Thursday October 5 2017, Daily News Digest

roboadvisors aum

News Comments Today’s main news: Aspire Fintech is closing. Navient buys Earnest for $155M. Schwab creates robo-advisor, hires ex-Betterment GM to run it. Atom Bank nears 1B GPB in deposits. SoFi’s plan to become a bank isn’t going so well. Rubique has issued 50K credit cards. Reserve Bank of India (RBI) issues P2P lending platform directions. Today’s main analysis: Nutmeg sees […]

roboadvisors aum

News Comments

United States

United Kingdom

European Union

International

India

Canada

News Summary

United States

SoFi’s Plan to Become the Bank of the Future Isn’t Going So Well (Bloomberg), Rated: AAA

Now, with Cagney felled by a flurry of sexual harassment allegations, the question is whether SoFi has any chance of building the financial supermarket he envisioned. This was always going to be a tall order given the intense competition from entrenched players and fintech startups alike, but now the SoFi brand has been tarnished as well.

“There are a lot of question marks,” says Alois Pirker, research director at advisory firm Aite Group. “The new CEO will need to find his or her bearings there and that will tell which direction they’ll be going.”

Some members of the board consider the moves into life insurance and wealth management Cagney “pet projects,” according to a person familiar with their thinking. Directors prefer to focus on more mature businesses such as personal loans and mortgages that are more predictable and established, said the person, who requested anonymity to discuss a private matter.

The firm reported revenue of $134 million in the second quarter, according to an email from Cagney to investors in August. It had adjusted earnings before interest, taxes, depreciation and amortization of $61.6 million and extended over $3.1 billion in student loans, personal loans and mortgages during that time frame. Personal loans are the most profitable, the person said, followed by student loans and then mortgages.

The wealth management unit had just $12 million in assets under management as of early September, according to a filing. This is far short of the more than $100 million the firm had set as an internal goal, people familiar with the matter have said.

SoFi readies 1st student loan bond post-management shakeup (Asset Securitization Report), Rated: A

Social Finance is returning to the securitization market with $626.4 million of bonds backed by loans used to refinance the student debt of borrowers with advanced degrees and high incomes.

The transaction, SoFi Professional Loan Program 2017-E (internal link; not in original source article), comes just weeks after the marketplace lender experienced a management shakeup; its chief executive officer and chief financial officer both resigned.

SoFi hosts party at Front & Palmer (Metro), Rated: B

Most people are not fans of student loan debt, but last week, SoFihosted a party at Front & Palmer in Philadelphia to celebrate it as a means of opening doors to education and more opportunities.

Recent college grads were invited to attend for free and to gain admittance, only needed to bring a proof of their student loan debt.

Source: Metro.com

Earnest, An Online Student Lender, Bought By Navient For $ 155 Million (Forbes), Rated: AAA

Financial technology start-up Earnest has agreed to be acquired by student loan servicing giant Navient for $155 million in cash, the companies said on Wednesday.

Earnest, an online lender that has focused on refinancing student loans, will remain a distinct brand and will continue to be led by its current management team, including founder and CEO Louis Beryl.

The acquisition will be a launching pad for Navient to begin originating its own student loans.

Schwab creates robo-exec slot and fills it with ex-Betterment unit chief (RIABiz), Rated: AAA

As its robo-assets soar to seemingly effortless heights, Charles Schwab & Co. is hiring an intriguing ex-Betterment talent to ensure that its good fortune holds.

The San Francisco-based investments giant, with $24 billion* of assets under automated management in Schwab Intelligent Portfolios and Schwab Intelligent Advisor, hired Cynthia Loh, the ex-general manager of Betterment for Business, the division that oversees the New York-based robo‘s 401(k) unit.

The Schwab robo-launch’s differentiators were its “zero” fee, its 24/7 access to service personnel and its national advertising. Yet the look and offering of the Schwab Intelligent offering are considered plain-vanilla in scope.

How tough can Schwab get with digital upstarts? (FinancialPlanning), Rated: AAA

Outlining his firm’s strategy for battling digital disruption, Schwab CEO Walt Bettinger envisioned it would push client asset revenues lower, while relying on its brand and established market share to grow.

Reacting to his statement, industry observers expect an uphill slog for independents as the largest firms gear up for a price war on three fronts: financial advice, online trading and ETFs.

An early study by A.T. Kearney predicted incumbents would slash prices to compete with robo advice upstarts. While that never came to pass, the 2015 study still predicted industry revenues would drop by as much as $12 billion by 2020.

“[Schwab has] $3 trillion in client assets. They have very positive brand recognition and customer satisfaction scores that are the envy of most of the industry. They have demonstrated a willingness to cut price to gain market share, as seen with their recent commission cuts in online trading. So yes, they can throw their weight around.”

The wisdom of possessing a trifurcated digital advice offering — Schwab Intelligent Portfolios, a digital-only service, an institutional platform for RIAs, and the hybrid robo advisor Schwab Intelligent Advisory — also becomes clearer, McDermott notes. (Schwab’s robo now has $20 billion in AUM).

Robo advice is expected to collectively top $1 trillion in assets under management in fewer than five years, according to Boston-based consulting firm Aite Group. But micro-investing will partly feed such growth, it predicts, noting over 60% of millennials already are subscribed to such apps.

FinTech Lenders and Banks Take Note (VedderPrice), Rated: AAA

While Upstart’s No-Action Letter has narrow applicability, it may serve as a tool for other FinTech lenders in implementing innovative products and services and establishing relationships with banks.

According to Upstart, its underwriting technology uses traditional underwriting methodologies in combination with other variables that are correlated with financial capacity and “repayment propensity.” Upstart states that its model understands and quantifies risk associated with all borrowers—both those with credit histories and those without credit histories. As a result, the Upstart loan program is able to offer credit to segments of the population with limited credit or work histories at more favorable rates. In other words, it appears Upstart is underwriting consumer loans without reliance upon traditional criteria, such as credit scores and length of employment history.

  • The No-Action Letter is only applicable to Upstart’s automated model for underwriting applicants for unsecured non-revolving credit, as described in Upstart’s original Request.
  • The No-Action Letter will expire three (3) years after its issuance, at which time Upstart may seek to renew the No-Action Letter.
  • The No-Action Letter is subject to modification or revocation at any time at the discretion of the CFPB staff for any reason, including where the CFPB’s staff determines that such modification or revocation is appropriate to protect consumers or is otherwise in the public interest.

On one hand, a no-action letter may be particularly useful for a FinTech company, utilizing innovative technology and operations, to obtain guidance concerning the permissibility of its business model under specific regulatory constructs. A no-action letter may also be useful for a FinTech company seeking to establish joint ventures with banks.

On the other hand, a CFPB-issued No-Action Letter has narrow applicability as it is only applicable to the requesting applicant, a specific regulatory issue and the facts and circumstances identified by the applicant in its request submitted to the CFPB. Should a fact or circumstance fail to be conveyed accurately, or should a fact or circumstance change, the No-Action Letter may be rendered useless.

Online housing investment platform Roofstock raises $ 35M in Series C (The Real Deal), Rated: A

Housing investment platform Roofstock raised $35 million in a Series C funding round as it looks to cash in on growing interest in single-family rental housing.

Roofstock CEO Gary Beasley said the firm will use the money to hire and to expand into new markets. The company has raised a total of $68 million from investors, according to Beasley.

From Shopping to Close, LendingTree Study Finds Mortgage Process is Getting Faster (Business Insider), Rated: A

LendingTree, an online loan marketplace, has released the findings of its study on shopping timelines for purchase mortgages. The study analyzed data from a sampling of more than 5,000 closed loans from March 2016 through May 2017 and reviews the timeline for the entire mortgage shopping experience – from first submitting a loan request and being matched with a lender to the date of the mortgage loan closing. The study revealed that the median time from early rate shopping to closing on a purchase mortgage declined 7 days from 2016 to 2017.

From 2016 to 2017, LendingTree has seen a 19% increase in the number of loans closed within 30 days and a 27% increase in loans closed in 60 days.

Congress is Trying to Get the IRS to Modernize (Lend Academy), Rated: A

Back in December 2013 Renaud Laplanche testified on Capitol Hill on small business lending. He was CEO of Lending Club back then and when a Congressman asked Laplanche a question as to how the government can best help he said to make IRS data more easily accessible to online lenders.

Fast forward four years and there appears to finally be some movement on this. Last week Congressman Patrick McHenry (R-NC) along with Senator Cory Booker (D-NJ) introduced a billthat would help the IRS move into the modern age and allow the automated retrieval of tax information through an API.

The IRS Data Verification Modernization Act of 2017 as it is called will require the IRS to create an API that will allow lenders to verify income in real time.

RealtyShares – New Small Balance Multifamily Program (RealtyShares), Rated: A

RealtyShares is now financing Small & Large Balance Commercial Multifamily, Apartment, Retail, & Hotel Assets.

Typical dwellings/ deal structure:

  • Class A, B & C+ dwellings
  • Typically like properties within a 30 mile radius of a popular MSA (but not necessarily a deal breaker as long as the project looks good)
  • The minimum loan financed needs to meet 1MM (Acquisition w/ renovation)
  • Asset Based Lender but having an experienced client who has done deals in the particular area is a great compensating factor

Project Summary

Loan Information

  1. Loan Amount
  2. Duration (term)
  3. Closing deadline
  4. Reason for deadline

Lien Information

  1. Amount of existing first lien
  2. Amount of other liens

Collateral Information

  1. Collateral Type
  2. Number of Units
  3. Total Square Footage
  4. Street Address
  5. Purchase Price and Purchase Date (if refi)
  6. “As Is” Real Estate Value
  7. Date of “as is” Appraisal/BPO
  8. Net Operating Income (NOI)
  9. Capital Expenditures since Purchase ($)
  10. Vacancy (%)

Guarantor(s) Information

  1. Net Worth of Guarantor(s)
  2. Estimated liquid assets of Guarantor(s)
  3. FICO Score of Guarantor(s)
  4. Guarantor(s) investment in collateral – current or proposed
  5. Sponsor’s Website

Use of Proceeds:
Please provide a concise description, a few sentences, on the Use of Proceeds (i.e., discuss: acquisition, refinance, site improvement, tenant improvements, planning, design/permitting, carry costs and etc.)

Exit Strategy:
Please provide a concise description, a few sentences on the Exit Strategy (e.g. discuss prospective buyer, prospective permanent financing).

What to Watch for When It Comes to Alternative Investing Opportunities (Madison.com), Rated: A

When you are working in the equity crowdfunding space, particularly as a company that is private, you certainly don’t have the liquidity that you would for a publicly traded stock that’s on the exchange.

On this episode of Industry Focus: Technology, host Dylan Lewis is joined by Motley Fool contributing writer Daniel Kline to talk about the dangers of this type of investing. They break down all the risks associated with purchasing shares in a company that does not have to report as much financial data as a traditional publicly traded company.

Watch the full video discussion here.

Elevate to Release Third Quarter 2017 Earnings on Monday, October 30, 2017 (Financial Times), Rated: B

Elevate Credit, Inc. today announced that it will release its third quarter 2017 financial results after the market closes on Monday, October 30, 2017. Ken Rees, Chief Executive Officer, and Chris Lutes, Chief Financial Officer, will also host a conference call on the day of the release (October 30, 2017) at 5:00 pm ET to discuss Elevate’s financial results.

Interested parties may access the conference call live over the phone by dialing 1-877-407-0792 (domestic) or 1-201-689-8263 (international) and requesting the Elevate Third Quarter 2017 Earnings Conference Call. Participants are asked to dial in a few minutes prior to the call to register for the event. The conference call will also be webcast live through Elevate’s website at 

An audio replay of the conference call will be available approximately three hours after the conference call until 11:59 pm ET on November 13, 2017, and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international), and providing the passcode 13671832, or by accessing Elevate’s website.

Citi FinTech’s Customer-Driven Journey: Our Latest Mobile Enhancements (Citi), Rated: B

These new mobile investment features include a dividend reinvestment plan (DRIP), fund screener, consolidated search functionality and enhanced visualization. Through the Citi Mobile App for iPhone, any Citi client with a brokerage account now enjoys one-touch access to their financial advisors and the ability to manage their investments personally, without switching to another channel.

Dividend Reinvestment Plan: Now clients can enroll eligible securities in a dividend reinvestment plan (DRIP) right within the app. Once a customer has opted in, this feature helps our clients put their cash dividends to work, instead of idling in their accounts.

Investment Search: This consolidated search function makes investing easier for clients interested in managing their portfolios themselves.

Performance Visualization: An enhanced visualization enables clients to track their portfolio’s performance and make adjustments right within the app.

United Kingdom

App-only bank Atom nears £1 billion in deposits (Business Insider), Rated: AAA

Startup, app-only bank Atom has passed £900 million in deposits less than two years after launching its first savings product.

The disclosure comes as Atom’s annual accounts show that the startup had £538 million in deposits from over 17,000 customers at the end of March. It means the app-only bank has attracted around £400 million in four months.

The bank’s accounts, filed with Companies House this week, show Atom has received over £300 million of small business loan applications and lent out close to £100 million in loans and mortgages by March this year.

Atom had a net interest loss of £1 million for the year, due to paying out interest on its 1.95% and 2.5% fixed savings accounts, at the time market-leading interest rates, before the launch of its lending products.

UK’s biggest robo-advisor Nutmeg sees losses widen (Business Insider), Rated: AAA

Nutmeg, the UK’s biggest automated investment fintech in terms of assets under management (AUM), released 

Source: Business Insider

P2P lending on course for 20 per cent jump (FT Adviser), Rated: A

Lending across all of the peer-to-peer platforms in 2017 to date is already higher than in the whole of 2016, according to data from research agency 4thWay.

According to the data, total lending across all peer-to-peer platforms is likely to be at least 20 per cent higher this year than last with the largest platforms, Funding Circle and Zopa, leading the way.

Funding Circle has lent £865m in 2017 to date, compared with £825m in the whole of 2016.

European Union

The 8 Biggest Startups in Europe by Funding (Nanalyze), Rated: AAA

Zee Germans are leading the pack with 4 unicorns and we also see that fintech and ecommerce make up half of all the sector allocations.

Company Name Funding Country Sector
Spotify $8.53 Sweden Internet Software & Services
Otto Bock HealthCare $3.50 Germany Healthcare
Auto1 Group $2.80 Germany eCommerce/Marketplace
Klarna $2.50 Sweden Fintech
VistaJet $2.50 Malta On-demand
Adyen $2.30 Netherlands Fintech
Hellofresh $2.09 Germany eCommerce/Marketplace
CureVac $1.65 Germany Healthcare
BlaBlaCar $1.60 France On-Demand
Saxo Bank $1.45 Denmark Fintech
Global Fashion Group $1.10 Luxembourg eCommerce/Marketplace
OVH $1.10 France Big Data
Avaloq Group $1.01 Switzerland Fintech
AVAST Software $1 Czech Republic Cybersecurity
letgo $1 Netherlands eCommerce/Marketplace
MindMaze $1 Switzerland VR/AR

Big Brand Payments, Part 1

Another big player from Sweden is Klarna, founded in 2005 and now valued at $2.5 billion. With $521.44 million in funding from investors like Sequoia and Visa, Klarna is one of the most popular e-commerce payment solutions in Europe, used by Burberry, Overstock.com, J.Crew, Nike, Lenovo, and hundreds more.

Adlibris, one of Europe’s largest booksellers, used Klarna to improve its mobile checkout solution, resulting in an 80% conversion increase.

Big Brand Payments, Part 2

With a valuation just shy of its Swedish colleague Klarna, Netherlands-based Adyen (valued at $2.3 billion), has established a firm foothold in the world of merchant payments by providing a “friction-less payment experience”. Founded in 2006 and funded with $266 million to date, Adyen has some huge customers in its corner, including Netflix, Uber, Etsy, Spotify, Groupon, and LinkedIn. The secret is in its platform, which features support for a wide variety of payment options (250 worldwide, to be exact) in a single system, including Apple and Android Pay, all major credit cards, direct debit for recurring payments, in-app purchases, and much more. The Cambridge Satchel, a UK handbag company, saw its Black Friday sales rocket by 124% after switching to Adyen’s platform. In addition to one-time purchases, the platform also facilitates subscriptions and recurring payments more seamlessly.

Trelix Approved as a Third-Party Due Diligence Provider by DBRS (Business Insider), Rated: A

Trelix, a provider of due diligence, quality control, licensed fulfillment and non-licensed fulfillment products and services across the origination and securitization lifecycle, today announced that it has been approved as a third-party due diligence provider for DBRS-rated transactions. DBRS is a full-service credit rating agency respected for its independent, third-party evaluations of corporate and government issues. DBRS’s approval process, before adding a company as an accepted provider, includes an on-site review to assess companies’ staffing, infrastructure and capabilities relevant to securitization-related services.

As part of Altisource’s Origination Solutions platform, Trelix offers clients a unique combination of technology and risk management tools that position it to have a meaningful impact on the securitization market.

Dutch fintech company InvoiceFinance raises €6 million in funding (Tech.eu), Rated: A

InvoiceFinance, a fintech startup based in Amsterdam, has raised €6 million from Peak Capital.

The new funds will be invested in marketing purposes and hiring for the sales and development team.

New10 Partners With Mambu To Redefine Dutch SME Lending (Bob’s Guide), Rated: A

Mambu today announced that New10, ABN AMRO’s newly launched FinTech, has selected the SaaS engine to power a range of small and medium enterprise (SME) lending products in the Netherlands. New10, which aims to provide credit decisions within 15 minutes, went from concept to launch within 10 months, in line with ABN AMRO’s vision of digitisation and innovation.

Mambu took a collaborative approach working with the New10 team in order to complete implementation within four months. In a highly regulated environment, Mambu’s partnership with Amazon Web Services (AWS) which has received Dutch regulatory approval, helped smooth the path to market. New10 launched on 21 September 2017 with a fully digital SME lending platform with plans to broaden the portfolio and potentially expand into new markets.

collectAI manages 25m Euro in Receivables (Otto Group), Rated: A

collectAI, the service for digital receivables, has processed receivables at a volume of 25m Euro since its foundation in 2016. collectAI automates and digitises invoices, dunning and debt collection processes and is the first digital end-to-end provider in receivables management.

Examples of successful KPIs on the clients’ side include: Introducing digital communication channels lead to an increase of the collection rate of 33 percent, while processing costs have been reduced by up to 41 percent.

While 23 percent of invoices are overdue Europe-wide (EHI 2016 – online retail only), the invoice remains the most popular payment method in Germany with a market share of 30,5 percent (EOS 2016). Even though returns from receivables and debt collection are essential for revenue and thus liquidity, only 18 percent of companies have digitised their receivables to date (EOS/Kantar 2017).

Papering Over the Cracks (LendIt), Rated: A

In 2016 there were a reported 5.4 million SMEs in operation in the UK alone and our economy depends heavily on the success of these “little guys”.

Fintechs and banks are now lending faster than the speed of light, but when it comes to uncovering fraudulent activity, are they actually left standing in the dark?

Invoice finance lenders have to be particularly vigilant when it comes to a different type of fraud: fresh air invoicing.

One way to avoid being stung by paper fraud is to lend against accurate financial data extracted directly from a company’s accounting package, rather than lending against a PDF or excel file that can be amended. Advances in technology means lenders are now able to access this level of data directly, securely and efficiently, so they can be sure they’re providing fair financial support to loan applicants.

International

BitProperty Announces Upcoming Token Sale, Beta Release of Real Estate Investment Platform (Bitcoinist), Rated: AAA

BitProperty, the blockchain-powered real estate investment platform, has announced that it will launch a closed beta release on October 5, 2017. Ten days later, on October 15, it will kick off a token sale to raise funds for further development of the platform.

The BitProperty platform is built on the Ethereum blockchain and uses two different types of tokens. The first type is an asset token that represents a share of a particular asset. When a real estate owner lists a property on the platform, the number of asset tokens issued against the property represents its value. Investors can purchase these asset tokens and will then receive income based on the performance of the asset (property) and the size of the stake that each investor holds.

The second type of token is the BTP token, which represents the inherent value of the platform backed by the pool of the company’s managed assets.

India

Rubique crosses over 50,000 credit cards customers (India.com), Rated: AAA

Mumbai-based FinTech startup Rubique continues to embark upon its fast-paced growth across sectors, including Retail and SME financing.

Rubique has till date successfully crossed over 50,000 Credit Cards customers.

RBI issues directions for peer-to-peer lending platforms (India Times), Rated: AAA

The Reserve Bank of India (RBI), on October 4, issued directions for non-banking financial companies (NBFC) that operate peer-to-peer (P2P) lending platforms. According to the directions, from now on no NBFC can start or carry on the business of a P2P lending platform without obtaining a Certificate of Registration. Every company seeking registration with the bank as an NBFC-P2P shall have a net owned funds of not less than Rs 20 million or such higher amount as the bank may specify.

They have been asked to apply for registration as NBFC-P2Ps within 3 months.

NOTIFICATIONS (Reserve Bank of India), Rated: AAA

3. Scope

These Directions provide a framework for the registration and operation of NBFC-P2Ps in India.

(2) Process of Registration

(i) Every existing and prospective NBFC-P2P shall make an application for registration to the Department of Non-Banking Regulation, Mumbai of the Bank, in the form which will be specified by the Bank for the purpose. Existing NBFC-P2Ps shall apply within three months from the issuance of these Directions.

(ii) The Bank, for the purpose of considering the application for registration, shall require the following conditions, among others, to be fulfilled:

  1. The company is incorporated in India;
  2. The company has the necessary technological, entrepreneurial and managerial resources to offer such services to the participants;
  3. The company has the adequate capital structure to undertake the business of Peer to Peer Lending Platform;
  4. The promoters and the Directors of the company are fit and proper;
  5. The general character of the management of the company is not prejudicial to the public interest;
  6. The company has submitted a plan for, or implemented, a robust and secure Information Technology system;
  7. The company has submitted a viable business plan for conducting the business of Peer to Peer Lending Platform;
  8. Public interest shall be served by the grant of CoR;

Any other condition as may be specified by the Bank, fulfillment of which, in the opinion of the Bank, is necessary to ensure that the commencement of or carrying on the business in India shall not be prejudicial to the public interest.

6. Scope of Activities

(1) An NBFC-P2P shall-

  1. act as an intermediary providing an online marketplace or platform to the participants involved in Peer to Peer lending;
  2. not raise deposits as defined by or under Section 45I(bb) of the Act or the Companies Act, 2013;
  3. not lend on its own;
  4. not provide or arrange any credit enhancement or credit guarantee;
  5. not facilitate or permit any secured lending linked to its platform; i.e. only clean loans will be permitted;
  6. not hold, on its own balance sheet, funds received from lenders for lending, or funds received from borrowers for servicing loans; or such funds as stipulated in paragraph 9;
  7. not cross sell any product except for loan specific insurance products;
  8. not permit international flow of funds;
  9. ensure adherence to legal requirements applicable to the participants as prescribed under relevant laws.
  10. store and process all data relating to its activities and participants on hardware located within India.

(2) Further, NBFC-P2P shall-

  1. undertake due diligence on the participants;
  2. undertake credit assessment and risk profiling of the borrowers and disclose the same to their prospective lenders;
  3. require prior and explicit consent of the participant to access its credit information;
  4. undertake documentation of loan agreements and other related documents;
  5. provide assistance in disbursement and repayments of loan amount;
  6. render services for recovery of loans originated on the platform.

(3) NBFC-P2P shall not undertake any activity other than those stated in paras 6(1) and 6(2) of these Directions. Deployment of investible funds by an NBFC-P2P in instruments specified by the Bank, not for trading, shall however be permitted.

11. Transparency and Disclosure Requirements

(1) An NBFC-P2P shall be required to disclose the following:

(i) to the lender

  1. details about the borrower/s including personal identity, required amount, interest rate sought and credit score as arrived by the NBFC-P2P.
  2. details about all the terms and conditions of the loan, including likely return, fees and taxes;

(ii) to the borrower – details about the lender/s including proposed amount, interest rate offered but excluding personal identity and contact details;

(iii) publicly disclose on its website:

  1. overview of credit assessment/score methodology and factors considered;
  2. disclosures on usage/protection of data;
  3. grievance redressal mechanism;
  4. portfolio performance including share of non-performing assets on a monthly basis and segregation by age; and
  5. its broad business model.

(2) NBFC-P2P shall ensure that the providing of services to a participant, who has applied for availing of such services, is backed by appropriate agreements between the participants and the NBFC-P2P. The agreements shall categorically specify all the terms and conditions among the borrower, the lender and the NBFC-P2P.

(3) The interest rates displayed on the platform shall be in Annualized Percentage Rate (APR) format.

Finance Ministry Welcomes RBI Move On P2P Lending (Bloomberg Quint), Rated: A

The finance ministry today welcomed the central bank’s move to treat peer-to-peer, also known as P2P, lending platforms as non banking financial companies, saying it would improve financing for smaller firms.

RBI To Observe P2P Lenders As Well As Invest in Security Frameworks (Industry Daily News), Rated: A

The government has declared RBI (Reserve Bank of India) as the watchdog for P2P (peer to peer) lending marketplaces that have been segmented as NBFCs (non-banking finance companies). While this might elevate prices for online lenders via compliance needs, most have greeted the decision claiming that it provides them identification.

RBI To Allow Funds Transfer Among Mobile Wallets (Bloomberg Quint), Rated: A

The Reserve Bank of India will make prepaid payment instruments like e-wallets, gift cards and meal coupons interoperable for customers complying with the central bank’s know your customer guidelines.

Inter-operability among KYC compliant prepaid instruments will be implemented in six months after the RBI issues its revised norms within a week by October 11, the central bank said as part of its developmental and regulatory policies.

What startup entrepreneurs should learn from sports (MoneyControl), Rated: B

The so-called unicorn startups and their founders have become role models for the millennials. Hardly any town or city in India is left untouched by the startup fever and its multi-million funding stories.

1. Sport helps build character: Sanjay Darbha, the founder of Peerlend, a peer-to-peer lending platform and a sports enthusiast who competes in Senior Men’s circuit tournaments of the International Tennis Federation (ITF), explains, that sports inculcates attributes such as discipline, focus, and patience.

2. Sports lets you, be yourself: If entrepreneurs want to know the better or bitter side of their team members – make them play a sport.

3. Sport is a medium to connect beyond business: Ecosystem players should find innovative ways to connect with each other to get a better understanding of other’s needs and challenges.

4. Sport helps in building lasting bonds: A playground in an excellent incubator that helps in the construction of robust and long-lasting relationships.

Startups could use games to let their team members explore possible synergies between them.

Canada

Aspire FinTech is closing down (Aspire Email), Rated: AAA

Hey all,

I wanted to share the news today that Aspire Financial Technologies will be officially shutting down this week.  Sadly, the search for a strategic partner we started in the summer wasn’t successful, and our funding has now run out.  As a result, we no longer have the resources to continue the build of our loan data and analytics infrastructure solutions.

I’ll be running a sale process of Aspire’s IP (Aspire Gateway and ALD Explorer solutions) over the next month or so, looking for a quick outcome.  Feel free to contact me to discuss.

Thanks to all that have supported Aspire over the past two years.  Despite the odds, we made it this far, with your help.  Unfortunately, expensive and complex build requirements, with long institutional sales cycles, combined with a lack of scalable professional seed-stage funding in Canada, have been our undoing.  Any one of these being different would likely have yielded a better outcome, but all three together have proved to be terminal.

Mark and I have had a great team to work with.  We thank them for all the hard work and long hours, and wish them well as they move on to their next challenges (and hopefully a bit more stability!).

For me personally, I’ve made and consumed a great deal of  “FinTech Kool-Aid” over the past two years, which has permanently altered by view of the future, and the role that technology will play in the delivery of financial services to consumers, small businesses and corporations going forward.  I’m excited to see this play out, and the role I can play in making it happen.

Best regards,

David A. Fry, MBA, CFA
Co-Founder and CEO
Aspire Financial Technologies Inc.

Authors:

George Popescu
Allen Taylor

Wednesday April 12 2017, Daily News Digest

REITs vs. RECF

News Comments Today’s main news: Further comments on Elevate’s IPO. Aspire announces new ALD Data and Analytics Module. Funding Circle to stop property development lending. Morningstar assigns MOR RV1 Residential Vendor Ranking to First Associates as Consumer Finance Servicer. Today’s main analysis: Texas real estate market great for RECF. Today’s thought-provoking articles: UK VC investment up, European funding […]

REITs vs. RECF

News Comments

United States

United Kingdom

European Union

China

News Summary

United States

Elevate Announces Closing of Initial Public Offering (BusinessWire), Rated: AAA

Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”) today announced the closing of its initial public offering of 12,400,000 shares of common stock at a price to the public of $6.50 per share. In connection with the closing, the underwriters fully exercised their option to purchase an additional 1,860,000 shares.

Elevate has now sold a total of 14,260,000 shares of its common stock in connection with its initial public offering for total net proceeds to the Company, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by Elevate, of approximately $81 million.

Elevate will use approximately $15 million of the net proceeds to repay a portion of the outstanding amount under its convertible term notes, approximately $65 million of the net proceeds to repay a portion of the outstanding amount under its financing agreement and the remainder, if any, for general corporate purposes, including to fund a portion of the loans made to its customers.

UBS Securities LLC, Credit Suisse Securities (USA) LLC, and Jefferies LLC acted as joint book-running managers and as representatives of the underwriters for the offering. Stifel, Nicolaus & Company, Incorporated and William Blair & Company L.L.C. also acted as joint book-running managers for the offering.

Texas Real Estate Market Active for Real Estate Crowdfunding (Yahoo! Finance), Rated: AAA

RealtyShares, a leading online marketplace for real estate investing, has just released data showing the total amount of crowdfunded real estate investments in Texas. To date $28.1 million has been raised for 31 real estate deals, ranking Texas among the most popular states for investors on the RealtyShares platform along with California and Florida.

Nearly half of all deals funded in Texas to date have been for multifamily properties with a trend favoring equity over debt. Investments have been spread throughout the state, with the most investments centered around the Dallas-Fort Worth Metroplex, followed by Austin and Houston.

The average investment in Texas since inception is $907,000, with the largest being a $3.25 million Class A multifamily property in Grand Prairie sponsored by Ventures Development Group.

Aspire Financial Technologies Announces New Asset-Level Disclosure (ALD) Data and Analytics Module (Aspire Email), Rated: AAA

Aspire Financial Technologies Inc. (“Aspire”), announced today the release of a new Asset-Level Disclosure module that will provide free access to market participants looking to access and analyze loan-level characteristic and performance data for asset pools of US public securitizations. On an ongoing basis, issuers publish these files to the SEC’s Edgar website. They currently cover the asset verticals of auto-loans, auto-leases, and CMBS, but will soon expand to RMBS and other debt securities. The module is part of Aspire’s more broadly focused Gateway TM platform, which enables users to seamlessly research, workflow, monitor, and forecast their consumer or SME loan risk exposure, across multiple use cases.

The release of consumer credit ALD data publicly provides for unique opportunities. For the first time, Aspire Gateway ABS ALD module gives participants the ability to stratify and compile performance views both within individual trusts and across trusts with similar asset pools on the same platform. Aspire released the product with an initial focus on auto loan asset pools, and will be expanding coverage to other verticals with filings on the SEC website. Aspire also makes available individual raw CSV files converted directly from the issuer postings on its platform.

Morningstar Credit Ratings Assigns MOR RV1 Residential Vendor Ranking to First Associates Loan Servicing as a Consumer Finance Servicer (PR Newswire), Rated: AAA

Morningstar Credit Ratings, LLC today assigned its MOR RV1 residential vendor ranking to First Associates Loan Servicing, LLC as a consumer finance servicer. Morningstar’s forecast for the ranking is Stable.

First Associates, headquartered in San Diego, provides third-party loan and lease servicing for originators and institutional investors. The company was founded in 1986 as First Associates Mortgage Corporation. The current management team subsequently acquired the company in 2008 and reformed it as First Associates Loan Servicing, LLC.

The Morningstar ranking is based on a variety of factors, including:

  • First Associates’ pervasive enterprise risk management culture that consists of consumer finance compliance protocols, internal audit, self-risk assessment protocols, quality assurance, call monitoring scoring and feedback, and a robust vendor management oversight program.
  • The company engages a third-party auditing firm to produce a SOC 1 audit report on an annual basis.
  • The effectiveness of First Associates’ servicing platform is evidenced by above-average call center metrics, portfolio volume growth, strong client diversity, and minimal client turnover.
  • First Associates benefits from a solid technology environment that includes a third-party consumer finance servicing system, a well-defined project management process, effective network security protocols, and a disaster recovery and business continuity plan that leverages the company’s cloud-based infrastructure and multiple office locations for geographic data redundancy and processing.

Real Estate Crowdfunding Is Riskier Than You Think (Seeking Alpha), Rated: A

Real estate crowdfunding is increasingly becoming an alternative to REITs (NYSEARCA:VNQ) for individual investors seeking real estate exposure.

The arguments in favor of real estate crowdfunding are typically the following:

  • Their deals provide higher risk adjusted returns
  • Crowdfunding assets are uncorrelated with the stock markets and are hence more stable than REITs.

Below I provide my counter arguments to real estate crowdfunding:

1. If you are not a real estate expert, you cannot perform adequate due diligence to evaluate individual properties for investment.

Most crowdfunding websites directly target individual investors who are not experts in commercial real estate investing or finance in general. The issue is that without these specialized skills, how are you then supposed to properly assess a given deal on a real estate crowdfunding website? It is simply impossible.

2. Success in real estate investing is largely a function of the management team

Lastly, you would have the same issue here concerning due diligence. It is very difficult to perform proper due diligence of the management team when investing through crowdfunding platforms.

REITs on the other hand are very large and have great resources. They can attract the best talent and retain the best in class managers of the whole industry.

3. Crowdfunding deals are riskier in many ways compared to REIT investments.

Private market sponsors tend to use substantially more leverage than REITs and often target riskier properties. While REITs utilize today on average about 30% leverage, it is not uncommon for private investors to use up to 80% loan to value.

Real estate crowdfunding is also highly illiquid and it may be difficult to exit your investment when desired; especially if the real estate market went into a down cycle.

4. Private sponsors may charge high fees

Most REITs are today internally managed and have great scale which reduces the impact of the G&A expenses. Crowdfunding deals, on the other hand, will be sponsored by asset management firms or real estate developers that will want to earn their fees to make a profit.

5. REITs have historically outperformed private real estate investments.

Over the last 40 years, REITs have returned more than 13% per year to investors according to NAREIT.

 

NCSS Partners with Kabbage, Inc. to Help Small Businesses (PR Newswire), Rated: A

Today, the National Cybersecurity Society (NCSS) entered into a strategic partnership with Kabbage Inc., an online financial technology company that provides funding directly to small businesses through its automated lending platform.

A recent study by FireEye revealed that 77 percent of global cybercrime affects small and medium sized businesses. NCSS is a non-profit organization created to educate and advise small business owners on the complex and changing world of cybersecurity.

NCSS works with victims of cybercrime, government and businesses of all sizes to help fortify cybersecurity on a continual basis to help thwart evolving cyber threats and to mitigate the effects of cyber incidents when they occur.

Mortgage Lenders Maintain Positive Sentiment for 2017 (Marketwired), Rated: A

The Lenders One® Cooperative, a national alliance of independent mortgage bankers, correspondent lenders and suppliers of mortgage products, has issued the results of the second annual Lenders One Mortgage Barometer, a survey of 200 mortgage lending professionals. According to the 2017 Lenders One Mortgage Barometer, a large majority of lenders (94 percent, up from 62 percent last year) expect an increase in mortgage purchase production.

Continued economic improvement should give first-time home buyers the boost they need to enter the market. In fact, about three in five lenders (59 percent) say it is very likely that there will be an increase in first-time home buyers in 2017. The optimism around first-time home buyers aligns with the recent report from the National Association of Realtors® that showed the share of sales to first-time home buyers grew from 2015 to 2016 and was the highest it’s been since 2013. However, many lenders are predicting some challenges to mortgage industry growth with respondents seeing consumer debt as the highest risk factor this year (41 percent).

Lenders Analyze Growth Opportunities
The populations that are most frequently cited as offering robust opportunity in 2017 include Generation X (86 percent) and millennials (85 percent, up from 79 percent last year). Following closely are nontraditional buyers, those who are in the rental and vacation home markets (84 percent, up from 70 percent last year); boomerang buyers, those people who can now qualify for a mortgage after undergoing a short sale, foreclosure or bankruptcy (83 percent, up from 68 percent last year) and baby boomers (82 percent).

Lenders Identify Strong Jumbo Loan Activity
A large majority of lenders (93 percent) report that they already originate non-qualifying mortgage (non-QM) loans. Bolstering one part of the non-QM market is continued home appreciation, especially in higher end markets, which has created demand for jumbo loans. Indeed, 91 percent of lenders project a significant increase in jumbo loan origination volume in 2017 for their organization.

Lenders’ Take on Emerging Trends
Given the growth of the sharing economy and services such as Airbnb, 82 percent of mortgage lending professionals anticipate an increase in people looking to finance larger homes to take advantage of rental incomes.

FinTech’s Shifting Landscape (The M Report), Rated: A

The ever-shifting landscape of technology has leaked into mortgage originations.

mello™ is loanDepot’s new digital mortgage platform including the customer facing platform.  It serves borrowers, sales, operations, and the entire ecosystem of realtors, builders and the title industry on a single platform that allows us to continuously improve and iterate the experience.

What other kind of technologies aren’t being implemented in the mortgage industry that can be brought in? What do think can be implemented to streamline the mortgage application process?

There are numerous foundational technologies that have existed in the mortgage industry and other related industries for a long time that have limited implementation.  In the early 2000s, we saw the first digital mortgage. Since then there has been incremental improvements but limited adoption.  E-Sign is another example of technology that has existed for the last fifteen years, also with limited adoption. With the regulatory changes brought on by TRID, they are becoming a little bit more main stream.  Technical change requires business drivers, effective change management and a platform to enable adoption.

Kabbage Co-Founder & Head Fintecher Kathryn Petralia: Power Lending, Predictions & Progress (Crowdfund Insider), Rated: A

Since launching in November 2008, team Kabbage has grown its global advanced lending infrastructure to enable small businesses to borrow necessary funds through its direct SMB lending product which has been adopted by banks and non-banks worldwide. The FinTech innovator has provided over $3B since its founding and has raised $236M in equity since its formation as well as more than $1 billion of debt.

Kathryn: The Office of the Comptroller’s “FinTech charter” is an exciting proposition for Kabbage. While the details are still being discussed, there is no denying that Fintech is here to stay when the “Big Bank” regulator is talking about bringing our platform into the mainstream of the U.S. financial system. Folks in Washington should think about what the technology actually does instead of how to box it into a rule or regulation.

Kathryn: Every executive hates uncertainty. We currently interact in one way or another with the FDIC, FTC, SEC, CFPB, SBA, Federal Reserve, OCC and other parts of the Treasury and state agencies. I don’t see that as a very efficient or navigable system, and I think the agencies agree because they are always vying with one another for authority. Washington is in a state of (uncertain) transition, and we hope to make our little slice of D.C. a lot more efficient and work to protect customers’ rights instead of checking boxes.

Europe is a different animal altogether. There is plenty of uncertainty in the EU, but I am not planning on a “Frexit” or a “Beljump” this year. We are chugging along with our European partner banks and preparing for GDPR, the EU’s solution to unified data protection for European citizens. Europeans are pragmatic people. They want to share their data with third parties but also know that the process is safe. Safe and open data is squarely with our culture and goals at Kabbage.

Kathryn: I haven’t been shy about my view on brokers—I generally don’t like them. Kabbage avoids the broker model because we want to interact directly with our customers.

As I mentioned, this is the year of the platform model. I expect to see large and medium banks beginning to integrate with third-party Fintech platforms to better serve their customers and expand their product offerings. It makes economic sense—do what you’re good at (working with customers and managing cheap capital) and partner with other specialized firms for technology and innovation. The U.S. market is amazingly under-tapped from both mega-banks to local institutions and we hope to continue to expand here, Europe and elsewhere.

Kathryn: Our strategic, referral and white label partnerships are vital to driving new customers to Kabbage.

US fintech regulation: a divided picture at the federal level (Banking Tech), Rated: A

Marketplace lending has been a topic of regulatory and industry conversation for the last several years.

Currently, marketplace lending is attempting to fill gaps still left in credit availability after the financial crisis, especially in small dollar small business loans. In this case, small dollar means $250,000 or less. Community banks have generally provided the lion’s share of small business and agriculture loans in the US, but the financial crisis and the response to it both eliminated many community banks and created a credit crunch. Marketplace lenders have stepped up to fill in the resulting gaps for both small business and personal loans. While the first generation of marketplace lenders tended to be distinct, separate entities, many are now partnering with banks. Marketplace lenders are not the only ones: money transmitters are exploring bank partnerships in order to avoid costly and time consuming fifty state licensing solutions.

Treasury received about 100 responses to its RFI and the white paper is generally positive about the potential for online marketplace lending to expand access to credit. Treasury offers its view of the RFI responses and provides some advice and recommendations for moving forward in this space. It found that online marketplace lending has expanded access to credit, especially small businesses, though the majority of the loans originated were for consolidating debt. The expansion of data used for underwriting was one of the more exciting innovations by online lenders and is being adopted by a larger segment of the financial services industry. However, these “data-driven algorithms” do not provide the borrower the opportunity to correct information and they may result in fair lending violations and disparate impacts. It’s really too early to determine the impact, but the expansion of data and modeling are an area on which Treasury will continue to focus. In addition, online marketplace lending has emerged in the low cost of credit environment during the Obama years; these lenders have not been properly tested during a higher cost of capital environment.

The SEC is also getting into the game on fintech. It has established a Distributed Ledger Technology (DLT) Working Group to investigate the new technology and its potential uses and abuses. Further, the SEC is looking at the growing field of crowdfunding, both its Regulation Crowdfunding equity crowdfunding model and others, including debt crowdfunding. In addition, the marketplace lending market, especially securitisation of loans, is of particular interest to the SEC.

In the US, Cook County, Illinois, is currently running a pilot program to use blockchain to transfer and track property titles and other public records. The Cook County Recorder’s Office is the second largest in the US, so the adoption and success of a DLT system there would likely encourage other states and counties to use the technology.

On top of DLT, the advent of “smart contracts” has the ability to change payments drastically.

While the CFPB’s policy is quite friendly, its no-action letters are not binding on other agencies, so that leaves a fintech company vulnerable to the determination, by another regulator, that it is not in compliance with all relevant laws and regulations. This is obviously true of any agency’s no-action letter, but considering most of the federal financial regulators are having trouble deciding what to do with fintech, many companies may decide not to take the chance of relying on the CFPB’s say-so. Again though, regulating by No-Action Letter is much less desirable than actually going through the Administrative Procedure Act-mandated rulemaking process.

The CFPB is likely the most vulnerable agency in a Trump government. Its broad mandate and limited congressional oversight has made it a target of Trump and Congressional Republicans. While it is incredibly unlikely the CFPB would actually be dismantled, its structure and leadership will almost certainly change, likely relatively early in President Trump’s term. The Court of Appeals for the D.C. Circuit’s recent decision in PHH Corporation, et al. v. Consumer Financial Protection Bureau found the current structure of the CFPB is unconstitutional.

States are also involved in regulating fintech and their role may grow if President Trump follows through on his early moves to cut down on federal regulation.

Over 50? Welcome to the New Frontier of Fintech! (Finovate), Rated: A

Meet the most financially challenged generation in American history. There are over 111 million Americans aged 50 and older, confronting a financial future with high anxiety, great struggle, and kitchen table economics that are more complex than any generation has ever faced. Financial decisions are numerous and amplified in importance with longevity. Much is at stake.

Although the 50-plus community represents only 35% of the entire U.S. population, they account for $116.8 billion in revenue in 2017 for the traditional banking industry. They are avid users of digital tools, services, and products, and they are increasingly finding that their needs are not met by the bank offerings alone. As a result, they are turning to alternative financial services and products. For 2017, AARP forecasts the 50-plus consumers will spend $15.3 billion in the fast-emerging alternative financial services sector.

To win over this market, innovators need to:

  • Remove friction from the user experience
  • Improve customer service
  • Proactively deliver personalized insight and advice
  • Transform consumer financial anxiety into digital empowerment
  • Influence regulatory change and financial policy to encourage healthy digital disruption

Regions recruits CIO from marketplace lender Kabbage (American Banker), Rated: B

Regions Bank in Birmingham, Ala., has plucked its new chief information officer from the fintech world.

Amala Duggirala, formerly the chief technology officer at the small-business lender Kabbage, is set to become CIO on April 17.

At Kabbage, Duggirala led the technology team’s efforts in advancing the scalability of the lending platform. Her tenure at Kabbage was brief — she joined the firm in November 2016.

Fidelity Investments, American Express and Bank of America Are the Top Scoring TotalSocial(TM) Brands (Yahoo! Finance), Rated: B

In a new, first of its kind analysis of combined online and offline consumer conversations, Engagement Labs released its TotalSocial rankings on the top performing financial services brands (banks, investment companies and credit card companies) in the U.S.

The analysis finds that, of the conversations taking place about financial services brands, the majority of them are happening offline (face-to-face) as opposed online (social media).

One financial institution that stuck out in particular is Citibank. The financial institution has the biggest discrepancy between its online and offline scores. The bank scores significantly better offline than online through all components measured — volume, sentiment, brand sharing and influence. This is what Engagement Labs calls a Social Misfit, brands that perform strongly offline but not online, or vice versa.

Another brand that stands out in the analysis is American Express. This is a brand propelled by particularly strong offline brand sharing, meaning people are talking about their marketing or advertising efforts.

United Kingdom

Funding Circle to stop property development lending (Bridging and Commercial), Rated: AAA

Peer-to-peer lending platform Funding Circle has announced plans to stop all property development lending by mid-2018.
The decision will allow the company to focus resources on its core small business lending product in the UK, US, Germany and the Netherlands.
Funding Circle will continue to service existing property loans and meet facilities to which it has already committed over the next 12 to 18 months.
Funding Circle stated its property loans continue to outperform expectations from a credit risk perspective, generating a 7% return each year and £22m of earnings for investors since 2014.

Advisers urged to be cautious on ‘esoteric’ P2P investments (New Model Adviser), Rated: A

Peer-to-peer (P2P) lending company Goji is launching the UK’s first diversified P2P lending bonds.

The Goji Diversified P2P Lending Bond is a fixed-term product that spreads risk by investing across a range of P2P lending platforms. It is eligible for inclusion in an Innovative Finance ISA. The one-year fixed-term bond has already launched, while the three-year bond is set to launch in April or May, with the five-year bond following soon after.

He said the current fund contains around 600 companies, ‘so there’s loan diversification’. Goji targets a 5% annual yield, and said the current yield after fees (after three months for the one-year bond) is 6.8%.

Phil Young, managing director of support services provider Threesixty, has concerns. ‘Advisers should steer clear of these products,’ he said. ‘It has an impact on PI [professional indemnity] insurance, as these insurers are sceptical of P2P lending.

Numerous advisers have also voiced concerns. ‘I don’t think the market is mature enough,’ said David Bashforth, partner at Derbyshire-based Belmayne Independent. ‘It’s untested in a downturn,’ said Mark Begg, director at London-based Mark Begg Asset Management. ‘We would need at least a three-year track record,’ said Andrew Brady, director of East Sussex-based Prosperity IFA.

FCA prepares for the march of ‘robo advisers’ (Financial Times), Rated: A

New rules aimed at “robo advisers” have been set out by the Treasury and the City watchdog as part of their efforts to make financial advice more widely available.

The guidelines are intended to free online providers from the heavier regulation associated with traditional financial advice, making it easier for them to offer low-cost help for less wealthy investors.

The regulator said it wanted to encourage the growth of “robo-advisers” — websites that suggest investment portfolios to investors based on online questionnaires — as a way to offer investment help to a greater number of people.

AltFi Data brings needed industry transparency (Bankless Times), Rated: A

An originator participating in independent verification of their data is motivated to continue to source good and well-priced assets, because the track record is there, in a clear and concise format, for all to see.

But there’s little transparent about dumping megabytes of data on investors and thinking you can go to sleep at night with a clear conscience, not in the era with the data aggregation and interpretation capabilities of ours.

This added transparency is especially necessary now that marketplace lending is out of the novelty stage and beginning to scale, Mr. Taylor said. It is no longer enough for platforms to originate assets which were previously hard to access. Investors need to be able to definitively understand what return the assets have delivered historically and to identify originators that have an ongoing motivation to keep originating assets based on quality not quantity.

Equally interesting is that Funding Circle, Zopa, MarketInvoice and RateSetter, the UK platforms that provide this enhanced disclosure, have gained market share relative to the rest of the market. Having represented 65% of UK market origination when they began to offer this disclosure, they now represent 75%.

Revenue-Based Finance Provider Fleximize Closes £16.3M Financing Facility (Finsmes), Rated: A

Fleximize, a London, UK-based revenue-based finance provider, closed a £16.3m financing facility.

Hadrian‘s Wall Secured Investments Limited, a specialised investment fund, provided the financial resources.

The company intends to use the funds to increase its lending capacity, towards its goal of lending over £100m to SMEs by 2019, to further develop and diversify its product offering, and continue to advance its proprietary technology platform with the introduction of dedicated areas for brokers and direct clients.

Britain’s finance watchdog is worried about ‘wild west’ fintech in some parts of the world (Business Insider), Rated: A

Christopher Woolard, the FCA’s director of strategy and competition, said in a speech earlier this week that that some regulators are using “sandboxes” to let fintech companies operate with little or no supervision.

Woolard said in a speech at the Innovate Finance Global Summit in London on Monday:

“But in a world where many governments and regulators have begun to show an interest in innovation there are challenges.

“As different jurisdictions begin to set up their own sandboxes, with different models and standards, some believe a ‘Wild West’ version could emerge.”

Fintech is now worth £7 billion to Britain’s economy and employs 60,000 people (Business Insider), Rated: B

The Treasury said ahead of the event that the UK’s fintech sector — which includes everything from online lending to applying blockchain to capital markets — is now worth £7 billion to the UK economy and employs 60,000 people.

Growth Street announces two senior hires (P2P Finance News), Rated: B

GROWTH Street has unveiled two new senior appointments that it hopes will aid the peer-to-peer lender’s expansion plans this year.

The platform, which was purely a business-to-business lender until it receivedregulatory permission to accept retail investors last December, has hired April Nardulli (pictured) as general counsel and Chris Weller as commercial director.

European Union

UK VC investment up in Q1 2017, but funding across Europe is down (Real Business), Rated: AAA

While UK VC investment may be up, European funding has fallen however. The KPMG Venture Pulse Q1 2017 revealed UK VC investment over the quarter reached $1.02bn, having dropped to under $1bn in Q4.

That was achieved despite a lower number of completed deals, with 196 secured versus 219 the previous quarter. KPMG suggested the “robust levels” of UK VC investment signals optimism and confidence for British business this year despite Brexit.

Imbach pointed to financial services, life sciences and biotech as key sectors where startups are securing UK VC investment and highlighted firms such as Currency Cloud, Funding Circle and Atlas Genetics.

While UK VC investment rose in Q1, there was a fall in VC investment across Europe overall, reaching $3.4bn, which was attributed to fewer angel and seed rounds. Meanwhile, deal volume was at its lowest for five quarters.

Lend Closes CHF3.5M Series A Funding (Finsemes), Rated: A

Lend, a Zürich, Switzerland-based fintech startup, closed a CHF3.5m Series A funding.

Backers included angel investors and Polytech Ecosystem Ventures.

The company will use the funds to further develop its platform and market its brands, LEND and splendit, enhancing automation, customer usability and increasing marketing efforts within Switzerland.

China

China’s Banking Regulator Clamps Down on Illegal P2P Lending (YiCai Global), Rate: AAA

China’s Banking Regulatory Commission (CBRC) issued its Guiding Opinions on Risk Prevention and Control in the Banking Sector yesterday, requiring banking institutions to step up risk prevention efforts related to internet finance businesses, focusing on ten types of high-priority risks. The P2P lending risk rectification program will be pushed forward, alongside the clean-up of student and microcredit businesses.

The regulator called for an effective clampdown on illegal student loan operators. Online lending agencies are prohibited from offering loans to people failing to meet the minimum income requirement, or to students aged under 18. They are also banned from engaging in misleading marketing or sales activities, or extending usurious loans.

With microloans, online lending agencies must ensure the legitimacy of funds provided by lenders in compliance with the law, and fraudulent marketing is prohibited. Provisions laid down by the supreme court regarding interest rates on private loans must be rigorously observed to prevent usury and the use of violence in debt collection.

To ward off risks associated with illegal fund-raising schemes, the CBRC required regulators at all levels to ramp up investigation into illegally-established banking organizations, and suppress illegal absorption of public funds and illicit lending businesses carried out under the guise of banking services.

Authors:

George Popescu
Allen Taylor