Paving a Path to Decentralized Credit Profiling

Pave's Global Credit Profile

In the U.S., consumers tend to take credit for granted. Access to credit is nearly ubiquitous, and the three major credit unions ensure that the vast majority of Americans have a credit score, which allows them to be assessed for risk by potential lenders considering making an offer for a loan product. But the recent […]

Pave's Global Credit Profile

In the U.S., consumers tend to take credit for granted. Access to credit is nearly ubiquitous, and the three major credit unions ensure that the vast majority of Americans have a credit score, which allows them to be assessed for risk by potential lenders considering making an offer for a loan product. But the recent Equifax data breach proved that there are drawbacks to the robust credit scoring system, even in the U.S. Pave seeks to solve that problem with their Global Credit Profile, a decentralized database that allows the consumer to control who has access to their credit information.

Why Credit Data Should Be Decentralized

As the Equifax data breach shows, no one’s credit information is secure. It’s estimated that 143 million Americans and as many as 400,000 Brits may have been affected by the breach. Since the breach has been reported, there has been a run on credit monitoring products. And none of the credit bureaus can guarantee that hackers won’t gain access to their data. In fact, its getting increasingly more difficult for any company using the Web for database storage to insure the data they keep is 100% secure.

What Pave wants to do is solve that core data issue for the consumer.

“We’re looking at the existing paradigm and saying it’s broken,” Pave CEO Oren Bass said. “Not too many people are looking to solve the data access problem on a global basis.”

Bass said the three major credit bureaus—Experian, Equifax, and TransUnion—collect information on individuals, which they get from banks, credit card companies, and other businesses that issue credit, and sell that data to third parties. The individual doesn’t get any of the money. They’re cut out of the equation altogether. And who can guarantee that the buyer of the data can keep it safe from bad actors? Pave’s solution is to wrap up the data in a digital wallet-like security lock connected to the blockchain.

Pave’s Meandering Path to Its Data Security Solution

Bass started Pave in 2012 with co-founders Justin Mitchell and Sal Lahoud. They founded the company as a response to the 2008 financial crisis. Their primary product was an income sharing agreement for people with limited credit history, and the target audience was millennials.

“Due to lack of data and legal clarity on the product, it didn’t have staying power,” Bass said, “so we pivoted to include short-term consumer loans.”

Their intent was to lend to people with limited credit histories, but they struggled with getting a solid process for underwriting them. That’s when they wrote an algorithm to assess creditworthiness and were delighted to see it worked so well. They ended up lending to 1,700 people with limited credit histories.

Then, 2016 happened. A difficult year for online lenders on the whole, it proved to be very difficult for Pave. “We capsized as a marketplace lender,” Bass said. “We didn’t have the equity capital to become a balance sheet lender.” So they started using their technology to solve a different problem—the problem of data access for the underserved population.

Earlier this year, Pave ended a seed round and funded half a million dollars in startup capital for the Global Credit Profile. Since 2015, they’ve managed to fund $18 million including a Series A funding round that year.

What the Global Credit Profile Does

The gist of Pave’s Global Credit Profile consists of its three buckets. They collect data for marketing, or prospecting, for underwriting, and to assess the value of consumer information. But when you collect information on individuals, you have to make sure that data is secure. That’s why they decided to connect the data to the blockchain.

Using the Global Credit Profile, users will be able to:

  • Monitor and control their own financial data in real time
  • Dispute errors and omissions
  • Link credit accounts so that more data is included in their profile
  • Port their data anywhere they want to globally to ensure they have access to the best credit products in any country they live or travel to
  • Control who gains access to the data and get paid for that access

Pave’s Global Credit Profile will work by leveraging the inherent decentralization of the blockchain as a distributed ledger allowing each credit transaction to be approved using the same or similar processes used to record cryptocurrency transactions in real time today. Any information currently collected by the credit bureaus can be kept in a consumer’s self-controlled file including rent and mortgage payments, utility bill payments, lines of credit, and more. Plus, the credit profile can include social data gathered from user’s social media accounts.

Each user gets an IP address and a key to enable the application. The user can access all of their financial information in one location.

Who is Using the Global Credit Profile Right Now?

In pre-launch, Pave got quite a few users, but it escalated when they decided to lend to consumers. They have lent $23 million to 1,700 users. Current users include many in Africa and India who connect their utility bills and payment data.

Pave’s technology is powered by a core data center including visualization and data integration. The data is hosted on Amazon Web Services (AWS). For data storage, they use IPFS. Due to the decentralized nature of their system, a hacker wanting access to credit information would need to hack as many 145 million different files with information on different individuals within each file.

The bulk of Pave’s user base today are immigrants, people who have a credit history abroad but don’t have a credit profile in the U.S. where they are living. They’re new to credit, but they have a low profile. They can use their education history, social data, and utility payments. Bass said they want to help these individuals build a credit profile and work their way up to prime status.

“We hope the credit bureaus will partner with us and use our technology to protect against the security issues they have,” Bass said.

Bass sees alternative data becoming the norm in credit profiling in the future. That will include machine learning algorithms, social data, and utility payments for many of the world’s unbanked and underbanked. They currently have plans to raise more capital through an ICO token issue, but they’re currently working with private investors. Ultimately, they want to build an ecosystem that will allow others to develop and build apps that interact with the Global Credit Profile. To make that happen, they need more people on their team with alternative credit, data, and programming expertise.

“The only way we’ll be successful is to take on the status quo of the credit bureaus,” Bass said. And Pave is off to a good start.

Author:

Allen Taylor

Tuesday September 14 2017, Daily News Digest

Goldman Sachs

News Comments Today’s main news: Equifax CEO vows to make changes in USA Today op-ed. dv01 closes Series A with big name investors. SmartBiz Loans surpasses $500M in SBA loan funding. stREITwise rolls out first REIT, focused on institutional-quality office buildings. Klarna completes BillPay acquisition. Wish Finance intros SME lending on blockchain in Singapore. Today’s main analysis: What millennials would give […]

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News Summary

United States

Equifax CEO: ‘We will make changes’ (USA Today), Rated: AAA

Last Thursday evening we announced a cybersecurity breach potentially impacting 143 million U.S. consumers. It was a painful announcement because of the concern and frustration this incident has created for so many consumers. We apologize to everyone affected. This is the most humbling moment in our 118-year history.

Equifax Security first discovered the intrusion on July 29. Understandably, many people are questioning why it took six weeks to report the incident to the public. Shortly after discovering the intrusion, we engaged a leading cybersecurity firm to conduct an investigation.

At the time, we thought the intrusion was limited. The team, working with Equifax Security personnel, devoted thousands of hours during the following weeks to investigate.

dv01 Closes $ 5.5M Series A Led by OCA Ventures (PR Newswire), Rated: AAA

dv01, the data management, reporting, and analytics platform that offers institutional investors transparency and insight into lending markets, today announced a $5.5M Series A round, led by OCA Ventures. Ribbit Capital, Illuminate Financial, and CreditEase Fintech Investment Fund also participated in the round, joining existing dv01 investors Leucadia National Corporation and Pivot Investment Partners.

OCA advisor Jack Lavin has joined dv01’s board, and will work alongside existing board members from Jefferies LLC, a subsidiary of Leucadia National Corporation, and Quantum Strategic Partners Ltd., a private investment vehicle managed by Soros Fund Management LLC.

SmartBiz Loans Surpasses $ 500 Million in Funded SBA Loans (BusinessWire), Rated: AAA

SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced that it has surpassed half a billion dollars in funded SBA loans. This milestone comes on the back of other recent successes for SmartBiz, including the addition of a fifth bank to its software platform and ranking as the number one facilitator of traditional SBA 7(a) loans under $350,000 for the 2016 fiscal year, over Wells Fargo and other major banks according to SBA lending data released in November, reflecting its 2016 fiscal year.

The company’s first-of-its-kind software platform automates a bank’s underwriting to cut time and costs by up to 90 percent for processing SBA loans under $350,000. By automating the underwriting process, the platform helps banks get low-cost capital into the hands of small business owners in a matter of weeks instead of months. This is vitally important to any busy, small business owner who needs capital.

The $500 million in funded SBA loans reflects not only continued growth for SmartBiz, but also for the entire market of bank-originated, small-sized business loans. Post-2008, banks reduced the number of smaller business loans they made because they couldn’t process them efficiently enough to make a profit.

Survey Reveals What Millennials Would Rather Deal With Than Paying Student Loans (Credible), Rated: AAA

The number of people with student loan debt is staggering. According to the latest numbers from the U.S. Department of Education, 42.3 million Americans are paying back $1.33 trillion in federal student loan debt. Lenders are collecting payments on another $64 billion in private student loans. A survey of borrowers by the Federal Reserve puts the median student loan debt balance at $17,000, with monthly payments of $222. Student loan debt can be suffocating for those who are struggling to make payments each month.

  • A staggering 49.8% of all respondents said they would give up their right to vote in the next two presidential elections in order to have their debt forgiven
  • Ride-sharing services like Uber or Lyft don’t seem to matter to millennials quite as much as some of the other options in the survey. According to the results, 43.6% were willing to give up these services forever in exchange for debt forgiveness
  • Interestingly, 42.4% of respondents would also give up traveling outside of the country for 5 years, while only 27.0% said they would be willing to move in with their parents for 5 years
  • Millennials seem to value texting more than the other options – only 13.2% reported being willing to give up texting and any mobile messaging equivalent for the next year in exchange for having their debt forgiven
  • Only 8.2% of respondents chose to select none of the above and said they would rather keep paying off their student debt

Working to Expose Silicon Valley’s Dark Side (Again) (The New York Times), Rated: AAA

Even before the ink was dry on an article Nathaniel wrote last year about an online lending start-up, Social Finance, and its unusual success — headlined “SoFi, an Online Lender, Is Looking for a Relationship” — he began hearing from people who painted a very different picture of what life looked like inside the company.

But in the intervening months, tales of sexual harassment and wrongdoing in Silicon Valley took center stage, in part because of Katie’s own reporting, which exposed a dark side to an industry known for growth, wealth and fantastic employee perks. Companies like ZenefitsTheranos and Uber made it clear that many venture capitalists and the companies they funded were incentivized to focus on growth at any cost, with good governance and corporate culture getting short shrift.

We are already getting more emails and phone calls that point to where the story might go from here — both with SoFi and the issue of bad behavior in Silicon Valley more broadly. These issues aren’t going away anytime soon.

stREITwise Announces Regulation A+ Offering to Lead New Era of Real Estate Crowdfunding (PR Newswire), Rated: AAA

stREITwise is introducing a new way to invest in real estate online commission-free by allowing direct investment on its website. Today they announced a Regulation A+ initial public offering for their first Real Estate Investment Trust (REIT) – 1st stREIT Office – which seeks to provide a diversified portfolio of institutional-quality office buildings with a revolutionary low-cost structure. Because it’s filed as a Regulation A+ offering, 1st stREIT Office will allow accredited and non-accredited investors alike the opportunity to participate.

This announcement comes shortly after 1st stREIT Office successfully raised over $20 million in a private offering to acquire the Panera Bread HQ Property in St. Louis, MO. At 99% occupancy in three separate buildings, the Panera Bread HQ Property includes over 290,000 square feet of Class “A” office space that is leased to many large tenants, including Panera Bread (World HQ), New Balance (Regional HQ), Wells Fargo, Edward Jones, Nationwide Insurance, and others.

With the Panera Bread HQ Property acquisition, 1st stREIT Office has been able to make 10% annualized dividend distributions to its existing investors. The company seeks to acquire more high-quality, stabilized office buildings in undervalued markets across the United States.

While Non-Traded REITs typically charge upfront fees of 10-15%1, stREITwise caps its upfront fee at just 3% by cutting out the middleman, eliminating financial advisor commissions, and passing the savings on to investors.

Goldman Banks on Lending to Grow (WSJ), Rated: A

The New York firm said Tuesday that loans to wealthy clients, companies and consumers would contribute almost half the $5 billion in revenue growth it is projecting by 2020.

Harvey Schwartz, a top lieutenant to Goldman Chief Executive Lloyd Blankfein, on Tuesday said persistently low volatility in financial markets meant that the third quarter would be a “challenging” one in terms of trading. J.P. Morgan Chase JPM 0.29% & Co. CEO James Dimon and executives at Citigroup Inc. and Bank of America Corp. projected trading declines of between 15% and 20% for the quarter.

Goldman on Tuesday laid out a detailed plan to grow revenue, which has remained flat since the financial crisis. Its target of $5 billion in new revenue by 2020 hinges on businesses that have been footnotes for most of the firm’s 147-year history: lending, asset management and tending to the mundane needs of corporate clients and money managers.

Lending to wealthy clients, companies and consumers could add $2 billion of new revenue over the next three years, said Mr. Schwartz at a global financial-services conference hosted by Barclays PLC.

Source: The Wall Street Journal

Lenda to expand in more states, invest in software platform (Mortgage Professional America), Rated: A

Online lender Lenda has announced plans to expand its reach to more states along with increased investment in its software platform, which offers a complete refinancing or mortgage origination transaction online.

New Pave’s Decentralized Global Credit Profile (GCP) Unlocks Access to Credit for Millions of Americans (BusinessWire), Rated: A

Pave, Inc announces an initial coin offering (“ICO”), scheduled for mid-October to fund Pave’s Global Credit Profile project, which could provide a ground-breaking solution to the problems associated with credit reporting worldwide. Based on its deep knowledge of lending to individuals with limited credit history (“thin files”), Pave’s GCP will give consumers and credit institutions access to richer and more accurate personal financial data than traditional credit bureaus provide, while significantly improving data security. GCP has the potential to unlock access to credit for millions of people — such as millennials and immigrants — who are marginalized by the current financial system.

While the centralized systems of companies such as Experian, Equifax and TransUnion continue to perform a valuable service by acting as a reliable source of information for third parties, they are plagued with systemic problems including a lack of transparency and control over personal data, vulnerability to fraud and data theft and unnecessary administrative costs. Using blockchain and related technologies, Pave’s GCP will decentralize the storage and ownership of an individual’s financial data by placing the user in control. The GCP thereby removes the reliance on a singular record keeper making security breaches infinitely less likely.

DigiFi Announces Launch of Next-Generation Digital Loan Origination System (PR Newswire), Rated: A

DigiFi, an enterprise financial technology company, announced today the launch of its cloud-based digital loan origination system (“LOS”) for banks, credit unions and consumer finance companies.  DigiFi’s next-generation LOS enables the automated online delivery of multiple consumer lending products through a single platform, driving better customer experiences and lower operating costs.

DigiFi’s proprietary technology was built over three years to digitize the consumer lending process, offering consumers immediate feedback and funding from any device at any time.  The platform supports multiple products including Personal Loans, Credit Cards, Personal Line of Credit, and Student Loan Refinancing, and DigiFi is adding additional products, including Home Equity, Auto and Mortgages.

The platform is highly configurable, empowering banks, credit unions and consumer finance companies to utilize their own risk models, documents and procedures.

Meet two fintech innovators showcasing their work at Finovate (Biz Journals), Rated: A

Two entrepreneurs who jumped up on the stage Tuesday were Lisa Shields and Ellison Anne Williams.

Shields, a longtime purveyor of payment technology, is the founder and former CEO of Vancouver-based Hyperwallet Systems Inc. After handing the reigns of that company over to Brent Warrington in 2015, she went on to launch Fi.Span, a provider of cloud-based platforms for commercial banks.

In the second half of the podcast, data mining expert Ellison Anne Williams also addressed the predominantly male demographic of her field. The effect it has on her approach is next to none, she said.

As the CEO and founder of data securitization startup Enveil, Williams brings more than a decade of experience in large scale analytics, information security and privacy.

U.S. banking regulator not ready for fintech charter applications (Reuters), Rated: A

The U.S. banking regulator, the Acting Comptroller of the Currency, said on Wednesday that he is not ready to accept applications from financial technology companies seeking a special purpose federal charter.

His comments underscore the broader difficulties faced by regulators globally as they attempt to keep up with dramatic changes in banking industry brought about by the increasing use of digital technologies which threaten to undermine traditional financial services businesses.

Samsung is working with banks to roll out retail pop-ups (Tearsheet), Rated: A

Banks may soon be experimenting with a new way to engage with customers: retail pop-ups.

Samsung’s head of sales for financial services, Reginald Jones, told Tearsheet that the company is in talks with its financial services customers about rolling out retail pop-ups “sooner than in a year.”

Those could be in a variety of formats, he said: a bus promoting a certain bank that drives a number of customers to an NFL game; a university campus presence where banks look to attract customers as they become of banking age; a shopping center that normally just has ATMs where banks could roll up for a weekend service to attract these potential new customers. Samsung, the consumer electronics giant, provides the devices that change how bank employees conduct business — to better influence the customer outcome.

Samsung has been working with bank branches for the last five years, incorporating its display screens into retail spaces as they take old signage and posters and move them to digital platforms. In some branches, greeters and bankers are also using Samsung tablets, he said.

How Fintech Is Reshaping the Small Loan Market (GuruFocus), Rated: A

Fintech companies around the world have moved swiftly to fill the gap left by mainstream lending institutions due to constraints related to interest rates and profit margins. Big lenders in the market are under constant pressure to increase profit margins, which limits the size of their addressable market, especially when trying to woo small and medium-sized business borrowers. Their interest rates are often high as they seek to remain competitive in the larger spectrum of the financial services industry.

One of the largest beneficiaries is LendingClub Corp. (NYSE:LC), which has seen its revenue increase 1,278% in under five years, from just over $37 million to over $500 million as of June 30 on a trailing 12-month basis.

Brazilian-based fintech companies are paying investors about 22% returns per year while borrowers are charged interest rates from as low as 1.7% to as high as 6.3% per month based on their credit profiles.

Fintech entrepreneur launches digital advice platform for retirees (Smartbrief), Rated: B

Matt Fellowes has launched United Income, an automated retirement-planning tool for retirees.

Federal Reserve Bank Of Philadelphia To Hold Conference On Blockchain’s Impact On Regulatory Policy (ETHNews), Rated: B

The Federal Reserve Bank of Philadelphia announced that it will hold a FinTech seminar in conjunction with the Journal of Economics and Business on September 28-29, 2017, focused on consumers, banking, and regulatory policy.

Aptly named FinTech: The Impact on Consumers, Banking, and Regulatory Policy, the conference will feature keynote speeches and research from industry experts on consumer protection; roles of alternative information; FinTech lending; blockchain-based currencies; machine learning and artificial intelligence; the new FinTech landscape; and marketplace lending and crowdfunding. The conference will also focus on the disruptive factors of blockchain technology and to what measure they continue to shape regulatory policies.

Erik A. Falk Joins Star Mountain Capital as Senior Advisory Board Member (BusinessWire), Rated: B

Star Mountain Capital, LLC (“Star Mountain”), a specialized investment manager focused exclusively on the large and underserved U.S. lower middle-market, is pleased to announce that industry veteran Erik A. Falk has joined the firm as a strategic personal investor and Senior Advisor.

Mr. Falk is a senior executive focused on strategic initiatives at Magnetar, a $13+ billion alternative asset management firm. Until early 2017, Mr. Falk oversaw the private funds as a Head of Private Credit within KKR’s (Kohlberg Kravis Roberts & Co.) $35 billion credit business and served on the Private Credit Investment Committee, the Leveraged Credit Investment Committee and the Portfolio Management Committee. He also oversaw KKR’s investment in Star Mountain. Before joining KKR in 2008, Mr. Falk spent eight years at Deutsche Bank where he held several roles including founding the Special Situations Group and Co-Heading the Global Securitized Products Group. Mr. Falk began his career in the Asset-Backed Securitizations group at Credit Suisse First Boston where he knew Star Mountain’s Chairman, Brian Finn, whose prior roles include Co-President of Credit Suisse First Boston and Head of Credit Suisse Alternatives (with approximately $100 billion in AUM at the time).

United Kingdom

UK Inflation Rate Jumps More Than Expected in August (Kirklin News), Rated: AAA

The UK’s annual inflation rate climbed to a higher-than-expected 2.9% in August, matching a four-year high reached in May, the Office for National Statistics (ONS) said on Tuesday, two days ahead of a key meeting by members of the Bank of England’s monetary policy committee.

The consumer prices Index (CPI) climbed from 2.6% in July, the ONS said on Tuesday. The August reading matched the highest since April 2012 and beat the 2.8% average forecast by economists polled by investing.com.

The annual core inflation rate, which strips out volatile food and fuel costs, also jumped to 2.7% from 2.4% in July, topping the 2.5% expectation by economists in an investing.com survey.

Chapters Financial to enter AI arena with chatbot technology (FT Adviser), Rated: A

Advisory firms need to do more to attract the next generation of clients or risk selling themselves short, financial adviser Keith Churchouse has said.

His firm Chapters Financial is developing a chatbot platform for its online advice business Saidso.

The chatbot will be aimed at the generation of clients who are more comfortable with changing and emerging technology. They are usually 45 years old or younger; the typical age group of customers who already use the Saidso website, which has been operational for the past two years.

UK regulator sounds alarm over initial coin offerings (Financial Times), Rated: A

The UK City watchdog has warned investors of the “high risk, speculative” nature of initial coin offerings as their popularity booms, becoming the latest global regulator to sound the alarm.

The Financial Conduct Authority warned that ICOs are mostly unregulated and potentially fraudulent, while investors may be provided with “unbalanced, incomplete or misleading” documents by the ICO issuer.

Even if an ICO is not fraudulent, the regulator said, investors still had “a good chance” of losing their entire investment.

10 Tips for New P2P Lending Investors – How to start (P2P-Banking), Rated: A

  1. Advantages of platforms with a track record  I prefer platforms that have a track record and have operated at least 1 or two years.
  2. Loan term and loan types – There are three main types: consumer loans, SME loans and property secured loans. SME loans has further subtypes like invoice financing. It can be a good idea to diversify over different loan types and different platforms.
  3. Diversification – Diversification can be achieved faster on platforms with very many comparable consumer loans, and will take longer on property platforms which launch only few large property loans.
  4. Autoinvest – Before you use the autoinvest I suggest to spend the first days/weeks making manual investments on the primary market to get a better understanding of the loans on offer.
  5. Secondary market – Before you use the secondary market, I suggest you first spend some time investing on the primary market to deepen your understanding of how the platform works.
  6. Cash drag – Investors only earn interest on money invested into loans. Cash deposited, but not (yet) invested will earn no interest.
  7. Unsecured vs. secured loans – Consumer loans listed on platforms are mostly unsecured (exception some car loans). SME loans offer no or or some type of asset as security and property loans typically offer a first or second charge on the property as security. Usually it is preferable to lend with some kind of security offered.
  8. Recovery process – A certain percentage of loans will default. This is normal in p2plending and nothing to worry about as long as this percentage stays in a healthy relationship to the interest offered for the risk.
  9. Tax – If the country you live in does not allow you to offset default losses against interest income earned, it may be a good idea to invest into loans with lower interest rates, but also lower default rates, to achieve higher returns after tax than with a more risky strategy.
  10. Final tip – Start slow. P2P lending has somewhat of a learning curve.
European Union

Klarna Announces Completion of Acquisition of BillPay (Klarna), Rated: AAA

Klarna Bank AB (publ) today announces that the acquisition of German online payments company BillPay has been completed. This will strengthen Klarna’s position as one of the leading e-commerce payment providers in Europe and further accelerate its growth in Germany, Austria, Switzerland and The Netherlands.

VISA reportedly owns almost one percent of Klarna (Business Insider), Rated: A

However, it wasn’t clear how much money had been invested. Now Swedish tech site Di Digital has revealed that Visa took part in Klarna’s $75 million euro acquisition of Billpay, a German competitor, in February.

Out of the $57 million euro share emission that went to financing the deal, Visa paid roughly a third, or $22 million.

Goldmint Is Unlocking Liquidity in Gold to Allow P2P Lending (Cointtelegraph), Rated: A

GoldMint is a comprehensive P2P solution that allows businesses like pawnshops to raise credit.

Recently, a Time article revealed that 28 percent of college educated millennials between the ages of 23-55 have accessed short-term lending from pawnshops and payday loan providers in the last five years.

Dmitry has had an eye on the pawnshop segment since 2015, when he noticed that while the pawnshop business was immensely profitable, it was void of technological progress. He worked with a team of four people in 2016 to address the four main issues that faced the pawnshop businesses:

  • realization of unclaimed pledges
  • wired payments
  • funding of pawnshops (lending)
  • the introduction of unified standards (consolidation)

GoldMint is holding an initial coin offering (ICO) in less than a week’s time starting Sept. 20, 2017. They have published a detailed whitepaper which lays the details of their crowdsale.

Interview with Stanislav Kulechov: 14 Facts About ETHLend (Coinspeaker), Rated: A

4. How did you start building ETHLend?

We started by developing the Smart Contract. It was ideal to begin with the token escrow contract, which allows the collateral to be held securely in the Smart Contract until the borrower repays the loan. If the borrower does not repay, the lender can claim the tokens and realize any losses. We made many interesting findings during the development and wrote the white paper after Alpha DApp. We believe this is a big advantage for us since practice does not always follow theory. Also, delivering an Alpha for the Ethereum main-net is important proof-of-concept wise.

7. Do you think the system will be more popular among individuals or companies?

Hard to tell since at the moment individuals are more keen on using cryptocurrencies. ETHLend has received a lot of interest from miners who want to expand their mining facilities or purchase more rigs. There are also growing tendencies for companies to use blockchain technology. We have received inquiries about pledging some of the ICO tokens for financing pre-sale marketing efforts. What I would like to see is that merchants who use cryptocurrencies would adopt ETHLend for financing and increasing their business.

8. What is the difference between the type of crediting ETHLend offers and the scheme “have sold the possessed currency-have bought ETH for raised money”.

Good point. Since our main financing instrument is pledging digital tokens, it provides opportunity to receive ETH when one does not want to sell digital tokens. Such might be the case when one has a token portfolio, investment funds like TaaS or ICONOMI. Funds or individuals could easily keep the possession of the token positions and still get more liquidity for growing their portfolio. On the other hand, a blockchain startup might keep more tokens at their possession when pledging the token before an ICO for a loan and repaying the loan after an ICO. A strategy like that leaves more tokens for the startup to recruit more talent.

11. How much time do you think you need to launch the project in case you obtain sufficient financing?

ETHLend has an extensive roadmap that stretches to the late 2019. At the moment we are still developing the ETHLend DApp. However, we need further resources to comply with the features set in the roadmap. We are also looking to add more developers and financial experts to the team. The basic collateral based lending is available on ETHLend but there are lot of functions that require more time to develop, such as being able to borrow Bitcoin or to use the price feed for the collateral value. We aim to  have a fully sophisticated DApp by the end of 2019.

14. The last tricky question: is lending good or bad?

Lending is an instrument that should be used in the correct circumstances and for the correct funding goals. Lending could be compared to other products – when consumed wrongly, they might be bad and vice versa.

A new Form of Real Estate Investment for Estonia: Crowdfunding (PropertyShowrooms), Rated: A

Igors Puntuss, co-founder of Bulkestate.com, explained that as wages rose rapidly and with it “population welfare”, meaning disposable income and savings, people living in Baltic countries began to look for safe and profitable ways to invest their spare cash. But banks are not able to provide smaller investors with attractive interest rates on deposits and, as the market of real estate crowdfunding is far from maturing, there are opportunities to be had.

He added that high reliability does not equate to low profit, when it comes to real estate crowdfunding. The website offers an annual interest rate of 14% at a low threshold for those who are risk adverse, and the minimum investment required is just 50.00 euros at Bulkestate.com.

Starling and Zopa CEOs to speak at LendIt Europe (Specialist Banking), Rated: B

Anne Boden of Starling Bank and Zopa’s Jaidev Janardana will be speaking at LendIt Europe, which brings together fintech experts from across the continent.

The conference takes place on 9-10th October at the InterContinental London – the O2, where more than 120 speakers will take to the stage with experts from banking, lending, technology and regulation.

Anne will be speaking on LendIt’s keynote panel, which will look at the digitalisation of finance and how customer expectations are changing.

International

How Banks Are Driving API-First Strategies (PYMNTS), Rated: A

The latest edition of the PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, examines how APIs are helping both banks and smaller businesses address their fears and embark on new ventures in new markets.

Recent research indicates merchant anxiety over non-payments is widespread. According to a study by Payoneer, 75 percent of small- and medium-sized businesses (SMBs) have backed away from global trade over concerns of not getting paid for their services.

India

OpenTap aims to lend ₹100 cr. by Dec. 2018 (The Hindu), Rated: A

OpenTap, a fintech firm that enables peer-to-peer lending for middle and low income borrowers, aims to facilitate ₹100 crore in short term loans by the end of 2018.

The Chennai-based fintech firm provides alternate financial services to blue-collared workers, which is two times of net salary. As on date, it has provided credit worth ₹3 crore to 1,200 borrowers.

Asia

Wish Finance Introduces Blockchain-Based Lending for SMEs, Schedules ICO (Crowdfunding), Rated: AAA

Wish Finance, based in Singapore, has announced the launch of its blockchain-based lending platform for small and medium businesses. The company has reportedly issued 100+ loans in 2017 during a soft launch with every loan successfully repaid and 0% default rate. Wish Finance plans to keep its entire portfolio on the public blockchain, anonymized, so investors can audit its performance at any given time.

Wish Finance is offering merchant cash advances and business loans with interest rates based on the company’s real cash flow, not assets. Wish Finance said it has direct access to POS terminals infrastructure to see real time financial transactions, which it combines with the local market data for scoring. Wish says it issues a loan in 24 hours, and then deducts a few percents of the merchant customer’s’ payments to automatically repay the loan. In this way, repayments are made seamless and effortless for SMEs. Each loan is said to be insured from customer’s bankruptcy.

Trade finance gap narrows amid minimal fintech impact (Global Trade Review), Rated: A

The global trade finance gap has fallen from US$1.6tn to US$1.5tn, but the impact of fintech has been minimal to date.

But despite the industry’s zeal for digitisation, just 20% of firms reporting have used digital finance platforms. In line with global trends, peer-to-peer lending is the most-used fintech model (23%).

74% of rejected trade finance transactions are for SME and midcap applicants, with 29% of these being rejected over KYC concerns. Last year’s survey showed that 56% of SME trade finance proposals are rejected, compared with 10% of multinationals.

Fintech firm SixCap responds to complaints about its investing strategy game (CNBC), Rated: A

Singapore-based financial technology company Six Capital Groupresponded Thursday to complaints from users who say they’re unable to cash out from the firm’s web-based strategy game.

The game, called Tagg Switch, works similarly to how trading currencies works: Players purchase one of six types of so-called “Nodes” that represent a different currency — either the U.S. dollar, Singapore dollar, British pound, euro, yen or the Australian dollar.

But a report from Singapore’s The Straits Times last week said users have complained online about facing problems cashing out of the game. However, the report added that there weren’t yet any complaints registered with the Consumers Association of Singapore, a consumer protection group.

Authors:

George Popescu
Allen Taylor

Friday June 30 2017, Daily News Digest

global developing markets sme credit demand

News Comments Today’s main news: Ron Suber steps down as Prosper president. Pave stops originations and considers strategic options. Square to start lending money. LendInvest cancels P2P authorization application. LendInvest receives highest rating from European agency. Reserve Bank of India finalizes P2P rules. Alipay to enter African market. Today’s main analysis: Alternative data transforming SME finance. Today’s thought-provoking articles: SoFi to offer […]

global developing markets sme credit demand

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

Canada

Africa

News Summary

United States

Ron Suber, Prosper President and Industry Legend, Stepping Down (Lend Academy), Rated: AAA

After nearly 5 years, Ron has decided it is time to move on from Prosper. He’s been part of two turnaround stories at the company – one in 2013, and more recently as we’ve seen Prosper grow its business following the challenging environment in 2016. It is great to see them back on track, and Ron told me that he is leaving Prosper in the hands of a great CEO and management team.

When Ron recently shared his plans with me he made it clear that he will still be involved with Prosper as a company advisor and “President Emeritus” but he will not be involved in the day-to-day activities.

Over the last several years, Ron has made 21 investments in various fintech companies and he is an advisor to several of these companies.

Personal note from Ron Suber:

This isn’t just another, “I changed jobs” announcement, it’s a next phase of life with eyes wide open called “rewirement” not retirement.

Rewirement will include doing even more of the things I have enjoyed in the past – travel, teaching, learning, coaching/cultivating young entrepreneurs, being the investor/advisor that I enjoyed working with as an entrepreneur, exploring and spending time with you.

Jack Dorsey’s Square Inc. May Soon Loan You Money (WSJ), Rated: AAA

Square Inc., the technology company best known for processing payments for small merchants across the U.S., is now angling to lend to consumers, too.

The initiative, which follows the launch of a consumer-oriented Square prepaid debit card, is part of a broader push from the company to branch out beyond its original products—small, white credit-card readers that merchants plug into a mobile phone or tablet.

Offering consumers financing options for their purchases brings Square into competition with financial-technology companies such as PayPal Holdings Inc., Affirm Inc. and GreenSky LLC, as well as consumer lenders like Synchrony Financial that offer credit cards tied to specific retailers.

It also means Square will be on the hook for consumer defaults, which have recently ticked up at some online lenders and credit-card companies.

Square plans to hold the consumer loans on its balance sheet, but as volume grows it could look to sell loans to outside money managers, as it does with its small-business credits unit.

This Company Is Offering A Month’s Worth of Avocado Toast to Millennials Who Buy a House (Money), Rated: AAA

Inspired by the controversial comments made by an Australian millionaire last month, SoFi, an online personal finance company that targets millennial consumers, will give new home buyers a month’s supply of avocado toast if they purchase a home with SoFi mortgage in July.

For those who qualify, the avocado toast incentive program will be delivered in three shipments right to the recent homebuyers’s doorsteps. There is also an option between regular and gluten-free bread. (Of course, they will still have to toast the bread once it arrives.)

The marketing decision was ultimately in response to a now-viral interview in May that caused global uproar, in which Australian millionaire and property mogul Tim Gurner said millennials should refrain from buying the popular brunch dish if they didn’t want to quash their hopes of owning a home.

Can You Make Payments on Plane Tickets? (Forbes), Rated: AAA

Did you know there are a few ways to make payments on plane tickets if you can’t afford the full price today?

A new startup that offers payment plans for plane tickets is Airfordable.

Airfordable charges a one-time fee of 10%-20% of the ticket price and a down deposit is required. Your credit score isn’t checked, which is a definite plus for several reasons. After that, you make bi-weekly payments. Once the ticket is paid for, your e-ticket and itinerary are released.

CheapAir.com offers monthly payment plans for flights that cost more than $100 by partnering with Affirm. After selecting the flight you want to buy on CheapAir, you will be taken to Affirm’s website to complete the financing request.

Affirm will offer you a 3-month, 6-month, or 12-month payment plan for the plane ticket(s). Your interest rate will range from 10% to 30% depending on your creditworthiness.

Expedia has also teamed up with Affirm to offer payments on plane tickets.

Flightlayaway.com allows you to make payments on plane tickets and cruise tickets.

Flights can only be on layaway from two weeks to twenty weeks. At the end of 20 weeks, all financed flight expenses must be paid to receive your e-ticket and itinerary.

There is a one-time service fee of 15% on domestic flights and 18% on international flights when the flight is booked. And, there is an interest rate of 15% on all flights.

British Airways allows weekly payments on flight + hotel and flight + car packages only.

In America, it’s pretty common to take out a loan to buy a car, or a house, or college tuition. It’s less likely to take out a loan to buy gas for that car, paint for the house, or beer for the college tuition. But what about everything in between? What about $500 drones?

That’s where Affirm, a startup by one of the founders of PayPal, comes in. CEO Max Levchin thinks there’s a financial niche to fill for young people who want expensive things, but don’t have multiple Gs in the bank or on credit to drop on a luxury purchase. Affirm offers small, short-term loans that let customers spread out a big purchase, like a drone or $1,500 couch, over a short period of time. Affirm fronts customers the cash, then collects regular payments in more manageable chunks.

Right now, Affirm is slightly limited to an (albeit wide) selection of online retailers. The stuff you can buy is typical pricey-but-not-luxury products — Casper mattresses, Pottery Barn furniture, Newegg computer parts, clothes from online retailers, as well as drones, phones, and tech you would find in a Sharper Image catalog. In April, the company issued its one millionth loan, meaning that with at least a couple bucks in interest on even the smallest of loans, it’s probably bringing in quite a bit of cash.

Urban Housing Development eFunds (Fundrise), Rated: A

Now, you can invest directly into building new homesfor the next generation of American homeowners.

Funding Circle Strengthens U.S. Leadership Team with Head of Capital Markets & CCO Appointments (PR Newswire), Rated: A

Funding Circle, the world’s leading lending platform focused exclusively on small business, today announced two additions to its U.S. leadership team: Joanna Karger as U.S. Head of Capital Markets, and Richard Stephenson as U.S. Chief Compliance Officer.

Prior to Funding Circle, Stephenson served as chief compliance officer of Silicon Valley Bank. He has more than thirty years’ experience in various senior roles at U.S. financial institutions and law firms, serving as general counsel, chief compliance officer, chief risk officer, head of internal audit and interim chief executive officer at institutions such as Bank of America, Union Bank, Washington Mutual Bank and Mechanics Bank.

Online lender Pave closes to new customers, explores strategic options (American Banker), Rated: A

Pave, an online consumer lender based in New York, has stopped making new loans — a retrenchment that reflects challenges facing the broader sector, according to the company’s CEO.

CEO Oren Bass said in an interview Wednesday that Pave stopped making new loans about two weeks ago.

I’m sick of fintech taking credit union business (CUInsight), Rated: A

Credit unions have been playing a game of catch-up with banks for many years, and now the new kid on the block— Fintechs —are here to present even more of a headache. On December 31, 2016, Prosper Funding had approximately $22.3 million in unrestricted cash and cash equivalents and $32.8 million available for sale investments at fair value.  Their marketplace facilitated $2.2 billion in Borrower Loan originations during 2016, and as of December 31, 2016, $8.3 billion in Borrower Loan originations since it first launched in 2006.

Lending Club ended the year with a servicing portfolio of $11.1 billion, up 24 percent from the same period last year, and delivered $1.8 billion of principal and interest payments to investors throughout the 4th quarter of 2016 with cash, cash equivalents, and securities available for sale totaling $803 million, with no outstanding debt. What’s even more worrisome is that Lending Club’s venture into auto lending is still young and has a lot of potential if it gains serious traction.

Both companies sell consumer lending and deposit products to exactly the same prime-rated consumer credit segment that banks and credit unions do.

Credit unions need to up their game by:

  1. Allowing members to send money and receive money like popular online Venmo.
  2. Stay updated across all devices with real-time push-notifications and transactions.
  3. Credit unions will need to offer various software to their members to help them make better decisions and save massive amounts of time through analytics, accounting, budgeting, prediction, and decision- making software.

How Banks Can Attract More Millennials (ValueWalk), Rated: A

When trying to appeal to this younger generation, it is important to keep in mind that millennials have two main financial priorities; paying off their student loans, and saving for the future. On average, they spend 43 percent of their income to pay down their debts and put away 38 percent of their income as savings for the future. Three out of five millennials would like their bank to be a financial partner as opposed to just another business profiting off of their work. At the same time, only 32 percent of this generation feel their bank understands them. This is largely due to the fact that banks and other financial providers still offer solutions to meet the needs of baby boomers. This means tailoring products to meet millennial needs will create a more mutually beneficial relationship and help to attract younger customers.

New OCC Bulletin on Third-Party Oversight Highlights Fintech Relationships (Lexology), Rated: A

FAQ 7: Is a fintech company arrangement considered a critical activity?

In its response to FAQ 7, the OCC clarified that a relationship between a national bank and a fintech may or may not involve a critical activity, depending on the nature of the specific services the bank or the fintech has agreed to perform. In giving this response, the OCC recognized that third-party relationships are not automatically “high risk” merely because a fintech is involved.

FAQ 10: What should a bank consider when entering a marketplace lending arrangement with nonbank entities?

Although some may read the OCC’s response to FAQ 10 as an endorsement of “bank partnership model” lending relationships between national banks and marketplace lenders, the response includes no explicit mention of these relationships. The response references “marketplace lending or servicing arrangements,” and states that “banks should not originate or support marketplace lenders that have inadequate compliance management processes . . .,” but does not speak to the respective obligations of the parties to these arrangements. Thus, it is conceivable that the bulletin only addresses other types of relationships, such as warehouse lines of credit or loan servicing arrangements. At a minimum, however, the response confirms that national banks should not hesitate to enter into relationships with marketplace lenders as long as appropriate oversight mechanisms are in place.

FAQ 11: Does OCC Bulletin 2013-29 apply when a bank engages a third party to provide bank customers the ability to make mobile payments using their bank accounts, including debit and credit cards?

Until now, a national bank could have taken the position that a third party that merely enabled mobile card payments was not subject to OCC Bulletin 2013-29. To this end, the presence of a third party’s mobile payments application has no effect on the underlying card transaction, and the bank’s involvement is likely confined to deciding whether to promote the availability of the application to its customers. In its response to FAQ 11, however, the OCC clarified that these relationships need to be managed “in a manner consistent with OCC Bulletin 2013-29,” and directed banks to “work with mobile payment providers to establish processes for authenticating enrollment of customers’ account information.”

Pantera Capital to Raise $ 100 Million in Investment for ICO Hedge Fund (Coindesk), Rated: A

Announced today, investment firm Pantera Capital is launching a new hedge fund focused on investments solely in tokens that power public blockchain protocols.

Called Pantera ICO Fund LP, the fund intends to raise $100m, with $35m already raised in support from the firm’s existing investor base, undisclosed new investors, and according to the company, unnamed venture capital firms.

Kabbage headquarters building to get major renovation (Biz Journals), Rated: A

Crestlight paid $35.3 million, or about $167 a foot, according to Fulton County records. It announced the acquisition last week, but had not released the price. Lincoln Property Company Southeast won the leasing and management assignments.

Prologis, Inc. (NYSE: PLD) today announced a strategic partnership with Plug and Play, a global startup ecosystem and venture fund specializing in the development of early-to-growth stage technology startups in the Supply Chain and Logistics vertical.Prologis will provide mentorship and space in its logistics real estate properties to a select group of startups in the Plug and Play accelerator program to pilot new technologies. Prologis joins DHL, Maersk, Panasonic, Hitachi, Mann+Hummel, CMA CGA, Daimler, Deutsche Bahn, Swiss Post, BASF, Union Pacific Railroad and Ericsson as partners with Plug and Play.

Funding Circle’s U.S. head talks about growth and hiring secrets (Biz Journals), Rated: A

Sam Hodges, the U.S. managing director of Funding Circle, spoke to the Business Times about hiring techniques, missed opportunities, and what book had a profound influence on him, among other things.

RealtyShares Names Kristina Wallender SVP of Marketing (BusinessWire), Rated: B

RealtyShares, a leading online marketplace for real estate investing, today announced Kristina Wallender has joined the pioneering startup as senior vice president of marketing, focused on helping the company reach more investors and sponsors.

Wallender joins RealtyShares with marketplace and marketing leadership experience spanning large enterprise businesses like Amazon and early stage companies like Ticketfly, where she was the head of marketing for the past four years. Over her tenure, Ticketfly grew from a small startup to a leading live entertainment brand serving over 1,800 venues and promoters across North America. Wallender also played a key role in Pandora’s acquisition of Ticketfly in 2015, earning her a spot on Billboard’s 40 Under 40: Top Young Power Players in music. As part of the RealtyShares team, she will be responsible for growing both sides of the marketplace.

Google and SoFi Alum Named Okta Security Chief (Fortune), Rated: B

Okta, the Silicon Valley firm behind one of the year’s top tech IPOs, has named a new chief security officer.

The maker of identity management software has appointed Yassir Abousselham, a former executive at Google (GOOG, -2.53%) and chief information security officer at financial tech startup SoFi, as head of security. Abousselham began in the role on June 5th.

Vela Boosted Its Fintech Offerings With OptionsCity Acquisition (Benzinga), Rated: B

Vela Trading Technologies LLC, a fintech company specializing in market data technology, recently announced its acquisition of OptionsCity Software, which offers futures and options trading with analytics solutions.

The deal is expected to close at the end of the second quarter.

dv01 is hiring (DV01 email), Rated: B

We believe smart people can succeed at almost anything, so we encourage on-the-job learning (e.g. trying a new programming language) and real ownership over your work. Our fast paced environment necessitates a desire and willingness to grow both personally and professionally. We see value in effort and output, which is why we encourage all of our team members to take measured risks and never back away from a challenge.

United Kingdom

LendInvest cancels application for P2P authorisation (P2P Finance News), Rated: AAA

LENDINVEST has confirmed that it has cancelled its application with the Financial Conduct Authority (FCA) to operate a peer-to-peer lending platform.

The online mortgage lender revealed in its annual report, released this week, that it had shelved several applications with the City watchdog, for permission to operate a P2P platform and for credit broking and consumer credit licences.

Social P2P lender rolls out IFISA offering (AltFi), Rated: A

Flender, a Dublin-based, “friendly” peer-to-peer lending platform, is bringing its newly launched Innovative Finance ISA to the UK. The firm was fully authorised by the FCA in May.

RateSetter’s Paul Marston comments on Brexit (RateSetter email), Rated: A

Given the economic uncertainty created by Brexit, it is easy to understand why some small business owners have postponed important business decisions. However, SMEs have some important advantages which position them well to navigate through this period successfully. They can more easily adapt business models, diversify into new activities and implement new ideas.  It will be the business owners who are forward-thinking and act positively and decisively who are most likely to use uncertainty to their advantage.

For SME businesses that see opportunities to invest for future growth, the good news is that there are now real alternatives to the banks in terms of access to finance that can be provided in a simple and straightforward manner. We stand ready to help these businesses realise their plans.

The door is open for business leaders to redefine Brexit so that it is seen as an opportunity, rather than a threat.

China

China leads as fintech adoption doubles in two years, and here’s why (The Asset), Rated: AAA

Financial technology (fintech) adoption has doubled in the past two years, with China leading fintech adoption globally.

The average percentage of digitally active consumers using fintech services is around 33% across 20 key markets – this represents a doubling over the past two years when fintech penetration was recorded to be around 16%. The findings are noted in the EY Fintech Adoption Index, which surveyed 22,000 people online in 20 countries.

The report further shows that China leads the world with 69% of consumers using some form of fintech service, which is unsurprising given the ubiquitous adoption of payment platforms WeChat Pay and Alipay in China. Alipay and TenPay (WeChat Pay) together make up for 92% of the mobile payment market, and mobile payment transactions increased 381% in 2016 to 58.8 trillion yuan, according to iResearch.

An O2O Education System Provider Closed A Round of financing (Xing Ping She), Rated: A

Nobo Education announced they have closed a new round of financing $6.4M. This round was led by National SME Development Fund (THG Ventures), with participation from The Chinese Education Industrial Fund, which is jointly managed by DT Capital and ChineseAll. Previously, Nobo Education was known to have raised pre-A round of $1.79M in June 2016.

Founded in March 2013, Nobo Education is a Beijing-based international preschool education institution as well as new high-tech enterprise. Their core product—— Nobo Education System, an O2O system solution efficiently in kindergarten management, is the only system of education that has independent intellectual property right in China.

According to Nobo Education, among the total raised funds, ¥10M will continue to be used in pre-school education software R&D and service.

CreditEase Wealth Management Toumi RA Achieved Top Performance in First Year (Cision), Rated: A

Toumi RA, China‘s leading Robo-advisory platform built on 11-year expertise of CreditEase Wealth Management, has achieved outstanding performance since its launch on May 28, 2016, generating 2.55%-11.48% of cumulative return through May 31 2017, successfully bucking global capital market fluctuation, geopolitical risks and black swans.

In the past year, Toumi RA’s platinum/diamond members enjoyed an average cumulative return of nearly 7% for different portfolios, among which the risk-level-eight option produced the highest return of 11.48%. For gold members, Toumi RA boosted the level-eight portfolio’s cumulative return by 9.4% and the lowest-risk option by 4.23%.

An overwhelming majority of investors (99.6%) made profits during the first year, according to Toumi RA’s performance report, while only 0.4% of investors experienced lost either because of unfortunate investment timing during market highs or short-term investment during highly-volatile periods.

China’s nude loans fill female students’ pockets but suck them dry (ASEAN Today), Rated: B

In April this year, Xiong took her own life in a hotel far from her hometown in Xiamen. Incapable of repaying a debt of 570,000 yuan (US$82,722), Xiong’s circumstances worsened as online loan sharks threatened to make her nude photos public. She took her own life a few days after her mother received her nude photos.

“Nude loans” involves offering one’s nude photos to secure credit. Nude loans first gained nationwide attention in December 2016. The China Youth Daily discovered 167 women’s nude photos and obscene videos online. These women, many of them in their early 20s and receiving college education, handed over their nude photos and videos as collateral for loans from peer-to-peer (P2P) lending platforms.

Online lenders’ choice to use nude selfies to enforce repayment reflects the country’s paternal society. Nude selfies are risky enough to prevent female student clients from defaulting because Chinese women are still valued for their chastity.

European Union

LendInvest receives highest rating from European ratings agency (Mortgage Introducer), Rated: AAA

Specialist mortgage lender LendInvest has received the highest possible rating for the quality of its loan servicing from European ratings agency ARC Ratings.

For the third time in as many years the agency has awarded a SQ1 Servicer Quality Rating for LendInvest following a comprehensive annual review of the company, its performance, processes and infrastructure.

Swiss Fintech Loses Big Hitter (Finews), Rated: A

Swiss digital insurance broker Knip has agreed to merge with Komparu, a Dutch technology firm. Together they will operate as Digital Insurance Group (DIG), according to a joint statement.

The founder and CEO of Knip, Dennis Just(pictured below), won’t stay at the company.

Roeland Werring, co-founder of Komparu, will be the Group chief technical officer, while Ruben Troostwijkwill stay on as CEO of Komparu. Ingo Weberwas appointed as CEO of DIG.

Tikehau Capital buys Credit.fr (PE Hub), Rated: A

Tikehau Capital (Paris:TKO) today announced it has completed the acquisition of Credit.fr, the French specialist in crowdlending for small businesses financing, for an amount of €12 million. Incubated since March 2015 by Truffle Capital and under the leadership of Geoffroy Roux de Bézieux, its chairman since November 2015, Credit.fr has rapidly established itself as an essential player in the small and mid-sized companies (SMEs) alternative financing market.

This acquisition enables Tikehau Capital, a leading company active in the corporate lending and private debt market in France, to consolidate and expand its lending platform by bringing its corporate financing solutions to smaller businesses and SMEs. Through Credit.fr, Tikehau Capital will enable its wide network of investors and partners to broaden their investment policy, currently focused on medium-sized and larger companies, to include smaller businesses rigorously selected by Credit.fr teams.

International

Alternative Data Transforming SME Finance (SME Finance Forum), Rated: AAA

The report titled “Alternative Data Transforming SME Finance” looked at 800+ innovative digital SME lenders and digital commerce, payments and service providers in more than 60 countries. Here are some of the key findings:

  • Banks have valuable data, but are often not using it: Banks have a highly valuable repository of SME data, including SME owners’ customers’ daily transaction data that provides reliable real-time visibility into SME cash flows and credit capacity. However, most banks lack the ability to create innovative SME lending models from it.
  • Digital SME lenders are developing new relationships with SME customers and their data: In some cases, non-bank digital SME lenders insert themselves between banks and their SME customers, and forge fundamental changes in SME customer expectations.
  • New SME digital data streams are becoming more readily available and accessible: Digital SME lenders leverage vast and expanding stores of data, including from electronically verifiable, real-time sales, bank account money flows and balances, payments, social media, trading, logistics, business accounting, and credit reporting service providers, as well as a wide range of other private and public data sources used in the SME credit assessment process.
  • There are a wide range of digital SME originator lending business models: The new digital SME lending originator business models that take advantage of the expanding universe of SME digital data vary widely. This report highlights these business models, selected players, and the digital SME data they use. It includes marketplace lenders, tech, e-commerce, and payment giants which are extending SME lending into their non-banking digital ecosystems where they are already dominant. It also includes supply chain financing firms, mobile micro-lenders graduating to SME lending, and innovative banks.
  • Digital SME lending is becoming more of a global trend: 
  • Digital SME lender-bank collaboration is also a growing part of the future of SME finance: Banks may have been blind to digital SME lenders at first, and digital SME lenders may have said they would replace banks. However, both parties now have come to a simple conclusion: there are limits to what each player can do on their own and there is strength in collaborating.
  • Access to data is no longer the problem in SME lending: The digital economy has also given rise to an ever-evolving set of value-added cloud-based services to help SMEs with their finances, business planning, productivity, legal issues, data backup and security, file sharing, web conferencing, website builds, online marketing, business training, e-commerce, payments, loyalty programs, business intelligence, and more.
  • However, access to data for SME lending brings new challenges: With the abundance of alternative data, there are new issues of what to use, how to use it, and how to do this responsibly — while also respecting privacy and other important rights of SMEs.

Download the report here.

Singapore and Denmark Regulators Sign Fintech Cooperation agreement (Finance Magnates), Rated: A

Regulators in Singapore and Denmark are building bridges to assist Fintech companies expand abroad. The Singapore’s Monetary Authority of Singapore (MAS) and the Danish Financial Supervisory Authority (Danish FSA) yesterday have entered a cooperation agreement to promote innovation in financial services in their respective markets.

The agreement aims to help FinTech companies in both countries to expand into each other’s markets and also provides facilitated introductions when a fintech firm operating in one jurisdiction wants to better understand the rules in the other.

Advances in digital platforms (The Asset), Rated: A

Midway through the month, on June 14, Misys and D+H merged to form a new company called Finastra.

Shortly after the merger, several institutions announced they were working with the newly formed fintech giant. Rabobank selected Finastra to centralize their cross-border payments; SIA, a European provider of payment infrastructure and services, partnered with Finastra to provide real-time instant payments capabilities; and Mexico’s central bank, Banco de Mexico, also selected Finastra to transform its legacy risk management platform.

Investment Roundup: Visa Buys Stake in Klarna; Revolut, Tango Land Financing (PAYbefore), Rated: A

London-based travel card specialist Revolut is close to landing a £50 million (US$65 million) funding round that will value the company at £300 million (US$390 million), according to a report from Sky News. The round will be led by Index Ventures, which acquired an interest in Revolut last year, the report said. Silicon Valley investor Ribbit Capital is also said to be taking part in the round.

Finally, Seattle-based Tango Card, a provider of digital rewards and incentives to 2,000 corporate enterprise customers, has secured a $10 million investment facility from Silicon Valley’s Western Technology Investment.

Australia

Zagga pitches alternative asset class (Financial Standard), Rated: A

A new marketplace lender is hoping to turn traditional investing on its head with a pitch to wholesale and sophisticated investors.

Backed by an Australian Financial Services Licence and an Australian Credit Licence, Zagga hopes to differentiate itself from other marketplace lenders by providing a lending platform where all loans will be secured by a registered mortgage against real property.

To date, Zagga has helped facilitate a number of loans including a $7.15 million loan which was fully-funded within 17 days by 26 investors, and a $1.15 million loan to a husband and wife investor who wanted to top up their super fund before 30 June, funded in a few hours by six investors.

India

RBI finalises peer-to-peer lending norms (The Hindu), Rated: AAA

The Reserve Bank of India (RBI) has finalised norms for peer-to-peer (P2P) lending platforms and is expected to release final guidelines in 2-3 weeks, a top finance ministry official said.

According to the official, the P2P lending interface will come under the purview of RBI’s regulation by defining these platforms as NBFCs under the RBI Act by issuing a notification in consultation with the government.

Lendingkart to add marketplace, P2P loans and offer SaaS product: Harshvardhan Lunia (VC Circle), Rated: AAA

You had also mentioned about raising Rs 500 crore in debt.

Apart from the first Rs 500-crore debt fundraising exercise, we will also look to raise another Rs 500 crore in debt. We have initiated talks for this, but the process will take some time.

So, eventually will you be looking to raise more funds from banks and less from NBFCs?
Banks offer us lower-cost loans, but the process is more time consuming. They also operate within certain limitations. NBFCs are quicker with their disbursals.

Do you have plans to increase the ticket size of your loans, which is capped at Rs 10 lakh?
About 93% of our loans are less than Rs 10 lakh, and the Rs 50,000-10 lakh range remains our sweet spot. But, sometimes we do disburse loans of Rs15-20 lakh if there is a strong reference or recommendation. Our USP will be to remain a sub-Rs 10-lakh lender.

Tech is a major component of your business operations. How much of your budget allocation goes towards it?
Almost 25-30% of our budget goes towards technology. The tech team accounts for around 35% of our total manpower while two-thirds of our resources work on the lending business.

Most players tend to be asset-light. What was the business logic and strategy behind going asset-heavy?

That experience led to the decision of Lendingkart having an NBFC of its own, which would allow us to design our own products.

Will you continue to operate the same business model?
Two years down, we will diversify as a marketplace model, and may even get into the peer-to-peer lending space.

In fact, we will start a pilot with one or two players within the next six months. However, this year, the lending will predominantly be from our books. These plans will take a larger form in 2018-19 and 2019-20.

When will you start making profits?
The lending arm of our business will turn profitable by March 2018.

Which are your top performing markets?
Bengaluru, Mumbai, Hyderabad, Pune and Surat have been our top five performing markets.When will you start making profits?
The lending arm of our business will turn profitable by March 2018.

Asia

InVent takes stake in fintech Digio (Bangkok Post), Rated: A

InVent, a venture capital arm of SET-listed Intouch Holdings, has invested in a fintech startup, Digio, to boost the fast-growing e-payment market.

Digio is the first fintech company in InVent’s portfolio, which will strengthen Intouch’s offerings in the mobile payment business.

InVent has taken a 10% in stake in Digio but declined to say what it was worth.

Canada

A Canadian venture capital firm is funding entrepreneurs to relocate and become citizens (Business Insider), Rated: AAA

Sharma is the CEO and cofounder of Extreme Venture Partners, a Canadian VC firm that recently assembled a fundfor paying startup founders and their families to relocate to Toronto.

Upon arrival, they’ll receive seed funding, guidance on beginning their new Canadian life, and the opportunity to get on the fast-track for citizenship. Sharma says EVP is prepared to welcome 30 companies over the next three years.

Upon arrival, they’ll receive seed funding, guidance on beginning their new Canadian life, and the opportunity to get on the fast-track for citizenship. Sharma says EVP is prepared to welcome 30 companies over the next three years.

Issues in Bringing Canadian Fintech to the International Stage (CIGI Online), Rated: A

The aim of this policy brief is to provide a general description of the fintech industry in Canada, and to describe and draw attention to two complementary aspects of developing a fintech strategy for Canada: first, encouraging domestic fintech innovation — through open data and payment systems — and second, encouraging international expansion — through international agreements among regulators and comprehensive intellectual property strategies.

Get the report here.

FLEXITI FINANCIAL WINS BID TO OFFER POINT-OF-SALE FINANCING TO OVER 800 DEALERS ACROSS CANADA (Flexiti Financial), Rated: A

Flexiti Financial, a provider of point-of-sale (POS) financing and payment technology for retailers, today announced that it has won a competitive bid to be the preferred POS financing partner in Canada for the dealers of outdoor maintenance and equipment manufacturers including Husqvarna, Briggs & Stratton, Ariens, Big Dog Mowers, Hustler, ECHO Power Equipment and ECHO Bear Cat. Flexiti Financial now has access to over 800 dealers that sell lawn and garden tools and outdoor power equipment.

Dealers will now have access to Flexiti Financial’s award-winning POS financing platform, which will allow them to provide instant financing on any device, anywhere, and instant credit approval in three minutes.

Africa

Alipay for the first time to enter the African globalization version of the addition of a piece (01Caijing), Rated: AAA

June 26 evening, Alipay announced that it will launch Alipay in Africa to provide services to Chinese tourists. Since then, from the Alipay global strategy has taken a step further.

Authors:

George Popescu
Allen Taylor