The Rise of Unregistered Securities

crowdcheck

The SEC issued a white paper titled “Capital Raising in the USA: An Analysis of the Market for Unregistered Securities Offerings, 2009‐2017.” This white paper presents some pretty interesting numbers. Capital formation through unregistered securities exceeds that from registered securities; 2017 saw unregistered securities raise over $3 trillion versus registered offerings’ $1.5 trillion. Also, according to […]

The post The Rise of Unregistered Securities appeared first on Lending Times.

crowdcheck

The SEC issued a white paper titled “Capital Raising in the USA: An Analysis of the Market for
Unregistered Securities Offerings, 2009‐2017
.” This white paper presents some pretty interesting numbers. Capital formation through unregistered securities exceeds that from registered securities; 2017 saw unregistered securities raise over $3 trillion versus registered offerings’ $1.5 trillion. Also, according to the report, the JOBS Act has had a booster effect on the ecosystem. This is evident by the hundreds of crowdfunding websites launched since its passing. Regulations CF, A+, and D have unshackled entrepreneurs and democratized fundraising. But a critical part of investing in unregistered securities is the due diligence behind whether the companies seeking the funding are genuine or not. CrowdCheck, incorporated in 2012, aims to verify the credibility of companies seeking such investments.

In a chat with CEO and Founder Sara Hanks, we uncovered how CrowdCheck has become the go-to player for due-diligence, compliance, and disclosure.

The Problem With Unregistered Securities

Hanks understood the need for building the trust layer between online investor and issuer since investors will buy shares in unknown companies online. Moreover, there is a list of legal requirements that a capital raising company and an investor need to meet to ensure everything is above board and handled according to these regulations.

CrowdCheck specializes in online capital raising. It serves the entrepreneur, the crowdfunding platform, and the investor in ensuring that the transaction is handled according to current laws and all necessary approvals are in place. From handling drafting and disclosures for Reg D, A+, and CF to filing the relevant notices, CrowdCheck is a one-stop shop. The company has executed 40 Reg A+, 50 Reg D, and about 450 Reg CF offerings.

The Relevant Regulations

Regulation A+

This regulation allows companies to generate income under two tiers representing two different types of investments.

  • Tier 1 – A company is permitted to offer a maximum of $20 million in any one year. The issuing company must also provide an offering circular, which must be filed with the SEC and subject to a vetting process by the commission and securities regulators relevant to the offering. Companies issuing under Tier 1 are not required to produce reports frequently. Instead, they are only required to issue a report on the final status of the offering.
  • Tier 2 – A company can offer up to $50 million in any one-year period. Though an offering circular is required and is subject to review and vetting by the SEC, it doesn’t have to be qualified by any state securities regulators. Companies issuing under Tier 2 must produce continual reports on the offering as well as its final status.

The offering can be marketed to both accredited and non-accredited investors.

Regulation CF Crowdfunding

The company must be incorporated in the US.

  • Allows only $1 million in fundraising.
  • An investor is limited in the amount to be invested in crowdfunding securities in any one-year period. If either the annual income or net worth of the investor is less than $100,000, the investor is limited to the greater of $2,000 or 5% of the lesser of the annual income or net worth. If greater, limited to 10% of the lesser of annual income or net worth, to a maximum of $100,000.

Regulation D

Rules under 506(b)

  • The company cannot use advertising to market securities.
  • No maximum fundraising limit.
  • Securities can be sold to an unlimited number of accredited investors and up to 35 non-accredited investors.

Rules under 506(c)

A company can generally advertise the offering and still be deemed to be in compliance with the exemption requirements if:

  • All the investors are accredited investors.
  • The company should review various documents like tax returns, W-2s, bank and brokerage statements, credit reports, etc. to verify that investors are accredited investors.
  • Companies that comply with the above requirements do not have to register their securities offering with the SEC.

Insights from CrowdCheck

Suitability

  • Reg CF is most suitable for complete startups. It is a cost effective way of raising capital due to the low threshold and regulatory requirements for fund raising. CrowdCheck offers complete services for this segment for just $5000.
  • The investee company needs to decide if it is happy with hundreds of shareholders or would just like to focus on a few accredited investors. Reg A+ is thus suited for companies looking to IPO in a few years.
  • Reg A+ is slightly more expensive than Reg D due to the requirement of SEC compliance. CrowdCheck offers a complete Reg A+ package for $60,000 whereas Reg D fees range from $25,000 to $40,000.

Platforms

There are multiple platforms available in the market, but the entrepreneur needs to choose carefully. Some specialize in a particular industry or particular regulation funding. Hanks believes StartEngine, Wefunder, Seed Invest, Next Seed, Micro Ventures, and Net Capital are the market leaders in the space.

Crowdfunding success is difficult to measure as startups usually have a low minimum threshold. Sites like Kickstarter are different from Wefunder as they do not provide any financial interest in the company being funded.

Numbers (as of Mid- 2018)

  • Reg CF has seen 960 offerings with 390 completed. Many of them are still under process.
  • The average amount raised via Reg CF is $236,000.
  • Reg A+ has seen 325 filings and 232 have qualified to raise funding.
  • Reg A+ has helped companies raise $1.1 billion, and 108 fundraisings are completed with the average fundraising around $10 million.

Conclusion

Hanks has 30 years in the corporate and securities field. Prior to CrowdCheck, she was general counsel of the bipartisan congressional oversight panel for TARP. The company has a core team of 19 people out of which six are full-time employees in core management, and others are paid consultants having backgrounds in securities law and finance.

As investors become more comfortable with online crowdfunding, the quality of companies looking to raise capital has improved. Many startups are skipping VC money to test crowdfunding. CrowdCheck acts as an important “check” to ensure the sanctity of the process. The entire ecosystem, from entrepreneurs to investors to platforms, depend on their validation for making online capital raising work.

Author:

Written by Heena Dhir.

The post The Rise of Unregistered Securities appeared first on Lending Times.

Connecting Small Dollar Lenders With Borrowers Through a Mobile App

Hundy small dollar lending

After the Great Recession from 2007-2009, income growth nearly flattened for the average American while prices have been continuously rising. Almost half of America is unable to raise $400 for an emergency. With payday loans turning out to be predatory debt traps, it is almost impossible to raise a small loan for a short period […]

Hundy small dollar lending

After the Great Recession from 2007-2009, income growth nearly flattened for the average American while prices have been continuously rising. Almost half of America is unable to raise $400 for an emergency. With payday loans turning out to be predatory debt traps, it is almost impossible to raise a small loan for a short period of time.

Realizing the fact that almost two thirds of the country is under a non-prime credit risk, Hundy wanted to reduce the grievances of the new middle class. The idea was to build a true peer-to-peer lending marketplace which would serve as a platform for raising loans of up to a few hundred dollars at a low interest rate. The platform is open to everyone and is easy to access. It is a friendly, convenient, and transparent way to borrow money from peers.

The mobile application is a community-based model which facilitates interaction between the borrower and lender. The company’s long term goal is to build a network where people can borrow, save and invest, all at the same place.

Focused on small dollar loans in the marketplace lending market, Hundy is based out of San Francisco. The mobile native platform was launched in 2016 and focuses on providing loans to the underserved at a fair price. It has raised over $400,000 in a friends and family round. In a conversation, Pete Budlong, the founder and CEO of the company, discussed how instability has become the new normal after 10 years of recession and how Hundy addresses this issue.

How Hundy Works

Getting a loan over the Hundy application is a very simple process. Users sign up using Facebook. After signing up, they sign agreements and link bank accounts. After a credit approval process, their profile is ready and they can start applying for loans. The company offers the option of hard and soft credit pulls so as not to adversely affect the user’s credit score.

On getting credit approval, users can immediately request their first loan of up to $100. However, if not approved automatically, they’ll get approved based upon their participation in the community over time. Once approved and a request for a loan has been made, the user’s application is processed within minutes and the loan amount transferred into their bank account by the next business day.

Loan payments, along with a repayment fee, will be withdrawn from the user’s bank account on the selected date of repayment, which can be up to four weeks after the date of loan issuance. If the user can’t pay off the loan on time, there is an option to convert the loan into a 60-day installment loan with no penalty. Every time a loan is paid off, the borrower’s credit limit will go up until it reaches the maximum of $250. The borrower is updated throughout the process via e-mails and text messages, making all transactions over the platform transparent and fair.

The company has originated over 1,000 loans and has an APR of 180% as compared to 350% for traditional payday lenders. Its main competitor in the online space is LendUp, and it competes with payday lenders in the offline market.

Hundy’s Reach and Market Stats

Currently holding a full lending license in California, Hundy is planning to expand its services to other states in the US. The app will be launched in Texas and Florida by the end of this year. The mobile application was ranked as high as 89 in the app store under the finance category with about 70K registered installs. Around 60,000 downloads are wait-listed. This is a massive reach considering that the company is not engaged in any kind of advertising activity. Another co-founder of the company, Ram Hegde has been operating a developer team in India, and a team of two in the US is helping Pete with the marketing.

The community currently has a monthly growth rate of 30%, which is doubling every two to three months. Most of its traffic, about 95%, comes from iOS devices.

Hundy’s Future Plans

The company’s goals are structured into three milestones. The first leg constitutes the launch of the social feed, which is already finished. Almost one-third of Hundy’s borrowers participate on this social feed. The second leg accounts for a non-profit lending product. The company made a formal announcement for the non-profit product at the Money 20/20 startup academy. The third leg involves for-profit crowdfunding, and the company aims to accomplish this by the end of this year.

As of now, the company is not looking to raise money but to originate borrowers. Once the application manages to strengthen its hold on the borrower side, it will focus on engaging lenders. The aim is to build a community-based lending platform where borrowers and lenders can directly interact with each other. These communications between various stakeholders also help create a database for developing machine learning- and artificial intelligence-driven algorithms for the platform. Currently, the company is serving accredited investors through a Reg D exemption but will soon leverage Reg CF and Reg A+ for allowing unaccredited investors to pool their money for loaning to potential borrowers.

Conclusion

People find it difficult to take out small loans at a reasonable rate of interest. The Hundy application proves to be a great platform in such scenarios, offering short-term loans at a fair price. It is aiming to provide affordable loans, not just in California but all across the US, by building a community where borrowers and lenders can communicate directly with each other through the app.

Author:

Written by Heena Dhir.

Tuesday January 9 2018, Daily News Digest

LendingTree purchase APR

News Comments Today’s main news: IEG Holdings wants to turn Lending Club into a balance sheet lender. Groundfloor launches nationwide. Crowd2Fund launches 30M GBP fundraise. China may get a second consumer credit bureau. Klarna expands e-commerce footprint. Today’s main analysis: LendingTree releases mortgage offer report for December. Today’s thought-provoking articles: Are corporations posting fake comments on government regulatory websites? History […]

LendingTree purchase APR

News Comments

United States

United Kingdom

China

European Union

International

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Asia

Canada

News Summary

United States

IEG HOLDINGS (IEGH) LAUNCHES TENDER OFFER FOR UP TO 4.99% OF LENDINGCLUB (LC) (Zacks.com), Rated: AAA

On January 5, 2017, IEG Holdings (OTC:IEGH) launched a tender offer for up to 4.99% of LendingClub (NYSE:LC).
– Management believes it can convert LendingClub from a broker of loans into a balance sheet lender

Groundfloor Expands Historic Qualification Under Regulation A To Launch Nationwide (Business Insider), Rated: AAA

Non-accredited and accredited investors in all 50 states can now participate in real estate crowdfunding investment opportunities with Groundfloor. Groundfloor, the first issuer qualified by the U.S. Securities & Exchange Commission to offer real estate debt investments via Regulation A that are available to non-accredited investors, today announced that it has received qualification as an issuer under Tier 2 of Regulation A. The qualification allows over 150 million additional investors to access real estate investment opportunities that have been previously unavailable to them, tripling Groundfloor’s addressable market.

In 2017, Groundfloor saw tremendous growth of over 380% in origination volume and 786% in revenue, prior to announcing a partnership with its first institutional investor, Direct Access Capital (DAC).2 Groundfloor lends in 27 states, and has self-originated over $50 million in loans for 398 real estate projects earning individual investor portfolios average annualized returns of 11.74 percent to date. Groundfloor has also raised $9.1M in venture capital from leading fintech VCs and angel investors.

LendingTree Releases Monthly Mortgage Offer Report for December (PR Newswire), Rated: AAA

LendingTree®, the online loan marketplace, today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.

Source: Purchase APR by Credit Score Range (PRNewsfoto/LendingTree)
  • December’s best offers for borrowers with the best profiles had an average APR of 3.80% for conforming 30-year fixed purchase loans, up from 3.75% in November. Refinance loan offers were up 1 bps to 3.70%.
  • For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were up 12 bps to 4.42%, the highest since July 2016. The loan note rate hit the highest since March 2016 at 4.32% and was up 14 bps from November.
  • Consumers with the highest credit scores (760+) saw offered APRs of 4.26% in December, vs 4.56% for consumers with scores of 680-719. The APR spread of 30 bps between these score ranges was 3 bps wider than in November and the widest since this data series began in April 2016. The spread represents nearly $15,000 in additional costs for borrowers with lower credit scores over 30-years for the average purchase loan amount of $233,586. The additional costs are due to higher interest rates, larger fees or a combination of the two.
  • Refinance APRs for conforming 30-yr fixed loans were up 7 bps to 4.31%. The credit score bracket spread widened to 24 from 20 bps, amounting to $12,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $241,973.
  • Average proposed purchase down payments have been rising for 8 months and reached $63,740.
Source: Purchase Mortgage Offers by Credit Score (PRNewsfoto/LendingTree)

Many Comments Critical of ‘Fiduciary’ Rule Are Fake (WSJ), Rated: AAA

A significant number of fake comments appear among thousands criticizing a proposed federal rule meant to prevent conflicts of interest in retirement advice, according to a Wall Street Journal analysis.

Consider the experience of Robert Schubert, a Devon, Pa., salesperson. A comment posted in his name on the Labor Department website opposed the rule, saying: “I do not need, do not want and object to any federal interference in my retirement planning.”

In an interview, Mr. Schubert said the comment was a fraud. He didn’t post it and doesn’t agree with it. “I am disgusted that people can post comments using my name,” Mr. Schubert said.

Mr. Schubert is among 50 people who responded to a survey last week conducted by research firm Mercury Analytics for The Journal—40%, or 20 of whom said they didn’t post the comment listed under their name, address, phone number and email.

The Journal previously found fraudulent postings under names and email addresses at the Consumer Financial Protection Bureau, Federal Energy Regulatory Commission and Securities and Exchange Commission and the Federal Communications Commission. The Journal’s findings were cited by calls from Congress to delay the repeal of the FCC’s net-neutrality rule.

Corporate Powers Are Stealing Online Identities, Posting Fake Comments to Push for Consumer Law Repeals (Alternet), Rated: A

A pattern of cyber deception is appearing across the federal government in the nooks and crannies of the process where White House directives or Congress’ laws are turned into the rules Americans must abide by—or in the Trump era, are repealed.

Hundreds of thousands of comments, purportedly made by Americans, have come in over the electronic transom to at least five different federal agencies calling for an end to Obama-era consumer protections and other regulations that impede profits, a series of investigative reports by the Wall Street Journal found. Except, the people who supposedly sent these comments never did.

Wrapping up 2017 (PeerIQ), Rated: A

The US economy added 148k jobs in December and the unemployment rate held steady at 4.1%. The jobs number was below economists’ estimates of 190k, but average hourly earnings rose 2.5%, a strong increase, and a metric that market participants are watching as a precursor to higher inflation.

In regulatory news, Indiana is planning legislation that would cap the interest rate on personal loans at 36%, down from the current cap of 391% on payday loans. If passed, this legislation would affect the payday lending industry and some experts have expressed concerns that this may crimp credit availability to the neediest individuals. The US government is also considering updating the credit scoring methodology used in evaluating mortgage applications, to use competitors to FICO score like VantageScore, with the hope that the new scores would expand mortgage credit access to borrowers.

Apollo Global Management and Värde Partners have agreed to acquire a 40.5% stake in OneMain Financial, the non-prime lender spun off by Citigroup after the financial crisis, from Fortress Investment Group.

 

 

Edison Partners makes $ 15M investment in fintech (ROI-NJ), Rated: A

Growth equity investment firm Edison Partners has invested $15 million into MoneyLion, a digital personal finance platform based in New York City.

Student Loan Startup Frank Secures $ 10 Million During Series A Funding Round (Crowdfund Insider), Rated: A

Frank, a New York-based student loan startup, announced this week that it has secured $10 million through its Series A  Funding Round, which was led by Apollo Global Management, with participation from Reach Capital, and Aleph. This funding round brought its total funding amount to $15.5 million.

Digital financial advice startup SuperEd raises $ 5 million from key investors and staff (Smart Company), Rated: A

Digital superannuation advice startup SuperEd has completed a $5 million capital raise from both external investors and staff members to ramp up its expansion, with the 2012-founded company betting on digital advice being a big deal for fund managers going forward.

Credit Karma Teams with American Express to Offer Advance Tax Refund (Finovate), Rated: A

Earlybird Advance is a no-fee, no-interest loan from MetaBank that allows users who file through Credit Karma to claim from $500 to $1,000 of their tax refund as soon as 24 hours after the IRS accepts their tax return. This is a step up from the three-to-four week time period it generally takes for taxpayers to receive their funds.

Testimonial Tree Partners With J4 Mortgage Solutions to Offer Online Review Software to Mortgage Lenders and Title Companies (PR Newswire), Rated: B

Testimonial Tree announces its new alliance with J4 Mortgage Solutions, LLC, a mortgage technology consulting firm, to add online reviews and automated feedback to its suite of tech services.

The Future Of Financial Advice Requires AI With A Human Touch (FA-Magazine), Rated: A

“Digital leaders report an 8.6 percent increase in revenue, an 11.3 percent rise in productivity, and a 6.3 percent improvement in market share. Advanced firms now generate 32 percent of their revenue through digital channels, and expect that amount to rise to 48 percent by 2022,” the study pointed out.

Digital leaders acknowledge what will be the growing importance of AI in the digital transformation of industry from the front office to the back office over the next five years. According to the study, while more than half of the digital leaders are already using AI to increase productivity, some 40 percent are extending AI applications to investment management as well.

Community Reinvestment Fund, USA and U.S. Bank Partner to Expand Access to Credit for Small Businesses (BusinessWire), Rated: A

Community Reinvestment Fund, USA (CRF) – a mission-driven non-profit lender dedicated to improving communities and transforming lives – announced today that it has partnered with U.S. Bank to deliver a new solution for connecting small business borrowers with responsible lending options from community-based lenders across the country.

There are approximately 28.8 million small businesses in the U.S., accounting for more than 63 percent of the net new jobs created between 1993 and 2013. However, the Federal Reserve Bank’s 2016 Small Business Credit Surveyfound the most common challenge facing small businesses was “credit availability or securing funds for expansion.”

Predicting Comptroller Otting’s Impact on Fintech (Lend360), Rated: A

Second, Comptroller Otting may be helpful to Fintech companies in addressing important issues such as the Second Circuit’s decision in Madden v. Midland Funding and the so-called “true lender” issue.  For example, the OCC could adopt a rule or issue interpretative guidance: (1) providing that loans funded by a bank in its own name as creditor are fully subject to Section 85 and other provisions of the National Bank Act for their entire term; and (2) emphasizing that banks that make loans are expected to manage and supervise the lending process in accordance with OCC guidance and will be subject to regulatory consequences if and to the extent that loan programs are unsafe or unsound or fail to comply with applicable law.  (The rule should apply in the same way to federal savings banks and their governing statute, the Home Owners’ Loan Act.)  In other words, it is the origination of the loan by a supervised bank (and the attendant legal consequences if the loans are improperly originated), and not whether the bank retains the predominant economic interest in the loan, that should govern the regulatory treatment of the loan under federal law.

 

Consider Alternative Funds to Hedge Against a Market Downturn (NASDAQ), Rated: A

To ease your anxiety, you might consider adding a small dose of alternative investments–things that zig when the stock market zags–to your portfolio, even if it means giving up some potential returns.

Wells Fargo Investment Institute, the research and strategy arm of the giant bank, recommends a 23% allotment to various alternative investments for moderate-risk investors, for example, up from 16% two years ago. At Altfest Personal Wealth Management, in New York, 15% of client assets are invested in alternatives, up from 10% last year.

Market-neutral funds. If your goal is to invest in an asset that doesn’t move in sync with the S&P 500, consider a market-neutral fund, such as a merger-arbitrage fund.

Options-based funds allow you to maintain your stock exposure–or even put new money in the market–with some degree of safety.

Long-short stock funds. These funds bet on some stocks and against others with the goal of delivering respectable returns with low volatility. The funds have been 15% to 25% less volatile than an S&P 500-stock index fund over the past decade.

CLSA Top Three Books For 2018 (ValueWalk), Rated: A

What do an undocumented immigrant in the South Bronx, a high-net-worth entrepreneur, and a twenty-something graduate student have in common? All three are victims of our dysfunctional mainstream bank and credit system. Today nearly half of all Americans live from paycheck to paycheck, and income volatility has doubled over the past thirty years. Banks, with their high monthly fees and overdraft charges, are gouging their low- and middle-income customers, while serving only the wealthiest Americans.

“The Unbanking of America”

Why I Joined MetaProp As An EIR (LinkedIn), Rated: A

I recently left RealtyShares, the online marketplace for real estate investing, as CEO after founding the company in my living room back in 2013.

When Zach realized I was leaving the CEO role at RealtyShares, he reached out and asked if I wanted to get involved with MetaProp, the first real estate technology incubator based out of NYC.

This opportunity would give me a chance to pursue my passion in real estate technology through a different lens while mentoring startup founders and CEOs and helping them as they embark on the same journey I embarked on four years ago.

AlphaFlow Appoints Chris Woida As Co-Chief Investment Officer (AlphaFlow), Rated: A

AlphaFlow, the first automated alternative investment platform for real estate, announced today that Chris Woida has joined the company as co-Chief Investment Officer. Woida will serve as co-CIO alongside the firm’s CEO Ray Sturm, who will act as both CEO and co-CIO.

Woida brings over 10 years of experience in the financial services industry, previously helping build BlackRock’s smart beta and factor-based platforms and serving as the lead investment strategist for its flagship style-factor hedge fund during his seven years with the company. Most recently, he served as Managing Director, Head of Index Solutions at Axioma, a provider of enterprise market risk and portfolio analytics solutions. In this role, Woida helped the index business expand into derivatives, fixed income and alternative data sources, including AI and ESG.

MPOWER Financing Hires Lutz Braum, Fintech and Higher Ed Marketing Veteran (Cleveland19), Rated: B

MPOWER Financing, a public benefit corporation focused on removing financial barriers to higher education in the U.S., has appointed Lutz Braum as its vice president of marketing and business development.

Finova Financial’s New Fundraising Process Leverages Cryptocurrency to Serve Non-Accredited Investors (Finovate), Rated: B

Alternative lender Finova Financial introduced a new product this week that will offer non-accredited investors access to regulated public securities offerings.

The new offering is called the JOBS Crypto Offering (JCO) and will allow investors to use cryptocurrency to invest in equity ownership of previously privately-held companies.

Read more about Finova’s JCO offering here.

Is it possible to land a car loan with no down payment? (Bankrate), Rated: B

Buying a car is a significant investment, with the average new car costing $34,968 in 2017.

The average down payment for a used car is generally 10 percent of the purchase price; if you’re buying a new car, you can expect to pay slightly more, probably between 12 and 20 percent.

LENDINGTREE, LEADSCON ANNOUNCE $ 25,000 INNOVATION CHALLENGE IN LAS VEGAS (Business Insider), Rated: B

LendingTree®, the online loan marketplace, and Access Intelligence, a business information and marketing company, today announced a new initiative to showcase the top innovations in financial technology (fintech) lead generation at LeadsCon Las Vegas this March.

Startups and established businesses from around the world can apply today for a chance to receive exposure, bragging rights and $25,000 in cash.

United Kingdom

IFISA first-mover Crowd2Fund kicks off £30m fundraise, eyes £1bn valuation by 2022 (AltFi), Rated: AAA

Crowd2Fund has embarked on an ambitious series of fundraises that it hopes will see £30m raised within the next 24 months.

The peer-to-peer lender, one of the first to launch an Innovative Finance ISA, has already raised £1.5m from 113 of its own investors (all of whom are either sophisticated or high net worth individuals). More shares were made available after demand exceeded the initial target of £1m. These investors have bought shares in the company at a valuation of £33m. The capital is being raised through Crowd2Fund’s platform.

UK consumer lending not driven by subprime borrowers, regulators say (Daily Mail), Rated: A

Rapid growth in Britain’s consumer credit has been driven by borrowing by people with good credit scores, not subprime lending, according to research from regulators on Monday.

Unsecured consumer lending grew at near double-digit rates in 2016 and 2017, and concern that lenders had overestimated their borrowers’ creditworthiness led the Bank of England to tell them in September to hold 10 billion pounds ($13.54 billion) of extra capital.

However, research jointly published by Britain’s Financial Conduct Authority and a BoE blog showed that two-thirds of outstanding lending as of November 2016 was held by borrowers with credit scores in the top 30 percent.

Here’s everything you need to know about business finance (UKTech.news), Rated: A

Wherever you are on your life cycle, knowing the financing options available to you is a crucial part of growing and running your business.

Equity Funding

Equity finance can be used at various stages of your business life cycle and giving up equity can be a big decision.

Private equity

Private equity focuses on more medium to long term investment and will usually involve the development of the product and a new management structure to improve the performance of the business.

Crowdfunding

Crowdfunding aims to connect businesses with a large number of potential investors via a shared online platform.

Debt Funding

Debt finance is usually used as a means of long term investment or funding working capital.

Peer to Peer (P2P) lending

P2P lending brings individual borrowers and lenders together via an online platform by by-passing traditional banks with the aim of achieving better rates for all.

Asset finance

Assets can be purchased via leasing or hire purchase agreements which can assist the cash flow of the business. The asset is not fully paid for upfront but over a fixed period of time and the lease or hire purchase agreement is secured on the asset being financed.

Debt factoring

A debt factor will take on the sales ledger of the business and chase money owed by your customers. The factor will advance most of the value of the outstanding sales invoices to the business with the balance being paid once the customers have fully repaid their debt.

China

China Fintech: 2nd consumer credit bureau in sight now (EJ Insight), Rated: AAA

Last week, on January 4, the People’s Bank of China (PBoC) accepted a license application for consumer credit bureau led by the National Internet Finance Association of China. As of now, the Credit Reference Center of the central bank is the only consumer credit bureau in China.

Consumer loan securitization boom put on hold as China clamps down on leverage (Reuters), Rated: A

A boom in asset-backed securities issued by micro-lenders aiming to expand in China’s fast-growing online credit market looks set to slow this year amid growing regulatory scrutiny.

Rules announced on Dec. 1 limited the amount of lending backed by the products the companies can make. They were also required to consolidate them on their balance sheets.

Ant Financial is the largest issuer of consumer loan securities, accounting for 60 percent of all issues in 2017, according to Reuters calculations based on data from China Securitisation Analytics.

Its two Chongqing-based micro-loan companies had total net capital of 10.6 billion yuan, but issued 265.1 billion yuan in loans by the end of June, according to CIB Research, a unit of Industrial Bank Co (601166.SS). Outstanding loan securities issued by the two units have exceeded 250 billion yuan, it said.

Growth in China’s financial technology has only just begun, CEO says (CNBC), Rated: A

China’s burgeoning financial technology industry went through plenty of ups and downs last year, but growing pains experienced in the sector aren’t fazing one local player.

But increased competition in the space doesn’t suggest the sector is overcrowded, according to David Ye, the co-founder and CEO of Jianpu Technology.

“In China, we have close to 9,000 microfinance companies, we have close to 2,000 peer-to-peer companies. Only four of them got listed … It’s just a tiny drop of water in the big blue ocean,” he said.

This firm’s fintech play is connecting financial services in China from CNBC.

European Union

Klarna Payments Expands eCommerce Footprint with ACI Worldwide (BusinessWire), Rated: AAA

ACI Worldwide (NASDAQ: ACIW), a global provider of real-time electronic payment and banking solutions, today announced an extended partnership with Klarna, leveraging ACI’s UP eCommerce Payments solution. This will enable online businesses in 10 major markets, including the U.S. and U.K., to easily integrate Klarna’s payment products, and offer shoppers a fast and frictionless checkout process that can improve conversion rates immediately.

International

History of Ripple (BuyRipple.com), Rated: AAA

Source: BuyRipple.com

Cryptocurrency markets: Top 10 coins with greatest 24-hour change 8 Jan 2018 (finder), Rated: A

3. ETHLend (LEND) +32%

The peer to peer lending platform has seen a decent spike after it featured heavily across exchange Coinspot’s Facebook page as they look too soon be listed on the exchange. That exposure has also highlighted the achievements the Estonian company has made recently, including launching its fiat based loans at the end of 2017.

Crypto cards just suffered a major setback (Financial Times), Rated: A

Strict terms and conditions usually govern the circumstances in which prepay cards can be issued by unlicensed (non-bank) institutions due to their popularity with the unbanked or low-credit community as well as their propensity to be taken advantage of for money laundering reasons. These T&Cs tend to be jurisdiction dependent, and can in some cases restrict the types of funds that can be loaded onto cards by source (for example the source of funds might be restricted to welfare payments and/or employer compensation for services rendered).

Take as an example the following condition attached to a card brought to market by an outfit called TenX:

LOADING FUNDS TO YOUR ACCOUNT

Five.1 Your Card is a payout card tied to an account directly or indirectly established by an employer or other such corporate payor (each, a “Payor”) on behalf of a consumer to which electronic funds transfers of the consumer’s wages or other compensation are made on a recurring basis, whether the account is operated or managed by the employer, a third party payout processor, or a depository institution. Only funds from a Payor may be loaded to your Account In case of errors or questions about the funds loaded to your Account, contact your payout provider.

How will lenders meet identity verification challenges in 2018? (Bankless Times), Rated: A

Online lenders will start to move away from the social security number (SSN) as a personal identifier.

Big data and machine learning will take centre stage in the drive for better identity verification.

Larger online lenders will bring more of their fraud-fighting efforts in-house.

Online financial institutions will begin to adopt blockchain.

Cybersecurity startups raked in $ 7.6 billion in VC money in 2017 — twice as much as the year before (Business Insider), Rated: B

Globally, venture investors put $7.6 billion in cybersecurity companies last year, which was up from $3.8 billion in 2016, according to the research firm. The number of cybersecurity-related investments jumped to 548 in 2017 from 467 deals the year before.

Global spending on cybersecurity was estimated to reach $83.5 billion in 2017, and that number could hit $119.9 billion in 2021, according to an IDC report from October.

India

FinTech Trends That Will Shape The Industry In 2018 (BW Disrupt), Rated: A

Banks will increasingly start looking at startups in the FinTech, RegTech and InsurTech space as their extended innovation arms with a view to collaborate with them.

The BharatQR code, a unique interoperable payment acceptance solution developed by the NPCI (National Payments Corporation of India), Mastercard and Visa will enable point of sale (POS) transactions to be made more seamlessly. Along with banks, payment wallets like Paytm and MobiKwik will continue to make huge investments to leverage this new standard.

Startups in this space are likely to well as adoption by banks and other financial institutions rises in AI, ML, NLP (Natural Language Processing) and NLG (Natural Language Generation).

Asia

How one woman beat the odds to start-up success (Myanmar Times), Rated: AAA

In credit-scarce Myanmar, obstacles abound for budding entrepreneurs with bright ideas, big potential and dry pockets. With banks reluctant to lend to individuals without appropriate collateral and proven track records, many small businesses ultimately fail.

Ma Khin Yadana is among those with a success story behind her garment business, which she started from scratch around five years ago.

To get back on her feet, Ma Khin Yadana sought help from a small business group on Facebook, where she met with other garment shop owners across Myanmar who were willing to invest in start-up businesses like hers by extending credit via a peer-to-peer (P2P) lending system. In return, the funds would be paid back with interest within 15 days.

However, the constant pressure of having to repay loans has begun to take a toll on the young entrepreneur. “Most of the loans from investors are on six-month terms. So far, I have 70 investors to whom I must repay K100 million in total.

When the loans are due, I have to repay in full plus interest. The main problem is the 15pc interest rate, which is too high,” she said.

In mid-2017, with higher levels of debt coming due, Ma Khin Yadana negotiated with investors for lower interest rates of 10pc.

Canada

CIBC Innovation Banking unit launched to help grow startups (Finextra), Rated: A

Today, CIBC (TSX: CM) (NYSE: CM) introduced CIBC Innovation Banking, a full-service business that delivers strategic advice and funding to North American technology and innovation clients at each stage of their business cycle, from start up to IPO and beyond.

Authors:

George Popescu
Allen Taylor

Fintech Leaders and Pundits Predict 2018

fintech predictions 2018

2017 proved to be another action-filled year for the fintech industry. New sectors like blockchain, robo-advice, and insurtech gained prominence while stringent regulations meant the industry went into a self-enforced consolidation phase and M&A was the order of the day. Legacy banks showcased their financial muscle by gobbling up fintech startups to enhance their technology […]

fintech predictions 2018

2017 proved to be another action-filled year for the fintech industry. New sectors like blockchain, robo-advice, and insurtech gained prominence while stringent regulations meant the industry went into a self-enforced consolidation phase and M&A was the order of the day. Legacy banks showcased their financial muscle by gobbling up fintech startups to enhance their technology quotient resulting in a level playing field for both. But what does 2018 hold? Nobody knows for sure, but this is what the pundits and industry leaders are expecting.

2018 Predictions for Alternative Lending and Fintech

Renaud Laplanche (former Lending Club CEO and Upgrade co-founder) believes the barren run with regard to lending origination levels will soon be over and the end of 2018 will see it reach the lofty heights of previous years. Consumer loans are one segment where he believes demand will remain high and online lending will accelerate over the next 15 months. Along with this, he predicts the long-awaited secondary market for online loans will develop substantially.

He also believes a host of new tech will deliver a ‘Online Lending 2.0’ ecosystem.  This includes cloud computing, big data, and a blockchain protocol.

The Daily Fintech: 2017 wasn’t a great one for The Daily Fintech in terms of predictions. They got five out of 10 right, but the most noteworthy prediction they got wrong was concerning bitcoin. They predicted the bitcoin price will not go past its all-time peak of $1,242. Well, we can’t really blame them for this one as not many others got this one right.

As for 2018 predictions, most of their predictions revolve around cryptocurrency and blockchain. This is understandable considering cryptocoins are the most revolutionary thing right now. Apart from that, one prediction that caught our eye was the acquisition of Lending Club at a bargain price. Just like previous predictions, they have left #10 empty for “big surprise.”

PwC (fintech predictions by Henri Arslanian, the firm’s FinTech and RegTech lead for China and Hong Kong): A couple of noteworthy predictions are mentioned here. First, RegTech – a wave of consolidation ahead? He believes RegTech will help companies deal better with regulatory obligations. In the bigger scheme of things, it will help reduce the cost and risk associated with the sector. He also feels that lack of dominant players in this segment will lead to further consolidation.

Another prediction involves banks embracing fintech – the end of innovation teams? With senior management at banks gaining deep insight about fintech, it is widely expected that banks will ditch innovations teams and deal directly with businesses.

Inc42 believes consumer lending will be a major force in 2018. Predictions were made keeping in mind the Indian market. They believe alternative lending will experience a boom as more startups will crop up to help the underserved and unserved.

They also predict the rise of insurtech. They believe there will be a greater degree of product customization on the back of solid consumer data and analytics. Apart from this, they predict a surge in investments in emerging technologies as government and regulatory bodies also push for fintech.

The Memo asked a panel of 12 financial technology experts how they expect the industry to shape up in 2018. A few of those predictions are listed below, compiled by senior reporter Oliver Smith.

  • Daniel Kjellen (CEO and co-founder of Tink, a finance app that continually analyses customer spending) believes new regulations at the beginning of next year will open up the retail banking market, which will benefit banks as well as customers. He also believes first-mover advantage will be critical. Account aggregation and payment initiation are two innovations banks will target first after striking partnerships with fintech.

“In 2018, we will say goodbye to the service formerly known as banking.”

  • Alastair Lukies CBE (Prime Minister’s Business Ambassador for Fintech and a Partner at Motive Partners, a financial technology investment fund) thinks regulatory compliance will be the most important thing next year, and that is why he believes large financial institutions will spend big on regulatory compliance as well as on technology that will help them tackle complex regulations. This will in turn help to drive innovation in the RegTech field.

“I think RegTech, using technology to simplify the process of being compliant with regulation, will become very important over the next year.”

  • Anne Boden (CEO and founder of Starling Bank, the upstart UK challenger bank expanding into the rest of Europe beginning with Ireland) believes 2018 will be a big year for artificial intelligence (AI). Right now, banks use AI to improve their own processes and to drive efficiencies. She reckons that 2018 will see them use AI to help customers make better money-related decisions.

“The interaction method, chatbots, and voice will become secondary – building a culture and technology that is centered around helping customers will become the priority.”

  • Lachlan Heussler (managing director of Spotcap Australia and NZ) believes the need for innovation and the advent of PSD2/Open Banking will be the reason the industry witnesses an increase in collaboration across the board. He also believes the demand for top talent will intensify, with bank, fintechs, and large companies all trying to attract the right talent.

A report by McKinsey estimates the total annual external investment in AI was $8B to $12B in 2016, with machine learning attracting nearly 60% of that investment. Therefore, he trusts companies will be motivated to adopt machine learning aggressively for tracking customer behavior, for market analysis, or calculating risk.

  • Charles Clinton (CEO and co-founder of EquityMultiple, a platform built for modern investors that connects accredited individuals with pre-vetted, high-yield commercial real estate investments from top companies) gave his predictions about the real estate crowdfunding industry. He believes “many companies are using pre-JOBS Act regulations and the push to open access to non-accredited investors has been driven almost entirely by Reg A+.” He also believes the industry is entering a combination of growth and maturation phase. There will be a lot of consolidation, and only tried and tested business models will survive.

Conclusion

We will have to wait a year to see how accurate these predictions are. We have tried to provide the best possible outlook on different verticals of fintech industry through these forecasts. One thing for sure is that 2018 will be an interesting year for the fintech and alternative lending.

Author:

Written by Heena Dhir.

Fintech Leaders and Pundits Predict 2018

fintech predictions 2018

2017 proved to be another action-filled year for the fintech industry. New sectors like blockchain, robo-advice, and insurtech gained prominence while stringent regulations meant the industry went into a self-enforced consolidation phase and M&A was the order of the day. Legacy banks showcased their financial muscle by gobbling up fintech startups to enhance their technology […]

fintech predictions 2018

2017 proved to be another action-filled year for the fintech industry. New sectors like blockchain, robo-advice, and insurtech gained prominence while stringent regulations meant the industry went into a self-enforced consolidation phase and M&A was the order of the day. Legacy banks showcased their financial muscle by gobbling up fintech startups to enhance their technology quotient resulting in a level playing field for both. But what does 2018 hold? Nobody knows for sure, but this is what the pundits and industry leaders are expecting.

2018 Predictions for Alternative Lending and Fintech

Renaud Laplanche (former Lending Club CEO and Upgrade co-founder) believes the barren run with regard to lending origination levels will soon be over and the end of 2018 will see it reach the lofty heights of previous years. Consumer loans are one segment where he believes demand will remain high and online lending will accelerate over the next 15 months. Along with this, he predicts the long-awaited secondary market for online loans will develop substantially.

He also believes a host of new tech will deliver a ‘Online Lending 2.0’ ecosystem.  This includes cloud computing, big data, and a blockchain protocol.

The Daily Fintech: 2017 wasn’t a great one for The Daily Fintech in terms of predictions. They got five out of 10 right, but the most noteworthy prediction they got wrong was concerning bitcoin. They predicted the bitcoin price will not go past its all-time peak of $1,242. Well, we can’t really blame them for this one as not many others got this one right.

As for 2018 predictions, most of their predictions revolve around cryptocurrency and blockchain. This is understandable considering cryptocoins are the most revolutionary thing right now. Apart from that, one prediction that caught our eye was the acquisition of Lending Club at a bargain price. Just like previous predictions, they have left #10 empty for “big surprise.”

PwC (fintech predictions by Henri Arslanian, the firm’s FinTech and RegTech lead for China and Hong Kong): A couple of noteworthy predictions are mentioned here. First, RegTech – a wave of consolidation ahead? He believes RegTech will help companies deal better with regulatory obligations. In the bigger scheme of things, it will help reduce the cost and risk associated with the sector. He also feels that lack of dominant players in this segment will lead to further consolidation.

Another prediction involves banks embracing fintech – the end of innovation teams? With senior management at banks gaining deep insight about fintech, it is widely expected that banks will ditch innovations teams and deal directly with businesses.

Inc42 believes consumer lending will be a major force in 2018. Predictions were made keeping in mind the Indian market. They believe alternative lending will experience a boom as more startups will crop up to help the underserved and unserved.

They also predict the rise of insurtech. They believe there will be a greater degree of product customization on the back of solid consumer data and analytics. Apart from this, they predict a surge in investments in emerging technologies as government and regulatory bodies also push for fintech.

The Memo asked a panel of 12 financial technology experts how they expect the industry to shape up in 2018. A few of those predictions are listed below, compiled by senior reporter Oliver Smith.

  • Daniel Kjellen (CEO and co-founder of Tink, a finance app that continually analyses customer spending) believes new regulations at the beginning of next year will open up the retail banking market, which will benefit banks as well as customers. He also believes first-mover advantage will be critical. Account aggregation and payment initiation are two innovations banks will target first after striking partnerships with fintech.

“In 2018, we will say goodbye to the service formerly known as banking.”

  • Alastair Lukies CBE (Prime Minister’s Business Ambassador for Fintech and a Partner at Motive Partners, a financial technology investment fund) thinks regulatory compliance will be the most important thing next year, and that is why he believes large financial institutions will spend big on regulatory compliance as well as on technology that will help them tackle complex regulations. This will in turn help to drive innovation in the RegTech field.

“I think RegTech, using technology to simplify the process of being compliant with regulation, will become very important over the next year.”

  • Anne Boden (CEO and founder of Starling Bank, the upstart UK challenger bank expanding into the rest of Europe beginning with Ireland) believes 2018 will be a big year for artificial intelligence (AI). Right now, banks use AI to improve their own processes and to drive efficiencies. She reckons that 2018 will see them use AI to help customers make better money-related decisions.

“The interaction method, chatbots, and voice will become secondary – building a culture and technology that is centered around helping customers will become the priority.”

  • Lachlan Heussler (managing director of Spotcap Australia and NZ) believes the need for innovation and the advent of PSD2/Open Banking will be the reason the industry witnesses an increase in collaboration across the board. He also believes the demand for top talent will intensify, with bank, fintechs, and large companies all trying to attract the right talent.

A report by McKinsey estimates the total annual external investment in AI was $8B to $12B in 2016, with machine learning attracting nearly 60% of that investment. Therefore, he trusts companies will be motivated to adopt machine learning aggressively for tracking customer behavior, for market analysis, or calculating risk.

  • Charles Clinton (CEO and co-founder of EquityMultiple, a platform built for modern investors that connects accredited individuals with pre-vetted, high-yield commercial real estate investments from top companies) gave his predictions about the real estate crowdfunding industry. He believes “many companies are using pre-JOBS Act regulations and the push to open access to non-accredited investors has been driven almost entirely by Reg A+.” He also believes the industry is entering a combination of growth and maturation phase. There will be a lot of consolidation, and only tried and tested business models will survive.

Conclusion

We will have to wait a year to see how accurate these predictions are. We have tried to provide the best possible outlook on different verticals of fintech industry through these forecasts. One thing for sure is that 2018 will be an interesting year for the fintech and alternative lending.

Author:

Written by Heena Dhir.

Move Over ICO, There’s Another Fundraising Vehicle In Town

Finova Financial and their JCO

Governments all around the world are increasingly concerned with the potential abuses of initial coin offerings (ICOs), a new method of fundraising that provide startups with operating capital out of the gate without giving away company equity. For good reason. It seems that virtually every startup these days is looking to fund their ventures with […]

Finova Financial and their JCO

Governments all around the world are increasingly concerned with the potential abuses of initial coin offerings (ICOs), a new method of fundraising that provide startups with operating capital out of the gate without giving away company equity. For good reason. It seems that virtually every startup these days is looking to fund their ventures with an ICO, and many of them think doing so is a good way to skirt securities regulations. That’s why Gregory Keough, CEO of Finova Financial decided to introduce a new method to raise capital through a hybrid vehicle he calls JOBS Crypto Offering, or JCO.

What is a JOBS Crypto Offering?

Keough likens the JCO to a hybrid between the ICO and an IPO (initial public offering).

“A lot of people are selling securities and trying to make them sound like they’re not securities,” Keough said.” As of September, Forbes reports there had been $2.3 billion raised by ICOs this year. And interest in them seems to be growing.

Unlike the traditional IPO, where investors trade currency for equity in a company, with an ICO, investors trade cryptocurrency for tokens. These tokens are often used as virtual bartering chips for specific actions related to the company issuing them. For instance, at Storj, a decentralized cloud storage startup, your tokens can be used to purchase cloud storage. So, investors getting in on the fundraising push don’t end up with stake in the company but are actually pre-paying for some part of the product. And ICOs are open only to accredited investors, thanks to the SEC that has ruled that ICO tokens are in fact a security.

This creates a conundrum. Companies issuing ICOs consider their offerings a utility token, but the SEC treats them like a security. JCOs don’t come with that baggage.

“The JCO offers more regulatory clarity and security,” Keough said. That’s because Finova has gone out of its way to comply with all SEC regulations and places the JCO in the category of Reg A offerings so that accredited an non-accredited investors can get in on the action, further differentiating it from the ICO.

The Details on Finova’s JCO

“We’re able to tap into VC and traditional money,” Keough said. In other words, he is offering investors equity in his company if they participate in the offering.

But the transaction isn’t conducted like a traditional security. It still involves the blockchain, and investors can still use cryptocurrency to initiate the transaction. Finova will also accept traditional currency.

To develop the concept, Finova commissioned law firm Cooley to assist with the legal framework. Like an IPO, the offering is open initially to a select few investors in a private round called SAFT (Simple Agreement for Future Tokens). Once that round is completed, the JCO is opened up to other investors on a public exchange. Finova will have to register an official public offering through the SEC, and then the tokens are created. If that isn’t done, investor funds are returned to them. Keogh said Finova hasn’t decided which exchange they are going to use yet, but the firm is looking at three separate exchanges.

“We take the equity stack and move it to the blockchain,” Keough said. “The token represents equity in Finova. We see it as an alternative path to the IPO for startups.”

Once tokens mature and investors start receiving dividends, they’ll be dropped into digital wallets. Tokens will then be available for selling back to the company or trading on a secondary market, like traditional securities. Keough believes other companies will want to issue their own JCOs, and it could potentially make the ICO as irrelevant as 8-track tapes. The company plans to sell $600 million in tokens through multiple tranches. Tokens sold earlier will appreciate in value until all are sold. The JCO will officially open in December and make its way to non-accredited investors by late January.

The Past, Present and Future of Equity Fundraising

While the private sale of tokens is limited to $50 million by regulation, Keough said Finova is seeing a lot of interest in its JCO. “There is a tremendous amount of interest in the U.S. and globally for something that has regulatory clarity,” he said. The JCO is intended for more mature companies because, as bigger money comes in, the more regulatory clarity is necessary for investors to feel comfortable getting in. Finova will accept Ethereum, Bitcoin, other cryptcurrencies, and fiat currency.

Finova is so sure of the JCO that they want to help other companies issue their own. He see the JCO as the IPO of the future.

To date, Finova has raised $150 million in equity and debt. Started two years ago, they’ve raised $100 million in revenue. While not yet profitable, they are getting close. Their niche is to provide technology to the unbanked, about 30% of the U.S. population, so they can have access to traditional financial services like lending and bank cards. A balance sheet lender, most of their customers have poor credit scores and no bank account.

“We created a digital service where they can get case the same day based on their most important assets,” Keough said. As a secured lender, they offer lines of credit for automobiles. The customer uses equity in their vehicle to tap into the line of credit when needed. Finova puts a lien on the vehicle until the customer is out of debt.

With a kickstart in Florida, they now operate in seven states with an eye on expansion as they grow their capital stack.

Author:

Allen Taylor

Wednesday June 28 2017, Daily News Digest

china big banks

News Comments Yesterday, Lending-Times incorrectly stated that Zopa would charge all borrowers the same rates with its planned bank. In actuality, the plan is to price the book the same between new and existing customers, and not make a difference between new and existing customers as other banks do. Today’s main news: MarketInvoice, Funding Circle, […]

china big banks
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Elevate’s RISE Credit Enters a Sixteenth State, Offering Lines of Credit in Kansas (BusinessWire), Rated: AAA

Elevate Credit, Inc., a tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, announced today that its RISE product, traditionally offering installment loans, will now offer lines of credit. Kansas will be the sixteenth state where RISE’s products are available and the first state in which RISE’s line of credit is available to non-prime consumers.

RISE is a state-licensed online lender offering unsecured installment loans and lines of credit. RISE is designed to meet the needs of the millions of non-prime Americans with less than prime-credit, who do not have access to traditional sources of credit. RISE is a path toward a brighter financial future with features such as fast approval, flexible loan terms, lower rates than other non-prime lenders, rates that can go down over time, credit bureau reporting, free credit score monitoring and financial literacy courses.

Take These 9 Steps Early To Make The Most Of Your Company’s Regulation A+ IPO (Forbes), Rated: AAA

When online peer to peer lending was new, consumers were the first investors to step in while accredited and institutional investors stayed on the sidelines until later – they now dominate the peer to peer lending business, which has grown to be a huge multi-billion dollar market.

1. If you have an enthusiastic following in your industry:

If you have a large enough network, this group might fund your entire capital raise. Take steps to build a working contact list of them. And make sure to establish a regular habit of emailing them so that when you later send out an email suggesting that they consider investing in your Reg A+ offering, your email will be opened and read.

2. Build a large and enthusiastic customer base.

VidAngel emailed their most active 30k customers andraised $10 mill in 5 days live to investors, setting the record for the fastest rate of onlineinvestor capital raise in Reg A+ to date.

3. Establish a direct sales relationship with your customers.

When your customers find it normal that you send them an email message, they are far more likely to respond favorably when you send them an email offering them the opportunity to become an investor and part owner of your company.

4. Add a consumer appealing product or service;

5. Build a large social media fan base;

A fan base of 100k people is a good start.

6. Combine product and investment marketing;

This combination can save marketing expense and also emphasizes the brand building and product sales synergy that can be levered in a Reg A+ offering.

7. Leverage your existing investors;

As an example, a sizable portion of the recent MYONYSE IPO and the ADOMNASDAQ IPO investments were from existing investors and their friends.

8. Prepare consumer investment rewards:

Line up your reward packages ahead of time to ensure that you have long lead time items ready and on hand in quantity when your Reg A+ goes live.

9. Assemble the proof points that you will need;

Gather and build the market size and total available market evidence you will need to make credible claims that your market is large enough to justify the attention of investors.

Larry Raffone is racing to ‘lock up’ the 401(k) market by combining robo with a semi-national RIA (RIABiz), Rated: A

Financial Engines Inc. CEO Larry Raffone is seeking to give his company a second date with destiny by combining the biggest 401(k) robo-advisor and one of the larger national RIAs — and coming out of it with a true national RIA that can take on the accounts of Fortune 500 companies at the retail as well as the pension-plan level.

Raffone plans to open new Financial Engines offices in more populous areas such as Southern California, where Financial Engines is already on-site at corporations where participants use its managed account 401(k) service.

The pricing model is still TBD, but William Blair equity analyst Robert Napoli said in an April 6 report that he expects Personal Advisor to come in at 80 basis points. He notes that compares to 35 basis points for FE’s managed account 401(k) program.

LendingOne Closes Series A Funding, Investors Include Ron Suber, Richard Vague, Sidney Brown, Michael Heller (Latest Share News), Rated: A

LendingOne, one of the nation’s fastest growing online lenders for real estate investors, announced today it closed a Series A financing round.

Investors include Ron Suber, a prominent fintech investor and President of Prosper Marketplace, Richard Vague, co-founder and former CEO of two credit card companies, First USA and Juniper Financial, Sidney Brown, CEO of NFI Industries and former Chairman of Sun National Bank, Michael Heller, CEO of Cozen O’Conner, a national full-service law firm, along with LendingOne founder and CEO, Bill Green.

College Ave Closes First Securitization, SoFi Finalizes Its Fourth (Lendedu), Rated: A

College Avenue Student Loans, an online student loan refinancing and origination company, has closed its first securitization of private student loans, according to Global Capital.

Getting into the asset-backed securities (ABS) business for the first time, College Ave’s securitization is a $160.89 million offering backed by private student loans. Barclays is the only underwriter on the company’s first ABS transaction.

Credit research and ratings company DBRS has assigned provisional ratings for the various classes of notes issued by College Ave. The Class A-1 notes worth $95,320,000 have been given an A rating, while the Class A-2 notes worth $43,470,000 have also been an A rating. The Class B notes worth $10,760,000 have been given a BBB rating, and, finally, the Class C notes worth $11,340,000 have been given a BB rating, according to DBRS.

Disruption Brings Great Opportunities — and Risks — to the Middle Market (PR Newswire), Rated: A

Most executives of middle-market companies not only expect their business to experience disruption in the near future, but welcome it, according to Disruption in the Middle Market, a report released today by Capital One Commercial Bank. However, this optimistic view does not always translate into action; only a small portion of middle market companies have taken a full range of defensive measures to protect against disruption’s potentially destructive consequences.

Capital One surveyed more than 300 senior executives from companies with annual revenues ranging from $100 million to $3 billion to determine their views on disruption—a significant interruption to an existing business arising from innovative technology, a new business model, or political, economic and environmental forces.

The study revealed that attitudes toward disruption correlated to size.  Smaller middle-market companies are more likely than their larger counterparts to be unprepared for disruption. The report also highlighted a series of steps, such as strengthening financial relationships, that smaller companies can take to catch up.

Disruption in the Middle Market provides a detailed picture of the views of middle-market executives about disruption and the steps they are taking to address it. Eighty-eight percent of respondents reported that their companies have already experienced disruption or expect to experience it during the next three years.  However, only one-sixth of those surveyed believe they are prepared to deal with a disruptive event. Despite this lack of preparation, four-fifths of middle-market executives view disruption as an opportunity, not a threat.  Many of these executives believe that disruption threatens their industry—but not their own company.  Forty-three percent said that their industry is vulnerable to disruption, while just 18 percent reported that their own company is vulnerable.

Size proved the key determinant in a company’s preparedness and attitude toward disruption. Companies with revenue between $2 billion and $3 billion are much more likely to see a disruptive event as an opportunity than companies in the $100 million to $499 million range. In addition, larger companies are more likely to have insulated themselves from the effects of a disruptive event and to be pursuing a disruptive strategy of their own that could lead to a competitive advantage.

Financial Preparation Is Critical

The study revealed that a strong relationship with a stable financial institution could play a critical role in helping a middle-market company respond to disruptive forces. Sixty-eight percent of those with an ongoing banking relationship expect to need additional funding in the face of a disruption. These companies will find it easier to arrange than the 32 percent without a strong banking relationship.  Here again, smaller companies are at a disadvantage.  Many lack the holistic banking relationship needed to confront disruption, and instead are willing to consider alternative sources of capital like peer-to-peer lending and even crowdfunding.

Attitude toward disruption varies considerably by industry
Middle market executives in some industries have adopted a much more proactive approach to disruption than those in others.

  • Financial services and insurance companies are archetypical disruptors. Forty-seven percent are quite or extremely prepared for disruption, and 83 percent are pursuing a disruptive strategy. The overall middle-market averages for the survey are 16 percent and 60 percent, respectively.
  • Energy, resources, and chemicals companies tend to be classic delayers. Eighty-three percent are slightly or not at all prepared for a disruptive event (compared to 53 percent for the full survey), and only 37 percent are pursuing a disruptive strategy (compared to 60 percent overall).

Plaid puts out a ‘request for startups’ in nine underserved fintech sectors (TechCrunch), Rated: A

Plaid wants to make it easier for financial services companies to serve consumers and businesses, but it also sees significant holes in the fintech ecosystem. As a result, the company has issued a Y Combinator-like “request for startups” to tackle particular issues where it believes significant innovation is lacking.

Like Yodlee before it, Plaid enables startups and other tech companies to more easily connect with banks, credit card companies and other financial institutions, both to authenticate consumer accounts and access their financial data.

  1. Better bills.
  2. Consumer-centric loan servicing.
  3. Hardware + software for branches.
  4. Tax preparation.
  5. Mobile bank account opening.
  6. Abstractions from the core.
  7. Brokerage-as-a-Service.
  8. “Exotic” insurance.
  9. Compliance-as-a-Service.

Easiest Path to Riches on the Web? An Initial Coin Offering (The New York Times), Rated: A

A new crop of technology entrepreneurs is forgoing the usual routes to raising money. The entrepreneurs are not pitching venture capitalists, selling stock in an initial public offering or using crowdfunding sites like Kickstarter.

Instead, before they even have a working product, they are creating their own digital currencies and selling so-called coins on the web, sometimes raising tens of millions of dollars in a matter of minutes.

Since the beginning of the year, 65 projects have raised $522 million in these offerings, according to Smith & Crown, a research firm focused on the new industry.

Last month, a small team of computer engineers in Lithuania raised $14 million in 45 minutes by selling a coin, known as Mysterium, that is intended to give access to an encrypted online data service that is still being built.

The next day, a group of coders in the Bay Area pulled in $35 million in under 30 seconds of online fund-raising. The coders were offering Basic Attention Tokens, which will one day work on a new kind of ad-free web browser.

Then this week, a team in Switzerland raised around $100 million for a coin that will be used on an online chat program that has not yet been released, known as Status.

Last year, the first blockbuster coin offering, the Decentralized Autonomous Organization, quickly raised more than $150 million. But the project blew up after a hacker manipulated the code and stole more than $50 million worth of digital currency.

Private SLABS upgrades anticipated (Structured Credit Investor), Rated: A

Moody’s has placed on review for possible upgrade the ratings of 41 private student loan ABS bonds – totalling approximately US$2.56bn worth of securities across 19 securitisations – issued by three marketplace lending platforms. At the same time, Fitch has released an exposure draft of criteria for rating US private student loan ABS that could result in multiple-category upgrades for …

Insurance Tech Rising: 135+ Insurance Startups Across P2P, Life, Commercial & More in One Chart (CB Insights), Rated: A

The map focuses on 11 categories, as follows.

  • Life/annuity: Private startups providing distribution of life insurance products including term life and annuities including Abaris and PolicyGenius
  • Auto insurance (split into distribution, usage-based insurance/telematics, and claims): Startups ranging from aggregators including CoverHound and Goji to white label auto claims apps (Snapsheet) to per-mile managing general agents like Metromile.
  • P2P insurance: Private peer-to-peer insurance and mutual-based startups include Lemonade, Guevara, Friendsurance, and others.
  • Small business insurance: Private tech companies serving as commercial insurance brokers and managing general agents to SMBs  include Insureon, Embroker, and Next Insurance.
  • Insurance industry software/analytics/IaaS: Insurance-specific software across the value chain providers range from BI and data-warehousing startup Quantemplate to insurance fraud detection firm Shift Technology to re-insurance SaaS analytics startup Analyze Re to claims inspection startup Spex.
  • Mobile insurance management: Startups focusing on allowing consumers to manage and purchase insurance policies via their mobile device including Knip and GetSafe.
  • Product insurance: Companies insuring or tracking products — i.e. smartphones, laptops — for insurance applications.
  • Renters/homeowners: Startups providing distribution of renter’s insurance and homeowner’s insurance as well as lease default insurance programs.
  • Sharing economy: Startups working on new insurance products in coverage areas including short-term rental marketplaces and for sharing economy 1099 workers.
  • Health insurance: Across new carriers like Oscar as well as healthcare insurance startups targeted at individuals (Stride Health) and employers (Zenefits).
  • Pet insurance: Startups include Embrace Pet Insurance and Figo Pet Insurance.
Source: CB Insights

 

The Fiduciary Rule And Investment Advisers: Why It Matters (AlphaFlow), Rated: A

One of the most hotly contested aspects of the Fiduciary Rule is around the standard of suitability as a determinant for an investment choice made by a registered representative. Today, a registered representative must only ensure that an investment is ‘suitable’ for a client. This suitability is determined by factors including investment risk tolerance, time frame, and goals. However, there is no determination made as to whether the investment is in the client’s best interests.

To illustrate, let’s say the registered representative (RR) has a choice of offering two different mutual funds to a client. Both invest in similar stocks and have relatively similar returns (before fees), but one charges higher fees and also pays the RR’s firm based on the total dollar investments made into that particular fund.  The RR only offers the client the one for which they get compensated, even though the other mutual fund option may be a better option for the client (because it charges lower fees).  The reason the RR can do this is that both mutual funds are considered “suitable”: meaning as long as the recommendation meets the client’s risk profile and investment goals, then they can offer that product to their client.

In contrast, an investment adviser representative (IAR) must act as a fiduciary.  In the same situation, if the IAR wanted to offer the same mutual fund that the RR did, they would need to disclose to the client that they are getting compensated for sales of that fund and that the lower cost option makes more sense for the client.  So, instead of simply offering a suitable choice for the client, the IAR must: 1) disclose conflicts of interest and, 2) act in the best interest of the client rather than in their own best interest.

What The Fiduciary Rule Would Change

Staying with the scenario above, the Fiduciary Rule would require an RR to act like the IAR in when selling any products related to, or be advising on anything related to retirement.

The rule would also apply to anyone dually-registered (meaning they are registered both as an RR and an IAR).  Currently, the dually-registered representative can decide what ‘hat’ they wear (RR or IAR) when suggesting investments for retirement.

A new way to estimate your home equity (Chicago Tribune), Rated: B

LendingTree, the popular mortgage site, which debuted its own valuation model earlier this month, can tell you why: Because none of the other value estimators calculate your home equity or suggest how and when you might want to tap into it.

If you’re not quite ready to move ahead but instead prefer to track your equity, credit and mortgage situation on a regular basis, you can sign up for a more comprehensive “My LendingTree” service, for which there is no charge. It provides you with monthly updates plus periodic alerts on your home equity movement. You get an alert when there’s “an actionable opportunity” for you to tap into your equity on favorable terms, based on “real-time market data,” changes in your credit files and equity levels, according to the website. There’s no requirement that you take any action.

OppLoans Welcomes Daniel Fell as VP of Business Development and Partnerships (Digital Journal), Rated: B

OppLoans, the nation’s leading socially responsible online lender serving non-prime consumers, has announced the appointment of Daniel Fell to the role of Vice President of Business Development. Fell will oversee all strategic business development and partnership objectives at the high-growth, profitable firm.

6 things that will help cut the cost of your business debt (TD Daily), Rated: B

1. Choosing the right product

Debt works really well when you choose the right type of debt for your business. You can reduce what you pay for business debt by making a well-informed choice. For example, peer-to-peer lending may be an option if you’re unable to get a loan or finance from a traditional bank and can be cheaper too.

2. Nurturing your cashflow/credit score

If your business doesn’t have great creditworthiness, or is too new to have any credit history, then a lender will look at the credit score of someone able to guarantee the business’ debts.

3. Shopping around for the best deal

If you need finance consider all the options – the high street bank, the online lender, the peer-to-peer lender and the government-backed lender.

4. Staying on top of the repayments

5. Consolidating debts

6. Pay your debts off more quickly

United Kingdom

MarketInvoice, Funding Circle, Zopa, LendInvest make Fintech 250 (P2P Finance News), Rated: AAA

MARKETINVOICE, Funding Circle, Zopa and LendInvest have made CB Insights’ Fintech 250 list for 2017, which awards the companies worldwide that are leading the transformation in financial services.

The list of 250 emerging private companies from 23 countries, which was chosen out of a longlist of more than 2,000 entrants, was revealed by the research firm’s chief executive and co-founder Anand Sanwal during The Future of Fintech conference in New York on Tuesday.

The Fintech 250 companies (in alphabetical order):

51Xinyongka

Axoni

Canopy Tax

55 Capital

Behalf

Capital Float

Acorns

Beijing LaKala Billing Services

Captable.io

Activehours

Better Mortgage

Chain

Addepar

Betterment

Circle Internet Financial

Adyen 

Billtrust

CircleUp

Affirm

BIMA

Clarity Money

Airwallex

bitFlyer

ClearTax

Algomi

BitPesa

Cloud9 Technologies

AlphaSense

Blend

Clover Health

AngelList

Blockstack Labs

Coinbase

Ant Financial Services Group

Blockstream

Coins.ph

Artivest Holdings

BlueVine

ComplyAdvantage

Assembly Payments

bonify

Credit Benchmark

Atom Bank

Branch International

Credit Karma

AutoGravity

Brave Software

Creditas

Auxmoney

Bright Health

CreditEase Insurance Agency

Avalara

C2FO

CreditMantri

AvidXchange

Cadre

Cross River Bank

Crowdcube

IEX Group

Nongfenqi

CurrencyCloud

Indiegogo

Nubank

CurrencyFair

Indifi Technologies

Numerai

Cyence

iyzico

Nutmeg

Dadao Financial

iZettle

One97 Communications  

Deposit Solutions

JD Finance

Onfido

DianRong

Juvo

OpenFin

Digit

Juzhen Financials

OpenGamma

Digital Asset Holdings

Kabbage

Oportun

Digital Reasoning Systems

Kakao Pay

Orchard Platform

Droit Fintech

Kasisto

Oscar Health Insurance Co.

Earnest

Kensho Technologies

Paga

Easynvest

Kickstarter

Parasut

Ebury

Klarna

Paymax

Ellevest

Kreditech

PayNearMe

Embroker

Kyriba

Payoneer

eShares

Ladder

Paystack

Even Respsonsible Finance

Lemonade

Paytm Payment Bank

EverCompliant

LendingHome

PeerIQ

Ezetap Mobile Solutions

Lendingkart

PeerStreet

Factom

LendInvest

Perfios

Fenergo

LendUp

Personal Capital

Fenqile

LevelUp

Ping++

figo

Lu.com

Plaid Technologies

FinanceIt

M-DAQ

Point Digital Finance

FinancialForce.com

Magento Commerce

Polychain Capital

Finrise

MarketInvoice

Ppdai

Flywire

Marqeta

Propel

Folio

Merlon Intelligence

Property Partner

freee

MetroMile

Prospa

Fundbox

MobiKwik

Qapital Insight

Funding Circle

MoMo

QFPay

Funding Societies

MoneyFarm

Qingsongchou

Futu5

Moneytree

Quantopian

GoCardless

Monzo

Qudian

GoFundMe

Mynt

Quovo

GreenSky

N26

Raisin

GuiaBolso

Namely

RealtyShares

Guideline

Nav

Red Dot Payment

Gusto

Neighborly

Reorg Research

Habito

NerdWallet

Revolut

hibob

New York Shipping Exchange  

Ripple Labs

IceKredit

Next Insurance

Riskalyze

Robinhood

THEO

Weidai

Rong360

Tiger Brokers

WeLab

Roofstock

Tink

WorldCover

Roostify

Token

WorldRemit

Seedrs

Tradeshift

Xapo

Shenzhen Kingdee

Trading Ticket

Xiaoyusan Insurance

Suishou Technology

TransferWise 

Xignite

Signifyd

TravelBank

Xishan Information Technology

Silverfin

Trov

YapStone

simplesurance

TrueAccord

Yoco

SirionLabs

Trulioo

YongQianBao

Smava

Trumid

Yuanbaopu

SocietyOne

Tyro Payments

Zeitgold

Socure

Upgrade

ZestFinance

SoFi

VATBox

ZestMoney

solarisBank

Veem

Zhong An Insurance

Stash Invest

Verato

Zoona

Street Contxt

Viva Republica

Zooz

Stripe

Wave Accounting

Zopa

Symphony Communication

Wealthfront

Zuora

Services Holdings

WealthNavi

Tala

Wealthsimple

Tally Technologies

WeCash

Fifty years of the ATM: How long can cash survive in a digital world? (International Business Times), Rated: AAA

Fifty years of using the hole in the wall

  • As of 2015 there were 70,270 cash points in the UK, more than 52,000 of which were free to use.
  • 48 million of us use cash machines and 89% use them at least once a month.
  • In 2015 the amount of average withdrawal was £69.
  • On average each cash machine dispensed £7,576 per day in 2015 – and that figure is on an upward trend.
  • The daily record for cash withdrawals was £730m, which was set on 23 December 2016.
  • 46% of cash machines are in supermarkets, shops and shopping centres, 27% are in banks and 4% in Post Offices.
  • HSBC has the UK’s busiest cash machine by Cambridge Circus in central London.
  • The original cash machine was designed by Scottish inventor John Adrian Shepherd-Barron who came up with the idea of a machine dispensing cash, rather than chocolate bars, while in his bath.
  • ATMs in temples in India let you make religious donations.
  • Vatican City has the only ATM that gives instructions in Latin.

TransferWise CEO talks about Brexit worries for fintech companies (CNBC), Rated: A

 

The Profitability Challenge for Fintech Startups (Finextra), Rated: A

The evidence from a sample of 20 fintech startups in the UK is that there are substantial profitability challenges that still need to be overcome. As of June 2017, the total equity investment in the sample companies I have looked at has been £852m. The total valuation of the sample at the last valuation round for each company was £2.6bn, but none are profitable and cumulative losses have been £211m.

Only one company in the whole sample has reported a single year of profitability, but this has since fallen back into loss.

However, the median losses are: £0.3m in year 1, £1.3m in year 2 and £2.0m in year 3. One company, Atom Bank, is already losing £22.5m in the third year of operation, substantially more than any of the others.

RateSetter exec sees opportunity in Brexit (Bankless Times), Rated: A

While the head of one of the United Kingdom’s largest P2P sites understands why small business owners are hesitant to make big decisions in Brexit’s wake, he cautions them to not miss the opportunities either.

“The door is open for business leaders to redefine Brexit so that it is seen as an opportunity, rather than a threat.”

Increasing options on low-yielding properties (Bridging & Commercial), Rated: A

Property investors have had to deal with a host of government and regulatory changes over the last couple of years.

These new rules have resulted in many buy-to-let lenders requiring much more significant interest rental coverage, often looking for as high as 145%.

For example, in the last LendInvest Buy-to-Let Index we found that Southampton offered an average yield of 4.08% – significantly lower than landlords can enjoy in other areas of the UK. Yet it has seen solid capital price growth at 5.47%,  its excellent transport links into the capital regularly see it named as a future house price hotspot, while the presence of two large universities boosts its appeal to landlords.

FT PARTNERS CONTINUES EXPANSION WITH ESTABLISHMENT OF EMEA PRESENCE IN LONDON (LendIt.com), Rated: B

Financial Technology Partners (FT Partners), the only global investment banking firm focused exclusively on FinTech, is pleased to formally announce its planned expansion into the Europe, the Middle East and Africa (EMEA) markets. This announcement is a direct response to the global demand the Firm is seeing for its highly specialized and deep domain focused advisory capabilities from EMEA clients and further highlights the Firm’s strong activity in cross-border FinTech deals globally. FT Partners’ global team of FinTech focused investment bankers will continue to serve its clients and its EMEA operations will be based out of London in the United Kingdom. The Firm is also announcing the continued expansion of its senior team with the addition of Timm Schipporeit, former FinTech investment banker at Morgan Stanley and FinTech investor at Index Ventures, who joins as Managing Director in our London office

Women In Fintech 2017 Powerlist: Innovate Finance Opens Nominations (Forbes), Rated: B

UK organisation and global fintech representative Innovate Finance has announced today the opening for submissions to its 2017 Women in Fintech Powerlist.

Innovate Finance is calling on both men and women to submit names of female colleagues (CxOs, managers, lawyers and journalists) to be included in the 2017 Powerlist.

China

Fintech No Threat for China’s Big Banks (Bloomberg), Rated: AAA

Concerns that bad-loan levels are worse than lenders are confessing to, combined with fears the country’s fintech giants, including Alibaba Group Holdings Ltd. affiliate Ant Financial, are disrupting operations, have weighed on stocks.

For one, bad-debt figures, if you believe them in the first place, are coming down. And even if you do think nonperforming loans have been understated, what’s undeniable is that the country’s big banks have been shifting into mortgage lending, which has a lower default rate than the state-firm lending that’s long been their bread and butter. The nonperforming loan ratio of a mortgage in China is 0.37 percent, one sixth of a corporate advance, according to CIMB Securities Ltd. analyst Michael Chang.

Of course, fintech companies getting into the lending business is cause for concern. Alipay’s consumer credit site Ant Check Later will lend up to a certain amount without needing to see bank records, while e-commerce outfits like JD.com Inc. allow monthly payment installments that blur the line between bank and retailer.

However, it’s worth noting that lending is a business with thin margins, and figuring out default risk is crucial, especially considering many fintech startups cater to those people the big banks won’t touch.

FinTech Wave Revolutionizes Financial World (SCMP), Rated: A

According to Morgan Stanley, online loan volume in the US market is expected to reach US$120 billion in 2020, up from US$20 billion in 2015.

Among others, one important promise of FinTech is that there will be greater reliance on algorithmically-determined financial decisions in areas such as loan, insurance and stock picking. The advancement of artificial intelligence methods has been the propeller facilitating the transition in such a direction.

The overall implication here is that a machine can replace a human in processing large amounts of text in a much more efficient way. This information extraction procedure also helps us understand more about the interplay between investors and various types of information. Interestingly, we find that investors react more strongly to negative than to positive text, and that analyst report text is more useful when it places more emphasis on non-financial topics, is written more assertively and concisely, and when the perceived validity of other information signals in the same report is low.

One common feature of the above two research studies is that computer algorithms are used to extract and quantify some otherwise fuzzy concepts: analyst sentiment in the first study, and analyst information discovery and interpretation effort in the second one. The computer achieves it by aggregating a huge amount of data which is surely beyond any human’s ability to process. Even though humans can understand intuition through very limited observations, it is hard for them to transfer the intuition or knowledge to other people. The computational limitation and the qualitative nature of the human knowledge are the underlying reasons why computers will eventually outperform humans in more and more settings.

FinTech does not come as a free lunch, however. Algorithm-based decisions are not immune to anomalies and manipulations. On 6 May, 2010, the Dow Jones Industrial Average dropped 998.5 points (about 9%), mostly within minutes. This sudden market crash was later attributed to the algorithm trading systems being manipulated by a trader.

European Union

Visa takes a strategic stake in Klarna, the finance startup out of Sweden (TechCrunch), Rated: AAA

Klarna, the $2 billion+ startup out of Sweden that works with some 70,000 e-commerce sites to enable payments and provide flexible financing to make purchases, is adding one more key investor to help take its next steps into a wider range of services. Today it announced that credit card giant Visa is making an equity investment in the company, and as part of it, the two are forging a strategic partnership to roll out new products.

Visa and Klarna are not disclosing the size of the stake — following the same pattern Visa took when it invested some years ago in two other fast-growing financial startups, Square and Stripe — and Klarna is not specifying what form the strategic partnership will take.

Brexit upheaval prompts French entrepreneurs to dream of home (Financial Times), Rated: A

In 2014, I moved to London to launch an asset management firm investing in loans originated by marketplace lending platforms.

Starting the business in London made sense. The UK boasted a business environment in which risk-taking was encouraged and entrepreneurial success valued and rewarded. Simple rules such as entrepreneurs’ relief, which reduces capital gains tax on the sale of a business, are very attractive for budding entrepreneurs.

However, the vote in last year’s referendum for Britain to leave the EU has caused me to reconsider my decision to live in and operate my business from London.

Gaël de Boissard joins the winner of last year’s Money20/20 Europe Startup Competition (deBanked), Rated: A

Exactly one year after winning Money20/20 Europe Startup Competition, James (a FinTech in Credit Risk, formerly known as CrowdProcess) returns to Copenhagen after closing an oversubscribed investment round led by Ex-Credit Suisse Board Member Gaël de Boissard. This round also included ex-Deutsche Bank COO, Henry Ritchotte, and BiG Start Ventures, a VC focused on FinTech and InsurTech. As a result of this deal, Mr. de Boissard has now joined James’s Board of Directors, after having previously been at the board of Credit Suisse.

Blockchain technology is moving into the financial mainstream with IBM and seven European banks (CNBC), Rated: B

IBM is building blockchain technology that will be used by seven of Europe’s largest banks, including HSBC and Rabobank, to facilitate international trade for small and medium-size enterprises, the company said on Tuesday.

International

Kiva.org Reaches $ 1 Billion Milestone in Crowd-Funding Loans Disbursed Globally (BusinessWire), Rated: AAA

Today Kiva.org, the world’s first and largest crowdfunding platform for social good, announced that it surpassed $1 billion USD in loans supporting borrowers around the world. More than 2.4 million entrepreneurs, farmers and students globally have been able to launch and expand viable businesses or pursue an education thanks to loan support from 1.6 million people, lending just $25 dollars at a time.

Recently on World Refugee Day (celebrated globally on June 20), Kiva launched a new World Refugee Fund, a $250K matching fund to be followed by a rotating fund of up to $9M in loan capital to provide support to refugees and host communities in countries including Lebanon, Jordan, and Turkey.

The World Refugee Fund seeks to fill this lending gap and is being developed by Kiva and the Alight Fund, along with founding partners the Tent Foundation and USA for UNHCR. To date, Kiva has crowdfunded $4.3 million in loans to 4,544 refugee borrowers globally.

Can Cash be Crushed? Multi-Country FinTech Survey Finds Many Adults Still Rely on Paper Money (IT News Online), Rated: AAA

According to KPMG’s 2016 global Pulse of Financial Technology (FinTech) Report (source), Venture Capital (VC) investment in the FinTech sector reached an all time high with a total of $13.6 billion across 840 financings in 2016. While FinTech investment proved to be “hot” in 2016, has this massive investment translated into consumer adoption? Today, at Money 20/20 Europe, early-stage venture capital firm Blumberg Capital released the results of its recent survey conducted online by Harris Poll in France, Germany, Israel, United Kingdom (U.K.), and the United States (U.S.), which found that FinTech appears to be gaining traction with Israel emerging as a leader in early-adoption. Despite investment and adoption progress, cash still remains king for most of these countries such as Germany, where 75 percent of adults still use paper currency and coins to make purchases at least once a week. Can cash ever be crushed? To see the full findings, please visit globalfintech.blumbergcapital.com.

Israel Embraces FinTech Early but Cash is Still König in Germany
The findings indicate Israel as a leader in early FinTech adoption as this country is more likely than other countries surveyed to use mobile banking apps and mobile wallets to make a purchase at least once per month. Additionally, nearly one in 10 Israeli adults say they have used alternative financing/lending services within the last 12 months. While many may believe cash to be an antiquated form of payment, the survey revealed paper money is still regularly in use.

  • Israeli adults are most likely to use a mobile banking app at least once a month (e.g., to check account balances, transfer funds, make a mobile deposit) (50 percent vs. 38 percent in U.S., 37 percent in U.K., 35 percent in France, 28 percent in Germany).
  • Israeli adults are more likely than French, British, and American adults to use mobile wallet apps to purchase goods/services at least once a month (27 percent of Israeli adults vs. 21 percent of French adults, 18 percent of American adults, and 17 percent of British adults).
  • Seven percent of Israeli adults have used alternative financing/lending services (e.g., peer-to-peer lending, online lender, lease-to-own) within the last 12 months.
  • German adults are most likely to use cash to make purchases at least once a week (75 percent vs. 64 percent of British adults, 58 percent of American adults, 48 percent of French adults, 47 percent of Israeli adults).

What is Fraud Anyway?
As cybersecurity continues to dominate the headlines, there was a surprisingly low level of concern among most countries surveyed given the current risk landscape. In Blumberg Capital’s 2017 State of Cybersecurity Report, findings revealed a gross overconfidence in cybersecurity knowledge and safety despite $15 billion being stolen from 13.1 million American consumers in 2015 in the U.S. alone (source). This disregard for fraud risk could indicate that consumers generally have confidence in the products and services they choose, suggesting that FinTech companies have the opportunity to educate new users on the security measures they have in place and why they are important.

  • British, American and Israeli adults are more likely than French and German adults to worry about being defrauded (e.g., getting scammed, having identity stolen, having accounts hacked) when they make financial transactions online (43 percent, 39 percent, and 38 percent vs. 31 percent and 23 percent, respectively).

Nationalism vs. Globalization: Are transactions crossing borders?
The survey also looked at how often people make online cross border purchases at least once a month. Again, Israeli adults lead the charge in cross-border transactions which could reflect on the narrower range of product choice available locally in Israel compared to other countries or Israel’s acceptance and wider adoption of FinTech and international eCommerce. Additionally, people were polled regarding the costs related to cross-border transactions, which revealed a budding anticipation of increased costs for these types of purchases in the future, especially in  the U.K. This belief in the U.K could be related to Brexit.  Findings include:

  • Israeli adults are most likely to make online purchases outside of the country they live in at least once a month (44 percent vs. 17 percent of French adults, 14 percent of German adults, 13 percent of British adults, and 9 percent of American adults).
  • 21 percent of British adults believe making online purchases outside of the country they reside will become more expensive (i.e., goods/ services will cost more and/or there will be additional fees) in the future. (Vs. 16 percent of American adults, 14 percent of German adults, 11 percent of French adults, 9 percent of Israeli adults).

Methodology
This survey was conducted online by Harris Poll on behalf of Blumberg Capital from May 16-22, 2017 among 2,166 American adults ages 18+, 1,046 German adults ages 18+, 1,048 French adults ages 18+, 1,050 British adults ages 18+, and 550 Israeli adults ages 18+. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For additional information about the survey results and methodology please contact: blumberg@sparkpr.com

What’s Next For Fintech After 50 Years Of The Cash Machine (Forbes), Rated: A

For the 50th anniversary of the first ATM, YouGov has conducted a global poll of 8000 consumers on behalf of ACI Worldwide to survey the usage of automated teller machines.

The survey found that only 42% of British consumers use ATMs just as much as they always have, while 48% in Germany, 47% in Spain and 40% in France believe the same, perhaps because of the widespread availability of alternative digital payments. 29% of UK consumers, 31% of French, 38% of Spanish and 43% of Italian would prefer this as well as a more secure way of payment authentication.

Zurawski does not see an ATM retirement any time soon as many still prefer using hard cash because it is a deliberate way of controlling spending.

The survey presented that customers want mini-statements, alerts for upcoming payments or overdraft fees plus the ability to dispense a new credit or debit card.

G20 watchdog says fintech doesn’t pose threat to financial stability (Reuters), Rated: A

The rise of fintech does not pose any compelling risks to financial stability, according to a review by global regulators, but this may change as the sector grows.

While financial technology is changing how financial services and information are being delivered, there is no evidence that services like crowdfunding, “robo” advice and cloud computing will fundamentally change underlying activities such as lending, the Financial Stability Board (FSB) said in a report published on Tuesday.

Australia

While money transfers and payments services still lead the fintech charge with an adoption rate of 50 per cent in 2017, insurance has come in a surprise second with a 24 per cent global adoption rate.

The adoption level for insurance fintech services in Australia stands at four per cent higher than the global average (29 per cent), linked to the upswing of personalised wearables with in-built abilities which allow for prediction of claim probability and lifestyle trends by insurance firms.

India

i2iFunding emerges as first P2P lending player (Outlook India), Rated: AAA

While many players try to attract investors by offering high-interest rates and leave them in the lurch in the case of default, i2iFunding has walked the talk by making the first payment from the Principal Protection Fund, and reiterated its commitment to shore up investors’ confidence.

Deteriorating asset quality has become an inevitable problem of the banking sector these days. Bad loans skyrocketed 135 percent over the last two years, and now, they constitute close to 11 percent of the advances of Public Sector Banks (PSBs).

The P2P lending industry is no immune to this trend.

i2iFunding has become the first P2P lending platform in India to compensate investors for the loss of outstanding principal amount incurred on the defaulted accounts.

Principal Protection programme will also be strengthened further, and many new features will be included. As of now, the level of principal protection depends on the category of the loan. Default in the category “A” qualifies for 100% protection of outstanding principal. This falls by 10% for the every next category and default in the “F” category offers you 50% protection. The functioning of the Principal Protection Fund will be further rationalised and smoothened. i2ifunding will primarily provide 50% and 100% principal protection options in each category from ‘A’ to ‘F’. There will also be the third option of ‘zero’ protection. Depending on the option selected by the investor, he/she will have to settle in for lower EMIS. The fee for offering principal protection service would be deducted through EMIs, but won’t be collected upfront. It’s noteworthy that, this may proportionately reduce the returns earned on lending projects but would make lending at i2iFunding safer and more secure.

Rubique breaks the language barrier; goes local to create earning opportunities for all (Outlook India), Rated: A

Always ahead of the innovation curve, Rubique has yet again demonstrated its focus on making financial solutions accessible to as many users as possible. The one-stop online marketplace providing technology enabled end-to-end solutions to financing needs of individuals and SMEs has just localised its Rubique Associate app.

The interactive app now live in Hindi, Marathi and Bengali language will now enable more number of potential Business Associates to register with Rubique and earn a commission for every reference search for loans or credit cards.

Authors:

George Popescu
Allen Taylor

Friday June 9 2017, Daily News Digest

uk house prices election

News Comments Today’s main news: April US consumer credit rises $8.2B. China Rapid Finance targets 3 million new users by end of year. TSB Bank lent $50M unsecured consumer loans through Harmoney. Today’s main analysis: UK house prices fall for three months in a row. Today’s thought-provoking articles: Amazon lent $1B to merchants in last 12 months. SBA enabled on […]

uk house prices election

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United States

LendingClub Operated Aggregator Note (LOAN) NP I, LLC (SEC), Rated: AAA

On June 1, 2017, representatives of the Company provided us with a computer-generated data file and related record layout containing data, as represented to us by the Company, as of the close of business on May 25, 2017, with respect to 46,766 unsecured consumer loans (the “Statistical Loan File”).
At the Company’s instruction, we randomly selected 115 unsecured consumer loans (the “Sample Loans”) from the Statistical Loan File and performed certain comparisons and recomputations for each of the Sample Loans relating to the unsecured consumer loan characteristics (the “Characteristics”) set forth on the Statistical Loan File and indicated below.
Characteristics
1.          Loan number (for informational purpose only)
2.          Origination date
3.          Original principal balance
4.          Maturity date
5.          Loan term (months)
6.          Borrower interest rate
7.          Contractual monthly payment
8.          State of residence
9.          Current principal balance
10.        FICO score low (at issuance)
11.        FICO score high (at issuance)
12.        Loan age (months)

April US Consumer Credit Rises $ 8.2bn, Weakest Reading For Over 5 Years (Economic Calendar), Rated: AAA

US consumer credit increased $8.2bn in April following a revised increases of $19.5bn which was originally reported as $16.4.bn.

The April increase was lower than consensus forecasts of around $16.0bn and the weakest reading since August 2011.

The annual increase slowed to 2.6% from 6.2% the previous month. Revolving credit slowed to an annual rate of 1.8% from 6.5% previously while there was a slowdown in non-revolving credit to 2.9% from 6.1%.

Amazon has lent $ 1 billion to merchants in an effort to help boost sales (Business Insider), Rated: AAA

Amazon.com Inc has stepped up lending to third-party sellers on its site who are looking to grow their business, a company executive said in an interview on Wednesday.

The e-commerce giant has doled out more than $1 billion in small loans to sellers in the past 12 months, compared with more than $1.5 billion it lent from 2011 through 2015, said Peeyush Nahar, vice president for Amazon Marketplace. Sellers have used the money to expand their inventory or discount items on Amazon, he said.

More than 20,000 small businesses have received a loan from Amazon and more than half of those have taken a second loan from the company, it said.

Loans range from $1,000 to $750,000. Sellers have said interest rates are between 6 percent and 14 percent.

Amazon Has Secretly Become a Giant Bank (The Street), Rated: AAA

Amazon.com (AMZN) said Thursday that its Amazon Lending service has surpassed $3 billion in loans to small businesses since it was launched in 2011.

“We created Amazon Lending to make it simple for up-and-coming small businesses to efficiently get a business loan, because we know that an infusion of capital at the right moment can put a small business on the path to even greater success,” Amazon Marketplace VP Peeyush Nahar said.

SBA enabler on sprouting more loans (Banking Exchange), Rated: AAA

When your largest client asks for a favor, you tend to do everything you can to help. For fintech company SmartBiz, that led to completely changing its business model.

The San Francisco-based company began life as an online consumer lender in 2010. However, three years in, the company switched gears to focus on small business lending.

Thus began a transition that culminated in SmartBiz selling off its consumer lending business. In place of that, SmartBiz built a bank-centric marketplace—an “ecosystem” in Singer’s words—in which SmartBiz refers qualified SBA loan applications to a network of banks. Currently the company works with five banks in the U.S.

Banking Exchange: Can you explain further why you made the switch from the consumer loan business to the small business loan market?

Singer: The stores typically needed $50,000 to $200,000, but were having a hard time obtaining financing at a decent rate. When we dove deeper, we found that starting in 2008 with the recession, many banks pulled out of the smaller end of the small business lending market.

They left for many reasons. The main one, though, is that it cost them just as much to originate a $200,000 loan as it did a $2 million loan.

We felt we could convert our existing base technology for use in small business lending. The concept, and what we have been working on since, is three-fold.

• First, it was key that we be able to tap into banks with their low cost of capital to provide well-priced loans to small business. But we had to make it economically feasible for the banks to make these loans, so we developed software that enables banks to auto-underwrite and auto-originate SBA loans quickly and easily.

• Second, small businesses want it to be easy to apply for a loan. SBA loans are typically very difficult to get—they can take months and months. So we made the process easier, automating a lot of the more difficult work, and put it online.

• Third, one of the most important things for a small business is get to a “yes.” So we created the first online SBA loan marketplace, in which we have multiple banks [currently five] looking at the loans.

BE: Do you concentrate on SBA 7(a) loans?

Singer: Yes. We’ve been focused on 7(a) loans in the sub $350,000 market for working capital. About six months ago we launched commercial real estate loans up to $5 million on the platform—also 7(a) loans.

BE: How is the underwriting handled working with the banks in your marketplace?

Singer: Unlike a traditional fintech company, which brings its underwriting model to a bank and says “Use this,” we do the opposite. We take the bank’s underwriting and digitize it. So we customize the underwriting software that each bank uses. That way we can refer the right borrower to the right bank.

BE: What percentage of applications that come into your system don’t make the cut?

Singer: I don’t think we’ve published anything on that. [SmartBiz is a private company.] It would be interesting for a new bank to note, however, that a little over 90% of what we refer to our bank partners they fund.

BE: In general, how do terms and rates in your network compare with others in the online marketplace?

Singer: All of our loans under $350,000 have a ten-year term. Most of the other players in the market—OnDeck or Funding Circle, for instance—are going to have somewhere between a one- and five-year term—most typically it’s two or three years, and at much higher cost. Our average APR is between 7% and 8%—prime plus 275 [basis points], compared with other online marketplace lenders where the average APR is as much as 44%.

BE: Are you reaching out to other potential bank partners?

Singer: Well, I’m not sure we want to add hundreds of banks. We’re picky and choosy about which bank we’re going to add on the platform. They’ve got to be a PLP [Preferred Lending Partner] with the SBA. Essentially the SBA establishes PLP banks as having delegated authority so they can make a loan decision without sending the file to SBA for approval.

What’s critical is that the bank wants to embrace technology; is focused on SBA lending; and has the mindset at the top where they want to partner with a fintech company.

Banks cede market share in auto lending (American Banker), Rated: A

New industrywide data confirms what bank CEOs have been saying for months: The banking sector is retreating in automobile finance.

During the first quarter of 2017, banks provided 32.5% of the financing for U.S. auto loans and leases, down from 34.8% in the same period a year earlier, according to an Experian report.

Attention New Mexico Lenders: New Regulations Coming Soon (Clarity Services Email), Rated: A

New Mexico House Bill 347 overhauls the state’s regulatory oversight of small-dollar lending. If you conduct business in New Mexico, these regulations will apply to you.

Effective January 1, 2018

The  bill includes the following components:

  • Complete Repeal of Payday Lending
  • Dollar Threshold Changes – All loans of $5,000 or less shall be made under the Small Loan Act or the Bank Installment Loan Act.
  • Mandatory Credit Reporting – Loans of $5,000 or less must be reported to a credit reporting agency. We have your back!
  • Limits on Loan Terms – Loans of $5,000 or less:
    • Must not have an APR that exceeds 175 percent.
    • Must have minimum maturity period of at least 120 days.
    • Must be repayable in a minimum of four substantially equal payments.

Fintech Company Raises $ 300 Million to Help Businesses Stop Using Checks (WSJ), Rated: A

AvidXchange Inc., a firm that automates bill-payment processes for businesses, said Thursday that it raised $300 million in equity from a group of new investors to bring its service to new industries, potentially acquire smaller competitors and to expand internationally.

Investors in the funding round include Mastercard Inc., Singaporean state investment firm Temasek Holdings Pte Ltd., Canadian pension fund Caisse de dépôt et placement du Québec and and Peter Thiel, the investor and co-founder of payments company PayPal Holdings Inc.

Since its founding, Charlotte, N.C.,-based AvidXchange has raised over $500 million, more than amounts raised by Stripe Inc., Credit Karma Inc. and other well-known fintech players.

The latest investment, one of the largest for a fintech company since lender Social Finance Inc. announced a $500-million fundraising in February, values AvidXchange at around $1.4 billion, according to people familiar with the matter.

VA Loan Captain Announces Partnership with EXIT Realty (PR Newswire), Rated: A

EXIT Realty Corp. International and VA Loan Captain (www.valoancaptain.com), the #1 VA Loan Marketplace, have announced a partnership to help educate veterans on their VA Home Loan benefit. As part of the partnership, EXIT Realty will offer veterans unbiased educational content in the form of an eBook, The Ultimate Guide to VA Loans, a VA Loan Learning Center on www.exitrealty.com, and a VA Loan Marketplace powered by VA Loan Captain to increase awareness of the 0% down home loan benefit available to all those who have served in the United States Military.

In addition to educating veteran home buyers, beginning on July 4th, 2017, EXIT Realty will also offer VA Loan Captain’s VA Loan Certification (VALC) to all of its agents. The VALC Certification provides real estate agents and lenders comprehensive knowledge of the VA Home Loan benefit to establish themselves as a local expert for the largely untapped military real estate market while simultaneously helping those who served the country.

Reg A+ Crowdfunding Conference Exclusive Savings Inside (Financial Research Associates Email), Rated: B

Exclusive Discount Code: SAVE 25% w/code FMP206
Early Bird Savings End 6/16/17

You are invited to attend July 19-20th at the LA Athletic Club in Los Angeles.

CONFIRMED SPEAKERS INCLUDE:
  • Dara Albright, President, Dara Albright Media
  • Brent Brague, Vice President of Sales, CrowdEngine
  • Craig Denlinger, Managing Partner, Artesian CPA
  • Andres Diana, Managing Director, SeedInvest
  • Peter Duggan, Senior Vice President, Computershare
  • David Gosselin, Principal, DBBMcKennon
  • Samuel Guzik, Founder, Guzik & Associates
  • Charles Kaufman, Counsel, Homeier Law PC
  • Anthony Lin, Founder, Endeavor, PC
  • Darren Marble, Chief Executive Officer, CrowdfundX
  • Gene Massey, Chief Executive Officer, MediaShares
  • Scott Purcell, Founder and CEO, FundAmerica
  • Mark Roderick, Shareholder, Flaster/Greenberg P.C.
  • Chadwick Sahley, CEO, Social Bluebook
  • Jillian Sidoti, Attorney, Trowbridge Sidoti LLP
  • Richard Swart, Chief Strategy Officer, NextGen Crowdfunding
  • Amy Wan, Founder & CEO, Bootstrap Legal

Money360 Closes $ 17 Million Bridge Loan for an Office Property in Morris County, New Jersey (Money360 Email), Rated: B

Loan Details

Loan Type: Bridge
Loan Amount: $17 million
Term: 3 Years

Amortization: Interest Only
Recourse: Non-Recourse
LTV: 72.34%

United Kingdom

UK house prices fall for third month in a row for first time since financial crisis (The Guardian), Rated: AAA

House prices in Britain have fallen for the third month in a row, for the first time since the height of the financial crisis in 2009.

The fall further dragged down the annual growth rate in May, to 2.1%, the lowest in nearly four years, providing further evidence that the housing market is losing steam, according to Nationwide, the UK’s biggest building society.

Its closely watched monthly house price index showed that the average price of a home fell by 0.2% between April and May, to £208,711. This compares with monthly declines of 0.4% in April and 0.3% in March. The annual growth rate of 2.1% is the lowest since June 2013, and compares with 2.6% in April.

The UK’s other main house price index, from mortgage lender Halifax, is also on a downward trend. It showed a 0.1% fall in April, taking the average property price to £219,649 – nearly £3,000 below the peak in December 2016.

Peer-to-peer lenders have their say ahead of election (AltFi), Rated: A

Funding Circle, which recently overtook Zopa as the UK’s largest P2P lender by total lending, said that ensuring continued access to capital for small businesses throughout the Brexit process is critical.

Carmen Dixon, vice-president of PR and Communications at LendInvest, echoed Funding Circle’s sentiments on the British Business Bank.

“Whatever the background or make-up of the new government, we will be urging it progress the (already fairly advanced) commitment made by Theresa May’s government to partner with alternative lenders to lend more,” she said. “That means empowering state-backed vehicles like the British Business Bank to put more money onto alternative lending platforms that will in turn lend more into the economy.”

Meanwhile, RateSetter, one of the UK’s “big three” peer-to-peer lenders, has also called on the next government to be active in its support of the fintech sector:

“The next government must steer the country through a series of huge challenges, not least keeping us safe and managing Brexit.  As it does so, it should make the most of opportunities to get behind businesses so that they can thrive, leading to more jobs, output and economic growth.”

OakNorth, the ‘bank for entrepreneurs,’ lent £300 million last year (Business Insider), Rated: A

Entrepreneur-focused startup bank OakNorth lent £300 million to small businesses last year and is expecting to lend out £800 million in 2017.

OakNorth’s annual accounts, filed with Companies House this week, show the bank made net income from its lending of £7.1 million last year, up from £156,000 in 2015, its first year of operation.

Notable deals include £19 million lent to healthy fast food chain LEON in August to fund expansion.

Lendy to sponsor world-famous sporting event (Bridging&Commercial), Rated: B

The peer-to-peer lending platform will begin sponsoring the world-famous sailing regatta – which will now be called Lendy Cowes Week – from 29th July 2017.

China

China Rapid Finance targets 3 million new users by year’s end (SCMP), Rated: AAA

China Rapid Finance (CRF), the Chinese financial technology business that recently listed in New York, expects to add up to 3 million users on its lending platform this year despite the government’s push to tighten restrictions on the burgeoning online lending sector.

In the first quarter of this year, the company attracted 545,000 new borrowers who obtained credit ranging from 500 yuan to 6,000 yuan (US$73.50 to US$882.50) per transaction.

Why Alibaba is eyeing India’s payments market (The Asset), Rated: AAA

To say digital payment volume in India has grown dramatically over the past few months would be an understatement. Since Modi’s demonetization policy in November 2016 the monthly digital payment volume via India’s Unified Payments Interface (UPI) has increased by almost 2300% as of March 2017.

Most P2P Lending platforms have finished bank depository before the deadline (Xing Ping She Email), Rated: A

China’s p2p regulator requires platforms must finish bank depository before the end of June. Currently, some platforms have signed depository agreement with banks. According to the latest news, Xeenho announced that they have signed the bank depository. The bank depository system docking is undergoing, which is expected to operate online in the late June.

Under the wave of Internet financial compliance, more and more fintech platforms attach importance to bank depository. According to data, 433 normal operating platforms have signed bank depository up to the end of May, accounting for 20.16% of the total. Among these platforms, 221 of them have finished the docking of depository system used online.

In response to the regulatory policy, Xeenho Wallet signed the bank depository to guarantee the independent management between funds of platform and users, so as to eliminate the risk of misappropriation.

Dr. Yang Li, CEO of Xeenho, said that the agreement of bank depository has laid a solid foundation for the future development of the company, and they will continue to proactively response to regulatory policies, aiming at achieving the goal of universal finance.

EZUBAO THE ONLINE LENDER BILKED INVESTORS OF OVER $ 7.6 BILLION (Petro Global News), Rated: A

An online finance company in China bilked its investors of over $7.6 billion, that was spent on lavish gifts, salaries and buried that evidence according to authorities who described it as being a huge Ponzi scheme.

These accusations throw a big shadow over the online China finance industry, a lucrative sector that has nurtured global leaders. However, it is one that authorities are saying also has seen a number of flameouts and frauds.

How late payments help create a billion-dollar market (The Asset), Rated: A

In China, there has been an increase in long-term overdue payments. From 2015 to 2016 the number of corporates experiencing average payment delays of between 90-119 days increased by 25% (from 21% to 26.3%), according to a survey of Chinese corporates, conducted by Coface. The survey also shows that corporates dealing with overdue payments of 150 days or more grew by 60% from 2015 to 2016 (from 9.9% to 15.9%).

In Asia-Pacific (ex-China) invoice trading volume grew from almost nothing in 2013 to a US$116.95 million market in 2015, as noted in the Asia-Pacific Alternative Finance Benchmarking report. Within China, invoice trading in 2015 represented a US$1.46 billion market compared to only US$25.59 million in 2013.

European Union

The Future of Finance (The Portugal News), Rated: A

Crowdfunding and Peer-to-Peer lending appear to be the areas which are bringing real business and willing investors together.

The World Bank has predicted the Crowdfunding industry will be worth $95 billion by 2025 and Goldman Sachs said in a report $1.2 trillion of opportunities could be addressed by Crowdfunding in the coming years.

Camden Town Brewery raised £1.5m in Equity Crowdfunding in July 2015, valuing the business at £28m. By December the company had been bought by AB InBev for £85m, netting investors a healthy return.

International

Peer to Peer Lending Market Expected to Reach $ 460,312 Million, Globally, by 2022 (Digital Journal), Rated: A

According to a new report published by Allied Market Research, titled, Peer to peer Lending by End-User Types and Business Model type: Global Opportunity Analysis and Industry Forecast, 2014-2022, the peer to peer (P2P) lending market was valued at $26,064 million in 2015 and is projected to reach $460,312 million by 2022, growing at a CAGR of 51.5% from 2016 to 2022. In 2015, small business loans dominated the market, whereas consumer credit loans is anticipated to grow at a robust rate, in terms of market share.

North America is leading the peer to peer lending market, followed by Asia-Pacific.

Asia- Pacific would witness the highest CAGR of 54.1% mainly led by China, owing to emergence of a number of small scale peer to peer lending service providers.

Australia/New Zealand

TSB Bank says it has lent $ 50 mln in unsecured consumer lending through P2P lender Harmoney (Interest.co.nz), Rated: AAA

TSB Bank has finally acknowledged that it’s lending money through peer-to-peer (P2P) lender Harmoney.

The bank has disclosed this in its annual report, released on Friday, saying it has lent $50 million through Harmoney to date.

Heartland Bank, which holds a 12.59% stake in Harmoney, also lends money through the P2P lender. By December 31 last year Heartland had lent $62 million through Harmoney’s online platform. TSB has not disclosed a shareholding in Harmoney.

Report on rapid growth in P2P lending – what does it mean for New Zealand? (Lexology), Rated; A

The key takeaways from the FSB’s report (which can be found here) are:

  • A growing sector: In absolute terms, the largest FinTech credit market is China, followed at a distance by the United States and the United Kingdom.
  • Benefits: The benefits include lower transaction costs, convenience for users, increased credit access for underserved segments of the population or business sectors, and (in relation to financial stability) a lower concentration of credit with traditional banks and more pressure on those banks to increase efficiency.
  • Risks: The risks include: increased financial risk in platforms due to a greater credit risk appetite; untested risk processes and relatively greater exposure to cyber-risks; swings in investor confidence impacting the financial performance of platforms; and (in relation to financial stability) lower lending standards, incumbent banks taking on more credit risk in response to competition, securitisation increasing the connection between traditional and FinTech credit and the challenges posed to the regulatory perimeter.
  • Business models: The nature of activity varies greatly across and within jurisdictions due to the diverse business models used. These models include: the ‘traditional P2P lending’ model (a borrower-lender matching service with the platform often providing a risk assessment); the ‘notary’ model (a matching service where the loan is originated by a partnering bank – Germany and Korea); the ‘guaranteed return’ model (the platform guarantees a return to lenders – prevalent in China); the ‘balance sheet’ model (the platform originates and retains the loans on its own balance sheet – Australia and Canada); and the ‘invoice trading’ model (factoring services to manage cash flow for the start-up and small business segments).
  • Sources of funding: Securitisation capital markets have become an important source of funding for FinTech credit platforms in the US. Cross-border funding is higher in Asia Pacific (ex-China). The average retail investment is around US$8,000 in China but, due to regulatory caps, only €500 in France.
  • Borrowers: The available data suggests that consumer loans are typically in the range of US$5,000 to US$25,000 with the US at the top end of that range. Average loans in China are much larger, at more than US$50,000.
Asia

Path clear for robo advisers in financial services (Nation Multimedia), Rated: A

The Monetary Authority of Singapore (MAS) has proposed to make it easier for digital advisory services providers to operate by offering some major concessions under the financial regulatory framework.

One is to allow digital or robo advisers operating as fund managers under the Securities and Futures Act to offer their services to retail investors. This could happen even if robo advisers do not meet track-record requirements, as long as they provide certain safeguards.

A MAS consultation paper released on Wednesday proposed that there would not be separate licensing for digital advice. But firms offering these services would have to comply with some safeguards.

One is that portfolios must be diversified and comprise non-complex assets.

Authors:

George Popescu
Allen Taylor

Event: Reg A+ Crowdfunding Conference

Event: Reg A+ Crowdfunding Conference

For Lending Times readers: save 25% with code FMP206 When ? July 19-20, 2017 Where? Los Angeles, California, USA Details The program is designed for: C-suite executives from growth companies: from start-ups to major companies Serial issuers Attorneys and compliance experts Broker/dealers Funding portals Platform operators Accountants and CPA’s Thanks to the JOBS Act and Regulation […]

Event: Reg A+ Crowdfunding Conference

For Lending Times readers: save 25% with code FMP206

When ?

July 19-20, 2017

Where?

Los Angeles, California, USA

Details

The program is designed for:

  • C-suite executives from growth companies: from start-ups to major companies
  • Serial issuers
  • Attorneys and compliance experts
  • Broker/dealers
  • Funding portals
  • Platform operators
  • Accountants and CPA’s

Thanks to the JOBS Act and Regulation A+, crowdfunding has become more popular and lucrative than ever, but success is not easy.  Raising $50 million in capital takes knowledge, the right team, and much more. Find out how marketing will make or break an offering. Learn how to overcome the challenges companies face when dealing with investors. Understand the best practices of creating an effective offering and how to successfully list to exchanges. Join industry experts and thought leaders as they share inside information on the future of capital raises at Investment Crowdfunding: Reg A+ and More.

TOP REASONS TO ATTEND

  • Network with crowdfunding’s best and brightest
  • Understand the building blocks of a successful Reg A+ offering
  • Get the latest on regulations and how to stay compliant
  • Find out what the future holds for crowdfunding
  • Identify who should and who should not pursue funding through Reg A+
  • Hear lessons learned from those who have failed as well as those who have found success
  • Get the deep knowledge most miss regarding audits and how to prepare
  • Learn best practices for investor relations and communication

RSVP

Tuesday May 2 2017, Daily News Digest

Morningstar average credit spreads

News Comments Today’s main news: CFPB sues 4 online Indian-tribe lenders. Sharestates launches real estate lending white label solution. China Rapid Finance announces IPO pricing. Yirendai files Form 20-F. Today’s main analysis: Corporate credit tightens amid sluggish Q1 growth. Avant’s first 2017 ABS. Today’s thought-provoking articles: Europe on pace to set new record for fintech deals. United States CFPB […]

Morningstar average credit spreads

News Comments

United States

  • CFPB sues four online lenders operated by Indian tribe. GP:”In general India-tribe lenders attract more lawsuits. It is unclear if it is because they tend to be sloppier on compliance or lenders who are more aggressive on terms tend to partner with Indian-tribes because no bank will partner with them. In all cases being associated with an Indian-tribe seems to bear stigmata at least recently.”AT: “The CFPB is attempting to do what it was set up to do, but with attacks coming from state regulators, who knows how long it will be able to continue to do so?”
  • Corporate credits spread amid Q1 economic growth sluggishness. GP:”An interesting data point in the overall economic cycle.”
  • Avant’s first 2017 ABS. GP:”A good test of market perception of the Avant underwriting and product quality. Securitization has seen favorable investor demand. Avant retained 5% of the deal per Dodd-Frank. “
  • Sharestates launches white label solution for real estate private lenders. GP:”A sign that the market is maturing. Also a sign that cost of customer acquisition is growing as real estate crowdfunding companies get into technology sales / white labels entrusting 3rd parties to finding customers and letting them focus on the platform.”AT: “This is brilliant, and I’m not just saying that because I write for this company. Real estate is inherently local. By establishing a white label solution for real estate private lenders, Sharestates could position itself as the leader in RECF for many years to come. As far as I know, this is the first white label solution specifically for the real estate lending market. If the solution is any good, they should get a lot of participation.”
  • Colorado moves to dismiss suits. GP:”A very standard move in any lawsuit. It is unlikely to suceed.”AT: “These are interesting arguments, but I don’t see it happening. There is too much at stake to allow states to railroad online lenders and relegate them to second-class status. There needs to be a real discussion about which level of government has the power to regulate and legislate online lending.”
  • Fundrise files new Reg A+ for Income eREIT. GP:”We haven’t seen many Reg A+ fund raises in our space. I do think it is a very interesting tool for early stage companies. “AT: “This should have been expected. Selling out of shares as quickly as they did on the first round, I wonder why they didn’t file a second Reg A+ sooner.”
  • Thrive to power small biz lending for Horizon Community Bank. AT: “Perhaps we’ll see a wave of community banks getting in on the online lending act.”
  • Online lending has reached a tipping point. GP:”I think they actually mean it has reached maturity.” AT: “GDR’s Charlie Moore lays good groundwork for his argument. He makes some great points.”
  • Lendio announces annual list of top 10 best states for small business lending. GP:”There is very little transparency and public data in the SME lending space (unlike in personal lending thanks to Lending Club for example). This data is a step in the good direction. We hope more will be made available.”AT: “This is based on their own data, so it’s not objective. Interesting nonetheless.”
  • The future of finance. AT: “What’s interesting about this is the unchanging talking points from SoFi’s Mike Cagney about how banks should adopt technology, and how it would affect their businesses if they did. Short story: They could lay off more employees and cut business expenses.”
  • How Goldman Sachs is trying to erase debt stigma. GP:””
  • Leverage digital tech to forge relationships with your clients’ children. AT: “For financial advisors.”
  • Justices affirm cities’ right to sue banks under housing law.
  • SoFi personal loans review. GP:”A good summary of SoFi’s approach, which has pushed them where they are today. Most notably: no origination fee. SoFi is probably the only major online lender that has no origination fee. Avant started without an origination fee and lately had to introduce one for profitability. “
  • Celent’s corporate banking appoints Alenka Grealish as senior analyst.

United Kingdom

  • TransferWise to set up office in Singapore. GP:”Singapore is a good compromise between pro-business environment, trained workforce with good skills and price. Hong Kong is extremely expensive. Mainland China is not a good base to do business outside China. However, in the past, I found that for South East Asia a good cost/quality/location compromie was Jakarta.”AT: “I can’t think of a better place to set up office if you want to tackle the Asian markets.”

European Union

Australia

China

India

News Summary

United States

CFPB Sues Four Online Lenders Operated by a California Indian Tribe (Crowdfund Insider), Rated: AAA

The Consumer Financial Protection Bureau (CFPB) has sued four online lenders for collecting debt from consumers they allegedly did not owe. The four lenders include: Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc.

The CFPB alleges that the lenders made deceptive demands and illegally took money from consumer bank accounts for debts that consumers did not legally owe. The CFPB filed to stop the practices, recoup relief for impacted consumers, and asses a penalty on the aforementioned lenders. Each of the four lenders operate out of a single address in Upper Lake, California and is owned and incorporated by the Habematolel Pomo of Upper Lake Indian Tribe (Habematolel Pomo Tribe or the Tribe), a federally recognized Indian tribe.

The CFPB states that since at least 2012, Golden Valley Lending and Silver Cloud Financial have offered online loans of between $300 and $1,200 with annual interest rates ranging from 440 percent up to 950 percent.

Read the actual complaint here.

Economic growth for the first quarter of 2017 slowed to a 0.7% annualized rate compared with a 2.1% rate in the fourth quarter of 2016. This represents the slowest rate of economic expansion over the past three years.

On a positive note, business investment picked up rapidly.

The average corporate credit spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) tightened 2 basis points over the course of last week to +121. In the high-yield market, the Bank of America Merrill Lynch High Yield Master Index tightened 22 basis points to end the week at +375. In the equity markets last week, the Nasdaq index broke through 6000 to new highs and the S&P 500 rose 1.5%.

As an indication of how tight corporate credit spreads have become compared with their historical averages, since the beginning of 2000, the average spread of the Morningstar Corporate Bond Index has registered below the current level only 26% of the time. The preponderance of the time that the index was at a level tighter than the current credit spread occurred during the buildup to the 2008-09 credit crisis. In 2004-07, corporate credit spreads were pushed to historically tight levels as new structured investment vehicles were engineered to arbitrage the differentials in expected default risk. But once the credit crisis emerged, investors found that many of these vehicles did not perform as advertised.

Avant’s First 2017 ABS (PeerIQ), Rated: AAA

We see a bifurcation in credit performance trends between mass affluent credit card issuers, and issuers focused on mass market credit segments. Synchrony, the largest store credit card issuer, shares dropped 16% on Friday due to a 45% increase in its loan loss provision. Capital One and Discover also increased their provision by 33% and 14% respectively. By contrast, the credit card master trusts of large card issuers (AXP, BAC, JPM) exhibit delinquencies that are near all-time lows (as analyzed in prior PeerIQ newsletter) due to their focus on higher credit quality relationship customers.

On Friday, bond investors welcomed the first Avant ABS deal of the year. AVNT 2017-A was upsized to $247.8 Mn collateral and received significant interest from broader credit investors.

Avant Loans Funding Trust 2017-A (AVNT 2017-A)

Avant priced its first unsecured subprime consumer deal of 2017 on April 26th (AVNT 2017-A), its fourth rated securitization. The transaction was upsized from $192.6 Mn to $218.9 Mn due to favorable investor demand. The deal was led by JP Morgan who also structured the transaction, as well as Credit Suisse and Morgan Stanley. Avant retained 5% of the deal, consistent with risk retention requirements of Dodd-Frank Act.

Source: PeerIQ, Bloomberg, Kroll Rating

Strong Alignment of Interests

Avant’s business operating model allows for several important components that strengthen alignment of interests between Avant and institutional investors. According to Kroll Rating’s pre-sale report, as of March 31st Avant retained approximately $2.5 Bn (65%) of the $3.8 Bn in loans originated through the Avant Platform. For this transaction, Avant contributed 95% of the loans in the collateral pool.

Further, on the deal Closing Date, Avant or its majority-owned affiliate acquires and retains at least 5% of the fair value of total capital structure by Regulation Risk Retention.

Loss Assumptions

Kroll increased the weighted average cumulative net loss (CNL) rate when rating AVNT 2017-A. For loans with 36 months or less terms, the CNL was increased from 13.86% in AVNT 2016-C to 18.39% in AVNT 2017-A (“Run-off Portion”). Further, Kroll assumed 16.55% for the representative portion in its pre-sale report, suggesting an upward shift in loss assumptions for AVNT loan product.

Pricing Tighter

We observe a parallel shift in the credit curve: the A tranche was 100 basis points tighter and the B tranche was 185 basis points tighter than the corresponding tranches in AVNT 2016-C. The C tranche was priced at 450 basis points.  The C tranche (BB-rated) was fourteen times over-subscribed, reflecting credit investors’ “risk-on” mentality.

Source: PeerIQ

Trigger Talk

The exhibit conveys that trigger profiles can be very different even for similar collateral from the same shelf. AVNT 2017-A shows a much higher starting CNL profile (MOB=1) than AVNT 2016-B, starting at 1% and peaking at 25%. Although the changes in the underwriting standard is obvious, the loss trigger profile is slightly steeper, reflecting more up-front loss timing for AVNT 2017-A as compared to older deals, such as AVNT 2016-B.

Source: PeerIQ

Sharestates Launches White Label Lending Solution for Real Estate Private Lenders: Shareline Solution (Crowdfund Insider), Rated: AAA

Sharestates, an online real estate investment marketplace, has announced the launch of a new financing capability; Shareline Solution. The new service is a hybrid between lending and brokering a loan. Private lenders will have access to Sharestates lending capabilities to directly serve their clients all under their own brand. The new lending service is described as a white label, correspondent lending program that empowers private lenders to quickly launch a robust real estate crowdfunding and lending marketplace.

With this solution, Sharestates explains it will tap into more geographical regions by working directly with local, private lenders through strategic partnerships.

Colorado Moves to Dismiss Suits (Orrick), Rated: A

As we noted in a recent Alert, WebBank and Cross River Bank filed separate federal civil actions to enjoin the Administrator of Colorado’s Uniform Consumer Credit Code from enforcing state lending laws against Avant, Inc. and Marlette Funding LLC, online lending platforms that facilitate and service loans originated by the two Banks. The Banks assert that Colorado’s lending laws are preempted by federal banking statutes. On April 25, the Administrator moved to dismiss the Banks’ actions on several grounds.

First, the Administrator contends that the lawsuits do not present a federal question and thus fail to establish subject-matter jurisdiction.

Second, the Administrator argues that the Banks lack standing because their alleged injuries—including loss of revenue from the assignment or sale of their loans—are either inadequately pled or insufficiently related to the enforcement proceedings against Avant and Marlette.

Third, the Administrator argued that if the State’s enforcement actions against Avant and Marlette (which were removed to federal court) are remanded to state court, then the federal court should either dismiss or stay the action brought by WebBank and Cross River Bank’s cases based on the Younger abstention doctrine (which establishes rules against federal courts from interfering with ongoing state court or administrative proceedings).

Fourth, and perhaps most significantly, the Administrator asserts that the Banks’ preemption arguments fail as a matter of law because federal banking statutes—particularly the National Bank Act (“NBA”), 12 U.S.C. § 85, and the Depository Institutions Deregulation and Monetary Control Act (“DIDMCA”), 12 U.S.C. § 1831d—do not preempt the application of state lending laws to nonbank entities.

Fundrise Files New Reg A+ for Income eREIT (Crowdfund Insider), Rated: A

Fundrise, an online marketplace for investing in real estate, has filed a Reg A+ offer with the SEC to sell additional shares in their Income eREIT. This will be the second round for the Fundrise Income eREIT. The first round sold out raising the maximum amount allowable of $50 million. Fundrise is offering up to $41,189,280 in common shares which represents the value of shares available to be offered as of the date of the offering circular out of the rolling 12-month maximum offering amount of $50 million in the eREIT shares.

Thrive Platform to Power Small Business Lending for Horizon Community Bank (Thrive Email), Rated: A

Thrive Inc. (Thrive) is pleased to announce a multi-year technology licensing agreement with Horizon Community Bank (HCB), a leading Arizona-based FDIC insured bank and subsidiary of Horizon Bancorp, Inc.

Thrive’s proprietary cloud-based lending technology will power the complete, end-to-end small business lending process for HCB encompassing:

  • Digital applications, automated credit / financial analysis and background/verification checks, loan offers and declines, e-closings, integrated servicing, borrower interface and real-time risk management capabilities
  • Operationally, HCB will benefit significantly from improved loan processing efficiencies and reduced origination costs:
    • Loan processing time is expected to be reduced from weeks to days
    • Cost reductions of greater than 40% are expected for each loan application cycle
  • HCB will benefit extensively from new digital customer acquisition channels, while user experiences for existing and new customers will be modernized and improved

Online lending has reached a tipping point (Business Insider), Rated: A

Online lenders have been facing an uphill battle recently as investors question whether they are truly getting the loan transparency they need to confidently invest in this young industry. Investors, credit providers and ratings agencies are worried about loan data integrity as well as collateral and ownership rights behind the loans.

Phase One: Concept – The Early Days (2006-2010)

The concept of partner banks – like WebBank and Cross River – issuing loans on behalf of these platforms, quickly became an established model. These banks helped ensure the borrower regulations were met, including state licenses among others. Consumers are well protected and borrower fraud is tightly managed.

But in 2008, regulators took notice of this rapidly expanding market, and the SEC issued a statement requiring lending platforms to register and report loan financials to the Commission to protect investors. With this change, the SEC highlighted the need to treat fractional loans as securities that need to be reported.

Phase Two: Institutional Entry – Enter the Big Dogs (2011-2015)

In 2011, the landscape changed for online lenders with institutional investors, in search of yield in a near-zero interest rate environment, tossing their hats in the ring to enter this emerging industry. A $5 million investment from an anonymous institutional investor into LendingClub marked the first infusion of institutional investor capital into the online lending space.

And that was only the beginning as institutional investment continued to flow into the market, primarily from specialist hedge funds, often with lines of credit from well-known large investment banks. At this point, the industry evolved its name from Peer to Peer to Marketplace Lending and ultimately Online Lending to reflect the fact that large institutions were now funding a large portion of the loans.

Also in 2013, securitization changed the face of online lending, providing lending platforms more scalable access to capital to fund the needs of new lenders. Eaglewood Capital closed on a $53 million unrated securitization deal for loans originated by LendingClub, making it the very first securitization deal in the space.

Analytics and secondary markets began to emerge in 2015, with companies like PeerIQ, dv01 and Monja providing analytics and reporting tools to help investors better track their online lending investments. Secondary markets for these loans kicked off this same year, with the launch of both Orchard and Ldger, aiming to provide additional liquidity options for investors in the space.

Later in 2015, the first partnership between a bank and lender was forged with JP Morgan and On Deck leading the charge.

Phase Three: Maturity & Scale – The Future is Clear (and transparent!) (2016 – …)

And now we arrive at the present – a tipping point where the fate of the industry lies squarely in its ability to adopt effective risk control infrastructure for investors to bring certainty to this asset class and therefore attract new capital.

A modern fintech lending model has been using a thirty-year-old due diligence methodology, comparing loan tapes with loan agreements, both provided by the seller. It goes without saying that this method is far from modern or efficient, with no independent validation of data integrity against trusted data sources.

Today, transparency is being redefined. Online lending has undoubtedly provided greater loan data and performance reporting than investors are used to. However, loan transparency from the seller without independent data certainty has been proven dangerous.

A vital part of this infrastructure is for the industry to adopt a central loan information clearing house that focuses on ownership rights and asset certainty for each loan as well as serving as a collateral pledge registry to prevent the double pledging of assets. Increased asset certainty is helping to protect and attract capital from new larger, more risk averse investor segments. With the infrastructure changes we’re seeing emerge in the industry today, including the potential of Blockchain technology, this goal of new capital sources is closer to reality for online lenders than ever.

Lendio Announces Annual List of Top 10 Best States for Small Business Lending (PRWeb), Rated: A

In honor of National Small Business Week, Lendio, the nation’s leading marketplace for small business loans, today announced its second annual list of top 10 states for small business lending, based on lending data from the Lendio platform, which matches businesses with more than 75 lenders.

This year’s top states for small business lending are:

  1. Utah
  2. Washington
  3. California
  4. Virginia
  5. Texas
  6. Florida
  7. New York
  8. New Hampshire
  9. Pennsylvania
  10. Georgia

The ranking is based on a calculation of several key indicators, including approval rates and loan sizes, from among thousands of Lendio’s customers from April 2016 to March 2017.

1 – Utah
2016 Ranking: 3
No. SMBs: 268,872*
No. SMB Employees: 540,268*
Average Loan Size: $37,648

2 – Washington
2016 Ranking: 4
No. SMBs: 574,455*
No. SMB Employees: 1,300,000*
Average Loan Size: $24,746

3 – California
2016 Ranking: 2
No. SMBs: 3,800,000*
No. SMB Employees: 6,800,000*
Average Loan Size: $23,391

4 – Virginia
2016 Ranking: 13
No. SMBs: 706,626*
No. SMB Employees: 1,500,000*
Average Loan Size: $20,520

5 – Texas
2016 Ranking: 6
No. SMBs: 2,600,000*
No. SMB Employees: 4,600,000*
Average Loan Size: $21,003

6 – Florida
2016 Ranking: 7
No. SMBs: 2,400,000*
No. SMB Employees: 3,200,000*
Average Loan Size: $21,103

7 – New York
2016 Ranking: 18
No. SMBs: 2,100,000*
No. SMB Employees: 4,000,000*
Average Loan Size: $23,014

8 – New Hampshire
2016 Ranking: 5
No. SMBs: 132,432*
No. SMB Employees: 289,914*
Average Loan Size: $19,893

9 – Pennsylvania
2016 Ranking: 22
No. SMBs: 1,000,000*
No. SMB Employees: 2,500,000*
Average Loan Size: $17,561

10 – Georgia
2016 Ranking: 8
No. SMBs: 1,000,000*
No. SMB Employees: 1,600,000*
Average Loan Size: $16,348

*Source:

The Future of Finance: More Data, Fewer People (Institutional Investor), Rated: A

Credit Suisse is now piloting a robot named Reggie, a virtual assistant not unlike Amazon’s Alexa. Credit Suisse’s Reggie was programmed to answer regulatory questions, according to Brian Chin, CEO of global markets for the investment bank. Chin, who spoke on a panel at the Milken Institute Global Conference in Los Angeles on Tuesday, expects that the Swiss bank will be able to ultimately cut the number of calls to its call center by 50 percent. But at this point, Reggie is better at providing information for simple questions than appropriately addressing more complex inquiries.

The technology exists now to streamline labor-intensive processes such as loan underwriting. Mike Cagney, CEO and co-founder of SoFi, an online consumer lender, uses five pieces of data to provide instantaneous loan decisions. SoFi is now moving to use non-traditional information for underwriting, including data from cell phones, which it thinks will predict consumers’ future behavior. Cagney said banks could shed thousands of people if they used similar technology.

How a Goldman Sachs brand is trying to erase debt stigma (Tearsheet), Rated: A

“There’s a stigma around debt, people don’t like to talk about it,” Nicole Sbarra, a product manager for Marcus, said at an event in New York Thursday night. “It makes them very uncomfortable. And most people also don’t think of credit card debt as actual debt, they see it as a balance… [Marcus] is going to help you understand that there’s more to you than this extreme amount of debt on your shoulders.”

Keeping the brand separate, as much as possible, from Goldman is necessary, in some ways, considering the bank’s history. From 2005 to 2007, Goldman issued and underwrote mortgages and securities backed by residential loans that were borrowed by consumers with poor credit. This led to the housing bubble burst and economic recession. Last year Goldman paid out $5.1 billion for its role in the financial crisis.

Money is one of the most personal and sensitive topics for people, even people with lots of it, which is why empathy plays such an important role in building a financial product. The average American carries some $16,000 in credit card debt and about 70 percent of them don’t know there are alternative options to that credit card debt, said Michael Cerda, head of product.

Leverage Digital Technology To Forge Relationships With Your Clients’ Children (FA Magazine), Rated: A

According to various statistics, millennials and members of Generation X will inherit anywhere from $15 trillion to $40 trillion or more from their baby boomer parents by 2050. This will be the largest cross-generational transfer of wealth in history, but many financial advisors haven’t yet prepared for this opportunity.

As the relationship progresses, advisors can proactively invite a client’s children to meetings, and reach out to them to offer financial planning education at applicable stages of their lives. This education can have a big impact if it is taught using the state-of-the-art reporting, proposal and prospecting tools that come with today’s digital advice platforms. For example, when a client mentions that their teenage son or daughter just secured their first after-school job, the advisor can offer to meet with them to deliver an interactive digital presentation on how to save and invest their earnings.

Justices affirm cities’ right to sue banks under housing law (Arkansas Online), Rated: B

The Supreme Court ruled Monday that cities may sue banks under the federal law that bans discrimination in housing, but it said such lawsuits must tie claims about predatory lending practices directly to declines in property tax revenue.

The justices’ 5-3 ruling partly validated an approach by Miami and other cities to try to hold banks accountable under the federal Fair Housing Act for the wave of foreclosures during the housing crisis a decade ago.

SoFi personal loans: 2017 comprehensive review (Bankrate), Rated: B

Who is a SoFi personal loan good for?

  • Anyone with good to excellent credit. SoFi borrowers have an average credit score of 730, although credit scores range from 680 to 850, according to the company. Check your credit score for free before you apply.
  • High-income earners. SoFi borrowers have an average annual income of $114,000. Real median household income in the U.S. is about $56,500.
  • Someone who has a short credit history. SoFi has no minimum requirement for how long you’ve used credit, but rather looks at how responsible you’ve been at paying bills.
  • Someone who doesn’t need a co-borrower. SoFi, like many other online lenders, does not allow joint borrowers on a single loan. If your credit or income aren’t good enough to qualify on your own, you may want to consider using a different lender.
  • Someone who doesn’t mind an entirely online experience. The entire process takes place virtually — from applying for a loan to receiving approval to having the money deposited in your bank account if you are funded.

SoFi offers both fixed- and variable-rate personal loans that range from $5,000 to $100,000 and are repayable over three, five or seven years. Minimum loan amounts are higher in four states: Arizona, Kentucky, Massachusetts and New Hampshire.

Fees and penalties

  • SoFi doesn’t charge an origination fee.
  • Late payment fee is either 4% of the unpaid installment amount or $15, whichever is less.
  • You won’t be penalized for paying off your loan early.

Celent’s Corporate Banking Appoints Alenka Grealish as Senior Analyst (citybizlist), Rated: B

Celent is pleased to announce that Alenka Grealish will be joining the Banking practice as a Senior Analyst based in San Francisco. Her research will focus on innovation in treasury management services, trade finance, working capital finance, and the implications for customer journeys across segments, including small business. As part of her research, she will track the digitization of the financial supply chain, and the rise of fintechs and new business and revenue models.

United Kingdom

TransferWise Goes Big. Sets up Office in Singapore for Asian Expansion & Global Domination (Crowdfund Insider), Rated: AAA

I am not alone in using the service as Transferwise has grown rapidly around the world. In the UK, 10% of the people who transfer money utilize the service. A recent funding round gave Transferwise a billion dollar valuation so it has achieved Fintech Unicorn status.

Today, Transferwise is moving  around $ 1.2 billion monthly. They estimate they save consumers and businesses, around $2 million daily. Who loses out? The banks, of course.

Global remittance stands at around half a trillion dollars each year. According to the World Bank, remittances in East Asia and Pacific registered about $126 billion last year. If you add South Asia (India, Pakistan, Nepal and Bangladesh) you can add another $110 billion to that number. Transferwise setting up shop in Singapore just makes sense.

European Union

Europe On Pace for Record Year in Fintech Deals (Crowdfund Insider), Rated: AAA

CB Insights reported that European fintech firms raised over $667 million over the first three months of the year through a total of 73 deals. It’s important to note that CB Insights’ report is based only on VC-backed deals as opposed to KPMG’s Q1 report which was based on all types of deals, which is why the report released by KPMG last week showed over $880 million raised from 89 deals in Europe.

In just three months, European firms this year have already raised 60% of the total amount that was raised all of last year.

What’s also promising is the fact that early-stage investing has increased as well. Over $195 million of the amount raised in Q1 of this year was in seed and series A funding rounds. Q4 of 2016 only saw $54 million raised in those rounds.

Australia

PledgeMe Launches Lending Month of May: Seeks to Help Kiwis Learn More About Crowdlending (Crowdfund Insider), Rated: A

On Monday, New Zealand’s crowdfunding platform PledgeMe announced it was dedicating the month of May to lending related goodness.

As part of the program, the PledgeMe crew will be doing the following:

  • Explaining what it means in a super straight forward way; borrowing money doesn’t need to be as complicated as it’s been made out to be. 
  • Create case studies on how it has worked in the past.
  • Hosting a webinar to answer questions real time, and then blog about it.
  • Writing a weekly blog series showcasing how crowdlending can work for various company organizations 
  • Creating a podcast series
  • Putting together a mini-documentary on the company behind “the bubble”

Australian youth drive P2P revolution (AltFi), Rated: A

But its millennials that are driving the P2P revolution. They’re turning away from banks and property in droves and creating space for fintech disrupters, according to new research by RateSetter Australia.

The company has seen the number of millennial investors using its platform increased a startling 250 percent the past 12 months.

The average investment from millennials was only A$10,000, much smaller than the A$50,000-plus averaged by baby boomers and the ‘silent generation’.

China

China Rapid Finance Announces Pricing of Initial Public Offering (PR Newswire), Rated: AAA

China Rapid Finance Limited (“China Rapid Finance”) (NYSE: XRF) announced today that its initial public offering of 10,000,000 American depositary shares (“ADSs”) was priced at US$6.00 per ADS, with a total offering size of US$60 million. Each ADS represents one Class A ordinary share of China Rapid Finance. China Rapid Finance has granted the underwriters a 30-day option to purchase up to an additional 1,500,000 ADSs at the initial public offering price, less the underwriting discounts and commission. The ADSs have been approved for listing on the New York Stock Exchange and are expected to begin trading on April 28, 2017 under the symbol “XRF.”

Yirendai FORM 20-F (SEC), Rated: AAA

119,512,300 ordinary shares, par value US$0.0001 per share, as of December 31, 2016.

IFC and Ant Financial to enable digital financial inclusion in emerging markets (The Asset), Rated: A

IFC, a member of the World Bank Group, and Ant Financial Services Group, the parent company of Alipay, have signed a memorandum of understanding to make basic financial services more accessible in China and other emerging markets.

Under the new memorandum the two parties will strengthen their collaboration for inclusive digital finance, green digital finance, business-environment enhancement and credit-data analysis.

Ant has invested in payment and digital finance companies in India, Thailand and Indonesia.

P2P Industry News (Xing Ping She Email), Rated: A

Monthly Report of China’s P2P Lending Industry
On 1st May, Online Lending House released the monthly report of P2P lending industry. According to the report, the total business volume decreased in April due to the two minor long leaves(Qingming Festival holiday and May Day holiday). However, the trend of the industry is optimistic especially in the number of borrowers, cumulative trading volume and the development of lending platforms.

In April 2017, the loan volume is 224.92 billion RMB, and the cumulative volume reached to 4,330.12 billion RMB, however, the same figure of the corresponding period last year was 1,888.12 billion RMB. Over the past year, the volume in P2P lending industry has nearly increased by 2.5 trillion RMB. The loan balance mainly concentrates on Beijing(338.70B RMB), Shanghai(242.35B RMB) and Guangdong province(177.98B RMB) , jointly accounting for 79.26% of the country’s total balance.

Ant Financial:Alipay Model will be Replicated in B&R(Belt and Road) Countries
The globalization process of Ant Financial started since February 2015 and the business has spreaded to India, Thailand, Indonesia and the Philippines etc. “We look for local partners instead of running a branch abroad, and aim at developing countries with great demand for e-payment rather than developed countries. The immediate benefits from this mode will save 5-8 years’ research and development time.” Jia Hang, the general manager of international division, explained the company’s overall global strategy for the first time. Ant Financial also announced they would keep replicating the Alipay business to other B&R Countries.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

This week, China Banking Regulatory Commission released a documentation “Guidelines on risk prevention and control in banking industry” to regulate the small cash loans market by perfecting the in-out mechanisms, paying more attention to the supervision and decreasing operation risk.

Here are some recommendations for this round of regulatory reform:

  • At present, diverse interest rates should be permitted to coexist, but the existence of exorbitant usury must be prohibited. It is reported that the average interest rate of cash loans has reached 158%, which produces disastrous influence on the development of microfinance industry in China.
  • To reduce risk, government should make the relevant laws to conduct stricter regulation on different kinds of cash loans companies.
  • Training should be provided to microfinance organizations in order to improve operations and strengthen management capabilities.

The Beijing Municipal Administration Traffic Card, more commonly known as the Yikatong, is preparing to tap into demand for mobile payment devices, with the launch of a wristband capable of making contactless payments.

With the wearable tech industry on the rise, Yikatong believes engineering a variety of payment methods is essential to ensuring customer satisfaction. According to analysts at IDC, the wearable devices market is booming, with around 50 million units projected to be sold in 2017, which is expected to achieve a target of 78% average growth a year until 2018.

One of China’s largest online lending platform, CreditEase, has launched a private blockchain service based on ethereum.

Renren Inc., which operates a social networking service and internet finance business in China, announced to reach a strategic partnership with Ping An Bank to develop automobile finance in China.

This week, Chinese bike-sharing startup ofo announced a strategic investment from Ant Financial, but the total funding volume was not disclosed. In the future, ofo will work with Ant Financial on payments, credit and other international business expansion.

India

FinMomenta launches peer-to-peer online lending platform Tachyloans (The Hindu BusinessLine), Rated: AAA

Even as a final set of regulations is yet to be firmed up in the country’s burgeoning digital peer to peer (P2P) lending space, a Singapore-based fintech start-up FinMomenta has launched its operations to tap individuals and businesses that are considered ‘risky’ by the bigger NBFCs and banks.

The company uses a proprietary credit scoring model enabled by Artificial Intelligence and Big Data to assess the creditworthiness of applicants. It also uses e-KYC and Aadhaar for verification of the borrowers that helps lenders to automatically invest in the recommended list of borrowers, according to Khaderbad.

Tachyloans also analyses the social media profiles of its borrowers and uses psychometric analysis to understand their creditworthiness.

The platform is currently open for all resident individuals looking for loans in 50 cities across India.

Tachyloans Targets India’s Fintech Segment Which is About to Touch $ 2.4B By 2020 (BW Disrupt), Rated: A

Tachyloans has made its entry at a strategically important time in India’s burgeoning fintech sector that is forecasted to touch $2.4bn by 2020. Tachyloans uses a proprietary credit scoring model enabled by Artificial Intelligence and Big Data to assess the creditworthiness of applicants. The stronger the credit profile, lesser the credit or default risk. The company’s innovative platform electronically verifies the borrower information using the KYC (Know Your Customer) documentation provided, and qualifies them through their proprietary credit decision model.

At Tachyloans, the entire registration, application and documentation procedure is simplified for both borrowers and lenders, thereby offering complete transparency throughout the process. Unlike the traditional banks, in Tachyloans lenders can earn returns as high as 25% per annum and borrowers can avail loan at lower interest rates starting from 11.5% per annum. The background verification check of the borrowers is also done by various parameters at the backend before getting them on board.

Furthermore, FinMomenta will be looking at collaborating with banks and other financial institutions to ensure a straightforward process and faster disbursement of loans.

Authors:

George Popescu
Allen Taylor