- Today’s main news: Versara Lending acquires Peerform; P2Binvestor raises $ 7.7 million
- Today’s main analysis : Benefits and pitfalls of MPL partnerships. Why investors and lenders should dump LC.
- Today’s thought-provoking articles: Balancing investor supply with entrepreneur demand. Klarna loses three key executives. Sino Guarantee invests in China Rapid Finance.
- Benefits and pitfalls of MPL partnerships. AT: “There are some excellent points made here, especially regarding the risks associated with banks partnering with marketplace lenders. However, I see the partnerships as a net positive for all parties involved. They allow banks to serve a different clientele with nimble services and allow MPLs to tap into the financial power of traditional banks.”
- BizFi originates $ 127 million+ in financing to SMBs. GP:” BizFi has been around for much longer than OnDeck or Kabbage. And their approach has been more traditional : being profitable, and growing only if you are profitable. In that way they are a very interesting company to monitor and keep an eye on as an alternative to OnDeck for example. “
- Why one investor and lender dumped Lending Club. AT: “Investors and lenders have different styles. This commentary focuses on a specific investment and lending strategy, offering some convincing arguments from that perspective. Maybe LC can use this feedback to improve its service.”
- Fundrise spins off RE investment branch.
- Balancing investor supply with entrepreneur demand in P2P lending. AT: “P2P lenders can glean a few tidbits of business wisdom from this commentary. I particularly like this line, ‘With crowdfunding becoming a more mainstream idea, P2P lending is a more credible concept.'”
- Key considerations in peer-to-peer lending. GP: ” A little too low a level for our readership.”
- MPL P2Binvestor raises $ 7.7 million for expansion plans. GP:” Always glad to hear more funds raised in the industry. It continues to confirm that good companies do well.”
- Marketplace lending’s regulatory risks. AT: “This is a rehash of the Madden v. Midland decision with a couple of additional insights.”
- Versara Lending acquires Peerform. GP: “Today’s big news in my eyes. Peerform is also a platform that has been around for some time and was struggling to get size. I am glad they found a good solution and this puts Versara Lending on the map as well.”
- Former Auction.com exec launches OffrBox.
- Wells Fargo and SigFig team up on robo-advice.
- LendInvest completes two deals in Scotland. AT: “It looks like LendInvest may solidify its presence in Scotland.”
- LendingCrowd thinks outside the bank with the power of the crowd.
- Investors pull FinTech finding after Brexit vote. AT: “We’ve been hearing a lot about this lately, but I’m still wondering how long this will last. Will there be a bounce back?”
- Aztec Exchange named to Forbes FinTech 50.
- Singapore sees Brexit as opportunity to lure UK FinTech talent. AT: “This can be said of every country.”
- United States
- Marketplace Lending Partnerships – Benefits and Pitfalls (ABL Advisor), Rated: AAA
- Bizfi Originates $ 127M+ in Financing to Small Businesses Across the U.S. in Q3 2016 (News on 6), Rated: AAA
- Dump Lending Club As An Investor And A Lender (Seeking Alpha), Rated: AAA
- Fundrise Spins Off its Real Estate Investment Branch RSE Capital Partners (Crowdfund Insider), Rated: AAA
- Peer-to-Peer Lending — Balancing Investor Supply With Entrepreneur Demand (Forbes), Rated: A
- Key Considerations in Peer-to-Peer Lending (Prime Meridian), Rated: A
- Marketplace Lender P2Binvestor Raises Additional $ 7.7 Million to Expand Operations (PR Newswire), Rated: A
- REGULATORY RISKS IN MARKETPLACE LENDING (Legal Solutions Blog), Rated: A
- Versara Lending Acquires P2P Marketplace Lender Peerform (Crowdfund Insider), Rated: A
- Former Auction.com Business Exec Launches OffrBox (PR Newswire), Rated: B
- Wells Fargo and SigFig team up on robo offering (Financial Planning), Rated: B
- United Kingdom
- LendInvest completes two deals in Scotland (Bridging&Commercial), Rated: AAA
- LendingCrowd thinks outside the bank using the power of the crowd (City A.M.), Rated: A
- Investors pull funding from fintech start-ups after Brexit vote (Financial Times), Rated: B
- Aztec Exchange named to Forbes Fintech 50 (News Channel 10), Rated: B
- European Union
- Klarna’s leadership reshuffle – loses three key people (Business Insider), Rated: AAA
- Fintech poses risks to regulators and consumers, says Central Bank (The Irish Times), Rated: B
- 5 Fintech Firms Reshaping Lending and Financing (Business2Community), Rated: A
- Sino Guarantee, Bank of Shanghai inject fresh capital into online lender China Rapid Finance (South China Morning Post), Rated: AAA
- Monexo introduces ‘auto invest’ feature in its platform (Economic Times, India Times), Rated: AAA
- Singapore sees Brexit as chance to lure FinTech talent from London (Reuters), Rated: B
Marketplace Lending Partnerships – Benefits and Pitfalls (ABL Advisor), Rated: AAA
Marketplace Lenders (MPLs) can offer several potential benefits to small businesses, including reduced application times and expanded access to credit for less-established businesses. MPLs’ partnerships with banks can also be mutually beneficial, allowing MPLs to achieve higher volumes while offering lower rates and allowing banks to expand existing relationships. Despite the potential economic benefits, however, several challenges — especially regulatory and loan performance uncertainty — could stymie the growth of bank and small business MPLs’ partnerships.
MPLs Are Steadily Expanding Credit for SMEs
The number of MPLs serving the U.S. small business community has increased steadily since the financial crisis.
Established small businesses often approach MPLs to meet short-term liquidity needs
Established small businesses more often have existing banking relationships and approach MPLs either when their credit histories are deemed too weak for banks to lend to, or when they have immediate liquidity needs and bank application and approval processes are not fast enough to address their immediate needs.
Small Business MPLs Will Continue to Build Other Alliances to Lend to Small businesses, Especially Micro-Borrowers
Despite its potential benefits, the OnDeck-JP Morgan partnership likely does not address the lending needs of micro-borrowers, an important borrowing group for MPLs. Micro-businesses, which lack the credit histories to obtain funding from banks, are largely unable to benefit from such relationships.
Bizfi Originates $ 127M+ in Financing to Small Businesses Across the U.S. in Q3 2016 (News on 6), Rated: AAA
Bizfi (www.bizfi.com), the premier fintech company with a platform that combines aggregation, funding and a marketplace for small businesses, announced they have originated more than $127 million in financing in the third quarter of 2016.
The top sectors seeking financing through the Bizfi marketplace include manufacturing, retail, business-to-consumer (B2C) services (i.e. daycare, cleaning) and business-to-business (B2B) services (i.e. inspectors, consultants). Funding to the manufacturing sector doubled, while retail showed a 23 percent increase, B2C services rose 20 percent and B2B fundings rose 15 percent.
Businesses in the following states sought out more capital from Bizfi in Q3 year-over-year:
- Michigan – 37 percent increase;
- Pennsylvania – 36 percent increase;
- Georgia – 24 percent increase;
- New York and Texas both experienced 10 percent growth, with significant volume increase
Dump Lending Club As An Investor And A Lender (Seeking Alpha), Rated: AAA
I have been investing in Lending Club (NYSE:LC) since 2015. I had a very clear investment plan.
The results of my investment after more than a year were pretty satisfying.
Well, after telling you how well everything goes, one might ask why did I leave Lending Club. Firstly, if you do want to invest there, I think my strategy is working. However, I still have my fears. The biggest fear is the lack of transparency.
Why I didn’t like it as a lender
As I said, transparency is the major issue. If I am to lend money to someone, I need plenty of information about him, and the goal of the loan. I believe that people who look to lend money from Lending Club are looking for better interest than they could get from the bank. Banks have plenty of information on their clients, while I got insufficient amount of data.
When there are problems with the payments, I barely got enough information.
Loan goals are not diversified enough. Sometimes it is really hard to understand what the borrower needs the money for.
Let’s take a deeper look into the fundamentals and valuation
However, when I analyze a company, the most important metrics for me are earnings and free cash flow. I want to make sure that the company I invested in, has a surplus of cash attributed to its shareholders. I know that some investors like to invest in companies that are losing money, because they are still growing, but this is far from my philosophy.
As you can see in the graph above, Lending Club just can’t create positive free cash flow and earnings. This is a major risk for investors and lenders. As the revenues grew by over 400%, the FCF and EPS actually declined, which is worrisome.
Fundrise Spins Off its Real Estate Investment Branch RSE Capital Partners (Crowdfund Insider), Rated: AAA
Crowdfunding real estate platform Fundrise is spinning off RSE Capital Partners, its real estate investment branch, into a stand-alone company, according to several news sources. The new standalone firm will continuation to focus on origination, underwriting, investment and management for the company’s eREIT platform.
In October Fundrise launched three new eREITs described as a “revolutionary direct to investor crowdfunding model,” putting Fundrise “on track” to raise a quarter of a billion dollars during the coming year. Fundrise now lists 5 different eREIT options; Growth eREIT, Income eREIT, West Coast eREIT, Heartland eREIT and East Coast eREIT.
Peer-to-Peer Lending — Balancing Investor Supply With Entrepreneur Demand (Forbes), Rated: A
NextAdvisor, a consumer information website that includes views and ratings of a variety of financial services and products, has seen a large increase in interest in P2P lending solutions.
Frustration with the traditional lending process appears to be the major driver of all forms of alternative lending, P2P included. Fintech as a master category has evolved precisely because traditional lending products, services, and technology were not coming together quickly or smoothly enough to meet prospective borrower needs.
With crowdfunding becoming a more mainstream idea, P2P lending is a more credible concept. And P2P offers a very different experience than traditional lending.
As the P2P space matures, a new crop of niche-focused services has emerged that focus on particular kinds of investors and businesses.
Average Percentage Rates (APRs) are a driver—and admittedly are all over the place—but they don’t provide a complete picture of a loan’s cost. Lending Club, for example, advertises rates as low as 5%, although not all qualify.
So with a set of leaders growing rapidly, and pent up startup demand, why are people speculating about a P2P bubble? Because balancing the growth on both the demand and supply side is a tough business. It is one thing to build a fintech pipe with a beautiful user experience and a polished brand. It is another thing entirely to continue to feed demand (borrowers) and supply (individual investors) in equal measure.
Key Considerations in Peer-to-Peer Lending (Prime Meridian), Rated: A
Now that you have decided to invest in P2P loans, what next? Before you jump right in, there are numerous issues to take into consideration. As the saying goes, “Knowledge is power” and that phrase certainly has meaning when it comes to investing. As with other types of investments or any new endeavor, it may be best to start small before committing any significant amount of capital.
Loan selection: Before you begin building a P2P loan portfolio, come up with a game plan as to how your funds will be invested.
Risk management: Just like any other investment, P2P lending carries its own set of risks.
A couple of questions to ask yourself are:
- How will I try to manage prepayment risk?
- How will I try to manage default risk?
One of the easiest and most effective ways to try to manage both default risk and prepayment risk is to diversify your investments.
How will you measure your success? When it comes to investing, it is imperative to have some type of benchmark that you can use to gauge your returns, or lack thereof.
A deeper performance evaluation: After comparing the performance of your portfolio with the performance of a relevant index, you can elect to make some changes in your portfolio going forward based on relative performance. If you are beating the index by a significant amount, you may want to consider taking a closer look at the amount of risk you are taking. On the other hand, if your portfolio is severely underperforming the index, you may want to consider adding more risk within your tolerance.
Marketplace Lender P2Binvestor Raises Additional $ 7.7 Million to Expand Operations (PR Newswire), Rated: A
P2Binvestor (P2Bi), a marketplace lender that provides growing businesses with debt capital through a crowdfunding model, announced today that it has raised $7.7 Million in Series A1 funding led by Rockies Venture Club (RVC), the largest angel investor network in Colorado and Future Venture Capital Co., Ltd. (FVC), a Japanese venture capital firm with its US subsidiary, FVC Americas.
P2Bi has funded over $350 million in revolving credit to its more than 80 borrowers since May 2014 and its average line of credit size is $1 million.
REGULATORY RISKS IN MARKETPLACE LENDING (Legal Solutions Blog), Rated: A
As marketplace lending becomes more commonplace and occupies larger part of the overall loan market, it will become essential for marketplace lenders and consumer financial services practitioners to familiarize themselves with the unique regulatory issues facing this fast-growing industry.
As Pearson and Steinbacher explain, the issues facing marketplace lenders depend on the type of products they offer, who those products are offered to, and how their business is structured. Marketplace lenders that act as marketing and servicing agents for banks and do not originate loans themselves face the most prominent regulatory challenges. These include a couple of issues that affect a marketplace lender’s ability export interest rates of their partner banks.
Separate from these two significant issues are actions taken by state licensing authorities to require licensure by marketplace lenders, or to prohibit existing licensees from participating in transactions which would be prohibited by state usury laws.
Versara Lending Acquires P2P Marketplace Lender Peerform (Crowdfund Insider), Rated: A
NYC-based Consumer lender Versara Lending has acquired the personal loan marketplace lender Peerform aiming to grow its prominence in the consumer lending space. Peerform will now operate out of the Versara Lending offices.
Founded in 2010 by Wall Street executive Mikael Rapaport, Peerform targeted dependable borrowers whose needs were not being met by existing lenders, offering them personal loans up to $25,000.
Former Auction.com Business Exec Launches OffrBox (PR Newswire), Rated: B
Eric Andrew, former Auction.com business executive, announced his new real estate tech venture. OffrBox.com is the first and only end-to-end transaction management marketplace for residential investment properties. As a simple and secure online marketplace, OffrBox.com streamlines the real estate investing process for buyers, sellers and brokers.
Wells Fargo and SigFig team up on robo offering (Financial Planning), Rated: B
On Tuesday, Wells Fargo announced that SigFig will power its digital advice offering.
Earlier this year, Wells Fargo outlined a pilot program to introduce robo advice in 2017 through its community bank unit. The platform would eventually be available to all of its brokers and clients, executives said.
LendInvest completes two deals in Scotland (Bridging&Commercial), Rated: AAA
The online lender officially began operating in Scotland four months ago and deals recently completed included bridging loans for £480,000 and £200,000.
LendInvest provided the £480,000 loan to an investor buying in a prestigious part of Edinburgh, who required the funds quickly.
LendInvest’s Scottish presence has been helped by the appointment of Peter McDermid as business development manager for Scotland, who joined from Shawbrook in June and brought with him experience of the Scottish mortgage market.
LendingCrowd thinks outside the bank using the power of the crowd (City A.M.), Rated: A
It’s not hard to see why peer-to-peer lending has established such a strong foothold in just a handful of years. Seeing the opportunity, LendingCrowd offers a real alternative to traditional bank funding with loans up to £250,000 at competitive rates. This is also good news for the loan funders — many are private individuals — who can earn a return significantly higher than on offer from traditional bank deposits.
Its customers come from right across the UK and span a wide range of industries — from technology and professional services to manufacturing and agribusiness. Since 2014 the company has facilitated over £6m through more than 80 loans. Over 2,000 individual investors have signed up to their online platform.
Edinburgh has proven to be a strong location for LendingCrowd; recruitment has gone well, with a wealth of skilled technology professionals at all levels.
Locating in Scotland has been instrumental in helping to find the right skills — the company’s lending team have credit expertise gained with RBS and Clydesdale Bank. The next stage of its development is already advanced: the company has raised share capital — part from private investors whose funding is matched by Scottish Investment Bank’s Co-investment Fund — that will allow it to accelerate growth.
Investors pull funding from fintech start-ups after Brexit vote (Financial Times), Rated: B
Investors pulled funding from dozens of start-ups in Britain’s financial technology industry in the wake of June’s Brexit vote, plunging them into a cash flow crisis, the head of the country’s main fintech association said.
Lawrence Wintermeyer, head of Innovate Finance, said 30 fintech start-ups have had their funding cancelled or postponed by investors since the end of June, forcing them to seek urgent funding elsewhere.
The sharp slowdown in UK fintech funding from VCs contrasts with what has been happening in the rest of the world. Global fintech funding from VCs rose 27 per cent to $15.2bn in the first nine months of the year, driven by particularly strong growth in China, which overtook the US as the sector’s biggest market by value, helped by the $4.5bn raised by Ant Financial Services.
Aztec Exchange named to Forbes Fintech 50 (News Channel 10), Rated: B
Aztec Exchange, a global supplier of invoice finance products and services, today announced it has been named to Forbes second-annual Fintech 50. The list features companies that use technology to disrupt “the way we save, invest, spend and borrow.” Aztec was selected from a group of 300 companies and was one of just 22 new companies to join the ranks.
Klarna’s leadership reshuffle – loses three key people (Business Insider), Rated: AAA
Swedish FinTech giant Klarna has lost three key executives this Fall. A co-founder, the CFO, and a VP for the Nordics are moving on to new opportunities, reports Breakit.
Matthew Risey, who has been CFO for a year, and with Klarna since 2013, announced his departure from the company in September.
There are speculations that the Klarna’s ongoing application process for a Swedish banking license may become more difficult without Risey, something that CEO Siemiatkowski refutes.
Victor Jacobsson, one of Klarna’s three founders, will leave the company’s executive board.
The third departure news came yesterday, as Anna Borg, Senior VP for the Nordic region, announced she will return to her previous employer, Swedish energy giant Vattenfall.
Fintech poses risks to regulators and consumers, says Central Bank (The Irish Times), Rated: B
The rise of fintech, evidenced by the emergence of crowdfunding and peer-to-peer lending online platforms, is likely to pose specific challenges for regulators and consumers alike, given that many products and services – such as peer-to-peer lending – exist outside of traditional, regulated activities.
While Mr Sheridan highlighted the positive impacts of fintech on society in helping to make products and services more accessible, improving service delivery and providing greater convenience for consumers and increasing choice, he warned that innovators need to take existing consumer protection standards into account.
5 Fintech Firms Reshaping Lending and Financing (Business2Community), Rated: A
This month, we’re exploring some of the most disruptive fintech firms changing the face of banking. To kick off, we’re looking at five fintech firms reshaping the lending and financing landscape, including Avant, Lending Club, Qufenqi, Affirm and SocietyOne.
Through the use of big data and machine learning algorithms, the company is able to offer a highly customized approach to consumer credit options.
2. Lending Club
Lending Club provides a platform for individual investors to deposit as much or as little money as they like at attractive rates of return and for borrowers to take out loans of whatever size they desire at lower rates than high street banks are generally able to offer. How is Lending Club able to do this? The answer is simple; they benefit from the efficiency that being a digital-only platform provides.
Founded in 2014, the company specializes in offering students and young, white collar workers micro loans for expensive electronics, white goods and property, working with a number of businesses across China to offer monthly payment plans. In just 2 years, the platform has grown to be worth an estimated $1.3 billion, with sales facilitated by Qufenqi totaling $1.52 billion in the first half of 2016.
Affirm offers installment loans to customers at the point of sale, quickly allowing people to take out simple loans in seconds, enabling them to turn any purchase into a few monthly payments. Whilst the low costs and efficiency associated with fintech providers allows Affirm to offer competitive rates, their unique selling point is transparency.
Founded in 2011, SocietyOne had received loan demands in excess of $100 million by the end of 2015, taking advantage of Australia’s historically low interest rate on savings to drum up significant interest from career investors and mass market savers alike, who have been able to take advantage of far better returns on savings than traditional bank savings accounts are able to provide.
Sino Guarantee, Bank of Shanghai inject fresh capital into online lender China Rapid Finance (South China Morning Post), Rated: AAA
China Rapid Finance, operator of the mainland’s largest online consumer lending platform, is looking to step up its domestic expansion after forging wide-ranging partnerships with China United SME Guarantee Corp (Sino Guarantee) and the Bank of Shanghai.
The state-owned Sino Guarantee, the premier financial guarantor for loans and bonds on the mainland, has made an initial commitment of 500 milllion yuan (HK$ 566.5 million) as lending capital for the China Rapid Finance platform.
It has also invested US$20 million in China Rapid Finance as part of the online lending start-up’s Series C financing round, in which a total funding of US$70 million was raised.
The China Rapid Finance platform has grown to 1 million borrowers, and processed a market-leading 8.8 million loans as of the end of last month.
Monexo introduces ‘auto invest’ feature in its platform (Economic Times, India Times), Rated: AAA
Online peer to peer lending platform Monexo has introduced the “auto-invest” feature on its platform. Through this feature, the lenders on Monexo’s platform can automate their entire lending process by setting up their auto-invest rules in 2 simple steps. Lenders select the maximum funding per borrower and desired portfolio allocation across M1 to M8 rating based on their desired risk-return criteria.
More than 90% of Monexo’s customers have expressed their interest in using the “auto-invest” feature and hence it has been made available to the customer much earlier than Monexo had actually planned said the company in a statement to the press.
Singapore sees Brexit as chance to lure FinTech talent from London (Reuters), Rated: B
Britain’s vote to leave the European Union opens an opportunity for Singapore to recruit talent for its ambitious plans to become a leading financial technology hub, the chief FinTech officer of the city-state’s central bank said.
Simon Kirby, Britain’s economic secretary to the treasury, told the audience that London will remain a leading financial center, though he acknowledged Singapore might be able to lure some of the talent.
He further defended his turf, noting “there are more FinTech businesses in Ireland and the UK than in the rest of Europe put together”. Kirby promised to “do everything” to make sure access to European markets remains in place after Brexit occurs.