Thursday April 20 2017, Daily News Digest

real estate technology

News Comments Today’s main news: California SC finds arbitration agreement waiver unenforceable. BondMason first P2P provider to launch SIPP. China’s internet finance thrives as fraud fades. Marvelstone plans robo-advisor for family offices. Today’s main analysis: Real estate tech deals tick up. Today’s thought-provoking articles: 5 areas of fintech attracting investment. UK still fintech unicorn capital of Europe. Millennials favor search […]

real estate technology

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United Kingdom

European Union

Australia

China

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News Summary

United States

California Supreme Court Finds Arbitration Agreement Waiver of ‘Public Right’ Unenforceable (JD Supra), Rated: AAA

On April 6, the California Supreme Court issued a unanimous opinion in McGill v. Citibank, finding that a pre-dispute arbitration agreement was unenforceable to the extent it required the plaintiff to waive her right to seek public injunctive relief. According to the court, the right to pursue a public injunction constitutes an “unwaivable public right” under California law. Therefore, “a provision in any contract ― even a contract that has no arbitration provision ― that purports to waive, in all fora, the statutory right to seek public injunctive relief . . . is invalid and unenforceable under California law.”

The California court further explained that its partial unenforceability finding is consistent with the U.S. Supreme Court’s decision in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985). In that case, the Court stated that “[b]y agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitrable, rather than a judicial forum.”

The court also acknowledged, but found no reason to address, the plaintiff’s related claim based on what is known under California law as the “Broughton-Cruz” rule, asserting that a request for a public injunction cannot be decided in arbitration. Finally, the decision remanded the case to the California Court of Appeals to consider ― if either party should raise the issue ― the question of whether the rest of the arbitration agreement remains enforceable in light of language contained in the most recent version of the underlying account agreement stating that, “if any portion of the arbitration provision is deemed invalid or unenforceable, the entire arbitration provision shall not remain in force.”

Pepper Points

  • The decision of the California Supreme Court in McGill v. Citibank will likely be appealed.
  • In light of this decision, providers of consumer products and services should review their existing arbitration agreements to determine whether the consumer’s ability to pursue a public injunction or other “public rights” is completely foreclosed.
  • McGill v. Citibank also highlights the risks of including language in an arbitration agreement (or in any contract) stating that the agreement will be invalid if any portion of the agreement is deemed invalid or unenforceable. Given the impossibility of predicting how courts may interpret even well-settled questions of law, standard severability language is always preferable unless different language is specifically mandated.

Five areas of fintech that are attracting investment (Financial Times), Rated: AAA

At the same time, some of the steam has come out of the sector. Overall investment and merger and acquisition activity in fintech almost halved from a record high of $46.7bn in 2015 to only $24.7bn last year, according to KPMG.

Another negative factor was the governance scandal last year at Lending Club, the biggest online lender in the US, combined with disappointing performances by some of its rivals, which turned investors off peer-to-peer lending.

China

Total fintech investment in Asia inched up to a new record of $8.6bn last year, although the number of deals fell by more than 8 per cent. More than half the region’s total fintech investment came from one deal: Ant Financial’s $4.5bn funding round.

Artificial intelligence

The launch of voice-activated assistants such as Amazon Alexa and Google Voice has opened up possibilities for making online banking easier for customers. Banks such as Capital One have already latched on to this trend.

Cyber security

Cyber security shot to the top of the boardroom agenda for banks after one of the biggest bank robberies in history was carried out by cyber thieves on the Bangladesh central bank via the Swift payments system in February 2016. The crooks made off with $81m that was on deposit at the US Federal Reserve.

Blockchain

Most big financial groups remain convinced of the potential for blockchain to revolutionise parts of their industry and several central banks are examining the potential for using the technology to create digital currencies. Venture capital investment in blockchain companies rose by a fifth to $544m last year, according to KPMG.

Insurtech

The insurance industry has been slower than other areas of finance to wake up to the digital disruption at its door. But recently start-ups such as So-sure, Friendsurance, Lemonade, Guevara and Brolly have emerged with plans to transform the sector. Venture capital investment in insurance technology companies doubled last year to almost $1.2bn, according to KPMG.

Real Estate Tech Deals Tick Up, But Still Well Below Peak (CB Insights), Rated: AAA

2016 was a banner year for real estate tech with over $2.6B in funding to the category across 277 deals. At the current run rate, 2017 could very well reach another consecutive funding high, even as deals are on track to come in slightly below last year’s total.

So far this year, real estate tech companies have received $733M across 61 deals.  At the current run-rate investment activity is on track to reach $2.9B invested across 247 deals.

On a quarterly basis, deals have materially declined since Q3’16.

Funding, on the other hand, has increased in each of the last three quarters and Q1’17 received the second-largest quarterly funding total ever, behind Q2’16.

Why I Don’t Believe in the Hybrid Advice Model (Lend Academy), Rated: A

On paper, it looks pretty good: let the robot do the simpler stuff, like a modern-portfolio-theory allocation between a few ETFs, and have a human being intervene to provide more sophisticated and personalized advice.

In practice, I think it’s nonsense. If you believe the market is truly efficient, then there’s no point in using an advisor, robot or human. Just invest in a broad market ETF and be done with it (except for tax harvesting).

If you think the market is efficient-ish, then low cost optimization is the solution. Go robot. If you think you need an active manager, you should read the trove of statistical analysis that demonstrate you’re simply paying for someone’s yacht. Indexes beat stockpickers [92% of time]…

It does make sense for robo-advisors to move to the hybrid model, since it allows them to differentiate and de-commoditize their service, but for their clients, not so much.

Machine learning algorithms have become so good in the last 10 years, that any number-crunching and quantitative decisions a smart but junior employee can do, the machine will do better, faster, and cheaper.

Wealthfront Now Offers Securities-Based Lending (Financial Advisor IQ), Rated: A

As its first move into lending, robo-advice provider Wealthfront has revealed it will let clients borrow money against their investments, Reuters reports.

Along with robo rival Betterment, the robo-advisor has increased competition in the wealth management space against the likes of wirehouses Merrill Lynch and Morgan Stanley, brokerages like Charles Schwab and even fund houses with direct-to-consumer offerings like Vanguard.

Investors with at least $100,000 with Wealthfront can now borrow up to 30% of their balance for loans for anything except purchasing more investments on the firm’s platform, the company announced Wednesday.

Reuters reports loans will cost between 3.25% and 4.5%, and any money a client deposits into their account after taking out a loan will pay off the balance rather than investments.

Edward Jones partners with SixThirty to support financial technology startups (PR Newswire), Rated: A

Financial services firm Edward Jones today announced a multi-year partnership with SixThirty, a St. Louis-based venture fund that invests in financial technology (FinTech) startup companies. Backed by the St. Louis Regional Chamber, SixThirty was founded in 2013 and to date has funded more than 25 startups across the globe.

As part of the partnership with SixThirty, Frank LaQuinta, a general partner with Edward Jones, has joined the organization’s Investment Committee which evaluates the investment pipeline and selects FinTech startups that SixThirty invests in.

Pi Capital Advises Money360 on $ 250 million South Korean Financing Vehicle (Yahoo! Finance), Rated: A

Pi Capital International LLC (“Pi Capital”) is pleased to announce that it was the exclusive financial advisor and placement agent to Money360, Inc. for a structured debt facility of up to $250 million. The financing vehicle is designed to allow Money360 to employ funding as it provides commercial real estate loans to its U.S. client base. The fund provides Korean investors with a short-duration, high-yield fixed-income instrument.

“The fund raise by Pi Capital will allow us to substantially increase our assets under management,” said Evan Gentry, M360 Advisors’ CEO. “We believe this gives us a competitive advantage with an anticipated $250 million investment from one of South Korea’s most reputable financial institutions.”

ApplePie Capital Announces Appointment of Chief Development Officer and Franchise Finance Company Acquisition (Yahoo! Finance), Rated: A

ApplePie Capital, the first online lender solely dedicated to the franchise industry, today announced the appointment of franchise industry veteran Ronald Feldman as chief development officer, as well as the acquisition of Funding Solutions, LLC, a well-established national franchise lending consultancy that specializes in SBA, conventional and equipment finance loans. Feldman and Funding Solutions’ managing partner Randy Jones will join ApplePie’s leadership team.

These additions position ApplePie’s financial platform to exponentially expand upon its hallmarks of speed, flexibility and efficiency with new product options, an expanded network of lending sources and an extraordinary wealth of franchise finance expertise for its growing list of franchisor partners. Currently, ApplePie serves more than 40 franchisors including Orangetheory Fitness, Jimmy John’s, Jersey Mike’s and Marco’s Pizza.

Responsible for growing ApplePie’s brand portfolio and contributing to product strategy, Ronald Feldman comes to the company with more than 20 years of experience in franchise leadership and franchise financing.  He previously served as chief development officer at FranData, the industry leader in market research, and as a principal and co-founder of Franchise America Finance (FAF) and The Siegel Financial Group. Feldman was also an early franchisee of The Goddard School system. As an active advocate of the franchising business model, Feldman currently serves the International Franchise Association (IFA) as chair of the Supplier Forum Advisory Board and sits on both the Board of Directors and the Executive Committee of the association.  Feldman was awarded the Sid Feltenstein MVP Award for service to the IFA’s Political Action Committee (FRANPAC) in 2013.

Why More Millennials Would Rather Visit The Dentist Than Listen To Banks (Forbes), Rated: A

Unfortunately, some Millennial stereotypes are rooted in fact. A 2015 PWC survey showed that only 24% of us have basic financial knowledge, and even so, only 27% of us seek financial advice on saving and investing.

When it comes to jobs, we’re not the deadbeats that people assume. In fact, a 2015 Deloitte report found that 54% of Millennials had started or had planned to start their own businesses by year-end. Although we may work differently than generations past, many of us are passionate, entrepreneurial and looking to make a difference.

“Advisors need to understand how truly connected this new generation is to each other and to information.” When it comes to trusting a financial advisor, Kamine highlights this outsider oversight as a road block.

Millennials currently represent a meaningful fraction of U.S. wealth that will grow as baby boomers continue to pass down an astounding $30 trillion over the next 30 years. When this transfer of wealth happens, an estimated 66% of Millennials will fire their parents’ financial advisor, according to InvestmentNews Data.

This year, 86% of Millennials said they are interested in socially responsible investing, according to Morgan Stanley.

The Millennial Disruption Index reports 71% of us would rather go to the dentist than listen to what banks tell us. In our financial planning, we have shorter-term goals that we’re trying to align with the things we care about.

With an average age of 51, many advisors still build financial plans based on their view of a traditional life cycle with set ages for when we start a family, buy a house, climb the corporate ladder and retire. But their view is not our reality. Kamine adds, “Financial advice has been like a structured box without much creativity or understanding of the individual. Advisors need to become more dynamic because we’re revolting against structure. I’ve told my advisors I don’t envision buying a house for at least the next five years. And I’m definitely not focused on planning for retirement 40 to 50 years from now.”

Miami fintech company DadeSystems receives $ 2 million in funding (Miami Herald), Rated: A

DadeSystems, a Miami-based provider of account receivable automation solutions, raised $2 million in funding to accelerate its growth from Miami early-stage venture firm Ocean Azul Partners.

New GAO Study Examines Fintech Industry Regulation (Banking Journal), Rated: B

The report, the first in a series on regulation in the fintech industry, focuses specifically on marketplace lenders, mobile payments, digital wealth management platforms and distributed ledger (also known as blockchain) technology.

While the GAO did not issue any recommendations in the report, it noted that regulation of these four subsectors was varied depending on the types of products or services offered and the way in which they are delivered to consumers.

College Ave Student Loans Kicks off the Naked Financial Truth Digital Tour Featuring Financial Advice for Parents and Students (BusinessWire), Rated: B

College Ave Student Loans, the leading next-generation student loan fintech lender, has teamed up with America’s #1 College Life Expert Harlan Cohen to help families get comfortable with the uncomfortable when it comes to college and money. Hosted by Harlan Cohen, author of The Naked Roommate, the Naked Financial Truth Digital Tour will feature a series of free webinars and videos focused on financial advice, strategies and tips to help parents and students plan for post-secondary education.

The first webinar, “The 7 Biggest Financial Mistakes College Students Make (And How Parents Can Help)” will be held on Tuesday, April 25 at 7 p.m. ET. Registration for the webinar is free and available online at

Ben Franklin’s Fintech Accelerator is First of its Kind in the Region. These 8 Startups Made the Cut (Biz Journals), Rated: B

These eight companies — which are required to have a presence in the region to receive an investment — will begin the 12-week accelerator on April 24, meeting with mentors and advisors selected to help guide them toward growth and fundings. They run the gamut of the financial industry, from creating data visualizations of personal assets to a student loan repayment benefit program. Four focus on putting financial technology to use solving social issues.

  • Asset-Map (Philadelphia)
  • Bright Idea Energy (Philadelphia)
  • College Affordability (Wynnewood)
  • Factury (Silicon Valley and New York City)
  • FinPay (King of Prussia)
  • FixList (Philadelphia)
  • NeedsList (Philadelphia)
  • PeopleJoy (Philadelphia)

RayJay Adds Real-Time Client Updates to Planning Tools (Financial Advisor IQ), Rated: B

In the next several weeks Raymond James is setting its sights on rolling out a revamped suite of “longevity” planning tools. The updated software comes with the kinds of bells and whistles that advisors might expect from a nearly five-year-old package – a “new look and feel” as well as a “more conversational design,” as company execs put it.

Other notable enhancements, they say, include more flexibility for analyzing portfolio return patterns and capabilities allowing real-time updates as clients’ household budgets and retirement goals change over time.

TAMARACK IMPLEMENTS ITS SALESFORCE.COM LEASE/LOAN ORIGINATOR FOR CHANNEL PARTNERS CAPITAL (NEF Association), Rated: B

Tamarack, a leader in providing independent software solutions in the equipment finance and commercial lending industry, has added Channel Partners Capital as its newest client to utilize Tamarack’s Lease/Loan Origination Accelerator on Salesforce.

Channel Partners, a leading provider of small business working capital loans, will benefit from added flexibility, streamlined operations and enhanced audit controls, as a result of using Tamarack’s Lease/Loan Origination Accelerator on Salesforce.

Tamarack’s Lease/Loan Origination Accelerator on Salesforce is a scalable solution offering users the ability to automate work queues,increase throughput of loans without additional head count and customize notifications from lead generation through to funding.

United Kingdom

UK is capital of Europe for fintech unicorns (The Telegraph), Rated: AAA

The UK dominates the European financial technology industry, with figures showing it boasts more billion-dollar fintech companies than the rest of the continent put together.

Britain houses four fintech “unicorns” – companies valued at $1bn (£780m) or more – with a combined valuation of $18.5bn, according to a report by the technology investment bank GP Bullhound.

This compares to two in the rest of Europe, which are worth $4.6bn between them.

Globally, fintech investment grew slightly to $13.6bn, although there was a decrease in the number of investments from 942 to 840.

BondMason is first P2P provider to launch a SIPP product (AltFi), Rated: AAA

BondMason has become the first peer-to-peer service provider to launch a self-invested personal pension (SIPP) product. The service aims to offer investors a flexible and tax-efficient way to save for retirement.

The new retirement product, which selects loans across P2P lending platforms, will grant UK savers exposure to higher-return assets than traditional pension savings products. Starting from a minimum investment of £5,000.

Just Google it! Millennials favour search engines over financial advice (P2P Finance News), Rated: AAA

MILLENNIALS are favouring search engines over professional financial advice when it comes to managing their own money, research claims.

A poll of more than 2,000 adults by Zurich UK claims 15 per cent of millennials, referring to those aged 18-34, are turning to search engines such as Google instead of seeking professional financial advice, more than any other age group.

Only three per cent of 35-44 year olds and nine per cent of those aged 45-54 and over 55 respectively, opt for web-based information.

Asked why they eschew professional help, one in five millennials cited confidence in their ability to sort their own financial futures as a reason for not initially seeking professional help, while 37 per cent felt they do not earn enough to need to speak to a financial adviser, and almost a quarter said they were too young.

Loan searches on the internet ‘may affect credit rating’ (BBC), Rated: B

High Street bank TSB said some loan providers make a “hard mark” on credit files when someone asks for a loan price or quote.

TSB chief executive Paul Pester said: “We estimate that consumers are losing out by as much as £400m each year, which is going straight into the pockets of aggressive loans providers. It is time the industry comes clean on these costly underhand tactics.”

P2P lending is fast becoming the go-to option (Bridging and Commercial), Rated: B

P2P lending offers an innovative funding option for businesses – including developers – and is fast becoming the go-to option.

It’s essential that the development finance sector stays competitive and vibrant, and alternative lending allows that to happen. Far from just being a back-up for situations that the traditional lending sector can’t cater to, crowdfunding and P2P platforms can actually be a more efficient source of funding.

European Union

2018 is shaping up to be a regulatory nightmare for financial services (Information-age.com), Rated: AAA

Achieving compliance will not happen overnight. Indeed, MiFID II is widely considered to be one of the most sprawling pieces of financial legislation ever devised, and thus it presents numerous challenges. One of which being that recording calls will become mandatory for all areas of financial advice.

Then, if you add GDPR (the EU’s General Data Protection Regulation), coming into effect in May 2018, into the equation, 2018 is shaping up to be a regulatory nightmare for financial services firms. Under GDPR, we all have a‘ right to be forgotten’ or a right to erasure of all personal information held on us by a particular company. This places a duty on companies to be able to quickly access and delete the information they hold on specific individuals, on request.

However, comparing the responses of IT professionals and those responsible for managing Risk & Compliance within a business shows IT teams have a better overall understanding of the consequences of non-compliance. 62% of risk and compliance managers admitted to not knowing a company can be fined up to five million euros or 10 per cent of annual turnover, compared to only 42% of IT managers and decision makers.

Tinder for microloans: How to share lending risk with strangers (Russia Beyond the Headlines), Rated: A

A stranger’s photograph appears on your smartphone screen, and you decide whether to give him or her a loan or not. The money is not yours, but instead is provided by microfinance organizations. That’s the main difference from traditional American P2P (peer-to-peer) lending, and with Suretly you can earn or lose depending on whether the recipient of your largesse proves to be a reliable borrower or not.

Suretly is geared exclusively to short-term loans of up to one month; in other words, those with the highest interest.

The money itself is loaned by the microfinance organization that the borrower applies to, but only if they attract enough sureties to cover the whole amount, plus interest. Users share the risks, and depending on whether the individual returns the money or not, they can lose or earn from $1 to $10.

On the app, borrowers are divided into seven categories from A to G depending on their trustworthiness. The higher the risk that the loan won’t be repaid, the higher the price of its surety. The maximum commission is $1.5.

Australia

Goldfields Money makes Australian BaaS play with Singapore’s Instarem (Daily Fintech), Rated: AAA

Listed Australian deposit taking institution Goldfields Money (ASX:GMY) looks to be making good on its intention to become a leading player in the digital banking product distribution and BaaS market in Australia, announcing last week that it had signed an MoU with Singapore headquartered remittance fintech Instarem.

What is interesting about the MoU is the intent to move beyond remittance towards a broader banking play for cross-border SMEs and products orientated towards visa holders visiting or living in Australia.

The two companies should have a healthy market ready to capitalise on. According to the Australian Bureau of Statistics, over the last 10 years the proportion of the Australian population born in China alone has increased from 1.2% to 2.2%, coming in just behind New Zealanders and British immigrants. Those born in India currently make up 1.9% of the population, while citizens from the Philippines, Vietnam and Malaysia collectively add up to further 2.7%.

Migration isn’t going away. And the degree to which an individual’s assets are spread across countries is also on the increase thanks to globalization.

China

China’s Internet finance thrives as fraud fades (XinhuaNet), Rated: AAA

China has four large state-owned banks, and state-owned enterprises generally have easier access to financing. Many small companies are troubled by the financing bottleneck, creating pent-up demand.

Meanwhile, working-class families struggle to figure out where to invest their savings to seek higher returns, and many of them move money online. The country, home to the world’s biggest online population, also has a number of groups, such as college students, who are underserved by banks.

By March 2017, 3,607 Chinese P2P lending platforms had run into trouble or been forced to close, with only 2,281 platforms in normal operation.

On top of P2P lending, Internet finance also covers business such as third-party online payment, crowd funding, and other financial services.

Risk caused by the Internet finance industry has wide repercussions. Some P2P lending platforms resembled hybrid financial institutions providing clients with various financial services online, analysts said.

Businesses such as P2P lending, Internet-based insurance, third-party online payment, and online asset management were among key areas for strengthened supervision, industry observers said.

Internet finance last week appeared on the top banking regulator’s list of ten most important areas for enhanced risk control, with targeted measures to be taken to stem emergence of a financial crisis.

Wang said 2017 will be a watershed year for Chinese Internet finance as the rules are tightened, bringing the industry out of the wilderness.

Tishman Speyer, CreditEase team up to invest $ 1.4b in China (Deal Street Asia), Rated: A

New York-based developer Tishman Speyer is teaming up with China’s CreditEase Wealth Management to invest $1.4 billion in China and other countries within the next three years.

The strategic partnership is aimed to extend “global cooperation in resource sharing, fund investment, buyouts and business development,” the firms said in a joint statement.

APAC

Marvelstone Capital plans a robo advisor platform for family offices (AltFi), Rated: AAA

Singapore-based Marvelstone Capital plans a robo advisor platform for the under-served family office market in Asia.

The platform is being developed with Singaporean fintech startup Smartfolios, and will be launched in the third quarter of 2017. It will be available on desktop and mobile for Marvelstone Capital’s clients.

Marvelstone will target family offices based in Singapore, Malaysia, Indonesia, Myanmar, as well as India. The company points out that Malaysia is an important market and Cho added: “It is a huge market and the culture is quite unique as well, there’s a huge Shariah-compliant market, so it is definitely one of the most important markets for us.”

No Uber Moment for Fintech Just Yet (Broadridge), Rated: AAA

 

Wednesday April 5 2017, Daily News Digest

Wednesday April 5 2017, Daily News Digest

News Comments Today’s main news: Colorado targets Marlette, Avant on ‘True Lender’ grounds. CRB sues Colorado. SoFi raises variable student loan refi rates. Kabbage extends $3B in funding to over 100K small biz customers. RateSetter adds expected losses committee. P2P Global Investments considers change of loan fund manager. Dango RECF platform celebrates 1M investors. Today’s main analysis: International P2P lending statistics. […]

Wednesday April 5 2017, Daily News Digest

News Comments

United States

United Kingdom

European Union

International

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China

Asia

News Summary

United States

Colorado Attorney General Pursues ‘True Lender’ and ‘Madden’ Actions Against Major Non-Bank Online Lenders (JD Supra), Rated: AAA

On February 15, the Colorado Attorney General filed substantially similar, separate amended complaints in the U.S. District Court of Colorado against Marlette Funding LLC and Avant of Colorado LLC, alleging violations of Colorado’s Uniform Consumer Credit Code based on “true lender” and loan assignment cases. Both actions were originally filed in state court on January 27, 2017, and both were subsequently removed to federal court — on March 3, 2017 and March 9, 2017, respectively. In each instance, the complaint cites CashCall, Inc. v. Morrisey, 2014 W. Va LEXIS (W. Va. May 30, 2014), and Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015), as legal authority for claims alleging usury and other violations of Colorado’s Uniform Consumer Credit Code.

The amended complaint filed in Mead v. Marlette Funding LLC d/b/a Best Egg asserts that Marlette paid all costs, including legal, marketing and other expenses, incurred by Cross River Bank in originating Best Egg loans. In addition, the complaint asserts that Cross River “bears no risk that it will lose its principal in the event consumers default on the Best Egg Loans that it sells to Marlette or to Marlette’s non-bank designees” because: (i) Marlette maintains a bank account in favor of Cross River in the amount of Marlette’s anticipated purchases; (ii) Best Egg loans originated by Cross River are sold to Marlette within two business days; (iii) the parties’ contract specifies that Cross River has no liability to Marlette for sold loans, and (iv) Marlette is obligated to indemnify Cross River “against any claim that any aspect of the Best Egg lending program violates the law.”

The amended complaint filed in Mead v. Avant of Colorado LLC, in turn, similarly asserts that Avant and not WebBank, which originated the subject loans, bears all cost and expenses, including the costs of evaluating loan applications and credit reports and the costs associated with dispersals of loan proceeds.

Cross River Bank Sues State of Colorado (Over the Transom), Rated: AAA

News Summary:

  • On April 3rd, Cross River Bank filed a Declaratory Judgment Action (Federal District Court) against the State of Colorado to protect its federal statutory and contractual rights to freely extend credit and to freely sell those loans on a nationwide basis
  • Previously (in January 2017), the Colorado Attorney General sued Marlette Funding in an attempt to prohibit Marlette from enforcing loans validly made by Cross River and validly sold by Cross River to Marlette
  • Cross River filed the declaratory judgment action in support of Marlette Funding (an MPL partner), and the broader bank-platform model
  • According to Cross River General Counsel, Arlen Gelbard, “the Colorado Attorney General is attempting to undermine the concept of federal preemption, and with it 150-years of established banking law.”
  • More specifically, Colorado’s action violates Federal Deposit Insurance Act (Section 27) and National Bank Act, as well as the “valid when made” doctrine
  • “It is clear to us that Colorado’s lawsuit against Marlette intentionally did not name Cross River as a party because Colorado knows that Cross River’s actions are protected by its status as a state-chartered, federally regulated Bank, which affords complete preemption over state law”

The Issue – Federal preemption/uncertainty:

  • The federal preemption provisions which allow small banks like Cross River to compete with larger entities, have come under attack by several states and in some recent court cases such as Madden v. Midland Funding and other so-called “True Lender” cases.
  • While we believe these cases were wrongly decided as a legal matter, the broader impact has been to encourage states and other plaintiffs to disregard or undermine key legal doctrines of federal preemption and loans as being “valid when made”, leading to market uncertainty.
  • The characteristics of the Cross River model are very different from many others in the marketplace, where the named lender has little to no involvement in the origination process and retains no “skin in the game”
  • This lack of certainty about what loan terms apply to subsequent purchasers has broad, adverse ramifications for US banking and financial markets. Specifically, certain investors have moved away from this asset class, which has reduced liquidity in the market.
  • “Although the action taken by the Colorado Attorney General is being positioned as one to protect the consumer, the actual result will likely have a negative impact on consumers and small businesses, as their access to this important source of credit is significantly reduced.”

SOFI RAISES THE VARIABLE STUDENT LOAN REFINANCING RATES (lendedu), Rated: AAA

The Federal Reserve’s interest rate increase last month is starting to show up in some loan products including student loan refinancing. Fixed rate borrowers are safe for now, but those with variable interest can expect to pay more.

As of April 1st the interest rate on a variable student loan at SoFi increased both on the low and high ends of the range. Borrowers will now pay anywhere from 2.565 percent to 6.490 percent interest on a variable refinance loan. That compares with 2.365 percent to 6.29 percent interest just a month ago. The interest rate on SoFi’s fixed rate products held steady at 3.375 percent to 6.74 percent from March to April.

Kabbage Extends $ 3 Billion in Funding to over 100,000 Small Business Customers (IT Business Net), Rated: AAA

Kabbage®, a pioneering financial services, technology and data platform, announced it has extended more than $3 billion to small businesses across all 50 U.S. states, covering every industry. The company has also now served over 100,000 small businesses through its platform, representing the largest customer base of any online small business lender.

ApplePie Capital CEO & Co-Founder Denise Thomas Makes Marketplace Lending Success Look Easy (Crowdfund Insider), Rated: A

“We have gained a foothold within the industry by partnering with 42 brands to date. Moving forward we will continue to innovate…”

Erin: You recently signed new investors plus funding capital, thus standing out in a challenging market. Please share details about your MO. How long did it take to raise the money?

Denise: It took five months. The two main sources of funding we closed were new strategic partners and existing investors. Our strategy was to continue to tell our story and educate investors about franchise debt as an asset.

Erin: Please share your experience about dealing with a prominent Bay Area VC saying, “You don’t look like Fintech.”

Denise: Statistically, there are far more men running fintech companies, clearly there are some biases out there around that. A study released by Peterson Institute for International Economics in 2016 found that “An increase in the share [on executive teams and boards] of women would be associated with a 15% rise in profitability.” At the end of the day, you want people in your board room who are supportive.

Erin: You have spoken quite positively about your relationship with Fifth Third. How and why does ApplePie’s relationship with this bank differ from others?

Denise: As opposed to our other loan purchasers, Fifth Third has made a strategic investment in our company and holds a stake in the growth of our business. They co-led our B round with QED Investors, with whom they have now also partnered to make strategic investments in VC-backed fintech companies. They have a long term vision for our industry and provide their expertise to create better financial solutions and a superior experience for our borrowers.

Erin: ApplePie Capital’s loans are backed by personal guarantee and unsecured. Personal assets are not required to back loans. Tell me more…

Denise: In franchising, there is a blueprint for the business owners to follow, in terms of cost analysis and every other aspect. This is measurable and people have a path to multi-unit ownership. We look at each brand and evaluate the sustainability of the business model, which has proven itself over the last 25 years through historical SBA data.

5W Public Relations Named Agency of Record for Sharestates (Yahoo! Finance), Rated: A

5W Public Relations, one of the 15 largest independently owned PR firms in the US, has been named PR Agency of Record by Sharestates, an online real estate investment marketplace that is an industry leader in crowdfunding for individual and institutional investors.

Could Real Estate Crowdfunding Help Millennials Retire Sooner? (Realty Biz), Rated: A

Real estate crowdfunding has proven a popular choice for one of the most fickle investing groups in the marketplace: Millennials.

On the surface, it seems improbable. Millennials investing in real estate? This is a group that has been loathe to purchase homes, with less than a third of Millennials becoming homeowners compared to 64 percent of the general population. After a little analysis, however, there are powerful reasons why real estate crowdfunding appeals to Millennials—enough that more are certain to join the crowd of investors in the coming years.

The stereotype, of course, is that Millennials are all underpaid with limited skills and few opportunities. That’s not reality, but even if it were, real estate crowdfunding has very low barriers to entry. Some of the best and most successful crowdfunding portals allow for investment minimums as low as $5,000. That lets Millennials get into the real estate investment game much earlier than previous generations.

Second, real estate crowdfunding is an investment option that allows Millennials to bypass banks. Having come of age during the Great Recession, many Millennials don’t trust financial institutions or Wall Street firms. They do, however, see the need to protect their money from the kind of financial breakdowns that hurt their parents’ retirement plans nine years ago by investing in hard assets. Real estate crowdfunding offers the chance to do just that.

PayPal Directors Hit With Class Action Suit from Shareholders Over Venmo (Crowdfund Insider), Rated: A

On March 24, 2017, shareholders of PayPal Holdings Inc., the parent company of mobile-payment provider Venmo, filed a derivative suit against its directors in the District Court of Delaware. A derivative suit is a form of class action in which shareholders can sue company officers or directors on behalf of the company.

The plaintiff shareholders claim in the suit that the directors of PayPal willfully or recklessly caused PayPal to make false or misleading statements which led to direct damages against PayPal. The false and misleading statements are alleged to have been made in PayPal’s quarterly reports, annual reports, and proxy statements which failed to disclose any of the alleged unfair and deceptive business practice or the fact that those practices would lead to increased regulatory scrutiny.

View the filing here.

Over 250,000 Shoppers And 1,400 Dealers Turn To AutoGravity (PR Newswire), Rated: A

AutoGravity, the FinTech pioneer transforming car shopping and finance with advanced mobile technology, today revealed that over a quarter million users – more than half of whom are millennials – have downloaded AutoGravity iOS and Android apps for car shopping and financing. AutoGravity also confirmed that its network of partner car dealerships has grown to more than 1,400 franchise dealers.

Since launching in 2016, AutoGravity has achieved significant growth across the United States, securing partnerships with the nation’s top automotive lenders, as well as four of the top five national dealer groups, representing all new and used car brands available in the country.

  • New cars remain popular with boomers. AutoGravity data shows two-thirds of car shoppers ages 50+ who pursue financing do so for new vehicles. In contrast, only half of AutoGravity car shoppers ages 18 to 25 who pursue financing do so for new vehicles
  • Japanese brands perform in California. Japanese economy and luxury car brands are more searched relative to American brands in California (as compared to the US overall)
  • Economy cars continue to be a popular choice. Economy brands rank in the top four most searched for vehicles across the US – luxury car brands round out the top seven
  • Millennials more cost sensitive than Gen X. Among car shoppers seeking financing on AutoGravity, millennials look to borrow ~15% less (finance amount requested) and seek to contribute ~25% less (cash down payment) relative to car shoppers ages 36+

Why FutureAdvisor orphaned its B2C book of business and other learnings at CFA Society’s robo-panel in San Francisco (RIABiz), Rated: A

The bad news: Selling robo financial advice to millennials — at least until they grow up and start acting like boomers — is a fool’s game.

Cianciolo provided the fullest update yet on FutureAdvisor since the firm’s eye-popping sale to BlackRock in 2015. See: Why BlackRock’s purchase of FutureAdvisor for $152 million could be a deal of destiny.

The robo — once the No. 3 retail player behind only Wealthfront and Betterment — no longer takes assets to millennials.

Standing up for retail and millennials was Zhang, a millennial herself, who questioned whether Roy and Ciancolo were being unduly pessimistic in capitulating to established players.

Jemstep had a brief period where it went for retail business but veered quickly to the B-to-B market.  “Can somebody [create a viable B-to-C robo advisor]?” Cianciolo asked. “Sure but you’re taking double and triple risks.”

Jamie Dimon Pushes for Simpler, More Coordinated Bank Regulations (WSJ), Rated: A

J.P. Morgan Chase JPM 0.33% & Co. Chief James Dimon laid out his wishlist of regulatory changes in his annual shareholder letter Tuesday, calling for simpler and better coordinated rules that could help to spur more lending and in turn economic growth.

Any changes are likely to help the bank. Mr. Dimon wrote that the “anticipated reversal of many negatives and the expectation of a more business-friendly environment” in addition to the bank’s results are among the reasons its stock price jumped about 30% in 2016.

Mr.. Dimon has previously said that rules should be coordinated among agencies, simplified and consistent, but in Tuesday’s letter spelled out what that meant for the first time.

He said banks have too much capital and that could be used instead to safely finance the economy.

Mr. Dimon reiterated that the so-called “gold plating” of international standards by U.S. regulators should be eliminated. Making U.S. rules stronger than international rules was in some cases a priority of Federal Reserve Governor Daniel Tarullo, who was the central bank’s regulatory point person but is stepping down this week.

Mr. Dimon also suggested reforms to the mortgage market since the housing sector has been “unusually slow to recover.”

Bond Street Partners With NerdWallet (Bond Street), Rated: A

Today, we are thrilled to announce that we’re partnering with NerdWallet to help more small business owners access fair and affordable financing. According to the Federal Reserve Bank, only 1 in 5 businesses that apply for a loan from a big bank are approved.

Together, we’ll create resources, guides and webinars to support the growth of businesses. In addition, entrepreneurs will now be able to access financing from Bond Street via NerdWallet’s Small Business Loan Tool.

Prominent Fintech Marketing Firm Leverage PR Sold to Caliber Corporate Advisors (Crowdfund Insider), Rated: B

Leverage PR, a prominent marketing firm engaged in the crowdfunding and Fintech sector, has been sold to Caliber Corporate Advisors.  Founded by Joy Schoffler, a well-known and highly visible participant in the emerging industry of financial innovation, shared the news with Crowdfund Insider, explaining she expects to remain engaged with the firm but in a different role.

Leverage PR was founded in 2010 and was the first marketing firm to recognize the potential of alternative finance.

United Kingdom

RateSetter continues to boost transparency with new expected losses committee (P2P Finance News), Rated: AAA

RATESETTER has set up a new committee on expected losses as part of a review of the way it monitors and reports on credit risk.

The panel, which will come into effect later this month, comprises the peer-to-peer lender’s chief executive Rhydian Lewis, its chief finance officer Harry Russell and various heads of consumer and commercial credit risk.

Boosting expected losses data is the latest of a batch of strategic changes RateSetter has put in place to price risk more accurately following higher-than-expected losses on its 2014 and 2015 loans.

Peer-to-peer loan fund considers change of manager (Financial Times), Rated: AAA

The UK’s first peer-to-peer loan fund is to review its investment manager as a swath of funds struggle to generate returns from the emerging asset class.

The listed fund, P2P Global Investments, buys loans from websites matching interest-paying borrowers with lenders in the UK, US, Europe and Australia, as well as holding stakes in the platforms.

It is currently managed by MW Eaglewood Europe, an asset manager majority-owned by UK hedge fund Marshall Wace. In a short announcement to the stock market on Tuesday, the board said it would review the arrangement following discussions with Eaglewood and “significant shareholders” and would update the market in due course.

Oakam Brings Gamification and Rewards to Consumer Finance with New Mobile App Feature (BusinessWire), Rated: A

Oakam has enhanced its mobile app with the launch of Oakam Grow, a new feature that uses gamification to make consumer finance more engaging, rewarding and inclusive. Oakam Grow builds on the UK-based consumer lender’s application of behavioural science to encourage the development of positive credit habits, and supports its strategy to bring digital disruption to the largely analogue micro-credit industry.

Oakam Grow gamifies the experience for Oakam’s mobile app users through the application of social currency theory, which enables customers to share in the financial upside of their responsible credit behaviour. Customers earn points when making repayments via the app or referring friends, redeemable for loan repayments, cash-back, store vouchers, lower rates on future loans, or to socially vouch for friends in the loan application process. Oakam’s award-winning mobile app first launched in 2015, and today more than 55 per cent of its customers are regular users. The addition of Oakam Grow will further drive app downloads and engagement.

Oakam has seized on the opportunity to disrupt the £1.8 tn global micro-lending industry through the use of AI, machine learning and cognitive science. The century-old industry has seen little innovation since its founding and today relies on the same analogue processes that keep cost-to-income ratios above 50 per cent, and prices high for consumers. The industry’s network of around 200,000 doorstep loan agents globally also leaves consumers with poor or no credit history, vulnerable to misleading offers and predatory practices.

Oakam’s omni-channel model, comprising its digital properties and UK retail network, confronts both the issues of inefficiency and consumer protection.

RateSetter Business Finance Adds Relationship Manager Amanda Sharp (Crowdfund Insider), Rated: A

RateSetter has appointed Amanda Sharp as Regional Relationship Manager for London and the South East. Sharp previously spent 35 years with RBS Group.

How to navigate the P2P maze (FT Adviser), Rated: A

Against a backdrop of rising inflation and continued low interest rates, it is no surprise that a growing number of the UK’s financial advisers are looking for ways to make their client’s money work harder.

And there is one solution in particular that has caught the attention of eagle-eyed advisers: peer-to-peer (P2P) lending.

Assuming current Bank of England inflation at 2.3 per cent, according to latest figures, and interest rate forecasts, money deposited in the average high street savings account today will shrink in real terms after both one and two years.

In fact, some high street bank cash savings accounts are offering just 0.01 per cent in savings – less even than the current Bank Base Rate of 0.25 per cent.

Even in its slowest year yet, 2015, the sector grew by over 80 per cent according to one report (Nesta, Pushing Boundaries: the 2015 UK alternative finance industry report).

P2P lending is likely to grow even faster as more and more P2P lenders receive their full FCA authorisation – heralding the arrival of the ‘Innovative Finance ISA’ (IFISA), which will almost certainly add to the momentum the sector is experiencing.

European Union

Why Stockholm is creating more unicorns than London per capita (elite business magazine), Rated: AAA

The result of the Swedish government’s tech drive of the 1990s is that while Silicon Valley may be the undisputed champion of the world when it comes to producing unicorns, Stockholm comes a close second. According to SparkLabs, the seed-stage fund, the Californian city has produced 10.7 unicorns per million inhabitants, the Nordic city produced three and Tel Aviv, which came third, birthed 1.2. So it’s no wonder the European Digital City Index ranked the metropolis as Europe’s second best city after London when it comes to supporting its digital entrepreneurs. “In Stockholm, we’re really freaking good,” says Stark.

But even though access to a solid infrastructure has proven vital in fostering this thriving entrepreneurial community, it isn’t the only factor. Equally important for the success of Sweden’s startups is the fact that that the nation has a population of just under ten million, which means new enterprises have to be thinking about international expansion from the get-go.

‘Shadow banks’ step into the spotlight (Financial Times), Rated: A

The growing influence of alternative capital is most evident in the US — in April 2015, nonbank lenders accounted for more than half of new government-backed mortgages. Banks are still the biggest lenders in Europe, but rivals are emerging. Many of the new players are linked to the securitisation industry, where loans are packaged up and sold on as bonds to capital markets investors.

Private equity-funded upstarts have quietly taken a more active role in the UK’s securitisation market, which used to be dominated by big banks.

Today one of the largest users of securitisation in the UK is not a bank. The Northview Group, which writes mortgages under the Kensington brand and is funded through securitisation, describes itself as a nonbank challenger lender.

A wave of nonbank lenders, including companies such as Munt and Dynamic Credit, have appeared in the past few years. These players now account for close to a fifth of new Dutch mortgages, according to IG&H, a consultancy. This is up from almost nothing just a few years ago. The companies take capital from institutions and lend to homeowners.

Technology companies that facilitate lending between investors and businesses make up another area of growth in shadow banking, and they are becoming more adventurous in the services they offer.

Funding Circle is one of Europe’s best known peer-to-peer lending platforms, where retail users can invest in loans made online. It lends £100m a month in the UK and is expanding in Europe.

As with other forms of shadow banking, European P2P lending lags far behind the US market. Investors who use Funding Circle, which is also active in North America, said they were disappointed last summer with the performance of US loans written by the company. The concerns followed losses that investors made on P2P loans securitised by OnDeck, a nonbank lender.

International

Statistic of International P2P Lending Services March 2017 (P2P-Banking), Rated: AAA

The total volume for the reported marketplaces adds up to 532 million Euro.

Milestones reached this month are:

  • Mintos crossed 150 million EUR in originations since launch
  • Moneything reached 50 million GBP since inception

Australia

Agri-lending helped drive SocietyOne to a new loan record (Finder), Rated: AAA

Peer-to-peer (P2P) lender SocietyOne has announced a new lending record, passing the $250 million lending mark in March of this year. Part of the lender’s success is due to increased demand for its two agri-lending products, which, combined with a surge in personal loans over the post-Christmas and New Year period, saw an additional $45 million lent to customers.

China

China P2P industry lending nears Rmb1tn despite crackdown, new regulations (Financial Time), Rated: AAA

Growth in China’s peer-to-peer lending sector has proven resilient in the face of new regulations and a year-long crackdown by authorities on online financing, with total P2P loans blowing past the Rmb900bn ($130.7bn) mark last month.

Outstanding P2P loans came to Rmb920bn at the end of March, according to new figures released today by lending platform Wangdaizhijia.

Month-on-month growth in outstanding loans slowed compared to before the new regulations were introduced in August, from 5.7 per cent in July 2016 to 4 per cent last month.But when viewed in renminbi terms, growth has ratcheted up, with the industry tacking on an average Rmb35.6bn a month in the seven months since regulations were introduced, compared to an average rise of Rmb29.1bn in the seven months ended August.

China curbs ‘Wild West’ P2P loan sector (Financial Times), Rated: AAA

Peer-to-peer lending in China is at an inflection point as state regulators aim to transform it from a “Wild West” industry rife with fraudsters into a respectable market in which legitimate lenders can offer funds to willing borrowers.

With their offer of attractive fixed returns over short periods, P2P investments appear similar to saving products that reputable commercial banks offer as an alternative to low rates available for deposits. P2P yields are typically higher than those available from banks, making them an easy sell to investors.

Since 2011, 3,556 platforms have collapsed, according to Online Lending House, a website that tracks the sector. In a third of the cases, law enforcement agencies closed the platforms or their owners or managers simply disappeared.

Asia

Dangoestate.com Real Estate Crowdfunding Platform Celebrates 1,000,000 Investors (Digital Journal), Rated: AAA

Dango estate, the now five months old Singapore based investment platform is growing by leaps and bounds. The mood at their three offices around the world was very high yesterday as they celebrated the 1,000,000’th investor on the platform.

Dango estate has achieved great success in the crowdfunding industry in the shortest time, the platform has already funded more than $500,000,000 in loans worldwide and delivered over $350,000,000 in principal and interest to investors, with yields as high as 10%.

Authors:

George Popescu
Allen Taylor

Monday April 3 2017, Daily News Digest

PeerIQ mpl securitization

News Comments Today’s main news: Activist investor pushes for new strategy at On Deck. Why Zopa is building a bank. Landbay reduces product rates & fees. Unicorn India Ventures invests in SmartCoin. SGX partners with Crowdo, PwC. Alternative Circle raises $1.1M.  Today’s main analysis: Q1 2017 MPL securitization tracker from PeerIQ. Today’s thought-provoking articles: New York case is a win […]

PeerIQ mpl securitization

News Comments

United States

United Kingdom

European Union

Australia

China

India

Asia

Africa

News Summary

 

United States

Marketplace Lending Securitization Tracker Q1 2017 (PeerIQ), Rated: AAA

  • Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.9 Bn this quarter with cumulative issuance now totaling $18.0 Bn across 80 deals.
  • The movement towards rated securitizations at larger transaction sizes continues. All deals were rated in this quarter, with record-sized consumer deals from SoFi, a large multi-seller deal from Marlette (where 45% of loans were funded by affiliates of GS and Cross Rive Bank), and the first prime paper deal from Lending Club. All deals this quarter had at least one rating.
  • New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization.  In 1Q2017, we saw spreads tighten in riskier tranches, indicating strong investor appetite for MPL ABS paper in the market.
  • Bank and non-bank platform partnerships continue to emerge. Over 15 banks are purchasing loans from marketplace lenders.
  • Our year-end forecasts volumes for new issuance of $11.2 Bn remain on-track. New issuers and repeat issuers are increasing deal activity.
  • 3rd party solutions are emerging to improve investor confidence. Originators are relying on 3rd party solutions to address “stacking”, perform data verification, loan validation, and improve investor confidence.
  • We expect higher volatility from rising rates, regulatory uncertainty, and an exit from a period of unusually benign credit conditions. Platforms that can sustain low-cost stable capital access, build investor confidence via 3rd party tools, and embrace strong risk management frameworks will grow and acquire market share.

 

Activist Investor Pushes for New Strategy at On Deck Capital (WSJ), Rated: AAA

Marathon Partners Equity Management LLC, a New York hedge-fund firm with about $275 million in assets under management, is pushing On Deck to shed millions of dollars in expenses to get to profitability, said Mario Cibelli, a managing partner at the firm, in an interview. Mr. Cibelli said he would also like On Deck to explore a potential sale or other alternatives that could increase shareholder value.

On Deck in February reported a record loss of $85.5 million in 2016 and burned through half of its cash, ending the year with a balance of $80 million. The New York-based company launched an initiative to eliminate 11% of its workforce, find other cost savings and get to profitability in 2018.

But Mr. Cibelli argued that the proposals don’t go deep enough. “The current strategy is not the right one and needs to be changed,” he said. Marathon has been buying shares in On Deck since last year, amassing a stake of 1.75% of the company as of the end of 2016, according to FactSet.

NEW YORK CASE IS A WIN FOR THE MERCHANT CASH ADVANCE INDUSTRY (Pepper Hamilton LLP), (Pepperlaw.com), Rated: AAA

On March 16, the Supreme Court of New York, Nassau County, issued a decision in IBIS Capital Group, LLC v. Four Paws Orlando LLC. The decision reaffirms the position consistently taken by New York courts that “For a true loan it is essential to provide for repayment absolutely and at all events [and where] the payment or enforcement [of an agreement to repay funds advanced] rests upon a contingency, the agreement is valid even though it provides for a return in excess of the legal rate of interest.”

Under section 190.40 of New York’s Penal Code, a person cannot intend to charge, take or receive interest on a loan greater than 25 percent. In this case, plaintiff IBIS advanced funds to defendant Four Paws under an agreement for the purchase and sale of future receivables. Four Paws subsequently refused to honor its commitment to pay IBIS on the basis that the payments called for a usurious rate of interest. IBIS sued Four Paws for breach of contract, and Four Paws asserted criminal usury as an affirmative defense.

The court further said that, even if the agreement had created a loan, there would be no violation of New York’s criminal usury law because Four Paws could not show that IBIS intended to charge a usurious rate of interest. To this end, in order to commit criminal usury, a person must enter into the agreement knowing that they are charging interest that exceeds 25 percent.

Ex-Xero boss Chris Ridd to lead cloud financial adviser platform Myprosperity (Financial Review), Rated: A

The former Australian CEO of accounting software firm Xero Chris Ridd will join cloud financial adviser platform myprosperity as its new CEO, after he and MYOB founder Craig Winkler backed its first external fund raising round.

The company provides an online platform, which is targeted at helping households manage their finances by using cloud technologies to connect data feeds from numerous sources, and provide a real-time picture of overall wealth and financial health. It sells most commonly to accountants and financial planners, who then use the platform to advise clients.

The company capped its capital raising at $2.5 million, saying it needed to take on the funds to ramp up its sales and marketing efforts, now that it has established itself, with more than 250 advisers and 10,000 subscribers signed up.

The top 10 US tech companies that pay the most when poaching employees (SCMP), Rated: A

3: Lending Club, the peer-to-peer lending site, pays on average a 48 per cent premium to poach. Employees were earning on average US$128,457 at their previous job and increased to US$183,469.

5: Groupon pays on average a 38 per cent premium to poach. Employees were earning on average US$137,390 at their previous job and increased to US$175,233.

Bank of America to commit $ 1.5M to Charlotte’s fintech initiative (Biz Journals), Rated: A

Bank of America Corp. (NYSE:BAC) will commit $1.5 million over three years to Charlotte’s fintech initiative, according to sources close to the matter. The bank confirmed the investment to the Charlotte Business Journal Wednesday.

Will Using Artificial Intelligence To Make Loans Trade One Kind Of Bias For Another? (NPR), Rated: A

Digital lending is expected to double in size over the next three years, reaching nearly 10 percent of all loans in the U.S. and Europe. There are now some 2,000 digital startups, many of which are using artificial intelligence to analyze the troves of data created every day.

Digital lenders are pulling in all kinds of data, including purchases, SAT scores and public records like fishing licenses.

Government research has found that FICO scores hurt younger borrowers and those from foreign counties because people with low incomes are targeted for higher-interest loans. Girouard argues that new, smarter data can make lending more fair.

If artificial intelligence can weed out good borrowers from bad just by looking at things like Web browsing history, suddenly it doesn’t matter if you live in a low-income neighborhood or your family just immigrated. But it does open the door to new, 21st century versions of redlining.

But what if you’re just buying M&Ms or prefer using cash? An algorithm doesn’t know that. Left unchecked, computers could create all sorts of unintended bias.

Some companies have correlated late-night Internet use with bad loan repayment. But does that mean night owls should pay a higher interest rate?

Comparing Costs For A Marketplace Loan Vs. A Bank Loan (NASDAQ), Rated: A

Since the early 1980s, the finance rate on personal loans at commercial banks for a 24-month loan has steadily dropped. At its height in 1981, the average reached 19.21%. Today, borrowers can expect to pay 9.45% according to the Federal Reserve Bank of St. Louis. However, many borrowers will face a higher rate given the average U.S. credit score of 695. At this score, a borrower will likely face an interest rate of 13.5% to 17.5%. Accessing these rates means having a minimum FICO score of 660 in many cases.

Remember, the origination fee is deducted from the loan amount. Therefore, if you borrow $15,000 at a 2% origination fee, you are only getting $14,700. Origination fees can reach as high as 6%.

Online lenders offer speed and flexibility that is not possible with traditional banks. Those in good credit standing can access capital for as low as 5.7% making the loans more competitive than the neighborhood bank.

Some of the most competitive providers like SoFi and Discover Personal Loans require no origination fee and users can borrow up to $100,00. Additionally, there are no prepayment fees. If we compare a borrower with a strong credit score at a bank versus an online lender, then the rates are 9.45% and 5.7% comparatively. Moreover, the absence of fees makes the savings even better.

6 Real Estate Startups Poised To Disrupt The Industry (Forbes), Rated: B

Using public records, comparables and other metrics, Bowery creates custom, data-driven reports that offer in-depth information to find the most accurate property appraisal value possible.

And if you’re on a lease and you need to leave town for a while, subletting your space without stress is just as difficult. Flip aims to make managing or finding subleases a breeze.

Ravti, a Y-Combinator-backed startup, brings intelligent software to building owners and operators reducing costs by 18 to 30 percent on capital replacements through direct procurement.

OnTarget helps construction projects wrap up successfully and on schedule. The cloud-based app allows property investors, managers, contractors and other vendors to connect through an online dashboard. This gives managers a simple and effective option to ensure everything is on track and information to respond appropriately when delays put the project schedule at risk.

Enertiv is focused on giving property owners and managers access to real-time energy use information around the clock. Through its proprietary platform, clients can view energy use by location with live data and prior period comparisons. Its weather overlay shows how a change in temperature translates to an increase or decrease in usage, letting you know instantly if you need to make money-saving adjustments.

As an event management option, the company turns a boring apartment building into a bustling lifestyle center. With fitness classes like yoga, pilates and fitness bootcamps, and a mix of social and professional events, hOM communities see a 15 percent higher tenant retention rate than the national average. Property managers and agents can use hOM to reduce turnover and related costs, helping owners improve overall profitability without overspending on gyms, pools, hot tubs and other amenities.

Venture Capital Funnel Shows Odds of Becoming a Unicorn Are Less than 1% (CB Insights), Rated: A

We followed a cohort of over 1,000 startups from the moment they raised their first seed investment to see what happens to them empirically.

Just over 70% of startups stall at some point in the VC process and fail to exit or raise follow-on funding.

Of the 1,098 tech companies we tracked that raised seed rounds in the US in 2008-2010, less than half, or 46%, managed to raise a second round of funding.

  • 306 (28%) of companies that raised a seed round in 2008–2010 exited through an M&A or IPO within 6 rounds of funding.
  • Less than 1%, 10 (0.91%) companies from our seed cohort ended up becoming unicorns valued at $1B+. Some of these companies are the most-hyped tech companies of the decade, including Uber, Airbnb, and Slack.
  • 61% of companies that raise a follow-on after their initial seed are then able to raise a second follow-on round after that.

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The Evolution of Crowdfunding Could Change Everything (Industry Leaders), Rated: A

According to the annual Massolution Crowdfunding Industry Report, the total equity crowdfunding volume worldwide in 2015 peaked $2.56 billion. The number is expected to triple in 2017 and will be roughly in the neighborhood of $4-5 billion.

While venture capital investment holds a steady $30 billion per year, equity crowdfunding is expected to surpass angel capital by 2020. According to the World Bank, the crowdfunding market as a whole will hit $90 billion in volume by 2020.

The launch of Crowdemand, Inc., has got crowdfunded fashion shopping up and running.

With the launch of crowdfunded insurance by American International Group, we saw the first of kind in the crowdfunding industry. Currently, AIG only sells coverage on the platforms, however, it is soon poised to offer insurance protection to all investors using the platform.

With real estate crowdfunding on sites like RealtyMogul.com, anybody can raise more than $200 million to crowdfund a real estate property.

Pebble E-Paper Watch Kickstarter campaign originally started out as a corporate crowdfunding initiative, raising $10,266,845.

Similarly, IBM has developed its own crowdfunding platform called iFundIT, through which employees in the IT department can develop and pitch potential projects on the company’s internal social network. Employees are given up to $2,000 of IBM money, which they can use to promote their products.

Is regtech the new fintech? (Computer Weekly), Rated: B

With mobile apps, banking automation and blockchain already transforming financial services, financial institutions are now looking to regulation technology, or regtech, to meet compliance requirements.

The key differentiator of regtech is agility. regtech allows the use of advanced technologies to extract, transfer and load data sets that are cluttered and tangled to create consumable information. This is done quickly and efficiently, giving businesses the agility to solve real-world problems and stay ahead of the competition.

Example: Onfido delivers next-generation background checks, helping financial services organisations and other businesses verify the identity of any person remotely using machine learning technologies.

Example: Scaled Risk is a financial software that integrates in-memory analytics and big data to provide real-time, scalable, and flexible risk management solutions for banks and other financial services companies.

Example: FundApps, a cloud-based platform, automates shareholding disclosures by organising regulatory information, combining regulatory compliance content with technology.

United Kingdom

Zopa’s Jaidev Janardana: Here’s Why We’re Building a Bank (Crowdfund Insider), Rated: AAA

“Legacy technology and poor customer service has disappointed consumers. That’s why we’ve seen a wave of start-up banks emerge, with greater focus on delivering a high quality customer experience through technology. This is what Zopa does in the peer-to-peer investment and loans space.”

Jaidev noted that along with the bank, Zopa will be expanding its customer offering as well. He and his team are planning to offer FSCS-protected deposit accounts for savers, P2P investments, including IF ISAs for investors, and personal loans, car finance, and credit cards for people looking to borrow.

P2P Lending Platform Landbay Reduces Product Rates & Fees (Crowdfund Insider), Rated: AAA

UK-based peer-to-peer lending platform Landbay has reportedly reduced its product rates and fees. According to various sources, Landbay’s rates are now starting at 3.39% for a 2-year fix and 3.59% for a 5-year fix, with arrangement fees up to 75% on standard products, which were cut from 1.75% to 1.5%.

Landbay’s products are available through the lender’s distribution partners, which are Atom, Brightstar, Complete FS, Connect Mortgages, Mortgage for Business, The Buy to Let Business and TBMC.

Five reasons fintech fears London may lose its crown after Brexit (Financial News), Rated: A

The UK fintech sector represented approximately £6.6 billion in revenue in 2015 and attracted around £524 million in investment, according to EY.

Startups say they are “apprehensive” and “worried” about the possible damage that Brexit may cause.

FN talks to key fintech founders and other entrepreneurs of their top five Brexit concerns and why they worry for London.

1. Talent

Jan Hammer, a partner at venture capital firm Index Ventures, said: “What we fear and are concerned about is that post-Brexit Britain will lose access to talent.”

More than 30% of the 250 chief executives and founders of fintech startups that are members of Innovate Finance are non-British, and others employ many European staff.

2. Funding

Funding has already dipped since Britain’s decision to leave the EU. A survey conducted by Tech London Advocates, a 4,500-strong industry body of key players, found that one in 10 of London’s tech sector has experienced investors holding off or withdrawing from a funding round since last summer.

3. Financial passport trading

Unfettered trade within the European Union is essential for most fintech companies and many worry the loss of the EU financial passport will result in a mountain of red tape.

Many are already looking to open offices in Luxembourg, Ireland and The Netherlands to give their business a European headquarters.

4. Government support

One fintech entrepreneur who asked not to be identified, said the fintech community has lost many of the relationships it had with Downing Street and Whitehall: “There was a proper massacre of the Cameroonians when the regime change happened.”

5. Reducing uncertainty

One company providing software using artificial intelligence to the asset management industry who asked not to be identified said that it experienced a potential German buyer holding off because it wanted to see how Brexit will play out.

HSBC partners with Tradeshift as banks increasingly see fintech as friends (Business Insider), Rated: A

HSBC announced on Thursday that it is partnering with Tradeshift to offer working capital to companies that use its platform. Tradeshift offers a cloud-based software platform to help companies keep track on their entire supply chain in one place. Lanng likened it to Facebook, connecting up all companies that do business together, directly or indirectly, in one place. Founded in 2010, it already has over 1.5 million companies connected to its platform on both the buy and supply side and processes $500 billion in trade over its platform each year.

European Union

EstateGuru launched its third market – Lithuania! (EstateGuru Email), Rated: AAA

In March, EstateGuru funded its first Lithuanian investment opportunity on the platform and thereby launched in the Lithuanian market.

The launch of the Lithuanian market established EstateGuru as the only peer-to-peer lending platform in the entire world to facilitate property-backed business loans in three countries. In addition to the newly added Lithuanian market, the company also provides secured real-estate loans in Estonia and Latvia, with several following destinations under preparation.

Klarna is working on a new personal finance service to rival banks and fintech apps (Business Insider), Rated: A

Swedish fintech giant Klarna is preparing the launch of a new product line that will directly compete with personal finance apps like Qapital and Tink, reports Breakit.

Meeting of Government Pension Fund Managers Considers P2P Lending Allocation (P2P-Banking), Rated: A

At an informal meeting of 21 government pensions funds in Geneva, Switzerland, the topic of alternative lending was for the first time on the agenda. A representative of the Australian Future Fund said, that investing to p2p lending marketplaces might be an interesting strategy in order to reduce the systemic risks that banks pose. However it would be much to all early to take this step now.

Australia

The ‘booming’ NSW economy that 100,000 people have joined (Western Advocate), Rated: AAA

The sale of goods and services via peer-to-peer technologies generated $2.6 billion in revenue for the NSW economy last year, recording growth of nearly 70 per cent, according to the research from Deloitte Access Economics commissioned by the finance department.

But the Deloitte report finds that financial services and peer-to-peer lending are the fastest growing part of the state’s collaborative economy.

Financial peer-to-peer businesses, including lending companies such as SocietyOne, a platform that connects lenders with borrowers more than tripled their yearly revenue last year. The number of people who derived income from collaborative financial services enterprise also rose more than 150 per cent.

An estimated 38,000 NSW homes are listed on the short-term accommodation rental service Airbnb, according to company estimates. The average user earns about $4700 a year from renting out their home for 28 nights a year.

China

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

On March 21, Ant Fortune, the investing app of Ant Financial Services Group (Alibaba Group’s finance affiliate), unveiled a B2C platform “Caifu Hao”, which would allow third-party financial institutions to set up shops inside the app.

On March 21, JD Finance announced to launch the blockchain based assets management system, which would be operated within JD Finance’s Assets Cloud Factory. With the aid of the system, consumer finance companies were first to settle in the Assets Cloud Factory.

On March 20, InsurTech Company Xiaoyusan, founded by Tencent, closed on RMB 100 million in Series B funding led by Matrix Partners and Tasly Capital. Its first two rounds of financing were led by Sequoia Capital and AV Capital.

India

Unicorn India Ventures makes maiden investment in fintech with SmartCoin (India Times), Rated: AAA

Early-stage venture fund Unicorn India Ventures, which is set to close its maiden fund in the range of Rs 100 crore, has made its first investment in the fintech space, leading a round of about half-a-million dollars in Bengaluru-based microlending startup SmartCoin.

The startup offers loans starting from Rs 1,000 and is targeting individuals beyond the salaried class, including cab drivers, delivery persons and kirana store owners, and has tied up with a few nonbanking finance companies (NBFCs).

Can’t Pay Your Car Loan? Here’s What To Do So You Don’t Default (Lifehacker), Rated: B

If you’re in danger of defaulting on your car loan, you’re not alone. Subprime borrowers are falling behind at the highest rate since 2010 . Before you default, make sure you’ve explored these possible options , though.

  • Talk to your lender: See if you can extend the length of your loan for a smaller monthly payment, negotiate your interest rate, or even get a 30-day deferral (which is basically more time to pay off your loan).
  • See if you can sell it or trade it in: Do you have equity? Check the car’s value. If it’s higher than the amount you owe, yes, you have equity and you may be able to sell your car and pay off your loan.
  • Find someone to take over your payments: There are peer-to-peer lease exchange sites like Swapalease andLeaseTrader .
  • Refinance your car loan: There are also peer-to-peer lending sites likeLending Club and Prosper where you may be able to get a better loan than you’d get with most traditional lenders.
Asia

Singapore stock exchange inks partnership with P2P lending company, wants to educate about access to capital (Yahoo! News), Rated: AAA

Aimed at helping startups find access to capital, Singapore’s stock exchange (SGX) signed two separate Memorandums of Understandings (MOUs) with separate stakeholders in the startup economy.

The agreement that can be considered unique to our modern economy is an MOU signed with Crowdo, a regional lending platform with P2P and equity crowdfunding options. To date, it has financed about 2,000 projects.

PwC is a global professional services company. The firm brands Venture Hub as a ‘one-stop shop’ for entrepreneurs and investors to find solutions and services to help build partnerships.

The MOU with SGX is meant to promote Singapore as an attractive hub for startups and educate global players about the opportunities in Asia (with Singapore as a hub). The two sides will also arrange dialogue and thought leadership in the ecosystem.

Yo Shibata, Co-Founder of Crowdport, Updates on “Social Lending” Status in Japan (Crowdfund Insider), Rated: A

According to a recent article in TechinAsia, 52% of Japan’s personal assets, or more than $15 trillion, are held as cash.

Yo Shibata: Marketplace lending in Japan started around 2008 as peer-to-peer lending, where borrowers were primarily individuals.

The default rate has been very low (close to zero among major CFPs for three years).  Annual investment amount has grown from $140 million USD in 2014 to $540 million USD in 2016.

Yo Shibata: Interest rates of bank savings in Japan is around 0.01〜0.1% (ARR). On the other hand, Japanese consumers are concerned that they might not be able to have a large enough pension after they have retired.

Yo Shibata: I had little knowledge of lending before starting Crowdport. To me, 8% ARR in Japan with close-to-zero default rate was “too good to be true”.

Yo Shibata: We are starting by providing quantitative and qualitative analytics on CFPs and their funds. On the quantitative analysis, we collect all the public data from all the funds released every day and provide free-to-use tools to investors to compare against historical data points.

Orchard Platform: Asia Is ‘Light Years’ Ahead In Innovation (Benzinga), Rated: A

Among the 27 “unicorn” companies in the planet, eight of them are based in China and valued at a combined $96.4 billion. Ant Financial, Alibaba Group Holding Ltd BABA‘s affiliate, leads the group with a $60 billion valuation.

By comparison, 14 fintech unicorns are United States-based and valued at a combined $31 billion.

Law Firms in Singapore and Malaysia Launch FinTech Practice (Cryptocoins News), Rated: B

Singapore-based Allen & Gledhill and Malaysia-based Rahmat Lim & Partners, which is also an associate firm of Allen & Gledhill, announced that they would be establishing fintech practices for both countries.

Last November, it was reported that U.K. law firm, Addleshaw Goddard, was offering free mentoring and legal advice to fintech startups through a new scheme worth up to £500,000.

Global law firm Steptoe & Johnson LLP, is another law practice that has embraced the legal issues fintech companies experience by launching a multidisciplinary blockchain practice with lawyers involved across the globe.

Africa

Kenyan fintech startup Alternative Circle raises $ 1.1m funding (Disrupt-Africa), Rated: AAA

Kenyan fintech startup Alternative Circle has raised US$1.1 million in funding from international credit risk management company Creditinfo Group to help it achieve a wider geographical footprint.

Alternative Circle will in July launch its mobile-based credit facility app Shika, which allows users to access mobile loans and uses a decision engine to identify creditworthy borrowers.

The funding arrangement with Creditinfo will see the startup benefit from the larger firms expertise in classic and alternative credit risk management.

Authors:

George Popescu
Allen Taylor

Why Online Lenders Need Strong Legal Counsel

online lenders need legal counsel

Non-bank financial services are being scrutinized similar to banks. This highlights the fact that the Consumer Financial Protection Bureau (CFPB) plans to hold online lenders to the same legal standards as other financial institutions involved in lending. The bureau gets a lot of information from lending companies themselves. It has executed “Project Catalyst,” which aims […]

online lenders need legal counsel

Non-bank financial services are being scrutinized similar to banks. This highlights the fact that the Consumer Financial Protection Bureau (CFPB) plans to hold online lenders to the same legal standards as other financial institutions involved in lending. The bureau gets a lot of information from lending companies themselves. It has executed “Project Catalyst,” which aims to help innovative consumer financial products meet regulatory requirements. The bureau also started the “no-action letter” initiative, which allows companies to seek pre-approval for product testing.

The CFPB recently fined LendUp a record $1.8 million for violating multiple provisions of the Consumer Financial Protection Act. Having the right law firm from the beginning is not only essential, but it’s a survival tool for lending startups struggling with complex legal issues with multi-state permissions, aggressive advertising, data security, and other issues that could get a lender caught in the crosshairs of regulation.

Venable LLP is a leader in compliance and regulatory litigation and does a lot of work in areas dealing with CFPB, enforcement, and investigations. A well-respected law firm ranked 66 on AmLaw’s top 100, the firm has close to 600 attorneys in multiple countries. Alexandra Megaris, an attorney at the firm, explained to Lending-Times the complicated scenario facing young startups. She advises companies on regulatory investigations and government enforcement matters with a focus on consumer protection, consumer finance, and advertising issues. She works with banks and non-banks to prepare for and navigate supervision examinations by the CFPB and other regulators, including advising companies on building and enhancing compliance management systems.

A Look at CFPB Case Studies

Megaris said the CFPB’s focus is on enforcement. Legal actions lead to big headlines, so attention is skewed towards enforcement. She believes that, though examination and supervision get less attention, they have the biggest impact on the FinTech ecosystem.

Though the CFPB has initiated many feel-good proposals, it has not been extremely amicable to the sector like other regulators. Many enforcement matters start out as examinations. Unlike investigations, examinations expect an “open kimono” policy. That is, they can access everything (even privileged documents). She also believes the CFPB has taken a lead over the FTC in becoming the most active regulatory agency in the FinTech lending segment.

LendUp was required to pay a restitution of $1.8 million to borrowers and another $1.8 million as a penalty. The CFPB found that LendUp misled consumers through false advertisements and other means with regard to the true cost of lending, shifting performers to lower APR loans and failing to report credit information to the bureaus. She also said this ruling puts the onus of responsibility on advertisers and marketers. Usually, the courts have held that affiliate messaging is the responsibility of the company. Now, the lead generator might also be obligated to make sure that information is being utilized by the end lender.

T3Leads and Lead Publisher is a case where the CFPB sought monetary relief, including disgorging the founder of Lead Publisher of his profits and banning him from the financial products and consumer leads industries. CFPB Director Richard Cordray issued a statement that said, “This is a reminder to the middlemen who traffic in personal information: If you ignore warning signs that those buying this data are violating the law, you risk the consequences for the harm you are doing to people.”

These cases show that CFPB is not going soft on Silicon Valley for any abuse of consumer rights. The entire FinTech industry will need to ensure it is compliant with the relevant laws, and that every vendor is responsible for how the information is utilized by the down chain.

Online Lenders Can No Longer Operate Without Sound Legal Advice

The True Lender Doctrine is another potential minefield for lenders. In the case of Cashcall, CFPB argued the company was the actual “true lender” and implied that its operations were unauthorized. Furthermore, the CFPB said, any legal structuring was deceptive and improper. The case hinged on the fact that, though payday loans were originated by tribal entity Western Sky Financial, the de-facto lender was Cashcall because the tribal entity had no monetary interest in the loans. Cashcall wanted to shield itself from state usury laws by processing transactions through an exempt tribal entity. Megaris has seen multiple litigations on the True Lender Doctrine and is not surprised to see that courts have ruled differently on similar sets of facts. This creates huge uncertainty for companies on whether their day-to-day operations are legal or not.

All this indicates that FinTechs are currently operating in a legal gray zone. It is essential to have compliance experts on board from the beginning. This will ensure that all products created are vetted by a professional well versed in what is allowed under the relevant laws. Advertising, affiliate network and purchase, and sale of users’ personal data are other corporate actions which need to go through an attorney to make sure the company is not participating in anything prohibited. Startups won’t be able to defend themselves by saying they could not afford such services or that the infractions took place when they were only a five-person team. LendUp got to know that the hard way. Other lenders are advised to learn from LendUp and firm up the legal side of the lending business.

Authors:

Written with Heena Dhir.

Allen Taylor