What Does Blockchain Tokenization Mean for P2P Lending?

tokenization P2P lending

The growth of peer-to-peer lending was a direct result of the 2008 economic recession. Banks vacated the consumer and SMB lending space, which allowed fintechs to capture the demand left by that gaping hole. According to a recent study, by the end of 2024, the P2P lending industry will be worth $897.85 billion. The market […]

tokenization P2P lending

The growth of peer-to-peer lending was a direct result of the 2008 economic recession. Banks vacated the consumer and SMB lending space, which allowed fintechs to capture the demand left by that gaping hole. According to a recent study, by the end of 2024, the P2P lending industry will be worth $897.85 billion. The market expects to grow at a CAGR of 48.2%.

Hitting a trillion dollars an important milestone. But with traditional banks and lenders investing heavily in getting their digital lending game right, it is critical to evaluate the source of the next wave of innovation in fintech lending. Though crypto lending is on the verge of hitting the mainstream, it is tokenization that we believe can change the face of the industry in myriad ways.

TOKENIZATION: The New Disintegration Technique?

Tokenization is a method that converts real world assets into transferable digital tokens that live on a blockchain.

  • Liquidity: Liquidity is a major concern when people invest. From real estate to VC funds, many lucrative assets are constrained by their ability to provide the investor a timely exit. Thus, investors are stuck with an investment for 5 – 10 years because they have no way to trade it. Tokenization brings in the necessary liquidity by converting interest into a tradeable asset.
  • Monetization: Many assets such as patents, copyrights, and carbon credits do not have a physical identity but exist in a digital format. The easiest way to convert these into their monetary equivalent is to tokenize them.
  • Access: 99.9% of investors do not have access to the next Facebook because they cannot invest the minimum 10 million dollars required for getting entry into Peter Thiel’s next fund. Tokenization creates democracy of access as it allows the everyday investor to bet just $1,000 on the next unicorn. Tokenization empowers inclusion of retail investors, and their participation is a game changer in the long term.
  • Use Case: For instance, you would like to own the Empire State Building (ESB), but you do not have the estimated $3 billion required to buy the building. On the other hand, ESB is on sale and its owners can’t find a ready buyer for such a large asset. Selling it piecemeal would degrade its value. With the help of tokenization, you can convert ESB into 3 billion tokens worth $1 each and sell it across the investing world. The investor gets to own an iconic asset at $1, and the seller will have a larger buyer universe to pitch a $3 billion asset.

How Would Tokenization Work for P2P Lending?

There are new applications coming out daily, but we believe these are the earliest use cases:

  • Tokenization would allow P2P loans to be funded by thousands of micro investors. Instead of institutional investors controlling the lending on platforms, the ‘P’ in P2P lending can be an individual investing $100 in a loan.
  • The loans would become truly tradeable, and liquid. If you invested in a 3-year loan but need the money back after 6 months, you can simply sell your digital asset on an exchange at a fair price.
  • Crypto P2P loans can enter the mainstream with tokenization, allowing development of fixed income instruments in crypto. This will allow wider participation and lure institutional investors to the market.

CASE STUDY

Blackmoon has launched a tokenization platform on this theme. Its Prime Meridian real estate lending fund is built on a similar thesis that tokenization has the power to change P2P lending fundamentally. It is in a strong position to capture a currently niche market, which will soon to grow to encompass the primary P2P lending industry.

Impact on the P2P Lending System

A P2P loan is not liquid, and the lender usually has to see through the period of the loan tenure. It can be difficult to find a third party looking to buy the same loan. The lender might need to sell at a deep discount due to lack of liquidity. Tokenization will help create more buyers/sellers and a functioning secondary market for the sector leading to more liquidity.

The process of tokenization allows for fractionalization so that the lender can sell any portion and at any time. This breaks everything you own into its digital equivalent. This enables users to create a stock or single proof of ownership tied to the specific asset. It will also make investing easier for the average investor.

Tokenization reduces trading friction and transaction costs. It would also make fractional ownership simple and easier to execute. As the financial asset is already divided into tokens, there would no duplication of legal costs after every transaction.

With integration of the tokenization process in P2P lending, lenders can list their assets as collateral. It is through tokenization, that assets such as patents, intellectual property, or even branding, can be used for raising loans. Moreover, tokenization can allow a brand new form of P2P funding to arise. Tokenized assets can also be offered for collateral funding. So if you own 10% of an apartment, you can borrow against that fractional asset on the alt-lending market.

It can spread risk across a variety of loans. Tokenization will attract more investors to alt-lending platforms as you can now diversify risk for even an amount as small as $100.

Investors have more freedom to invest around the globe. Tokenized currencies enable investors to trade in any geographic area they wish to. Now an American Investor can lend to Asian borrowers in US-denominated loans and Asian accredited investors can invest in certain property loan platforms that are open only to a certain class of investors.

Conclusion

Tokenization is an interesting development with myriad applications in finance. One of its biggest impacts should be felt in the P2P lending industry. With the advent of new players like Blackmoon, P2P lending 2.0 is on the horizon.

Author:

Written by Heena Dhir.

Wednesday November 20 2017, Daily News Digest

credible

News Comments Today’s main news: SoFi offers 6-month grace period for SoFi ReFi. Zopa to build Open Banking infrastructure. Faircent secures $4M funding round. Assetz Capital launches IFISA. Ping An make big bet on technology. Ant Financial partners with Standard Chartered. Today’s main analysis: Student loan borrowers prefer payments over iPhone X or bitcoin. Who are LendingClub borrowers? (A must-read market […]

credible

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Canada

News Summary

United States

Behind the Investment Platform: The LendingClub Borrower (LendingClub), Rated: AAA

From 2007 through 2017, LendingClub has matched $31 billion investor dollars with 2 million borrowers’ loans.

Source: LendingClub

Today, outstanding credit card and personal loan balances in the U.S. are approximately $960 billion. Of that, two-thirds, or roughly $600 billion, represents interest-earning balances carried month-to-month —the overall addressable population. About half of the addressable population (more than $300 billion) currently meets LendingClub’s target credit profile—a market that we have only just begun to penetrate.

Read LendingClub’s Marketplace Insights report in full here.

Holiday Finance with Lending Club (ABC News), Rated: A

LendingClub Appoints Former Netflix Chief Talent Officer Patty McCord As New Board of Directors Member (Crowdfund Insider), Rated: B

Online credit marketplace LendingClub Corporation (NYSE: LC), announced on Tuesday it has appointed Patty McCord as the newest member of its Board of Directors, effective December 13, 2017.

McCord spent 14 years creating the unique and high-performing culture at Netflix and as the video streaming giant’s Chief Talent Officer, she helped create the Netflix Culture deck and experimented and cultivated new ways to work.

SoFi Now Offering Six-Month Grace Period for Graduates Using SoFi ReFi (Crowdfund Insider), Rated: AAA

On Tuesday, online lending platform SoFi announced it is now offering a six-month grace period for graduates using its newly launched SoFi ReFi program.

ABS investors could pull back from MPLs in 2018 as cycle set to turn (GlobalCapital), Rated: AAA

Interest in marketplace loan ABS from the buyside picked up in 2017, but some investors are now saying that they could sit things out in 2018 as credit concerns grow and a lack of data presents problems in the late stages of the credit cycle.

ABS volumes doubled from $3.4bn in 2016 to $7bn in 2017, with SoFi issuing more than $3bn in deals this year, according to data from JP Morgan. The introduction of multi-seller platforms from SoFi, Lending Club, Marlette Funding, Prosper Marketplace also drove liquidity for the sector, while new …

Fiserv teams with TransUnion for loan origination system (Banking Technology), Rated: A

Financial services company Fiserv and credit reporting agency and risk information provider TransUnion have joined forces, reports Julie Muhn at Finovate (Banking Technology‘s sister company).

Under the agreement, Fiserv will integrate TransUnion’s CreditVision Link to increase precision of scoring and risk modeling in its Automotive Loan Origination System.

Over 65% of students prefer student loan payments over iPhone X or Bitcoin for holidays (TechRepublic), Rated: AAA

LendEDU asked 1,000 people repaying student loans if they would prefer a popular holiday gift or a loan payment of equal value. And, despite the hype surrounding tech trends, they wanted loan payments more.

Source: LendEDU

Voice assistants like Google Home and Amazon Echo won’t change banking in 2018 (Tearsheet), Rated: A

Bankers agree voice will be the biggest and most important channel to their business after mobile, only this time, it won’t sneak up on them like mobile did. They’re looking at 2018 as a year to get their companies more involved with voice by adding features to their Alexa skills, creating an Alexa skill if they haven’t done so already or expanding Alexa capabilities to other parts of the organization. But for the most part, they’re looking for a clearer sense of how people even use Alexa.

In 2017, USAA, Ally Bank and U.S. Bank launched Alexa skills. Before this year, Capital One was the only bank with the feature, which it launched in 2016.

Upstart’s First SaaS Partner (LinkedIn), Rated: A

Earlier this year, we announced an initiative to bring the industry’s first Software as a Service (SaaS) lending platform to market, which we call “Powered by Upstart”. Now we’re excited to announce that BankMobile is the first bank to launch their personal loan program on the Upstart platform. Beginning today, BankMobile offers consumers in 43 states personal loans from $5,000 to $30,000, with no origination fees and interest rates starting at 5.99%.

Overcoming the Hurdles of Big Data Start-ups (Big Data), Rated: A

We are an early investor in the company ‘Kabbage” and Kabbage to me is a major disruption in the fund-lending and risk-analysis market. Established in 2009, Kabbage supported the emerging companies that were suffering the blow of a financial crisis. Banks were declining to lend money to small businesses and entrepreneurs had no access to capital to support their businesses. What aggravated the problem is that even if they did get access to money, the procedure for evaluating the risks of money lending were strictly based on scrutinizing the company’s financial background and fico scores instead of probing into the business. Deviating from the established model of risk analysis, Kabbage stepped into the market at a time of financial distress and operated on a completely different strategy. They would evaluate your UPA shipping data, ebay seller reviews, and other bits of information that are generated on different platforms and then assess credit card risks based on these factors and not just credit card fico scores. Kabbage started off by accumulating a ton of third party data which they ingested, analyzed and then created a solution. Over time, the company has gathered a substantial amount of primary data that they can use to tweak and refine their risk-analysis model. The company efficiently leveraged big data to provide an entire new service in the risk-analysis industry.

Anthemis Group’s Jillian Williams on tough times for personal finance apps (Tearsheet), Rated: A

It’s a space that started out with Mint ten years ago, with a new way to look at all of one’s finances in one place. The field has now grown to accommodate an ever-expanding number of direct-to-consumer PFM apps, including apps like Digit, Clarity Money, Penny and Qapital, and banks are now folding PFM capabilities into their mobile apps.

Banks have been folding in PFM features and competing apps are having trouble differentiating. Where do you see the PFM market right now?
A lot of PFM will continue to move to a business-to-business, or business-to-business-to-consumer model. Things [business-to-consumer PFMs] struggle with are being able to monetize and with customer acquisition.

What’s the problem with business-to-consumer PFM?
The market is really crowded and it’s hard to provide that extra value to really distinguish themselves from other platforms in the space.

Instant Loans at Checkout: helpful or hurtful? (MSN News Now), Rated: A

An $800 mattress for your bed. A $600 sofa for your living room. A vintage designer bag as a Christmas gift for your best friend.  They’re all pretty big purchases to buy online, but now you can get an instant loan for any of them right at checkout.

Ingle says the payment plans are different than credit card options. Companies like Affirm partner with certain retailers to offer the loans, which are installment loans with interest rates, and set payments are made over time.

India

Peer-to-peer lending platform Faircent gets $ 4m in Series B (Economic Times), Rated: AAA

Peer-to-peer lending platform Faircent has raised $4 million in a Series-B round led by Belgian impact investment fund Incofin and Muthoot Fincorp.

P2P platform Faircent raises Series B from Muthoot Fincorp, Incofin, others (Economic Times), Rated: A

In a statement Faircent said it will utilise the newly acquired funds towards strengthening the platform’s technology and creating greater awareness about P2P lending’s significance as a new and highly rewarding asset class.

Fintech Startups Seek to Shake Up Money Transfer Industry (WSJ), Rated: AAA

The race is on to become the top global app for international money transfers.

Fintech startups including WorldRemit Ltd., TransferWise Ltd. and Remitly Inc. are pulling ahead of the pack of the dozens of companies trying to disrupt the remittance industry, using the latest technology to send money internationally.

More than $600 billion is remitted world-wide every year, mostly by migrant workers from places like India, Mexico and the Philippines, who have traditionally had to deal with long lines and high fees to send money home.

Source: The Wall Street Journal

Finvasia gets licence to operate as NBFC (The Tribune), Rated: A

Chandigarh-based Finvasia, a fintech company offering zero brokerage, has received the Certificate of Registration (CoR) from RBI to operate as a non-banking financial corporation (NBFC). This extension will allow the company to offer loan-based products to retail and corporates alike. The company plans to develop block chain technology based P2P (peer-to-peer) lending platform.

Canada

Fintech Select Announces Launch of Physical Bitcoins (GlobeNewswire), Rated: A

Fintech Select Ltd. (“Fintech Select” or the “Company”) (TSX-V:FTEC) is pleased to announce that it will be launching its physical Bitcoin product alongside its Selectcoin closed loop swipe card.

Authors:

George Popescu
Allen Taylor

Wednesday November 15 2017, Daily News Digest

credit spreads

News Comments Today’s main news: PayPal launches P2P funding platform.True Accord lands $22M in funding.Lendable hits 100M GBP lending milestone.P2P Global Investments fund sees huge reduction in U.S. consumer loan exposure.Yirendai’s Q3 results.Klarna, PPRO partner on credit payment across Europe. Today’s main analysis: The latest trends in consumer credit.The corporate bond market suffers indigestion. Today’s […]

credit spreads

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Canada

MENA

News Summary

United States

New Q3 2017 TransUnion Industry Insights Report reveals latest consumer credit trends (TransUnion Email), Rated: AAA

With the holiday shopping season officially kicking off during Black Friday next week, TransUnion’s (NYSE: TRU) just released  

Credit Card Lending Metric Q3 2017 Q3 2016 Q3 2015 Q3 2014  

Number of Credit Card Loans  

414.3 million  

398.5 million  

374.2 million  

361.2 million Borrower-Level Delinquency Rate (90+ DPD)  

1.68%  

1.53%  

1.44%  

1.35%  

Average Debt Per Borrower $5,483 $5,323 $5,229 $5,251 Prior Quarter Originations* 15.5 million 17.6 million 15.3 million  

13.7 million Average New Account Credit Lines*  

$5,307  

$5,252  

$5,047  

$4,920

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Q3 2017 Credit Card Loan Performance by Age Group

Age/Variable 90+ DPD Annual Pct. Change Average Loan Balances Per Consumer Annual Pct. Change
Gen Z (1995 – present) 2.55% 15.5% $1,101 28.5%
Millennials (1980-1994) 2.48% 5.6% $4,028 12.0%
Gen X (1965-1979) 2.10% 7.7% $6,997 4.9%
Baby Boomers (1946-1964) 1.11% 8.8% $6,351 0.8%
Silent (Until 1945) 0.74% 10.2% $3,928 0.2%

 

Q3 2017 Auto Loan Trends

 

Auto Lending Metric

Q3 2017 Q3 2016 Q3 2015 Q3 2014
 

Number of Auto Loans

 

78.6 million

 

74.8 million

 

69.8 million

 

64.6 million

Borrower-Level Delinquency Rate (60+ DPD)  

1.40%

 

1.33%

 

1.19%

 

1.20%

 

Average Debt Per Borrower

$18,567 $18,361 $17,946 $17,351
Prior Quarter Originations* 7.1 million 7.3 million 7.2 million 6.8 million
Average Balance

of New Auto Loans*

 

$20,653

 

$20,436

 

$20,097

 

$19,524

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Mortgage Delinquency Rates Continue Extended Decline

Q3 2017 Mortgage Loan Trends

 

Mortgage Lending Metric

Q3 2017 Q3 2016 Q3 2015 Q3 2014
 

Number of Mortgage Loans

 

52.7 million

 

52.3 million

 

52.9 million

 

53.6 million

Borrower-Level Delinquency Rate (60+ DPD)  

1.91%

 

2.29%

 

2.50%

 

3.51%

 

Average Debt Per Borrower

$199,417 $193,489 $189,428 $186,577
Prior Quarter Originations* 1.9 million 2.0 million 1.9 million 1.4 million
Average Balance

of New Mortgage Loans*

 

$224,502

 

$230,120

 

$221,753

 

$195,514

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

 Personal Loan Balances Reach All-Time High as Delinquency Rates Decline

Q3 2017 Unsecured Personal Loan Trends

 

Personal Loan Metric

Q3 2017 Q3 2016 Q3 2015 Q3 2014
Total Balances $112 billion $100 billion $83 billion $66 billion
Number of Unsecured Personal Loans  

17.5 million

 

16.2 million

 

14.3 million

 

12.5 million

Borrower-Level Delinquency Rate (60+ DPD)  

3.13%

 

3.53%%

 

3.51%

 

3.61%

 

Average Debt Per Borrower

$8,017 $7,755 $7,258 $6,673
Prior Quarter Originations* 3.6 million 3.6 million 3.6 million 3.2 million
Average Balance of New Unsecured Personal Loans*  

$6,140

 

$5,475

 

$5,520

 

$4,847

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Corporate bond market suffers bout of indigestion (Morningstar), Rated: AAA

The corporate bond market suffered a bout of indigestion last week. Between absorbing a healthy amount of new issues and profit-taking from early year-end window-dressing, corporate credit spreads widened, albeit from levels that are still near multiyear lows. The average spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) widened 5 basis points to +104. In the high-yield market, the BofA Merrill Lynch High Yield Master Index widened 24 basis points to end the week at +376.

Source: Morningstar

Energy Companies’ Credit Quality Expected to Continue to Improve;
2018 Oil Forecast $55-$60

A confluence of global events recently drove the crude oil futures price curve into backwardation, a condition in which a commodity’s market price today (or spot price) is higher than the price for further-out month contracts. As of this writing, the spot price for West Texas Intermediate crude is $56.90/barrel and the December 2018 contract is priced at $55.70/barrel. Typically, the oil market trades in contango, which is the opposite of backwardation. In contango, a commodity’s spot price is below the price for further-out month contracts.

Source: Morningstar

See the full Morningstar report here.

Goldman Sachs’ Marcus is winning the personal loans arms race (Tearsheet), Rated: AAA

Marcus by Goldman Sachs said it was going to lend $2 billion to customers by the end of this year. As of late Monday, it had already done that.

Lending Club has reported losses exceeding $200 million over the last six quarters; Prosper has lost $210 million since the start of 2016, despite various cost-cutting measures, and lost its unicorn status. Even OnDeck Capital, which focuses on small businesses, is struggling to become profitable, having reported losses over eight consecutive quarters.

Goldman sees a $13 billion lending opportunity with Marcus over three years, CFO Marty Chavez said Tuesday in remarks at the Bank of America Merrill Lynch Future of Financials Conference.

TrueAccord Nabs $ 22M Series B To Bring Machine Learning To Debt Collections (Forbes), Rated: AAA

San Francisco based TrueAccord, announced today that is has closed $22M in additional funding led by Arbor Ventures, with participation from existing and new investors. The Series B funding follows a period of sustained and rapid growth for the company.

Why customer acquisition is so difficult for financial startups (Tearsheet), Rated: AAA

Customer acquisition is expensive. For a large bank it could cost between $1,500 and $2,000 to acquire a retail banking customer, according to Ciaran Rogers, director of marketing at StratiFi, an early stage startup that helps advisors manage portfolio risk. In credit cards the cost could be in the hundreds, not thousands — according to David True, a partner at PayGility Advisors. An expensive customer could be as high as about $800, which would include the cost of teasers and bonus loyalty points. At startups it could be between $5 to about $300 for one customer. Fintechs want to spend less money on that — Wealthfront, for example, decreases its marketing budget year after year.

Partnerships with bigger brands have been one way to bring that cost down. For example, Canada’s fifth largest bank, CIBC, is reportedly in talks with robo-adviser Wealthsimple over a referral deal in which the bank would send some of its customers to the digital investment startup.

At MoneyLion, the cost of customer acquisition is about $5 or less, said chief marketing officer Tim Hong. MoneyLion launched in 2013 and now touts about 1.5 million customers. Earlier this year, Luvleen Sidhu, president and chief strategy officer of the all-digital BankMobile, said it spends about $10 to acquire an account.

Solar Finance Pioneer CleanCapital Closes 3.7M Investment Round to Help Investors Tap Solar Market (EIN Presswire), Rated: A

CleanCapital, an online marketplace for clean energy investing, announced today that it closed its Series A with a total investment of $3.7 million. This investment came through 50 investors to include FinTech and cleantech leaders as well as SeedInvest’s Selections Fund in this latest round.

Over the past five years, the solar market grew an average rate of 72% per year, fueled by regulatory stability and reduced install costs.

As Black Friday Nears, a Record 196 Million Consumers Now Have Access to Various Forms of Credit Cards and Other Revolving Lines of Credit (TransUnion Email), Rated: A

With the holiday shopping season officially kicking off during Black Friday next week, TransUnion’s (NYSE: TRU) just released Q3 2017 Industry Insights Report found that 195.9 million consumers now have access to revolving credit such as bank-issued and private label credit cards. According to the report, this is the highest level of revolving credit access since TransUnion began measuring the variable and is greater than the 192.6 million consumers who had access to such credit products in Q3 2016.

TransUnion’s analysis found that average private label card originations in the holiday season (defined as November and December) for 2016 was 148% of the average originations for the January through October timeframe. This is tracking in line with recent rises observed in 2015 (156%) and 2014 (164%).

Other Consumer Credit Headlines from the Industry Insights Report:

  • Total Credit Balances Rise despite Slowdown in New Credit Card Accounts
  • Auto Loan Market Shifting Toward Less Risky Consumers
  • Mortgage Delinquency Rates Continue Extended Decline
  • Personal Loan Balances Reach All-Time High as Delinquency Rates Decline

Online Lending And A Tale Of Two Fed Studies (PYMNTS), Rated: A

In 2010, digital lenders originated $249 million in unsecured personal loans, and by 2016 that number had grown ninety-fold.

Cleveland’s Dark Outlook

That detail alone isn’t necessarily bad news – after all, having more debt doesn’t necessarily mean the online lending customers are doing worse. But paired with other data, the news looks pretty grim. According to the Cleveland Fed survey, the online lending customers also showed lower credit scores on average, more delinquent debt and more total debt outstanding.

The findings further suggest that in some cases, the three- to five-year installment loans of up to $30,000 to $40,000 often offered by online lending sites are not being used for their intended purpose of consolidating credit card debt into a single, lower-interest loan. Instead, customers were using those loans to rack up more debt and maxing out the cards they used to pay off the loans.

Philly, Chicago And A Very Different Result

The earlier report did note that outcomes varied depending on the specific borrower profile and their precise lending requirements. However, because of the expanded and more inclusive credit ranking criteria, consumers who might otherwise be “credit invisible” or appear to have a sub-prime score are able to get a more complete evaluation that considers a wider array of factors.

The lack of regulatory clarity raises concerns, they said, over whether customers are treated fairly, have “equal access to credit, and receive offers that can be easily compared and understood,” suggesting that alt lenders need to compete on a level playing field with their regulated bank counterparts.

Why The Discrepancy?

The Cleveland Fed study examined data from TransUnion for consumers who had been identified as having taken out “online bank-based loans.” That includes a much wider set of businesses and lenders than is technically defined by the more traditional online lenders.

The Philly-Chicago study focused entirely on data from Lending Club, a marketplace lender.

Fintech critics call it predatory lending (CBS News), Rated: A

The Cleveland Fed study goes even further. It claims that P2P lending is a ticking time bomb in which loose lending and cascading defaults could lead to another crash like the one the US suffered in 2008 when the subprime lending bust took down major banks and insurers, disabling the housing market for years.

Astrada points specifically to the high interest rates that prospective borrowers with poor credit could have to pay. Many websites offering P2P loans advertise 5 percent loans with terms of one to five years. This may look good to those who would like to roll their credit card debt of 25 percent into a P2P loan.

But the reality is that for many borrowers, the interest rate is much higher. He emphasizes that one up and coming P2P lender about to go public claims that its average loan portfolio across its business model is nearly 150 percent.

While Killing The Check, Kill The (Airline) Voucher, Too (PYMNTS), Rated: A

In the seventh installment of the “Kill the Check” series, PYMNTS’ Karen Webster sat down with Ingo Money CEO Drew Edwards to get a sense of how airlines can use push payments to quell misfires and compensate passengers for their troubles when things go awry.

The digital nature of push payments also helps airlines as they can better control when, where and how such monies are spent. In addition, Edwards noted, push payments are instantly reconciled with the airline’s own accounting functions as they are being used.

Real Estate Fintech Firm Unison Announces 2018 Expansion Plans (Crowdfund Insider), Rated: A

On Monday, home ownership investment platform Unison announced 2018 expansion plans.

The platform reported that in 2017 alone it has expanded into five additional states including IllinoisNew YorkArizonaNew Jersey and Pennsylvania, bringing its total footprint to twelve states plus Washington D.C.

In addition to announcing 2018 expansion plans, Unison also revealed multiple promotions and additions to its management team. These are the following:

  • Jim Riccitelli assumed the role of President focusing on facilitating Unison’s rapid expansion and supporting Unison’s trademark focus on consumer education and financial literacy.
  • Bill Walker and Brian Elbogen, former Managing Directors, have been promoted to Chief Revenue Officer and Chief Strategy Officer
  • Laura Wensley has been brought on as Director of Finance
  • Rayan Rafay has been promoted to Chief Operating Officer of Unison’s investment management business
  • John Arens, who is General Counsel at Unison, has taken on additional responsibilities as Managing Director of Business Operations
  • Heather Phillips has joined as Associate General Counsel

CFPB requests information on free access to credit scores (American Banker), Rated: A

The Consumer Financial Protection Bureau is seeking more information about consumers’ experience with free access to credit scores.

In two separate notices published in the Federal Register on Monday, the CFPB said it wants more data on which companies consumers are using to obtain their free scores. The bureau also said it is updating a public list of companies that offer free access to a credit score.

Dave Wilson’s Chart of the Day for Nov. 14 (Bloomberg), Rated: A

GUESTS: David Wilson Stocks Editor Bloomberg News Discussing his Chart of the Day “Here’s a ‘secret’ about tech stocks from Rich Bernstein.”

Julie Verhage Reporter Bloomberg Editorial Discussing the Cleveland Federal Reserve Bank slamming the peer-to-peer lending business, calling it predatory and asking for more regulation.

Listen to the podcast here.

Lend360: A New Era in Online Lending (Crowdfund Insider), Rated: A

I can sense that most of the folks attending the conference that got hurt by Operation Chokepoint feels a bit vindicated by the latest roll back of many new proposals laid out by the CFPB, Consumer Finance Protection Bureau. Just recently the United State senate overruled the CFPB’s arbitration rule. The overruling by CFPB and essentially a no-confidence vote happened about a week after Lend360 concluded in Dallas, Texas.

I attended Dan Quan’s “The Regulator’s View of Fintech” session on the last day of the conference. Dan manages the small dollar lender desk at the Consumer Financial Protection Bureau, at his panel, Dama Brown from FTC and Shamoil Shipchandler from SEC all spoke about an era of collaboration with lenders. The tones from all three regulatory representative is vastly different than that of five years ago where mass regulation and penalties were the topic of discussion.

I feel like the industry has finally evolved from a cat and mouse game with the regulators to a more collaborative marketing participants as this industry continues to mature.

2017 Holiday Budgets by City (WalletHub), Rated: A

The National Retail Federation predicts the average per-person tab this holiday season will reach $967, up nearly 3.4 percent since 2016.

Americans are on track to end 2017 with more than $60 billion in additional credit-card balances, according to WalletHub’s projections. That figure puts us perilously close to the nearly $1 trillion grand total recorded at the height of the Great Recession.

Holiday Budget by City

Overall Rank* City Holiday Budget
1 Naperville, IL $2,381
2 Sugar Land, TX $2,368
3 Bellevue, WA $2,367
4 Sunnyvale, CA $2,360
5 Carmel, IN $2,330
6 Milpitas, CA $2,262
7 League City, TX $2,225
8 Maple Grove, MN $2,221
9 Allen, TX $2,163
10 Columbia, MD $2,032

In order to determine the cities with the biggest holiday budgets, WalletHub’s analysts compared 570 cities across five key metrics: 1) Income, 2) Age, 3) Debt-to-Income Ratio, 4) Monthly Income-to-Monthly Expenses Ratio and 5) Savings-to-Monthly Expenses Ratio.

National Real Estate Investor Ranks Magilla Loans a Top Financial Intermediary with $ 1B in Commercial Loans (PR Newswire), Rated: B

Magilla Loans, a search engine for loans which connects borrowers to banks without requesting personal information, has been recognized by National Real Estate Investor (NREI), a leading authority on trends in the commercial real estate market, as one of the 2017 Top Financial Intermediaries for commercial real estate loans arranged within the last calendar year. The ranking identifies Magilla Loans as a reliable and efficient service which satisfies the needs of commercial real estate developers and executives.

Read our featured analysis on Magilla Loans.

Värde Partners Acquires CreditShop (PR Newswire), Rated: B

CreditShop and Värde Partners today announced that Värde will acquire Austin-based CreditShop.  CreditShop is a specialty finance company focused on providing consumer friendly credit products and personal loans to prime and near-prime consumers.  CreditShop is the 25th largest MasterCard and Visa credit card issuer in the United States.

In March 2017, CreditShop acquired a $1.6 billion MasterCard credit card portfolio from Barclaycard.  The company expects to launch its own credit card products in 2018.

United Kingdom

Lendable hits £100m lending landmark (P2P Finance News), Rated: AAA

LENDABLE has announced that it has hit the £100m cumulative lending milestone in less than four years since launch.

The peer-to-peer consumer lender said on Monday that it is the third UK consumer lender after Zopa and RateSetter to reach this milestone and that it reached it in the fastest time.

P2P Global Investments fund sees large reduction in US consumer loan exposure (AltFi), Rated: AAA

The £798m P2P Global Investments fund has entered into an agreement to sell a significant proportion of its exposure to US consumer loans.

The transaction represents a reduction of £36.9m net exposure or 4.56 per cent of the fund’s net asset value (NAV) and £167.1m in gross exposure.

Demands of millennial borrowers underline need for digitisation in lending (AltFi), Rated: A

A new report from Equiniti finds that 30 per cent of consumers aged 18-25 have borrowed more than £1,000 over the past year. This equates to approximately 2 million people, according to estimates: the highest proportion of any generational group.

The report draws on data from a survey of 2,001 UK consumers in August 2017. 32 per cent were classified millennials, 34 per cent generation-x and 34 per cent baby boomers. 52 per cent were women, 48 per cent were men.

Since 2015, borrowing (of over £1,000) has increased by 17 per cent among millennials, 9 per cent for generation-x and just 1 per cent for baby boomers.

Fintech sector needs a meaningful investment fund says challenger bank boss (Yorkshire Post), Rated: A

Speaking at a fintech summit in Leeds, Mr Letts also questioned whether the challenger banks were radically different from mainstream banking, positing that some had simply “put new clothes on the emperor”.

“On other the other side are what I call the ‘neobanks’, people coming in with much hurrah and hysteria and telling everyone that the big banks are finished and that they are going to take over the world .

“If you set up a fund, from Government, that invested in fintechs and you had a billion pound fund where do you think businesses will come to? It is very simple.”

More than one in 20 nurses have taken out a payday loan to pay bills, survey claims (ChronicleLive), Rated: A

The Royal College of Nursing’s (RCN) workforce survey found that 6% of nurses have been forced to take out one of the high interest rate loans in the last year to meet their daily bills and living expenses.

Meanwhile, one in four has borrowed money from friends, family or their bank, 23% have taken on an additional paid job and half did overtime to cover their bills and expenses, according to the poll of 7,720 nurses from across the UK.

China

Yirendai Reports Third Quarter 2017 Financial Results (PR Newswire), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”) today announced its unaudited financial results for the quarter ended September 30, 2017

For Three Months Ended

in RMB million

September
30, 2017

June
30, 2017

September
30, 2016

QoQ
Change

YoY
Change

Amount of Loans Facilitated

12,185.4

8,536.1

5,617.5

43%

117%

Total Net Revenue

1,513.9

1,183.1

876.7

28%

73%

Total Fees Billed (non-GAAP)

2,475.3

1,862.5

1,322.6

33%

87%

Net Income

303.0

269.1

344.3

13%

-12%

Adjusted EBITDA(1) (non-GAAP)

422.4

378.4

220.7

12%

91%

Adjusted Net Income (2) (non-GAAP)

303.0

269.1

192.6

13%

57%

In the third quarter of 2017, Yirendai facilitated RMB 12,185.4 million (US$1,831.5 million) of loans to 192,725 qualified individual borrowers through its online marketplace, representing a year-over-year growth of 117%; 75.7% of the borrowers were acquired from online channels; 57.2% of the loan volume was originated from online channels and nearly 100% of the online volume was facilitated through mobile.

In the third quarter of 2017, Yirendai facilitated 214,967 investors with total investment amount of RMB 13,510.0 million(US$2,030.6 million), 100% of which was facilitated through its online platform and 92% of which was facilitated through its mobile application.

For the third quarter of 2017, total net revenue was RMB 1,513.9 million (US$227.5 million), an increase of 28% from the previous quarter and 73% year-over-year; net income was RMB 303.0 million (US$45.5 million), and increase of 13% from the previous quarter and a decrease of 12% year-over-year. The decrease of net income is mainly because that, in the third quarter of 2016, the Company recognized a tax credit of RMB 151.7 million because one of its subsidiaries became qualified as a software enterprise which makes it eligible for an exemption of enterprise income tax for 2015 and 2016. Excluding the impact of the tax credit, adjusted net income in the third quarter of 2016 was RMB 192.6 million.

Have phone will borrow: Here’s the latest tech play on China’s spendthrift youth (SCMP), Rated: A

An online lender targeting spendthrift 24 to 36 year olds is the latest fintech firm from China to bet on the willingness of Chinese youth to go into debt for the newest smartphone – and on the willingness of US investors to bid up its shares.

Shenzhen-based Lexin Fintech Holdings, which operates an online e-commerce platform offering instalment shopping, is following in the footsteps of Chinese microcredit providers Qudian and Hexindai which raised US$900 million and US$50 million in their US IPOs in October and November, respectively.

They were also out in force for the recent Singles’ Day shopping festival, which saw sales on Alibaba’s e-commerce platforms reach 168 billion yuan (US$25.3 billion). During the first hour of the 24 hour shopping spree the number and value of orders on the Fenqile platform rose three and six times respectively compared with the same period last year.

Hui Ying Financial Holdings Corp. Reports Unaudited Third Quarter 2017 Financial Results (PR Newswire), Rated: A

Hui Ying Financial Holdings Corp. (OTCQB: SFHD) (“Hui Ying” or the “Company”), a leading online financial credit facility solution provider servicing Small-to-Medium Enterprises (“SMEs”) and individual borrowers in China, today announced its financial results for the three and nine months ended September 30, 2017.

Third Quarter 2017 Highlights

For the Three Months Ended September 30,

($ millions, except per share data)

2017

2016

% Change

Revenues

$           14.28

$            7.07

101.9%

Loan origination service fee

$             8.39

$            5.11

64.3%

Loan repayment management fee

$             5.25

$            1.97

167.0%

Financing income from entrusted loans

$             0.64

$                  –

NM

Operating income

$             6.41

$            1.92

233.2%

Other income (expenses)

$           (0.24)

$            0.04

-717.6%

Net income

$             4.76

$            1.46

226.3%

EPS – diluted

$             0.06

$            0.02

179.0%

  • Total loans facilitated through our platform increased by 73.3% to RMB 2.6 billion for the third quarter of 2017, from RMB 1.5 billion for the same period of last year, as China’s online peer-to-peer lending platform industry continued to grow significantly during the third quarter, coupled with the increased marketing campaign, promotion activities on our platform as well as increased brand awareness of our online marketplace.
  • Total revenues more than doubled to $14.28 million for the third quarter of 2017 from $7.07 million for the same period of last year, as a result of increase in loans facilitated through our platform and the contribution from the newly launched entrusted loan business. Revenues from loan origination service fee, loan repayment management fee and financing income from entrusted loans were $8.39 million$5.25 million and $0.64 million, respectively, for the third quarter of 2017 compared to $5.11 million$1.97 million and nil, respectively, for the same period of last year.
  • Net income was $4.76 million, or $0.06 per diluted share, for the third quarter of 2017, compared to $1.46 million, or $0.02 per diluted share, for the same period of last year.
European Union

PPRO, Klarna team up for credit payment methods across Europe (The Paypers), Rated: AAA

PPRO Group and Klarna have announced an agreement aimed at enabling PSPs to offer credit-based payments through PPRO`s payment hub to European merchants.

The partnership will be marketed to PPRO’s payment service providers customer base and will provide access to Klarna’s services and consumers across Sweden, Norway, Finland, Denmark, the Netherlands, Germany, Austria, and the UK.

Banco BNI Europa and Belgian Fintech EDEBEX celebrate a partnership to support Portuguese SMEs (BNI Europa Email), Rated: A

Banco BNI Europa and Edebex have announced today the celebration of a new partnership for immediate availability of an online platform for the purchase and sale of invoices to Portuguese companies with cash requirements, offering an innovative alternative to financial credit and traditional factoring.

Swiss Fintech Goes Germany (FiNews), Rated: A

CreditGate24 is opening its first branch outside Switzerland in Berlin, seeking to develop the German market for digital financing and investment, the company said in a statement today.

Fintech putting power in hands of the customer (Belfast Telegraph), Rated: A

A number of areas have been established or significantly impacted by FinTech; Peer-to-Peer (P2P) lending, mobile payments, and instant payment notifications, to name a few.

The ongoing bank branch closures across Ireland and the UK demonstrates the changing climate.

With a reduction in branches, banks are investing heavily in technology to reduce costs, to improve their customer experience and to increase customer self-service in an attempt to ward off the threat of FinTech start-ups.

The blockchain is another example of FinTech and one which has been a hot topic across multiple industries for a number of years.

A Digital Future: Financial Services and the Generation Game (EIU.com), Rated: B

A digital future: financial services and the generation game is a report sponsored by Banco Santander for presentation at the Tenth Santander International Banking Conference, written by The Economist Intelligence Unit.

It assesses how people’s expectations of their financial services providers are changing and how technology must be deployed to meet them. The report is based on extensive desk research and in-depth interviews, conducted in August-October 2017 with 14 representatives of financial institutions and companies.

International

PayPal launches P2P funding platform (Business Insider), Rated: AAA

PayPal has launched Money Pools, a service that allows its users to create fundraising pages where their contacts can contribute money for a shared item or event, like a group gift or trip, 

Source: Business Insider

Bringing Cash Into The Digital World – On A Global Stage (PYMNTS), Rated: A

In the latest Data Drivers installment, Steve Villegas, vice president of Partner Management at PPRO Group, told PYMNTS’ Karen Webster that “alternative payments are going to drive the future of eCommerce.” But between the promise and the reality, some connectivity is on order, bringing consumers payment options – and merchants toward better conversion rates when it comes to online commerce.

Data Point One: 17.6 Percent

This is the percentage of credit card penetration worldwide – a lot of cards, but not a lot of penetration on a global stage.

Alternative payments may capture 50 percent of transactions this year, globally speaking, he said.

As has been widely reported, Alibaba grabbed as much as $25 billion in sales to 225 countries and regions. Roughly 90 percent of transactions were completed on mobile devices.

Data Point Two: Three Billion

This is the number of people estimated worldwide to be without a bank account – and yet, armed with mobile devices, can be brought into the world of digital transactions and can participate fully in the global economy.

Data Point Three: 38 Percent

This is the average rate of eCommerce growth of the 11 fastest growing countries globally. That far outpaces the 12 percent a year eCommerce growth seen in the U.S.

China provides a stark reminder of the explosive boost to eCommerce, at 64 percent year over year. Other areas that have high eCommerce growth rates include Indonesia and Malaysia. Growth is high both in bank payment-related transactions and with eWallet. Russia is also showing growth, Villegas stated.

TRANSFORMATION IN CAPITAL MARKETS DEMANDS EVOLUTIONARY APPROACH, FIND CELENT AND FINASTRA (Global Banking and Finance), Rated: A

New research from Celent (commissioned by Finastra) which examines the future transformation of capital markets, identifies six key drivers of change over the next five years to 2022:

  • Digitalization of the trade and client lifecycle
  • The Fintech revolution
  • The need to integrate with an evolving ecosystem
  • The trend for banks to focus on core capabilities and outsourcing of non-core functions
  • Advances in big data, machine learning and data analytics
  • The rise of open APIs and micro-services in helping banks deliver increased agility

The report, The Great Transformation in Capital Markets – Revolution to Evolution’, examines the changes that have already taken place in capital markets since the 2008 crisis, the wave of big transformation projects undertaken since 2011-12 designed to optimize operations and reduce costs, and expected trends in the transformation journey over the next five years. It incorporates the findings of detailed discussions conducted with 17 tier one and two global capital markets institutions, predominantly in the US and Europe but also across Asia and Latin America.

Australia/New Zealand

David Chaston reviews the effective cost of credit, being interest plus standard fees, of taking out a payday loan (Interest.co.nz), Rated: A

In this table we have set out what each lender says you must repay for borrowing $500. (We targeted 30 days but not every lender offers that.) Then we calculated the effective annual interest rate for entering into that deal. This is different to the interest rate the lender discloses because we bundle up that interest rate with any set-up loan fees into an effective rate. But we haven’t included any fees if you default; this analysis assumes the borrower meets all payments on time.

making one repayment (except as noted) Borrow Repay in (days) % daily % pa
in random order … $ $ # effective effective
Ferratum $500 $748 30 1.352% 493.4%
Save My Bacon $500 $828 30 1.696% 618.9%
Need Cash Today $500 $640 28 (4 wp) 1.458% 532.1%
Moola $500 $640 28 (4 wp) 1.458% 532.1%
Zebra Loans $500 $835 30 1.724% 629.3%
Payday Advance $500 $932 30 2.097% 765.6%
Payday Loan $500 $932 30 2.097% 765.6%
Can’twait $500 $731 30 1.274% 465.0%
Cash Relief $500 $748 30 1.352% 493.4%
Smart Cash $500 $691 30 1.084% 395.8%
Just Cash $500 $748 30 1.352% 493.4%
Little Loan Shop $500 $748 30 1.352% 493.4%
Seed Cash – 3 monthly pymts $500 $950 91 (3 mp) 1.128% 411.8%
Cash Burst – 2 monthly pymts $500 $1189 61 (2 mp) 2.029% 740.6%
Real Finance $500 $665 30 0.956% 348.9%
Easy Cash $500 $605 30 0.537% 232.5%
Cash till Payday $500 $647 30 1.700% 620.5%
Money Shop $500
Easy Financing $500
Instant Cash Online $500 $637 30 0.812% 296.3%
India

How FinMomenta plans to change the way financial loans are disbursed (Money Control), Rated: A

Ex-bankers Brahma Mahesh, Naveen Madgula, and a techie for 17 years at Hexaware – Praveen Krishnam founded FinMomenta last year, launching its loans platform Tachyloans in May.

The startup borrows from the emerging trend of servicing small-ticket loans online for individuals and SMEs.

“The loan approval process in banks is very subjective. It is dependent on a human perception of the loans officer. It kills the whole idea of credit scoring. That’s the reason banks are able to service just about 2%-5% of the huge working class of about 60 crore population. Others just depend on money lenders. Banks don’t touch these people because they don’t have a credit history,” says FinMomenta co-founder Brahma Mahesh.

The interest rates on Tachyloans range from 11.5% to 25% depending on the FinMomenta credit rating – the better the credit score, the lower the interest rate.

By the end of 2018, the company is targeting to service 1,500 loans and 34,000 loans in next 5 years, which will increase its loan portfolio to about Rs 500 crore.

Canada

Forget iris scans, Canadians to use Blockchain for digital IDs (Information Management), Rated: A

Consumers will be able to sign up for new digital-identity system developed by SecureKey Technologies Inc. and underpinned by IBM Corp.’s blockchain technology in the first half of 2018. They’ll be able to instantly prove who they are to banks, telecom providers and governments using apps on their phones and Windows devices, according to Greg Wolfond, chief executive officer of Toronto-based SecureKey.

Canada’s six-largest lenders, including Toronto-Dominion Bank and Royal Bank of Canada invested C$30 million ($24 million) in the project.

MENA

DIFC unveils $ 100 million fintech investment fund (The National), Rated: B

The Dubai International Financial Center (DIFC) it has established a $100 million fund to invest in fintech start-ups, the latest move in the freezone’s bid to position itself as the regional centre for the fast-growing and disruptive sector.

Authors:

George Popescu
Allen Taylor