When an industry develops at a breakneck speed, the law can take some time to catch up. Existing regulations usually do not fit new paradigms, and it can stifle innovation. A regulatory sandbox is the perfect solution because it allows for the testing of new innovations in a controlled environment. The term “sandbox” refers to […]
When an industry develops at a breakneck speed, the law can take some time to catch up. Existing regulations usually do not fit new paradigms, and it can stifle innovation. A regulatory sandbox is the perfect solution because it allows for the testing of new innovations in a controlled environment.
The term “sandbox” refers to the box of sand where small children play in a confined boundary. The term has received a new connotation in a commercial sense and refers to a closed environment used for experimenting and testing projects or new ideas. Regulatory sandboxes help in testing business proposals and prototypes under a regulator’s supervision. These testing grounds have an advantage of not being governed by current rules and, therefore, the business can explicitly experiment the validity of their projects without the danger of getting caught on the wrong side of existing law.
Such regulatory sandboxes are critical for the development of the alternative lending industry. The gist of having regulatory sandboxes in this sector is to comply with the regulatory directives that complement the growth of fintech companies without compromising on users’ safety and protection. The existence of suitable safeguards assists players in executing a live trial in the market without having to worry about the legal consequences.
The Dawn of the Regulatory Sandbox
Financial regulators across the globe understand the challenges and opportunities presented by innovations like digital-only banking, P2P lending, robo-advisors, and other fintech innovations. Some countries have taken the lead in ensuring that an ecosystem is created which helps startups experiment with their products and services without running afoul of current rules.
United Kingdom- The Pioneer
Seeing massive investor interest in this industry, the Financial Conduct Authority (FCA) proposed a regulatory sandbox as a part of its Project Innovate. It started accepting applications in mid-2016.
The UK has completed the successful testing of models from 18 out of 69 firms in the first phase and 24 out of 77 firms in the second phase. The sandbox has accepted 18 out of 61 firms for the third phase, and 29 out of 69 applications received qualified to the testing stage in the fuurth phase.
Participants in the UK sandbox came from sectors like retail banking, general insurance, retail lending, and wholesale lending. Around 35 percent of the participants in the secnd phase were from other countries, including the US and Singapore. The fourth cohort has almost 40 percent of startups experimenting with distributed ledger technology for disrupting traditional finance.
The UK regulatory sandbox includes:
A positive reaction from other global regulators.
The startup community’s eagerness is evident from each phase being oversubscribed.
It has reduced the time to get an idea to market. FCA claims that, during the first year itself, 90 percent of the firms were able to go for a commercial market launch of their product.
Also, many of the approved fintech companies were able to attract VC investment for their projects.
The second jurisdiction to launch the concept of a regulatory sandbox is Singapore. The Monetary Authority of Singapore (MAS) introduced its sandbox in June 2016. It has launched a range of schemes for interested startups. Till date, the country has the maximum regulatory alliances and has entered into co-operation arrangements with eight countries including UK, Australia, and Japan.
Since its launch, the MAS has guided over 140 applicants from around the globe. About one in five applications has been approved for experimentation.
Startups in crowdfunding, financial advisory, artificial intelligence, cross-border funding, distributed ledgers, and more were able to experiment under the MAS scheme. The sandbox has helped Singapore attract overseas startups to come and do business in the country. And it is contributing positively in making Singapore a Smart Financial Hub by allowing these young startups to form partnerships with traditional financial institutions.
The Consumer Protection Financial Bureau (CPFB) initiated the concept of regulatory sandboxes to ensure global compliance and to stimulate innovation in the fintech industry.
Arizona became the first state to open a fintech sandbox in the US by passing a legislation to create a Regulatory Sandbox Program. This program will enable finetch players to test their financial products without being subjected to the licensing provisions of the state. The move will come under the supervision of the Arizona Attorney General. Another state, Illinois, also on the footsteps of Arizona, has a separate regulatory bill (currently on hold) on the horizon.
Along with the regulatory sandbox, the US has also launched an ‘office of innovation’, which primarily focuses on blockchain and cryptocurrency technologies. The aim is to stimulate competition in the industry and expedite consumer advancement.
The participants included payment start-ups, financial technology companies, credit agencies, and lending companies.
The startups in the Arizona sandbox will be allowed to experiment with their financial products for a period of up to two years. The sandbox has promoted investment and job creation in the state. It will help improve the competitive position of the country in the global fintech industry. The concept has also helped early stage entrepreneurs surpass the legal hurdles with access to a trillion dollar opportunity.
The Ontario Securities Commission (OSC) launched its sandbox “LaunchPad” in February 2017. The government is said to create a “super sandbox” that will help foster communication between fintech players, financial institutions, regulators, and the government. It is a part of its 2016-2019 Business Plan to understand how technology affects the markets. An agency by the name Ontario Fintech Accelerator Office will also be instituted to provide assistance to start ups. The government plans to develop the retail payment and financial sector framework at the national level.
It has given a push to Canada’s innovation market as earlier, due to the domination of a few financial companies in the industry, innovation was slow. Now, it has allowed Canadian fintech companies to come forward and grow both locally and internationally. The new idea will benefit Canadian SMEs who could not access funding from traditional lenders.
The concept of regulatory sandboxes is currently running in over 20 nations. Apart from the countries mentioned above, Australia, Indonesia, Hong Kong, Malaysia, Denmark, and Thailand have sandboxes running to join the race. To promote interaction among participants at a global level, a GFIN (Global Financial Innovation Network) has been launched, aimed at knowledge sharing and facilitating cross-border testing of ideas. It is a joint effort of FCA and 11 other regulatory authorities. Organizations such as the US CFPB, Hong Kong Monetary Authority, UK FCA, MAS, and others, are a part of this network. The goal is to go past the idea of a sandbox and ensure that regulators are able to support the advancements in the fintech industry.
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half […]
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half day event included more than 500 speakers and 15 agenda themes.
Themes included :
Payments and Platforms
Banking and Personal Finance
AI and Deep Learning
Cybersecurity and Fraud
Alt Lending and Credit
Blockchain and Crypto
Digital Identity and Biometrics
And much more
While this is going to serve as a brief overview of the Conference, some of the notables who spoke, and bigger announcements, there will be special interest on Alternative lending and credit. We’ll also look at the all-important payments race.
A lot of the coverage is available on YouTube where Money20/20 has its own channel, so, if you missed the conference, you still have free access to some of the information.
Apple Co-founder Steve Wozniak is always a good bet to help you get a financial conference rolling. The business legend’s assurances that the claims that artificial intelligence (AI) and robotics, along with other forms of technology, are going to cut into human productivity are unwarranted helped to establish an ongoing theme that tech is necessary for the broader inclusiveness of our collective financial future.
Jennifer Bailey, VP Internet Services for Apple Pay, detailed some of the expansions of the new iPhone X, which include face ID security.
Other notable speakers from the first day of the conference included John Collison of Stripe, Michael Mebach, CPO of Mastercard (who spoke on how to build a seven-trillion-dollar middle class), Anand Sanwal of CB Insights, and Bill Ready of PayPal.
Day Two’s lineup of speakers was headed by none other than Virgin’s own Richard Branson, who told a remarkable story about how he created Virgin by renting a plane and selling seats to the other passengers scheduled to be on the American Airlines flight that was delayed. Sallie Krawcheck, Ellevest’s CEO and co-founder, had some valuable remarks on diversity, and Vanessa Colella, head of Citi Ventures and CIO of CitiGroup, shared some keen insights on partnerships.
Possibly the speaker from the conferences second day who made the biggest impression was Nikolay Storonsky, CEO of Revolut. The way money is moved is changing rapidly, but if Storonsky is correct in his predictions, it may change even faster. He predicts that in 10 years, two or three large fintech players will take 95 percent of banks’ business marking an industry overhaul akin to how Amazon bypassed the retail industry and Uber took on taxis.
Patrick Gauthier, VP of Amazon Pay, spoke to Tracey Davies’s central theme when he talked about the use of technology to make things simpler and more natural between the merchant and the consumer. Harley Finkelstein, CEO of Shopify, pointed out that middlemen will not be totally going away in the financial realm of the future, but they will have to “provide a disproportionate amount of value for their profit margin in the future.”
Other notable speakers included Asiff Hijri, president and COO of Coinbase, who framed the crypto world well when he spoke of the two base use cases of the space, the store of value of bitcoin and the ability to build apps on top of Ethereum, while noting that we’re still looking for that breakthrough app. His quote “Fintech before crypto, and the promise of a stablecoin…is like mobile before the iPhone came along” might be one of those “remember when” moments.
NBA legend Shaquille O’Neal also spoke on the third day of the conference. Now an advisor and advocate of Steady, the platform which helps Americans find work, says his partnership with these efforts is driven by recollections of a past where the only investments that paid off were those he embarked on in order to help others.
Much of what happened on Day Four is listed below, including the Uber/Barclays and the Grab/Mastercard partnerships, but the day also had some other mentionable happenings.
Marisol Menendez, head of open innovation for BBVA, introduced the overall winner of the 10th annual BBVA Open Talent competition, the reward going to Sedicii; founder Rob Leslie accepted the award. Sedicii provides a service that identifies data between two organizations without exposing the underlying data.
Also, adding some hope for the financial sector in general, Ripple’s Co-Founder and Executive Chairman Chris Larson stated that he thinks digital assets can help guard against another financial crisis by solving some of the key problems of global liquidity. He also predicts that a fluid digital asset (he thinks it will be XRP, of course) will make more fluid the trillions of dollars that are tied up due to the “clunkiness” of current systems.
Focus on Alternative Lending and Credit Cards
As instant payments and expanded remittance options gain more prominence in the world of payments and commerce, an app designed to speed up the remittance process, designed via Visa APIs, took top honors at the conference.
American Express and Amazon announced a partnership, which will produce a no-annual-fee business card. Cardholders (Amazon Prime members) will get to choose if they want to receive five percent rewards on any Amazon purchase (Whole Foods included) or 90-day payment terms, a reward that might benefit small businesses with cash flow issues.
Goldman Sachs’s Marcus Platform announced a new wealth management offering designed to make the financial market more inclusive for average Americans. The offering will focus on online savings accounts and personal lending, the end game being to educate customers on some of the ins and outs of the financial sector.
Grab Financial and M and A Mastercard announced a partnership that will make prepaid cards available to underbanked and underserved customers in Southeast Asia in order to bring them into the financial realm and allow them to conduct business globally.
Gregory Wright, CPO and SVP of Experian, touched on a common theme from the conference, that of businesses going forward by putting consumers first. He reinforced the platform’s focus on putting the consumer at the center of the lending decision by giving the consumer more control over his or her data to allow them to make a more informed lending decision. The goal is for lenders to make better decisions at lower risk while giving more consumers access to credit.
David Richter, global head of business and corporate development for Uber, joined with Curt Hess, CEO of BarclayCard US, to announce the unveiling of the Uber Visa card. A native app specifically designed for the Uber platform, the app will make it more engaging and enjoyable for Uber riders and Uber eaters to experience the platform. The card will also offer real-time notifications of rewards and balances, rather than customers having to wait a month for a statement as credit cards traditionally do.
Other Noteworthy Announcements
ViSync took the grand prize in the conference’s hackathon challenge. According to a Visa spokesperson, their entry, an app designed to help send remittance payments overseas, should make it easier for migrant workers to send money back to their home countries.
FICO announced an “Ultra” FICO rating. The new device will consider how people manage their checking accounts and will incorporate things like overdraft history to determine credit scores. The goal is to help younger people and others with little or no credit and people who are rebuilding their credit after a couple of setbacks.
Tracey Davies, president of Money20/20, also announced the Rise Up! program, the pilot of which took place at this event. Rise Up! seeks to increase inclusion into the financial sector on all levels. This pilot program, which will expand to other demographics in the future, focused on gender (women make up 50 percent of the population, but only 20 percent of leadership roles in the financial sector.). Of the 300 women who applied to the program, only 35 were selected. Those who were selected were privy to special seminars and one-on-one access to various leaders from the financial space.
The Payments Race
Knowing how we build points of sale, I wonder if the organizers of the original event knew just how apropos the payments race would be to the overall message of the Money20/20 events. Whether they did or not, the event serves to draw a good picture of how we use and interact with different forms of currency in our daily lives.
Closely resembling the scavenger hunt of the television series The Amazing Race, five participants were given six days to make it to Las Vegas for the opening day of the convention. They drew to see which host city will host most of their scavenging, and then they all have to make it to their city and then to Vegas. Along the way, they got points for things like the number of states they visited and the different modes of transportation they use.
The catch is this: Each participant was only allowed to use one form of payment; the options were
Team Credit Cards
Team Devices (Apple Pay and such)
The episodes—all of which can be seen on YouTube—show the obstacles in trying to perform these tasks with only the given form of payment.
As you can imagine, Team Checks had a hard time of it, and they had to rely on the goodness of many others to navigate their journey. Team Cash didn’t face as many obstacles, but travel required some finagling as they got deeper into the trip. Team Crypto had some transportation issues early on, but also relied on the kindness of others to make the necessary accommodations.
Team Credit seemed to have the most ease traveling—they just rented an RV and drove—and the representative from Team Devices said after it was all over that using only devices proved to be easier than she thought it was going to be; she did have to go to some pretty significant lengths to rent a car.
In all, the little series of videos showed the importance of various forms of payment and that we still haven’t gotten to the point where we can survive conveniently on one single form of payment; still, everything from the conference seems to speak to the reality that we’ll get there.
And how did the race turn out? Well, I haven’t seen an actual crowning, but Team Crypto was the first to get to the Las Vegas sign, which was basically the finish line—I haven’t seen anything that mentioned how each fared at the number of states visited or modes of transportation used. If Team Crypto did prove the winner, it was their second straight title.
The event will return to Vegas next year, the dates being October 27-30, 2019.
Alarmists are busy drawing parallels to fintech and the dot-com bust of 2000. But here’s why fintech has immeasurably more sticking power than the investment craze over Internet-based companies. Quick to talk. Slow to act. It’s a symptom of most innovations that come to the financial services industry, and there’s good reason for that. Financial […]
Alarmists are busy drawing parallels to fintech and the dot-com bust of 2000. But here’s why fintech has immeasurably more sticking power than the investment craze over Internet-based companies.
Quick to talk. Slow to act. It’s a symptom of most innovations that come to the financial services industry, and there’s good reason for that. Financial services, a sector that’s ripe for change, has long favored tradition. Banks have gone unchallenged for over a century in the marketplace.
But with the generational shift from Gen X to nearly 85 million Millennials, a new digital imperative is emerging. The widespread use of mobile has all but erased the need to visit a physical bank branch. The cost of computing has decreased drastically, representative in that two iPhone 6s contain more memory than the International Space Station. And sentiments toward centralized power in banking is met with distrust at a higher degree than ever before. Fintechs are edging in on low-margin business product offerings like payments with faster solutions and an eye toward the future user.
Fintech’s spotlight moment
It goes without saying that fintech is having its moment. Research firm The McKinsey Global Institute has tracked upwards of 2,000 fintech startups in this space, and estimates as many as 12,000 exist. The 2018 World Economic Forum at Davos discussed fintech at length in a panel of experts titled: “The Future of Fintech.”
There is no shadow of doubt among innovators that the change fintech provides is enduring. But with nervous investors watching Bitcoin’s volatility, it’s important to make the distinction of what makes fintech different from the dot-com boom.
Dot-com businesses operated in the market like a sugar high. Basic cash flow principles flew out the window as many companies skimped on proving their ideas actually had market potential. Speculative valuations led many investors to follow the buzz instead of looking at a balance sheet or profitability. And while it is true that the internet has immense power to displace brick-and-mortar businesses, the momentum was shortsighted. This caused a good number of dot-com businesses to run out of cash shy of the goal, rightfully spooking investors.
Fintech moves into “adulthood”
The difference in the fintech movement is two fold:
A growing distrust of traditional financial establishments, thanks to the housing market crisis of 2008;
Fintech’s unique symbiotic relationship with incumbent banks.
While the dot-com wave was tech’s early failure, fintech’s approach is more timely and measured. The market sector has matured with fintech services that deliver better technology and services to the customer alongside banks as a trusted repository of funds.
Building customer loyalty
Fintech’s current challenge is to draw customers. Banks have always focused on the customer relationship and have enjoyed an assumed level of trust that has gone unchecked for centuries.
But with the turnover from Generation X to Millennials, many of the younger generation are less likely to go with a traditional bank than before. A growing mistrust of centralized banks is one driver that’s widening the scope of traditional financial service providers. Wells Fargo’s recent payout in the amount of $185 million for opening fake accounts under customer names is just one example. According to a 2016 Gallup poll, America’s confidence in banks hasn’t shown signs of improvement since the 2007 recession, lingering around 30 percent.
Unlike traditional banks, fintechs have an approach that creates sticking power through lean operational principles. While banks have clunky legacy technology to deal with, fintechs can afford to serve customers at a lower cost due to better technology. Fintech’s focus on niche market segments means there are huge opportunities to outfit far-flung populations with digital solutions as is the case with the underbanked.
Clearing the regulatory bar
Playing nice with regulators will put fintechs into a winning stride. This is again where the dot-com bust missed the mark.
Forging ahead into the future without a game plan instead of forecasting the requirements for legitimate businesses has its price. Fintech outfits in the U.S. are expectant that the Office of the Comptroller of the Currency will pass down a special charter that will allow them to do business under slightly different terms as banks, but with a measure of prudent oversight. Things like compliance, security of customer data, and anti-money laundering efforts will boost companies on the fringe of the disruption onto center stage. As with most things, and especially fintech, there are no shortcuts.
Disrupting the banking industry is no small feat, but for those who make it out the other side, there are big rewards. The untapped opportunity made possible through technology is vast, but entrants strategic in their approach and operational standards will outlast the others. As with most disruptions, fintech is expected to persist, despite naysayers, although it may not transfuse the market with change as rapidly as some expect. There’s a reason they call it the “slow march” toward progress, but it doesn’t negate the fact that change is coming.
Written by Lauren Ruef, a research analyst at Nvoicepay.
With a host of services from payments, credit, and underwriting, managed services like branded customer support and accounts receivables services along with smart integrations for ERPs, CRMs, etc., MSTS is an all-encompassing platform that helps its clients reach their full B2B sales potential. Laying the Seed for Credit As A Service Multi-Service Technology Solutions (MSTS) […]
With a host of services from payments, credit, and underwriting, managed services like branded customer support and accounts receivables services along with smart integrations for ERPs, CRMs, etc., MSTS is an all-encompassing platform that helps its clients reach their full B2B sales potential.
Laying the Seed for Credit As A Service
Multi-Service Technology Solutions (MSTS) was founded in 1978 by a former trucking company owner who wanted to automate payments for trucking services. It used its expertise in business payments along with other technical ideas to devise a unique turnkey way to provide credit as a service to the B2B community. Over the years, the platform expanded into more technologies, assets, and verticals. However, the brand MSTS has not been able to get the due recognition it deserves because of the fact that the primary focus of the business has been in providing white label solutions. MSTS has now entered new markets, developed its smart technology, and, recently, unveiled the Credit as a Service (CaaS) offering to bring automation in the payment and credit system.
World Fuel Services (NYSE:INT) acquired the company in 2012 for $137 million.
What is MSTS?
MSTS processes $5 billion of volume through its platform. There are about 150,000 businesses that collect money and send invoices through the platform. MSTS operates in 32 countries and with 12 currencies as of now. The company is led by Brandon Spear who has been the president of the company for almost three years. He also has experience at marquee companies like SAP and Ariba.
MSTS introduced Credit as a Service (CaaS) to streamline the payment and credit management systems of its client base. The company is focused on acquiring large clients and serve their entire customer base. MSTS underwrites each customer on an individual basis and helps clients provide their customer base with credit without creating the mess usually associated with lending and overdue payments. The company is also looking to partner with players who can underwrite the portfolio of its customers’ debtors. Currently, the entire work is self-funded and the business has grown organically over time.
MSTS supports customers in growing their B2B relationships while extending credit to their customers. It provides a turnkey solution where it is able to help its clients figure out how to structure its B2B payment network, how to create a framework for credit to customers, collect dues, and manage their processes.
Core Competencies, the MSTS Platform, and Competition
The MSTS platform aims to solve problems in several industries. Spear shares a business case that has grown in retail and is now looking to establish itself in B2B; it won’t be able to hone B2B invoicing and credit collection skills overnight. The idea is to help the company establish a B2B channel to leverage its existing retail infrastructure.
MSTS provides a combination of technology, e-commerce infrastructure, physical point of sale technology, and the ability to have an omni-channel solution; this ensures a seamless experience for all participants in the ecosystem. Though its solutions are not industry-specific, it has deep domain expertise in B2B retail, manufacturing, automotive, and e-commerce sectors.
MSTS charges clients on the basis of the technology stack involved and the level of customization required by the client. So factors like ecommerce integration, physical POS, customer platforms, payment collections, overdues management, etc. decide the overall fee. The company aims to ensure that its fees are less than a credit card company’s; its average fees range around 1.75% of volume.
The Application Programming Interfaces (APIs) of MSTS are cloud-based and proprietary. The core stack of the business is Amazon Web Services, and the core technology used is RedHat Linux apart from other tech integrated for functionality.
The biggest competitors to MSTS are its clients looking to execute the process in-house. Young fintechs are currently not in competition because they only serve a particular segment whereas MSTS provides a single window experience. Banks with credit card departments are also possible competitors in the space. MSTS core competencies include:
Credit/Underwriting automation for an improved customer experience
Smart Integration with ERPs, e-commerce systems, banks, etc.
Business Intelligence to drive sales and provide customer support
Expertise at payments, movement of money, and collections
Consolidated payments with a guarantee of not exceeding limits & a consistent customer experience
MSTS and Customer Relationships
MSTS constantly endeavors to understand the needs of its customers to provide an end-to-end turnkey solution for them. From arranging for credit/underwriting to capital and a technological stack, MSTS executes it all under one roof. New platforms tend to specialize in only one step of the entire process and have usually no idea about how to solve services or capital needs. MSTS has a deep expertise in the verticals that it operates in and uses business intelligence to drive sales, big data and analytics to identify creditworthy customers, and helps its clients get a bigger share of their wallet. MSTS has packaged a version of Credit as a Service (CaaS) to facilitate credit management for smaller and mid-sized businesses considering the fact that such businesses face bigger challenges in terms of developing the B2B market. MSTS aims at making businesses successful by laying out the back-office stack and therefore fast-tracking processes.
Spear also shares the company’s thought process on the changing trends in the B2B industry. The purchase process in B2C industries has evolved, but the B2B industry has still some way to catch up. He believes that companies need to explore their B2B data as well as to draw insights from it. The company’s philosophy is that customers, whether B2B or B2C, need to have a great customer experience. MSTS is trying to manufacture that experience with its proprietary system for clients.
What Lies Ahead?
MSTS is working on exploiting the global market. It wants to establish itself in another 14 countries in the next two years and delve deeper in the verticals it currently operates in. The platform will continue to build out on the critical competencies in the market. Though it is not very well known, this white label provider is investing in its branding, and is focused on developing more sales channels for smarter penetration.
News Comments Today’s main news: OCC approves fintech charter. Microsoft, Nationwide invest in BlueVine. UK overtakes US in fintech investment. P2PFA members take in over 300M GBP from IFISAs. Today’s main analysis: Trump Administration hugs fintech. Today’s thought-provoking articles: Online lenders, payment companies can act more like banks. How Revolut reduced fraud by 30%. Chinese P2P lending under severe challenges. Fintechs […]
OCC moves forward with fintech charter. This has to be the best news of the year so far. Washington has long proven itself to be on the side of the status quo, so this long-awaited move was anticipated with some nervousness. The sitting president, however, being unpredictable, and his administration equally so, this isn’t as surprising as it seems, but it is most certainly welcome and should give another boost of momentum to the sector.
The Office of the Comptroller of the Currency announced Tuesday that it would move ahead to consider special-purpose charter applications from fintech firms, ending the guessing game over whether the agency was serious about giving fintechs a federal option.
The decision, unveiled just hours after the Treasury Department released a report endorsing a national fintech charter, means fintech firms that opt for the charter could soon be regulated more like banks on a national scale.
The Treasury Department released a report today with more than 80 recommendations that are aimed at tailoring regulations for nonbank financial institutions and encouraging the development of financial technology.
Online lenders and other so-called fintech firms — including the payment processor Square, the online lender Lending Club and the cryptocurrency exchange Coinbase — have pressed for regulatory routes that would let them cut through the thicket of state and federal laws that govern financial businesses.
Heeding those requests, the Treasury Department released a 222-page report laying out the Trump administration’s view on how nonbank financial companies should be regulated. Hours later, the Office of the Comptroller of the Currency, a national bank regulator, announced a new kind of charter that would potentially free such companies from the state-by-state approvals they currently need to offer loans and other financial products.
We appreciate the Treasury’s recognition of the vital role performed by state regulators in overseeing nonbank financial service providers. And we are pleased that Treasury noted the substantial progress states have made towards harmonizing the multistate experience for industry.
At the same time, we disagree with certain Treasury recommendations. We do not support creation of new federal rules or unauthorized federal charters that would seek to compromise the ability of state officials to apply and enforce state laws. And so, we disagree with Treasury’s recommended changes to the valid-when-made doctrine and the true-lender doctrine, and the creation of an OCC special purpose bank charter for fintech companies.
An OCC fintech charter is a regulatory train wreck in the making.
Fintech startup BlueVine has added $12 million to its recently announced series E round of funding, bringing Microsoft’s venture capital (VC) unit M12 onboard alongside the VC arm of finance giant Nationwide.
On average, veterans are getting, through us, about 2% to 3%lower interest rates than nonveterans. That’s an internal discount that we give. Comparing us to an OnDeck or a Kabbage, we are probably half the average APR of OnDeck and probably a quarter of Kabbage. They may disagree with that, but that’s our numbers.
Notably, a group of lenders that is currently not subject to licensing – those making loans between 7 and 16 percent – would have to become Licensed Lenders. As a result, those lenders would have to complete the licensing process, pay the associated fees, and would then be subject to supervision and examinations by the NYDFS.
Additionally, any nonbank that lends to a New York borrower, either directly or through a partnership, would have to comply with New York’s usury limit. This rule is already in effect for servicers that acquire loans originated by banks, due to the Second Circuit’s decision in Madden v. Midland Funding. However, the NYDFS recommendation would potentially expand that rule to loans originated by lending companies organized by Native American tribes, among other situations.
Gusto, which sells payroll, benefits and human resources management and monitoring services to small businesses, has raised $140 million in its latest round of funding.
The company said it will use the money to add new services to increase payment flexibility for employees. The company launched a new service called Flexible Pay, which gives employees a way to get paid no matter when a company’s pay schedule dictates. It seems sort of like a payday loan, where a percentage of the salary is taken by Gusto for providing money upfront.
Before I catch on the specific highlights for Q2, I’d like to restate, as I usually do, our commitment to use technology and advanced analytics to be the most responsible lender in our space and to make a positive impact in the lives of our customers. As Slide 3 shows, we’ve now extended more than $5.9 billion in credit to more than 2 million nonprime consumers. We’ve come to call the 170 million consumers in the U.S. and U.K. who are credit constrained, the new middle class. And we’re proud to announce on this call that Elevate products have now saved our customers more than $4 billion over what they would’ve paid for legacy products like payday loans.
Elevate Credit (NYSE:ELVT) updated its FY18 earnings guidance on Monday. The company provided EPS guidance of $0.55-0.90 for the period, compared to the Thomson Reuters consensus EPS estimate of $0.72. The company issued revenue guidance of $790-810 million, compared to the consensus revenue estimate of $803.81 million.
Several brokerages have recently weighed in on ELVT. Zacks Investment Research upgraded shares of Elevate Credit from a hold rating to a buy rating and set a $11.00 price objective on the stock in a report on Tuesday, July 24th.
A year in, Zelle’s reviews are mixed. Usage is up, but most banks haven’t signed on, meaning many consumers can’t use it without downloading a separate app. It also fell short of its goal to have 33 banks on the network by its first anniversary, and behind the scenes, it runs on plumbing that’s more than 40 years old.
Zelle’s rocky debut shows the challenges of trying to make alterations to an industry often slow to change and still weighed down by old infrastructure.
For startups, they are not the obvious places to settle down. While fintech is flush with venture capital, three states — California, Massachusetts and New York — gobble up 75% of all VC funds. Yet if there is a good time to go against the odds, it might be now. These days, it has become fashionable for venture capitalists to say they are scouting for opportunities beyond the coasts.
Most visibly, Revolution’s Rise of the Rest seed fund, co-founded by AOL co-founder Steve Case, continues to make a splash by investing in all kinds of startups across America to promote growth and increase investment capital. As Case blogged, “People know that the future of America is tied to more than just three cities, and there is an eagerness, now more than ever, to address the investment gap.”
Legislation to enhance credit scores by allowing consumers to include data about their monthly bills has broad bipartisan support, but some consumer advocates and others question whether the legislation may backfire on those it is meant to help.
The measure, which passed the House earlier this month and is authored by Rep. Keith Ellison, D-Minn., is intended to allow consumers to benefit from positive information about lease, telecommunications and utility payments in their credit reports. An identical version has been introduced by Sens. Tim Scott, R-S.C., and Joe Manchin, D-W.Va., in the upper chamber.
Last week, LendingTree acquired Student Loan Hero for $60 million. In an interview with Business Insider, Josuweit reflected on how his view of the student-loan industry had changed since launching his business.
Today, Student Loan Hero offers users financial-comparison tools and personalized advice for paying off student loans, rather than taking a one-size-fits-all approach.
Josuweit said he had also softened his stance on student loans in general. Where he once saw them as predatory, he now considers them a valuable tool when used wisely.
Blockchain’s Spring Labs names Peter Tapling, an identity and payments expert, as chief commercial officer and head of industry relations. He will be responsible for overseeing Spring Lab’s network development, industry awareness, partnerships and commercialization. He will report directly to CEO and Founder of Spring Labs, Adam Jiwan, and will be based in Spring Labs’ Chicago office.
The UK has overtaken the US in terms of fintech investment for the first half of the year, and taken the top spot in Europe to attract $16.1bn (£12.3bn) out of the EUs $26bn total.
Four of Europe’s top 10 fintech deals happened in the UK, which included a $250m raise by Revolut, $100m by eToro, $60m by Flender and $54m by Moneyfarm. Data provided by KPMG’s pulse of fintech report has allayed fears that Brexit would hurt the UK’s startup scene, as venture capital firms have cemented the UK’s position as a funding hot spot.
Fintech investment across the world reached record levels over the last six months, taking in $57.9bn across 875 deals. This was an increase of 34.2 per cent compared to the whole of 2017, which recorded just $38.1bn overall.
UK-based neobank Revolut launched disposable virtual cards in March , and has now reported that they resulted in a 30% reduction in card fraud cases.
Disposable virtual cards provide users with card details that get destroyed right after making an online purchase, and new details are made seconds after the previous ones are scrapped. This way, a merchant can’t charge the customer again, as they don’t have the person’s actual card information.
This fraud reduction announcement comes at the right time for Revolut. Earlier in July, we reported that the neobank had discovered potential money laundering activity on its digital payments system a few months back. It informed the National Crime Agency (NCA) and the Financial Conduct Authority (FCA), suggesting that the severity of the issue was high, as conventionally companies just inform the NCA.
It’s an industry that has often come under intense scrutiny, but the high cost short term loans sector has seen a significant increase in consumer confidence. This comes as a result of the FCA facilitating dramatic changes and the enforcement of new regulations. In fact, a recent review by the FCA has stated that the noticeable improvements in the payday loan industry means that it will now not be reviewing this sector again until 2020. We take a look at the reasons why the FCA has successfully increased consumer confidence in the high-cost short term loan industry.
According to the U.K. Peer-to-Peer Finance Association (P2PFA), a self-regulating P2P industry group that includes most of the biggest names in U.K. marketplace lending, the country’s P2P lending industry had hit £9 billion in loan originations from the group’s members as of Q1 2018.
The figures also reflected having provided finance for approximately 50,000 businesses and 221,000 individuals overall, with a total investor count of about 150,000. According to the The Times of London, those figures are even higher – though they agree on the 150,000 investor count, they think about £10 billion in total loans have been underwritten.
The Financial Conduct Authority, the UK’s chief financial watchdog, has just spent months investigating the sector, where it has already intervened with new rules once to safeguard investors. Now the FCA says the sector has further problems that must be addressed, including poor standards of disclosure, opaque pricing structures, over-optimistic marketing claims and poor record-keeping. It is consulting on a series of potential reforms and has also warned individual businesses in the industry could be investigated for compliance failures.
Much of the regulator’s ire is reserved for the peer-to-peer lending sector, where online platforms facilitate loans from investors to consumers or small businesses. While defaults have been relatively rare – though the regulator points out most platforms have not been tested through a complete economic cycle – the FCA is worried that investors are sometimes being given false expectations about the returns they should expect.
Past economic turbulence, the recession, and the uncertainty over Brexit and its impact on future investments, has made it imperative for every investor to keep an eye on their investments. Individual Saving Accounts (ISAs) are a great way to earn tax-free interest on your investment. But which ISA is the most profitable? This question can now be easily answered with the new online service offered by QuickISA.
Back then new platforms were launching pretty much every day as p2p lending became the hot new investment. The number of platforms grew to well over 3,000, a number that everyone agreed was not sustainable. But new platforms kept on launching, attracting both investors and borrowers with relative ease.
We all knew the party was going to end at some point and it looks like 2018 will be the year of reckoning. According to industry data provider, Wangdaizhijia (loosely translated as Online Lending House), platforms are failing at a rate of around five a day with 114 platforms shutting down between July 1 and July 24.
But in the lead up to the company’s IPO earlier this month – which continues to be a rocky one – its founder LEI Jun went all in to deliver his bigger vision: Xiaomi isn’t a gadget maker, it’s an internet company. One that gathers data from a network of smartphones and other internet-enabled devices, and sells additional “online services” – things like utility apps and content, created by partners. In other words, a platform business built around the Xiaomi brand and gadgets ecosystem.
Well, large parts of China’s P2P sector were crumbling after a government crackdown. For some, it came too late – they had trusted sites with their savings in hopes of getting the promised returns.
Xiaomi had an explanation: It doesn’t have anything to do with those lenders. It only let them use its platform for advertising purposes.
In the first half of 2018, the total assets increased significantly from EUR 445.2 million to nearly EUR 665.5 million. Customer deposits continue to be the dominant amount on the liabilities side with EUR 599.3 million and therefore 90%.
The company’s interest result increased due to the expanded lending volume from TEUR 2,047 in the first half of 2017 to TEUR 3,429 in the first half of 2018. The commission result remained almost constant at TEUR 8,108 in the first half of 2018 (30th June 2017: TEUR 5,818).
There were 70 mergers and acquisitions among fintechs in the U.S., Canada and South America in the first quarter, and those deals were worth a combined $3.4 billion, according to a fintech investment report issued by KPMG on Tuesday.
The number of deals fell to 60 in the second quarter, but the total value rose to $5.8 billion. M&A activity in this field is expected to remain “very healthy [in] 2018 on the whole,” the report said.
The investment flow is also breeding new companies looking for bank clients. American fintechs, the report noted, attracted $14.2 billion in overall funding in the first half of 2018.
What that means for all banks is when it comes to tech, there’s plenty to ponder: more options for their front- and back-office operations; more retail and commercial service improvements to consider; more new vendors that will be seeking their business; and more fintech investment opportunities to pursue.
China came in second place with $15.1bn, followed by the US with $14.2bn.
Four of Europe’s top 10 fintech deals happened in the UK, which included a $250m raise by Revolut, $100m by eToro, $60m by Flender and $54m by Moneyfarm. Data provided by KPMG’s pulse of fintech report has allayed fears that Brexit would hurt the UK’s startup scene, as venture capital firms have cemented the UK’s position as a funding hot spot.
Fintech investment across the world reached record levels over the last six months, taking in $57.9bn across 875 deals. This was an increase of 34.2 per cent compared to the whole of 2017, which recorded just $38.1bn overall.
The way I view it is that interval funds are a great blend of the traditional closed-end fund that Tortoise is used to managing, along with the traditional mutual fund that we also have managed in the past and still do. Compared to other registered fund structures, they’re obviously less liquid than a mutual fund and a traditional closed-end fund, but they’re great for more long-term investors that aren’t looking to need liquidity quite as often. From our fund’s perspective, you can subscribe daily. You only have the option to redeem at certain periods, and that’s typically between 5 and 25 percent on a quarterly basis. From a liquidity standpoint, obviously, this is nice for folks that aren’t qualified purchasers that aren’t getting exposure to traditional private funds in the limited partnership structure.
Estonia-based startup CoinLoan has officially launched its crypto-to-fiat lending platform that allow users to HODL crypto and borrow fiat money.
For borrowers, the platform allows them to create an application for receiving a loan in the amount that does not exceed 70 percent of the current market value of the crypto collateral. This limitation has been created for preserving the crypto assets of the borrower and reducing risk related to the high volatility of the crypto asset market.
The platform currently supports bitcoin, ethereum, Litecoin, Dash, ZCash, and Ripple. Users can borrow a loan in the following fiat currencies: USD, EUR, GBP, CNY, JPY, RUB, CHF, PLN and CZK.
A blockchain solution for global peer-to-peer lending is on the horizon, adding an exciting layer to an already booming sector which is expected to reach the $1 trillion mark by 2025.
The problem is, some aren’t excited by blockchain’s arrival. Experiencing Déjà vu? It’s easy to be transported back to the 1990s when the Internet was dismissed as just a “wasteland of unfiltered data”.
FintruX Network, the global P2P lending ecosystem, has just announced a new addition to its Board of Directors, Bob Rinaldi, a serial entrepreneur and business director. FintruX Network is an online ecosystem that facilitates the lending and borrowing of finances to small businesses in a peer-to-peer marketplace powered by blockchain and no-code development.
Heartland Bank says it’s planning a corporate restructure that will remove business growth constraints stemming from Reserve Bank regulation, and see it list on the Australian sharemarket.
The proposal is for a restructure of the Heartland Bank Ltd group of companies via a court approved scheme of arrangement under Part 15 of the Companies Act. The purpose of the restructure is to more clearly define the separation between Heartland Bank Ltd’s New Zealand and Australian businesses, and to enable it to access the most efficient forms of equity and debt funding, according to an NZX filing.
Over the past couple of years, non-banking financial companies (NBFCs) in India have undergone major transformations to keep up with the growing demand in the country’s credit market.
Subsequent to the ease in regulations, a number of new NBFCs were established to supply credit to consumers. However, access to financial services was only restricted to a small segment of consumers/ borrowers with existing credit histories and profiles.
On the other hand, the unbanked sections of the population, or those with limited exposure to institutional credit were not affected much with these developments, finding themselves in more or less the same situation as before.
Indonesian P2P firm Investree has announced the closing of a Series B investment in a round led by SBI Holdings and joined by Mandiri Capital Indonesia, Persada Capital, Endeavor Catalyst, 9F Fintech Holdings Group and previous backer Kejora Ventures.
The financial details of the round were not disclosed.
News Comments Today’s main news: Square, eBay partner on businesss loans. BNP Paribas launches UK fund for SME lending. Crowdstacker seeking 800K GBP on Seedrs. PPDAI to boost tech investment. Alipay, WeBank competition heats up. Today’s main analysis: The good news and bad news about Lending Club. Today’s thought-provoking articles: Americans are splurging on personal loans. How irresponsible mortgage lenders […]
eBay (Nasdaq:EBAY) and Square Capital (NYSE:SQ) have signed an agreement to provide up to $100,000 in credit to sellers – in as little as one day. The partnership is not only a streamlined offering of financing for small businesses that use eBay but also a whack at traditional banks which are mostly unable to match such a speedy lending agreement.
Scott Cutler, Senior Vice President, Americas at eBay, says that eBay is committed to helping their sellers and providing credit in partnership with Square simply makes sense.
For example, if you have $30,000 CC debt and good credit you can get a 3-year payoff at about 6% and a 5 year at about 7%. That is a big improvement over a typical rate of 17.5% on purchases and an amazing 23.5% on cash advances. So you take out the $30,000 loan, pay off your credit cards and save thousands in interest while you are at it. In addition, your CC is now zero and you can start using it again.
They came to market via an IPO late in 2014 and were an immediate hit rising over 50% their first day. They were immediately valued at over $9 billion. Today they are at less than $2 billion, a drop of almost 80%.
And finally here is LC’s chart since the IPO. Talk about ugly.
The stock of personal loans outstanding has grown to about $120 billion as of March, according to TransUnion data. That compares with $71.9 billion a decade ago—worth around $90 billion adjusted for inflation—when the subprime mortgage crisis crescendoed. About 17 million Americans have this type of debt which, unlike mortgages and automobile loans, isn’t collateralized by an asset.
Upstart financial technology companies like Lending Club, Prosper, and Avant account for about a third of this lending, up from less than 1% in 2010.
I believe the culprit is a new crop of lenders who are outside of Fannie Mae and Freddie Mac regulations on FICO scores and DTI. For example, San Francisco lender Social Finance (SoFi) is offering up to 3 million dollar loans with 10 percent down and “flexible DTI.“
Firms like SoFi are the engine driving the madness in the California housing market. Here’s what Michael Tannenbaum, former Vice President of SoFi, had to say about their loans in 2016, “Sixty-five percent of the business we do is first-time home buyers; it’s a big deal we’re opening up to the jumbo first-time market.” A year later, he was gone. Other gems from the San Francisco Chronicle article – SoFi’s average loan at the time was $800,000 and two-thirds were in California. I shudder to think what their average loan size and DTI is now. Also, in addition to not being big fans of debt to income ratios, SoFi isn’t big on using other traditional measures like FICO scores to evaluate borrowers. In 2016, they declared their company a “FICO Free Zone” in a press release. Said a former business development associate, “The volume of applications coming in was crazy.” Other sources reported on the wild sex culture at the firm. As for their underwriting practices? As long as housing prices went up, they were more or less irrelevant. But, if prices go down, SoFi and their backers stand to lose a lot of money.
Mike Cagney’s return to fintech’s center stage had been foreshadowed by a handful of reports suggesting that his new company would be focused on the origination of real estate-related assets and that, somehow, blockchain would figure into the mix. But Cagney, who played a foundational role in building SoFi into one of fintech’s biggest success stories before his departure, isn’t the type of entrepreneur who thinks small and nichey. With his new company, Figure, and the blockchain protocol it has built, Provenance, Cagney and his team of 80 professionals are taking aim at the gigantic world of institutional capital markets transactions. Why? Because that’s one place where the vig (i.e., rent-seeking) still sloshes around in copious amounts. But unlike SoFi, which is taking aim at banks, Cagney is now fixing his gaze on the administrators, trustees, custodians and other intermediaries who take a cut out of each securitization and other types of deals. On the eve of the first transaction to be put on Provenance (a HELOC), The FR’s Gregg Schoenberg sat down with Cagney to learn more about his plans and how blockchain is central to his mission.
Those who do not have the scores to secure loans from traditional lenders now have alternatives particularly in the form of P2P lenders. These platforms pool together money from interested investors and loan them out to borrowers.
They also have a much quicker turnaround compared to what customers might experience with banks and other large lenders. While these services started out only to fund smaller personal loans, some like LendingClub have grown and expanded to allow larger-value loans like mortgages to be made on the platform.
Blockchain-based lenders have built upon this crowdfunding concept and enhanced it with blockchain’s capabilities with smart contracts and tokenization. While initial efforts as espoused by the likes of
US-based personal finance management (PFM) company Even has raised a $40 million Series B funding round led by Keith Rabois of Khoshla Ventures, and including Valar Ventures, Allen & Company, Harrison Metal, Ron Conway, and Silicon Valley Bank.
Even integrates with attendance, payroll, and banking systems to help consumers improve their financial health. Its features include Instapay, which enables users to request the money they have earned before their actual payday, and it uses AI to give users an “okay to spend” amount, so they don’t get surprised by sudden expenses. Additionally, it offers an automatic savings feature, similar to other PFM companies including Acorns and Cleo.
LoanSnap, a San Francisco, CA-based developer of technology that protects people against dumb loans, raised $8m in Series A financing.
The round was led by True Ventures with participation from Baseline Ventures, Richard Branson’s Virgin Group, Core Innovation Partners, Joe Montana’s Liquid 2 Ventures, OVO Fund, Transmedia Ventures, and angel investors.
BlockFi, the leading cryptoasset to USD lender, announced today it has raised $52.5M to expand operations. Galaxy Digital Ventures LLC, a digital currency and blockchain technology investment firm founded by Mike Novogratz led the deal. This marks the industry’s first institutional investment in cryptoasset backed loans. BlockFi’s existing investors, which include ConsenSys Ventures and PJC, also participated in the funding round.
BlockFi planning rapid expansion of cryptoasset-to-USD lending platform
BlockFi partners with Galaxy Digital Lending LLC on loan purchasing facility and receives equity investment from Galaxy Digital Ventures LLC
Marks first institutional investment in cryptoasset backed loans
Tally, an automated debt-managing app, has raised $25 million in Series B funding with the goal of expanding its reach and finding new ways to alleviate consumers’ financial anxiety, Cheddar has learned.
ArborCrowd (the “Company”) today announced its Southern States Multifamily Portfolio (SSMP) investment has been realized ahead of schedule, outpacing targeted return estimates. One of the properties in the portfolio is located in Mississippi and sold in late 2017. The two remaining properties, located in Alabama, recently sold. The aggregate portfolio sales price was $25.85 million, generating an internal rate of return (IRR) of over 29% for ArborCrowd investors.
The transaction marks the first of ArborCrowd’s six deals to complete its investment cycle, and its success is a great sign of the long-term viability of the Company’s growing platform. The SSMP investment opportunity was quickly oversubscribed when ArborCrowd presented the deal on its platform in February 2017, raising over $2.1 million in just 5 days. The over 29% IRR generated by the sale of the portfolio far exceeded the targeted 17% to 20% IRR projected by ArborCrowd at the time of the offering.
Lendio, the nation’s leading marketplace for small business loans, today announced record growth across all areas of its business, including 90 percent year-over-year quarterly revenue growth. To date, Lendio has helped facilitate more than $900 million in financing to over 45,000 small businesses across the U.S. and Canada through its marketplace of more than 75 small business lenders. The growth milestone comes after an 80 percent increase in loans funded through the Lendio platform in the last year.
From July 2017 to June 2018, Lendio facilitated nearly $400 million in loans to more than 22,000 small businesses. The average initial loan size among Lendio’s small business customers grew to nearly $35,000. The top five industries funded through Lendio’s marketplace include construction, retail, restaurants, health care and information media.
Goodlord, a UK-based proptech platform, has formed a new open banking partnership with TrueLayer. Founded in 2014, Goodlord reports that its cloud-based platform is trusted by hundreds of agencies across the UK. The company has created a one-stop-shop by providing access to a dynamic suite of specialized services, including insurance, e-signing, referencing, and e-payments.
UK digital challenger Starling Bank is upping its design game with the launch of a new teal-coloured vertical debit card as it plays catch up with Monzo.
The new card has all customer details, including name, card number and expiry date, on the back – and it’s rolling them out this week.
The card is inspired by the blue-green tones of the plumage of the starling bird. It is also one of the initial group of 16 original “web colours” formulated in 1987 to display web pages, reflecting Starling’s digital heritage.
PPDai, China’s first online peer-to-peer lending platform listed in the US, said today it would increase its registered capital to 1 billion yuan (US$149 million) and expand its artificial intelligence applications to hedge risks and improve investor confidence amid concerns over P2P lending.
The Shanghai-based company, which has about 71 million users ,employs AI, Big Data and blockchain to fight against risk and fraud.
Alipay and WeBank are set up perfectly to take advantage of new priorities from Chinese policymakers to increase the flow of capital to small companies and households, their approach is different as WeBank looks to use bank partnerships to make capital connections.
Alipay uses scale, data and technology capabilities to compete with banks for deposits and funds its borrowing through the ABS market.
Alipay and WeBank plan to list their finance arms soon which will continue to put pressure on the rivalry as well as the broader financial market in China.
Analysing these questions is all part of the day job for Zennon Kapron, the head of fintech research and consulting firm Kapronasia. In this interview with China Economic Review, Kapron gives his take on some of the market’s recent developments, and explains why China’s fintech industry is such an exciting space to watch.
CER:How worried should we be about the recent panic surrounding China’s small P2P lending platforms?
ZK: The fact that P2P lending platforms are failing is not surprising. Many of these platforms had inadequate internal operational processes, poor lending practices, and in some cases, were just complete scams. What will be interesting to see is if retail investors will still want to put new money on these platforms. I get the impression at the moment that many investors are just trying to get their money out. Even if the P2P industry manages to right itself, it may find that all the investors are gone.
Another domino in China’s peer-to-peer lending industry fell.
Beijing-based iqianbang.com was the latest online P2P lending platform to close down. The company announced a “benign exit” last Friday night, citing “deteriorating online lending environment and drying up liquidity.”
Investors in several P2P platforms, including iqianbang.com, gathered Monday at a local Beijing police station to report the loss of money to police.
Zheng Yansen, the controller of peer-to-peer lender Guangzhou Leader Internet Financial Information Service has disappeared, the firm announced yesterday.
It also acknowledged that ‘some of its projects are delayed’ and said it will set up a work group as soon as possible to inventory its assets and businesses, request borrowers to repay loans earlier than scheduled, and liquidate collateral as quickly as possible.
FinLeap, the fintech start-up platform behind Germany’s SolarisBank, announced on Monday it has teamed up with Italian open banking platform Fabrick to launch a new financial management startup specifically for small businesses. According to FinLeap, the startup, called Beesy, will simplify accounting, tax and banking services for micro-enterprises and freelancers.
As soon as Beesy is launched, FinLeap added it will provide more details about the services and how they work.
Take Dutch-based Rabobank, for example, which now converts customer data to the Latin names of flowers and animals in order to comply with the General Data Protection Regulation that sensitive client information be disguised.
At the heart of all these regulations is the mandate that companies must make sure no one can access customer data who shouldn’t, and that every effort is made to protect that data from breaches. Storing customer data in the clear — not encrypted, anonymized, or pseudonymized — is not acceptable, to regulators or anyone else.
MoneyGram and Visa announced today (July 24) that they have partnered to deliver real-time digital disbursements to MoneyGram customers using Visa’s push payments platform, Visa Direct.
Launching in October in two key markets, Mexico and the Philippines, MoneyGram will expand its options in which receivers from those markets may receive and use funds instantly — via their bank-issued Visa-branded debit card or Visa-branded prepaid card — and senders may choose the option by which to send those funds. The partnership leverages the trust that consumers globally have in the MoneyGram and Visa brands, as well as the ability for receivers to access funds 24/7/365 without having to visit an agent location to pick up cash.
Realty services group Property Connect Holdings (ASX: PCH) has entered into a minimum five-year licence agreement to use a technology platform powered by marketplace treasury company Clearmatch, in the development and marketing of its own lending products designed to ease property market transactions.
The binding heads of agreement allows Property Connect to use the SocietyOne platform owned by Clearmatch to develop products focused on the emerging project development finance and residential mortgage sectors within the private peer-to-peer lending market.
Peer-to-Peer (P2P) lender, Monexo Fintech has partnered with Cube Wealth to provide clients with an alternative avenue for investments. The app-based wealth management firm’s user-base of 350,000 customers will have an option of placing a portion of their investments onto Monexo’s platform.
The P2P market space is only three years old and until last October operated without any regulatory oversight. While there are 3,000 P2P lenders in China with a total lending book of $500 million, the Reserve Bank of India (RBI) is said to have approved P2P licenses to around eight firms.
July 6th – 13th, 2018 QEII Centre, London UK Fintech Week is a series of conferences, exhibitions, workshops, hackathons, meetups and parties. Each day, the focus is on a different topic. There is also plenty of time for networking and meeting other innovators. The main conference/exhibition takes place at the QEII Centre in Westminster, but […]
July 6th – 13th, 2018 QEII Centre, London UK
Fintech Week is a series of conferences, exhibitions, workshops, hackathons, meetups and parties. Each day, the focus is on a different topic. There is also plenty of time for networking and meeting other innovators. The main conference/exhibition takes place at the QEII Centre in Westminster, but other events take place across the city of London, Canary Wharf and “Tech City.”
Expect 600-1,000 conference delegates per day from over 50 countries and 3,000 – 5,000 participants in events throughout the week.
Date: June 6-8, 2018 Location: The Neal Kocurek Memorial Austin Convention Center 500 E Cesar Chavez Street, Austin, TX 78701 Digital Banking is the leading and largest digital banking event in the industry, covering innovation in financial services for consumer and commercial customers around mobile, digital, AI, payments, RegTech, data, blockchain, API, channel and technology strategies. […]
Date: June 6-8, 2018
Location: The Neal Kocurek Memorial Austin Convention Center
500 E Cesar Chavez Street, Austin, TX 78701
Digital Banking is the leading and largest digital banking event in the industry, covering innovation in financial services for consumer and commercial customers around mobile, digital, AI, payments, RegTech, data, blockchain, API, channel and technology strategies.
Featured Speakers include:
Lisa Adams, Product Marketing Manager, Avoka
Duangporn Aphiraksatyakul. VP of Enterprise Risk Analytics, Bank of America
Dan Armstrong, Chief Digital Officer, BankMobile
Amir Ben-Efraim, Co-Founder and CEO, Menlo Security
Lisa Cook, Product Manager for the Digital Banking channel, FirstBank
Keith Costello, CFA, President and CEO, First GREEN Bank
Parker Crockford, Commercial Director US, Onfido
Jennifer Daugherty, Senior Vice President and Director, Omnichannel Strategy, Fifth Third Bank
News Comments Today’s main news: Kabbage to launch payment services. Funding Circle SME Income Fund limited force signal moves past key line. Zopa boosts TruFin results. DEPO launches to help lenders accept digital assets as collateral. Qudian stock drops 16.5%. Today’s main analysis: Deep dive into MFT 2018-2 vs. AVNT 2018-A (A MUST-READ). Today’s thought-provoking articles: Credit score improvement […]
Kabbage to launch payment services. AT: “Expansion is a good thing, and Kabbage has been making some great strides lately. Of course, there are a few ways to expand. Expanding services is just one of them, but a very important one.”
MFT 2018-2 vs. AVNT 2018-A. AT: “A very good, deep look at Marlette’s MFT 2018-2 securitization and Avant’s AVNT 2018-A. A great comparison. A must-read.”
GreenSky’s IPO is online lending litmus test. AT: “A very good look at GreenSky’s value versus LendingClub’s and Prosper’s. We can debate why the two latter have had struggles since their IPOs, but the industry is maturing now and GreenSky’s IPO could signal a new wave of online lending IPOs. If it does well, a floodgate could open. If not, the doors may shut for a long time.”
Decentralized lending: Is it too good to be true? AT: “A sober look at a new buzzword. Lenders should be cautious about jumping on the decentralized bandwagon and throwing about a word that might be misleading or confusing. If your lending business is truly decentralized, fine, but is that really a distinction that can drive value?”
Kabbage Inc, a U.S. online lender for small businesses, plans to launch payment processing services by year-end, President Kathryn Petralia said on Monday, helping it to diversify and compete more directly with industry leaders PayPal Holdings Inc and Square Inc.
The Atlanta-based startup will offer tools to enable clients, mostly brick-and-mortar businesses, to accept card payments in-store and online, Petralia said in an interview.
This week we compare 2 very different MPL personal loan securitizations – Marlette’s MFT 2018-2 Prime deal and Avant’s AVNT 2018-A Near Prime deal.
AVNT 2018-A has lower average loan size by $6,435, shorter weighted average loan terms by 9 months and higher WAC by 16.28%. This is a reflection of the quality of borrowers that Avant and Marlette target. Marlette’s prime borrowers have higher weighted average FICO scores by 59 points than Avant’s near prime borrowers. The geographic distribution is quite similar between the two deals.
Bond Characteristics and Pricing
The significantly higher WAC on AVNT 2018-A leads to a 14.8% pickup in excess spread. KBRA’s base case loss estimate is 7.4% higher on AVNT 2018-A, which leads to a 7.4% higher loss-adjusted excess spread on AVNT 2018-A.
AVNT 2018-A has 3.3% lower O/C which is compensated by 14.8% higher excess spread. The A tranches have similar CE in both deals but Marlette’s A is rated one notch higher.
The introduction of tighter underwriting criteria continues to pay off for the online consumer lender Avant.
The company, which was founded in 2012 and is based in Chicago, was able to lower the credit enhancement, again, on its latest securitization, the $221.9 million Avant Loans Funding Trust 2018-A.
Kroll Bond Rating Agency assigned an A- to the $149 million senior tranche of notes to be issued, which benefit from 38.42% credit enhancement. That’s down from 41.8% on the comparable tranche of its prior transaction, completed last year.
LendingTree today released its study on the top places with rising credit scores. With credit scores being a crucial component of personal financial stability and opportunity, LendingTree analysts decided to look at anonymized My LendingTree users who logged into their accounts in both the first quarter of 2017 and the first quarter of 2018 to determine the top metros for rising credit scores among the 50 largest in the United States.
Below are some of the key takeaways from the study.
Jacksonville, Indianapolis, Denver and Tampa saw the highest rate of rising credit scores among the 50 biggest metros from Q1 2017 to Q1 2018.
Virginia Beach, Va., Los Angeles and Birmingham, Ala., had the lowest rate of rising credit scores, with 47 percent of Virginia Beach users raised their credit scores.
San Jose (Silicon Valley) saw the most dramatic rises in credit scores, with the highest rates of people who raised their score by more than 75 points and 100 points.
In the majority of the 50 metros analyzed, more than 50 percent of users improved their credit scores between Q1 2017 and Q1 2018.
About one in three increased their scores by over 20 points, and 3.5 percent were able to improve their scores by 100 points or more.
It wasn’t long ago that online lenders were ascendant. More than $3 billion in capital from investors as diverse as Japanese conglomerate SoftBank GroupCorp. and celebrity chef David Chang gushed into lending startups in 2015, according to Dow Jones VentureSource. Analysts at Morgan Stanley predicted that year that the nascent industry would account for 10% of all unsecured consumer and small-business loans by 2020.
Investors soured on the sector. Shares of LendingClub, which once had a market value of about $10 billion, are down 77% from their IPO price. Prosper’s valuation was slashed by more than two-thirds in a private fundraising round last year.
GreenSky said in its IPO filings that it has facilitated more than $12 billion in loans to consumers for home-improvement projects and elective medical procedures.
Part of GreenSky’s advantage comes from its relatively low customer-acquisition costs. LendingClub’s biggest expense is sales and marketing, which last year rose to $229.9 million, equivalent to 40% of revenue.
Recently, Bank of America, Chase, and Citigroup joined Capital One and Discover in banning cardholders from using them to buy cryptocurrencies. Credit cards were one of the most popular payment methods because of their relatively low fees and instant transaction rates, and investors are having to look at other options to make their investments.
You can borrow money from a family member or friend, or you can use a peer-to-peer lending platform like SoFi to leverage funds for Bitcoin investments. However, be cautious when borrowing money for an investment. Interest rates can eliminate any gains you get from the investment, and the risk of losing money in such a volatile market is high.
The acting director also responded to a question about qualified mortgages which has left the industry scratching its head since. Was Mulvaney separating fintech marketplace lending from traditional mortgage lending, or was he drawing a line between depository mortgage and non-depository mortgages?
Legislation that would ease banking regulations — and modify rules governing credit reports and some consumer loans — is headed for likely passage in Congress any day now.
The bill cleared the Senate in March with some bipartisan support and is expected to be voted on by House lawmakers this week, perhaps as early as Tuesday.
The measure rolls back some of the regulations imposed by the Dodd-Frank Act of 2010. That legislation came on the heels of the financial meltdown that rocked the U.S. economy a decade ago, when risky and unaffordable mortgages contributed to millions of homeowners losing their houses to foreclosure.
Main Street banks are feeling squeezed by competition from new rivals: nonbanks like hedge funds and private-equity firms that are elbowing into business loans.
Growth in business lending has picked up recently—it was up 3.3% year over year as of May 9, according to Federal Reserve data released Friday, after falling below 1% earlier this year. But the growth rate is still far below where it’s been in recent years, when loans to businesses grew at a double-digit clip for much of 2014, 2015 and 2016.
The board members of R Bank in Round Rock, Texas — who include the Hall of Fame fireballer Nolan Ryan, a co-founder of the bank — hold accounts there, and they, like most other patrons, knew its old technology made for clunky customer service.
So, says president and CEO Steve Stapp, he channeled those irksome experiences into board support for an investment in a systems overhaul at the $455 million-asset bank.
Blippy, which was hyped up to a $46.2 million valuation back in 2010 before the world realized that almost nobody wanted a dedicated network for sharing and viewing each others’ purchases. Well, guess what? Someone’s trying a Blippy-like thing again — this time, in the form of a new app called Vota, which automatically records your credit card purchases and the places you visit so you can share them with friends or family, or view them privately for your own reference.
As a byproduct of this data collection, you may spot credit card fraud or other errant charges, too, or just get a handle on your spending.
Optimal Blue is proud to recognize enterprise SaaS digital mortgage solution leader, Capsilon, as its first strategic partner to complete certification with the highly anticipated Pipeline & Lock Management APIs. By debuting these innovative system-to-system API interfaces in the mortgage industry, Optimal Blue has enabled Capsilon’s digital mortgage platform to fully support the creation, management, registration, and locking of first-lien mortgages instantaneously with Optimal Blue. As a result of this advanced integration, a completed application and pre-approval are done in half the time of the traditional back-and-forth processes, empowering loan officers to be more competitive in today’s purchase market and win more business from real estate agents.
The company on Monday announced the creation of Accelerate, a new initiative to drive growth at scale for the fast-evolving fintech industry, reflecting the company’s ongoing commitment to this sector.
Designed to operate alongside its successful Start Path program, Accelerate will broaden Mastercard’s engagement with the payment fintech community including the next generation of digital banks.
TruFin, the AIM listed fintech lender and payments provider, has released its first set of annual results following on from its public listing back in February. The numbers show a 7.67 per cent uptick in its valuation of its stake in p2p lender Zopa in 2017.
TruFin, which says it used an external company to aid the valuation of Zopa, re-valued its holding upwards by £2.6m to £36.5m over the course of the year. The firm, which was spun out of hedge fund Arrowgrass’ fintech holdings, holds a c.15 per cent stake in Zopa bought by Arrowgrass in 2014 for £15m. TruFin was set up by Henry Kenner, one of the founders of Arrowgrass, who is also its CEO and chairman. The hedge fund itself was launched by a group of Deutsche Bank traders in the wake of the financial crisis, including Kenner.
Advice doled out online or via smartphone apps, referred to in the industry as “robo advice”, aims to cut costs for customers looking to save or invest. It also seeks to foster innovation and increase competition in financial services.
But the Financial Conduct Authority (FCA) said two reviews of the industry uncovered problems among early entrants.
Following our exclusive report from earlier this month that Jamieson Blake, Head of Client Experience at the FCA regulated London based arm of ADS Securities, had resigned from the company, LeapRate has now learned that Mr. Blake has landed – at specialty lending and retail investment firm Basset and Gold, as Head of Relationship Management.
Shares of Qudian (NYSE:QD) closed down 16.5% on Monday after the Chinese online lender announced earnings that fell short of expectations.
Qudian reported “diluted adjusted net income per share” of $0.16 but GAAP diluted net income per share of only $0.15 per share. Whichever yardstick you use, though, these numbers appear to be lower than the $0.17-per-share estimate quoted on Yahoo! Finance. Revenue, on the other hand, came in at $273.7 million, significantly above consensus expectations for $214.6 million.
Following a similar model as traditional depository services, DEPO gives lenders the freedom to accept digital assets as loan collateral. The platform also allows borrowers to keep ownership of their digital asset during the entire loan period. The platform also protects future financial gain of the asset for borrowers with its decentralized design.
By employing the DEPO platform, lenders will be able to accept cryptocurrency as collateral for loans. To be protected, lenders can request additional collateral, or a partial sale of the asset should the market become excessively volatile at any time during the loan period.
The history of Naspers, the parent company of PayU.
What PayU does and the markets where it operates.
Why Matthias decided to leave PayPal after 12 years and move to PayU.
How PayU approaches going into a new international market.
The Naspers investment in Chinese giant Tencent and the PayU footprint in China.
Why the number one country PayU is focused on today is India.
Why they invested €110 million in Kreditech and how they are leveraging that partnership.
The point of sale lending product they have launched in India with Kreditech.
The biggest growth drivers for PayU over the next 12-18 months.
New Insight will change the way you think about data (Instantor Email) Rated: A
Today Instantor, the Swedish fintech company making financial decisions easy, announces Insight. A new product that will transform the way financial organisations assess risk for loan applicants. By using robust machine learning, Insight analyses more than 70 predictive features and insightful patterns in historical banking, and can be used to make better risk and opportunity decisions. Instead of having a risk team spending months testing risk models, Insight ́s intelligent features will build the most optimal risk model using the clients own data and can be up and running within a week.
Untie Group used to be several companies, the largest of which were Bricknode and Lendytech. They had a common founder in Stefan Willebrand and used, at least to a degree, the same self developed software. Also a number of people have gone from one firm to the other over the years.
Since the rise of cryptocurrencies, the term “decentralized” seems to be everywhere. Decentralization has been proposed in many industries as a way to heighten transparency and make transactions simpler. One field in particular which has shown great potential for the application of decentralization is money lending. As many might rightly ask, don’t we need banks who are willing to take the financial risk and approve loans? As it turns out, maybe we don’t.
The report, entitled Whose customer are you? The reality of digital banking, shows that 73 per cent of bankers believe retail banking will be at least 80 per cent automated in the next two years. A further 78 per cent see ‘platformisation’ steering the market in the future.
71 per cent of respondents are focusing their digital investment budget on cyber security, up from 34 per cent last year. Yet a mere 17 per cent are thinking about the risks of third-party integrations under Open Banking.
The new FinTech lending model opens new opportunities to people who were not able to borrow from traditional banks and other financial institutions because of the poor credit history and other factors. Such loans are now available to the new groups of people who need an instant funding, for instance, small business owners, students etc. In particular, entrepreneurs got a chance to get a loan without collateral, which a while ago was a real obstacle for many business owners.
Today we are already witnessing a drastic change in the lending model that existed for centuries. Consumers want to have a more flexible way to lend money but most importantly, they want this process to be quick. The FinTech industry already gave us this opportunity and hopefully, the following changes will be for the better.
There are currently two major issues with crypto payments – currency volatility and network transmission time. The recipient wants to receive the exact amount owed them. But, because cryptocurrencies are volatile and experience rapid price changes multiple times every day, that’s a difficult task to handle for crypto payment providers. Price swings can be more […]
There are currently two major issues with crypto payments – currency volatility and network transmission time. The recipient wants to receive the exact amount owed them. But, because cryptocurrencies are volatile and experience rapid price changes multiple times every day, that’s a difficult task to handle for crypto payment providers. Price swings can be more than 20% a day, so many merchants don’t accept crypto assets payments. Also, the merchant wants the payment instantaneously and is not willing to wait for it under any circumstance.
To solve these issues, Ben Way, CEO of Digits, conceptualized a new instrument he calls a hedge lending network. This is a service that provides instant loans thereby enabling its users to pay with fiat currency using their cryptocurrency. Its framework runs on a machine learning algorithm and is the first time the concept of hedging and lending has been combined together in a financial instrument.
How Hedge Lending Works
In the process, the user swipes his Digits registered card for making a transaction. Let’s say $100 is turned into a smart contract-backed loan, which is paid for by the hedge lending network. The merchant receives the money instantaneously. The $100 becomes a loan for the customer for a period of 366 days. If the consumer does not pay back the loan, the crypto is taken out of her wallet after the 12 months, gets liquidated, and the lender is paid back.
The customer is able to save almost 33 percent in capital gains if she is able to wait out the one-year period for holding a crypto asset. She can pay the loan back within 12 months and get her currency back. If she had spent $100 while her crypto asset doubled in price, she can pay the original $100 and take her cryptocurrency back. It’s similar to an escrow account in that it can either be liquidated or paid back. At the end of 366 days, the transaction is liquidated and the lender gets the money or the borrower pays it off, taking the difference.
The Hedge Lending Network uses the lender’s invested fiat currency in exchange for the Digits user’s cryptocurrency-backed smart contract. In doing this, Digits can overcome the payment issues faced when customers pay in cryptocurrency. The main objective is to find the lowest interest rates and reduce the cost of the network to the minimum possible level. Apart from this, the lending network accounts for volatility, as wel.
If a cryptocurrency price goes up during the transmission time, Digits takes the gain and puts it in the buffer to account for the decreases in crypto prices during transmission. Being currency agnostic, the firm supports every cryptocurrency the interacting exchange supports. Currently, Digits works with Coinbase with relationship expected soon for other crypto exchanges. The company has its own wallet system and does not need to prepay for transactions. This is important in its journey to scale up and support the payments ecosystem.
The Benefits of Paying Through Digits
Way estimates that, by 2025, five percent of the population will be using a crypto wallet. Digits turns any credit or debit card in the world into a means to pay with cryptocurrency assets. The solution is extremely elegant as it settles on the MasterCard and Visa Network and allows any existing card to be converted into a crypto card. The user just needs to type in his credit card details and connect it to Coinbase for making the crypto payments. The Digits technology interrupts the payment, executes the necessary conversions and then settles the transaction on the existing network only. This allows the merchant and MasterCard/Visa to not deal with cryptocurrencies, a major hurdle in the growth of crypto payments thus far.
Way and Co-Founder Laura Wagner founded Digits in September 2017 in the San Francisco Bay Area. Way had been a tech prodigy from a very young age. When he was six, he received a laptop that helped him enter the world of technology. At 15, he was earning good money online consulting with people to solve their computer issues. He later founded Pulsar, an e-commerce search engine that went on to raise $33 million.
That company eventually failed during the dotcom bust of 2000-2001. He lost everything he had, but he was able to start over and launched multiple companies and projects over the years since.
During the Clinton years, Way was a senior consultant to the White House on matters of technology. He is currently the CEO of Rainmakers, one of the first incubators in Europe and has helped launch around 200 companies.
Priot to starting Digits, Way was associated with a traditional payments company where he learned a lot about the payments industry and its inherent complexity. Being there, he realized how difficult it was to use cryptocurrency in the real world and came up with an idea to build a crypto payments company to make paying with cryptocurrency as easy as paying with a credit or debit card. This led to the launch of Digits.
For the last six months, he and his team have been building the platform and the technology. Currently, they are in the Pre-ICO stage on their way to raising $50 million.
Digits is currently in the alpha phase and Way expects a product release in the next six months. He believes there is little competition in this space right now. There are a few crypto lenders and hedgers, but no one has been able to combine the two in a way Digits has accomplished. He wants his competitors to use his technology stack to build new products for their clients and believes this will allow for the entire space to grow.
Cryptocurrencies were expected to change the way our payment systems work. But almost nine years after the creation of Bitcoin, the ability to pay via crypto assets is restricted in the real world. Ben Way has come up with an innovative solution that will end the difference between a debit/credit card payment and a crypto card payment without interfering in the present debit/credit card system.
Digits is looking to capture a segment that has some major competition. But the company’s ability to transmit payments instantaneously without having the merchant or payment processors touch cryptocurrences and simultaneously create a potential 33 percent capital gain tax savings for the user is a win-win for all involved.