Tuesday November 27 2018, Daily News Digest

Reliable Consumers for JP morgan, Citigroup, wells fargo and Bank of America

News Comments Today’s main news: LendingClub hits $1B in CLUB certificate issuance. Zopa boosts Augmentum Fintech fund returns. Monzo breaks record on crowdfunding round. Yirendai’s critical stage to regain growth. Judo gets $350M in funding. Today’s main analysis: How late-cycle expansions turn into recessions. Today’s thought-provoking articles: LendingClub does more lending during holidays. Turning LendingClub into a financial health club. Why […]

Reliable Consumers for JP morgan, Citigroup, wells fargo and Bank of America

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News Summary

United States

LendingClub Reaches $ 1bn in CLUB Certificate Issuance (Lend Academy) Rated: AAA

LendingClub has seen issuance of their new CLUB Certificate reach $1bn in less than a year after first announcing the pass-through security product last December at their investor day. The CLUB Certificate was created to make it easier for institutions to invest in LendingClub originated loans.

Loan for the holidays: Lending Club loans out more during holiday shopping months (Thinknum Media) Rated: AAA

This year was a record-breaking season for holiday shopping, as online spending surged 23.6% according to Adobe Analytics.

But where is all that money coming from? While some consumers saved up for the season, others might have turned to loans, such as ones offered at Lending Club ($NYSE:LC), to pay down huge gifts or refinance debt from credit card spending.

Outside of March 2016 — a month during an unusual stretch of time right before its chief executive Renaud Laplanche stepped down and a federal subpoena came in — Lending Club typically has the most loans issued by dollar amount in the months before the holiday season, according to data tracked since 2013.

Source: Thinknum

LendingClub CEO Working to Turn It Into a Financial Health Club (Web Pro News) Rated: AAA

The CEO of LendingClub, Scott Sanborn, says that they are really looking to make membership in the club mean something and are working to take Lending Club and turn it into a ‘financial health club’ that will help people successfully manage expenses. He says that LendingClub helps by shining a spotlight on credit card debt which is the first step to doing something about it.

A Looming Crisis in People’s Overall Financial Health

We are seeing really an epidemic happening which is incomes have been stagnant for more than 20 years. All of people’s major expenses, healthcare, college, housing, is going up and it’s creating a real looming crisis in people’s overall financial health and it’s something that people just aren’t talking about. Close to half of Americans have credit card debts and they are more than twice as likely to talk about spousal infidelity than they are about the fact that they have credit card debt that they need to manage. We believe that by shining a spotlight on the problem it’s the first step to helping people do something about it.

Top fintech VCs explain how PayPal missed a golden opportunity and why they wouldn’t invest in LendingClub today (Business Insider) Rated: AAA

PayPal is arguably one of the biggest success stories to come out of Silicon Valley in the last 20 years. It launched the careers of Peter Thiel, Elon Musk, and Max Levchin and paved the way for other members of the “PayPal mafia” to make seed investments in a next generation of startups.

“OnDeck and LendingClub have scaled, strong businesses now, but you’d never invest in those companies as startups today,” Harris said. “I don’t think you would look at unsecured personal lending or small-business lending, where you have to go out and acquire customers in the wild, with no special sauce. That’s 10-year-old thinking.”

The current model many VCs advocate is for companies to find ways to offer additional services, like loans, to existing customers. Acquiring new customers can be expensive, and there’s a competitive advantage when you underwrite or target new services to existing customers, because they know more about them.

PeerIQ’s Lender Earnings Webinar; Bank Exec Comments on the Credit Cycle (Peer IQ) Rated: AAA

One of the main themes that we explored in the LEI was how late we are in the credit cycle. Most C-level executives were extremely are sanguine on the economy but are nonetheless taking precautions. PeerIQ’s view is “The good news — and the bad news — is that conditions don’t get better than they are now.” We recommend reviewing Bloomberg Julie Verhage’s “US Banks See Good Times Ahead Even as Many Prep for Downturn” for more.

Source: Peer IQ

How Late-Cycle Expansions Turn into Recessions

The current US expansion that started in June 2009 is the longest on record at over 113 months. Late expansions are characterized by low unemployment, high consumer confidence, high asset values. We currently observe a near 50-year low unemployment rate, near record high consumer confidence, and the highest level of consumer credit outstanding (although well below peak per-capita debt levels).

Ironically, it is these solid economic indicators that are responsible for the party coming to an end. In a simplified model, credit availability expands to the marginal borrower (e.g., new entrants, cov-lite corporate loans, thin-file credits, etc.) just until the marginal consumer or corporate loans creates more losses than expected. Lenders feel the pinch on credit performance and on funding due to rising rates. Lenders individually tighten lending leading to a reduction in the supply of credit on an aggregate basis.

PeerIQ’s Q4 2018 Lending Earnings Insights Report (Lend Academy) Rated: A

PeerIQ released their Q4 2018 Lending Earnings Insights Report which points to a number of themes showing the economy is strong but CEOs are striking a cautious tone. Delinquencies and defaults continue to be low as consumers have seen their wages rise and taxes drop. Lenders are increasing reserves as they anticipate credit to renormalize in the near future, saying the economy right now was too good to be true.

Read the Full Report here.

Excerpts:

Regulators are increasingly focusing on the greater role of non-banks in consumer lending.Large money center banks continue to pull-back from riskier loans such as small business and consumer lending. Large banks instead have increased their credit facility volume 6x since 2010. FDIC Chair Jelena McWilliams cites the significant role of non-banks in origination as potential for systemic risk. The FDIC is contemplating granting ILC charters to non-banks – a major shift.

Delinquencies and charge-offs in FinTech asset classes are near all-time lows, although charge-offs on prime credit are increasing. Enova (Subprime) and OnDeck (Small Biz) are seeing near cycle-low charge-offs, while LendingClub (Prime) is seeing higher delinquencies on newer vintages. The change in LendingClub’s charge-off estimates across loan grades was mixed. Charge-offs on grades B and C are estimated to be higher by 28 bps and 16 bps respectively QoQ.

Small Businesses Are Poised for Growth, but Are Lenders Ready? (Business Wire) Rated: AAA

Source Business Wire

Betterment, Merrill Edge, Fidelity’s Go Lead the Pack in Digital Advice Branding, Claims Cerulli (Financial Advisor IQ) Rated: A

Robo-advice pioneer Betterment is the pack leader in digital platform awareness among investors, a new Cerulli Associates study reveals. But Merrill Lynch and Fidelity aren’t far behind, the study shows.

Among the more than 5,500 people polled, the Betterment brand was known by 15% of respondents, Merrill Lynch’s Merrill EDGE by 13%, and Fidelity’s Go by 12%. Trailing the three frontrunners was Charles Schwab’s Intelligent Portfolios and Vanguard’s Personal Advisor Services, which were each recognized by 10% of respondents, the study reveals.

For its digital platform marketing awareness study, Cerulli polled investors under the age of 45 earning more than $125,000 annually and with more than $250,000 in investable assets.

5 Business Loans You Can Get Without Being Profitable (NAV) Rated: A

With the Bureau of Labor Statistics reporting over 415,226 startup firms less than 1 year old in 2017, it’s apparent that this category of business will need funding like never before. However, business loans are tricky. On hand, they tend to offer a larger line of credit to companies than personal loans or lines of credit. On the other hand, qualifying can be difficult and often requires you to provide at least two years of documentation that you are profitable.

For the brand new business that hasn’t managed to turn a profit (yet), what is left? How can you get a cash infusion into your business in time to expand, add employees, support a product launch, or refinance existing debt? The following loans are a bit non-traditional, but just might be exactly what you are looking for in your quest for funding during your startup years.

TD Bank Launches New Digital Mortgage Experience Powered by Roostify (Business Wire) Rated: A

Roostify, a digital lending platform provider, announced that TD Bank, America’s Most Convenient Bank®, has leveraged Roostify’s technology to provide customers with a digital mortgage offering. This digital experience combines the latest in lending technology with a human-centric approach that gives TD Bank’s customers an accelerated, low-stress path to home ownership.

The deployment now provides prospective homebuyers with useful tools to assist them in finding a loan that fits their needs and budget. Leveraging Roostify’s proprietary DecisionBuilder lead tool, TD Bank’s Digital Mortgage allows consumers to explore which loan products they qualify for, right from a simple-to-use web page. Consumers can then move on to apply for their chosen loan in minutes, and follow a streamlined, all-digital process for moving their loan through closing. With easy access to TD Bank’s expert loan team, homebuyers can enjoy both the convenience of a digital solution and reassurance of expert guidance as they navigate one of the most significant transactions of their lives.

The Lending Alternatives Hopeful Investors Should Know Inside And Out (Forbes) Rated: A

People buy real estate for many reasons — generating cash flow, a tax write-off, appreciation value. Some of the greatest profits are made when buying real estate in a down market. Seasoned investors and fortunate newcomers who purchased coastal residential property from 2012-2017 are sitting on healthy equity appreciation as well as competitive interest rates in the 3.5-5% range.

The traditional path to buy a property is to obtain financing through banks, credit unions or a mortgage company. Following the 2008 housing crisis, traditional lenders implemented more strict guidelines: Stellar credit scores from 740 and above, stable employment, a low debt-to-income ratio, six months or more of liquid reserves.

For hopeful investors unable to meet these demands, alternatives are to pay all cash or to finance the purchase using hard money financing or a private lender. By utilizing one of these two methods, buyers also do not have to be concerned with the mounds of paperwork lenders requested. There are some advantages and disadvantages by using either type of alternative financing.

How Marcus by Goldman Sachs took to the streets of New York to market its high yield savings account (Tearsheet) Rated: A

Marcus, the online consumer bank by Goldman Sachs, has been running a man-on-the-street ad campaign about recent research the company conducted. According to the survey, 60 percent of Americans with savings accounts don’t know the interest rate on their savings account, and *more than half* of Americans with savings accounts (56 percent) opened theirs without exploring other options.

Dustin Cohn, head of brand and marketing communications at Marcus, joins the podcast to talk about the survey and why Marcus chose interest rates as a differentiator. We unpack the recent advertising campaign and explore the recent acquisition and integration of personal finance app, Clarity Money.

Ross: Easy money and the rise of ‘neo banking’ (My NorthWest) Rated: A

Banks are entering a whole new era. It’s called neo banking. Because it’s so “neo.”

You just sign over your paycheck, and suddenly you can buy things with a wave of the phone. As far as I can tell, you just look romantically at what you want to buy – and it’s yours!

You can even get loans. But it’s friendlier because neo banks don’t have loan officers who look at your income statement and say “Ha ha ha, you’re kidding!”

United Kingdom

Zopa helps boost Augmentum Fintech fund returns (Peer2Peer Finance) Rated: AAA

ZOPA’S latest funding round has boosted the value of Augmentum Fintech’s portfolio, helping the fintech investment fund report net asset value growth of 5.1 per cent in its maiden financial results.

UK-listed Augmentum Fintech unveiled its first financial results on Monday since launching in December 2017. It reported that a recent £60m private fundraise by Zopa had boosted the value of its stake in the lender by £3.5m to £22m.

Augmentum Fintech Sees Portfolio Rise In First Interims Since IPO (Morning Star) Rated: A

Augmentum Fintech PLC reported its first interim results Monday since listing on the London Main Market in March.

In the period from incorporation on December 19 last year to September 30, the fintech venture capital investor had a net asset value total return of 5.1%.

At September 30, Augmentum Fintech’s NAV per share was 104p. The company’s net assets at September 30 totalled GBP97.8 million.

The company’s portfolio fair value increased 62% since the company listed in March to GBP53.9 million on September 30 from GBP33.3 million on March 13.

Monzo confirms record-breaking UK fintech crowdfunding round (City AM) Rated: AAA

Digital bank Monzo has today announced it will be heading back to the crowd for the last chunk of its series E fundraising round, with a target of up to £20m.

The raise, first reported exclusively by City A.M. in August, will be the largest fintech crowdfunding round in the UK to date.

Going live on Exeter-based platform Crowdcube, existing Monzo investors will get early access to the round from 3 December. The round will then be opened up to other Monzo customers, who can invest up to £2,000.

Banking app Monzo explores expansion into high-cost loan products (The Telegraph) Rated: A

Monzo, the financial technology start-up,  is considering launching loans aimed at “the Wonga segment” of the market, its chief executive Tom Blomfield said.

Mr Blomfield said he hopes in future to offer loans to people with poor credit scores who may not be able to access more traditional loan products.

UK Competition and Markets Authority Questions PayPal Acquisition of iZettle (Crowdfund Insider) Rated: A

The UK Competition and Markets Authority (CMA) has issued a statement on the PayPal acquisition of iZettle – an event that was announced in early 2018 and closed in September. PayPal purchased Sweden based iZettle for $2.2 billion as the company seeks to gain access to iZettle’s point of purchase credit platform.

The CMA stated:

“… the CMA has found that PayPal could face insufficient competition in the UK after acquiring its market-leading rival. The finding raises concerns that the merger could result in customers, which include small and medium-sized businesses, paying higher prices or receiving a lower quality service.”

The CMA added that iZettle could have provided strong competition for PayPal if the company had not moved to take over the Fintech.

NatWest digital loan ceiling lifted to £700K (FinExtra) Rated: A

NatWest has today announced the launch of a new digital platform which will be available to all NatWest business and commercial customers allowing them to apply online for secured and unsecured loans of up to £750,000 – the largest digitally available loans in the industry.

The new platform, available to all business and commercial banking customers who use online banking, will allow applicants to complete the process in a matter of minutes, with a decision being communicated to customers usually within 24 hours, sometimes immediately. This fully digitised application process streamlines the customer experience and reinforces NatWest’s position as the UK’s leading commercial lender.

NatWest’s development underlines the bank’s commitment to further improving its digital offering and builds on the success of its ESME Loans platform, which provides loans of up to £150,000, Mettle – the standalone digital business current account, and LenderComm, the first production use of blockchain in the syndicated loan marketplace.

Arbuthnot Commercial Asset Based Lending supports acquisition of Euxton Tile Supplies Ltd (Bridging Loan Directory) Rated: B

Arbuthnot Commercial Asset Based Lending (ABL) has supported the acquisition of Euxton Tile Supplies Ltd (Euxton) by Earle Group with a £2m asset based lending facility, comprising a £1,250,000 confidential invoice discounting line and a £750,000 cash flow strip to provide the desired level of headroom in the transaction.

Wonga to automate compensation claims (TNT Magazine) Rated: A

Wonga, the payday lender that went into administration this August, plans to automate its compensation claims process – sparking fears that customers will lose out. Accounting firm Grant Thornton is in the process of winding up Wonga and is legally obliged to assess the claims of all customers who believe that they have been mis-sold loans.

The Guardian reports that in a bid to cut costs the administrators are creating an automated ‘adjudication tool’ that will decide which claims to pay out on, rather than processing each claim manually.

In its October letter to creditors, Wonga said that it had been receiving roughly 200 to 500 compensation claims every day after it went into administration on 30 August. Before that date the company had received 24,000 complaints from customers and a further 9,500 had been escalated to the Financial Ombudsman Service.

Proplend Milestone: Surpasses £50 Million in Online Lending (Crowdfund Insider) Rated: A

Less than six months after surpassing £40 million in online lending, UK based peer to peer lender in the property space, Proplend, announced on Monday it has now reached £50 million in online lending. According to the lender, all loans are commercial property backed, comprising a mix of bridging and mortgage lending risk-adjusted returns, which were funded by the lending platform’s growing band of Classic account, Pension account, and ISA “Lenders.” Proplend also revealed:

“By circumventing the traditional banking system, our Lenders have access to secured, inflation-beating fixed income returns whilst providing creditworthy commercial borrowers with an invaluable source of fast, flexible, interest only alternative funding. Having facilitated its first loan in 2014, Proplend has since accommodated over 50 commercial facilities, each loan typically funded within 24 hours by more than 100 participating Lenders. With a maximum loan term of 5 years, 20 loans have fully repaid to date with more than £15m capital returned and over £4m interest earned across the book – much of it tax-free.”

China

Yirendai Is At A Critical Stage To Regain Growth (Seeking Alpha) Rated: AAA

Yirendai Ltd (NYSE: YRD) released the third quarter 2018 earnings on November 12, with diluted Earnings per ADS of RMB2.43 (USD$0.35), decreased from USD 0.5 from second quarter. Considering the application of ASC 606, the adjusted earnings per ADS (if ASC were not adopted) is RMB 5.89 (USD 0.86), increased from RMB 4.91 in the same period from last year.

  1. The volume of newly originated loans has been decreasing, more than the loan volume decrease of the industry. We can compare YRD’s loan volume with the industry, as well as some competitors, as below.
    Source: Seeking Alpha

WeiyangX Fintech Review (Crowdfund Insider) Rated: A

Ping An Invests $47 million in Berlin-based Fintech Startup Finleap

The Ping An Insurance Group’s Global Voyager Investment Fund led a €41.5 million ($47 million) investment towards Berlin-based Fintech company Finleap.

Internet Finance Association of Jiangxi Province Issues P2P Exit Guidelines

On November 16, the Internet Finance Association of Jiangxi Province issued the “Guidelines for the Exit of Online Lending Intermediary Organizations in Jiangxi Province (Trial)”, stating that online lending institutions should put the rights of protecting lenders at the top of their exit work and minimize the loss of lenders. The guidelines specifically mention that when a P2P institution exit, it needs to take eight steps, namely:

(1) to file an application for withdrawal;

(2) to set up an exit work leading group;

(3) to issue an exit notice and close some platform functions;

(4) to prepare a business list of circumstances and formulate an exit plan;

(5) submit an exit plan and other related materials;

(6) publish relevant information such as the exit plan;

(7) implement the lender’s funds as planned, and steadily settle the stock items;

(8) completion of the exit.

European Union

Lendingblock Receives In-Principle Licence as DLT Provider in Gibraltar (Crowdfun Insider) Rated: AAA

Securities lending platform for digital assets Lendingblock has issued a statement indicating that the Gibraltar Financial Services Commission (GFSC) has made an in-principle decision to grant the firm authorization as a Distributed Ledger Technology (DLT) provider. Lendingblock adds that it continues to work closely with the GFSC as it seeks the full DLT licence.

Lendingblock says that following this decision, and the successful testing period, the Lendingblock platform is open for institutional onboarding in preparation for launch.

Market participants are now able to sign up for access and will be able to commence borrowing and lending  BTC, ETC, BCH, and LTC beginning early next year.

Digital lenders ‘must keep investing to grow’ (IBS Intelligence) Rated: A

Research from digital ID specialist Mitek has concluded that there is a huge opportunity for digital lenders to grow, if they continue to invest in digitisation.

The findings have been published as a whitepaper, authored by fintech research practice Autonomous NEXT. Titled European Digital Lenders, it looks into the state of the digital lending market in Europe.

He said the report found that venture capital investment is still flowing into the space and is set to hit $800m in Europe: “The UK alone has originations of over $6bn, and Europe-wide, the addressable market is $150bn – with current digital lender revenues estimated at $400m,” he added. “Moreover, the market shows impressive originations growth, with a 60% CAGR since 2013.”

Australia/New Zealand

Australian challenger bank Judo gets $ 350m funding boost (Fintech Futures) Rated: A

Melbourne-based challenger bank Judo Capital is edging towards a bank licence with a $350 million debt facility agreement with firm Credit Suisse.

The bank shared the news with Business Insider. David Hornery, co-founder and co-CEO of Judo, says the facility will provide further depth to Judo’s funding for Australian SMEs.

Short-term loan, long-term debt: Superloans under investigation after slew of complaints (Stuff) Rated: A

Short-term money lender Superloans has come under attack from people who say they target poor and vulnerable consumers, charge extremely high interest rates, and resort to illegal means for recouping their money.

The Commerce Commission has launched an investigation into Superloans after it received more than 20 complaints against the company since 2013 – several from financial advisors.

Copies of the complaints, obtained under the Official Information Act, reveal one complainant alleged Superloans threatened to take repayments out of a person’s pay cheque, illegally.

Another woman complained that a Superloans’ employee only looked at her bank statements before approving her loan application, and did not check her credit.

India

IvyCap Ventures makes first investment in P2P lending through Lendbox (The Ecomonic Times) Rated: AAA

Credit marketplace LendBox has secured the first investment by a large institutional investor in India’s peer-to-peer lending space, raising Rs 6 crore in a pre-series A financing round.

Major Trends Witnessed this year in Fintech (Entrepreneur) Rated: A

Online lending platforms have been quite phenomenal in filling in the credit void within our country. But how accomplished are they in doing so? MSME loans are considered as the trickiest element of lending given the sheer opacity that exists within the sector. This opacity has decreased the share of scheduled commercial banks in MSME credit from 95% to 90% between December 2015 and March 2018. The credit growth turned negative post-demonetization. During the same period, the share of loans by NBFCs (which are essentially used by online lending platforms) nearly doubled growing with an annual average of 35 per cent, largely because of cutting-edge technologies such as Artificial Intelligence and Big Data.

5 ways to reduce risk in P2P lending (The Economic Times) Rated: A

Lending money is a risky affair. However, there are ways to minimize the risk. Since peer-to-peer (P2P) lending is a relatively new concept and the RBI regulations for the P2P sector are barely about a year old, here are five effective ways in which you can reduce the risk to ensure getting your money back. Of course, with interest.

Understand the platform
You should try to understand how the online P2P model works before lending money on it. An investor should be aware how the money is lent on the platform and what are the risks involved in lending money on the platform.

Do not hesitate to ask the P2P player about the overall volume, defaults, recovery process and likely returns. You can do your own research or simply contact the P2P company through emails, chats or phone calls.

Do not go overboard
Sure, P2P platforms can offer your higher double-digit returns. But that doesn’t mean you should lend your entire in P2P lending. Choose the amount you wish to invest and then diversify,” says Raghavendra Pratap Singh, Co-Founder, i2ifunding.

Ex-Infosys CFO & Director V. Balakrishnan Joins Association of NBFC P2P Platforms as Patron Member (Indian Web) Rated: B

Within a month after the formation of NBFC-P2P industry bodyAssociation of NBFC P2P Platforms, the association today announced the joining of finance industry veteran & Former Infosys Chief Financial Officer V Balakrishnan as Patron Member.

P2P lending industry players have formed association to represent the Indian NBFC-P2P industry at various national as well as at international forums. The P2P operators participating in the operations are OML P2P, Monexo, PaisaDukan, Finzy, Cashkumar, Liquiloans, Micrograam, Lendsmartp2p, Peerlend and Indiamoneymart. The association aims to establish formal lines of communication between various government and regulatory authorities on matter of compliance and to create awareness about the industry and to work towards enhancement of public trust in this sector.

Asia

HonestFund Raises $ 12.2 million (USD) in our Series B round (Honestfund Email) Rated: AAA

HonestFund is one of the largest peer-to-peer lending players in South Korea. We were founded in 2015 and currently have about USD 300 million in cumulative originated loans. We have recently raised USD 12.2 million in our Series B round from the top VC firms, IT giants, and the largest financial institutions (i.e. Shinhan Bank and Hanwha Life Insurance) in South Korea.

Canada

Unlicensed online payday lenders are operating in New Brunswick (Global Newswire) Rated: A

Unlicensed online payday lenders are targeting New Brunswickers, warns the Financial and Consumer Services Commission.

FCNB has been receiving complaints from consumers about inappropriate collection practices by payday lending businesses not licensed to operate in the province.

“We are hearing that these businesses are contacting consumers who have fallen behind in their payments at their place of employment and in some cases, threatening to seek repayment from their employer. Sometimes they are contacting them up to 50 times a day,” said Alaina Nicholson, director of Consumer Affairs at FCNB. “It is against the law for a payday lender in the province to contact you at your place of work, or to contact your employers or coworkers to collect a payday loan that is late.”

Subscribe Technologies Upgrading Lendertech With Peer To Peer Lending Service And Integrating Platform Into Gingerly Marketplace (Stockhouse) Rated: A

Subscribe Technologies Inc. is pleased to announce it is upgrading the Company’s Lendertech financial technology platform with financial service auction and matchmaking features and has begun the initial phase of integrating the technology with the Company’s flagship Gingerly small business software application marketplace.

LenderTech facilitates greater and broader access to capital for those in need, including across a number of traditional and emerging areas such as mortgages, commercial lending, auto loans, student loans, and small business loans, among others.

As intended, our development team is now integrating this money lending service into the Gingerly software application marketplace and dashboard, with the addition of new Peer-to-Peer matchmaking features, designed for SMEs to have greater and faster access to lenders in one clean and simple to use interface.

IOU Financial Inc. Joins the FINSYNC Lending Network  (PR Newswire) Rated: B

 IOU FINANCIAL INC., a leading online lender to small businesses (IOUFinancial.com), is pleased to announce its strategic partnership with FINSYNC, Inc. (“FINSYNC”).

Small businesses of all types rely on FINSYNC to visualize, manage and project cash flow and analyze loan options.  IOU’s non-collateralized financing product has been assimilated by FINSYNC, enabling users who apply for financing through FINSYNC to quickly access IOU’s affordable, flexible financing for working capital and expansion.

Africa

Nigeria’s mixed signals on fintech (Euromoney) Rated: AAA

Earlier this year, the country’s central bank and the Nigeria Inter-Bank Settlement System opened a regulatory sandbox to enable budding fintech companies to develop new products freely and securely, becoming one of the first African countries to do so.

Even before that launch, Nigeria was frequently touted as the continent’s next big fintech hub, set to compete with South Africa and Kenya.

Bitcoin exchange NairaEx, online lender KiaKia and invoicing platform Payant are just three of the firms that have made a name for themselves in short order.

Authors:

George Popescu
Allen Taylor

Thursday May 31 2018, Daily News Digest

places that owe the most in student debt

News Comments Today’s main news: Online lenders tighten rules against default wave. UK P2P lenders join effort to overturn Brexit. Consumer credit sees the most financial complaints in UK. Today’s main analysis: Where is the most student debt? Today’s thought-provoking articles: How regulations will impact Ant Financial. The 7 most innovative fintech companies. Where is the fintech innovation right […]

places that owe the most in student debt

News Comments

United States

United Kingdom

China

International

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News Summary

United States

Online lenders tighten rules as default wave rattles investors (American Banker) Rated: AAA

It’s gotten a lot harder to borrow money from the raft of fintech firms looking to bring online lending into the mainstream.

Besieged by a wave of defaults after several years of rapid growth, the biggest online lenders have been forced by bond investors to tighten underwriting standards. Social Finance, Prosper, LendingClub and Avant now demand higher average credit scores and offer shorter maturities to boost the quality of loans they repackage into asset-backed securities.

The shift in the $30 billion market comes after a swarm of borrower defaults in the past three years rattled ABS investors. It also marks a coming of age of sorts for the fintech startups that offered cut-rate loans to build a customer base. Now, with rates rising and a potential economic slowdown looming, the move toward higher-quality from the push for quantity has taken on added urgency.

According to Kroll, the weighted average of FICO credit scores of Prosper’s loans packaged in ABS increased to 717 in a March 2018 deal from 704 in a sale two years earlier.

LendingTree Study: Which Places Have the Most Student Debt? (PR Newswire) Rated: AAA

LendingTree today released its study on the places with the most student debt. To determine whether there are geographic variations in student debt, LendingTree analysts looked at a sample of anonymized users who logged into My LendingTree in the first quarter of 2018 and calculated how many had student loans, as well as the other reported statistics related to their balances.

Source: Lending Tree

Wells Fargo Plans to Expand Auto Lending Again (Lend EDU) Rated: A

Wells Fargo & Co. expects to increase its auto lending again. In mid-2017, Wells Fargo decided to reduce car financing and tighten its underwriting standards. In February 2018, the firm said it intended to finish consolidating its regional car loan centers by April, and that lending would expand within two quarters, reported Bloomberg.

For lenders in a $1.2 trillion U.S. auto loan market, they face a landscape with falling vehicle resale prices, making it difficult for them to soften losses from repossessing cars when borrowers default.

Principal Financial acquires digital advice startup RobustWealth (Investment News) Rated: A

Principal Financial Group is acquiring financial technology startup RobustWealth to improve its own technology offering and expand distribution capabilities among the banking, broker-dealer and registered investment adviser channels.

Principal also sees the RobustWealth’s platform — which includes digital advice, goal-based investment tools and client onboarding — as providing the foundation for a direct-to-consumer robo-adviser in the future.

What to Do When You Lend Family Money But They Can’t Pay You Back (Entrepreneur) Rated: A

Like many people, Entrepreneur Network partner Jeff Rose once has convinced himself it was a good idea to loan money to a family member. In reality, the situation can get messy when this close personal connection cannot return the investment. This does not mean Rose has given up on peer-to-peer lending, which is a helpful tool that can streamline the loan process.

OppLoans Named One of the Country’s Best Workplaces by Inc. Magazine (Markets Insider) Rated: A

Online lender and service provider OppLoans has been listed as one of the country’s 2018 Best Workplaces by Inc. Magazine. The award determination was based on employee survey results in areas like benefits, perks, executive leadership and opportunities for career development.

OppLoans enjoys a rating of 4.9 out of 5 stars on Glassdoor as well as a 98 percent retention rate and 99 percent approval rating for CEO Jared Kaplan. Last December, Glassdoor rated the Chicago-based startup as the sixth-best place to work nationally for small-to medium-sized businesses. The firm was named #219 on the 2017 Inc. 500 list of fastest-growing companies and the third-fastest growing technology company in Chicago by Built in Chicago.

Autoloans Company Lendbuzz Secures $ 30 Million in Funding (CTech) Rated: A

Boston-headquartered car financing service Lendbuzz Funding LLC has raised $30 million in financing, the company announced Tuesday. The round was led by BHI, the U.S. division of Israel-based Bank Hapoalim, by Viola credit, the growth and venture lending arm of Israel-based Viola Group, and by U.S.-based ConnectOne Bank.

The company, which currently offers its services in most U.S. states, says it reviews loan requests within 24 hours and transfers money immediately upon approval. Since its establishment, the company raised $43 million in both debt and equity funding.

Fifth Third Bank eBus offers free financial advice (The Blade) Rated: B

For the next week, a large bus operated by Fifth Third Bank will travel throughout Toledo, offering residents free money management advice and job-searching services.

The bus, called the Fifth Third Bank Financial Empowerment Mobile, or eBus, was located at the Lucas Metropolitan Housing Authority on Wednesday, and though it’s operated by Fifth Third, its services can be used by any residents no matter which bank they use, said Loretta Humphrey-Cruz, community development relationship manager.

PLI 23rd Annual Consumer Financial Services Institute (JD Supra) Rated: B

The third location of PLI’s 23rd Annual Consumer Financial Services Institute will take place in PLI’s San Francisco Conference facility and via concurrent live Webcast on June 25-26, 2018.  This will be the first time in many years that the Institute will take place in San Francisco.  Since the first location of this event in NYC on March 26-27 was well-attended, and the second location in Chicago on May 7-8 was sold-out, anyone interested in attending the program in San Francisco is encouraged to act quickly to register.

United Kingdom

Tech Entrepreneurs Launch Campaign to Reverse Brexit Vote (Forbes) Rated: AAA

Could Britain’s leading technology entrepreneurs derail Brexit? More than 80 innovators and investors from across the UK’s tech sector have launched a new group, Tech for UK, which will campaign for a meaningful vote on the final terms of the Brexit agreement that the British Government is currently negotiating with the European Union. Such a vote should give Britons the option to vote for the UK to remain in the EU, Tech for UK argues.

The group boasts a string of high-profile business leaders from the tech sector, including Martha Lane-Fox, best-known as the co-founder of Lastminute.com, Giles Andrews, one of the founders of peer-to-peer lending pioneer Zopa, and George Bevis, the CEO of Tide Bank. It also features leading venture capital and private equity investors, such as Simon Murdoch, the managing partner of Episode 1 Ventures.

Consumer credit made up the bulk of financial complaints last year (Peer2Peer Finance) Rated: AAA

The FOS annual report for 2017/2018 found consumer credit products, which includes some peer-to-peer lending as well as payment protection insurance, accounted for the most complaints at 36,349 last year, up 40 per cent.

The Ombudsman upheld 47 per cent of complaints, up from 45 per cent a year before.

There was also an eight per cent increase in complaints about unsecured loans to 6,909, while credit card complaints were up 15 per cent to 11,073.

How to invest in property without buying a home (City A.M.) Rated: A

Over the past few years, property-oriented investment companies have been coming in thick and fast, bolstered partly by the launch of the Innovative Finance Isa (IFISA).

The minimum investment can be as little as £10, which isn’t a patch on the huge deposits needed to buy a house (the average deposit in London is more than £90,000).

Robo-rumble: Will FCA scrutiny stop digital services moving further towards advice? (Money Marketing) Rated: A

The FCA reviewed seven firms offering online discretionary investment management services and three firms giving automated advice.

It found service and fee-related disclosures at most online discretionary investment management firms in its sample were unclear.

Some firms did not make clear whether their service was advised, non-advised, discretionary or non-discretionary. Others also compared their fee levels with their peers in a “potentially misleading way”. For example, they compared a non-advised, non-discretionary service with a discretionary service solely on a cost basis without explaining the difference in the nature of the service.

FIVE SPEAKERS JOIN ‘FUTURE OF FINTECH’ EVENT LINE-UP (Business Cloud) Rated: B

Five speakers from the world of FinTech have been confirmed for BusinessCloud’s The Future of FinTech event in London on 12 July.

Nicola Horlick, a former investment banker turned high-profile player in the peer-to-peer (P2P) lending market, is the headline speaker for the breakfast event.

China

How Will Ant Financial, China’s Fintech Giant, Be Impacted By New Regulations? (Forbes) Rated: AAA

Regulations are expected to be implemented on money market funds. Ant Financial’s main money market fund, Yu’e Bao, has been rated as much weaker than its 

GXChain (GXS) Review – A Blockchain-based Commercialized Data Marketplace (Chain Bits) Rated: A

With the proliferation of data on the internet, there are many pain points for individuals. Since you do not own your data, someone can sell you information and personal data without sharing profits. In addition, data is often scattered among multiple platforms, making it difficult to manage. Finally, data is difficult, if not impossible, for individuals seeks to monetize and earn from it. They don’t know how the blockchain could be applied in this scenario to better their lives.

GXChain solves these pain points by obtaining user consent before collecting and storing user data on a blockchain.

GXChain wants to be the data trading network that protects user privacy and offers copyright protection and usability at the same time. It has real-world applications in insurance, online lending, consumer loans and banks.

International

7 most innovative Fintech companies right now (Forex News Now) Rated: AAA

Stripe-is one of the most valuable Fintech startups. It was worth over $9 billion in 2016.

Ant Financial-has a market capitalization of $60 billion, which makes it the most valuable Fintech company in the world.

Atom Bank-has raised over $290 million in financing.

Robinhood-Valued at $5.6 billion, offers its customers a mobile wallet that allows trading shares and exchange-traded funds without paying commissions.

Lufax-is an online peer-to-peer lending platform. It matches borrowers with investors for a fee of 4% and is valued at over $18.5 million.

SoFi-is valued at over $4.4 billion.

Coinbase-has over 13 million users and makes more than $1 billion in revenue a year.

Where In the World Is Fintech Innovation? (Bank Innovations) Rated: AAA

China is also at the forefront of innovation. The government is actively cultivating fintech there.

Fintech companies like Qudian, LuFax, and ZhongAn (owned by Ant Financial), China’s first online-only insurer, are now emerging. Investment bank CLSA ranks ZhongAn as the sixth most valuable e-finance company in the world. The Chinese government has also designated development zones, such as Zhongguancun and Shenzhen, for innovation industries.

Source: Bank Innovation
Australia

Banks’ $ 220m bill for dudding customers to rise ‘significantly’ (The Canberra Times) Rated: A

Banks are set to refund “significantly” more than the $220 million already set aside for financial advice clients who were charged for services that were never provided, as institutions search their files for customers who were ripped off.

What you should look for when buying a partially renovated house (Domain) Rated: A

A recent survey by online lender State Custodians found 52 per cent of people would be open to a renovation project for their next purchase but only 19 per cent of people would be keen on tackling a full fixer-upper.

On the other hand, a quarter of respondents would prefer taking on a partially renovated home as a project, with Millennials in particular more open to the idea of buying a half-renovated house.

India

ICICI Bank also wants to be a fintech (The Ken) Rated: A

In mid-2017, B Madhivanan, the chief technology and digital officer of ICICI Bank, met Rohan Angrish, the chief technology officer of online lender Capital Float. Madhivanan had questions about online lenders’ small-ticket loans. Fintechs like Capital Float lend to underserved segments like kirana stores that banks don’t normally touch.

Asia

Funding Societies partners with UOB Malaysia to accelerate small business growth (Deal Street Asia) Rated: AAA

United Overseas Bank (Malaysia) Bhd has partnered with regional peer-to-peer financing platform Modalku Ventures Sdn Bhd (Funding Societies) to connect startups and small businesses with alternative financing solutions.

Through the partnership, startups and UOB Malaysia’s small business customers will be able to raise up to RM500,000 directly from individual and institutional investors using Funding Societies’ platform without the need to pledge collateral.

Fintech firms need support from banks: SBV (Vietnam News) Rated: A

The fintech (financial technology) sector is facing difficulties of capital mobilisation shortage, inadequate legal framework and banks’ hesitance in co-operation, said Lê Minh Hưng, Governor of State Bank of Việt Nam (SBV).

Hưng told the Việt Nam fintech forum 2018 held in Hà Nội on Wednesday that fintech and banks could contribute to expand financial universalisation, and promoting hunger eradication and poverty reduction while enhancing social equality and sustainable economic development.

Japan’s Gumi Games Founder Launches $ 30M Crypto Fund (Blockchain News) Rated: A

Japanese mobile games publisher gumi today launches a fund to invest in promising global cryptocurrency companies. With USD 30 million in initial investment secured, the venture capital fund is moving to open up the Japanese crypto startup market to international investors, honing in on a target that has, up to now, been a struggle to access and understand.

While the Japanese yen accounts for over 56 percent of Bitcoin volume, gumi believes that there is lack of understanding of Japan’s crypto market and the project’s leaders are keen to fill a void in the country that was also the first to legalize bitcoin.

He has helped to raise over USD 250 million to date for companies such as Bee Token, the Decentralized AirBnB and crypto lending platform Celsius Network.

Africa

Fintech in Africa: what investors are looking for (Fin24) Rated: AAA

According to EcoBank, more than 57% of all mobile money accounts globally can be found in sub-Saharan Africa, with the African fintech market set to grow from $200m currently to $3bn by 2020.

A recent study by McKinsey found room for growth in meeting unmet banking needs in Africa. These include borrowing, saving, and investing across the continent. South Africa alone is set to see an increase in banking revenues of $4bn over the next five years.

Kenya calls for regulation of fintech lenders (IT Web) Rated: A

A boom in  by fintech firms in Kenya has led to an increase in predatory lending practices, the country’s central bank governor said yesterday, calling for the sector to be regulated.

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Canada

One set of borrowers at greater risk are Canada’s 1.14 million small businesses, defined as companies that employ up to 99 workers. Statistics Canada reports that small businesses represented 98 per cent of all businesses, employed 70 per cent of workers, and generated 30 per cent of each province’s GDP on average. This category includes startups and high-growth firms, which represent Canada’s best hope for job creation and economic growth.

Fortunately, small businesses now have an alternative source for loans called peer-to-peer (P2P) lending. These online platforms match borrowers and investors directly and can provide loans cheaper and faster than traditional sources. How can that be? The answer is technology.

Fintech Select Records a Net Profit of $ 986k for Q1 Ending March 31 2018  (GlobeNewswire) Rated: A

Fintech Select Ltd. is pleased to announce that its financial statements for the Q1 ending March 31 2018 have resulted in a net profit of $986k. Q1 2018 Financial Statements and Management Discussion & Analysis (“MD&A”) have been filed on SEDAR.

Authors:

George Popescu
Allen Taylor

Alternative Lending In Canada

Canada alternative lending

In many ways, Canada has long lived under the shadow of the U.S. The alternative lending industry has proven to be no exception. The last few years, however, have seen Canada turn the corner on marketplace lending (MPL). With MPL markets around the world (especially Europe, U.S., and UK) maturing, startups around the world are […]

Canada alternative lending

In many ways, Canada has long lived under the shadow of the U.S. The alternative lending industry has proven to be no exception. The last few years, however, have seen Canada turn the corner on marketplace lending (MPL).

With MPL markets around the world (especially Europe, U.S., and UK) maturing, startups around the world are scampering to find new locations and new opportunities to tap. Though it is not fair to term Canada as a new entrant to the fintech ecosystem, it has finally garnered the attention as one of the most promising alt-lending hubs.

Canadian Alternative Lending Numbers

 

Source: Alternative Finance Benchmarking Report 2016

As the above image indicates, the Canadian alternative finance industry is on a strong growth momentum. All segments of alt-lending (consumer, SMB, real estate) have shown multiple times growth albeit on a very low base. With a GDP of over 1.5 trillion dollars, it is a massive market for lenders. The current size of the market does not even reach a billion dollars, a paltry sum for a country with household debt over 2 trillion dollars.

A Supportive Regulatory Framework

Ontario Securities Commission (OSC), the fintech regulatory body of Canada, has been very supportive of the industry and is one of the major tailwinds for alternative lending in Canada. In October 2016, OSC started LaunchPad with an aim to support and guide fintech startups with compliance. This initiative was followed by the establishment of a Fintech Advisory Committee in January 2017, which helps apprise the regulator on fintech-related developments as well as regulatory challenges faced by businesses. Feedback from the committee will be used by OSC to frame future regulatory guidelines.

Lending startups will still have to comply with different regulatory compliance obligations depending on what kind of financial services are offered by them. Also, depending on which province they are operating in, they will be subject to different regulation and licensing requirements.

Leading P2P Lenders in Canada

  • Lendified was founded in 2015 by Troy Wright and is headquartered in Toronto, Ontario. It raised $80 million in a couple of funding rounds. Small business owners can apply online in under 10 minutes, receive an instant quote, and get funded in as fast as 48 hours. It offers loans ranging from CAD $5,000 to CAD$150,000 with APR ranging from 8%-18% and terms ranging from 6-24 months.
  • Borrowell was founded in 2014 by Andrew Graham and Eva Wong.  It’s also headquartered in Toronto. It recently raised over $57 million in funding for aggressive expansion and offers free credit score monitoring, personal loans, and product recommendations. It has lent over $10 million to over 10,000 customers. Borrowell offers loans ranging from $1,000-$35,000 and offers two terms–36 months or 60 months–with APRs ranging from 5.6%-25%.
  • Financeit was founded in 2011 by Casper Wong, Michael Garrity, and Paul Sehr. Headquartered in Toronto, it has managed from inception to raise over $38 million and recently was acquired by Goldman Sachs for an undisclosed amount. Over the years, Financeit has worked with over 7,000 merchants and processed over $2.5 billion in loan applications. Financeit offers a platform that allows businesses to offer consumer financing to their customers from various devices in Canada. It works with multiple lending partners and automates the banking role for its partner financial institutions, entirely managing loan origination, credit adjudication, regulatory reporting, loan servicing, and collections.
  • FundThrough was founded in 2014 by Steven Uster. Its headquarters is in Toronto, and it has raised over CAD $26 million in multiple funding rounds. FundThrough is an innovative technology company helping American and Canadian small business owners improve their cash flow through invoice factoring and financing. It charges 0.5% fees on the top of the funding amount and the borrower has to repay within a period of 12 weeks. The average invoice ranges from $1000 to $100,000 while the average outstanding loan is around $50,000-100,000.
  • Lendful Financial was founded in 2015 by Alex Benjamin and is located in Vancouver, British Columbia. It has raised $15 million in multiple funding rounds and offers three-to-five-year, fixed-term loans to credit-worthy borrowers with a credit score of 650 and over. It offers loans up to CAD $35,000 with APRs starting from as low as 7.9%. Loan terms range from 3 to 5 years.
  • Lending Loop was founded in 2014 by Brandon Vlaar and Cato Pastoll. Headquartered in Toronto, it has raised $12 million in debt and equity. Lending Loop is Canada’s first and only regulated peer-to-peer lending marketplace focused on small businesses. Its core focus is on providing businesses with accessible capital at a fair rate of interest through a simple online process. Loans range from $5,000- $250,000 with rates starting as low as 5.9% and terms from 3-60 months.
  • Progressa was founded in 2013 by Ali Pourdad, David Gens, and Michael Jover. Since inception, it has raised over $11 million. Progressa is a direct-pay lending platform that helps Canadian individuals who are in debt pay back their due bills. It pays its users’ bills directly so they are able to manage debt, interest payments, and collections. The platform provides users with partial payment loans between $1,000 and $15,000 with payback terms ranging from 6 to 60 months. It enables its users to get access to automated interest rate reductions every six months helping them cut down borrowing costs with good payment behavior.

Conclusion

From a global point of view, Canada is a relatively small market and still at a nascent stage. But the supportive regulatory framework coupled with growing interest of VCs and investors in the Canadian market says that major expansion is just around the corner. The Canadian market would also be conducive for U.S. players looking to expand their geographical ambitions.

Authors:

Written by Heena Dhir.

Wednesday January 3 2018, Daily News Digest

ETFs Europe

News Comments Today’s main news: GreenSky raises $4.5B in equity, becomes most valuable online lender. Funding Circle has eye on IPO at 2B GBP valuation. P2P lenders in India blame lending limit on rising costs. GN Compass wants to disrupt lending liquidity in Canada. Today’s main analysis: Can Mifid II spur growth in European ETF market? Today’s thought-provoking […]

ETFs Europe

News Comments

United States

United Kingdom

European Union

International

India

Asia

Canada

Africa

News Summary

United States

Who’s the Most Valuable Online Lender? After This Deal, It’s GreenSky (WSJ), Rated: AAA

Financial-technology firm GreenSky LLC raised new equity from Pacific Investment Management Co. in a deal that valued the digital lender at nearly $4.5 billion, said a person familiar with the matter.

It vaults GreenSky over Social Finance Inc. to become the most highly-valued online lender in the U.S. It also makes the Atlanta company the second most valuable privately held U.S. fintech company behind Stripe Inc., which processes payments for Internet businesses.

Pimco, the Newport Beach, Calif., money manager, invested at a valuation roughly 25% above the $3.6 billion GreenSky fetched in 2016.

What 2018 Will Mean For Marketplace Lenders (PYMNTS), Rated: AAA

2017 was a tough year for some of the biggest names in alternative financial services in the U.S. – Prosper, OnDeck and LendingClub, in particular.

Breslow is hyping OnDeck’s future of partnerships with mainstream baking players – in particular, calling out a renewed partnership with JPMorgan Chase in August to expand the banks’ SMB lending reach.

Prosper, perhaps unsurprisingly, is focused on remaining prosperous, as measured by profitability and further developing its new securitization platform.

LendingClub finally got investors to show them some love – and after its record low following its analyst day earnings accounting, stock jumped 15 percent in mid-December and has managed to hold relatively stable.

Marketplace Lending Predictions for 2018 (Lend Academy), Rated: AAA

First, let’s review my predictions I made exactly one year ago.

  1. 2017 will be the year of the bank partnership
    I would say I was partially right on this one.
  2. The OCC Fintech Charter will receive a positive reception
    So, while many of the fintech platforms supported the charter there was no real positive movement this year.
  3. Lending platforms will offer banking products
    While we had a couple of platforms offering credit cards for the most part this prediction failed to materialize.
  4. One large platform will be acquired
    Student lender Earnest was acquired by Navient in a deal announced in early October.
  5. There will be no new IPOs this year
    I was almost right on this one but one US lending platform did have an IPO in 2017.
  6. China will become an important source of capital outside the USA
    I got this one right.
  7. Artificial intelligence will take center stage
    I think I read more articles about AI this year than in the previous five years combined.

My 2018 Marketplace Lending Predictions

  1. Five top 25 banks will launch their own online lending platforms
    Banks have realized that if you want to provide successful loan products today you need to have an online presence.
  2. Two new pieces of legislation will be passed that will benefit the industry
  3. One of the top five (non-bank) online lending platforms will be acquired
  4. A major lending platform will get hit with a cyber attack
    Here is the one prediction where I really hope I am wrong.
  5. The tech giants consolidate their positions in online lending
    Amazon, PayPal and Square have all started to roll out various online lending offerings to their huge customer bases.
  6. 2018 is the year of product line expansion
  7. Messaging apps start to get integrated into online lending

The Top 10 Most Important Marketplace Lending Stories of 2017 (Lend Academy), Rated: A

  1. Mike Cagney is Gone as CEO of SoFi Effective Immediately
  2. The Cleveland Fed Retracts Their Report on “P2P Lending”
  3. Prosper Finally Closes Their Big $5 Billion Deal
  4. Renaud Laplanche is Back with a New Consumer Lending Platform Called Upgrade 
  5. The New Breed of Small Business Lenders: Amazon, Paypal and Square
  6. The Fastest Consumer Lenders to $1 Billion in Originations
  7. CFPB Announces No-Action Letter to Upstart
  8. The OCC Publishes Details on the Fintech Charter
  9. Bills Being Introduced to “Fix” Decision in Madden v. Midland
  10. Takeaways From LendingClub’s First Ever Investor Day

Ex-Netflix Exec Thinks This Fintech Company Has Netflix-Like Potential (The Motley Fool), Rated: AAA

Netflix has completely disrupted the entertainment industry, sending large incumbents scrambling to compete with its vast global scale.

How did Netflix pull this off? Several reasons, but one is certainly Netflix’s unique culture, outlined in its now-famous Culture Deck.

That deck was constructed by Patty McCord, who spent 14 years as Netflix’s chief talent officer.

The company McCord joined is Lending Club (NYSE:LC).

In the press release, McCord stated:

I see a lot of parallels between where Netflix was as a company 10 years ago, where LendingClub is today, and where it can go in the next 10 years. I’m attracted to LendingClub for the stellar people and the way it exemplifies the concepts of freedom and responsibility. Culture can help drive innovation in companies that are paving new ground and transforming legacy industries, like Netflix did and like LendingClub is doing today. … In our innovative world, I see marketplaces like LendingClub as the future.

Ousted SoFi CEO is back with a new startup (Axios), Rated: A

Why it matters: If 2017 was the year in which VCs began to fire controversial execs, 2018 may be the year in which they’re forced to decide on quick-turn second acts.

Affirm’s big business for 2018 is marketing (Tearsheet), Rated: A

  • Affirm isn’t just a payment method or a personal loan anymore — it’s a marketing lever for merchants

  • Affirm sees every transaction at the point of sale — who is buying, what they’re buying and where; it’s a departure from the way credit is underwritten today, where lenders have no idea why borrowers need the money or how they’ll use it

Where Does Alternative Lending Go in 2018? (Hackernoon), Rated: A

When most people think of alternative lending, they immediately think of payday loans and other abusive loan products. In the tech world, the first thing that comes to mind are online lenders: those who take loans traditionally originated in person and move them online. That was the first wave of alternative lenders — think LendingClub, Prosper, OnDeck, to name a few.

Alt investments on the rise among RIAs (InvestmentNews), Rated: A

Based on the success of the RIA industry, the trend of breakaway advisers interested in exploring the independent channel continues to gain momentum.

Propagated by wirehouse branch management to keep their top producers in their seats, this false campaign is now being revealed as its exact opposite; there are more customizable solutions for RIAs to access and deploy alternative investments for their high net worth clients than ever before.

For example, to access alternatives on their own, RIAs in the past typically would be looking at $25 million AUM minimums just to reach cost-effective scale, and many alternative managers have $10 million individual minimums themselves.

5 fintech charts that surprised us this year (Tearsheet), Rated: A

Loyalty and rewards incentives may not be enough to make consumers like mobile payments, and it could be on retailers to find what would keep people coming back to their mobile wallets. Mobile payment adoption among Apple, Android and Samsung Pay today is low. Paying with cash or card works just fine for them, customers say.

Transparency is the big sticking point when it comes to why small businesses still prefer banks to online lenders.

What Silicon Valley Misunderstands About Banking & Fintech (The Financial Brand), Rated: A

There are some relevant lessons learned about behavioral finance and digital adoption discussed in the book “FinTech Innovation.” One of the most important lessons is the distinction between digital banking winners and laggards over time.

  • Disruptive innovation is ultimately less important than sustaining innovation.
  • Digital is a ‘pull’ technology, while much of financial serves are ‘push’ market places.
  • Platforms win on digital: bundling is more important than unbundling.

The Distinction Between ‘Push’ and ‘Pull’ Marketplaces

Digital brings many benefits to streamline the processes in financial services, but front office disintermediation could easily create financial exclusion in the Western world because many households operate in a ‘push’ modality. Only the few self-directed consumers are comfortable enough to ‘pull’ financial products.

This is the reason why the growth of first mover Robo-Advisor solutions were initially very promising but then faltered, while firms like Vanguard and Charles Schwab can still grow fast on digital.

Being a ‘pull’ marketplace means using digital with a purpose, like looking for a specific product on Amazon. However, very few households would google for the next investment fund or business loan. Instead, the majority would ask a friend, a banking organization or an advisor about their recommendations.

Will tomorrow’s core banking systems run on open-source software? (American Banker), Rated: A

Banks, long committed to keeping customer data private and their own code proprietary, are now opening up to fintechs and third-party developers in new ways.

Open-source projects are underway at Deutsche Bank, which made code from its Autobahn commercial banking software publicly available this fall, and at JPMorgan Chase, whose Quorum blockchain software is available in the open-source software repository GitHub.

For fintech owned by a CUSO, will banks buy? (Banking Exchange), Rated: A

Morales, CEO of QCash Financial, a credit union service organization (CUSO) owned by WSECU (formerly Washington State Employee Credit Union), says that constraint may be lessening based on the final ruling on payday lending issued by the Consumer Financial Protection Bureau in October.

Credit unions, however, are interested in the QCash small-dollar lending platform. Morales says that nine credit unions have signed up for the product and five are currently live with it.

Fintech Predictions For 2018 (Financial Advisor), Rated: B

Identity verification will be a priority in 2018, with 60 percent of online marketplaces and other websites adopting technologies and techniques for verifying new users’ identities, the company predicts.

Bankers anxious as Trump mulls credit union regulator for CFPB (American Banker), Rated: B

The Trump administration’s consideration of J. Mark McWatters to lead the Consumer Financial Protection Bureau is stoking fears among bankers that he will show favor to credit unions once in office.

United Kingdom

UK’s Largest P2P Lender Funding Circle Said to be Planning IPO at £2 Billion Valuation (Crowdfund Insider), Rated: AAA

Funding Circle, a UK based peer to peer lender, is reportedly planning an initial public offering (IPO) for 2018. The news of the new listing is courtesy of SkyNews that reports Funding Circle will begin meeting with investment banks during Q1 of 2018 as they sign up underwriters for the deal. Shares are expected to list at some point in late 2018. If Funding Circle trades on an exchange it will become the first UK P2P lender to do so thus representing a seminal event in the online lending industry.

Urban Jungle Raises £1M in Seed Funding (FinSMEs), Rated: A

Urban Jungle, a London, UK-based insurtech startup, completed a £1m seed funding round.

Moneywise reveals top 2018 financial resolutions for UK adults (London School of Business & Finance), Rated: A

Research from financial advice website Moneywise has revealed the top financial goals of its users for 2018.

Moneywise found that cutting down on unnecessary spending was the top financial resolution for 2018, with 18 per cent citing this as their main priority.

Starting or boosting cash savings was voted the second most popular financial resolution for 2018, with this goal being set by 11 per cent of Moneywise users, whilst 10 per cent plan to start investing for the first time or boosting investments in a Stocks and Shares Isa.

When IFAs fight back against digital investment management (WhatInvestment.co.uk), Rated: A

More robo-advice platforms are on the market than ever before, and the number will grow rapidly during 2018. A joint report from the FCA and the Treasury, published last June, found that 100 robo firms are either on the market already or in active development.

IFAs may well find this frustrating – even with professional credentials and years of experience, they are subject to more distrust and scrutiny than a number of untested algorithms. Worse, these algorithms may come to represent their primary competition: they offer lower prices, they open up access to financial advice, and there is a range of options available for customers minded to use them, with more to come.

Proplend Looks Back on 2017 P2P Successes & Announces 2018 Plans (Crowdfund Insider), Rated: A

On Tuesday, online platform Proplend gave its 2017 peer-to-peer lending year in review.

  • The majority of platforms gained full Financial Conduct Authority (FCA) authorization
  • Many platforms sought ISA Manager Status to launch Innovative Finance ISA (IFISA) – with Proplend being among the early adopters.
  • LendInvest withdrew FCA approval application and stepped down from the Peer to Peer Finance Association as it moved from all P2P activity
  • RateSetter’s wholesale lending practices notably proved costly. The lender eventually withdrew from the P2PFA after breathing the association’s operating principles

The lender went on to note its plans for 2018:

  • The redesign of Lender Dashboards, Proplend.com website and the launch of our Auto-Invest product
  • Initially Proplend Auto-Invest will be a low-risk (Tranche A), three-year, Innovative Finance ISA product targeting returns of c.5% each year
  • The lender has built a “healthy” loan pipeline which will be available on the platform from early 2018, subject to due diligence, valuations, and legals.

5 alternative investments to the stock market (BM Magazine), Rated: B

  1. Real Estate
  2. Gold and other Precious Metals
  3. Backing and Staking in Poker
  4. Peer-to-Peer Lending
  5. Equity Crowdfunding

Could 2018 be a bumper year for tech IPOs? (Computer Business Review), Rated: B

After a couple of quiet years on the IPO front, the market could be ready to bounce back with Funding Circle said to be the first targeting flotation.

In January 2017 the P2P site surpassed a £1bn valuation thanks to an £82m funding round, led by the likes of Accel.

With distribution deals with the likes of the Royal Bank of Scotland and Santander, Funding Circle lent more than £1.7bn in 2017.

The London Stock Exchange revealed that 106 companies floated on its markets in 2017, raising £15bn, up 63% by number and 164% by value on 2016. These numbers mean that the LSE surpassed all European exchanges in the year by both IPO number and by money raised.

European Union

ETF providers hope Mifid II will spur European growth (Financial Times), Rated: AAA

ETF trading has since spread to 25 exchanges across Europe, but no accurate record of activity has been required by regulators. About 70 per cent of ETF trading in Europe goes unreported because it occurs via private bilateral over-the-counter transactions.

This should begin to end from Wednesday with the introduction of sweeping European rules designed to strengthen protection for investors and improve transparency across the continent’s financial markets. The package of regulations, known as Mifid II, requires comprehensive, detailed reporting of ETF trades.

Source: Financial Times

The passive investment industry, which is dominated by BlackRock, State Street and Vanguard, are betting Mifid II will set their European businesses on a growth path akin to the US, where usage has spread far more widely and deeply. Assets held in US-listed ETFs stood at $3.5tn at the end of November, compared with just $790bn across all European-listed ETFs, according to ETFGI.

Source: Financial Times
International

The FinTech outlook for 2018 (The Finanser), Rated: AAA

There are four big things for 2018 from a FinTech viewpoint that are obvious to me however, which are:

  1. Getting down to business with Artificial Intelligence (AI)
  2. Rationalising and cleansing core data structures
  3. Continuing the digital drive
  4. Distributed Ledger Technology (DLT) continues to rise

Therefore, rather than me making predictions, I thought it interesting to review the views of other commentators.

Jim also wrote another piece that nicely summarises Forrester’s predictions for 2018 which include:

  1. Banks not embracing Open Banking, but increasing partnerships with start-ups;
  2. Faster moves to embrace Digital Banking whilst losing focus on face-to-face communications; and
  3. Focus on back office transformation.

 

Saxo Bank’s Payments business sent me a press release with their top three predictions, which are:

  • The demise of traditional, slow, expensive cross border payments
  • Payment Service Providers (PSPs) will help merchants to expand internationally
  • Tech giants move into banking

Top 10 Companies of the Blockchain Industry in 2017 (Coin Telegraph), Rated: A

The total market capitalization of all the cryptocurrencies hit the $600 bln mark in December.

Source: Coin Telegraph

Coinbase is one of the top digital currency wallet and platform for exchange. Market capitalization: $2 bln (GDAX)

Ripple is a real-time gross settlement and currency exchange. Its main goal is to make an entire system devoted to money transferring. Market capitalization: $30 bln

India

P2P players blame lending limit for rising costs (Business Standard), Rated: AAA

Peer-to-peer lending (P2P) platforms have seen a rise in traffic as well as investor interest after registering themselves with the  But they argue the Rs 1-million limit placed on across all platforms is restrictive.

“With time, these limits are going to be relaxed by the  These have been imposed in order to avoid rapid growth that could lead to systemic risk,” said Ekmeet Singh, CEO, Lendbox.

Industry players want the to raise the limit for individual borrowers and remove the limit for institutional 

P2P lender AnyTimeLoan, prop-tech startup Foyr, tech firm Imanis raise funds (Deal Street Asia), Rated: A

While Spice Digital is investing up to $3.9 million in AnyTimeLoan, prop-tech startup Foyr has raised $3.8 million from JLL and others. Also, Wipro has put in an additional $2 million in US-based tech firm Imanis.

Asia

Crowdo Recaps 2017 Milestones: 3,500+ Projects Funded (Crowdfund Insider), Rated: A

Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding, posted an infographic citing its 2017 milestones.

Canada

Meet GN Compass: The ICO Attempting to Disrupt Liquidity In The Lending Market (Equities.com), Rated: AAA

Collins: I left the railway, cashed out my pension and started my own lending company; Great North Capital Inc. We have successfully funded approximately 100 loans; primarily focusing on high risk clients. Based on my accumulative knowledge and experience in both banking and running Great North Capital, I started to develop the idea for a peer-to-peer lending solution where there is very limited risk to the investors (lenders) while making loans liquid. Also by having our own credit system for borrowers, they have the opportunity to improve their credit rating on the platform by making timely payments and having no delinquencies. At the same time, I was learning more about cryptocurrencies and blockchain technology. I quickly realized the huge potential of the blockchain and how it can solve the liquidity problem as well as securing an investor’s principal capital; which are the main issues of current peer-to-peer lending platforms. I got in touch with Jean Pierre Rukebesha who immediately liked the idea and decided to come on board as co-founder and CFO. Hence GN Compass (Great North Compass) was born.

Older Canadians still leery of fintech despite flood of services, RateHub finds (IT Business), Rated: A

Between last year’s official release of Android Pay, the increasing ubiquity of artificial intelligence (AI)-powered support platforms such as Sun Life’s Ella, and the ongoing digital transformation of Canada’s banks, Canadians have more opportunities than ever to integrate fintech into their lives – but according to financial comparison platform developer Ratehub.ca, the eldest among us aren’t taking advantage.

According to the company’s 2017 Digital Money Trends Report, released last month, fewer than half of baby boomers reported trusting robo-advisors, mobile payments, marketplace and peer-to-peer lenders, and rate comparison website, while in many cases millennials and generation X-ers were nearly twice as likely to do so.

Other findings from the report include:

  • Nearly twice as many millennials (44 per cent) and generation X-ers (42 per cent) reported trusting robo-advisors compared to boomers (23 per cent).
  • Nearly twice as many millennials (71 per cent) said they trust mobile payments compared to boomers (38 per cent). (62 per cent of generation X-ers said they trust mobile payments.)
  • Twice as many millennials (47 per cent) and generation X-ers (48 per cent) trust marketplace lenders compared to boomers (23 per cent).
  • 58 per cent of millennials and 53 per cent of generation X-ers trust peer-to-peer lenders, versus only 32 per cent of boomers.
  • 63 per cent of millennials and 60 per cent of generation X-ers trust rate comparison websites, versus 42 per cent of boomers.
Africa

Internet firm Opera bets on Kenyan to steer Africa Fintech (Business Daily), Rated: A

Internet browser company Opera has picked Eddie Ndichu to drive its Fintech strategy in Africa even as it prepares to set up an office in Nairobi.

Opera has said that it is investing Sh10.3 billion ($100 million) in Africa’s digital economy over the next two years and OPay is part of those investments.

In a statement Tuesday, Opera said that it had appointed Mr Ndichu as the managing director and vice president for Fintech in Africa.

Authors:

George Popescu
Allen Taylor

Wednesday January 3 2018, Daily News Digest

ETFs Europe

News Comments Today’s main news: GreenSky raises $4.5B in equity, becomes most valuable online lender. Funding Circle has eye on IPO at 2B GBP valuation. P2P lenders in India blame lending limit on rising costs. GN Compass wants to disrupt lending liquidity in Canada. Today’s main analysis: Can Mifid II spur growth in European ETF market? Today’s thought-provoking […]

ETFs Europe

News Comments

United States

United Kingdom

European Union

International

India

Asia

Canada

Africa

News Summary

United States

Who’s the Most Valuable Online Lender? After This Deal, It’s GreenSky (WSJ), Rated: AAA

Financial-technology firm GreenSky LLC raised new equity from Pacific Investment Management Co. in a deal that valued the digital lender at nearly $4.5 billion, said a person familiar with the matter.

It vaults GreenSky over Social Finance Inc. to become the most highly-valued online lender in the U.S. It also makes the Atlanta company the second most valuable privately held U.S. fintech company behind Stripe Inc., which processes payments for Internet businesses.

Pimco, the Newport Beach, Calif., money manager, invested at a valuation roughly 25% above the $3.6 billion GreenSky fetched in 2016.

What 2018 Will Mean For Marketplace Lenders (PYMNTS), Rated: AAA

2017 was a tough year for some of the biggest names in alternative financial services in the U.S. – Prosper, OnDeck and LendingClub, in particular.

Breslow is hyping OnDeck’s future of partnerships with mainstream baking players – in particular, calling out a renewed partnership with JPMorgan Chase in August to expand the banks’ SMB lending reach.

Prosper, perhaps unsurprisingly, is focused on remaining prosperous, as measured by profitability and further developing its new securitization platform.

LendingClub finally got investors to show them some love – and after its record low following its analyst day earnings accounting, stock jumped 15 percent in mid-December and has managed to hold relatively stable.

Marketplace Lending Predictions for 2018 (Lend Academy), Rated: AAA

First, let’s review my predictions I made exactly one year ago.

  1. 2017 will be the year of the bank partnership
    I would say I was partially right on this one.
  2. The OCC Fintech Charter will receive a positive reception
    So, while many of the fintech platforms supported the charter there was no real positive movement this year.
  3. Lending platforms will offer banking products
    While we had a couple of platforms offering credit cards for the most part this prediction failed to materialize.
  4. One large platform will be acquired
    Student lender Earnest was acquired by Navient in a deal announced in early October.
  5. There will be no new IPOs this year
    I was almost right on this one but one US lending platform did have an IPO in 2017.
  6. China will become an important source of capital outside the USA
    I got this one right.
  7. Artificial intelligence will take center stage
    I think I read more articles about AI this year than in the previous five years combined.

My 2018 Marketplace Lending Predictions

  1. Five top 25 banks will launch their own online lending platforms
    Banks have realized that if you want to provide successful loan products today you need to have an online presence.
  2. Two new pieces of legislation will be passed that will benefit the industry
  3. One of the top five (non-bank) online lending platforms will be acquired
  4. A major lending platform will get hit with a cyber attack
    Here is the one prediction where I really hope I am wrong.
  5. The tech giants consolidate their positions in online lending
    Amazon, PayPal and Square have all started to roll out various online lending offerings to their huge customer bases.
  6. 2018 is the year of product line expansion
  7. Messaging apps start to get integrated into online lending

The Top 10 Most Important Marketplace Lending Stories of 2017 (Lend Academy), Rated: A

  1. Mike Cagney is Gone as CEO of SoFi Effective Immediately
  2. The Cleveland Fed Retracts Their Report on “P2P Lending”
  3. Prosper Finally Closes Their Big $5 Billion Deal
  4. Renaud Laplanche is Back with a New Consumer Lending Platform Called Upgrade 
  5. The New Breed of Small Business Lenders: Amazon, Paypal and Square
  6. The Fastest Consumer Lenders to $1 Billion in Originations
  7. CFPB Announces No-Action Letter to Upstart
  8. The OCC Publishes Details on the Fintech Charter
  9. Bills Being Introduced to “Fix” Decision in Madden v. Midland
  10. Takeaways From LendingClub’s First Ever Investor Day

Ex-Netflix Exec Thinks This Fintech Company Has Netflix-Like Potential (The Motley Fool), Rated: AAA

Netflix has completely disrupted the entertainment industry, sending large incumbents scrambling to compete with its vast global scale.

How did Netflix pull this off? Several reasons, but one is certainly Netflix’s unique culture, outlined in its now-famous Culture Deck.

That deck was constructed by Patty McCord, who spent 14 years as Netflix’s chief talent officer.

The company McCord joined is Lending Club (NYSE:LC).

In the press release, McCord stated:

I see a lot of parallels between where Netflix was as a company 10 years ago, where LendingClub is today, and where it can go in the next 10 years. I’m attracted to LendingClub for the stellar people and the way it exemplifies the concepts of freedom and responsibility. Culture can help drive innovation in companies that are paving new ground and transforming legacy industries, like Netflix did and like LendingClub is doing today. … In our innovative world, I see marketplaces like LendingClub as the future.

Ousted SoFi CEO is back with a new startup (Axios), Rated: A

Why it matters: If 2017 was the year in which VCs began to fire controversial execs, 2018 may be the year in which they’re forced to decide on quick-turn second acts.

Affirm’s big business for 2018 is marketing (Tearsheet), Rated: A

  • Affirm isn’t just a payment method or a personal loan anymore — it’s a marketing lever for merchants

  • Affirm sees every transaction at the point of sale — who is buying, what they’re buying and where; it’s a departure from the way credit is underwritten today, where lenders have no idea why borrowers need the money or how they’ll use it

Where Does Alternative Lending Go in 2018? (Hackernoon), Rated: A

When most people think of alternative lending, they immediately think of payday loans and other abusive loan products. In the tech world, the first thing that comes to mind are online lenders: those who take loans traditionally originated in person and move them online. That was the first wave of alternative lenders — think LendingClub, Prosper, OnDeck, to name a few.

Alt investments on the rise among RIAs (InvestmentNews), Rated: A

Based on the success of the RIA industry, the trend of breakaway advisers interested in exploring the independent channel continues to gain momentum.

Propagated by wirehouse branch management to keep their top producers in their seats, this false campaign is now being revealed as its exact opposite; there are more customizable solutions for RIAs to access and deploy alternative investments for their high net worth clients than ever before.

For example, to access alternatives on their own, RIAs in the past typically would be looking at $25 million AUM minimums just to reach cost-effective scale, and many alternative managers have $10 million individual minimums themselves.

5 fintech charts that surprised us this year (Tearsheet), Rated: A

Loyalty and rewards incentives may not be enough to make consumers like mobile payments, and it could be on retailers to find what would keep people coming back to their mobile wallets. Mobile payment adoption among Apple, Android and Samsung Pay today is low. Paying with cash or card works just fine for them, customers say.

Transparency is the big sticking point when it comes to why small businesses still prefer banks to online lenders.

What Silicon Valley Misunderstands About Banking & Fintech (The Financial Brand), Rated: A

There are some relevant lessons learned about behavioral finance and digital adoption discussed in the book “FinTech Innovation.” One of the most important lessons is the distinction between digital banking winners and laggards over time.

  • Disruptive innovation is ultimately less important than sustaining innovation.
  • Digital is a ‘pull’ technology, while much of financial serves are ‘push’ market places.
  • Platforms win on digital: bundling is more important than unbundling.

The Distinction Between ‘Push’ and ‘Pull’ Marketplaces

Digital brings many benefits to streamline the processes in financial services, but front office disintermediation could easily create financial exclusion in the Western world because many households operate in a ‘push’ modality. Only the few self-directed consumers are comfortable enough to ‘pull’ financial products.

This is the reason why the growth of first mover Robo-Advisor solutions were initially very promising but then faltered, while firms like Vanguard and Charles Schwab can still grow fast on digital.

Being a ‘pull’ marketplace means using digital with a purpose, like looking for a specific product on Amazon. However, very few households would google for the next investment fund or business loan. Instead, the majority would ask a friend, a banking organization or an advisor about their recommendations.

Will tomorrow’s core banking systems run on open-source software? (American Banker), Rated: A

Banks, long committed to keeping customer data private and their own code proprietary, are now opening up to fintechs and third-party developers in new ways.

Open-source projects are underway at Deutsche Bank, which made code from its Autobahn commercial banking software publicly available this fall, and at JPMorgan Chase, whose Quorum blockchain software is available in the open-source software repository GitHub.

For fintech owned by a CUSO, will banks buy? (Banking Exchange), Rated: A

Morales, CEO of QCash Financial, a credit union service organization (CUSO) owned by WSECU (formerly Washington State Employee Credit Union), says that constraint may be lessening based on the final ruling on payday lending issued by the Consumer Financial Protection Bureau in October.

Credit unions, however, are interested in the QCash small-dollar lending platform. Morales says that nine credit unions have signed up for the product and five are currently live with it.

Fintech Predictions For 2018 (Financial Advisor), Rated: B

Identity verification will be a priority in 2018, with 60 percent of online marketplaces and other websites adopting technologies and techniques for verifying new users’ identities, the company predicts.

Bankers anxious as Trump mulls credit union regulator for CFPB (American Banker), Rated: B

The Trump administration’s consideration of J. Mark McWatters to lead the Consumer Financial Protection Bureau is stoking fears among bankers that he will show favor to credit unions once in office.

United Kingdom

UK’s Largest P2P Lender Funding Circle Said to be Planning IPO at £2 Billion Valuation (Crowdfund Insider), Rated: AAA

Funding Circle, a UK based peer to peer lender, is reportedly planning an initial public offering (IPO) for 2018. The news of the new listing is courtesy of SkyNews that reports Funding Circle will begin meeting with investment banks during Q1 of 2018 as they sign up underwriters for the deal. Shares are expected to list at some point in late 2018. If Funding Circle trades on an exchange it will become the first UK P2P lender to do so thus representing a seminal event in the online lending industry.

Urban Jungle Raises £1M in Seed Funding (FinSMEs), Rated: A

Urban Jungle, a London, UK-based insurtech startup, completed a £1m seed funding round.

Moneywise reveals top 2018 financial resolutions for UK adults (London School of Business & Finance), Rated: A

Research from financial advice website Moneywise has revealed the top financial goals of its users for 2018.

Moneywise found that cutting down on unnecessary spending was the top financial resolution for 2018, with 18 per cent citing this as their main priority.

Starting or boosting cash savings was voted the second most popular financial resolution for 2018, with this goal being set by 11 per cent of Moneywise users, whilst 10 per cent plan to start investing for the first time or boosting investments in a Stocks and Shares Isa.

When IFAs fight back against digital investment management (WhatInvestment.co.uk), Rated: A

More robo-advice platforms are on the market than ever before, and the number will grow rapidly during 2018. A joint report from the FCA and the Treasury, published last June, found that 100 robo firms are either on the market already or in active development.

IFAs may well find this frustrating – even with professional credentials and years of experience, they are subject to more distrust and scrutiny than a number of untested algorithms. Worse, these algorithms may come to represent their primary competition: they offer lower prices, they open up access to financial advice, and there is a range of options available for customers minded to use them, with more to come.

Proplend Looks Back on 2017 P2P Successes & Announces 2018 Plans (Crowdfund Insider), Rated: A

On Tuesday, online platform Proplend gave its 2017 peer-to-peer lending year in review.

  • The majority of platforms gained full Financial Conduct Authority (FCA) authorization
  • Many platforms sought ISA Manager Status to launch Innovative Finance ISA (IFISA) – with Proplend being among the early adopters.
  • LendInvest withdrew FCA approval application and stepped down from the Peer to Peer Finance Association as it moved from all P2P activity
  • RateSetter’s wholesale lending practices notably proved costly. The lender eventually withdrew from the P2PFA after breathing the association’s operating principles

The lender went on to note its plans for 2018:

  • The redesign of Lender Dashboards, Proplend.com website and the launch of our Auto-Invest product
  • Initially Proplend Auto-Invest will be a low-risk (Tranche A), three-year, Innovative Finance ISA product targeting returns of c.5% each year
  • The lender has built a “healthy” loan pipeline which will be available on the platform from early 2018, subject to due diligence, valuations, and legals.

5 alternative investments to the stock market (BM Magazine), Rated: B

  1. Real Estate
  2. Gold and other Precious Metals
  3. Backing and Staking in Poker
  4. Peer-to-Peer Lending
  5. Equity Crowdfunding

Could 2018 be a bumper year for tech IPOs? (Computer Business Review), Rated: B

After a couple of quiet years on the IPO front, the market could be ready to bounce back with Funding Circle said to be the first targeting flotation.

In January 2017 the P2P site surpassed a £1bn valuation thanks to an £82m funding round, led by the likes of Accel.

With distribution deals with the likes of the Royal Bank of Scotland and Santander, Funding Circle lent more than £1.7bn in 2017.

The London Stock Exchange revealed that 106 companies floated on its markets in 2017, raising £15bn, up 63% by number and 164% by value on 2016. These numbers mean that the LSE surpassed all European exchanges in the year by both IPO number and by money raised.

European Union

ETF providers hope Mifid II will spur European growth (Financial Times), Rated: AAA

ETF trading has since spread to 25 exchanges across Europe, but no accurate record of activity has been required by regulators. About 70 per cent of ETF trading in Europe goes unreported because it occurs via private bilateral over-the-counter transactions.

This should begin to end from Wednesday with the introduction of sweeping European rules designed to strengthen protection for investors and improve transparency across the continent’s financial markets. The package of regulations, known as Mifid II, requires comprehensive, detailed reporting of ETF trades.

Source: Financial Times

The passive investment industry, which is dominated by BlackRock, State Street and Vanguard, are betting Mifid II will set their European businesses on a growth path akin to the US, where usage has spread far more widely and deeply. Assets held in US-listed ETFs stood at $3.5tn at the end of November, compared with just $790bn across all European-listed ETFs, according to ETFGI.

Source: Financial Times
International

The FinTech outlook for 2018 (The Finanser), Rated: AAA

There are four big things for 2018 from a FinTech viewpoint that are obvious to me however, which are:

  1. Getting down to business with Artificial Intelligence (AI)
  2. Rationalising and cleansing core data structures
  3. Continuing the digital drive
  4. Distributed Ledger Technology (DLT) continues to rise

Therefore, rather than me making predictions, I thought it interesting to review the views of other commentators.

Jim also wrote another piece that nicely summarises Forrester’s predictions for 2018 which include:

  1. Banks not embracing Open Banking, but increasing partnerships with start-ups;
  2. Faster moves to embrace Digital Banking whilst losing focus on face-to-face communications; and
  3. Focus on back office transformation.

 

Saxo Bank’s Payments business sent me a press release with their top three predictions, which are:

  • The demise of traditional, slow, expensive cross border payments
  • Payment Service Providers (PSPs) will help merchants to expand internationally
  • Tech giants move into banking

Top 10 Companies of the Blockchain Industry in 2017 (Coin Telegraph), Rated: A

The total market capitalization of all the cryptocurrencies hit the $600 bln mark in December.

Source: Coin Telegraph

Coinbase is one of the top digital currency wallet and platform for exchange. Market capitalization: $2 bln (GDAX)

Ripple is a real-time gross settlement and currency exchange. Its main goal is to make an entire system devoted to money transferring. Market capitalization: $30 bln

India

P2P players blame lending limit for rising costs (Business Standard), Rated: AAA

Peer-to-peer lending (P2P) platforms have seen a rise in traffic as well as investor interest after registering themselves with the  But they argue the Rs 1-million limit placed on across all platforms is restrictive.

“With time, these limits are going to be relaxed by the  These have been imposed in order to avoid rapid growth that could lead to systemic risk,” said Ekmeet Singh, CEO, Lendbox.

Industry players want the to raise the limit for individual borrowers and remove the limit for institutional 

P2P lender AnyTimeLoan, prop-tech startup Foyr, tech firm Imanis raise funds (Deal Street Asia), Rated: A

While Spice Digital is investing up to $3.9 million in AnyTimeLoan, prop-tech startup Foyr has raised $3.8 million from JLL and others. Also, Wipro has put in an additional $2 million in US-based tech firm Imanis.

Asia

Crowdo Recaps 2017 Milestones: 3,500+ Projects Funded (Crowdfund Insider), Rated: A

Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding, posted an infographic citing its 2017 milestones.

Canada

Meet GN Compass: The ICO Attempting to Disrupt Liquidity In The Lending Market (Equities.com), Rated: AAA

Collins: I left the railway, cashed out my pension and started my own lending company; Great North Capital Inc. We have successfully funded approximately 100 loans; primarily focusing on high risk clients. Based on my accumulative knowledge and experience in both banking and running Great North Capital, I started to develop the idea for a peer-to-peer lending solution where there is very limited risk to the investors (lenders) while making loans liquid. Also by having our own credit system for borrowers, they have the opportunity to improve their credit rating on the platform by making timely payments and having no delinquencies. At the same time, I was learning more about cryptocurrencies and blockchain technology. I quickly realized the huge potential of the blockchain and how it can solve the liquidity problem as well as securing an investor’s principal capital; which are the main issues of current peer-to-peer lending platforms. I got in touch with Jean Pierre Rukebesha who immediately liked the idea and decided to come on board as co-founder and CFO. Hence GN Compass (Great North Compass) was born.

Older Canadians still leery of fintech despite flood of services, RateHub finds (IT Business), Rated: A

Between last year’s official release of Android Pay, the increasing ubiquity of artificial intelligence (AI)-powered support platforms such as Sun Life’s Ella, and the ongoing digital transformation of Canada’s banks, Canadians have more opportunities than ever to integrate fintech into their lives – but according to financial comparison platform developer Ratehub.ca, the eldest among us aren’t taking advantage.

According to the company’s 2017 Digital Money Trends Report, released last month, fewer than half of baby boomers reported trusting robo-advisors, mobile payments, marketplace and peer-to-peer lenders, and rate comparison website, while in many cases millennials and generation X-ers were nearly twice as likely to do so.

Other findings from the report include:

  • Nearly twice as many millennials (44 per cent) and generation X-ers (42 per cent) reported trusting robo-advisors compared to boomers (23 per cent).
  • Nearly twice as many millennials (71 per cent) said they trust mobile payments compared to boomers (38 per cent). (62 per cent of generation X-ers said they trust mobile payments.)
  • Twice as many millennials (47 per cent) and generation X-ers (48 per cent) trust marketplace lenders compared to boomers (23 per cent).
  • 58 per cent of millennials and 53 per cent of generation X-ers trust peer-to-peer lenders, versus only 32 per cent of boomers.
  • 63 per cent of millennials and 60 per cent of generation X-ers trust rate comparison websites, versus 42 per cent of boomers.
Africa

Internet firm Opera bets on Kenyan to steer Africa Fintech (Business Daily), Rated: A

Internet browser company Opera has picked Eddie Ndichu to drive its Fintech strategy in Africa even as it prepares to set up an office in Nairobi.

Opera has said that it is investing Sh10.3 billion ($100 million) in Africa’s digital economy over the next two years and OPay is part of those investments.

In a statement Tuesday, Opera said that it had appointed Mr Ndichu as the managing director and vice president for Fintech in Africa.

Authors:

George Popescu
Allen Taylor

Wednesday July 12 2017, Daily News Digest

challenger banks customer channels

News Comments Today’s main news: dv01 partners with Upgrade. U.S. lawmakers try to stop sale of Chicago Stock Exchange to Chinese buyers. PayPal hires ex-Amazon exec to head lending. LendingClub expands Opportunity Fund partnership. Revolut raises $66M, adds bitcoin. Yirendai lawsuit dismissed. International RegTech Association launches. Today’s main analysis: 5 reasons fintech consolidation is inevitable. Today’s thought-provoking articles: Real estate investing […]

challenger banks customer channels

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

Africa

Canada

News Summary

United States

dv01 Launches Strategic Reporting Partnership With Upgrade (Cision), Rated: AAA

dv01, the reporting and analytics platform that offers institutional investors transparency and insight into lending markets, today announced a partnership with Upgrade, Inc., the new consumer credit platform, whose founding team is led by Renaud Laplanche.

Under this partnership, all Upgrade investors will initially receive complimentary access to Upgrade data through dv01’s reporting and analytics platform, including use of dv01’s Portfolio Management solution. Investors will have a full suite of visualization tools at their disposal, making it simple to gain a high level portfolio overview or gather answers to complex questions involving loan composition, performance metrics, and credit metrics.

dv01 will also act as loan data agent for Upgrade’s securitizations, providing investors access to its Securitization Explorer, which includes loan level performance and composition details of upcoming deals, as well as reporting and analytics tools for use after a deal closes. Upgrade expects to access the securitization market on a quarterly basis.

US lawmakers are trying to stop the sale of the Chicago Stock Exchange to Chinese buyers (Business Insider), Rated: AAA

Eleven members of Congress asked the U.S. Securities and Exchange Commission on Monday to stop the sale of the Chicago Stock Exchange to a group led by China-based investors, saying the regulator lacks the ability to monitor the foreign buyers.

The proposal to sell privately owned CHX for an undisclosed amount to a consortium led by Chongqing Casin Enterprise Group (CCEG) has drawn attention because it would be the first time a U.S. exchange has been bought by Chinese investors. There are also U.S. investors in the group.

Casin Group, a privately held company that invests in real estate development and financial holdings, said its long-term goal is to list Chinese companies in the United States through CHX, which has locations in Chicago and New Jersey.

PayPal hires ex-Amazon exec for lending business (MarketWatch), Rated: AAA

PayPal Holdings Inc. said Tuesday it has hired Mark Britto, a financial-technology entrepreneur and a former executive at Amazon.com Inc., to lead its lending business.

Mr. Britto, 53, joins PayPal from Boku Inc., a company he founded that lets consumers buy goods and services using their mobile phones and pay for them alongside their usual bill from their telecommunications provider. He replaces Steve Allocca, who left PayPal in May to become the president of online lender LendingClub Corp.

The company currently uses cash to fund the $5.1 billion of consumer loans and around $600 million of small business loans it has on its balance sheet.

The unit has bolstered PayPal’s bottom line in recent years: the consumer-credit portion accounts for around 13% of PayPal’s annual operating profit, or roughly $280 million, according to analysts at J.P. Morgan Chase & Co.

Expanding access to credit, one small business at a time (LendingClub), Rated: AAA

Access to credit has long been a challenge for small businesses, often a chicken and egg scenario where owners need capital to grow, but can’t get the loan they need until they’ve grown. And, while access to capital has a key role in fueling economic mobility, job creation and the health of the middle class, traditional banks aren’t meeting small business’ needs, especially as it relates to minority communities and women entrepreneurs.

To help, we’ve expanded our partnership with Opportunity Fund, combining the best of high-tech and nonprofit lending, to provide underserved small businesses the loans they need to flourish. Now, small business owners living in California, Florida, Georgia, Illinois, Michigan, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, and Washington will have access to affordable credit.

Already this partnership has helped many entrepreneurs access capital and by 2020 Opportunity Fund plans to invest $400 million in over 10,000 small businesses.

Real Estate Investing versus Stocks: Returns and How to Get the Best of Both Worlds (Equities.com), Rated: AAA

The decision to invest in real estate or stocks doesn’t necessarily have to be either-or and there’s good reason to choose both.

Stocks offer advantages as well with higher liquidity and lower transaction costs. It’s difficult to build a diversified portfolio of property types and regions without several hundred thousand dollars in real estate investments. Not so with stocks where you can invest easily across the major sectors for less than $100 in commissions.

Despite the steep drop in property prices when the bubble burst in 2008, real estate has still outperformed stocks over the last 20 years.

Real estate has benefited from historically low interest rates over the past decade, providing cheap money on highly leveraged properties. Stocks have also benefited from lower rates but not to the extent as property investors.

The downside to REIT investing is that you don’t get the control or tax benefits you get in direct property ownership. I still own several rental properties as well as equity ownership in some real estate crowdfunding deals to benefit from the tax shelter of real estate investing.

Why PayPal Could Join the Payments Buying Spree (Barrons), Rated: A

PayPal has a strong presence in the U.S. and the U.K., but it’s less well-known in the rest of the world, Ellis notes. Given the fast pace of evolution in the digital-payments industry, “the window is closing rapidly on PayPal’s ability to expand organically into new markets,” she tells Barron’s Next. Rather than build up a user base and merchant base from scratch in new areas, which could take years, PayPal might decide to buy a company that has already done the heavy lifting.

Ellis thinks a European acquisition makes the most sense. She points to a number of attractive candidates in Europe, including payment processors Adyen and Wirecard. PayPal could also buy Klarna or outbid Vantiv for Worldpay. On a practical level, PayPal’s cash is mostly sitting in Europe.

And the company has a good deal of cash: it could have about $10 billion by the end of the year once it sells off its credit receivables business, Ellis notes.

LendingTree Builds the 200 Millionth Predictive Model Delivered on the DataRobot Cloud (BusinessWire), Rated: A

DataRobot today announced a new milestone in AI adoption: since January 2015, customers have run more than 200 million predictive analytics models in the DataRobot Cloud. LendingTree, the online loan marketplace that connects consumers with multiple lenders, banks, and credit partners, achieved this milestone for the company.

Using DataRobot, companies quickly deploy machine learning models to uncover hidden opportunities and predict future outcomes from vast amounts of data. Previously deployed by expensive and elusive data scientists, these sophisticated models have the ability to learn without being explicitly programmed, making them fundamental to big data strategies.

Orchard CEO Matt Burton Started Off Running Fintech Meetups; Now He’s Raised $ 44 Million (Benzinga), Rated: A

What’s true in real estate is true in fintech—location, location, location is everything. Matt Burton, CEO of Orchard Platform, a technology and data analysis provider for online lending platforms, is living proof of that.

Despite his vision of building an electronic market for loan trading, Burton started Orchard without any network in the financial services space, he said in a fireside chat discussion at the 2017 Benzinga Global Fintech Awards.

Orchard has raised $44.7 million to date, Burton said at the event.

Silicon Valley Honors Munich Re US and Mozeika for Insurtech Leadership (Insurance Journal), Rated: A

Plug and Play presented Munich Re and Mozeika with one of 10 Corporate Innovation Awards to those it calls its “most engaged partners” in various accelerators that in addition to insurtech include fintech, health and wellness, food and beverage, mobility, new materials and packaging, brand and retail, travel and hospitality, and Internet of Things (IoT).

Some of the insurtechs Munich Re has invested in and/or partnered with include Trov, Lemonade, Root, Next, Slice, Bunker, Bought By Many and Helium.

Financial Resources Federal Credit Union Teams with Roostify to Create Better Online Mortgage Experience (BusinessWire), Rated: A

Roostify, a provider of automated mortgage transaction technology, today announced that Financial Resources Federal Credit Union (FRFCU) has implemented Roostify’s mortgage technology platform in order to create a better online experience for its members applying for or refinancing a home loan.

Financial Resources members are now able to complete their entire mortgage application online, including using a mobile device or tablet. They can upload their financial information directly into the platform and communicate with a loan officer during every step of the process. When they are on the go, they can easily upload and sign documents without a trip to the bank, saving precious time in the closing process.

This Programmatic Marketplace Is Just For Financial Services Advertisers (Ad Exchanger), Rated: A

The data just isn’t there, said Phillip Rosen, CEO and co-founder of Even Financial, an ad tech provider for financial marketers.

On Tuesday, the company added a programmatic marketplace offering to its existing supply-side API to help connect app owners and financial institutions with specific targeting needs.

Rather than paying on a cost-per-click basis, Even Financial’s programmatic marketplace operates on a real-time pricing model that rewards publishers at the top of the funnel when offers are served to pre-approved consumers.

Impact of Brexit, US politics being felt by fintech firms, says Western Union’s head of partnerships (CNBC), Rated: A

Financial technology (fintech) has felt the impact of Brexit, U.S. politics and a perceived direction towards protectionism, Western Union’s partnerships lead has said.

Christina Hamilton, head of partnerships and international expansion at the global payments and transfers company, said that protectionism and a populist surge against globalization was a serious concern for the fintech industry.

She said that her views should not necessarily be regarded as the views of Western Union, but was clear that her business had been affected.

VirtualAdvisors.com launches new FinTech tool (Sys-Con), Rated: A

VirtualAdvisors.com announces the launch of its first artificial intelligence (AI) powered market intelligence campaign.

The Newport Beach FinTech startup wants to scrape all the data on the web to put it into a structured format, with the intent to specifically make it useful to the financial service industry for many different business purposes.

The platform offers free access for family offices as well as retail and institutional investors who can use it as an educational and due diligence tool for various asset classes and specific products.

The market intelligence campaigns will be periodically launched and focus on specific alternative investment niches, starting with 1031 exchanges.

Advisor Group, Jemstep Launch Fintech Platform For Financial Advisors, Retail Investors (Benzinga), Rated: A

Advisor Group has partnered with Invesco Ltd.’s Jemstep to launch an onboarding, advice and data aggregation platform for both financial advisors and retail investors.

The new platform is expected to offer fintech solutions to challenges commonly faced by independent financial advisors, according to Advisor Group.

They include a paperless process for opening new client accounts, and a web portal where clients can monitor their accounts.

The transferring of client assets to brokerage and advisory accounts will be handled using a paperless, e-signature based process, according to the announcement by Advisor Group and Jemstep. The platform is integrated with Pershing for brokerage accounts and Envestnet for advisory solutions.

CFP Board’s proposed rule changes prompt heated debate online (Financial-Planning), Rated: A

Richard Feight (adviser)

I applaud the CFP Board for the proposed new standard for delivering all financial advice under a fiduciary standard. This is clearly a move towards establishing more credibility in the eyes of the public, media and practitioners. It’s also a move towards establishing financial planning as a true profession.

Thomas Mayo (adviser)

I mostly like the new CFP rules as explained on the site. The problem is that I now have too many government and professional groups telling me their view of what is best for my clients…. Sorry, but the odd person out may be the CFP Board. The government agencies carry more oomph! No one in the past 20 years has hired me because of my CFP credentials!… If the DOL Rule is enacted in January 2018 as it is, there is a good chance I will cancel my CFP certification.

Genti Cici (adviser)

I don’t believe [the proposed standards] go far enough. They could even backfire and give false hope that now (with the new standards) ALL CFPs are fiduciaries, at ALL TIMES, which is what I first thought. But if we read carefully at part B, we see that while the standards call for a fiduciary duty, the CFP has room NOT to use the standards.… The CFP can still be paid commissions and not be a fiduciary at certain times. Thus clients will still be confused.

Robert Burns (adviser)

I adamantly protest the proposal. When does it get to be too much bureaucracy? We have FINRA, the SEC, the IRS and the Department of Labor all seeing who can out-regulate whom. It is getting ridiculous …. By your heaping more onto us, you end up increasing the cost of our doing business. Because you all want it make it easy for us to be sued, the cost of our insurance will go up. Let the regulators regulate. You stay out of it. …. Ninety-nine percent of us are good people intent on doing the best possible job for our clients. Now get out of our way!

Cross River Appoints SVP and General Manager of Payments Division (Cision), Rated: B

Cross River announced today the appointment of Ben Isaacson as SVP and General Manager of its Payments Division. With 20 years of experience and a sophisticated understanding of the payments industry, Isaacson will be responsible for managing and growing Cross River’s full suite of payments products and clients.

Isaacson joins Cross River after six years at JPMorgan Chase and , most recently as Product Executive within Treasury Services, where he was responsible for the product development, commercialization and industry development for Real Time Payment services. Prior to this role, Isaacson led the Wholesale Payments Strategy team at JPMorgan Chase, and was responsible for long-term growth initiatives, such as business-to-business payments strategy and FinTech engagement. Before JP Morgan Chase, Isaacson spent seven years at MasterCard in the Strategic Planning and MasterCard Advisors’ Payments Strategy group, focusing on growth strategies and opportunities for MasterCard and its bank clients.

Home Point Financial Names Chad Patton Executive Managing Director-Chief Strategy Officer (Marketwired), Rated: B

Home Point Financial Corporation (“Home Point”), a national, multi-channel mortgage originator and servicer, today announced that Chad Patton has been named Executive Managing Director-Chief Strategy Officer. In this role, he will focus on funding and capital planning, business intelligence and strategic initiatives.

Mr. Patton has over 20 years of experience in the mortgage and financial industry. Prior to joining Home Point, he served as Executive Vice President at Nationstar Mortgage, overseeing production, capital markets and business development activities. Previously, he was Managing Director at Lone Star Funds, where he oversaw financial services private equity investments, including the formation and growth of Caliber Home Loans.

Ascentium Capital Announces Record Second Quarter in Originations (Ascentium Capital), Rated: B

Ascentium Capital LLC, a leader in small business financing, announced a record quarter in origination volume, reaching $255.7 million. This represents a 14.0% increase quarter-over quarter.

United Kingdom

UK fintech start-up Revolut raises million, adds bitcoin (Reuters), Rated: AAA

The “global banking alternative” Revolut has raised $66 million in a fund-raising round, the start-up said on Wednesday, in the latest sign that London is so far weathering Brexit to remain a global financial-technology center.

Led by Europe- and San Francisco-based venture capital fund Index Ventures, the fund-raising round was one of the biggest ever Series B rounds in Europe. It should provide some comfort to the British capitol as it jostles to hold onto its reputation as Europe’s leading hub for the nascent fintech sector.

Revolut also announced that it is adding digital currency bitcoin BTC=BTSP to its app in response to high demand from customers. Users will now be able to hold, exchange, spend and transfer bitcoin the same way they use other currencies. Rival cryptocurrencies Ether and Litecoin will soon be added.

London fintech Curve raises $ 10M Series A (TechCrunch), Rated: AAA

Curve, the London fintech startup that offers a platform that lets you consolidate all your bank cards into a single Curve card and manage your money, is on the verge of closing $10 million in Series A funding.

According to sources, the round, which could be announced as soon as this week, is being led by Connect Ventures, with participation from Santander Ventures, the venture arm of Spain-headquartered bank Santander Group.

Investors are banking providers Santander InnoVentures, Investec, Connect Ventures, Speedinvest, Oxford Capital, Breega Capital, and Samos Investments. Individual investors include: Henry Ritchotte (ex Deutsche Bank COO), Gael de Boissard (ex Credit Suisse board member), Alessandro Hatami (The Pacemakers; ex Lloyds, Paypal, GE Capital), Paul Townsend (Vitesse PSP, Barclays, WorldPay), Emilian Popa (Rocket Internet, Naspers, Groupon), Rohan Haldea (Apax Partners)

P2P wholesale ban boosts business for wider crowdfunding sector (P2P Finance News), Rated: A

THE FINANCIAL CONDUCT AUTHORITY (FCA)’s clampdown on peer-to-peer wholesale lending activities is pushing lenders towards other types of crowdfunding platforms to obtain finance.

P2P platforms have had to stop lending to other lenders after the City watchdog confirmed its position on the practice earlier this year, warning that it could be in breach of the rules.

“The recent changes in the P2P sector effectively pushed that type of company to the crowdfunding space,” said Andrew Adcock, chief marketing officer at Crowd for Angels.

The bond- and equity-based lending platform has recently launched a fundraising for The Asset Exchange, an asset-backed lender operating in the car finance market.

Victory Park Capital CEO buys £60k of fund’s stock (AltFi), Rated: A

Richard Levy, a director of the £351m VPC Speciality Lending Investment Trust, has increased his holding in the fund.

Levy  is founder and CEO of the trust’s investment manager Victory Park Capital as well as a board member of the fund. He bought 71,916 shares at an average price of £0.8275, totalling £59,510.

Darktrace valued at $ 825m as fintech firm Revolut secures new funding (The Telegraph), Rated: A

Darktrace, a cyber security firm backed by Mike Lynch, the Autonomy founder, has received $75m (£58m) in a funding round that values the company at $825m.

Darktrace, created by mathematicians from the University of Cambridge, claims to use artificial intelligence software that mimics the characteristics of the human immune system to detect and counter cyber threats.

Darktrace’s funding round, which brings it close to the $1bn “unicorn” valuation that represents success to many start-ups, was led by Insight Venture Partners, a New York group that has previously backed Twitter and Alibaba. Its biggest shareholder remains Invoke Capital, which was set up by Mr Lynch after Autonomy was sold to HP for $11.7bn in 2011.

Will blockchain be the building blocks of a better finance industry? (Elite Business Magazine), Rated: A

In fact, a study in 2016 by Accenture, the management consultancy, found that just 29% of respondents thought banks were trustworthy. But perhaps instead of trusting banks, people might be willing to place their faith in code instead. Blockchain has been around for some time now but it’s only relatively recently that people have started to speak of it as a sort of truth serum for the way transactions are recorded. If things keep progressing as they are, it could seriously disrupt financial services companies – or perhaps even restore people’s confidence in them.

Many of these innovations were inspired by a frustration with the status quo: Nuggets, a service that allows people to make payments or log in without having their data stored, was born out of founder Alastair Johnson’s discomfort with the way personal information was traditionally being handled by brands.

In fact, Santander has estimated that blockchain could save banks up to $20bn each year in administrative costs. However, it could also herald the start of a peer-to-peer lending regime that’s cheaper and more appealing to consumers.

Green energy “crying out” for investment, says F&P Sponsors (Bioenergy Insight), Rated: B

Green energy businesses are “crying out” for investment, according to P2P lending specialists F&P Sponsors, and are increasingly turning to the alternative financing sector to get the money they need.

Recently, the P2P lending specialists secured funding for BioDynamic UK, which owns and operates an AD plant in Colwick, Nottinghamshire. BioDynamic UK had been rejected 25 times in attempts to win funding, before F&P secured them £1.5 million in just two weeks.

China

Lawsuit Against P2P Lender Yirendai Dismissed (Crowdfund Insider), Rated: AAA

Yirendai (NYSE:YRD), a China based peer to peer lender that is a sister company of CreditEase, has shared that a lawsuit filed against it in 2016 has been completely dismissed. The putative class action lawsuit was brought by multiple law firms pertaining to the decline in the share price. Ostensibly, the legal action was taken in part due to actions by the Chinese government and not Yirendai as the government was in the midst of issuing new rules to regulate the exceptionally large P2P lending industry. Yirendai has facilitated approximately RMB 32.3 billion (USD $ 4.75 billion) in loans from March 2012 through December 31, 2016.

Shares in Yirendai have moved higher on the news. The American Depository Shares (ADS) were priced at $10 per share when they went public in 2015. Today they stand at over $27/share.

Read the order here.

The CEO of LeTV Financial Resigned. (Xing Ping She), Rated: A

Recently, Wang Yongli, the CEO of Letv Financial, confirmed that he has resigned from Letv. When it comes to his next stop, Wang only said he would take a break and hasn’t revealed too much. Wang joined Letv Financial in August 2015, acting as the CEO and vice president of financial service sector. Before that, he had worked in Bank of China (BOC) for over 26 years, and playing the role of vice president for about 10 years.

Since the Letv funding crisis broke out from the end of last year, senior executives from different business sectors of Letv ecosystem left in session, now it spread to financial sector. Now, the parent company Letv Holdings is in trouble again. According to a civil decision made by the court, three companies held by Jia Yueting couple and deposit asset amounted to $182.21million have been applied for a freeze by banks. Under the heavy crisis, how long could Letv finance sustain for is remains to be seen.

European Union

5 Reasons Why Consolidation of Fintech Ecosystem May be Inevitable (The Financial Brand), Rated: AAA

1. Challenger Banks Need to Achieve Scale

This model will increasingly make it difficult for any individual challenger bank to achieve significant scale and to compete effectively with large traditional banks. Burnmark’s primary research also showed that challenger banking users are not fully loyal yet – most will stay with the challenger bank until their customer service expectations are met.

2. Traditional Banks Need to Improve Customer Experience

The most interesting strategies from challenger banks involve targeting the banking needs of traditionally under-served, niche segments like students, freelancers, small businesses, refugees and immigrants.

Challenger banks are proving that there is viable and commercial sense in targeting niche segments that were not traditionally profitable for the big banks.

 

3. Challenger Banks Lack Product Diversity

Roughly half of challenger banks today offer only basic products like savings and checking/current accounts – and this is a gap that can be successfully filled with collaboration within the space.

4. Challenger Banks Redefine Operational Structures

The biggest challenge any large banking operation faces today is costs – finding operational efficiency in its decades’ worth of legacy systems and non-strategic investments in outdated IT systems. The biggest desire for a traditional bank in today’s world of heavy fintech competition is to build digital technology from scratch, focusing on openness, transparency, efficiency, low costs and with the ability to future-proof disruption.

5. The Importance of Digital Banking

Both traditional banks and challenger fintech banks are using digital technology as an important component of their operational strategies. Digital technology is used to acquire and retain customers as well as to find cost efficiencies.

One way or the other, most challenger banking start-ups will be in a better competitive position with larger banks as partners, and vice versa. With the number of partnership announcements made around Money2020 Europe, the industry is clearly turning to maturity and scalability through collaboration.

2017 ‘a storming year’ for venture capital investment (EuropeanCEO), Rated: AAA

2016 was a record year for venture capital investment in Europe. Businesses raised €16.2bn – up 12 percent on 2015. Freddie Achom, founder and CEO of Rosemont Group, takes a look back at the trends of the last 12 months, and suggests where the UK and Europe may be heading. You can watch more of our conversation with Freddie, where he discusses how crowdfunding is disrupting the venture capital industry, and how Rosemont Group is innovating in the private equity space.

French fintech startup Shine completes a €2.8 million financing round (Tech.eu), Rated: A

Shine, a company that provides an administrative and financial management platform for freelance workers, raised €2.8 million from DaphniKima Ventures, and several business angels in a recent financing round.

Shine offers freelancers a multitasking solution platform that combines online banking with contract and invoice management, streamlining administrative and financial tasks for those who work independently.

LEGEND IN TALKS TO TAKE OVER BIL: REPORT (Delano), Rated: B

A Chinese firm may acquire a 90% stake in Luxembourg’s Banque international à Luxembourg, a news agency has reported.

Legend Holdings is in talks with Precision Capital, the Luxembourg-based Qatari investment vehicle that owns the Bil shares, Reuters reported on 11 July.

The deal is valued between €1bn-€1.5bn, according to Reuters.

Bank rivals see a disruptive force in PSD2 (Payments Source), Rated: B

Information sharing is about to get much different in Europe, giving bank alternatives such as Klarna more to work with as they compete against the financial services establishment.

“In northern Europe most countries have only around five banks that dominate the entire market after 20 years of consolidation,” said Jim Lofgren, CEO of Klarna in North America.

International

International RegTech Association Launches, Lists Executive Board Members (Crowdfund Insider), Rated: AAA

The non-profit International RegTech Association (IRTA), incorporated in Switzerland in May, has launched to provide a united community of individuals and organizations, with a shared vision to innovate, advance, and influence the future of Regulatory Technology (Regtech).

The IRTA’s objectives include:

  • Operate in key markets and economies, internationally
  • Support the entire Regtech ecosystem
  • Represent the interests of Regtech providers and consumers globally – including
    technology firms, service providers, professional advisers, and financial institutions
  • Engage and liaises with the most influential financial regulators and academics
  • Promote the advancement of the Regtech profession, through Regtech research,
    innovation initiatives, and standards development
  • Support Regtech accelerators, and delivers professional education, and certification
  • Work in collaboration with existing industry Associations, Agencies and other
    international organizations

The Dark Side of Fintech: Navigating the Hidden Risks of Digital Financial Services (Chipin), Rated: AAA

On one end of the risk spectrum are the risk-taking fintech startups. These fast technology adopters are disrupting traditional financial services and their delivery. Circumventing regulation is part of their cost advantage, but also their weakness. Lacking strong credit and capital adequacy standards, P2P lenders have loaned to terrorists, money launderers and hundreds of fictitious companies. Without deposit insurance, hacked cryptocurrency exchanges have gone out of business, leaving depositors high and dry. More digital disruptions are being introduced. New lending platform SALT is using cryptocurrencies as collateral for loans.

Despite the credit risks, these fintech businesses are taking market share from traditional financial services firms.

Over 50 percent of bank customers are now asking for similar low-cost online lending (P2P lending), wire transfer (P2P transfers) and investment management (robo-advisor) services.

A recent default on an Alipay-facilitated investment has highlighted the laxer credit standards. Investors who crowdfunded Chinese mobile phone maker Cosun (via Alipay on their mobile phones) face a loss of $45 million following a bond default. AliPay’s rapid expansion through parent Ant Financial into a suite of digital financial services for its 400 million registered users is the model of the future. But the default has raised concerns as China’s consumer e-finance leader integrates its P2P lending, insurance and investments starting at 1 renminbi with global wire transfer stalwart MoneyGram and its 350,000 agencies worldwide.

Even with digital credit information easily accessible, the increase in competition in fintech – China alone has 5,000 peer-2-peer (P2P) lenders — is pushing financial services firms to relax credit rules to compete for customers. Industry leader the Funding Circle has maintained a default rate under 2% on £2.3 billion in loans originated since 2010, averaging 5% returns, but for the broader P2P loan market, default rates are rising .

Australia

Melbourne invoice funder Timelio hits nine digits (AltFi), Rated: AAA

Melbourne-based peer-to-peer lender Timelio has hit the nine-digit mark, having successfully funded A$100 million in invoices through its platform since it was launched two years ago.

Like Qupital in Hong Kong and Capital Match in Singapore, Timelio provides a two-way marketplace for invoices and offers SMEs an easy online solution for working capital problems.

How online lender Tic:Toc can approve a home loan in just 22 minutes (TechGuide), Rated: A

Thanks to this connected world we live in, Tic:Toc can give you an answer on one of the biggest financial decisions of your life in 22 minutes, not 22 days.

Tic:Toc is based in South Australia and offers the world’s first complete online home loan platform.

The online business is backed by Bendigo and Adelaide Bank after being awarded a $900,000 grant from the South Australian government.

To be offered a loan, a customer must have at least 20 per cent deposit for the property they want to buy as well as the fees and charges.

The property you’re purchasing must be in a major capital city which, at this stage, excludes Tasmania and the Northern Territory.

Tic:Toc performs a credit check and can even check the value of your current property.

India

A Better Deal (Business Today), Rated: AAA

As a business model, P2P lending is still at a nascent stage in India. According to Tracxn, there are 63 pure-play companies in this domain such as Faircent, Lendbox, Capital Float, Indifi Technologies and i-Lend.

P2P is a simple concept, but its very nature mandates a robust system for assessing the creditworthiness of borrowers. To make that cut, i2i gathers as much information as possible about people looking for loans (yes, it looks at their social media profiles as well), collects all relevant documents and verifies them. Each profile is then automatically analysed and put under one of the three tabs – Accepted, Rejected and On border. Next, its underwriters manually go through the borderline cases and ask for more information to give them a specific status. They also list the strengths and concerns regarding each ‘Accepted’ borrower, taking into account factors such as incomes, liabilities and CIBIL scores. The company receives an average of 4,000 loan applications every month, out of which only 50-60 per cent people complete the entire application process and out of that, only 60-70 applications get accepted, says Singh.

The start-up has also initiated a ‘One loan, One Interest’ policy for every risk category.

The company currently makes money from the fees paid by its registered users. While investors pay a one-time registration fee of `500, potential borrowers just need to pay `100. Additionally, an investor has to pay a service fee, which is 1 per cent of the total amount invested on the platform. Again, based on the risk profile, a borrower has to make an upfront payment of 3-6 per cent of the loan.

Asia

Online Bank’s Loans and Deposits Soar Past W1.2 Trillion (Chosun), Rated: AAA

Korea’s first online lender K-Bank said Tuesday that the amount of loans extended and deposits collected has exceeded W1.2 trillion just 100 days after its launch (US$1=W1,152).

The online bank has racked up 400,000 customers so far.

Africa

Lending potential in Africa (Biz Community), Rated: A

According to the Africa and Middle East Alternative Finance Benchmarking Report, Kenya and South Africa are leading the P2P business lending market in Africa. However, 90% of online alternative finance originated from platforms headquartered outside of Africa.

Furthermore, the East Africa region has the largest market share of the African alternative finance market. In 2015, East Africa accounted for 41% of total African market share, while West Africa accounted for 24% and Southern Africa accounted for 19%.

Canada

The repackaging of U.S. fintech loans comes to Canada (Financial Post), Rated: A

But the news that fixed income manager Kilgour Williams Capital has, after about two years of due diligence, launched a credit fund that will buy high interest consumer loans from U.S. fintech companies funded with capital from Canadian high net worth and institutional investors, is significant for other reasons as well.

And for KiWi Credit Fund — which has nothing to do with fruits or birds — the concept makes enough sense that a well known asset manager has anted up $30 million to become the lead investor.

But to our knowledge we are the first Canadian-managed fund to invest in this space,” said Colin Kilgour, a founder at Kilgour Williams, a firm best known for managing the program put in place after the $30 billion asset-backed commercial paper froze a few years back.

Authors:

George Popescu
Allen Taylor

Friday March 24 2017, Daily News Digest

unbanked

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

unbanked

News Comments

United States

United Kingdom

European Union

Australia

China

India

Canada

 

News Summary

United States

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Does Sanborn have a point?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Clarity Money

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

CommonBond

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

Payoneer

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

Forter

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

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

ConsenSys

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

United Kingdom

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

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

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

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

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

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

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

The report states:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

European Union

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

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

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

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

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

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

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

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

Australia

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

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

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

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

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

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

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

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

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

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

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

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

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

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

China

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

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

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

India

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

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

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

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

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

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

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

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

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

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

Canada

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

Authors:

George Popescu
Allen Taylor

Friday February 24 2017, Daily News Digest

French crowdfunding barometer

News Comments Today’s main news: dv01 creates new securitization portal. China requires P2P lenders to keep money in banks. Today’s main analysis: France’s online alt finance doubles in size. Today’s thought-provoking articles: Robo-advice to go mainstream in 2017. China Rapid Finance to target U.S. IPO as early as 2017. Is ‘peer’ being muscled out of P2P investment? United […]

French crowdfunding barometer

News Comments

United States

United Kingdom

European Union

Australia

China

  • P2P lenders required to keep funds in banks. GP:” What is important to know here is that it is very hard for a p2p lender to find a bank who will accept to bank for them, so this is in fact a way to shut them down more or less. Which is unfortunate because this in desperation people take desperate measures. And wewould all be better off if the p2p lenders did hold all their money in a bank, if banks would accept them.  ” AT: “Considering the business climate in China, I think this is the right move.”
  • China Rapid Finance to target U.S. IPO, maybe in 2017. AT: “Interestingly, the source for this story is saying the IPO will be used to raise money for expansion in China. Rumor, or fact?”

Canada

News Summary

United States

Leading FinTech Analytics Platform dv01 Announces New Portal Dedicated to Securitizations (Yahoo! Finance), Rated: AAA

dv01, the reporting and analytics platform that brings transparency to lending markets, today announced the launch of Securitization Explorer, a new web portal dedicated to providing investors with increased insights into securitizations of consumer loans.

Institutional investors have long used dv01’s cloud-hosted web application to gain real-time insight into consumer loans, analyzing over $50 billion of loans to date.  With the launch of Securitization Explorer, dv01 leverages superior data, analytical, and visualization tools to deliver a comprehensive application dedicated to the needs of investors in consumer loan securitizations.  The new application is fully integrated into the dv01 environment and allows seamless transition from whole loan pool analysis to securitization analysis.

dv01 is the Loan Data Agent on numerous securitizations, overseeing an aggregate securitized collateral balance in excess of $1 billion. The company has aggregated performance data from marketplace lenders including SoFi, Lending Club, Prosper, Marlette Funding, Avant, and CommonBond. By normalizing data across lenders, dv01 simplifies comparison and analysis, enabling institutional investors to study both pool and individual loan performance, as well as quickly detect issues within portfolios.

Orchard’s CEO Matt Burton Talks Marketplace Lending (Forbes), Rated: A

Matt Burton: Like many startups, Orchard began as a small circle of friends with unique perspectives and complementary skill sets. In 2013, we created a Meetup in NYC for people interested in the emerging online lending industry. I met with a number of institutional investors who were investing in online loans and what I discovered was that most of them needed a system capable of purchasing and tracking large portfolios of small loans from multiple lending platforms. Since one didn’t exist, they were trying to cobble something together on their own, and most were struggling with it. Rather than becoming an investor or launching another lending platform, it occurred to me that someone should build the infrastructure to connect these two sides of the market at scale. On the flight home, I decided to launch Orchard and had just the right team of co-founders in mind to do it.

To date, we’ve on-boarded over $40 billion of loans to our platform across 20+ lenders, covering a diverse range of consumer and small business credit products.

We believe that an efficient, diversified method of selling and reselling whole loans and loan portfolios is critical to the industry’s growth and longevity over multiple credit cycles.

We are excited about the possibilities that come with more and more traditional lenders adopting a ‘fintech’ approach to providing services and how that may help underserved segments of the market access the credit they need. The opportunity will likely be even more pronounced in other regions of the world where these underserved segments of the market have almost no access to traditional banking services but wide access to smartphones and mobile-only services.

Let’s not forget that lending is still the primary business activity of banks, credit unions, and specialty finance companies. Most of them are in the process of converting their lending operations to the online model—or quickly evaluating whether to build their own platform or partner with an existing lender or technology provider.

The broader convergence of banking and financial technology feels inevitable at this point.

4 Trends Transforming Online Business Lending (Entrepreneur), Rated: AAA

Alternative lending swooped in to fulfill the needs of consumers and small business owners during the credit pinch after 2008, and every sign points to the industry scaling up. By 2020, some estimate that 1 in 5 small business loans will be made by an alternative lender. That share of the pie will be $52 billion, compared to $5 billion today.

1. Multi-product offerings.

Our nation’s largest financial institutions are full-service banks, offering credit cards, personal loans, student loans, mortgages and small business loans, among other financial products. But to date, most online lenders have stuck to one side of the market, with some notable exceptions like Lending Club, which operates both in the personal loan and small business loan sectors. Over the next few years, we’ll probably see more online lenders offering multiple kinds of loans themselves.

2. Bank partnerships.

Banks have large customer bases, low cost of capital, and scale on their side. Alternative lenders have speed, better user experiences, and a regulatory vacuum to operate in.

While they’re natural competitors, they don’t have to be. Indeed, a number of partnerships are beginning to form between banks and online lenders that will define how the credit needs of small businesses are met in the future.

3. Pushes towards self-policing

But over the past few years, we’ve seen the rise of different self-policing initiatives, from trade associations to industry announcements. The Innovative Lenders Platform Association, the Marketplace Lenders Association, the Responsible Business Lending Coalition, the Small Business Borrower Bill of Rights: they’re all attempts at self-regulation.

4. Increased government regulation.

Regulators aren’t blind to the potential that alternative lenders have to innovate—and to the possibility that misregulation could quickly lead to the death of an important new industry. But, online lending is brand new, and it’s disrupting what’s traditionally been a highly regulated industry. So, expect more news coming out of Washington as regulators look to get up to speed on the innovation that’s happening in online lending, and seek to build first principles on what an appropriate regulatory framework should look like.

VeriComply Appoints Former LendingClub Executive Roger Dickerson President, Prepares to Expand Into MPL (Crowdfund Insider), Rated: A

VeriComply, a company that automates the verification of marketplace loans for the secondary market, announced on Thursday it appointed former LendingClub executive, Roger Dickerson as its new president as it prepares to expand into the marketplace lending industry.

According to VeriComply, Dickerson served as Vice President of Finance Operations at LendingClub where he oversaw investor operations.

Panhandle students owe slightly more, but default less (Amarillo.com), Rated: B

Students in the U.S. congressional district that encompasses the Texas Panhandle hold, on average, more loan debt than the state average. But on the other hand they also default on student loans at a lower rate.

The average student debt per borrower in the district is $29,122, according to a student debt analysis released Thursday by LendEDU, a student loan marketplace.

That amount is about $2,100 more than the state average.

The loan default rate in the congressional district is 7.27 percent, the study found. Statewide, the rate is 7.39 percent.

Texas’ colleges and universities

Average student debt per borrower: $27,048

Debt per borrower rank: 22/50

Proportion of grads with student debt: 58%

Student loan default rate: 7.39%

Total college cnrollment: 748,866

District 13’s colleges and universities

Average student debt per borrower: $29,122

Proportion of grads with student debt: 59%

Student loan default rate: 7.27%

Total college enrollment: 76,084

Source: LendEDU

United Kingdom

2017 will be the year that robo-advice enters the mainstream (FT Advisor), Rated: AAA

It is anticipated that by the mid-point of this year there will be between 50 and 70 players offering an automated advice solution in the UK, including several major providers.

A human element is crucial to the approach of these more complex online financial advisers. Many are also routing online customers to a human if it is apparent that the need is complex or the customer may not have properly understood the questions asked during the process.

But a human element is only part of the solution; additional safeguards will also be required. We would not allow a human adviser, however well trained, to operate without a system of checks, balances and oversight, and the same is true of an automated model.

Once safeguards are in place, EY believes that a robo-adviser would be expected to have fewer biases and a better audit trail than any human.

The ‘peer’ is being muscled out of peer-to-peer investment (BusinessZone), Rated: AAA

The peer-to-peer business lending market has reached over £4bn. Nearly a quarter of all equity investments last year were made through Seedrs and Crowdcube, the two largest crowdfunding platforms.

Yet in both cases, the future depends not on the retail investors – Joe Public – that made their name but on market-shaping institutional investors.

“Around 10% of all businesses funded on our platform have some form of VC, institutional or corporate investment involved at some point in their history, and that rises to 50% when it comes to growth-stage business,” he said.

Seedrs echoes the sentiment. Rich Mason, its business development director, says they’ve seen a “surge” in co-investment with institutions and later stage investors.

At the other end of the spectrum, 25% of Funding Circle’s investment is from institutions (including the securitisation of loans).

ThinCats’ Caley says changes to its lending criteria due to the demands of institutional investors, cut 20-25% of loans last year.

Whether this is a good thing or not seems split between the two leading forces of alternative finance. On one hand, everyday investors now have access to big funding rounds like Monzo, something that would have been impossible in the past.

On the other, the future of peer-to-peer lending is less clear. Very few of these platforms make money and several have already struggled after key institutional investors pulled the plug.

New fintech degree course aims to churn out next generation of entrepreneurs (Finextra), Rated: AAA

Budding entrepreneurs looking for a career in the fast-growing financial technology industry can now sign up to the UK’s first fintech undergraduate degree course at Wrexham Glyndwr University.

The new BSc (Hons) Financial Technology Management course has been designed with the input of fintech startups and support from North American investment firms Franklin Templeton and State Street.

Course leader Anna Sung, lecturer at Wrexham Glyndwr University, says: “Rather than teaching students the technologies behind the rise of fintech, the course will teach them how to generate new business ideas and create their own startup using the technologies available to them.”

Global investment in fintech ventures in the first quarter of 2016 was £4.1 billion and it’s estimated that 100,000 new jobs in the sector will be created in the UK by 2020.

Has the P2P halo slipped? (City A.M.), Rated: A

A look at some headline numbers from Funding Circle, the most well known in the SME lending P2P space, is telling. It operates a pooling system where a retail investor lends to a portfolio of, typically, 100 businesses, with no more than 1 per cent exposure to any one loan. Given average SME default rates, this is a significant risk mitigation tool. And when you overlay this with risk banding, quality underwriting and proactive arrears management and collection, it becomes a pretty tightly controlled environment. The upshot is that investors have received a 7.1 per cent return after fees and bad debts.

Nevertheless, the head of the Financial Conduct Authority (FCA) Andrew Bailey has said that he’s “pretty worried” about some aspects of the P2P market. Speaking to the Treasury select Committee, he was referring to attempts by some platforms to draw direct comparisons between their offerings and the returns from bank deposit accounts – implying that the two products are comparable, when they are not.

Bailey’s caution should be taken as a warning. While the concept and principles of P2P have political and regulatory recognition, behaviours that are seen to be misleading investors will not be tolerated. Absolute transparency about risk, return and redress are essential if the sector wishes to avoid damaging itself. Moreover, while banks exist under increasing levels of scrutiny, platforms can currently operate under lighter regulation.

So is there really a problem with P2P? I think there is, but not in the investor protection/regulatory space, or in its customer outcomes (which are largely excellent). The problem lies with the business model itself.

Robo’s opportunities and risks for advisers – Keith Richards (Professional Adviser), Rated: A

Robo-advice still has its limits, Richards cautioned, however, and advisers should be careful not see it as a ‘one size fits all’ solution.

“Mis-selling scandals of the past have generally been based on formulaic sales processes so it is important not to repeat history. The individual review and tailored recommendation process of financial advisers protects the market from systemic failure.”

Romford climbs to top spot for buy-to-let investor returns (Mortgage Solutions), Rated: A

Romford has replaced Luton as the postcode offering the greatest return for buy-to-let investors, after seeing rental prices grow 8% in the year to November.

The city climbed six places to knock Luton off the top spot, after it posted a capital gains growth of 17% and a buy-to-let yield of 5%.

Luton still remains a desirable market for investors, however, where continued growth in the rental market has offset the shrinking of yields, LendInvest said. The city posted a respectable 5% yield and a capital gains rate of 15% on rental price growth of 8%.

Last in the latest ranking of top 10 postcodes was Stevenage, where, despite 10% rental growth – the highest of all – capital gains were comparatively low at 9% on yields of 4%. Overall, Northampton remained the only postcode in top 10 to be located outside the South East.

European Union

France’s Online Alternative Finance Doubles in Size – Crowdfunding Grows 40% (Crowdfund Insider), Rated: AAA

The French Crowdfunding Association (Financement Participatif France) released today the 3rd edition of its annual industry Barometer. For the first time, the data was compiled by auditing and consulting firm KPMG, which lends to the Barometer additional weight.

As it stands, the 2016 Alternative Finance Barometer reports that:

  • French alternative finance overall raised €668 million, a 112% increase from 2015.
  • French crowdfunding raised €234 million, a 40% increase from 2015.

I draw two conclusions from these numbers:

  • The rapid growth of alternative finance comes from models fueled by institutional investors.
  • The French alternative finance market is catching up, but is still dwarfed by the UK’s.

The Barometer focuses in more detail on the narrowly defined category of crowdfunding that remains closer to the original roots of “funding by the crowd”. The three segments of this category show:

  • Donation and rewards-based crowdfunding show a sustained 37% growth to €69 million.
  • Debt financing and crowdlending grew by +46% to €97 million. The strong 125% growth stated in the 2015 barometer is not directly comparable to the 46% growth rate stated for 2016. The latter is based on comparable data, retro-fitted to a smaller parameter of SME, real estate and green debt funding and crowdlending.
  • Equity crowdfunding decelerates to +36% to €69 million.

In conclusion, while 40% is a very healthy growth number by common standards, it is not enough to sustain some 100 startups in the crowdfunding category. Many will jump ship or consolidate. The winners will most likely go for more hybrid models to get a nudge of acceleration from institutional investors.

Australia

Marketlend Appoints Brad Pattelli as Non-Executive Director (Yahoo! Finance), Rated: A

Marketlend, Australia’s leading peer-to-peer trade credit platform, today announced that it has appointed Brad Pattelli as a non-executive member of its board of directors. Pattelli brings decades of experience as an investor in a broad range of businesses, multiple prior public and private board roles, and significant expertise in the P2P arena as the former President of LC Advisors, a subsidiary of LendingClub, the award-winning online platform.

Founded in 2014, Marketlend provides investors with a unique opportunity to invest in supply chain or debtor lending facilities secured by short-term receivables, primarily from small to medium sized Australian businesses. An A+ rated global insurance company protects Marketlend investors against insolvency of the borrower and its debtors, enabling uninterrupted principal repayment on the majority of Marketlend’s lending facilities, providing investors with significant credit enhancement whilst enabling borrowers to receive better interest rates. Marketlend has recently secured a mandate from an undisclosed institutional investor to invest on its platform.

China

P2P lenders to keep funds at banks (Shanghai Daily), Rated: AAA

CHINA’S banking regulator yesterday issued a new rule requiring peer-to-peer lending platforms to use third-party banks for custody of funds as it enhanced a national campaign to curb financial fraud.

The bank requirement seeks to strengthen fund security and prevent capital embezzlement, the China Banking Regulatory Commission said in a statement yesterday.

A P2P lending platform should sign an agreement with only one commercial bank to safeguard the funds, and all P2P lenders should meet the custody requirement in six months, the regulator said.

As of yesterday, 209 operating online P2P platforms have signed such agreements with commercial banks, accounting for 8.8 percent of all P2P lenders, according to data compiled by Online Lending House, a portal that tracks the sector.

China Rapid Finance Said to Target U.S. IPO as Soon as 2017 (Bloomberg), Rated: AAA

China Rapid Finance, a Shanghai-based peer-to-peer lender, is planning to raise at least $100 million in an initial public offering in the U.S., people familiar with the matter said.

The company, which raised $20 million at a pre-money valuation of $1 billion in November, could hold the IPO as soon as this year, the people said, asking not to be identified because the information is private.  The money will be used to fund expansion in China, one of the people said. The company declined to comment in an e-mailed statement.

Canada

Jean-Sébastien Drolet, RealStarter on Making Real Estate Investments Accessible (Crowdfund Insider), Rated: AAA

Crowdfund Insider had the opportunity to interview the co-founder of Canadian real estate crowdfunding platform, RealStarter.

Jean-Sébastien Drolet:  RealStarter stands for a reachable start in the real estate investment. As you might know, buying property is not accessible to everyone because one encounters many costs and fees. Also, real estate investment can be challenging if you don’t have enough knowledge regarding the market and market trends.

JSD:  I would say our main challenge in 2017 will be to build trust with our users. I say that for two reasons that go hand in hand with each other: real estate crowdfunding is not very well known in Canada, especially in Quebec, and people are distrustful about investing money in real estate through a web platform. (It was only legalized in 2015 in Canada.)

JSD:  I don’t think so — things are moving quite slowly in terms of regulations but they are still moving forward. In 2017, the Canadian regulators across Canada will be looking at what is going on in other jurisdictions to amend the regulatory regime actually in place in order to make it more efficient with the new emerging fintech business models. For example, the AMF (Quebec regulator) recently announced the creation of a technological Innovation Advisory Committee on which RealStarter will be. Its primary mandate will be to analyze technological innovations in the financial sector and anticipate regulatory, market efficiency and consumer protection issues.

JSD:  Yes, it takes time to build a real estate crowdfunding market.  After reading a few market studies about the US and the UK market, we can see it took about three years to achieve good growth in terms of investment volume made through crowdfunding platforms. We predict it is going to take less time in Canada since we now have positive results from these jurisdictions. Also, we like the E-Reit model adopted by certain US crowdfunding platforms, such as Fundrise.  We are currently working toward doing something similar available if the regulation is flexible enough.

Authors:

George Popescu
Allen Taylor