Thursday March 16 2017, Daily News Digest

sofi net loss triggers

News Comments Today’s main news: Blackmoon, ID Finance partnership results in $10.71 mil investment. OCC issues draft manual for FinTech charter.  Yirendai reports Q4 and full year 2016 results.Marlette cuts staff to push for profitability. Today’s main analysis: Are SoFi borrowers really defaulting more? Robo-advice stirs up more competition. Today’s thought-provoking articles:  ISA myths for robo-investors. Beijing vows to […]

sofi net loss triggers

News Comments

United States

United Kingdom

European Union

  • N26 hits 300K customers. AT: “App-only banking is taking millennials by storm. I think this will become a big deal in most of the world, particularly Europe and Asia.”




  • Yirendai reports Q4, the full year 2016 results. GP:”Yirenday originates $1bil per quarter, approx 1/2 the size of Lending Club. And reports approx. $158mil in EBITDA profit in 2016. Our understanding is that this profitability is due to being focused on lower quality borrowers than previously. To be noted as well: 97.8% was facilitated via the mobile app. ” AT: “Added bonus: See the Yirendai presentation at LendIt USA 2017.
  • Beijing vows to clean up digital small lenders.


Latin America

News Summary


United States

EXCLUSIVE: Blackmoon, ID Finance partnership results in 10 mil EUR investment (ID Finance Email), Rated: AAA

As reported yesterday, Blackmoon and ID Finance have integrated for packaged loans to investors. Total investments so far: 10 mil EUR, the equivalent of about US $10.71 million.

From the press release:

ID Finance has integrated with Blackmoon and is now executing investment transactions via the Russian lending platform. Blackmoon, which was cofounded by the former vice president of Ilya Perekopsky and whose backers include international venture capital firm Flint Capital, can now offer professional investors the ability to acquire portfolios of loans made to emerging market borrowers. The loans have been screened and scored by ID Finance’s advanced risk assessment system and allow Blackmoon investors to benefit from interest rates higher than traditional investment tools.

If the issued loans meet the strategies of investors that deal with Blackmoon, the system registers the fact of sale, the investor’s funds are transferred to the creditor and the transaction is deemed closed. Hence, ID Finance registers the profit by the securitised portfolio and continues servicing borrowers who are redeeming the loans now to the benefit of Blackmoon investors. In this case, Blackmoon ensures execution of transactions, analysis, accounting and investment process management for the investor and lender. ID Finance will benefit from a new steady scaled funding source from professional investors.

ID Finance is currently operating in Russia, Kazakhstan, Georgia, Poland, Spain and Brazil. Presently, the loan portfolios available to Blackmoon investors cover Poland, Georgia and Spain although additional markets may be added in the future. Thanks to ID Finance’s advanced credit scoring and risk analysis technology, investors who purchase loan portfolios via Blackmoon receive an enhanced income-and-risk ratio compared to conventional investment instruments.

For additional context, read TechCrunch and VentureBeat.

Are SoFi Borrowers Really Defaulting More? (Lend Academy), Rated: AAA

There was an article in Bloomberg earlier this week that called into question the performance of a 2015 SoFi securitization. Given that I have always held SoFi out as the gold standard in industry performance I was surprised to read about these issues. So, I did some digging and discovered that Matt Scully (the author) did not provide the complete story.

The Cumulative Net Loss (CNL) trigger for this deal in February was very low, reportedly below 3% and the actual CNL for February barely went above these low trigger points. But what is more important is that it is misleading to use this case as another example of underperformance. As I said this was a one-off deal between a motivated buyer and seller and was much tighter than subsequent deals.

One final point. Because the triggers were barely breached it is quite possible that in coming months future triggers will not be breached and the deal will cure. The reality is that triggers were not set at the appropriate level for this deal. SoFi did not set these triggers and likely did not agree with them as they were negotiated directly between the buyer and the seller. So to read anything into this particular breach is misleading.

Online Lender Marlette Cuts Staff in Push for Profitability (WSJ), Rated: AAA

Online lender Marlette Funding LLC is cutting around one-fifth of its workforce after the company decided to mothball plans to branch out into businesses beyond making unsecured personal loans, according to people familiar with the matter.

While smaller than better-known rivals like LendingClub Corp., Marlette expanded more quickly in recent years. The Delaware-based company said earlier this month that it extended more than $3 billion in loans under its Best Egg brand in its first three years in business, a milestone that took LendingClub around twice as long to reach. Marlette’s 2016 loan volume was $1.1 billion compared with $8.7 billion for LendingClub.

Robo advice gets human, stirring competition again (Financial-Planning), Rated: AAA

Over the past two years, there has been a clear divide in the assets of robo advice startups and the initial efforts of incumbent firms. But that partition could collapse, as the major players gravitate to one model and price competition takes hold.

Forming a separate cluster ranked by AUM are the independent digital startups, with Betterment the leader with over $7 billion, followed by Wealthfront, Personal Capital, and other offerings.

But by last year, firms realized that customers wanted a human touch with their digital solutions, and numerous analysts came to the conclusion that hybrid robo platforms would be the go-to model for digital wealth management.

Schwab’s hybrid seems to be aimed at the leading competition as well, undercutting Vanguard’s PAS with account minimums of $25,000 and fees capped at $900 a quarter. It’s priced aggressively enough that even industry observers such as Joel Bruckenstein, co-creator of the Technology Tools for Today conference series, wondered if it was “the beginning of the commoditization of entry level planning.”

Another factor to keep in mind: the biggest banks are reinvigorating their PFM applications and developing their own hybrid robo advice solutions, keen to keep even small retail assets rather than seeing them leak to digital wealth firms or custodians.

OCC Issues Draft Licensing Manual for Fintech Charter Applicants (ABA Banking Journal), Rated: AAA

The Office of the Comptroller of the Currency today released its long-awaited draft licensing manual for fintech companies seeking the agency’s new limited-purpose national bank charters. The manual spells out in greater detail than at any point previously how applicants can seek a charter and how the OCC will review applications and examine newly chartered fintech firms. Consistent with previous OCC statements and papers, the manual makes clear that the special-purpose charters will be subject to all applicable banking laws and regulations. It also clarifies that the special-purpose charters will not authorize deposit-taking.

The manual walks through the initial steps of applying, the chartering standards the OCC will apply, the business plan the applicant is expected to provide and the OCC’s final decision-making process. For example, the manual notes that some members of the organizing group, management and board would usually be expected to have “experience in regulated financial services” in addition to experience with the kind of novel products or services the company may propose to offer.

In response to concerns expressed by ABA, the draft manual makes clear that the agency “will not approve proposals that would result in an inappropriate commingling of banking and commerce.”

Marketplace Lending Industry Sees Efficiency, Cost, Authentication and… (Broadway World), Rated: A

Ninety percent of those involved in the burgeoning marketplace lending industry anticipate an increase in traditional bank and marketplace lender partnerships in 2017, eOriginal, Inc., the expert in digital transactions, today announced as part of the results of a survey conducted at last week’s LendIt USA 2017 Conference in New York.

Survey takers were also asked to highlight challenges to growth within marketplace lending. The top answers included regulations (47 percent) and access to capital (25 percent). When asked to focus specifically on the adoption of end-to-end digital transaction management solution, participants cited the challenges to be full adoption by partners (31 percent), lack of infrastructure (29 percent), security and privacy concerns (22 percent) and cost (17 percent).

House GOP demands that OCC slow down on fintech charter (American Banker), Rated: A

A group of House Republicans is asking Comptroller of the Currency Thomas Curry to slow down on the creation of a fintech charter.

ProducePay raises $ 77 million in debt and equity to revolutionize farm financing (TechCrunch), Rated: A

His company has just raised $77 million in equity and debt to provide financing to farmers of perishable goods. While there are all sorts of financial instruments for certain types of farmland — including billion-dollar investment funds for timberland, and certain kinds of non-perishable crops — most fruits and vegetables aren’t considered good prospects for loans.

ProducePay has come up with a model that works for those farmers whose crops can’t be siloed or stored.

ProducePay reaches out to farms to buy their crops at a price that the company sets up front, then goes out and sells those crops on the market. If the company breaks even, the farmer doesn’t owe a cent. If the company makes a profit, the profits are returned to the farmer minus a commission or percentage of the profit that ProducePay collects.

And by using the crop as collateral, Schwarzbeck’s company manages to avoid forcing farmers to put up their farms as collateral — the phenomenon that forced many farmers into bankruptcy in the 80s and hastened the advent of industrial farming.

Klarna Finds Feintuch (O’Dwyer’s), Rated: A

Swedish e-commerce company Klarna has retained New York-based Feintuch Communications as its PR agency of record for North America.

Feintuch will work with Klarna’s North American and headquarters teams to increase market support for the payments provider through an integrated PR and social media campaign.

Innovative criminals embrace online opportunities (Financial Times), Rated: A

Good innovation must therefore be differentiated from bad. And one area in which this is becoming abundantly clear is the fast expanding high-tech financial service industry, colloquially known as “fintech”. Fintech innovators boast their technologies are making financial services more convenient, more inclusive and more competitive, all the while bringing down costs.

But the spike in digital financial crime accompanying the frictionless payments systems these technologies promote suggests criminals may be innovating as quickly, if not quicker. For now at least, more fintech equals more “crimtech”.

Of particular concern is the phenomenon of “transaction laundering”. Think of the cost savings brought about by e-commerce and mobile app services for the legitimate e-retailing sector and then apply them to the world of money laundering. Whereas an old-school money launderer would face the headache of managing a bricks-and-mortar front business to launder his illicit profits, today’s online criminals need only set up a bogus online website to achieve the same effect, or else partner — on a commission basis — with a legitimate e-retailer prepared to process their illicit transactions.

With the costs so low, there are few obstacles to criminals seeking to set up their own transaction laundering fronts. Add identity fraud to the mix, and criminals might not even have to put their own reputation at risk.

Flu Season Hits Small Businesses Especially Hard — And It’s Not Over Yet (Small Biz Trends), Rated: B

The impact of the flu on small businesses is big. New data from Funding Circle shows that 47.4 percent of small businesses report being adversely impacted by the flu virus.

Almost half of all small businesses suffered loss of productivity or disruption of operations due to flu, Funding Circle found during a 2016 small business owner survey.

The U.S. Centers for Disease Control and Prevention (CDC) notes that 111 million work days are lost to the flu every year. That includes big businesses, too, of course. The financial impact of the flu each year adds up to about $7 billion, including both lost wages and slowed productivity. Since most businesses in the U.S. are small businesses, their share of those totals is considerable.

Mike Bingle, Steven Freiberg and Robert L. Joss AC Elected to SoFi’s Board of Directors (PR Newswire), Rated: B

SoFi, a modern finance company taking an unprecedented approach to lending, wealth management, and insurance, announced today the election of Mike Bingle, Steven Freiberg, and Robert L. Joss AC to its Board of Directors.

Bingle is a Managing Partner and Managing Director at Silver Lake. He currently serves on the Board of Directors of, Fanatics, Gartner, and SolarWinds. Bingle has been a private equity investor for over 20 years, and he has invested in numerous financial technology companies, including having served as a Director of: TD Ameritrade, Datek Online Holdings, Inc., Interactive Data Corporation, IPC Systems, Instinet, Mercury Payment Systems, and Virtu Financial. Prior to joining Silver Lake, Bingle was a principal at Apollo Management; he also worked in the Investment Banking Division of Goldman, Sachs & Co. Bingle holds a BSE in Biomedical Engineering from Duke University.

Freiberg is also a long term veteran of the financial services sector, having held multiple positions at Citigroup over a 30 year period including serving as the Co-Chairman and CEO of Citigroup’s Global Consumer Group, and most recently as the CEO of E*TRADE Financial Corporation where he led the company back to profitability in the aftermath of the 2008 financial crisis. He is currently a Board member of Fair Square Financial, MasterCard, OANDA, Purchasing Power, and Regional Management, and a senior advisor to several companies including The Boston Consulting Group and Verisk Analytics. Freiberg holds a BS in Finance as well as an MBA in Finance from Hofstra University.

United Kingdom

The ISA myths robo advice investors should dispel this ISA Season pt.1 (AltFi), Rated: AAA

With returns on cash ISA meagre at best, many are looking to the new Innovative Finance ISA and regular stocks and shares ISAs for both income and growth.

Many experts are also expecting ISAs to play a bigger role in investors overall wealth planning, not least as the current allowance of £15,240 is set to rise to £20,000 in April. In this brave new world, however, a huge gulf of information exists.

  • Myth 1: the money is locked in
  • Myth 2: ISAs are only for people with lots of money
  • Myth 3: ISAs are just for cash savings
  • Myth 4: Stocks and shares ISAs are for seasoned investors
  • Myth 5: The ISA limit is the total limit of what I can invest this year
  • Myth 6: If I get a stocks and shares ISA I’ll have to do a tax return
European Union

App-only bank N26 hits 300,000 customers as startups across Europe race to be the finance app for millennials (Business Insider), Rated: AAA

App-only bank N26 has tripled customer numbers in little over a year, announcing on Wednesday that it now has 300,000 users across Europe.

The customer number is up from 100,000 in January 2016. N26 has customers in 17 European countries, including 30,000 in France and 10,000 in both Spain and Ireland.

The startup also announced on Wednesday that it has processed €3 billion (£2.6 billion, $3.1 billion) of transactions, with more than 60% of that total in the last year alone.

Berlin-based N26 is one of a number of app-only bank or bank-like services that have sprung up across Europe in the last few years. Many of them are competing to become the go-to bank for millennials, the generation glued to their smartphones who find bank branches as old school as sending a fax. N26 highlights in a blog post announcing the milestone that 59% of its customers are aged 18-34.

N26 has a significant war chest to take on any would-be rivals. The 200-person business has raised over $55 million, most recently raising $40 million from investors including Hong Kong billionaire Li Ka-Shing last June. N26 has said it plans to launch in Britain later this year.


Financial Services Application Market Projected to Grow (Broadway World), Rated: AAA

Investments in financial technology (fintech) are growing rapidly. According to a new report published by Accenture, in the first quarter of 2016, global investment in financial technology ventures reached $5.3 billion, a 67 percent increase year over year. About 62 percent of the investments went to fintech companies in Europeand Asia-Pacific. China is the world’s leader in the fintech industry. For the period of July 2015 to June 2016, Chinese FinTech investments surged to $8.8 billion, commanding the largest share of global investment in this sector, according to a report by EY.



New research has found that 1 in 5 Australian business owners took a hit to the bottom line in this summer’s heatwave, facing a double whammy as customers stayed at home and energy bills soared.

The sweltering summer season created headaches for thousands of business owners, with almost 30% saying their business performed worse than the summer before and almost the same number unhappy with their level of trade over the period.   Some reasons cited for a drop-in business were lower foot traffic as customers stayed indoors, it being too hot to work outside, heat and rain damaging stock, and hot and bothered customers being in a bad mood.

Mr Poolman said 1 in 4 OnDeck loans were used for purchasing stock or inventory, with business expansion, more staff, marketing & advertising the other top reasons.

The weather is not the only thing impacting Australian small businesses at the moment, according to the research. Of the 300 businesses surveyed, more than half (53%) believe Australia’s high cost of housing is having a negative impact on consumer confidence – and in turn the small business community.


Yirendai Reports Fourth Quarter and Full Year 2016 Financial Results (Yahoo! Finance), Rated: AAA

Yirendai Ltd. (YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the quarter and full year ended December 31, 2016.

Starting from the second quarter of 2016, the Company changed its reporting currency from the U.S. dollar (“US$”) to the Renminbi (“RMB”), to reduce the impact of increased volatility of the RMB to US$ exchange rate on the Company’s reported operating results. The aligning of the reporting currency with the underlying operations will better depict the Company’s results of operations for each period. This release contains translations of certain RMB amounts into US$ for convenience[1]. Prior period numbers have been recast into the new reporting currency.

In the fourth quarter of 2016, Yirendai facilitated RMB 6,675.2 million (US$961.4 million) of loans to 110,785 qualified individual borrowers on its online marketplace, representing a 102% year-over-year growth; 57% of the borrowers were acquired from online channels; 37% of the loan volume was originated from online channels and 98.8% of the online volume was facilitated through the Yirendai mobile application.

In the fourth quarter of 2016, Yirendai facilitated 194,505 investors with total investment amount of RMB 7,806.9 million (US$1,124.4 million), 100% of which was facilitated through its online platform and 85.0% of which was facilitated through its mobile application.

For the fourth quarter of 2016, total net revenue was RMB 1,071.1 million (US$154.3 million), up by 137% from the same period in 2015; net income was RMB 379.8 million (US$54.7 million), representing an increase of 356% from the same period in 2015.

In the full year of 2016, Yirendai facilitated RMB 20,277.9 million (US$2,920.6 million) of loans to 321,019 qualified individual borrowers on its online marketplace, representing a 112% year-over-year growth; 57% of the borrowers were acquired from online channels; 38% of the loan volume was originated from online channels and 97.8% of the online volume was facilitated through the Yirendai mobile application.

In the full year of 2016, Yirendai facilitated 597,765 investors with total investment amount of RMB 25,038.3 million (US$3,606.3 million), 100% of which was facilitated through its online platform and 83.0% of which was facilitated through its mobile application.

For the full year of 2016, total net revenue was RMB 3,238.0 million (US$466.4 million), up 146% from the same period in 2015; net income was RMB 1,116.4 million (US$160.8 million), representing an increase of 305% from the same period in 2015.

See the full LendIt USA 2017 presentation delivered by Yihan Fang and Yang Cao, CEO and COO/CTO, respectively, of Yirendai here.

Beijing vows to clean up digital small lenders (Financial Times), Rated: AAA

Chinese authorities are preparing new rules to reduce risks caused by the rapid growth of online small-loan companies, which have emerged as among the most active lenders in the country following a crackdown on peer-to-peer rivals.

Loans outstanding among China’s 8,673 small-loan companies totalled Rmb927bn at the end of last year, according to government data. That is more than the Rmb673bn outstanding from peer-to-peer lenders, according to Online Lending House.

But even that figure understates the true scale of activity by small-loan companies because these groups are among the most active issuers in China’s burgeoning securitisation market. Securitisation of small-loan assets hit Rmb82bn in 2016, up from Rmb13bn a year earlier, according to data from Wind Info.

Traditional, offline small-loan companies are restricted to lending within their home provinces where they know local businesses. But provincial governments have approved a new wave of online small-loan companies in recent years. These new online groups are not subject to regional restrictions, opening the door to new risks.

Online small-loan approvals have become a valuable commodity amid aggressive enforcement of new rules on P2P lending announced last year. The rules cap P2P loans at Rmb200,000 for an individual and Rmb1m for a company. They also forbid peer-to-peer lenders from operating “fund pools” that allow platforms to fund payouts on maturing investment products with inflows from new product sales.

The goal of the ban on fund pools is to force P2P groups to serve as pure intermediaries that match investors with loans. Yet fund pools have been crucial to enabling these platforms to offer products with both short maturities and high yields. By contrast, small-loan companies rely on their own capital to fund loans, which means they have greater freedom to manage liquidity.


This real estate start-up will help you invest with as little as Rs50,000 (The Express Tribune), Rated: AAA

NEST, one of the finalists at the Fintech Disrupt Challenge 2016, will be offering an entry-level ticket, as low as Rs50,000 ($477), to own a small stake in a managed commercial/residential property.

Fintech Disrupt Challenge 2016 was organised by Karandaaz Pakistan and will be facilitating people with shared social demographics and interest in real estate, investing to pool money and purchase properties. Arazi Ventures CEO Umair Sheikh said the team has been working on this project for quite some time but getting past the current regulatory framework has been a major challenge.

Latin America

Startupbootcamp bets on Latin American fintech (Global Trade Review), Rated: A

Accelerator firm Startupbootcamp has launched a fintech-focused programme based in Mexico City, targeting the wealth of start-ups that have recently appeared in Latin America.

The company has teamed up with the region’s main fintech champion, Finnovista, on the project, which will be led by Nektarios Liolios, CEO and co-founder of Startupbootcamp Fintech, together with Latin American entrepreneurs Fermín Bueno and Andrés Fontao from Finnovista.

Though based in Mexico City, the programme is open to all fintech start-ups from across Latin America, with ‘FastTrack’ events scheduled to be held in all major Latin American cities from March to May 2017 to introduce companies to the Startupbootcamp team and encourage them to apply.


George Popescu
Allen Taylor