- Today’s main news: Judge says OCC cannot issue fintech charters. Kabbage ends Q3 with nearly $100M in revenue. Funding Circle shares up over 10% while loans under management up over 30%. Balboa competes $409M securitization. FundingSecure enters administration.
- Today’s main analysis: Q3 bank earnings.
- Today’s thought-provoking articles: 2019 financial fears infographic. Why there will be no LendIt China this year. P2P lending tax rates across Europe. Banks risk $88 million revenue loss if they can’t keep up with fintech.
- Judge says OCC can’t issue fintech charters. This is not a huge surprise, but the fight is not over yet. The OCC still has an appeal option. This could go to the Supreme Court.
- Kabbage almost reaches $100 million in revenue in Q3. Kabbage has grown into one of the major players in SMB lending. The number of loans issued is growing, and that means revenues are growing–as long as the economy remains strong.
- Q3 bank earnings, Venmo and AmEx cards. Anyone who thinks fintech is not making a dent in traditional banking needs to read this. Fintech and alternative lending platforms are forcing banks to change their business models, or go out of business.
- Balboa Capital completes largest securitization in history. Congratulations! This is a great achievement.
- 2019 Financial Fears Survey. 78 million Americans refer to their finances as a “horror show.” People are most fearful of medical bills, but credit card debt and car loans also make the list. Oh, and they’re afraid the economy will turn sour, but that’s no surprise.
- Bank charter is still a long way off for fintechs.
- Is this the end of the OCC fintech charter?
- What the judge said about bank charters, and why Kabbage is back in court.
- OnDeck subsidiary, Investors Bancorp partner on loans.
- ABS professionals look to new financial partners.
- IIRR Management Services on RealtyShares acquisition.
- Crowdstreet democratizes real estate investment.
- Finitive receives $2 million.
- Best online lender in Iowa, according to Benzinga.
- Bitcoin IRA partners with crypto lender on interest-earning accounts.
- RippleWorks expands its reach.
- Kabbage launches payment service for SMBs to get paid in 24 hours.
- Fundbox makes IDC Fintech Rankings.
- Online calculators. Bad?
- Funding Circle loans under management up 30%. And shares go up 10%.
- FundingSecure goes into administration.
- Assetz Capital chief says it’s not a reflection of P2P lending as a whole.
- 3,500 investors face unclear future.
- Starling Bank raises 30 million GBP. Closes in on millionth account.
- Andrew Lawson leaves Zopa, joins Oodle Car Finance.
- Celsius Network supports Tether with 12% interest.
- Klarna, Wayfair partner on retail payments.
- Reseller Gaia enters administration owing Funding Circle 500,000 GBP.
- Capitalise.com partners with iwoca.
- There will be no LendIt China this year. China’s crackdown on P2P lending has destroyed the industry.
- More P2P closures on the way with stricter rules.
- China’s incredible shrinking P2P lending industry.
- Europe: P2P lending tax rates. A great infographic.
- Europe: Roostify to expand with Santander investment.
- International: Banks risk $88 million revenue loss if they can’t keep up with fintech.
- Canada: Luge Capital raises $85 million to invest in Canadian fintechs.
- Indonesia: Fintechs need stricter laws to protect consumers.
- Indonesia: How Gojek, Weyland Tech are winning in fintech.
- United States
- Fintech unicorn Kabbage ends Q3 with nearly $100 million in revenue amid loan growth (MarketWatch), Rated: AAA
- US fintech Kabbage launches new payment service to help small businesses get paid quicker (AltFi), Rated: B
- Judge Rules OCC Unable to Issue Fintech Charters (Lend Academy), Rated: AAA
- Banking charter remains a long way off for fintechs after court ruling (American Banker), Rated: A
- Is This the End for the OCC Fintech Charter? (Payments Journal), Rated: B
- New Jersey bank partners with On Deck Capital (Biz Journals), Rated: A
- Marketplace Lending Update #7: This and That (The National Law Review), Rated: A
- Q3 Bank Earnings, Venmo & AmEx Card Launch (PeerIQ), Rated: AAA
- Balboa Completes Largest Securitization in Company History at $ 409MM (Monitor Daily), Rated: AAA
- ABS Professionals Look to New Financial Partners Amidst Changing Economic Landscape, Capital One (ABL Advisor), Rated: A
- 2019 Financial Fears Survey (Wallet Hub), Rated: AAA
- Current Mortgage Rates in Iowa (Benzinga), Rated: A
- IIRR Management Services Discusses RealtyShares Acquisition (Crowdfund Insider), Rated: A
- CrowdStreet: A Platform that Democratizes Real Estate Investment Opportunities While Diversifying Portfolios (CardRates), Rated: A
- Finitive Receives $ 2M in Venture Debt from Silicon Valley Bank (FINSMES), Rated: A
- Bitcoin IRA to Launch Interest-Earning Crypto Accounts (Altcoin Buzz), Rated: A
- Crypto-powered foundation Rippleworks expands its reach (Devex), Rated: A
- Fintech Innovator Fundbox Named to Prestigious IDC FinTech Rankings by IDC Financial Insights (Yahoo! Finance), Rated: B
- Beware Online Loan Calculators (WSJ), Rated: B
- United Kingdom
- Shares in Funding Circle up over 10 per cent, after loans under management jump by more than 30 per cent (AltFi), Rated: AAA
- FundingSecure goes into administration (P2P Finance News), Rated: AAA
- FundingSecure administration not a ‘reflection of P2P as a whole’, claims major platform (Bridging and Commercial), Rated: A
- Industry raises concerns as Funding Secure enters administration (Mortgage Introducer), Rated: A
- Starling Bank Raises £30 Million to Fund its Expansion as it Approaches its Millionth Account (The Fintech Times), Rated: A
- Andrew Lawson joins Oodle Car Finance as chief product officer (Asset Finance International), Rated: A
- Celsius Network Now Supports Tether At 12% Interest (CryptoBriefing), Rated: A
- Wayfair, Klarna bring flexible payments to UK shoppers (The Paypers), Rated: A
- Six bids made for stricken reseller (Channel Web), Rated: B
- Capitalise.com launches partnership with iwoca and a high street bank to enable instant funding quotes for SMEs (Fintech Finance), Rated: B
- The Meteoric Rise and Spectacular Fall of Peer to Peer Lending in China (Lend Academy), Rated: AAA
- Chinese Regulators Forcing More P2P Platform Closures With Stricter Rules (Business Times), Rated: A
- China’s Incredible Shrinking P2P Lending Industry (Caixin Global), Rated: A
- European Union
- Digital lending platform Roostify plots expansion with new investment from Santander (Housingwire), Rated: AAA
- Tax Rates on P2P Lending – Low versus High (P2P-Banking), Rated: AAA
- Banks That Can’t Keep Pace With Fintech Firms Risk $ 88 Billion Revenue Loss (Forbes), Rated: AAA
- Fintech companies need strict law to protect consumers, ensure fair business (The Jakarta Post), Rated: AAA
- The Explosion of FinTech in Indonesia and how Companies like Gojek and Weyland Tech, Inc. are Winning (Investor Ideas), Rated: A
- Luge Capital raises $ 85M to invest in Canadian fintech startups (TechCrunch), Rated: AAA
Fintech unicorn Kabbage ends Q3 with nearly 0 million in revenue amid loan growth (MarketWatch), Rated: AAA
Financial technology unicorn Kabbage finished the third quarter with just shy of $100 million in revenue as the company continued to grow its small-business lending platform.
The decade-old company told MarketWatch that it generated $99.4 million in third-quarter revenue as loan originations ticked up 43% on a year-over-year basis. The company said it extended $715 million in loans to customers during the quarter.
US fintech Kabbage launches new payment service to help small businesses get paid quicker (AltFi), Rated: B
Kabbage, a US fintech backed by Softbank which uses AI-based algorithms to help work out the terms of small business lending, is launching a payments service which it says will cut the time it takes small businesses to get paid from 90 days to 24 hours.
Judge Rules OCC Unable to Issue Fintech Charters (Lend Academy), Rated: AAA
Yesterday, a federal judge ruled that the OCC does not have the legal authority to issue bank charters to non-banks. Judge Victor Marrero ruled on the fact that a clause in the National Bank Act’s business of banking requires that only firms which take deposits can receive a national bank charter.
Banking charter remains a long way off for fintechs after court ruling (American Banker), Rated: A
Fintech firms continue to face a murky path into the banking system after a federal court ruling that threw out the Office of the Comptroller of the Currency’s special-purpose charter, observers said.
The charter has already been on unsteady ground. No firm has yet applied with the OCC facing legal challenges. But the decision Monday out of the U.S. District Court for the Southern District of New York shines an even brighter light on potential alternatives for fintech companies seeking a national licensing solution.
Is This the End for the OCC Fintech Charter? (Payments Journal), Rated: B
The story isn’t over yet. The OCC has said it will appeal the decision.
New Jersey bank partners with On Deck Capital (Biz Journals), Rated: A
Marketplace Lending Update #7: This and That (The National Law Review), Rated: A
In striking down the OCC’s interpretation of Section 5.20(e)(1), Judge Marrero reasoned that the National Bank Act “unambiguously requires that, absent a statutory provision to the contrary, only depository institutions are eligible to receive national bank charters from the OCC.”
Kabbage Heads to Court (Again)
Non-bank marketplace lender Kabbage joins the growing number of online lenders who are defending Madden and “true lender” claims in New York’s federal courts. Unlike prior lawsuits, such as those recently filed against Capital One and Chase Bank,2 the putative class action against Kabbage targets small business loans, not credit card or other consumer loans.
Q3 Bank Earnings, Venmo & AmEx Card Launch (PeerIQ), Rated: AAA
PayPal is launching a Venmo credit card (expected 2H 2020). Venmo’s credit card launch follows a flurry of launches from Avant, Upgrade, Ollo, Brex and others in recent years. PayPal has a unique edge – the breadth of customers on its payment network. Relatedly, PayPal and Synchrony extending their overall 15-year consumer credit relationship.
Bank Earnings Season Underway
- Industry leading ROE of 18% driven by consumer banking ROE 30%+ [!!]
- Strongest 35% YTD share price gain in KBW index (stock trading below book value)
- 66% of new deposits coming from areas where they do not have branches
- ROE in the 12% range, profit drops 26%. ROE will be low for the foreseeable future while GS pours billions in investing in building a consumer franchise
- CEO David Solomon: “In three short years, we have raised $55 billion in deposits on the Marcus platform, generated $5 billion in loans, and built a new credit-card platform and launched Apple Card,” adding “which we believe is the most successful credit card launch ever.”
Bank of America
- Profits up 8% YOY; NIM robust at 244 bps just shy of recent peak of 251 bps
- #1 in mobile banking and online banking. Digital banking users have increased by 5% over the past year and number of active mobile users has increased by almost 11%. – Number of branches has decreased by 1.9
Balboa Completes Largest Securitization in Company History at $ 409MM (Monitor Daily), Rated: AAA
Online lender Balboa Capital successfully completed a $409 million asset-backed securitization (ABS) of small and mid-ticket equipment loans and leases, its sixth and largest transaction to date.
ABS Professionals Look to New Financial Partners Amidst Changing Economic Landscape, Capital One (ABL Advisor), Rated: A
A Capital One survey conducted at ABS East 2019, a conference convening professionals from across the asset-backed securities (ABS) industry, found more than one-third (38 percent) of professionals plan to engage with new financial partners and implement new technologies, over the next 12 months, to prepare for the changing economic landscape. Additionally, 34 percent of respondents plan on reviewing or reshaping their credit and underwriting risks over the next 12 months.
Of the various challenges facing the industry, ABS professionals elected that regulatory uncertainty (22 percent), increased credit risk (18 percent) and increased competition (18 percent) pose the greatest challenges for their businesses over the next 12 months. Fluctuations in interest rates was listed as the greatest challenge for 15 percent of respondents.
2019 Financial Fears Survey (Wallet Hub), Rated: AAA
Shares in Funding Circle up over 10 per cent, after loans under management jump by more than 30 per cent (AltFi), Rated: AAA
Shares in peer-to-peer lender Funding Circle climbed over 10 percent after its loans under management soared 31 percent to £3.7bn, but the company cautioned of “an uncertain economic environment”.
It said loans under management had grown to £3.7bn compared to £2.8bn the year previous.
Funding Circle reported that loan originations were up from £1.6bn in 2018 to £1.8bn in 2019.
FundingSecure goes into administration (P2P Finance News), Rated: AAA
FUNDINGSECURE, the peer-to-peer pawnbroker and property lender, has gone into administration.
FundingSecure administration not a ‘reflection of P2P as a whole’, claims major platform (Bridging and Commercial), Rated: A
Jonathan Avery-Gee, Edward Avery-Gee and Daniel Richardson at CG & Co have been appointed administrators of the company and are working closely with the FCA.
Stuart Law, CEO at Assetz Capital, claimed that smaller P2P lenders were “clearly struggling to keep up”.
Industry raises concerns as Funding Secure enters administration (Mortgage Introducer), Rated: A
The collapse of the P2P firm has left around 3,500 investors facing an unclear future as the administrator works their way through the loans.
Starling Bank Raises £30 Million to Fund its Expansion as it Approaches its Millionth Account (The Fintech Times), Rated: A
Starling Bank, the UK digital bank, has raised £30 million in a new funding round. Merian Chrysalis Investment Company Limited is leading the round with an investment of £20 million, while Starling’s existing investor, JTC, has added a further £10 million.
Andrew Lawson joins Oodle Car Finance as chief product officer (Asset Finance International), Rated: A
Oodle Car Finance has appointed Andrew Lawson as chief product officer.
He joins from Zopa, the world’s first peer-to-peer lender, where he spent five years as chief product officer responsible for business growth during a period of expansion that saw the brand become the UK’s largest online open market lender.
Celsius Network Now Supports Tether At 12% Interest (CryptoBriefing), Rated: A
Celsius Network will begin supporting Tether (USDT), the largest stablecoin in the market, in its interest-earning wallet. That will enable users to leverage their holdings in order to receive a passive income.
Wayfair, Klarna bring flexible payments to UK shoppers (The Paypers), Rated: A
Klarna’s range of flexible payments are available to shoppers online at Wayfair.co.uk, with additional new features on Wayfair.de. Joining Klarna’s partner list, Wayfair customers across the UK now have control over how and when they pay for their purchases, with payments options such as Pay later and Pay in 3.
Six bids made for stricken reseller (Channel Web), Rated: B
Six offers have been made for welsh education reseller Gaia, which fell into administration earlier this year.
A number of lenders were also revealed to be owed hundreds of thousands of pounds, with White Oak UK and Funding Circle owed £703,000 and £500,000 respectively. HMRC is owed £866,148.
Capitalise.com launches partnership with iwoca and a high street bank to enable instant funding quotes for SMEs (Fintech Finance), Rated: B
Capitalise.com, the business funding platform for accountants, has today announced a partnership with small business lender, iwoca, and a high street bank, to launch Instant Offers. The partnership enables accountants to receive instant quotes on funding applications for their clients. Accountants benefit from offering their clients exceptional customer service with instant quotations and eligibility on suitable financial products whilst lenders can onboard high credit quality businesses, faster.
The Meteoric Rise and Spectacular Fall of Peer to Peer Lending in China (Lend Academy), Rated: AAA
I first wrote about the Chinese p2p lending industry later that year and introduced the west to CreditEase, the company that was the largest p2p lending platform in the world. Over the next couple of years the industry thrived with thousands of platforms launching and the total loan volume skyrocketing to over $150 billion in 2015, which was four times the loan volume of 2014.
China’s Biggest Ever Financial Scandal
We got the first inkling that something was not quite right when China was rocked by the biggest financial scandal in its history. Ezubao, one of China’s largest p2p lending platforms, collapsed as it was revealed the business was nothing more than an elaborate Ponzi scheme. Around 900,000 investors collectively lost $7.6 billion in what was the second largest Ponzi scheme the world had ever seen (Madoff being the largest).
There Will Be No LendIt China in 2019
We have held LendIt China every year since 2016 in Shanghai and I am sad to report that in 2019 there will be no event. While we have expanded beyond online lending it still represented a significant part of our business in 2018 but given the recent challenges we expect no lending companies will be interested in speaking, sponsoring or even attending this year. So, we made the difficult decision to cancel the event. We will regroup in 2020 and hopefully will be able to bring our unique event back to China.
Chinese Regulators Forcing More P2P Platform Closures With Stricter Rules (Business Times), Rated: A
The newly imposed rules by the China Banking and Insurance Regulatory Commission (CBIRC) will mainly be targeting online P2P lending companies. These companies often entail high-risk lending activities that result in massive defaults, suicide, deaths, and illegal debt collections.
Since 2017, the country has had an estimated $692.8 billion in bad loans. The sector has tried to dispose of these bad loans as best they can through different methods.
China’s Incredible Shrinking P2P Lending Industry (Caixin Global), Rated: A
The draconian cleanup campaign of China’s scandal-ridden peer-to-peer (P2P) industry has led to a three-year implosion that has put the sector almost back to where it was in 2014.
The number of functioning P2P lending platforms fell to 646 in September, a decline of nine compared with August and the lowest since early 2014 when the industry was booming, data compiled by Wangdaizhijia, an online lending research portal, show. The scale of the drop has been dramatic — at its peak in November 2015, the sector had more than 3,600 platforms.
Digital lending platform Roostify plots expansion with new investment from Santander (Housingwire), Rated: AAA
Roostify, which powers the digital mortgage platforms of JPMorgan Chase, TD Bank, Guild Mortgage, HSBC Bank USA and more, is plotting an expansion in the U.S. and internationally thanks to a new injection of funding from Santander Group and others.
Tax Rates on P2P Lending – Low versus High (P2P-Banking), Rated: AAA
In the countries colored in black the income tax rate is applied on interest earned on p2p lending investments. That means the individual rate of taxation depends on the other and overall income of the investor. For example in the UK the tax bands are 20%, 40% and 45% dependent on overall income. In Ireland tax bands are 20% and 40%.
Banks That Can’t Keep Pace With Fintech Firms Risk $ 88 Billion Revenue Loss (Forbes), Rated: AAA
Days after it was announced that banks across the world are currently in a ‘do-or-die dilemma,’ Accenture’s 2019 Global Payments Survey reveals that 60 percent of the participants believe they will lose up to 15 percent of payments revenue – $88 billion – in the next three years after being displaced by emerging, competing financial services players.
38 percent of respondents said that big technology companies pose a competitive threat and 32 percent of those surveyed feel the same about fintech firms, which makes sense with the latter attracting nearly $11 billion through over 800 deals between 2016 and 2018.
Fintech companies need strict law to protect consumers, ensure fair business (The Jakarta Post), Rated: AAA
Indonesia’s growing financial technology (fintech) companies have called on the government and legislators to issue a new law to ensure fair business for and better protection of both the industry and consumers. The Indonesian Fintech Lenders Association (AFPI) said that fintech companies, especially those involved in peer-to-peer (P2P) lending or online lending, needed a stricter regulation to ensure that all the stakeholders, such as borrowers and investors, would receive better protection.
The Explosion of FinTech in Indonesia and how Companies like Gojek and Weyland Tech, Inc. are Winning (Investor Ideas), Rated: A
According to one recent report, “Indonesia’s fintech industry is in the midst of a period of significant growth. P2P lending recorded a triple-digit increase in 2018, while e-payment services have grown more than six-fold since 2012, prompting a surge of new foreign investment into a vibrant and increasingly diverse start-up community.”
Luge Capital raises $ 85M to invest in Canadian fintech startups (TechCrunch), Rated: AAA
There are 831 financial technology startups headquartered in or operating in Canada, according to data collected by Fintech Growth Syndicate, yet only a handful of venture capital funds specializing in the region and sector.
Luge Capital, a fintech and AI-focused venture capital fund headquartered in Montreal and Toronto, is looking to close that gap. The firm has raised $85 million for its debut fund and plans to make seed investments as small as $150,000 and as large as $2 million.