Tuesday February 13 2018, Daily News Digest

china asset-backed securities

News Comments Today’s main news: SoFi’s adjusted 2017 profit was $126M. Funding Circle lent over 117M GBP in January. CreditEase Fintech Investment Fund invests in Fair. FT Partners advises Yapstone on $71M Series C round. LendingKart raises Rs1,129 crore. Today’s main analysis: Why China isn’t worried about the slowdown in asset-backed securities. Today’s thought-provoking articles: Goldman’s fintech approach to […]

china asset-backed securities

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United Kingdom

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United States

Fintech SoFi blames missed earnings on borrowers skipping payments, increased hiring costs (San Francisco Business Times), Rated: AAA

SoFi said it made an adjusted profit of $126 million after pulling in revenue of $547 million for all of 2017, but did not break out figures for the fourth quarter.

(MarketWatch), Rated: A

SoFi Turns Losers Into Winners (and Investors) with the So Money Sweepstakes (PR Newswire), Rated: A

From February 12th through 16th, SoFi will award $25 in a SoFi Wealth account to 200 losers of HQ Trivia each day. To enter for a chance to win, all people need to do is Tweet to @SoFi on Twitter with a screenshot of their HQ loss screen and the hashtag #SoMoneyEntry. In addition to the $25, winners will also receive SoFi’s new card game, “So Money,” featuring playful questions that aim to encourage people to talk more openly about their financial lives.

Goldman Sachs is taking a fintech approach to grow its consumer lending business (Econsultancy), Rated: AAA

Two of the biggest proofs of Goldman’s transformation were its launch of GS Bank, a internet bank with a $1 deposit requirement, and Marcus, an online consumer lending platform through which well-qualified consumers could obtain personal loans of up to $30,000. GS Bank has since been merged into Marcus, which now serves as Goldman’s consumer brand.

As QZ pointed out, “Goldman thinks it can make $1 billion in extra revenue from its consumer lending business over the next three years, as much as it expects for its trading operations.”

As detailed by the Wall Street Journal, Goldman is reportedly in talks with Apple to offer buyers of Apple devices financing at point-of-sale. “Customers purchasing a $1,000 iPhone X could take out a loan from Goldman instead of charging it to credit cards that often carry high interest rates,” the Journal explained.

This type of financing is big business: by one estimate, $80bn of the $200bn consumers borrowed using retailer-affiliated credit cards or point-of-sale loans went towards big-ticket items including electronic gadgets.

Source: Econsultancy

The Future of Banking (Crowdfund Insider), Rated: AAA

The Use of Artificial Intelligence (AI) Will Increase

Artificial Intelligence (AI) will have a major role in banking for both the short-term and long-term. First, we will see AI help banks with fraud mitigation. Today, most fraud is detected through computer patterns that alert a fraud team who would then take the necessary steps to try to prevent or mitigate the threat. Now that technology has made access to money fast and easy, the transaction volume has increased exponentially.

Banks and Non-Banks Will Form Closer Partnerships

By tapping into a non-bank’s customer base, it will lower the bank’s cost of acquisition while providing more value for the customer. Banks will also realize that non-banks provide them with valuable data from their customer bases that they can leverage to provide a customized banking experience as well as a source for additional revenue streams.

There Will Be More Competition in the Digital Banking Space

Whether it’s JPMorgan Chase with Finn, or Greenhouse by Wells Fargo, big banks are entering into the digital banking space full force with the hope of attracting young consumers. Then you have digital banks like Ally, USAA and Capital One 360 who truly made a major effort in 2017 to attract millennials by tweaking their product, tone, messaging and branding to make sure they start penetrating that segment. We will continue to see that this year.

You still have niche financial products like Sofi that focuses on student loans or Stash Invest that focuses on investing, which are playing in the digital banking space.

Lastly, you have neobanks like Moven, GoBank, Simple and Varo who will continue to flourish and grow, but will be threatened by giants like Amazon, Google and Apple.

Cybersecurity will Get an Upgrade

After the highly publicized and damaging Equifax security breach that affected approximate 145 million Americans, we will surely see a modernization and upgrade of cybersecurity.

We spoke with the creator of the Chase Sapphire Reserve about millennials and the other challenges she’ll confront at JPMorgan (Business Insider), Rated: A

JPMorgan Chase, on the other hand, recently announced plans to expand its network. It’ll add 400 new branches in 15 to 20 new markets over the next five years — an investment spurred in part by the savings from the recently enacted tax law.

JPMorgan has, of course, culled some branches over the years, but far fewer than its peers — just 484, or 8.6%, since 2012, compared with cuts of more than 30% by its competitors Citigroup and Capital One over the same period.

BI: How does what happened with the Chase Sapphire Reserve phenomenon translate to the rest of the Chase consumer business?

Codispoti: The fact that we were able to break some myths with millennials. When I first took the job there was kind of this general consensus in the market that millennials wouldn’t pay a fee for a credit card or wouldn’t be interested in premium products — it just isn’t true. So I think we’re kind of breaking those myths when we think about banking and home lending as well.

We’ve shared in the past that we’ve had some extremely successful initial tests with the Sapphire Reserve customer, offering them a home lending offer of 100,000 points if they completed a home-lending mortgage with us. And 50,000 points for those who upgraded to Chase Private Client and deposited $100,000 into an account. We saw extraordinary results, greater than we ever expected. So clearly this is an engaged customer base, they love the Reserve brand. It transcends card into other areas of their financial life.

Citi Ventures’ Vanessa Colella: ‘No one runs innovation, it’s all about unleashing it’ (Tearsheet), Rated: A

As one of the largest financial institutions in the world, Citi takes its innovation efforts seriously. Combining internal and external models of collaboration with a disciplined corporate venture arm, the financial services giant ensures that it has a lot of coals in the innovation fire.

Real Estate Investment Platform, Sharestates, Continues Impressive Growth Launching New Marketplace in Arizona (AltFi), Rated: A

Today, Sharestates, an online real estate investment platform, announced today their inception into the Arizona Banking Department roster of lenders as Sharestates Investments LLC, NMLS ID number 1538766. With this launch, Sharestates will be offering their loan products to the real estate speculation and development community in a statewide effort.

As a part of Sharestates’ launch into the Arizona market, the company will be attending the 45th Pitbull Hard Money Conference located at the We-Ko-Pa Resort and Conference Center in Scottsdale, Arizona. The event will be held March 14-15, 2018 and members of the Sharestates team will occupy booth #417.

Sharestates has funded more than 895 individual loans, providing an average return on investment of 10.42%.

Realty Mentors Launches Its New Investment Advisory Business (Realty Biz), Rated: B

Realty Mentors announced a new investment advisory business. According to the article in Crowd Fund Insider.com, the company which is a commercial real estate diligence and underwriting company and is an affiliate company of CreditVest is claiming to be the first of its kind to launch in the commercial real estate crowdfunding industry.

When it comes to the real estate crowdfunding industry, their services will encourage new investors to enter the market because they will have the benefit of an objective and independent third party advising them.

Vishal Garg of Better Mortgage (Lend Academy), Rated: A

Our latest guest on the Lend Academy Podcast also thought it was crazy and decided to actually do something about it. Vishal Garg is the CEO and Founder of Better Mortgage and a few years back he missed out on buying his dream home because of the clunky and slow mortgage process. So, he started a company to completely turn this process on its head.

Stock Market Volatility & Your Retirement, Who You Gonna Call? Robo Or Human Advisor (Forbes), Rated: A

Spooked investors looking for reassurance beyond the panic in the headlines have two options to turn to. They can call up a financial advisor, or they can go on the Internet. Artificial intelligence, or fintech’s application of AI, robo advisors, are viewed by many as the future of affordable and effective retirement and investment advice. These algorithms are seen as thetechnology that will disrupt, if not replace, human advice.

Most robo advisor websites provide real-time quantitative information about the market’s performance. But information alone is not necessarily what people are looking for when they are faced with uncertainty. Market performance is public, but the impact on retirement investments is profoundly personal.

That observation touches on the key difference and perhaps the strategic advantage of human advice versus advice by algorithm alone. Clients, which for now are primarily of the human variety, are looking for someone to help them cope and to care as much as they do, as well as someone who has the discipline and expertise to provide perspective to what is otherwise presented in the news as chaos.

Klarna Announces Progressive Parental Leave and Benefit Policy for U.S. Employees (PR Newswire), Rated: A

Global payments provider Klarna (www.klarna.com) has implemented a new parental leave and benefits policy that offers all of its U.S. employees who become parents a comprehensive package that includes 20 weeks of leave at full pay, a flexible, part-time work week “ramp-up period” on their return and a two-year child care subsidy.

As of January 1, 2018, Klarna’s full-time and part-time female and male employees who become parents—either biologically or through adoption—are eligible to receive the new parental leave and benefits. In addition, applicable benefits of the new policy will be extended retroactively to U.S. employees who became parents in 2017.

The new Klarna parental leave and benefits policy for U.S. employees has three core components:

  • Parental Leave: The new parent may take 20 weeks of leave at full pay, and with full health and welfare benefits, during the child’s first two years.
  • Ramp-Up Period: Upon returning to work, employees will have the option to return to work on a part-time schedule.
  • Child Care Subsidy: Upon their return to work, Klarna will provide new parents with a child care benefit during the child’s first two years that will subsidize parents up to $250 per month to defray costs.

Trump Administration Plans To Defang Consumer Protection Watchdog (NPR), Rated: A

Within weeks of coming on board, Mulvaney has worked to make the watchdog agency less aggressive. Under his leadership, the CFPB delayed a new payday lending regulation from going into effect and dropped an investigation into one payday lender that contributed to Mulvaney’s campaign. In another move that particularly upset some staffers, the new boss also dropped a lawsuit against an alleged online loan shark called Golden Valley Lending. The suit says the lender illegally charges people up to 950 percent interest rates. It took CFPB staffers years to build the case.

Bonenfant sent NPR a screenshot from the Golden Valley website. It says on her $900 loan, her scheduled payments in less than 12 months will total $3,735, or more than four times what she borrowed.

Bonenfant has so far paid more than $3,000 to Golden Valley and rung up more than $1,000 in overdraft fees at her bank.

The lawsuit was moving forward until Mulvaney came on board, when it was suddenly dropped.

Federal Rent-a-Bank Bill May Harm Financially Distressed Consumers (Pagosa Daily Post), Rated: A

Recently, it was announced that the U.S. House of Representatives is likely to vote, the week of February 12, on H.R. 3299, the so-called “Madden fix” bill which would preempt state interest rate caps and open the flood gates to online predatory lending. The bill is spearheaded by U.S. Reps. Patrick McHenry (R-N.C.) and Greg Meeks (D-New York).

There are signs that some online lenders are making large numbers of loans that consumers will not have the ability to repay:

  • News reports show that delinquencies and charge-offs at marketplace lenders are rising.
  • One lender has had so many of its loans fail, that it had to repay investors for their losses in consecutive securitizations of the loans it bundled up and sold to Wall Street.
  • One online lender reportedly failed to verify a borrower’s income for a full two-thirds of its loans in 2016.
  • Moody’s credit-rating firm likens this industry to mortgage lending in the years leading up to the 2008 financial crisis in that “the companies that market the loans and approve them quickly sell them off to investors,” relieving themselves of the risk of the loan later going bad.
  • Many marketplace lenders make very large loans of $30,000-$50,000 or higher, and even 36% is a very high rate for such loans. Many states have tiered rate caps in recognition that interest becomes more unaffordable the larger the loan. Iowa, for example, caps interest at 21% for loans over $10,000.
United Kingdom

Funding Circle lends over £117m in January (Bridging&Commercial), Rated: AAA

Funding Circle has announced that it lent more than £117m last month to UK businesses.
The largest portion of funding went to businesses in the South East (22.1%), followed by companies based in London (16.2%), the Midlands (14.4%) and the South West (11.7%).
The property and construction sector received the largest part of the funding (17.6%), followed by professional and business support (13.5%) and retail (11.9%).

Referral schemes: make money from your friends and family (Love Money), Rated: B

People using peer-to-peer platform Funding Circle can net £50 if they recommend a friend or relative who goes on to lend at least £2,000.

Normally, Zopa investors can earn up to £50 if the person they recommend lends £2,000 with the platform. They’ll receive £50 too.

FSB launches new FinTech funding platform for SMEs (Tamebay), Rated: A

The Federation of Small Businesses (FSB) has launched a new fintech platform to provide small businesses and self-employed people with greater access to funding to help them grow and develop their enterprise..

The average amount a small business applies for from an alternative finance provider was found to be £39,000 in the survey, with equipment purchases and working capital for short-term operations or late payments being among the top reasons for businesses seeking finance.

LendInvest Announces Launch of Product Transition Process to Support Developers Throughout Their Projects (Crowdfund Insider), Rated: A

On Monday, LendInvest announced the launch of its new process for development finance borrowers to transition seamlessly between products. According to the online lender, the Product Transition process allows existing borrowers to transfer easily between specialized loans that are tailored to support them at each stage in their development project.

Mobile banking start up Fiinu launches Seedrs crowdfunding campaign (AltFi), Rated: B

Banking start up Fiinu has today launched a crowdfunding campaign on Seedrs,as it seeks £500k in seed funding to support its development and an application for regulatory approval from the Financial Conduct Authority (FCA).

China

CreditEase FinTech Investment Fund to Invest in Automotive Financial Technology Company Fair (Business Insider), Rated: AAA

CreditEase, a Beijing-based leading FinTech conglomerate in China, announced today that its venture fund, CreditEase FinTech Investment Fund (“CEFIF”), recently joined a group of prestigious investors to support California based Fair’s strategic expansion. Other investors in this round of financing include Siemens-backed next47 global venture fund, BMW i Ventures, Millennium Technology Value Partners, 137 Ventures, G Squared and Upfront Ventures.

Fair is a mobile technology platform that allows customers to lease and return a car with flexible terms entirely by using a smartphone.

Why China Isn’t Worried About a Slowdown in This Lending Market (WSJ), Rated: AAA

China’s market for asset-backed securities—which bundle up car loans, mortgages, consumer loans and other receivables into bondlike products—surged in 2017, led by issuers including the financial affiliate of Alibaba Group Holding Ltd. and other nonbank lenders. Total issuance of such instruments, which are mostly denominated in yuan, jumped 90% to over $220 billion last year from 2016, according to S&P Global.

The country is now the world’s second-largest market for securitized assets after the U.S., where issuance reached $510 billion in 2017, it said.

In the past couple of months, however, issuance in China of securities backed by unsecured small consumer loans has slowed sharply. This came after Chinese financial regulators took steps to curb a proliferation of internet lenders making microloans, small, short-term loans that typically carry high interest rates. These small loans represent roughly 40% of all consumer loans backing asset-backed securities in the country, according to S&P.

Around $1.3 billion worth of securities backed by unsecured microloans were issued in January 2018, down from $3 billion in the same month a year ago and versus a peak monthly issuance volume of nearly $7 billion last autumn, according to data provider Wind Info.

Source: The Wall Street Journal

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

WeChat has permanently banned over 1000 “cash loans” mini programs which violated its verification and operation rules. Xinhuanet has reported that there were multiple mini programs about “loans” on WeChat (e.g. unsecured loans and quick loans), ranging from 200 to 100,000. Complaints about the illegal credit products reached over 1,000 on one of China’s leading complain platform Ts.21.com

Hong Kong Monetary Authority (HKMA) announced that it would amend the relevant regulations on virtual banks.

Official documents show that the original guidelines require that a virtual bank incorporated in Hong Kong must hold at least 50% of its shares by an officially recognized and reputable bank or financial institution. The new ordinance recommends that non-financial institutions could register an “intermediary holding company” first when setting up a virtual bank, and then use the company to controls the virtual bank. This means that the authorities in Hong Kong have lowered the entry threshold on the financial qualification of virtual bank applicants. Non-financial institutions, including technology companies, can also apply to own and operate virtual banks in Hong Kong.

This week, LähiTaksi, a Finnish taxi company from Helsinki, announced that it would soon accept Alipay payments.

European Union

Robo firms signal their advice intentions (Money Marketing), Rated: A

Robo-advisers will increasingly move towards hybrid models over the next year, combining the human touch with machine learning, experts predict.

Scalable Capital, the Europe-wide robo firm, which has received financial backing from investment giant BlackRock, has just started offering telephone and face-to-face advice for clients who want to progress beyond an initial free session.

Nutmeg and Moneyfarm have both signalled plans to move in a similar direction, while Wealthify, which saw Aviva take a majority stake last year, won’t rule out taking this step in the future.

International

The Most Important FinTech Innovations that Will Change Our Lives in the Near Future (Interesting Engineering), Rated: AAA

It is largely evident that we are looking at inevitable digital disruption in financial services. The traditional banking system is yet to see any major technological innovation in lending whereas the FinTech firms have made huge investments in the same area. China moved96% of its e-commerce sales without the services of a bank. A report by Cisco pegs the peer to peer lending volume in China at approximately $66 billion, for the US that number stands at $16.6 billion, and for the UK it is $5.4 billion. Clearly, the opportunities aren’t fictional, and technology will guide this paradigm change.

American FinTech giants include Stripe, a San Francisco based firm valued at $5 billion, Credit Karma, another Silicon Valley-based FinTech firm valued at $3 billion.

The UK lags behind the US by quite a distance, but is second overall with $5.4 billion investment in the same time frame, thus confirming its position as one of the world’s leading FinTech hubs. Its FinTech bigwigs include TransferWise, DueDil, AstroPay, GoCardless and Digital Shadows.

FT Partners Advises YapStone on its million Series C Financing Round (FT Partners), Rated: AAA

FT Partners is pleased to announce our role as exclusive strategic and financial advisor to 

Source: FT Partners

Read the full transaction profile here.

ETHLend alters terms to encourage use of its own digital currency (P2P Finance News), Rated: A

CRYPTO-BACKED peer-to-peer lending platform ETHLend has reached more than £2m of loans as it announces new incentives to encourage users to transact with its LEND token.

Borrowers can post any digital currency as collateral and loans can be made in Bitcoin or Ethereum or LEND. But ETHLend now wants more people to use the LEND token as the means of exchange so it has said anyone providing funds in LEND won’t have to pay any transaction fees.

There is also a 50 per cent discount when the LEND coin is posted by borrowers as collateral.

Australia

DirectMoney a leading ASX gainer after revealing Alceon investment (Proactive Investors), Rated: AAA

DirectMoney Ltd (ASX:DM1) is an ASX leading gainer intra-day on news of a strategic investment by alternative investment manager Alceon.

The investment comprises an initial placement of $600,000 at $0.042 per share and is equivalent to a 3.1% interest.

India

Lendingkart raises total of Rs1,129 crore after latest funding round (livemint), Rated: AAA

Rs565 crore

What is it? The amount raised in equity funding by Lendingkart Technologies, a fintech start-up that provides online loans to small businesses. The latest fund raise, announced on Monday, takes the total amount raised by the Lendingkart Group to Rs1,129 crore.

Tell me more: Lendingkart’s latest funding round was led by Singapore’s Fullerton Financial Holdings, and also saw participation by existinginvestors, namely Sistema Asia Fund, Bertelsmann India Investment, Mayfield India, India Quotient and Saama Capital.

India fintech seeking to raise at least US$ 87m to grow tech capabilities (Business Times), Rated: A

AN Indian fintech company is seeking to raise over US$87 million of equity funding to expand its technological and analytics capabilities.

Lendingkart Technologies will be doing so through series C capital-raising, with the initiative led by Singapore’s Fullerton Financial Holdings, along with participation from existing investors.

Canada

Payday Loan Use Among Heavily Indebted Borrowers On The Rise (Payment Week), Rated: AAA

Payday loan use among heavily indebted Ontarians continues to escalate, as Ontario in 2017 involve payday loans, up from 27% in 2016.

The average number of payday loans outstanding at the time of insolvency declined to 3.2 in 2017, after peaking at 3.5 loans in 2014. However, the average payday loan size in 2017 is $1,095, an increase of 12.4% from $974 in 2016.  One in ten (9%) loans are $2,500 or more, up from 6% in 2016.

The average insolvent payday loan borrower owes $3,464 in payday loans, or $1.34 for every dollar of monthly take-home pay, on top of $29,997 in other unsecured debts. They are using payday loans to keep up with existing debt repayment.

Borrowell Gives Birth To New TV Campaign (Borrowell Email), Rated: A

Borrowell is making its first major foray into television with a 30-second spot that launches today, called “Home Birth.” Created by Toronto-based agency Conflict, the commercial aims to raise awareness of Borrowell’s free credit score monitoring service.

MENA

Saudi startups have wider funding options amid huge fund volumes (Saudi Gazette), Rated: AAA

In an interview, Nawaf Al Sahhaf, CEO of Badir, said financing options for these startups include without limitation Venture Capital firms, angel investors, accelerators, and incubators in addition to new alternatives such as crowd funding or even P2P lending platforms.

Venture Capital funding is an essential piece of the startup jigsaw.

Venture Funding is unique, however in its characteristic. I define a startup as a company that is looking to receive funding from a venture capitalist. This means that they meet several basic criteria for growth 1) a strong founding team 2) a solution to a clear and identifiable problem 3) a clear path to monetization and most important 4) a scalable product that has a regional if not global market.

All of these criteria are essential to be eligible for Venture Funding. Many of these criteria may not be applicable or sufficient for alternative funding channels including debt, bank funding or grants.

UAE ranked third for Islamic Fintech start-ups (Gulf Today), Rated: A

The UAE is ranked third in an analysis of Islamic Fintech start-ups, according to a survey by Bloomberg Intelligence, issued today. Malaysia and the United Kingdom are ranked first and second.

Crowdfunding and peer-to-peer (P2P) financing could be a game-changer in Islamic finance, it suggests, giving wider reach and potential to close the gap for small and medium enterprises, SMEs, which generated about 60 per cent of UAE GDP in 2014, with Dubai’s regulator introducing the first tailored regulation for crowdfunding in the GCC.

Authors:

George Popescu
Allen Taylor

Wednesday January 17 2018, Daily News Digest

European alt SME lending

News Comments Today’s main news: Wells Fargo is closing branches left and right. Repeal  of payday lending rule under consideration. Moody’s assigns provisional ratings to SoFi Professional Loan Program 2018-A-LLC. RateSetter leads in personal loans. Curve launches. Victory Park Capital looks overseas. Today’s main analysis: How Lendix blazes a trail in SME lending. Today’s thought-provoking articles: Why regulation is crucial. Wells […]

European alt SME lending

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United States

Wells Fargo is getting more aggressive with branch closures (Tearsheet), Rated: AAA

Wells Fargo is charging toward its goal to cut over 800 branches by the end of 2020, it said in a presentation of its fourth quarter earnings on Friday.

 

Wells, which has been struggling to cut costs while it continues getting hit with legal fees following its various scandals, expects to save $4 billion as a result of the plan.
Source: Tearsheet

Consumer Financial Protection Bureau considering repeal of payday lending rule (NBC News), Rated: AAA

The bureau, which came under control of the Trump administration late last year, said in a statement Tuesday that it plans to take a second look at the payday lending rules. While the bureau did not submit a proposal to repeal the rules outright, the statement opens the door for the bureau to start the process of revising or even repealing the regulations. The bureau also said it would grant waivers to companies as the first sets of regulations going into effect later this year.

Moody’s assigns provisional ratings to SoFi Professional Loan Program 2018-A LLC (Moody’s), Rated: AAA

Moody’s Investors Service has assigned provisional ratings of (P)Aaa (sf) to Class A-1 Notes, the Class A-2A Notes and the Class A-2B Notes to be issued by SoFi Professional Loan Program 2018-A LLC (SoFi 2018-A). The collateral underlying the transaction consists of SoFi’s private student loans, which are loans the government does not guarantee. Our cumulative net loss expectation for SoFi 2018-A’s loan pool is approximately 2.0%.

Issuer: SoFi Professional Loan Program 2018-A LLC

  • $55,000,000 Floating Rate Post-Graduate Loan Asset-Backed Class A-1 Notes, Assigned (P)Aaa (sf)
  • $358,500,000 Fixed Rate Post-Graduate Loan Asset-Backed Class A-2A Notes, Assigned (P)Aaa (sf)
  • $236,800,000 Fixed Rate Post-Graduate Loan Asset-Backed Class A-2B Notes, Assigned (P)Aaa (sf)

Magilla Loans Platform Surpasses $ 4.5B Loan Origination Milestone (PR Newswire), Rated: A

Magilla Loans, a search engine for loans that connects borrowers to banks without requesting personal information, announced it has surpassed $4.5 billion in aggregated loans from top banks across the U.S. The Magilla platform provides business owners with access to multiple financing options, including access to business, home and real estate loans.

UpLift Closes Financings of $ 90M (FINSMES), Rated: A

UpLift, a Sunnyvale, CA-based travel financing company, closed financings of $90m.

The company received:
– a $75m credit facility in partnership with funds managed by affiliates of Fortress Investment Group, and
– a $15m equity round which includes participation from previous investors including PAR Capital with Draper Nexus, Highgate Ventures, and former Expedia CEO Erik Blachford.

NextCapital does $ 30-million VC round with a staggering objective that’s taking shape first with John Hancock (RIABiz), Rated: A

The shoot-the-moon robo strategy of NextCapital Advisers Inc. is looking up now that John Hancock Financial Services Inc. has come out of pilot and State Street Global Advisors became a partner in going after RIAs.

The Chicago-based digital advisor, founded in 2013, announced it more than doubled its backing with $30 million of venture round led this time led by Oak HC/FT of Greenwich, Conn. See: NextCapital raises $16 million as its founder goes where Financial Engines’ 401(k) robo strategy didn’t.

All told, the firm has raised $54 million: Six million dollars in August 2014, $18 million in 2015 and, just recently, this $30-million round.

Borrowers in the Lone Star State Can Now Get a Better Mortgage (Digital Journal), Rated: A

Better Mortgage, a digital mortgage company focused on improving access to home financing for a new generation of homeowners, is now available to Texas homebuyers. Better will now be able to serve more than half of Americans who are looking to own or currently own a home. In 2017, Better expanded its footprint in major real estate markets around the country, with Texas being the latest licensed states.

Texas is Better’s 14th market. In 2018, they expect to continue their expansion, focusing on geographies that help first-time homebuyers invest in their communities by putting down roots.

Gary Lieberman of Laurel Road (Lend Academy), Rated: A

In this podcast you will learn:

  • The history of Darien Rowayton Bank.
  • Why Gary decided to buy this small community bank in 2010.
  • How the bank has grown since Gary took it over.
  • How student loan refinancing first got on his radar decades ago.
  • When DRB originated their first student loan.
  • The advantages of being a bank and a fintech platform.
  • Some of the affiliate partnerships DRB has.
  • Other verticals where DRB has offerings today.
  • Why DRB rebranded to Laurel Road in 2017.
  • The scale they are at today with student loan refinancing.
  • Their approach to securitization.
  • How their loans have been performing to date.
  • The profile of their typical borrower.
  • How they market their offerings.
  • What the future holds for Laurel Road.

Refinancing Student Loans Gets Mixed Report (247WallSt), Rated: A

More than 45 million Americans have borrowed $1.45 trillion in student loans to help pay for their post-secondary educations. Repaying those loans can be tough, especially if the loan amount is high and pay for the first job after graduation is low.

Student loan marketplace and refinancing website LendEDU has just released its second annual report on the state of the student loan refinancing market. Here are several highlights from the report:

  • Average credit score of an approved refinance applicant is 764.
  • Just over 58% of 2017 applications are denied.
  • The average interest rate on a refinanced loan is 5.56%. The average rate rose 74 basis points year over year from 4.82% in 2016.
  • The average size of a refinance loan was $66,453. The 2017 average was more than 23% higher year over year.
  • Less than half of approved applicants actually end up refinancing their loans. In 2016, just over 33% of all applicants completed the loan process.

Reliamax’s Michael VanErdewyk: ‘We’re seeing a move towards more private student loans’ (Tearsheet), Rated: A

With all the excitement around online lending, there are still some spaces that have a long growth runway. One of the most persuasive growth opportunities is private student lending. Macroeconomic and policy changes are contributing to the growth thesis but so too are the number of local lending institutions that want to move into this asset class.

Rising costs of higher education
The cost of education continues to increase and the number of kids in school isn’t declining. So, it’s a big opportunity. Really, we have to talk about the cost of education. The cost of higher education in the U.S. today costs over $400 billion a year. About 25 percent of that is free money (grants and scholarships). Another 25 percent is federal student loans. The remainder — about $200 billion a year — is really family contributions.

The focus on private student loans
If you look at the total outstanding student debt, there’s about $1.4 trillion in federal student loans and $100 billion in private student loans, comprising only about 7 percent of total outstanding student debt.

CreditVest starts crowdfunding advisory firm (BizJournals.com), Rated: B

Jon Mauro founded Realty Mentors with Andrea Humphrey, who is president and owner of CreditVest, to focus on individual investors who want to participate in commercial real estate crowdfunding.

Zelle is now running TV ads (Tearsheet), Rated: A

Zelle is spending “tens of millions” of dollars on a television ad campaign featuring spoken word artist Daveed Diggs.

Early Warning, the bank-owned consortium behind the peer-to-peer payments platform, aired the first ad Saturday during the National Football League’s divisional round of playoff games and will continue to run them alongside unifying cultural events like the Grammy Awards, the NBA All-Star Game and the Super Bowl pre-game show. They’ll also run during popular shows on Bravo, Comedy Central, The Discovery Channel, ESPN and MTV.

Zelle is trying to build some brand recognition for itself among its target audience, mobile users, in an effort to compete with Venmo.

An investing platform founded by a 25-year-old went free — and now it’s facing a backlash from its rivals (Business Insider), Rated: A

M1, which was founded by CEO Brian Barnes when he was 25, originally charged users 25 to 40 basis points to use its platform, which allows users to buy fractional stocks and invest in pre-built portfolios. In December, it decided to go free, and make money strictly on the backend, by selling flow to trading firms and lending out non-invested funds sitting in users’ accounts to banks. The company also plans to offer margin trading to its users.

Since going free in December, M1 has seen daily inflows hit as high as $1 million, and a 10-fold increase in the number of new accounts each day.

Still,  M1’s robo rivals aren’t convinced the strategy will work for the small company.

Tipalti Launches Payables Automation Partner Program (BusinessWire), Rated: A

Tipalti, the leading global payables automation platform, today announced the launch of its Partner Program, which will offer accounting firms, financial institutions, system integrators, ERP resellers/VARs, consultants, and partners who work with the office of the CFO, the ability for their clients to leverage Tipalti’s software to eliminate the friction, risk, and time spent on manual accounts payable operations.

Key Features of Tipalti’s Partner Program:

  • Training and support for partners as they assist their clients
  • Option to pass exclusive savings on to their clients
  • Option to receive income stream through revenue-sharing
  • Low-impact engagement with minimal investment by partner

STOCKHOLDER INSPECTION RIGHTS SURVIVE CHALLENGE IN DELAWARE (AllAboutAlpha), Rated: A

On December 29, 2017, the last business day of the expiring year, the Delaware Chancery Court, in a memorandum of opinion by Vice Chancellor Slights, upheld stockholders’ statutory books-and-records inspection rights against a defendant corporation that sought to invoke and considerably to widen the scope of the Delaware Supreme Court’s Corwin decision of 2015.

The significance of this is that Delaware, some impressions to the contrary, is not a corporate-management-always-wins state. It was not so before the Corwin decision, nor did that decision make it so.  That ought to be good news for activist investors and their counsel. There may be alpha, or at least leverage toward alpha, lurking in the right to inspect books and records.

United Kingdom

RateSetter leading the way for personal loans (RateCity), Rated: AAA

Interest rates for personal loans listed on RateCity range from as low as 3.57 per cent to as high as 48.00 per cent.

The average personal loan interest rate was 11.89 per cent at the end of December, according to an analysis of the dozens of lenders listed on RateCity.

RateSetter, a peer-to-peer lender, has a one-year unsecured personal loan with an advertised rate of 3.57 per cent and a comparison rate of 3.92 per cent.

Curve, the fintech that connects all your cards to a single card and app, gets full consumer launch (TechCrunch), Rated: AAA

Curve, the London fintech startup that offers a platform that lets you consolidate all your bank cards into a single Curve card and app to make it easier to manage your spending, is finally launching to U.K. consumers. Up until now, the service remained in beta and was only officially available to business users.

In a call with Curve founder and CEO Shachar Bialick, he described the consumer launch as a major milestone for the company, noting that 50,000 people have signed up to its waitlist, in addition to the 100,000 or so users who joined Curve in its beta phase. It’s free to join, although a premium version of the Curve card is also available for £50 that offers additional perks.

How P2P could be a financial lifeline for UK landowners (Bridging&Commercial), Rated: A

A recent study of 172 farms by the Prince’s Farm Resilience Programme found that just 16% made a profit from their farming activities over the period assessed. The analysis found that instead many farms are now reliant on alternative income streams to turn a profit, such as tourism, renewable energy and selling their products directly to consumers.

But moving into alternative areas of business requires capital. And – with the average farm in the study making a loss of more than £20,000 from its farming activities – it may be capital that landowners require to invest in their business to prevent a loss.

Folk2Folk champions local lending because we believe in creating financially and socially sustainable communities by matching local businesses with local lenders.

Robo advice platform citing AI and machine learning raises £562k on Crowdcube (AltFi), Rated: A

Marketsflow, a new digital wealth management platform closed its fully funded investment round via equity crowdfunding.

Initially looking to raise £210k, the fundraise has seen more than £562k of commitments from nearly 800 investors giving Marketsflow a pre-money valuation of £2.4m.

What we learned about fintech from some of the biggest brains at Clifford Chance (Legal Cheek), Rated: A

What kind of financial technology has come across your desk at Clifford Chance, then? (Here comes the educational bit.) Chapman identified four technologies driving change:

Marketplace lending: crowdfunding or peer to peer lending, with the potential for “disintermediation” of the financial institution that used act as middleman for loans.
Big data and AI: you might just have seen it in the newspapers. But it’s closer than you think: if you’ve applied for a credit card, according to Chapman, chances are that a machine took part of the decision on whether or not to approve you.
Mobile payments: forget branches, even internet banking on a web browser is old hat. Some banks, indeed, exist only as apps (I instantly thought of my Revolut app, which started out offering as a slick currency exchange platform, but is now offering credit).
Blockchain and distributed ledger: different things, but often used in combination. These are “the pieces of technology that underpin the Bitcoin phenomenon”. It’s not just media hype, either: Clifford Chance is “seeing a lot of work in this space”.

5 Top Alternative Investments in the UK (What Investment), Rated: B

1. Crowdfunding

Rather than rely on venture capital trusts and angel investors, many new businesses are using crowdfunding to get off the ground. In fact, UK platforms such as CrowdCube and Angels Den have raised over £72 million from investors this year.

5. Peer-to-peer lending

Peer-to-peer lending allows you to loan money to people through online platforms, without a bank. These agreements are arranged through peer-to-peer lending platforms such as Zopa, Prosper and Lending Works. These peer-to-peer companies are typically FCA regulated and they organise credit and ID checks as well as set interest rates, collect payments and pay your returns.

After PSD2 and GDPR, what Wayfinding Signs will guide visitors through an Open Bank? (LinkedIn), Rated: A

When branch banking was the mainstream method of service distribution in financial services, both a bank’s customers and potential business partners could follow clear signs that directed them where to go and who to contact. The first sign that a bank sent its customers and potential business partners was the geographic location of a bank branch.

One in four very-low income households are struggling to pay bills or debt, with 10 per cent spending more than a quarter of their salary on credit card repayments, a report has found.

Data from the Institute for Fiscal Studies (IFS) showed one-sixth of the poorest households in Britain were in arrears on repayments and bills.

A further 10 per cent were spending at least a quarter of their monthly income on unsecured debts, such as credit cards and payday loans.

China

‘Freedom at a Price’: Why Regulation Is Crucial to Fintech’s Future (Wharton), Rated: AAA

In recent years, financial technology, or fintech, has dramatically expanded financial inclusion in China and elsewhere in Asia. Small and midsized businesses that have been underserved by banks now have access to capital, as fintech enterprises use the internet and mobile technology to reach those borrowers; leverage data analytics to build credible and innovative risk profiles to gauge creditworthiness, and are able to scale their reach exponentially with 24/7 customer windows and without the baggage of fixed-cost overheads that typically shackle traditional banks. Not surprisingly, the unmet needs of the underserved have provided huge market potential for fintechs.

Credit China FinTech, which is listed on the Hong Kong Stock Exchange as Chong Sing Holdings FinTech Group Ltd., or CSF, provides third party payments, online investment, technology-enabled lending, and traditional loans and financing services. Today, it has more than 51 million users who generated transactions worth RMB 868 billion ($130 billion) in the first half of 2017.

At the same time, both have proved massively popular in China which accounts for roughly half of the world’s digital payments and three-quarters of global, online P2P lending volume, according to Pricewaterhouse Coopers.

For one, default rates are higher than anticipated on peer-to-peer lending platforms. Also, instead of being disrupted by the fintechs, traditional banks have entered the peer-to-peer lending space to become the dominant players, he added.

China regulator says fintech must serve real economy (Finextra), Rated: A

Jiang Yang, vice chairman of China’s Securities Regulatory Commission (CSRC) was speaking at the Asian Financial Forum to an audience of fintech entrepreneurs. The development of fintechs should benefit the real economy and not “a small group of people”, he said in comments reported by the Nikkei Financial Review.

European Union

Lendix Raises €200 Million Institutional Financing to Trailblaze European Alternative SME Finance (Crowdfund Insider), Rated: AAA

The European Investment Bank Group (EIB), CNP Assurances, Eiffel IM, Groupama, Zencap AM, Matmut and Decaux Frères Investissements are among the first investors joining to finance Lendix’s latest investment vehicle to fund unsecured loans to SMEs in France, Spain and Italy. New institutional investors from banks and asset management firms in Spain and Italy are joining. As of now, €120 million of the planned €200 million are already committed and the first loans from this fund will start rolling out as soon as February.

Source: Crowdfund Insider

As of December 2017, Lendix originated a cumulated worth of €143 million of SME loans, a 90% increase from 2016.

Online Lender Robo.Cash Shares Insight into Investor Activity (Crowdfund Insider), Rated: A

Peer to peer lender Robo.cash has shared a “financial portrait of a Robo.cash investor.”

According to their results, investors from a younger age group, 18-24 years old, usually deposit circa €200 at a time and rarely withdrew  any funds. The maximum funding size is characteristic of the older age groups: the average deposit of investors of 35-44 years old is equal to €879 and for those who are older than 45 years old is €838.

Millennials of 25-34 years of age invest about €679 on average making frequent deposits in comparison to the younger age group.

Approaching energy crowdfunding with eyes wide open (YourIS.com), Rated: A

youris.com met Sissy Windisch, from the German company Green Crowding, who published a guide for new small investors, to allow them to make the best decisions. The document was released under the EU project CrowdFundRES.

This is a different kind of crowdfunding, unlike what platforms such as Kickstarter do?
With Kickstarter you donate money, so a comic book for example can be published, or you just want an artist to keep on creating art. Instead, the type of crowdfunding we are interested in is debt-based, which means that you get your money back plus interest. If you finance a solar roof on a school for five years, you get 3% every year and at the end of five years you get your money back.

Could you tell us more about debt-based crowdfunding?
Debt-based funding is already one of the largest types of crowdfunding. I would say one of the biggest areas in terms of funding volume at the moment is real estate. I think for 2016 alone the funding was estimated at around 3.5 billion dollars.

Why can’t the traditional financial institutions, such as banks or investment firms, offer these services?
What we’ve often seen, particularly for renewables, is that banks and other traditional financial institutions often look for large projects to invest in. They prefer investing in one 50-million wind park than in 500 small photovoltaic installations.

Swaper Offers One-Click Portfolio Investing (Benzinga), Rated: B

What does your company do? What unique problem does it solve?

Swaper CEO Peteris Kisis: Swaper is a loan marketplace offering an easy investing in pre-funded consumer loans originated by its parent company Wandoo Finance Group in Poland, Georgia, Spain, Denmark and Russia. All investments offered on our marketplace start from 12 percent annual interest and are BuyBack guaranteed, meaning Swaper will compensate investors both for the invested principal and accrued interest in case the borrower is late with payments.

International

Top backer of US subprime lenders eyes overseas opportunities (Financial Times), Rated: AAA

Victory Park Capital, a Chicago-based investment firm, has been a vital source of debt capital for a string of online lenders, including Avant, Elevate and LendUp, all of which focus on borrowers in the subprime segment. Total commitments and investments come to about $6.5bn from more than 90 deals, mostly in the US.

The firm, which was founded 10 years ago, is seeking to add to a portfolio including zip Money in Australia, Kreditech in Germany and Oakam in the UK.

(The Merkle), Rated: A

Vitalik Buterin, the creator of the Ethereum Network, recently proposed a new method for decentralized fundraising called the “DAICO”. Incorporating elements of Decentralized Autonomous Organizations, or DAOs, the new model is designed to minimize the complexity and risk associated with ICOs.

Buterin outlined the new model in a post on the Ethereum Research Forum entitled “Explanation of DAICOs”. In the exposition, the Russian-Canadian programmer outlines a new model that integrates characteristics of DAOs into ICOs to create a new model he refers to as the “DAICO”.

Source: The Merkle
Asia

New Crypto Exchange and 1000 Percent Revenue Growth Could Make KPAY The Crypto Stock To Own In 2018 (Baystreet), Rated: AAA

The little-known Indonesian digital payments company KinerjaPay (KPAY) reported another blowout quarter in December with sales that topped the previous 3 month period by a whopping 1,100%!

Revenue and User-Base Growing Parabolically? +1100% in Q3

KinerjaPay is a digital payments platform in Indonesia and South Asia, and the company ha been growing at an astronomical rate in the last year. In the third fiscal quarter of 2017 ended September 30, 2017, the company posted quarterly transactional revenue of $1.76 million, an 1,183% increase over $149K in the second quarter.

User growth is accelerating as the company brings on more partners for digital payments and bill pay capabilities in a region of the world where a fraction of people have a bank account or credit/debit card. The rate at which KinerjaPay is adding customers grew 58% in the 3rd quarter; the company reported 10,962 new users compared to 6,904 new users in the same quarter of last year, demonstrating just how fast they’re adding users for a small emerging company.

Asian stocks bounce back, with Hang Seng closing at a record (MarketWatch), Rated: A

Asian equity markets on Tuesday found their footing after some initial softness, leaving Hong Kong’s benchmark at a record closing high.

The Hang Seng rose 1.8% to 31,904.75, topping the previous high set on Oct. 30, 2007.

Japanese stocks rebounded from Monday’s selloff, with a weaker yen helping the country’s exporters. The dollar gained 0.2% to ¥110.7200, pushing the Nikkei to finish up 1% at a fresh 26-year high.

Africa

Fintech startups took nearly a third of all African venture funding in 2017 (Quartz), Rated: AAA

Almost a third of funding raised by African startups in 2017 was in the fintech sector as investors bet on consumers turning to more formal financial services in a region where just 17% of the population have banking accounts. Venture funding for African startups jumped by 51% to $195 million in 2017, according to a report from Disrupt Africa.

The success of mobile money technology like M-Pesa in Kenya and across East Africa has long shown the potential for other underserved markets. M-Pesa’s success is likely also behind for the increasing presence of mobile networks in the African financial sector and the convergence of the two sectors (pdf page 11).

Nigeria, South Africa and Kenya remained the countries with highest funding raised, consistent with their record from previous years.

Canada

Still a market for short-term loans (Edmonton Journal), Rated: A

Payday loan licences in Alberta have fallen by more than one-quarter, to 165 from 230, and industry officials predict even more payday loan stores will be shuttering their doors this year.

Before then, rules around payday loans in Alberta allowed for the second-highest interest rates in Canada, with lenders being allowed to charge up to $23 for every $100 borrowed, up to a maximum of $1,500. Now, the rate is $15 per $100 — touted to be the lowest in Canada — and borrowers are allowed to repay the the loans in instalments over two months. Lenders are also no longer allowed to penalize customers for paying back loans early and must restrict the number of times a lender can make preauthorized withdrawals.

Authors:

George Popescu
Allen Taylor