Wednesday May 3 2017, Daily News Digest

funding circle

 News Comments Today’s main news: China Rapid Finance goes public at $350M valuation, down from C round valuation of $1bil. VPC Specialty Lending Investments annual results continues to disappoint Morty launches fully-automated mortgage marketplace. Barclay’s opens Europe’s largest fintech site in London. Airwallex wins $17M funding. India to see fintech regulations soon. Today’s main analysis: National survey shows instant […]

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United States

United Kingdom

China

International

European Union

Australia

India

News Summary

United States

Elevate Announces Expanded Elastic Funding Capacity (BusinessWire), Rated: AAA

Elevate Credit, Inc. (“Elevate”) announced today that Elastic SPV, which purchases loan participations in the Elastic line of credit product originated by Republic Bank & Trust Company (“Republic Bank”), increased its debt facility with Victory Park Capital from $150 million to $250 million. This is the first step in a two-step process to further increase and diversify the funding capacity for the Elastic line of credit product.

During the second quarter of 2017, an additional SPV will be created as another funding source for the Elastic line of credit product. This additional SPV for Elastic would provide additional funding, diversified funding sources and further lower the cost of funds.

SoFi’s first PR campaign answers the question, ‘How do I ask for a raise?’ (PRWeek), Rated: AAA

Starting May 15, SoFi staffers will participate in an online series that will offer users tips on communicating their value in the workplace and tell inspirational stories. The company will hold workshops in eight U.S. cities including New York, Chicago, Seattle, San Francisco, and Washington, DC, on negotiating pay raises, non-monetary benefits, and other topics. Career expert Nicole Lapin will appear at the New York event.

The average SoFi student loan customer is about 33 years old and has a student loan balance of about $75,000, more than twice the national average. A SoFi survey also found 50% of young, college-educated professionals had not negotiated their own salaries, and 54% said they don’t know their “market value.”

PayPal launches a small biz toolset, ‘Business in a Box,’ with WooCommerce & Xero (TechCrunch), Rated: AAA

PayPal today launched a new service, called Business in Box, aimed at bringing more U.S. small business owners to its payments platform. The service, which was developed in partnership with WooCommerce and Xero, offers merchants a suite of tools for running their online businesses, including an online storefront, accounting tools, the ability to apply for working capital from PayPal and, of course, support for taking payments either online or offline, via PayPal.

Business in a Box is largely aimed at first-time business owners who already know what they want to sell and have a roadmap in mind, as well as at established offline businesses that want to make the move online.

Often, these business owners would otherwise turn to an e-commerce platform, like Shopify, Magento, BigCommerce or WooCommerce, to establish their online presence and take advantage of other add-ons that can help them with other aspects of their business, like running promotions, marketing, order management, shipping, social media and more.

The company also noted today that PayPal Working Capital has now helped more than 115,000 businesses worldwide access more than $3 billion in loans and cash advances since the service launched in 2013.

National Survey Shows Instant Financing Will Drive Business to Online Retailers (PR Newswire), Rated: AAA

American consumers appear to be warming up to instant financing options when purchasing goods and services online. According to a new national survey, three quarters (75 percent) of consumers indicate they would be likely to select an online retailer that offered instant financing compared to another that did not; 28 percent would be very likely to change merchants in order to use instant financing.

Instant financing is an easy-to-use, revolving line of credit that consumers apply for within a merchant’s online checkout. It allows consumers to spread purchases over time with low APR financing offers, and provides an alternative to credit and debit cards when paying for an online purchase.

The online study was fielded between April 10 and 13, 2017 by Researchscape International on behalf of Klarna North America (www.klarna.com). The survey of 2,024 consumers, ages 18 and older, was designed to better understand the behaviors and attitudes of consumers towards instant financing. Consumers were quota-sampled using 32 different cells (gender by age by region) to closely match the overall national population.

In terms of how instant financing might impact their spending while shopping online, 39 percent of consumers indicated they would spend more money on a purchase if they had the option of instant financing compared to 42 percent who would not and 19 percent who did not know if they would spend more money.

Smartphone owners, 88 percent of consumers who responded, were asked about the ease and willingness to enter certain types of personal information when applying for instant financing. Among the information seen to be “too much trouble” to enter were Social Security number and bank account numbers (51 percent each), and credit card numbers (40 percent). On the other hand, just over a tenth of consumers found it to be too much trouble to enter an email address (11 percent), birthday (12 percent) or spouse’s name (12 percent).

Other key findings of the survey include:

  • Nearly half of respondents (47 percent) would like to be presented with an instant financing option while shopping online
  • Just over a quarter of consumers surveyed (28 percent) have used instant financing while 68 percent have not and 4 percent were not sure if they had

Beyond probing consumers’ thoughts regarding availability, the survey also asked about the convenience and ease-of-use factors of instant financing. For instance, a majority of consumers (52 percent) expect to wait three or more minutes to be approved for instant financing. Twenty-eight percent would expect to wait two minutes and just 20 percent would expect to wait under a minute. Klarna’s approval process typically provides an approval in under a minute with only simple, top-of-mind information required.

This infographic illustrates the impact of instant financing on consumers’ purchasing decisions as revealed in a survey conducted by Klarna in April 2017. (PRNewsfoto/Klarna)

Morty launches fully-automated mortgage marketplace (PRNewswire), Rated: A

Focused on empowering homeowners to make smarter decisions about their mortgages, today Morty (www.himorty.com) launches its fully-automated mortgage marketplace, where homebuyers can shop, compare — and close — any loan option from among its network of lenders. Morty is initially rolling out with 10 major lenders across 10 markets in the United States, with plans to expand nationally by the end of 2017.

Leveraging the founding team’s diverse experience and learning first-hand from homebuyers during its initial pilot, Morty was able to identify pain points from start to finish and prove the benefits of a marketplace model. In the over one thousand real-life loan scenarios it has run for homebuyers, Morty has observed rate and fee variances across lenders that can add up to tens of thousands of dollars in fees and monthly payments.

Morty is creating an entirely new model: access to any lender or mortgage product within a single, unified mortgage process from first click to closing day.

Here’s how it works:

  • Homebuyers create a simple financial profile by linking their income, assets, employment, and property information and describing their homeownership goals.
  • Morty’s pricing engine algorithmically matches the homebuyer’s profile with each lender’s eligibility and pricing guidelines to show accurate, customized quotes, inclusive of all lender fees and closing costs.
  • Borrowers see their loan options in full transparency and compare across lenders and products.
  • Never once leaving the Morty platform, the homebuyer chooses a loan and Morty automates the process all the way to the closing table.

In addition to its launch, Morty also announces that it has raised $3 million in funding led by Thrive Capital with participation from SV Angel, FJ Labs, Corigin Ventures, MetaProp, Techstars and several angel investors.

RealtyeVest Is the One-Stop Platform for Real Estate Investing and Project Financing (PR Newswire), Rated: A

RealtyeVest, Formerly IHT Realty Group, officially unveiled their new brand and optimized website. Destined to become one of the largest real estate crowdfunding platforms in the US, the new RealtyeVest website () provides a simple, secure and transparent platform for accredited investors, real estate developers and owner-operators.

“Our decision to rebrand from IHT Realty Group to RealtyeVest was a result of listening to feedback from our strategic partners and observing best practices in the industry,” said Daniel Summers, CEO. “We believe our new name better represents the essence of our business, and we are excited about the innovative technology that powers our new online marketplace. We spared no expense in the new build, providing a win-win to our investors and Sponsors.”

RealtyeVest is an online marketplace that connects investors and Sponsors (real estate owner-operators) to crowdfund exclusive real estate investments. Their platform allows its members to browse, research and make informed investment decisions on these exclusive properties.

Lending IPOs Find Cautious Investors Amid Consumer Credit Fears (Bloomberg), Rated: A

China Rapid Finance Ltd. on Friday became just the second consumer lender this year to list in the U.S., following Elevate Credit Inc. earlier in April. Although they do business on opposite sides of the world, the duo has much in common: Both face investor questions about the reliability of their borrowers, both begin trading amid a particularly iffy time in the credit cycle and — perhaps consequently — both slashed their IPO price days before going public.

When LendingClub Corp. went public in 2014, some hailed the event as the dawn of a new era for finance. Shares have since fallen 60 percent from the IPO price.

“China Rapid Finance is coming to the market during a turbulent time in the China peer-to-peer industry as regulators roll out more controls to clean up what has so far been chaotic growth in the past few years,” MCM Partners analyst Ryan Roberts wrote in a note on the stock’s first initiation, a buy rating. “The company reduced the pricing range by about 40 percent, which we suspect reflected tepid demand from backers,” the note said.

Both recent IPOs are now trading up from their reduced offering prices by nearly 25 percent. MCM says the IPO valued China Rapid Finance at 4.7 times its book ratio. William Blair on Monday said that Elevate Credit is trading at 7.5 times its 2018 estimated earnings per share.

This Startup Wants to Be the Amazon of Real Estate (Inc), Rated: A

Even so, the 29-year-old Williams is a force, as is his company. Since launching, Cadre has generated nearly $1 billion worth of deals, raising close to $70 million in funding from high-profile investors such as Peter Thiel, Goldman Sachs, and Jack Ma.

So Williams set up a website where he could analyze these homes using a tax parcel ID–which tracks the value of a property over time–and measured this against what they were selling for. Using the data, and bolstered by the cash of wealthy Harvard alums including the Kushners, he started buying dozens of properties and flipping them for three times their original price. “By the time I graduated, I was at a crossroads: Do I scale this business nationally, or do I do tech banking at Goldman Sachs?” he recalls thinking.

Williams decided to do both. He pulled 18-hour days as an investment banker–and then would quietly work on his startup from the comfort of a supply-closet-size room by night. Real estate, he figured, was a valuable asset that ought to be made available to more (and more average) investors.

Cadre is an e-commerce site for investing in real estate. It connects customers–primarily wealthy individuals, referred to as “qualified purchasers”–to property deals across the U.S. (Cadre requires a minimum investment of a few hundred thousand dollars; that’s somewhat less than what a traditional fund requires, but likely more than what you’d pay to buy into a real estate investment trust, or REIT, which trades like common stock.) Williams declined to comment on what exactly the company charges its investors–it asks for an upfront fee and a recurring subscription rate–though notes that it’s in the range of a “couple hundred basis points.” A fund, by contrast, will typically take 2 percent of the investment, and then 20 percent of profits over time.

Although Cadre faces competition mainly from the traditional brokers, a growing number of startups have emerged in the real estate leasing space, such as 42Floors, a San Francisco website that lists commercial real estate and office rentals, and Rofo, an online marketplace for property listings and potential tenants that can facilitate lease deals without broker intervention.

NCAP Notice to Clients regarding Public Record Standards (Experian Email), Rated: A

In 2015, Equifax, Experian, and TransUnion announced the National Consumer Assistance Plan (NCAP), a set of initiatives designed to improve the accuracy of credit report information, as well as to provide consumers with a better experience interacting with the nationwide Credit Reporting Agencies (CRAs).

In June 2016, the CRAs announced enhanced public record data standards for the collection and timely updating of public record data reported on consumer credit reports.  The enhanced standards require: (i) minimum consumer identifying information (name, address, social security number and/or date of birth) (“PII”) and (ii) minimum collection frequency for public records (at least every 90 days).  These enhanced standards will apply to new and existing public record data on the CRAs’ respective consumer credit reporting databases. As previously announced, these enhanced standards are effective July 1, 2017.

Based on information provided by our public record vendor about the data available from courts and recorders’ offices, we expect bankruptcy public record data will continue to meet the enhanced collection and reporting standards. However, civil judgments and approximately half of tax lien data are not expected to meet the enhanced standards.

During the week of July 10, 2017, the CRAs will remove from their databases previously collected public record data that does not meet the enhanced PII standards. This includes the removal of all judgment public records and the portion of tax liens not meeting the enhanced standard. Public record data will also be monitored for adherence to the enhanced PII and collection frequency standards after July 1, 2017.

Despite the anticipated loss of significant volume of public record data from credit files, impact analysis conducted by the CRAs, as well as leading scoring model companies using CRA data, show a modest risk scoring impact and minimal loss in predictive performance as a result of these changes.

Please contact any member of your Account teams with questions you may have or forward questions to:

Robo Advice: Better Than No Advice? (Forbes), Rated: A

The proliferation of Robo-Advisors bringing low priced financial services out into the market has received significant buzz over the past few years.

When it comes to managing your money, minimal human intervention can be good or bad. The good comes when the algorithms and mathematical rules produce an asset allocation that is sensible for the purpose for which it is intended. The good also comes when the “human advisor” interjects personal preferences and judgments that are in the clients’ best interest.

Now, let’s analyze the downside, which can be a very deep and chasm. How we consider money, how we use money, how we value money, and what we believe about money is very human, indeed, and cannot be solved by mathematical equations.

For those who are looking for an asset allocation and a low-cost entry into investing, Robo advice can be a great place to start.

Helping Clients Determine Risks in Alternative Investments (Wealth Management), Rated: A

Alternative investments constitute a growing $7 trillion industry and more than 10,000 hedge funds have money in alternative platforms. Yet, most retail investors are just learning about these lucrative asset classes.

To illustrate the difference for clients who may not be familiar with alternative investments, ask them to imagine this scenario. A successful real estate flipper has bought and sold 25 properties in five years. After finding a great deal on a house in foreclosure, he applies for a bank loan to purchase it. The bank declines, spooked by four open mortgages he holds on current projects.

He’s never defaulted, but the bank still judges him as overleveraged because his loan-to-value ratio is 50 percent. It doesn’t fit into the bank’s rigid evaluation box, which has become even more stringent after the 2008 financial crisis. The perceived risk is much higher than the actual risk.

Then, he approaches an alternative lender who sees he’s willing to put his own money into a property in a desirable neighborhood and to offer a personal guarantee. The decision comes down to actual risk. Can this property fall in value by 50 percent in nine months? Will the borrower flip it in nine months for a handsome profit? By understanding the data and the flipper’s borrowing track record, the lender concludes that he will flip the house and fronts the capital.

FLEETCOR to Acquire “Cambridge Global Payments,” a B2B International Payments Provider (BusinessWire), Rated: A

FLEETCOR Technologies, Inc. (NYSE: FLT), a global provider of fuel cards and workforce payment products to businesses, announced today that it has signed a definitive agreement to acquire Cambridge Global Payments (“Cambridge”), a B2B international payments provider.

Lantern Credit Appoints Ricardo Gomez-Acebo to Board of Managers (BusinessWire), Rated: B

Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, adds Ricardo Gomez-Acebo to its Board of Managers. He joins Chairman John Mack, Vice Chairman John Sculley, James Held, Seth Johnson, Kevin Knight and Chad Swensen on the Lantern Board.

Gomez-Acebo has more than 30 years of experience in the Spanish and International Retail Banking sector, holding various executive roles at Spanish banks Banesto and Banco Santander including General Manager of Europe for Banesto. Gomez-Acebo led business development with strategic financial partners at Banco Santander and most recently is heading risk management for the bank.

Incumbent financial services’ millennial strategy (The New Yorker via CB Insights Email), Rated: B

Attorney Jonathan Frutkin Featured Speaker at Washington D.C Crowdfunding Conference (Benzinga), Rated: B

Radix Law’s principal attorney, Jonathan Frutkin, will be a featured speaker at the “Fourth Annual Conference and Workshop for Crowdfunding USA” scheduled for May 4 to 5 at the National Press Club in Washington D.C. Frutkin is the author of the book Equity Crowdfunding: Transforming Customers into Loyal Owners.

United Kingdom

RateSetter upgraded transparency to “top-tier” level, says 4th Way (P2P Finance News), Rated: AAA

RATESETTER’S upgraded data disclosure on its loan book and expected losses has brought its transparency to a top-tier level, according to peer-to-peer lending research firm 4th Way.

Based on the amended methodology, expected cumulative losses now stand at £18.06m, which paired with the current £22.44m provision fund buffer result in a 124 per cent coverage ratio – six per cent higher than last reported.

RateSetter’s data table now provides a clear estimate of the losses expected over the lifetime of its loan book, spelling out the losses that have already materialised and future expected losses for each year of origination, as well as a detailed breakdown of different types of arrears, provision fund adequacy levels, and investors’ expected returns.

Sharing the voice of British small businesses (Funding Circle), Rated: AAA

What we discovered is that small businesses are going for growth, unfazed by the uncertainty caused by last year’s referendum result and the snap election. Nearly 70% of UK small businesses expect their turnover to increase within the next 12 months – half of whom expect a steady increase of between 6 and 20%, and only 6% expect turnover to decrease.

Small businesses, who already account for 60% of private sector employment, will continue to drive much needed job creation this year. More than half of the businesses we spoke to are planning to hire at least one new full-time member of staff over the next year. With more than 5 million small businesses across the country – this could mean the creation of millions of new jobs in the next 12 months!

When asked what their one policy priority is in the run up to the election, tax was by far the most important issue. With business rates mentioned specifically nearly 300 times, 40% said that they want the new Government to focus on this area after the election. The second most important policy area, according to a quarter of businesses, was of course Brexit.

To date investors have lent £2.2 billion to more than 23,000 UK small businesses.

 

UK SMEs set to back Tory leadership (P2P Finance News), Rated: A

A vast majority of the 2,300 firms interviewed by the country’s third largest small- and medium-sized enterprises (SME) lender are poised to throw their weight behind Theresa May’s party as the best positioned to deliver Brexit, despite half of them opposing the separation from the 28-nation bloc in the referendum last year.

The research also confirmed that UK SMEs have quickly shrugged off Brexit-induced economic worries, as seven in 10 firms expect to deliver stronger profits in the next 12 months and only six per cent forecast a drop in turnover over the same period.

Flender is granted its P2P credit license (AltFi), Rated: A

Peer-to-peer friends and family lender, Flender announced it has now received its full authorisation from the FCA and has also launched operations in Ireland.

The platform says it has funded loans of over €900,000 since its soft-launch, without any marketing or advertising. It has seen demand from companies in a wide range of industry sectors including construction, F&B, energy companies, retailers and more. It reports that it has attracted over 750 registered users, 138 campaigns submitted with 11 currently live on the platform.

RateSetter Partners with George Banco, Acquires Two Motor Finance Businesses (Crowdfund Insider), Rated: A

RateSetter previously provided financing to George Banco. RateSetter will now lend directly to George Banco’s growing customer base with George Banco generating the leads.der George Banco. RateSetter has also acquired an equity stake in the George Banco company.

Additionally, RateSetter has acquired specialist motor finance providers Vehicle Stocking Limited and Vehicle Credit Limited out of their parent company’s administration. RateSetter will rebrand both businesses and invest in them to build on its current motor finance capabilities. RateSetter previously provided wholesale finance to these businesses.

UK P2P Lender Growth Street Celebrates Marketplace Rate Drop, Signals Increased Momentum (Crowdfund Insider), Rated: A

Growth Street’s marketplace rate dropped on Monday from 6.5% AER to 6.4% AER, rewarding borrowers with a 10bps drop in their costs of funds. The UK P2P lender attributes the drop to the momentum it has built on its platform, welcoming over 700 investors to date since the launch of its investment offering in November.

FUNDING CIRCLE REVIEW (Orca Money), Rated: A

Loans are split into a minimum of £20 chunks or loan parts allowing investors to achieve a high level of diversification when investing relatively low amounts. Funding Circle suggests lending to a minimum of 100 businesses to achieve a 1% exposure to any one business. When investing a minimum of £2,000, Funding Circle’s auto-bid function will achieve this level of diversification automatically.

Borrowers across Funding Circle are all small to medium sized businesses (SMEs), borrowing between £5,000- £1million for loan terms of 6 months to 5 years.

Funding Circle is the only peer-to-peer lending platform of scale which operates across multiple geographies. The P2P platform has expanded from the UK to the USA, Germany and Spain. 74% of Funding Circle’s group (Funding Circle Holding Limited) revenue in the period ending the 31st December 2015 came from its UK business (Funding Circle UK Limited).

VPC Specialty Lending Investments Annual Results Continues to Disappoint (Crowdfund Insider), Rated: A

VPC Specialty Lending Investments PLC (LSE:VSL.L) released 2016 annual results last week and according to Chairman Andrew Adcock, results continue to disappoint. Shares in the fund that invests in various online lending assets continue to trade at a significant discount to the net asset value per share. As of December 31, 2016, VPC had deployed 87% of its NAV (with its cash holding of 13% temporarily elevated due to the recent sale of the Funding Circle U.K. portfolio). During 2016, VPC generated an NAV return of 0.85% for the Ordinary Shares and distributed dividends of 6.00 pence per Ordinary Share relating to the income earned during the year.

Going round in circles (Bridging&Commercial), Rated: B

The recent news that peer-to-peer lending platform Funding Circle plans to stop all property development lending by mid-2018 came as something of a surprise.

Risk is always a factor in construction, but it is how that risk is managed that is important. Funding Circle’s withdrawal could allow other lenders to enter this space, and increased competition will be no bad thing in giving developers greater choice.

While we appreciate that there are always certain areas of the market that give cause for concern, many of our clients have a clear appetite for further growth. While demand is strong, and developers continue to be starved of funds by traditional lenders, the market for alternative finance – and peer-to-peer lending particularly – will come to the fore.

China

Former Unicorn China Rapid Finance Goes Public at a $ 350M Valuation (Lend Academy), Rated: AAA

The IPO price was set at $6.00 and the company raised $60 million which was adjusted down from their anticipated raise of $105 million. Back in 2015, it was reported that the company had a pre-money valuation of $1 billion after closing a $35 million Series C. The company is now valued at $350 million.

At time of writing shares were trading around $7.10 per share.

The fact that China Rapid Finance and Yirendai before them chose to go public in the US is significant. In a recent Lend Academy podcast with Yirendai CEO Yihan Fang, she stated that they felt the US was more educated on marketplace lending. This coupled with the fact that Ning Tang (Founder of parent company CreditEase) and other management members had experience in the US and were more comfortable with the US capital markets led to their decision to list in the US.

Another company that could seek a US IPO is Ppdai.com who last year said it could go public in the first half of 2017.

P2P Industry News (Xing Ping She Email), Rated: A

Financial Company of XIAOMI Raised A Round of 100 Million RMB

Today, FuMi Tech, MI’s related eco-chain company, announced it has finished A round of financing and raised 100 million RMB. This round of financing led by Buddhism Capital, with MoBai Capital and the previous investor ShunWei Capital participated. The fund will be continuously used to improve users’ experience.

WeBull, one of the products of FuMi Tech, providing trading services of US and HK stocks, and supporting real-time quotes of global stock, foreign exchange, funds and derivatives markets of over 20 countries. In fact, FuMi Tech has previously raised a joint investment of 50 million RMB from MI and ShunWei Capital.

China’s State-owned Commercial Bank Breaking the Ice between P2P platforms

Recently, China Construction Bank(Guangdong Branch) has launched its P2P funding depository product “Dragon depository”, and currently the bank has reached agreements with several P2P lending platforms.

According to an insider of CCB, the two critical measurements for their P2P cooperators are: bad debts and overall strength of the platform.The participation of CCB will promote the compliance process and bring a sustainable development of P2P lending industry.

NDRC(National Development and Reform Commission): Promote the Construction of Asia Credit System

The first Asia Credit Rating Agencies CEO Fair & Systemic Risk International Seminar was held in Beijing recently. Hongwan Chen, the deputy director of the financial department of National Development and Reform Commission, said that the regional cooperation across Asia is important for it could accelerate the Construction of Credit System in the area. He also advise to build credit record for local companies incorporated overseas and foreign investors, and set up a “blacklist” about those seriously illegal enterprises.

China Rapid Finance a consumer lending force in China (Bankless Times), Rated: A

Dr. Wang completed his Ph.D in statistics at the University of Chicago in 1995 before moving on to Sears Credit where as head of analytics he developed models employing credit bureau data while also overseeing the creation of a credit data warehouse. He returned to China, where in 2001 he founded  China Rapid Finance which began by developing credit scoring and decisioning models that helped companies issue more than 100 million credit cards.

In 2010 they made the move into marketplace lending, where they teamed up with more than 100 Chinese internet companies to analyze and score data that allowed them to preselect customers.

Seven years later China Rapid Finance has become China’s leading online consumer credit marketplace after facilitating 15 million loans to two million borrowers, beginning with small amounts for short durations and growing into longer-term loans for larger amounts.

EMMAs total 500 million and have been underserved by traditional credit providers, who focus on the 300 million super prime people who work for government or large institutions, Dr. Wang explained. He estimates China’s consumer credit coverage at roughly one-fourth that of the United States. While roughly 60 per cent of Americans have credit coverage, that rate is 16 per cent in China.

EMMAs are prime and near-prime consumers who are educated and have stable employment in the services and with startups and SMEs, but they have little credit history and cannot obtain bank credit.  They also largely stayed away from the notorious shadow banks, a large (no one knows precisely how large) opaque industry which helped fuel both real estate and small consumer loans.

International

International P2P Lending Volumes April 2017 (P2P-Banking), Rated: AAA

Funding Circle leads ahead of Zopa and Lendinvest. The total volume for the reported marketplaces adds up to 445 million Euro.

Milestones reached this month are:

  • Younited Credit crossed 500 million Euro loan volume since launch

European Union

Barclays Opens Europe’s Largest FinTech Site in London (Yahoo! Finance), Rated: AAA

Barclays has today opened its flagship open innovation site, Rise London, in Shoreditch. It is Europe’s largest co-working space dedicated to financial technologies (FinTech).

Rise, created by Barclays, brings together from across the world a carefully curated community of FinTech startups, along with our corporate clients and other experts, to work on Barclays’ customer and business opportunities and together help to create the future of financial services.

Rise London will house more than 40 FinTech companies, along with Banking and Technology teams from Barclays, and will serve as a gathering place for leaders in the FinTech and venture capital communities. Rise London will play host to more than 200 hours of learning, workshops, hackathons and networking on a monthly basis.

Australia

Melbourne fintech Airwallex just won $ 17 million funding from Mastercard, Sequoia and Tencent (Business Insider), Rated: AAA

Australian cross-border payment startup Airwallex has secured US$13 million ($17.4 million) in a funding round to continue its expansion overseas.

For Sequoia — the 45-year-old firm famous for investing in famous tech brands such as Apple, Google and AirBnB – the deal represents its Chinese arm’s first investment in an Australian startup.

Airwallex founder and chief executive Jack Zhang told Business Insider that the company, which already can make payments to 100 countries, will use the cash injection to expand its physical presence in locations such as London, Shanghai, Hong Kong, Indonesia, Malaysia and Taiwan.

FinTech Australia Reflects on First Year (Crowdfund Insider), Rated: A

FinTech Australia, the advocacy group promoting all things fintech related in Australia, celebrated its one year anniversary by sharing its “Year of Review.”

India

India to see regulations for fintech space soon: KPMG report  (Outlook), Rated: AAA

The government is expected to come out with regulations for fintech (financial technology) space as the industry is likely to witness increased payments and lending activities, a study said today.

Over the next quarter, insurtech may come into its own in India, according to the report.

Citing Paytm attracting Asia’s largest funding round of USD 200 million in March quarter, it said AI and blockchain may be big bets for investors apart from payments, open data and data analytics.

Over the quarter, investment into Asia’s fintech space hit USD 492 million across 33 deals, as per the report.

SoftBank Said in Talks to Invest $ 1.4 Billion in India’s Paytm (Bloomberg), Rated: AAA

SoftBank Group Corp. is in talks to invest about $1.4 billion in India’s One97 Communications Ltd. in a deal that would value the owner of the country’s largest digital-payments provider at about $7 billion, according to people familiar with the matter.

The deal is not yet finalized and the terms may yet change, said the people, asking not to be identified because the matter is private. One97 Communications, whose Paytm unit has seen business surge as India took most of its paper bills from circulation, has also had discussions with two other investors, one of the people said. The company was last valued at $4.2 billion, according to research firm CB Insights.

3 Alternative Lending Trends That Have Made Fintech Startups Popular (Inc42), Rated: A

Traditional banks have left quite a few gaping holes when it comes to unsecured loans, especially for salaried people who are not employed in companies that they classify as A/A+ category.

Quick Personal Loans

Customers, it appears, are warming up to online alternative lending portals, and it is predominantly due to the speed with which the loan application is processed, verified and approved. Tedious documentation, in addition to ambiguous rules and non-transparency in the whole process that a customer faces with banks, has made entrepreneurs reinvent lending for salaried employees. The ease and convenience of digital (and painless) transactions are considered priceless. There are lenders such as Qbera, which disburses personal loans up to INR 5 Lakhs in 24 hours.

Alternative Fixed Income Products Become More Popular

2016 saw RBI releasing a set of directives regarding P2P loans in India. The paper recommends NBFCs status for P2P lenders, which is almost consistent with what the P2P sector has been demanding. This liberal approach helps to protect the interest of all stakeholders without choking innovative ideas. P2P lenders are hoping for these recommendations to become regulations after the budget announcement, which will give the arena a facelift.

Short-Term Payday Loans

You don’t get instant cash from banks and online payday loan providers often save the day. As they are offered for shorter tenures compared to online personal loans, it gets repaid more quickly, which is a definite plus. You can even opt for monthly, fortnightly, weekly or daily loans.

Authors:

George Popescu
Allen Taylor

Tuesday March 28 2017, Daily News Digest

global fintech vc investment

News Comments Today’s main news: CreditEase Wealth Management announces new investments in US MPLs. Elevate heading toward IPO. Lendable secures 100M GBP investment. Relendex receives FCA authorization.  Perpule raises $650K in India. Today’s main analysis: The state of fintech funding in five charts. Today’s thought-provoking articles: 41 people locked up for Baiyin Wealth P2P fraud in China. Bitbond, BitPesa partner […]

global fintech vc investment

News Comments

United States

United Kingdom

European Union

China

  • 41 people locked up for fraud case in China. AT: “This is both a good time and a bad time to be in P2P lending in China. Good if you’re ethical, bad if you’re not. I suspect we’ll see a lot more arrests this year.”

India

Africa

Middle East

News Summary

United States

CreditEase Wealth Management Announces New Investments in the US Marketplace Lending Platforms (PR Newswire), Rated: AAA

CreditEase Wealth Management announces today that its Offshore Private Credit Fund (“OPCF”) has invested a total of US$30 million in two transactions with OnDeck and LendingHome, after making its first investment in Avant and Prosper last year. OPCF raised US$80 million from its Chinese clients in late 2015 which will be fully deployed by end March 2017.

OPCF is the first Chinese offshore fund to invest in loans issued by western platforms. OPCF provides Chinese high net worth and mass affluent investors the opportunity to spread risks across different geographies with exposure to Western private credit. It is also a natural fit for CreditEase Wealth Management clients, given that they are already familiar with the P2P asset class having exposure to it in China.

Marketplace lending has emerged as a new asset class with attractive returns compared to other fixed-income products and low correlation to equities. Against a backdrop of bank deleveraging and de-risking, the global marketplace lending market is expected grow to US$150-490 billion by 2020, according to a recent report published by Morgan Stanley.

The state of fintech funding, in five charts (Tearsheet), Rated: AAA

Total global funding to fintech companies fell to 47.2 percent to $24.7 billion in 2016 from $46.7 billion the year before, according to KPMG’s quarterly fintech funding report, The Pulse of Fintech, which came out in February 23. Deal activity dropped to 1,076 from 1,255 the year before.

VC deal volume is down, but dollar value keeps growing

The number of venture capital deals fell to 1,436 last year from 1,617 in 2015. However, those deals continued to increase in value, rising to $17.35 billion globally in VC investment from $15.64 billion the year before.


Early stage deals are down, late stage deals are up
According to CB Insights, seed investments fell to 29 percent at the end of 2016 from 35 percent the year before, while Series D investments rose to 7 percent, showing that while investment volume is still larger among younger companies, interest in those startups slipped over the last year while interest in more established, developed companies grew.
Private equity is emerging as an additional source of fintech investment
The value of private equity deals in fintech fell by about $7 billion between 2015 and 2016, but deal volume rose to 112 from 99.
Corporates and startups are more open to working together
The venture arms of financial institutions increased their participation in fintech startup investment to $8.5 billion (17 percent of deals) in 2016 from $4.9 billion (14 percent of deals) the year before.

Online lender Elevate is heading for an IPO (Business Insider), Rated: AAA

The company is offering 7.7 million shares at $12 to $14 each, it said in an updated filing on Monday. It has also put aside 1.15 million shares that the underwriters have the option to purchase. At the top of the range it would raise about $124 million.

The company plans to list its shares on the New York Stock Exchange with a ticker of ELVT. UBS is leading the deal with Credit Suisse and Jefferies.

Online retailers now armed with free fraud prevention resource to combat data breaches (XOR Data Exchange Email), Rated: AAA

Austin-based data and analytics startup XOR Data Exchange is introducing a free resource for online retailers to identify and prevent account takeover attempts caused by the increasing frequency of data breaches that include account login credentials.

XOR’s Compromised Identity Exchange Basic platform allows e-retailers insight into the level of identity theft risk associated with a specific customer based on the number and types of data breaches the individual has been impacted by, whether or not those breaches are producing fraud, and if the individual’s stolen information is available for sale on the Dark Web. Participating retailers will also receive details about recent data breach activity and format of any compromised account passwords in order to implement authentication measures as needed to ensure a purchase is being made by the rightful person.

Following the implementation of EMV chip technologies in U.S. payment cards, retailers and card issuers have reported an increase in card not present (CNP) and online fraud, with some studies reflecting a 3-to-1 surge in growth. Combined with increasing frequency of data breaches that include login credentials, consumers carry increasing risk of experiencing identity theft in the form of account takeover across multiple online platforms.

By implementing this free version of XOR’s Compromised Identity Exchange, which was initially introduced in May 2016, retailers that process online transactions for customers are able to determine the level of identity theft and account takeover risk associated with approving a specific transaction or fulfilling an order. For many of these retailers, customer payment and shipping information is automatically saved for convenience, putting these individuals at risk of identity theft.

Global Debt Registry to Utilize TransUnion Data to Expand eValidationSM Services within Online Lending (Global Debt Registry Email), Rated: A

Global Debt Registry (GDR), the asset certainty company known for its loan validation expertise, today announced it will be utilizing data from leading credit information provider, TransUnion, to extend the range of GDR’s eValidationSM services for investors and issuing creditors in the online lending industry.

By combining GDR’s expertise in real validation of underlying loan data with trusted third-party information providers such as TransUnion, investors obtain greater insight and confidence in their online lending portfolios than achieved in traditional verification programs.

With TransUnion data, investors can obtain in-depth validation of their online lending portfolios while minimizing the exposure of risks associated with managing and protecting confidential consumer data. Additionally, originating creditors are able to leverage an independent third-party service made possible by GDR’s use of TransUnion data to validate certain account data on loans provided to them by online lending platforms. Similarly, warehouse lenders have greater and much needed transparency into these pledged assets and can do so within the current FCRA/GLBA regulatory framework.

ID Finance Joins Mintos Marketplace,  Places Unsecured Loans in Spain Under MoneyMan Brand (Crowdfund Insider), Rated: A

ID Finance, a data science and digital finance company, announced on Monday it has officially joined peer-to-peer lender Mintos and has already begun placing personal unsecured loans issued in Spain under its MoneyMan brand on the lending platform’s marketplace. 

ID Finance claims it is now the largest online lender in Russia and it currently operates Kazakhstan, Georgia, Poland, Spain, and Brazil.

A community banker’s fintech ‘aha’ moment (American Banker), Rated: A

While watching the game on television, the president and chief executive of Reading Cooperative Bank saw a commercial for the online lender Social Finance. She decided to try out its loan process for herself right then and, before the game came back on screen, her application was approved. She had an $89,000 personal loan.

“If they can deliver that quickly and that seamlessly, they are going to take all of the best customers with the best credit scores,” Thurlow said. “We are going to be left with the lower credit scores.”

The incident prompted her $513 million-asset bank in Reading, Mass., to accelerate its mobile efforts. It is testing some new functions now — like account opening on its mobile app — and Thurlow said she is happy with the results so far.

Invest Efficiently with a Lending Club or Prosper IRA (Lend Academy), Rated: A

Both Lending Club and Prosper allow you to open up retirement accounts. You can also transfer money from an existing IRA to either company which can be done at any time.

The losses or charge offs from loans are capital losses. Investors are able to deduct $3,000 a year of capital losses (Federal). Any losses over $3,000 are carried over to future years. There also may be a limit in capital losses you can claim each year at the state level.

IRAs are available with Lending Club’s preferred custodian, Self Directed IRA Services, Inc. (SDIRA). There is an annual account fee of $100, but this is covered by Lending Club if your initial investment exceeds $5,000. Lending Club will continue to cover this fee in subsequent years if your investment in Lending Club notes exceeds $10,000 or more.

Prosper, like Lending Club offers IRA transfers, rollovers and annual contributions. Prosper will also cover your first year IRA account fee to the custodian with a $5,000 contribution. If you have at least $10,000 invested on your one year anniversary, they will continue to pay the account fee. Prosper’s preferred IRA custodians are Millennium Trust and Equity Institutional.

Is Kabbage Buying Out Rival OnDeck? (Crowdfund Insider), Rated: B

Kabbage is growing while OnDeck seems to be on a downward trend, and given last years negative analysis of the online lending marketplace, it makes some sense that Kabbage will soon make an offer to buyout OnDeck.

So will Kabbage attempt to buy out OnDeck? Maybe, but the more important question is whether OnDeck will agree to it and at what terms.

Bloomberg columnist Gillian Tan thinks that OnDeck most likely won’t agree to a standard buyout based on the fact that OnDeck’s earliest investors still own 45% of the company.

OnDeck did see a slight uptick in its shares last week when speculation of a buyout was first reported on and the recent hiring of former Morgan Stanley COO Jim Rosenthal to its board of directors might be a sign that things will improve.

Potential Applications of Blockchain For Real Estate (Lend Academy), Rated: B

What’s most interesting to me is how companies are applying technology to real estate and one of the big opportunities is bringing blockchain technology to real estate.

One of the keys to the adoption of blockchain for real estate is to demonstrate the cost savings and reduction of risk. As larger companies start to adopt the technology Ragnar believes the rest will follow. Chicago’s Cook County is currently running a pilot program with velox.RE for transferring and tracking property titles as well as filing liens.

For boutique real estate investors or even homeowners there is also an opportunity on a smaller scale to increase the efficiency and lessen the cost of the home buying process. For instance, closing costs can be reduced by reducing the friction that is currently involved in real estate transactions.

Panelists also highlighted the opportunity of the technology being applied to crowdfunding. There are three perceived benefits:

  • Accepting bitcoin for payment will allow for investments from across the world, big and small
  • Payments can be automated to investors in the property
  • The blockchain can provide proof of real estate ownership
United Kingdom

P2P Real Estate Lending Marketplace Relendex Reaches Milestone with Full FCA Authorisation (MarketWatch), Rated: AAA

Relendex, a peer-to-peer (P2P) commercial real estate lending marketplace that directly connects creditworthy borrowers to investors, has reached a significant milestone with full authorisation from the Financial Conduct Authority (FCA). The regulation demonstrates the rigour and governance of the platform and will allow Relendex to launch its new Innovative Finance ISA giving retail investors unparalleled tax efficient lending to the U.K. commercial property market.

Relendex, an early mover in security-backed commercial property lending for investors, specialises in innovative finance through its nimble P2P marketplace lending platform technology and ultimately improves accessibility of established and secure asset classes into the direct retail and institutional investor market. Their commercial approach and automated secondary market provides much needed liquidity to lenders. Relendex has sustained zero defaults on its loan book to date ().

Reaching this important milestone in Relendex’s real estate lending development with full FCA approval is testament to its commitment to support U.K. economic growth with fast and flexible financing options for Britain’s commercial property businesses. Whilst providing creditworthy borrowers with access to much needed credit and at the same time providing investors attractive and secured returns that are delivered through Relendex’s leading technology.

Obtaining ISA manager status on the back of this full FCA approval is the next step for Relendex allowing them to be one of the first movers in offering the Innovative Finance ISA to retail investors – the tax free wrapper and P2P investments that is forecast to propel the industry into the mainstream.

LendInvest and Pepper UK announce industry-first partnership (LendInvest), Rated: AAA

LendInvest, the online mortgage lender, and Pepper UK, one of the country’s leading specialist loan servicing companies, have agreed to form what is believed to be the industry’s first partnership between a UK online property finance marketplace and an outsourced loan servicing business.

Under the terms of the partnership, Pepper UK will take responsibility for servicing all new loans originated by the LendInvest team. The LendInvest team will service existing loans until the autumn at which point these loans will be migrated to the Pepper team for continuity of service. All loans that require special servicing (e.g. arrears or expiries) will continue to be handled by the LendInvest team.

Lendable secures £100 million investment to grow its consumer loan marketplace (Lendable Email), Rated: A

Lendable announced today a £100 million investment by Waterfall Asset Management, a global credit investor.

Based in London, Lendable has developed proprietary, automated underwriting technology to offer instant decisions, transparent rates and competitive pricing on small consumer loans. The platform has generated market-leading returns to investors, and will continue to add further private and institutional investors in the coming months.

HMRC applies to shut down more businesses as it pursues unpaid tax (SmallBusiness.co.uk), Rated: A

HMRC applications to wind up businesses in order to recover unpaid tax rose 12 per cent last year, up to 3,906 in 2016 from 3,485 in 2015, says Funding Options, the online business finance supermarket.

Funding Options says that if HMRC is successful in obtaining a winding up order from a court, the business concerned will be forced to close, and its assets liquidated to pay outstanding tax bills.

Funding Options has warned that in addition to being wound up, businesses face other debilitating consequences if they cannot afford to pay tax bills on time. HMRC also has the power to seize business assets and levy substantial penalties on businesses that fail to pay their tax arrears.

European Union

Blockchain startup Humaniq announces alpha release of mobile app (EconoTimes), Rated: AAA

Blockchain startup Humaniq announced the alpha release of their mobile app that is focused to tackling the global issue of financial exclusion for people across the world, who do not have bank accounts.

The application on iOS and Android will have various unique features, which have not been before with banking apps. The app software will have biometric ID for unlocking the app or verifying the transactions, as well as to replace the entire sign up process. The Humaniq app builds user profiles that are based on facial and voice recognition algorithms.

With the launch of the app initially, the blockchain company will focus on developing the core banking services of the app, such as remittance payments and P2P lending. The app will support various cryptocurrencies including bitcoin and ether, apart from Humaniq’s own tokens known as HMQ.

China

41 Peopled Locked Up for Baiyin Wealth Co. P2P Fraud in China (Crowdfund Insider), Rated: AAA

In what is being described as Shanghai’s “first and high profile” peer to peer lending fraud case, 41 people associated with Baiyin Wealth Co. have been imprisoned according to China News. The case included the theft of approximately 700 million yuan or about USD $10.2 million. Sentences were said to range from 6 to 8 months with some individuals receiving a reprieve.

India

Fintech startup Perpule raises $ 650k from Kstart Capital (India Times), Rated: AAA

Fintech startup Perpule has raised $650,000 in a funding round led by Kstart Capital, the sister concern of VC firm Kalaari Capital, reports Shadma Shaikh. The round also saw participation from venture fund Venture Highway and Raghunandan G, cofounder of TaxiForSure. “Our vision is to ensure waiting in queues is a thing of the past.

Banks should team up with FinTech startups, says Rana Kapoor (India Times), Rated: A

Universal banks need to explore partnerships with entities such as payments banks, small finance banks and FinTech startups to achieve a more financially included society, said YES BankBSE 0.49 % Managing Director Rana Kapoor, while he warned banks against strategies of trying out indigenous solutions.

Africa

Bitbond & BitPesa Announces New Partnership: Seeks to Improve Financing of SMEs in Africa (Crowdfund Insider), Rated: AAA

German-based SME lending platform Bitbond and African payment services provider BitPesa announced on Monday they have formed a new partnership to improve access to African SMEs financing.

BitPesa pays local currency out to the borrower’s preferred payment option within minutes. The integration between the companies is currently live in Kenya, Nigeria, Uganda, and Tanzania.

Middle East

Fintech startups compete in the growing Middle East market (ImpactAlpha), Rated: A

The small financial technology, or fintech, sector in the Middle East is May 3-4 may help change that.

Authors:

George Popescu
Allen Taylor

Friday March 24 2017, Daily News Digest

unbanked

News Comments Today’s main news: OnDeck’s bumpy ride isn’t over. UK equity crowdfunding recovers. Capital Float partners with Amazon in India. Today’s main analysis: Subprime auto loan delinquencies on the rise. 8 out of 10 online shoppers vow not to return to retailers if they have bad returns experience. Today’s thought-provoking articles: The state of bank innovation. An earthquake […]

unbanked

News Comments

United States

United Kingdom

European Union

Australia

China

India

Canada

 

News Summary

United States

OnDeck’s Bumpy Ride Isn’t Over (Bloomberg), Rated: AAA

On Deck Capital Inc. jumped as much as 11 percent on Thursday after a report that the New York-based online lender is an acquisition target of closely held rival Kabbage Inc.

Assuming Kabbage were to propose a traditional takeover at a standard premium, it probably would be swiftly rejected by On Deck’s earliest investors, who still own a combined stake of more than 45 percent, according to data compiled by Bloomberg.

A different type of merger arrangement might not be such a terrible idea, especially in the face of potentially heightened regulation. Together, Kabbage and On Deck could share the costs of compliance, if increased scrutiny of online lending is formalized. The combined company could also cut overlapping costs and create scale, which may help it better compete against other providers of loans to small businesses including Square Inc., PayPal Holdings Inc. and CAN Capital.

Could Kabbage’s purported interest in On Deck draw other suitors?

‘Subprime credit losses are accelerating’: There’s a problem in the auto loan market (Business Insider), Rated: AAA

US auto loan and lease credit loss rates weakened in the second half of 2016, according to a new report from Fitch Ratings, which said they will continue to deteriorate.

Losses on subprime auto loans have spiked in the last few months, according to Steven Ricchiuto, Mizuho’s chief US economist. They jumped to 9.1% in January, up from 7.9% in January 2016.

Banks are losing share in the auto lending market, potentially as a result of tightening lending standards. Independent finance companies and credit unions are stepping in to the void.

The state of bank innovation in 5 charts (Digiday), Rated: AAA

Of the more than 100 banking executives surveyed for industry strategist Jim Marous, 71 percent cited improving the digital experience in their top three priorities for 2017; half also identified enhancing data analytics as a priority and 41 percent cited reducing operating costs. 

Just 10 percent, most likely those from major institutions, indicated that investing in or partnering with a third-party fintech startup is a priority.

The biggest challenge for banks seems to be hiring and retaining innovation talent and leadership with the specialized skills necessary to lead an increasingly digital bank, according to a new report by Celent, Innovation Outlook 2017: Making Progress.

Is Kabbage Gearing Up To Buy OnDeck? (PYMNTS.com), Rated: A

OnDeck Capital, Inc has market capitalization of $321 million at present, meaning it won’t be a cheap buy. But OnDeck has seen its share price drop 80 percent since first going public in 2014, and as of February of this year had posted five straight quarters of losses. And more losses are widely expected to come — OnDeck has already publicly noted that it has been forced to set aside additional funds for future losses after determining its calculations in its internal models were off.

Kabbage announced earlier this month that it has priced the largest asset-backed securitization of small business loans in the online lending industry. That means it will be selling about $525 million worth of loans to investors, which Kabbage says will allow it to up its loan volume to around $2.7 billion.

Marketplace Lending Industry Sees Efficiency, Cost, Authentication and Transparency as Primary Drivers of Growth (PRWeb), Rated: A

Ninety percent of those involved in the burgeoning marketplace lending industry anticipate an increase in traditional bank and marketplace lender partnerships in 2017, eOriginal, Inc., the expert in digital transactions, today announced as part of the results of a survey conducted at last week’s LendIt USA 2017 Conference in New York.

The increasing convergence of traditional and marketplace lenders was a sentiment echoed by Prosper President and eOriginal Advisory Board Member Ron Suber in his keynote at the conference. According to survey respondents, the anticipated growth in partnership was despite the ongoing obstacles for collaboration, including technology integration (38 percent) and conflicting goals (27 percent).

Survey takers were also asked to highlight challenges to growth within marketplace lending. The top answers included regulations (47 percent) and access to capital (25 percent). When asked to focus specifically on the adoption of end-to-end digital transaction management solution, participants cited the challenges to be full adoption by partners (31 percent), lack of infrastructure (29 percent), security and privacy concerns (22 percent) and cost (17 percent).

Alexa Now Orders Starbucks From Ford Sync 3 (PYMNTS.com), Rated: A

Starbucks just recently announced an ordering integration with Ford’s SYNC3, the automaker’s voice-activated technology powered by Alexa. In a nutshell, this will allow drivers to voice-order their caffeinated beverage of choice while on the road.

On the new in-car voice ordering feature, customers reportedly assign their usual Starbucks order in advance and can direct the request to the 10 stores they’ve most ordered from.

Is Lending Club Really Like Amazon? (The Motley Fool), Rated: A

At the recent Lendit conference, CEO Scott Sanborn made an interesting argument: that online lending is currently in a similar place to online retail at the turn of the millennium. He read passages from a 1999 Barron’s story, “Amazon.bomb,” which criticized Jeff Bezos and foretold the end of Amazon (NASDAQ: AMZN) as we know it. As Amazon investors are well aware, that didn’t happen!

Does Sanborn have a point?

Lending Club was also a first mover in its field, and commands a leading 45% market share Sanborn argues this scale enables a similar “network effect” that will allow Lending Club to get through this tough period.

The second parallel Sanborn drew was cost savings. Just as online retailers like Amazon cut out the costs of physical stores, Lending Club and other online lenders don’t need bank branches or human underwriters. These costs savings allow online lenders to offer loans at lower rates than credit cards, which is how people traditionally obtained unsecured personal loans.

And while sites like eBay and Amazon need buyers, investors in high-yield loans are more fickle. The current low-interest rate period has made high-yield online loans attractive — but that could change if the Fed raises interest rates.

If defaults spike, Lending Club’s underwriting algorithms would come under scrutiny, and lenders might flee the platform again. In contrast, an Amazon customer pays right away, a good is shipped, and the transaction ends. And while Amazon needs to cultivate repeat customers, Lending Club is much more dependent on the financial behavior of others on an ongoing basis.

Why China’s .6 Billion Peer Lending Fraud Is Unlikely To Happen To Lending Club (LC) (CNA Finance), Rated: A

A key difference between the Chinese and US peer lending scene is the level of defaults that occur due to fraudulent listings. Up until the recent regulatory crackdown, fraudulent listings on Chinese lending platforms were rampant, often running as high as 50% versus 1% in the US.

The lack of regulation in China has also fostered a large number of fly-by-night operations opening up shop, often with dubious intentions from the get-go. The hurdles to entry for peer-to-peer lending platforms in the US by contrast are substantial. In fact regulation of the sector is considered so severe that Zopa, the largest based marketplace lender in the UK has actively shelved their expansion plans into the US in order to avoid becoming tied up in US regulations.

Why mobile might be the only platform to serve underbanked (American Banker), Rated: A

In 2015, a Federal Deposit Insurance Corp. study found that one in five citizens were “underbanked.” That same study also found that almost 8% of respondents were completely “unbanked.”

Yet financial institutions globally are serving more people than ever. A recent report from the World Bank found that from 2011 to 2014, 700 million people became account holders at banks, other financial institutions or mobile money-services providers. The number of unbanked individuals dropped by 20%, to 2 billion adults, during that same time period.

To be sure, the use of mobile banking is also growing in the United States. A recent Bank of America report found that 54% of consumers used a mobile banking app, for instance.

In 2015, Pew Research found that although two-thirds of Americans owned a smartphone, 19% of respondents rely on a smartphone to some degree for staying connected to the world around them. Further, 10% of Americans who own a smartphone lack broadband internet at home and 15% who own a smartphone admit to having a limited number of options for internet access beyond their cell phone. Deemed “smartphone-dependent,” this group is largely made up of relatively low-income individuals, consumers with less education, younger adults and minorities.

Are Peer To Peer Loans Right For Your Portfolio? (Forbes), Rated: A

Estimates vary, but the peer to peer market is expected to grow to somewhere between a few hundred billion to over trillion dollars over the coming years, as it captures a high single digit share of consumer lending. The key medium term questions for growth are firstly, how well banks react with their own online lending services, and secondly how successful peer to peer lenders are at maintaining effective lending standards.

Due to differing state regulation, peer-to-peer loans are available in the majority of states, but not everywhere, income qualifications may also apply, such as having an income of over $70,000. Currently, if you live in Iowa, New Mexico, North Carolina or Pennsylvania then your ability to own loans via peer to peer platforms is likely constrained, but in most other states in the US you may qualify.

Often peer to peer debt is issued for several years and so earning a, say, 9% return in one year is great, but if the next year the loan defaults and you lose the full value only 1 year into a 3 year loan term, then that temporary 9% return is not so attractive, and you’ve lost money.

With debt investing, you do need to pay careful attention to your downside risk if you want to be successful, because your interest payments (your upside) can be fairly small relative to the total amount you have at risk (your downside).

Again, to return to the graph above, how many of borrowers can’t pay you back in a bad economy is a reflection of your lending standards, with tighter standards you’re likely to see more borrowers able to pay you back, with looser standards your loans could see far higher loss rates on your investment. There are strong voices on both sides of this debate.

This matters because as interest rates increase, your peer to peer loans are received fixed interest payments. So earning, for example, 5% may seem attractive now, but if the Federal Reserve were to sharply raise interest rates in the coming years, then 5% may be less attractive if government debt also paid 5% interest and so you could invest in government securities, rather than peer to peer and achieve a similar interest rate, or purchase newly issued peer to peer debt at higher interest rates.

With peer to peer lending you may be invested invested in a loan for several years, whether you like it or not. Some peer to peer lenders have so-called ‘secondary markets’ that enabled notes to be traded, though there’s no guarantee your note will sell.

It is possible to defer or eliminate tax on peer to peer loans, by purchasing peer to peer loans within an IRA for example.

5 local startup leaders weigh in on what’s in store for fintech in NYC (Built in NYC), Rated: A

Clarity Money

My hope is to see more technical talent join the New York tech community in general. There are already a few unicorns in the space based in New York and this is very promising. We are noticing a lot of people in banking and consulting who are joining the fintech community because of the lack of innovation and disruption in big corporation due to regulations and bureaucracy.

CommonBond

First, this location is unparalleled for access to talent. New York is home to so many diverse industries — from design to marketing to risk analysis — and that helps us hire top-notch team members. Second, as a fintech company, there’s no better place to be than in one of the world’s largest financial markets.

Payoneer

Being based in New York has made all the difference for Payoneer. New York has always been a financial services hub, but has really become a ‘high-tech hub’ and that has helped our digital payments business grow beyond our expectations. The combination of the city’s dynamic startup community and established financial services community has allowed Payoneer to build a very strong foundation of employees, partners and customers. There are people with big dreams in all of the hi-tech hubs, but particularly in New York many of these people have been in demanding, professional environments for years, so they bring a different focus and discipline to the table. In my opinion, there truly is no place better to start or expand a fintech company than in NYC.

Forter

Being in New York enables me and the whole team to be close to our customers and partners, making sure we understand what their vision is and how we can help them overcome their challenges. The fintech ecosystem in the city has grown significantly in the recent years which enables us to learn and cooperate with other local companies.

NYC is still a significantly more traditional market than the Silicon Valley, especially in the financial sectors, and we haven’t seen as much crossover of experienced successful executives into fintech companies. In the last few months, I’ve started to get the feeling that this is beginning to change. Several people I know, who worked for 30-plus years for big banks, have moved to startups that are challenging those same banks to be better, and leaner.

ConsenSys

ConsenSys now employs 160 blockchain and Ethereum experts with offices in several major cities around the world including the Middle East and Asia, making it the largest blockchain startup. About 40 percent of our staff works out of our office in Bushwick, Brooklyn. We’re proud of our remote-first work culture, and at the same time, many of the Fortune 500 clients of our enterprise group works with are based in New York.

Although Ethereum is increasingly catching on all over the world, there is so much excitement about it in New York that we chose to host the launch of the Enterprise Ethereum Alliance right in Brooklyn, along with 30 partners. New York has been a financial capital of the world for many years, so it makes sense that interest in blockchain would be high here.

What Is a Mortgage REIT? (Yahoo! Finance), Rated: B

Mortgage-backed securities got a black eye in the financial crisis, but real estate investment trusts that own them are currently generous to income income-oriented investors, with dividend yields averaging nearly 10 percent, according to the National Association of Real Estate Investment Trusts.

But with interest rates expected to rise, are they safe enough for a retiree who must preserve principal? Experts have mixed views.

Like ordinary bonds, mortgage securities can lose value when rising rates make older issues with lower yields less appealing. On the other hand, funds that own mortgage securities can gradually pay higher yields as newer securities are added to the portfolio.

Trying to get REIT investors to think like a property investor — and not a stock market investor (FP Street), Rated: B

In other words, to generate a return in REITS, investors need to think like a property investor — and not a stock market investor. All of which means that perceived wisdoms — including that REITs are an interest play, higher-dividend-paying REITs are more attractive investments, and REIT returns are macro-driven — need to be expunged.

6 Guidelines for Building a Client-Friendly Financial App (Think Advisor), Rated: B

The Fintech App Development Compass outlines six steps to help firms build and launch an effective app for their clients.

  1. Know Your User
  2. Focus on Access – One of the hallmarks of fintech is that it can bring financial services to underserved portions of the population.
  3. Establish and Maintain Trust – To keep that trust, they need to make sure that clients will be safe when using the app, and that their concerns and feedback will be heard by developers.
  4. Test and Iterate
  5. Drive Positive User Behavior
  6. Recognize the Value of Mutual Success

Closed-End Funds: Democratizing Alternative Investment Strategies (Think Advisor), Rated: B

Flows into the alternative asset category show this; a 2015 McKinsey article notes that global alternative assets under management grew at a 10.7% annualized rate between 2005 and 2013, twice as fast as traditional investments.

As a result, lines have blurred between traditional and alternative asset classes as investment managers battle for an overlapping opportunity set.

Open-end mutual funds can invest only 15% of their portfolios in illiquid securities. Closed-end funds do not have this restriction, making them attractive vehicles for investing in alternative strategies.

United Kingdom

8 out of 10 online shoppers vow not to go back to a retailer if they have a bad experience returning items (Net Imperative), Rated: AAA

Retailers who fail to provide consumers with a customer friendly and easy returns service risk losing a large proportion of their customer base, according to new data from leading European payments provider Klarna.

Online returns are big business for British retailers today, with nearly 9 out of 10 (87%) of online shoppers having returned items they have purchased online.

On average online shoppers estimate they returned 10% of their total online purchases in the last twelve months. With online spending in the UK reaching £133 billion in 2016, the online returns economy in the UK could be valued as high as £13bn.

A survey of 2,000 UK consumers reveals that 83% of respondents who shop online would not shop with a retailer they have a bad returns experience with. Over three quarters (77%) of online shoppers believe UK retailers need to improve their returns capabilities, while one in four (28%) have been put off returning items due to the hassle of the retailer’s returns process.

Two thirds of online shoppers (67%) say easy returns are an essential factor in their choice of retailer. 28% of online shoppers would spend more if there was an easier online returns process, while 67% say free returns mean they will buy more from a retailer over time.

Report: UK Equity Crowdfunding Recovers from January Slump (Crowdfund Insider), Rated: AAA

The report states:

“February’s OFF3R Index data, made up of 6 equity crowdfunding platforms, has shown a strong uptick funds raised since January. The figures have jumped from just under £9 million in January to well over £16 million in February. These figures were boosted by large rounds from Hibergene (raised via SyndicateRoom) and CauliRice (raised via Crowdcube). Early data from March appears to suggest that this momentum will continue for the equity crowdfunding sector. There has been an increase in the number of larger rounds this month across many of the platforms. This is consistent with the data trends that we saw last year as investors increase investments in equity crowdfunding just before the end of the tax year.”

How tech can help close the advice gap (FT Adviser), Rated: A

Robo advice has been touted over the past 24 months as an answer to the advice gap.

In the Review, which was published in March 2016, robo-advice was hailed as one of several areas where development of technology-based services could go some way towards closing up the so-called advice gap.

“That is why we need to defend professional advice and help firms by using any new emerging technology and have it embedded in their businesses, so the experience the customer receives when they come and meet with their adviser is as streamlined and professional as possible. Quite simply we cannot allow our profession to be left behind.”

As the FCA’s Mr Geale explains, technological innovation will create new ways for consumers to engage with the financial services industry, and the industry will find new ways to provide compliant products and services.

There will always be circumstances or considerations that cannot be captured by an automated model, which is why some firms, such as Learnvest in the US, offer a 24/7 email contact offering, while Australia’s Movo offers tiered packages tied to different levels of human involvement.

Open APIs to shake up small business banking market (Finextra), Rated: A

The global fintech industry, with an estimated 12,000 fintechs and counting, has changed the way small businesses can manage their money in all kinds of ways.

The promise of fintech is so great that $36 billion of venture capital and growth equity has been invested in the sector globally in 2016 alone, representing exponential growth since 2010. The promise of fintech is so great that $36 billion of venture capital and growth equity has been invested in the sector globally in 2016 alone, representing exponential growth since 2010.

Although there are big differences between small business banks and loans in costs and quality (with some banks charging twice what others do for monthly bank account fees, for example), 28% of UK start-ups don’t look into the lifetime costs of a bank account when they open one, and only 4% of businesses switch bank accounts each year. And 35% of businesses who think their banking service to be poor are still not considering switching.

To align with the Open Banking agenda, Nesta’s Challenge Prize Centre has launched the ‘Open Up Challenge’, a new £5m prize fund to inspire the creation of next-generation services, apps and tools designed for the UK’s 5 million small businesses. The Challenge is looking for 20 winning entries from anywhere in the world that will use the UK’s open banking APIs – newly available from early 2018 – to transform the way small businesses discover, access and use core financial products.

Why investors should demand even greater levels of disclosure from P2P platforms (City A.M.), Rated: B

These platforms are proving that, when it comes to matching borrowers and lenders, online is a superior location to the traditional bank branch network. A chunk of bricks and mortar cost has been removed and platforms are able to access new sources of data to determine the expected risk of the loan. This results in better rates for both borrowers and lenders.

Thankfully, the market-leading platforms, both in the UK and the US, have significantly developed their approach to disclosure. They recognise that the answer lies in validation and standardisation. They may not eat their own cooking – but they can ensure that their output is subjected to the most intense scrutiny. Zopa, Funding Circle, Ratesetter, Market Invoice, and now Prosper Marketplace in the US, are providing sufficient disclosure to allow third party validation of their lending data, in order to show their returns to a consistent standard.

Presenting granular historic data of this kind also demonstrates the correct alignment between platform and investor. Lenders should seek platforms that can demonstrate that their overriding motivation is to originate loans at an interest rate that adequately compensates for the risk of default.

Platforms rely on revenues derived from loan origination fees. So, if the status of historic lending can be meaningfully appraised, then continued loan origination fees rely on the performance of historic loans. That results in a genuine alignment between investor and originator because the economic outcomes for both have become inextricably intertwined.

European Union

An earthquake in European banking (The Economist), Rated: AAA

To date, despite dire warnings, European retail banking has been remarkably unscathed by technology-driven disruption. Customers stay loyal, and banks still do the most of the lending. Financial-technology (“fintech”) companies are beginning to mount a challenge, most conspicuously in the online-payments industry in northern Europe: Sofort, iDEAL and other fintech firms conduct over half of online transactions in Germany and the Netherlands, for example. But their reach is more limited elsewhere in Europe. Physical payments are still overwhelmingly made with cash or bank cards.

Regulators, however, are about to transform the landscape. The Payments Services Directive 2 (PSD2), due to be implemented by EU members in January 2018, aims to kick-start competition while making payments more secure. Provided the customer has given explicit consent, banks will be forced to share customer-account information with licensed financial-services providers.

This should change the way payment services work. They could become more integrated into the internet-browsing experience—enabling, for example, one-click bank transfers, at least for low-value payments. Security for payments above €30 ($32) will be tightened up, with customers having to provide two pieces of secret information (“strong authentication”) to wave through a transaction.

According to Deloitte, a consultancy, banks’ lockhold on payments serves as a handy source of income, earning European banks €128bn in 2015, around a quarter of retail-banking revenue. Many see PSD2 as a threat to their business models; they fear becoming the “dumb pipes” of the financial system.

European Commission opens public consultation on fintech (Finextra), Rated: B

The Commission has set up a Task Force on Financial Technology working across issues relating to financial regulation, technology, data, access to finance, entrepreneurship, consumer protection and competition.

Market participants and EU citizens are invited to give their feedback by responding to an online questionnaire which addresses emerging aspects of the fintech ecosystem, including the application of artificial intelligence and big data, distributed ledgers, and barriers to market entry for fintech startups.

Australia

Money Management asked financial service law firms and an Australian regtech what the top 10 common areas of regulatory and legal concern were, and broke down the nexus of technology, advice, and regulation.

The Fold Legal managing director, Claire Wivell Plater, said the fintech ‘regulatory sandbox’ specified in ASIC RG 257, would not shake up traditional advice due to capped limitations.

New said the legal crux with sandbox was taking disclosure, reduced compensation, and additional dispute resolution requirements into account.

Nearly three years after the implementation of the Future of Financial Advice (FOFA) reforms, Wivell Plater said advisers could trust technology solutions and recognise that through all the FOFA changes, it played a part in the agenda to maintain integrity in financial advice.

Managing director of regtech firm GRC Solutions, Julian Fenwick pointed to conflicted remuneration, best interests duty and continued issues of conduct risk; advisers would need to be flexible and ensure a technology partner would not compromise legal obligations or align them to a third-party.

The potential lack of flexibility in technology solutions placed best interests duty compliance as a significant area of attention for the regulator.

Vigilance was required around updates to ASIC and the Australian Prudential Regulation Authority (APRA) policy amendments, and would help advisers stay abreast of legal hurdles.

The Financial Planning Association (FPA) last year proposed robo-advisers appoint independent actuaries to monitor automated advice.

Wivell Plater said advisers were skating on thin ice when it came to ensuring automated advice still provided client and situation accurate solutions.

Lack of specialist knowledge on algorithmic resources was a pitfall for unintentional non-compliance.

‘Regtech,’ or regulatory technology, emerged as a major forerunner last year in financial services, and New said advisers had questions about check-ups on newly-implemented technologies and how they could be utilised for risk mitigation.

Wivell Plater recommended advisers check that both their systems, and those of their technology providers, were well protected against cyber-attacks which compromised privacy law.

Technology was no substitute for professionalism, which meant planners needed to ensure their own competency was up to scratch.

Wivell Plater reminded advisers that it was their ASFL duty to safeguard themselves and maintain regular checks on technological services.

China

Report: China’s digital edge export-worthy (China Daily), Rated: A

China is in a strong position to export its internet financial services and standards to economies along the Belt and Road Initiative, as the country maintains an “obvious” edge in the booming sector, a key report said on Thursday.

As of October 2016, the Chinese mainland had about 1,850 peer-to-peer lending online platforms, with total transactions in the first 10 months of last year exceeding 1.59 trillion yuan ($232 billion), data from the report showed.

India

Capital Float partners with Amazon India to disburse loans to e-sellers (India Times), Rated: AAA

Digital lending platform Capital Float has announced its partnership with Amazon India to disburse thousands of loans to e-sellers. The company – the only fintech startup to partner with the e-commerce giant – has also partnered with other leading online platforms including PayTM, Snapdeal and Shopclues.

Capital Float has designed a collateral free credit facility for online sellers called Pay Later that helps them make supplier payments within 24 hours.

3 Ways Fintech Is Disrupting The Indian Lending Space (CXO Today), Rated: A

The Indian fintech sector saw investments upwards of $1.6 billion in 2016 and has been growing at a steady rate, while investments in the global sector grew by 10% to $23.2 billion.

P2P lenders in India are primarily focussing their portfolio on categories such as personal loans, commercial loans and micro finance. The P2P lending model has great potential for growth in India considering the fact that there are over 5.5 crore small businesses operating in the country, a large percentage of which do not own bank accounts.

Though robo advisory has a low market share, it is nonetheless expected to grow at a CAGR of 68% and manage assets worth USD 5 trillion by the year 2025.

Bengaluru NGO extends loans to farmers widows in Warangal (Th Hans India), Rated: B

Rang De, peer-to-peer lending platform has associated with the town-based Sarvodaya Youth Organisation, is offering loans to the farmers’ widows in the district. At a programme held in Hanamkonda, Parkal MLA Ch Dharma Reddy distributed loan of Rs 50,000s to a group of widows of Atmakur mandal.

The selected widows were given each Rs 50,000 loan and every month 20 farmers’ widows would be selected to distribute the loans. The loans could be repaid in instalments spread over 24 months, he added.

Canada

Cato Pastoll of LendingLoop Presents Bringing Peer-to-Peer Lending to Canada (StartUp Toronto), Rated: AAA

Authors:

George Popescu
Allen Taylor