Wednesday June 7 2017, Daily News Digest

Ranking by average gross yield

News Comments Today’s main news: SoFi to add 400 Delaware workers by 2018. KBRA rates Upstart Securitization Trust 2017-1. RateSetter, MarketInvoice, LendInvest make Fintech50 list. China P2P lenders face tighter disclosure rules. Danish fashion tycoon invests in Klarna. Today’s main analysis: RentRange identifies 25 markets with highest average gross yield. Today’s thought-provoking articles: Did someone cancel the fintech revolution? Innovators […]

Ranking by average gross yield

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United States

United Kingdom

China

European Union

International

India

Canada

News Summary

United States

FinTech company SoFi to add 400 Delaware workers by 2018 (Delaware Online), Rated: AAA

SoFi, an online provider of personal loans, will add 400 workers to its Claymont office by the end of 2018.

SoFi entered Delaware in February when it acquired Claymont-based Zenbanx for an undisclosed sum. The Zenbanx purchase bolstered SoFi’s portfolio of online personal finance offerings. Among the former Zenbanx products that now belong to SoFi are software that enables customers to transfer international currency through mobile devices and an app that allows users to transfer money through the sound of their voice.

SoFi has vowed to ramp up the former Zenbanx office with an aggressive hiring plan that will see it add 100 workers by August, 200 workers by the end of the year and 400 employees by the end of 2018.

The majority of the openings are call center jobs, but SoFi is also looking to fill IT, business development and management positions. Of the first 200 openings, 130 will be call center positions, 30 will be mortgage operations jobs and the remaining 40 will be IT, business development and office staff.

KBRA Rates Upstart Securitization Trust 2017-1 (KBRA Email), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Upstart Securitization Trust 2017-1 (“UPST 2017-1”). This is a $163.107 million consumer loan ABS transaction that is expected to close on June 21, 2017.

This transaction is Upstart Network, Inc.’s (“Upstart” or the “Company”) first securitization of prime and near prime unsecured consumer loans. The loans are facilitated by Upstart’s proprietary models supporting an online marketplace that connects borrowers and investors by offering consumer loans originated by Cross River Bank (“CRB”) through the platform, www.upstart.com (the “Upstart Platform” or the “Platform”).

RentRange Identifies 25 Markets with the Highest Average Gross Yield (Markets Insider), Rated: AAA

RentRange, one of the premier providers of market data and analytics for the housing industry, today released data ranking the top 25 U.S. metropolitan statistical areas (MSAs) by highest average gross yield for singlefamily1 homes during the first quarter (Q1) of 2017. The data analysis also identified the average rental rate increase between the first quarter (Q1) of 2017 and the same quarter in 2016, average vacancy rate in Q1 2017 and investor purchases over the past 12 months.

The Q1 2017 RentRange® data shows that the highest yielding markets are dominated by older metro areas in the Midwest and Northeast.

Analyzing the average vacancy rates, which is the percentage of rental properties that are vacant or unoccupied at a particular time, the lowest rates from the list are in Pittsburgh, Indianapolis, St. Louis, Oklahoma City and Canton. Lower vacancy rates generally mean properties stay vacant for less time, limiting the loss of rent.

Source: Markets Insider

Lenders Seeking to Provide Real-Time Credit Offers Online Can Cut Implementation from Months to Weeks with TransUnion Find My Offer Solution (Globe Newswire), Rated: A

As financial institutions seek to improve customer experiences online, TransUnion (NYSE:TRU) today announced the launch of Find My Offer to help lenders deliver relevant credit offers to consumers online. Find My Offer is a set of configurable white-label web screens that support a lender’s consumer prequalification and digital prescreen initiatives.

Lenders can use Find My Offer to acquire new customers and expand existing relationships online. The site automatically integrates with TransUnion’s DecisionEdge suite, allowing lenders to use their existing underwriting criteria for their online marketing.

A top 20 national bank recently utilized Find My Offer to increase online acquisitions. Its IT team estimated a six month development cycle to build a customer-facing site to initiate credit offers online. Using Find My Offer, the bank saved more than 40% in development costs and was able to present relevant, tailored offers to consumers within three weeks – approximately 20 weeks earlier than what was projected using internal IT resources.

Sharestates Launches Auto-Invest Tool for Highly-Tailored Investments While Surpassing $ 500M in Loan Originations (PR Newswire), Rated: A

Sharestates, an online real estate investment marketplace, announced today the launch of its new Auto-Invest tool, a feature that will maximize the investor’s chances of investing in the platform’s highly sought after real estate debt opportunities. The new feature will allow investors to choose from multiple strategies, including a custom investment strategy that includes 12 underwriting filters to choose from. The launch of this new tool coincides with the company reaching a major milestone of $500 million in loan volume.

With the Auto-Invest tool, the investor will have the ability to increase the frequency at which their funds are deployed. These automatic investments will give the investor a better chance of eliminating “cash drag,” which occurs when the investor does not have a chance to log in, review the new loan and manually make their investment before the loan sells-out.

The interface provides a user-friendly and client-focused tool, making investing in real estate loans hassle-free. Additionally, after every auto-invest transaction, the investor will receive a confirmation email with loan and investment details, where they will then have a 24-hour window to opt out or increase participation.

In order to tailor the best possible loan selection for each individual, Sharestates uses a multitude of adjustable measurements for each investor to meet their investment goals. These measurements include; investment totals per loan, maximum investment frequency and limit, interest rate requirements, risk ratings, property types and more.

Sharestates continues to outperform the online real estate lending industry with originations exceeding $500 million since inception in 2014. Current run rates have Sharestates exceeding $1 billion in total originations before the end of 2017, with current monthly totals hovering around $60 million. Sharestates has funded more than 520 individual loans, providing an average return on investment of 10.62%.

Kuber’s Fluid App that Allows Students to Borrow Money Interest Free Now Live on iTunes (Crowdfund Insider), Rated: A

Kuber Inc, a Southern California based Fintech company, has launched it’s personal finance product targeting the more than 22 million university students in United States. Fluid App is now live on Apple iTunes store and free to download. This is first of its kind finance product is designed specifically to build credit for college students in America.

Using the app, users may borrow up to $500 dollars interest free and without and other associated fees. The lending and repayment activities are then reported to major U.S. credit bureaus to start building credit from day one.

Direct Online Loans: Support That Works For You (NuWire Investor), Rated: A

Direct lenders have streamlined their rules and regulations to help those typically overlooked by conventional lenders. They still review you application carefully, but they don’t necessarily use subprime credit scores to reject your application. If you speak with the representatives at MoneyKey, they’ll you know what you need to provide. These reps may review your rating through other channels, but it’s not the only way they’ll determine your candidacy. It’s just one number amongst many factors they use to review your application.

They also don’t rely on in-person meetings to determine your candidacy, as they do most of their business online. All they require is basic contact and financial information submitted in an online application, and they’ll notify you if you qualify within minutes. For those that do, you’ll receive a phone call from a representative to verify the information that you supplied. If everything checks out, direct payday lenders like MoneyKey deposit your approved short term loan into the account that you supplied on your application. In some cases, you’ll receive your cash in as little as one business day.

Robo-Advice Is Not Your Differentiator (FA Magazine), Rated:  AAA

Increasingly, robo-advice technology will become bare necessities for any retail financial advice firm that wants to grow by adding value to financial advisors and their clients.

How to Get Small Business Loans: Part 2 (FX Daily Report), Rated: B

At some point, bank is one of the most reputable lenders. Banks usually have lower interest rates and the credit duration may be longer. However, large banks usually have more requirements and slower process.

These banks may have slightly higher interest rates. However, local community banks offer simpler procedures, as they always want to be the partners for small business. Local banks commonly offers shorter credit period.

They are the most welcoming partners for quick loan. Direct online lenders usually apply a relatively easy loan process. They are also supported by reputable lenders. Another advantage is that the lenders may not require you to provide collateral. Some lenders do not even check your credit record before making approval. Some lenders even offer overnight credit process. Once you send the application today, you will get the money in your account tomorrow.

The disadvantages include higher interest rates, shorter duration, and lower credit limit. Direct online lenders can be easily found on internet. Some of them have only online presence, but some are online divisions of a conventional lending agency.

They also have online presence. However, peer-to-peer lending sites are not the true lenders. Instead, they act as the middlemen between the clients and the lenders.

Merrill Lynch, Betterment Execs Agree On Financial Advice For New Grads (FA Magazine), Rated: B

Joe DePaulo, CEO and co-founder of College Ave Student Loans, had this advice for grads starting a job on how to ease the burden of the ball and chain of college debt weighing on their finances:

1. Organize all your student loans to make sure you know when your monthly payments start, the amount due for each one and your various due dates so you don’t accidentally miss any payments or pay late.
2. Get to know your loan servicers — the companies handling the billing and payment services for your loans — and make sure each of them have your current contact information, including both your e-mail and mailing address.
3. Consider signing up for auto-pay for each loan through your student loan servicers. You’ll often get a discount on your interest rate when you’re making automatic payments, and you’ll know that your payments are being made on time each month. It’s a great way to save money and build good credit.
4. Know your grace period for your student loans, or how long you can wait after leaving school before you have to make your first payment. This can vary by loan depending which types of loans you have. The grace period is usually six or nine months, and it’s designed to give you time after you graduate to find a job and get on your feet before payments are due. Interest continues to accrue during the grace period on most loans though, so if you have the ability to start making payments before the grace period ends, you should. This will help you save money in the long run.
5. Pay attention to the interest rate on each loan. When you can afford to pay a little extra, you’ll usually save the most money by paying down the loan with the highest interest rate first.

United Kingdom

RateSetter, MarketInvoice and LendInvest make this year’s Fintech50 list (P2P Finance News), Rated: AAA

RATESETTER, MarketInvoice and LendInvest have made this year’s Fintech50 list, while Funding Circle and Zopa have been awarded a place in the Fintech50 Hall of Fame.

The annual Fintech50 list, which was first launched in 2013, selects the 50 European fintechs that are transforming financial services and recognises innovation rather than revenue. The companies are selected by a panel of more than 60 industry experts, following extensive year-round research from the Fintech50 team.

This year’s list, unveiled at a launch event at Silicon Valley Bank in London on Tuesday night, was chosen out of 1,500 companies. As well as an impressive presence from a raft of UK peer-to-peer lenders, the list includes business finance provider Iwoca, crowdfunding platform Seedrs, challenger lender Atom Bank and cryptocurrency Ethereum.

The Fintech50 2017:

  • Action.ai (London, UK)
  • Advice Robo (Amsterdam, Netherlands)
  • Aire (London, UK)
  • Algomi (London, UK)
  • AQMetrics (Kildare, Ireland)
  • Atom Bank (London, UK)
  • Azimo (London, UK)
  • Behaviosec (Stockholm, Sweden)
  • Bonify (Berlin, Germany)
  • Clearmatics (London, UK)
  • Clearscore (London, UK)
  • ComplyAdvantage (London, UK)
  • Contego (London, UK)
  • Credit Benchmark (London, UK)
  • Curve (London, UK)
  • Cuvva (Scotland, UK)
  • DarkTrace (Cambridge, UK)
  • Digital Shadows (London, UK)
  • Ethereum (worldwide)
  • FeatureSpace (London, UK)
  • Fenergo (Dublin, Ireland)
  • Figo (Hamburg, Germany)
  • FundApps (London, UK)
  • Iwoca (London, UK)
  • Kantox (London, UK)
  • LendInvest (London, UK)
  • Mambu (Berlin, Germany)
  • MarketInvoice (London, UK)
  • Meniga (Rejkyavik, Iceland)
  • Monzo (London, UK)
  • N26 (Berlin, Germany)
  • NetGuardians (Switzerland)
  • Onfido (London, UK)
  • OpenGamma (London, UK)
  • PayKey (Tel Aviv, Israel)
  • Privitar (London, UK)
  • Qumram (Zurich, Switzerland)
  • Railsbank (London, UK)
  • Raisin (Berlin, Germany)
  • RateSetter (London, UK)
  • Revolut (London, UK)
  • Scalable Capital (Munich, Germany / London, UK)
  • Seedrs (London, UK)
  • SETL (London, UK)
  • solarisBank AG (Berlin, Germany)
  • Suade (London, UK)
  • Thought Machine (London, UK)
  • Traxpay (Berlin, Germany)
  • Trussle (London, UK)
  • WeFox (Switzerland)

The FinTech50 Hall of Fame:

  • Adyen (Amsterdam, Netherlands)
  • Currencycloud (London, UK)
  • eToro (Limassol, Cyprus)
  • Funding Circle (London, UK)
  • iZettle (Stockholm, Sweden)
  • Klarna (Stockholm, Sweden)
  • Nutmeg (London, UK)
  • Transferwise (London, UK)
  • WorldRemit (London, UK)
  • Zopa (London, UK)

The Hot Ten – this year’s ones to watch:

  • Bud (London, UK)
  • ClearBank (London, UK)
  • Cleo (London, UK)
  • Datasine (London, UK)
  • Deposify (Dublin, Ireland)
  • Governance.io (Luxembourg)
  • Meteo Project (Paris, France)
  • Nxchange (Amsterdam, Netherlands)
  • Post Quantum (London, UK)
  • 10xBanking (London, UK)
China

China P2P lenders facing tighter disclosure rules (China Economic Review), Rated: AAA

Efforts to clean up China’s scandal-plagued peer-to-peer (P2P) lending sector are taking another step forward with a pilot program that imposes tighter information disclosure requirements to protect customers from being swindled, Caixin reports.  Under an initiative announced on Monday, companies will have to give people who use their P2P platforms a range of information including their registration address, shareholders, who provides custodian services, how many investors they have, their bad loan ratio and their outstanding loans. Altogether 47 separate pieces of information will need to be disclosed, 32 of which are mandatory, according to the National Internet Finance Association of China (NIFA), which is in charge of the pilot.

Chinese banks boost offshore lending in Asia-Pacific (The Asset), Rated: A

Chinese banks have been increasing their offshore lending volume in Asia-Pacific, outside of Japan, since 2014. Based on the pro-rata mandated lead arranger (MLA) role, China’s offshore lending amounted to US$70.5 billion via 300 deals in 2016, or nearly double the 2015 figure of US$36.3 billion, and nearly three times the 2014 volume of US$24 billion in 2014.

Figures released by Thomson Reuters on June 5 show that the bulk of China’s offshore lending has been concentrated in Northeast Asia. In 2016, Chinese banks accounted for US$52.7 billion through 172 transactions on a pro-rata basis at the MLA lender level, representing an increase of 83% from 2015.

European Union

Danish fashion tycoon invests in Swedish payments firm Klarna (Daily Mail), Rated: AAA

Anders Holch Povlsen, owner of Danish fashion retailer Bestseller, is buying a stake in payments firm Klarna, one of Europe’s most highly valued tech startups, the firm said on Wednesday.

A Klarna spokeswoman declined to comment on the precise size of the stake, but said it would be at least 10 percent.

Klarna said Povlsen’s company Brightfolk would buy shares from General Atlantic, DST Global and Niklas Adalberth, who will all still retain stakes in the firm.

Doing KYC on International Investors and the Potential of Automation (P2P Banking), Rated: A

On the majority of p2p lending marketplaces that accept non-resident international investors, the necessary process to comply with ‘Know Your Customer’ (KYC) rules involves multiple manual steps both on the side of the investor and on the side of the marketplace. After filling in details in forms the investor typically needs to submit scans (or photos) of an ID or a passport. As an investor  I balk at the very few marketplaces that ask me to submit these via unsecured email. The better ones offer an upload inside the SSL secured website after login. The British marketplace typically also require a recent utility bill to confirm address.

In continental Europe a few marketplaces are doing video ident. Recently when I registered at Paskoluklubas, aside from entering details in forms I needed to schedule a Skype video call in which I answered several questions and had to show my ID live. While it was straightforward, it is not more time efficient (both for investor and for marketplace). And I was lost for words for a split second when asked for my zodiac. How many non-native-english speakers can answer that question without hesitating for the right word (luckily mine is easy to translate).

Another example of outsoucing is the process Lenndy uses. When registering, all an investor is asked by Lenndy is his email address, nothing else. Then the investor is required to link an Paysera account with at least level 3.

Last week British Relendex moved from a manual document upload process to an automated process for investors of 7 countries; Australia, Canada, Denmark, Germany, Sweden, Switzerland. Relendex uses the Call Validate solution and checks (in case of Germany) first , middle, last name, gender, phone, address, city and postal code with the data coming from three different data sources and which Relendex says has high match accuracy. Relendex’s criteria was that the data available should be of equal quality and accuracy to that of the UK database.

Irish fintech start-up Plynk raises €25m in fundraising round (The Irish Times), Rated: A

Dublin-based financial payments start-up Plynk has raised €25 million in a Series A fundraising round as it looks to roll out its money-messaging app globally.

The investment, which has been led by Swiss Privee, is one of the largest-ever Irish Series A rounds.

The company has also announced plans to increase headcount from eight to 28 over the next 12 to 18 months as the number of users it has in Ireland this week reached 6,000, easily surpassing its initial target of 4,000.

Plynk has a licence to operate across the European Economic Area, which includes the EU along with Iceland, Liechtenstein and Norway. While only available in Ireland, the start-up intends to roll out its app in Spain over the summer with Portugal to follow shortly after.

German fintech platform Fincompare raises €2.5 million to provide financing for SMEs (Tech.EU), Rated: A

The German fintech startup Fincompare has raised €2.5 million in seed financing. The funding comes from the VC Speedinvest and Uniqa insurance, both from Austria. Several business angels from Berlin also participated in the round.

The Fincompare platform allows SMEs to receive and compare various offers for loans – anywhere from €10,000 to €5 million.

Grundag Real Estate Crowdfunding Platform Launches Powered by CrowdDesk (Crowdfund Insider), Rated: A

A new real estate crowdfunding platform has launched in Germany. Grundag GmbH & Co., a wholly-owned subsidiary of CrowdDesk, has launched to provide debt based crowdfunding for German real estate projects. CrowdDesk is a white label crowdfunding platform that powers several well established platforms in Germany. The new site was launched in partnership with ERGE Miet- & Finanzvermittlung GmbH & Co. KG.

International

FINTECH – DID SOMEONE CANCEL THE REVOLUTION? (Finextra), Rated: AAA

There are indications the Fintech revolution has stalled. It promised to change market structure, to radically improve products and services, and to save the incumbent banking sector from a slow slide to invisible utility status.

But these promises are yet to come to pass. Yet the revolution could still be completed – the underlying technologies are real and, deployed in the right way, they can still have a transformative effect on the financial services industry.

Source: FinTech – Did Someone Cancel the Revolution, Accenture

Read the full report.

FinTech Innovators vs. Incumbents: Understanding the Odds (Morgan Stanley), Rated: AAA

How can investors navigate this next chapter in FinTech? In a recent global collaborative report, “FinTech: A Gauntlet to Riches,” Faucette and his colleagues offer an investment framework for understanding where FinTech companies are likely to disrupt—and where established players are poised to get ahead.

Indeed, the pace of venture capital funding in FinTechs has slowed recently, suggesting that early-stage investors are coming to grips with the challenges of this space, and that established financial services firms are likely to take a more meaningful role in funding and developing new technology.

To understand which trends favor startups and which bode well for incumbents, investors should ask some key questions:

  1. What is the existing infrastructure? Innovators have the best shot at success in areas that lack established infrastructure. One area that is particularly poised for growth is B2B payments, a large and underserved corner of the market, with roughly 50% of payments still made via checks.
  2. Is consumer behavior changing? Early adopters in a nascent market tend to be more receptive to a new technology or provider, giving innovators a first-mover advantage. This bodes well for FinTech disruptors focused on small-business insurance (a.k.a. InsurTech).
  3. Does government help or hinder innovation? 
  4. How important is access to data? Investors should take note of the role of data, which can limit a small firm’s ability to scale without partnering with a data owner.
  5. Does success hinge on collaboration? 
  6. How important is access to capital markets? Companies that require continuous access to capital markets are subject to a high degree of market volatility, which can put an entire business model in jeopardy if still early in its formation, says Faucette. For fledgling U.S. marketplace lenders (a.k.a. peer-to-peer lending) and mortgage originators, access to capital markets could be a limiting factor, especially now that established players are investing in the space.
  7. Is the industry concentrated?

TransferWise CEO: ‘There is a huge fight to be the fintech capital of the world’ (Business Insider), Rated: A

The CEO and cofounder of TransferWise says cities around the world are becoming increasingly competitive in attempts to attract tech companies.

Luxembourg earlier this year set up a public-private partnership called the “House of Fintech,” aimed at attracting more companies to set up in the country. Lobbyists from Paris have made multiple trips to the UK in recent months in a bid to tempt financial services, including fintech, to set up in the French capital in the wake of Brexit. The Monetary Authority of Singapore has also copied the UK regulator in setting up a regulatory “sandbox,” which allows innovative companies to experiment with new products in a safe environment.

Why Trustly CEO Oscar Berglund Is Offering An Alternative To Credit Cards (Forbes), Rated: A

Excitement over fintech remains high even though investor enthusiasm has been curbing in recent months. According to a KPMG report, the flow of investments has started to ease. Global investments dropped to $3.2 billion in Q1 of 2017 from $4.15 billion in Q4 of the previous year. Indeed, investors seem to have made their wagers and are now more focused on ensuring that existing fintech companies start delivering.

More mature segments, such as payments, are also seeing saturation, as new competitors seek to maximize opportunities in markets keen on going cashless.

Having processed a whopping €3.2 billion in transactions in 2016, payment startup Trustly has recently emerged as a leader in the global fintech scene. Based in Stockholm, Trustly offers a fresh perspective on payments by putting the bank account at the center of digital payments instead of credit cards. The company is now used in 29 European countries, enabling merchants to perform cross-border business easily.

Berglund: We aren’t really going head to head against big banks. We see the bank account as the hub of people’s financial lives, and it’s what most other payment methods depend on. Trustly’s service is built around the relevance of the bank account and as such around the relevance of banks.

In Europe banks focused on the online channel are at the forefront of the adoption of new technology and I believe more banks will no doubt make use of our services going forward.

Berglund: Credit cards were invented to make payments easier in the physical world, but they may not have the same raison d’être as people move to online and mobile platforms. The truth is, it’s a pain to dig for your credit card and key in a long string of numbers, especially if you’re on the go and trying to make a purchase from a tiny smartphone screen. With Trustly, users can make a payment in just a few steps using only information they know top of mind. And our product is optimized for mobile and other devices to make it even more convenient. So while credit cards won’t be going anywhere for a while, it’s important to offer other user-friendly alternatives too.

India

CIOs Will No Longer be the Most Influential Technology Decision Makers (BW Disrupt), Rated: AAA

The year 2016 registered an impressive impact on the Indian economy and therefore was a landmark year for fintech and banking industries. This year, 2017 started out to be an exciting one for Financial Technology which will spell out a future of continued scale and disruption for the industry, especially after India’s digitalisation movement. With the proliferation of cloud and mobile technologies advancing and customer demand for better digital banking experiences growing, Fintech firms will continue to innovate faster and offer new services with richer user experiences.

Top 5 Trends to watch out for: 

  1. Mobile Everything
  2. Chatbots, machine learning & AI
  3. Banks & Fintech firms to partnerAccording to a recent Business Insider report, 87% of banks that have partnered with financial service providers (fintech companies) have been able to cut costs. Additionally, the same study found that 54% of partnerships increased revenue.
  4. Blockchain moves out of the labs into the real world
  5. Reforming Digital Leadership: CIOs will no longer be the most influential technology decision makers. With the continued rise of the Chief Digital Officer and in many cases the Chief Marketing Officer will help financial institutions usurp the IT team in implementing ‘digital’ throughout the organisation.

FinMomenta Plans to Expand Footprint of P2P Lending Model ‘Tachyloans’ to Other Asian Nations (BW Disrupt), Rated: A

FinMomenta founders believe that they are the Next Moment in FinTech industry. With their latest product TachyLoans, they plan to build a digital lending marketplace that connects people (Investors/Lenders) who wants to invest/lend their incomes, with people (Borrowers) who are looking to borrow funds to meet their financial requirements. The platform caters to both Individuals and Small & Medium Enterprises (SMEs).

How does the platform FinMomenta work?

Investors can earn returns as high as 25% per annum and borrowers can avail loan at lower interest rates starting from 11.5% per annum. Interest rates are charged based on borrower’s creditworthiness. Lenders and borrowers can negotiate on the loan amount, interest rates and loan tenor through a two-way bidding process available on their dashboard.

Please elaborate key features/services of Tachyloans?

The platform uses a unique 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.

Tachyloans not just focuses on cutting down the transaction time for lenders and borrowers but also reduces the overhead costs associated with the traditional lending process and enables us to pass on the cost savings to lenders in the form of higher returns and to borrowers in the form of lower interest rates. Lenders and borrowers can negotiate on the interest rates through Tachyloans platform.

What is the Monetization model of FinMomenta?

FinMomenta charges a service fee to both lenders and borrowers for having loans enabled on the platform.

What is the market size and opportunities for companies operating in Fintech industry in India?

Consumer credit market in India is currently at $300bn out of which $98bn is the personal loans market. The market is currently growing at 14% year on year. The SME business loan market is currently at $600bn and is expected to grow to $3.4 trillion by 2022. In terms of the population, out of 1.2bn population only 150mn population has their history in credit bureaus and 20mn has scores acceptable to banks. There is a very small population that is being serviced by the banks. Around 10mn citizens are entering jobs every year and with more than 55% less than 45 years, the population would have huge aspiration to grow in life which would require access to credit for them.

Canada

Aztec Exchange Launches PayMe in Canada with EDI Gateway (PR Newswire), Rated: A

Aztec Exchange, a global supplier of invoice finance products and services, and Canadian EDI provider EDI Gateway today announced a partnership to deliver Aztec’s breakthrough early e-invoice payment service PayMe (payme.cloud) to EDI Gateway’s (edigateway.com) Canadian supplier and corporate clients.

PayMe is unique in the early payment market because, unlike with factoring firms, creditworthiness is based on that of the buyer, not the supplier.  There is complete pricing transparency, meaning there are no hidden fees or interest charges.  Suppliers are only required to pay a minimal invoice discount charge and a standard transaction fee.  For customers on the EDI Gateway platform using PayMe, this means they’ll typically receive payment within 24 hours.  Furthermore, because it’s entirely online, they can submit for early payment any time from any internet-connected device.  There are also no restrictive long-term contracts and suppliers can sell as many approved invoices as they want.

This partnership with EDI Gateway is the latest for PayMe, which launched in May 2016.  Over the course of the past year, PayMe has had tremendous growth and is now available to more than 100,000 SMEs globally via e-invoice providers as a white label solution for traditional banks.  It will soon be launched directly through corporates. For EDI Gateway, PayMe complements their existing e-invoicing solution, enabling them to offer an integrated payment and financing service.  The firm looks to continue this approach going forward to attract and retain their retail and vendor clients.

Authors:

George Popescu
Allen Taylor

Monday February 27 2017, Daily News Digest

funding circle sme income fund

News Comments Today’s main news: SoFi raises $500M for international expansion. Funding Circle business jumped 50% post-Brexit. Bank lending in UK soars. Today’s main analysis: My adventures in various p2p lenders. How P2P funds have fared over the last 12 months. Today’s thought-provoking articles:  Rise of P2P in Korea puts government on edge. Canadian regulators welcome FinTechs. United States SoFi […]

funding circle sme income fund

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International

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China

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Asia

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United States

SoFi Raises $ 500 Million Led by Silver Lake for Global Expansion (Bloomberg), Rated: AAA

Social Finance Inc. said it raised $500 million in a financing round led by private equity firm Silver Lake Partners. It plans to use the funds for international expansion of its online lending business and development of new financial products.

Other investors in the round include SoftBank Group Corp. and GPI Capital, and the funding brings SoFi’s total investment to $1.9 billion, the company said. Several sovereign wealth funds from countries in Asia and Europe invested as well, said Mike Cagney, SoFi’s chief executive officer and co-founder. The international group will purchase SoFi’s loans in addition to taking an equity stake, he said.

SoFi said it plans to develop new personal finance tools, including mobile deposit, credit and payment products that will be rolled out this year. It also anticipates bringing its lending products to Australia and Canada by the end of the year.

My Adventures in Fintech (Wealth Management), Rated: A

Two major factors have come together to make fintech platforms so popular. First, the rise of smartphones puts the apps right into the hands of millions of users who feel alienated by slow-moving traditional banks. Second, the financial crisis of 2008 eroded the borrowing ability of many middle-class individuals and small business owners as banks curtailed unsecured lending and other high-risk loans.

From 2010 to 2015, investment in fintech has grown from $1.8 billion to $22.3 billion, according to Accenture.

Lending Club

I started investing in Lending Club in 2011. My experience is limited to being an investor. I am a fractional owner in a total of 3,167 notes (see Figure 1).

So, if any one note defaults, my downside is generally limited to $25. Of those notes, 1,387 are current (that is, the individual borrowers are current in their payments), 1,269 notes have been fully paid off, and 432 notes have defaulted and been charged off.

 

My 12.97 percent net annualized return will probably be reduced by 1 to 2 percentage points given the predictable defaults, but I’m very satisfied with the results to date.

I faced two major issues in managing a P2P account. First, how to select notes. Second, how to manage the small amounts of cash that accumulate every day. The Lending Club website lists tens of thousands of notes available for investment at any time, each with details about the underlying borrower such as income, credit score, whether he or she owns or rents, state of residence, purpose of loan, etc. At first, I inspected each note and selected the ones that appealed to me, but that can be a full-time job and is probably counterproductive. It’s much easier, and probably more reliable, to trust the Lending Club automated investment system.

Upstart

Almost all Upstart borrowers are recent college graduates at the beginning of their careers. This population has a much thinner conventional credit history, so Upstart developed an algorithm that looks beyond traditional credit data such as earning potential and employability. To invest with Upstart, you must be an accredited investor.

But lately, the platform is encouraging investors to determine a risk grade then automate the selection. Risk grade notes run from AAA to D. Almost every borrower signals that they intend to use Upstart funds to consolidate high interest credit card debt.

I have funded on a fractional basis 140 three-year notes from exclusively Grade B borrowers. Eight notes have matured. One borrower has defaulted. The value of my account is $13,933. I’ve made $452 in interest and my annualized IRR is 7.24 percent (Figure 3). Based on Upstart’s performance statistics (Figure 4), my performance of 7.42 percent is apparently better than the average across all notes (5.72 percent).

Acorns

I easily linked Acorns with my checking and credit card account more than a year ago. Since then, it has been systematically rounding up my purchases to the next dollar and investing the difference in a diversified portfolio of ETFs.

At the end of a year, I had contributed a total of $283.57, and earned $3.17 in dividends. I’ve paid a total of $8 in fees. The current value of my account is $282.23—not too great of a return until you consider I chose the “conservative” balanced portfolio with 39 percent in government bonds and 18 percent in corporate debt.

Fees are $1 per month or 0.25% per year, depending on your balance. The app is free and fees are waived to college students for four years.

Weekly Online Lending Snapshot – February 24, 2017 (Orchard Platform), Rated: AAA

In China, as reported by the Beijing Bureau of Financial Work, nine out of 10 of the roughly 5,000 lending platforms across the country may not survive the coming year as the government begins a well-telegraphed tightening ofregulatory supervision of these lending platforms. NatWest Bank, in the U.K., announced the launch of a digital platform for small and medium-sized businesses to apply for unsecured loans up GPB$150,000. Australian small business lender Prospa raised an AU$25 million funding round led by Sydney-based AirTree Ventures valuing the firm at AU$235 million.

3 Industries Being Disrupted by Crowdfunding (Entrepreneur), Rated: A

1. Corporate finance: From software to farm equipment

Large finance organizations can use it as a catalyst for gaining small businesses who seek to harness leased products that are tailored to them specifically. What’s more, the lower cost credit of the products they offer will appeal more to businesses that pay sky-high APRs.

For leaseholders of larger equipment, crowdfunding platforms will allow leaseholders such as farmers to finance crops and equipment from other farmers and associates.

2. Real estate: From housing to business establishments

Before crowdfunding, closing an actual real-estate deal required back and forth passing and signing of documents among lawyers. Beyond being slow, the process often added up to thousands of dollars in legal fees. Crowdfunding allows businesses of all sizes to bypass the monotonous process and dodge expenses. What’s more, real-estate crowdfunding allows potential investors access to a wider array of deals.

3. Consumer lending: Cars and home appliances

For financial institutions, this means learning to leverage a crowd’s interest to inform their lending offers. As the trend continues, new crowdfunding platforms will pop up to cater to specific lending verticals. Imagine a crowdfunding space where consumers can get loans for anything related to transportation or kitchen appliances. In this way, brands will be able to save on financing costs while gaining on capital returns.

AUTOFI UNVEILS ONLINE MULTI-LENDER SALES SOLUTION FOR USED CAR DEALERS (iLendingDirect Email) Rated: A

Today AutoFi, a financial technology company that is transforming the way cars are bought and sold, announced the launch of the first fully online sales and multi-lender financing solution for used car dealers. Financing on AutoFi’s platform will be provided by its lender network of banks, speciality lenders, and credit unions. Today, the company announced that its credit union financing will be offered in partnership with iLendingDIRECT.

The AutoFi platform is the first online point-of-sale solution for auto finance. It allows customers to purchase and finance a car completely online, either through a dealer’s website or an in-store digital experience. The company recently announced the world’s first online car sales and financing solution for new car dealers in partnership with Ford Motor Credit. Today’s announcement further expands AutoFi’s ability to serve the multi-billion-dollar used car sales market through its partnership with iLendingDirect.

AutoFi’s platform will now allow used car buyers to research a vehicle on the dealership’s website; select “Buy Now”; receive an automated credit decision; and get loan offers from banks, specialty lenders and iLendingDIRECT’s credit union network who compete for the car buyer’s business in real time.

Consumers can then customize their financing deal by selecting down payment and loan  terms; choose vehicle protection products; and e-sign all financing documents online. The new platform gives used car dealers and buyers the ability to transact online with competitive financing options in a fully automated process.

Lending Club Alters Grace Period for Borrowers (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) has tweaked the way it manages the “grace period” for borrowers when they make payments past the due date. Previously, borrowers received a 15 day grace period for any penalties on payments less than 15 days late.  Beginning today, Lending Club requires borrowers to pay the additional accrued interest as a result of their late payment.

RentRange Identifies 25 Markets with the Largest Rental Rate Increases (MarketWatch), Rated: A

RentRange, one of the premier providers of market data and analytics for the housing industry, today released data ranking the top 25 U.S. Metropolitan Statistical Areas (MSAs) by average rental rate increase for single-family1 homes between the fourth quarter (Q4) of 2016 and the same quarter in 2015. The data analysis also identified the average vacancy rate within these markets in Q4 2016.

The Q4 2016 RentRange® data identified rental rate increases in areas like Cape Coral and Portland, both of which moved up the list into the top five, as well as newcomers including McAllen, Denver, Boston, Nashville and Miami. While rents remain high in the Bay Area, San Francisco dropped several positions, indicating that the year-over-year rent change was not as significant as seen in past years. Comparatively, San Jose made the list as a new addition in Q4 2016.

Analyzing the average vacancy rate, which demonstrates the percentage of all available units in a rental property that are vacant or unoccupied at a particular time, shows that the highest rates, as reflected from the list, are seen in the Southeast region, where vacancy rates range from 10.5 percent in Charleston to 20.4 percent in Myrtle Beach. In these areas, builders and investors may need to compete for a limited number of renters. An oversupply of new properties can drive up the vacancy rate and eventually push rental rates down. This scenario is currently happening in Myrtle Beach, where more than 3,100 new homes were built in 2015, a 94 percent increase compared to two years earlier.

United Kingdom

Brexit Terrified This CEO. Then Business Jumped 50% (Bloomberg), Rated: AAA

At sunrise on June 24, Samir Desai rushed to his offices near St. Paul’s Cathedral in London. Britain had just voted to quit the European Union and he knew his staff at peer-to-peer lender Funding Circle Ltd. would be freaking out.

As the pound tumbled and the government quaked following the resignation of Prime Minister David Cameron, Desai walked the floor of Funding Circle’s whiteboard-decked offices, fielding anxious questions. The non-British EU citizens feared they’d have to leave the country. The sales team feared that investors funding the firm’s loans to small businesses would bail.

In the eight months since the Brexit vote, Funding Circle has been on a tear. The firm originated more than 530 million pounds ($685 million) in loans during the second half of 2016, a 50 percent jump from the same period a year earlier, according to AltFi Data Ltd., which analyzes the British peer-to-peer industry. In the fourth quarter, Funding Circle’s U.K. division became profitable for the first time.

The question now is whether Funding Circle’s post-referendum run has legs. Meekings theorizes that volume has been driven by the Bank of England’s decision to lower interest rates to 0.25 percent from 0.50 percent in August. That spurred more retail investors to chase yield in the firm’s loans, which are returning an average 6.2 percent annually. Meantime, credit-hungry borrowers may also be flocking to Funding Circle as banks retrench from lending to small companies.

The great British credit boom: Bank lending soars in January (P2P Finance News), Rated: AAA

Figures from the British Bankers Association (BBA) showed that total consumer borrowing growth rose to £538m, more than doubling from December’s figure. This was primarily driven by the increase in personal loans and overdrafts, which rose to an eight-month high of £422m.

Meanwhile, bank lending to businesses rose by £3.4bn in January, which was the largest increase since January 2015.

Banks tightened up lending after the financial crisis which had a detrimental impact on economic recovery, although it created an opportunity for the peer-to-peer lending sector.

At 44,657 in January, mortgage approvals for house purchases were up 18.6 per cent from their August 2016 low, although they were still 2.5 per cent below the January 2016 level.

Gross mortgage borrowing came in at £13.8bn, with re-mortgaging approvals 15.7 per cent higher year on year.

How P2P funds have fared over the past year (P2P Finance News), Rated: AAA

Net asset value (NAV) returns range from three per cent to 20 per cent while discounts to NAV have fallen as low as 20 per cent.

P2P Global Investments

Almost 60 per cent of the assets are in the US, with 23.2 per cent in Europe, 8.7 per cent in cash, 6.4 per cent globally and 2.2 per cent in Australia.

Over the past 12 months its NAV has grown 5.34 per cent and it is currently on a discount to premium of 20.8 per cent.

SME Loan Fund

Almost two thirds, 63 per cent, of assets are in the UK, with 13.1 per cent in the US, 18.6 per cent in Europe and the rest in cash.

The trust has seen its NAV total return grow by seven per cent over the past 12 months and it is currently trading at a discount to net asset value of 10.3 per cent.

Ranger Direct Lending

The ordinary income share class is currently on a discount to NAV of 10.5 per cent while the zero preference and c share classes are on 2.2 per cent and 1.2 per cent respectively.

Funding Circle SME Income Fund

Its regional exposure is currently broken up as 73 per cent in the UK, 17 per cent in the US, two per cent in continental Europe and eight per cent in cash.

It has seen its NAV deliver total returns of 6.7 per cent over the past 12 months and is currently on a premium of 1.6 per cent.

VPC Specialty Lending

The investment trust is composed of 36 per cent marketplace loans and 39 percent in balance sheet investments, with the rest in shares, securitisation and cash.

Its NAV has returned 3.1 per cent over the past year and it is trading at a discount to NAV of 19.4 per cent.

Honeycomb Investment Trust

It has returned 8.7 per cent over the past 12 months and is on a premium to NAV of 7.7 per cent.

RateSetter Forms Partnership With Accountancy Advisor TaxAssist to Engage With SMEs (Crowdfund Insider), Rated: AAA

Online lender RateSetter has formed a partnership with accountancy advisor TaxAssist Accountants to help engage with small and medium-sized enterprises (SMEs). TaxAssist Accountant notably specializes in all businesses with a turnover of £2 million of less. It has more than 290 locations throughout the UK.

I’d use peer-to-peer lending to beat the banks (Moneywise), Rated: A

This growing market, which is now regulated, is dominated by three players – Funding Circle, RateSetter and Zopa. The annual interest on offer varies, ranging from 2.9% (RateSetter) through to in excess of 7% (Funding Circle), but so does the degree of risk you will take.

While the 2.9% interest on offer from RateSetter comes with the backing of a ‘provision fund’ (designed to protect your capital from losses if loans turn bad), the 7% from Funding Circle has no such underpin. If a loan goes bad, your capital could be compromised.

My peer-to-peer money is spread across 16 businesses operating in everything from retail through to IT. It is effectively an investment play on UK plc. When the economy is strong, my companies are more than likely to keep repaying the loans they have secured.

Welendus Live on Seedrs (Welendus Email), Rated: A

I am pleased to announce that Welendus is now back live on Seedrs. I would like to invite you to visit our campaign and watch our video at (

The Funding Network celebrates 15th anniversary (UK Fundraising), Rated: B

The Funding Network celebrates its 15th anniversary this March, having so far raised over £9.8 million for more than 1,450 social change projects through its live events since its 2002 launch.

TFN is celebrating with a special event on 16th March at the Funding Circle’s Funderbar in London.

International

Marketplace lending news roundup 27/02/17 (AltFi), Rated: AAA

In the UK, the overall market for alternative finance has just ticked over £10bn – including crowdfunding – in terms of the amount of money lent and invested into the equity of companies via crowdfunding platforms.

UK P2P business lending Growth is still in rude health as proven by AltFi Data’s number crunching, in the same week that Funding Circle tops £2bn mark. In the funds world, P2P GI has continued its share buyback strategy while the SME Loan Fund may be about to see an investment management change by New York-based SQN.

Not so good for US-based OnDeck, which despite a surge in Q4 lending is looking to cut jobs amid rising losses.

Financial technologies that make banks better (Finextra), Rated: A

A Reykjavik-based company strongly commits to improving the way the banks function. Meniga is, mostly, known for its money management software that allows the banks to start offering great personal and business financial management applications to their clients without investing heavily into the development.

Recent developments in Payment Services Directive 2 make banking APIs so important as never before. On the one side, banks are required to provide open technology for accessing their customers’ data to third parties. And, instead of investing into the development of open APIs, a bank can pick the technology up from Kontomatik as it already has the API in place. On the other side, smart banks will not only release open APIs but will also do everything at their disposal to benefit from the access to the data of other banks.

Started in 2009, it has taken Kabbage roughly 5 years to come up with a white-label solution that allows financial companies to use its technology for assessing the risks and issuing the loans online. With white-label technologies from Kabbage, a bank should be able to launch a great B2B lending platform without investing into development, testing and implementation of the modern risk assessment models.

Australia

US Market leader delivers keynote address to AltFi Australasia (The Bull), Rated: A

A reluctance by banks and government agencies to share data with alternative lenders is driving up the cost of borrowing in Australia, a global fintech leader told the AltFi Australasia conference in Sydney today.

Rob Young, Senior Vice President, International at OnDeck Capital Inc, said that a lack of open data is a major issue for alternative lenders in the fintech space.

He explained that in Australia, there is limited sharing of credit, banking or tax data, while the UK’s open data regime has forced banks to share customer data and open up their APIs to third parties.

“The UK is a great example of where open data has been in place for several years, the alternative finance sector is flourishing, and even the banks have benefited by opening up cross-sell opportunities within their own businesses. It’s a win-win for the lending sector and its customers,” Mr Young said.

Fintech Business Awards announces 2017 winners (EconoTimes), Rated: B

Midwinter Financial Services that has developed a range of cutting edge financial planning software packages, has been recognized for the Fintech Business Excellence Award for company category, having been awarded the highest points of all winners.

Other awards in the fintech category include Fintech Mentor of the Year that was awarded to Claire Wivell Plater from The Fold Legal and Fintech Start-Up of the Year given to Valiant Finance. Apart from this, Crowdfunding Innovator of the Year, Insurance Innovator of the Year, Payments Innovator of the Year, Investment Innovator of the Year, among other awards were also recognized.

China

The day of reckoning is nigh for fintech startups (SCMP), Rated: A

What started as a venture capital-driven, primal scream against the perceived backwardness of traditional banks and financial institutions has run into problems that no other new technology has faced.

The last two years saw an expansion of incubators and platforms to cultivate fintech startups. And this year, I am observing clues in major fintech centres where leaders are quitting startups and bank sponsored vehicles.

The hope and dream of being able to disintermediate financial institutions and the entire industry is unrealistic given how much protection and restriction is needed to prevent another financial meltdown that threatens to cast a 1930s style depression across the world.

Besides BlackRock’s acquisition of the roboadvisor site FutureAdvisor in 2015 (valuing it between US$150 million to $200 million) other asset managers like Fidelity and Schwab believed they could accomplish roboadvisor front ends on their own.

So approaches and results are very mixed.

India

Fintech aims to facilitate Rs. 100 cr. loan in 100 days (The Hindu), Rated: A

Peer-to-peer lending platform Oxyloans is targeting to facilitate disbursement of Rs. 100 crore as loans in 100 days beginning March 1. The firm, which neither mobilises deposits nor disburses loans, earns revenue from the commission — 1.5% from lenders and 2.5% from borrowers — it charges.

The loans disbursed through the platform are typically short-term, from 6 months to 11 months, and the rate of interest ranges between 14% and 36%.

India to Get Its Own Fintech Hub in Vizag (NewsBTC), Rated: A

India has been making a lot of noise in the banking, fintech and cryptocurrency sector lately. The country, currently heading towards a financial revolution now has plans to set up a fintech hub. The proposed fintech hub will be established in the city of Vizag.

According to reports, the concerned government has allocated resources to set up the necessary infrastructure in the “Fintech Tower”. Slated to go live next month, Thomson Reuters and Visa will be among the first few companies to set up shop in the Fintech Tower.

Asia

Rise of peer-to-peer financing puts gov’t on edge (Korea JoongAng Daily), Rated: AAA

Starting this week, a guideline that sets ground rules for P2P platforms will go into effect nationwide. Other steps to safeguard investors from risk include ongoing efforts by the Financial Services Commission, the country’s financial regulator, to make credit businesses linked to P2P platforms register with the FSC regardless of size.

According to Crowd Institute, a research center in Korea dedicated to P2P finance, the P2P market size grew to as much as 700 billion won ($616 million) by January this year, growing almost 14 times from 2015. The number of P2P platforms also skyrocketed to 131 in January this year from 16 in January 2016.

The Crowd Institute projects that by the end of this year, the size of the market will grow to as large as 1.5 trillion won.

Of the 700 billion won already in the P2P market, over half, or around 408 billion won, is in real estate, according to the institute.

Roof Funding’s model is project financing, which means investors crowdfund a project to build a building from scratch. If the builder goes bankrupt, the ownership is transferred to the investors, and they can choose to auction off the building or sell the units after completing construction with additional funding.

For instance, interest rates on one-year fixed deposits at local commercial banks as of Feb. 21 range from 1.10 percent to 1.75 percent, according to data from the Korea Federation of Banks.

Despite the rising popularity of real estate P2P platforms, financial authorities in Korea warn that the investments may not be as safe as they seem. In one case, a firm called Money Auction declared bankruptcy last November after it was saddled with debt. Founded over a decade ago as one of the first P2P platforms in Korea, it faced a liquidity crunch after payment delays led the firm to owe over 4 billion won to investors.

Those working in the P2P industry note that many apartments are struggling to attract buyers, and when the market suffers, smaller buildings like duplexes and multiplexes (the main investment targets of most P2P platforms) will likely feel the impact first, jeopardizing lenders’ interest and principal.

Lee complains that some clauses in the guideline are too restrictive. “For instance, about 80 percent of all investment made through January exceeded 10 million won, which is especially the case for real estate P2P projects,” he said. “If investors can only invest less than 10 million won per year, it is possible that the entire industry will take a heavy blow.”

SBXbank to Launch Crypto Currency Marketplace (JakartaGlobe), Rated: A

Smart Banking Exchange, better-known as SBXbank, a London-headquartered company, is set to launch a unique marketplace called “Coinxmart,” in which transactions are done using crypto currency, an alternative digital currency not dissimilar to the old bitcoin.

Abdul Rahman Said, SBXbank’s Asean vice president of marketing, told the Jakarta Globe in an interview on Wednesday (25/2) the company seeks to sink up to Rp 100 billion ($7.5 million) into developing financial technology services that offer not only e-commerce, but also peer-to-peer investment and peer-to-peer lending, all of which will use a crypto currency.

Sedania to buy fintech firm for RM12m (The Star), Rated: A

Technology empowerment company, Sedania Innovator Bhd, has proposed to acquire a syariah-based financial technology (fintech) company, Sedania As Salam Capital (SASC), for RM12 million.

In a statement on Monday, Sedania Innovator said the purchase consideration would be satisfied via RM4 million cash, and RM8 million via the issuance of 25.8 million new Sedania Innovator shares at 31 sen each.

Sedania Innovator said under the proposed acquisition, SASC would provide a profit guarantee of RM1.5 million per year for the financial years ending Dec 31, 2017 and 2018.

To-date, it has processed over 300,000 personal financing transactions worth more than RM25 billion.

Canada

Canadian regulators welcome fintech amid rising global oversight interest (Reuters), Rated: AAA

Recognizing the need to shift its regulatory focus to accommodate the use of advanced technology in the delivery of financial services, the Ontario Securities Commission (OSC) has launched initiatives aimed at providing compliance advice and flexible regulatory requirements for fintechs.

The OSC Launchpad initiative provides some flexibility in regulatory compliance for fintechs with the aim of making it easier for startups to innovate. The types of relief or support available through the OSC LaunchPad include informal guidance on regulatory compliance matters from OSC staff and, on a case-by-case basis, eligibility for time-limited registration or exemptive relief. At the same time the OSC has stated (here) that it will continue to scrutinize fintechs for potential investor protection risks.

While the OSC is the first provincial securities regulator to undertake formal fintech initiatives, other provinces and territories have begun to recognize a need for more flexibility in overseeing fintechs. When Lending Loop, a peer-to-peer lending platform, began in Canada in 2015, it had to obtain approval from provincial securities regulators for a prospectus and comply with other securities-related regulatory requirements. The Toronto-based company subsequently paused its operations and re-launched in late 2016 under an exempt market dealer license (here) that was granted by the OSC.

Authors:

George Popescu
Allen Taylor