China is the second largest economy in the world with a GDP of $11.8 trillion, and it’s the home to many mega banks and lenders. Like the US, savers investing in bank deposits were not getting good enough returns and small borrowers were being crowded out of the formal lending system by big corporations. P2P […]
China is the second largest economy in the world with a GDP of $11.8 trillion, and it’s the home to many mega banks and lenders. Like the US, savers investing in bank deposits were not getting good enough returns and small borrowers were being crowded out of the formal lending system by big corporations. P2P lending looked like the perfect solution; it cut out the middlemen and democratized borrowing. As a result, China rapidly became the largest P2P market in the world. But the explosive growth of the P2P market in recent years has exposed the gulf of problems that have been plaguing the online lending market in China.
Numbers don’t lie
According to Beijing Bureau of Financial Work, nine out of 10 P2P lending platforms will find it difficult to survive 2017 once the government fully rolls out its stiff regulatory supervisions. Only 500 (approx 10%) P2P companies out of the total 4,856 across the country are expected to remain in operation after this year, according to the same report.
Chinese regulators have introduced tougher requirements for P2P lenders to stay in business. Every P2P lender now needs to appoint a custodian bank and needs to provide a full disclosure of the use of deposits. There are other variables like risk management, shareholder credibility, and the scale of business in play, as well. A lender not passing the review will eventually have to liquidate.
Raison d’être
In the beginning of 2016, Ezubao was one of the largest P2P lending platforms in the country. It was launched in 2014, but because it offered a lucrative rate of return (9%-15%) it quickly managed to attract a lot of investors. The company was actually running a Ponzi scheme and scammed 900,000 investors out of over $7.6 billion. It was the biggest Ponzi scheme in Chinese financial history. Reports said 95% of all listed borrowers were fraudulent. Such a massive fraud obviously woke up the regulators, and they came cracking down on the entire industry.
Fall of the giant: Hongling Capital
Hongling Capital was founded in 2009; it was one of the earliest and biggest P2P lending platforms in China. The pioneer P2P lending platform, once considered a benchmark in the industry, declared it will exit the online lending business and pay off investors by selling collateral properties. Though Hongling Capital was the largest P2P platform in terms of trade volume, the platform has barely made any profits. In 2016, the platform lost 183 million Yuan ($27.4 million).
Hongling Capital was established to provide small and medium enterprises easy access to capital, something they were not able to get from traditional banks and financial institutions. But it was its “guarantee of principal and interest” which set the platform apart from its contemporaries.
“Big Loan Model”
Another bet that went wrong for Hongling Capital was its “Big Loan Model.” Projects which required financing over 100 million CNY were considered “Big Loans” and Hongling matched the investor money with big projects. Considering that the majority of these projects had been rejected by traditional banks and were subprime meant it was a risky proposition from the get-go. The company, for example, granted 50 million Yuan in loans to China Huishan Dairy Holding. The company defaulted on its debt in late March. Loans like these were a major reason for Hongling Capital’s deep troubles.
The platform now has over 20 billion Yuan ($3 billion) assets to settle, which includes 5 billion Yuan ($750 million) of non-performing assets and 800 million Yuan ($120 million) of bad debts. As of August, Hongling Capital has 1.85 million investors, and the accumulated trade volume is 274.7 billion Yuan ($41 billion).
Regulation by Chinese Banking Regulatory Commission (CBRC)
In August 2016, CBRC released “Interim Measures for the Management of Business Activities of Internet Lending Information Agencies.” The report clearly stated “on a single platform, the personal borrowing balance shall not exceed 200,000, and the enterprise shall not exceed one million” and “p2p platform must not provide vouching or principal and interest warranty for investors.”
This regulation hit the two cornerstones of Hongling- guaranteed payments and big loan models and rendered the company’s business model obsolete.
The online lending industry knows there are more restrictions to follow. People’s Bank of China and 17 other regulatory authorities issued a notice in July stating: “Effective measures must be taken to ensure that the number of internet financial entities and the scale of business operation are cut down.”
This goes to show that there is a concerted effort by the regulators to curb the P2P lending sector and ensure that all non-serious and fraud actors are removed from the ecosystem
Conclusion
Well, it is clear that Ezubao is not the only bad apple in the system. There are hundreds of P2P lenders which have evaporated in thin air and the existing regulations will lead to a major shakeup. Though this might be detrimental in the short term, it was necessary for the survival of the industry in the long run. Now investors will understand the risks facing them while investing in such schemes, and would be focused on collaborating with only compliant P2P lenders. It will force platforms to re-look at their business models and ensure sustainability is given precedence over growth.
News Comments Today’s main news: Earnest has Barclays looking for a buyer. Kabbage raises $250M. KBRA assigns preliminary Kabbage Asset Securitization ratings for Series 2017-1 Additional Notes. Funding Circle revamps website. Today’s main analysis: Small Business Credit Survey. Today’s thought-provoking articles: How good is POS financing? How the People’s Bank of China is changing online payments. Goldman Sachs on China’s […]
Affirm leads in POS financing. AT: “While Affirm may have an early lead in U.S. point of sale financing, competition is heating up. Klarna leads in Europe and has entered the U.S. market with force. Other companies are getting in on the action. It will be interesting to see how this sector develops in the next 2-5 years.”
PayPal acquires Swift Financial. AT: “This acquisition significantly increases PayPal’s ability to provide small business loans. The money transfer and payments processor has made some bold moves lately and looks to be shaping up its fintech and lending portfolio. PayPal could become a powerhouse in lending.”
Vanguard posts unrivaled digital platform AUM. AT: “I think it’s interesting that a traditional money manager is leading in assets under management when their are robos who pioneered the industry–heck, created the industry–and aren’t even close.”
Fintech company Kabbage completed $250 million in financing from a subsidiary of SoftBank Group.
According to the company, this investment represents the largest equity raise in the online small business lending segment to date and brings Kabbage’s total equity raised to nearly $500 million.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of additional Series 2017-1 notes (the “Series 2017-1 Additional Notes”) issued by Kabbage Asset Securitization LLC.
Kabbage Asset Securitization LLC (the “Issuer”) issued $525 million of Series 2017-1 Class A, Class B, Class C and Class D Notes (collectively, the “Series 2017-1 Notes”) on March 20, 2017. The Series 2017-1 Additional Notes include $25 million of additional Series 2017-1 Class A, Class B, Class C, and Class D Notes (together with the Series 2017-1 Notes, the “Notes”). The ratings for the $525 million of original Series 2017-1 Notes will be confirmed in conjunction with the issuance of the Series 2017-1 Additional Notes. The Series 2017-1 Additional Notes will have the same terms as the corresponding classes of Series 2017-1 Notes, including same Note Rate, Advance Rate and Legal Final Payment Date. The proceeds of the sale of the Series 2017-1 Additional Notes will be used to provide extra funding capacity for Kabbage.
Not surprisingly, there is a lot of easy money to be made in loans. If we look at the CB Insights list of unicorns, we see 211 of these mythical creatures grazing in a field of rainbow colored grass. If we break these unicorns into categories, here are the top-3:
eCommerce/Marketplace – 16%
Internet Software and Services – 13%
Fintech – 12%
When we drill into the fintech category, we see that just over half of the companies are based in the USA (13 fintech companies). Of these 13 fintechs, almost half are enabling people to spend money they don’t have:
Social Finance – $20 billion in loans funded (vs. just $1.45 billion in savings)
Credit Karma – Helps you see how much money you can borrow
Greensky – Instant credit decisions
Avant – Personal loans using artificial intelligence (AI) for credit scores
Prosper – Loan money to your neighbors so they can buy more isht
Kabbage – Loan money to small businesses at ridiculous rates
San Francisco startup Affirm has taken in a whopping $420 million in funding so far from high profile investors like Andreessen Horowitz, Khosla Ventures, Morgan Stanley, and Peter Thiel’s Founders Fund.
The ability for Affirm to be right there at the point of purchase is what puts them in front of everyone else who is trying to finance purchases. When you select Affirm, then you’re required to create an account after which your ability to pay is assessed.
This is not a revolving line of credit, but rather each transaction is evaluated on its own merits. The transactions are reported to Experian so that you can build up your credit to buy even more isht. For the privilege of instant credit at the point of purchase, you’ll pay between 10% and 30% APR simple interest.
San Francisco fintech Earnest has hired Barclays (NYSE: BCS) to help it find a buyer and raise $50 million in equity, a “dual track” process that could see the company sold for around $200 million, The Information reports.
A sale of the online lender at that price would be lower than previous valuations, which have been pegged higher after the company raised $200 million in debt and $100 million in equity.
Startups are of particular interest since they account for 34% of all small employer firms and play an outsized role in U.S. innovation and productivity. Young firms are the drivers of job growth in the United States, accounting for nearly all net new job creation and almost 20% of gross job creation. Yet, even as their importance has become more widely recognized, the rate of startup creation has been decreasing for years. And, of those ventures that launch, failure rates are high. Approximately one-third of new establishments fail within their first two years, and half fail within five years.
While funding is the lifeblood of every company, capital is especially critical for startups. To reach scale, startups need to be able to secure expansion capital. The Report on Startup Firms offers detailed intelligence on startups’ financing needs and challenges, asking questions about capital requests, borrowing qualifications, applications and success levels.
This report addresses several important borrower-centric questions:
How strong is demand for financing among startups?
Are startup firms seeking financing and credit from traditional lenders, or are younger firms attracted to new capital sources?
How successful are new firms in obtaining financing, and how do they rate their experiences with lenders?
PayPal Holdings Inc. ( PYPL) has acquired online lending firm Swift Financial in an effort to expand the online payments company’s business that offers working capital to merchants, Reuters reports.
PayPal will now be able to offer term loans of up to $500,000 to its larger merchants while taking advantage of Swift’s data and capabilities.
Policymakers pushing to scale back regulation have relied heavily on a core argument — bank lending is being held back by post-crisis capital rules and other restrictions.
Federal Reserve Board Chair Janet Yellen has repeatedly said that banks’ lending activities have not been appreciably affected by new rules. In a hearing last month, she pointed to a survey of members by the National Federation of Independent Business which suggested that only a small fraction of small businesses are unable to get the credit they desire.
But loan demand is a difficult thing to measure, in part because it’s hard to count loans that aren’t made. By some metrics, lending demand is down.
But the industry says there is a worrisome trend that those aggregate numbers fail to address, and that is the heightened challenges that banks — particularly larger institutions — face in lending money to borrowers with less than perfect credit scores.
Bill Nelson, chief economist and head of research at The Clearing House Association, said that the new capital and liquidity rules — and especially the Fed’s stress testing program — have made it especially hard for the largest banks to make loans that run a risk of default under economic stress.
An analysis of rate requests submitted by students and their families through the Credible marketplace found that when borrowers prequalified with more than one lender:
The average difference between the high and low interest rate on 10-year, fixed-rate loans was 1.7 percentage points.
Borrowers choosing the loan with the lower interest rate could expect median savings of $2,769.
In addition, private student loans funded through the Credible marketplace so far this year carry rates that can be competitive with federal PLUS loans.
When students and families request rates through the Credible marketplace and prequalify with more than one lender, the difference between their high rate and low rate averages 1.1 to 1.7 percentage points, depending on the loan term and type.
The firm’s hybrid advice offering, Personal Advisor Services, is now at $83 billion in assets under management, according to the firm, putting it in position to be the first digital platform to cross $100 billion.
Since the first quarter of the year, the platform’s assets have experienced a 66% growth increase.
Even during its pilot phase with no paid advertising support, assets for Personal Adviser Services rose from $755 million in 2013 to $10.1 billion at the time of its launch in 2015.
FastPay, a prominent financial technology company that provides lending and payment solutions to digital businesses, along with Tennenbaum Capital Partners, LLC today announced the close of an $80 million international credit facility for Videology. Videology is a leading, global converged TV and video software provider with offices across the United States, Europe, Canada, Asia and Australia.
The gist of its new report is that the alternatives asset industry has grown to nearly $6.5 trillion in assets under management. The world’s largest 100 alternative asset managers make up more than 61% of the pie, with $4 trillion, which represents an increase of 10% in the latter AUM number over the course of 2016.
The survey divided those 100 managers into seven classes, and found that of the ten, the largest share of assets is that held by real estate managers. The full breakdown among the seven classes is as follows:
Real estate – 35% of the whole, over $1.4 trillion;
Private equity fund managers – 18%, and $695 billion;
iFunding, a real estate crowdfunding platform, is getting hammered on Bigger Pockets – a real estate investment forum. iFunding has had a choppy operational history at best. The platform has been peppered with high profile partnerships and then departures. Two unrelated lawsuits, in which the platform allegedly prevailed, certainly did not help. iFunding has not been originating any new deals since 2016 – as far as we know. Now there are allegations of deals gone back and the possibility of insolvency.
Little Rock, Ark., home to the VC FinTech Accelerator, wasn’t quite as sexy a locale, but the 12-week program was sponsored by FIS, the largest FinTech company in the world. It offered funding as well as access to 30 executives from a variety of major banks and FinTech companies who’d signed on as mentors and advisors.
The decision has been a good one. WalletFi has signed on its first customer and two high profile advisors including the CEO of a publicly-traded bank.
It is becoming extremely hard to correctly determine the eligibility of a loan borrower. Even after careful evaluation of all available parameters, some successful companies and individuals still default their bank loan.
Loan eligibility evaluation tasks will be taken over by the smart machine learning technology. To determine the credit score of a client, machine learning can apply regression algorithms which are accurate.
As the financial world transition to digital currencies and digital transactions, there is going to be no physical theft because the money is virtually held. For this reason, thieves are starting to change tact and are now switching to digital means of stealing money.
When put in place, machine learning begins by gathering and segmenting data into at least three segments to create models which eventually amounts to datasets. These datasets can be obtained from historical information. The machine learning models and datasets can then be used to predict the possibility of fraud occurring in financial transactions.
Forbes reported earlier this year that real estate crowdfunding was a $3.5 billion industry in 2016, up from $1 billion in 2014.
Real Estate Investing Is No Longer (as) Local. With online tools and search algorithms, you can put searching for properties ‘on automatic’ and find properties that match your criteria – locally, nationally or even anywhere in the world.
Transparency. Many online platforms, in addition to doing most of the due diligence before presenting their investment opportunities, have built-in tools that allow investors to analyze risk, assess property valuations, calculate internal rates of return and loan-to-value calculations, and do market research.
Availability of Information. This availability of information has spurred some investors to create their own investment groups where they pool (i.e. crowdsource) their collective knowledge to evaluate the investments presented, and often will use other resources and means to further evaluate an investment opportunity.
Document Delivery Is More Efficient.
Convenience. Investors in this century no longer have to drive to view properties because images and virtual tours online make it unnecessary. Technology has taken real estate from the ground to the cloud.
Lower Barriers to Entry. Many real estate investing platforms facilitate investments for$1,000, $5,000 or $10,000. Through online real estate platforms, investing can be done with just a few hundred dollars per month, as many investments are simply equity trades where investors are buying a stake in a project or stakes in multiple projects within a single portfolio. Even debt-based instruments can be entered into with a small fraction of the investment needed 10 or 20 years ago. A few up-and-coming real estate platforms allow non-accredited investors ways to invest for as low as $100 per month.
Greater Diversification. With today’s online options, an investor can diversify into fix-and-flip projects, rental properties, and debt or equity across residential, multifamily and commercial more easily than even 5 years ago.
Fortunately for investors of all types, real estate became the perfect asset class for crowdfunding: stable, tangible, and relatively predictable in its growth and eventual returns.
If you’re looking to get started in real estate in a few hours or less, here are a few tips to get you started:
Understand how crowdfunding portals work. There are two classes of investors: accredited and non-accredited.
Ascertain what kind of investor you are. There are two classes of investors: accredited and non-accredited.
Carefully weigh any investment, with the help of an expert. There are two classes of investors: accredited and non-accredited.
Kabbage processes data generated through ordinary business activity, such as accounting data, online sales, shipping and dozens of other sources, to understand performance and deliver fast, flexible funding in real time. Kabbage has raised nearly $500 million in funding, with a whopping $250 million Series F that closed just a few days ago. According to the company, Kabbage has provided in excess of $3 billion in loans to more than 100,000 small businesses across all 50 U.S. states.
According to the company, more than 13,000 customers around the world use PrimeRevenue to optimize their financial supply chain. PrimeRevenue has raised more than $115 million in funding from Battery Ventures, Brown Brothers Harriman, and RRE Ventures.
On Thursday, online lender Funding Circle announced it is revamping its platform by offering a new look and feel. The lending portal also announced its new motto, Made to Do More.
Over the past 12 months to August 2017 investment trusts have raised £9.6 billion from investors in these two ways – known as issuance. Of this, 74% has been within what could broadly be termed alternative income; those assets not directly comparable to equities or conventional bonds and which distribute a structured yield to shareholders.
Issuance in what could be termed conventional income, such as multi-asset or UK and global equity income trusts, totalled £668 million. Finsbury Growth & Income (FGT) led the way with £112 million of issuance. Conventional issuance amounted for around £950 million which was dominated by activity in the secondary market from Scottish Mortgage (SMT) £299 million. Alternative income accounted for the remaining £7.2 billion.
The regulator should stop pandering towards banks when it develops rules for robo-advice, evestor chief executive Anthony Morrow has argued.
‘If [evestor co-founder] Duncan Cameron and I can build a business to provide financial advice to customers then banks should be able to.
‘The only reason is absolute greed. There is probably an argument to say if, and it is a massive if, interest rates went up three or four percent, would the banks even be bothered because at that sort of rate they would probably still be getting a 2% margin on current accounts which is more than they would make on these new robo-advice things, and with absolutely no risk there,’ he said.
In particular, it cited fee transparency and the removal of commissions as steps forward, and that the results of its recent suitability review, which showed that 93 per cent of advice cases were suitable, demonstrated positive results.
The FCA writes: “A market where advisers aren’t driven by commission and are better qualified will provide a better quality of advice for consumers.”
The new document requires all third-party platforms, such as WeChat Pay, Alipay and others, to connect with Wang’lian (网联), an independent clearing house jointly established by PBoC, other Chinese regulatory bodies and some payments companies.
The new model adopts a centralized clearing procedure where Wang’lian will act as the sole intermediary clearing entity to handle all transactions between payments companies and banks.
According to Chinese media, the document from PBoC requires that banks and payments companies be ready with the internal infrastructure changes required for the new model by October 15. From June 30 2018, all payments and transfers will be processed by Wang’lian.
Data from online transactions, for instance transactions through WeChat’s red packet function, will be monitored by PBoC.
Recently, a third-party institution has launched the Monthly Report of P2P Lending Industry of Chinese First-tier Cities. According to the report, the total number of P2P lending platforms in Chinese first-tier Cities has reached to 1,100 by the end of July, among which 403 platforms are in Beijing, 279 in Shanghai, and 418 in Guangdong Province.
Meanwhile, the total Volume of P2P lending industry in the three areas has reached to $27.37bn, increased by $592m from the last month. The volume of Guangdong Province ranked No.1, which amounts to $9.53bn, with growth rate of 2.01 percent from the last month. The following was Beijing, where the volume amounted to $9.19bn, with the month-on-month growth of 6.69%. And Shanghai reached the p2p industry volume of $8.65bn, which was down 1.95% from the previous month.
China Rapid Finance Limited Sponsored ADR (NYSE:XRF) is scheduled to announce its earnings results before the market opens on Thursday, August 17th. Analysts expect the company to announce earnings of ($0.17) per share for the quarter.
China Rapid Finance Limited Sponsored ADR (NYSE:XRF) last posted its quarterly earnings data on Thursday, May 25th. The company reported ($1.01) earnings per share for the quarter.
Robo.Cash, an automated peer to peer lending platform with a buyback guarantee, reports that July was a solid month for the online lender as investments jumped 30%. In the first half of the year, Robo.Cash says that over 700 investors have signed up and 85,720 loans have been originated. In July, 187 investors joined the platform.
Nearly one in five German companies has faced being charged for parking cash at its bank as a result of the European Central Bank’s negative rate policy, the Ifo economic institute said on Wednesday.
Only 8 percent of all companies eventually accept the charge, with most others escaping it through negotiations or by switching banks, Ifo’s survey of 4,000 companies showed.
The best partnerships between financial institutions and fintechs are a win-win for both partners, as well as for financial inclusion. Mainstream financial institutions partner with fintechs to improve product offerings, increase efficiency, and lower costs – goals with special relevance to low-income customers. By partnering with mainstream financial institutions, fintechs get to scale their technology and can access capital to grow. As a result of these partnerships, low-income customers who are left out of – or poorly served by – the financial sector have greater access to higher quality, more convenient, and less expensive financial products and services.
To facilitate productive fintech partnerships, mainstream financial institutions are organizing internally for innovation, strategically integrating systems and staff, and developing contractual agreements to ensure stability and success. Fintech partnerships enable legacy institutions to engage with and learn from new technology in low-risk, low-cost ways. They are also key to allowing incumbents to compete in a world where alternative players, like Facebook and Amazon, are threatening the central role of financial institutions in the lives of customers. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institution.
One encouraging and somewhat unexpected finding is that the partnerships between financial institutions and fintechs represent a slow but pervasive financial industry shift toward customer-centricity. Better data management and use, new digital banking products, and greater customer engagement all enable better service for underserved customer segments.
VISA handles on average around 2,000 transactions per second (tps) and peaks around 4,000 tps during high shopping periods. This is just a fraction of their capacity, which is said to be around 56,000 transactions per second.
Paypal, in contrast, handled around 10 millions transactions per day or 115 transactions per second according to data from late 2014.
Today, the Bitcoin network is restricted to a sustain rate of around 7 transactions per second or a little over 600,000 transactions per day.
REAL will disrupt global real estate investing by moving it on to the Ethereum blockchain and enabling the average investor to build a real estate portfolio.
Property owners and developers will apply to have their assets tokenized and listed on the REAL crowdfunding website. The REAL team – which is composed of successful entrepreneurs, venture capitalists, and developers who have already invested $350,000 of their own funds in the project – will carefully analyze the properties to select the ones that will provide investors with the greatest long-term value, with targeted annual returns of 12-20%.
The REAL token sale will begin on August 31, but investors contributing greater than 100 ETH will have the opportunity to participate in a 24-hour pre-sale on August 24. During the ICO, investors will be able to acquire tokens at the rate of 220 REAL per 1 ETH until the investment cap has been reached.
The Board of DirectMoney Limited (ASX: DM1), (“DirectMoney”, or the “Company”) are delighted to announce the completion of a wholesale funding agreement with 255 Finance.
The agreement is structured around the purchase of $50 million in DirectMoney originated loan assets, with the intent to increase this in the future. 255 Finance will also receive equity in DirectMoney and options that vest based upon specific hurdles being met. Significant growth in both lending volumes and the operational performance of DirectMoney is anticipated as a result of the facility.
One technical difficulty is the need for compatible payments systems across different entities. The ISO 20022 XML format is a standardized and popular format for payments among financial institutions. However, payments under the XML standard still need to be reformatted if the transaction goes through the United States’ Automated Clearing House network.
Regulatory requirements, which can include know-your-client checks and anti-money laundering, as well as risk and control, can mandate that a part of the process is completed manually.
OnDeck posts surprise quarterly adjusted profit. AT: “I like these kinds of surprises. If OnDeck turns itself around, and it looks like it’s going to, it could be an even bigger story than the LendingClub turn around. Maybe pundits will quit talking about a buyout.”
OnDeck to focus on better borrowers, expanded partnerships. AT: “This is smart business. Borrowers are the lifeblood of the business. If OnDeck can reduce risk by creating better risk assessment tools, make smart loans, and develop good partnerships that benefit both partners, we could see a different company in 2-3 years.”
Online lender OnDeck Capital <ONDK.N> posted a surprise quarterly adjusted profit on Monday, driven by lower costs and higher interest income.
Excluding items, OnDeck earned 2 cents per share in the second quarter ended June 30, compared with the average analyst estimate of loss of 1 cent, according to Thomson Reuters I/B/E/S.
Net loss attributable to common shareholders narrowed to $1.49 million, or 2 cents per share, in the quarter, from a loss of $17.9 million, or 25 cents per share, a year earlier.
Originations fell 21.3 percent to $464.4 million.
Operating expenses fell about 6.3 percent to $44.6 million.
The online lender will continue this focus on higher quality borrowers going into the remainder of 2017, and will also be expanding several of its loan features, including prepaid benefits for term loans and a “more tailored” underwriting experience for businesses, said Breslow.
Adjusted EBITDA of $3.3M vs. a negative $12.4M a year earlier.
Full-year guidance is reiterated: Revenue of $342M-$352M, and adjusted EBITDA of $5M-$15M. Q3 revenue is seen at $82M-$86M, with adjusted EBITDA of $1M-$5M.
OnDeck Capital, Inc. ONDK, +18.48% on Monday announced it had expanded a collaboration with JPMorgan Chase, JPM, -0.02% which is providing technology that runs the online lending platform.
JPMorgan Chase (NYSE: JPM) and OnDeck (NYSE: ONDK) today announced a contract extension to continue their collaboration on the bank’s digital small business lending product, Chase Business Quick Capital, for up to four years.
Shares of On Deck Capital(NYSE:ONDK) were up more than 21% as of 3:15 p.m. EDT, after the company announced a smaller net loss during the second quarter and a promising expansion in its partnership with JPMorgan Chase(NYSE:JPM). Shares of LendingClub(NYSE:LC), its primary rival in the world of online lending, rose 7%, as investors see On Deck’s recent performance as a good omen for the industry as a whole.
A focus on higher-quality borrowers seems to have relaxed investors’ worries about the company’s loan quality, a perennial concern given that the average On Deck loan carries an APR in excess of 40% per year.
Lending Club’s second quarter earnings marked an important milestone for the company – a return to growth. Originations have been hovering around $1.9 billion since Q2 of last year. This quarter Lending Club announced originations of $2.15 billion for the quarter, up 10% from the prior quarter of $1.96 billion. While this is still down from their previous highs, it shows that the company is back on a growth trajectory.
Source: Lend Academy
Last quarter the company announced banks were funding 40% of loans, but that reached higher in the second quarter to 44%.
Achieved 10% sequential growth to over $2.1 billion in originations, driven by strong borrower demand
Successfully launched multiple conversion initiatives, including pricing optimization and a redesigned website
Improved sales and marketing efficiency by over 7% sequentially
Credit continues to perform in line with expectations as observed in both vintage and portfolio trendsInvestors
Successfully executed the first self-sponsored securitization thereby opening a new funding source, expanding the investor base with 20 new investors, and generating a new repeatable revenue stream
Record number of managed accounts and institutional investors participating on the platform in the quarter
Successfully launched new iOS mobile application for retail investors
Online lender LendingClub Corp (LC.N) raised its earnings outlook on Monday after reporting the second-highest quarterly revenue in its history and a drop in costs, sending shares up nearly 8 percent.
LendingClub now expects full-year total net revenue to be in the range of $585 million to $600 million, compared with its earlier forecast of $575 million to $595 million.
Shares of the company, which connects consumers looking for loans with individual or institutional investors such as banks through its website, were up 7.8 percent at $5.46 in after-hours trading.
LendingClub Corp <LC.N> and OnDeck Capital Inc <ONDK.N> surprised investors on Monday with strong growth forecasts that sent the online lenders’ stocks soaring, but analysts said the sector’s health was still a concern.
OnDeck shares closed 18.5 percent higher at $5, and LendingClub ended up 4.8 percent $5.46. The stocks rose in after-hours trading but remain far below their initial public offering prices of $20 and $15, respectively.
Executives of both companies were upbeat about the progress in their turnaround plans after they reported second-quarter results.
Earnest Corp is looking to sell itself for $200 million, Bloomberg News reported on Friday, far less than the $300 million it has raised from investors.
The online lending industry regained its footing in the second quarter, more than a year after it was knocked off-balance by severe disruptions in the loan marketplace. But investors’ sky-high hopes for the sector may have been lowered permanently.
Investors also were relieved that On Deck reiterated it would turn profitable later this year. Shares rose a sharp 18.5% Monday, but they fetch only about a fourth of their December 2014 IPO price, a sign of just how much the hype around these lenders has deflated.
Crucially, On Deck has moved on from funding loans through an online marketplace, the aspect of its business model that was truly disruptive. It now funds the vast majority through its own balance sheet, making On Deck more like an ordinary bank.
Both companies have to worry about rising competition. Innovative payment companies like Square and PayPal are extending more microloans to their merchant customers. Meanwhile, giants of finance like Goldman Sachs are extending more unsecured personal loans, which is LendingClub’s sweet spot.
U.S. financial technology provider Fiserv made an improved offer for Monitise worth about 75 million pounds ($98 million) on Monday, hoping to secure backing from the British financial services technology group’s investors.
Fiserv’s earlier offer, which valued the group at about 70 million pounds, drew criticism from Monitise’s investors led by Cavendish Asset Management, for being too low, given that the British group was worth over 1 billion pounds three year ago.
Fiserv’s final offer of 3.1 pence in cash per share represents a premium of 34.8 percent over Monitise’s closing price on June 12, the last before the initial offer was made.
Banco Santander, Monitise’s top shareholder with a 4.67 percent stake, had submitted a letter of intent to back the deal, as had Visa Inc, a large customer and investor with a 2.41 percent stake.
LendingRobot Series finished the second quarter with a healthy YTD aggregated return of 2.7%. Each Series’ return and portfolio health is in line with projections. Since April 1st, LendingRobot Series has added over 2,800 loans to its portfolio, more than doubling the number of loans held in each series.
Source: LendingRobot
Legislative Update 161 (Experian Email), Rated: A
Highlights this issue:
On July 10, the CFPB published a final rule prohibiting the use of mandatory predispute arbitration clauses that prevent class action lawsuits in consumer contracts for a wide array of financial products. The final rule was published in the Federal Register on July 19, and will become effective 60 days after that date, or September 18. All consumer contracts with arbitration clauses will need to comply with the rule within 180 days of the effective date, which will be March 19, 2018.
The House of Representatives is working to pass 12 appropriations bills by September 30 to fund federal agencies for the Fiscal Year 2018. The House Appropriations Committee passed the spending bill for financial regulatory agencies on July 13. The measure included several provisions important to Experian and our clients.
On July 19, Representatives Patrick McHenry (R-N.C.) and Gregory Meeks (DNY) introduced the Protecting Consumers Access to Credit Act. The bill would codify the legal precedent under federal banking laws that preempts a loan’s interest as valid when made.
Legislators in California continue to debate legislation that would enact a broadband privacy law in the state, similar to the rule issued by the FCC and then overturned by Congress. A.B. 375 would prohibit an internet service provider from using, disclosing, selling or permitting access to customer personal information.
In recent years, Kabbage and others have stepped up to introduce a purchasing card product to their borrowers, and with their early success, many lenders are now following suit for the following four reasons:
Staying on top of the customer’s mind
Speaking the language of large corporate partner targets
Underwriting use of funds
Revenue sharing
New Financial Technology Upgrades Bank’s Credit Review Process (PayNet Email), Rated: A
Enables Banks To Review All Credits and Focus on the Highest Risks
The real challenge is convincing bank management that they do not have to apply the same credit review process to the entire portfolio. Adopting different processes based upon exposure size and measured risk (APD for example) should be the goal of every bank. In other words, focus credit review efforts to those accounts that represent the greatest risk to the bank – and that is what you are hoping to do with your credit review process.
Conducting credit reviews are a “waste of time” in most cases because nothing has changed. What form that documentation takes is where PayNet can be most helpful to the prospect.
PayNet is introducing PayNet Credit Review Express,a risk management tool which streamlines the credit review process making credit review easier and less costly.
Credit Review Expressassesses the credit risk of each C&I borrower each month. Banks can assign their definition of risk from delinquency to probability of default to assign high, medium or low risk to each borrower. Currently, PayNet sees less than 2% of C&I borrowers as high risk credits. Other features include automated action steps (such as Watch, Restructure, Work-out) and a customized dashboard to monitor and track activity.
The Federal Deposit Insurance Corp. defended its authority to approve prospective new banks in response to suggestions by acting Comptroller of the Currency Keith Noreika that his agency should be able to approve applications on its own.
So it’s important for borrowers, especially recent grads, to think about the best places to live — the cities in which they’re not only likely to find a well-paying job, but also where rents and other living expenses aren’t so exorbitant so as to add to their pile of debt.
5 cities where student loans borrowers struggle the most with debt:
1. San Jose, California
2. Fort Worth, Texas
3. Boston, Massachusetts
4. Los Angeles, California
5. Denver, Colorado
5 cities where student loans borrowers struggle the least with debt:
1. Dallas, TX
2. Jacksonville, FL
3. Houston, TX
4. Columbus, OH
5. Austin, TX
The key indicator for affordability was how much of a borrower’s monthly income would go towards their student loan payments and monthly housing costs.
Marketplace lending has grown by nearly 150 percent on a compound annual basis for the last half-decade. Strong growth and real longevity mean that most advisors have to consider the role that marketplace lending plays in their clients’ portfolios.
Source: WealthManagement.com
Refinancing high-rate credit card debt or other hard-money-type loans among high-quality borrowers via a marketplace lender is sensible and provides good value to all parties.
As part of a fixed income allocation, what are the risks in marketplace loans? There is the credit risk of the borrower first and foremost—here the asset can be seen as clearly pro-cyclical; in other words, as the economy improves, the asset strengthens. Correspondingly, as the economy weakens, the credit of the borrower will weaken. Additionally, there has recently been some weakness in consumer credit, primarily in auto loans and credit card defaults, though these have been largely limited to the subprime aspects of these loan categories.
The latest equity crowdfunding statistics released by OFF3R last month revealed that the first half of 2017 was the strongest 6 months for equity crowdfunding to date.
Six of the leading equity crowdfunding platforms that form the OFF3R Index raised nearly £130M in 2017 for UK private companies. This is £2M above the previous half yearly record that was reached back in the second half of 2015. March 2017, where Over £40 million was raised, buoyed the latest data and the period as a whole was characterised by some very large fundraises from Q1 2017.
The data also revealed that peer to peer lendinglevels continue to rise in the UK. The peer to peer lending statistics showed that over £1.8 billion was lent in the first half of 2017 by the nine platforms that make up the OFF3R Index. This is an increase of over £350 million from the previous half year period at the end of 2016.
The data also revealed that Assetz Capital had a record breaking month in June 2017. The total amount lent of over £30 million by the platform was higher than any previous period since the OFF3R Index began.
More than half of the customers of an internet loan firm run by an aristocratic financier are behind on their payments or in default, the Mail can reveal.
Wellesley, a peer-to-peer lender which allows property developers to borrow cash from savers, is grappling with losses on its loan book.
Start-up lender Tandem has snapped up Harrods Bank in a deal that will bring it closer to launching a savings account.
The undisclosed deal will hand the online-only lender £80 million of additional capital and enable it to regain its banking licence , if it wins regulatory backing.
Old Mutual, a sigificant shareholder in the £351m VPC Speciality Lending fund, has further reduced its holding in the closed ended portfolio following previous reductions in exposure earlier in the year.
Its holding in the fund fell below 6 per cent back in March 2017, now it has sold more shares with its stake now less than 4.99 per cent, according to regulatory filings.
A VENTURE capital (VC) firm that backed Zopa in its early days has been named among judges for the second annual PitchIt Europe competition.
Rob Moffat, partner at Balderton Capital, an early Zopa backer, will be one of the VC judges alongside Seedcamp’s Reshma Sohoni, Blenheim Chalcot’s Dan Cobley and managing director of CommerzVentures Patrick Meisberger.
Tencent is developing a credit scoring system as it ramps up its battle with rival Alibaba for a share of China’s $5.5tn mobile payments market.
Ant Financial, Alibaba’s payments affiliate, launched its Sesame Credit two years ago, parlaying its data on consumers into a measure of their trustworthiness, providing comfort for small businesses and consumers alike.
Credit scoring is popular in China, especially among younger subscribers who lack a credit history but might be eligible for a high rating that would let them rent hotel rooms, bikes or phone chargers without leaving a deposit. The services are particularly valuable given the lack of access to credit cards in the country.
Tencent is testing a credit scoring service among a small group of its subscribers, upping the stakes as the two tech titans engage in an aggressive promotion this week encouraging Chinese to forgo cash in favour of payments made with a swipe of the phone.
Recently, Internet Society of China (ISA) and the information center of Industry and Information Technology Ministry Jointly issued the list of “China’s Top 100 Internet Companies in 2017”. For this time, Tencent overtook Alibaba to become the No.1. Tencent, Alibaba and Baidu were still the top three for five consecutive years, while Letv was out of the list.
The top 10 of the list were:
No.1 Tencent
No.2 Alibaba
No.3 Baidu
No.4 Jingdong
No.5 NetEase
No.6 Sina
No.7 Sohu
No.8 Meituan
No.9 Ctrip
No.10 360
The list of “China’s top 100 Internet Companies” has been published every year since 2013 and has been published five times so far.The evaluation index combines seven core indicators of enterprise scale, profitability, innovation, growth, influence and social responsibility.
In a report released last weekend, the People’s Bank of China said some financial products offered through internet channels by fintech companies are “systemically important” and hence will be included in its macro-prudential assessment or MPA.
The aim is to prevent cyclical risks and cross-market risk transmission, it said.
Analysts said this is the first time that the PBOC said it will include fintech businesses in its MPA.
On 7th August, a Webank staff said in WeChat Moments that the loan balance of Weli Dai reached a milestone of over 100 billion RMB (equivalent to $14.91 bn). In a speech at the LendIt on July 16, Fang Zhengyu, the director of retail credit section in Webank, revealed that the loan balance of Weli Dai was $1.13 bn. And it has increased by $3.58 bn within just 22 days. What an amazing growth!
Weli Dai is focused on providing a cash loans product, with the loans amount from ￥500 to ￥300,000, and is operated in pure online pattern. With its white list invitation system, Weli Dai identifies the target customers effectively. The loan period is flexible from one day to twenty months, which makes users borrow and repay money at any time. Many factors contributed to the performance of Webank today, the most important is that Webank developed its business in the huge customer base of QQ and WeChat. Besides, Webank has built partnerships with nearly 40 banks for jointly making loans.
TNG FinTech Group Inc, a Hong Kong-based digital wallet operator founded in 2013, is poised to close a funding round and is targeting a valuation of about US$500mil, according to a person familiar with the matter.
It has attracted almost US$60mil in the series A round from investors including a Beijing-based private equity fund, said the person, who asked not to be named discussing private deliberations.
TNG, which offers global money transfers, foreign-exchange transactions and bill payments, expects to be profitable this year and is targeting a listing in either New York or Hong Kong by 2019, the person said.
Our next guest on the Lend Academy Podcast is Jin (Jeffrey) Chen, the CEO of ZhongAn Insurance. I sat down with him when I was in Shanghai recently for Lang Di Fintech (LendIt’s Chinese event) and we conducted this interview with the assistance of his translator.
The People’s Bank of China said in a report that it is considering expanding its risk-assessment system beyond banks to include major online financial businesses. Last month, it reached agreement with 45 nonbank financial firms– including payment systems affiliated with internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd.–on joining a new payment-clearing platform called Wanglian, according to listed-company documents.
This effectively gives the PBOC a clearer view of payments, enhancing regulation, said Tencent, which owns the TenPay payment system.
Finnish p2p lending service Fellow Finance has opened a new invoice finance service for companies, which allows businesses to convert their trade receivables into cash immediately. In the new invoice finance service, a company gets funding against its invoice receivables directly from investors.
In adjacent Estonia p2p lending marketplace Investly, which specializes on invoice financing for Estonian and UK SMEs, is growing. The last figures we reported for them show 78% month on month and 319% y-o-y growth.
Rob Moffat is a Partner at Balderton Capital, a London-based venture capital firm that has invested in fintech businesses including GoCardless, Revolut, Crowdcube, Nutmeg, Seedcamp, ComplyAdvantage, Wonga, Zopa and more. Prior to joining Balderton, Rob worked at Bain & Company and Google. Rob holds degrees from Cambridge and INSEAD.
As has been noted in the financial and trade press, the Financial Choice Act, which was passed last month by the U.S. House of Representatives, now awaits a vote in the U.S. Senate.
In other regulatory news, one executive in Britain is calling for tighter financial regulations in the United Kingdom. Douglas Flint, departing chairman of Britain’s largest bank, HSBC, said in a statement that, amid issues such as Brexit and a revamp of the European financial order, a lack of homogeneity in regulation means there should be cooperation between overseers to find — and stop — “bad actors.” Flint advocated that “greater cooperation between the public and private sectors, together with a refresh of bank secrecy laws and regulation designed for a different age, would significantly increase the effectiveness of our joint efforts.”
As it turns out, putting that spec on the shelf helped to inform the development of the EMVCo QR code standard, which was released yesterday into a payments ecosystem that looks at them as anything but uninteresting.
China is a prime example as, over the course of the last five years, the QR code-based mobile payment has almost entirely displaced cash in the country — and leapfrogged credit and debit cards — to become Chinese consumers’ preferred alternative for payment. There are $5.5 trillion worth of mobile payments made in China per year, the vast, vast majority of which are handled via QR code.
But perhaps most striking is India and its government’s November 2016 decision to move toward a cashless society. That led the country to the accompanying adoption of a QR code-focused payments scheme based on Visa’s mVisa standard.
Getting To Scale
Visa is currently developing mVisa as a worldwide solution. The key to scale, Shrauger told Webster, is making it useful and accessible for their two client groups — merchants and their customers.
zipMoney (ASX:ZML) has announced a $40 million strategic investment from Westpac Banking (ASX:WBC). The investment was paired with an agreement for the two companies to explore the integration of Zip’s products and services into Westpac’s network across Australia. The investment will be by subscription of ordinary equity of 49,382,716 shares at a price of $0.81 per share. This represents a 14.1% premium over the close of $0.71 on August 4th.
Most Indians save first and think of spending later. However, when it comes time for them to plan their expenses, they end up relying on mental estimates of their financial position. As a result, most people are never confident of 1) how much to save and 2) whether they can reach their financial aspirations with their current investment plan. This is especially true for young professionals who want to save for a secure future but also want a more fulfilling life experience. What is required is financial advice that delivers the answers to these questions in a clear and quantified way.
A solution to these issues has come from the field of artificial intelligence. Cognitive technologies is a branch of artificial intelligence that deals with the application of computers towards tasks traditionally performed by people. The aim of this process is to design a software solution that has comprehensive and detailed instructions, that enables it to do the same work that a person can. The benefits of this approach are that the same work can be done at a much faster pace, at a higher accuracy and at a lower cost.
Japan’s SoftBank Group Corp on Monday reported a 50.1 percent rise in first-quarter operating profit, after the company included Vision Fund, the world’s largest private equity fund, as a new reportable segment and booked a valuation gain.
The internet and telecoms giant said profit for the quarter through June increased to 479.2 billion yen ($4.33 billion).
GLOBAL investment in financial technology (fintech) firms more than doubled in the second quarter of the year, compared with the first quarter, to US$8.4bil (S$11.4bil) across 293 deals, KPMG said in a recent report.
Investment in fintech in Singapore more than tripled to US$61.5mil (S$83.3mil), although there were only four deals, compared with seven the quarter before.
On Monday, Indonesia-based peer-to-peer lending platform UangTeman announced it successfully secured $12 million during its Series A funding round, which was led by K2 Venture Capital, with participation from STI Financial Group and Draper Associates.
United Arab Emirates (UAE) regulators are setting out to establish a framework to guide the small business (SMB) crowdfunding market, news reports on Sunday (Aug. 6) said.
Equity crowdfunding is expected to provide $93 billion to small- and medium-sized enterprises by 2020, reports added. In the UAE, SMBs stand to gain significantly from that trend, as these businesses make up an estimated 85 percent of all UAE companies. In Dubai, that number is even higher, at nearly 95 percent of all businesses, reports added.
Meanwhile, research from the Khalifa Fund for Enterprise Development found that as many as 70 percent of small business loan applications in the UAE are rejected by traditional banks, despite efforts from the national government and the Central Bank of the UAE to promote SMB financing.
Take Flutterwave, a payments company which builds infrastructure to ease processing payments across Africa, it’s just raised $10 million in its Series A round. Significantly, the round was led by leading Silicon Valley venture capital funds Greycroft and Green Visor Capital, with participation from Y Combinator and Glynn Capital.
Fintech startups are the “most attractive,” for tech investors looking towards Africa, according to a recent report by Disrupt Africa. Nearly 20% of fintech startups tracked raised money in the last two years and in 2016, there was a 84% increase in the number of fintech startups secured investment compared to the previous year. In total, since 2015, fintech startups in Africa had raised $93 million in investment as of June 2017. Flutterwave’s raise takes that total past the $100 million mark.
In more advanced economies, fintech startups are focused on disrupting the traditional banking industry by changing how people access financial services. But in most parts of sub Saharan Africa, that’s not the case. In fact, fintech startups are typically creating products and services to plug many of the gaps which currently exist.
Indeed, as of 2014, only 34% of adults in sub Saharan Africa had bank accounts.Given the sheer size of the market which remains under-served, fintech startups are presented with a huge opportunity. And for investors, all that represents a major upside.
News Comments Today’s main news: Laplanche shares vision for Online Lending 2.0 at Lang Di Fintech. Elevate named a great place to work (again). FinLeap raises 39M Euro. Crunchbase-like database launches in Singapore. Today’s main analysis: Ant Financial poised for more growth. Fintech use reaching mass adoption among digital consumers. Today’s thought-provoking articles: OCC vs. New York DFS. Ant Financial […]
Elevate named Great Place to Work. AT: “One can’t underestimate the importance of work culture. It’s vitally important for startups to create a great work environment. First, how else will you attract the kind of talent you need to grow into a major player? Besides access to capital, company culture is one of the biggest and most important drivers of early success. Evidently, Elevate has it.”
OCC vs. New York DFS. AT: “The battle over regulatory control of fintech in the U.S. isn’t going to end anytime soon. It’s perhaps the most important thing right now affecting the future of the entire ecosystem.”
Bankers worry about losing jobs to automation. AT: “There will undoubtedly be some lost jobs as robos, machine learning, and other tech innovations continue to grow in popularity.”
Ant Financial poised for more growth. AT: “This is an excellent must-read about the world’s largest fintech company. A lot of drill-down on the detail.”
Fintech use reaching mass adoption with digital consumers. AT: “It makes sense that digital consumers will lead the way on fintech adoption. As digital consumers and digital natives reach the zenith on adoption, it should trickle down to casual digital users.”
Elevate was recently certified as a great workplace by the independent analysts at Great Place to Work®. Elevate earned this credential based on ratings provided by its employees in anonymous surveys. A summary of these ratings can be found at
Online lender Upgrade, launched by former LendingCLub Corp CEO Renaud Laplanche in April, expects to grow its loan volumes and add new asset managers to its roster of buyers in coming months, Laplanche said in an interview on Monday.
Upgrade has been testing its credit quality and risk management systems, compliance framework and other operations, as well as building up its infrastructure to deal with rising volumes before ramping up the service, Laplanche added. The company has signed up six asset managers who are already buying or plan to buy loans originated by the company, including Jefferies LLC and an unnamed Hong Kong firm, he said.
In the rapidly developing world of financial technology it often is unclear who has the legal authority to regulate the activities of newly created companies. Many of these companies do not neatly fit into any established regulatory scheme. However, answering the question of who will be creating the regulatory rules for FinTech companies is important both for regulators and the FinTech companies themselves.
State Regulators Want to Regulate FinTech
Over the past several years, state regulators have been staking out positions as leading regulators of FinTech companies.
During this same period, federal regulators have announced the intention to assert control over the regulation of FinTech companies.
The OCC indicated that its authority to grant FinTech Charters to nonbank FinTech companies stems from 12 C.F.R. § 5.20(e)(1), which states that the agency may grant such charters to institutions that conduct “at least one of the following three core banking functions: receiving depositions, paying checks, or lending money.”
The Lawsuit
The DFS did not limit itself to criticizing the proposed FinTech Charters. On May 12, 2017, the DFS filed a lawsuit against the OCC in the District Court for the Southern District of New York, alleging that the OCC’s proposed FinTech Charters exceeded the agency’s statutory authority under the National Banking Act and violated the Tenth Amendment. Based on these claims, the DFS sought declaratory and injunctive relief that would declare the proposed FinTech Charters to be unlawful and prohibit the OCC from creating or issuing these charters in the absence of express authorization from Congress.
Third, even if the OCC prevails and begins granting FinTech Charters, state agencies such as the DFS will still attempt to regulate FinTech companies. This could lead to future disputes over the nature and scope of the federal preemption of state regulations, which will add to the confusion over which regulations apply to which FinTech companies.
As a result of these issues, FinTech companies have little idea what the future regulatory terrain will look like. This uncertainty makes it difficult for companies to predict the future regulatory cost of business decisions they would like to make today.
Worthy, a digital investment app that redefines how Americans access investment products, diversify their portfolios and save for retirement, announced the successful closing of its seed financing round. The funds will be used for the full-scale roll-out of the Worthy mobile app, and will enable Worthy to expand its growing user base as well as to broaden the array of investment product options it offers retail investors.
Worthy provides users with the unprecedented ability to spend their way to retirement by investing retail round-ups into high-yielding fixed interest bonds, the proceeds of which fund growing businesses. In doing so, anyone has the capability to build a nest egg, enhance portfolio returns, mitigate risk, and generate both social as well as financial returns. Worthy investors grow their portfolios while simultaneously supporting American entrepreneurs.
Krieg and Robinson realized then that they had an opportunity to help.
They founded Stash, an app that lets you build a portfolio and start investing with only $5, plus it teaches you the ins and outs of the stock market.
Krieg and Robinson realized then that they had an opportunity to help.
The company launched in October 2015 and just closed on a $40 million Series C led by Coatue Management. That brings Stash’s total funding to $78 million and values the New York-based startup at $240 million, according to a person familiar with the company.
Stash makes money by charging a subscription fee of $1 per month for accounts with less than $5,000. When an account has more than $5,000, Stash charges a fee of 0.25% fee.
Robo-advisors and robo-analysts are both important to enabling wealth management firms to cut costs without sacrificing quality of advice, but the importance of a robo-analyst to enhance the quality of investment advice shouldn’t be underestimated.
Today, many of the tasks performed by robo-advisors are low value-added services such as determining and communicating asset allocation strategies (e.g., 60% equities, 30% fixed income and 10% cash). In fact, these services are so low value-added that advisors cannot make money doing them unless they are bundled with higher value-added services.The value proposition of a robo-analyst is very different.
Specifically, by shining an analytical light in the dark corners of financial filings, robo-analyst technology can identify many critical data points overlooked by most research analysts today. No longer must investors rely on the headlines or management-manipulated earnings. With new technologies, investors can receive a much fuller, more comprehensive analysis of financial filings, company profits and valuation so as to make better informed decisions than ever before. As a result, robo-analyst tech raises the analytical bar universally, enabling investors to transcend the short-sighted and high turnover trading mentality that, in the long run, does more damage to investors than good.
A quarter of banking’s “front line” professionals are worried about losing their jobs to robots and artificial intelligence-boosted mobile apps, according to a LinkedIn survey.
In the poll of 1,012 pros from financial technology, investment banking, retail and corporate banking, financial and hedge fund management, accounting, insurance, and private equity, 25 percent said they are concerned automation will impact their job security – with 34 percent of retail bankers saying it is a significant concern for them.
The survey also found 42 percent of financial services pros think financial technology is a “direct threat” to traditional financial services, compared with 13 percent of professionals who work in traditional financial services, and 18 percent of all the financial professionals.
In today’s episode of the Lend Academy podcast we have Matthew Wong of CB Insights. He has been following innovation in the insurtech space for some time and his weekly insurtech newsletter has a subscriber base of more than 18,000 people.
In this podcast you will learn:
Matt’s background and how he first became involved in insurtech.
What CB Insights does.
The headwinds facing insurance industry incumbents today.
Why millennials are not buying insurance as much as other generations.
Why insurtech is hot right now when it comes to VC investments.
Some of the most interesting companies in the insurtech space right now.
Why it will probably take a long time for these startups to get to scale.
Why Matt likes Zhong An Insurance, the first and largest online insurer in China.
How the incumbent insurance companies have been reacting to this surge in startup activity.
Why Munich Re is one of the most interesting incumbents.
Matt’s view on what SoFi is doing partnering with a life insurance company.
Solar loans are on the rise as the industry undergoes a transition and credit investors consider whether these asset-backed securities are worth the risk. In some ways, they’re similar to other types of collateral, and credit investors are already used to dealing with the types of risk they pose. However, analysts at Moody’s warn that they’re one of the riskiest securitization asset classes.
The reason solar loans are so new is because until now, the residential solar market has been dominated by third-party ownership of solar panel systems via power-purchase agreements and leases. GTM Research projected late last year that 2017 will be the year direct ownership of residential solar panels retakes its position as the top solar financing model.
The firm projected that 55% of the U.S. residential solar capacity that’s installed this year will be bought by customers who either pay in cash or take out a loan to finance their systems.
The narrative isn’t the product of any single malfunction, but rather the result of overhyped marketing, deficiencies in operating with deep learning and GPUs and intensive data preparation demands.
If job postings are any indication, IBM is not keeping pace with other technology companies in hiring machine learning developers.
US prepaid card and P2P payment services provider Cascade Financial Technology Corp has signed a 3-year contract to power customer onboarding and KYC with 2nd generation ID authentication and onboarding automation. AU10TIX Secure Customer onboarding (SCO) cloud service that already powers major players across financial services markets, is known not only to increase KYC robustness and fraud protection but also improve customer conversion success chances and operating efficiency.
In the last ten years, the fundamental assumption that financial institutions are the only avenue to financial transactions is being called to question, especially by Millennials, who are by far the most entrepreneurial generation.
In a disruptive world, what does the future of banking and finance look like? How can and should financial institutions adapt to remain relevant, or even lead in this era of change?
Seamless, efficient and fast
Payments are perhaps the most basic and prevalent interaction with finance for the masses, yet for the longest time, payments to businesses saw minimal innovation. P2P transfers were never a focus for banks since it was a zero commission business. This was a pain-point to Millennials, who are used to sending everything from photos to documents electronically – having to withdraw physical cash or obtaining account details to securely transfer money for lunch is considered old fashioned!
Flexibility and access to funds
Traditional unsecured loans might require a strong financial history or proof of steady income stream, which would be unlikely if the individual were not taking a salaried job. Cash advances on credit cards would usually incur overly high interests costs.
This creates opportunities for peer to peer (P2P) lending marketplaces such as Prosper and Lending Club, platforms which create alternative ways to access cash loans while providing alternative yields on deposits.
Information access
Websites such as MoneySmart, DirectAsia, GoBear and Milelion position themselves as third-party and an unbiased advisor of investment products and policies. They perform the heavy lifting of trawling through multiple sites to aggregate and analyse information, empowering consumers to make informed purchases in the shortest time.
The reversal to brand love
The answer lies in placing the consumer in the centre of their businesses and asking the right questions constantly to redefine scope of value-add. It is an iterative journey, and worthwhile to include consumers as co-creators in product design and transformation.
Wela, a personal finance app that pairs artificial intelligence (AI) and human advisors, announces today it is available for download on Android devices in addition to iOS. Wela pairs real financial advisors with AI through the personification of its digital advising algorithm, Benjamin. The first true digital advisor, Benjamin utilizes AI to track users’ daily, weekly and monthly spending habits and provides personalized advice based on their financial needs and goals. Unlike other free consumer finance apps, Wela also offers access to real financial advisors via phone, video chat or in-person at no additional cost.
The Android app contains the full functionality of the iOS version and employs the same innovative features that allow users to track all their financial accounts in one place. Wela protects user privacy by leveraging bank-level security, as well as 256-bit SSL encryption and two forms of secure authentication. Capable of aggregating data from more than 13,000 financial institutions, Benjamin pulls linked account information to run a complete analysis, helping users take steps toward financial wellness based on three main pillars: creating an emergency reserve, paying off debt and implementing an investment strategy. In addition to Benjamin’s foundational metrics, the algorithm delivers custom insights on demand, helping users stay on track to reach their short- and long-term goals.
This past February, MarketInvoice shared it had funded invoices over £1.1 billion since platform launch in 2011. The online lender said it expects to top the £2 billion in invoices funded by the end of the year.
In Q2 of 2017, MarketInvoice announced that it had funded invoices from UK businesses worth £161.9 million. Compare this amount to the £103 million funded in Q2 of 2016 and the platform is generating some serious momentum.
In the first quarter of 2017, MarketInvoice generated £130 million in invoice finance.
RATESETTER’S new non-executive chairman Paul Manduca (pictured) has heralded the peer-to-peer lender’s “simplicity”, citing its provision fund as an example, on his first day in his new role.
The asset management veteran said that financial innovation can sometimes result in overly-complex products that investors cannot understand, which is “complacent and out of step with what customers want”.
The LIM Asia Special Situations Master Fund has increased its stake in the £243m Ranger Direct Lending fund, following the portfolio’s move to a double-digit discount.
The Hong-Kong based fund had already invested in the closed-ended portfolio, which invests in a host of online lending platforms, owning less than 4 per cent. Last week it increased its holding to 5.48 per cent (on the 7th July).
Assetz Capital is continuing its strategy of establishing a local presence across the UK with the appointment of Ian Craig as Regional Relationship Director to help manage operations in Scotland. The appointment comes as Assetz Capital says growth in Scotland continues with a target of £50 million in lending (subject to two upcoming completions). Assetz Capital says it is well on its way to becoming the second largest alternative finance lender in Scotland.
Craig will be responsible for helping local Scottish businesses acquire finance through the peer-to-peer platform and ensure borrowing with Assetz Capital runs seamlessly.
PEER-TO-PEER lenders were among the delivery partners helping the British Business Bank (BBB) fund £717m of loans to small businesses last year, the firm’s annual report revealed.
The state-backed institution, which has channelled funds through P2P platforms such as RateSetter, Funding Circle and MarketInvoice, facilitated 94 per cent of its finance through banks outside of the ‘big four’ last year, up from 90 per cent in 2015 and 79 per cent in 2014.
The BBB has a key performance indicator of having more than 75 per cent of its finance facilitated through providers other than the four largest banks over five years, so it has already surpassed that aim.
In his first public appearance in over a year Renaud Laplanche, the CEO of Upgrade, gave a presentation this past weekend at Lang Di Fintech, LendIt’s annual Chinese conference, in Shanghai. Titled Online Lending 2.0 he laid out his vision for where he thinks the online lending industry is going next.
He talked about how one of the big innovations in Online Lending 1.0 was the introduction of more data into the underwriting process. Ten years ago, which marked the beginning of Online Lending 1.0, this new data allowed more accurate underwriting of consumers. But in Online Lending 2.0 this has expanded dramatically with not just more data but new and better tools available to analyze this data.
The two key data points that are being added in Online Lending 2.0 are location data and free cash flow analysis. We need to adjust underwriting to take into account location because a consumer in New York City has a much higher than average cost of living while a consumer in Greenville, SC has a much lower than average cost of living for example. This is why Debt-to-Income (DTI) is less important than free cash flow today.
Ant Financial, Alibaba’s (NYSE:BABA) financial affiliate, is the largest fintech in the world, and leads the pack of the world’s largest fintech unicorns, the top four of which are from China, the largest fintech market in the world: Ant Financial (US$60 billion), Lufax (US$18.5 billion), JD Finance (US$7 billion) (NASDAQ:JD), and Qufenqi (US$5.9 billion).
Alipay
Payments make up the biggest portion of fintech in China and this is expected to be the same going forward.
Mobile phones function as mobile wallets for about 425 million Chinese, or 65% of all mobile users. This is the highest penetration rate in the world. At 38 trillion yuan (US$ 5.5 trillion) last year according to data from iResearch, China is the world’s largest mobile payments market and is over 50 times bigger than the American market where mobile payments reached US$112 billion.
China’s e-commerce market is expected to continue its upward climb. Online sales represented 16.4% of China’s total retail sales in the first half of 2016 and this is expected to climb to 21.7% by 2020 which should benefit Alipaygoing forward.
Wealth Management
Wealth management is the largest area of fintech after payments.
There are about 325 million Chinese investors in Yu’e Bao, a number almost as big as the population of the United States and the fund has more assets than the rest of the top 10 Chinese peers combined.
The majority of Yu’e Bao users are millennials under the age of 30 and about 99.7% of its investors are individuals, according to its annual report, rather than companies or financial intermediaries as is usually the case at other Chinese money-market funds.
Credit scoring
Data from the World Bank’s Global Findex study revealed that the bank account ownership rate among individuals aged 15 and older is quite high in China (79% in 2014) yet credit usage is relatively low at 14% in 2014.
The People’s Bank of China covers credit profiles for just about 25% (around 350 million) of China’s 1.3 billion population and shares this data only with selected banks. This absence of reliable credit scoring is partly the reason individuals and small enterprises experience difficulty obtaining a loan from China’s state-controlled banking system which tends to favor large corporates and state-owned enterprises.
Lending
Credit data from the system will also be used to support lending activities at Ant Financial’s MYbank, an internet-only bank which provides loans to SMEs. Set up in mid-2015, the bank will extend loans up to US$800,000 as well as smaller loans that state banks usually don’t pay much attention to.
China has just 8.1 commercial bank branches and 55 ATMs per 100,000 people. This compares with US and Canada which have 28.2 branches and 222 ATMs per 100,000 people and in Europe where there are 28 branches and 81 ATMS per 100,000 people.
China’s central bank has urged financial technology (fintech) companies to help pay for a government-controlled monitoring system to watch over financial transactions on the internet.
Sun Guofeng, director general of the People’s Bank of China’s research institute, said the fast-growing fintech businesses have ratcheted up pressure on authorities to invest heavily in regulatory technology, or regtech, but he pointed out that it would be unfair to cover the costs by using taxpayers’ money.
Recently, Dianrong announced that the company has purchased Quark Finance, Quark Credit Workshop and its related branches and teams. Before that, the merger has been spread for a long time. The merger seems indicate a direction for P2P lending platforms: small platforms might be realise the compliance requirements by being merged, and big platforms also could expand and increase their market share through the acquisition. Thus, mergers and acquisitions might become the next new wave of the P2P lending industry in China.
There are three main areas of finance that are poised to be irreversibly changed, according to PwC. Consumer banking, investment & wealth management and transfers & payments are becoming pretty much all digital and data driven.
Some high level bullet points on China and Fintech include:
68% of financial institutions expect to increase Fintech partnerships in the next three to five years
85% believe mobile apps are the fastest growing customer channel
71% regard price wars as one of the challenges of Fintech
Personal loans are at the top of the list for moving to Fintech over the next 5 years
FinLeap, the startup platform behind Germany’s solarisBank, has secured EUR39 million in equity capital to support its ongoing fintech incubation programme.
Having launched twelve fintech ventures so far – including bank account switching platform FinReach, digital debt management outfit Pair Finance, insurance broker Clark, and Germany’s solarisBank – FinLeap is already active in ten European countries.
On Friday 14th July Brian hosted an event at the European Parliament offices in Dublin entitled ‘Regulating FinTech: the Way Forward’. Speakers at the event were the Minister for Financial Services Michael D’Arcy TD, Neil Ryan, COO Quaternion Risk Management; Derek Butler, CEO Grid Finance; Camille Blackburn, Central Bank of Ireland, and Ruth McCarthy, Director of the FinTech and Payments Association of Ireland and CEO of FEXCO Corporate Payments.
The panel discussed regulatory responses to FinTech services at EU and domestic level, as well as examining opportunities within the FinTech ecosystem in Ireland.
Strong networks, good government supports and the presence of major innovators are enabling Ireland to stay at the cutting edge, and these factors will help Ireland to achieve its IFS2020 target for job creation in financial services.
Financial institutions of various types are required to conduct periodic reporting to local regulators, like the Swedish Financial Inspection and EU-authorities like the European Banking Authority. Following the financial crisis of 2007/2008 numerous resolutions were past to increase regulations of the participants in financial markets. These initiatives are now being implemented regularly. Both MiFID II and MiFIR are scheduled to be implemented as of January 2018 with extensive reporting requirements and scarce information of how this should be implemented practically. During 2017, financial institutions and FinTech companies were impacted by EU-reporting in practice. One example is the reporting file format called XBLR were a lot of confusion exists.
Findings from the EY Fintech Adoption Index 2017, published by EY, indicate that fintech firms are approaching mass adoption among digitally active consumers. Leveraging digital technology, combined with personalized solutions, fintech firms are differentiating the customer banking experience. Simplicity, clean design, personalization, real-time insights and transparency are the defining components of these new solutions.
The four key themes that emerged from the 2017 EY Fintech Adoption Index were:
Fintech services have reached mass adoption in most global markets
New services and players are driving increased adoption
Fintech users prefer digital channels and technologies
Fintech adoption will continue to gain momentum
According to the EY report, some of the primary strategies used by fintech firms to gain traction include:
Offering a service for free or at a much lower cost that traditionally had a cost associated
Solve a problem an existing customer base
Provide an entirely new service
Create word-of-mouth advocates
Build a strong brand identity
Leverage highly targeted marketing
The most dramatic variance between fintech users and non-users is the ways consumers prefer to manage their lives. According to EY, “64% of FinTech users prefer managing their lives through digital channels, compared to 38% of non-FinTech users. FinTech users are also more likely to be users of non-fintech digital platforms, such as on-demand services (digital taxis, online food, etc.) and the sharing economy (bike and housing rentals).”
The city-based alternative lending platform, OxyLoans, today said it is planning to raise a debt of Rs 200 crore to meet the requirements of borrowers.
He said they have over 240 asset-backed applications from borrowers, and expressed hope to complete the process (raising debt of Rs 200 crore) within six months.
Thatavarti further said that OxyLoans, which has set a loan disbursal target of Rs 156 crore in three years, has facilitated loans to the tune of Rs 64 crore in the last nine months.
TachyLoans is an online lending marketplace catering to both Individuals & Small and Medium Enterprises (SMEs). Their platform is based on Peer-to-Peer lending paradigm that uses the proprietary credit decision model designed with some of the best and innovative practices in the financial industry using the cutting edge technologies like Artificial Intelligence & Machine Learning and is built through state of the art technology.
Founded by Brahma, TachyLoans is based out of Bangalore and was established in the year 2016. Brahma brings to the table more than 20 years experience and expertise in Retail Banking, Sales, Marketing and Operations.
The regulations will lay out the corporate structure that each of the platforms would need to follow and most importantly the DOS and Don’ts related to dealing with lenders and borrowers. However, of late, there has been an interesting trend of platforms coming up with a lender protection fund. What does it do? In case a lender loses the money he has extended to a borrower as a loan, the lender protection fund is expected to cover the losses for the investor. On the face of it, it sounds like a good idea, but if you dig deeper, there are several issues.
The flyer is aware of the risk, but he trusts the plane. You have a life vest under your seat for an emergency landing on water, but you do not have an escape pod that can be activated if a flight is about to crash. Similarly, the lender on a P2P site should be able to trust that the lending platform has built a system that can help Lender earn higher returns by mitigating risk. While a P2P platform cannot shirk its responsibilities when it comes to investor protection, having a fund to mitigate losses is not the answer. Proper systemic safeguards and strong ethics should alone suffice.
Launching LPF would in some ways signal that a platform does not have confidence in its own credit evaluation and risk-mitigation system.
India’s leading digital payments and m-commerce company Paytm has made an investment in loyalty app developer Mobiquest. The funding amount was not disclosed.
The Singapore Fintech Association (SFA) announced today it has created an online directory for fintech companies based in the city-state. The database contains a short description of each company and information about its founding team, funding status, and business model.
Currently listing around 300 startups, the database is free to use and data is maintained by the companies themselves. The directory looks similar to Crunchbase and Tech in Asia’s own startup database, but it’s exclusive to fintech.
The SFA built the directory in collaboration with US data company Let’s Talk Payments and its Medici platform, which provides information and resources about the fintech industry.
According to The Korea Herald, officials at South Korea’s Financial Supervisory Service (FSS) announced last week that they expect approximately 40 FinTech firms to provide international money transfer services starting August 15.
Per Yonhap News Agency, South Korea’s international money transfer market currently totals approximately 10 trillion won ($8.7 billion). Opening the market to FinTech firms will encourage competition and drive down costs to consumers since the companies can offer money transfer services at much lower prices than traditional banks.
Single transfers via FinTech firms will be capped at $3,000, and individual annual limits will be set at $20,000. For FinTech firms to qualify for the FSS permit, they must possess 2 billion won ($1.77 million) and a debt-equity ratiobelow 200 percent.
News Comments Today’s main news: PayPal invests in LendUp. KBRA upgrades SoFi Consumer Loan Program 2016-1. Revolut spent 7M GBP on incredible sales growth. Today’s main analysis: VCs may face cash crunch as more tech startups stay private longer. Today’s thought-provoking articles: FSB issues report on fintech. Inside Ping An’s massive expansion. Chinese players pursue $3.4T international digital payments opportunity. Auto manufacturers leverage […]
PayPal invests in LendUp. GP:”An outstanding partner to have for LendUp. With a little luck maybe Paypal and LendUp can also partner on customer acquisition.”AT: “I wonder why PayPal isn’t in the top 25 largest Internet companies. They’ve always had such great potential, but they never make the lists. Perhaps they aren’t diversified enough.”
Venture capitalists may face cash crunch, tech startups stay private longer. GP:”This could also be a hint that the companies private VC-driven valuations are not in line with the general public’s perception of their value”AT: “Not specific to online lending or fintech companies, but there is certainly an application to the alternative lending space. I can’t help but wonder if this is a long-term or shorter-term trend, but it seems to have started in the middle of last year some time.”
Global Debt Registry develops blockchain-based proof of concept for online lending. GP:”Slowly but surely we are starting to see the first blockchain applications that make sense.”AT: “There hasn’t been a single public ledger make a breakout, so these kinds of initiatives make me wonder if developments are based on demand or high hopes. I like this particular one, it’s interesting and innovative, but how many online lenders are asking for it?”
SEC’s robos handling is a big charade. GP:”The workings of a government are often obscure. I would call it politics. Perhaps one shoudl watch House of Cards TV series more often.”
Better Mortgage empowers consumers with a better price guarantee. GP:”I am not sure if this was necessary in order to convince people that a simpler and faster application is needed. In fact I usually advise companies not to price cheapest but to price as expensive as they can get away with as long as they provide real value to the users. Cheap has many issues: low margins, no profits, perceived lack of value, etc.”
Why Square is the ‘Tesla of payments’. GP:”I personally am not convinced that a Tesla car makes sense economically or practically over a gas or hybrid car at this time. There is a lot of hype and fashion into Tesla. I do have to recognize the Tesla cars look great though. I don’t think there is a hype behind Square, as it offers a really easy solution to accept credit card payments. Setting up credit card payments has always been a nightmare for all small businesses for no aparent reason. I am glad Square solved that.”
Revolut spent 7M GBP last year to fuel growth. GP:”What one needs to look at is not how much money was spent but what was gained and built through that. I am happy with a company spending 100mil GBP if they build 200mil GBP in revenue per year. A ration of spending 7mil for a revenue of 2.3mil is not impressive, however lets see the impact of this spent the following year.”AT: “Customer acquisition costs money. Remember, it took Amazon 10 years to make a profit. Now they’re the largest Internet company on the planet. While Revolut’s sales went up more than 500% in one year, they spent over half of their equity capital to do it. I see another funding round on its way.”
Are alt lenders ready to publish APRs? GP:”Many of them already are publishing APRs on their websites. I am not sure why this is a question. While it is not a requirement I think it’s good practice and the serious ones are publishing it.”
Building a bank is not easy. GP:”Nobody ever said building a company , a startup , or a bank was easy. This is why often people with no experience and who don’t know what it takes are better position to take such a project. They are not afraid of what they don’t know and often they even find new solutions and innovate withotu being constrained of the existing established solutions to known problems. Many VCs, because of this reason, invest in inexperienced CEOs seeing it as a strenght. “
PayPal Holdings Inc has invested in LendUp, a San Francisco-based startup that offers loans online to consumers who have been traditionally overlooked by banks because they are considered too risky.
LendUp said it had secured a strategic investment from the payments company on Wednesday. It did not disclose terms of the deal. PayPal confirmed in a statement that it had made an investment.
PayPal has been expanding partnerships and acquiring new services to gain advantage over rivals in a highly competitive digital payments market.
KBRA Upgrades the Ratings on SoFi Consumer Loan Program 2016-1 (KBRA Email), Rated: AAA
Kroll Bond Rating Agency (KBRA) upgrades the rating on the Class A notes issued under the SoFi Consumer Loan Program (SCLP 2016-1), a consumer loan ABS transaction which closed on June 27, 2016. The credit enhancement has built for the Class A notes since closing. While cumulative net losses are slightly above KBRA’s initial loss expectations, the transaction has breakeven loss multiples which are sufficient for an upgrade of the Class A rating.
The collateral in the SCLP 2016-1 deal currently includes $382.3 million of loans, as of May 31, 2017. The collateral in the transaction has amortized from the initial pool balance of $506.4 million at closing. The current credit enhancement levels are 31.66% for the Class A notes. Credit enhancement consists of overcollateralization, cash reserves, and excess spread.
Please click on the link below to access the report:
Private equity research firm Pitchbook reports startup exits—sales or mergers of companies delivering returns to shareholders—has fallen in recent years. The number and value of startup exits were down about 70% last year from their 2014 peak. Despite big IPOs of companies such as Snap, 2017 has yet to yield a bumper crop of new exits as companies stay private longer.
It’s not a new problem, says Scott Jordon, managing director at Glynn Capital, but it’s now more acute. The time it takes for technology firms time to IPO has stretched (pdf) from around five to eight years in 2000 to about 11 years today. Pitchbook’s Nizar Tarhuni says they’re seeing venture firms extend funds or negotiate longer periods than the standard 10 years to return money to their limited partners such as pension funds.
A resurgence in IPOs is still possible. Public investors extended a (mostly) warm welcome to the 11 or so tech companies that have gone public so far this year, including Appian, Carvana, Cloudera, Elevate Credit, Netshoes, Okta, Veritone, and Yext.
Loan data specialist Global Debt Registry has completed a proof-of-concept that utilizes the blockchain to provide investors with an immutable audit trail and a single source of core loan data.
The firm’s inaugural blockchain proof-of-concept (POC) lays the groundwork for providing investors and senior lenders in the online lending space with a safe and secure way to confirm loan ownership and collateral interests across companies within the ecosystem, GDR said.
In developing the blockchain POC, GDR worked with three leading blockchain platforms – Hyperledger, Ethereum and Chain.
Shortly after wrapping up its acquisition ofStonegate Mortgage Corp., Home Point Financial Corp. already announced it’s expanding its third-party origination channel.
The lender plans to increase its wholesale client base by expanding the geographic reach and number of third-party originators the channel will serve.
Home Point finalized its $211 million acquisition of Stonegate Mortgage back at the beginning of the month.
The rising popularity of robo-advisors is bringing increased scrutiny by regulators. At the same time, industry lawyers say they don’t foresee any substantive changes coming in the form of new rules.
This year for the first time, the SEC put online advice-giving on its list of examination priorities, raising concerns about “heightened risk to investors and/or the integrity of the U.S. capital markets.”
A key issue securities lawyers like Fein raises is that if the SEC insists its current rules adequately apply to robos – yet there seem to be shortcomings in how some robos execute their fiduciary duty – then any perceived enforcement gap will only widen.
But MacKillop, whose startup indie RIA manages about $50 million, scoffs at notions that computer-based investing can live up to the same sort of “best interest” standards for individual clients as brick-and-mortar advisors.
Better Mortgage officially rolled out the Better Price Guarantee — a promise to all of its borrowers that it will beat any competitor’s loan estimate by $1,000. If not, Better will actually give the borrower $1,000.
Better’s mission is to embolden consumers to confidently shop around while also de-risking one of the largest financial transactions they’ll ever make. According to a report published by Oliver Wyman, 71% of customers only get a loan estimate from one lender, which could mean that many home buyers aren’t actually getting the best price on their mortgage.
How the Better Price Guarantee works:
If the customer thinks another lender has a more competitive price, they can send Better the competitor’s Loan Estimate(LE) within three business days from the date on the loan estimate. If Better can’t beat the competitor’s LE by at least $1,000, Better will give the borrower $1,000 in cash when they fund with the other lender.
An LE is a standard form that all lenders are required to provide a consumer.
Better Mortgage may extend this guarantee to non-standard rate sheets.
What do you call a financial-technology company whose stock is up 75% this year as investors bank on its ability to bring a disruptive product into the mainstream? The “ Tesla of Payments,” apparently.
That’s the way to describe Square, according to Mizuho analyst Thomas McCrohan, who began covering the company on Tuesday. The key question for Square is whether it can scale its business up to serve larger customers, and McCrohan is optimistic about the payment processor’s ability to do so while still making money.
Tesla happens to be up 74% this year. Tesla and Square are the top two performers in the Barron’s Next 50 index.
Pros: Works across several types of mobile devices and bank accounts. Funds can immediately be used to shop with Venmo.
Apple
Pros: Service works with Apple’s iMessage, so users don’t need to download a separate app.
Zelle
Pros: Will work within the apps of the biggest banks such as J.P. Morgan Chase, Bank of America and Wells Fargo. Funds are deposited directly into bank accounts within minutes.
London-based Revolut, which offers a pre-paid international currency card, made a pre-tax loss of £7.1 million in 2016, its first full year of operations. Revenue was £2.3 million in the year to December 31, accounts filed with Companies House show.
The loss was largely down to “card scheme costs, acquiring costs, and user acquisition costs,” the company’s directors write in the accounts. In plain English, that means the cost of processing payments done on its cards, and the cost of getting people to sign up for the cards in the first place. The cost of sales jumped from £1.5 million to £7.8 million.
Staff numbers jumped from 7 in 2015 to 32, with staffing costs climbing from just under £300,000 to £1.5 million.
The startup has raised £12.1 million in equity capital to date.
The Financial Stability Board (FSB) has weighed in on the burgeoning Fintech sector of finance. The FSB has been analyzing “financial stability implications” potentially created by Fintech innovation. The FSB says it is specifically seeking to identify “supervisory and regulatory issues that merit authorities’ attention”.
The FSB stated there are currently no compelling financial stability risks from emerging Fintech innovations.
According to the FSB, ten areas of interest have been identified of which the following three are seen as priorities for international collaboration. These three priorities are viewed as “essential” to supporting financial stability “while fostering more inclusive and sustainable finance.” The three priorities are:
The need to manage operational risk from third-party service providers;
Mitigating cyber risks; and
Monitoring macro financial risks that could emerge as Fintech activities increase.
The other areas that merit attention include:
Cross-border legal issues and regulatory arrangements.
Governance and disclosure frameworks for big data analytics.
Assessing the regulatory perimeter and updating it on a timely basis.
Shared learning with a diverse set of private sector parties.
Further developing open lines of communication across relevant authorities.
Building staff capacity in new areas of required expertise.
Studying alternative configurations of digital currencies.
In May of last year, the Competition & Markets Authority (CMA) published its rather hefty “Retail banking market investigation” report. Buried among its “proposed remedies” was a provisional decision to require lenders specialising in unsecured loans and overdrafts of up to £25k for SMEs to use annual percentage rates (APRs) to show the cost of these products. The proposed measure is set to become a reality in August, according to multiple sources. But are the UK’s alternative lenders ready?
The impending APR directive will not affect merchant cash advance firms, such as Liberis, because merchant cash advance is not technically considered lending. Nor will it affect asset-backed finance firms like MarketInvoice.
GrowthStreet is another business lending platform that would be affected by the directive, had it not taken the decision some time ago to publish APRs of its own accord.
UK Challenger banks, like Atom, Starling, Tandem and Monzo, are building from the ground up to do things differently.
But building a bank is not easy. Sophisticated and diverse product offerings, consumer trust, and security are three vital components. And in this regard, the incumbents often have a head start.
In our portfolio, we have seen AukaPay partnering with Sparebank1 in Norway to provide a white label payments app, MarketInvoice joining forces with BNI Europa to enable SMEs to access more working capital on its platform, Crosslend working with institutions to provide investment opportunities in consumer loans, and iZettle in successful partnership with Santander.
And when talking challenger banks, we can’t forget to mention BBVA’s acquisition of Holvi last year.
While P2P lending still represents a small proportion of total lending volumes, in the UK, origination grew 36% year on year in 2016.
Zopa is approaching bank building from a different base to the other challenger banks, and a case in point of collaboration with the incumbents.
Hargreaves Lansdown has dropped its plans to set up a peer-to-peer lending platform.
The company, which was expected to launch both a P2P lending platform and a cash management service to clients this year, has now decided it will solely focus on the cash management service.
Hargreaves Lansdown chief executive Chris Hill tells Money Marketing that despite P2P being “interesting”, the firm would rather focus on the new savings proposition because it is “a much bigger market”.
P2P lending seems to be a novel and definitely, profitable investment opportunity. It is becoming more and more popular and so there is a constant boost in the number of lenders who are getting profitable returns from this investment option. Here are a few essential steps for making money from the P2P investment.
Step No.1: P2P investment should be treated as an extra element in the overall financial portfolio
You must do ample research, deliberate and then come to a decision about what all should be included in your financial portfolio. You must possess a diversified and comprehensive financial portfolio. P2P lending seems to be a wonderful addition to this portfolio.
Step No. 2: Set a target and attain it
A profit of 2 percent over a 12-month deposit seems to be realistic. The two percent would be paying for the risk factors including investment in time.
Step No.3: Fortify your financial foundation
In order to make an impressive profit in your P2P investment, you must have a fantastic and truly solid financial foundation. This is certainly not a getting rich fast scheme but eventually, you could expect good returns.
Step No.4: Create a comprehensive system
Create a comprehensive system for investing in borrowers that is based on important information which is available, and is relating to the borrower.
Almost 30 years after founding Ping An, Ma is ambitiously broadening his supermarket of financial products, much like U.S. financier Sandy Weill did as chief executive officer of Citigroup from 1998 to 2003.
Ma founded Ping An in 1988 in Shenzhen, the financial hub of southern China, which lies just north of Hong Kong’s border with the mainland. Over the past five years, the company has climbed onto the list of the world’s ten largest insurers, now ranking No. 4 behind France’s AXA, Germany’s Allianz, and U.S.-based MetLife in terms of assets, according to Relbanks.com. Though Ping An’s insurance assets rose 17 percent in 2016, to $802 billion, the company’s double-digit profit growth is benefiting in part from a diverse group of revenue streams, including banking, securities, asset management, wealth management, private equity, and, more recently, China’s booming arena of Internet finance.
Ping An saw 11.7 percent revenue growth, with gross earnings reaching a record high of 774 billion yuan ($112 billion), and a 15 percent growth in profits; net earnings rose to 62 billion yuan. About 56 percent of the group’s profits were derived from insurance, down from more than 80 percent a decade ago. The rest came from banking (20.6 percent), asset management (15.5 percent), and Internet finance (8.3 percent).
Among the company’s most touted technology successes is the 2011 founding of peer-to-peer lender Shanghai Lujiazui International Financial Asset Exchange Co. Lufax, as the company is known, has become an e-commerce giant for finance in China, the world’s second-largest economy. It’s the country’s biggest online marketplace for wealth management products: Last year more than 7.4 million individual and corporate investors used Lufax to purchase 6 trillion yuan worth of investment products from Ping An and thousands of other Chinese financial institutions.
A new study from Juniper Research highlights the increasing dominance of Chinese companies in digital payments, with players such as Alibaba, Tencent and UnionPay seeking to bolster their revenues through international expansion.
The research includes the latest Juniper Leaderboards, highlighting best-in-class players in key payments arenas, including PayPal (for eWallets), Worldpay (for payment service providers) and Vodafone (for telco payments in emerging markets).
The complimentary whitepaper, Who will Own the Digital Payments Sector in 2021?, is available to download from the Juniper website together with further details of the full research and the attendant IFxl (Interactive Forecast Excel).
Hong Kong’s role as a global financial hub may be under threat unless the city can embrace technology and adapt quickly to the tectonic changes that have taken place in the financial landscape in the two decade since its return to Chinese rule, experts say.
Hong Kong’s greatest moment of innovation was in 1997 with the Octopus card, a smart-card payment system that is now a ubiquitous part of daily life. Two decades since, the city has not made further progress and has lagged mainland China in exploring new forms of electronic payment such as Tencent Holdings’ WePay or Alibaba Group Holding’s Alipay.
Hong Kong’s existing banking model would change dramatically with the rise of fintech, similar to how Amazon.com revolutionised America’s retail industry, he said.
For Hong Kong to succeed as a fintech hub, regulators should license more companies to handle clients’ money to accelerate innovations in fintech and wealthtech, or the use of technology for wealth management and investing, he said.
“More than 70 of the world’s largest 100 banks are in Hong Kong, and this gives the city a big advantage because in fintech, the majority of the customers are going to be banks,” he said.
As many as 82 per cent of incumbent banks and financial institutions plan to increase partnerships with fintech companies in the next three to five years, according to a fintech survey in Hong Kong by PwC this year.
The People’s Bank of China (PBoC) is releasing new details about a forthcoming five-year development plan focused on its strategy for advancing technology use in the country’s domestic financial industry.
According to the announcement by the central bank, the PBoC intends to actively push forward the development of new technologies such as blockchain and AI. It also plans to strengthen its research on applications of fintech in regulation, cloud computing and big data.
In fact, the FinTech Association of Hong Kong (FTAHK) had its official launch on June 28, underscoring the point that financial IT innovation is no longer restricted to New York City and its concrete canyons or Silicon Valley in Northern California.
There will be committees taking on key sectors such as:
The thinning margins in the automotive industry are making a strong case for vehicle original equipment manufacturers (OEMs) to explore revenue streams beyond sales and periodic maintenance. As customers become accustomed to digital transactions, OEMs will look to tap the hitherto underutilised fintechservices segment to generate additional revenues. Active partnerships with fintech companies will enable OEMs to offer multiple use cases that enrich in-vehicle experience, which will ultimately influence customers’ purchase decisions.
Fintech in the Global Automotive Industry, Forecast to 2025 is part of Frost & Sullivan’s Automotive & TransportationGrowth Partnership Subscription. The study examines key application areas of fintech in the automotive industry: leasing and finance, insurance, digital retailing, digital payments, and automotive services. Europe, followed by North America, is anticipated to lead in digitising finance, and North America, followed by Europe, in automotive service investments. The average investment in fintech is estimated to grow from $16 million in 2016 to $230 million by 2025with the emergence of digital car retailing and new business models in insurance.
The synergies between automakers and technology companies will power next-generation financial service infrastructure. Even though fintech partnerships with big banks slow down transactions, it is important to note that banks manage almost 32% all new vehicle financing in North America. Besides:
The competition for market share between banks and captives finance companies is expected to digitise new car sales and result in a $1 trillion auto financing market; and
Fintech will monetise services based on subscription models and on-demand vehicle features.
The LHoFT, Luxembourg House of Financial Technology, and LATTICE80, the world’s largest Fintech Hub located in Singapore, are excited to have signed a Memorandum of Understanding (“MOU”) at Money 2020 Europe, setting a foundation for collaboration between the two centres.
This Memorandum of Understanding provides a framework to intensify the cooperation between two leading financial centres with a specific focus on Fintech and driving digital transformation in financial services.
Splendit is a Swiss fintech firm dedicated to broker loans to students paid for by financiers.
The company has decided to link up with Blockchain-fintech Lykke, Splendit said in a statement today.
Thanks to the deal with Lykke, Splendit henceforth will be able to finance foreign students by sending them their loans via the Lykke Wallet. Florian Kuebler, the co-founder of Splendit, says that this will save transaction costs and enable crowdlending across the globe.
Willis Towers Watson (WTW) and Workinvoice have signed a collaboration agreement exclusively with the aim of bringing more and more Italian companies on the commercial credit market run by the Italian Fintech company.
The Workinvoice activities enable companies ‘ access to a particular market to obtain immediate liquidity, and to protect themselves from payment risks through the sale of its trade receivables to Italian and international institutional investors “ .
MPOWER Financing (), an innovative fintech company and provider of educational loans to high-potential, international students, recently appointed Rohan Tibrawalla to the position of Country Director-India to oversee the company’s operations in the region from its soon-to-be-opened office in Bangalore.
In his new position, Tibrawalla is responsible for expanding and executing MPOWER Financing’s operations, marketing and business development strategies as well as for managing the loan portfolio and debt and equity capital sourcing.
MPOWER Financing is a public benefit corporation whose mission is to remove the financial barriers to higher education in the U.S. by providing loans and other resources necessary for students to complete their undergraduate or graduate studies.
Nadeem Syed, who heads mega fintech firm Finastra, believes regulators worldwide will need to evolve guidelines for the emerging sector (fintech) but the challenge for many financial services firms would be to navigate the new environment and also scale services.
What are your plans in Asia Pacific in terms of expansion and growth after the merger and how has the journey been in Asia so far in terms of revenues and capturing markets?
We have long been committed to Asia Pacific and continue to see great opportunity across the region with double-digit growth rates. Developed and growth markets of Asia Pacific are successfully riding the digital wave especially with the tremendous opportunities that lie ahead of us in Indonesia, Myanmar, Thailand and China to name a few.
Misys has over 400 customers that cut across from Japan to Australia and we see tremendous opportunity to leverage our strength in the region to bring the D+H products to market, especially payments and cash.
Over the years, how have you seen Asia’s competitiveness in fintech being transformed? Has that been affected by the rivalry between region’s financial centres – Singapore and Hong Kong?
The financial services landscape, not just in Asia but globally, has seen a lot of regulators becoming more and more receptive to new technologies – distributed ledger technology, artificial intelligence, P2P lending and so on.
The challenge for all financial services companies is to navigate each jurisdiction’s new or upcoming regulations on fintech while translating their various innovations into services that can be scaled up and rolled out in a safe and reliable manner.
What kind of competition do you see from the internet giants like Baidu or Alibaba are fast emerging as fintech players worth noticing. What future do you see for Chinese fintech industry?
China’s internet giants are increasingly looking at fintech as it is a complementary sector that helps create a tighter online ecosystem for their customers. They are mostly focused on personal banking and payments solutions, which means traditional banks need to concentrate on evolving their own digital and online presence.
As the fastest growing region, do you see Asia emerging as a digital champion anytime soon. If yes, what will help to bring it and where are the major challenges?
Many countries in Asia are seeing exponential growth in the number of Internet and mobile device users – this has a direct correlation to the boom in digital or online banking, as well as other services being carried out online. Digital platforms mean that rural populations now have easy access to services previously unavailable to them, but the challenge is always how to ensure these platforms are safe and secure as cyber criminals get more sophisticated.
Fujitsu today announced it is commencing sales in Japan of cloud-based solutions for lending and leasing businesses. Developed by US-based Cloud Lending Solutions and known as the CL Series, the solutions will be deployed and operated as Software as a Service (SaaS) with the support and operations services of Fujitsu technicians with expertise in financial systems. This is the first time services from Cloud Lending Solutions will be available in Japan.
ALT Corporation, a subsidiary of Yayoi Co., Ltd., Japan’s largest accounting software company, has decided to become the first Japanese customer for these solutions. ALT is using these solutions to set up a unique online lending business, with plans to begin trial lending in October 2017.
With the goal of offering solutions to transform business using Fintech to customers at financial institutions around the world, on July 12, 2016, Fujitsu signed a Memorandum of Understanding (MOU) with Cloud Lending Solutions for a strategic partnership.
The CL Series is a set of cutting-edge cloud services offered as SaaS, which digitize a suite of business processes for lending and leasing businesses, from applications to reviews, contracts and collections.
Canadian FinTechs that made the list include Wealthsimple, which recently announced its UK expansion and raised a $50 million Series B; Montreal-based Blockstream, which raised a $55 millionSeries A in February 2016; and Toronto-based Wave, which raised $32 millionfinancing round from RBC, Portag3, and other investors in May.
The list also includes Vancouver-based Trulioo, which produces ID verification software for compliance and to fraud risk mitigation; Toronto-based Financeit, a cloud-based point-of-sale platform; and Toronto-based Street Contxt, which raised a fresh round of funding from 8VC, Point72 Ventures, Palm Drive Capital, and Portag3 Ventures in April.
