfolio performance between 2014 and 2016. The analysis differentiated between those loans issued by banks, credit unions, FinTechs and traditional finance companies to compare performance across lender types. The study found that the balance share of these loans originated by FinTechs had dramatically risen in recent years. At the end of 2016, FinTechs represented 30% of all personal loan balances, up from about 4% in 2012 and less than 1% in 2010. This trend continued through the first six months of 2017, with FinTechs now representing 32% of personal loan balances.
Share of Originated Personal Loan Balances
2017 (Through June)
Full year 2016
Full year 2015
Full year 2012
As part of this study, TransUnion developed a coarse risk-return metric*. While loans provided by FinTechs experienced higher delinquencies than competitors, specifically within the lower credit risk tiers, TransUnion’s study found that they generated effective portfolio risk-return ratios that exceeded those of banks and credit unions. As of Q2 2017, FinTechs averaged an 8.7% return compared to 6.7% for banks and 6.3% for credit unions. Traditional finance companies average the highest return at 11.5%.
The study demonstrated how FinTechs focus their originations in the near prime and prime risk tiers. As of Q4 2016, 59% of FinTech balances originated were in those two risk tiers. This is slightly higher than the 57% rate in Q1 2014.
Personal Loans Continue to Grow
The study also observed general personal loan trends. Personal loan total balances and consumer participation have both grown considerably. As of Q2 2017, 16.1 million consumers possessed a personal loan, compared to 14.8 million in Q2 2016 and 13.1 million in Q2 2015. Just five years ago in Q2 2012, approximately 9.8 million consumers had a personal loan. Total outstanding balances have risen from about $45 billion in Q2 2012 to $106 billion in Q2 2017.
While conventional wisdom holds that personal loan borrowers fall in the subprime risk bucket, TransUnion data through Q2 2017 show that personal loan adoption is greatest in the near prime (26%) and prime and above (49%) risk levels. Subprime constituted only 25% of such loans.
The most recent TransUnion data show that the number of lenders issuing personal loans has decreased in recent years from 7,245 in 2012 to 6,896 in 2015 and 6,680 in 2016. However, the number of lenders issuing large volumes of personal loans (at least 10,000 annually) has nearly doubled in the last 5 years from 68 in 2012 to 128 in 2016.
6th Avenue Capital, LLC (“6th Avenue Capital”), a provider of small business financing solutions, announced today its securement of a $60 million commitment from a large institutional investor. The investor made their commitment based on 6th Avenue Capital’s industry-leading underwriting, compliance standards and processes. 6th Avenue Capital will draw from this commitment to offer merchant cash advances to small businesses through its nationwide network of Independent Sales Organizations (“ISOs”) and other strategic partnerships, such as banks and small business associations.
This month, the Consumer Financial Protection Bureau took an important step toward making that potential a reality with its release of consumer-authorized data-sharing and aggregation principles. In the principles, the bureau reiterated consumers’ right to share data, recognizing that connectivity is the underlying magic fueling the consumer fintech revolution. The guidelines will promote innovation, competition and consumer control.
Data sharing often requires consumers to provide their bank account usernames and passwords to third parties. In the guidance, the CFPB clarified that granting consumers access to their data does not necessarily mean sharing login credentials. At the same time, the bureau made it equally clear that if banks and others want to prevent the sharing of credentials, they need to find another, more secure way to provide access. Both banks and data aggregators should have an incentive to eliminate the use of credentials.
Third, banking regulators could update their third-party vendor risk management guidelines to clarify the kinds of due diligence banks are required to conduct on parties with whom they share data.
Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”), today announced financial results for the third quarter ended September 30, 2017. Elevate has posted its third quarter earnings release to its Investor Relations webpage at
Robinhood, the fintech brokerage that offers commission-free trading through a mobile app, announced Wednesday it’s launching a web platform.
Bhatt says the web trading platform is primarily geared towards informing people who are interested in investing about the stock market. However, the company faces an interesting product design challenge, in that about half of its users have invested previously on another platform.
LendingTree®, the nation’s leading online loan marketplace, today released its quarterly list of the top customer-rated lenders on its network based on actual customer reviews for the third quarter of 2017. The list features the top lenders in multiple loan product categories, including Mortgages, Personal Loans, Business Loans and Auto Loans, all of which are included in LendingTree’s online loan marketplace.
The online lenders set up to upend US retail banking in the wake of the financial crisis are still expanding in spite of scandals and setbacks at some of the biggest names in the business.
Financial technology groups originated $15bn of personal loans in the first half of the year, according to figures published on Thursday by TransUnion, the credit bureau whose database covers the borrowing habits of 220m consumers.
That was almost a third of the total US market for new personal loans — a bigger share than banks or credit unions or other traditional consumer finance companies — and compares with just 4 per cent in 2012 and 28 per cent in 2015.
It’s long been a mantra in the fintech community: Traditional underwriting models that rely heavily on conventional credit scores leave out people who haven’t built up a credit history. A percentage of these people are creditworthy, but without a history to go on, the credit bureaus haven’t created profiles of them yet.
To assess whether unscored people can repay loans, lenders are increasingly looking at “alternative data” — information that comes from someplace besides a traditional credit bureau that can help predict how a potential ….
Which is why we’re excited to have led the Series B for CoverWallet, an online insurance broker for small businesses which is upending the industry.
Small-to-medium business (SMB) insurance is a profitable, but highly fragmented $100 billion/year market. At the present, SMB insurance is sold through 40k+ brick-and-mortar insurance brokers, which employ 500k+ agents and move 99% of premiums. The typical SMB insurance application has 27 pages, and is completed while having “the talk” with the agent, which will include many upsell & cross-sell attempts. The typical SMB insurance quote takes 7-10 days. For SMB owners, this process is time consuming and painful.
Remitly, a Seattle, WA-based independent digital remittance company, is to raise up to $115m in Series D funding.
The financing – subject to applicable third party and regulatory approvals – will be led by Naspers’ fintech investment division PayU, a global online payment service provider, with participation from existing investors Stripes Group, DFJ, and DN Capital. In conjunction with the funding, Laurent le Moal, PayU CEO, will join Remitly’s board of directors.
When you see prominent investors such as George Soros, Larry Silverstein and Goldman Sachs participating in the real estate crowdfunding business – it means something. So, let’s follow the smart money. The real estate crowdfunder that everyone is talking about now is CityVest, which claims a top pedigree of founders and investors. And CityVest.com is living up to its mission – Smarter Real Estate Investing.
CityVest provides wealthy individuals with online access to institutional real estate funds and the higher rates of return they generate.
Prospective home buyers overwhelmingly want to head south, according to a recent LendingTree analysis. The online loan marketplace looked at the 1.5 million mortgage requests it received from October 2016 to October 2017 to come up with the results.
Which state do home buyers most want to move to?
But of all the Southern states, which was the most desirable? Drumroll please … that would be Florida. The Sunshine State was the top destination for folks from 18 states, or about 9.14% of those looking at loans on LendingTree.
Which state do home buyers most want to leave?
Vermont residents were the most likely to want to hightail it out of the Green Mountain State. Despite its popular ski resorts, only about 76% of locals were looking for in-state mortgages.
Which state do home buyers most want to stay in?
Texans were the most happy of any state’s residents to stay put. About 92.5% of folks looking for potential mortgages wanted to stay within Texas, according to LendingTree’s report.
So as a techie, how does one go about evaluating not just the real estate but also the platform offering the investment?
That’s why it’s critical for real estate investing platforms to be willing and able to answer questions from prospective investors — even those would-be investors without a ton of prior real estate knowledge. These companies should take a page out of Amazon’s book and develop a customer obsession.
Be leery of any cliché claims of leveraging big data to automate underwriting. Underwriting is as much science as it is intuition/experience, and the best commercial real estate professionals have a carefully tailored mix of both.
In the long run, the track records of the platforms will speak loudest.
Steven Dupree was SoFi’s first marketing executive and VP of marketing for 3 years. He and his growth-oriented team took SoFi from originating 10 loans a day to over 1000.
The three most basic ingredients for being able to succeed in FinTech are:
1) “Good enough” technology
2) Tremendous capital markets expertise
3) Some sort of customer acquisition strategy
Companies like Experian and Equifax know if you have loan balances, and specifically they know if you have student loan balances. We sent pre-screened offers to prospects with outstanding student loan debt through physical mail about how SoFi could help them with those loans.
QCash Financial, a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology for financial institutions, announces it will co-host a free webinar with Filene Research Institute and the Center for Financial Services Innovation to discuss the opportunities for credit unions in offering small-dollar lending on November 14.
During the webinar, QCash Financial will address our industry’s impact and opportunity to deliver small dollar loans. QCash Financial, the Center for Financial Services Innovation and Filene will collaborate to discuss the omni-channel lending solution that serves members in search of small, short-term unsecured loans.
Registration information can be found at filene.com. The webinar is scheduled from 2 p.m. CST / 12 p.m. PST until 3 p.m. CST / 1 p.m. PST.
Ken Rees, Chief Executive Officer at Elevate, a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, will speak on a panel session at Dallas Techweek on Thursday, November 2, at 9:15am CT. The panel will focus on data intelligence, breaking down the hype around data science, and exploring ways companies can turn that hype into actionable business intelligence.
Rees will be joined by local tech talent and founders, including Clarisa Lindenmeyer, Chief of Strategy/Partnerships at Launch DFW; Sravan Ankaraju, President of Divergence.Academy, CEO of Divergence.AI; Dave Copps, CEO of Brainspace; and Steve Hebert, Co-Founder & CEO of Nimbix, Inc.
U.S. Sen. Elizabeth Warren warned Wednesday that the nation’s largest student loan servicer has positioned itself to stealthily strip consumer protections from unwitting borrowers across the country. In an interview with International Business Times, she also said the loan servicer, Navient, should not be permitted to be a government contractor handling student loans on behalf of the U.S. Department of Education.
The Massachusetts Democrat was sounding an alarm about Navient’s recent acquisition of online lender Earnest. She said the transaction opened up the possibility that the company will try to boost its profits by selling debtors on refinancing their current federal student loans with the company’s own private loans — the kind that she said to do not necessarily permit income-based repayment options.
A new robo-advisory platform has hit the market, under the moniker BrightPlan.
Important to note, according to the firm, clients are not required to invest through BrightPlan in order to receive financial planning advice. They can manually input external account balances or link external accounts from more than 10,000 financial institutions to BrightPlan, which will monitor goal progress and provide advice to stay on track.
Avant has created an online lending platform that uses Big Data and machine learning algorithms to streamline the loan decision process helping borrowers consolidate debt through personal loans. The company, led by CEO and co-founder Al Goldstein (pictured), raised $325 million in Series E financing back in September 2015, with General Atlantic leading a round at a $2 billion valuation.
Avant isn’t alone, with competitors like publicly traded Lending Club (NYSE: LC) and VC-backed Kabbage using a similar strategy: automating the credit creation process.
RATESETTER is changing the way it deals with defaulted property development loans, which could involve taking control of the project and completing it itself.
The peer-to-peer lender said on Wednesday that if a property development is only partially completed and has gone into default, it will now examine whether maximum value would be delivered via an immediate sale or by completing the development and then selling it.
UK-based peer-to-peer property platform Lendy announced on Thursday it has broken all previous records for loan repayments generated in any one month, recovering £20 million in total in October 2017 alone. The online lender reported that this exceeds its previous September 2016 high of £14.5 million. The record figure includes repayments on P2P loans on three caravan parks in Christchurch, Dorset, totaling £7.6 million and a Manchester mill of £1.35 million.
A digital invoice finance platform in the U.K. will provide business loans to its customers for the first time, it was announced Wednesday.
The firm said it would expand into the business lending market, pitting it against established players such as U.S. listed peer-to-peer lender LendingClub and Britain’s Funding Circle. The latter raised £82 million ($100 million) in funding from venture capital investors earlier this year.
CEO and co-founder Anil Stocker told CNBC that MarketInvoice will take advantage of an incoming European Union regulation called the Second Payment Services Directive (PSD2), which forces banks to open up data about their customers to third party companies.
‘We’re taking business from the banks, from the invoice discounters and from the traditional suppliers of finance, in ever larger amounts,’ says Angus Dent, chief executive of ArchOver, a P2P lender that launched in September 2014. ‘We only lend to companies with strong balance sheets and we only lend against accounts receivable (ARs). We will loan up to 80 per cent of the value of the ARs. Once the loan is made the ARs must be maintained at 125 per cent of the value of the loan, monitored by us on a monthly basis. This provides a quickly realisable asset for our investors in case the borrower gets into difficulties over repaying for the loan.’ The minimum amount that ArchOver expects clients to invest is £1,000 per project.
For Anil Stocker, chief executive and co-founder of MarketInvoice, P2P lending against receivables (amounts owed to a business) offers a particularly interesting investment class ‘because it’s of short duration, a liquid product, with invoices typically taking 45 to 50 days to be paid.
IMLA found that lending by specialists has grown by an average of 19% each year from 2009 to 2016, with a total of almost £17bn lent last year. That’s enormous growth from a sector that was particularly badly dented by the effects of the financial crisis.
Even with these enormous annual increases in lending, the market share of these specialists remains modest. According to IMLA it has grown from 3.5% in 2009 to 6.8% in 2016, and that still lags significantly below the levels seen before the onset of the financial crisis.
Britain’s leading financial technology start-ups are celebrating a record-setting week as they accelerate their push to take market share from high-street banks in areas such as payments and lending.
TransferWise will on Thursday announce that it has collected $280m from investors, a record fundraising round for a UK fintech, to finance expansion of its cross-border payments service into more countries around the world.
Meanwhile, Funding Circle has for the first time outstripped net new lending by the major high-street banks to UK small businesses, according to figures released by the Bank of England this week and data provided by Europe’s largest peer-to-peer lender to SMEs.
Of 1000 small biz owners quizzed by WorldPay, more than half say that they are planning for growth in 2018, yet 52% admit to being concerned that the traditional routes to finance, such as bank loans, are not going to be as easily available in the coming year.
While 21% of business owners aged 44 or under say they’re still most likely to apply for a bank loan when looking for funding, nearly as many respondents (17%) say they’re more likely to look at crowd-funding, while 11% prefer P2P lending, and six per cent say they favour business cash advance.
HSBC’s head of retail wealth, Dean Butler, provided his perspective on automated advice, and the bank’s plans for new products in the area, at the UK Robo-Advice Innovation Forum on Wednesday, attended by BI Intelligence.
Earlier this week, Landbay and Buy to Let Club completed lending to a new building in Southgate, a suburban area of north London, in under two months. The initial case was reportedly submitted on the broker portal by Buy to Let Club on August 24th.
A North East company has been named by social media site LinkedIn as one of the country’s 25 most disruptive companies.
Durham ’s Atom Bank, which is shaking up the banking world with its mobile-based app and personalised services, is named alongside companies including Deliveroo, Uber and Airbnb, on a list of start-ups which LinkedIn says are changing the UK business landscape.
In recent years, with the rise of Internet financial and the change of macroeconomic environment, the traditional commercial banks did go through a “severe winter”. Since 2011, banking climate index has been down all the way. It is not until 2017 that the new season of spring is coming.We selected 38 listed Chinese Banks in exchange of Shanghai, Hong Kong and Shenzhen as the performance comparison samples, and analyzed their comprehensive profitability based on the financial data of the first half of 2017.During this time, the total net profit of the 38 banks selected in this paper was 823.93 billion RMB, up 4.14 percent from the same period last year. The chart below described the profit data of all the 38 banks in the first half of 2017.
Profitability Banks Ranking
Among the 38 listed banks, we can also find the Top10 earning banks as follows, including 5 large-scale commercial banks and 5 joint-equity commercial banks. In addition, the net profit of Ping An Bank and Beijing Bank has reached the threshold of 10 billion RMB.
Chinese listed banks VS internet giants in profitability
According to the total value and earning data of the selected 38 listed banks as follow, their total market capitalization is about 10 trillion RMB, and the total net profit was 823.93 billion RMB. That means the net profit ratio was about 0.082.
As for the BAT giants which are closely watched in the Internet industry, the three Internet companies are worth about 6.5 trillion RMB in total for the first half of 2017, and the net profit reached 52 billion RMB. That means their net profit ratio was just 0.008, much lower than the listed banks. Obviously, Banks still have an advantage over emerging Internet companies in terms of profit creation.
In fact, research shows that the rise of the Internet financial companies has little impact on the profitability of large commercial Banks and rural commercial Banks, while has a great influence on city commercial Banks, and Joint-stock commercial Banks have been promoted instead because they can seize the Internet financial opportunities. In general, though the development of Internet finance has brought adverse effects on the profitability of commercial Banks, and also forced it to actively adjust the profit model and promote the diversified development of the profit structure.
Chinese facial recognition start-up Megvii Face++ has raised $460m in an investment round led by a government fund, as the country pours money into efforts to become an artificial intelligence superpower to rival the US.
The Beijing-based Face++ said on Wednesday that it had raised money from China State-Owned Venture Capital Fund and the China-Russian Investment Fund, which is backed by the sovereign wealth funds of both countries. Private investors including Alibaba’s payments affiliate Ant Financial also participated.
On October 17, Handing Yuyou(300300.SZ), a listed company that was suspended from trading, began to transfer its assets of internet finance continuously. On October 30th, the company announced that it would transfer a 2 percent stake in the Wei Dai Network for 170m RMB, and then they announced to transfer a 1.5 percent stake in the Wei Dai Network for 127.5 million RMB. Through the two deals, Handing Yuyou(300300.SZ) will receive nearly 300 million RMB in cash. Deducting the previous investment costs, Handing Yuyou(300300.SZ) won over 100 million RMB in less than half a year. In the past three years, according to the company’s history of the investment in Wei Dai Network, we can find that the company has earned at least 10 times to the original investment.
The transferee of this transaction is Beijing Qianshan Xinyuan Investment Management co., LTD. According to the public information, Beijing Qianshan Xinyuan Investment Management co., LTD. was established in 2015 with the registered capital of 10 million RMB. Its parent company, Qianshan Capital Management co., LTD is a private company registered in 2016. The parent company also have the other several subsidiary corporations, including Qianshan Venture Investment Management co., LTD., Beijing Qianshan Wealth Management co., LTD., etc. Currently, the parent company has a total capital size of 1 billion RMB.
Starting from today, November 1, 2017, we have removed the 1% fee for selling loans on the secondary market of the Mintos marketplace. This means from now on, there are absolutely no fees for investing through Mintos.
Telecoms giant Orange launches its own bank on Thursday, aiming to win 25 percent of France’s online banking market by capitalizing on the rising use of smartphones to steal share from established lenders with inferior technology.
Orange is starting from a small base – Coisne says it has 25,000 customers have expressed interest ahead of the launch, a tiny fraction of the company’s 21 million mobile clients. But the timing of its entry gives some room for optimism.
In France, 793.4 million online banking e-payments were made last year according to the European Central Bank, up from 586.2 million in 2014.
Financing and loans are even being re-thought of with new forms of capital raising, such as ICOs, crowdsourcing/crowdfunding, and P2P lending, making banks and legacy financial institutions even less needed.
Small business loan marketplace Lendio announced it has provided more than $25,000 in loans to over 1,200 small business owners in 75 countries around the world through its employee-based Lendio Gives program in partnership with Kiva.
The top five sectors supported by Lendio’s funding are agriculture, food, retail, clothing, and services. Of the loans Lendio has funded, 86 percent have gone to women or women’s groups. The top countries Lendio has supplied funding to include Zimbabwe, Peru, Haiti, the Democratic Republic of Congo, Ecuador, the Philippines, Kenya, El Salvador, and Senegal.
To gauge the IMF’s most recent analysis: A speech last month, at the Bank of England, by the IMF’s Managing Director—Christine Lagarde—analyzed potential challenges posed by fintech innovations to central banking.
In my remarks here today—focusing on implications of fintech for cross-border payments—I’ll explore three broad areas: 
First, a sketch of the economic framework on how fintech applications will affect financial services and the market structure.
Second, the current landscape of cross-border payments, and the possible evolution of cross-border payment systems; and
Third, the role of central banks, themselves, and the possible reasons for them to issue their own digital currencies.
Alternative asset classes – in particular, real assets, private equity and private debt – will more than double in size, reaching $21.1trn by 2025, accounting for 15 per cent of global AuM as investors diversify to reduce volatility and target specific return and risk outcomes, according to research by PwC.
It is now mandatory for entities proposing to undertake this business to be registered as ‘NBFC-P2P Lending Platforms’ with the RBI (NBFC-P2P). To ensure business continuity, existing players have been given a period of three months to apply for this licence. Applicants will be scrutinised for scalable and secure technological capabilities, financial standing as well as fit and proper management.
Fundamentally, the NBFC-P2P is expected to operate only as an intermediary and not undertake any lending activities itself or hold any funds of its participants (lenders or borrowers) on its books. Towards this end, an escrow mechanism for movement of funds has also been envisaged.
The exposure of each lender and loans (not exceeding a three year maturity period) availed by each borrower across all NBFC-P2Ps has also been capped at INR 10 lakhs, with each borrower not permitted to avail more than INR 50,000 per lender.
In addition, directions also prescribe that NBFC-P2Ps adopt minimum standards of transparency, disclosure requirements and fair practices.
Impact on Aggregators
To the extent P2P lending platforms are servicing individuals and/or unregulated entities, there is merit in regulating such operators to contain any systemic risks. However, there are existing players in the market who primarily service regulated financial institutions (viz. banks and NBFCs) as lenders. The Master Directions fail to recognise this distinction.
Separately, banks and NBFCs today use distribution channels including web-based loan aggregators.
PrimechainTechnologies announced on Wednesday that the country’s largest bank, State Bank of India (SBI), will adopt blockchain technology to manage the mandatory Know Your Customer (KYC) details in its system. Intel Corporation will act as a technology provider to facilitate the implementation.
Korea’s accumulated peer-to-peer lending reached 1.47 trillion won (US$1.31 billion) by end-September as more and more borrowers are embracing the new, more convenient platforms for connecting with investors.
Considering that the figure accounts for only 60 members of the Korea P2P Finance Association among the industry estimates of 130 lenders, the market is actually bigger. It also reflects a sharp upward trend; back in June 2016, when the association first began compiling data, accumulated loans granted by 22 members stood at just 152 billion won.
Against this background, Kim founded PeopleFund in March 2015. Since then, the bank has been on a roll. On Nov. 1, its accumulated loans stood at 121 billion won, compared to 19 billion won in February. It’s the No. 3 player in the local industry.
The South African SME sector is set for a major crisis unless access to adequate business funding can be ensured as a matter of urgency. This was the key takeout from the just-released Key Funding Challenges for South African SMEs 2017 report developed by online lenderLulalend.
“76% of respondents to our national survey of SMEs said they had undergone a tedious months-long paperwork-heavy process in applying for businessfunding from traditional lenders, only to have their applications denied.
Considering access to credit was the #1 business challenge for nearly three out of every five SMEs surveyed, this disconnect between the needs of business owners and the lenders that have traditionally supported them is creating conditions of high risk and volatility.”
News Comments Today’s main news: Lending Club closes 5 investment funds, rebrands LC Advisors. CommonBond closes $248M securitization, receives AA S&P rating. LendingTree Q3 results. LandlordInvest expects to double IFISA intake. Ant Financial puts off IPO. Renredai volume surpasses 37.8B RMB. New Zealand prepares for open banking. SMART Box to debut in Canada. Today’s main analysis: Don’t forget about loan recoveries. Today’s […]
Big Tech vs. Big Banks. AT: “So far, all this talk of Amazon and Google threatening banks has been speculation. They certainly have the financial clout and technological prowess to be the threat that everyone is anticipating. But we still haven’t seen it happen–yet.”
Yesterday, Lending Clubannounced the closure of several funds. The funds were part of what was previously known as LC Advisors, an investment management company dedicated to investing in notes originated by the platform.
Since each fund is a separate legal entity there were many different buyers that participated. While we don’t know the terms of the deals or who purchased these loans, Suri did share with us that there were over 40 bids for the assets and 5 of the 6 funds have been sold at fair value or a slight premium.
What happens next?
Lending Club is rebranding its asset management business. Now called LendingClub Asset Management or LCAM for short.
When we asked Suri about positioning the new offerings to investors he stated that their biggest flagship fund under LC Advisors had delivered slightly over 6% annualized since 2011.
CommonBond, a leading financial technology company that helps students and graduates pay for higher education, today announces the close of a $248 million securitization of refinanced student loans. The offering’s most senior notes achieved AA ratings from Moody’s, S&P, and DBRS – Aa2, AA, and AA (high), respectively – the company’s highest ratings to date.
The transaction was CommonBond’s fifth and largest to date. Investors submitted $1 billion in orders, making the deal more than four times oversubscribed. Goldman Sachs served as structuring agent, co-lead manager, book-runner, and co-sponsor. Barclays and Citi also served as co-lead managers and book-runners on the transaction, while Guggenheim Securities served as co-manager.
The transaction was the first of CommonBond’s to be rated by S&P, who assigned AA ratings to the transaction, alongside similar ratings from Moody’s and DBRS. Moody’s and DBRS also recently upgraded CommonBond’s ratings on previous deals in recognition of the company’s strong credit performance.
To showcase the significance of the third-party debt collection industry in America, the New York Fed publishes in their Quarterly Report on Household Debt and Credit a ‘Third-Party Collections’ chart (below). As of 2017-Q1, between 12-13% of consumers with debt have debt being collected by third-party agencies (blue line). Of those, the average amount of debt in collections is ~$1,400 (red line).
The 2015-2016 roll rate matrix is experiencing a higher percentage of loans going from non-performing (60-89 DPD & 90-119 DPD) to current when compared to the 2013-2014 roll rate matrix. This 100 bps difference for 60-89 DPD and 200 bps for 90-119 DPD can be attributed to the improvement of servicers’ collection and outreach programs for delinquent loans.
Consumer loans have experienced a monthly recovery rate between 5% to 15% within different portfolios on our platform. Based on this table, a $100M pool of loans would have a $1M valuation difference between a 5% and 15% recovery rate input.
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced results for the quarter ended September 30, 2017.
Third Quarter 2017 Business Highlights
Record revenue from mortgage products of $73.8 million represents an increase of 38% over third quarter 2016 driven by strong growth in both purchase and refinance revenues at 87% and 24%, respectively. According to Mortgage Bankers Association, originations industry-wide were down 16% in the comparable period.
Record revenue from non-mortgage products of $97.7 million in the third quarter represents an increase of 138% over the third quarter 2016 and increased to 57% of total revenue compared to 43% one year ago.
Home equity revenue growth accelerated, increasing $9.0 million, or 176% over third quarter 2016, and marked the eighth consecutive quarter of year-over-year growth exceeding 100%.
Personal loans revenue of $25.4 million grew 44% over third quarter 2016 and grew 24% sequentially.
Revenue from our credit card offerings grew to $39.4 million in 3Q compared to just $6.6 million in 3Q 2016. On a proforma basis, giving effect to the CompareCards and MagnifyMoney acquisitions as if they had occurred on January 1, 2016, credit cards revenue grew 43%.
More than 6.5 million consumers have now signed up for free credit scores and savings alerts through My LendingTree, and the volume of new enrollments accelerated. Revenue contribution from MyLendingTree grew 96% in the third quarter compared to the prior year period as new features and smarter savings alerts are driving increased engagement.
Third Quarter 2017 Financial Highlights
Record consolidated revenue of $171.5 million represents an increase of $76.9 million, or 81%, over revenue in the third quarter 2016.
GAAP net income from continuing operations of $10.1 million, or $0.74per diluted share.
Record Variable Marketing Margin of $59.1 million represents an increase of $22.8 million, or 63%, over third quarter 2016.
Record Adjusted EBITDA of $34.7 million increased $16.2 million, or 88%, over third quarter 2016.
Adjusted Net Income per share of $1.17 represents growth of 65% over third quarter 2016.
During the quarter, the company repurchased 42 thousand shares of its stock at a weighted-average price per share of $237 for aggregate consideration of $10.0 million. As of September 30, 2017, the company has $38.7 million in repurchase authorization remaining.
Business Outlook – 2017
LendingTree is revising Revenue, Variable Marketing Margin and Adjusted EBITDA guidance for full-year 2017, as follows:
Revenue is anticipated to be in the range of $603 – $608 million, representing growth of 57% – 58% over full-year 2016 and an increase from prior guidance of $580 – $590 million.
Variable Marketing Margin is anticipated to be $202 – $205 millioncompared to prior guidance of $190 – $195 million.
Adjusted EBITDA is anticipated to be in the range of $111 – $113 million, up 59% – 62% over full-year 2016 and an increase from prior guidance of $103 – $106 million.
A recent report from McKinsey on the global banking industry addressed the threat banks face from technology firms. Amazon stock jumped 13% on earnings and reporting that Amazon is increasing its lending footprint. Tune into Bloomberg Radio archive to hear more about this topic as PeerIQ’s CEO discusses the threats and opportunities of big technology with Bloomberg’s Lisa Abramowicz and Pimm Fox.
Summary of Amazon’s Lending Business
Amazon finances small businesses that sell products through the Amazon marketplace on an invitation-only basis. Interest rates range from 6 to 15%, tenor ranges from 4 to 6 months, and loan size is up to $750K.
Although there is no segment-level P&L reporting for the lending unit, loss-rates according to Amazon’s Peeyush Nahar have been “very, very small.” Amazon’s lending makes up a small part of their business (e.g., $3 Bn in loans to date vs. Amazon’s $136 Bn annual revenue). Amazon is also not directly financing the consumers indicating substantial opportunity to grow.
Owning the Customer
The most compelling advantage big tech has outside of data and customer acquisition are the creation of entirely new channels that banks cannot easily replicate.
A few examples:
In-Home: Large consumer tech firms occupy the most intimate space of consumer through services such as Amazon’s Echo, Google’s Home, or Apple’s Siri. These platforms represent a trojan horse for delivering new products and services in a highly personal and exclusive manner.
Personal assistants that are increasingly anticipatory and have access to the calendars, preferences, and daily lives of consumers.
Mobile and virtual wallets which shift the battleground from legacy “share of wallet” and “primary card” concepts to mobile platforms and virtual wallets
Virtual spaces created via social media including Facebook or services such as Lyft or Uber which enable unobstructed access to the consumer.
Technology giants like Google and Amazon, which gained their market muscle from non-finance-related ventures, are slowly stepping into the space. Their next target could be small business lending, and according to some experts, it’s fast approaching the market.
Amazon in particular is positioned to dominate. The company has already lent more than $1 billion to merchants selling on its platform, and, just as alternative lenders put the pressure on traditional FIs with their quick surge into the market, the Amazons of the world will do the same, Mills predicted.
Chatter Picks Up Steam
Karen Mills’ statements have found new backing in the latest banking report released by McKinsey & Co. this week. New reports in Bloomberg on Wednesday (Oct. 25) said the report identifies Amazon as the newest, biggest threat to the small business lending status quo.
The report points to sagging return on equities for the banks, which have not been able to surpass 10 percent since the 2007/2008 global financial crisis. The FIs that collaborate with those FinTechs could boost their return on equities to 14 percent and even higher if they develop their own solutions in-house.
When customers open an account at one of these automated investing firms, they’re put into funds from companies like Charles Schwab Corp. and Vanguard Group and charged a fee of anywhere from 25 to 50 basis points. In return, they get some extra benefits, like tax loss harvesting, which can result in a lower tax bill, and automatic re-balancing at no extra cost.
But there’s a catch, the funds that customers buy through these advisors are all available on free trading platforms such as Robinhood Financial, where there’s no added cost.
Consumer analytics company SelfScore has rebranded as Deserve, writes Julie Muhn at Finovate (Banking Technology‘s sister company).
The California-based company continues to be committed to providing underbanked Americans with access to credit, and to fuel that mission, Deserve has received $12 million in funding. The round was led by Accel, with participation from Aspect Ventures, Pelion Ventures, Mission Holdings, Alumni Venture Group, and GDP Venture, and brings Deserve’s total funding to $27 million.
Blockchain is particularly relevant to the lending market. Lending is a contract-intensive process with an extensive lifecycle; it carries significant risk and limited trust across its value chain – from origination to funding through to the fulfillment and servicing of the loan.
Moreover, the integration of blockchain with digital lending ensures transactions are tracked in an open and transparent way. Banks and lenders get direct visibility into exactly what happened during the lending process – who was involved, who had control over the authoritative copy of the digital assets and ultimately, who owns the value of those assets, as required by law.
Touching on the recent boom in real estate crowdfunding firms, John McNellis, co-founder of Palo Alto, Calif.-based development firm McNellis Partners, divided the crowdfunding sector into two groups: firms that simply connect investors with developers and firms that invest in projects themselves. The first concept should work in the long term, he noted. But when it comes to crowdfunding firms underwriting real estate deals, McNellis pointed out that it takes at least a decade in the business to become a reliable underwriter. “To expect these 20-year-olds who are good at tech to be good at underwriting” is unrealistic, he said. McNellis added that established developers normally already have financial partners that they prefer to work with. The developers most in need of crowdfunding dollars would be either those just starting out in the business or developers with a spotty track record.
The decline in underlying collateral quality — a theme across wider consumer ABS sectors — has been playing out in marketplace loan ABS, with recent deals from Prosper, Marlette Funding and Avant featuring a growing proportion of loans taken by borrowers with credit scores of less than 680.
A 2017 crowdfunding reportby the National Women’s Business Council, for example, found that 47% of successful campaigns on the popular crowdfunding platform Indiegogo were run by women.
Keep in mind that online business loan shopping sites may operate in a variety of ways:
Lead generation sites will simply gather your information then sell it to various lenders, which may then call or email you with information or offers.
Online lenders may offer a specific set of loan products aimed at specific types of borrowers (for example, those with significant credit card sales). Remember: just because you can’t qualify with one lender doesn’t mean you can’t quality with others.
Online brokers may try to help get you funding with various lenders with whom they have a relationship. They may charge a significant fee for this service, so be sure to ask.
Online marketplaces will present you with options and allow you to choose which ones seem right for your needs. Ideally, you’ll also see which loans are best matched to your qualifications. (Disclosure: Nav’s small business loan marketplace operates this way.)
Zeus CrowdFunding once again offers borrowers what other lenders won’t – low rates designed specifically for the real estate investor and their year-end needs. For a limited time, qualified applicants will pay only six percent interest for the first six months of the loan term.
The company loans up to 100 percent of a project’s cost to qualified applicants in as little as four days.
On Deck Capital, Inc. (NYSE:ONDK) is scheduled to be issuing its quarterly earnings data before the market opens on Wednesday, November 1st. Analysts expect the company to announce earnings of $0.03 per share for the quarter.
As banks rush to catch a wave of robo technologies, Wells Fargo Advisors is rolling out a factor-based approach designed for advisors and their clients.
The wirehouse has launched an expansion to its electronic model portfolio services platform, according to Patty Loepker, WFA’s head of research directed advisory programs. The new managed accounts program features allocations built around smart beta ETFs.
Litigation finance specialist Pravati Capital has launched its third fund vehicle to capitalize on opportunities in the burgeoning litigation finance sector.
The new fund, named Pravati Credit Fund III, will invest in mature stage, high-probability, high-value cases or case portfolios where there is established liability and precedent for settlement, according to a statement.
Initially, my co-founders and I had experience verifying identity documents meant for an offline world. The current way of verifying documentation for a standard current account requires hours and hours of face-to-face in-branch and still not getting approved; it’s no wonder there’s a 40% drop-off.
Of the 7 billion people in the world, Facebook has brought their social identity online, LinkedIn has brought their professional identity online and now we’re looking to bring their legal identity online.
How exactly are Onfido providing something that mainstream banks should take notice of?
Very simply, we help business verify the identity of the people they are onboarding digitally. That can be with a photo of their government issued ID that the user can send with a smartphone. We cover 600 IDs globally and use machine learning to verify whether the ID is genuine or not. There are three steps to our core technology. The first, we extract the details, see if the patterns are consistent and compare them to the millions of historically computed IDs. The second step is asking the user to take a photo or short video of their face, which we compare to the photo on their identity document for similarity. The third step is to check that their details – name, date of birth and address – are consistent with records on multiple databases. Altogether this verifies the person is who they claim to be and, end-to-end, takes two minutes.
We use a hybrid machine/human approach – the technology is able to automatically process the vast majority of documents, and the small number of outliers are passed to our expert human team for review. It means that human resource can be put to more effective use, and would heavily cut down on the 30,000 people employed by Citibank, for example, who just work on onboarding and compliance checks.
As a Millennial yourself, how much of a role do you think generations play on attitudes to banking?
Millennials are just so used to doing absolutely everything on their phone.
Fintechs have really monopolised the millennial market and they’re building the models to ensure they keep that market for the next 15-20 years. That’s where PSD2 becomes very relevant as a leveller of the playing field for the market – it’ll increase healthy competition.
Silicon Valley investors have more than doubled funding for UK technology companies this year, in a sign of strengthening links with the world’s biggest tech hub after the Brexit vote.
British start-ups received £884.8m from venture capital backers based in San Francisco and the Bay Area in the first nine months of this year, compared to £342m in the whole of 2016, according to London & Partners, the London mayor’s promotional agency.
According to the latest figures from London & Partners (L&P), the Mayor of London’s official promotional firm, investors from around the world have backed London-based fintech firms to the tune of £825m so far this year. This is a positive sign for the industry after UK fintech investment plummeted by more than a third in 2016 as investors put off decisions in the wake of the Brexit vote.
One of the biggest London fintech success stories, currency exchange platform Transferwise, is reported to be in discussions with investors to raise a further £77m, which would value the company at more than £1.2bn.
Strange as it may seem, using the analogy of Lego may be the best way to demonstrate why we believe the peer-to-peer (P2P) industry also isn’t – and can’t be – a one trick pony. While some see the industry as a fad that is set to become redundant, there are many reasons why this isn’t the case.
P2P platforms are exploring a range of new and old ways, and their aim is to create something which is more equitable, satisfactory and useful for everyone.
Uber has appointed a former senior adviser to the Bank of England as non-executive chair in the UK, as it endeavours to clean up its image and “make things right” after Transport for London last month revoked the ride hailing company’s licence to operate in the city.
Laurel Powers-Freeling, who will take up the newly created position, is currently senior independent director at online lender Atom Bank.
Flush with cash, Chinese financial-technology giant Ant Financial Services Group is putting on hold plans for an initial public offering while it steps up investments in everything from startups to artificial intelligence, according to a senior company executive.
Investors and analysts have been expecting Ant to go public sometime in 2018. The Hangzhou-based company last raised $4.5 billion from private investors in April 2016 in a deal that gave it a $60 billion valuation—and its business has since expanded significantly.
51 CreditCard (u51.com), an online platform for credit card bill management, is reported to be listed on Hong Kong Exchanges and Clearing Limited (HKEX) in 2018, aiming to raise at least 500 million dollars.
According to a report of China Daily, the credit database of PBOC has collected credit information of more than 840 million individuals as well as more than 19 million companies and organizations by the end of April. Among these agencies, only 255 licensed micro loan companies have been connected to the company credit information system and 156 to the individual credit information system.
From November 1st, customers will be able to pay their train tickets by using WeChat Pay through the official booking website 12306.com or in the train station (booking office/self-service ticket machine).
On October 18th, Trustdata released the long-awaited “Trustdata: China Consumer Finance Analysis Report (2017)”. The document presents a comprehensive review of consumer finance development in China, makes a deep analysis of payday loan, installment credit and consumer behaviors, and proposes a new concept called “Consumer Finance Development Index”.Statistics from the research notes that, by the end of last month, the credit scale of consumer finance in China has reached more than 110 billion yuan with 3.7 million registered users.
The phenomenon of “Chinese companies lining up for an IPO in the United States or Hong Kong” has re-surfaced recently, Tiger Brokers, an online brokerage helping Chinese investors trade US- or HK-listed stocks, told chinadaily.com.cn Thursday.
Beijing-based Jianpu Technology Inc, which is 100 percent controlled by RONG360 Inc filed its preliminary prospectus with the US Securities and Exchange Commission, without the estimated IPO price range, on Oct 20.
Prior to Jianpu, Chinese online small consumer credit provider Qudian Inc made its debut on the New York Stock Exchange on Oct 18. Qudian priced its IPO of 37,500,000 American depositary shares (ADSs) at $24.00 per ADS for a total offering size of about $900 million, according to Xinhua News Agency. Qudian closed at $26.39 Wednesday after diving 7.24 percent, still above its IPO price.
Recently, Renrendai issued its performance report for the third quarter of 2017.According to the report, the cumulative turnover of the platform surpass 37.88 billion RMB, with 524 thousand transactions in total.
More details, Renrendai remained steady growth in the third quarter. The volume on the platform reached 6.51 billion RMB this quarter, a 109% increase over the same period last year, and the amount of money that investors earn is up 55% from the same period last year. In addition, the per capita borrowing amount on the platform is 80.8 thousand RMB, which represents the capital requirements of small business owners and self-employed people in the class, and always below the national regulations of loan balance ceiling of $200000.
On 27th October, the shares of Qudian tumbled again, closing down $3.59 to $22.8, down 13.6% below the offering price of $24 a share.
The company has fall into constant questioning just after it landed in the SEC. Luo Min, the CEO of Qudian, responded several questions through an interview Qudian’s Luo Min Respond To All, but this move has raised more query. Many media and media outlets gathered to lambast Luo Min for “lying” in her response.
On 23th October, Luo Min avoided all the media interviews again. Since then, the shares of Qudian began to slump, which closed at $26.39 on 26th Oct, down nearly 20 percent from the opening price of $31.89 on Wednesday.
Jianpu Technology Inc, a wholly-owned subsidiary of Chinese fintech firm Rong360, has filed for a $200 million IPO in the US. Goldman Sachs, Morgan Stanley and JP Morgan are bookrunners for the deal, according to a stock exchange filing.
China is preparing to tighten regulation of online consumer lending as part of a campaign against financial risks, dealing a possible setback to Chinese fintech groups that hope to sell shares in the US.
Household debt in China remains low as a share of GDP, and authorities have encouraged growth of consumer credit as a way to rebalance the economy towards consumer spending, but now concerns are rising about irresponsible lending practices online.
Online consumer lending has replaced peer-to-peer lending as the trendy new area in Chinese fintech, as a regulatory crackdown on P2P reduced that sector’s profitability. Short-term consumer loans outstanding in China grew by Rmb1.49tn ($225bn) through the first nine months of this year, compared to an increase of Rmb830bn for all of 2016, according to PBoC data.
Chan also said the rapid growth of new fintech services, such as peer-to-peer lending marketplaces and online money market funds, was made possible by a lack of innovation by the country’s traditional banks in addressing the needs of not only the average consumer, but also many small and medium-sized enterprises.
High-flying start-up Ant Financial Services Group, which runs online payments service Alipay and money market fund Yu’ebao, has made AI a key driver for expanding its businesses and improving customer service.
China was the world’s second-biggest investor in AI enterprises last year, injecting US$2.6 billion into the sector, according to the state-run think tank, Wuzhen Institute. The United States topped the list with US$17.9 billion in investments.
What would your reaction be if you wanted to get a loan and your bank asks to go through your Facebook profile? In China, this is already happening on a large scale, but it’s not banks that are doing the rating—it’s the country’s burgeoning fintech companies. And it’s not Facebook they are looking at—its social platform WeChat and shopping website Taobao.
Social credit scoring analyses data from non-traditional sources: social media, online shopping, payment apps, cell phone accounts, and more. This type of scoring is meant to fill a gap for people who want a loan but don’t have any way of proving they can repay one. In order to gauge whether you are creditworthy or not, the score can take into account a number of variables: who your friends are, what you buy, whether pay your bills on time or even how much time you spend reading the user agreement. It’s like FICO but decidedly more creepy.
Alibaba was once a kind of shadow lender too. The company first started building its own credit scoring model to provide loans to Taobao vendors. For this, it relied solely on the platform’s ability to gather big data—transactions, user ratings, market positioning, and others.
Sesame Score (screenshot above) tracks five areas: identity information, such as information on users’ education and work, ability to keep financial obligations, credit history, behavioral preferences like shopping, money transfers, and connections with other people. In return, it offers deposit-free bike and power bank rentals as well as other benefits.
Yirendai (YRD) is a Chinese fintec company focused on facilitating unsecured loans. Leveraging the experience of its parent company, CreditEase, Yirendai has facilitated more than RMB 47 billion (US$7 billion) of loans since commencing operations in March 2012.
Financials and performance
Yirendai’s core business has seen rapid growth, facilitating over RMB 20 billion(US$3 billion) in loans in 2016, up 112% from 2015. The most recent forecastfrom the company expects loan volume to continue to grow through 2017, with RMB 35-37 billion (US$5.3-5.6 billion) this year. Earnings have been strong and growing as well, with net income for the six months ending June 30, 2017, rising from RMB 392 million to 620 million (US$58.9 million to 93.2 million) over the same prior-year period, translating to diluted earnings per ADS of RMB 6.71 to 10.26 (US$1.01 to 1.54) for the same periods.
China’s upcoming Social Credit System
Presently, eight companies have been licensed to develop algorithmic SCS scoring systems, including China Rapid Finance, a partner of social network TenCent (OTCPK:TCEHY) and Sesame Credit, which is run by Ant Financial, an Alibaba (BABA) affiliate.
Italian P2P firm BorsadelCredito.it has followed in the footsteps of its UK antecedent Funding Circle by launching a closed-end fund. The unlisted fund, which is called Colombo, hopes to raise €100m to invest across a 5 year timespan, and is managed by BorsadelCredito.it (through a vehicle named ART SGR SpA). The fund’s custodian bank is Caceis Bank.
By investing in Italian SME loans, originated exclusively by BorsadelCredito.it, the fund will target a yield of 5 per cent (5.5 per cent pre-tax).
Desai left the audience in no doubt that Funding Circle has “no plans” to launch a bank. Later that same day, Zopa CEO Jaidev Janardana delivered his keynote: “Why we’re launching a bank”.
José Rego, who runs Portuguese P2P firm Raize, sees the issue as black-and-white.
“By definition, if you become a bank, you stop being an alternative lender,” he said. “Becoming a bank is an extremely complex and very expensive strategic decision which typically takes into consideration other elements besides the equity value generated by the alternative lending. Only a select number of platforms are likely to have the opportunity to become banks (if they wish so). So, in reality, I don’t think it should be something we’re thinking about within the industry.”
In a new report ‘Asset & Wealth Management Revolution: Embracing Exponential Change’, PwC anticipates that global Assets under Management (AuM) will almost double in size by 2025, from US$84.9 trillion in 2016 to US$111.2 trillion by 2020, and then again to US$145.4 trillion by 2025.
By 2025, AuM will have almost doubled – rising by 6.2% a year, from US$84.9 trillion in 2016 to US$145.4 trillion in 2025, with the fastest growth seen in the developing markets of Latin America and Asia Pacific.
While active management will continue to grow and play an important role, reaching $87.6 trillion by 2025 (60% of global AuM), PwC predicts growth in passive management to reach $36.6 trillion by 2025 (25% of global AuM).
If current growth is sustained, the industry’s penetration rate (managed assets, as a proportion of total assets) will expand from 39.6% in 2016 to 42.1% by 2025.
PwC anticipates assets growing at 5.7% a year in North America from 2016 to 2020, slowing to 4.0% per annum from 2020 to 2025, lifting assets from US$46.9 trillion to US$71.2 trillion over the nine years. Similarly, Europe is projected to grow at 8.4% and 3.4% per annum respectively over the two periods, with assets rising from US$21.9 trillion to US$35.7 trillion.
McKinsey said that the industry needs to continue its digital makeover to protect the up to 40 percent of revenues at risk by 2025 and prepare for competition from so-called platform companies like Bezos’s Amazon.com Inc.
As he extends Amazon’s reach, the Seattle-based company has had discussions with banking regulators about financial innovation, according to lobbying disclosures reviewed by American Banker. And it already has a small-business lending arm that has doled out more than $3 billion to more than 20,000 of the merchants on its e-commerce platform.
The global banking industry, which had an 8.6 percent return on equity last year, could offset the loss of profits from price competition by partnering with platform companies and generating more revenue from their data. Banks that go further by creating their own platforms could elevate their ROE to 14 percent, according to the report. ROE is a measure of profitability.
Furthermore with smartphone prices of $30 to $50, Asian markets maintain a robust mobile market. 76% of Taiwan is connected to mobile, and 70% of Myanmar is connected.
Experts estimate Asia as the region to become the fastest growing Internet region by 2020. And while their internet industry is flourishing, only 27% of Southeast Asians have a bank account. In 2017, China has 731 million internet users. That is only 53.1% of the population. China represents internet development at a fast pace, but it still has 21% unbanked. Internet traffic growth in Myanmar is at 58%, yet Myanmar is one of the lowest banking rates in Asia with over 70% of adults (aged 15+ years) unbanked.
As an example OECD research points out that financial sector works constitute 19% of the top 1% earners but the share of finance in the overall employment is only 4%.
In developed world, there are huge reserves of money lying in banks at sub zero, zero or miniscule interest rates. On the other hand in the developing world where there is a dearth of credit, loans can only be had at rates as high as 20-30%.
According to Eurostat, SMEs represent around 99% of all enterprises. In OECDcountries alone SMEs are responsible for job creation to the tune of 60-70%.
Karma plans to use the blockchain in such a way that individuals as well as legal entities can make the most of profitable relationships with each other. This will entail creating a community of participants, who will be able to lend money, borrow money, insure against default, Score loans and carry out assessments and even collections. All of this will be fuelled by the Karma token that will be at the centre of this new ecosystem.
The sale of Karma tokens is legal in all jurisdictions including the United States and China. Qualified US investors can participate. The basic price of Karma Token is US$ 0.01. Early investors can get discounts of 50% till US$ 1 mln is collected, thereafter 30% discount is available till US$3 mln is collected and 15% till US$ 8 mln is collected. There is a hard cap of US$ 10 mln on the token sale.
Though fintech can take many forms, “I think the disruption is really in the payer experience,” says Sharon Butler, EVP, education at Flywire, a global payment solutions company. “Essentially we are leveraging banking infrastructure. I think really what fintech is, is sort of the blend of the old and the new.”
Preceding the growth in cross-border tuition fee payment services, which track the money and file it instantly with minimum costs involved, were more staff resources sifting through multiple transactions and matching them to the student, coupled with uncertainty from the student’s side about when or whether the money would actually have arrived.
Improvements in payment services is one of the biggest ways fintech has benefitted students, agrees Devie Mohan, founder of fintech research company, Burnmark.
Fertile ground in China
Financial technology as an industry has grown globally at an unprecedented scale. Last year, fintech reaped $17.4 billion of venture capital investment – a colossal increase on the $2.5 billion it received just four years ago.
And $7.7 billion of this investment went to China, seeing it overtake the US as the top investment market for fintech companies for the first time.
A platform targeting the Chinese market has recently struck a deal to partner with ChinaPay, the online payment subsidiary of China UnionPay, one of the world’s payment giants.
The mobile payment industry is one which has grown particularly quickly in China in comparison with other countries around the world, predominantly led by Alipay and WeChat Pay. These two platforms combined saw $2.9 trillion in transactions overall last year.
Modernising student loans
But it was Prodigy Finance that entered the loan market specifically to serve international students. Since its inception in 2007, the platform has lent over $310 million to international students all around the world to study overseas, and is expanding its services.
Financial services startup Ethercash has proudly announced its Pre-ICO Campaign, which will raise funds to develop its blockchain-backed financial platform. The Ethercash platform aims to revolutionise three core functions of finance to bring greater transparency and security in the way we lend, send and spend. The Etherecash platform will allow its users to leverage their cryptocurrency holdings to acquire fiat currency loans without the need for credit history, through the application of lawyer-backed smart contracts. The Etherecash Pre-ICO campaign will run from October 25th, 2017 until November 7th, 2017 and ICO campaign will begin November 15th, 2017 and finish on December 19th, 2017.
Andrew Sieprath is among the first people in the Europe to embrace “open banking” as a customer.
His chosen banking provider is Revolut, which isn’t even a bank.
Revolut is just one of three “open banking” services due to launch here in the next few months. They will lead New Zealand into something of a banking revolution which threatens to do to banks what Uber is doing to taxi firms, and ultimately put more pressure on them to cut staff or close branches.
There are many emerging open banking models, but as a starting point, think internet banking that’s slicker, more intuitive, and allows users to see and manage accounts from multiple banks in a single place.
While the technology behind robo-advice is making it cheaper to invest, it doesn’t mean it is actually providing advice let alone the right advice, says the Association of Real Return Investment Advisers general manager Rebecca Jacques.
She told a recent Calastone forum that she put a few global and domestic robo-advisers to the test by giving each the same simplistic target: to pay her young children’s private school fees.
Every robo asked for a country of origin; only one asked for a tax bracket – but what was “scary” was that not one asked if the funds would be used for private school tuition, she notes.
But the report found property transactions made up a very small part of that alternative financing industry, making up just $49 million, or 8%, of the $609 million dealt out in 2016.
Australia lags behind the Asia-Pacific average (excluding China) of 17% of alternative financing going towards real estate. The popularity of peer-to-peer property financing in South Korea is a big contributor to the high average.
The $49 million alternative lending spent on real estate in Australia is made up of $36 million in peer-to-peer lending and $13 million in crowdfunding. In the US, peer-to-peer is worth $1 billion and crowdfunding $800 million.
CrowdfundUP – The startup has so far allowed 2,000 people invest in 17 projects, with individual investments typically ranging from $5,000 to $2 million.
CoVESTA – The real estate on offer includes residential, commercial and even agricultural properties, with investors requiring to contribute at least 5% of the purchase price if they wish to be a tenant in the property. For passive ownership, just 1% ownership is required.
It has been observed that, when the P2P lending industry or any other industry is prudently regulated, it attracts more participation. In terms of P2P, the regulation will increase entry of investors as well as borrowers. This is a reason why RBI regulating the NBFC-P2Ps is a long-term positive for the Indian P2P lendingindustry.
RBI regulating the sector means dead-end for players that are looking only to generate money without adding any value.
However, the potential social benefits of P2P lending are contingent on a facilitative and proportionate regulatory ecosystem. A review of the P2P regulations issued by the RBI leaves much to be desired in that sense. Saliently, the P2P regulations delegate potentially arbitrary discretion to RBI in gatekeeping, impose high market-access barriers that would inhibit innovation in a technology-intensive sector, and lack clarity around critical issues like leverage ratio.
A. Excessive regulatory discretion: One of the principal governance issues of a modern state is injecting accountability into regulatory discretion.
B. Disproportionate minimum capital requirements: The RBI has prescribed a mandate that would require a minimum net-owned fund (NOF) of Rs2 crore.
C. Lack of clarity around critical issues like leverage ratio: Leverage ratio is defined as “total outside liabilities divided by owned funds, of the non-banking financial corporation in P2P (NBFC-P2P)”. This leverage ratio has been capped at 2.
The current marketplace for financial products in India is still highly inefficient, time-consuming & uncertain for customers – especially the SMEs and the MSMEs. When they require loans as working capital or for expenditures like purchase of raw materials, payment towards wages etc. to achieve scale and growth, approaching a bank directly or even visiting loan aggregator websites becomes challenging in terms of time & information. Also, due to varied risk appetite of traditional financial institutions, many SME and MSME entrepreneurs are often puzzled in terms of documentation requirements; different banks and lenders have their own set of risk parameters which they assess while sanctioning a lending facility. This results in high rejection rates within the loan ecosystem.
Why online lending is emerging as an enabler for India’s MSME industry
New-age fintech lending marketplaces endeavor to revolutionize the country’s financial lending patterns by changing the way it works. They are enabling easy access to loans by connecting these small businesses to financial institutions on a consolidated platform for quicker sanctions. Such neutral platforms, with customer-centric features offering a wide range of loan products and end-to-end loan fulfillment, enable MSMEs to concentrate on building their businesses rather than worrying about finances to fulfill the gap in their cash flows or fund their expansion and growth.
While the Reserve Bank of India’s (RBI) guidelines for lenders and borrowers on peer to peer (P2P) lending platforms are important cautionary moves, caps on lending should ideally be linked to lenders’ incomes, Neha Agarwal, co-founder of i2ifunding, told Shritama Bose. The company has disbursed more than Rs 3 crore so far in FY18 and has a full-year target of Rs 10 crore, she added.
We have had more than 30,000 registrations on our platform so far, of which around 25,000 people are registered as borrowers and around 5,000 as lenders. Since launch, around 500 loans have been disbursed and we have around 2,000 active lenders.
The average loan size is about Rs 1.5 lakh.
Almost 90% of the lenders have invested more than once. Around 40% of lenders are lending regularly on our platform.
Gregor has a company in Singapore where individuals can securely store their gold and silver.
Using peer to peer lending you can withdraw up to half of your holdings in loans at low-interest rates. For example, if you have $100k worth of gold you can deposit and take out a loan for 50k at around 3.5% interest per year.
The fast growing Fintech industry is another feather in the cap of rising Asia. According to EY FinTech Adoption Index 2017, there is a palpable global shift of fintech activities from the UK and the US to Asia.
Another report provided by KPMG and CB Insights says in 2016, investments in Fintech companies in Asia hit $8.6 billion across 181 deals.
In light of this, fintech innovation labs and fintech accelerator/incubator spaces are rapidly growing throughout Asia, especially in Hong Kong. The FinTech Innovation Lab Asia-Pacific is collaboration between Accenture and leading financial institutions including Bank of America, Merrill Lynch, Goldman Sachs, HSBC, J.P. Morgan, and Standard Chartered, etc.
A bout of high-profile mega-rounds in the Chinese market has also played a vital role in uplifting Fintech investment. One such activity was a whopping US$4.5 billion funding round by Ant Financial, an affiliate of Alibaba group. The other smaller but successful funding rounds in China during 2016 were: US$73 million to Quant Group, and US$30.4 million to China Rapid Finance.
According to a recent research conducted by Startupbootcamp FinTech Mumbai and PwC, it was found that more than 95% of financial service companies are seeking partnership with Fintech startups through collaboration rather than competing with them.
Another report regarding Indian Fintech ecosystem is more interesting. It says Indian Fintech market is expected to double from current US$1.2 billion to US$2.4 billion in 2020.
Tan, who formerly partnered with Sequoia Capital Asia, said his Singapore-based fund is looking for ambitious, strong Korean tech startups to invest in what could become the next unicorn.
He believes Asian-based VCs have a competitive advantage over established VCs from Europe or the US in the region as they can effectively tackle the needs of startups.
Fintech and software as a service, especially targeting small and midsized businesses, are the buzzword in Southeast Asia, according to Yoo Jung-ho, investment manager at Korea Investment Partners.
“In many of these countries, payment, banking abd finance, are still in a nascent stage with only 10 percent of the population utilizing credit and banking services,” said Yoo. “There is a great demand for firms that provides peer-to-peer lending and payment services. “So companies that target small and medium enterprises that make up the majority in Southeast Asia, will have a fighting chance.
According to recent reports, only 12 percent of households in Malawi have access to credit. With 65 percent of the population living under the poverty line, the rural population is especially vulnerable to the limitations of credit.
In today’s modern age, a physical bank is no longer needed to conduct financial services. Virtual and automated banking is expected to replace 30 percent of bank roles in the next ten years. These virtual banks even the playing field for Malawians by allowing consolidated rates, 24/7 access to services, and a location for information about other services. Some of these alternative, virtual services include:
Peer to Peer Loans:Rather than receiving a loan from a financial institution, peer to peer loans allow people to receive a loan directly from an individual financer. In order to apply for a loan, you must visit a peer to peer lending platform such as Prosper or Perform, and the online marketplace will match borrowers and lenders. Although the site still uses credit scores, individuals may have more sympathy towards you and your situation as opposed to a national bank.
Crowdfunding:Another way to finance an opportunity is through crowdfunding. Crowdfunding is a fairly recent innovation that utilizes crowdsourcing as a way to raise funds for a project or business.
The change in financial technologies in the coming years will have a great impact in Malawi, and create more access to services for the entire population.
Lendified, a Canada-based lender who provides small business loans online has entered into an agreement with ClearFlow Commercial Finance to increase its lending capacity. According to the lending platform, through the agreement, ClearFlow is providing it with a $60 million credit facility to fund loans delivered through its website.
Introduction The last few quarters were not good for IPOs, but, finally, the market has gained some momentum. In Q2 2017, 54 IPOs managed to raise $11 billion. The first two quarters of the year have surpassed IPO fundraising for the whole of 2016. Online lenders are also moving down the IPO road, and SoFi […]
The last few quarters were not good for IPOs, but, finally, the market has gained some momentum. In Q2 2017, 54 IPOs managed to raise $11 billion.
The first two quarters of the year have surpassed IPO fundraising for the whole of 2016. Online lenders are also moving down the IPO road, and SoFi is the next online lender touted for listing on the stock exchange after posting record numbers in its second quarter results. But the recent departure of CEO and founder Mike Cagney puts a major question mark on what’s next for the student finance pioneer.
Social Finance: First of its Kind
Social Finance (SoFi) is an online finance company that offers a range of lending and wealth management services. Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady founded SoFi in 2011 to provide a lending platform to students at Stanford and other elite colleges. Initially, the company was structured on a model to help students use funds raised from alumni, and since the borrowers and lenders are socially connected via alumni networks, default are less likely to happen.
The lender shifted from the alumni-based model to a more scalable underwriting approach to provide lending options to all financially responsible individuals. The underwriting model does not only evaluate its borrowers on financial parameters like bill payments and debt, but also evaluates their cash flow, professional history, and education. It has broadened its offerings from the initial student refinance to mortgages and personal loans targeting high earning young professionals.
Social Finance: Numbers
Last year has been tumultuous for the entire alternative lending space as the industry was plagued by an increase in default rates, regulatory changes, corporate governance issues, and scandals. Amidst all this chaos, SoFi still managed to generate positive results in 2016 as it funded approximately $8 billion in loans witnessing an impressive jump from $5 billion in loans in 2015. The graph below shows the growth in total loan originations to $16.7 billion (approx) from more than 250,000 members since inception.
With its vision to expand into new product segments and countries beyond the US, SoFi raised $500 million in February 2017 in a Series F funding led by Silver Lake, Softbank Group, and GPI Capital. With this investment round, the company’s total equity funding has reached a mammoth $1.9 billion.
In the second quarter of 2017, SoFi reported that it originated $3.1 Billion in loans and earned $134 million in revenues with an adjusted EBITDA of $61.6 million. The company has expanded its horizons by venturing into the lucrative insurance business. SoFi has obtained insurance license from several states such as Massachusetts, California, Florida, South Dakota, and Arkansas to act as insurance broker and has partnered with Protective Life Insurance. This could be a game changer as it allows SoFi to cross sell multiple products to its existing clientele.
Controversies and Scandals
SoFi was recently in the news as Cagney was accused of fostering a toxic culture in the company by current and former employees. In the wake of sexual harassment allegations, his resignation is not surprising. But such a reputational hit might hamper the company’s plans of opening a bank this year.
To ensure strategic continuity of its operations and to achieve its plans to go public this year, Tom Hutton, the Executive Chairman of the company has been selected as the interim CEO. He was of the view that the company is “well positioned, stable and strong enough; there is only need to build a transparent, respectful and accountable culture”.
Previous Attempts made by the company for an IPO
In 2014, SoFi shelved its first IPO plans after receiving funding of $1 billion from a group of investors led by Softbank. SoFi was developing new business lines such as wealth management and life insurance at the time and was not ready to be scrutinized by investors on a quarterly basis.
In 2015, Cagney again claimed that the company was looking to file an IPO within 12 months. But due to adverse market conditions in 2016 and regulatory challenges faced by the entire sector, SoFi decided to put off its plans that year.
The headwinds subsided in July 2017 when the US IPO market embraced Redfin’s IPO (an online real estate brokerage company which also offers mortgages) with open arms. With the offer price of $15 per share, Redfin managed to raise $138 million and closed at $21.72 on the first day of listing (45% above the listed price). Its grand show in the US IPO market broke the dry spell for fintech IPOs and gave SoFi the proverbial green signal to go public this year.
Following the Footsteps of Other Lending Platforms
2014 proved to be a path-breaking year for online lending platforms as two of the biggest players in the industry–Lending Club and OnDeck–came out with their IPOs. Lending Club’s IPO marked the first ever public offering by an online lending platform and raised $870 million. It was valued at $8.9 billion at one point. And in December 2014, OnDeck, a lending platform for small businesses also went public raising $200 million with a valuation of $1.3 billion. Since the beginning of 2016, both companies haven’t had a good run in the stock market as the stock price of Lending Club has fallen by approximately 43.4% and OnDeck’s stock price has fallen by 53.88%. Waiting out almost three years for that coveted IPO may prove to be lucky for SoFi as the market seems to have bottomed out.
Recent OCC Developments
The recent development at The Office of the Comptroller of the Currency (OCC), which regulates all national banks and federal saving associations, is surely going to benefit SoFi. The OCC declared it would accept applications by fintech lenders provided such companies would be subject to certain federal banking rules under the special charter. Being designated as a national bank will help SoFi to accelerate its growth plan and also will instill confidence in potential borrowers and investors.
With its focus on creating a community, SoFi has set the gold standard in the industry in terms of customer satisfaction and product innovation. This has enabled the company to etch its place among the elites in the industry. The only clouds on the horizon are the departure of Cagney along with sexual harassment claims. But analysts expect that the company’s IPO will receive a strong reception from the market. Investment from some of the big names in the industry goes to show investors believe in the platform’s business model, and now the stage is set for SoFi to roll out its long-awaited IPO.
A little-known segment of U.S. financial services – Industrial Loan Companies (ILC), also known as industrial banks – have captured the interest of alternative lenders this year. Even though ILCs have been around for nearly 100 years, their flexible structure and compliance has brought them again to the forefront. Fintech majors like SoFi and Square […]
A little-known segment of U.S. financial services – Industrial Loan Companies (ILC), also known as industrial banks – have captured the interest of alternative lenders this year. Even though ILCs have been around for nearly 100 years, their flexible structure and compliance has brought them again to the forefront. Fintech majors like SoFi and Square have applied for this obscure charter last granted a decade ago. The charter allows diversified companies to own a bank without having to comply with the requirements of the Bank Holding Company Act. Therefore, it is imperative to understand how this ILC structure could be a game changer. Mike Nonaka, Partner at Covington & Burling LLP, addresses some of the bigger issues around ILCs.
Who is Covington and Burling LLP?
Covington & Burling LLP was founded by Judge J. Harry Covington and Edward B. Burling in 1919 and has its headquarters in Washington DC. The firm employs over 1,000 lawyers and advisers, and provides legal services in fields like litigation and investigations, regulatory and public policy, and mergers and acquisitions. Its clientele ranges from large companies to trade associations. They have also advised various online lenders and other financial institutions on different regulatory issues for decades.
What is an ILC?
An ILC is a state-chartered depository institution that is supervised by the state and Federal Deposit Insurance Corporation (FDIC), and whose deposits are insured by the FDIC. Utah industrial banks are the most popular state charters with eight out of the 10 largest ILCs. The state’s ILCs also account for 90 percent of the industry’s assets.
California, Colorado, Minnesota, Indiana, Hawaii, and Nevada are other states that have permitted ILCs at various times. Since an ILC is exempted from the definition of “bank” in the Bank Holding Company Act, a company that owns an ILC is not subject to Federal Reserve supervision, capital requirements, and a number of other regulatory requirements. This makes the ILC charter an attractive option for commercial companies interested in owning a bank, as well as for financial firms with the same interest.
A company that owns an ILC can engage in banking activities as well as in activities that are commercial in nature, since they are not subject to any restrictions. There generally are restrictions on the types of companies that can own a bank – commercial companies may not own a bank – but the owner of an ILC is exempt from this restriction. Many commercial companies and financial services firms like Merrill Lynch, UBS, Morgan Stanley, BMW, and Harley-Davidson have set up industrial banks.
The ILC Controversy
Regulators fear that mixing banking with traditional commerce will give an unfair advantage to commercial companies and a “parallel banking system” will unbalance the entire financial system of the country.
Controversy erupted when Wal-Mart wanted to acquire an ILC in 2005, and when Home Depot emerged as a buyer for Utah-based EnerBank, an ILC owned by CMS Energy Corp. Applications by these giants attracted a lot of negative attention, and thousands of comment letters were sent to the FDIC, which held a public hearing on the Wal-Mart application in 2006. Subsequently, 98 members of Congress requested a moratorium on approval of new commercially-owned ILCs. In July 2006, the FDIC issued a six-month moratorium on ILC applications.
Federal deposit insurance, access to the Federal Reserve’s discount window and payment systems, all along with the freedom to run the company’s business free from restrictions under the Bank Holding Company Act are what makes an ILC charter extremely appealing for alternative lenders. Banks are taking note of this development, as federally insured deposits would allow alternative lenders to attract savers and low-cost funds, creating competition for deposits.
SoFi’s ILC Application
It is hard to predict whether the FDIC will approve the SoFi application, submitted on June 6, 2017. But Nonaka believes that SoFi has put together a compelling application. Whether SoFi is fulfilling the statutory criteria or not will be decided by the FDIC and state regulators, and it will be interesting to see how regulators react to the public comments on the SoFi application. What makes the SoFi application so compelling in Nonaka’s eyes is the fact that the company is a mature company with established risk management controls in a lot of the areas the FDIC is concerned about. On the other hand, a former SEC head is on the record for saying SoFi’s recent scandals may put the ILC charter further out of reach for the company.
SoFi applied in June 2017, and with an equity capitalization of over $1.9 billion and almost a $170 million war chest for capitalizing bank operations, has a strong story to tell with regard to its financial resources.
Square’s ILC Application
Square applied for an ILC charter in September 2017. SoFi is an online lender whereas Square is more of a payments company, thus their applications will be judged from different angles, Nonaka said. The FDIC will evaluate Square, like other applicants, in terms of its management expertise, controls the company has in place, its business processes, and its financial stability.
Banking agencies tend to impose higher risk-based capital and liquidity requirements on new institutions. For example, regulators require a higher capital base for new institutions as compared to traditional banks already in operation. Considering that Square Inc. is a listed company with a market cap of around $11 billion, these financial uncertainties should not be insurmountable hurdles for the firm.
Varo Money provides a mobile-first banking product to consumers and has applied for a traditional national bank charter with the FDIC and the Office of the Comptroller of the Currency (OCC). If approved, they will also be able to offer insured deposits, and they will operate as any other brick-and-mortar bank.
The company is relatively young and has raised around $27 million from Warburg Pincus.
The OCC fintech charter is currently not available as compared to the ILC charter, for which the state regulator and FDIC are accepting applications. However, the OCC is in discussion stages regarding the charter. Therefore, Varo Money will not see a ruling on its application until the charter is approved.
More importantly, the OCC fintech charter does not necessitate the applicant offering FDIC-insured deposits, and any proposal for a fintech company to obtain the special purpose charter to offer such deposits also would need to apply for FDIC approval. An ILC, on the other hand, will be able to offer deposits insured by the FDIC given its charter and approval from the FDIC. Thus, in order for an OCC fintech charter applicant to have the same funding advantages as an ILC, the applicant would need to follow similar processes as applicants for an ILC.
Consumer Financial Protection Bureau (CFPB): No Action is a Good Action
One groundbreaking event that happened recently was the issuance of a “no-action” letter to Upstart Network Inc, a lending marketplace for personal loans using “non-traditional variables like education and employment, to predict creditworthiness.” According to the CFPB, “the letter signifies that Bureau staff has no present intent to recommend initiation of supervisory or enforcement action against Upstart with respect to the Equal Credit Opportunity Act.”
The CFPB playing catch up to the innovation in credit models is a good sign for fintech startups looking to leverage diverse data points for originating loans.
The Future of Fintech Banks
Nonaka believes financial regulatory reform will be of great interest to the alternative-lending ecosystem. This reform may involve Congressional legislation.
The decisions on SoFi’s and Square’s ILC applications will be noteworthy as other companies currently are waiting on the sidelines to see the FDIC’s and Utah’s decisions. Approvals of the applications will bring in even more interest in the ILC charter. It may not put an end to traditional brick-and-mortar banks, but it could lead to an all new type of bank that fits in somewhere between challenger banks in the UK and neobanks such as Monzo and Moven and the legacy banks opposing ILC charters.