Tuesday July 18 2017, Daily News Digest

fintech adoption

News Comments Today’s main news: Laplanche shares vision for Online Lending 2.0 at Lang Di Fintech. Elevate named a great place to work (again). FinLeap raises 39M Euro. Crunchbase-like database launches in Singapore. Today’s main analysis: Ant Financial poised for more growth. Fintech use reaching mass adoption among digital consumers. Today’s thought-provoking articles: OCC vs. New York DFS.  Ant Financial […]

fintech adoption

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

News Summary

United States

Elevate Named Great Place to Work by Independent Analysts for Second Year in a Row (4-Traders), Rated: AAA

Elevate was recently certified as a great workplace by the independent analysts at Great Place to Work®. Elevate earned this credential based on ratings provided by its employees in anonymous surveys. A summary of these ratings can be found at 

“According to our study, 87 percent of Elevate employees say it is a great workplace,” says Sarah Lewis-Kulin, Vice President of Great Place to Work Certification & List Production.

79% of Elevate employees completed a survey, resulting in a 90 percent confidence level and a margin of error of ± 2.04.

Ex-LendingClub CEO Laplanche sees new Upgrade venture growing loan volumes (Yahoo! News), Rated: AAA

Online lender Upgrade, launched by former LendingCLub Corp CEO Renaud Laplanche in April, expects to grow its loan volumes and add new asset managers to its roster of buyers in coming months, Laplanche said in an interview on Monday.

Upgrade has been testing its credit quality and risk management systems, compliance framework and other operations, as well as building up its infrastructure to deal with rising volumes before ramping up the service, Laplanche added. The company has signed up six asset managers who are already buying or plan to buy loans originated by the company, including Jefferies LLC and an unnamed Hong Kong firm, he said.

OCC vs. New York DFS: Battle for the Future of FinTech (Bloomberg BNA), Rated: AAA

In the rapidly developing world of financial technology it often is unclear who has the legal authority to regulate the activities of newly created companies. Many of these companies do not neatly fit into any established regulatory scheme. However, answering the question of who will be creating the regulatory rules for FinTech companies is important both for regulators and the FinTech companies themselves.

State Regulators Want to Regulate FinTech

Over the past several years, state regulators have been staking out positions as leading regulators of FinTech companies.

During this same period, federal regulators have announced the intention to assert control over the regulation of FinTech companies.

The OCC indicated that its authority to grant FinTech Charters to nonbank FinTech companies stems from 12 C.F.R. § 5.20(e)(1), which states that the agency may grant such charters to institutions that conduct “at least one of the following three core banking functions: receiving depositions, paying checks, or lending money.”

The Lawsuit

The DFS did not limit itself to criticizing the proposed FinTech Charters. On May 12, 2017, the DFS filed a lawsuit against the OCC in the District Court for the Southern District of New York, alleging that the OCC’s proposed FinTech Charters exceeded the agency’s statutory authority under the National Banking Act and violated the Tenth Amendment. Based on these claims, the DFS sought declaratory and injunctive relief that would declare the proposed FinTech Charters to be unlawful and prohibit the OCC from creating or issuing these charters in the absence of express authorization from Congress.

Third, even if the OCC prevails and begins granting FinTech Charters, state agencies such as the DFS will still attempt to regulate FinTech companies. This could lead to future disputes over the nature and scope of the federal preemption of state regulations, which will add to the confusion over which regulations apply to which FinTech companies.

As a result of these issues, FinTech companies have little idea what the future regulatory terrain will look like. This uncertainty makes it difficult for companies to predict the future regulatory cost of business decisions they would like to make today.

Worthy Financial Announces the Closing of Its Seed Financing Round (BusinessWire), Rated: A

Worthy, a digital investment app that redefines how Americans access investment products, diversify their portfolios and save for retirement, announced the successful closing of its seed financing round. The funds will be used for the full-scale roll-out of the Worthy mobile app, and will enable Worthy to expand its growing user base as well as to broaden the array of investment product options it offers retail investors.

Worthy provides users with the unprecedented ability to spend their way to retirement by investing retail round-ups into high-yielding fixed interest bonds, the proceeds of which fund growing businesses. In doing so, anyone has the capability to build a nest egg, enhance portfolio returns, mitigate risk, and generate both social as well as financial returns. Worthy investors grow their portfolios while simultaneously supporting American entrepreneurs.

Stash, now valued at $ 240 million, lets anyone start investing in the stock market with just $ 5 (Business Insider), Rated: A

Krieg and Robinson realized then that they had an opportunity to help.

They founded Stash, an app that lets you build a portfolio and start investing with only $5, plus it teaches you the ins and outs of the stock market.

Krieg and Robinson realized then that they had an opportunity to help.

The company launched in October 2015 and just closed on a $40 million Series C led by Coatue Management. That brings Stash’s total funding to $78 million and values the New York-based startup at $240 million, according to a person familiar with the company.

Stash makes money by charging a subscription fee of $1 per month for accounts with less than $5,000. When an account has more than $5,000, Stash charges a fee of 0.25% fee.

Stash now has about 850,000 customers nationwide.

Why Robo-Analysts, Not Robo-Advisors, Will Transform Investing (The Financial Revolutionist), Rated: A

Robo-advisors and robo-analysts are both important to enabling wealth management firms to cut costs without sacrificing quality of advice, but the importance of a robo-analyst to enhance the quality of investment advice shouldn’t be underestimated.

Today, many of the tasks performed by robo-advisors are low value-added services such as determining and communicating asset allocation strategies (e.g., 60% equities, 30% fixed income and 10% cash). In fact, these services are so low value-added that advisors cannot make money doing them unless they are bundled with higher value-added services.The value proposition of a robo-analyst is very different.

Specifically, by shining an analytical light in the dark corners of financial filings, robo-analyst technology can identify many critical data points overlooked by most research analysts today. No longer must investors rely on the headlines or management-manipulated earnings. With new technologies, investors can receive a much fuller, more comprehensive analysis of financial filings, company profits and valuation so as to make better informed decisions than ever before. As a result, robo-analyst tech raises the analytical bar universally, enabling investors to transcend the short-sighted and high turnover trading mentality that, in the long run, does more damage to investors than good.

Bankers Worry About Jobs Lost to Automation (Newsmax), Rated: A

A quarter of banking’s “front line” professionals are worried about losing their jobs to robots and artificial intelligence-boosted mobile apps, according to a LinkedIn survey.

In the poll of 1,012 pros from financial technology, investment banking, retail and corporate banking, financial and hedge fund management, accounting, insurance, and private equity, 25 percent said they are concerned automation will impact their job security – with 34 percent of retail bankers saying it is a significant concern for them.

The survey also found 42 percent of financial services pros think financial technology is a “direct threat” to traditional financial services, compared with 13 percent of professionals who work in traditional financial services, and 18 percent of all the financial professionals.

Matthew Wong of CB Insights on Insurtech (Lend Academy), Rated: A

In today’s episode of the Lend Academy podcast we have Matthew Wong of CB Insights. He has been following innovation in the insurtech space for some time and his weekly insurtech newsletter has a subscriber base of more than 18,000 people.

In this podcast you will learn:

  • Matt’s background and how he first became involved in insurtech.
  • What CB Insights does.
  • The headwinds facing insurance industry incumbents today.
  • Why millennials are not buying insurance as much as other generations.
  • Why insurtech is hot right now when it comes to VC investments.
  • Some of the most interesting companies in the insurtech space right now.
  • Why it will probably take a long time for these startups to get to scale.
  • Why Matt likes Zhong An Insurance, the first and largest online insurer in China.
  • How the incumbent insurance companies have been reacting to this surge in startup activity.
  • Why Munich Re is one of the most interesting incumbents.
  • Matt’s view on what SoFi is doing partnering with a life insurance company.
  • The endgame for many of the insurtech startups.

Solar Loans Are A Risky Investment But Not Unlike Other ABS (ValueWalk), Rated: A

Solar loans are on the rise as the industry undergoes a transition and credit investors consider whether these asset-backed securities are worth the risk. In some ways, they’re similar to other types of collateral, and credit investors are already used to dealing with the types of risk they pose. However, analysts at Moody’s warn that they’re one of the riskiest securitization asset classes.

The reason solar loans are so new is because until now, the residential solar market has been dominated by third-party ownership of solar panel systems via power-purchase agreements and leases. GTM Research projected late last year that 2017 will be the year direct ownership of residential solar panels retakes its position as the top solar financing model.

The firm projected that 55% of the U.S. residential solar capacity that’s installed this year will be bought by customers who either pay in cash or take out a loan to finance their systems.

Jefferies gives IBM Watson a Wall Street reality check (TechCrunch), Rated: A

IBM’s Watson unit is receiving heat today in the form of a scathing equity research report from Jefferies’ James Kisner. The group believes that IBM’s investment into Watson will struggle to return value to shareholders.

The narrative isn’t the product of any single malfunction, but rather the result of overhyped marketing, deficiencies in operating with deep learning and GPUs and intensive data preparation demands.

If job postings are any indication, IBM is not keeping pace with other technology companies in hiring machine learning developers.

Cascade Fintech Signs 3-Year Contract for AU10TIX ID Authentication & Onboarding Automation (WVAlways.com), Rated: A

US prepaid card and P2P payment services provider Cascade Financial Technology Corp has signed a 3-year contract to power customer onboarding and KYC with 2nd generation ID authentication and onboarding automation. AU10TIX Secure Customer onboarding (SCO) cloud service that already powers major players across financial services markets, is known not only to increase KYC robustness and fraud protection but also improve customer conversion success chances and operating efficiency.

The future of Millennial banking (Marketing-Interactive), Rated: A

In the last ten years, the fundamental assumption that financial institutions are the only avenue to financial transactions is being called to question, especially by Millennials, who are by far the most entrepreneurial generation.

In a disruptive world, what does the future of banking and finance look like? How can and should financial institutions adapt to remain relevant, or even lead in this era of change?

  • Seamless, efficient and fast

Payments are perhaps the most basic and prevalent interaction with finance for the masses, yet for the longest time, payments to businesses saw minimal innovation. P2P transfers were never a focus for banks since it was a zero commission business. This was a pain-point to Millennials, who are used to sending everything from photos to documents electronically – having to withdraw physical cash or obtaining account details to securely transfer money for lunch is considered old fashioned!

  • Flexibility and access to funds

Traditional unsecured loans might require a strong financial history or proof of steady income stream, which would be unlikely if the individual were not taking a salaried job. Cash advances on credit cards would usually incur overly high interests costs.

This creates opportunities for peer to peer (P2P) lending marketplaces such as Prosper and Lending Club, platforms which create alternative ways to access cash loans while providing alternative yields on deposits.

  • Information access

Websites such as MoneySmart, DirectAsia, GoBear and Milelion position themselves as third-party and an unbiased advisor of investment products and policies. They perform the heavy lifting of trawling through multiple sites to aggregate and analyse information, empowering consumers to make informed purchases in the shortest time.

  • The reversal to brand love

The answer lies in placing the consumer in the centre of their businesses and asking the right questions constantly to redefine scope of value-add. It is an iterative journey, and worthwhile to include consumers as co-creators in product design and transformation.

Wela, the World’s First Financial Advice App Pairing Artificial Intelligence with Real Advisors, Available for Android Devices (Marketwired), Rated: B

Wela, a personal finance app that pairs artificial intelligence (AI) and human advisors, announces today it is available for download on Android devices in addition to iOS. Wela pairs real financial advisors with AI through the personification of its digital advising algorithm, Benjamin. The first true digital advisor, Benjamin utilizes AI to track users’ daily, weekly and monthly spending habits and provides personalized advice based on their financial needs and goals. Unlike other free consumer finance apps, Wela also offers access to real financial advisors via phone, video chat or in-person at no additional cost.

The Android app contains the full functionality of the iOS version and employs the same innovative features that allow users to track all their financial accounts in one place. Wela protects user privacy by leveraging bank-level security, as well as 256-bit SSL encryption and two forms of secure authentication. Capable of aggregating data from more than 13,000 financial institutions, Benjamin pulls linked account information to run a complete analysis, helping users take steps toward financial wellness based on three main pillars: creating an emergency reserve, paying off debt and implementing an investment strategy. In addition to Benjamin’s foundational metrics, the algorithm delivers custom insights on demand, helping users stay on track to reach their short- and long-term goals.

Three Leading Lawyers Take the Helm of Manatt’s Financial Services Group (BusinessWire), Rated: B

Manatt, Phelps & Phillips, LLP, today announced new co-chairs of the firm’s industry-leading financial services group, with the appointment of Richard Gottlieb, Brian Korn and Donna Wilson.

Gottlieb is a partner in the firm’s Chicago office, Korn is based in Manhattan, and Wilson practices in Manatt’s Los Angeles office.

United Kingdom

MarketInvoice Stands at £1.34 Cumulative Invoices Funded (Crowdfund Insider), Rated: AAA

This past February, MarketInvoice shared it had funded invoices over £1.1 billion since platform launch in 2011. The online lender said it expects to top the £2 billion in invoices funded by the end of the year.

In Q2 of 2017, MarketInvoice announced that it had funded invoices from UK businesses worth £161.9 million. Compare this amount to the £103 million funded in Q2 of 2016 and the platform is generating some serious momentum.

In the first quarter of 2017, MarketInvoice generated £130 million in invoice finance.

RateSetter’s new chairman heralds benefits of provision fund (P2P Finance News), Rated: AAA

RATESETTER’S new non-executive chairman Paul Manduca (pictured) has heralded the peer-to-peer lender’s “simplicity”, citing its provision fund as an example, on his first day in his new role.

The asset management veteran said that financial innovation can sometimes result in overly-complex products that investors cannot understand, which is “complacent and out of step with what customers want”.

Activist investor increases stake in Ranger Direct Lending fund (AltFi), Rated: A

The LIM Asia Special Situations Master Fund has increased its stake in the £243m Ranger Direct Lending fund, following the portfolio’s move to a double-digit discount.

The Hong-Kong based fund had already invested in the closed-ended portfolio, which invests in a host of online lending platforms, owning less than 4 per cent. Last week it increased its holding to 5.48 per cent (on the 7th July).

Assetz Capital Continues UK P2P Expansion with Scotland Appointment (Crowdfund Insider), Rated: A

Assetz Capital is continuing its strategy of establishing a local presence across the UK with the appointment of Ian Craig as Regional Relationship Director to help manage operations in Scotland. The appointment comes as Assetz Capital says growth in Scotland continues with a target of £50 million in lending (subject to two upcoming completions). Assetz Capital says it is well on its way to becoming the second largest alternative finance lender in Scotland.

Craig will be responsible for helping local Scottish businesses acquire finance through the peer-to-peer platform and ensure borrowing with Assetz Capital runs seamlessly.

P2P lenders helped British Business Bank fund £717m of SME loans last year (P2P Finance news), Rated: A

PEER-TO-PEER lenders were among the delivery partners helping the British Business Bank (BBB) fund £717m of loans to small businesses last year, the firm’s annual report revealed.

The state-backed institution, which has channelled funds through P2P platforms such as RateSetter, Funding Circle and MarketInvoice, facilitated 94 per cent of its finance through banks outside of the ‘big four’ last year, up from 90 per cent in 2015 and 79 per cent in 2014.

The BBB has a key performance indicator of having more than 75 per cent of its finance facilitated through providers other than the four largest banks over five years, so it has already surpassed that aim.

China

Renaud Laplanche Shares His Vision for Online Lending 2.0 at Lang Di Fintech (Lend Academy), Rated: AAA

In his first public appearance in over a year Renaud Laplanche, the CEO of Upgrade, gave a presentation this past weekend at Lang Di Fintech, LendIt’s annual Chinese conference, in Shanghai. Titled Online Lending 2.0 he laid out his vision for where he thinks the online lending industry is going next.

He talked about how one of the big innovations in Online Lending 1.0 was the introduction of more data into the underwriting process. Ten years ago, which marked the beginning of Online Lending 1.0, this new data allowed more accurate underwriting of consumers. But in Online Lending 2.0 this has expanded dramatically with not just more data but new and better tools available to analyze this data.

The two key data points that are being added in Online Lending 2.0 are location data and free cash flow analysis. We need to adjust underwriting to take into account location because a consumer in New York City has a much higher than average cost of living while a consumer in Greenville, SC has a much lower than average cost of living for example. This is why Debt-to-Income (DTI) is less important than free cash flow today.

Alibaba Affiliate Ant Financial: World’s Largest Fintech Poised For More Growth (Seeking Alpha), Rated: AAA

Ant Financial, Alibaba’s (NYSE:BABA) financial affiliate, is the largest fintech in the world, and leads the pack of the world’s largest fintech unicorns, the top four of which are from China, the largest fintech market in the world: Ant Financial (US$60 billion), Lufax (US$18.5 billion), JD Finance (US$7 billion) (NASDAQ:JD), and Qufenqi (US$5.9 billion).

Alipay

Payments make up the biggest portion of fintech in China and this is expected to be the same going forward.

Mobile phones function as mobile wallets for about 425 million Chinese, or 65% of all mobile users. This is the highest penetration rate in the world. At 38 trillion yuan (US$ 5.5 trillion) last year according to data from iResearch, China is the world’s largest mobile payments market and is over 50 times bigger than the American market where mobile payments reached US$112 billion.

China’s e-commerce market is expected to continue its upward climb. Online sales represented 16.4% of China’s total retail sales in the first half of 2016 and this is expected to climb to 21.7% by 2020 which should benefit Alipaygoing forward.

Wealth Management

Wealth management is the largest area of fintech after payments.

There are about 325 million Chinese investors in Yu’e Bao, a number almost as big as the population of the United States and the fund has more assets than the rest of the top 10 Chinese peers combined.

The majority of Yu’e Bao users are millennials under the age of 30 and about 99.7% of its investors are individuals, according to its annual report, rather than companies or financial intermediaries as is usually the case at other Chinese money-market funds.

Credit scoring

Data from the World Bank’s Global Findex study revealed that the bank account ownership rate among individuals aged 15 and older is quite high in China (79% in 2014) yet credit usage is relatively low at 14% in 2014.

The People’s Bank of China covers credit profiles for just about 25% (around 350 million) of China’s 1.3 billion population and shares this data only with selected banks. This absence of reliable credit scoring is partly the reason individuals and small enterprises experience difficulty obtaining a loan from China’s state-controlled banking system which tends to favor large corporates and state-owned enterprises.

Lending

Credit data from the system will also be used to support lending activities at Ant Financial’s MYbank, an internet-only bank which provides loans to SMEs. Set up in mid-2015, the bank will extend loans up to US$800,000 as well as smaller loans that state banks usually don’t pay much attention to.

China has just 8.1 commercial bank branches and 55 ATMs per 100,000 people. This compares with US and Canada which have 28.2 branches and 222 ATMs per 100,000 people and in Europe where there are 28 branches and 81 ATMS per 100,000 people.

PBOC calls upon fintech firms to help fund system to monitor online transactions (SCMP), Rated: A

China’s central bank has urged financial technology (fintech) companies to help pay for a government-controlled monitoring system to watch over financial transactions on the internet.

Sun Guofeng, director general of the People’s Bank of China’s research institute, said the fast-growing fintech businesses have ratcheted up pressure on authorities to invest heavily in regulatory technology, or regtech, but he pointed out that it would be unfair to cover the costs by using taxpayers’ money.

Merger and acquisition may be the future trend for P2P lending sector (Xing Ping She), Rated: A

Recently, Dianrong announced that the company has purchased Quark Finance, Quark Credit Workshop and its related branches and teams. Before that, the merger has been spread for a long time. The merger seems indicate a direction for P2P lending platforms: small platforms might be realise the compliance requirements by being merged, and big platforms also could expand and increase their market share through the acquisition. Thus, mergers and acquisitions might become the next new wave of the P2P lending industry in China.

PwC: Fintech Survey China 2017 (Crowdfund Insider), Rated: A

There are three main areas of finance that are poised to be irreversibly changed, according to PwC. Consumer banking, investment & wealth management and transfers & payments are becoming pretty much all digital and data driven.

Some high level bullet points on China and Fintech include:

  • 68% of financial institutions expect to increase Fintech partnerships in the next three to five years
  • 85% believe mobile apps are the fastest growing customer channel
  • 71% regard price wars as one of the challenges of Fintech
  • Personal loans are at the top of the list for moving to Fintech over the next 5 years

Download the full report here.

European Union

German fintech factory FinLeap raises EUR39 million (Finextra), Rated: AAA

FinLeap, the startup platform behind Germany’s solarisBank, has secured EUR39 million in equity capital to support its ongoing fintech incubation programme.
Having launched twelve fintech ventures so far – including bank account switching platform FinReach, digital debt management outfit Pair Finance, insurance broker Clark, and Germany’s solarisBank – FinLeap is already active in ten European countries.

Regulating FinTech: the Way Forward (Fexco), Rated: A

On Friday 14th July Brian hosted an event at the European Parliament offices in Dublin entitled ‘Regulating FinTech: the Way Forward’. Speakers at the event were the Minister for Financial Services Michael D’Arcy TD, Neil Ryan, COO Quaternion Risk Management; Derek Butler, CEO Grid Finance; Camille Blackburn, Central Bank of Ireland, and Ruth McCarthy, Director of the FinTech and Payments Association of Ireland and CEO of FEXCO Corporate Payments.

The panel discussed regulatory responses to FinTech services at EU and domestic level, as well as examining opportunities within the FinTech ecosystem in Ireland.

Strong networks, good government supports and the presence of major innovators are enabling Ireland to stay at the cutting edge, and these factors will help Ireland to achieve its IFS2020 target for job creation in financial services.

Bricknode: Reporting To fFnancial Regulators With The XBLR Format Creates Confusion (Mondovisione), Rated: A

Financial institutions of various types are required to conduct periodic reporting to local regulators, like the Swedish Financial Inspection and EU-authorities like the European Banking Authority. Following the financial crisis of 2007/2008 numerous resolutions were past to increase regulations of the participants in financial markets. These initiatives are now being implemented regularly. Both MiFID II and MiFIR are scheduled to be implemented as of January 2018 with extensive reporting requirements and scarce information of how this should be implemented practically. During 2017, financial institutions and FinTech companies were impacted by EU-reporting in practice. One example is the reporting file format called XBLR were a lot of confusion exists.

International

Fintech Use Reaching ‘Mass Adoption’ Among Digital Consumers (The Financial Brand), Rated: AAA

Findings from the EY Fintech Adoption Index 2017, published by EY, indicate that fintech firms are approaching mass adoption among digitally active consumers. Leveraging digital technology, combined with personalized solutions, fintech firms are differentiating the customer banking experience. Simplicity, clean design, personalization, real-time insights and transparency are the defining components of these new solutions.

The four key themes that emerged from the 2017 EY Fintech Adoption Index were:

  1. Fintech services have reached mass adoption in most global markets
  2. New services and players are driving increased adoption
  3. Fintech users prefer digital channels and technologies
  4. Fintech adoption will continue to gain momentum

According to the EY report, some of the primary strategies used by fintech firms to gain traction include:

  • Offering a service for free or at a much lower cost that traditionally had a cost associated
  • Solve a problem an existing customer base
  • Provide an entirely new service
  • Create word-of-mouth advocates
  • Build a strong brand identity
  • Leverage highly targeted marketing

The most dramatic variance between fintech users and non-users is the ways consumers prefer to manage their lives. According to EY, “64% of FinTech users prefer managing their lives through digital channels, compared to 38% of non-FinTech users. FinTech users are also more likely to be users of non-fintech digital platforms, such as on-demand services (digital taxis, online food, etc.) and the sharing economy (bike and housing rentals).”

India

Alt Lending platform OxyLoans plans to raise Rs 200 cr debt (MoneyControl), Rated: AAA

The city-based alternative lending platform, OxyLoans, today said it is planning to raise a debt of Rs 200 crore to meet the requirements of borrowers.

He said they have over 240 asset-backed applications from borrowers, and expressed hope to complete the process (raising debt of Rs 200 crore) within six months.

Thatavarti further said that OxyLoans, which has set a loan disbursal target of Rs 156 crore in three years, has facilitated loans to the tune of Rs 64 crore in the last nine months.

This startup is an end-to-end digital platform for lenders and borrowers – TachyLoans (KnowStartup), Rated: A

TachyLoans is an online lending marketplace catering to both Individuals & Small and Medium Enterprises (SMEs). Their platform is based on Peer-to-Peer lending paradigm that uses the proprietary credit decision model designed with some of the best and innovative practices in the financial industry using the cutting edge technologies like Artificial Intelligence & Machine Learning and is built through state of the art technology.

Founded by Brahma, TachyLoans is based out of Bangalore and was established in the year 2016. Brahma brings to the table more than 20 years experience and expertise in Retail Banking, Sales, Marketing and Operations.

When airlines don’t have parachutes, why should P2P lending platforms have LPF? (India Times), Rated: A

The regulations will lay out the corporate structure that each of the platforms would need to follow and most importantly the DOS and Don’ts related to dealing with lenders and borrowers. However, of late, there has been an interesting trend of platforms coming up with a lender protection fund. What does it do? In case a lender loses the money he has extended to a borrower as a loan, the lender protection fund is expected to cover the losses for the investor. On the face of it, it sounds like a good idea, but if you dig deeper, there are several issues.

The flyer is aware of the risk, but he trusts the plane. You have a life vest under your seat for an emergency landing on water, but you do not have an escape pod that can be activated if a flight is about to crash. Similarly, the lender on a P2P site should be able to trust that the lending platform has built a system that can help Lender earn higher returns by mitigating risk. While a P2P platform cannot shirk its responsibilities when it comes to investor protection, having a fund to mitigate losses is not the answer. Proper systemic safeguards and strong ethics should alone suffice.

Launching LPF would in some ways signal that a platform does not have confidence in its own credit evaluation and risk-mitigation system.

Paytm invests in Mobiquest (e27), Rated: B

India’s leading digital payments and m-commerce company Paytm has made an investment in loyalty app developer Mobiquest. The funding amount was not disclosed.

Asia

Fintech non-profit launches database for financial technology startups in Singapore (Tech in Asia), Rated: AAA

The Singapore Fintech Association (SFA) announced today it has created an online directory for fintech companies based in the city-state. The database contains a short description of each company and information about its founding team, funding status, and business model.

Currently listing around 300 startups, the database is free to use and data is maintained by the companies themselves. The directory looks similar to Crunchbase and Tech in Asia’s own startup database, but it’s exclusive to fintech.

The SFA built the directory in collaboration with US data company Let’s Talk Payments and its Medici platform, which provides information and resources about the fintech industry.

South Korean FinTech Firms To Offer International Money Transfer Services (ETH News), Rated: A

According to The Korea Heraldofficials at South Korea’s Financial Supervisory Service (FSS) announced last week that they expect approximately 40 FinTech firms to provide international money transfer services starting August 15.

Per Yonhap News Agency, South Korea’s international money transfer market currently totals approximately 10 trillion won ($8.7 billion). Opening the market to FinTech firms will encourage competition and drive down costs to consumers since the companies can offer money transfer services at much lower prices than traditional banks.

Single transfers via FinTech firms will be capped at $3,000, and individual annual limits will be set at $20,000. For FinTech firms to qualify for the FSS permit, they must possess 2 billion won ($1.77 million) and a debt-equity ratiobelow 200 percent.

Authors:

George Popescu
Allen Taylor

Thursday December 8 2016, Daily News Digest

europe unemployment rates

News Comments Today’s main news: Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter. Europe introduces standardized banking API. Today’s main analysis: SoFi’sWealth Management division takes a look at Europe. Today’s thought-provoking articles: Big 3 still waiting for FCA. Banks vs. third-parties. United States Cross River  CEO comments on OCC FinTech charter. GP: ” One would […]

europe unemployment rates

News Comments

United States

  • Cross River  CEO comments on OCC FinTech charter. GP: ” One would expect that the OCC Fintech Charter would take out of business banks who’s focus is on partnering with Fintechs to enable them to originate accross state boarders easily. In a surprising statement CRB comes out in support of the OCC Charter. We will not know what CRB really thinks, and nobody wants to be seen as preventing progress. Perhaps the charter is a good thing for CRB. Or perhaps not. We will find out in a few years.” AT: “CRB supports the OCC charter, and for some very good reasons.”
  • Window of opportunity closing on alternative lending salvation. AT: “This is interesting commentary although somewhat pessimistic. There might be some evidence of a bubble, but it isn’t all doom and gloom. Every industry has its ups and downs, and for nascent ones, it’s often turbulent. What we’ve seen in 2016 is just a ripple, not a tidal wave.”
  • Credit Karma to launch free tax preparation service.GP:” An interesting effort from Credit Karma to grow beyond credit and use their existing free-lead-for-sale model in other verticals. Very interesting.” AT: “This is interesting. If Credit Karma can get the word out about their free tax preparation service, it could deliver a huge blow to paid tax preparation. It would be disruptive, to say the least, and could lead to increased competition with new models of tax advice.”
  • Speakers announced for the Context alternative lending summit in Miami, FL. GP: ” A good time of the year to visit Florida for a business pretext.”
  • 1 P2P brand that took a beating and 1 FinTech brand on the rise. AT: “This isn’t breaking news, but it does allow us to see what good company two major players in FinTech run in.”
  • Winners of OnDeck contest to meet with Barbara Corcoran. AT: “These three businesses will get a lift by receiving start-up advice from Shark Tank regular Barbara Corcoran, and OnDeck gets great exposure for helping these start-ups get a leg up.”

United Kingdom

European Union

India

International

News Summary

United States

Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter (Cross River Bank Email), Rated: AAA

Cross River Bank welcomes the announcement of the OCC’s proposed fintech limited charter as a positive development for the fintech industry, and we commend Commissioner Curry on his leadership. This initiative fosters an environment of collaboration and reflection on what is in the best interest of the consumer.

We believe the OCC’s initiative will provide a great opportunity for both fintech firms and banks to engage in a constructive dialogue with regulators. This is a step in the right direction as some banking laws may need to be revisited in the process, which could benefit the entire financial services industry.

It is our hope that this development will further stimulate innovation and economic growth by:

  • clarifying the respective roles and responsibilities of industry players;
  • encouraging regulatory agencies to provide clear and consistent guidance; and
  • providing a framework to create a regulatory environment that protects the consumer and promotes investor confidence

As the comment period advances, we look forward to hearing more details on several critical issues, including:

  • Regulatory consistency;
  • Capital requirements and the impact on participants, large and small;
  • The issue of preemption, the right of the charter, and states’ treatment alignment (exportation of home state usury laws);
  • Timeline and documentation required to obtain a charter;
  • Interplay between the limited charter and with the application of other laws such as CRA, Reg W, etc. without compromising their importance;
  • Optionality of the charter;
  • Accessibility to funds; and
  • Examination standards as well asfrequency of examination and content of examination manual.

Furthermore:

  • The FSA experience in the UK may be a good barometer of what to expect in the US.
  • We very much appreciate that there is a steep learning curve for fintech platforms as they become educated on the complexities of the banking compliance framework.
  • We identify with our partners that a change to the status quo is needed. Banks, such as CRB, are well equipped to advise and prepare the fintech applicants for a limited charter, if they so choose that route. We also believe that a top down culture of compliance is the foundation all fintech companies venturing into the charter application process must achieve. As the relationship between traditional banks and fintech companies evolves, it is important to not compromise the standards we set for ourselves and continue to work towards our common goal through a thoughtful and deliberate approach. The OCC’s proposal is the starting point of this transformative moment of our nascent industry.
  • CRB is a financial services pioneer and stands ready to help the fintech industry move forward, and we applaud the message of optimism and inclusion behind the OCC’s announcement.

The Window Of Opportunity To Save The Alternative Lending Industry Is Rapidly Closing (Forbes), Rated: A

Over the past five years, no segment of the Fintech sector has been as hot as alternative lending.

The amount of capital and attention heaped on these companies has been astonishing, with players like Lending Club, CAN Capital, and OnDeckgrowing at a breakneck pace.

Each promised to disrupt the status quo of lending, particularly in the smallbusiness space. However, I believe that the sector has failed to deliver on this promise.

Instead, plentiful capital and sky-high valuations created a bubble that only a handful of the most forward-thinking players can survive.

The competition for these sub-prime borrowers is so strong right now that companies are willing to pay up to 10% for a successfully closed lead. This is very problematic.

While specific statistics are hard to pin down, we estimate that there are approximately 1,300 companies operating in the alternative lending space today. These 1,300 organizations are competing for about 1% of the overall market, compared to about 6,500 traditional banks competing for the remaining 99%.

As a result of this race to the bottom, these lenders continue to take on ever-riskier loans.

Online lenders must shift their focus from growth to quality, with strong data analytics and monitoring taking center stage. There’s really no excuse for systemic non-performing loans anymore.

Credit Karma Launches Always-Free Online Tax Preparation Service (PR Newswire), Rated: A

Credit Karma today introduced Credit Karma Tax™, its new online self-directed tax preparation service. Credit Karma Tax provides always-free federal and state tax preparation, along with free e-filing, for its members. This announcement coincides with a new look and feel for the company.

Credit Karma Tax will launch for the 2017 tax filing season. The service will be available to U.S. consumers.

Context Summits Announces Speakers for 2017 Alternative Lending Summit (PR Newswire), Rated: A

Context Summits, the preeminent producer of investment summits for the alternative asset management industry, today announced the preliminary agenda and speaker lineup for its upcoming Alternative Lending 2017 Summit, occurring on January 30-31, 2017 at the Fontainebleau Hotel in Miami Beach, FL.

Context Summits Alternative Lending 2017 will expand its programming to two full days of keynote and panel sessions from industry leaders and investors in the sector, followed by targeted one-on-one meetings.

On the first day (January 30), Ron Suber, President of Prosper Marketplace, will deliver a morning keynote on “Current Market Environment & the Future of Alternative Lending.” This day will also feature panel sessions on securitization, transparency, portfolio stabilization, crowdfunding and small business lending.

On day two (January 31), Sam Hodges, Co-Founder of Funding Circle, will deliver a morning keynote about “The Changing Relationship with Lending Institutions & the Impact on the US Economy,” followed by several panels on capital raising, valuation methodologies, legal and regulatory risks, navigating credit risk and student loans.

Additional industry speakers include:

  • Rohit Arora, CEO of Biz2Credit
  • Stu Richards, CEO of Bredin
  • Brendan Ross, CEO of Direct Lending Investments
  • Perry Rahbar, CEO of dv01
  • Greg Zeeman, COO of Enova International
  • Sam Graziano, CEO of Fundation
  • Matthew Rodak, CEO of Fund That flip
  • Gregory Parker, CEO of Indie Crowd Funder
  • Peter Renton, Founder of Lend Academy
  • Mike Romano, Co-Founder of Lendsnap
  • Kristin Slink, Co-Founder & COO of LoanHero
  • Mark Solovy, Managing Director of Monroe Capital
  • Brew Johnson, CEO of PeerStreet
  • Clay Smudsky, Managing Director at SoFi
  • Michael Weisz, Founder & President of YieldStreet

10 Brands That Took a Beating in 2016 and 10 That Took Off (Go BankingRates), Rated: B

The peer-to-peer lending company Lending Club was on a downward path in 2016, with losses of $81.4 million in the second quarter and $36.5 million for the third quarter.

Regulators decided to gain some control over the rapidly growing online peer-to-peer lending industry, and their regulatory demands required online platforms to increase their fees. Consequently, some large investors either withdrew funds or stopped investing.

Moreover, CFO Carrie Dolan resigned, further destabilizing the company. Lending Club has eliminated high-risk borrowers and added auto loan refinancing to its mix. However, fourth-quarter predictions show an expected net loss of between $38 million to $48 million.

PayPal is on its way to world domination in global payments. The firm announced a partnership with Visa in July that allows users to pay with a Visa card, or using automated clearing house (ACH) debit payments. Also, PayPal will be available for use in physical stores where Visa contactless transactions are accepted. Such a pairing will be hard to beat. PayPal announced third-quarter revenues of $2.67 billion.

Barbara Corcoran Unveils The Winners Of Annual OnDeck Seal Of Approval Contest (Yahoo! Finance), Rated: AAA

OnDeck® (ONDK), the leader in online lending for small business, and celebrated entrepreneur Barbara Corcoran announced the three winners of the 2016 OnDeck Seal of Approval Contest —B’more Organic®, Beau & Belle Littles™, and Hardball Cider®— during a nationally televised broadcast of the Rachael Ray Show yesterday. Chosen from over 1,000 submissions, each of the winning small businesses will receive a $10,000 cash prize from OnDeck and a one-on-one coaching session with Barbara Corcoran designed to propel their businesses to the next level.

The winners of the 2016 OnDeck Seal of Approval Contest are three innovative small businesses from diverse backgrounds:

  • B’more Organic, an organic smoothie company founded by Jennifer and Andrew Buerger, promotes healthy living with a socially conscious mission. Dedicated to local, family-owned sustainable farming, B’more Organic smoothies use skyr, an Icelandic yogurt packed with protein. One percent of their sales benefit Jodi’s Climb for Hope, a non-profit dedicated to funding the development of a new viable treatment for breast cancer. The company’s biggest challenge is educating consumers about the brand while competing in the increasingly popular health food space. With Barbara’s advice and the $10,000, B’more Organic hopes to gain marketing techniques to help move more of their products off the shelf.
  • Beau & Belle Littles, maker of reusable swim diapers, started out in 2015 in Loveland, CO. What began as a few well-designed and adorable swim alternatives for Rachelle and Paul Baron’s water-loving six-month-old, Beau, quickly developed into a top-selling Amazon product – the Nageuret Swim Diaper – which grossed $250,000 in the first year. The eco-friendly diaper manufacturer also donates 5% of their profits to Compassion International to help bring children and their parents out of poverty worldwide. Leveraging Barbara’s advice, the Baron family is looking to expand their reach, develop new product lines, and pinpoint the most cost-effective way to expand.
  • Hardball Cider, driven by founder Geoffrey Dean’s passion for baseball and real hard cider, began three years ago in Mount Bethel, PA. The company’s three varieties of cider can now be found in the area’s local restaurants and, appropriately, in many of Pennsylvania’s major and minor league baseball stadiums. As an avid Shark Tank fan, Geoffrey hopes that Barbara can offer guidance on how to plan for controlled expansion across multiple market segments and to overcome his challenge of scaling production.

For a full summary of the contest winners, including their video submissions, visit the OnDeck blog at:

United Kingdom

Peer-to-peer platform Folk2Folk gets authorised by the regulator — but the ‘Big 3’ are still waiting (Business Insider), Rated: AAA

Zopa, Funding Circle, and RateSetter — the UK’s three biggest peer-to-peer lending platforms — are still waiting to be authorised over 2 years after the government announced that the FCA would authorise the sector. All three are operating under what is known as interim permissions and all three dwarf Folk2Folk, with over £1 billion lent over each platform.

You might assume that their sheer size means it takes longer to audit them. But several people I have spoken to close to the authorisation process say they have had little communication from the regulator over the last 6 months and little clarity from on timings.

Several industry sources have suggested that the complexity of some platforms, notably RateSetter, could also be delaying the process. RateSetter operates a provision fund, meant to cover investor losses, and offers fixed-term investment products. (FT Alphaville’s Kadhim Shubber has a good summary of RateSetter’s complexity here.)

The FCA declined to comment. However, it said in a statement from March: “How long it takes to consider an application depends on a number of factors including the completeness of the application, the complexity of the business, and the firm’s demonstrated compliance with regulatory requirements.”

Wellesley & Co. put on notice over late accounts, launches fundraise on Seedrs (altfi), Rated: A

Wellesley Group Investors Limited, the operator of secured peer-to-peer lending platform Wellesley & Co., has received a First Gazette notice for compulsory strike-off from Companies House. The notice required the firm to either file its accounts with Companies House within two months of 6 December 2016, or be struck from the register and dissolved.

Wellesley says that the filing of its accounts has been delayed for three reasons. The first is to allow time for a new chief financial officer (Alasdair Lenman) to review processes and procedures and implement a transition to IFRS accounting standards. The second is to complete a fundraising round (which we’ll come back to). The third is to prepare an annual review for publication alongside the financial statements, which will provide “further transparency on Wellesley’s business model, market opportunity and strategy”.

Wellesley has been flirting with the idea of a fundraise on equity crowdfunding site Seedrs for some time, and the campaign is now live. The firm is looking for a minimum raise of £1.5m, but with capacity to take on as much as £4m. It’s a convertible round, so the valuation of the firm is not clear at this stage.

Brexit and FinTech (Financier Worldwide), Rated: A

For example, peer-to-peer lending, which is a relatively new concept, is not regulated by an EU Directive. This means that firms operating peer-to-peer lending platforms do not need to worry about the loss of passporting rights as they continue to develop their business. However, equity-based crowdfunding, which is a popular alternative to traditional forms of fundraising, is regulated by the EU Markets in Financial Instruments Directive (MiFID) and will subsequently be regulated by MiFID II when it comes into effect in January 2018. Accordingly, for UK equity-based crowdfunding firms that have developed, or intend to develop, an EU customer base in reliance on passporting their services into the single market, the loss of passporting rights and access to the single market will be a cause for concern.

If such issuers were to lose those rights, then equity based crowdfunding platforms would not be able to offer those issuers’ securities to investors across the EU with the same level of ease that they currently enjoy.

Local alternative lending is enabling business growth outside the city (City A.M.), Rated: A

Many businesses are already accessing alternative finance. A recent report from the University of Cambridge showed that more than 12 per cent of new lending to SMEs came from the peer to peer sector – in 2015 alone, 20,000 small and medium-sized firms raised money this way country-wide.

In particular, the ascendancy of peer to peer lending at the local level will encourage business growth outside of the City, pooling resources into rural areas by connecting local business owners with local investors. What we are now seeing is a return to a formally bygone tradition of community-focused lending, a movement in which our business has its roots.

Unlike the high street banks, alternative local lenders can take a more holistic approach through their local knowledge and understanding of the reputation of the businesses in their local area. This means that businesses can access the right type of finance that suits their requirements.

Ultimately, we want to see businesses coming to alternative lenders first. Things are moving in the right direction, but it is now up to the lenders themselves to implement policies that attract more businesses, while at the same time protecting them at every level.

£4bn start-up funding gap bridged by friends and family (TaxAssist Accountants), Rated: B

More than 1.6 million people have given money to a close friend or family member, giving them the financial support to start or grow their business, according to new research from peer-to-peer lending platform, ThinCats.

It is estimated that £7.2bn has exchanged hands between friends and family, with entrepreneurs increasingly forced to rely on social networks to solve the lending gap.

European Union

Banks vs. Third Parties: Europe Unleashes Client Banking Data (Kabbage), Rated: AAA

For years, client data stored in banks was inaccessible to third parties. But with the help of technology (like “screen scraping” and “banking API”), the information that used to be proprietary is now available if the account owner gives their consent.

In the U.S., there are no official legal bans on these types of technologies. However, banks claim this procedure creates potential security risks, which has caused many banks to limit access to accounts when their systems detect unusual peaks of data traffic. Still, banks are not willing to provide official and secure APIs (data exchange channels) for third parties.

A different approach was taken by the European Union, which revised its Payment Service Directive (PSD) to include a common, standardized banking API that would allow interested companies to use client data stored in banks. Before the updated PSD directive, PSD2, each member state could treat solutions (based on screen scraping technology) at their own discretion: one would ban it, the other wouldn’t. With PSD2, third parties will gain access to banking information through an official and secure API.

The screen scraping technology can mine all data available to a user in a banking transactional system, while the API that is currently developed in accordance to PSD2 guidelines will probably be limited to a few basic operations, such as account balance checking or locking an amount of money necessary to make payment.

EUROPE AND THE U.K. LOOK STRONG – WEEK OF DEC. 7, 2016 (SoFi), Rated: AAA

We have recently reduced our overweight position in the United States and increased exposure to the United Kingdom and Eurozone. This shift is driven by the differing outlooks for monetary policy on each side of the Atlantic, by supportive valuations, and the market’s increased tolerance for political risk.

We can see in the chart below that the unemployment rate has followed a strikingly different path in the Eurozone when compared to the United States and United Kingdom.

The outlook for the ECB’s monetary policy is incredibly dovish, with rates not expected to go positive until 2018. The market expects the Bank of England (BoE) to raise rates at a similarly slow pace (albeit from a higher level).

Given lower interest rates and the expected gradual pace of hikes, you would expect higher stock valuations in the U.K. and Eurozone, all else being equal. After all, if the return on bonds is low then domestic investors can be expected to buy stocks, pushing up their price.

That has not been the case.

But, investors seem to be more comfortable with political risk. The widely touted fears of a Brexit and the surprise Trump victory affected asset prices for only a few days.

Economic and political risks certainly remain in the U.K. and Europe. However, we feel that when weighed against a more supportive monetary environment and better valuations the risks are well compensated.

Klarna-founder’s new innovation hub will combine tech and social impact (Business Insider Nordic), Rated: A

Immediately after Niklas Adalberth stepped down from Klarna last Fall – after ten years spent building Sweden’s first Fintech unicorn – he announced he wanted to work with charity and social impact, and not “die with a huge bag of money on my bank account”, according to Di Digital.

Now he has delivered on that statement, with Norrsken Foundation

The non-profit foundation’s core mission is to channel the tools and methods of entrepreneurship – like apps, product development and big data – into social impact areas, such as corruption and charity. The foundation will house and incubate both for-profit startups, as well as non-profit organizations.

Starting in January 2017, the Norrsken House will house some 200 social entrepreneurs from around the world

Among the startups taking residence will be two apps that will help immigrants find new job opportunities, called Just Arrived and Welcome App; the former with financial backing from Adalberth. Another one is Klarity, founded by Adalberth, “an Instagram for reporting corruption”, which enables the user to upload images, for example when people receive bribes.

Belgian crowdlending platform Look&Fin secures €3 million for growth (Tech.eu), Rated: B

Belgian Look&Fin, a crowdlending platform dedicated to SME financing, has completed its first funding round of €3 million. The funding comes from private Belgian and French investors.

Look&Fin will use the funds to increase the number of projects that it finances. The platform intends to spread to other countries and raise €150 million euros by the end of 2018.

India

One-stop shop for all your loan needs with Oxyloans (New Indian Express), Rated: A

Oxyloans was born from the idea of helping customers who had their loan applications rejected by traditional banks for various reasons, and those who seek a different option from private moneylenders who allegedly charge usurious interest rates coupled with harsh recovery methods.

Marking an entry into the Peer-to-Peer (P2P) world, apart from easy access to loans, Oxyloans promises high returns for investors as well, through its Peer-to-Peer Investing (P2PI) platform.

Moreover, the lending platform assures flexible loan repayment options, with the Equated Monthly Installments (EMI) being decided between the lender and the borrower.

International

The Largest Global Banks And How They Rank For Investments In Fintech Startups (CB Insights), Rated: A

VC-backed global fintech financing activity declined for the second straight quarter in Q3, with $2.4B raised across 178 deals, according to The Pulse of Fintech – Q3’16 published by KPMG and CB Insights. But banks are still finding opportunity in the sector.

Authors:

George Popescu
Allen Taylor

Thursday December 8 2016, Daily News Digest

europe unemployment rates

News Comments Today’s main news: Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter. Europe introduces standardized banking API. Today’s main analysis: SoFi’sWealth Management division takes a look at Europe. Today’s thought-provoking articles: Big 3 still waiting for FCA. Banks vs. third-parties. United States Cross River  CEO comments on OCC FinTech charter. GP: ” One would […]

europe unemployment rates

News Comments

United States

  • Cross River  CEO comments on OCC FinTech charter. GP: ” One would expect that the OCC Fintech Charter would take out of business banks who’s focus is on partnering with Fintechs to enable them to originate accross state boarders easily. In a surprising statement CRB comes out in support of the OCC Charter. We will not know what CRB really thinks, and nobody wants to be seen as preventing progress. Perhaps the charter is a good thing for CRB. Or perhaps not. We will find out in a few years.” AT: “CRB supports the OCC charter, and for some very good reasons.”
  • Window of opportunity closing on alternative lending salvation. AT: “This is interesting commentary although somewhat pessimistic. There might be some evidence of a bubble, but it isn’t all doom and gloom. Every industry has its ups and downs, and for nascent ones, it’s often turbulent. What we’ve seen in 2016 is just a ripple, not a tidal wave.”
  • Credit Karma to launch free tax preparation service.GP:” An interesting effort from Credit Karma to grow beyond credit and use their existing free-lead-for-sale model in other verticals. Very interesting.” AT: “This is interesting. If Credit Karma can get the word out about their free tax preparation service, it could deliver a huge blow to paid tax preparation. It would be disruptive, to say the least, and could lead to increased competition with new models of tax advice.”
  • Speakers announced for the Context alternative lending summit in Miami, FL. GP: ” A good time of the year to visit Florida for a business pretext.”
  • 1 P2P brand that took a beating and 1 FinTech brand on the rise. AT: “This isn’t breaking news, but it does allow us to see what good company two major players in FinTech run in.”
  • Winners of OnDeck contest to meet with Barbara Corcoran. AT: “These three businesses will get a lift by receiving start-up advice from Shark Tank regular Barbara Corcoran, and OnDeck gets great exposure for helping these start-ups get a leg up.”

United Kingdom

European Union

India

International

News Summary

United States

Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter (Cross River Bank Email), Rated: AAA

Cross River Bank welcomes the announcement of the OCC’s proposed fintech limited charter as a positive development for the fintech industry, and we commend Commissioner Curry on his leadership. This initiative fosters an environment of collaboration and reflection on what is in the best interest of the consumer.

We believe the OCC’s initiative will provide a great opportunity for both fintech firms and banks to engage in a constructive dialogue with regulators. This is a step in the right direction as some banking laws may need to be revisited in the process, which could benefit the entire financial services industry.

It is our hope that this development will further stimulate innovation and economic growth by:

  • clarifying the respective roles and responsibilities of industry players;
  • encouraging regulatory agencies to provide clear and consistent guidance; and
  • providing a framework to create a regulatory environment that protects the consumer and promotes investor confidence

As the comment period advances, we look forward to hearing more details on several critical issues, including:

  • Regulatory consistency;
  • Capital requirements and the impact on participants, large and small;
  • The issue of preemption, the right of the charter, and states’ treatment alignment (exportation of home state usury laws);
  • Timeline and documentation required to obtain a charter;
  • Interplay between the limited charter and with the application of other laws such as CRA, Reg W, etc. without compromising their importance;
  • Optionality of the charter;
  • Accessibility to funds; and
  • Examination standards as well asfrequency of examination and content of examination manual.

Furthermore:

  • The FSA experience in the UK may be a good barometer of what to expect in the US.
  • We very much appreciate that there is a steep learning curve for fintech platforms as they become educated on the complexities of the banking compliance framework.
  • We identify with our partners that a change to the status quo is needed. Banks, such as CRB, are well equipped to advise and prepare the fintech applicants for a limited charter, if they so choose that route. We also believe that a top down culture of compliance is the foundation all fintech companies venturing into the charter application process must achieve. As the relationship between traditional banks and fintech companies evolves, it is important to not compromise the standards we set for ourselves and continue to work towards our common goal through a thoughtful and deliberate approach. The OCC’s proposal is the starting point of this transformative moment of our nascent industry.
  • CRB is a financial services pioneer and stands ready to help the fintech industry move forward, and we applaud the message of optimism and inclusion behind the OCC’s announcement.

The Window Of Opportunity To Save The Alternative Lending Industry Is Rapidly Closing (Forbes), Rated: A

Over the past five years, no segment of the Fintech sector has been as hot as alternative lending.

The amount of capital and attention heaped on these companies has been astonishing, with players like Lending Club, CAN Capital, and OnDeckgrowing at a breakneck pace.

Each promised to disrupt the status quo of lending, particularly in the smallbusiness space. However, I believe that the sector has failed to deliver on this promise.

Instead, plentiful capital and sky-high valuations created a bubble that only a handful of the most forward-thinking players can survive.

The competition for these sub-prime borrowers is so strong right now that companies are willing to pay up to 10% for a successfully closed lead. This is very problematic.

While specific statistics are hard to pin down, we estimate that there are approximately 1,300 companies operating in the alternative lending space today. These 1,300 organizations are competing for about 1% of the overall market, compared to about 6,500 traditional banks competing for the remaining 99%.

As a result of this race to the bottom, these lenders continue to take on ever-riskier loans.

Online lenders must shift their focus from growth to quality, with strong data analytics and monitoring taking center stage. There’s really no excuse for systemic non-performing loans anymore.

Credit Karma Launches Always-Free Online Tax Preparation Service (PR Newswire), Rated: A

Credit Karma today introduced Credit Karma Tax™, its new online self-directed tax preparation service. Credit Karma Tax provides always-free federal and state tax preparation, along with free e-filing, for its members. This announcement coincides with a new look and feel for the company.

Credit Karma Tax will launch for the 2017 tax filing season. The service will be available to U.S. consumers.

Context Summits Announces Speakers for 2017 Alternative Lending Summit (PR Newswire), Rated: A

Context Summits, the preeminent producer of investment summits for the alternative asset management industry, today announced the preliminary agenda and speaker lineup for its upcoming Alternative Lending 2017 Summit, occurring on January 30-31, 2017 at the Fontainebleau Hotel in Miami Beach, FL.

Context Summits Alternative Lending 2017 will expand its programming to two full days of keynote and panel sessions from industry leaders and investors in the sector, followed by targeted one-on-one meetings.

On the first day (January 30), Ron Suber, President of Prosper Marketplace, will deliver a morning keynote on “Current Market Environment & the Future of Alternative Lending.” This day will also feature panel sessions on securitization, transparency, portfolio stabilization, crowdfunding and small business lending.

On day two (January 31), Sam Hodges, Co-Founder of Funding Circle, will deliver a morning keynote about “The Changing Relationship with Lending Institutions & the Impact on the US Economy,” followed by several panels on capital raising, valuation methodologies, legal and regulatory risks, navigating credit risk and student loans.

Additional industry speakers include:

  • Rohit Arora, CEO of Biz2Credit
  • Stu Richards, CEO of Bredin
  • Brendan Ross, CEO of Direct Lending Investments
  • Perry Rahbar, CEO of dv01
  • Greg Zeeman, COO of Enova International
  • Sam Graziano, CEO of Fundation
  • Matthew Rodak, CEO of Fund That flip
  • Gregory Parker, CEO of Indie Crowd Funder
  • Peter Renton, Founder of Lend Academy
  • Mike Romano, Co-Founder of Lendsnap
  • Kristin Slink, Co-Founder & COO of LoanHero
  • Mark Solovy, Managing Director of Monroe Capital
  • Brew Johnson, CEO of PeerStreet
  • Clay Smudsky, Managing Director at SoFi
  • Michael Weisz, Founder & President of YieldStreet

10 Brands That Took a Beating in 2016 and 10 That Took Off (Go BankingRates), Rated: B

The peer-to-peer lending company Lending Club was on a downward path in 2016, with losses of $81.4 million in the second quarter and $36.5 million for the third quarter.

Regulators decided to gain some control over the rapidly growing online peer-to-peer lending industry, and their regulatory demands required online platforms to increase their fees. Consequently, some large investors either withdrew funds or stopped investing.

Moreover, CFO Carrie Dolan resigned, further destabilizing the company. Lending Club has eliminated high-risk borrowers and added auto loan refinancing to its mix. However, fourth-quarter predictions show an expected net loss of between $38 million to $48 million.

PayPal is on its way to world domination in global payments. The firm announced a partnership with Visa in July that allows users to pay with a Visa card, or using automated clearing house (ACH) debit payments. Also, PayPal will be available for use in physical stores where Visa contactless transactions are accepted. Such a pairing will be hard to beat. PayPal announced third-quarter revenues of $2.67 billion.

Barbara Corcoran Unveils The Winners Of Annual OnDeck Seal Of Approval Contest (Yahoo! Finance), Rated: AAA

OnDeck® (ONDK), the leader in online lending for small business, and celebrated entrepreneur Barbara Corcoran announced the three winners of the 2016 OnDeck Seal of Approval Contest —B’more Organic®, Beau & Belle Littles™, and Hardball Cider®— during a nationally televised broadcast of the Rachael Ray Show yesterday. Chosen from over 1,000 submissions, each of the winning small businesses will receive a $10,000 cash prize from OnDeck and a one-on-one coaching session with Barbara Corcoran designed to propel their businesses to the next level.

The winners of the 2016 OnDeck Seal of Approval Contest are three innovative small businesses from diverse backgrounds:

  • B’more Organic, an organic smoothie company founded by Jennifer and Andrew Buerger, promotes healthy living with a socially conscious mission. Dedicated to local, family-owned sustainable farming, B’more Organic smoothies use skyr, an Icelandic yogurt packed with protein. One percent of their sales benefit Jodi’s Climb for Hope, a non-profit dedicated to funding the development of a new viable treatment for breast cancer. The company’s biggest challenge is educating consumers about the brand while competing in the increasingly popular health food space. With Barbara’s advice and the $10,000, B’more Organic hopes to gain marketing techniques to help move more of their products off the shelf.
  • Beau & Belle Littles, maker of reusable swim diapers, started out in 2015 in Loveland, CO. What began as a few well-designed and adorable swim alternatives for Rachelle and Paul Baron’s water-loving six-month-old, Beau, quickly developed into a top-selling Amazon product – the Nageuret Swim Diaper – which grossed $250,000 in the first year. The eco-friendly diaper manufacturer also donates 5% of their profits to Compassion International to help bring children and their parents out of poverty worldwide. Leveraging Barbara’s advice, the Baron family is looking to expand their reach, develop new product lines, and pinpoint the most cost-effective way to expand.
  • Hardball Cider, driven by founder Geoffrey Dean’s passion for baseball and real hard cider, began three years ago in Mount Bethel, PA. The company’s three varieties of cider can now be found in the area’s local restaurants and, appropriately, in many of Pennsylvania’s major and minor league baseball stadiums. As an avid Shark Tank fan, Geoffrey hopes that Barbara can offer guidance on how to plan for controlled expansion across multiple market segments and to overcome his challenge of scaling production.

For a full summary of the contest winners, including their video submissions, visit the OnDeck blog at:

United Kingdom

Peer-to-peer platform Folk2Folk gets authorised by the regulator — but the ‘Big 3’ are still waiting (Business Insider), Rated: AAA

Zopa, Funding Circle, and RateSetter — the UK’s three biggest peer-to-peer lending platforms — are still waiting to be authorised over 2 years after the government announced that the FCA would authorise the sector. All three are operating under what is known as interim permissions and all three dwarf Folk2Folk, with over £1 billion lent over each platform.

You might assume that their sheer size means it takes longer to audit them. But several people I have spoken to close to the authorisation process say they have had little communication from the regulator over the last 6 months and little clarity from on timings.

Several industry sources have suggested that the complexity of some platforms, notably RateSetter, could also be delaying the process. RateSetter operates a provision fund, meant to cover investor losses, and offers fixed-term investment products. (FT Alphaville’s Kadhim Shubber has a good summary of RateSetter’s complexity here.)

The FCA declined to comment. However, it said in a statement from March: “How long it takes to consider an application depends on a number of factors including the completeness of the application, the complexity of the business, and the firm’s demonstrated compliance with regulatory requirements.”

Wellesley & Co. put on notice over late accounts, launches fundraise on Seedrs (altfi), Rated: A

Wellesley Group Investors Limited, the operator of secured peer-to-peer lending platform Wellesley & Co., has received a First Gazette notice for compulsory strike-off from Companies House. The notice required the firm to either file its accounts with Companies House within two months of 6 December 2016, or be struck from the register and dissolved.

Wellesley says that the filing of its accounts has been delayed for three reasons. The first is to allow time for a new chief financial officer (Alasdair Lenman) to review processes and procedures and implement a transition to IFRS accounting standards. The second is to complete a fundraising round (which we’ll come back to). The third is to prepare an annual review for publication alongside the financial statements, which will provide “further transparency on Wellesley’s business model, market opportunity and strategy”.

Wellesley has been flirting with the idea of a fundraise on equity crowdfunding site Seedrs for some time, and the campaign is now live. The firm is looking for a minimum raise of £1.5m, but with capacity to take on as much as £4m. It’s a convertible round, so the valuation of the firm is not clear at this stage.

Brexit and FinTech (Financier Worldwide), Rated: A

For example, peer-to-peer lending, which is a relatively new concept, is not regulated by an EU Directive. This means that firms operating peer-to-peer lending platforms do not need to worry about the loss of passporting rights as they continue to develop their business. However, equity-based crowdfunding, which is a popular alternative to traditional forms of fundraising, is regulated by the EU Markets in Financial Instruments Directive (MiFID) and will subsequently be regulated by MiFID II when it comes into effect in January 2018. Accordingly, for UK equity-based crowdfunding firms that have developed, or intend to develop, an EU customer base in reliance on passporting their services into the single market, the loss of passporting rights and access to the single market will be a cause for concern.

If such issuers were to lose those rights, then equity based crowdfunding platforms would not be able to offer those issuers’ securities to investors across the EU with the same level of ease that they currently enjoy.

Local alternative lending is enabling business growth outside the city (City A.M.), Rated: A

Many businesses are already accessing alternative finance. A recent report from the University of Cambridge showed that more than 12 per cent of new lending to SMEs came from the peer to peer sector – in 2015 alone, 20,000 small and medium-sized firms raised money this way country-wide.

In particular, the ascendancy of peer to peer lending at the local level will encourage business growth outside of the City, pooling resources into rural areas by connecting local business owners with local investors. What we are now seeing is a return to a formally bygone tradition of community-focused lending, a movement in which our business has its roots.

Unlike the high street banks, alternative local lenders can take a more holistic approach through their local knowledge and understanding of the reputation of the businesses in their local area. This means that businesses can access the right type of finance that suits their requirements.

Ultimately, we want to see businesses coming to alternative lenders first. Things are moving in the right direction, but it is now up to the lenders themselves to implement policies that attract more businesses, while at the same time protecting them at every level.

£4bn start-up funding gap bridged by friends and family (TaxAssist Accountants), Rated: B

More than 1.6 million people have given money to a close friend or family member, giving them the financial support to start or grow their business, according to new research from peer-to-peer lending platform, ThinCats.

It is estimated that £7.2bn has exchanged hands between friends and family, with entrepreneurs increasingly forced to rely on social networks to solve the lending gap.

European Union

Banks vs. Third Parties: Europe Unleashes Client Banking Data (Kabbage), Rated: AAA

For years, client data stored in banks was inaccessible to third parties. But with the help of technology (like “screen scraping” and “banking API”), the information that used to be proprietary is now available if the account owner gives their consent.

In the U.S., there are no official legal bans on these types of technologies. However, banks claim this procedure creates potential security risks, which has caused many banks to limit access to accounts when their systems detect unusual peaks of data traffic. Still, banks are not willing to provide official and secure APIs (data exchange channels) for third parties.

A different approach was taken by the European Union, which revised its Payment Service Directive (PSD) to include a common, standardized banking API that would allow interested companies to use client data stored in banks. Before the updated PSD directive, PSD2, each member state could treat solutions (based on screen scraping technology) at their own discretion: one would ban it, the other wouldn’t. With PSD2, third parties will gain access to banking information through an official and secure API.

The screen scraping technology can mine all data available to a user in a banking transactional system, while the API that is currently developed in accordance to PSD2 guidelines will probably be limited to a few basic operations, such as account balance checking or locking an amount of money necessary to make payment.

EUROPE AND THE U.K. LOOK STRONG – WEEK OF DEC. 7, 2016 (SoFi), Rated: AAA

We have recently reduced our overweight position in the United States and increased exposure to the United Kingdom and Eurozone. This shift is driven by the differing outlooks for monetary policy on each side of the Atlantic, by supportive valuations, and the market’s increased tolerance for political risk.

We can see in the chart below that the unemployment rate has followed a strikingly different path in the Eurozone when compared to the United States and United Kingdom.

The outlook for the ECB’s monetary policy is incredibly dovish, with rates not expected to go positive until 2018. The market expects the Bank of England (BoE) to raise rates at a similarly slow pace (albeit from a higher level).

Given lower interest rates and the expected gradual pace of hikes, you would expect higher stock valuations in the U.K. and Eurozone, all else being equal. After all, if the return on bonds is low then domestic investors can be expected to buy stocks, pushing up their price.

That has not been the case.

But, investors seem to be more comfortable with political risk. The widely touted fears of a Brexit and the surprise Trump victory affected asset prices for only a few days.

Economic and political risks certainly remain in the U.K. and Europe. However, we feel that when weighed against a more supportive monetary environment and better valuations the risks are well compensated.

Klarna-founder’s new innovation hub will combine tech and social impact (Business Insider Nordic), Rated: A

Immediately after Niklas Adalberth stepped down from Klarna last Fall – after ten years spent building Sweden’s first Fintech unicorn – he announced he wanted to work with charity and social impact, and not “die with a huge bag of money on my bank account”, according to Di Digital.

Now he has delivered on that statement, with Norrsken Foundation

The non-profit foundation’s core mission is to channel the tools and methods of entrepreneurship – like apps, product development and big data – into social impact areas, such as corruption and charity. The foundation will house and incubate both for-profit startups, as well as non-profit organizations.

Starting in January 2017, the Norrsken House will house some 200 social entrepreneurs from around the world

Among the startups taking residence will be two apps that will help immigrants find new job opportunities, called Just Arrived and Welcome App; the former with financial backing from Adalberth. Another one is Klarity, founded by Adalberth, “an Instagram for reporting corruption”, which enables the user to upload images, for example when people receive bribes.

Belgian crowdlending platform Look&Fin secures €3 million for growth (Tech.eu), Rated: B

Belgian Look&Fin, a crowdlending platform dedicated to SME financing, has completed its first funding round of €3 million. The funding comes from private Belgian and French investors.

Look&Fin will use the funds to increase the number of projects that it finances. The platform intends to spread to other countries and raise €150 million euros by the end of 2018.

India

One-stop shop for all your loan needs with Oxyloans (New Indian Express), Rated: A

Oxyloans was born from the idea of helping customers who had their loan applications rejected by traditional banks for various reasons, and those who seek a different option from private moneylenders who allegedly charge usurious interest rates coupled with harsh recovery methods.

Marking an entry into the Peer-to-Peer (P2P) world, apart from easy access to loans, Oxyloans promises high returns for investors as well, through its Peer-to-Peer Investing (P2PI) platform.

Moreover, the lending platform assures flexible loan repayment options, with the Equated Monthly Installments (EMI) being decided between the lender and the borrower.

International

The Largest Global Banks And How They Rank For Investments In Fintech Startups (CB Insights), Rated: A

VC-backed global fintech financing activity declined for the second straight quarter in Q3, with $2.4B raised across 178 deals, according to The Pulse of Fintech – Q3’16 published by KPMG and CB Insights. But banks are still finding opportunity in the sector.

Authors:

George Popescu
Allen Taylor

Thursday November 17 2016, Daily News Digest

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News Comments Today’s main news: Zopa plans to start a digital-only bank. Renaud Laplanche kicks off a rival to Lending Club. Two Avant securitization break triggers. Today’s main analysis : Surge of online loan defaults. Today’s thought-provoking articles: Yirendai’s CFO Dennis Cong discusses P2P rules in China. Indonesian P2P companies seek regulatory clarity. Fundbox reveals volume of small […]

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News Comments

United States

  • Fired Lending Club CEO starts another online lending company. GP:” I strongly believe that Renaud didn’t do anything really wrong and that he demonstrated his unbelievable accumen in building Lending Club. I would back him any day of the week to build a new company in the space. Yes, he did round some corners, but who has never made any mistakes ? And I think one learnes from past experiences. I am very bullish on Credify ” AT: “Anyone who didn’t see this coming is blind. There was no non-compete in place. What else would a pioneer of an industry do?”
  • A surge of online loan defaults rocks the industry. GP:” There are 2 extremes in the industry. On one side companies like SoFi who have outstanding performance and on the other side companies like Circle Back who demonstrated a track record of poor underwriting. Underwriting is the foundation of all online lenders and some understood it and some have not. I don’t think that online lending has any particular correlation with underwriting quality. However, because hundreds of new companies debuted in online lending, of course some of them will do a poor job at it.” AT: “Critics have been warning aboout a P2P bubble for quite a while now. Is this evidence of it? Or perhaps online lenders have simply taken too many risks and this is a self-correcting hurdle the industry must get through to move on to higher mountains. I favor the latter.”
  • Fundbox analysis shows $ 825 billion in small business unpaid invoices. AT: “There have been an untold number of small businesses tank due to cash flow issues caused by big businesses paying invoices late, slowly, or not at all. While interesting, and not really news to small business owners, this PR looks like an attempt at free publicity.”
  • U.S. consumers increasingly default on marketplace loans. GP: ” 2 Avant securitizations, done by Jefferies, and 1 done by Morgan Stanley, breached triggers. The 2 Jefferies ones did so this month. In addition, a CircleBack securitization done by Jefferies is expected to do so as well. The common points ? Loans made to sub-prime borrowers on average, and 3 out of 4 securitized by Jefferies.”
  • Jefferies files for second LC ABS. GP:” Jefferies securitizations have a poor reputation in general in p2p lending. However, Lending Club has all interest for this second securitization to go well. We think Lending Club has the expertise and means to do a good evaluation of what they are selling. In all cases, we are curious to see how this package will sell.”
  • Blockchain investment declines with few exceptions.
  • Baltimore-based eOriginal raises $ 26.5 million.

United Kingdom

China

India

Asia

United States

Fired LendingClub CEO Sets Up Rival Lender Nearby (The Wall Street Journal), Rated: AAA

A few blocks from the San Francisco headquarters of LendingClub Corp., its ousted chief executive is plotting a comeback to the industry he pioneered.

Renaud Laplanche has started a company called Credify Finance Corp. that will make loans via the internet just like LendingClub, according to corporate filings in several states.

Credify is still in the early stages of development. The company hopes to start extending credit to consumers in 2017, according to people familiar with the firm’s plans. It estimates it will generate $50 million in revenue next year, according to one state filing.

Credify was incorporated in Delaware on May 31, less than a month after Mr. Laplanche left LendingClub, according to state records. He didn’t sign a noncompete agreement with LendingClub that likely would have prevented him from starting a rival firm, according to people familiar with the matter.

Over the summer, Mr. Laplanche’s new company set up offices in a high-rise in San Francisco’s financial district and started the process of registering to do business in more than a dozen states, according to filings in those states.

Credify is being funded with Mr. Laplanche’s money and that of outside investors, people familiar with the matter said.

Surge In Online Loan Defaults Sends Shockwaves Through The Industry (Zero Hedge), Rated: AAA

Online lenders were supposed to revolutionize the consumer loan industry. Instead, they are rapidly becoming yet another “the next subprime.”

We first started writing about the P2P sector in early 2015 with cautionary pieces like and “Presenting The $77 Billion P2P Bubble” and “What Bubble? Wall Street To Turn P2P Loans Into CDOs.” Things accelerated in February of this yearwhen we first noted that substantial cracks were starting to show in the world of P2P lending, and more specifically, with LendingClub’s inability to assess credit risk of its borrowers that were causing the company to experience higher write-off rates than forecast.

Until today, that is, when we learned that – as expected – there has been a spike in online loan defaults by US consumers, sending a shockwave through the online lending industry: a group of online loans that were packaged into bonds is going bad faster than lenders and bond underwriters had expected even after the recent volatility in the P2P market, in what Bloomberg dubbed was “the latest sign that some startups that aimed to revolutionize the banking industry underestimated the risk they were taking.”


However, that was a linear deterioration which had no impact on mandatory cash covenants, at least not yet. With the breach of trigger points, online lenders have officially entered the world of binary outcomes, where the accumulation of enough bad loans will have implications on the underlying business and its use of cash.

And while P2P may be the “next” subrpime, there is always the “old” subprime to fall back on to get a sense of the true state of the US consumer :as Bloomberg adds, the percentage of subprime car loan borrowers that were past due reached a six-year high in August according to S&P Global Ratings’ analysis of debts bundled into bonds.

Fundbox Reveals How $ 825B In Unpaid Invoices Stagnates U.S. Small Businesses (PR Newswire), Rated: A

Fundbox, the leading cash flow optimization platform for small businesses (SMBs), today released findings from its customer data on invoice payments. The study, designed to better understand the overall financial health of SMBs, revealed the huge economic impact of unpaid invoices. Over the last 12 months, the total amount in unpaid invoices across all U.S. SMBs is approximately $825 billion.

Cash flow gaps from unpaid invoices are often cited as the most challenging hurdle for SMBs. Looking back at 12 months of data, Fundbox analysis found that 22 percent of invoices are unpaid at any given time. This equates to $84,000 per small business in unpaid invoices. In some cases they never receive payment.

U.S. Consumers Are Increasingly Defaulting on Loans Made Online (Bloomberg), Rated: A

Delinquencies and defaults are reaching key levels known as “triggers” for at least four different sets of bonds. Breaching those levels will force lenders or underwriters to start paying down the bonds early. Avant Inc. and its underwriters, for example, are going to have to begin to repay three of its asset-backed notes, according to a person with knowledge of the matter.

Online loans have shown other signs of weakening.

LendingClub’s founder, Renaud Laplanche, wanted to change banking as we know it, but many online lenders are now finding themselves in uncharted territory. Steve Eisman, a money manager who famously predicted the collapse of subprime mortgage securities, said some firms have been careless and that Silicon Valley is “clueless” about the work involved in making loans to consumers. Non-bank startups arranged more than $36 billion of loans in 2015, mainly for consumers, up from $11 billion the year before, according to a report from KPMG.

Lenders themselves are talking about the heavy competition for customers. Jay Levine, the chief executive officer of OneMain Holdings Inc., one of America’s largest subprime lenders, said last week that “the availability of unsecured credit is currently the greatest that has been in recent years,” although he said much of the most intense competition is coming from credit card lenders. OneMain, formerly part of Citigroup, is taking steps to curb potential losses by requiring the weakest borrowers to pledge collateral.

Jefferies arranges second Lending Club ABS (Global Capital), Rated: A

Jefferies filed deal documents with the US Securities and Exchange Commission (SEC) on Tuesday for Lending Club Issuance Trust Series 2016-NP2. The transacation will be backed by near-prime unsecured consumer loans from Lending Club. Jefferies previously debuted a $105m unrated private offering from the same shelf in August.

Blockchain Capital Dries Up as Big FinTech Deals Decline (CoinDesk), Rated: B

Cash is drying up for bitcoin and blockchain startups amid a broader decline in FinTech funding, according to new research from KPMG and CB Insights.

The report, published today, shows that for the third straight quarter, VC investment in startups using distributed ledgers declined.

While enthusiasm for the technology remains, the report said that companies shouldn’t expect additional funds until countless proofs-of-concept emerge on the market.

But while venture capital for blockchain innovation is on the decline, different regions tell different stories.

The US and Denmark are listed as the top countries participating in blockchain investment, while a particularly slow quarter for Europe is blamed in part on uncertainly following Britain’s decision to leave the European Union.

An “uptick” in Asian investment in blockchain and financial technology more generally speaking is credited with the region’s interest in its potential to help it expand beyond its traditional borders.

Fintech company eOriginal raises $ 26.5 million (Technical.ly), Rated: B

A Baltimore fintech company closed a $26.5 million transaction of its own this week.

The equity round for eOriginal was led by Philadelphia-based private equity firm LLR Partners. eOriginal was founded in 1996, and has offices in the Camden Yards warehouse.

With the new funding eOriginal is looking to expand its digital transaction management offerings, which help companies execute businesses transactions with electronic signatures and document verification. The tools are used for marketplace lending, as well as vehicle and equipment banking.

United Kingdom

Peer-to-peer giant Zopa to launch digital bank (The Telegraph), Rated: AAA

Zopa, Britain’s biggest peer-to-peer website, has applied for a banking licence to launch a “next generation bank”, which will sit alongside its existing investments business.

When launched, the platform says it will offer term-deposit accounts for savers and revolving lines of credit for borrowers, although a spokesman admitted the company does not yet know “exactly what they will look like”.

By applying for a banking licence Zopa says its customers will receive protection through the Financial Services Compensation Scheme. However, it expects this will only apply to banking customers and not to its peer-to-peer customers.

It expects the licence approval to take up to two years.

A year of growth for online lending. October industry news (Funding Circle), Rated: AAA

Last month our team was the lead sponsor at LendIt, the largest conference dedicated to connecting the global online lending community. The conference, which took place over two days in London, had more than 900 attendees from across the world. Samir Desai, Funding Circle CEO and co-founder, delivered the keynote speech where he discussed the importance of being good at both the ‘fin’ and the ‘tech’. Watch the video to learn about the three ‘mega-trends’ that make online lending an unstoppable force and read this piece to hear why Samir believes our sector is about to enter a ‘golden age’.

Another way for investors to diversify their online lending portfolio is to look at the various investment trusts that are now in this space. These funds allow investors to diversify either across regions or platforms. Learn more about the opportunities and risks involved with these investments in This is Money. Remember, when you lend, your capital is at risk.

Where is the most profitable area in the UK for buy-to-let landlords? (Home.co.uk), Rated: A

According to Lendinvest’s latest buy-to-let index, Luton in Bedfordshire is currently the most profitable area in the UK for buy-to-let landlords, with rental prices increasing by almost 10%, the largest increase in the country.

On an annual basis landlords in Luton generated a 4.81% yield, while home prices rose by 13.63% and experienced rental price growth of 9.58%.

The top 10 buy-to-let postcodes

Yield Capital gains Rental price growth Transaction volume growth
Luton 4.81% 13.63% 9.58% -4.71%
Stevenage 4.31% 14.78% 8.95% -9.81%
Enfield 4.76% 17.36% 2.21% -4.35%
Northampton 4.87% 8.11% 8.33% 4.38%
Dartford 4.78% 13.02% 7.98% -10.22%
Southend-on-Sea 4.56% 11.79% 5.95% -4.63%
Romford 5.26% 13.47% 2.48% -1.55%
Chelmsford 4.26% 12.15% 5.29% -3.96%
Southall 4.88% 14.01% 3.97% -10.36%
Twickenham 4.48% 15.49% 2.34% -9.16%

OFF3R launches index for AIM (Every Investor), Rated: A

OFF3R analysed major equity crowdfunding platforms including Seedrs, Crowdcube, Syndicate Room, Angels Den, Envestors and The House Crowd. The P2P lending platforms examined were Zopa, Landbay, RateSetter, ArchOver, Marketinvoice, Lending Works, Funding Circle and Thin Cats.

The Index shows that equity crowdfunding raised a combined total of £216.25m and P2P facilitated a combined lending of £2.6bn.

The Index shows that the average amount lent per month was £197m across the eight platforms. April 2016 showed a 7% drop due to a number of factors, such as Lord Turner’s negative comments about the P2P market and Lending Club’s loan book discrepancies.

China

Yirendai’s Cong: China’s P2P Rules a Great Step Forward (Bloomberg), Rated: AAA

P2P Industry Struggles to Conform to New Restrictions (Caixin Online), Rated: A

Three months after Beijing imposed strict rules on the peer-to-peer (P2P) lending industry, many firms have made little progress in meeting some of the key requirements.

One major problem they have is ensuring borrowers don’t exceed newly imposed credit limits, industry experts said. Another is that many P2P firms haven’t met the new requirement to find a bank to be the custodian of the funds they get from their client investors, who are essentially the lenders.

Among the many restrictions the policy introduced was a ceiling on how much a person can borrow through P2P platforms. The limit for each individual through one website was set at 200,000 yuan ($29,200). A person cannot borrow more than a combined 1 million yuan from P2P lenders regardless of how many platforms they use.

The policy gave all P2P firms until the end of August 2017 to ensure compliance.

Even with the grace period, however, about 90% of the existing platforms will likely have to shut down, primarily because of the loan-size requirement, said Xu Jianwen, founder and CEO of rrjc.com. Xu’s P2P lending website is ranked by industry data provider wdzj.com as among the country’s top 50 such sites.

India

SRS Fin Tech launches alternative lending platform OxyLoans (Business Standard), Rated: AAA

City-based financial technology startup SRS Fin Tech Labs today announced the launch of ‘OxyLoans’, an alternative lending platform, and said it aimed to disburse USD 1 billion by 2024.

Armed with proprietary algorithms showcasing credit score, underwriting and agreement preparation, OxyLoans enables investors and lenders to assess borrowers and offer them the option of accepting or rejecting an application, he said, adding that it also provides business as usual loans in partnership with banks.

Asia

Indonesian P2P industry seeks regulatory clarity (Nikkei Asian Review), Rated: AAA

Peer-to-peer (P2P) online lending is surging in Indonesia, prompting regulators to prioritize the establishment of a legal framework to protect the industry — a move that participants say is essential to fulfil its potential.

The market is growing rapidly, driven in part by the 65% of the population of 250 million that is excluded from the banking system. The value of online transactions will reach $14.8 billion in 2016 from $8 billion in 2013, according to Bank Indonesia, and is expected to grow to $130 billion by 2020.

The Financial Services Authority, known by its Indonesian initials OJK, has made financial technology regulation a priority, and is focusing on the payment services industry, which is seen as the sector with the highest growth potential.

The OJK has said that security and consumer protection are its main concerns, given Indonesia’s history of fraud in various business sectors. It has also taken heed of a large P2P scandal in China, in which Ezubao, one of China’s highest profile P2P lending sites, cheated more than 900,000 investors of $7.6 billion.

While the OJK’s move has been viewed positively by the market, there are still concerns that the regulator lacks sufficient financial technology knowledge to be able to establish an effective legal framework. Some P2P companies have described the agency as inexperienced in financial technology matters, urging it to involve the industry in discussions about regulations and laws.

Indonesia also lacks a secondary market in which P2P lenders and investors can offload risk to secondary buyers, which is regarded as crucial for P2P businesses in profitable but risky emerging markets.

Authors:

George Popescu
Allen Taylor