News Comments Today’s main news: SoFi’s new CEO wants to get the company ready to go public. Revolut’s transaction volumes increased 700%. China to crackdown on non-bank lending. Blender raises $16M. Today’s main analysis: Stay away from LendingClub’s notes and shares. Today’s thought-provoking articles: Legacy banks, digital startups see opportunity to go beyond storing money. LendingBlock aims to mainstream […]
SoFi CEO aims to take SoFi public. AT: “It’s about time, and the company probably would have already started the paperwork had it not been for the scandal that erupted late last year around the former CEO Mike Cagney.”
Legacy banks, digital startups see opportunity to go beyond storing money. AT: “Financial services have grown more complex in the last few years. Technology has enabled greater innovation and specialization, but this will only continue. It’s been a long time since banks saw themselves as simply places people store money. Now, however, it’s essential that they think of themselves otherwise.”
Anthony Noto, the new chief executive officer of Social Finance Inc., is looking to steer the company out of crisis and get it in shape for a potential initial public offering.
The vision for SoFi outlined by Noto didn’t stray far from the one set by his predecessor Mike Cagney, who was ousted after accusations of sexual misconduct inside the company. Noto wants to create a broad online financial-service company, adding checking and savings accounts and wealth management to the main business of refinancing student loans.
I bought my first batch of $25 notes on April 22, 2016. Now, it is important to note that LendingClub is very clear in its advertising that “99% of portfolios with 100+ Notes have seen positive returns.” So I suppose I added a level of risk by not having a portfolio worth at least $2500. But even still, returns can be .1% annualized and count as ‘positive’, but that is not an acceptable return by anyone’s standards given the risks involved in lending to strangers.
To date, I have received $436 in payments, $96 of which is interest. I have lost $100 on notes that have charged-off, meaning that there is zero expectation of future payment and LendingClub collectors have stopped attempting to reach the borrower. I also have a note that is late, and based on how things have gone so far, I fully expect that to charge-off too and will lose the $11.50 still owed. In short, I have already lost almost 20% of my initial investment, crossing my fingers that none of the 14 notes I still have that are current don’t enter a late status with more than a year to go before the oldest reaches full term. My results have been dismal.
LendingClub’s ratings are A-G, with A being the safest. As you can see, the vast majority of my portfolio sits in A-C, with one E and one G note (LendingClub did away with F and G notes last year).
Change can be hard for the financial industry, which is dominated by decades of processes and internal systems. But with a slew of upstarts making their way into the trillion-dollar industry, the old guard is finding innovative ways to beat these challenger brands at their own game.
“A lot of these companies have what we call ‘technical debt’—very expensive mainframe systems that are very difficult to change, run [and are] expensive and obviously that limits their ability to innovate,” said Oliwia Berdak, principal analyst at Forrester Research. “The biggest challenge is often culture … In banks the attitude has always been to perfect [products] before it’s unleashed on customers and [technology] is a big change where you’re working with a certain degree of uncertainty and risk.”
According to data collected by Accenture, 90 percent of banking executives said that their companies needed to “innovate at an increasingly rapid pace just to remain competitive,” but only 47.8 percent say that they are actually “investing comprehensively” in digital.
Another challenge: For all the talk about slick mobile banking apps and services, consumers—gasp—still like going to physical banks to manage financial decisions. Eighty-seven percent of customers enjoy going to a physical bank and prefer to interact with a human while there, per Accenture.
Most customers who received face-to-face financial advice from their retail bank felt their needs were completely met (58 percent), but satisfaction drops when advice is delivered by other means, according to J.D. Power’s 2018 U.S. Retail Banking Sales Practices & Advice Study. Only 45 percent of customers who received digital advice through their bank’s website or mobile app felt their needs were met and only 33 percent felt their needs were met via email.
The majority of customers surveyed for the study (58 percent) said they want to receive advice through their bank’s website and mobile app, but only 12 percent said they received advice in that manner.
Customers still aren’t excited about digital-only banks. Less than 10 percent of Americans looking to open a checking account would consider doing so at a digital bank, according to a new report by Cornerstone Advisors.
For example, San Francisco-based neobank Chime’s customers are mostly middle-income millennials, with a median age of 29 and incomes between $45,000 to $65,000. Chime says it caters to a gap in the market for younger customers who felt larger institutions weren’t meeting their needs.
Neobanks should focus on a “clear, differentiated value proposition” for the customer, but too many of them are just adding a little technology to a customer experience that’s not terribly different from what the big banks offer, said Satya Patel, a partner at Homebrew, a seed-stage venture capital firm based in San Francisco and an investor in Chime.
For the past year, Capital One has been rethinking how it can get out of the too-common approach of “innovating” by layering new technology on top of an old product — it’s realized it needs to entirely reconsider the customer’s interaction with it.
About a third of companies have knowingly sacrificed security for expediency or business performance, according to a newly published study, and researchers said that bankers’ responses were consistent with the group as a whole, which included health care and other sectors.
in 2015, mobile payments in the US represented $550 billion. That’s good by most any standard, but the growth expected is staggering. By 2020, that number is projected to hit $2.8 trillion. That represents a compound annual growth rate (CAGR) of 39.1 percent, which is far beyond most any but the most unlikely investments.
China represents $5.5 trillion in mobile payments use as of right now, a combination of various societal factors like a comparative eschewing of the personal computer in favor of the mobile device, as well as a near-ubiquity of locations that accept the system.
BREAKFORM | RE closed its latest small lot subdivision development project in the prime West Hollywood adjacent neighborhood in record time using Equity Multiple, one of the leading real estate crowdfunding platforms. The offering was 145% subscribed in 72 hours.
Credible, the consumer finance marketplace that helps consumers save money and make smarter financial decisions, today announced that it has appointed Chris Bishko as chief financial officer. Mr. Bishko will report to Credible’s founder and CEO Stephen Dash.
A bill to reform the regulation could be introduced “very soon,” State Senator David Carlucci told CoinDesk.
But what is likely to remain is the animosity toward the BitLicense, as evidenced by the small but dedicated protest gathering outside just before the roundtable began, not to mention the grievances aired by the two dozen or so attendees.
Lendingblock aims to become the first to build a marketplace where cryptocurrency lenders meet borrowers, and can exchange their assets across blockchains. The platform aims to bring securities lending to the crypto economy. The current estimates of the market paint a picture of enormous potential for development: in 2017, $2 trillion of assets on loan in traditional securities lending brought approximately $4 billion in revenue. Replicating this in crypto could generate up to $300 million within 3 years as the project notes in its white paper.
British retail banks are poised to introduce money management apps to compete with those already launched by financial technology start-ups, betting their trusted brands, broad client base and deep pockets will help them make up lost ground.
The European Fintech Alliance has fired another broadside in its tussle with the financial services establishment over PSD2, raising fears that banks will develop substandard APIs as a way to fend off competition.
Specifically, the alliance of 74 fintechs, challenger banks and fintech associations is unhappy that the Regulatory Technical Standards on strong customer authentication and common and secure communication under PSD2 allow banks the possibility to be exempted by their National Competent Authority from having to accommodate licensed Third Party Payment Services Providers (TPPs) to access accounts via the so called fallback option in case of malfunction of the API.
THE GLOBAL marketplace lending sector saw nearly $9bn (£6.45bn) invested across 233 deals last year, marking a new funding record for the industry.
Consultancy firm Fintech Global, who compiled the data, found that equity investment in the sector rebounded to $8.9bn last year after a slowdown in 2016. The total was boosted by the top 10 deals, which raised a combined $4.4bn.
The second half of the year was strongest for funding, with the largest deal of the year closing in the fourth quarter when Shanghai-based peer-to-peer lender Lufax raised $1.2bn.
ID Finance, the emerging markets fintech company, is incorporating behavioural biometrics into its AI-based fraud scoring engine to eliminate fraud, boost loan approvals and reduce the incidence of non-performing loans.
The behavioural biometrics system studies the unique typing and behavioural patterns users display during the loan application process to capture a range of patterns. These include mouse movements, to how fingers interact with a keyboard. The biometrics record patterns such typing speed, typos, flight time between keys, keystroke depressions, as well as the patterns from actual input.
The global financial system is wobbling. Banks and other traditional financial institutions have so far managed to survive the crisis resulting entirely from their errors, greed, and arrogance. Now, many believe, they won’t live through the crypto revolution unless they embrace it.
Meet the Celsius Wallet – a combination of a digital wallet and a peer-to-peer lending platform where members can earn passive interest on their crypto holdings and use them as collateral to get loans in fiat currencies.
The chief executive of banking disruptor Xinja has revealed that mortgage brokers have been involved in the group’s home loan plans and will be “essential” to its strategy.
The crowdfunded online lender recently received an Australian credit license (ACL) from the Australian Securities and Investments Commission (ASIC) and plans to utilise the broker channel to facilitate its digital home loan approval process.
Mortgage franchise Yellow Brick Road posted a 2% decline to $7.74bn in loan settlement volume in the first half of FY18 over the previous period as it reduced its number of branches.
Overall, the company delivered 85% growth in profitability, with net profit before tax increasing to $0.53m in the first half of FY18 over the same period of FY17. It cited higher revenue – up by 5% – and lower costs – down by 4% – as drivers of its result.
The company also expects the addition of a small business lending product through its partner Prospa to provide additional revenue opportunities for its network and support growth in commercial lending.
P Kanwal is from Punjab’s Bhatinda. He has a furniture business which mainly deals in cash, because of which it was difficult for him to get a secured loan from the formal banking system. For him, a Peer-to-peer (P2P) lending platform came as a rescue, which got him an unsecured loan for his kid’s education and expanding his business.
This not just the story of Mr Kanwal, but many more small entrepreneurs who are operating their businesses in Tier-1, Tier-2 cities and far-flung areas, some not even on Google map, who are getting financial support through P2P lending.
The pattern that emerges currently from the P2P lending is that borrowers from tier-2 and tier-3 cities comprised 20% and 17% of the total number of loans disbursed through the platform. The new-to-credit borrowers comprise 35% of fulfilled borrowers, while those with poor credit ratings accounted for 10% of the overall number.
Airfox, a mobile financial services company, today launched its free Android app in Brazil, giving millions of people unprecedented access to much-needed financing solutions.
More than 44 percent of Brazil’s population is unbanked, another 30-44 percent lack sufficient access to mainstream financial services, and those with credit cards face interest rates upwards of 200 percent (sources: World Bank, Bloomberg).
PayJoy, a San Francisco fintech startup, announced on Friday it has teamed up with mobile distributor Allied Mobile to bring affordable smartphone payment plans to markets across the continent of Africa. According to the duo, Allied Mobile will use PayJoy Checkout, an instant paperless finance system for customers without access to formal credit, and the patented PayJoy Lock which enables “pay-as-you-go” access to the phone.
News Comments Today’s main news: SoFi CEO Mike Cagney to step down by end of year. Goldman Sachs invests 100M GBP in Neyber. PayJoy raises $6M investment. Groundfloor announces $100M expansion of lending capital with Direct Access Capital. Zopa customers battle loan sale delays. Former Ezubao lead gets life sentence. Lenda raises $5.25M to fund expansion Today’s main analysis: LendingClub launches next generation […]
Lending Club launches next generation credit model. AT: “Without giving a lot of details, Lending Club does allude to the necessary changes in its credit model, and they are very interesting. Trending data can make a huge difference in analyzing risk, and technology is what makes this type of predictive modeling a possibility. This is the type of tech that will keep Lending Club on top.”
What critics of fintech ILC bids aren’t saying. AT: “They’re actually not saying quite a bit, but this article sheds light on one of the most important things not being said, namely, that these companies are asking for more regulation, not less.”
Mike Cagney, the co-founder and chief executive of Social Finance, is to step down from the online lender by the end of the year.
Several former employees said that Mr. Cagney had inappropriate relationships with SoFi employees.
In 2012, Mr. Cagney sent sexually explicit text messages to an executive assistant named Laura Munoz. The company and its board agreed to pay Ms. Munoz a $75,000 settlement.
A former employee of SoFi filed a lawsuit in August saying that he had witnessed female employees being harassed by managers and was fired after he reported it. The lawsuit did not initially name Mr. Cagney, but he was added later.
Mr. Cagney may have been overaggressive in expanding the business, skirting risk controls and compliance rules.
The company said it had raised $90 million in debt financing for one of the loan products that it sold to investors in 2012, but that financing never took place. SoFi eventually bought the loans back from investors.
Employees who spoke to The Wall Street Journal also described a culture in which they felt pressure to work extra hours for fear of being fired. These employees also described angry executives breaking furniture and throwing telephones.
It used to be that financial services firms would respond to accusations of sexual harassment inside their company with denials, followed by investigations and inevitably a spate of firings and public apologies.
In Silicon Valley, the whole thing seems to be strangely flipped. Harassment is so seemingly rampant in tech that companies are on the offense, attempting to prove a negative and paint themselves as the rare “Woke” tech firm. More often than not, the whole thing unravels.
According to the WSJ, the online lender SoFi is denying widespread sexual harassment inside the company by willfully misunderstanding what sexual harassment is.
So like a Fantasy Football thing, or was this another example of a touching-based-yet-non-sexual dispute? It seems like nothing at SoFi is ever sexual, which is hard to believe at a place that offers such great rates!!!
SoFi today announced its first-ever ‘SoFi Accelerate’ event series for ambitious millennials looking to break away, look beyond, and get ahead in their careers. SoFi Accelerate is a series of one-day retreats taking place just outside Chicago, New York City, and San Francisco that will give event attendees the time and space to think big—as well as the tools and structures to make their career goals happen.
Launching in September, the retreats will consist of creative visioning and leadership exercises, career strategy sessions with SoFi career advisors, and inspirational talks from unconventional thinkers like criminal justice reform advocate Adam Foss, Stanford professor and co-founder of Electronic Arts Dave Evans, and Gretchen Rubin, author of New York Times bestseller The Happiness Project, among others on how to set and achieve professional goals.
UNCONVENTIONAL VENUES SoFi Accelerate will offer its programming in unconventional retreat settings to encourage expansive views and open minds. These venues include the Chicago Botanic Garden (Glencoe, IL), Grounds for Sculpture (Hamilton Township, NJ), and Montalvo Arts Center (Saratoga, CA).
UNEXPECTED SPEAKERS A panel of experts from unexpected (i.e. outside of the financial planning realm) and highly relevant disciplines discuss how to create and execute on life, career, and financial goals. These speakers will include:
Ryan Holiday: Writer, media strategist, entrepreneur, and editor-at-large for the New York Observer
Adam Foss: Criminal justice reform advocate; co-founder of Roxbury CHOICE Program, a collaborative effort between defendants, the court, the probation department, and the D.A. to recast probation as a transformative experience rather than a punitive process
Gretchen Rubin: New York Times bestselling author of The Happiness Project and Happier at Home, and most recently, Better Than Before
Coss Marte: Ex-drug dealer, ex-convict, and founder of ConBody, a “prison-style” fitness boot camp with a loyal following of 10,000+ clients that employs formerly incarcerated individuals, giving ex-convicts stability and breaking down barriers between them and the general population
Today, Lending Club announced a new credit model in an email to investors. According to the email, this is the most advanced and predictive credit model ever used on the Lending Club platform. This is Lending Club’s fifth generation model that began to go in effect on September 8, 2017 and will roll out to all borrowers in the coming days.
The company outlines that the model further leverages machine learning along with the 10 years of data on 1.5 million borrowers they have accumulated. The new model is 24% better at differentiating the likelihood of a borrower charging off compared to the fourth generation model. It also includes more data points, and uses new custom attributes that Lending Club states are predictive in assessing risk.
Instead of using aggregates, the new model uses very granular views of credit data which discern individual borrower actions vs. a simple aggregate (e.g. a borrower’s credit card balance per credit card vs. his total credit card balance).
The model makes more extensive use of trended data, which provides insight into a borrower’s credit behavior over time rather than a snapshot into a borrower’s credit behavior at a point in time. Dozens of new custom variables like these improve the model’s predictive power and are proprietary to Lending Club.
The bids by tech firms Social Finance and Square for industrial loan company charters and federal deposit insurance have rekindled debate over two questions: What is the appropriate regulatory oversight for industrial loan companies, and should fintech platforms be allowed to compete with traditional banks?
Many of the arguments in this debate have less to do with either applicant’s qualifications than with traditional banks’ fear of new, innovative competitors, and with a decades-old turf war between the Federal Deposit Insurance Corp. and the Federal Reserve over the regulation of ILCs.
ILCs face greater restrictions on the types of deposits they are allowed to offer compared to commercial banks.
SoFi and Square are actually asking for more regulation, not less, by seeking a charter. This would put leading nonbank fintech providers on more equal regulatory ground with banks — something that mainstream financial institutions say they want. Getting an ILC would add yet another agency — the FDIC — to the regulatory labyrinth the companies must navigate. This should be considered a win for banking industry and consumer advocates who favor more transparency and oversight of fintechs.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P1 (“CLUB 2017-P1”). This is a $363.098 million consumer loan ABS transaction that is expected to close September 28, 2017.
Groundfloor, the only real estate crowdfunding platform that is open to non-accredited investors, today announced that it has entered into a whole loan purchase relationship with Direct Access Capital (DAC), a specialty finance company focused on providing liquidity to non-bank lenders of short term residential backed business loans. This marks Groundfloor’s first institutional partnership to enable the company to scale its loan origination volume and expand its product offerings over the next year. The shared target is $100 million in loans through 2018.
It’s been a busy few days for fintech startup PayJoy, which today announced that it closed a $6 million investment, only a few days after it reached another milestone.
Based in San Francisco, PayJoy hopes to make the smartphone a mainstream financial tool for those who cannot afford these devices. Established in 2015 at Stanford University, PayJoy provides payment plans to purchase smartphones for people with limited or no access to credit.
Betterment for Business, the technology-led 401(k) provider that aims to deliver better retirement outcomes and personalized advice, today announced the results of its new consumer retirement survey, the State of Consumer Retirement Advice. The results of the survey show that alongside the expansion of digital and employer-sponsored retirement advice resources, a majority of respondents (53 percent) report receiving absolutely no advice on their retirement investments. For the 47 percent of consumers who do seek retirement advice, 65 percent of this group utilize a financial advisor, the top source of advice among those consumers.
Less than half of respondents (42 percent) correctly identified the definition of a fiduciary; 20 percent of respondents believed that the terms “fiduciary” and “financial advisor” are synonymous, and 27 percent did not know what one was at all.
Nearly all (94 percent) of respondents in a 401(k) with auto-enrollment, which allows an employer to “enroll” an eligible employee in their plan unless the employee affirmatively elects otherwise, currently make contributions to their plan. In fact, for those who remained enrolled, 49 percent of respondents increased the contribution rate. Millennial respondents were most likely to remain enrolled in the plan after auto-enrollment. 78 percent of respondents that have access to an auto-escalation feature, which gradually increases plan contribution amounts over time, use it.
Targeted education could go a long way in setting consumers on the right path–given that 89 percent of respondents were offered a 401(k) match by employers, but 23 percent didn’t take full advantage of it. Of those 23 percent, 16 percent don’t max out their match, and 7 percent don’t know if they do.
“We believe there are two types of financial products: chutes and ladders. Ladders help you up, chutes push you down. We’ve used design to create loan and credit card ‘ladder’ products for the more than half of Americans who’ve traditionally been shut out of mainstream banking due to poor credit or income volatility,” said Sasha Orloff, co-founder and CEO of LendUp.
According to Fast Company, the award—one of the most sought-after in the design industry—is based on seven core factors of innovation: functionality, originality, beauty, sustainability, depth of user insight, cultural impact and business impact.
Studies have shown that 56 percent of Americans don’t have access to traditional financial services due to low credit scores or thin credit files1, and nearly half of U.S. families don’t have enough savings to cover a $400emergency expense2. As workplace trends shift from careers to jobs to the gig economy, 40 percent of Americans blame irregular work schedules for volatile monthly incomes, with paychecks sometimes varying by more than 30 percent3.
Small business lenders have unprecedented opportunities ahead of them, according to Rohit Arora, the CEO of Biz2Credit.
The only thing is, not all lenders are positioned to seize these opportunities. The ones that are, says Arora, are the lenders that understand two things. “They understand the changing expectations of today’s borrowers. They also understand how to leverage new technology,” Arora explains.
Biz2Credit recently analyzed 30,000 small business credit applications. Based on the analysis, one of the top expectations small business borrowers have is for 24/7 customer availability. In fact, 51 percent of customer application activity occurred outside of regular banking hours or on weekends.
Advanced Credit Repair Technology – Last year alone, Lexington Law helped clients remove more than 9 million negative items from their credit reports. This wouldn’t have been possible without advanced technology.
Growing Focus on Artificial Intelligence
Emergence of Challenger Banks – If there’s one thing we know about Millennials, they’ve shown an affinity for online banking and “challenger banks.” On a related note, there’s been a massive increase in the use of virtual wallets and alternative forms of payment. These two trends go hand-in-hand and will support each other.
XRF’s 14.61% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade.
XRF insiders hold a significant stake of 16.89% in the company.
A big stake of 38.57% in XRF is held by the general public.
Zopa users are reporting significant delays when trying to sell their loans, with the firm battling against slow speeds on its platform.
At present, users trying to sell their loans on the site are currently told to expect delays beyond the standard 20-day sales window. The platform says: “We will continue to try and sell your loans for 20 days, but there is no guarantee that you will be able to access your money before your loans mature.”
Fellow Moneywise reader John Mitchell is an existing Zopa customer and wished to transfer his holdings to its IF Isa. When the Isa product was launched, customers were told they would soon be able to sell their existing Zopa loans – without incurring a 1% sales fee – before purchasing new loans within the Isa wrapper.
Three months on, and Zopa is yet to offer these fee-free sales to its customers.
Moneywise reader Jonathan Yonge, who manages his own portfolio of assets for a living, is one of the customers that has been affected by the issue. He currently has around £220,000 invested in the Zopa Access product and a further £100,000 in Zopa Plus. Zopa Access has now been closed to new investors and he has been unable to sell most of his loans.
Goldman Sachs is making its first investment in the British consumer lender market by providing £100m of debt and equity financing to Neyber, a fintech start-up providing loans that are repaid out of people’s salaries.
Founded by two former Goldman Sachs investment bankers five years ago, Neyber partners with companies to offer their employees loans at lower rates than credit cards or payday lenders.
The company says its loans are less likely to default because of the security of deducting repayments directly from a borrower’s salary, and the extra information it gains about its customers by tapping into their employer’s payroll systems.
The government launched the Innovative Finance ISA last year to give savers a tax-efficient way to participate in peer-to-peer lending. Official figures for the last tax year showed low take-up of the new ISA so far, with just £17 million invested. But there are renewable projects available through this route so it could be worth a look.
A crowdfunding platform called Abundance Investments launched what it said was the UK’s first green energy ISA in 2016. It allowed customers to invest directly in renewable energy projects through a range of bonds, and predicted a 6% annual return.
A Beijing court on Tuesday sentenced the architect of the $9 billion Ezubao online financial scam to life imprisonment, and handed down jail time to 26 others, marking the close to one of the biggest Ponzi schemes in modern Chinese history.
Beijing First Intermediate People’s Court sentenced Ding Ning – chairman of Anhui Yucheng Holdings Group that launched Ezubao in 2014 – to life in prison and fined him 100 million yuan ($15.29 million) for crimes including illegal fundraising, illegal gun possession and smuggling precious metals.
Ding Dian, the chairman’s brother, was also sentenced to life, while Zhang Min, Yucheng’s president, and 24 others were sentenced to imprisonment for 3 to 15 years, according to an article on the Beijing Courts social media account.
Pittsburgh-based Pineapple Payments, which offers omnichannel payment processing technology, has secured a $35 million growth equity commitment from Providence Strategic Growth (PSG), the an affiliate of Providence Equity Partners, a global private equity firm with more than $50 billion in assets under management.
PayJoy, which offers smartphone financing for underserved consumers, has closed $6 million of new investment with strategic partners that will help the San Francisco-based company, which has offices in Mexico City, to further expand throughout Latin America, Asia and Africa.
Finnish B2BPay earned the top spot among hundreds of entries in its segment in BBVA’s Open Talent competition “because of the way their solution enables SME businesses to grow internationally and trade with greater ease.”
In his first interview since being appointed chief executive of the nation’s largest retail superannuation fund, MLC Super, Matthew Lawrance told The Australian that the industry needed to lift its standards.
He also called for more balanced media commentary that would help to inform the public rather than instil fear.
“Our customers want more targeted support and advice across banking and wealth management, and so we need to invest to develop new and innovative solutions that give them the ability to engage us — whenever, however, and through whatever means suits them, whether it be digital or face-to-face,” Mr Lawrance said.
NAB is currently developing its robo-advice capabilities, with more details to be released in the coming months, but Mr Lawrance says it won’t replace traditional face-to-face advice. Rather, the two will complement each other.
There is no doubt that future growth would also be sustained by the performance of the 50-million plus strong SME sector, which employs close to 40 percent of India’s total workforce and contributes 45 percent of the total industrial output.
A major challenge that could stymie SME sector growth is the lack of adequate and timely funding.
Fintech lenders use non-conventional data sources for underwriting
This movement makes available data pertaining to these businesses which new-age Fintech lenders can use to accurately assess the SMEs. For instance, an SME registered under GST files documentation that reveals their sales trajectory, income sources, inventory sold, credit cycles, etc.
Banks want to diversity loan books without scaling OPEX
Banks have large balance sheets from which they churn loans, catering to millions of customers. However, traditional underwriting practices have prevented them from effectively underwriting certain SME segments.
News Comments Today’s main news: Funding Circle US to bolster capital markets team. US investors in Yirendai try to preserve lawsuit. Fed wants a say in fintech rules. Ablrate gains ISA manager status. Mizuho commits to fintech partnerships. Today’s main analysis: AI fintech startups offer loans on new credit. Global fintech report from CB Insights. Today’s thought-provoking articles: Multi-seller ABS […]
Ten MPL options for accredited investors. AT: Virtually all MPL opportunities are for accredited investors. I think it would be more interesting to highlight the few that non-accredited investors can pursue.”
Shareholders in Chinese peer-to-peer lending company Yirendai Ltd. asked a California federal judge on Thursday to keep their securities fraud suit against the company and its executives alive, saying their request to dismiss the case rested on mischaracterizations and factual arguments the court couldn’t consider.
The investors sued Yirendai in 2016 after news that Chinese regulators were cracking down on the peer-to-peer lending business sent its stock tanking.
We’ve found more than a dozen AI fintech firms through our friends at CB Insights that claim their machine-learning algorithms can evaluate loan applications in milliseconds while minimizing defaults.
Many of these companies target so-called thin-file borrowers—people with little credit history—who are usually trying to consolidate debt from high-interest credit cards.
CB Insights reported in its 2016 Global Fintech report that investments dropped from an all-time high of $14.6 billion in 2015 to $12.7 billion last year. Online loan companies, in particular, took something of a hit in 2016. The last quarter was particularly tough, with a 31 percent tumble in loan originations. (However, overall, the top online loan sharks companies tracked by S&P Global Market Intelligence improved their bottom-dollar on loan originations by 15 percent from year-to-year, mostly on the backs of small businesses and students.)
Avant offers direct unsecured personal loans ranging from $1,000-$35,000 with funding delivered as soon as the next business day. It has served more than 500,000 customers worldwide, though last year’s downturn for digital lenders also hit Avant. Its year-to-year loan originations were down 12 percent to about $1.7 billion.
Led by a bevy of former Google-ites, including former Google CIO and ZestFinance CEO and founder Douglass Merrill, ZestFinance has raised $62 million in equity financing, including an undisclosed amount last July. Total funding is $262 million thanks to a couple of additional rounds of debt financing. Peter Thiel’s name again appears on the long list of investors.
Upstart is an AI fintech version of Lending Club. Meaning it provides peer-to-peer lending. Like ZestFinance, it particularly markets to the skinny jeans crowd, offering loans of up to $50,000 to help consolidate debt, pay off student loans and build credit history for those living in hipster cities like Portland and Brooklyn. The machine learning bit involves taking less tangible variables like education, college major and astrological sign into account.
Federal Reserve wants a say on U.S. fintech rules -Brainard (NASDAQ), Rated: AAA
The Federal Reserve wants to give input on future rules governing how technology companies move into consumer lending markets, Fed Governor Lael Brainard said on Friday.
Policymakers will have to determine whether financial technology, or fintech, companies may tap the Fed for services that large, traditional banks enjoy.
“The OCC’s proposal raises interpretive and policy issues for the Federal Reserve regarding whether charter recipients would become Federal Reserve members or have access to Federal Reserve accounts and services,” Brainard told a conference at Northwestern University in Evanston, Illinois.
LendingHome launched in 2014 but quickly established themselves as the leader in the category. They are the only real estate crowdfunding platform to have reached $1 billion in total loans issued, a milestone they crossed in December, 2016 just two and half years after launching.
PeerStreet were founded just 18 months ago but they are already making a name for themselves. They are also focused on the fix & flip market providing loans ranging from 6-24 months in length. They target 6-12% returns and they maintain a conservative maximum LTV (loan-to-value) of 75%.
Sharestates has offered both debt and equity investments, although the vast majority of their deals are for debt. These deals are similar to other platforms with loan terms typically 6-24 months targeting 8-12% returns.
RealtyMogul is one of the most established players in the space having launched in 2013. They have done around $260 million in deals and today they focus primarily on commercial property.
Patch of Land is 100% focused on debt deals tied to mainly residential properties but with a small number of commercial properties as well.
RealtyShares is a “full stack” capital provider, meaning they offer both debt and equity deals on a single project for borrowers. They have done some large deals including this $5.9 million deal for a 132-unit apartment complex in Ohio.
The world leader in marketplace lending for small business loans offers US accredited investors a solid option. Loan terms range from 12 – 60 months and interest rates from 5.49% – 27.79%. Loans are rated from A+ for least risky down to D grade. They have a marketplace where you can browse the loans on offer or you can setup automated investing strategies based on loan grade. As I wrote this there were 12 loans available on their marketplace. Funding Circle provides financials and other details about each company although they don’t provide the company name.
Streetshares is a relatively new small business lender, they launched in 2014, and they are focused primarily on providing funding for military and veteran community businesses. Run by two veterans they provide three different products: term loans (3 – 36 months), lines of credit ($5,000 – $100,000) and government contract financing (for companies dealing with federal or state government contracts).
P2Binvestor, or P2Bi for short, is an asset backed lender providing revolving lines of credit typically backed by accounts receivables. These lines of credit range from $250,000 to as much as $10 million.
Upstart has been something of a quiet achiever when compared to some of their well-established competitors. Founded by ex-Googlers they have a very data-centric approach to their business. One of the things that makes Upstart unique is they were the first platform to look at a borrower’s education and factor that into the lending decision. Interest rates range from 6.37% – 29.99% APR, loan terms are three or five years and amounts range from $1,000 – $50,000.
In Wilmington, N.C., a high-tech company called Lapetus Solutions has developed a technology it calls Chronos that interprets facial characteristics such as baggy eyes, rosy cheeks and double chins to estimate a person’s life expectancy. One purported use of this futuristic-sounding software is to help insurance companies assess risk quickly and inexpensively. Customers could then purchase life insurance online in record time, perhaps circumventing the usual medical examination altogether.
In theory at least, insurance carriers want to provide coverage only to those less likely to need it. The better the carriers understand and predict risks, the better they can manage their liabilities. So if facial recognition technology identifies risks that were previously unknown or unknowable, it could render some consumers uninsurable, an advantage perhaps for the insurance company but not the consumer.
But Erin Ardleigh, president and founder of Dynama Insurance, an independent insurance brokerage based in New York City, isn’t so sure. “How would facial recognition technology help underwriters? I suppose if it could identify clients [who were] engaging in risky behavior, such as smoking or skydiving,” she says.
Rodgers, though, contends that the decision of whether to try this or any other new technology may ultimately come down to dollars and cents.
A leading House Republican on financial technology issues said April 25 he is working with a Senate Democrat on a revised “permanent beta test” bill to prod regulators to foster fintech innovation.
“You must have a default ‘yes’ to new innovation,” Rep. Patrick McHenry (R-N.C.) said in a speech at the American Action Forum in Washington.
McHenry said the 2017 version of the act would include “significant changes and revisions,” but he declined to discuss those. He also declined to identify the Democratic senator with whom he is working. He said he hopes to introduce the new bill in two months.
Global Debt Registry Wins FinTech Breakthrough Award (GDR Email), Rated: A
Global Debt Registry (GDR), the asset certainty company known for itsloan validation expertise, today announced it has won the FinTech Breakthrough Award for ‘Best Business Lending Product’. The
Karla Friede was first an executive with depth in sales and marketing and a passion for innovating. As the president and CEO of a company who had developed a new offering, a B2B payment technology, she was excited about getting to market.
Friede admits it wasn’t easy launching and scaling at that time. But, it taught them to be very smart with every penny. And, they had to prove their business case as they went along because investors weren’t throwing money at every shiny object.
Many B2B organizations don’t accept credit cards. And, managing ACH transfers require a lot of manual processes and the collection of sensitive financial data.
Friede says she was a little naïve in tackling the launch because the B2B payments space was so large. It’s one thing tackling Billion Dollar industries, it’s another thing dipping your toe into a market in the tens of Trillions.
Friede encourages founders to partner with people that think differently but complement your skills.
As Friede puts it, investors are looking for reasons not to invest in you…rather than reasons to invest in you. Don’t give them those reasons, give them a proven business model and secure set of customers.
Only 9% of VC-backed companies have woman CEOs so you won’t ‘look and feel like them.’ Instead, look and feel like someone who knows what they are doing and has proven it. That’s a shorthand all investors respond to.
If you are a female founder and you’re concerned about bias, she has this advice:
Target women-lead VCs or those with a woman partner.
Make it easy for the VC to relate to you.
Talk like the men around you.
She considers it a point of pride that they’ve raised $25M and it’s taken them to Series F to do it.
Real estate crowdfunding platform Small Change announced this week the launch of Pittsburgh’s Liberty Bank Building real estate offering. The funding portal noted that the project is seeking $300,000 to fund development of the building into co-working operator Beauty Shoppe’s flagship location.
Picker also noted that the next reincarnation of the Liberty Bank Building is having difficulty getting funds because it is considered to be the first full co-working building in Pittsburgh:
“Why is it so difficult to finance projects that bring innovation and new life to neighborhoods and cities? Must we rely on traditional financial institutions that are not very innovative at their core?”
Small Change added there is a 10% projected return on debt instrument. A full return of interest and capital is anticipated in 36 months. This is not an offer to sell securities.
As we reported last fall, New York Department of Financial Services Superintendent Maria T. Vullo stated that she was “ardently opposed” to the Office of the Comptroller of the Currency’s (OCC’s) intention to process applications for a new financial technology (fintech) company charter. We now see just how much her counterparts in other states share that view, as the state bank regulators recently came together under the Conference of State Bank Supervisors (CSBS) banner to ask the federal courts to stop the OCC’s fintech charter initiative.
In turn, we believe that the CSBS action will act as a further disincentive for at least some fintech companies to pursue a national bank charter at this time.
Rather than having a “real” human being as your financial adviser, you can now hire a robot, or robo-adviser. The automated adviser will then manage your investment funds through the use of mathematical rules called algorithms. There is almost no human interaction.
While there may be cost savings, it is important to understand their risks and limitations before using them. First, what level of human interaction is important to you? While limited human interaction may result in reduced fees, many people feel more comfortable having often complex investment decisions explained by a person they trust. Before you decide to create an account with a robo-adviser, it’s important that you understand how the system works. Robo-adviser systems are limited to the information provided, and do not seek out new information or research potential options in the same way that a human adviser would.
Therefore, remember that even if you are not dealing with a human, you still need to verify the license of the service and the registration of the product or offering with the proper authorities.
PayJoy is a FinTech company based in San Francisco, CA. PayJoy is bringing consumer finance to people who otherwise could not afford modern electronics such as smartphones. Today, PayJoy’s unique locking technology enables us to offer monthly installment payment plans to millions who otherwise would be unable to afford a quality smartphone. PayJoy’s ambition is to deliver affordable consumer finance to 1B+ people worldwide to obtain a smartphone and join the modern digital, mobile economy.
Unfortunately, Poloniex Lending Bot cannot do much about issuing loans at very low rates when the market spikes. Additionally, the bot negates any opportunity to benefit from high long-term rates. Moreover, there is a 10% fee for using the bot, which can negate some of the profits earned rather quickly. It is a convenient lending bot, granted, but it should not necessarily replace manual, lending activities for anyone who knows what they are doing.
This also means one needs to buy small amounts of said coin to effectively issue the loan. If the coin suddenly plummets in value, that can cause losses in a cryptocurrency portfolio. Then again, a lending bot would not be able to protect users from falling currency values either by any means.
David Bradley-Ward, CEO at Ablrate, said: “Following our successful application for full authorisation from the FCA we now have the necessary approvals from HMRC to offer an Innovative Finance ISA. We hope to be able announce the launch of our IFISA soon after integrating the necessary technology.”
However, the asset backed lender is taking a cautious attitude towards the new product.
Marketplace loan ABS involving a multi-seller approach is expected to become more commonplace, due to the extra control that online lending platforms can exert over the securitisation process. Investors and loan sellers also benefit from a consistent securitisation programme, but a degree of expertise is required to handle the greater complexity involved in executing such transactions effectively.
VPC Specialty Lending Investments PLC on Friday said its net asset value increased significantly over the course of 2016 but said its NAV per share declined after its share capital swelled, while it reported negative total return in the period.
VPC said its net asset value at the end of 2016 stood at GBP363.1 million versus GBP201.8 million at the close of 2015, but the NAV per share fell to 95.26 pence from 100.90 pence after 182.6 million new shares were issued throughout the year.
Total shareholder return in the period was -17% versus the total return in 2015 of -5.5%. Revenue return was 6.0% versus 4.3% the year before.
FUNDING Circle is closing its community forum on Tuesday, as it says that some investors are “asking questions about a narrow range of technical topics” that would be better dealt with through its investor support team.
A thread on short-term property loans has now attracted 1,300 replies and more than 59,000 views. Lenders on the platform expressed their concerns around a tranche of London-based property loans that are going into default.
The platform suggested that its investors share their views on another website called the P2P Independent Forum instead.
For a start, you are probably wondering what future jobs will be available in fintech, as banking as we know it transforms into an online entity and long-standing financial institutions are shapeshifting for a new era.
If you want to work in this sector, you’ll need to brush up on the latest goings-on in the industry, and what better way to do that than to follow the experts online? To save you some trouble, we’ve provided you with a list of 10 people to follow on Twitter if you want to work in the fintech sector.
Note: the deal was done in CHF which is about parity with USD, so you can read that as $100m.
A $100m Fintech raise in Switzerland in 2014 would have been inconceivable. In 2017 it is noteworthy as another sign of a rapidly maturing Fintech community in Switzerland.
I could only find the Tradeplus24 news on German language sites, so if that is an issue for you, here are the key facts:
– they raised CHF100m debt
– The debt is for lending to Swiss SME (note: they refer to KMU which translates to SME). This makes them a balance sheet lender, like Avant, not a marketplace lender like Lending Club. This means they have assured capital to offer rather than simply matching on a best efforts basis (our take is the latter is the better model long term but that you need balance sheet based lending to get a market going).
The Tradeplus24 approach is different. It brings Insurance into the mix. AsOceanoOne put it “An insurance or equal protection of investment grade quality against credit loss and fraud is in place for all pre-financed receivables. The purchase of the receivables occurs only when a credit insurance or an equal protection is in place and confirmed by the relevant protection provider.”
Twenty-six executives of a Chinese online peer-to-peer lender stood trial in Beijing on Wednesday and Thursday after allegedly cheating the public out of a huge amount of money.
The local procuratorate charged that the defendants had used two online P2P platforms, Ezubao and Sesame Financial, to illegally raise funds and then spent lavishly on luxury gifts and salaries between June 2014 and December 2015.
While fintech covers a diverse array of companies, business models, and technologies, companies generally fall into several key verticals, including:
Lending tech: Lending companies on the list include primarily peer-to-peer lending platforms as well as underwriter and lending platforms using machine learning technologies and algorithms to assess creditworthiness.
Payments/billing tech: Payments and billing tech companies span from solutions to facilitate payments processing to payment card developers to subscription billing software tools.
Personal finance/wealth management: Tech companies that help individuals manage their personal bills, accounts and/or credit, as well as manage their personal assets and investments.
Money transfer/remittance: Money transfer companies include primarily peer-to-peer platforms to transfer money between individuals across countries.
Blockchain/bitcoin: Companies here span key software or technology firms in the distributed ledger space, ranging from bitcoin wallets to security providers to sidechains.
Institutional/capital markets tech: Companies either providing tools to financial institutions such as banks, hedge funds, mutual funds, or other institutional investors. These range from alternative trading systems to financial modeling and analysis software.
Equity crowdfunding: Platforms that allow a collection of individuals to provide monetary contributions for projects or companies provisioned in the form of equity.
Insurance tech: Companies creating new underwriting, claims, distribution and brokerage platforms, enhanced customer experience offerings, and software-as-a-service to help insurers deal with legacy IT issues.
ASIC targets $ 200m in fee for no service (Money Management), Rated: AAA
The Australian Securities and Investments Commission (ASIC) anticipates getting over $200 million returned to consumers out of its so-called “fee for no service” remediation projects plus $30 million out of quality-of-advice work with the large institutions.
It said that in the financial advice space in the last 12 months it had extracted six enforceable undertakings; banned 41 individuals from providing financial advice; had four infringement notices and had undertaken seven criminal actions.
“In our fee-for-no-service remediations, we have got up to just over $60 million, and we anticipate getting over $200 million returned to consumers out of that project. We will have about $30 million in the backward-looking quality-of-advice work that we have done with the large institutions,” Bird said.
As the programme director for New Zealand’s first fintech-focused business accelerator programme, the pressure is on in the countdown to demo day. That’s when the teams will pitch their business plans and – they hope – attract the crucial dollars that will enable them to forge ahead.
The 39-year-old expat Canadian moved to Wellington six years ago with her husband and two pre-school children after falling in love with the country when the couple honeymooned here.
One of the largest banks in Japan, Mizuho Financial Group, has been in the news recently for several partnerships involving fintech. According to Nikkei Asian Review, the bank is in talks to co-develop a fintech incubator that will be focused on virtual currencies, like bitcoin, and AI-based loan screening ventures. The discussions are with World Innovation Labs (WiL), a firm based out of Silicon Valley that helps US and Japanese startups raise capital, to co-found the incubator by as early as June of this year.
The creation of an incubator is not Mizuho’s first foray into fintech. Just last week, it was reported that Mizuho partnered with Cognizant (one of the world’s leading professional services companies, a member of the Nasdaq-100, and Fortune 500 company) to develop a distributed ledger solution for more efficient and secure trade financing.
Just two days after the partnership with Cognizant was reported, it was announced that Mizuho had also partnered with IBM to create a blockchain-based trading platform.
Both agreements must be drawn up in an electronic form. Providers are restricted by the following rules:
Providers must be established as a legal entity in the form of a limited-liability company as meant by Law No. 40 of 2007, or in the form of a cooperative as meant by Law No. 25 of 1992.
The maximum direct or indirect foreign share ownership in Providers in the form of a limited-liability company which are established and owned by foreign citizens and/or legal entities is 85% of the total issued capital.
Providers are required to have IDR 1 billion in capital (i.e. paid-up capital for a limited-liability company and self-capital for a cooperative) at the time they apply for registration and IDR 2.5 billion at the time they apply for the license. Limited-liability companies or cooperatives intending to engage in the P2P Lending Services business are required to register with and subsequently apply for a license to the OJK.
Providers are prohibited from conducting other businesses outside the P2P Lending Services, such as acting as lender or borrower, providing security or guarantee for other parties’ debt and issuing bonds.
An exclusive pan-African post-acceleration programme, XL Africa has been launched by the World Bank Group for African digital startups.
XL Africa aims at supporting enterprises in any sector that are making smart use of digital solutions and connect these businesses with angel investors and venture capital firms in a bid to raise growth capital estimated at US$1.5 million.
PayJoy installs on Android smartphones a bios-level in-house developed solution which allows to completely disable phone functioning remotely. Through this method, PayJoy is able to reduce payment delinquency by an order of magnitude in comparison with existing smartphone device financing solutions. PayJoy has announced on Monday, July 11th the close of a Round A for […]
PayJoy installs on Android smartphones a bios-level in-house developed solution which allows to completely disable phone functioning remotely. Through this method, PayJoy is able to reduce payment delinquency by an order of magnitude in comparison with existing smartphone device financing solutions.
PayJoy has announced on Monday, July 11th the close of a Round A for a total of $17,650,000 . The round was composed of $8mil in equity led by Union Sq Ventures; $4mil in venture debt lead by WTI which can be used for either corporate expenses as lending capital; and an additional $5.65 mil in debt capital. The valuation, which should be expected to be in a 3 to 6 the invested amount ($50mil to $100mil) was not disclosed. This round follows a previous seed round in October 2015 under the same structure with a $4mil equity, $1mil venture debt and $1mil in lending capital.
The founders expect this investment to finance the company until the end of 2017. However if lending volume grows faster than expected the company may need additional lending capital earlier.
The cost of defaults
The greatest headache for unsecured consumer lending has always been recovering from delinquents. Once a consumer defaults it is usually uneconomical for the lender to pursue the borrower for recovering the pending principal and accrued interest. This is because of the high litigation costs associated with pursuing the customer (versus the lending amount in consumer finance which is usually in thousands of dollars). This has resulted in an artificial increase in APRs for especially the sub-prime category, penalizing the good borrowers because of the few defaulters. Payjoy has been able to create a technological solution for this consumer finance problem.
The remote-phone disabling technology makes Payjoy special in the already crowded smartphone financing market as it allows a markup in the range of 15-45% as compared to 200 to 500% for other financing companies. The start-up has 3 patents filed on its unique locking technology and this technology can be extended from smartphone to any other electronic product as well.
San Mateo-based Payjoy was founded in February 2015 and has 22 people in the firm. The founders are Doug Ricket(CEO), Gib Lopez(COO), Mark Heynen(CBO) and Tom Ricket. It was launched at Stanford University’s StartX Accelerator and was subsequently selected for the Draper University FinTech Connection Forum and Village Capital’s 2015 FinTech program. Doug has a Masters from MIT and an MBA from Stanford. He has worked at Google and spent 2 years in Africa as a teacher which gave him the horizon to understand the credit and technology needs of the next billion consumers in the developing world. Gib has also received his MBA from Stanford. The company has raised $4.3 mil in capital, with equal proportions of debt and equity. Red Swan Ventures and Metamorphic Ventures were the lead for equity investors.
The startup was inspired by a friend of co-founder Doug, who launched an installment plan for solar kits in India. To improve the default rates, the company would switch off the solar systems when customers missed a payment. This gave Doug the motivation to create “kill-switch” technology which will remotely lock any electronic device by shutting off a microchip. The founders have classified their tech as “Hardware-as-a-service” with unique applications in consumer finance. The Fintech startup is currently active in California, Florida, and Texas and looking to roll out in the entire country in the coming year. It is acquiring customers by partnering with mobile stores, who are able to offer higher end smartphones via Payjoy to customers who do not usually qualify for buying a phone through contract services from any carrier. The company is looking to partner with carriers as well and has a pilot starting with a national carrier.
Enabled by the new funds raised PayJoy will start offering an indefinite cell phone rental program which, to date, has been a great product for prime clients but does not exist for underbanked clients. In this program, each client will decide how much they are willing to pay monthly which will translate on how often they can upgrade their device. By paying more per month and by choosing a cheaper or a more expensive handset customers can have a new phone model as often as every 12 months or as infrequent as every 16 months.
Thorugh this indefinite rental program, PayJoy hopes to increase the customer life time value. This program is also psychologically positive for clients as it is not a debt product : customers can terminate at any time the program, and stop making payments if they return the device.
No credit history needed
The company has achieved great reception among immigrants as they have thin credit histories, thus historically condemning them to prepaid phones. Also according to the founder, over 25% of the United States is under-banked and Payjoy gives them an opportunity to own a great smartphone which they can pay over 3, 6, 9 or 12 months. This flexibility allows them to use all the apps and their complete features which are usually not available in cheaper smartphones. With the freelancing economy booming thanks to the likes of Uber, TaskRabbit, Instacart etc, it is vital that workers have the technology to access such apps 24/7. Therefore, a great smartphone is not a splurge but a necessary investment.
The company would look to expand to Mexico, Brazil, India and other developing countries were credit is not well developed, and will essentially allow Payjoy to lend by using the smartphone as collateral. The lender will expand its association with customers by offering them further credit depending upon their payment history and by re-collateralizing their smartphones. The company has also included a damage protection plan so that the borrower is incentivized to keep paying his debt even if the phone were to break down.
Default rates and numbers
To date, PayJoy has financed 1000s of phones in partnership with 100s of retail locations. All these strategies, according to the founder, have led to a default rate in just single digits versus the 30-40% default rates for similar unsecured lenders. The company has completed originations of over $1 mil to a couple of thousand borrowers. The products financed range from $150 to $700 and the average transaction size is $500.
The company is currently only focused on Android as it fits with its target demographics and Apple is famously obsessed with centralized control of its iPhones. The start-up would have to scale the model before it can think of convincing Apple to allow it to have a “kill-switch” for the iPhones. The company is expanding aggressively to that end, with volume in February 2016 surpassing the entire Q4 for 2015.
On the debt side, the company has structured an off-balance sheet funding structure. It is not taking a direct loan; they have created an external fund which purchases all the loan contracts originated by Payjoy and holds them to maturity. Debt investors put money in the fund and will directly not be lending to Payjoy.
Prepaid handset market in the United States is estimated to be over $15 bil annually. Payjoy’s competitors have not been able to penetrate more than 2-3% of the market. The low default rates because of its proprietary technology have allowed the startup to offer the lowest lending rates in the market. This, in turn, will allow it to capture significant market share. The application of its technology are not limited to smartphones or America, and it can revolutionize how we create feasible credit for third world countries without charging exorbitant rates.
For readers who are familiar with Pokemon Go, and the need of high end with long battery phones, it should not be a surprise that PayJoy is even planning a promotional campaign around Pokemon Go.