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.
News Comments Today’s main news: PayPal to fully integrate Swift Financial after closing acquisition.GoCardless raises $22.5M.Qudian poising for U.S. IPO.Varengold Bank AG to give $61M to MarketInvoice.Bondora hits 100M Euro milestone.Reserve Bank of India to treat P2P lenders as non-banking financial companies. Today’s main analysis: Public distrusts regulators as much as Wall Street.(a must-read) Today’s […]
Public distrusts Wall Street regulators as much as Wall Street. AT: “This is a must-read. Based on a Cato Institute survey, it tells the attitudes of Americans toward banks, regulations, Wall Street, credit, consumer lending, and a host of other financial matters. Quite interesting that Americans thing tech executives, along with athletes and entertainers, are over paid, however, they don’t want regulation to oversee pay scales.”
A manifesto to all men: We have to do better. AT: “I wholeheartedly agree. With two younger sisters, three daughters, and two granddaughters, I want them to live in a world where they are as respected for their talents as men are for theirs. There’s absolutely no reason men shouldn’t respect their female colleagues as much as they respect their male colleagues.”
PayPal said that it plans to fully integrate Swift Financial into its payment service “over the course of the next year,” according to Darrell Esch, PayPal’s vice president and commercial officer of global credit, in a blog post.
PayPal has actually offered a working capital program for lending money to small businesses since 2013, and it has loaned more than $3 billion through the program to date. This compares to the $3 billion Amazon has loaned SMEs since the launch of Amazon Lending back in 2011, and the $1.5 billion in loans Square has doled out since launching Square Capital in 2014.
Americans have a love-hate relationship with regulators. Most believe regulators are ineffective, selfish, and biased:
74% of Americans believe regulations often fail to have their intended effect.
75% believe government financial regulators care more about their own jobs and ambitions than about the well-being of Americans.
80% think regulators allow political biases to impact their judgment.
But most also believe regulation can serve some important functions:
59% believe regulations, at least in the past, have produced positive benefits.
56% say regulations can help make businesses more responsive to people’s needs.
Americans want regulators to focus on preventing banks and financial institutions from committing fraud (65%) and ensuring banks and financial institutions fulfill their obligations to customers (56%).
77% believe bankers would harm consumers if they thought they could make a lot of money doing so and get away with it.
64% think Wall Street bankers “get paid huge amounts of money” for “essentially tricking people.”
Nearly half (49%) of Americans worry that corruption in the industry is “widespread” rather than limited to a few institutions.
Few Americans Want “More” Financial Regulations—They Want the Right Kinds of Regulations, Properly Enforced
Polls routinely find that a plurality or majority of Americans want more oversight of Wall Street banks and financial institutions. This survey is no different. A plurality (41%) of Americans think more oversight of the financial industry is needed. However, only 18% think the problem with federal oversight of the banking industry is that there are “too few” rules on Wall Street. Instead, 63% say the government either fails to “properly enforce existing rules” (40%) or enacts the “wrong kinds” of regulations on big banks (23%).
Despite Distrust of Wall Street, Americans Like Their Own Banks and Financial Institutions
90% are satisfied with their personal bank; 76% believe their bank has given them good information about the rates and risks associated with their account.
87% are satisfied with their credit card issuer; 81% believe their credit card issuer has given them good information about the rates, fees, and risks associated with their card.
83% are satisfied with their mortgage lender.
Of those who have used payday or installment lenders in the past year, 63% believe the lender gave them good information about the fees and risks associated with the loan.
Democrats and Republicans Want a Bipartisan Commission to Run CFPB, Divided on CFPB Independence
Nearly two-thirds (63%) of Americans think the CFPB should be run by a bipartisan commission of Democrats and Republicans, rather than by a single director. Support is post-partisan with 67% of Democrats and 64% of Republicans in favor of a bipartisan commission leading the agency.
A majority (54%) of Americans think that Congress should not set the CFPB’s budget and should only have limited oversight of the agency.
Few Americans (26%) believe the CFPB has achieved its mission to make the terms and conditions of credit cards and financial products easier to understand. Instead, 71% say that since the CFPB was created in 2011 credit card terms and conditions have not become easier to understand—including 54% who believe they have stayed the same and 17% who think they have become less clear.
Most Support Risk-Based Pricing for Loans, Say Low Credit Scores are Due to Irresponsibility
Nearly three-fourths of Americans (74%) say they’d be “unwilling” to pay more for their home mortgage, car loan, or student loan to help those with low credit scores access these loans.
The acquisition will expand PayPal’s ability to provide access to business financing options to the millions of small business owners who rely on PayPal and our partner platforms to run their businesses. As we’ve said before, increasing access to capital is vital to the success of small businesses and is a strategic offering for PayPal, which drives merchants’ sales growth, increases processing volume, and reduces merchant churn.
Like many of you I was shocked and infuriated by the news out of SoFi last week. I think we all expected better from the company and its leaders. Some of the behavior that has been reported is reprehensible and it points to a much deeper problem that goes way beyond fintech. The problem of sexual harassment in the workplace is bigger than any one company, any one industry or even any one country. It is rampant throughout the globe.
Men: we cannot keep behaving this way.
I have been drinking at the bar late at night at enough conferences to know that many men believe it is still ok to treat women as objects. This kind of attitude has consequences in the workplace. And if the leaders of the company condone this behavior there will be a culture that is at best unwelcoming towards women and at worst so toxic it can endanger the very survival of the company.
Women in Fintech
People often complain to me about the lack of women in fintech. People say that LendIt does not have enough female speakers and there are not enough women in general at our events.
This article is the first step in what I expect will be a long journey towards making fintech a more welcoming place for women. I want to see us do better as an industry. We should do everything we can to make fintech an attractive career choice for young women. We have several initiatives around this that are in the planning stages that we hope to roll out at LendIt USA in San Francisco next year.
Ellevest, a nearly three-year-old, New York-based digital investment platform built for women and led by former Wall Street titan Sallie Krawcheck, has raised $34.6 million in fresh funding.
It’s technically a Series A round, according to the company, which says a widely reported $10 million round that closed last year was seed capital.
The round — which was led by Rethink Impact, and includes participation from PSP Growth, Salesforce Ventures, CreditEase Fintech Investment Fund, LH Holdings, SK Impact Fund, Morningstar, Khosla Ventures, Mellody Hobson, Ulu Ventures, Contour Venture Partners and Astia Angels — brings the company’s total funding to $44.6 million.
Chinese payments company Ant Financial is planning to resubmit its application for U.S. review of its deal to buy MoneyGram International Inc (MGI.O) for $1.2 billion, a source familiar with the matter said on Friday.
Ant Financial and MoneyGram have already refiled for clearance from Committee on Foreign Investment in the United States (CFIUS) when they were unable to secure it within an assessment period after the first application, Reuters reported in July, citing sources.
Ant Financial’s latest attempt for approval would be its third as the maximum time of 75 days for assessing such applications nears completion.
JPMorgan Chase & Co. is partnering with another fast-growing technology firm, this time to help business clients eradicate paper checks.
The bank is working with Bill.com, the largest U.S. business-to-business payments network, to enable customers to send and receive electronic payments and invoices, according to Stephen Markwell, a product strategy head for JPMorgan’s commercial bank. The New York-based lender will pilot the service in early 2018 and plans to offer it to more business and commercial clients later in that year, Markwell said.
While many consumers already are embracing digital tools for sending money, like PayPal Inc.’s Venmo or the banking industry’s Zelle, more than half of business payments are still via check, according to Markwell. Companies write 8 billion checks a year, each costing about $4 to print and handle, he said.
LendingTree Inc. (NASDAQ:TREE) has acquired an online loan platform for businesses called Snap Capital, known as SnapCap, in a potential $21 million deal. SnapCap is LendingTree’s fifth acquisition since June of 2016.
LendingTree says the acquisition has a potential value of $21 million. The online marketplace will pay $12 million in cash upfront and if SnapCap hits certain performance targets over time, it will receive contingent payments of up to $9 million.
Charlotte-based LendingTree has been diversifying its business over the last several years beyond mortgages. And its stock price has been on the rise as a result. LendingTree’s stock was up about 7% Tuesday afternoon after the acquisition announcement. The company’s shares were trading at $251 Tuesday afternoon, up from about $93 per share a year ago.
Online lender LendingPoint announced Tuesday (Sept. 19) that it had closed an up to $500 million credit facility on Aug. 22.
In a press release, the company said the credit facility was arranged by Guggenheim Securities. LendingPoint noted it drew down $138.5 million of the facility at the closing, and it took an additional $32.7 million on Sept. 15. The proceeds are being earmarked to bankroll the growth of its consumer installment loan portfolio, a business element which has roughly doubled between August 2016 and August 2017.
According to the company, the up to $500 million credit facility is among the largest credit facilities raised in the online consumer lending market in 2017.
Most of the country has never heard of Madden v. Midland Funding and the common law doctrine of “valid-when-made,” but the impact of the misguided decision by the 2nd U.S. Circuit Court of Appeals on consumers is far-reaching.
Rate exportation has been key to the rise of standardized nationwide financial products, like credit cards, allowing banks to lend to borrowers across state lines without necessarily establishing a physical presence in every state, giving consumers better choices.
Following the Madden decision, it is unclear in the 2nd Circuit whether certain bank loans transferred to a marketplace lending platform would be ruled valid or not. Are loans bound by the bank’s “home” state rate cap, or the borrower’s “host” state rate cap? No one knows for sure. This legal uncertainty has caused nonbank investors in these loans to pull back, which, in turn, has led to a reduction in responsible and affordable online lending. Borrowers who are still trying to build credit have lost better options. According to an August study by professors at the Columbia, Stanford and Fordham law schools, “the decision reduced credit availability for higher-risk borrowers in affected states.”
San Diego-based Reliant Funding and New York-based Merchants Capital Access are now joined as one under the Reliant Funding name.
Four Facts about Reliant Funding
Reliant Funding’s business model provides access to capital for businesses that traditional banking typically does not serve. With innovative pricing and cutting-edge risk management, it gives businesses the fuel they need to penetrate their market and grow.
Since its founding, Reliant has funded businesses over thirty thousand times, providing over $900 million in working capital to America’s small businesses.
Reliant Funding speaks directly with thousands of American small and medium sized businesses each month and services thousands more. The focus is always on the individual client, their business story and meeting their needs.
Reliant Funding’s Wholesale Division currently works with hundreds of partners, providing them with funding for their clients as if those clients were directly originated in-house. The key is a commitment to strategic alliances, ensuring the relationship lasts longer than a single transaction. It’s just one aspect of many which sets Reliant Funding apart from the competition.
Cloud computing, big data and financial technologies have raised the stakes for finance and accounting professionals according to Randstad Professionals‘ new whitepaper, Technology’s Impact on Finance and Accounting.
There are three broad areas in which emerging technologies and digital tools are causing significant disruption to the way things are done:
Breaking down big data for strategy: Finance and accounting employees can use big data to their advantage by forecasting trends, pinpointing behavioral patterns and suggesting probable outcomes — all of which can tie into a company’s strategy and impact their bottom line.
Leaving repetitive work to the cloud: Cloud actions have the ability to handle inventory management, generate invoices and provide accurate financial data. The software also delivers convenience for employees who want to digitally share company finances among coworkers, financial advisors, customers and other key stakeholders at a moment’s notice.
Putting the functionality in finance: Finance is making its way into fixed markets that provide mobile phone applications and access on everyday devices. Over the years, we have revolutionized how we pay, view our bank statements and transfer money through start-ups such as Bitcoin and Linden Dollar. Technologies that also integrate peer-to-peer lending or personal loan requests allow for a frictionless experience for customers.
The Consumer Financial Protection Bureau (CFPB) is expected in coming days to release a long-anticipated rule curbing payday lending, now that a final review by other regulatory agencies has concluded, three people familiar with the matter said.
The rule pits the country’s consumer financial watchdog against payday lenders who say the new regulation will wipe out much of their established industry, currently overseen by the states, and push poor and rural customers to use illegal loan sharks.
Because the loans can carry interest rates as high as 390 percent, borrowers can become trapped in devastating cycles of taking out new loans to pay outstanding ones, the CFPB said.
Payday and short-term lending is an approximately $6 billion-a-year industry, one that both critics and supporters of payday lending agree will take a major hit if the CFPB’s proposed rules on payday lending go through.
To make that block happen, Republicans in the House of Representatives added a “rider,” or amendment, to a spending bill banning the CFPB from regulating the payday loan industry.
The CFPB rules on payday lending have been in the works for some time and would require lenders to conduct background checks showing borrowers can afford the loans and to limit the number of loans made to a single borrower.
First Associates Loan Servicing announced today the release of the Morningstar ranking report certifying their overall excellence in loan servicing. Morningstar awarded First Associates a MOR RV1 ranking of ‘stable’ which is the highest certification possible and deeply assesses risk management, call center performance, quality assurance, technology, security protocols, project management and disaster recovery protocols.
Since the majority of consumers lacked insurance coverage for flood damage, the costs keep adding up from replacing furniture and appliances to renting another home or apartment until the costly repairs are completed.
What makes it so diverse? The markets available or the types of real estate?
Amy Kirsch: All of the above. We’ve done deals in 39 states, we offer debt and equity, commercial and residential, and we’ve done basically every asset class.
Do you have a minimum for investment?
The lowest limit we have now is $5,000, but it varies on how large of a fundraise we’re completing.
What’s innovative about RealtyShares? The technology, or what it lets you access?
A combination of both—I’ve invested in real estate in the past, and it’s always come through people I knew, and it was concentrated to where I was living at the time. When you’re looking at middle-market opportunities or don’t have hundreds millions of dollars to invest, the opportunities become a little more rare. So access is definitely a differentiator here.
On Monday, Prime-Ex Perpetual‘s real estate crowdfunding effort began in earnest with the launch of their PEX-Token cryptocurrency sale, aimed at generating $25,000,000 in USD equivalent cryptocurrencies. The PEX-Token is a dividend token in which the company will pay 80% of company profits back to the PEX-Token holders. Beginning Monday people purchasing PEX-Tokens will receive 15% bonus PEX-Tokens for purchasing PEX-Tokens early.
Once again, Accel, Balderton Capital, Notion, and Passion are backing GoCardless, this time to the tune of $22.5 million and on the back of what the startup says is record annual growth in the U.K. and strong, early traction in new markets. Outside of Blighty, the company operates its bank-to-bank payments network in the Eurozone and Sweden.
GoCardless isn’t disclosing revenue. Instead the company says it processes over $4bn worth of transactions across more than 30,000 organisations in the U.K. and Europe, working with small startups and large enterprises across a number of industries. It offers an API and off the shelf integrations with over 100 partners including Xero, Sage and Zuora. Customers include Sage, Thomas Cook, Box and The Guardian.
Artificial intelligence (AI) will soon be everywhere. The insurance industry is facing huge changes as AI steps boldly into every aspect of its internal operations and external relationships wearing the bright new clothes of InsurTech.
It has brought new players into the insurance market with some, like Lemonade, the world’s first peer-to-peer insurance carrier powered by AI and behavioural economics, experiencing phenomenal growth over a very short time.
It is estimated that around £1.32 billion was invested globally in the InsurTech arena in 2016, up 32% on the previous year. The lion’s share of this was in the United States but the UK and Europe are increasing their investment (see chart below).
Other innovations, such as fractional insurance where customers buy on a pay-as-you-go basis or peer-to-peer insurance, will have a deeper impact.
For Rutter, one of the key cultural challenges for the insurance industry is going to be its cautious approach to regulation.
he Financial Conduct Authority is the lead regulator in this area and it has been trying to engage the industry, setting up a ‘sandbox’ to encourage insurers to work with it to explore the impact of regulation on technological innovation. In particular, it will be aiming to test the boundaries of legislation such as the Insurance Distribution Directive (IDD).
There will be some InsurTech applications that get it wrong, predicts Rutter, potentially selling large numbers of policies to the very people underwriters don’t want on their books: “Insurers need to understand that once automated decisions have been made, you can’t pull back from them by cancelling policies. That is hardly treating customers fairly”.
Bruce Davis, co-founder and MD of green energy-focused P2P platform Abundance, has been appointed to the government’s Green Energy Taskforce. The group has been set up to help accelerate the growth of green finance and the UK’s low carbon economy.
Abundance is the UK’s biggest green energy-centric peer-to-peer site, with roughly £50m in finance facilitated for projects to date, according to AltFi Data. Its investors are able to invest in debentures for projects such as wind turbines and solar farms, and can hold those investments in an Innovative Finance ISA.
Online consumer microlender Qudian said it plans to raise up to $750 million in a New York IPO, in the second of two major fintech deals this month which are expected to kick off a wave of similar listings by year-end. But a source with direct knowledge of the situation told Caixin the final fundraising amount is likely to exceed $1 billion, possibly making it the largest IPO by a Chinese company in the US this year.
Uncertainty around Brexit may be mounting as political leaders from the U.K. and the European Union clash on the terms of separation, but that isn’t slowing down foreign investors from betting on Britain’s top peer-to-peer lenders.
Varengold Bank AG, a Hamburg-based private banking firm, will provide 45 million pounds ($61 million) in annual funding for loans to small businesses arranged by MarketInvoice Ltd., the British finance company said in an emailed statement.
Younited Credit, the Paris-headquartered consumer lender announced a capital increase of €40 million subscribed by a panel of the top of the crop growth investors in France. Next to its historical shareholders, Eurazeo, Crédit Mutuel Arkema, AG2R La Mondiale and Weber Investissements which are already very active in Fintech and alternative finance financing, the startup now takes on board new major investors: Bpifrance, Matmut Innovation, and Zencap Asset Management.
Today, on the 20th of September, GoldMint is launching its ICO.
GoldMint is celebrating the beginning of its ICO by attending 3 major events on the same day the crowdsale kicks off. One of these events is BlockchainLive in London – Europe’s leading Blockchain conference bringing together over 75+ global experts in various fields.
Another one is Moscow’s ICO Event which this time mainly focuses on how legislation will impact the cryptocurrency space.
Today GoldMint is also present at the Global Blockchain Summit in Hong Kong gathering iconic speakers from various industries to discuss about the real-world applications of blockchain technology, as well as its potential benefits, risks, and regulatory concerns.
To spread the word about GoldMint in the USA – GoldMint’s advisor and business developer Evgeniy Volfman has recently completed the official Northern American road trip representing the project in New York, Los Angeles, San Francisco and Miami.
Simultaneously, GoldMint is opting to expand its campaign globally, with the Middle East & Singapore regions being the current primary focus.
Nominations are open to Innovate Finance’s Women in Fintech Powerlist, which recognises women shaping the future of fintech around the world.
UK-based membership organisation Innovate Finance compiles its Powerlist of Women in Fintech each year, with the aim of closing the fintech gender gap by showcasing the women driving the global fintech space.
Wayniloans joins several other companies in withdrawing support for SegWit2x and the NYA. Banking and payment processor Bitwala announced last month it will only follow the SegWit2x blockchain if it receives support from Bitcoin Core, which does not appear likely.
FinTechs are certainly in competition with other FinTechs, but the real competition is the established financial service industry, epitomised by the big four banks. Consumer banking is where FinTechs aim to cause the most disruption – and many would say it’s an area where disruption is long overdue.
One recent startup, Spriggy, is out to grab its fair share of the kids’ bank accounts market, for instance.
Over the past 10 years, consumers have lost about $5.7 billion to financial advisers and financial services providers who put their own interests first. The scandals have included Opes Prime, Storm Financial, Timbercorp/Great Southern, Bridgecorp, Fincorp, Trio/Astarra, Westpoint and Commonwealth Financial Planning.
The size of the market in Australia has grown substantially year on year. In 2014, $9.45 million changed hands by way of P2P consumer lending platforms, for instance; in 2015, the P2P consumer lending figure stood at $43.15m.
And when it comes to money raised through crowdfunding, the figure jumped from $8.2m to $26m over the same time period.
At the moment, there are at least 86 FinTech tools operating in Australia through which you can borrow money, most of which are P2P lending services.
And there are at least 24 crowdfunding services on offer. It’s no surprise, then, that the biggest external challenge for FinTechs these days is finding customers.
Nine Australian FinTech companies made the 2016 list of the top 100 FinTech innovators around the world, an annual roundup compiled by the FinTech investment firm H2 Ventures and KPMG Fintech.
Prospa – Offers small business loans from $5000 to $250,000 with payback terms from three to 12 months, “for any business purpose”
Tyro – A payment system technology designed for businesses.
Society One – A P2P lender that says it provides “simple, investor funded personal loans with low rates based on your good credit history”.
Afterpay – Allows you to pay for goods in instalments direct debited from your credit card or other payment option.
Brighte – Offers 0% interest loans to approved homeowners for household energy efficiency improvement, such as solar panels or more efficient windows.
Data Republic – A customer data exchange service to help businesses better target their services to customers.
Identitii – Allows banks and other financial institutions to get more information about where and when payment transactions occur.
HashChing – An online home loan service that connects you with mortgage brokers.
Spriggy – Allows parents to manage kids’ bank accounts using digital tools.
The Reserve Bank of India on Wednesday notified that peer-to-peer (P2P) lending platforms would be treated as non-banking financial companies (NBFCs), an agency reported. This suggests the lending interface will now come under the purview of RBIs regulation under the RBI Act.
Rubique, India’s leading FinTech company, is now taking giant strides in enhancing the level of education and training in the FinTech domain in India. In view of the highly lucrative opportunities that await young professionals in the landscape, it is leveraging its expertise to co-certify courses in FinTech at the prestigious SP Jain School of Global Management.
Many Latin Americans are hard pressed to obtain credit for their businesses or family needs, as 49% of adults do not have bank accounts.
The region’s fintech industry secured $186 million in venture capital investments last year, according to the Latin America Venture Capital Association (LAVCA) – with more than one-third going to startups. Deal count increased by 81%, with 38 transactions.
In Brazil, 160 million adults have some type of banking relationship, but only 55 million are borrowers, according to the country’s central bank. This, combined with more than 20 million unbanked people, turns Latin America’s largest economy into a fertile ground for fintechs, says Jose Prado, founder of Conexao Fintech, an online hub for fintech entrepreneurs and enthusiasts.
Creditas raised $19 million in a Series B funding round. The Sao Paulo-based firm provides asset-backed debt focused on auto and mortgage loans.
In Mexico, where 55.9% of adults have no access to any form of savings deposits, fintechs are offering digital, user-friendly alternatives to traditional banking products, according to Jorge Ortiz, founding president and CEO of non-profit organization Fintech Mexico.
Ripio Credit Network, a company that has raised $5 million in funding from VC like Tim Draper, Pantera, DCG, Overstock (Medici Ventures) and others. Has launched their Initial Coin Offering pre-sale as they gear up for the crowd sale scheduled to launch on October 17th. This comes just as Ripio has received a nice recognition, along with a check, from the d10e Pitch competition.
Ripio, a prominent crypto-based company in Latin America, is building a global credit network solution that aims to enhance transparency and reliability in credit and lending. Ripio is designed to enable connections between lenders and borrowers located anywhere in the world, regardless of currency.
FMO together with Miami based Fintech and digital transformation strategists above & beyond (a&b), launched “ FinForward”, a marketplace where Fintech companies, Financial Institutions (FIs) and Mobile Money Providers (MMPs) in Africa are matched.
The objective of the new platform is to accelerate the digitization of the financial industry in Africa by supporting innovation of the core business with digital solutions. The matching and integration tool will make global Fintech companies accessible and top-of-mind to African financial institutions in order to help them to reduce costs, innovate, add services, tap into new revenue streams and work towards open banking platforms. It will also enable them to service difficult to reach segments such as the bottom of the pyramid, women and small entrepreneurs.
The matching and integration tool will make global Fintech companies accessible and top-of-mind to African financial institutions in order to help them to reduce costs, innovate, add services, tap into new revenue streams and work towards open banking platforms. It will also enable them to service difficult to reach segments such as the bottom of the pyramid, women and small entrepreneurs.
How does it work?
Outreach – Banks, Mobile Money Providers and Fintechs are invited to join
Fintech Opportunity Scan – Participating banks and mobile money providers define their problems and needs
Matching – Pairing of Fintechs based on problem definition
Acceleration & Integration – Testing of Fintech solutions in a sandbox and integrating the technology into the bank’s operations
Showcase – demonstrate success during showcase days
Shift expanding the reach of tech-enabled lenders As the U.S. and global economies continue to expand and recover from the Great Recession of 2007-2009, the consumer, a key driver of the U.S. economy, is spending again and tapping into different types of credit. The rapid growth of online lenders, expansion of digitally enabled lending technologies […]
Shift expanding the reach of tech-enabled lenders
As the U.S. and global economies continue to expand and recover from the Great Recession of 2007-2009, the consumer, a key driver of the U.S. economy, is spending again and tapping into different types of credit. The rapid growth of online lenders, expansion of digitally enabled lending technologies (e.g. point of sale solutions at the home or online), and growth in lending to subprime borrowers are all catalysts for the rise in demand.
Furthermore, increases in M&A activity in the consumer lending space demonstrate that the consumer is back and ready to borrow. Just this year, Elevate Credit completed their long-anticipated IPO, ECN paid $304 million to acquire Service Finance, and Prosper announced a $5 billion loan program.
Total consumer borrowing, which includes both loans and revolving credit accounts, rose by $18.4 billion in May 2017. This rise in borrowing is the highest since November 2016 when it increased by $25.1 billion. Additionally, total household debt reached a record $12.7 trillion in March 2017 — a $50 billion increase over its peak just prior to the height of the market in 2008.
The increase in demand for consumer credit in the U.S. is the result of three factors influencing the economy. We see these factors as key to expansion and further growth in the consumer lending segment:
1) Improved credit scores
Equifax, Experian, and TransUnion implemented a new credit rating process on July 1, 2017, which excluded certain civil debts and tax liens. As a result, FICO estimates that approximately 7 percent of consumers now have credit scores up to 20 points higher than they did previously. Many of those consumers who did not have the necessary credit score to access capital (loans, credit cards) now qualify due to higher FICO scores. This development, coupled with the general improvement of credit scores as bankruptcies roll off credit reports, will enable higher levels of consumer borrowing.
At the same time, many consumers who suffered through bankruptcies and foreclosures during the real estate collapse, which peaked in early 2010, are recovering from the blow to their credit. According to a recent report released by Barclays PLC, more than six million Americans will see personal bankruptcies disappear from their credit reports within the next five years. These consumers will soon have greater purchasing power through access to credit.
And finally, credit score education programs are proving effective at getting consumers to change behaviors that negatively impact their credit scores. FICO reports that its consumer education initiative, Open Access, now provides over 200 million consumers with free access to their credit scores and actions they can take to improve the score.
These factors alone will accelerate growth for prime consumer finance names such as Synchrony Financial and Ally Financial, but also for other companies including Elevate Credit, Prosper, and LendingClub.
2) Confidence in the economy is on the rise.
In March 2017, U.S. consumer confidence in the economy hit a 16-year high and has remained at elevated levels. This leap followed the election of President Donald Trump, whose pro-business and pro-deregulation agendas have experts predicting significant economic gains for the housing, job, and stock markets in the near future.
Furthermore, the Federal Reserve has raised interest rates only three times since the economic crisis, but now has plans to raise rates at least two — if not three — more times this year. The rise in interest rates is a key indicator of a successful economic recovery.
When consumers are confident that the economy is on an upswing, they often make large purchasing decisions again — buying homes, cars, and other substantial assets. Consequently, their credit needs increase, which contributes to the rise in demand for consumer loans. Consumers may also increase spending on smaller luxury items that require short-term credit, such as vacations and holiday gifts. We’re in the middle of vacation season now and the holiday shopping season is just around the corner. We anticipate increasing demand for consumer credit through the remainder of the year.
Companies that stand to benefit from the increase in consumer confidence and its subsequent positive effect on consumers’ demand for credit run the gamut from traditional banks; disruptive players in the online lending space such as LendingTree, Quicken Loans, and SoFi; and smaller “Main Street” businesses that are so vital to local economies.
3) Unemployment rate is declining.
The upswing in the economy has brought with it a welcome dip in the unemployment rate. In May 2017, unemployment hit a 16-year low of 4.3 percent. In the same month, disposable income reached an all-time high of $14.49 billion. Both of these numbers are highly influential on activity in the consumer lending space. After all, when more consumers are employed and potentially earning disposable income, their spending increases along with their demand for credit.
Also interesting from a lending standpoint is the creation of what experts are calling the New Middle Class, which has been caused in part by the gradual reentry of Americans into the workplace post-recession. This term applies to roughly 160 million consumers in the U.S. population, and describes the large segment of the population who were negatively affected by the financial crisis and now have near-prime or subprime credit as a result and will continue to have less-than-prime credit despite the changes in FICO score qualifications.
The New Middle Class have been largely underserved since the recession, but are gaining access to the capital they require as non-banks, online lenders, and fintech-powered alternative loan providers work to meet consumer demands. As this segment of the population’s credit needs increase, non-banks’ influence in the lending space is becoming increasingly significant. As of 2016, six non-banks — including Quicken Loans, loanDepot, and PHH Mortgage — were included in the top 10 largest lenders by volume; in 2011, non-banks made up just two of the 10.
Lenders Must Quickly Ready Themselves to Serve More Consumers
As demand for consumer credit increases, providing a highly efficient means of accessing that credit is important. Evidence indicates that the rise in demand for consumer loans and credit cards has created a unique opportunity for online lenders and other fintech-powered loan providers to meet the needs of this market — and that credit providers that leverage fintech to facilitate the application and approval processes can successfully compete with traditional lenders who still use time-consuming, antiquated processes. The door is open and the time is right for innovative solutions in the consumer lending space.
Alex Koles, Founder, CEO, Managing Director, Evolve Capital Partners Alexander Koles is a Managing Director and Founder of Evolve Capital Partners, based in New York City. He has over 14 years of investment banking and advisory experience working with regional and multinational corporations on merger and acquisition strategies and execution, restructurings, and complex financings.
Prior to founding Evolve Capital Partners, he worked at a number of leading investment banks in leadership roles focused on restructuring deals. His restructuring career began at BDO where he provided restructuring advisory and transaction services for distressed companies and their stakeholders, notably in the sustainability space.
He started his career at Merrill Lynch as an investment banking analyst in the corporate finance group.
Koles is qualified as a FINRA Investment Banking Representative (Series 79), Private Securities Offering Representative (Series 82) and Uniform Securities Agent (Series 63). He received a Bachelor of Arts in Economics from Macalester College in St. Paul, Minnesota.
News Comments Today’s main news: 400K UK consumers may have been affected by Equifax breach. Independent Community Bankers of America letter opposing ILCs. RateSetter launches consumer hire-purchase product. Klarna partners with Wacom. Google enters digital payments in India. Payday type loans come to e-tailers in India. Today’s main analysis: Analysis of SoFi deal SCLP 2017-5 and Lending Club deal CLUB 2017-P1. […]
Did lending just change permanently? AT: “A must-read. This really gets to the heart of what the CFPB no-action letter means for alternative lending. An interesting question for me is, how could this impact the ILC discussion. Long-term, if this analysis is correct, the prospects could be good for online lenders to own banks.”
As you may be aware, ICBA recently filed a comment letter with the FDIC objecting to the deposit insurance application of SoFi Bank, an industrial loan corporation to be chartered by the state of Utah. In our letter, we urged FDIC, for safety and soundness reasons and to maintain the separation of banking and commerce, to not only deny SoFi Bank’s application but also impose a moratorium on ILC deposit insurance applications. Furthermore, we said that Congress should close the ILC loophole because it not only threatens the financial system but creates an uneven playing field for community banks.
The news that Square also intends to apply to the FDIC for deposit insurance as an industrial loan corporation has significantly increased our concerns and made it even more urgent that the FDIC immediately impose a moratorium on approving deposit insurance applications for ILCs. As we noted in our SoFi Bank letter, the ILC charter is nothing more than a loophole in the law to circumvent the legal prohibitions and restrictions under the Bank Holding Company Act.
SoFi Bank and Square are applying as ILCs and not as commercial banks because their parent companies and their affiliates do not want to be subject to the legal restrictions and supervision attendant to the BHCA. Square, for instance, already owns a point-of-sale hardware appliance business and a food delivery service and therefore could not own a commercial bank without divesting its commercial activities. For safety and soundness 2 reasons and to maintain the separation of banking and commerce, the FDIC should deny SoFi Bank’s application and impose a moratorium for at least two years on future ILC deposit insurance applications, including any application by Square.
Bank lending regulations have rarely been thought of as dynamic or exciting but last night’s ruling by the Consumer Financial Protection Bureau (CFPB) to allow a lender to begin using alternative data in their underwriting could herald the beginning of a new era in lending and how banks work.
Why is this significant?
US banks have traditionally been guided by three key pieces of legislation, the Truth in Lending Act of 1968, the Equal Credit Opportunity Act of 1974 and the Community Reinvestment Act of 1977.These three acts were created before the era of personal computers yet still guide bank lending today.Since the rise of marketplace lending, which began in 2006, where borrowers go through a platform and investors fund those loans, it is becoming increasingly apparent that many of these regulations are in need of updating.
In an overly simplistic interpretation (and I am not an attorney), the regulator is giving an online consumer lender the right to underwrite loans using ‘alternative data’ which before was not in line with how the Equal Opportunity Act is interpreted by lenders.It is not clear what data will be allowed but in a CNBC interview, Upstart co-founder Paul Gu suggested that SAT scores, college grades and even college majors are data points which are helpful in predicting loan defaults.
So assuming the change stands, what is next?
As alternative lenders have more scope to use alternative data, machine learning complex data analysis is opening up an entirely new space for investors.Gone are the days where banks only competed against each other with marketplace lenders now allowing investors to allocate capital in a similar way to banks, choosing loans to fund based on their own ideas and risk profile. For now, this is mostly impacting consumer credit, but in the years to come, look for marketplace lending to impact all areas of lending as investors get more comfortable investing in this space regulations start to adapt.
SoFi’s application to become a bank has almost no chance of approval in the wake of a sex scandal that forced out its chief executive, says a close adviser and former chairman of the Securities and Exchange Commission.
But last week’s departure of Mike Cagney, the co-founder, chairman and chief executive, has effectively killed the application, said Arthur Levitt, a former chairman of the SEC, who began advising the company two years ago.
“This departure of Mike makes that a very questionable attainment,” Mr Levitt said, referring to the charter.
He noted that the FDIC had turned down this type of application “many times” before.
We turned first to SoFi, a consumer-finance unicorn that has raised more than a billion in equity, and over $2 billion in total. The company is now down a CEO after allegations of misconduct brought censure upon its CEO, Michael Cagney, and the company’s culture.
Goldman Sachs has been pilloried for lackluster results from its trading division (paywall), so this week the bank gave investors a peek into its plans (pdf) for making more money. Surprisingly, the Wall Street powerhouse thinks it can generate as much revenue from online consumer loans—a market targeted by many fintech startups—as from buying and selling securities.
Specifically, Goldman thinks it can make $1 billion in extra revenue from its consumer lending business over the next three years, as much as it expects for its trading operations. Combined with new lending for the wealthy and companies, the bank expects to bring in $2 billion in additional sales from loans. Goldman co-chief operating officer Harvey Schwartz said it’s one of the fastest-growing lending platforms ever launched, even though he says the bank is taking its time with the nascent business. The bank’s digital consumer-lending arm called Marcus is expected to have lent out $2 billion by the end of the year.
Meanwhile, big banks have access to cheaper funds than peer-to-peer lenders like Lending Club or Zopa. With consumer deposits and the billions of dollars they routinely borrow in credit markets, banks can undercut the loan rates offered by smaller companies.
That said, Schwartz acknowledged that consumer lending isn’t immune to economic downturns, and analysts cited by Bloomberg were skeptical about Goldman jumping into a market outside its core expertise.
It might seem like it is only a matter of time before the tech giants knock on banking’s door. In fact, a recent World Economic Forum report posited that big tech companies present a greater challenge to banks than fintech startups. The report notes that regulators will accept a more “oligopolistic distribution of financial services products by tech firms.” Already, the fintech providers Social Finance and Square have applied for FDIC-insured banking charters, just as the Office of the Comptroller of the Currency continues work to develop its limited-purpose fintech charter. Are the largest tech firms next in line?
Incumbents still hold the upper hand. The risk of an Amazon or Google or Apple dominating the traditional banking sector is nowhere near a slam dunk.
In every scenario, the tech giants would need to persuade regulators to grant them some kind of charter access in order to effectively compete and level the playing field on funding costs. This would involve easing traditional limits on commercial firms owning banks, and potentially navigating opposition from members of Congress.
But more fundamentally, tech giants have had mixed experiences in rolling out financial services such as Google Wallet and Apple Pay. And despite the reported consumer skepticism of legacy institutions, banks still continue to maintain a high volume of customer relationships.
In the fallout of the Equifax breach, the leading credit bureaus are dealing with an overwhelming volume of credit freeze requests from consumers. While it is still too early to tell, it seems that the genie is out of the bottle. The breach is sparking additional focus on FinTech innovation to protect consumers (e.g., digital identity verification, disposable card numbers, etc.).
Beyond the headlines, SoFi’s growth engine continues. In Q2 2017 alone, SoFi funded $3.1 Bn in loans with $134 Mn in revenue and $61.6 Mn in adjusted EBITDA. Revenue and adjusted EBITDA were up 67% and 60% year over year respectively. The news of Cagney’s resignation coincided with SoFi marketing its latest personal loan deal which priced this Friday. Interest in SCLP 2017-5 was initially strong, however the bond priced somewhat wider than guidance.
SoFi’s Latest Consumer Lending Deal: SCLP 2017-5
After Mike Cagney’s resignation on Friday, the lead underwriter re-launched SCLP 2017-5. Since guidance was released before the critical NY Times article on Tuesday, we have a close (but imperfect) control to study the consequences of management upheaval on deal execution.
ABS investors reacted negatively to the news; the bonds priced 10 to 15 bps wider than guidance on Monday.
LendingClub’s Self-Sponsored Prime Consumer Deal: CLUB 2017-P1
This is the second self-sponsored deal from LendingClub, and it follows the success of CLUB 2017-NP1. LendingClub expects to alternate between prime and near-prime securitizations at least once a year going forward. Of the $363 Mn outstanding, approximately $100 Mn came from LendingClub’s balance sheet (a shift from prior management’s business practice); the remaining loans were contributed from investors.
The CLUB 2017-NP1 and CLUB 2017-P1 deals total to approximately $628 Mn in loans, yet LendingClub has facilitated almost $29 Bn in loans on its platform as of Q2 2017 making it a small part of LendingClub by dollars loaned but a meaningful portion of EBITDA.
Fintech has become a major force over the decade since the financial crisis, with $12.8 billion in venture capital flowing into the sector in 2016 alone. But of the nearly 500 deals that took place in the U.S. last year, less than a dozen went to companies founded by women.
“It’s lonely to be a woman in fintech, especially as a CEO,” says Rachel Mayer, cofounder and CEO of Trigger, an automated tool for investing alerts.
At Anthemis, based in London, 56% of employees are women, a remarkably equitable gender breakdown that is consistent at every level.
Former banking executive Sallie Krawcheck is following a similar playbook with her female-focused investing service, Ellevest. Since founding the company three years ago she has raised over $50 million in venture funding.
In an interview Friday, Upstart co-founder and CEO Dave Girouard explained why the fintech applied for the letter and how it works.
Is it fair to think of a no-action letter as a stay-out-of-jail-free card?
DAVE GIROUARD: We’re careful about not trying to interpret it in any way that is different than what the CFPB says it is. The letter makes it clear that they have reviewed what we do and how we do what we do and that they don’t find issue with it.
How do you feel about the agreement?
We’re pleased that the CFPB recognized the consumer advantage of alternative data and machine learning, the fact that it could make affordable credit more broadly available to more people.
So it’s not just about Upstart for sure — it’s the acceptance of these more modern techniques because they can and will benefit consumers broadly over time.
The new hire is accompanied by the completion of the company’s SOC 2 Type 2 Certification, which affirms that Sharestates now meets the security requirements and parameters for storing information on the cloud as laid out by The American Institute of CPAs (AICPA).
ReliaMax®, the complete private student lending solutions provider for banks, credit unions and alternative lenders, today announced at the 23rd Annual ABS East 2017 Conference a new whole loan trading service, ReliaMax Portfolio Placement, as an extension of its existing capital markets and liquidity programs. The ReliaMax Portfolio Placement service will facilitate qualified existing private student whole loan portfolios for sellers and buyers.
The ReliaMax Portfolio Placement service provides unique value to the private student lending marketplace in multiple ways including insurance, default prevention, credit analysis, and servicing. Some benefits include:
State-of-the-art servicing through ReliaMax helps buyers maximize the value of their portfolio, providing compliance and regulatory support and staffing to manage student loan-specific servicing requirements.
Loan insurance through ReliaMax Surety Company covers 100% principal and interest and mitigates risks, reduces defaults, and provides better cash flow.
Portfolio review and credit analysis provides guidance around the price at which the portfolio might transact.
ReliaMax has been involved in many third-party portfolio transactions. For example, in December 2106, MetaBank acquired a $151 million student loan portfolio which ReliaMax Surety Company now insures. The transaction also included the conversion of the portfolio servicing onto the ReliaMax Platform. Over the last three years, ReliaMax has provided insurance and/or servicing on 12 portfolio placement transactions.
Lendio, the nation’s leading marketplace for small business loans,today announced a partnership with Ocrolus, the emerging leader in bank statement review automation. The PerfectAudit API, powered by Ocrolus, analyzes uploaded bank statements with 99+% accuracy, replacing manual review with automation. Ocrolus technology allows lenders, for the first time, to review every potential borrower’s bank statement data automatically, regardless of whether or not the borrower provides sensitive bank login credentials.
In April, Lendio became the first lending marketplace to integrate with Ocrolus, whose clients include banks, alternative lenders, accounting firms, law firms, and government entities. The PerfectAudit API gives Lendio the ability to systematically combat bank statement fraud and conduct a hyper-accurate review for every potential borrower.
From peer-to-peer lending to online banking, the fintech industry is a rapidly growing area for technology investment. In the first quarter of 2017 alone, U.S. venture capital-backed fintech start-ups raised $1.1 billion across 90 deals, according to CBInsights Global Fintech Report. The only region to outdo the U.S. during this same period was Asia, which reported for the same group investment of $2.7 billion across 226 deals.
There exists a wide range of technologies that fall under the definition of fintech, and each is seeing significant growth. One such technology is artificial intelligence, which, according to the PricewaterhouseCoopers 2017 Global Fintech Report, 30 percent of large financial institutions are investing in. For example, another factoid from a separate PricewaterhouseCoopers report, projects that, by 2020, AI will automate a considerable amount of underwriting.
Mobile payments are another rapidly growing area of fintech, with TechCrunch reporting that there will be an estimated $60 billion worth of payments made on mobile platforms in 2017. The site also predicts that, by 2020, 90 percent of smartphone users will have made a mobile payment, which serves to underscore just how commonplace this fintech will be within a very short time.
A new report from Aon discusses the contemporary market for alternative risk premia: where it is, how it got here; where it may be headed.
The authors, Matthew Towsey and Chris Walvoord, begin with some very basic considerations of what ‘risk premia’ are. They are, on the one hand, the payments one receives for taking on a risk that others do not wish to hold (providing insurance), or they are on the other the winnings one pockets on strategies that take advantage of market anomalies.
How does NerdWallet create its content and recommendations? Do data and algorithms play a role in your platform? I’m curious about the company from a fintech perspective.
It’s actually a mixture of both — algorithms and incredibly smart, financially savvy humans power our recommendations, reviews and expert advice.
The company seems to simplify financial information for everyday consumers. Do you think NerdWallet has helped to democratize the space?
That’s the goal! I truly believe that a person that has spent no time at all thinking about personal finance and can’t afford a financial advisor, should be able to make the same quality of choice as the most financially savvy person in the country
Experts deliver new alternative investment advice and resources for individuals being impacted by the giant 2017 Equifax data breach. This includes all new episodes of SDIRA TV with national finance experts and investment advisors, as well as a side by side comparison white paper on retirement investing options.
Deeper concerns have surfaced as it was discovered three Equifax executives sold off substantial amounts of personally held stock before making the breach known.
In general, those are new untested platforms, which may or may not do well for you over time. These investments have not been time tested during a recession. In addition, I do not understand very well how investment assets are segregated in those platforms, and how things would work out if a project you invested in fails miserably.
He’s talking about fintech, which has leveled the playing field for non-New Yorks to flourish in financial services. Inspired by emerging tech trends, Raznick and Benzinga are taking stakes in Michigan’s future by spearheading the new Detroit Fintech Association.
The nonprofit trade organization will enhance the community’s exposure, connect startups with national leaders and mentors, support talent recruitment and magnify the Detroit voice in U.S. regulatory discussions. The DFA also aims to improve financial literacy in the city through work with Detroit high schools and higher education institutions.
Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a provider of real estate, mortgage and technology services, today issued the results of its inaugural Default Servicing Survey, a survey of over 200 mortgage default servicing professionals. According to the study, nearly three-quarters (71 percent) of servicing professionals surveyed predicted FHA/VA loan volumes would increase within their organizations in the next 12 to 24 months; 41 percent believed FHA loans will offer their organizations the most portfolio growth over the same time period.
According to the U.S. Department for Housing and Urban Development, FHA loans accounted for over 17 percent of newly originated mortgages in 20161 and currently constitute 35 percent of all loans delinquent for 30 or more days2. As the issuance of FHA loans grows, so does the potential increase in volume of default assets. Thus, it is not surprising that 93 percent of servicing professionals surveyed stated that foreclosure/trustee and Claims Without Conveyance of Title (CWCOT) capabilities are important factors to consider when evaluating a vendor to manage growing default portfolios.
Servicing Professionals Cite Challenges Stemming from Costs of FHA Conveyance and Managing CWCOT Programs
Servicing professionals (29 percent) cited remitting fees, costs and financial obligations associated with FHA conveyance as the greatest challenge for effective CWCOT programs. For servicing professionals working with third-party vendors to manage CWCOT portfolios, 15 percent said overall vendor management is a challenge associated with managing CWCOT programs while another 15 percent pointed to timeline delays and increased costs due to attorney oversight; 11 percent cited not having enough in-house personnel on staff to effectively manage the program.
Third-Party Expertise and Central Coordination are Critical to Successful CWCOT Program Administration
In order to overcome the financial, regulatory and oversight challenges associated with their vendors’ CWCOT programs, servicers must carefully evaluate their third-party vendor strategy to ensure vendors possess the right expertise and resources to execute the program. Most servicing professionals surveyed (97 percent) said they are exploring options including a single-vendor approach to help achieve their objectives; 91 percent identified FHA asset management experience as an important criterion for vendors. When specifically evaluating single vendors, 72 percent of servicing professionals surveyed said consistency and efficiency in managing REO properties is a very important consideration; 69 percent also pointed to compliance management.
Equifax, the US credit-reporting company at the heart of a cyber-security scandal, has admitted that as many as 400,000 UK consumers may have had their personal information stolen.
The company said that while its UK systems were not affected by the massive cyber raid that targeted information for as many as 143m Americans, UK customer data “may potentially have been accessed”, because it was stored on US systems between 2011 and 2016.
If Equifax’s forecast is borne out, the data breach will be the biggest in UK cyber history, bypassing that of payday lender Wonga, which affected more than 250,000 customers.
RATESETTER has launched a hire-purchase (HP) product for individuals looking to buy vehicles.
Consumers will be able to borrow up to £25,000, but the peer-to-peer lender expects the agreements typically to be around £6,000. The terms range between 12 and 60 months, with APRs going from 19.9 per cent to 49.9 per cent depending on the customer’s creditworthiness.
Peer to peer lender Assetz Capital is reporting it has seen a year-on-year increase of 175% in the number of property development projects funded around the UK. The online lender says this rise comes following sustained growth in the funding pool for property developments, as investors hunt for a piece of the development market.
But as new types of Isa have emerged and new rules have been introduced, the situation has become more complicated.
And some Isa features – notably “flexibility”, which allows account holders to make withdrawals and then pay the money back in during the same tax year while keeping the tax benefits – have not been introduced by all providers, which has further muddied the waters.
A Help to Buy Isa, a type of cash Isa, is also an option. First-time buyers can deposit £1,200 in the first month and £200 a month thereafter to put towards a home purchase. The Government then tops up savers’ money by 25pc.
However, you can’t pay into a normal cash Isa and Help to Buy Isa in the same year, unless you choose a provider that allows you to split the cash. Nationwide and Aldermore both offer this option; they pay 2pc and 1.75pc respectively.
The Lifetime Isa is the newest addition to the Isa family.
Consumers between the ages of 18 and 40 can use the accounts to save towards their first home or retirement. Up to £4,000 can be put away each year into either a cash Lisa or a stocks and shares version. Eligible savers can continue to contribute until the age of 50.
Hargreaves Lansdown, Britain’s biggest fund shop, and rivals including AJ Bell, The Share Centre and Nutmeg, an online wealth manager, offer investment Lisas.
Innovative Finance Isas
These Isas shield peer-to-peer investments, which allow consumers to offer unsecured loans to individuals and businesses through online platforms such as Zopa and Ratesetter, and certain “crowdfunding” investments, from tax.
Lending Works was the first to offer the new Isa, paying the same return as the firm’s existing accounts.
Zopa allows existing customers to sell their loans and buy them back within the Isa. They can also transfer their Isas with other providers to Zopa.
There are a lot more people in the world that can collectively lend micro loans on a regular basis than there are corporations that can regularly distribute loans above the value of a thousand dollars.
“A network of independent lenders committed to distributing micro loans could potentially rival long established financial organisations in terms of the combined value of peer to peer loans serviced to borrowers on a world wide scale” says Richard Ochieze, Managing Director at Ledgermark, LTD.
The case for Digital Collateral
The internet makes non repayment of loans a marvellously simple task for borrowers and as such; organisations like the Funding Circle, a peer to peer lending firm, are left wide open to have the profits of their retail investors depleted due to this lingering risk.
Traditional financial institutions have been able to maintain a fortress of checks and balances such as strict collateral requirements for both business and personal loans in order to provide themselves with a means of recourse should a borrower fail to repay his debt.
In this digital age in which peer to peer transactions are becoming the norm, this same form of protection must be made available to the average individual who wishes to loan his money out to borrowers in return for profit.
However, the question must be asked: how can a borrower pledge his house or farm as collateral via an online loans application?
Prior to the invention of the Blockchain such an asset did not exist and now that it does, the door has been opened to allow individuals based anywhere in the world to distribute and/or become the recipient of a secured micro-loan.
Robo-adviser Wealth Wizards, for example, typically charges £65 for advice on investments of up to £30,000, and 0.30%, or £300, for guidance on what to do with a £100,000 retirement savings pot.
A typical financial adviser, meanwhile, charges about £580 for telling you how to invest a £200-a-month pension contribution, or between £1,000 and £2,000 for at-retirement advice on your £100,000 pot, according to figures from UK adviser network Unbiased.
China will strengthen its supervision of overseas investment risks and capital flows from insurance funds, the insurance regulator said on Monday, adding that it will urge companies to improve their risk monitoring systems.
The China Insurance Regulatory Commission (CIRC) will step up supervision over the use of insurance funds, with focus on “chaos” such as irrational stock market fundraising and overseas acquisitions, said Guo Jing, vice head of the finance and accounting department of the CIRC.
Shanghai-based BTCC is the largest and first domestic bitcoin exchange in China. On September 14th, BTCC announced that it would immediately stop new user registration and close operation in China on September 30th.
The 2nd China Fintech Conference (2017) will be held on September 17th, 2017 in Beijing.
IDC Financial Insights announced the 2017 Fintech Rankings and Real Results at Finovate Fall New York 2017. This year, 4 Chinese companies won the honor to be named in the 2017 IDC Fintech Rankings. They are Ping An Technology (38), Hundsun Technologies Inc. (54), Pactera Technology International, Ltd. (55) and ECCOM Network System, Ltd. (64).
Last week, China’s financial and educational regulators announced to ban online lenders from offering loans to college students, and encouraged commercial banks to offer micro-credit products for the campus market. As a response to the call, Industrial and Commercial Bank of China (ICBC) has launched its own student loan product Rong e Loan this week.
Sofort has been bought by Klarna. Although everything should function as normal according to Klarna, since the switch the order is not going into “pending” after checkout — order status is “in checkout”.
This is a good place trying to get this sorted. My questions are:
Is this a new shop or one that runs for a while and worked OK before?
From the screenshot it looks like Sofort sends notifications pretty often, is that true?
The expectation is that the first of those notifications should switch the status to pending and confirming that to Sofort so that they know you got it and then they wouldn’t notify you again, right?
That’s exactly why this is failing. The Ubercart payment module wants to write into its table the value Aus sofort-Überweisung wird Klarna into the field method.
You should notify Sofort AG about this problem and I will do the same.
Today we are proud to announce a new partnership with global technology company Wacom® that further accelerates Klarna’s expansion in the U.S. Wacom is now bringing our simple retail financing solution to the world of creative interface technology and software.
Financing a purchase over time has historically been optimized for brick and mortar stores. But the online equivalent can often be an ordeal, with redirects, lengthy forms and unclear information. Our process only requires a few fields of information, and lets consumers know instantly if they qualify for the financing solution.
Digital technology has changed financial services. It has facilitated innovation, increased competition and made the mobile customer experience the key differentiator.
This embodies a strategic threat with McKinsey estimating that legacy financial institutions will see profits decline by up to 60% by 2025 if they fail to evolve, a figure which should be motivating incumbents to look outside of traditional practices for growth and sustainability.
Millennials and digital natives have turned away from traditional banks in search of mobile alternatives. They are drawn to the best products and experience, and banks with the right level of service can win over this large market. Mobile-only banks like N26 are leading the way.
SME lending also offers a significant opportunity for growth. The European Commission’s SME Performance Review estimated just under 23 million small and medium enterprises generated €3.9 trillion in value add and employed 90 million people in 2016-2016, and McKinsey has identified a $350 billion untapped lending opportunity within this sector.
One path is acquisition, which banks like BBVA have followed by acquiring companies like Finland’s Holvi and neobank Simple. This is an expensive option complicated by having to find a company with the right fit for the business.
Given the technology available, a cleaner option would be to build a digital banking spinoff which can operate like a FinTech.
The far reaching nature of the internet has allowed the myriad of local economies that exist in the world to become merged into one, global, interwoven marketplace.
Despite this, it is still incredibly difficult for people to get a loan from an international organisation – without offering some form of collateral and/or proving credit worthiness.
The average size of deposit needed to get a mortgage is 62% of annual income, and in London, it’s 131%.
As a result, only 20% of 25-year-olds own their home today compared with 46% 20 years ago – less than half.
If you have a bad (or no) credit history, it is virtually impossible to borrow from a mainstream lender.
Banks and building societies advertise temptingly low rates, but they only need to apply to 51% of successful applicants, so almost half of all borrowers pay a different rate – probably higher.
Director of Ledgermark LTD, Richard Ochieze, explains:
An alternative should be offered to people who are being let down by the traditional banking system. We believe that the Meridian system can do a lot to alleviate some of the problems that exist in today’s online lending market.
The Meridian service offers users the opportunity to procure a loan of up to one Bitcoin at a time.
To qualify for a loan users must pledge a certain amount of Meridian tokens as collateral.
Meridian tokens can be purchased during the ICO on 12 October 2017 and will then become tradable on all alternative currency exchanges.
Google is expected to launch a mobile payments app in India next week, according to several news reports. Google Tez, which means “fast” in Hindi is the anticipated name of the payments service, which Indian news outlet The Ken says is “largely fashioned on the company’s global product – Android Pay“.
As TechCrunch notes, “this is a big deal because Google hasn’t made a big push into payments outside of the US.”
In a first of its kind for India, ICICI Bank will partner with e-commercefirms to provide automated payday loan-type credit to customers at the bottom of the digital pyramid. Unlike other software-based loans, the digital credit planned by the bank will be available to non-customers and new-to-credit borrowers.
Speaking to TOI, Anup Bagchi, executive director, ICICI Bank, said that the bank would price these loans similar to credit card advances. In the West, payday loans are advances that fund the low-income individuals to make up for cash shortfalls until their salary. The difference in the ICICI Bank loan is that for the first month, the buyer will get free credit for up to 45 days. It is only if they do not pay on the due date that borrowers will be charged interest at close to credit card rates.
The bank will lend to new-to-credit customers based on their track record with the e-commerce provider.
“The RBI is concerned that this can go big and get out of control,” says Harish.
Faircent—which is backed by financial institutions like JM Financial, venture fund Aarin Capital and Mohandas Pai-promoted 3one4 Capital—is seen as the largest online P2P lender in India. Other names include Lendbox, Rupaiya Exchange and LenDen Club.
There are typically three models through which such lenders operate, says Aditya Kumar, founder and chief executive officer at Qbera.com, an online lender that began operations in February this year and claims to have a Rs 10 crore loan book. “While there are at least 30-40 P2P players, who connect lenders to borrowers, 15-20 do marketplace lending (where money is raised from banks and other financial institutions) and then there are loan aggregators who have been around for longer,” says Kumar.
While Kumar says the total P2P lending market size would be around Rs 25 crore, Rajat Gandhi, founder and CEO at Faircent, puts the figure at Rs 50-70 crore on an annualised basis.
Figures available with Peer2Peer Finance Association (P2PFA) suggest that the global P2P lending market saw cumulative lending of £8.5 billion during the first quarter of 2017, against £5.8 billion three quarters before. In the same period, the number of lenders grew by a fifth from 1.5 lakh to just over 1.8 lakh.
The discourse around P2P lending has always been centered around what it means for borrowers and the advantages they can derive. However, what gets missed is that P2P lending has the potential to be a great source of investment for the lenders contributing to their retirement fund.
P2P lending is an investment delivering multiple benefits when building a retirement plan:
1. Add Lending to your Portfolio Mix: The adage that talks of not putting all your eggs in one basket still holds true. An investor should not limit his portfolio to only a few asset class, but focus on investing across investment opportunities so that market fluctuations do not have a huge negative impact on their retirement funds.
2. Steady and high returns not Linked to Stock Markets: P2P lending adds to building such a diversified investment portfolio while delivering returns that are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, and SIPs.
Lenders on Faircent.com are earning gross returns to the tune of 18% to 24% per annum on an average by building a diversified loans portfolio.
3. Income Generation & Power of Compounding: Another reason that P2P investment does well is because investors can compound their earnings. Lenders are earning back part of their investment, both principal and return, every month.
MicroMoney co-founder and CEO Anton Dzyatkovsky on attracting new customers, recruitment issues and risks in greenfield countries.
Now that we’ve opened new offices in Myanmar, Thailand and Sri-Lanka, our decision to start with Cambodia can be seen as a definitive step which enabled us to embrace the largest community of unbanked people in the region, bringing the advantages of Blockchain as the key technology for global financial inclusion.
Cambodia is all about banks
For us as Europeans, the first surprise was the population’s absolute trust in local banks.
The US dollar is as used in Cambodia as the local currency is, and the exchange rate has remained stable for over 20 years. State regulators do not exercise particular pressure on the financial industry, and by the time we stepped into the game, 50 organizations had been involved in the consumer loan industry, each with an average capital of $1.5 mln and an ARPU of $5,000.
30-day overdue loans in Cambodia account for only 0.9 percent of the total, so the PAR ratio (portfolio at risk) is quite profitable (according to the local Central Bank).
Our Cambodian lessons
A growing share of the middle class due to the growth of GDP. For instance, Cambodian GDP grew six percent in 2016.
A market capable of generating cheap leads. We discovered all Cambodians belonging to the target audience have at least one active Facebook account, and for them Facebook often equals Internet in general: every national mobile operator provides free access to Facebook.
Dormant or non-existent competition. in Cambodia there were no paperless lending services without an escrow of land or real estate property.
Eager audience in need of a product. when we were checking out the market, we found only five percent of the population had a credit record. According to McKinsey, the number of ‘unbanked’ people in Asian region overall ranges from 65 to 80 percent of the adult population.
Collaboration at the local level. It helped us understand local customers and comply with local regulations (in this case you must be ready to assign 51 percent of your newly established company to a local partner).
Funding Societies, which started in Singapore in 2015, is one of the first peer-to-peer (P2P) financing companies to open its doors here in Malaysia in February this year. It is also present in Indonesia.
Wong, who learned about alternative financing while studying at Harvard Business School, says P2P is well-suited for the Malaysian and South-East Asian markets where there is a big gap in SME financing. He estimates financing needs for small businesses in Malaysia to be at RM80bil.
According to Research and Markets, the global P2P lending market was valued at US$26bil in 2015 and is projected to reach US$460bil by 2022, growing at a compound annual growth rate of 51.5% from 2016 to 2022.
Funding Societies has made it to the Fintech 250 list, which is recognised and regulated by Securities Commission Malaysia, to provide financing to SMEs. The company also provides flexible investment opportunities with rigorous risk assessment and returns of up to 14% per year for investors, says Wong.
So far, the company has done more than 800 deals and disbursed more than RM180mil in financing to SMEs in Malaysia, Singapore and Indonesia.
Taiwanese could soon be able to open bank accounts denominated in foreign currencies on the Internet after the central bank on Thursday gave its go-ahead to the plan.
Local banks could seek approval for the new accounts by the end of this year, or 60 days after the introduction of the new regulations, the central bank said in a statement.
Taishin, the banking arm of Taishin Financial Holding Co (台新金控) and the nation’s largest online lender by the number of accounts, told reporters that it aims to be the first applicant when the notification period begins.