Thursday May 18 2017, Daily News Digest

Thursday May 18 2017, Daily News Digest

News Comments Today’s main news: Lending Club increases minimum investment to open account. Consumers pay off unsecured personal loans first. American Households Return To Peak Debt, Thanks To Booming Student Loans. RateSetter sells off bad debts. Today’s main analysis: The fast lane to better small business funding. Today’s thought-provoking articles: Consumers pay off unsecured personal loans first. American Households […]

Thursday May 18 2017, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

Australia

India

Middle East

News Summary

United States

Lending Club Increases Minimum Investment to Open an Account to ,000 (Lend Academy), Rated: AAA

Until today new investors at Lending Club could open an account with as little as $25. This has now changed. Going forward to open a new account at Lending Club you must deposit $1,000. The $25 minimum investment per loan still applies but you will no longer be able to start an account with less than $1,000.

The reason for this move can be explained in one word: diversification. We have written manytimes before about the importance of diversification and Lending Club has a page on their site dedicated to this topic. With $1,000 investors will be able to invest in 40 notes; while that is still not very diversified it is a lot better than investing in, say, four notes when someone starts with $100.

American Households Return To Peak Debt, Thanks To Booming Student Loans, (Buzz Feed), Rated: AAA

American households are back at peak debt, with new data showing the highest level of household debt since 2008.

Kind of.

Americans now sit on a $12.73 trillion pile of household debt, meaning mortgages, loans, credit cards, home equity lines of credit, car loans, and student debt. That figure previously peaked at $12.68 trillion in the early days of the Great Recession.

Those numbers aren’t adjusted for inflation, and $12.68 trillion 2008 dollars would be equal to more than $14.5 trillion today. And while debt number is at it’s highest ever, the economy has grown significantly in the last nine years, meaning that as a percentage of the total economy, it’s still well below its 2008 high.

“Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today,” said Donghoon Lee, a Research Officer at the New York Fed. “This record debt level is neither a reason to celebrate nor a cause for alarm.”

The makeup of American household debt has changed in a big way. Back in 2008, people held $10 trillion in housing debt; that has fallen to $9.1 trillion today. In its place, student loan debt has boomed, and car loan and credit card debt also rose.

Home loans have become harder to come by for middle- and low-income buyers in the decade since the housing crisis began. And as the recession kicked into high gear and unemployment spiked, people poured into colleges in huge numbers, looking to weather the storm. That led to a boom in the for-profit college industry — and a soaring national student debt pile.

When household debt peaked in 2008, Americans had $610 billion in student loan debt, about 5% percent of all consumer debt and 23% percent of all non-housing debt. Today, student debt balances have more than doubled to $1.3 trillion, 11% of all consumer debt and 37% of all non-housing debt.

But people are now defaulting on those student loans at at a higher rate than any other form of debt. 11% of all student debt is now more than 90 days overdue, compared to 7.5% for credit cards and 3.8% for home loans.

“The standout, however, has been student loans—with new serious delinquency flows that deteriorated steadily between 2004 and 2014 and have remained stubbornly high since then,” the Fed researchers said.

The Fast Lane to Better Small Business Funding (Lendio Email), Rated: AAA

Consumers Place Personal Loans Atop the Credit Mountain (GlobeNewswire), Rated: AAA

When faced with the choice of which debts to pay and which to miss, consumers in financial distress tend to prioritize unsecured personal loans ahead of other credit products such as auto loans, mortgages and credit cards. These findings were released today during TransUnion’s annual Financial Services Summit, attended by more than 300 senior-level financial services executives from around the globe.

The most recent study incorporates unsecured personal loans for the first time since TransUnion began analyzing the payment hierarchy dynamic in 2010. Beyond personal loans, this most recent analysis is consistent with prior TransUnion studies in finding that consumers have historically prioritized auto loans over their mortgages and credit cards, and have done so consistently since at least the beginning of 2004.

Personal Loan Delinquencies* Consistently Remain Lower Than Other Loan Types
Delinquency* Rates for Consumers Possessing

Auto Loans, Credit Cards, Mortgage Loans and Unsecured Personal Loans

Year Personal Loan Auto Loan Mortgage Credit Card
Q4 2012 1.10% 1.86% 3.49% 3.11%
Q4 2013 1.17% 1.84% 3.13% 3.23%
Q4 2014 1.19% 1.76% 2.63% 3.05%
Q4 2015 1.26% 1.68% 2.32% 2.87%
Q4 2016 1.49% 1.75% 2.44% 3.65%

*Delinquency rates after 12 months for consumers who possess and are current on all four credit products at the beginning of the respective performance measurement period.    

Recent TransUnion data show that average term lengths are much shorter for unsecured personal loans. For loans originated in Q4 2016, unsecured personal loans had an average term of 28 months. In this same timeframe, the length of auto loans averaged 60 months and mortgages averaged 230 months.

Why Millennials Are Interested In Real Estate Investing (Forbes), Rated: AAA

RealtyShares recently teamed up with Harris Interactive to put out the Real Estate Investing Report, surveying Americans on their investment preferences. And according to the survey results, 55 percent of millennials are interested in investing in real estate, the highest percentage of all demographics questioned. Research from Fannie Mae supports these findings, reporting that 85 percent of millennials think real estate is a good investment.

According to a recent Pew report, there are 75.4 million millennials compared with 74.9 million baby boomers.

In the RealtyShares survey results, 20 percent of millennials indicated they believe real estate has performed the best since 2000. In fact, millennials were the age group with the largest percentage with that belief. The next highest group to believe real estate outperformed the stock market since 2000 is comprised primarily of Generation X (ages 35–44), 16 percent of whom chose real estate as the top performer.

Millennials, ever-vigilant on the internet, are paying heed to online financial experts. One of these experts especially popular among millennials is personal finance blogger Financial Samurai, who recently shared his preference for investing in real estate over the stock market.

While the large down payment needed to invest in real estate is the biggest reason millennials aren’t buying real estate, thanks to online real estate investing platforms, millennials can now invest in real estate without saving tens of thousands of dollars for a down payment.

Juvo Appoints Financial Services Expert Ron Suber As Strategic Advisor (Juvo Email), Rated: A

Juvo, a pioneer in mobile Identity Scoring, today announced the appointment of Ron Suber, president of Prosper Marketplace, as strategic advisor to the company. An investor in Juvo, Suber is a prolific presence in fintech and is well known as an industry influencer around the world. In his advisor role at Juvo, he will help direct the company through its global growth, ongoing product development and expansion into new markets.

Ron’s appointment helps round out the Juvo advisory team, which includes:

  • Nils Puhlmann, leads Juvo’s security and privacy efforts: former Chief Security Officer & co-founder of Cloud Security Alliance
  • Vicente Silveira, fraud and risk management advisor: head of fraud data science at Uber
  • Allison Duncan, social impact advisor: founder and CEO of Amplifier Strategies
  • Ken Laversin, enterprise software/SaaS advisor: senior vice president, worldwide sales at Jasper
  • Monica Rogati, data science advisor: equity partner at Data Collective, former VP of data at Jawbone and LinkedIn data scientist

LendingHome Hires New CFO. Receives Fannie Mae Approval to Expand Home Loans (Crowdfund Insider), Rated: A

LendingHome says it is ready to ratchet up platform growth. The marketplace lending platform that finances residential mortgages has made two announcements today.

First, the online lender has announced that former Nationstar Mortgage CFO, Robert Stiles, has been appointed to become LendingHome’s CFO.

Simultaneously, LendingHome has been approved by Fannie Mae as a seller and servicer provider which will enable  LendingHome to expand its consumer home financing business, a bit of a big deal.

By working directly with Fannie Mae, LendingHome may streamline operations and offer better loan pricing to its customers.

Is the CSBS Vision 2020 the Answer to the OCC Fintech Charter? (Crowdfund Insider), Rated: A

Earlier this week, the Conference on State Bank Supervisors (CSBS) announced their “Vision 2020” initiative.

The CSBS outlined their initial objectives:

  • Redesign the Nationwide Multistate Licensing System (NMLS). CSBS has launched a technology effort that redesigns and expands NMLS, the common platform for state non-bank regulation. The redesign will use data and analytics to provide a more automated licensing process for new applicants, streamline multi-state regulation, and shift state resources to higher-risk cases. State regulators also will ensure transparency through NMLS Consumer Access, which was viewed 3.7 million times last year.
  • Harmonize multi-state supervision. CSBS has created working groups to establish model approaches to key aspects of non-bank supervision. The groups will work to enhance uniformity in examinations, facilitate best practices, and capture and report non-bank violations at the national level. To further streamline the process, CSBS will create a common technology platform for state examinations.
  • Form an industry advisory panel. CSBS will establish a fintech industry advisory panel to identify points of friction in licensing and multi-state regulation, and provide feedback to state efforts to modernize regulatory regimes. The panel will focus on lending and money transmission, and discuss a wide range of solutions. Individual state regulators already have been engaging the fintech industry in formal dialogue.
  • Assist state banking departments. CSBS education programs will make state departments more effective in supervising banks and non-banks. Updated standards and analytics will help states determine where new expertise is most needed, identify and address weaknesses, update supervisory processes, and compare themselves to and learn from other state departments. These higher standards will be validated through an enhanced CSBS accreditation program.
  • Make it easier for banks to provide services to non-banks. CSBS is stepping up efforts to address de-risking – where banks are cautious about doing business with non-banks, due to regulatory uncertainty – by increasing industry awareness that strong regulatory regimes exist for compliance with laws for money laundering, the Bank Secrecy Act, and cybersecurity.
  • Make supervision more efficient for third parties. Banks of all sizes work with a variety of third-party service providers, including fintech companies. CSBS supports federal legislation that would allow state and federal regulators to better coordinate supervision of bank third-party service providers.

Fintech Lawyers on State Regulators’ Possible Alternative to OCC Charter Plan (Corporate Counsel), Rated: A

Lawyers who work for and with fintechs are encouraged that the state regulators at the CSBS are at least thinking about changes to the system that they believe would modernize state regulations of nonbanks or help centralize regulation among the states.

The state banking regulators’ plan for nonbanks such as fintechs outlines six ways in which it seeks to provide “a regulatory system that makes supervision more efficient and recognizes standards across state lines” by 2020, according to a press release.

Initial actions will include: redesigning the Nationwide Multistate Licensing System, harmonizing multistate supervision, forming an industry advisory panel, assisting state banking departments, making it easier for banks to provide services to nonbanks and making supervision more efficient for third parties, according to the association.

LendUp And Beneficial State Bank Announce Major Expansion Of Credit Card Partnership (PR Newswire), Rated: A

LendUp, a socially responsible lender for the emerging middle class, and Beneficial State Bank (Beneficial State), a social enterprise bank, today announced a significant expansion of the L Card, its credit card joint venture. The move is expected to quadruple the availability of L Cards, a Visa credit card product designed by LendUp and issued by Beneficial State for consumers traditionally shut out of mainstream banking due to poor credit scores or damaged credit files. The expansion builds on the firms’ partnership that extends back to the L Card pilot in April 2015.

According to the Credit Builders Alliance, a person with subprime credit pays on average $250,000 more in interest than borrowers with good credit over the course of their lifetime — and that doesn’t even include fees on financial products. In addition, according to LendUp research, many of its own customers are currently shut out of mainstream credit card products, such as rewards credit cards (98.5%) and retail rewards cards (66.5%).

In response, LendUp created a card for Beneficial State that meets borrowers’ immediate credit needs while helping to build their long term financial health. Features include:

  • Instant decisions
  • No over-the-limit fees or security deposits
  • Reporting to the three main credit bureaus
  • Affordable payments

The L Card carries an annual fee of $0$60 and APR ranging from 19.99% to 29.99%; it has a 4.8 average star review on CreditKarma.

Addepar To Buy Alternatives Data Provider AltX (Financial Advisor), Rated: A

Mountainview, Calif.-based Addepar announced on Thursday that it is purchasing AltX, an alternatives market intelligence platform.

Addepar hopes that the acquisition will boost it’s capabilities around alternative investing by enabling advisors to make better-informed decisions, said Eric Poirier, Addepar CEO, in a statement released on Thursday.

AltX’s platform uses machine learning to gather intelligence on alternative investments, incorporating reference data, public filings and news into a database of performance, holdings and key reference data for more than 17,000 funds.

Ascentium Capital Surpasses $ 3.0 Billion in Origination Volume (Ascentium), Rated: A

Ascentium Capital LLC, the top private independent finance company in the United States by new business volume, announced surpassing $3 billion in origination volume since the Company’s inception in August 2011.

Milwaukee FinTech firms aim to help consumers (Biz Times), Rated: A

The pace of FinTech disruption is increasing in the financial industry, with about $22 billion raised by FinTech startups over the past five years, Schedler said.

Northwestern Mutual has invested in two key early FinTech leaders, Betterment and Learnvest. And with its Future Ventures program, it plans to invest $50 million in series A and series B funding rounds over the next five to six years to bring in more partnership opportunities.

Bank My Biz has 13 bank partners in Wisconsin and many more across the country, he said. So if one of those banks isn’t able to extend an equipment or working capital loan of less than $100,000 to a small business, Bank My Biz may be able to do so with its financial partner, Brookfield-based national direct lender Advantage+.

Banks earn income off the term loan and Bank My Biz earns its revenue through the interest rate spread. It charges interest rates of between 9 and 13 percent.

Looking Glass buys marketplace loans on lending sites Funding Circle, LendingClub, Peerform and Prosper. Using its custom predictive analytics software, LGI evaluates and underwrites loans it has determined are unlikely to default. The alternative investment model promises investors a less volatile environment than the equity markets.

It also runs LoansOfTheDay.com, which uses big data, predictive analytics, artificial intelligence and machine learning to distribute risk and optimize returns on peer-to-peer lending sites. LGI contributes a minimum of $25 to each loan on the site.

And its newest product is LendSight, a SaaS underwriting tool banks can use to improve their profit margins by doing predictive underwriting, while allowing Looking Glass to capture more market share, Siefkes said.

Redpoint Capital Group Names Alex Dunev as Managing Partner (BusinessWire), Rated: B

Redpoint Capital Group, LLC (“Redpoint”), an alternative investment company focused on providing financing solutions to companies in the Specialty Finance and FinTech sectors, announced today that it has added Alex Dunev as a Managing Partner. Alex will be responsible for driving Redpoint’s strategic priorities, including sourcing new investment opportunities and raising capital to deploy into Redpoint’s investment strategies. Alex will also manage Redpoint’s office in Westport, Connecticut.

Alex was previously a Managing Director in the Investment Banking Division at UBS, leading the bank’s Specialty Finance efforts in the Americas. Prior to UBS Alex also covered Specialty Finance companies at Morgan Stanley and Credit Suisse.

DiversyFund, Inc. Brings New Innovations to Real Estate Crowdfunding (Digital Journal), Rated: B

Mr. Cecilio and Mr. Lewis formed DiversyFund, Inc. to create the industry’s first online crowdfunding real estate platform where the company acts as the real estate developer on all of its investment offerings in order to deliver to its investors better quality control and more detailed and robust investor reporting, including monthly construction updates on each real estate project with pictures of all work in progress.

Because DiversyFund, Inc. acts as the developer and receives a developer fee that is paid at the project level, DiversyFund does not charge any platform fees, servicing fees or other sales commissions to its investors, enabling investors to keep 100% of their investment returns.

Additionally, DiversyFund, Inc. is the only crowdfunding real estate site that focuses exclusively on strong-performing Southern California real estate markets.

United Kingdom

P2P Lender Sells Off Bad Debts Worth £2.1 Million (iExpats), Rated: AAA

A British peer-to-peer lender has become the first platform to sell non-performing debt.

RateSetter has completed a deal with undisclosed terms to 1st Credit, a debt purchasing company.

The lender says the loans were taken out between 2010 and 2015 and that the company felt borrowers were unlikely to settle the debt.

RateSetter has a £22.23 million provision fund to cover bad debts and expects to pay out £18.78 million compensation to investors.

Landbay introduces retention fee for intermediaries (P2P Finance News), Rated: AAA

LANDBAY has announced that its intermediaries will now receive a retention fee for all customer renewals.

The peer-to-peer lender, which specialises in buy-to-let mortgages, said that it introduced the 0.3 per cent fee because of its ongoing recognition of the role of intermediaries in offering advice in the retention process of customers.

Investing in the UK’s growth when it needs it most (FT Adviser), Rated: A

The notoriety and growth of crowd funding, and its variations, has gathered a great deal of attention. For good and bad. Only last year, Lord Turner warned: “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.”

While investing in VCTs has its risks, just as any investment has, these risks are for more measured and disciplined with quality offerings. Many quality VCT providers have more recently felt lumped in the same bucket as the under fire feel peer to peer (P2P) lenders and equity crowdfunders (ECFs) both of which now the subject of a clampdown by the FCA.

Despite some of the misconceptions, VCTs raised £458m in the 2015-16 tax year, making it the third highest year for VCT investment since records began in 1995. In the tax year that has just closed, most but not all were fully funded by the end of 2016-2017.

VCTs invest in small, largely unquoted, companies in the UK of up to £15m in size.

London-based VC Notion Capital has announced a new $ 80 million startup fund (Business Insider), Rated: A

Notion Capital, a London-based venture capital firm that backs startups across Europe, has announced a new $80 million (£60 million) startup fund that will be used to back later stage companies.

The VC, which focuses on backing enterprise software and cloud companies, also announced on Tuesday the final closing of a $140 million (£107 million) venture fund to back early stage startups.

Ford: Wine, watches and cars: the rise of alternative investing (Automotive World), Rated: B

As savvy investors champion alternative commodities such as wine and watches, classic Fords have proved themselves another sound investment.

For those who think there’s no money to be made from cars, think again – total growth over the past decade was 457 per cent***. This is a bigger increase than even property, which has increased in value on average 20 per cent in the last decade and 152 per cent since 2000 across Europe*****. And it’s not just new super cars such as the latest Ford GT newly on sale in excess of $450,000 that command a hefty price tag and appreciate rapidly. Among the list of top investor car makes, Ford offers among the lowest entry costs.

In March 2016, a Ford Escort Cosworth with less than 2,500 miles on the clock sold at auction for £67,580 after originally going on sale at £22,050 in 1992. The average price of a Cosworth is now more than double that original price and the Fiesta XR2 which went on sale in 1981 for £5,150, has trebled in value since 2014 to prices well in excess of £10,000, with the best advertised at close to £20,000.******

China

Alibaba Invests In Its First Fintech Company In Hong Kong (Crowdfund Insider), Rated: AAA

As reported by Forbes today, Alibaba has invested in online invoice exchange marketplace Qupital, marking the Chinese e-commerce giant’s first foray into fintech investment in Hong Kong. Qupital raised a total of $2 million in its seed round.

Qupital bills itself as Hong Kong’s first and largest online invoice discounting exchange. The company aims to solve the problem of companies not having quick access to cash by allowing them to raise funds on the site through the auctioning off of unpaid invoices, essentially securitizing their accounts receivable.

Dianrong Announces Next Technology Agreement Outside Mainland China (Military-Technologies), Rated: AAA

Dianrong today announced a new technology agreement with Maggie Ng, a leading consumer banking executive in Asia Pacific, to launch the first global fintech marketplace connecting Asian investors with high-quality, low-volatility and largely untapped asset classes, including U.S. consumer lending. The new strategic alliance combines Dianrong’s advanced technology with Ms. Ng’s extensive consumer-lending experience.

Ms. Ng and Dianrong engineers are currently completing beta testing for the new fintech platform that will provide Asian investors with an integrated solution to access U.S. marketplace lending assets. The platform will utilize multiple U.S. marketplace lenders and a single onboarding and know-your-customer process. It will also offer advanced risk modeling capabilities, added credit enhancement and structuring features, and blockchain solutions to safeguard data integrity. Investors will also have access to real-time performance monitoring, U.S. tax-exemption filing capabilities and a secondary market for liquidity.

Chinese Celebrity-Backed Fintech Firm QuantGroup Considering US IPO (Crowfund Insider), Rated: A

Fintech company QuantGroup, which was founded by several notable Chinese movie stars, is considering a US IPO, according to an article published in Bloomberg last week. The firm is looking to raise an estimated $200 million according to unnamed sources.

The Beijing-based QuantGroup is a financial services company that provides estimated credit ratings using big data.

QuantGroup joins a growing list of Chinese fintech firms in the process of launching US IPOs. Fenqile, a Chinese online shopping mall that lets customers pay in installments, is also looking to raise over $600 million through a US IPO.

LCQ5: Regulation of online crowdfunding and lending platforms (7th Space), Rated: B

Platforms for raising funds from and lending small loans to members of the public through the Internet (crowdfunding and lending platforms) have become popular in recent years. However, some financial advisers have pointed out that investors participating in crowdfunding activities are exposed to considerable risks. In this connection, will the Government inform this Council:

(1) whether it knows the number of companies currently operating local crowdfunding and lending platforms, and the number of complaints received by the authorities in the past three years concerning crowdfunding activities, with a breakdown by type of complaints;

(2) how the current legislation regulates the fundraising and lending activities conducted through crowdfunding and lending platforms;

(3) as some financial advisers have pointed out that investors provide funds through such platforms, which in turn lend the funds to borrowers, whether the authorities will, to avoid such investors breaching the law inadvertently, clarify if such investors are regarded as money lenders under the Money Lenders Ordinance (Cap. 163) and therefore are required to obtain money lender licences; and

(4) whether the authorities will conduct public education activities on the risks faced by investors participating in crowdfunding activities; if so, of the details?

Answers:

Year No. of complaints about crowdfunding No. of complaints about lending platforms
2015 0 6
2016 4 1
2017
(as at end March)
0 0

 

(2) and (3) Depending on the specific structure and features of the relevant arrangement, some types of crowdfunding activities, in particular equity crowdfunding and peer-to-peer lending, may be subject to the provisions of the Securities and Futures Ordinance (Cap.571), and/or the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32).

(4) We will ensure that investors and consumers of crowdfunding and lending platforms will receive proper protection under Hong Kong’s regulatory rules and standards. In view of the rapid development of financial technologies (Fintech), the Investor Education Centre (IEC) is working on a series of articles to introduce various Fintech services/products, associated risks and regulatory framework to the public.

European Union

Older Swiss fintech additiv gets $ 21.3 million in new capital (CNBC), Rated: AAA

A Zurich-based Swiss financial technology (fintech) firm, additiv, has today raised CHF21m Swiss Francs ($21.3m) in capital from core investors including BZ Bank, acting on behalf of its clients, and the investment vehicle Patinex.

Additiv provides systems to help with the digitalization of banks, asset managers and insurers.

Additiv’s key software product is the Digital Finance Suite (DFS). It has offices in Switzerland, Hong Kong and Singapore, as well as an international network of reselling partners and customers around the world.

Additiv’s key software product is the Digital Finance Suite (DFS). It has offices in Switzerland, Hong Kong and Singapore, as well as an international network of reselling partners and customers around the world.

Lendity: ideal marketplace lending exposure for pension funds, asset managers, family offices, private banks (Daily Fintech), Rated: A

A sea of 300 suits is what I faced last week at the first Swiss Alternative Lending conference hosted at SIX and in partnership SIX and Lendity.

Lendity is focused on developing structures that a family office, an asset manager, a pension fund, can book on their books or a private bank can list in their private debt product offering for qualified investors. And at the same time include:

o   Global exposure – US and Europe for now (USD, CHF)

o   Asset diversification – Consumer, SME, real estate etc

o   Platform diversification

o   Tax efficiency, despite the cross-border exposure

o   Regulatory compliance, despite the cross-border exposure

o   Private debt without additional counterparty risk from the issuer.

Lendity is really solving a pain point for both marketplace lending platforms and for institutional investors.

For marketplace lending platforms, Lendity acts as a marketplace that matches them with institutional capital from Financial advisors, Private Bankers, Pension funds, Family offices, and Asset managers (the 5 “investor” types).

FinTech: the influence of technology on the future of the financial sector (Lexology), Rated: A

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has published its final report on ‘ (2016/2243(INI))’.

On the other side of the coin, the report stresses the following:

  1. Financial services legislation at both the EU and national levels should be sufficiently innovation friendly.
  2. Fintech companies should continue to contribute positively to the development of financial intermediation.
  3. There is scope for improvement in the means that can be used for cross-border payments (while noting the regret of the European Parliament that there is no EU-wide European-owned credit or debit card scheme).
  4. There are no clear European rules or guidelines for outsourcing data to the could with regard to the financial sector.
  5. It is concerned about the increased use of permissionless blockchain applications for criminal activities.

See the full report here.

Australia

Retirees are riskier investors than millennials, says ASX report (Financial Review), Rated: AAA

The latest ASX Australian Investor Study found the proportion of 18 to 24-year-olds who invested in the ASX over the past five years had increased from 10 to 20 per cent. The proportion of 25 to 34-year-olds had also increased, from 24  to 39 per cent.

The survey shows that 81 per cent of 18 to 24-year-olds are seeking guaranteed or stable returns, compared to 67 per cent of 25 to 59-year-old investors and 60 per cent of retirees.

Millennials have grown to recently become the largest generational cohort in Australia, with 4.9 million people, eclipsing Gen X (4.8 million) and baby boomers (4.1 million), Roy Morgan Australia says.

According to the ASX research, 44 per cent of 18 to 24-year-old investors hold cash, 31 per cent hold shares and 25 per cent have investment properties.

The ASX survey also revealed that the proportion of 18 to 24-year-old investors using professional financial advisers was 37 per cent, but Mr Mahony said the number of people who used Google to see where they should be investing was 48 per cent.

NAB’s fintech arm brings robo-advice to home loans (AltFi), Rated: A

The fintech arm of Australian banking giant NAB, UBank, has unveiled a robo-advisor aimed at helping customers complete their home loan applications.

In a national first, “RoboChat” will offer real time help for online home loan applications available 24/7. The robot will answer FAQs, such as “what term do you offer on home loans?” and “do you offer redraws and how do they work?”, as well as stupid and unrelated questions with a sense of humour.

India

Robo advisors: Stay relaxed while getting accurate financial advice (DNA), Rated: A

Robo advisors give users access to advice by highly qualified experts who have multiple decades of financial experience with them as against serviced by a 22-25 year sales executive, or a family member. Also, since this is available online and requires minimal human intervention, it is the best and most economical way to make customised expert financial advice available to the masses.

Capacity (Who will cater to masses?): Bank relationship managers and advisors are a privilege of the rich as reduction in distributor commissions have made intermediaries vacate the low/ medium end of the market.

Robo-advisors reduce a lot of unpleasant experience of interaction. There is no pressure for you to buy right now, in addition to having the option of doing it at your own convenience. The design and UX at certain platforms are created to engage users without being too intrusive.

The unbundling of banking (CB Insights), Rated: A

Paytm, the private Indian mobile payment unicorn, is now coming for the banks.

Middle East

Abu Dhabi Global Market admits first five fintech start-ups into its Reglab sandbox (CNBC), Rated: B

Abu Dhabi Global Market (ADGM) has announced its first batch of financial technology (fintech) regulatory laboratory (Reglab) companies that will go through its new innovation center.

They are:

  • Now Money – UAE: provides mobile technology to allow low income migrant workers in the UAE to access banking and remittance services, which would otherwise be out of reach.
  • Titanium Escrow – UAE: This is an automated escrow service that aims to increase trust in counterparties and stabilize the cash cycle for small businesses.
  • CapitaWorld – India: A one-stop digital platform that automates the entire loan value chain from loan application to credit appraisal and post-disbursement credit monitoring. Rather than needing to physically visit multiple banks to apply for a loan, the CapitaWorld platform allows a borrower to submit a loan application just once online, and its platform will use analytics to carry out verification and credit risk scoring. It will then match the borrower with multiple banks that have signed onto the platform and ensure that the credit risk appetite matches the borrower’s profile.
  • Rubique – India: Rubique is an online platform that connects banks and fund seekers/borrowers via a smart financing process that links to a range of loan, credit card and financing options that attempt to bridge the gap between lenders and borrowers.
  • Finalytix -US: This is a robo-advisory platform for wealth management applications that seeks to help clients optimize their holdings, mitigate risks and costs, and identify new investment opportunities.

Authors:

George Popescu
Allen Taylor

Monday November 28 2016, Daily News Digest

orchard quarterly originations report

News Comments Today’s main news: Orchard’s quarterly consumer lending report. Today’s main analysis : Why Lending Club should become a bank sooner rather than later. Are there any good reasons to invest in FinTech? Today’s thought-provoking articles: China recovers $ 1.5 billion in online lending fraud case. Why some SMEs are not happy in Hong Kong. United States […]

orchard quarterly originations report

News Comments

United States

United Kingdom

European Union

Australia

  • Why invest in Fintech? AT: “This is an interesting analysis and shows that P2P lending is the top sector within FinTech. While still swaying toward pessimism, it brings out some of the positives in the industry. There is still growth in the sector despite some of the recent fallbacks. FinTech operators should not lose hope because of one bad year.”

China

Canada

MENA

United States

Consumer Unsecured Q32016 (Orchard Platform Email), Rated: AAA

Key Insights

  • Origination volumes continued to fall in Q3, down approximately 21% from Q2 origination volume and down just over 50% from peak originations in Q4 2015. Following years of consistent quarter-over-quarter increases in originations, we hav eseen 3 consecutive quarters of declines in 2016. The Q3 change represents a smaller drop than the one experienced in Q2, and may indicate that these declines are beginning to taper off. We’re not ruling out an uptick in originations next quarter as confidence and capital returns to the origination platforms.
  • 2014 vintage charge offs have increased more steeply than in recent years, aligning closely with rates we saw in 2011 and 2012. While some of this trend can be attributed to deteriorating loan performance, most of it is due to the continued growth of subprime loan origination platforms. These platforms charge off at higher rates but offer investors increased interest rates as compensation for this additional risk. Early indications show 2015 vintage performance on the same track as the 2014 vintage.
  • After increasing 96 bps in Q2, borrower rates fell 79 bps in Q3, primarily driven by decreases in origination volumes for subprime originators in this period.

Lending Club should become a bank as fast as it can (FT Alphaville), Rated: AAA

The fragility of “true” marketplace lenders like Lending Club was displayed for all to see earlier this year when market conditions suddenly shifted, originations plummeted and a scandalinvolving Lending Club’s CEO hit the papers. Marketplace lenders (sometimes referred to as P2P or online lenders) transfer loan revenue and credit risk to loan investors at origination, so they earn nothing from loans held on balance sheet.

The takeaway? Lending Club should become a bank as fast as it can in order to reap the economic benefits of its loans and secure a more stable funding base. And, in the meantime, there are changes it can and should be making to increase resiliency and create the foundation for a sustainable and profitable business.

According to my simplified view, Lending Club would need an annualised net income run rate of $329m (at a 7x P/E) by Q3 2018 to justify its current $2.3bn valuation.

If Lending Club were able to quadruple originations to $8bn a quarter by Q3 2016, with the same aggressive assumptions, quarterly net income would be $93m. That would translate into a market cap of $2.6bn at a 7x P/E, which is around 13 per cent above the company’s current market cap, although the difference amounts to nothing for shareholders absent dividends in the interim.

If Lending Club were able to quadruple originations to $8bn a quarter by Q3 2016, with the same aggressive assumptions, quarterly net income would be $93m. That would translate into a market cap of $2.6bn at a 7x P/E, which is around 13 per cent above the company’s current market cap, although the difference amounts to nothing for shareholders absent dividends in the interim.

Online lending platforms yet to prove their worth (Financial Times), Rated: A

It has not quite turned out like that. After years of rapid growth, the industry in the US has gone into reverse, as concerns over the quality of the assets pumped out by the likes of Lending Club, Prosper and Avant have spread a chill across the sector.

New data from Orchard, a technology and data provider based in New York, shows that volumes across US consumer-loan platforms slipped for a third successive quarter between July and September, dropping 21 per cent to $1.86bn. That was less than half of the peak in the fourth quarter last year.

Through measures such as these, Lending Club says it has lured back almost all of the banks and hedge funds that were active earlier in the year.

But buyers, rather than sellers, still have the whip hand, says Matt Burton, chief executive of Orchard. He notes that platforms have been offering discounts for volume, and sometimes sweetening deals with warrants and preferential servicing fees.

Lending Robot Files to Form Pooled Investment Fund (Crowdfund Insider), Rated: A

Lending Robot, the robo-advisor geared towards marketplace lending assets, has filed a Form D 506cwith the SEC indicating its intent to create a pooled investment fund. According to the filing, the minimum investment accepted will be $100,000.00 with no targeted max size of the fund.

United Kingdom

17 firms authorised to manage Innovative Finance Isas (Bridging&Commercial), Rated: AAA

A total of 17 firms have been authorised to manage Innovative Finance Isas (IFIsa) by HM Revenue and Customs as of 26th October 2016.

     Company name                                                                        Types of business

  • Abundance Investmnt Ltd                                                       Peer-to-peer
  • British Pearl Ltd                                                                        Property crowdfunding platform
  • Crowd2Fund                                                                              Crowdfunding platform
  • Crowdcube Capital Ltd.                                                           Crowdfunding platform
  • Crowd for Angels UK                                                                Crowdfunding platform
  • Crowdstacker Limited                                                              Peer-to-peer
  • London House Exchange (Property Partner)                       Property crowdfunder

Crowd2Fund was one of the first firms to offer the IFIsa and revealed that it had seen a growth of investors in the past six months.

(NOTE: This list represents only crowdfunding and P2P firms on the list. For the complete list, click the link.)

UK Government Commits To Invest £500,000 A Year In FinTech (PYMNTS), Rated: A

The U.K. is already a hotbed of FinTech startups, but the government is getting behind it in a bigger way, committing to invest £500,000 a year into financial technology companies.

According to a report, the U.K. government is also gearing up to launch a network of regional FinTech envoys as an effort to enhance the country’s status as a leader in FinTech. The funds, noted the report, will come out of the Department of International Trade.

European Union

ECrowd! raises more than €300K in second round of funding (Finextra), Rated: A

The debt crowdfunding – also known as crowdlending- platform ECrowd!, specializing in sustainable investments, has closed an investment round of € 307,900 through the online investment platform Crowdcube (equity crowdfunding).

This is the second round of funding which ECrowd! has closed in just over a year. In all, 135 private investors have participated in the round in exchange for 10.24% of the capital of the company. The largest investment was € 76,000, coming from a private professional investor.

Australia

LONGREAD: Why would you invest in fintech? (Bluenotes), Rated: AAA

As it stands today, fintech to date is not innovative or transformative enough and investment dollars are not sufficient to build a world-leading financial-services breakthrough.So let’s analyse the decimators. The World Economic Forum’s Cluster of Innovation Model provides one view of fintech and breaks the market into 11 major sectors and 33 market segments as shown below.

Total Fintech investment from 2009 to 2015 totalled $US43.9 Billion, including Venture Capital(VCs) and other investors such as private equity and crowd funding.

So let’s analyse the decimators. The World Economic Forum’s Cluster of Innovation Model provides one view of fintech and breaks the market into 11 major sectors and 33 market segments as shown below.

The key question is whether this level of investment is sufficient for major disruption. Uber, for example, has raised $US11.45 billion in funding and debt in 14 funding rounds since March 2009 and has had some success in some taxi markets – markets much smaller than financial services.

Total fintech investment by VCs from 2009 to 2015 is $US31.3 billion while total VC investments over same period is $US476.4 billion. Therefore, fintech is only 7 per cent of all VC investments – it is not a dominant category.

The major fintech angel-investing and start-up categories are:

Peer to Peer Lending: Lending to consumers using online, mobile and social media that matches lenders directly with borrowers.

SME and business lending: Mobile, online and social media lending services targeted at small-to-medium businesses.

Student loans: Direct lending to students using mobile, online and social-media channels.

Point of sale/online payments: Tech services targeting online payments, point of sale payments and related services .

Crypto currencies: Cyber or digital asset designed to work as a currency or a value exchange.

Digital banking: Retail banking using social media, mobile and web based services often supported by tools and rewards e.g. budget tools.

Local and international remittances: Remittances services for local person-to-person payments and international transfers using social media, mobile and the web

Wealth/investment and related tech: Investment and pension products using mobile, social media and the web.

Insurances and tech: Insurance and tech services using web, mobile and social media.

The leading segment is P2P Lending with $US5.2 billion followed by three segments – SME lending, POS/online payments and digital banking.

It is significant these nine segments total 67 per cent of fintech investment. It is likely therefore any major disruptor will emerge from these segments.

Fintech’s first decade is high on hype and spin but very low on delivering its ‘vision’ of a total disruption of financial services.

The modest level of investment to date – $US43.9 billion – is not enough to create the next financial service giant.The P2P example is salient. Launched when money was cheap, the sector has realised it is not quite easy to build a billion-dollar business.

China

China recovers over $ 1.5 billion of assets in online lending fraud case (Reuters), Rated: AAA

China has recovered more than 10 billion yuan ($1.5 billion) of illegal assets since launching a fraud investigation into an online lending platform, the official Xinhua news agency quoted the Beijing public security bureau as saying on Wednesday.

China’s police have seized nearly 300 million yuan in cash, 187,000 grams of gold, as well as real estate, jewelry, stock equities, luxury cars, and helicopters from online peer-to-peer (P2P) platform Ezubao, Xinhua said.

Why many SMEs are unhappy in Hong Kong (The Asset), Rated: AAA

One-in-five small and medium-sized businesses (SMEs) in Hong Kong are dissatisfied with the availability of finance and 57% of SMEs rate highly the importance of their main financial services provider in understanding how theirbusiness works.

Overall, only 20% of SMEs are using external financing sources such as bank loans, leasing, private equity and crowd funding. The bulk of funding for most Hong Kong SMEs are from the companies’ retained profits, which account for 53%, followed by savings (10%) and bank loans (8%). Bibby Financial analysts say that the most common avenue for SMEs to get bank loans is to pledge property or cash deposits as collateral. This explains why only a small proportion of SMEs get financed by banks or externally, as most of them lack excess assets for collateral purposes. Moreover,the research found thatreceivables financing accounts for just 2% of funding in Hong Kong, compared with 13% in the US. Bibby Financial analysts believe the significant gap may stem from Hong Kong SMEs’ lower awareness of factoring and similar trade financing tools, which are not yet common in the market where there is considerable room for growth.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On November 15th, JD.COM announced it would transfer/sell all the shares it held in JD Finance.

On November 17th, Yonyou Network Co., Ltd announced it was jointly launching Zhongguancun Bank, which is the first private and digital-centered bank in Beijing, with ten other companies.

However, Gregory D. Gibb, co-chairman of Lufax said in a recent interview that robo-advisors in Chinese financial service market had yet matured.

The year of 2015 is regarded as a milestone of China’s equity crowdfunding industry—Internet giant Alibaba, JD.COM and 360 were all targeting this emerging market. In spite of the thriving prospect, the industry is still faced up with a number of problems:

  1. No special laws for industry regulation;
  2. Constrained by only two main profit models: commission fees and service fees;
  3. Filled with fund-raisers with high project risk;
  4. Non-professional or non-accredited investors with high possibility of blind investment;
  5. No general standard for funding project valuation;
  6. High level of information asymmetry;
  7. Difficulties in equity exits;
  8. Not sufficient attention attached on fund custody.

The P2P lending industry has experienced tremendous growth in the past years, yet only a few managed to be profitable. This is the same situation with China, which is now the largest P2P lending market in the world. Xue Hongyan, senior analyst at Suning Institute of Finance, said:

”According to public information, only 1% of the 2154 Chinese P2P lending platforms have managed to be profitable.”

Making P2P firm globally respected (China Daily), Rated: A

At the time of this interview, Tang Ning, founder and CEO of CreditEase Corp, one of China’s leading peer-to-peer or P2P lending and wealth management firms, was busy with his preparations to attend the Asia-Pacific Economic Cooperation or APEC Economic Leaders’ Meeting in Lima, Peru, this month.

He became the pioneer of P2P lending in China when he founded CreditEast in 2006. Under his stewardship, CreditEase has grown rapidly and has 100 billion yuan ($14.7 billion) in assets under management now.

Ten years on, CreditEase has four branches in the United States, Israel, Singapore and China’s Hong Kong. Tang visits the US up to three times a year to teach at Harvard University and Stanford University as well as interact with financial services industry leaders and venture capital institutions.

CreditEase Corp has set up the Fintech Investment Fund totaling $1 billion, half of which will be invested abroad.

QuantGroup closes $ 73m Series C led by Sunshine Insurance (Deal Street Asia), Rated: A

Fintech startup QuantGroup has closed a RMB500 million $73 million) Series C financing round led by Sunshine Insurance Group Corporation, Fosun Capital, Guosen Hongsheng Investment Co., Ltd., and other undisclosed investors.

QuantGroup, which operates via QuantGroup.cn, provides online financial services including credit-based consumption and IOUs. It previously raised an undisclosed series A funding round from Fosun Kinzon Capital, Banyan Capital and China Grow Capital and a series B round from Zhixin Capital, Star VC, Oriental Fortune Capital and others.

Canada

First Digital Lending Platform To Be Granted Exempt Market Dealer Licence By OSC (Mondaq), Rated: AAA

On September 28, 2016, Vault Circle Inc. (Vault Circle) announced that it had received approval by the Ontario Securities Commission (OSC) to operate as an exempt market dealer in Ontario.

The proceeds raised by Vault Circle from accredited investors will be used by Lendified Inc. (Lendified), an affiliate of Vault Circle, to provide alternative financing options to small and medium sized businesses (SMEs) in Canada.

The OSC initially set out its expectations for businesses planning to operate “peer-to-peer” lending websites on June 19, 2015, by highlighting the concern that such online platforms and their related activities may trigger the application of dealer registration and prospectus requirements under the relevant provisions of the Securities Act (Ontario).

MENA

2016/17 TRN Report: Top Exit Strategies of Real Estate Crowdfunding Platforms (MENAFN.com), Rated: A

Real estate crowdfunding (RECF) landscape has transformed rapidly over the past four years. It is much easier to become a real estate investor or developer today, than it was a few years ago. Also, the industry is now open to everyone wherever they are. The developments are making the industry more accessible, transparent, attractive and rewarding.

Most crowdfunding legislations passed and enacted so far have diminished the requirements for real estate investing.

Exit strategies make it easier for investors to leave a deal without necessarily having to pull out their money. One exit strategy is allowing investors to sell their property shares to willing buyers on a secondary market. These strategies made it easier for RECF investors to liquidate their investments.

Authors:

George Popescu
Allen Taylor