Friday July 14 2017, Daily News Digest

Visa revenues

News Comments Today’s main news: DBRS assigns provisional ratings to SoFi Professional Loan Program 2017-D. IEG Holdings cites slim margins, weak underwriting as reasons for LendingClub offer. Bank execs say UK sets the standard for fintech regulation. Rocket Internet sells stake in Lendico. Today’s main analysis: Visa’s international expansion. Today’s thought-provoking articles: DBRS Student Loan ABS report (a […]

Visa revenues

News Comments

United States

United Kingdom

China

European Union

International

Israel

India

Latin America

Canada

News Summary

United States

DBRS Assigns Provisional Ratings to SoFi Professional Loan Program 2017-D (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of notes issued by SoFi Professional Loan Program 2017-D (SoFi 2017-D):

— $245,000,000 Class A-1FX Notes at AAA (sf)
— $266,000,000 Class A-2FX Notes at AAA (sf)
— $40,000,000 Class B-FX Notes at AA (sf)

DBRS Student Loan ABS report (DBRS), Rated: AAA

In this commentary, DBRS provides the following:
— A review of Q1 2017 student loan ABS performance and H1 2017 student loan ABS issuance.
— An outlook for future student loan ABS issuance and the trends expected in H2 2017.
— Analysis and highlights of student loan collateral performance.

Download the full report here.

IEG Holdings Highlights the Urgency of LendingClub Correcting its Flawed, Slim Margin “Broker” Business Model and Weak Underwriting Standards (Sys-Con), Rated: AAA

IEG Holdings yesterday announced the commencement of a tender offer to exchange four shares of IEG Holdings’ common stock for each share of LendingClub common stock, up to an aggregate of 40,345,603 shares of LendingClub common stock, representing approximately 9.99% of LendingClub’s outstanding shares as of April 28, 2017, validly tendered and not properly withdrawn in the offer.

IEG Holdings Corporation (OTCQB: IEGH) (“IEG Holdings”) cautions shareholders of LendingClub Corporation (“LendingClub”) against dismissing IEG Holdings’ tender offer. IEG Holdings believes that the LendingClub board of directors should be held accountable by its shareholders for continuing to pursue a flawed, slim margin “broker” business model. IEG Holdings urges LendingClub to enter into negotiations with IEG Holdings, rather than simply dismissing the tender offer.

FLAWED, SLIM MARGIN, LOSS-MAKING BUSINESS MODEL

Despite brokering more than $26 billion of loans since inception, LendingClub still reported a loss of $29.8 million for Q1 2017 and loss of $146.0 million for the 2016 full year. Transitioning to a balance sheet lender likely would significantly increase gross margins, without a significant change in customer acquisition costs.

WEAK UNDERWRITING STANDARDS

A recent media report by Bloomberg indicates that:

  • LendingClub only verified income about a third of the time for one of the most popular loans it made in 2016, and
  • If LendingClub finds errors in a loan application, it may still approve the loan.

LACK OF COMPANY-OWNED STATE LENDING LICENSES

LendingClub doesn’t hold individual state lending licenses and instead utilizes the services of a Utah-based bank. This raises regulatory risks around issues such as the potential breaking of individual state interest rate caps and compliance.

POOR STOCK MARKET PERFORMANCE AND ZERO DIVIDENDS TO SHAREHOLDERS

LendingClub’s share price has decreased 79% since its initial public offering in December 2014, dropping from $25.74 in December 2014 to $5.39 yesterday, after reaching a low of $3.51 in May 2016. In addition, LendingClub has never paid, and has no reported intention to pay, a dividend to shareholders.

IEG Holdings’ Reasons for the Offer

IEG Holdings believes that changing LendingClub’s business model to a balance sheet lender model would enable the company to generate significantly higher gross margins, provide significantly higher long duration cash flow from customers, build increased customer goodwill with customers and enable increased customer refinancing. The longer duration cash flow would provide more flexibility in reducing lending volumes during periods when underwriting risk levels are rising, as the company would be less dependent on brokering new loan deals every day to provide revenue.

  • IEG Holdings intends to encourage LendingClub to undertake substantial costs cuts by terminating excess employees, achieving substantial cuts in advertising/marketing costs and other significant cost cutting measures;
  • IEG Holdings intends to encourage LendingClub to transform its broker business model with low gross margins and high volumes to focus on high gross margin unsecured loans to near prime clients with strong underwriting, company owned individual state licenses and retention of loans on its balance sheet to secure long duration cash flow from longer term loans; and
  • The acquisition of LendingClub shares would be substantially net asset per share accretive for IEG Holdings stockholders and substantially increase shareholder equity.

New partnership turns PayPal into Apple App Store payment option (Banking Tech), Rated: A

This week the company announced a partnership with Apple to allow shoppers pay for their purchases at the App Store using PayPal. The feature will be available for users of a variety of Apple devices including iPhone, iPad, Apple TV, Apple Watch, and iPod.In addition to the App Store, PayPal will be a payment option for a variety of Apple services including Apple Music, iTunes, and iBooks.

Finicity and JP Morgan Chase pair for data share (Banking Tech), Rated: A

Data aggregation provider Finicity has signed an agreement with JP Morgan Chase to let the bank’s customers choose data to share with apps.

The companies will use a direct API to allow Chase customers to share information with the apps and services that Finicity supports. According to the firms, this tokenised access will eliminate the need for customers to share their Chase credentials with third-party apps.

Paypal Holdings Inc (NASDAQ:PYPL): Beginning of Market Dominance (Library for Smart Investors), Rated: A

Paypal Holdings Inc (NASDAQ:PYPL) is getting investors attention after the stock touched fresh highs amid a new partnership with Apple.

The stock is up over 43% since the start of the year.

In the first quarter, PayPal saw a jump of 10.3% in monthly active users on year-over-year basis. The total number of transactions also increased by 22.5% in the period.

In the first quarter, Venmo processed $6.8 billion in total payments, a 100% growth on year-over-year basis. Venmo is slated to grow more as the company expands to small businesses.

WEALTHTECH — THE DIGITIZATION OF WEALTH MANAGEMENT (FT Partners), Rated: A

WealthTech companies are targeting inefficiencies that span the entire wealth management value chain, from client prospecting to investing to portfolio management and reporting. Benefits include more efficient workflows, improved client experiences and greater transparency. Regardless of their value proposition, WealthTech companies are seeking to improve overall wealth management and investing.

This report highlights a number of key trends within the broader WealthTech industry such as…

  • Growing number of advisors joining the independent channel
  • Incumbent financial institutions are entering the robo-advice space
  • Increased demand for alternative investments
  • Financial planning trending towards goal-based approaches
  • Higher levels of active risk management
  • Commoditization of portfolio management software is leading to expanded offerings
  • RIA custodians evolving into more holistic roles

Download the full report here.

Wells Fargo trims auto loans as market cools, risk overhaul kicks in (Reuters), Rated: A

Wells Fargo & Co (WFC.N) is scaling back and remolding its auto lending business in response to growing stress in the market, as well as a bank-wide push for more centralized risk controls.

Wells, which was the No. 2 U.S. provider of auto loans less than a year ago, has already cut quarterly originations by nearly 30 percent over the nine months leading into March 31, according to a May 11 company presentation. It has also begun consolidating the collections operation in a move that people familiar with the business say could eliminate hundreds of jobs, after a new head of auto finance took the reins in April.

5 Fintech Startups Under the Radar (Bank Innovation), Rated: A

Spotme

This New York City-based startup facilitates micro-loans between borrowers and lenders, allowing users to set up pretty much all the parameters of a loan themselves: users can control the amount, the interest rate, the payback period, and the way they are reimbursed for the loan themselves.

Ledger

Ledger might be able to help out there: this San Francisco-based startup allows users to “open tabs with friends,” boiling down a transaction to just 3 clicks. By connecting with a user’s financial accounts (protected by “military-grade” cybersecurity, according to the company), users are able to aggregate all of their transactions in one place, as well as receive notification about when transactions are due.

Wallio

More and more companies are striving to solve the main problem when it comes to personal finance management services: how do you make a user actually take the financial advice that is being offered?

Wallio starts off the week by giving a user an allocated amount of money they can spend for that week, on whatever the user wants (expenses and savings are already factored into this amount). If a user underspends, great: Wallio will allow that user to put that money towards a goal. If a user overspends, Wallio will simply allocate less money for the user to spend next week.

Samwise

This robo-investing startup allows users to turn their existing brokerage account into an autonomous investing account using machine learning algorithms.

OnePebble

Invest, and make a difference in the world at the same time: that’s the dream of OnePebble, an online investment broker/dealer that puts each investment toward companies “doing good in the world.”

3 Investing Trends to Keep on Your Radar (Morningstar), Rated: A

Trend: Passive products continue to gain assets.

This is the trend shaping the investment management industry today. Asset flows to passive products, both traditional index mutual funds and exchange-traded funds, began in earnest following disappointing active-fund performance during the financial crisis.

Trend: New ways to hire–and pay for–financial advice. 

Robo-advisors provide automated advice for a low annual fee as low as 0.25% or even less. Meanwhile, mutual fund companies and brokerage firms may provide advice for customers who have amassed sufficient assets at the firm. For example, Vanguard Personal Advisor Service charges 0.30% and is available to investors with at least $50,000 in assets at the firm. (The service combines human financial advisors with robo-advisor technology.)

What to watch out for: The profusion of different business models means that the business of selecting an advisor is more complicated than ever. Robo-advisor fees might look like a screaming buy relative to the fees that a full-service human advisor charges, but the robo won’t be able to give you advice on nonportfolio matters like whether to pay off your mortgage or purchase long-term care insurance.

Trend: An increased emphasis on behavioral factors that can affect investor outcomes.

What’s to like: Many robo-advisors have also embedded behaviorial research into their services.

What to watch out for: Behavioral finance is trendy right now, and with any trend comes the opportunity for gimmickry. Beware of advisors who are using behavioral finance as their main hook to snag clients; high-quality advisors have been employing behavioral finance into their practices for years.

US Tax Professionals Tackles the Tax implications of Crowdfunding (Digital Journal), Rated: A

It’s important to understand that all the income a person receives, regardless of the source, is considered taxable income in the eyes of the IRS. That includes crowdfunding dollars.

Even if the campaign only raised the projected $15,000 and no gifts were offered, the money would still be considered taxable income and need to be reported as such on a tax return.

Generally, crowdfunding revenues are included in income as long as they are not:

  • Loans that must be repaid;
  • Capital contributed to an entity in exchange for an equity interest in the entity; or
  • Gifts made out of detached generosity and without any “quid pro quo.” However, a voluntary transfer without a “quid pro quo” isn’t necessarily a gift for federal income tax purposes.

Morgan Stanley digital chief: AI to help advisers, not ‘cyborg bots’ (Financial-Planning), Rated: A

Advisers tasked with processing a “mountain of information” will get a reprieve through artificial intelligence, according to Morgan Stanley Wealth Management’s chief digital officer.

“What we want to do is, with one click of a button, they can take action on that research report to all their clients within minutes, not hours, not phone calls,” Hassan said. “That’s the promise of what we’re trying to build.”

Rival firms have shown they’re headed down a similar path. Like Morgan’s planned offering, the UBS-SigFig service will save advisers’ time through automated messaging to clients on important dates, according to Richard Steinmeier, the head of the UBS Wealth Advice Center.

Congress Should Use Congressional Review Act to Strike Down Ill-Advised Arbitration Rule (Daily Signal), Rated: B

Cutting through the hyperbole that the arbitration rule protects consumers from “unfairness” that would deny them “their day in court,” this rule is in fact highly anti-consumer and harmful to innovation.

This regulation could have particularly harmful effects on FinTech innovations, such as peer-to-peer lending.”

How much money do Arizonans spend playing the lottery? Less than most Americans (AZ Central), Rated: B

Arizonans on average shelled out $100.85 per capita on lottery tickets in 2015, according to the study by LendEDU, based on preliminary data for state government finances collected by the Census Bureau. For Americans overall, the per-capita figure was $206.69.

United Kingdom

UK setting the bar for fintech regulation, bank execs say (SNL.com), Rated: AAA

U.K. authorities have created a world-leading regulatory environment for the burgeoning fintech industry that is being emulated elsewhere, according to bankers.

The Financial Conduct Authority’s “sandbox,” a program launched in 2015 to let companies test innovative ideas under close regulatory supervision, has been particularly helpful, she said.

Meanwhile, initiatives such as FCA-organized hackathons — or “TechSprints” as it prefers to call them — have been particularly appreciated by the industry, according to Sophie Guibaud, vice president of European expansion at Fidor Bank AG, a German online lender that was bought by Groupe BPCE in 2016. These events invite market participants to come up with technological solutions to certain problems, such as financial issues faced by people with mental health problems.

The U.K. is home to more fintech companies valued at more than $1 billion than the rest of Europe put together, according to an April 2017 report by technology investment bank GP Bullhound. Three U.K.-based companies, Funding Circle, Paysafe and Transferwise, have crossed that threshold, and GP Bullhound said that it does not expect London to relinquish its lead, due to its prominence in international financial services.

Comparison site GoCompare invests in mortgage robo-adviser (AltFi), Rated: A

Financial comparison site GoCompare is hoping to transform the UK’s mortgage application process by investing in MortgageGym, a digital mortgage robo-adviser.

Users can complete a free application within 15 minutes on MortgageGym and receive matches within 60 seconds, as well as robo advice and access to live advisers. The website will use automated algorithms to match applicants with the best mortgage providers.

The House Crowd hits £50m via mix of P2P and crowdfunding (P2P Finance News), Rated: A

THE HOUSE CROWD has hit the £50m funding target it set out to achieve in October last year.

The Manchester-based property platform started targeting institutional money at the end of last year to achieve its first £50m of funds channelled to property and buy-to-let borrowers, through both its peer-to-peer side and its crowdfunding arm.

The firm raised over £15m in the six months to early 2017, while a loan it closed last month added another £600,000.

Fintech CurrencyCloud tapped up investors months before Google raise (Business Insider), Rated: A

CurrencyCloud, which provides a platform to process international payments, raised £9.5 million from its existing investors in December 2016. The company had £10.5 million in the bank at the end of the month, accounts show, suggesting the platform had around £1 million left at the time of the fundraising.

The volume of payments jumped by 110% to 1.5 million but net revenue from currency transactions increased by just 10% to £3.2 million. Meanwhile, administrative expenses rose by 54% to £13.9 million as CurrencyCloud invested in “recruiting staff, developing our technology infrastructure and operations services, and moving to new office premises.”

P2P fund share issues boost investment trust sector (P2P Finance News), Rated: A

FUNDRAISINGS by Honeycomb and the Funding Circle SME Income Fund (FCIF) helped push share issues to record levels in the investment trust sector for the first half of 2017.

Secondary issuances raised £3.3bn in the first six months of the year, trade body the Association of Investment Companies has revealed, up from £1.8bn at the same time in 2016.

FCIF raised £142m in conversion shares in April, the largest total in the specialist debt sector, while the Honeycomb investment trust raised £105m through a ordinary share issue.

Alternative Credit funds drive record cash raise (AltFi), Rated: A

Assets in investment trusts have hit an all time high thanks in part to a huge swathe of secondary issuance in closed-ended funds’ shares.

In the first half of 2017, the most poplar area of the investment trust market was Infrastructure – in terms secondary issuance – raising £1.2bn. This was followed by Alternative Credit at  £514m. Funding Circle SME Income raised the largest total in the sector securing £142m via its C share issue, followed by Honeycomb Investment Trust (£105m).

China

The number of Online Financial platforms in China Exceed 19,000, ranking the first place of the world. (Xing Ping She), Rated: AAA

According to data from National Institution of Internet Financial Risk Analysis &Technology,there are more than 19,000 online financial platforms across China, including over 6000 online lending platforms, nearly 3500 online assets managers, and 800 crowdfunding platforms. The total cumulative volume of internet loans, crowdfunding and internet payment have reached to 70 trillion RMB (US$ 10.33 trillion). Zhou Hongren, director of the National Committee of Internet Finance Professional Technology, claimed that, “No matter in terms of quantity or scale, China has already become the largest international finance marketplace around the world.”

European Union

Rocket Internet Sells Stake in Lendico Startup (Handelsblatt), Rated: AAA

Incubator firm Rocket Internet has sold its majority stake in peer-to-peer lender Lendico to Arrowgrass, Handelsblatt has learned, as the British hedge fund acquired complete ownership of the Berlin startup.

The partners to the transaction agreed to keep the purchase price confidential. Rocket Internet, which specializes in helping online startups get off the ground, most recently valued its 50-percent-plus stake in Lendico at €140 million ($159 million).

Funding Circle Germany Takes a Fresh Start (Crowdfund Insider), Rated: AAA

Germany is a huge SME and VSME (very small business) credit market. But it is not as mature a market for online marketplace lending as the UK, the US, or even the Netherlands. This partly explains why Funding Circle Germany’s early loan book underperformed. Now the platform is starting afresh to match its market’s reality.

With offices and business in Germany, the Netherlands and Spain, Zencap had originated €35 million in loans to 500 SMEs at the time of its acquisition. Its operations were very small in comparison with the more than $1.5 billion originated by Funding Circle in the US and the UK at the time (meanwhile Funding Circle passed the $3 billion mark).

The second reason for starting afresh, was a need to revisit the credit model. Since January, the new German team has been busy recalibrating and restarting the German operations.

Loan origination resumed at previous level in the first half of 2017 and is expected to grow again in the second half of this year.

Spanish Fintech Industry Comes into its Own (Finance Magnates), Rated: A

The Spanish fintech ecosystem has been a steadily growing force over the past few years, swelling from just fifty financial technology startups in 2013 to well over three hundred in 2017. This rapid surge is only going to continue with this number estimated to hit four hundred companies by 2018.

In terms of the value of the operations, this sector passed rose from just €35 million in 2014 to €206 million in 2016, justifying a 600 percent growth in just two years.

According to the Spanish Association for Fintech and Insurtech (Asociación Española de Fintech e Insurtech – Aefi), companies operating in this space in Spain are going to create a total of 10,000 jobs in 2017 alone.

While the value offintech operations in Spain is increasing, two areas that constitute the most focus are the crowdfactoring or invoice factoring crowdfunding platforms – these saw a total of €120 milion euros in 2016, that concentrate most of the operations domestically, followed by crowdfunding with €43.5 million and crowdlending or p2p lending with €42 million.

International

Visa Expands Its Footprint in Europe (Market Realist), Rated: AAA

In May 2017, Visa announced that in order to give consumers more control and make transactions transparent, the company will create digital card management experiences for its partners. Visa’s partners include financial institutions. Since the new offerings will lead to more transparency, Visa expects to see volume growth in fiscal 3Q17. Market analysts expect Visa to report revenues of $4.36 billion in fiscal 3Q17—a decline of 2.7%.

 

What Can Visa Expect from Russia, China, Japan, and India?

In fiscal 2Q17, there was growth in Visa’s cross-border business due to Russia’s developed economy. Visa implemented ~1,600 point-of-sale terminals. As a result, payment volumes are expected to grow in fiscal 3Q17.

Management thinks that obtaining a domestic license in China is a time-consuming process. Visa is expected to witness lower revenues and payment volumes from China due to discontinued dual branded cards.

Management has a positive outlook on Japan’s economy due to digitization. Japan’s government has become more inclined to use digital and electronic payments.

In fiscal 3Q17, India could be a major contributor to payment volume growth.

Visa has delivered a return on equity of 16.2% on trailing 12-months basis. Other consumer financial peers (XLF) have delivered the following return on equity on a trailing 12-month basis:

  • American Express (AXP) – 25.1%
  • MasterCard (MA) – 75%Discover Financial Services (DFS) – 21.10%

Visa Expects to Benefit from Its European Business

Visa’s (V) acquisition of Visa Europe allowed the company to enhance its global reach. The main agenda behind the acquisition was to bring innovation to the European market. Visa had been working closely with its partners and clients. The company also plans to create new services and products.

Israel

THE SURPRISING COUNTRY LEADING THE FINTECH REVOLUTION (Ozy.com), Rated: AAA

The country that gave the world smart drip irrigation and the Epilady has also been an early and enthusiastic adopter of financial technology, as in mobile banking apps, digital wallets, online lending and other services that manage moola. In fact, a survey of selected industrialized countries shows that:

As for the specifics, 50 percent of Israeli adults use mobile banking apps at least once a month. In the U.S., it was 38 percent; the U.K., 37 percent; in France, 35 percent; and in Germany, a surprisingly anemic 28 percent.

The five largest banks in Israel control more than 90 percent of the market, and as Sandra Octaviani, research lead for fintech at the University of Utah’s Center for Innovation in Banking and Financial Services, notes, traditional banks tend to serve low-risk, highly profitable clients, which creates an opportunity for nimbler fintech firms to swoop in and serve the underserved.

India

RBI wary of first loan default guarantee cover (India Times), Rated: AAA

The Reserve Bank of India is learnt to be wary of peerto-peer lending platforms offering any FLDG, or first loan default guarantee, cover to institutional lenders for any lending they do through these technology startups, said sources familiar with the discussions.

While various lending entities are keen on exploring this space as a cheap source of customers, they often look for a security cover against loans going bad. Experts say such guarantees or covers might go against the intentions of the central bank.

SME Lending Based on Payment History is the Next Big Wave in Fintech (BW Disrupt), Rated: A

ftCash aims to empower micro-merchants and entrepreneurs with the power of electronic payments and loans with zero upfront cost and no monthly rentals. Merchants are able to offer their customers multiple payment methods including credit cards, debit cards, net banking, mobile wallets, PayPal and more.

Nonethless, credit lending is the next big wave of Indian fintech. Lodha explains, “SME Lending based on payment history will be next big wave in fintech. On an active basis, it allows a lender to decide the paying ability of a merchant/business and the recollection of these loans can be done from the payment platform itself. The combination of the payments data along with GST data provides deeper insights into a business. We at ftcash are heavily invested in this idea and believe there is a great potential for scale here.”

Latin America

Venture fund for Latino entrepreneurs, fintech in Mexico  (ImpactAlpha), Rated: AAA

Financial technology, or fintech, startups offering digital payment, remittances and lending services, could capture 30% of Mexico’s banking market within 10 years, according to Finnovista, a fintech accelerator. Six in 10 Mexicans are unbanked. Financial exclusion is a problem but “also an opportunity,” Francisco Meré, the director of Bankaool, one of the first online-only banks in Mexico, told the Financial Times[paywall]. “The cost of engaging a customer through technology is a fraction of using a branch.” Clip has grown to become one of Mexico’s largest digital payment providers (Accion sold its stake in February). Kubo Financieroprovides peer-to-peer lending; Albo, mobile-based banking; and Kueski, a digital micro-lender — all have secured venture backing. More than 150 fintech, or financial technology, firms now operate in Mexico, giving Mexico 35% of fintech companies serving the under- and un-banked in Latin America.

AFLUENTA INCORPORATES THE MEXICAN INVESTMENT FUND IGNIA TO ITS PRESTIGIOUS LIST OF SHAREHOLDERS (AltFi), Rated: A

Afluenta (www.afluenta.com), a leading online credit platform for the people of Latin America, announced the addition of Mexican venture capital fund IGNIA to its group of shareholders. IGNIA is a venture capital fund specializing in investments in entrepreneurial companies with great potential for growth, whose services meet the needs of the emerging middle class.

In Mexico, where local credit to the private sector is below 35% of GDP, compared to 68% in Brazil, Afluenta aims to revolutionize the market with its human approach to credit and investment.

Afluenta connects borrowers with investors who can be individuals or companies, eliminating intermediaries such as traditional financial institutions. Its technology allows investors to receive competitive returns on their contributions in a simple, fast and efficient way, while applicants obtain loans faster, without bureaucracy and at a lower interest rate than in a bank.

Canada

Katipult CEO finalist for the prestigious EY Entrepreneur Of The Year 2017 (Digital Journal), Rated: A

Brock Murray, CEO of Katipult, a SaaS company that enables firms to design, setup, and manage an investment crowdfunding, Peer to Peer lending, or investor management platform, has been named a finalist in Ernst & Young’s Entrepreneur of the Year in the Emerging Technology category in Prairies.

Authors:

George Popescu
Allen Taylor

Friday July 14 2017, Daily News Digest

Visa revenues

News Comments Today’s main news: DBRS assigns provisional ratings to SoFi Professional Loan Program 2017-D. IEG Holdings cites slim margins, weak underwriting as reasons for LendingClub offer. Bank execs say UK sets the standard for fintech regulation. Rocket Internet sells stake in Lendico. Today’s main analysis: Visa’s international expansion. Today’s thought-provoking articles: DBRS Student Loan ABS report (a […]

Visa revenues

News Comments

United States

United Kingdom

China

European Union

International

Israel

India

Latin America

Canada

News Summary

United States

DBRS Assigns Provisional Ratings to SoFi Professional Loan Program 2017-D (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of notes issued by SoFi Professional Loan Program 2017-D (SoFi 2017-D):

— $245,000,000 Class A-1FX Notes at AAA (sf)
— $266,000,000 Class A-2FX Notes at AAA (sf)
— $40,000,000 Class B-FX Notes at AA (sf)

DBRS Student Loan ABS report (DBRS), Rated: AAA

In this commentary, DBRS provides the following:
— A review of Q1 2017 student loan ABS performance and H1 2017 student loan ABS issuance.
— An outlook for future student loan ABS issuance and the trends expected in H2 2017.
— Analysis and highlights of student loan collateral performance.

Download the full report here.

IEG Holdings Highlights the Urgency of LendingClub Correcting its Flawed, Slim Margin “Broker” Business Model and Weak Underwriting Standards (Sys-Con), Rated: AAA

IEG Holdings yesterday announced the commencement of a tender offer to exchange four shares of IEG Holdings’ common stock for each share of LendingClub common stock, up to an aggregate of 40,345,603 shares of LendingClub common stock, representing approximately 9.99% of LendingClub’s outstanding shares as of April 28, 2017, validly tendered and not properly withdrawn in the offer.

IEG Holdings Corporation (OTCQB: IEGH) (“IEG Holdings”) cautions shareholders of LendingClub Corporation (“LendingClub”) against dismissing IEG Holdings’ tender offer. IEG Holdings believes that the LendingClub board of directors should be held accountable by its shareholders for continuing to pursue a flawed, slim margin “broker” business model. IEG Holdings urges LendingClub to enter into negotiations with IEG Holdings, rather than simply dismissing the tender offer.

FLAWED, SLIM MARGIN, LOSS-MAKING BUSINESS MODEL

Despite brokering more than $26 billion of loans since inception, LendingClub still reported a loss of $29.8 million for Q1 2017 and loss of $146.0 million for the 2016 full year. Transitioning to a balance sheet lender likely would significantly increase gross margins, without a significant change in customer acquisition costs.

WEAK UNDERWRITING STANDARDS

A recent media report by Bloomberg indicates that:

  • LendingClub only verified income about a third of the time for one of the most popular loans it made in 2016, and
  • If LendingClub finds errors in a loan application, it may still approve the loan.

LACK OF COMPANY-OWNED STATE LENDING LICENSES

LendingClub doesn’t hold individual state lending licenses and instead utilizes the services of a Utah-based bank. This raises regulatory risks around issues such as the potential breaking of individual state interest rate caps and compliance.

POOR STOCK MARKET PERFORMANCE AND ZERO DIVIDENDS TO SHAREHOLDERS

LendingClub’s share price has decreased 79% since its initial public offering in December 2014, dropping from $25.74 in December 2014 to $5.39 yesterday, after reaching a low of $3.51 in May 2016. In addition, LendingClub has never paid, and has no reported intention to pay, a dividend to shareholders.

IEG Holdings’ Reasons for the Offer

IEG Holdings believes that changing LendingClub’s business model to a balance sheet lender model would enable the company to generate significantly higher gross margins, provide significantly higher long duration cash flow from customers, build increased customer goodwill with customers and enable increased customer refinancing. The longer duration cash flow would provide more flexibility in reducing lending volumes during periods when underwriting risk levels are rising, as the company would be less dependent on brokering new loan deals every day to provide revenue.

  • IEG Holdings intends to encourage LendingClub to undertake substantial costs cuts by terminating excess employees, achieving substantial cuts in advertising/marketing costs and other significant cost cutting measures;
  • IEG Holdings intends to encourage LendingClub to transform its broker business model with low gross margins and high volumes to focus on high gross margin unsecured loans to near prime clients with strong underwriting, company owned individual state licenses and retention of loans on its balance sheet to secure long duration cash flow from longer term loans; and
  • The acquisition of LendingClub shares would be substantially net asset per share accretive for IEG Holdings stockholders and substantially increase shareholder equity.

New partnership turns PayPal into Apple App Store payment option (Banking Tech), Rated: A

This week the company announced a partnership with Apple to allow shoppers pay for their purchases at the App Store using PayPal. The feature will be available for users of a variety of Apple devices including iPhone, iPad, Apple TV, Apple Watch, and iPod.In addition to the App Store, PayPal will be a payment option for a variety of Apple services including Apple Music, iTunes, and iBooks.

Finicity and JP Morgan Chase pair for data share (Banking Tech), Rated: A

Data aggregation provider Finicity has signed an agreement with JP Morgan Chase to let the bank’s customers choose data to share with apps.

The companies will use a direct API to allow Chase customers to share information with the apps and services that Finicity supports. According to the firms, this tokenised access will eliminate the need for customers to share their Chase credentials with third-party apps.

Paypal Holdings Inc (NASDAQ:PYPL): Beginning of Market Dominance (Library for Smart Investors), Rated: A

Paypal Holdings Inc (NASDAQ:PYPL) is getting investors attention after the stock touched fresh highs amid a new partnership with Apple.

The stock is up over 43% since the start of the year.

In the first quarter, PayPal saw a jump of 10.3% in monthly active users on year-over-year basis. The total number of transactions also increased by 22.5% in the period.

In the first quarter, Venmo processed $6.8 billion in total payments, a 100% growth on year-over-year basis. Venmo is slated to grow more as the company expands to small businesses.

WEALTHTECH — THE DIGITIZATION OF WEALTH MANAGEMENT (FT Partners), Rated: A

WealthTech companies are targeting inefficiencies that span the entire wealth management value chain, from client prospecting to investing to portfolio management and reporting. Benefits include more efficient workflows, improved client experiences and greater transparency. Regardless of their value proposition, WealthTech companies are seeking to improve overall wealth management and investing.

This report highlights a number of key trends within the broader WealthTech industry such as…

  • Growing number of advisors joining the independent channel
  • Incumbent financial institutions are entering the robo-advice space
  • Increased demand for alternative investments
  • Financial planning trending towards goal-based approaches
  • Higher levels of active risk management
  • Commoditization of portfolio management software is leading to expanded offerings
  • RIA custodians evolving into more holistic roles

Download the full report here.

Wells Fargo trims auto loans as market cools, risk overhaul kicks in (Reuters), Rated: A

Wells Fargo & Co (WFC.N) is scaling back and remolding its auto lending business in response to growing stress in the market, as well as a bank-wide push for more centralized risk controls.

Wells, which was the No. 2 U.S. provider of auto loans less than a year ago, has already cut quarterly originations by nearly 30 percent over the nine months leading into March 31, according to a May 11 company presentation. It has also begun consolidating the collections operation in a move that people familiar with the business say could eliminate hundreds of jobs, after a new head of auto finance took the reins in April.

5 Fintech Startups Under the Radar (Bank Innovation), Rated: A

Spotme

This New York City-based startup facilitates micro-loans between borrowers and lenders, allowing users to set up pretty much all the parameters of a loan themselves: users can control the amount, the interest rate, the payback period, and the way they are reimbursed for the loan themselves.

Ledger

Ledger might be able to help out there: this San Francisco-based startup allows users to “open tabs with friends,” boiling down a transaction to just 3 clicks. By connecting with a user’s financial accounts (protected by “military-grade” cybersecurity, according to the company), users are able to aggregate all of their transactions in one place, as well as receive notification about when transactions are due.

Wallio

More and more companies are striving to solve the main problem when it comes to personal finance management services: how do you make a user actually take the financial advice that is being offered?

Wallio starts off the week by giving a user an allocated amount of money they can spend for that week, on whatever the user wants (expenses and savings are already factored into this amount). If a user underspends, great: Wallio will allow that user to put that money towards a goal. If a user overspends, Wallio will simply allocate less money for the user to spend next week.

Samwise

This robo-investing startup allows users to turn their existing brokerage account into an autonomous investing account using machine learning algorithms.

OnePebble

Invest, and make a difference in the world at the same time: that’s the dream of OnePebble, an online investment broker/dealer that puts each investment toward companies “doing good in the world.”

3 Investing Trends to Keep on Your Radar (Morningstar), Rated: A

Trend: Passive products continue to gain assets.

This is the trend shaping the investment management industry today. Asset flows to passive products, both traditional index mutual funds and exchange-traded funds, began in earnest following disappointing active-fund performance during the financial crisis.

Trend: New ways to hire–and pay for–financial advice. 

Robo-advisors provide automated advice for a low annual fee as low as 0.25% or even less. Meanwhile, mutual fund companies and brokerage firms may provide advice for customers who have amassed sufficient assets at the firm. For example, Vanguard Personal Advisor Service charges 0.30% and is available to investors with at least $50,000 in assets at the firm. (The service combines human financial advisors with robo-advisor technology.)

What to watch out for: The profusion of different business models means that the business of selecting an advisor is more complicated than ever. Robo-advisor fees might look like a screaming buy relative to the fees that a full-service human advisor charges, but the robo won’t be able to give you advice on nonportfolio matters like whether to pay off your mortgage or purchase long-term care insurance.

Trend: An increased emphasis on behavioral factors that can affect investor outcomes.

What’s to like: Many robo-advisors have also embedded behaviorial research into their services.

What to watch out for: Behavioral finance is trendy right now, and with any trend comes the opportunity for gimmickry. Beware of advisors who are using behavioral finance as their main hook to snag clients; high-quality advisors have been employing behavioral finance into their practices for years.

US Tax Professionals Tackles the Tax implications of Crowdfunding (Digital Journal), Rated: A

It’s important to understand that all the income a person receives, regardless of the source, is considered taxable income in the eyes of the IRS. That includes crowdfunding dollars.

Even if the campaign only raised the projected $15,000 and no gifts were offered, the money would still be considered taxable income and need to be reported as such on a tax return.

Generally, crowdfunding revenues are included in income as long as they are not:

  • Loans that must be repaid;
  • Capital contributed to an entity in exchange for an equity interest in the entity; or
  • Gifts made out of detached generosity and without any “quid pro quo.” However, a voluntary transfer without a “quid pro quo” isn’t necessarily a gift for federal income tax purposes.

Morgan Stanley digital chief: AI to help advisers, not ‘cyborg bots’ (Financial-Planning), Rated: A

Advisers tasked with processing a “mountain of information” will get a reprieve through artificial intelligence, according to Morgan Stanley Wealth Management’s chief digital officer.

“What we want to do is, with one click of a button, they can take action on that research report to all their clients within minutes, not hours, not phone calls,” Hassan said. “That’s the promise of what we’re trying to build.”

Rival firms have shown they’re headed down a similar path. Like Morgan’s planned offering, the UBS-SigFig service will save advisers’ time through automated messaging to clients on important dates, according to Richard Steinmeier, the head of the UBS Wealth Advice Center.

Congress Should Use Congressional Review Act to Strike Down Ill-Advised Arbitration Rule (Daily Signal), Rated: B

Cutting through the hyperbole that the arbitration rule protects consumers from “unfairness” that would deny them “their day in court,” this rule is in fact highly anti-consumer and harmful to innovation.

This regulation could have particularly harmful effects on FinTech innovations, such as peer-to-peer lending.”

How much money do Arizonans spend playing the lottery? Less than most Americans (AZ Central), Rated: B

Arizonans on average shelled out $100.85 per capita on lottery tickets in 2015, according to the study by LendEDU, based on preliminary data for state government finances collected by the Census Bureau. For Americans overall, the per-capita figure was $206.69.

United Kingdom

UK setting the bar for fintech regulation, bank execs say (SNL.com), Rated: AAA

U.K. authorities have created a world-leading regulatory environment for the burgeoning fintech industry that is being emulated elsewhere, according to bankers.

The Financial Conduct Authority’s “sandbox,” a program launched in 2015 to let companies test innovative ideas under close regulatory supervision, has been particularly helpful, she said.

Meanwhile, initiatives such as FCA-organized hackathons — or “TechSprints” as it prefers to call them — have been particularly appreciated by the industry, according to Sophie Guibaud, vice president of European expansion at Fidor Bank AG, a German online lender that was bought by Groupe BPCE in 2016. These events invite market participants to come up with technological solutions to certain problems, such as financial issues faced by people with mental health problems.

The U.K. is home to more fintech companies valued at more than $1 billion than the rest of Europe put together, according to an April 2017 report by technology investment bank GP Bullhound. Three U.K.-based companies, Funding Circle, Paysafe and Transferwise, have crossed that threshold, and GP Bullhound said that it does not expect London to relinquish its lead, due to its prominence in international financial services.

Comparison site GoCompare invests in mortgage robo-adviser (AltFi), Rated: A

Financial comparison site GoCompare is hoping to transform the UK’s mortgage application process by investing in MortgageGym, a digital mortgage robo-adviser.

Users can complete a free application within 15 minutes on MortgageGym and receive matches within 60 seconds, as well as robo advice and access to live advisers. The website will use automated algorithms to match applicants with the best mortgage providers.

The House Crowd hits £50m via mix of P2P and crowdfunding (P2P Finance News), Rated: A

THE HOUSE CROWD has hit the £50m funding target it set out to achieve in October last year.

The Manchester-based property platform started targeting institutional money at the end of last year to achieve its first £50m of funds channelled to property and buy-to-let borrowers, through both its peer-to-peer side and its crowdfunding arm.

The firm raised over £15m in the six months to early 2017, while a loan it closed last month added another £600,000.

Fintech CurrencyCloud tapped up investors months before Google raise (Business Insider), Rated: A

CurrencyCloud, which provides a platform to process international payments, raised £9.5 million from its existing investors in December 2016. The company had £10.5 million in the bank at the end of the month, accounts show, suggesting the platform had around £1 million left at the time of the fundraising.

The volume of payments jumped by 110% to 1.5 million but net revenue from currency transactions increased by just 10% to £3.2 million. Meanwhile, administrative expenses rose by 54% to £13.9 million as CurrencyCloud invested in “recruiting staff, developing our technology infrastructure and operations services, and moving to new office premises.”

P2P fund share issues boost investment trust sector (P2P Finance News), Rated: A

FUNDRAISINGS by Honeycomb and the Funding Circle SME Income Fund (FCIF) helped push share issues to record levels in the investment trust sector for the first half of 2017.

Secondary issuances raised £3.3bn in the first six months of the year, trade body the Association of Investment Companies has revealed, up from £1.8bn at the same time in 2016.

FCIF raised £142m in conversion shares in April, the largest total in the specialist debt sector, while the Honeycomb investment trust raised £105m through a ordinary share issue.

Alternative Credit funds drive record cash raise (AltFi), Rated: A

Assets in investment trusts have hit an all time high thanks in part to a huge swathe of secondary issuance in closed-ended funds’ shares.

In the first half of 2017, the most poplar area of the investment trust market was Infrastructure – in terms secondary issuance – raising £1.2bn. This was followed by Alternative Credit at  £514m. Funding Circle SME Income raised the largest total in the sector securing £142m via its C share issue, followed by Honeycomb Investment Trust (£105m).

China

The number of Online Financial platforms in China Exceed 19,000, ranking the first place of the world. (Xing Ping She), Rated: AAA

According to data from National Institution of Internet Financial Risk Analysis &Technology,there are more than 19,000 online financial platforms across China, including over 6000 online lending platforms, nearly 3500 online assets managers, and 800 crowdfunding platforms. The total cumulative volume of internet loans, crowdfunding and internet payment have reached to 70 trillion RMB (US$ 10.33 trillion). Zhou Hongren, director of the National Committee of Internet Finance Professional Technology, claimed that, “No matter in terms of quantity or scale, China has already become the largest international finance marketplace around the world.”

European Union

Rocket Internet Sells Stake in Lendico Startup (Handelsblatt), Rated: AAA

Incubator firm Rocket Internet has sold its majority stake in peer-to-peer lender Lendico to Arrowgrass, Handelsblatt has learned, as the British hedge fund acquired complete ownership of the Berlin startup.

The partners to the transaction agreed to keep the purchase price confidential. Rocket Internet, which specializes in helping online startups get off the ground, most recently valued its 50-percent-plus stake in Lendico at €140 million ($159 million).

Funding Circle Germany Takes a Fresh Start (Crowdfund Insider), Rated: AAA

Germany is a huge SME and VSME (very small business) credit market. But it is not as mature a market for online marketplace lending as the UK, the US, or even the Netherlands. This partly explains why Funding Circle Germany’s early loan book underperformed. Now the platform is starting afresh to match its market’s reality.

With offices and business in Germany, the Netherlands and Spain, Zencap had originated €35 million in loans to 500 SMEs at the time of its acquisition. Its operations were very small in comparison with the more than $1.5 billion originated by Funding Circle in the US and the UK at the time (meanwhile Funding Circle passed the $3 billion mark).

The second reason for starting afresh, was a need to revisit the credit model. Since January, the new German team has been busy recalibrating and restarting the German operations.

Loan origination resumed at previous level in the first half of 2017 and is expected to grow again in the second half of this year.

Spanish Fintech Industry Comes into its Own (Finance Magnates), Rated: A

The Spanish fintech ecosystem has been a steadily growing force over the past few years, swelling from just fifty financial technology startups in 2013 to well over three hundred in 2017. This rapid surge is only going to continue with this number estimated to hit four hundred companies by 2018.

In terms of the value of the operations, this sector passed rose from just €35 million in 2014 to €206 million in 2016, justifying a 600 percent growth in just two years.

According to the Spanish Association for Fintech and Insurtech (Asociación Española de Fintech e Insurtech – Aefi), companies operating in this space in Spain are going to create a total of 10,000 jobs in 2017 alone.

While the value offintech operations in Spain is increasing, two areas that constitute the most focus are the crowdfactoring or invoice factoring crowdfunding platforms – these saw a total of €120 milion euros in 2016, that concentrate most of the operations domestically, followed by crowdfunding with €43.5 million and crowdlending or p2p lending with €42 million.

International

Visa Expands Its Footprint in Europe (Market Realist), Rated: AAA

In May 2017, Visa announced that in order to give consumers more control and make transactions transparent, the company will create digital card management experiences for its partners. Visa’s partners include financial institutions. Since the new offerings will lead to more transparency, Visa expects to see volume growth in fiscal 3Q17. Market analysts expect Visa to report revenues of $4.36 billion in fiscal 3Q17—a decline of 2.7%.

 

What Can Visa Expect from Russia, China, Japan, and India?

In fiscal 2Q17, there was growth in Visa’s cross-border business due to Russia’s developed economy. Visa implemented ~1,600 point-of-sale terminals. As a result, payment volumes are expected to grow in fiscal 3Q17.

Management thinks that obtaining a domestic license in China is a time-consuming process. Visa is expected to witness lower revenues and payment volumes from China due to discontinued dual branded cards.

Management has a positive outlook on Japan’s economy due to digitization. Japan’s government has become more inclined to use digital and electronic payments.

In fiscal 3Q17, India could be a major contributor to payment volume growth.

Visa has delivered a return on equity of 16.2% on trailing 12-months basis. Other consumer financial peers (XLF) have delivered the following return on equity on a trailing 12-month basis:

  • American Express (AXP) – 25.1%
  • MasterCard (MA) – 75%Discover Financial Services (DFS) – 21.10%

Visa Expects to Benefit from Its European Business

Visa’s (V) acquisition of Visa Europe allowed the company to enhance its global reach. The main agenda behind the acquisition was to bring innovation to the European market. Visa had been working closely with its partners and clients. The company also plans to create new services and products.

Israel

THE SURPRISING COUNTRY LEADING THE FINTECH REVOLUTION (Ozy.com), Rated: AAA

The country that gave the world smart drip irrigation and the Epilady has also been an early and enthusiastic adopter of financial technology, as in mobile banking apps, digital wallets, online lending and other services that manage moola. In fact, a survey of selected industrialized countries shows that:

As for the specifics, 50 percent of Israeli adults use mobile banking apps at least once a month. In the U.S., it was 38 percent; the U.K., 37 percent; in France, 35 percent; and in Germany, a surprisingly anemic 28 percent.

The five largest banks in Israel control more than 90 percent of the market, and as Sandra Octaviani, research lead for fintech at the University of Utah’s Center for Innovation in Banking and Financial Services, notes, traditional banks tend to serve low-risk, highly profitable clients, which creates an opportunity for nimbler fintech firms to swoop in and serve the underserved.

India

RBI wary of first loan default guarantee cover (India Times), Rated: AAA

The Reserve Bank of India is learnt to be wary of peerto-peer lending platforms offering any FLDG, or first loan default guarantee, cover to institutional lenders for any lending they do through these technology startups, said sources familiar with the discussions.

While various lending entities are keen on exploring this space as a cheap source of customers, they often look for a security cover against loans going bad. Experts say such guarantees or covers might go against the intentions of the central bank.

SME Lending Based on Payment History is the Next Big Wave in Fintech (BW Disrupt), Rated: A

ftCash aims to empower micro-merchants and entrepreneurs with the power of electronic payments and loans with zero upfront cost and no monthly rentals. Merchants are able to offer their customers multiple payment methods including credit cards, debit cards, net banking, mobile wallets, PayPal and more.

Nonethless, credit lending is the next big wave of Indian fintech. Lodha explains, “SME Lending based on payment history will be next big wave in fintech. On an active basis, it allows a lender to decide the paying ability of a merchant/business and the recollection of these loans can be done from the payment platform itself. The combination of the payments data along with GST data provides deeper insights into a business. We at ftcash are heavily invested in this idea and believe there is a great potential for scale here.”

Latin America

Venture fund for Latino entrepreneurs, fintech in Mexico  (ImpactAlpha), Rated: AAA

Financial technology, or fintech, startups offering digital payment, remittances and lending services, could capture 30% of Mexico’s banking market within 10 years, according to Finnovista, a fintech accelerator. Six in 10 Mexicans are unbanked. Financial exclusion is a problem but “also an opportunity,” Francisco Meré, the director of Bankaool, one of the first online-only banks in Mexico, told the Financial Times[paywall]. “The cost of engaging a customer through technology is a fraction of using a branch.” Clip has grown to become one of Mexico’s largest digital payment providers (Accion sold its stake in February). Kubo Financieroprovides peer-to-peer lending; Albo, mobile-based banking; and Kueski, a digital micro-lender — all have secured venture backing. More than 150 fintech, or financial technology, firms now operate in Mexico, giving Mexico 35% of fintech companies serving the under- and un-banked in Latin America.

AFLUENTA INCORPORATES THE MEXICAN INVESTMENT FUND IGNIA TO ITS PRESTIGIOUS LIST OF SHAREHOLDERS (AltFi), Rated: A

Afluenta (www.afluenta.com), a leading online credit platform for the people of Latin America, announced the addition of Mexican venture capital fund IGNIA to its group of shareholders. IGNIA is a venture capital fund specializing in investments in entrepreneurial companies with great potential for growth, whose services meet the needs of the emerging middle class.

In Mexico, where local credit to the private sector is below 35% of GDP, compared to 68% in Brazil, Afluenta aims to revolutionize the market with its human approach to credit and investment.

Afluenta connects borrowers with investors who can be individuals or companies, eliminating intermediaries such as traditional financial institutions. Its technology allows investors to receive competitive returns on their contributions in a simple, fast and efficient way, while applicants obtain loans faster, without bureaucracy and at a lower interest rate than in a bank.

Canada

Katipult CEO finalist for the prestigious EY Entrepreneur Of The Year 2017 (Digital Journal), Rated: A

Brock Murray, CEO of Katipult, a SaaS company that enables firms to design, setup, and manage an investment crowdfunding, Peer to Peer lending, or investor management platform, has been named a finalist in Ernst & Young’s Entrepreneur of the Year in the Emerging Technology category in Prairies.

Authors:

George Popescu
Allen Taylor

May 23 2017, Daily News Digest

industrial bank charters declining

News Comments Today’s main news:  Yirendai reports Q1 results. Desai steps down from Funding Circle P2P fund. Yirendai reports Q1 results.  Klarna is changing its name. Uncertainty looms over SoFi’s bank charter. Today’s main analysis: Quarterly marketplace lending results. Today’s thought-provoking articles: What’s in Ron Suber’s portfolio. China Rapid Finance quiet period coming to an end. Online lenders dominate Mozo awards. Over […]

industrial bank charters declining

News Comments

United States

  • KBRA assigns prelim ratings to Oportun Funding VI, LLC, Series 2017-A. GP:”The flurry of bond sales continues.”
  • What’s in Ron Suber’s portfolio. GP:”Most angel investors lose money and they do it for the fun. A few have made it a carreer. I have always been very curious what Ron Suber invested in. Finally we get some very interesting insights. The real question is: why he said yes to these and no to probably 100x more companies.”AT: “Payments, online lending, and financial inclusion. None of this is surprising. I’d expect the leader of a disruptive finance industry to back financial inclusion. It’s not just decent humanity, it’s good business sense, especially if you believe in the technology doing the disrupting.”
  • Quarterly MPL results. GP:”The take away: An average ROI of 7.73%. A great number to remember.”AT: “Interesting portfolio mix, but it doesn’t seem very diversified.”
  • Uncertainty looms over SoFi’s plan to obtain bank charter. GP:”Of course uncertainty rules in any interaction with a regulator, judge, client. The take away from this article: the chart showing the number of industrial banks over time. “AT: “Obey this rule: Don’t believe it until you see it.”
  • U.S. startups fail to attract crowd of small investors. AT: “This is a misleading headline. There are any number of reasons why non-accredited investors may not be flocking to crowdfunding opportunities, one of which is they may not know about them. Most opportunities are still open only to accredited investors. The investment for the platforms to get in front of these investors is huge, and the potential ROI on the short term is thin, so long-term business sense is undoubtedly driving the current focus on accredited investors until cash flows reach a point to do otherwise. In time, the cost of meeting regulatory demands and marketing will decrease allowing platforms to built a real business model around the non-accredited investors. Plus, small investors themselves tend to be more cautious with their money simply because a loss can be much more devastating than an equal loss to a larger investor. The market will come around–in time.”
  • Goldman, Cohen bet on Nav. GP:”A few companies are always attracting a lot of attention from the public: Apple, Goldman, Google, Facebook due to their reputation of smart strategic visionaries who have made surprising bets in the past that paid off incredibly well. Is Nav such a bet?”
  • Thousands flock to Build credit card for credit repair. GP:”Beyond the sensational title: a few startups , and now banks, are selling the “improvide your FICO” by using our product. Some of them in fact even allow you to lend money to yourself in order to achieve this via a complex locked account structure. “
  • How fintech’s are beating credit unions. AT: “Credit unions typically are not innovators. They too will come around, eventually. It will take time.”
  • Podcast: Raul Vazquez of Oportun.
  • Why Wells Fargo is engaging fintech partnerships right now.
  • Lender expansion.
  • The top 10 players in Bay Area fintech.  GP:”The interesting story here given the share of the finance industry in the world and local economy: Why isn’t New York the hot bed of Fintech? A possible answer: because people experience in finance always see all the reasons why an idea won’t work and don’t even want to try. Young inexperienced people don’t know better and try, and sometimes they find a pocket of opportunity.”AT: “San Francisco is a hotbed for fintech companies.”
  • Fintech marketer on why you should simplify your message. AT: “Simplifying your marketing message is important, but clarifying your messaging is just as important. How you say what you say is as important as saying it.”

United Kingdom

China

European Union

  • Klarna is changing its name to include ‘Bank’. AT: “This is very interesting. If Klarna can entice consumers to open up digital bank accounts and fund their retail purchases through those accounts, the company should be able to corner the market on e-commerce payments. This would be a huge boon.”

International

Australian/New Zealand

India

Asia

News Summary

United States

KBRA Assigns Preliminary Ratings to Oportun Funding VI, LLC, Series 2017-A (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two classes of Oportun Funding VI, LLC, Series 2017-A (“Oportun 2017-A”), a consumer loan asset-backed securities transaction.

The collateral in the Oportun 2017-A deal includes approximately $188.24 million of loans, as of the April 12, 2017 statistical calculation date. The transaction includes a three year revolving period during which additional collateral may be funded in the transaction so long as it complies with certain eligibility criteria. The preliminary ratings reflect the initial credit enhancement levels ranging from 30.0% for the Class A notes and 15.0% for the Class B notes.

Preliminary Ratings Assigned: Oportun Funding VI, LLC, Series 2017-A

Class Preliminary Rating Expected Initial Class Principal
A A (sf) $131,766,000
B BBB (sf) $28,235,000

Here’s what’s in Ron Suber’s portfolio (Biz Journals), Rated: AAA

Digital signature company DocuSign and online lender SoFi, which have been valued at $3 billion and $4.3 billion respectively. His involvement with Prosper itself started out as an investment in the company back in 2013.Digital signature company DocuSign and online lender SoFi, which have been valued at $3 billion and $4.3 billion respectively.

He added that he focuses on five themes in his personal fintech investing: digital transactions, the payment rails of fintech, online lending, unlocking cash for assets and financial inclusion.

My Quarterly Marketplace Lending Results – Q1 2017 (Lend Academy), Rated: AAA

Overall Marketplace Lending Return at 7.73%

I complained last quarter that the annualized return, based just on the latest quarterly numbers, on my main Lending Club account had dropped to 2.1% in Q4. Well, this quarter it dipped further. The balance on this account on December 31, 2016 was $39,733, the balance on March 31, 2017 was $39,472 for a -2.6% annualized return according to Lending Club’s own statements.

When I look at where the recent defaults have been coming from the majority are in the D and E grade 36-month loans issued in 2015.

My TTM return according to my own calculations is 2.56% and Lending Club says my return is 8.32%.

Last month marked four years since I invested in the Direct Lending Investments fund. It has been my best performing investment by far over this time period. While yields have come down slightly from the initial 13-15% to 10-12% today I am still very happy with this investment. As the fund has grown, today it is closing in on $1 billion, it has changed focus from investing in high yield short-term small business loans to providing funding lines for a variety of consumer, small business and real estate lenders.

Peerstreet focuses on short term loans – typically 6-24 months with yield to investors in the mid to high single digits. I like the $1,000 minimum per investment at Peerstreet which has enabled me to feel comfortable starting with a relatively small investment. I have already almost cycled through my initial investment as 11 of my first 12 properties have already paid off in full.

Uncertainty looms over SoFi’s plan to obtain bank charter (SNL), Rated: AAA

Social Finance Inc. executives say the company is ready to be regulated more like a bank, but it is unclear how feasible it will be for SoFi to obtain the industrial bank charter it wants.

In his comments to TechCrunch, Cagney said that the goal of the charter is not to use deposits to fund loans.

SoFi has yet to submit an application for an industrial bank charter in Utah, according to Utah Department of Financial Institutions supervisor of industrial banks Shaun Berrett. As of May 19, the online lender had 28 job openings in its Cottonwood Heights location.

U.S. Startups Fail to Attract Crowd of Small Investors (Bloomberg), Rated: A

Investors sprinkled about $38 million across 142 companies since May 2016 when Title III of the JOBS Act allowed equity crowdfunding for non-accredited investors, according to data from industry tracker NextGen Crowdfunding LLC.

Swat said the practice is still in its infancy. Wefunder, StartEngine and SeedInvest are the primary crowdfunding platforms, and many founders aren’t aware that equity fundraising is an option. Of those who explore it, many decide it’s not worth the hassle and expense.

NextGen data show companies typically spend from $20,000 to $50,000 on legal, accounting and marketing — a serious outlay for a startup that’s only looking to raise a couple hundred thousand dollars.

Technology startups, quite understandably, have largely ignored the new fundraising option because they benefit more from the existing system.

Goldman, Cohen Bet on Nav (deBanked), Rated: AAA

Nav recently lifted the size of a Series B round by $13 million for lead investor Goldman Sachs Principal Strategic Investments as well as Cohen’s Point72 Ventures and others, bringing the tally for this round to $38 million.

King points out that bringing the startup’s vision to reality is a gamble. For instance, Nav’s current customer count is 215,000 and they aspire to have 28 million.

Also part of the vision is international expansion.

Thousands are flocking to a credit card that helps repair their bad FICO scores and avoid payday loans (Business Insider), Rated: A

Marla Blow thinks she can help. A card industry veteran who spent nearly a decade at Capital One and helped run the credit card and payments division at the Consumer Financial Protection Bureau, Blow recently helped launch a startup called FS Card, whose sole product at the moment is a credit card targeted toward those with tarnished credit histories.

The card, which is called “Build” and has MasterCard branding, enables customers to avoid the local payday lender’s sky-high rates and gradually mend their standing in the eyes of the almighty FICO.

FS Card’s strategy is to target “deep subprime customers” in the 550 to 600 credit score range, a group that’s largely been overlooked and forgotten by the big banks, according to Blow, the company’s CEO. By offering transparent rates and fees and low spending limits to start, Blow thinks she can carve out a profitable business that also helps people repair their financial bedrock.

There’s some evidence from the Federal Reserve Bank of New York that lending is returning for subprime borrowers with credit scores below 660.

The payday loan industry — wherein people take out a two-week loan for several hundred dollars that comes with a fee that amounts to a 400% interest rate on average — now serves 19 million households out of some 20,600 locations across the country, according to industry group the Community Financial Services Association of America.

The Build card, on the other hand, is unsecured and requires no deposit, providing a more flexible line of credit from the get-go.

The Build card comes with a $75 annual fee and a starting credit limit of about $500 — not incidentally, the same as the maximum payday loan amount in many states — which grows as the borrower proves responsible over time. The interest rate percentage starts in the upper 20s, on the high end for most credit cards. All the terms are laid out plainly to avoid any surprises.

In a year and a half on the market, the Build card has extended $25 million in credit to nearly 50,000 customers, according to Blow.

How fintech is beating credit unions at their own game (Credit Union Journal), Rated: A

One of the leaders in that effort is Acorns, an app that connects to a user’s credit or debit cards and rounds up purchases to the next dollar, holding the accumulated difference in escrow and investing it with a risk portfolio determined by the user. The service costs just $1 per month for balances of less than $5,000 and users can withdraw their funds at any time.

The bigger issue, said Habib, is that CUs are once again being cut out of the relationship with their members’ money. Saving a nickel here and a dime there may not seem like a significant threat, but if Acorns or similar fintechs eventually enter the lending space then credit unions could really begin to feel the pinch.

While most CUs don’t have a round-up offering, one credit union that has embraced the idea is Tampa’s GTE Financial, which in 2015 launched Future Change, an app that allows members to round up purchases and set aside money to pay off their loans at the credit union more quickly.

In the two years since GTE began offering Future Change, $1.3 million per year has been moved to roundup savings accounts, with members making more than 3,500 principal payments on their loans. The app has been downloaded more than 15,000 times and Burney said members log in about 14,000 times per month.

Podcast 101: Raul Vazquez of Oportun (Lend Academy), Rated: A

The CFPB estimates there are 45 million adults in the US today who have little or no credit history.

In this podcast you will learn:

  • What Raul did before he came to Oportun.
  • The three criteria Raul needed to consider when moving from Walmart to Oportun.
  • The core market of borrowers served by Oportun.
  • The percentage of Oportun borrowers who do not have a credit score.
  • The total loan volume they have done to date.
  • The typical loan terms they offer.
  • Why they base their interest rates on the size of the loan.
  • The marketing channels they use to find their customers.
  • Why they use physical locations in most of the states where they operate.
  • How they are able to do 100% automated underwriting.
  • What being a CDFI means and why it is important for Oportun.
  • The three ways Oportun gets the funding they need.
  • The work that Raul does with the CFPB Consumer Advisory Board.
  • How long Oportun has been profitable.
  • What they are working on for the future.

Why Wells Fargo is stepping up fintech partnerships now (American Banker), Rated: A

Wells Fargo is putting more focus and effort into its partnerships with tech companies — from giants like Apple, Samsung and PayPal to the smallest startups.

Lender Expansion; FHA, VA; Households Moving Toward Buying (Mortgage News Daily), Rated: A

Some originators will say that the FHA program is the “new” subprime channel – certainly the program appeals to lenders who like the profit margins, and it appeals to borrowers new to home ownership and who may not have the necessary down payment for other programs. Good LOs have a sense of demographics & population trends, and as it turns out, for the first time in a decade, more new U.S. households in the first quarter chose to buy homes than to rent, suggesting a long-term decline in home-ownership rates might be coming to an end.

Speaking of SoFi and other lenders that use computers (is there a definitive definition of “fintech?”), the WSJ discusses how investors are returning to bonds backed by online lending securitizations.

The top 10 players in fintech in the Bay Area (Biz Journals), Rated: A






See the entire presentation.

Fintech Marketer Tom Roberts On Why Simplifying Your Company’s Message Is Key (Hypepotamus), Rated: A

Regardless of how complex your product may seem, your company’s marketing message should be simple and straight-forward. A complicated, dense message could alienate customers unfamiliar with the technology and reduce your leads. Crafting a narrative around your company’s solution should translate to all sides of your target market — potential customers, investors and users.

You’ve worked on simplifying the PrimeRevenue brand and presenting the company in a more digestible way. How did you approach this?

But every marketing person should be so lucky to find a great story that is not being effectively told. That’s exactly what I discovered with PrimeRevenue. We work with some of the world’s largest brands to help them optimize their working capital, and we support their suppliers by giving them more visibility and control over what their customers owe them. I crafted the narrative around the immense ROI we deliver into a simple core messaging for both buyers and suppliers.

How did you approach the company when talking about the new brand message?

I’ve done a lot of work to simplify complicated messages for B2B audiences in the past. I find the key is putting together a logical story about what you are trying to achieve and how it will accelerate sales. Then you’ve got to be a great collaborative, internal seller of both your approach and your progress. I say collaborative since one mistake marketers seem to make is huddling with their team and then popping new “stuff” on an executive team. Unless you’re lucky, that can backfire.

Why was simplifying the brand so important for the marketing strategy?

A simplified brand message was key for us putting in place a sophisticated, multi-channel digital lead and demand generation program. Frankly, the company didn’t have much in the way of lead gen other than some field marketing at very small niche conferences.

United Kingdom

Funding Circle boss steps down from P2P fund (Citywire), Rated: AAA

Samir Desai, the founder and chief executive of Funding Circle, the peer-to-peer (P2P) lender to small businesses, has stepped down from the platform’s investment company.

FCIF is listed on the London Stock Exchange and invests in loans originated by Funding Circle. It is unusual in not levying a management fee, with the fund’s shareholders only paying the platform’s 1% annual charge. Last month it nearly doubled in size by raising £142 million from investors in a C-share issue.

Stepping back from FCIF allows Desai to concentrate on Funding Circle, whose backers include Baillie Gifford, manager of Scottish Mortgage Trust (SMT), which holds an investment in the private company in its unquoted portfolio. Funding Circle has lent over £2.2 billion in the UK having and attracted 61,000 private investors who the company estimates have made an average return f 7.2% lending through the platform.

UK Online Lender WiseAlpha Exceeds £627K During Second Crowdcube Run (Crowdfund Insider), Rated: AAA

WiseAlpha, a UK online lending platform that gives everyday investors access to high yield institutional bond and loan investments, has raised over £627,000 on its Crowdcube return in just 7 days, coming in at 125% over its original target. More than 433 investors have invested in return for 8.92% equity. The highest amount by a single investor was £150,000 for the platform pre-valued at £6,402,630.

UK P2P Lender RateSetter Announces Joanna Wright as New CRO (Crowdfund Insider), Rated: AAA

Peer-to-peer lending platform RateSetter has appointed Joanna Wright as Chief Risk Officer. Wright joins RateSetter from GE Capital where she was Chief Risk Officer for GE Capital Bank in the UK, leading a team of over 200 risk professionals with responsibility for prudential and enterprise risks across the bank.

HSBC voice recognition security system duped by customer’s twin brother (IB Times), Rated: A

HSBC’s much-touted voice recognition software, used by half a million customers to verify their identity and secure their bank accounts, has successfully been duped by the brother of one of its customers. In an investigation carried out by BBC Click reporter Dan Simmons and his non-identical twin, Joe, the brothers revealed that it was possible to breach an HSBC customer’s account by mimicking their voice.

After Dan Simmons set up his own HSBC voice-ID authenticated account, his twin Joe attempted to access the account by providing his account details, date of birth and saying the simple phrase. After seven repeated attempts to mimic his brother’s voice print, the bank granted him access on his eighth try.

Although Joe was not able to withdraw any money from the account, he was able to access balances, recent transactions and even transfer money between accounts, the BBC reports.

Lenders look to alternative asset classes and areas (Bridging&Commercial), Rated: A

Last week saw a mix of property developers and finance providers come together to discuss the state of the property market.

In the afternoon, the focus shifted towards the future of the property market with a look at new types of finance, such as crowdfunding, challenger banks and peer-to-peer lending.

Even though he admitted that banks and challenger banks still dominated the space, Ashley pointed out that the alternative finance sector was continuing to grow.

As a result of new lenders entering into the development finance space, Ashley added that some lenders have been looking to move away from ‘safer’ geographical areas, such as the South East, and are targeting places further north, including Scotland.

Fears grow over P2P trusts (FT Adviser), Rated: A

Recent months have seen problems return to the fore in the £2bn trust sub-sector, which has attracted investor interest in part because of yields well in excess of 5 per cent.

Winterflood also criticised certain P2P investment trusts over disclosure levels in its latest monthly report. Analyst Simon Elliott said Ranger Direct’s partial writedown of a 20 per cent exposure to the struggling Princeton Alternative Income fund was a “disheartening episode”. Princeton had previously said its NAV would not be affected by problems at firms in which it had invested.

Of the six funds in Winterflood’s P2P trust sector, three are trading on double-digit discounts, although one – Honeycomb – trades on a premium of 12.2 per cent.

Is There Still an Advice Gap? (Morningstar), Rated: A

Four years ago, sweeping reforms were introduced to the financial advice market, aiming to improve free transparency and professionalism.

However, one of the biggest unintended consequences has been what many describe as an ‘advice gap’. This has been caused by high street banks, investment management firms and financial advisers withdrawing services for those with less than £100,000 to invest. They argue the cost of servicing these clients has become too high.

A number of advisers also used the RDR as an opportunity to leave the industry, leaving many ‘orphaned’ clients behind.

Stephen Kavanagh, chief executive of financial advice firm Chase de Vere, believes the advice gap was not caused by the RDR, but rather the regulation exacerbated existing inefficiencies in the market.

According to AXA Wealth, there is only one adviser for every 2,700 people in the UK who require help with their finances. This compares to ratios of one adviser per 1,400 people in Australia and one per 156 savers in Hong Kong.

The good news is that the advice gap is on the agenda for the Financial Conduct Authority, the regulator, alongside the Treasury. The two organisations have launched the Financial Advice Market Review, which is ongoing and aims to ensure that affordable advice and guidance is available to everyone.

Since the RDR was introduced, robo-advisers have sought to address the issue, with new entrants and established firms offering online services for those with smaller sums to invest. Some deliver investment management online, while others provide automated financial advice. They are typically powered by computer models, known as algorithms, and involve little or no human interaction.

Although Kavanagh recognises that technology has the potential to plug the advice gap by offering lower-cost services to a wider range of people, he believes the robo-advice market still has much further to go before it reaches this point.

Tinder for businesses: Five things you need to know about Peer-to-Peer lending (Independent.ie), Rated: B

One – It was invented in Ireland!

Two – As the whole process is run online, overheads are lower and lending can therefore be provided more cheaply than in more traditional financial institutions.

Three – According to Linked Finance, lenders can earn between 8.5pc and 15pc interest on the loans that they issue, however any income earned on the lending will be subject to income tax.

Four – P2P is currently not regulated in Ireland, as a result of this certain protections do not apply to consumers of P2P products.

Five – Figures for the first three months of 2017, show that the Irish P2P platform increased lending activity by more than 326pc on the same period in 2016, according to Linked Finance, and the platform has now facilitated more than €25m in loans to Irish SMEs.

China

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

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the quarter ended March 31, 2017.

Starting from the second quarter of 2016, the Company changed its reporting currency from the U.S. dollar (“US$”) to the Renminbi (“RMB”), to reduce the impact of increased volatility of the RMB to US$ exchange rate on the Company’s reported operating results. The aligning of the reporting currency with the underlying operations will better depict the Company’s results of operations for each period. This release contains translations of certain RMB amounts into US$ for convenience. Prior period numbers have been recast into the new reporting currency.

For Three Months Ended

in RMB million

March 31,
2017

December 31,
2016

March 31,
2016

QoQ
Change

YoY

Change

Amount of Loans Facilitated

6,922.7

6,675.2

3,446.5

3.7%

100.9%

Total Net Revenue

1,021.6

1,071.1

556.4

-4.6%

83.6%

Total Fees Billed (non-GAAP)

1,583.5

1,630.4

847.4

-2.9%

86.9%

Net Income

350.9

379.8

131.7

-7.6%

166.4%

Adjusted EBITDA (non-GAAP)

400.3

401.1

206.6

-0.2%

93.7%


A Quick Buy For China Rapid Finance At Upcoming Quiet Period Expiration (Seeking Alpha), Rated: AAA

The 25-day quiet period on China Rapid Finance Ltd (NYSE: XRF) will end on May 23, allowing the firm’s IPO underwriters to publish reports and recommendations after this time.

China Rapid Finance acquires consumers through multiple channels, such as online travel agencies, social networks, e-commerce platforms, and payment service providers. Its business model offers smaller, shorter-term loans through its platform. The proprietary technology then analyzes the data and identifies borrowers who may qualify for larger, longer-term loans. In 2016, 89% of its total loan volume originated through this platform, and the borrowers were prime and near-prime consumers with creditworthiness closely comparable to FICO scores ranging from 660 to 720.

XRF’s principal loan amounts range from RMB500 (US$72) to RMB6,000 (US$865). Longer-term loans range from three months to three years, with principal amounts from RMB6,000 (US$865) to RMB100,000 (US$14,400).

The total number of loans has grown from 63,251 in 2014 to 6.0 million in 2016. The number of borrowers has increased from 101,384 in 2014 to 1.4 million in 2016. However, net losses reached US$131,000, US$(30.0) million and US$(33.4) million in 2014, 2015 and 2016, respectively.

The average annual investment return for investors in lifestyle loans was 11.9% in 2014, 11.5% in 2015, and 11.3% in 2016.

With a market cap of $1.475M, net income of $1.116M, and a P/E of 9.1; YRD appears to be more reasonably priced in general than XRF.

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

Zhongan Financial Holding Raised ¥220M in A Round
Zhongan Financial Holding (ZFH), an auto consumer financial services provider, announced that it has raised 220 million RMB in A round of financing at the end of 2016. This capital was led by Haitong Capital, followed by Huaxin Capital, YinDuhui, Promising Capital and the listed company Sunyard.

Founded in 2014, ZFH is focused in personal car consumer financial services across the country. It provides lifecycle service of car transactions for consumers and dealers, including marketing, customer acquiring, car sourcing, trading and financing.

In addition, ZFH cooperated with banks to use the way of interbank (credit card stage) for the car consumer finance business. In this way, the cooperative bank originates credit card loans to customers, and customers mortgage the vehicle to the bank, then after the loans are issued, customers will pay the monthly payment.

Alipay to launch ““Face Identifying Payment”
Alipay has recently tested for “Face Identifying Payment” inside. In this new way of paying, the process of face identifying takes only one second, if succeed, the customer should further input the last four digits of his phone number. After the two-step verification, the payment can be completed.

Shortly after that, Alipay confirmed the news, and announced they have finished the last step of bringing “Face Identifying Payment” from laboratory to commercial use, it will soon be available on the stores of partners.

European Union

Klarna is changing its name — revealing a bold challenge to incumbent banks (Business Insider), Rated: AAA

Swedish e-commerce company Klarna wants to change its name to Klarna Bank, reveals application documents received by the Swedish Companies Registration Office.

This implies that Klarna could soon be receiving its Swedish banking license, which it applied for in October 2015.

International

Should Real Estate Investors Go Global? (ETF Daily News), Rated: B

The FlexShares Global Quality Real Estate Index Fund (NYSE:GQRE) was trading at $59.44 per share on Monday afternoon, up $0.15 (+0.25%). Year-to-date, GQRE has gained 5.45%, versus a 7.10% rise in the benchmark S&P 500 index during the same period.

GQRE currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #5 of 11 ETFs in the Global Real Estate ETFs category.

Australia/New Zealand

Online lenders dominate 2017 Mozo Experts Choice Home Loan Awards (Mozo), Rated: AAA

The awards compared 504 home loans from 89 providers, and awarded the top 10% in each of the 8 categories.

This year, Mozo found that online lenders took out more awards for great value mortgage products than in previous years, accounting for approximately 41% of the winners overall, up from just over 25% last year.

Some of the major online bank winners included Non-Bank Home Loan Lender of the Year, Homestar, which took out awards across 5 of the 8 categories and Reduce Home Loans.

InvestmentLink launches goals-based advice platform (Financial Standard), Rated: A

Financial data feed provider InvestmentLink is launching a new cloud-based platform targeted at financial planners looking to provide outcomes-oriented advice to clients.

CashDeck uses InvestmentLink’s data repository to allow clients to manage all their financial information, while advisers can use the information to generate projections and insights around client goals.

Wellington ranks #2 in the world for sharing economy (IT Brief), Rated: A

Peer-to-peer motorhome rental platform SHAREaCAMPER recently released the 2017 Return on Investment Index. The study aims to identify which cities offer the highest return on asset investment via rental peer-to-peer (P2P) platforms.

The application Airbnb was used to collect data alongside a collection of other rental platforms.

Taking into account all five of the markets researched, Wellington is ranked in second place. Auckland placed in the fifth position in the ranking.

India

Over 90% lenders in P2P lending earn gross returns of 18-26% per annum (India Times), Rated: AAA

Promise of higher returns and faster adoption of digital disruption has pulled a large number of millennials towards P2P lending, according to a report by online P2P lending platform Faircent.com. In fact as per the report, nearly 60% of the lenders on the platform are less than 35 years old.

According to the report, lenders are investing more and those with investments worth more than Rs 5 lakh are earning gross returns upwards of 22% per annum with the lowest volatility of returns. Furthermore, it states that significant increase in timely repayment has led to increase in reinvestment of returns back on to the platform, leading to further increase in returns.

Meet the Analytics & Data Science Head at Kabbage, one of the hottest fintech companies (Analytics India Mag), Rated: A

This week we bring you a closer look at Kabbage, a Fintech company headquartered at Atlanta USA, through an interaction with Ratnakar Pandey. RP, as he is popularly known, heads the Analytics and Data Science portfolio at Kabbage India.

RP has more than 15 years of experience in analytics and data science fields. At Kabbage, RP is leading the machine and deep learning models development activity across customer lifecycle, from acquisition to customer engagement to fraud prevention to risk based underwriting policy development.

Analytics India Magazine- Could you tell us more about Kabbage and your data and analytics platform?

Most of the heavy lifting that happens in Kabbage is done by technology and data, which is one of the key differentiators. We like to call ourselves a data company rather than a typical finance company. So, data is the core competency of the company and we use that in our decision making every day.

AIM- Would you like to share some of the analytics solutions you have worked on?

We use several programming and data management tools for providing both tactical and strategic analytical solutions, some noteworthy tools are Python, R, SQL, Spark, Hadoop and Scala.  In terms of statistical techniques for machine learning, we routinely use regression techniques (linear, logistics) and classifiers such as Gradient Boosting Machines (GBM), Elastic Net Regression, Support Vector Machine (SVM), Ensemble Learning etc. For forecasting and anomaly detection we use ARIMA/X, k-NN and other similar techniques. We also heavily use Natural Language Processing (NLP) for drawing insights from text and unstructured data.

AIM- What kind of knowledge and skill-sets do you look for, while recruiting your workforce?

For the positions that we are currently hiring, we are looking for 8+ years of work experience in data science, preferably in the banking and lending industry. We are keen on hiring people who can lead a project from start to finish and take the full accountability and ownership of it. We generally hire from the premiere institutes, 90% of people we have right now are from tier 1 institutes.

AIM- What are the most significant challenges you face being at the forefront in analytics space?

Lack of machine learning and deep learning talent is the biggest challenge in the Indian market.

AIM- How do you think ‘Analytics’ as an industry is evolving today? Could you tell us the most important contemporary trends that you see emerging in the present analytics space across the globe?

We are generating more data than ever before- 90% of the data that we have today is generated in last 2 years alone. This data is coming from a variety of different sources such as voice, text, transaction, sensor, chat, images, videos etc.

At this rate, Fintech will slaughter India’s banks (India Times), Rated: A

India’s banks, which still dominate the country’s financial landscape, appear to have hardly a kick left in them. Stressed assets without any loan-loss cover now exceed $96 billion, McKinsey & Co. said last week. An overwhelming 91 percent, or $87 billion, of the provisioning gap is at state-run lenders, whose net worth would be wiped out if they took the hit on their capital.

Even as McKinsey was delivering this sobering reality check, fintech was running a victory lap of sorts. Paytm, a digital payments company announced a $1.4 billion investment by Masayoshi Son’s SoftBank Group Corp. on Thursday, the largest funding round by a single investor in an Indian startup.

Capital First’s retail assets have grown 24-fold in six years to about $3 billion. Its bad-loan ratio of less than 1 percent compares with almost 10 percent for banks. And the latter figure is an official estimate; the reality is probably a lot worse.

McKinsey has several suggestions on how Indian banks can deal with the mess: by quarantining assets that would eventually find their footing, liquidating those that won’t, and working with professional asset managers to turn around debtors that lie in between. But even if the delicate surgery is successful, banks — especially state-run ones — will end up ceding a lot of ground to fintech.
Asia

SoftBank’s massive Vision Fund raises $ 93 billion in its first close (TechCrunch), Rated: AAA

SoftBank’s huge $100 billion investment fund — the largest tech fund in history — announced its first close today… and it’s huge.

The Japanese telecom giant revealed that its VisionFund has closed an initial commitment of $93 billion from a bevy of high profile backers. They include Apple, Qualcomm, UAE-based Mubadala Investment Company, Saudi Arabia’s PID public fund, Foxconn, and Foxconn-owned Sharp. The plan is for the fund to reach its $100 billion target within the next six months through commitments from other investors.

Recent deals include Indian fintech unicorn Paytm, virtual reality Improbable Worlds, China’s Uber killer Didi Chuxing, and global connectivity company OneWeb. Beyond that, there’s been a steady flow of unconfirmed investments linking the fund to companies like WeWork.

Authors:

George Popescu
Allen Taylor

Monday February 27 2017, Daily News Digest

funding circle sme income fund

News Comments Today’s main news: SoFi raises $500M for international expansion. Funding Circle business jumped 50% post-Brexit. Bank lending in UK soars. Today’s main analysis: My adventures in various p2p lenders. How P2P funds have fared over the last 12 months. Today’s thought-provoking articles:  Rise of P2P in Korea puts government on edge. Canadian regulators welcome FinTechs. United States SoFi […]

funding circle sme income fund

News Comments

United States

United Kingdom

International

Australia

China

India

Asia

Canada

News Summary

United States

SoFi Raises $ 500 Million Led by Silver Lake for Global Expansion (Bloomberg), Rated: AAA

Social Finance Inc. said it raised $500 million in a financing round led by private equity firm Silver Lake Partners. It plans to use the funds for international expansion of its online lending business and development of new financial products.

Other investors in the round include SoftBank Group Corp. and GPI Capital, and the funding brings SoFi’s total investment to $1.9 billion, the company said. Several sovereign wealth funds from countries in Asia and Europe invested as well, said Mike Cagney, SoFi’s chief executive officer and co-founder. The international group will purchase SoFi’s loans in addition to taking an equity stake, he said.

SoFi said it plans to develop new personal finance tools, including mobile deposit, credit and payment products that will be rolled out this year. It also anticipates bringing its lending products to Australia and Canada by the end of the year.

My Adventures in Fintech (Wealth Management), Rated: A

Two major factors have come together to make fintech platforms so popular. First, the rise of smartphones puts the apps right into the hands of millions of users who feel alienated by slow-moving traditional banks. Second, the financial crisis of 2008 eroded the borrowing ability of many middle-class individuals and small business owners as banks curtailed unsecured lending and other high-risk loans.

From 2010 to 2015, investment in fintech has grown from $1.8 billion to $22.3 billion, according to Accenture.

Lending Club

I started investing in Lending Club in 2011. My experience is limited to being an investor. I am a fractional owner in a total of 3,167 notes (see Figure 1).

So, if any one note defaults, my downside is generally limited to $25. Of those notes, 1,387 are current (that is, the individual borrowers are current in their payments), 1,269 notes have been fully paid off, and 432 notes have defaulted and been charged off.

 

My 12.97 percent net annualized return will probably be reduced by 1 to 2 percentage points given the predictable defaults, but I’m very satisfied with the results to date.

I faced two major issues in managing a P2P account. First, how to select notes. Second, how to manage the small amounts of cash that accumulate every day. The Lending Club website lists tens of thousands of notes available for investment at any time, each with details about the underlying borrower such as income, credit score, whether he or she owns or rents, state of residence, purpose of loan, etc. At first, I inspected each note and selected the ones that appealed to me, but that can be a full-time job and is probably counterproductive. It’s much easier, and probably more reliable, to trust the Lending Club automated investment system.

Upstart

Almost all Upstart borrowers are recent college graduates at the beginning of their careers. This population has a much thinner conventional credit history, so Upstart developed an algorithm that looks beyond traditional credit data such as earning potential and employability. To invest with Upstart, you must be an accredited investor.

But lately, the platform is encouraging investors to determine a risk grade then automate the selection. Risk grade notes run from AAA to D. Almost every borrower signals that they intend to use Upstart funds to consolidate high interest credit card debt.

I have funded on a fractional basis 140 three-year notes from exclusively Grade B borrowers. Eight notes have matured. One borrower has defaulted. The value of my account is $13,933. I’ve made $452 in interest and my annualized IRR is 7.24 percent (Figure 3). Based on Upstart’s performance statistics (Figure 4), my performance of 7.42 percent is apparently better than the average across all notes (5.72 percent).

Acorns

I easily linked Acorns with my checking and credit card account more than a year ago. Since then, it has been systematically rounding up my purchases to the next dollar and investing the difference in a diversified portfolio of ETFs.

At the end of a year, I had contributed a total of $283.57, and earned $3.17 in dividends. I’ve paid a total of $8 in fees. The current value of my account is $282.23—not too great of a return until you consider I chose the “conservative” balanced portfolio with 39 percent in government bonds and 18 percent in corporate debt.

Fees are $1 per month or 0.25% per year, depending on your balance. The app is free and fees are waived to college students for four years.

Weekly Online Lending Snapshot – February 24, 2017 (Orchard Platform), Rated: AAA

In China, as reported by the Beijing Bureau of Financial Work, nine out of 10 of the roughly 5,000 lending platforms across the country may not survive the coming year as the government begins a well-telegraphed tightening ofregulatory supervision of these lending platforms. NatWest Bank, in the U.K., announced the launch of a digital platform for small and medium-sized businesses to apply for unsecured loans up GPB$150,000. Australian small business lender Prospa raised an AU$25 million funding round led by Sydney-based AirTree Ventures valuing the firm at AU$235 million.

3 Industries Being Disrupted by Crowdfunding (Entrepreneur), Rated: A

1. Corporate finance: From software to farm equipment

Large finance organizations can use it as a catalyst for gaining small businesses who seek to harness leased products that are tailored to them specifically. What’s more, the lower cost credit of the products they offer will appeal more to businesses that pay sky-high APRs.

For leaseholders of larger equipment, crowdfunding platforms will allow leaseholders such as farmers to finance crops and equipment from other farmers and associates.

2. Real estate: From housing to business establishments

Before crowdfunding, closing an actual real-estate deal required back and forth passing and signing of documents among lawyers. Beyond being slow, the process often added up to thousands of dollars in legal fees. Crowdfunding allows businesses of all sizes to bypass the monotonous process and dodge expenses. What’s more, real-estate crowdfunding allows potential investors access to a wider array of deals.

3. Consumer lending: Cars and home appliances

For financial institutions, this means learning to leverage a crowd’s interest to inform their lending offers. As the trend continues, new crowdfunding platforms will pop up to cater to specific lending verticals. Imagine a crowdfunding space where consumers can get loans for anything related to transportation or kitchen appliances. In this way, brands will be able to save on financing costs while gaining on capital returns.

AUTOFI UNVEILS ONLINE MULTI-LENDER SALES SOLUTION FOR USED CAR DEALERS (iLendingDirect Email) Rated: A

Today AutoFi, a financial technology company that is transforming the way cars are bought and sold, announced the launch of the first fully online sales and multi-lender financing solution for used car dealers. Financing on AutoFi’s platform will be provided by its lender network of banks, speciality lenders, and credit unions. Today, the company announced that its credit union financing will be offered in partnership with iLendingDIRECT.

The AutoFi platform is the first online point-of-sale solution for auto finance. It allows customers to purchase and finance a car completely online, either through a dealer’s website or an in-store digital experience. The company recently announced the world’s first online car sales and financing solution for new car dealers in partnership with Ford Motor Credit. Today’s announcement further expands AutoFi’s ability to serve the multi-billion-dollar used car sales market through its partnership with iLendingDirect.

AutoFi’s platform will now allow used car buyers to research a vehicle on the dealership’s website; select “Buy Now”; receive an automated credit decision; and get loan offers from banks, specialty lenders and iLendingDIRECT’s credit union network who compete for the car buyer’s business in real time.

Consumers can then customize their financing deal by selecting down payment and loan  terms; choose vehicle protection products; and e-sign all financing documents online. The new platform gives used car dealers and buyers the ability to transact online with competitive financing options in a fully automated process.

Lending Club Alters Grace Period for Borrowers (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) has tweaked the way it manages the “grace period” for borrowers when they make payments past the due date. Previously, borrowers received a 15 day grace period for any penalties on payments less than 15 days late.  Beginning today, Lending Club requires borrowers to pay the additional accrued interest as a result of their late payment.

RentRange Identifies 25 Markets with the Largest Rental Rate Increases (MarketWatch), Rated: A

RentRange, one of the premier providers of market data and analytics for the housing industry, today released data ranking the top 25 U.S. Metropolitan Statistical Areas (MSAs) by average rental rate increase for single-family1 homes between the fourth quarter (Q4) of 2016 and the same quarter in 2015. The data analysis also identified the average vacancy rate within these markets in Q4 2016.

The Q4 2016 RentRange® data identified rental rate increases in areas like Cape Coral and Portland, both of which moved up the list into the top five, as well as newcomers including McAllen, Denver, Boston, Nashville and Miami. While rents remain high in the Bay Area, San Francisco dropped several positions, indicating that the year-over-year rent change was not as significant as seen in past years. Comparatively, San Jose made the list as a new addition in Q4 2016.

Analyzing the average vacancy rate, which demonstrates the percentage of all available units in a rental property that are vacant or unoccupied at a particular time, shows that the highest rates, as reflected from the list, are seen in the Southeast region, where vacancy rates range from 10.5 percent in Charleston to 20.4 percent in Myrtle Beach. In these areas, builders and investors may need to compete for a limited number of renters. An oversupply of new properties can drive up the vacancy rate and eventually push rental rates down. This scenario is currently happening in Myrtle Beach, where more than 3,100 new homes were built in 2015, a 94 percent increase compared to two years earlier.

United Kingdom

Brexit Terrified This CEO. Then Business Jumped 50% (Bloomberg), Rated: AAA

At sunrise on June 24, Samir Desai rushed to his offices near St. Paul’s Cathedral in London. Britain had just voted to quit the European Union and he knew his staff at peer-to-peer lender Funding Circle Ltd. would be freaking out.

As the pound tumbled and the government quaked following the resignation of Prime Minister David Cameron, Desai walked the floor of Funding Circle’s whiteboard-decked offices, fielding anxious questions. The non-British EU citizens feared they’d have to leave the country. The sales team feared that investors funding the firm’s loans to small businesses would bail.

In the eight months since the Brexit vote, Funding Circle has been on a tear. The firm originated more than 530 million pounds ($685 million) in loans during the second half of 2016, a 50 percent jump from the same period a year earlier, according to AltFi Data Ltd., which analyzes the British peer-to-peer industry. In the fourth quarter, Funding Circle’s U.K. division became profitable for the first time.

The question now is whether Funding Circle’s post-referendum run has legs. Meekings theorizes that volume has been driven by the Bank of England’s decision to lower interest rates to 0.25 percent from 0.50 percent in August. That spurred more retail investors to chase yield in the firm’s loans, which are returning an average 6.2 percent annually. Meantime, credit-hungry borrowers may also be flocking to Funding Circle as banks retrench from lending to small companies.

The great British credit boom: Bank lending soars in January (P2P Finance News), Rated: AAA

Figures from the British Bankers Association (BBA) showed that total consumer borrowing growth rose to £538m, more than doubling from December’s figure. This was primarily driven by the increase in personal loans and overdrafts, which rose to an eight-month high of £422m.

Meanwhile, bank lending to businesses rose by £3.4bn in January, which was the largest increase since January 2015.

Banks tightened up lending after the financial crisis which had a detrimental impact on economic recovery, although it created an opportunity for the peer-to-peer lending sector.

At 44,657 in January, mortgage approvals for house purchases were up 18.6 per cent from their August 2016 low, although they were still 2.5 per cent below the January 2016 level.

Gross mortgage borrowing came in at £13.8bn, with re-mortgaging approvals 15.7 per cent higher year on year.

How P2P funds have fared over the past year (P2P Finance News), Rated: AAA

Net asset value (NAV) returns range from three per cent to 20 per cent while discounts to NAV have fallen as low as 20 per cent.

P2P Global Investments

Almost 60 per cent of the assets are in the US, with 23.2 per cent in Europe, 8.7 per cent in cash, 6.4 per cent globally and 2.2 per cent in Australia.

Over the past 12 months its NAV has grown 5.34 per cent and it is currently on a discount to premium of 20.8 per cent.

SME Loan Fund

Almost two thirds, 63 per cent, of assets are in the UK, with 13.1 per cent in the US, 18.6 per cent in Europe and the rest in cash.

The trust has seen its NAV total return grow by seven per cent over the past 12 months and it is currently trading at a discount to net asset value of 10.3 per cent.

Ranger Direct Lending

The ordinary income share class is currently on a discount to NAV of 10.5 per cent while the zero preference and c share classes are on 2.2 per cent and 1.2 per cent respectively.

Funding Circle SME Income Fund

Its regional exposure is currently broken up as 73 per cent in the UK, 17 per cent in the US, two per cent in continental Europe and eight per cent in cash.

It has seen its NAV deliver total returns of 6.7 per cent over the past 12 months and is currently on a premium of 1.6 per cent.

VPC Specialty Lending

The investment trust is composed of 36 per cent marketplace loans and 39 percent in balance sheet investments, with the rest in shares, securitisation and cash.

Its NAV has returned 3.1 per cent over the past year and it is trading at a discount to NAV of 19.4 per cent.

Honeycomb Investment Trust

It has returned 8.7 per cent over the past 12 months and is on a premium to NAV of 7.7 per cent.

RateSetter Forms Partnership With Accountancy Advisor TaxAssist to Engage With SMEs (Crowdfund Insider), Rated: AAA

Online lender RateSetter has formed a partnership with accountancy advisor TaxAssist Accountants to help engage with small and medium-sized enterprises (SMEs). TaxAssist Accountant notably specializes in all businesses with a turnover of £2 million of less. It has more than 290 locations throughout the UK.

I’d use peer-to-peer lending to beat the banks (Moneywise), Rated: A

This growing market, which is now regulated, is dominated by three players – Funding Circle, RateSetter and Zopa. The annual interest on offer varies, ranging from 2.9% (RateSetter) through to in excess of 7% (Funding Circle), but so does the degree of risk you will take.

While the 2.9% interest on offer from RateSetter comes with the backing of a ‘provision fund’ (designed to protect your capital from losses if loans turn bad), the 7% from Funding Circle has no such underpin. If a loan goes bad, your capital could be compromised.

My peer-to-peer money is spread across 16 businesses operating in everything from retail through to IT. It is effectively an investment play on UK plc. When the economy is strong, my companies are more than likely to keep repaying the loans they have secured.

Welendus Live on Seedrs (Welendus Email), Rated: A

I am pleased to announce that Welendus is now back live on Seedrs. I would like to invite you to visit our campaign and watch our video at (

The Funding Network celebrates 15th anniversary (UK Fundraising), Rated: B

The Funding Network celebrates its 15th anniversary this March, having so far raised over £9.8 million for more than 1,450 social change projects through its live events since its 2002 launch.

TFN is celebrating with a special event on 16th March at the Funding Circle’s Funderbar in London.

International

Marketplace lending news roundup 27/02/17 (AltFi), Rated: AAA

In the UK, the overall market for alternative finance has just ticked over £10bn – including crowdfunding – in terms of the amount of money lent and invested into the equity of companies via crowdfunding platforms.

UK P2P business lending Growth is still in rude health as proven by AltFi Data’s number crunching, in the same week that Funding Circle tops £2bn mark. In the funds world, P2P GI has continued its share buyback strategy while the SME Loan Fund may be about to see an investment management change by New York-based SQN.

Not so good for US-based OnDeck, which despite a surge in Q4 lending is looking to cut jobs amid rising losses.

Financial technologies that make banks better (Finextra), Rated: A

A Reykjavik-based company strongly commits to improving the way the banks function. Meniga is, mostly, known for its money management software that allows the banks to start offering great personal and business financial management applications to their clients without investing heavily into the development.

Recent developments in Payment Services Directive 2 make banking APIs so important as never before. On the one side, banks are required to provide open technology for accessing their customers’ data to third parties. And, instead of investing into the development of open APIs, a bank can pick the technology up from Kontomatik as it already has the API in place. On the other side, smart banks will not only release open APIs but will also do everything at their disposal to benefit from the access to the data of other banks.

Started in 2009, it has taken Kabbage roughly 5 years to come up with a white-label solution that allows financial companies to use its technology for assessing the risks and issuing the loans online. With white-label technologies from Kabbage, a bank should be able to launch a great B2B lending platform without investing into development, testing and implementation of the modern risk assessment models.

Australia

US Market leader delivers keynote address to AltFi Australasia (The Bull), Rated: A

A reluctance by banks and government agencies to share data with alternative lenders is driving up the cost of borrowing in Australia, a global fintech leader told the AltFi Australasia conference in Sydney today.

Rob Young, Senior Vice President, International at OnDeck Capital Inc, said that a lack of open data is a major issue for alternative lenders in the fintech space.

He explained that in Australia, there is limited sharing of credit, banking or tax data, while the UK’s open data regime has forced banks to share customer data and open up their APIs to third parties.

“The UK is a great example of where open data has been in place for several years, the alternative finance sector is flourishing, and even the banks have benefited by opening up cross-sell opportunities within their own businesses. It’s a win-win for the lending sector and its customers,” Mr Young said.

Fintech Business Awards announces 2017 winners (EconoTimes), Rated: B

Midwinter Financial Services that has developed a range of cutting edge financial planning software packages, has been recognized for the Fintech Business Excellence Award for company category, having been awarded the highest points of all winners.

Other awards in the fintech category include Fintech Mentor of the Year that was awarded to Claire Wivell Plater from The Fold Legal and Fintech Start-Up of the Year given to Valiant Finance. Apart from this, Crowdfunding Innovator of the Year, Insurance Innovator of the Year, Payments Innovator of the Year, Investment Innovator of the Year, among other awards were also recognized.

China

The day of reckoning is nigh for fintech startups (SCMP), Rated: A

What started as a venture capital-driven, primal scream against the perceived backwardness of traditional banks and financial institutions has run into problems that no other new technology has faced.

The last two years saw an expansion of incubators and platforms to cultivate fintech startups. And this year, I am observing clues in major fintech centres where leaders are quitting startups and bank sponsored vehicles.

The hope and dream of being able to disintermediate financial institutions and the entire industry is unrealistic given how much protection and restriction is needed to prevent another financial meltdown that threatens to cast a 1930s style depression across the world.

Besides BlackRock’s acquisition of the roboadvisor site FutureAdvisor in 2015 (valuing it between US$150 million to $200 million) other asset managers like Fidelity and Schwab believed they could accomplish roboadvisor front ends on their own.

So approaches and results are very mixed.

India

Fintech aims to facilitate Rs. 100 cr. loan in 100 days (The Hindu), Rated: A

Peer-to-peer lending platform Oxyloans is targeting to facilitate disbursement of Rs. 100 crore as loans in 100 days beginning March 1. The firm, which neither mobilises deposits nor disburses loans, earns revenue from the commission — 1.5% from lenders and 2.5% from borrowers — it charges.

The loans disbursed through the platform are typically short-term, from 6 months to 11 months, and the rate of interest ranges between 14% and 36%.

India to Get Its Own Fintech Hub in Vizag (NewsBTC), Rated: A

India has been making a lot of noise in the banking, fintech and cryptocurrency sector lately. The country, currently heading towards a financial revolution now has plans to set up a fintech hub. The proposed fintech hub will be established in the city of Vizag.

According to reports, the concerned government has allocated resources to set up the necessary infrastructure in the “Fintech Tower”. Slated to go live next month, Thomson Reuters and Visa will be among the first few companies to set up shop in the Fintech Tower.

Asia

Rise of peer-to-peer financing puts gov’t on edge (Korea JoongAng Daily), Rated: AAA

Starting this week, a guideline that sets ground rules for P2P platforms will go into effect nationwide. Other steps to safeguard investors from risk include ongoing efforts by the Financial Services Commission, the country’s financial regulator, to make credit businesses linked to P2P platforms register with the FSC regardless of size.

According to Crowd Institute, a research center in Korea dedicated to P2P finance, the P2P market size grew to as much as 700 billion won ($616 million) by January this year, growing almost 14 times from 2015. The number of P2P platforms also skyrocketed to 131 in January this year from 16 in January 2016.

The Crowd Institute projects that by the end of this year, the size of the market will grow to as large as 1.5 trillion won.

Of the 700 billion won already in the P2P market, over half, or around 408 billion won, is in real estate, according to the institute.

Roof Funding’s model is project financing, which means investors crowdfund a project to build a building from scratch. If the builder goes bankrupt, the ownership is transferred to the investors, and they can choose to auction off the building or sell the units after completing construction with additional funding.

For instance, interest rates on one-year fixed deposits at local commercial banks as of Feb. 21 range from 1.10 percent to 1.75 percent, according to data from the Korea Federation of Banks.

Despite the rising popularity of real estate P2P platforms, financial authorities in Korea warn that the investments may not be as safe as they seem. In one case, a firm called Money Auction declared bankruptcy last November after it was saddled with debt. Founded over a decade ago as one of the first P2P platforms in Korea, it faced a liquidity crunch after payment delays led the firm to owe over 4 billion won to investors.

Those working in the P2P industry note that many apartments are struggling to attract buyers, and when the market suffers, smaller buildings like duplexes and multiplexes (the main investment targets of most P2P platforms) will likely feel the impact first, jeopardizing lenders’ interest and principal.

Lee complains that some clauses in the guideline are too restrictive. “For instance, about 80 percent of all investment made through January exceeded 10 million won, which is especially the case for real estate P2P projects,” he said. “If investors can only invest less than 10 million won per year, it is possible that the entire industry will take a heavy blow.”

SBXbank to Launch Crypto Currency Marketplace (JakartaGlobe), Rated: A

Smart Banking Exchange, better-known as SBXbank, a London-headquartered company, is set to launch a unique marketplace called “Coinxmart,” in which transactions are done using crypto currency, an alternative digital currency not dissimilar to the old bitcoin.

Abdul Rahman Said, SBXbank’s Asean vice president of marketing, told the Jakarta Globe in an interview on Wednesday (25/2) the company seeks to sink up to Rp 100 billion ($7.5 million) into developing financial technology services that offer not only e-commerce, but also peer-to-peer investment and peer-to-peer lending, all of which will use a crypto currency.

Sedania to buy fintech firm for RM12m (The Star), Rated: A

Technology empowerment company, Sedania Innovator Bhd, has proposed to acquire a syariah-based financial technology (fintech) company, Sedania As Salam Capital (SASC), for RM12 million.

In a statement on Monday, Sedania Innovator said the purchase consideration would be satisfied via RM4 million cash, and RM8 million via the issuance of 25.8 million new Sedania Innovator shares at 31 sen each.

Sedania Innovator said under the proposed acquisition, SASC would provide a profit guarantee of RM1.5 million per year for the financial years ending Dec 31, 2017 and 2018.

To-date, it has processed over 300,000 personal financing transactions worth more than RM25 billion.

Canada

Canadian regulators welcome fintech amid rising global oversight interest (Reuters), Rated: AAA

Recognizing the need to shift its regulatory focus to accommodate the use of advanced technology in the delivery of financial services, the Ontario Securities Commission (OSC) has launched initiatives aimed at providing compliance advice and flexible regulatory requirements for fintechs.

The OSC Launchpad initiative provides some flexibility in regulatory compliance for fintechs with the aim of making it easier for startups to innovate. The types of relief or support available through the OSC LaunchPad include informal guidance on regulatory compliance matters from OSC staff and, on a case-by-case basis, eligibility for time-limited registration or exemptive relief. At the same time the OSC has stated (here) that it will continue to scrutinize fintechs for potential investor protection risks.

While the OSC is the first provincial securities regulator to undertake formal fintech initiatives, other provinces and territories have begun to recognize a need for more flexibility in overseeing fintechs. When Lending Loop, a peer-to-peer lending platform, began in Canada in 2015, it had to obtain approval from provincial securities regulators for a prospectus and comply with other securities-related regulatory requirements. The Toronto-based company subsequently paused its operations and re-launched in late 2016 under an exempt market dealer license (here) that was granted by the OSC.

Authors:

George Popescu
Allen Taylor

July 5th 2016, Daily News Digest

July 5th 2016, Daily News Digest

News Comments United States According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times. A short survey on the different US regulators’ interaction with the marketplace lending space. New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down […]

July 5th 2016, Daily News Digest

News Comments

United States

  • According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times.
  • A short survey on the different US regulators’ interaction with the marketplace lending space.
  • New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down trading units in debt-securitization due to insufficient return on equity. This change could have a huge impact on marketplace asset backed securitization.
  • Wells Fargo continues to push FastFlex, their own quick SME financing product competing with OnDeck, Kabbage, CAN Capital and all other SME marketplace lenders.
  • Morgan Stanley is pointing out all the positive data coming out of Lending Club: higher origination than predicted in Q2 2016 and much more.
  • Lending Club’s CIO unvailing the future plans for Lending Club : Point-of-Sales, offline and a cloud-base micro-services platform.
  • CFPB’s monthly report points out the most-complained-about companies in consumer loans. It would be interesting to plot company size vs number of complaints.
  • Square analysts believe that more regulation in marketplace lending will favor Square vs its competitors.
  • Last week news, worth a reminder after the long weekend: Avant is downsizing, again.
  • Boston, feeling left behind in fintech, is launching a fintech hub initiative supported by Fidelity, Putnam, Santander Bank, U.S. Bank and Boston Private Financial.

United Kingdom

  • An interesting way to leverage your p2p investments: buying discounted P2P public fund shares at the present 20% discount, and relying on stock buy-backs to bet on up side in yield + equity appreciation.
  • Brexit: in short, fintech firms fear for staff shortages and lost EU customer access.

European Union

  • Insurer Aviva France, in partnership with Eiffel Investment Group and AG2R La Mondiale launching a €100 million fund to invest in “crowdlending SME debt” in France and elsewhere.
  • A list, without any transparency on the inclusion criteria,  of the top 11 p2p lending platforms in Europe, (Pre-Brexit), per Fintechnews.ch. And a very interesting map of relative p2p lending market size in European countries.

Australia

  • Public p2p lender DirectMoney preparing a new share issuance to finance loans as loan demand outstrips funding.”DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders.”
  • OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award.

India

  • P2P players are moving towards institutional capital for growth. Following in the footsteps of their US cousins, we hope the Indian p2p lenders have learned their lessons from Prosper, Lendnig Club and Avant’s experiences with institutional capital.

China

  • P2P lenders exiting office space in Shanghai have brought office space vacancies supply to a 10-year-high level.

Korea

  • Interesting data and information on one of the 1st Korean p2p lending companies we learn about.

News Summary

Unites States

Bond Markets Have a Message About the Economy That Stock Investors Might Not Want to Hear, (Bloomberg), Rated: AAA

There’s a big disagreement brewing in global markets.

There’s 60 percent chance of recession, according to a Deutsche Bank model.

While risky assets including equities have surged following the U.K. electorate’s historic vote to leave the European Union, government bonds have also rallied; two things that ought to suggest different outlooks for economic growth. Soaring bond prices have sent yields on the perceived safe havens of government debt plumbing fresh lows, even while expectations of looser monetary policy produce a burst of animal spirits in stock markets.

The flight to safety has prompted some analysts to question the durability of the rally in equities, where the S&P 500 was up 3.5 percent last week and the FTSE 100 has erased its post-referendum dip — at least, in local-currency terms. Still others say that money is pouring into stocks as lower bond yields force investors to search for returns in alternative asset classes.

The spread between the yield on 10-year and two-year U.S. Treasury notes narrowed in the immediate aftermath of the June 23rd referendum, widened briefly, and is now shrinking again as investors continue to flock to the perceived safety of U.S. government debt. A model maintained by Deutsche Bank AG’s Steven Zeng, who adjusts the spread for historically low short-term interest rates, suggests the yield curve is now signaling a 60 percent chance of a U.S. recession in the next 12 months — up from a 55 percent probability as of mid-June, and the highest implied odds since August 2008.

“This relentless flattening of the curve is worrisome,” Deutsche analysts led by Dominic Konstam said in their note on the model. “Given the historical tendency of a very flat or inverted yield curve to precede a U.S. recession, the odds of the next economic downturn are rising.”

The 10-year yield is currently at 1.44 percent, making a recession just about 40 basis points away according to this particular interpretation of the bond market’s moves.

Rundown of Regulator Interest in Marketplace Lending, (Lend Academy), Rated: AAA

U.S. Treasury

The Treasury first publicly showed interest in marketplace lending with a request for information(RFI) back in July 2015. Over 100 companies responded to the RFI and the Treasury reported on their findings in May 2016 where they shared their response in the form of a white paper. It did not provide any recommendations for new regulations and was generally quite positive on the industry.

Office of Comptroller of the Currency (OCC)

On March 31, the OCC released a white paper titled Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective. More recently, the head of the OCC, Thomas Curry, reaffirmed his commitment to responsible innovation in a speech just last week. He brought up the idea of a “regulatory sandbox” – a place where fintech companies can have a conversation about what the rules of the road are for their new ideas. He also brought up the idea of a limited purpose charter for fintech firms as a possible way forward.

Federal Deposit Insurance Corporation (FDIC)

The FDIC first addressed marketplace lending in a paper titled Supervisory Insights. They are concerned about the impact on banks as well as the general risk to financial services.

Consumer Financial Protection Bureau (CFPB)

Early this year, the CFPB made two announcements impacting marketplace lending. They said that they would begin accepting complaints directly from consumers about marketplace lending companies. Around the same time they issued a new No-Action letter policy that was designed to encourage innovation in financial services.

According to the Wall Street Journal the CFPB is planning to supervise marketplace lenders and will release a proposal some time in the fall. The CFPB has not commented publicly on this news so right now it is just a possibility but it makes sense.

Securities and Exchange Commission (SEC)

SEC involvement in marketplace lending goes back to the early days of Lending Club and Prosper. In 2008 the SEC decided that the notes issued by these companies were securities and should be registered as such. The result was Lending Club and Prosper filing a S-1 registration and becoming quasi public companies with quarterly financials being filed with the SEC.

Now that Lending Club is a public company it is has more responsibilities to both equity and debt investors both of which come under the purview of the SEC. The reality is while the SEC keeps a close eye on marketplace lending it is unlikely there will be much in the way of new developments here.

Federal Trade Commission (FTC)

The FTC recently hosted a financial technology forum on marketplace lending. The forum sought to look at consumer protections in marketplace lending and fintech more broadly. According to Jessica Rich, director of the FTC’s consumer-protection bureau marketplace lenders haven’t done enough in borrower protection.

United States Congress

In May 2015, the House Small Business Committee held a hearing on Capital Hill.

In January, in the wake of the San Bernardino shooting tragedy, the House Financial Services Committee held a hearing on terrorism financing that included a discussion of marketplace lending. But no new initiatives have come yet from these hearings.

Financial Stability Oversight Council (FSOC)

The FSOC most recently included their thoughts on marketplace lending in their annual report. Although the report highlights the lower cost and efficiencies of marketplace lenders they also discuss risks and concerns. One of the main concerns listed are the new and untested underwriting models used by platforms.

Conclusion

This list is only a start of the involvement we are likely to see from regulators as it pertains to marketplace lending. Due to the attention, we’ve seen many industry associations created to ensure a productive dialogue is being undertaken in Washington with all the organizations discussed here. We sincerely hope that any new regulation to come is thoughtful and comes from a well informed view of the industry.

Capital Rules Stifling Securitized-Debt Trading Profit: JPM, (PeerIQ), Rated: AAA

New layers of regulatory capital expected to be imposed on Wall Street are likely to further pressure banks to exit trading of securitized-debt, JPMorgan analysts John Sim, Kaustub Samant, Carol Zhang wrote in client note Friday.

NOTE: Reports of dealers paring or shutting down trading units have grown; banks include Barclays, DB, MS, SocGen, Jefferies, RBS, Nomura, CS

  • There’s “no path to profitability” under current and recently released capital rules
  • JPM analysts calculated ROE (return on equity) for hypothetical RMBS portfolio based on impact from Basel’s Fundamental Review of the Trading Book
  • Concluded ROE of ~4%, “clearly not attractive enough to entice dealers to enter the space and make markets”
  • Adjusted model to various hypotheticals, such as reallocation, bid-ask, turnover rates
  • Concluded the “cumulative effect of all of these realistic and unrealistic changes would only increase the return to 7%, which is far short of our 10% to 15% ROE threshold”
  • “Running ROEs for hypothetical ABS and CMBS businesses would not result in markedly different results”
  • Primary market and business of underwriting new-issue securitizations can still be attractive, however, contingent  underwriting volumes
  • Revenue derived from underwriting fees without consuming much capital; when balanced with secondary trading, ROEs for the business can become attractive, depending on volumes
  • Liquidity will continue to be constrained for non-agency RMBS, particularly in legacy space where dealers have no commensurate underwriting
  • CRT deals will also suffer from limited trading activity relative to market size; expect limited liquidity for Jumbo RMBS and SFR deals

How Wells Fargo Aims to Satisfy ‘Need for Speed’ From Millennial Borrowers, (The Street), Rated: AAA

Known as FastFlex, the San Francisco-based bank’s product offers customers with a business checking account a one-year loan of up to $100,000. Wells Fargo is considering expanding the availability of the loan next year, Lisa Stevens, the company’s head of small business, said in an interview.

FastFlex is designed for businesses with under $5 million a year in revenue who have “quick short-term needs to do some type of expansion or cash management,” Stevens said.

Some 67% of millennials are willing to take some financial risks to grow their businesses, compared with just 54% of older owners.

The FastFlex loan is one effort to meet that demand, he said, by providing a digital service with a rapid turnaround, two of the qualities that millennials have said they value most highly in financial services products. “We wanted to design our own product that would compete well in the marketplace-lending environment,” Case said.

Lending Club Corp : Positive Updates from the Annual Meeting, (Morgan Stanley), Rated: AAA

2Q16 originations down ⅓ from 1Q equates to ~$1.8bn in originations or -4.4% YoY,vs. our $1.4bn (-25% YoY) estimate.Assuming volumes for the first five weeks in the quarter (prior to

Assuming volumes for the first five weeks in the quarter (prior to announcement of irregularities and CEO resignation) were consistent with the 1Q run rate, this suggests volumes over the remaining 8 weeks were down ~50% sequentially and 37% YoY.

LC has had dialog with hundreds of investors,and none have outrightly refused to come back as an investor on the platform. Most investors need to go through a due diligence process and LC appears confident in its ability to bring them back to prior levels of investment over the long term.

While investors from every category have returned to the platform, banks and large investors are taking longer with their audits, which is in-line with our expectations.It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and

It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and
4Q volumes should be similar to 2Q with potential for upward bias.

LC expects to incur $9mn of investor incentives (to be booked as contra-revenues) in 2Q , which are likely to continue in 3Q with a plan to eliminate these by 4Q.

LC expects to “resume revenue and EBITDA growth in 1H17” though it remains unclear to us if this comment suggests sequential or YoY growth.We expect LC to return to origination, revenue,and adjusted EBITDA growth by 2Q17, though we expect 1H17 to remain below 1H16 given tough comps on 1Q17e.

2016 Bay Area CIO of the Year Innovation/Transportation finalist: A conversation with LendingClub’s John MacIlwaine, (Silicon Valley Business Journal), Rated: AAA

How do you predict your company will be different in two years, and how do you see yourself shaping that change?

We’ll also have a wider set of financing products that will be accessible online, offline, and at point of sale, while expanding our partnerships with banks and other non-financial institutions. We’re enabling that change by building our cloud-based micro-services platform, which simplifies integration of our solution for our partners and allow us to quickly and efficiently scale our core business and expand our product set.

What do you feel has been your biggest impact/success at this company? My biggest impact on LendingClub has been building a world-class team of engineers, scaling our technology platform to support the company’s incredible growth (compound annual growth rate of 124 percent Q4 2009 to Q4 2015 and well over $16 billion in loan originations to date), and setting a clear vision for a technology platform that is flexible and adaptable enough to handle future loan origination growth, partnership integration, and regulatory compliance updates.

What are your top three priorities for 2016-2017?

  1. Transform our current technology platform into a suite of cloud-based micro-services;
  2. Move our platform hosting environments to AWS (Amazon Web Services);
  3. Double the size of our world-class technology team.

CFPB June 2016 complaint report highlights consumer loan complaints, complaints from Arkansas consumers, (JDSupra Business Advisor), Rated: AAA

The CFPB has issued its June 2016 complaint report which highlights complaints about consumer loans and complaints from consumers in Arkansas and the Little Rock metro area.

The report does not specifically identify any complaints as involving marketplace lending.  Unlike prior monthly complaint reports, the June 2016 report includes a “Sub Product spotlight” section that highlights auto lending.

  • The most-complained-about issue involved managing the loan, lease or line of credit.  Other complaint issues included problems arising when the consumer was unable to pay, such as issues relating to debt collection, bankruptcy, and default.
Source: CFPB June complaint report.

General findings include the following:

  • Complaints about student loans showed the greatest percentage increase based on a three-month average, increasing about 61 percent from the same time last year (March to May 2015 compared with March to May 2016).  As we noted in our blog posts about the April and May2016 complaint reports, rather than reflecting an increase in the number of borrowers making student loan complaints, the increase most likely reflects that in March 2016, the CFPB began accepting complaints about federal student loans.  Previously, such complaints were directed to the Department of Education.
  • Payday loan complaints showed the greatest percentage decrease based on a three-month average, decreasing about 15 percent from the same time last year (March to May 2015 compared with March to May 2016).  Complaints during those periods decreased from 479 complaints in 2015 to 405 complaints in 2016.  In the March, April, and May 2016 complaint reports, payday loan complaints also showed the greatest percentage decrease based on a three-month average.

Square Inc Better Risk Reflection Leads to Upgrade: Wedbush, (Bidness Etc), Rated: A

Helmed by Twitter CEO, Jack Dorsey, the Square’s lending business encountered a substantial obstacle in May, in the form of new and strict scrutiny from regulatory authorities. In a comprehensive study, the US Department of Treasury along with several other government agencies put forward recommendations, to safeguard the access and growth to credit through the continued developments of online marketplace lending.

Wedbush analysts believe that regulatory scrutiny is likely to increase the company’s lending business.

For the 2Q, Square projects revenue to fall between $151–156 million. Wedbush expects the company to surpass its own expectations — reporting closer to the sell-side firm’s own $168 million estimates — but foresees considerable downside to the financial services company’s shares, if it reports within its given guidance range.

Interestingly enough, in a research note published yesterday, Morgan Stanley lowered its prices target on Square stock from $12 to $10, following a meeting with the company. The sell-side firm also raised its Stock-Based Comp estimates, in light of the company’s transition from private to a public entity and higher comp to select personnel vs. prior expectations.

Why Online Lender Avant Is Cutting Down Its Workforce Again, (Fortune), Rated: A

After also deciding to pull back in May from new verticals such as auto loans to concentrate on its core personal loans business, Avant is now cutting its lending target for that unit by 50% to about $100 million per month, Bloomberg reported.

Avant’s problem, like much of the so-called peer-to-peer lending market, isn’t a lack of demand from potential borrowers. Instead, the company and other online lenders are having increasing difficulty raising money to lend out as hedge funds and other investors outside the usual banking circles that backed the industry have grown wary.

The company had grown quickly for the past few years, reaching $3.5 billion in total loan volume. But with less access to capital, business has slowed recently, and loan volume declined 27% in the first quarter from the fourth quarter—the first such quarter-to-quarter drop since Avant started in 2012.

LendingClub’s Negative Press Blitz Continues, (Yahoo Finance), Rated: A

An $800 million LendingClub Corp (NYSE: LC) fund that invests in the company’s online consumer loans is expected to report its first monthly loss in the past 64 months in June. According to a letter to investors from LendingClub CEO Scott Sanborn, LendingClub’s Broad Based Consumer Credit (Q) Fund’s June return “is likely to be negative.”

The fund is LendingCub’s largest and has regularly returned around 0.5 percent per month throughout its five-year history. However, default rates on the fund’s loans have begun to rise in recent months and returns have dropped, prompting a number of investor redemption requests

The Wall Street Journal’s Peter Rudegeair reported that as of June 17, LendingClub had received $442 million in redemption requests representing about 58 percent of the value of the fund. In response to the large number of redemption requests, LendingClub announced it was placing restrictions on withdrawals and would be considering winding down the fund entirely.

Group led by State Street, Putnam launches fintech initiative, (Boston Business Journal), Rated: A

The Boston Financial Services Leadership Council and the business consulting group Mass Insight have created Financial Technology Boston, under which they will host networking events and possibly job fairs involving fintech professionals from the corporate, startup, government and higher-education worlds.

In addition to State Street (NYSE: STT), Fidelity and Putnam, the BFSLC includes Santander Bank, U.S. Bank and Boston Private Financial (Nasdaq: BPFH).

Boston is already home to fintech-focused incubators FinTech Sandbox and the DCU Center of Excellence in Financial Services, as well as a monthly meetup for fintech professionals.

United Kingdom

Why investors should scoop up discounted P2P funds before putting cash into platforms, (AltFi News), Rated: AAA

Analysis by AltFi Data shows loan origination has more or less been static across the UK P2P lending industry in 2016. This somewhat contrasts with the rapid growth seen in 2015 and 2014. Any number of explanations are given for this including a broad risk-off attitude from markets as well as the ongoing fiasco at the major US platform Lending Club.

However, for professional and private investors alike who are not dissuaded from the adverse headlines, and attracted by the high yields on offer from investing in the market, there is a clear argument to avoid investing directly on platforms. While this is the normal route for many, buying shares in the investment trusts offering exposure to loans originated from the platforms that are heavily discounted at present arguably makes more sense.

Over time in addition to the 7.4 per cent yield on offer, a narrowing of this discount or perhaps even a move to a premium could significantly bolster returns.

The table below shows what will happen to the share price following a 20 per cent return in net asset value alongside changes in the discount/premium. It clearly shows that buying at a premium massively adds to the total return.

Of course there is always the risk that the discount moves out further. This could be caused by investors going off the trusts even more. Or it could be broader negative sentiment towards equity markets that sees index level selling of the FTSE 250 – in the case of P2P GI – or FTSE All Share selling in the case of VPC Specialty Lending. This would add to weakness in both trusts’ share prices, and potentially widen the discount.

However, as AltFi reported last week P2P GI has started to defend its discount by buying up its shares using spare cash. Last week it bought £2m of its shares at an average price of 827p, says Monica Tepes, analyst at Cantor Fitzgerald.

This did temporarily lower P2P GI’s discount to 17.5 per cent although it has since moved back to over 20 per cent.

Brexit: FinTech firms fear for staff shortages and lost EU customers, (Tech Republic), Rated: AAA

London is a major player in the international FinTech market, with startups in the UK capital securing more venture capital funding last year than their European counterparts.

That status won’t necessarily change after Britain leaves the EU but FinTech firms have said it will complicate the picture, particularly when it comes to their ability to sell services to Europe and attract new talent.

Controlling migration was the second most important reason for quitting the EU, according to those who voted Leave in last week’s referendum.

Access to the single market allows goods and finance to be moved between EU countries without tariffs. However, full access also requires free movement of workers between European countries, something many Leave voters oppose.

Nevertheless, for peer-to-peer (P2P) lending platform MarketInvoice, as for many other London-based FinTech firms, free movement of European labor is essential to meet its demands for skills.

“Here at MarketInvoice we have a super-diverse team from all corners of the globe. Most notably within our software-engineering and data-science teams. Many FinTech founders themselves come from outside the UK,” said Anil Stocker, CEO of MarketInvoice.

European Union

Insurer Aviva France to Lend €50 Million to SMEs Through Crowdlending Platforms, (Crowdfund Insider),Rated: AAA

Aviva France, together with two partners, alternative asset management firm Eiffel Investment Group and insurer AG2R La Mondiale, is launching an investment fund called “Prêtons Ensemble” (Lending together) dedicated to financing loans to small and medium-size enterprises (SMEs) provided through crowdlending platforms.

Starting with an initial endowment of €50 million from Aviva France and €20 million from AG2R La Mondiale, the fund is expected to quickly grow to €100 million by rallying other institutional investors around the project.

The goal is to invest in the French real economy by financing SME loans granted through regulated crowdfunding platforms. Eiffel Investment Group is a specialist with more than eight years of experience in investing on crowdlending platforms, notably in the more advanced UK and US markets. Eiffel Investment will be in charge of the due diligence on the platforms and their loan portfolios. Currently, they have identified around 100 platforms and have made contact with 50 of them. Eventually, in five years from now, the fund should be invested to 70% in lending to SMEs and minimum to 50% in France. At the onset, we’re starting with a dozen platforms, mostly, but not only from France as the market is still emerging here. The (soon-to-be published) list includes names such as Younited Credit, Finexkap and Lendix.

The fund will be diversified in terms of the platforms’ business model and of the type of credit provided to SMEs. This means that it will include both unsecured and secured loans, short-term invoice financing as well as mid-term loans. On average, the loans are expected to have a maturity of 2.5 years.

Our decision was made long before the Lending Club problems surfaced. Upon hearing about them, we conducted a thorough analysis of their actual causes and impact. We were quite reassured to find out that the scale of the financial issue was small, that it had been fixed, and that a subsequent audit did not uncover any other impropriety.

Europe’s Top 11 Peer-to-Peer Lending Platforms, (Fintech News), Rated: A

Comment: As author chose to label the article Europe’s top 11, and includes UK companies, we chose to do the same.

In Europe today, although the vast majority of the P2P lending activity is concentrated in the UK – which accounts for over 84% of the whole European market –, Germany, France and Nordic countries are experiencing strong growth and development in the P2P lending space with a number of homegrown startups starting to emerge as regional leaders.

Australia

Fintech losses blamed on rerating, (The Australian Business Review), Rated: AAA

DirectMoney, which writes personal loans, slid to 4.5c a share after coming to market last year at 20c via a backdoor listing. On Friday, the company unveiled a $5.7m non-renounceable capital raising at 4.2c a share on a one-new-share-for-every-two-held basis.

The raising, underwritten by Bell Potter, opens on July 11.

It follows a mixed ride for investors, with the stock exchange in February querying its financial position and DirectMoney subsequently unveiling a deal with Macquarie, which bought $5m of the company’s personal loans and took shares in the company in exchange for advisory services.

In May, DirectMoney revealed loan demand was outstripping funding as the company slowly gained traction for its personal loan fund for retail investors. In the interim, the company turned to two “large financial institutions” for funding facilities, signing a non-binding term sheet with one for $20m.

Part of the cash from the $5.7m raising will be used as upfront collateral for the funding facilities. “We’ve proven our ability to originate loans; that is difficult for some organisations and what we are now doing is establishing committed funding programs of sufficient size so we can leverage the assets we’ve built,” Mr Beaumont said.

DirectMoney has written $17.6m of unsecured personal loans up to $35,000 for three to five years. Revenue in the financial year to the end of May was $1.19m, compared to $435,513 in the six months to December 31.

DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders, arguing there were many benefits and the sector globally had suffered a de-rating.

“We’re disappointed there were investors that came in at higher prices and have had capital losses at this point, but marketplace lending globally has experienced a resetting of valuations, whether it’s LendingClub in the US or others, since last year,” he said.

The inaugural Australian Fintech Awards regonised innovation in the finance industry, with OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award. OnDeck entered the Australian market last year with CBA and online accounting software provider, MYOB, as distribution partners.

India

P2P players bank on institutional lenders for growth, (Economic Times), Rated: AAA

I-lend has stitched a partnership with Hyderabad-based non-banking finance company Star Finserve, becoming the first peer-topeer online lending platform to join hands with an institutional lender while several other players including MicroGraam, Faircent and LenDenClub are in talks for similar pacts.

“The cost of loan origination is going up steadily for NBFCs and banks, the number of successful applications is declining and through these partnerships the institutional lenders can cut down on incurring origination of loan and administration costs,” said VVSB Shankar, founder of i-lend.

Shankar said the decline in the number of applications could be attributed to several factors such as competition among institutional lenders, quality of borrowers or involvement of non-performing assets. The company’s loan book size is about `1.5 crore and lenders on the platform can opt for borrowers who pay 18-21% interest.

Peer-to-peer platforms have reported an increase in the number of high net worth individuals or HNIs they have attracted over the past six months. “HNIs and family offices are showing interest in the peer-to-peer space. Since there is a criterion for lenders to have an income of over `10 lakh, this is bound to happen. Our top lenders have invested more than `40-50 lakh each, with the highest being around Rs 60 lakh,” said Rajat Gandhi, founder of Faircent, which has a loan book size of Rs 6.5 crore.

Smaller players including LenDen-Club said they have also seen increasing interest from HNIs, specifically from Maharashtra and Gujarat, spending about Rs 15 lakh individually. Since retail investors are central to how such platforms function, the companies aim to firm up a select few partnerships with institutional lenders over the next one year.

China

Exit of P2P lenders from Shanghai office market poses a challenge, (South China Morning Post),Rated: A

The recent collapse and exodus of numerous peer-to-peer lending (P2P) companies in China after a government crackdown on fraud has rattled the Shanghai CBD office market and may “pose a challenge for landlords”, experts say.

In the second quarter of the year, supply spiked to a 10-year high, according to real estate firm Colliers International, as overall vacancy rates in the area increased 3.2 per cent quarter on quarter to 7.2 per cent.

Korea

8PERCENT: Men in 30s Major P2P Investors, (The Korea Bizwire), Rated: A

8PERCENT, a P2P (peer-to-peer) lending company, revealed on July 4 that 30-something men who live in metropolitan areas are their primary investors.

As of June 30, top P2P lending company 8PERCENT’s total accrued loans summed up to 26.6 billion won ($23 million), with a total of 8,283 investors investing 3.21 million won ($2800) on average per person.

The average age of the investors was 34.3, and more than 90 percent of the investors were between the ages of 20 and 40. 8PERCENT also revealed that 77 percent of the investors lived in metropolitan areas, and that 67.5 percent were male and 32.5 percent, female.

The largest investment made so far was 453 million won ($395,000) diversified into 1,115 different bonds.

“Until last year, 90 percent of investors were from metropolitan areas, but the portion from non-metropolitan areas increased to 23 percent this year. Investment from women also increased from the low 20s to 30 percent, and we’re seeing growth in the number of investors in their 50s as well,” said Kang Seok-hwan, chief marking officer of 8PERCENT.

Small credit loans of 24.2 billion won ($21 million) comprise more than 90 percent of the total investments. Out of the total amount, 13.4 billion won ($11 million) was loaned to individuals, and 10.8 billion won ($9.4 million) to corporations.

Besides credit loans, borrowers also obtained real estate mortgage loans of 2.4 million won ($2 million).

 

Author:

George Popescu