Cryptocurrencies entered the mainstream in 2017. The million dollar fortunes made and 1,000% returns hogged the headlines. But behind all the hoopla is blockchain, the technology behind cryptocurrencies, quietly and steadily changing the business universe. The technology has myriad applications. Also called distributed ledger technology (DLT), it can reimagine entire industries in hitherto unknown ways. […]
Cryptocurrencies entered the mainstream in 2017. The million dollar fortunes made and 1,000% returns hogged the headlines. But behind all the hoopla is blockchain, the technology behind cryptocurrencies, quietly and steadily changing the business universe. The technology has myriad applications. Also called distributed ledger technology (DLT), it can reimagine entire industries in hitherto unknown ways. From issues of security to scalability and cost effectiveness, entrepreneurs are incorporating DLT to bring the benefits to the masses.
Similarly, alternative lending has changed how Americans borrow. Small business and consumer lending was hard hit when banks decamped en masse after the 2008-09 crisis. Online lending came to the fore with players like Lending Club, SoFi, OnDeck building multi-billion dollar lending platforms.
Almost 10 years since, alternative lending is growing but not at the speed which experts had imagined. Morgan Stanley had predicted Trillion Dollar funding via such platforms in the coming future. The sector is nowhere close to these figures. Aside from corporate governance issues, fraud and high default rates have been the true bane of the industry. IdentityMind, a RegTech company, reports that fraud caused 12% of losses in P2P online lending. That translates to almost 1.2% of total funding, which is also 2-3 times as compared to banks or retail cards.
Blockchain and Alternative Lending
Blockchain is an open, distributed ledger that records transactions between two parties in a verifiable and efficient manner. Putting digital assets (contracts, documents, financial data, etc.) on blockchain technology helps build a wall against unauthorized access and prevents fraud. Blockchain helps maintains transparency between entities; it could be between buyer and seller, business and employee, or customers and investor.
A World Economic Forum report predicts that, by 2025, 10% of GDP will be stored on blockchains. Amalgamating blockchain and alternative lending has not only a technical appeal but is business common sense. Online finance decentralized lending allows savers to directly fund borrowers; they took away the middlemen, traditional banks, who otherwise used to take the major benefit away from the transaction. Now, it is the alternative lending sectors’ turn to leverage the power of decentralization via blockchain.
The Benefits of a Decentralized Distributed Ledger
Currently, alternative lenders hold their complete data centrally, in either their own servers or on Amazon Web Services-type cloud structures. This is a honey pot for hackers. In 2017, an Equifax data breach collected 145.5 million users’ data. The breach was caused by a software flaw that allowed the hackers to take over the company’s website.
Lenders have access to extremely sensitive data such as bank account numbers, social security numbers, and other personal identification information. Losing control of that data can compromise the entire financial history of an individual or a business. Blockchain eliminates the risk by storing information on a decentralized ledger. So a massive data hack would never be possible because it will be practically impossible for the hackers to have access to each and every part of the distributed record.
A distributed ledger also provides transparency and allows that all transactions are recorded are on the blockchain in an immutable manner. Thus, backdating of contracts is not possible under any circumstance (Re: Lending Club backdating loans scandal). Corporate governance improves across the board, and investors and regulators can breathe easy knowing that the data they are seeing is the absolute truth.
Digital loans can be tokenized via blockchain and be constructed as a tradeable security. This, in effect, allows securitization for loans; so you don’t need to wait till you are a billion dollar fintech lender. Othera, a blockchain lending platform, is doing just that. It creates an online marketplace where lenders can tokenize their cashflow by putting the loan on the blockchain and selling it to investors.
Apart from this, blockchain technology is more user-friendly as it is open to the public with no authentication or permission issues. It is scalable and cost efficient for businesses to incorporate into their existing systems and allows for all stakeholders to easily extract relevant information about their transactions without risking the entire system’s database.
Digital identity verification
Identity theft is one of the biggest reasons for online lending fraud. That is exacerbated by the fact that the lender and the borrower usually never meet in real life. The old traditional way was to go through the lengthy and costly process of physical verification. But in the age of blockchain, by merging identity verification with decentralized blockchain principles, a tamper proof digital-id can be used as the digital signature for recording and validating all transactions.
How Blockchains Are Revolutionizing Lending
Alternate lending has seen many iterations and pivots since inception. From being a pure peer-to-peer platform, the sector has metamorphosed to one dominated by balance sheet lenders and institutional investors. Now, the era of Alt Lending 2.0 is emerging, which is going to be dominated by players who have co-opted blockchain as an integral part of their business processes.
Here is a brief description of some companies that are doing innovative work in the field.
The ERP giant is experimenting with blockchain on an enterprise level. One of its applications is focused on KYC. The distributed ledger solution is to store a customer’s ID and link it to their personal documents, which are not stored on the blockchain. Once the transaction is cleared, the link is established and the documents are accessed to prove identity and the onboarding process continues. In this, SAP provides a solution to KYC issues, with running proof of identity. Thus, there is a single source of truth for all parties.
WishFinance is a Singapore- and Honk Kong-focused lender to merchants and small businesses. It is keeping its entire loan portfolio on a public blockchain to push transparency for investors. The investors can evaluate the performance of a loan at anytime (the data is anonymized so no identifiable borrower information is shared).
SALT is reversing the model by allowing crytpocurrency holders to cash out without actually selling their crypto assets. It allows loans for Bitcoin. The borrower can redeem his crypto assets once the loan is paid.
Blockchain has the power to allow alternative lending companies to scale effortlessly and solve fraud and KYC issues haunting the industry. Lenders who are able to get their blockchain game right should see renewed investor interest and benefit from higher unit economics.
News Comments Today’s main news: Betterment achieves private unicorn status. Venmo available at 2 million retailers. PayPal sees profits rise after targeting mobile payments growth. Finova secures $102.5M in equity, credit facility. Lendy investors see 100M GBP in returns. PayKey raises $10M for Asian expansion. Lendex.io plans ICO. Today’s main analysis: Qudian’s IPO underlines China’s fintech appetite. Mind the GAP in the […]
Alternative lenders speak on small dollar rule. AT: “Online lenders seem to be in favor of the rule across the board. That’s understandable since a decline in brick-and-mortar payday lenders could lead to a rise in online lenders who can create viable products to fill the gap.”
Betterment, a roboadviser with $11 billion under management, is considered a unicorn in the private markets.
Preferred shares of Betterment are being offered at a price of $11 on EquityZen, an online marketsite for shares of private companies, according to a list of investment opportunities seen by Business Insider. That gives Betterment an implied valuation of over $1 billion.
EquityZen, a four-year-old New York-based company, provides a platform on which private company investors can sell their shares to accredited investors. It serves 20,000 investors and has secured $6.5 million in funding.
Sharp growth in mobile payments led PayPal Holdings Inc (PYPL.O) to report a better-than-expected third-quarter profit on Thursday and lift its guidance for earnings through the rest of the year.
The San Jose, California-based payments company has been working hard in recent years to expand its reach to new customers through partnerships and acquisitions, particularly in mobile payments. Those deals are clearly starting to bear fruit, analysts said.
PayPal shares were up 3.9 percent at $69.89 in after-hours trading following the results.
The company’s adjusted profit rose 32 percent during the third quarter to $560 million, or 46 cents per share, beating the average analyst estimate of 43 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 21.4 percent to $3.24 billion.
Its mobile payments volume jumped 54 percent during the third quarter compared with the year-ago period, to about $40 billion. Total payments volume rose 31 percent to $114 billion.
Florida fintech firm Finova Financial announced on Tuesday it has secured $102.5 million in equity and credit facility funding. The financing was led by CoVenture with participation from existing investors.
Finova’s current digital products include its Car Equity Line of Credit (CLOC) and Automobile-Secured Prepaid Card. Its services are available in Florida, California, Tennessee, New Mexico, South Carolina, Oregon and Arizona.
Mota Group’s LILY® division today announced a new flexible time-payment option, partnering with Affirm to offer shoppers in the United States the flexibility of buying now and making simple monthly payments for their purchases.
This new option is in addition to LILY’s existing payment methods of credit and debit cards, Bitcoin, and PayPal, making LILY the only consumer drone company to offer all five methods of payment.
LILY customers may select Affirm at checkout and view their monthly payments up front before making their purchase. More information and purchasing options are available at www.lily.camera/affirm.
“The number one thing that prevents entrepreneurs from growing big businesses is access to capital,” says tech entrepreneur and CBC Dragon Michele Romanow. She’s looking to change that for e-commerce businesses.
Today, Romanow’s Clearbanc, which provides revenue-based financing to online businesses, announced a new program with Facebook that will give the social media giant’s five million online merchants across Canada and the U.S. access to up to $500,000 in financing without having to give up any equity or fill out any paperwork or even undergo a credit check.
Facebook advertisers that have been operating for more than six months and are looking for money to grow, and have positive economics on ad spends — meaning when they buy an ad they are making a positive margin on selling that product — can apply online through Clearbanc’s Chrged program, which provides tools to help businesses scale, and connecting their Facebook Ad Account and payment processor.
As a socially-responsible lender on a mission to improve credit access for underserved consumers, LendUp shares the CFPB’s goal of reforming the troubled payday lending market. Since our founding, we’ve been a strong advocate for eliminating the predatory practices that have defined the short-term lending market and are pleased that many of these reforms are included in the rule.
At a time when more than half of Americans are unable to access traditional banking products, it is critical that we offer consumers as many safe credit options as possible.
We believe the CFPB got it exactly right with the rule.
The rule will dramatically change the landscape of non-bank, non-prime lending in this country. In addition to reducing the number of payday lenders and title lenders, the requirements for advanced underwriting and reporting will push most of the mom-and-pop, primarily brick-and-mortar lenders out of existence. We believe that the growing need for non-prime consumer credit will be filled by more sophisticated technology-enabled online lenders.
Climb Credit, a student lending company that expands access to quality education for the new economy, today announced that it has entered into agreements with investors to purchase $130 million of student loans originated by Climb Credit.
The transaction will enable Climb Credit to continue expanding its student loan programs beyond its current network of software development, UI/UX design, robotics, welding, nursing, and other skills-based programs in additional high-earning fields. Climb Credit’s focus is to transform the higher education paradigm by providing better access and affordable funding to students to attend schools that consistently demonstrate a strong return on investment (ROI) for their students.
Roostify, a provider of automated mortgage transaction technology, today announced the upcoming release of Decision Builder, a new tool that will enable lenders to easily provide their prospective applicants with a clear, easily-digestible view of their loan options, based on the lender’s actual product and pricing system. The company will be offering live demonstrations of Decision Builder for the first time at the upcoming MBA Annual Convention.
The Decision Builder tool can be placed on a lender’s existing website, and features a handful of dropdown questions, such as the desired loan amount, the expected down payment, and the ZIP code of the house to be purchased. With that information, Decision Builder will generate a series of loan options based on the lender’s product and pricing system, showing the consumer what products and rates they would qualify for. Each option is presented in a visual, easy-to-understand interface with clear explanation of the benefit of the loan product – for example, a lower monthly payment or low total interest. From there, the consumer can more easily evaluate which loan product is right for them.
With accurate, realistic loan information from the lender’s website, the consumer can carefully consider their options on their own time, without the pressure of having to decide within the limited window of an appointment with a loan officer. When they’ve made a decision, the interface includes a convenient option to move forward on their chosen loan with the click of a button.
Artificial intelligence is becoming a competitive advantage that will force institutions to incorporate it, according to participants at the BankAI conference this week.
“People will have to adopt artificial intelligence,” said Brian Pearce, senior vice president of artificial intelligence at Wells Fargo. “It will have to become part of everyone’s set of tools.”
What banks are doing
Wells Fargo is piloting several chatbot technologies, though it has yet to suggest a launch date for any of them.
The bank has a team dedicated to bereavement — they take these phone calls and help executors manage the estates of the newly deceased.
Bank of America
Michelle Moore, head of digital banking at Bank of America, shared an update on the virtual assistant it announced a year ago, erica. It’s now in use by 300 employees. Sixty percent of the time, employees choose to interact with erica by voice, though they could also use chat, Moore said.
Ally Bank was one of the first to launch an AI-based virtual assistant two years ago: Ally Assist, which is based on technology from Personetics.
Most people who commonly interact with Ally Assist are heavier transaction customers, Morais said.
The bank is also using AI in the back office. For instance, the bank used robotic process automation to streamline an exception process that had required back-office staff to navigate multiple screens and type hundreds of keystrokes. It now takes three clicks.
Robert Sears, executive vice president and global head of product for new digital businesses at BBVA, said the bank is applying AI in credit decisions and focusing on explainability.
For those studying abroad, organizations like Prodigy Finance—a borderless, peer-to-peer lending platform—provide international, post-graduate loans.
Student Loan Hero looked at 116 of the top American business schools to identify which programs are most financially affordable, taking into account the average debt of graduates, average starting salaries, and annual tuition fees.
Jay DesMarteau, head of commercial bank specialty segments at TD Bank, said early-stage businesses will often use their funds for operational necessities such as buying inventory and building products.
Isaac Rodriguez, CEO of Provident Loan Society, notes that as a not-for-profit collateral lender, most of his organization’s loans are made for short-term expenses such as meeting payroll.
David Reiling, CEO of Minnesota-based Sunrise Banks, confirmed this trend, noting that many of the bank’s small business customers now use their borrowed capital for technology purchases.
For example, according to a recent survey from TD Bank, 69 percent of small business owners either believe they do not have a business credit score or believe that business credit scores do not exist.
Of course, an alternative lender may be a better option if you want an even smaller loan or if you don’t qualify for a traditional bank loan.
Student loan marketplace and refinancing website LendEDU polled 1,000 Americans to discover their personal finance preferences when it comes to dating.
The big question, though, was this one: “Would you consider [annual income, student loan debt, or credit card debt] to be a critical factor when deciding to date someone?”
Just over 30% of respondents said that credit card debt was a critical factor in deciding whom to date, compared with just less than 19% who saw annual income as a critical factor and 12% who saw student loan debt as critical.
Acting Comptroller of the Currency Keith Noreika today reiterated his view that companies providing financial products and services should be subject to the same regulations and examinations as traditional banks, while emphasizing that a path should exist for these companies to apply for a national bank charter.
Online lender OppLoans announced on Thursday it has appointed Andy Pruitt to the role of CTO. Pruitt is a hands-on technologist who has helped start and grow three Chicago-area software companies. He isfounder of Data Anywhere, a data management company.
LENDY has announced that it has returned £100m to investors over the last year alone, as it celebrates its fifth birthday this week.
The peer-to-peer property platform said on Thursday that this was a 120 per cent year-on-year increase and that it has now repaid £183m to investors since launch.
Lendy recently announced the repayment of a £7.92m loan, one of the largest seen in the UK’s P2P sector to date. The facility had been repaid ahead of schedule and delivered annual returns of 12 per cent to investors.
First Associates Loan Servicing announced that they have received Financial Conduct Authority authorization to undertake debt administration and debt collection in the United Kingdom.
In addition to having a stellar reputation for their loan servicing support and being the only loan servicer in their class to earn Morningstar Credit Ratings’ highest operational assessment ranking1, First Associates also offers lending support solutions to their roster of industry-lending clients including:
2018 MAY be the year in which the Innovative Finance ISA (IFISA) finally takes off, an industry expert has suggested.
Neil Faulkner, chief executive and founder of peer-to-peer analysis firm 4th Way, noted that the small platforms that have already launched IFISAs have seen massive boosts to their lending volumes, and suggested that the amount of money in IFISAs “will go up many-fold” when the major platforms have their own accounts on offer.
HSBC UK has announced a partnership with Bud through first direct to offer an integrated offering of financial services products and tools across the market.
This first direct trial kicks off in December and it includes proprietary algorithms – Market+ – to suggest the most suitable financial and non-financial products and services based on individual needs.
More than £825million has been pumped into the UK fintech since January – double the amount raised in the same period in 2016 – proving the vote to leave the European Union (EU) has not turned investors off Britain.
In fact, since the EU referendum vote, UK fintech companies have raised more than £1billion, according to research by London & Partners.
The capital has been the major winner from investment, receiving around 90 per cent of all venture capital investment.
London-based firms Funding Circle, Revolut and Receipt Bank each raised tens of millions of pounds of investment this year.
There are several online lenders available to offer you loans; they use your social media data to take a decision. Kabbage is the most popular loan landers working online. Kabbage offers the loan to the small businesses and keeps the cash flow in the different businesses. Before giving you the loan, they will ask you to get the access to your social media accounts.
Mark Arnold – a branding expert advises the credit unions and banks check a business credibility and see how effectively they are grabbing the market through social media. These businesses primarily look at different business especially at LinkedIn pages to determine the loan eligibility.
Use some crowdfunding websites to raise money for your business-like GoFundMe, Kickstarter, and Indiegogo.Share links to your crowdfunding webpages on your social networks on Twitter and Facebook and motivate people to share on their social networks.
Qudian, one of China’s largest online lenders, had a debut to remember on the New York Stock Exchange this week. Its shares closed up 22 per cent, making a multi-millionaire of founder and chief executive Min Luo.
The company, which raised $900m in the share sale, is the latest to underline investors’ appetite for the collision of lending and technology that has given rise to the Chinese fintech sector. Two days before Qudian’s debut on Wednesday, Chinese peer-to-peer lender Ppdai announced plans to raise $350m in New York, and at least a dozen similar issuers are preparing flotations.
About 40 per cent of consumers in China make payments online, and 14 per cent have gone on the web to borrow money, according to DBS.
Qudian’s IPO — the fourth-biggest in the US this year — comes on the heels of Chinese online insurer ZhongAn’s hotly received $1.5bn IPO last month in Hong Kong. ZhongAn’s stock is up 34 per cent from its debut.
Wary of online lending, regulators have strictly limited online financial products such as high interest “payday loans” and microloans by capping interest rates at 36 per cent. Last May, new restrictions wiped out scores of P2P lending networks in China, after worries that it was fuelling real estate speculation and subprime lending.
In the past two months at least seven online lenders backed by SOEs have collapsed. It was a business none should have been in, far removed from the industries they were supposed to focus on. The money potentially lost is trivial—roughly 1bn yuan ($150m), compared with government assets worth more than 100trn yuan. Still, these cases highlight how hard it is for the party to stamp its authority on the vast state sector.
The troubled SOEs include distant subsidiaries of the national nuclear company, an aviation company and a big energy company in Shanxi, a northern province. They had acquired stakes, from as little as 20% up to 100%, in online peer-to-peer (P2P) lending platforms.
They were “marriages of convenience”, says Joe Zhang, chairman of China Smartpay, a financial-services company.
China’s supply chain finance sector is now being tipped to be worth a whopping 15 trillion yuan (US$2.27 trillion) by 2020, and the mainland’s booming internet-based businesses are lining up to grab their own share of it.
And despite the reverberations from the recent peer-to-peer (P2P) lending crisis, a marriage between information technology and financial services is continuing to play a vital role in transforming Chinese business.
That 15 trillion yuan figure was calculated by Forward Business, a Shenzhen-based consultancy focusing on studies of IT and other emerging industries, which also suggests mainland banks granted a combined 12.65 trillion yuan in new loans to the budding sector.
But the grim reality remains, that the larger commercial lenders remain belligerently reluctant to grant small loans to businesses and individuals, who present anything like a risk.
Established in 2013, Tiandihui is an online platform where cargo and trucks are matched.
It s network stretches across 50 mainland cities and it handled some 64 billion yuan worth of transactions last year. The company, which charges fees for its matchmaking, has yet to break even.
Israeli fintech startup PayKey has raised $10 million in its Series B round led by MizMaa with participation from SBI Group, Digital Ventures, SixThirty, Fintech71, and The FinLab.
The new funds will be invested in global expansion, namely in the Asian market. Several of the investors in this round are Asian based while the startup graduated from the Singaporean FinLab accelerator.
The Lending Gap has been one of the most quoted negative consequences of the financial crisis. Many political efforts have been conducted to stimulate the economy. New business models (e.g., private debt, direct lending, alternative finance, peer to peer) were born with the explicit aim and mission to “fill the gap”.
Where are we today, 10 years after the crisis? Are borrowers still suffering? What investment opportunities are out there, if any?
FACT #1. The lending gap has been reduced, and the drivers have changed.
FACT #2. New alternative lending opportunities have opened up.
FACT #3. Banks are in better shape today, but exposed to the digital revolution and various structural challenges.
FACT #4. Credit expansion has resumed since YE 2014.
THE MOVE towards auto-lending among some peer-to-peer platforms may limit interest rates and be a stumbling block for investors worried about the type of businesses they lend to, a European automated P2P firm has said.
Despite being automated itself, Latvia-based Robo.cash has claimed lenders may be missing out on higher interest rates with a passive investment strategy.
As an example, Funding Circle recently moved from manual to auto-lending,now offering a conservation option at 4.8 per cent or a balanced approach at 7.5 per cent.
Online retail marketplace MyDeal.com.au has launched business loan offering MyDeal Marketplace Loans to accelerate the growth of their listed retailers.
Retailers who list their products through the MyDeal Marketplace can now apply for a business loan of up to $250,000 directly through their supplier management system and in many cases receive the funding in under 24 hours.
This offering is in partnership with fintech business Prospa, Australia’s leading online lender for small business.
“We’ve long seen the potential for technology to deliver better personalised financial advice to Kiwis,” said Ramesh Naran, Senior Manager, Digital and Innovation at Kiwi Wealth. “With this decision by the FMA, we can go through the application process and turn Future You into the powerful, personalised tool we’ve always wanted it to be. It’s already on its way to becoming the platform that’ll set the industry standard.”
Mr Naran said the FMA’s approach recognises the ability of technology to improve financial understanding and outcomes for New Zealanders.
In a much-awaited move, RBI issued guidelines to govern peer-to-peer lending or P2P. This is a landmark decision that will go the distance in achieving the objective of financial inclusion.
For the time being, RBI has advised NBFC P2Ps not to offer or arrange any credit enhancement or credit guarantee. Against this backdrop, the principal protection fund, which has been an exclusive offering of i2iFunding so far, may need some tweaking. At present, we are neither guaranteeing any compensation from the third-party nor are we making a claim of apportioning our capital for the purpose. Therefore, we will approach the regulator to get more clarity on this and would do our best in the interest of members of the platform. Existing investors need not hit the panic button.
More than 24,000 branches and 42 crore customers make the State Bank of IndiaBSE 0.00 % the goliath of all banks by sheer size and physical presence but its new chairman Rajnish Kumar is worried about the competition from nimble fintech companies.
“Today, the risk is the disruption that is caused by the technology ,“ Rajnish Kumar, chairman, State Bank of India told ET in an interview. “We have to be very alert to this challenge. Protecting the turf and meeting the challenges from all the new fintech companies is the priority .“
Wallets and other payment mechanisms have become the preferred mode of payments as people walking into branches have dwindled.
Founded and developed in Kazakhstan, the biggest economy of Central Asia, FinTech startup Lendex has announced plans for ICO crowdsale to finance the launch of a cross-border P2P (peer-to-peer) lending platform for underbanked consumers in Central and South East Asia.
Global fintech investment has risen phenomenally in recent years – from $3 billion in 2013 to $24.7 billion in 2016.
Although less than 0.1% of fintech investment originates in the Middle East, growing influence from a soaring millennial population, and increasing expectations for digital solutions, are giving rise to a burgeoning number of fintech initiatives throughout the region. In fact, the number of fintech companies in the Middle East and North Africa (MENA) region is expected to surge – from 105 at the start of 2016 to 250 by 2020. And fintech investment is predicted to grow by 270% in the Middle East this year, indicating the huge potential for digital change –and a strengthening drive to deliver it.
The majority of fintech innovation so far has been in the payments sector. Although fintech has already made a mark in the retail payments space – with new companies such as the UAE’s Beehive, an online marketplace for peer to peer lending, and Telr, an online payment gateway for emerging markets – effecting change in the corporate sector is more challenging. This is primarily due to the often more complex, cross-border nature of corporate payments and the accompanying regulations and security requirements.
SWIFT gpi already has the backing of over 110 banks across the globe – including BNY Mellon – which represents over 75% of SWIFT’s global payments traffic. The UAE’s Mashreq Bank was the first Middle Eastern bank to join SWIFT gpi earlier this year.
Trade finance and fintech development
AI, for instance, offers solutions to improve documentation flow and cut the need for time consuming processes. Two types of AI that could benefit trade finance are optimal character recognition (OCR) and intelligent character recognition (ICR). OCR converts images of paper documents into machine-encoded text, enabling documents used in trade transactions to be verified automatically; while ICR is able to learn and identify patterns of behaviour embedded in trade documentation. These capabilities would both help to improve efficiency and reduce costs in the supply chain.
They launched their Toronto-based venture, MagneTree Books, in the spring of 2015 with the help of a Kickstarter campaign for presales of their inaugural book.
Neither Josie, who was at the end of a maternity leave, nor Ronny, who worked for a humanitarian aid organization, had much savings to fund their startup or the first run of books, which together rang in at more than $65,000. A bank loan wasn’t an option; neither entrepreneur was in a position to cover the debt if something went awry.
Online sales have been slow – just 15 per cent of their books are sold on the web. But corporate gifting and wholesaling has proven fertile. Still, the company has yet to break even. Profit on a run of books rings up at about $7,000.
But they have a big problem: no cash to fund the second book’s production and marketing. Neither sibling is able to personally lend the company money, and they have begun crowdfunding once more.
Mr. Zakharia notes that the amount of money the siblings need to fund their second book is relatively small at between $7,000 and $10,000. Still, their inability to make a personal loan or secure a bank loan will make them unattractive to traditional lenders. “Banks are going to be very conservative,” Mr. Zakharia said.
One option the pair might consider is Lending Loop, a peer-to-peer lending marketplace that might be their fastest route to raising cash. “Because it’s such a small amount, I think it would be pretty easy to raise,” he said.
News Comments Today’s main news: Zopa’s 6.1% return IFISA to launch June 15. CFPB’s Corday extends small biz lending RFI comment period. Zopa looking for 40 tech whizzes. WeChat Pay available globally through Paymentwall. Today’s main analysis: Lending Club and the rise of securtization club deals. Today’s thought-provoking articles: China urges banks to devolve loan approval responsibility. How Thailand could […]
Lending Club and the rise of club deals. GP:”By standardizing documents in a deal it allows for a faster and cheaper securitization. A model worth noting and perhaps even adopting. A must read in all cases.”
CFPB comment period for small business lending RFI extended. GP:”As our readers are aware the CFPB is looking into small business lending regulation. Most lenders are concerned that small business lending could be regulated as personal lending because the loan is in fact underwritten on the business owner him-or-her-self. While it seems unlikely, we look forward to the RFI and the following CFPB decision.”
Elevate launches Elevate Labs. GP:”I find data interesting and we learn that Elevate is using a terabyte-scale Hadoop database with 1.5mil customer records with data from bureaus, web behavior, performance, bank account and other non-traditional data. And they employ 35 people in the analytics team. “
Here are all the financial reforms that will disappear with Dodd-Frank. AT: “Few people will disagree with most of the principles of the CHOICE Act. The real issue is, how do we get to the promised land from here? Even if the Republicans win on Dodd-Frank, this battle won’t go away. It will live on in the mid-term elections and then the next presidential election.”
Industry power players join RealtyShares. GP:”We believe the fix and flip model to be extremely correlated to particular times in the real estate market. I hope RealtyShares is diversified enough beyond this particular market whent he turn comes.”
U.S. business schools embrace fintech. AT: “I’m not quite sure what colleges and universities can teach about fintech that they haven’t already been teaching about business. Fintech is not a business model any more than science fiction is a storytelling technique. It’s one genre in the business world, so why not stick to teaching business principles?”
Zopa hunts for 40 tech whizzes. GP:”It is probably going to be expensive but I am sure they will find it. The Zopa office is cool enough where people really want to work from there. Adn yes, do they really need 40 developers to launch a tech-bank? Usually teams of 6-8 people are ideal so I would expect Zopa has 4-6 systems to build for the bank , hense this many developers.”AT: “This is the first I’ve seen of a number for new employees to help launch bank. Does it really take 40 technology superstars to start a bank?”
Weekly Industry Update: Lending Club and The Rise of Club Deals (PeerIQ Email), Rated: AAA
A club deal program enables Lending Club to drive standardization – in offering docs, covenants, structure, servicing, collateral consistency, and offering cadence. As a sponsor, Lending Club is able control its brand in the public ABS markets and manage competing interests amongst issuers, placement agents, and investors. (See this week’s
Last month, in conjunction with a field hearing, the CFPB issued the RFI, together with a white paper on small business lending. In his remarks, Director Cordray revealed that, in response to requests for additional time to respond to the RFI (which currently has a July 14, 2017 comment deadline), the CFPB is extending the comment period by 60 days.
With regard to the CFPB’s debt collection rulemaking, Director Cordray discussed thedebt collection proposals under consideration by the CFPB which it released last July in anticipation of convening a SBREFA panel.
Elevate Credit, Inc., a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced the launch of Elevate Labs at its new San Diego-based Advanced Analytics center. The center of excellence underscores the company’s commitment to innovation in the non-prime credit market.
Elevate’s industry-leading technology and proprietary risk analytics are optimized to help non-prime consumers meet their immediate financial needs while improving their financial futures. The company annually invests $40 million in its technology and analytics capabilities, including substantial investments in its proprietary IQ and DORA risk technology and analytics platforms, to support rapid scaling and innovation, robust regulatory compliance and ongoing improvements in underwriting.
DORA, Elevate’s proprietary risk analytics platform, utilizes a terabyte-scale Hadoop database composed of thousands of elements, 1.5 million customer records and other wide-ranging data inputs including credit bureau data, web behavioral and performance data, bank account data and other non-traditional data, to accurately assign risk to customers.
Elevate’s cutting edge technology and analytics team, worldwide, consists of the most advanced thinkers in risk analytics with more than 35 data scientists in our Risk Management department including over 25 staff members with advanced degrees and eight with PhDs. While the San Diego location is the company’s most concentrated and fastest growing analytics center, the team is spread across offices in Texas and the United Kingdom.
The U.S. House of Representatives on Thursday passed the Financial CHOICE Act.
The Act has seven principals:
1. Taxpayer bailouts of financial institutions must end and no company can remain too big to fail.
2. Both Wall St. & Washington must be accountable
3. Simplicity must replace complexity
4. Economic growth must be revitalized
5. Every American must be able to achieve financial independence
6. Consumers must be protected
7. Systemic risk must be managed via profit & loss
The Act proposes to restructure the Consumer Financial Protection Bureau, an agency that monitors financial products from loans to high-fee investment products.
Stress tests for America’s big banks, another Dodd Frank invention, are also contentious. The CHOICE Act proposes major changes.
In mortgages, the CHOICE Act will aim to allow smaller banks to increase lending by minimizing a rule about qualified mortgages. The rule increases costs of lending to higher risk borrowers and often precludes banks from holding mortgages on their books. Modifying the rules may allow local banks to increase lending.
The Financial Services industry is in the middle innings of a multi-phased and disruptive process that began in 1993 with the first ETF, and jump-started in 2008 with the first “robo advisor.” These two disruptive events continue to put enormous downward pressure on the fees charged by mutual fund companies and individual Advisors.
I do not believe financial services is racing toward a flat-fee model. However, the pace of fee compression will accelerate as clients have more low-priced options from which to choose. The end-result is enormous pressure on traditional Advisors to justify their higher prices and deliver an asset management solution more sophisticated than buy-hold-rebalance.
There are six key steps to becoming a Quant Advisor:
1. Develop a small but powerful set of investment models that are both unique and compelling. As an example, we only work with a small number of Advisors in an area to create and keep a competitive edge.
2. Have discretion on client accounts. The real value of using models is the ability to affect many client accounts at the same time to create efficiency and scalability. Building scale is the only sustainable way to overcome fee compression.
3. Communicate. Most clients simply don’t need or want to meet with their Advisor four times a year, but they want regular access to bite-sized information about what their Advisor thinks. Creating valuable, but short-and-sweet communications keep a client happy and informed. Generic newsletters do not count (because no one reads them).
4. Create multiple channels for a client to engage. Most traditional Advisors have a simple fee grid based on assets. A Quant Advisor will have a service menu that provides options from super low-cost investment-only relationships all the way to complex financial planning solutions. Due to scale and efficiency, any of these service levels can be highly profitable. Maybe one of the options is aflat fee only service level?
5. Sell more than advice. A Quant Advisor sells financial advice/planning and asset management services. Traditional Advisors only sell advice/planning and pay someone else to provide asset management (such as managed accounts, SMA’s, mutual funds, etc.). By having a unique and compelling asset management capability in-house, Quant Advisors do not have to pay someone to do it for them. That creates a new revenue source and the ability to capture a higher percentage of the total fees paid by the client. As fee compression continues to eat away at advice/planning prices, having multiple services to sell a client creates a more stable revenue stream.
6. Be hyper-transparent. Clients are more afraid of what they do not know than what they do. By proactively talking about and disclosing fees (including the hidden ones), risk and performance the relationship can blossom based on a new level of trust and understanding.
Industry Power Players Join RealtyShares (RealtyShares Email), Rated: A
Stanford University and Georgetown University business schools are planning to offer “fintech” courses for business school students for the first time this fall. New York University is planning a new course for undergraduates after launching a fintech specialization in its business school last year.
They join the University of Pennsylvania’s Wharton School, Columbia University’s business school and the Massachusetts Institute of Technology’s (MIT) Sloan School of Management, which all launched similar programs in recent years.
A number of prominent startups have exploded onto the fintech scene in recent years, fostering interest in mobile payment apps like Venmo, digital loan platforms like SoFi and robotic wealth managers like Betterment.
Unlike the wealthy, retail (individual) investors have limited options to invest in high-risk, high-return alternative instruments. The ticket size of such products — private equity, exclusive wines and paintings — are too high for small investors. But, in recent times, more avenues have opened that allow retail investors to make risky bets in assets other than stocks. For example, bitcoins is one such asset that younger investors are looking at. The price of this virtual currency has gone up from $579.13 a year back to $2,825.03 — a return of 488 per cent.
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced that it will participate in RBC Financial Technology Investor Day at The Westin New York Grand Central in New York, NY.
Doug Lebda, LendingTree Founder and CEO, is scheduled to present on Wednesday, June 14 at 8:55am ET. The presentation will be webcast live and archived at
Additionally, the company’s latest investor presentation will be available on its investor relations site at investors.lendingtree.com.
RealtyeVest lowered its required minimum investment amount to $5,000 for all offerings on their real estate crowdfunding platform for accredited investors. Previous minimum investment amounts ranged from $15,000 to $50,000, depending on the real estate project. The new $5,000 threshold is intended to draw first-time investors to experience RealtyeVest’s high-caliber performance with a nominal financial commitment. “We are seeing significant activity on our platform, however we feel there is a corner of the market we are not appealing to,” said Daniel Summers, RealtyeVest CEO, in a statement. “So we are offering investors a taste of our service with a new lowered investment amount for all projects. Once they see the quick return on their investments, they will no doubt want to increase their contribution amounts.”
Having raised £32m from investors eager to support the project earlier this month, the group is now looking to bulk out its workforce by at least 16pc – bringing in tech experts able to build a digital bank from scratch.
The hires will come from London and Barcelona, where Zopa opened a technology hub last week.
Zopa’s long-awaited innovative finance Isa (Ifisa) will be made available to existing customers on Thursday 15 June, but it won’t be protected by the company’s Safeguard scheme.
The Isa, offering projected returns of up to 6.1%, will initially be made available to existing Zopa customers wanting to invest new money. It will then be possible to move existing Zopa loans into an Isa wrapper from 1 July, and transfer funds from third-party Isas from 17 August.
It is expected that new customers will have to wait two months or longer before being invited to open a Zopa Ifisa, due to expected high demand.
Zopa’s Safeguard scheme is a central compensation fund that aims to pay out to lenders whenever a borrower defaults on a loan. This fund is limited, so it could run out if lots of borrowers fail to repay, but it has covered 100% of eligible loans to date.
However, this scheme won’t be offered to Isa customers, nor will it be available to any new investors after December 2017.
It will offer two savings products in an Isa wrapper.
Zopa Core, in which your money will only be lent to lower-risk borrowers, offers expected returns of 3.9%.
Zopa Plus lends your money to a wider range of borrowers, offering expected returns of 6.1%.
More than a decade after the first peer-to-peer sites launched in the UK, the sector that allows investors to lend directly to individuals and small businesses is coming of age. Two of the largest sites in the UK — Zopa and Funding Circle — were last month authorised by the City watchdog, marking a seal of approval for the lenders and providing a boost to the broader sector.
Institutional investors are already piling in. High-profile fund managers including Neil Woodford and Artemis invested more equity capital into RateSetter in recent weeks, valuing the company at more than £200m. Zopa completed a £32m funding round, led by Wadhawan Global Capital, an Indian financial services company.
The rise of peer-to-peer sites means that lending, which as an asset class has been a monopoly for the banks, is opening up to ordinary investors.
Credit Crowd gets on Othera’s blockchain, citing transparency as the key issue.
Blockchain provider Othera has linked up with Australian fintech lender Credit Crowd, allowing the Sydney fintech to digitise its loans on blockchain.
The partnership will allow Credit Crowd’s loans to be tokenised and traded on digital asset token exchanges—in effect, a kind of securitisation.
Credit Crowd is a P2P marketplace that specialises in short-term loans, secured by first mortgage properties. The company claims to have facilitated more than A$100 million worth of loans since its founding in 2012 and managed over A$50 million in their retail fund.
To date, robo-advice offerings have tended to focus more on the less complex end of the financial advice spectrum. The FCA’s enthusiasm for robo-advisers stemmed largely from concerns about an ‘advice gap’, situations where consumers (particularly those with limited assets) are unable to get advice and guidance on a need they have at a price they are willing to pay. The FCA has therefore seen robo-advisers as a way of providing quick and inexpensive advice primarily in relation to lower value or less complex scenarios. Robo-advice is still in its infancy and is generally not yet at the stage where it can provide sophisticated advice in relation to complex circumstances. Certain external factors are also slowing the spread of robo-advice. For example, recent research sponsored by ING suggests that the majority of the public remains uncomfortable with the idea of automated advice and this attitude will take time to change. In addition, PI Insurers may feel, by necessity, that they need to take a relatively cautious view in relation to new and untested technology. Firms implementing robo-advice solutions may therefore face increased insurance premiums, which is a further potential brake on innovation.
For the foreseeable future then, it appears that human advisers have no need to be concerned. Robo-advice is in the process of automating only one part of the wider industry and even then at a relatively restricted pace. But what about the longer term? If we make the reasonable assumption that advances in robo-adviser technology are inevitable does that mean that robo-advisers will one day become so sophisticated and accepted as to render human input redundant?
Winner of the startup stage Curve, started out in 2015 to cut out the noise and disconnection in the banking landscape. The digital wallet platform is designed to connect all of a person’s financial services into a single go-to place online, which is accessed with a Mastercard.
Finimize has grown an online community of 100,000 people. Each day, members receive a newsletter that digests the biggest finance stories of the day and why they should matter to them.
AgentCASH is an enterprise grade omnichannel platform that enables SMEs to sell and manage their products on multiple channels in real time.
Crowdsurfer brings big-data engineering expertise to crowd and peer finance to help the world understand where funds are flowing to.
Reposit was developed by its CEO Curran McKay as a faster, more affordable alternative to the £3.5 billion tenancy deposit system.
Lendr uses artificial intelligence to act as a reverse auction platform for mortgages.
Co-founder of Capitalise Paul Surtees has built technology that enables SMEs and their advisors to find, compare and select the best lenders available to them – allowing them to access the funding available. The platform matches SMEs with lenders, who are ranked based on their past successes.
London-based Paybase rolls an end-to-end solution for payments, compliance and risk into one unified API. The platform is designed for marketplaces such as the sharing economy or crowdfunding sites, as well as fintech apps and products that have complex payment processes.
The Chinese Internet Investment Fund was founded jointly by the Cyberspace Administration of China and the Ministry of Finance. The total size of the fund is around $14.9billion. The initial subscription (almost $4.4 billion) has been finished with $300million was acquired by central government as guiding fund, and the rest was raised from strategic investors. Thus, the driven coefficient of the government funds reached to 1:14.
On 9th June, shares of Alibaba jumped by 13.29% and closed at $142.34 per share, the companies’ total market value reached to $362.3 billion. Exceeding Tencent for the second time and become Aisa’s most valuable company.
Previously, Alibaba issued its annual report of 2017 fiscal year, showing that Alibaba has surpassed Tencent on core metrics such as revenue, net earnings and cash flow.
According a report released by Deutsche Bank, Alibaba's estimated revenue for 2018 fiscal year will be far higher than expected, and the disclosed information will drive its stock price up further.
Sepaking at the recent WSJ D.Live Asia event in Hong Kong, Ping An CIO Jonathan Larsen said Ping An is launching a new fund to invest in early stage Fintech ranging from $10 million to $30 million, according to a report from Dow Jones (here).
CHINA Rapid Finance will follow the strategy of “low and grow” to realize a stable and sustainable growth after its debut on the New York Stock Exchange on April 28, Wang Zhengyu, founder and CEO of the Shanghai-based peer-to-peer lender, said in Shanghai yesterday.
CreditEase’s founder and CEO Ning Tang was invited to deliver a keynote speech today at The Asian Banker’s 18th flagship Summit “The Future of Finance” in Singapore. The Summit gathered leading industry, government and academic speakers such as Barney Frank, former US Congressman and a leading co-sponsor of the 2010 Dodd–Frank Act, David Shrier, Managing Director, MIT Connection Science and Engineering, and representatives from: ANZ, Bank of the Philippine Islands, DBS Bank, the Federal Reserve Bank of Chicago, Prosper Marketplace, Prudential, and Uber.
Future Life, Future Finance
The theme of this year’s Summit shares the same vision as CreditEase at its 11th anniversary – “Future Life, Future Finance”.
In his keynote speech, Tang shared his insights as a pioneer and thought leader in the FinTech industry, giving an overview of the current landscape, and anticipating where opportunities will be against the backdrop of potential or inevitable changes.
After 10 years of successful domestic growth, at its 11th anniversary, CreditEase is ready to accelerate its global expansion. The opening of the new Singapore office and Tang’s delivery of the keynote speech at one of world’s renowned financial summits is just part of the global voyage. In addition to Singapore, CreditEase Wealth Management operates overseas offices and affiliate offices in Hong Kong, New York, and Tel Aviv and its domestic mainland China network covers over 40 cities. Its resources are also spread across the US west coast, Germany, UK, and Australia.
On June 3, 2017 Tsinghua PBCSF Global Finance Forum, which was hosted by Tsinghua University, and organized jointly by the Tsinghua University PBC School of Finance (PBCSF) and Tsinghua University National Institute of Financial Research (NIFR), convened in Beijing.
The highlights of the forum include:
Digital Financial Inclusion: LI Dongrong, President of National Internet Finance Association of China, pointed out in his speech that China and the world had the potential to drive the growth of inclusive economies by promoting digital financial services. While tremendous gains in financial inclusion have already been achieved, digital financial services, together with effective supervision, are essential to close the remaining gaps in financial inclusion.
InsurTech Innovation: JIANG Bo, Director-General of the International Department of China Insurance Regulatory Commission and Member of the strategic Council of PBCSF, said that Insurance technology (InsurTech) is a burgeoning phenomenon that has the potential to help the insurance industry reconnect with its customers following a period of increasing alienation and disengagement.
Three Chinese Fintech Companies Join Slate of Overseas Listing in 2017
Rong360, an online platform for financial product search, comparison and recommendation, has announced to raise at least $400 million in an initial public offering in the U.S. as soon as 2017.
With its rapid expansion, Chinese online lending platform Neo Capital has revealed its IPO plan in the U.S. last year.
On June 5, Chinese company Xiaomi, perhaps best known for its smartphones, announced that its affiliate Xiaomi Loan would partner with CITIC Securities to list CNY600 million asset backed securities (ABS) under a shelf registration on Shanghai Stock Exchange.
The ABS product was split into three tranches: AAA, AA and the subprime:
Paymentwall has partnered with Tencent to bring WeChat Pay (Weixin Pay) to every online and retail store. The partnership allows every business owner around the world to get instant access to 600 million Chinese shoppers in China and abroad.
With over 600 million active users, WeChat Pay is now one of the most popular payment methods in the world. WeChat Pay processed over $1.5 trillion in Chinese digital payments, representing over 30% of all online transactions made in 2016.
A combination of human and robo could be the answer for underserved Asian investors seeking low-cost technology-driven financial advice, a market that pure robo-advice providers have found hard to crack.
Inexpensive, automated robo-advisors could be a solution, but unlike in the large markets of US and Europe, in Asia they face difficulties stemming from regulatory fragmentation, lack of scale and investors’ preference for human contact.
The hybrid approach uses automated financial advice systems, but provides a layer of personal contact when dealing with the institution. Some call this approach “cyborg-advisor”, others “bionic advisor”.
Due to low profit margins of robo-advisory services and the necessity to achieve scale in order to be profitable, independent robo-advisors are not likely to succeed in the region under current regulations, according to Aldcroft.
Flipkart, one of the largest e-commerce platforms in India sales topping $2 billion each year, is getting into Fintech. Flipkart states that with the creation of a new focused team for financial services and products, Flipkart will be providing the public the option of obtaining loans from e-lending firms.
Flipkart is also expected to start offering other financial services such as access to funds.
Lendingkart, an online platform for lending to small businesses and entrepreneurs, has raised debt funding worth Rs 50 crore from Yes Bank Ltd. The company said that this is the first step towards eventually shifting from non-banking financial companies (NBFCs), who provide loans at a higher rate, to banks.
In June last year, Lendingkart had raised Rs 205 crore ($32 million) in a series B round of funding led by Bertelsmann India Investments (BII) and Darrin Capital Management, with participation from existing investors Mayfield India, Saama Capital and India Quotient. Of this, $20 million was raised through equity sale and remaining $12 million through debt financing.
Peer to peer lending is hardly new. But it has risen to commercial prominence in the past few years, thanks to technology. The emergence of marketplace lending platforms connecting individual borrowers and lenders is disrupting the business of lending.
Peer to peer lending is hardly new. But it has risen to commercial prominence in the past few years, thanks to technology. The emergence of marketplace lending platforms connecting individual borrowers and lenders is disrupting the business of lending.
A 2015 survey shows that 25% of U.S. millennials have used a P2P lending platform. According to recent research, the cumulative amount of loans that originated via marketplace lending platforms in China was over $150 billion in 2015. In US and UK, it was close to $30 billion and $10 billion respectively.
While the Indian P2P market is much smaller, the scene is heating up. Last year alone, 20 lending firms cropped up to take the total to about 30. What does this imply for our banking industry?
Omise, a payment management platform founded by Jun Hasegawa and Ezra Don Harinsut, is Thai fintech’s greatest success story to date. In 2016, it raised a $17.5 million Series B round and currently operates in Thailand, Japan, Indonesia and Singapore.
The Thai Fintech Association formed in 2016 as a networking club that would facilitate connections among fintech startups, big banks and investors, according to Disyadej. But the organization filed as an association with the Ministry of the Interior this year so it could take a more hands-on role in the industry’s development.
Although TechGrind operates in six countries in the region, it has relocated several of its startups to Bangkok so they can make use of TechGrind’s network and resources there. But TechGrind approaches opportunities in fintech — and in all startup sectors — from a cross-border perspective.
One such company is Pymlo, which creates accounting software for small businesses in Thailand and the broader region.
Governments across Asia – most notably Hong Kong and Singapore – have launched a raft of initiatives to grab a slice of the $100 billion invested in financial technology globally but the regulatory hotchpotch is making it tough for firms to scale up, the Asia Securities Industry and Financial Markets Association (ASIFMA) said in a report on Friday.
Investors poured $19 billion worldwide into fintech – including P2P lenders, distributed ledger technology and crowdfunding platforms – in 2016 alone and thousands of fintech start-ups continue to proliferate, according to a February report by global regulatory body the International Organization of Securities Commissions (IOSCO).
Hong Kong, Singapore, Australia, Japan, South Korea and Malaysia have launched a range of special programs to attract and foster fintech ventures, from incubators and grants, to temporary license waiver schemes, with competition fiercest between Hong Kong and Singapore.
Consolidated credit database likely to improve lending in the Philippines in 2018 (ASEAN Today), Rated: A
Bulk of lending in the Philippines have been corporate loan, forming more than 80% of loan books. Consumer lending business have been secondary to corporate lending – analysts explained that the lack of consumer level data can explain this.
The gap between corporate and retail lending is the lack of a credible database.
The government’s Credit Information Corporate collects data from banks in the Philippines. This will be extended to rural financial institutions to build a credible database by 2018.
News Comments Today’s main news: Goldman Sachs now highest-interest paying bank for savers. Zopa to build challenger bank in Barcelona. KBRA releases comprehensive surveillance report for American credit acceptance receivables trusts. CreditEase Wealth Management expands to Singapore. Today’s main analysis: Funding Circle June review. Today’s thought-provoking articles: OCC posts FAQ on fintech questions. Addepar raises $140M in quiet […]
Goldman raises interest rates for savers. GP:”This is a validation that their new model of using savings accounts as source of capital is working. The spreads must be sufficient and they are seeking to increase volumes and potentially have other usages of this capital. I also expect other investment banks to launch their own savings-account capital intake solutions.”AT: “Kiplinger predicts the inflation rate for 2017 to be above 2%. As of April 2017, inflation was at 2.2% for the previous 12 months. So, Goldman’s savings interest rate is still going to cause savers to lose money. Still, it’s exciting to see the bank get competitive, and it appears they’ll be chasing this business online.”
Cadre is now worth $800M. GP:”A valuation is just an indicator of the price the last investor was willing to invest in or the last price a share was sold at. It is often just an illusion, and often an overvalued illusion.”
Funding Circle’s June review. GP:”April 2017 was a particularly low volume month and we are glad May is back”AT: “Over 8,500 customers borrowed more than 610M GBP in June.”
Zopa to build challenger bank in Barcelona. GP:”A very interesting choice and surprising. Perhaps it’s cheaper to build a bank in Spain than in London and the rules still allow you to use the capital to lend to the British market. A very smart move.”
U.S. savers who routinely scour personal finance sites for the best deposit rates are soon going to see an unusual bank at the top of the list: Goldman Sachs Group Inc.
The Wall Street bank’s consumer arm, Goldman Sachs Bank USA, plans on Wednesday to raise the rate it offers customers on deposits to 1.2 percent, slightly higher than rivals Synchrony Bank, CIT Bank and New York Community Bank’s My Banking Direct.
Goldman had previously offered savers 1.05 percent. The average national rate for savings accounts is currently 0.06 percent, according to the U.S. Federal Deposit Insurance Corporation.
The move makes Goldman the highest interest paying bank, according to personal finance website Bankrate.com. The firm is aggressively trying to boost its deposit base and attract Main Street clients.
Goldman’s online deposits from individuals total $12 billion, a small but growing fraction of the $128 billion in overall deposits on the firm’s overall balance sheet.
Kroll Bond Rating Agency (KBRA) takes rating actions on 8 American Credit Acceptance Receivables Trust. In total, 15 notes were affirmed and 15 were upgraded. The data used are as of the April 31, 2017 collection period. No rating actions were taken on American Credit Acceptance Receivables Trusts 2017-1 and 2017-2, since these transactions have less than 6 months of seasoning. The rating actions reflect the fact that losses are in-line with KBRA’s initial loss expectations and credit enhancement has built for each class of notes. The breakeven loss multiples for each class of notes were sufficient for their respective affirmations and upgrades.
Credit enhancement for each transaction consists of overcollateralization (“OC”), subordination of junior notes, cash reserves, and excess spread. Each transaction has either met or is building to their respective target OC. The collateral for all the transactions has amortized from their initial pool balance since closing.
The Office of the Comptroller of the Currency (OCC) is out with an FAQ to supplement a Bulletin (2013-29). Several of the items address Fintech specifically, as well as marketplace lending.
9. How can a bank offer products or services to underbanked or underserved segments of the population through a third-party relationship with a Fintech company?
Banks may partner with Fintech companies to offer savings, credit, financial planning, or payments in an effort to increase consumer access. In some instances, banks serve only as facilitators for the Fintech companies’ products or services with one of the products or services coming from the banks.
10. What should a bank consider when entering a marketplace lending arrangement with nonbank entities?
When engaging in marketplace lending activities, a bank’s board and management should understand the relationships among the bank, the marketplace lender, and the borrowers; fully understand the legal, strategic, reputation, operational, and other risks that these arrangements pose; and evaluate the marketplace lender’s practices for compliance with applicable laws and regulations. As with any third-party relationship, management at banks involved with marketplace lenders should ensure the risk exposure is consistent with their boards’ strategic goals, risk appetite, and safety and soundness objectives. In addition, boards should adopt appropriate policies, inclusive of concentration limitations, before beginning business relationships with marketplace lenders.
In May, real-estate investing start-up Cadre found itself in the limelight when The Wall Street Journal reported that Jared Kushner, President Donald Trump’s son-in-law, had failed to disclose his investment in the three-year-old company when he became a senior adviser to Trump. Jared and his younger brother, Josh, are both listed as the company’s co-founders, along with Ryan Williams, who met Josh Kushner at Harvard. Before Trump’s inauguration, Jared Kushner stepped down from Cadre’s board and sold some of his stake in the company, Bloomberg reports.
Now, the company has raised $65 million in funding, valuing Cadre at $800 million. The biggest firm to invest in the new round of funding is Silicon Valley heavyweight Andreessen Horowitz, which joins a number of institutional investors, including Vinod Khosla,David Yu,George Soros, and Trump adviser Peter Thiel in backing the real-estate tech start-up.
Cadre is just one Kushner-connected start-up in the tech world. Before he divested from his assets, Kushner had a $30 million stake in Thrive, his brother’s venture-capital firm, which invests in companies that include Slack, Glossier, Juicero, and, of course, Cadre.
Statement by Con Hurley, Executive Director, Online Lending Policy Institute (OLPI) (OLPI Email), Rated: A
“At a time when some are calling to reimpose the strictures of the Glass-Steagall Act on banks, no one is calling for a return to the days on interstate restrictions on banking activities. Yet, this is precisely what the misguided federal court decision in the Madden case would achieve.
The U.S. House of Representatives is expected to ratify the longstanding law and custom of banking in the U.S. that a loan, once made, is valid regardless of subsequent buyers or assignees of that loan. The Online Lending Policy Institute salutes this action. Further, OLPI urges the Senate to make this part of its reform legislation.”
The CHOICE Act 2.0 introduces amendments to the National Bank Act, Federal Deposit Insurance Act, Home Owners’ Loan Act, and Federal Credit Union Act to clarify that the interest rate of a loan that is valid when made by a national bank, state-chartered insured depository institution, federal savings association, or federal credit union shall remain valid regardless of whether the loan is subsequently sold, assigned, or otherwise transferred to a third party. These amendments would overturn the 2015 decision of the Second Circuit Court of Appeals in Madden v. Midland Funding, which suggested that loans held by non-bank entities may be subject to state usury laws even where the loans were originated by national banks for which such laws are preempted. The Madden decision has created some uncertainty in the secondary markets for bank-originated loans.
Today, InstaLend announced successful growth of its real estate crowdfunding platform, expanding to Pennsylvania, Illinois, and Georgia. As of June 1, 2017, investors in these three states, as well as New Jersey, will be able to participate in passive residential real estate investments through InstaLend’s online crowdfunding platform.
For any given project, InstaLend funds between 80 and 90 percent of the total project’s cost (acquisition + renovation) in the form of a senior debt loan. The capital provided by InstaLend is sourced through its network of crowd investors, and borrowers commit between 10 and 20 percent of total project cost as common equity.
RealtyeVest lowered their required minimum investment amount today to just $5,000 for all offerings on their real estate crowdfunding platform for accredited investors. Previous minimum investment amounts ranged from $15,000 to $50,000, depending on the real estate project. The new $5,000 threshold is intended to draw first-time investors to experience RealtyeVest’s high-caliber performance with a nominal financial commitment.
RealtyeVest connects commercial and residential real estate owner-operators with investors. Their one-stop platform, realtyevest.com, provides a simple, secure, and transparent digital dashboard for accredited investors to partake in exclusive high-yield investment opportunities. New investors can complete the simple accreditation process right on the RealtyeVest website and become accredited within approximately 24 hours.
Payments to the people — it’s the motto and guiding principle behind Payscape, an Atlanta-based Fintech company that provides small to mid-size business owners with technologies that help them accept payments, streamline business, and increase cash flow. Payscape has grown exponentially since its inception in 2004 — their commitment to consistently developing and iterating new products that serve their customer base has allowed them to expand to 14 offices. They’ve processed 125 million transactions to the tune of $7 billion.
CEO Jeremy Wing and his team have had a busy 2017 thus far. The company invested $50 million to expand their operations, add 200+ jobs, and relocate to Midtown for access to talent and strategic partners. Most recently the team launched a new software product — Payscape Registration, an online registration management system with integrated payments. It’s already on the wish list of a few major universities, including Cornell University.
Q2 2017 was big for Payscape. Tell me more about your product launch and how it will add to Payscape’s current features.
Our new product includes a mobile app for event registration and payments, enhanced communication features such as text and an integration marketplace that will make it easier to connect other SaaS technologies with our platform.
You’re investing $50 million on an expansion and relocation to Midtown. What prompted your decision?
Midtown is the center of the Atlanta Fintech hub. It’s near Tech Square and Georgia Tech, and strategic partners like NCR, ParkMobile, Equifax, TTV, TechSquare Labs and Flashpoint. We not only look to partners to grow businesses, but as a major talent acquisition tool.
We also love the infrastructure for live/work/play. Most of our team will be using alternative transportation to get to our new headquarters.
Here’s what you need to know to score a mortgage in today’s market:
Start the process early. You can make the process easier by having your financial documents — including tax returns, bank statements and pay stubs — in order and ready to share with your lender. More than half of borrowers recently surveyed by FreeandClear.com said that the paperwork was the most challenging part of the mortgage process. Pull your credit report, too, to make sure that there aren’t any errors or surprises that could haunt you.
Shop around. Get quotes from at least three lenders, including a national bank, a local bank or credit union and an online lender.
Understand private mortgage insurance. Any time you have a down payment of less than 20 percent, you’ll need to pay mortgage insurance on the loan, which will push up your monthly bill.
Ask about all your loan options.
Consider locking in your rate. On a median-priced home, an increase in mortgage rates from 4 percent to 5 percent would add $100 to the monthly bill, according to Zillow.
Summer has arrived, and it’s been another exciting month. We’ve been given full authorisation from the UK regulator, the Financial Conduct Authority – another step forward to offering industry-leading, tax-free returns with the Funding Circle ISA, which we plan to launch later this year. You can read the full story in this article.
You’ve helped more than 8,500 small businesses access finance in the last 6 months…
P2P Lending marketplace Assetz Capital today announced the launch of another account type. The Property Secured Investment Account (PSIA) is marketed as a way to invest exclusively in property backed loans with automatic diversification intended to help investors spread their risk across a diverse range of lending.
The target rate for the Assetz PSIA account is 5.5%.
Specialist business peer to peer lending platform Folk2Folk has hired a new Chief Marketing Officer (CMO) and four Business Development Managers (BDM). Folk2Folk specializes in secured loans for businesses across the UK. The platform matches local businesses looking for finance with investors looking for a great return.
Leading Chinese Fintech and wealth management company, CreditEase announced today the opening of its new Singapore office in the Asia Square Tower. The new office opening was hosted by CreditEase Founder and CEO Ning Tang, CreditEase senior executives, distinguished guests from Blackstone, KKR and Tishman Speyers and other strategic partners.
Tang forecast an explosive development in crowdfunding, robo-advisor, insurance tech and blockchain innovations in the coming decade, while reiterating the company’s willingness to share its Fintech achievements and the “development dividend” to continuously create value for clients.
CreditEase Wealth Management opened its Singapore office in October 2014 with a focus on global real estate finance and investment. Its global property FoF products have been very popular among high-net-worth Chinese clients. When it obtained an asset management license from the Monetary Authority of Singapore (MAS) in 2016, it marked the cornerstone for further business expansion in the country.
In addition to Singapore, CreditEase operates overseas offices and affiliate offices in Hong Kong, New York, and Tel Aviv. Domestically, the CreditEase wealth management network covers over 40 mainland cities, and in in 2016 the company was awarded “Best Non-Bank Private Wealth Product” by The Asian Banker.
The Hong Kong Monetary Authority (HKMA), the defacto central bank, is co-operating with the neighboring city of Shenzhen in China over developments in financial technologies or FinTech.
Given the geographical proximity between the two cities, the bilateral co-operation is certain to promote FinTech activity and adoption in two of the most prosperous cities in the region. Shenzhen is among the largest and the wealthiest cities in China, one that links Hong Kong to the Mainland.
National Internet Finance Association (NIFA) launched the Information Disclosure System on June 5th, and the first 10 P2P lenders were known to disclose financial data in the system, including Wei Dai Network, Lufax, Souyidai.com, etc.
Now, we can search for basic and operating information of the above P2P lenders on the website of NIFA. And 8 of them have disclosed financial information as follows.
Zopa, the innovative finance company, today announces the opening of a development centre in Barcelona, Spain.
The new hub will initially focus on building the technology to support the launch of Zopa’s next generation bank and developers will work on developing payment gateways, credit card processing, and deposit systems.
Martin Saidler has built Centralway Numbrs with a considerable personal financial investment, achieving a most respectable response from investors. The firm is a global distribution platform for banking products, a super market for customers of retail banking services ranging from loans to car insurance and funds.
Centralway Numbrs in the final week of May abruptly terminated the contracts of about 50 of its staff. The people affected are programmers and other technical staff. Reason for the cuts are high development and personnel costs.
The company still doesn’t generate significant revenues with its banking app and the platform. Therefore, the fintech has to cut costs, eliminating jobs in Zurich or moving them elsewhere.
Centralway Numbrs says the reduction of jobs in Zurich is part of a restructuring process. Jobs will go in Zurich, but the company continues to hire programmers across the world who work from home – so-called remote workers, the company told finews.com.
Centralway Numbrs says the reduction of jobs in Zurich is part of a restructuring process. Jobs will go in Zurich, but the company continues to hire programmers across the world who work from home – so-called remote workers, the company told finews.com.
Centralway Numbrs has reached its first agreements with three companies this year, generating an initial return: Postbank, Norisbank and SWK Bank, three German companies which make their products available via the platform. These contracts aren’t enough to make the platform viable though.
Payments startup Klarna is ramping up its valuation again as it picks up a new, strategic investor. Last valued at $2.25 billion in 2015, the company today announced that Brightfolk, controlled by fashion tycoon Anders Holch Povlsen, is becoming a “qualified owner” of Klarna — that is, buying up at least 10 percent of the company.
At Klarna’s $2.25 billion valuation, Brightfolk’s 10 percent+ stake is valued at $225 million or more. But while the company is not commenting on any of the financial terms of today’s deal, TechCrunch understands that this is an “up” round, with the valuation now higher than $2.25 billion.
Poland’s most popular mobile payments service was not created in a garage or innovation lab. It was designed around a conference table by the heads of country’s six biggest banks, who had decided the market needed a new service.
Poland’s most popular mobile payments service was not created in a garage or innovation lab. It was designed around a conference table by the heads of country’s six biggest banks, who had decided the market needed a new service.
In 1989, when communist rule ended, the country had just two retail banks, both of which were state-controlled. International banking groups and new private Polish banks quickly joined the fray.
Today, services such as free real-time online payments are standard, contactless payment is available in almost every shop throughout the country and customers have a choice of apps for organising their finances.
Suretly is a unique crowdvouching platform that offers an alternative to conventional P2P lending practice. The crowdvouching model followed by Suretly works in conjunction with microfinancing organizations where investors can vouch for a borrower by offering assurance to repay a portion of the loan amount in case of default. In return for their guarantee, they will receive compensation based on the borrower’s credit rating.
Suretly mainly targets short-term loans and the platform is already dubbed as the “Tinder for Microloans.”
The company has already set up its operations in Russia and has plans to enter the US market in Q4 2017.
SUR Token ICO
Suretly is planning to raise between $1.5 – $8 million USD in the next round of financing by selling 15% of its existing shares. Funds raised through the crowdsale will be used to accelerate integration into new markets and countries, spearheaded by a new, soon to be set up legal entity in Singapore.
AEVIandMorokutoday announced a partnership to bring their all-in-one small merchantPOS softwareMarrakashto AEVI‘s Global Marketplace; a B2B app store for smart Point of Sale (SmartPOS) devices.Marrakashis designed with the next generation of banks in mind,delivering a single solutionfor theirsmallretail and hospitalitymerchantsthatseamlesslyintegrates their business,products,customers andpayment systems into one easy-to-use platform.The partnership willleverage AEVI‘s open solutions and global support infrastructure to target multiple vertical markets including the hospitality,food and drink, retail andfinancial service industries.
Based in Sydney, Australia, Moroku is a pioneering Fintech firm that is providing the finance industry with engaging banking and payment experiences through gamification. AEVI’s Global Marketplace will now also feature Moroku’s Marrakash, POS software that enables small mobile merchants to grow and run their business entirely from a single SmartPOS device.
Marrakash is already in operation today with merchants in Australia, India, North America and the UK. Voted runner-up at the New Zealand Payment Innovation awards, Marrakash enables businesses to display a full product catalogue, create bespoke customer loyalty schemes and take secure card payments on the go. This gives merchants the control and freedom to run their business and take payments however, and wherever, they need. Having Marrakash available on AEVI’s Marketplace will allow vendors across the globe using AEVI-enabled POS hardware to download and add the app directly to their SmartPOS device. The strategic partnership will increase Marrakash’s speed to market in key US and European territories where AEVI already have a strong, and ever-growing, presence.
Sancus Finance, a specialist financial services provider, has launched a new funding platform for businesses looking to participate in financing on their site. The new platform is part of a series of developments designed to improve the overall service offered to both funders and businesses. Sancus is part of AIM listed GLI Finance.Sancus BMS Group, the parent of Sancus Finance, has provided in excess of £578 million of funding to SME’s and their owners and has operations in the UK, Ireland, Jersey, Guernsey, Gibraltar & the Isle of Man.
It was announced recently that Australia-based P2P lender, Credit Crowd, has joined Othera’s Blockchain Lending Platform and Digital Asset Trading Exchange. By joining Othera’s platform, Credit Crowd is seeking to evolve its P2P lending market by digitizing the trading of P2P loans on the block chain.
Founded in 2012, Credit Crowd provides short-term mortgages to borrowers as well as a marketplace for retail and institutional investors. The company claims to have originated over $100 million in loans to finance over 50 projects for its borrowers since being founded.
Addepar, a B2B fintech company that offers a data-driven operating system for wealth advisors and other financial professionals, has raised $140 million in a VC round led by Valor Equity Partners, 8VC and Harry McPike. Valor Equity Partners is an existing backer, and 8VC, the venture firm led by Addepar co-founder Joe Lonsdale, previously invested in the company through its predecessor firm, Formation 8. Addepar had raised about $67 million prior to this round and was most recently valued at $292 million in 2014.
Much of the new funding will go toward research and development.
Among the other companies in the financial services industry that have raised significant equity funding in 2017 are online lender SoFi ($453 million in March) and Robinhood, the provider of a mobile stock-trading app ($110 million in April).
Overall, funding in the fintech industry is on pace for a
Roll up, roll up, there’s a new fintech VC fund in Southeast Asia town. Today, Thailand-based Kasikorn Bank announced its inaugural tech fund which is 1 billion THB, just shy of $30 million, in size.
Kasikorn, which was founded in 1945 and is one of Thailand’s major banks, is calling the fund Beacon — think lights on top of lighthouses — and it is aimed at giving the firm first-mover advantage on global tech through startups based in Thailand and overseas. Thanapong Na Ranong, formerly with InVent, a VC affiliated with mobile operator AIS, will lead Beacon VC.
The capital, which is 100 percent from the bank, will go towards direct investments in startups and also contributions into VC funds as an LP. Kasikorn said today that it has already backed Dymon Asia, a fintech fund headquartered in Singapore that is targeting a $50 million final close, and put money into Bangkok-based FlowAccount, its first direct investment in a startup.
Going forward, it is targeting three to five deals per year ranging from seed-plus to Series A stage with a target across all aspects of fintech. The firm aims to lead or co-lead investments with a typical check size of $500,000 to $3 million. It did not disclose what portion of the fund is reserved for follow-on deals, but the capital itself is anticipated to last between four and six years.
Peer-to-peer lending startups Investree, Amartha, and KoinWorks are among eight Indonesian fintech startups that have been officially registered under the Financial Services Authority (OJK) in May 2017.
As of June 5, 2017, Investree claims to have successfully disbursed Rp 148 billion unfunded loan with 592 total loans, 17.5 per cent average rate of return, and zero default.
Amartha started in 2010 as a micro-finance institution. Six years later, it changed into a P2P lending marketplace. Today, Amartha claims to have facilitated over $6 million in loans to over 30,000 women micro-entrepreneurs while maintaining a 7-year long 0% default rate.
Indonesia’s fintech sector is currently the second biggest in the region after Singapore.
News Comments Today’s main news: Marathon Partner calls for change at OnDeck. LC releases mobile app. Ranger slumps after the collapse of Argon Credit. College Ave secures $30M in a fourth equity round. Droom launches first used auto MPL in India. First Circle secures funding to expand into SE Asia. Today’s main analysis: High-Net-Worth Millennials want advice from humans. Ranking the […]
Marathon Partners calls for change at OnDeck. GP:”There is an entire industry, especially in New York, of funds who buy a minor number of shares in public companies and then mount a public campaign to impose their views to the companies. Examples are Karl Icahn, Bill Ackman, Dan Loeb and Herbalife. Their objective is a quick appreciation of the share value and not the long-term success of the company. They typically encourage the company to sell assets to quickly raise cash for the share prices to increase quickly. They then sell their shares at a large profit, having double or tripled their investment in months to a year. And over time, the company is left on its own, now without the assets, it sold. All companies have issues and I am sure plenty of people disagree with the choices made at OnDeck. But from there to saying that OnDeck is in big trouble I think the leap is too large. Many companies have the exact same board structure as OnDeck, common CEO and Chairman and more. I see this campaign as a pressure campaign, unfortunately, picked up by WSJ, who probably saw some pieces of truth and some sensationalism in it but is likely exaggerated. The real issue at OnDeck: they need cash, and soon. Let’s see how they solve that issues while keeping control. Being a public company opens the doors to this kind of attacks. “AT: “More and more, it’s looking like OnDeck may be headed for a sale. It could at least see a changeover in leadership. That new leadership will be expected to turn the company around, and if they can’t, we could see a buyer emerge in the near- to mid-term future.”
LendingClub releases mobile app for investors. GP:”As many of our readers we are surprised they didn’t have a mobile app yet. There is a difference between a mobile responsive website and a native app. When will people be able to apply for a loan using just the app? While the core of Lending Club’s applicants are baby boomers and Gen X, I still think that mobile apps open the door to new features like taking pictures of your IDs and documents in real time, using the mobile phone’s info for underwriting and applying even faster.” AT: “I wonder why they hadn’t already.”
HNW Millennials are hungry for advice from humans. AT: “This is interesting since we’ve been hearing a lot about how millennials prefer robo, or at least want a mix of human-robo advice. High-net-worth individuals are different, though, and I think that’s across generations. Significant is the fact that many HNW millennials are in charge of their families’ fortunes, or at least a part of it. I would imagine they would not want to be responsible for losing what their fathers and grandfathers built, therefore, it makes sense they’d want advice from a human mentor in some respects.”
Ranking all 50 states by average credit score of citizens. AT: “The interesting thing about this to me is there seems to be a cultural attitude at play here. The top states and bottom states in the ranking are clumped together in regions, which says to me that attitudes toward credit, and behavior driven by those attitudes, are at work within the cultures. Of course, you also can’t deny economic indicators such as unemployment, which tends to be higher in certain areas, probably due to certain industries losing out to automation and other paradigm-shifting forces.”
Could fintech enable a resurgence in predatory lending. AT: “Yes, but this is a scare tactic aimed at borrowers. This thinking takes away from personal responsibility. It’s important for lenders to take note of this attitude and develop responsible-but-profitable lending practices. Anything else could land lenders in the same hot water as those caught up in the S&L crisis and mortgage default crises.”
Banks favor lending to owner-occupiers. AT: “Owner-occupiers are a good risk because they are more likely to ensure properties are well taken care of, and since the property is occupied, the likelihood of a default is lower. Banks like safer investments.”
Dianrong sees growth from market shakeout. AT: “In any regulatory environment there will be winners and losers. When there is rampant corruption and fraud that is dealt with by regulatory authorities, as is the case in China, the players that stay above board will ultimately benefit. Congrats to Dianrong for keeping to a business model built on trust.”
Marathon Partners Equity Management, LLC, together with its affiliates (“Marathon Partners”), announced today that it has released a letter that was sent to the board of directors of OnDeck Capital, Inc. (“OnDeck” or the “Company”) last month expressing concerns about the direction of the Company and making recommendations on steps to improve shareholder value. Marathon Partners also announced today its intention to vote against the three incumbent directors up for election at OnDeck’s upcoming Annual Meeting scheduled to be held on May 10, 2017.
In its letter to the Board, Marathon Partners recommended two courses of action for OnDeck:
Fully rationalize the Company’s cost structure in order to rapidly achieve GAAP profitability and reduce the pressure on the organization to grow its loan portfolio
Seek the sale of the Company to a stable partner where OnDeck can thrive without the risks of destabilizing confidence in the business from shareholders and the capital markets.
In addition to the concerns expressed in the letter, Marathon Partners is also disappointed with OnDeck’s corporate governance and executive compensation practices, as exemplified by ISS’s Governance QuickScore of ’10’ – indicating the highest level of concern – at the 2016 Annual Meeting. OnDeck’s current practices, including plurality voting for director elections, a classified board structure, no special meeting rights for shareholders, and combined CEO and Chairman roles, among others, serve to disenfranchise their shareholders’ rights. Marathon Partners also has concerns around the metrics believed to denote success for the Company, such as adjusted EBITDA that ignores stock-based compensation and is blind to increased balance sheet risk.
Given Marathon Partners’ lack of confidence in the Board’s ability to represent the shareholders’ best interests, it plans on voting against the entire class of directors up for election at the 2017 Annual Meeting.
The three directors up for re-election are Noah Breslow, who also serves as On Deck’s chief executive; Jane Thompson, a former financial-services executive at Wal-Mart StoresInc.WMT -0.39% ; and Ron Verni, a former CEO of Sage Software Inc.
On Deck’s shares, which fell 3.3% Thursday afternoon, are down more than 35% over the past 12 months following the reporting of wider losses and cooler investor demand for its loans.
Today, with more than $24 billion invested through the platform, LendingClub is thrilled to introduce its new iOS mobile application – LendingClub Invest.
Investors said that some of the most important functionality they use on a regular basis is checking their account summaries and investing in Notes. Armed with this insight, the team crafted a visually-attractive user interface that consolidates the investor’s total account value, available cash, returns and holdings on the first page.
Online lender SoFi recently announced the launch of its new two-step verification feature that will offer users the next level of account protection. The company revealed that two-factor authentication (or 2FA) would provide an additional layer of security to help protect accounts from unauthorized access.
High-net-worth millennials enjoy growing influence in the management of their families’ portfolios, but few are fully satisfied with their investment objectives. They have strong opinions, but are hungry for advice and don’t seem particularly excited about getting it from a computer.
Only 32 percent of millennials rate their values-based investment knowledge highly, with roughly a quarter deeming their knowledge either poor or very poor. That being said, there is a continuing hunger for investment knowledge, with 42 percent claiming they would like to learn more about the area.
The other potential reason for this discontent is that millenials simply have differing philosophies on investment than previous generations.
Scores range from 300 to 850, the data comes from Experian. The national average ends up being 673, this is kind of shocking to me since my banker seemed to stress the necessity of a 720 credit score to get a loan with the best rate. Obviously, not everyone owns their home, but even in the state with the highest average – Minnesota – the average is only 706.5. Even then, the state ranks a full 7 points ahead of the runner up – Wisconsin.
Someone has to bring up the rear and for this metric, that someone is the state of Georgia, with an average credit score of 642.
At first glance, the aspect that pops out the most is that the top four states are all bundled in the upper Midwest while 5 of the 6 lowest are basically neighbors in the south.
High unemployment + low wages = lower than average credit scores.
Student loan marketplace, College Ave Student Loans, announced on Thursday it secured $30 million during its fourth equity round. Investors of the funding round included new and existing participants, which included Comcast Ventures and Leading Edge Ventures.
CrediFi Corp., the leading source of data and analytics for commercial real estate (CRE) finance, has announced the launch of CredifX, its online marketplace for financing commercial properties.
CrediFi has already made the commercial real estate market more transparent, by providing data about more than two million properties and thirteen trillion dollars in loans across the U.S. Now CredifX is taking that transparency revolution one step further. In addition to accessing information about commercial real estate finance through the CrediFi platform, CRE borrowers, brokers and lenders will now have unprecedented access to financing opportunities allowing them to close real estate deals through CredifX, CrediFi’s latest fintech solution.
The last method mentioned above, utilizing the $50,000 limit on transfers, is being utilized by Chinese fintech startup, Niu Jiao Suo, to help Chinese investors to move their money overseas. Niu Jiao Suo operates by connecting Chinese investors with foreign mutual funds. Its mobile app allows users to invest in foreign mutual funds like Blackrock, Vanguard, JP Morgan, and Goldman Sachs with a minimum investment amount of $400. Users are limited to $50,000 in total investments per year in accordance with China’s annual threshold. A $400 investment may not sound attractive to funds by itself, but Niu Jiao Suo is able to attract such prestigious funds by bundling their users’ smaller investments together into a larger investment package.
The average household carries $134,643 in combined debt which includes mortgage, credit cards, auto loans, and student loans. A good chunk of household income go into servicing these loans as illustrated in how Americans spend their paychecks. The biggest chunks of people’s monthly spending correspond to housing, transportation, and education. For other expenses, Americans continue to rely on plastic. While not necessarily a bad thing, many fail to pay charges in full and carry a balance on their cards, further exposing them to compounded interest and other fees.
Credit card debt is at its highest since 2008. Americans added $60.4 billion to the outstanding credit card debt as 2016. Worse is that, 69 percent of Americans have less than $1,000 in savings. 34 percent of respondents revealed that they don’t have any savings at all. When emergency strikes, many are left with little choice but to get more loans. However, with bad credit scores, borrowers are resort to getting them from predatory lenders.
For cash-strapped consumers, the promise of fast and easy money is always enticing. The payday loan industry alone is a $38.5 billion industry.
Late last year, the Office of the Comptroller for Currency started to accept applications from fintech companies that would subject them to federal banking rules. Chartered companies will face controls to prevent money laundering and have to abide by consumer protection rules. However, some argue that a federal charter would also enable fintech companies to bypass state-specific provisions such as interest rate caps. Such flexibility may be abused by enterprising lenders.
You should always go with numbers. Know how much the loan will totally cost you. Calculate the annual percentage rate (APR). Many predatory loans would have APRs of three digits meaning you could pay triple, quadruple, or even more of the loan amount in a year’s time if you fail to pay. While many of these loans are designed to be short term, it’s really dependent on your capacity to pay.
Shares in Ranger Direct Lending (RDL) have slumped after the investment trust was forced to write down 4% of its portfolio following the collapse of US peer-to-peer lending platform Argon Credit.
Shares in the trust are trading at 996p, down 6.9% since the write-down was announced yesterday, languishing at a 17.3% discount to net asset value.
The £172 million trust holds a position in Princeton Alternative Income, which gives the trust indirect exposure to $28.3 million of a $37.5 million credit facility Princeton has supplied to Argon, which went bust in December.
Numis analyst Charles Cade said the entire position in Princeton represented 12.1% of net assets in December and as Ranger could not determine the exact impact ‘we would not be surprised to see further writedowns’.
A £120,000 loan arranged by RateSetter boosted child care placements in an Essex-based foster care company by almost a quarter.
The peer-to-peer lending platform helped Brighter Futures Foster Care increase the number of new foster households from 67 to 83, making its foray into a sector where it found “finance is desperately needed”.
The borrower works with local authorities in the South East to find foster families for young people amidst a national shortage of 10,000 foster places, and is looking to raise further finance to bring the number of placements to 110-120.
Assetz Capital, one of the UK’s largest and fastest growing peer-to-peer finance platforms, today announced it was raising the interest rate on its popular 30 Day Access Account (30DAA) by 0.5% to 4.75% for a limited time.
Investors will have until midday on 11 May to take advantage of the new rate and will benefit from a capped return of 4.75% for up to 90 days after an investment is made. After this, the account will return to its original rate of 4.25%.
Investors can automatically invest any amount from £1 in a diverse portfolio of secured business loans that have passed Assetz Capital’s strict credit checks.
Bank of England statistics reveal that since the EU referendum, net lending (that’s total lending minus repayments) to British small businesses by 22 of the largest banks dropped from £1 billion in the second quarter of 2016, down to just £220 million in the last three months of the year. Meanwhile, Funding Circle investors lent £167 million on a net basis in Q4 alone!
It was also great to see Samir Desai, Funding Circle CEO, featured in the The Sunday Times Maserati 100 list, which recognises influential entrepreneurs who are disrupting the business world.
And finally, our US business announced that Community Investment Management, an impact investment firm focused on direct lending, is now lending an additional $100 million to American small businesses.
The Financial Conduct Authority’s decision to define peer-to-peer lending too narrowly has hampered the market, it has been claimed.
According to one compliance expert, the FCA’s decision has meant only 40 per cent of the P2P loans which HM Treasury had intended to be covered by the legislation were actually captured by the regulator’s definition.
Lendy believes that regulations such as Basel III have incentivised banks to take risks in the owner-occupier market and cut exposure to property developers.
This comes after the peer-to-peer secured lending platform found that the number of new residential mortgages worth over £1m increased by 24% in the 12 months to 30th September 2016.
Lendy discovered that the number of new £1m plus mortgages written by banks in 2015/16 increased to 4,844, up from 3,896 in 2014/15, while the total value of these mortgages grew by 18% from £7.59bn to £8.95bn in the same period.
Sydney-based platform Othera goes a step further: the blockchain lending platform allows lenders and investors to access digital loans. It then chops up those loans – which are backed by businesses’ cashflows – in a process called tokenisation. These tokens can then be sold on an exchange, turning a traditionally fairly illiquid asset into a highly liquid digital asset.
Why did you launch Othera?
The overarching reason for launching Othera and building a blockchain lending platform is to unlock the alternative investment asset class and help it become mainstream.
You use blockchain to provide ongoing credit analysis of borrowing firms. How does that work and why is that so useful?
The blockchain provides what I call “total asset provenance” which means that every single interaction between the borrower and the lender is logged on it.
How does tokenisation work?
When we talk about tokenisation in the context of our platform, I am talking about the process of linking the rights to loan repayment cashflows (the principal and interest of the loan) to a digital cryptographic token similar to a bitcoin. So if you hold (own) the token, you will receive the pro rata portion of the loan repayment that your token represents. Tokens represent a digital form of fixed-income alternative investment. Tokens can be bought and sold just like an equity or bond or cryptocurrency.
Tell us about the importance of the secondary market.
Creating a vibrant secondary market for alternative investment assets is key to the growth of an industry or product sector for several reasons:
First, at a basic level, investors will only ever commit a relatively small portion of their investable funds into an asset class or a market with no liquidity.
Second, secondary markets are also a very good barometer of the performance of an asset class or specific investment, as the market quickly builds the strength or weakness of an investment into the current market price of that asset.
Bank of England Governor Mark Carney said the crisis shows why regulators and the banking industry must stay on top of the rapid developments in financial technology so that the system is solid enough to withstand shocks.
Riga-based 4finance Holding S.A., a large online and mobile consumer lending group, has placed and priced $325 million of senior unsecured 5 year fixed rate notes. These notes mature in 2022 and were issued with a 10.75% yield, at par.
The new 5 year issue was described as representing a liquid benchmark offering, with the scale to attract over 50 investors and secures 4finance’s long term funding.
These senior notes have a 5 year maturity with a 2 year non-call period and were offered on a Rule 144A / Reg S basis with ISINs XS1597295838 / XS1597294781 respectively. The bond was priced on April 12th, closing is expected on 28 April 2017.
Profile Software, an international financial solutions provider, today announced the latest upgrade in the FMS.next Alternative Finance platform, to offer enhanced capabilities for “Auto-investing” that further boost the marketplace lending processes.
In November 2016, a report jointly produced by professional-services firm Ernst & Young (EY) and leading Singaporean bank DBS stated in no uncertain terms that China has now leapfrogged ahead of global technology hubs such as Silicon Valley and London to become “the undoubted centre of global fintech innovation and adoption”. Multiple fintech hubs have now emerged in China alone, most prominently in Shanghai, Hangzhou, Beijing and Shenzhen, which has led to EY and DBS concluding that the country now clearly leads the way in fintech and is “revolutionising many aspects of financial services”.
China also dominates the fintech “unicorn” space—those startups valued in excess of $1 billion. The country is home to eight of the world’s 27 unicorns.
Firstly, the sector has been well supported by the country’s regulatory framework.
Secondly, China’s population appears to be increasingly open to using online finance, with evidence mounting that they are eager to incorporate the support provided by various fintech services into many different aspects of their lives, including online banking, payments, transfers, crowdfunding, investing and shopping. Indeed, e-commerce in China is estimated to be a RMB 16 trillion market, and is now transforming the consumption habits of a rapidly growing number of Chinese people.
A significant chunk of China’s fintech success in recent years can be credited to Baidu, Alibaba and Tencent. Collectively referred to as BAT, the three tech giants control an intimidating share of China’s e-commerce landscape, as well as online messaging and Internet search platforms. They also control approximately half of the Chinese third-party payments market; whereas their US equivalents—Alphabet, Apple, Facebook and Amazon—control a mere 2 percent, as per recent analysis by Citigroup.
Payments/e-wallets is the dominant sector at present, with China having 380 million people shopping online via their phones, as well as nearly 200 million people using their phones as a wallet for in-store payments.
The popularity of online banking is also exploding, with both China’s tech companies and its existing banks making a foray into this world, often in joint initiatives.
P2P (peer-to-peer) lending also deserves a mention, with China almost exclusively leading Asia’s growth in platforms designed to deliver credit to individuals and SMEs.
Chinese online lender Dianrong.com expects to grow rapidly in the next few years, benefiting from tightening regulation driving a shake-out in the nation’s $100 billion-plus peer-to-peer (P2P) industry and pent-up demand for credit and investment.
Loan originations at the P2P lender, which is backed by investors including U.S. investment firm Tiger Global and Standard Chartered’s private equity unit, more than doubled to 16.2 billion yuan ($2.3 billion) in 2016 from the previous year.
Dianrong.com matches investors with individuals and small and medium-sized businesses in real-time, with loan sizes ranging from 500 yuan to 200,000 yuan for individuals and a maximum of one million yuan for small and medium enterprises.
Nearly half of the 4,000-odd online lending platforms in China were “problematic”, China’s banking regulator said in August when it unveiled the rules.
The P2P lender, founded in 2012 by Guo, a former lawyer, and Soul Htite, a co-founder of LendingClub Corp, is looking to grow loan origination by 50 percent annually over the next three to five years. It expects to broker about 30 billion yuan in loans this year.
Droom, an online platform for buying and selling used vehicles, has launched Droom Credit, a loan marketplace for pre-owned automobiles it claims is the country’s first.
For the initial rollout, it is going live with a dozen lenders, including HDFC Bank, Kotak Prime, Tata Capital, Faircent, i2i Lending and Capital First, a company statement said.
The platform, which guarantees loan approval within 30 seconds, uses the government-backed Aadhaar stack, apart from PAN verification, credit score validation and several other variables for credit evaluation.
There are three ways we are going to earn money, he said.
“First, the take rate, which will depend on who the lender is (different take rates and commission structures for different lenders). It will also depend on the category and profile of the borrower, and on the fulfilment and disbursal of the loan.”
Second, Droom will charge Rs 999 from borrowers.
Third, it will also charge the lender Rs 999 upon successful loan disbursal.
Droom Credit will initially restrict lending to borrowers purchasing vehicles from Droom. Going forward, however, it plans to open it to other platforms too.
Crowd Genie, a small business lending platform, has received regulatory approval from the Monetary Authority of Singapore (MAS). Crowd Genie was granted a Capital Markets Services (CMS) license from MAS, an important development for the peer to peer lending platform. Crowd Genie has been in operation since mid-2016.
First Circle today confirmed investments from Accion Venture Lab, the seed-stage investment initiative of financial inclusion leader Accion, and Deep Blue VC. First Circle has now reported equity funding of $2.5m USD – from Accion Venture Lab, Deep Blue VC, 500 Startups, IMJ, and Key Capital – along with an undisclosed sum of debt funding.
The investment funds will be used to further develop First Circle’s technology and data analytics platform.
“It’s not that it (equity crowdfunding) is illegal – it’s just that there’s no clarity,” he said.
Thundafund chief executive Patrick Schofield said he was not waiting for any regulatory certainty from the FSB and was going ahead with setting up a platform to facilitate equity crowdfunding in South Africa.
His idea is to use venture capital funds to vet deals and provide a certain percentage of the total equity injection, before placing these on the platform to attract investors.
Meanwhile a new lending threshold which came into effect in November under the National Credit Regulations is also likely to limit the ability of peer-to-peer lending platforms to fund startups.
News Comments Main News: RateSetter’s results and their change in business model by amortizing origination fee over the duration of the loan; Prosper’s Monthly Report ; Eisman’s claim online lenders are clueless. Main Analysis: Prosper’s Monthly Report analysis; RateSetter’s balance sheet actions. Main though generating pieces : Use of blockchain in lending. United States Eisman, […]
RateSetter published 2015-2016 financial results. FT focuses on the fact that while claiming they do not take any balance sheet risk they did take £2m in loans on the balance sheet. And the company continues to confirm they do not take balance sheet risk while they are doing it. I think they need to work a little better on the communications front.
And even more analysis on RateSetter: RateSetter, for those who are not aware , has been profitable in 2013-2015. What changed recently ? Their interest has been aligned with the investor’s interest by charging the origination fee over the duration of the loan instead of all upfront. This change was apparently mandated by City of London investors Woodford Investment Management and Artemis. Also to be noted: “Bad debt rates have risen since RateSetter first opened its doors in 2011” . This has led to numerous articles on their reserves fund and ensuing adjustments.
While the loans these companies make are small on average and don’t portend to be the next “Big Short” — the title of the book and film that detailed Eisman’s bet against the debt central to the 2008 financial crisis — there is reason for investors to be cautious, he said.
The central problem is that these lending startups, their founders and backers in particular, don’t have a lot of experience making loans to consumers, and some of them approach loan-making as they would retail sales, Eisman said in opening remarks at a conference of investment bankers and investors in Miami Beach, Florida, on Sunday.
“When you go to Amazon and buy a book, you buy it and the transaction is over,” he said. “But when you take out a loan, that is just the beginning of the transaction — it’s like a relationship.”
The remarks were given inside a large conference hall of the beachfront Fontainebleau Hotel, where several thousand Wall Street securitization professionals are convening this week for their 22nd annual ABS East Conference. It’s the same gathering where, in one scene of the film “The Big Short,” the character based on Eisman bursts into outrage at a mortgage executive giving a talk.
“We have seen loans underperform from their expected loss estimate at the time of underwriting,” Stephanie Yeh, a director at Credit Suisse Group AG, said on a Monday morning panel discussion. “There still isn’t a lot of data.”
“Traditional Wall Street occasionally forgets that online lending has a long track record and that these platforms have been built by people with deep financial markets experience,” Nat Hoopes, executive director of the Marketplace Lending Association, a trade group, wrote in an e-mail. “Borrowers and investors are turning to these online products because they are delivering enormous value compared to the traditional alternatives.”
This month, a top U.S. banking regulator, Thomas Curry, warned the startup lenders about the potential for unintended biases in their underwriting that could lead to violations of federal law. Bond graders have also noted that these startups have varying degrees of underwriting sophistication and that regulatory and legal risks abound.
Prosper states that the 2016 portfolio is on track to have the highest estimated return since 2013. This is alongside the highest average FICO to date. Estimated returns on August 2016 production continues to be just over 7% on average.
Although delinquency rates for 2015 loans remain elevated in comparison to 2013 and 2014 vintages, Prosper is of the opinion that internal adjustments will “positively impact delinquency in the new 2016 vintages.”
Monthly loan averages stood at $13,541 per borrower with the weighted average borrower rate at 14.79%. Weighted average estimated return adjusted for expected losses came in at 7.19%.
TopConsumerReviews.com recently awarded its best-in-class 5 star rating to OnDeck
Small business ownership is on the rise. For some, the desire to own a business is fueled by numerous success stories of entrepreneurs and inventors, while others are looking for opportunities beyond their traditional 9-to-5 workplace.
One of the key features of peer-to-peer (P2P) lending is an absence of centralised balance sheet risk. In the traditional, boring model of banking, a bank holds deposits and loans on its balance sheet and earns a spread by paying depositors less than it charges borrowers.
That was the dream, this is the reality:
That snippet is from the latest annual accounts of Ratesetter, one of the UK’s top three “peer-to-peer” lenders, and shows the startup taking £2m of risk on to its own balance sheet in order to fund a borrower in “financial difficulty”.
In the broader world of business, £2m is not a huge sum of money. But this particular sum of money is important for one specific and one general reason.
First, it’s a meaningful amount of cash for Ratesetter and, according to a spokesperson, it’s the first time it’s done something like this. At the end of March this year, the accounts say, the lender had £15.4m of funds available, meaning the £2m working capital commitment accounts for about 13 per cent of its cash.
Second, it’s yet another sign that P2P lenders will take on balance sheet risk if it suits them.
On a smaller scale, another UK P2P lender, Funding Circle, also takes some balance sheet risk when writing property loans. Borrowers in that market can’t wait around to see if their request for money will be fulfilled by individual lenders on the platform, so the platform itself underwrites the loan.
But just as Laplanche had insisted “we don’t take credit risk”, so too Ratesetter’s chief executive Rhydian Lewis has argued publicly against the need for P2P lenders (more accurately called ‘online lenders’) to use their balance sheets.
RateSetter has released its accounts for 2015 – 2016.
According to their financial results, top line revenue increased 46% to £18.5 million from £12.6 million versus prior period. The increase in revenue was paired with a pre-tax loss of £4.9 million compared to a pre-tax profit of £476,000 for the year prior.
RateSetter explained that results were driven by an accounting decision to charge fees over the lifetime of the loans instead of charging upfront.
RateSetter stated that if fees had been charged upfront the peer to peer lender would have recorded a pre-tax profit.
Having turned a small profit in 2013-14 and 2014-15, proving our model, we’ve deliberately planned and delivered an increased level of investment into our business.
RateSetter shared additional information regarding their operations including;
Major investment in financial year 2015-16; will continue in 2016-17.
Loans under management increased by 70%, from £341 million on 31 March 2015, to £581 million a year later.
The number of active investors grew from 18,608 to 31,036 over the same period.
Today these figures stand at £640 million and 36,310 respectively – with a 70% increase in new active investors in the period since the EU referendum compared to the same three months last year.
“The switch from up front to recurring fees was not a decision we took lightly. However, it greatly enhances the sustainability of our business — we strongly feel that it will prove to be a very positive development and anticipate that others in our industry will follow our lead.”
Kameo is one of a number of Swedish startups in the crowdfunding business. The company has chosen a slightly different direction than Swedish peers Fundedbyme and Pepins.
Kameo is a platform where individuals partner to finance loans to specific companies, also known as crowdlending.
Harung says they are primarily focused on small construction companies that use Kameo to supplement bank loans for building projects
“Initially, we wanted to use a Saas-platform, but the one we chose wasn’t approved by the Danish FSA. So, we chose to develop our own.” said Mr. Harung.
Mr. Harung had Avanza Bank financier Bjørn Braaten onboard from the start. With nearly 40 percent of the share, Mr. Braaten is currently the largest shareholder in Kameo. The company also counts Svein S. Jacobsen as chairman, who has also served on the board of Nordea Bank.
The service has already been live in Sweden for a while, but now it’s time to bang the drum and start promoting the site.
Mr. Heldaldeclined to comment on exactly how much he has invested himself, but he says it is “in the region of a few million SEK.”
According to Roger Crook, CEO of Fintech startup Capital Springboard, the P2P market in Southeast Asia remains relatively more young compared to the US and Europe, albeit the industry is witnessing the same experience curve (uptake).
He estimates the overall bank lending in Singapore at S$350 billion a year with SMEs accounting for S$80 billion of the figure. “And if you look at P2P today, it’s probably around S$150 million market total. So, the penetration is very low. The local banks provide about 60% of loans to SMEs while foreign banks take up the rest,” estimated Crook.
Crook observed that the average Singaporean SME is under three years of age, with revenues of less than S$30 million. And with the Monetary Authority of Singapore defining SMEs as businesses with revenues of up to S$100 million, this puts a lot of smaller SMEs out of reach of bank loans.
Othera, a Sydney startup based in the BlueChilli tech incubator, provides credit analytics and investment solutions to loan originators, institutional and private investors, and small businesses.
Having launched their proprietary credit decisioning software to the market earlier this year, they have followed up with the delivery of an innovative two-part blockchain solution that will redefine how the global financial systems manage and trade debt and other asset back securities- and retail investors can get in on the action too.
Othera currently has two prototypes in testing phase, the Othera Blockchain Lending Platform and the Digital Asset Trading Exchange (both worldwide patent pending). They are linked platforms and when used together, they enable loan originators and investors the ability to directly connect and transact debt or asset backed securities with more investment transparency, lower risk and for known fixed returns. This is a radical investment proposition for an industry that has not seen this been done before.