Thursday November 16 2017, Daily News Digest

securitization

News Comments Today’s main news: Marcus surpasses 2017 goal. LendInvest gets into buy-to-let. Top 3 spots on KPMG Fintech 100 list are all Chinese. Lendix launches SME bridge loans in France, Spain, and Italy. Mauritia issues draft P2P lending rules. Marlette closes fourth securitization in a year. Today’s main analysis: Rising challenges unlikely to deter U.S. securitizations. Today’s thought-provoking articles: […]

securitization

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Africa

Canada

Russia

News Summary

United States

Marcus from Goldman Sachs Surpasses 2017 Goal (Bank Innovation), Rated: AAA

Martin Chavez, chief financial officer for Goldman Sachs, showed in a slideshow at a Bank of America Merrill Lynch event yesterday that Marcus had already surpassed $1.96 billion in originations as of Nov. 9.

What that means is that from Nov. 9 to Nov. 14, over a span of five days, Marcus originated more than $40 million in loans.

Rising challenges unlikely to deter U.S. securitization in 2018 (Asset Securitization Report), Rated: AAA

As a result, Fitch’s outlook for U.S. structured finance ratings is predominately stable for 2018. That said, given where we are in the credit cycle, Fitch is keeping a close watch on select asset types that could run into some issues over the next 12 months.

Entering 2018, Fitch has either Positive or Stable Outlook on over 90% of its rated securitized bonds.

Perhaps the most notable change that has manifested from risk retention is the shrinking universe of originators bringing new securitizations to market. This is particularly notable in the universe of CMBS originators, which has shrunk from a high of roughly 40 to now less than 20 due to a combination of risk retention and Reg A/B.

Competitive pressures, long in place for subprime autos, are escalating in a marketplace ABS environment that is struggling to find its footing by testing recent underwriting models, asset quality and, in some cases, business models. Delinquencies and chargeoffs of existing assets continue to increase as marginal borrowers increase their leverage. Not likely to help is the drive for growth among large marketplace lenders coupled with rising market pressure from competing banks like Goldman Sachs (Marcus), Discover, and Suntrust. And unless originators tighten their credit policies with discipline, the strain will intensify.

Source: Asset Securitization Report

Online lenders should heed criticism of their effect on borrowers (American Banker), Rated: AAA

The consumer lending industry is abuzz about the Federal Reserve Bank of Cleveland’s recent report on debt consolidation and online lending. This excellent piece of research concludes that, on average, online installment loan borrowers fall into more debt after taking out a loan, experience hits to their credit score and history as a result, and take out online loans despite having access to traditional banking and credit channels.

The first two conclusions are damning, especially as these loans are often marketed as a way to help consumers consolidate credit card debt and improve their finances. At the end of the day, a lender’s duty is not merely to avoid losses. Any loan must be suitable for the customer — which means it should be made only if the lender believes it is improving the customer’s financial health. A lender not guided by that principle should be prepared for severe criticism as well as elevated losses down the road.

But it would be nonsensical to discredit or ignore the study because it includes online lenders beyond well-known fintech names.

The Best of Both Worlds with Prosper for Borrowers and Lenders (DoughRoller), Rated: AAA

Founded in 2005, and generally recognized as the first peer-to-peer (P2P) lending platform in the US, Prosper has funded more than $10 billion in loans since.

While borrowers can get personal loans ranging in size between $2,000 and $35,000, investors can put as little as $25 toward funding those loans.

There is one exception, however. You cannot use loan proceeds for post-secondary educational expenses. That’s because some of the rules in federal law aren’t compatible with P2P lending. More specifically, with education loans, the borrower must have at least 30 days to accept or reject a loan offer.

Medical procedures available for financing under the PHL program include:

  • Cosmetic dentistry
  • Bariatric surgery
  • Cosmetic and plastic surgery
  • Fertility and reproductive procedures

All Prosper loans have a term of either three or five years.

The minimum requirements are:

  • A minimum FICO score of 640, based on a TransUnion FICO 08 score
  • Debt-to-Income (DTI) ratio below 50%
  • Stated income greater than $0 (you must have an income)
  • No bankruptcies filed within the previous 12 months
  • Fewer than seven credit bureau inquiries within the last six months
  • A minimum of three open trades reported on your credit report

Interest rates are between a minimum of 3.00% for the best AA rated borrowers to a maximum of 36.00% for the lowest rated HR borrower grades.

Source: DoughRoller

Prosper for Investors

Prosper advertises that the average rate of return by investors on the platform is 7.41% per year.

Loans rated HR have a much higher average return, at 11.73%.

You can open either a General Investment Account or an IRA. Available IRAs include traditional, Roth, SIMPLE, SEP and rollover IRAs (IRA accounts are held with Millennium Trust Company). At this time, Prosper has made only individual accounts available. You cannot hold an account jointly with someone else.

For regular investment accounts, the minimum is $25. For IRA accounts, the minimum is $5,000.

Similar to other P2P platforms, when you invest with Prosper, you don’t actually invest in whole loans. Instead, you invest in small slivers of those loans, referred to as “notes.” The notes are in denominations of $25. This means that you can spread an investment of $1,000 across as many as 40 different loans.

The servicing fee is 1% of the outstanding balance of a loan. That means that if the loan pays 8%, your net return will be 7%.

Source: DoughRoller

Marlette Funding Closes Fourth Personal Loan Securitization Within Past Year (LendEDU), Rated: A

Last week, marketplace lender Marlette Funding announced the closing of its fourth proprietary securitization. The transaction was worth an estimated $312 million, and it is the fourth securitization announcement since August of 2016 from Marlette Funding.

eOriginal Named as One of Fastest Growing Companies in North America on Deloitte’s 2017 Technology Fast 500 (eOriginal), Rated: A

eOriginal, Inc., today announced it has been named to Deloitte’s Technology Fast 500 list as one of North America’s fastest growing technology, media, telecommunications, life sciences, and energy companies. eOriginal earned the rank of 294 by more than doubling revenues during the evaluation period of FY 2013 through FY 2016.

Betterment, the investing startup with $ 11 billion in assets, is rolling out a new service to make charitable giving easier (Business Insider), Rated: A

Betterment, the New York-based roboadviser, announced Wednesday a charitable giving feature that’ll let users donate shares of their account to partnered charities.

The firm, which manages $11 billion for over 300,000 customers, partnered with 11 charities for Betterment Charitable Giving, including Big Brothers Big Sisters of NYC, UNICEF, and World Wildlife Fund, according to a news release. The new feature is set to go live November 28.

Subprime car loans souring faster at nonbank lenders (American Banker), Rated: A

Despite signs of trouble in subprime auto lending, U.S. banks and credit unions are well positioned to ride out any market turbulence, a new report from the Federal Reserve Bank of New York suggests.

More than $435 billion in auto loans to borrowers with credit scores below 660 were outstanding during the third quarter of this year, the report found. That total has been climbing steadily since bottoming out at $249 billion in early 2011. Delinquency rates have also been rising as it has become easier to qualify for an auto loan.

Fidelity latest financial firm to facilitate data sharing with fintechs (American Banker), Rated: A

Fidelity Investments is joining the ranks of financial firms sharing customer account data with others through an application programming interface.

The new service, called Fidelity Access, will give third parties access to Fidelity customers’ account data for use in apps and services like tax preparation, budgeting, financial planning, spending analysis and portfolio advice — provided the Fidelity customers give their OK. Customer data to be shared includes Fidelity account balances, securities holdings, and transactions.

These are the most valuable fintech companies in America (MarketWatch), Rated: A

Stripe Inc., whose software is used by businesses to accept and track digital payments, leads the way as the most valuable fintech startup in the U.S., with a $9.2 billion valuation.

And just to be clear, fintech startups are nowhere near close to catching up to the big banks. Wells Fargo & Co. has a market cap of more than $266 billion, and Bank of America Corp. has a market cap of more than $273 billion.

RealtyProfits Offers Accredited Investors an Innovative Platform to Invest in the Real Estate Sector (Digital Journal), Rated: A

RealtyProfits (www.RealtyProfits.com) announces today an exciting and innovative investment opportunity, RealtyProfits IV, with a Preferred Return of 12 percent per annum, available exclusively to accredited high net-worth individuals and institutional investors. The private preferred equity securities, available for purchase at www.RealtyProfits.com, are being offered through WealthForge Securities, LLC, a registered broker/dealer and member of FINRA/SIPC.

The geographically diversified portfolio includes properties in 700 cities coast to coast, with a current estimated value of $1.73 billion and more than $700 million of equity in more than 5,900 portfolio properties. The properties include primarily single-family homes and condominiums ranging in value from $100,000 to more than $2,500,000.

Accredited investors can start investing with as little as $20,000. RealtyProfits IV offers monthly cash distributions. Preferred equity investors receive all distributions made by RealtyProfits IV until fully repaid. The Preferred Return is 12 percent per annum, with initial monthly Base Preferred Return payments at 6 percent per annum anticipated depending on cash flow during each of the first 24 months.

Reality Shares Teams up with Nasdaq to Launch Blockchain Tech Index (BusinessWire), Rated: A

Reality Shares and Nasdaq announce the creation of the Reality Shares Nasdaq Blockchain Economy Index, a smart-beta index that tracks the growth and development of leading global companies creating and implementing blockchain solutions.

An ETF that will track the Index is already in the works, with Reality Shares filing for it on November 2, 2017.

Reality Shares and Nasdaq compiled the index by utilizing internal and external research and their proprietary Blockchain ScoreTM ranking system. The Index is comprised of global companies that seek to capitalize upon transformational blockchain technology that may potentially disrupt the markets in which they operate.

How to Choose Between a Peer-To-Peer Lending or Traditional Loan (Experian), Rated: A

Shopping for a loan at a P2P provider is a two-step process. First, based on a credit score (or credit scores) and your answers to a few basic questions—your full name, address, date of birth and annual income—the lender determines which loan offer(s) to extend to you. (It’s possible at this juncture that the lender will decide not to extend any loan offers; if they do, they’ll explain why.)

Once you choose the loan you want, the lender does a more detailed credit check and may ask you to verify your income and to provide additional background information.  Each P2P site has its own lending criteria, including minimum credit scores, and additional information requirements vary accordingly. Some P2P lenders want information on your educational background; others want work history or details about your financial assets. In most cases, you can submit the necessary documents electronically.

The first step in the P2P loan-approval process gets one or more of your credit scores by a method known as a soft inquiry—the same process you use when you check your own credit scores. Soft inquiries have no impact on your credit scores. However, the hard inquiries traditional lenders make when you apply for a credit cards or bank loans are reported to the national credit bureaus. They appear on your credit reports, and typically cause temporary credit-score drops of several points.

In the second step of P2P loan approval, the lender performs a hard inquiry to confirm your credit score and, likely, to review your full credit report.

Before you apply for a P2P loan

  • Take a look at the fine print on the bottom of each provider’s homepage, to get an overview of the loan amounts they offer and the rates and fees they charge.
  • Make sure the lender operates in your state.
  • Check your FICO Score and review your credit reports for any major negative entries. Accounts in collection, liens and civil judgments are among the items that could torpedo your loan application, even if you meet the credit-score requirements.
  • Determine the amount of money you need and watch out for tempting upsells.
  • Consider using the Experian loan-referral tool to explore offers from multiple P2P lenders (and possibly traditional lenders as well).

Resignation of CFPB head gives Trump opportunity to erase Elizabeth Warren’s legacy (Legal Insurrection), Rated: A

Richard Cordray, an Obama appointee and head of the Consumer Financial Protection Bureau (CFPB) announced to staff in an email Wednesday his plans to resign. While he’s yet to confirm his plans, there’s speculation Cordray will return home to run for Ohio’s governorship.

Seven Signs That the Bond Bull Market is Over (INTL FCStone), Rated: A

  • The bond bear market is already here: short and medium-term treasuries have lost value in the past 5 years
  • Buybacks have fallen to a five-year low, and big repurchasers have underperformed
  • Oil prices are at a 30-month high, and the futures curve is in backwardation
  • The long and the short ends of the yield curve are moving together again
  • The Chinese trade surplus has shrunk from 10% of GDP to almost zero in the past ten years
  • The U.S. deficit is growing again, an unprecedented phenomenon in times of expansion and peace
  • Small bubbles are popping out: Auckland houses, Ethereum crypto coins, and collectible cars
Source: Global Macro Report, INTL FCStone

Read the full report here.

Spring Framework Creator Launches Atomist for Development Automation With $ 22 Million in Series A Funding (Marketwired), Rated: A

Today on stage at Structure 2017, Atomist is formally launching and unveiling its Development Automation Platform with an Open Source client and API. As part of today’s launch, Atomist is announcing $22 million in Series A funding from Accel and Matrix Partners.

Bestow Gives Texas Residents First Access to On-Demand Life Insurance (PRWeb), Rated: A

Bestow Inc., the company behind a revolutionary new approach to life insurance, today announced the early access roll out of its comprehensive, full-stack, digital life insurance solution in Texas. For the first time Bestow’s solution is available to the public, giving Texas residents primary access to apply for the only on-demand life insurance solution, instantly and without a medical exam.

Leveraging applied intelligence and algorithmic underwriting, Bestow redefines the way consumers research, buy and manage life insurance. Using data to calculate risk, Bestow removes the need for a medical exam and streamlines the entire process into a matter of minutes. The Texas launch gives consumers access to choice term life insurance plans, including a unique two year term policy never before available for life insurance. Additionally, customers can choose between ten or twenty year term life insurance.

The Zebra Raises $ 40 Million, Taps New CEO To Expand Beyond Car Insurance (Forbes), Rated: A

The Zebra, which has always described itself as the Kayak of car insurance, has hired a longtime Kayak executive as its new CEO.

The Austin-based company, which allows drivers to compare prices for car insurance online, said on Tuesday that it has tapped Kayak’s former president Keith Melnick to run the company.

The Zebra also said it has raised $40 million in a Series B funding round, led by Accel Partners. That brings its total funding to $61.5 million.

MarketScout in Dallas Creates $ 25M Insurtech Venture Fund (Insurance Journal), Rated: B

Dallas-based insurance exchange and MGA MarketScout announced it has launched MarketScout InsurTech (MIT), which will make investments in tech-enabled insurance distribution. The initial funding of $25 million will come exclusively from MarketScout Corp., parent of MIT, according to the firm.

House Financial Services Committee Approves Legislation to Help Keep Lending Partnerships Between Banks and Online Lenders (Crowdfund Insider), Rated: A

The House Financial Services Committee has approved HR 3299 or the “Protecting Consumers’ Access to Credit Act of 2017.” The bill “restores consistency” in lending laws across state boundaries. HR 3299 impacts the case of Midland Funding, LLC v. Madden – an ongoing law suit that has the potential to undermine online lenders. Sponsored by Congressman Patrick McHenry, includes an important statement that clarifies allowable interest rates on loans potentially ending the issue associated with the law suit.

How Do You Beat a Robo-Advisor? Trust (Think Advisor), Rated: A

“Technology by itself cannot create trust,” Robert C. Merton, a Nobel laureate in economics now teaching at MIT, recently told ThinkAdvisor. “The successful advisor must have the trust of their clients.”

Given the importance of trust in the advisor-client relationship, Merton recommends financial advisors (the breathing kind) should:

  • Check what they are doing to retain and enhance trust with their clients.
  • Make sure the business model being used supports the creation of trust.
  • Take advantage of technology to improve/enhance what the advisor does.
  • Do not view technology as a “competitor or substitute” for the advisor.
  • Understand and assess the financial technology they employ to certify trusting its use in client solutions.

HFLA launches initiative to help underserved reach financial stability (Cleveland Jewish News), Rated: A

The Hebrew Free Loan Association has launched its Looking to the Future Initiative with support from the St. Luke’s Foundation and the PNC Foundation. The initiative accounts for $73,000.

The initiative enables HFLA to increase its lending of interest-free loans to Cleveland’s underserved neighborhoods and grows the organization by expanding its reach, according to a news release. HFLA received a $63,000 grant from the St. Luke’s Foundation and a $10,000 grant from the PNC Foundation to launch the effort.

Fundation Purchases Select Assets from Able Lending to Enhance Partnership Strategy (BusinessWire), Rated: B

Fundation Group LLC, a digitally-enabled lender and credit solutions provider, today announced that it has acquired a variety of assets from online small business lender, Able Lending of Austin, Texas.

Former Capital One Executive Troy Jamison Joins Victory Park Capital as Chief Risk Officer (BusinessWire), Rated: B

Victory Park Capital (VPC), an investment firm focused on middle-market debt and equity investments, announced today that Troy Jamison joins as chief risk officer for the firm’s nonbank financial services portfolio. Jamison is based in Chicago and reports directly to CEO and Co-Founder Richard Levy.

CFPB updates website to officially address end of arbitration rule (Housingwire), Rated: B

The Consumer Financial Protection Bureau finally updated its website to acknowledge President Donald Trump revoking the controversial arbitration rule.

blog post from Ballard Spahr previously stressed the importance of the CFPB updating its website to note the rule’s override since the rule was killed nearly two weeks ago.

The webpage for “Arbitration agreements” now has an update on the top that states:

On Nov. 1, 2017, the President signed a joint resolution passed by Congress disapproving the Arbitration Agreements Rule under the Congressional Review Act (CRA). Pursuant to the joint resolution, the Arbitration Agreements Rule has no force or effect. The materials relating to the Arbitration Agreements Rule on the Bureau’s website are for reference only.

HOUSE FINANCIAL SERVICES COMMITTEE PASSES SMALL BUSINESS CREDIT ACT (Coalition for Small Business Growth Email), Rated: B

The 

United Kingdom

LendInvest launches into buy-to-let (Mortgage Strategy), Rated: AAA

LendInvest is launching a range of buy-to-let loans aimed at professional landlords and investors.

Rates start at 3.69 per cent for a two-year fix at 60 per cent LTV.

The firm will offer loans of between £50,000 and £5m, up to a maximum LTV of 80 per cent.

Citigroup joins the AI bandwagon (Business Insider), Rated: A

Citigroup 

Source: Business Insider

SyndicateRoom Alum Squirrel Launches Crowdcube Funding Round (Crowdfund Insider), Rated: A

Squirrel, a personal finance app designed to help users have more control over their money, has launched an equity crowdfunding round on Crowdcube. This initiative debut comes less than one year after the company completed its SyndicateRoom funding round with £585,000 in funds. Squrriel is now seeking £400,000.

Government unveils financial package to support tech (P2P Finance News), Rated: A

THE GOVERNMENT has given a £21m boost to a technology programme that has supported firms such as Zopa and Funding Circle as part of a range of measures to boost the tech sector.

The funding will make Tech City UK and Tech North one national organisation called Tech Nation and help grow government-backed startup support programmes such as Founders Network, Northern Stars, Future Fifty and Upscale.

Cash Converters International Ltd reports security breach and ransom demand (The Motley Fool), Rated: A

Payday lending and pawnbroking business Cash Converters International Ltd (ASX:CCV) announced a cybersecurity breach in its UK operations last night.

Sadly, computer system integrity is becoming an increasingly relevant – and often overlooked – concern for investors, with a vast majority of companies relying in one way or another on computer systems.

Valorem Foundation Launches All-New Cryptocurrency Platform (PR Newswire), Rated: A

Valorem Foundation, a Blockchain startup specializing in stabilized value-based exchange and transactions, has announced the launch of its new cryptocurrency platform. The company has developed a multi-layered platform to disrupt and expand the following services globally: microloans, car loans, student loans, rent payment, P2P networks, buying and selling of goods & services, business investing, real estate crowdfunding, and insurance.

Empowering the world: How you can make money through improving lives (City A.M.), Rated: A

This sea change should explain why investment firm Ethex has managed to scoop up so much support in its short history – raising more than £50m since 2013.

Its business model has a peer-to-peer lending feel – that is, it uses a digital platform to allow retail investors to lend to individuals and entrepreneurs.

But it comes with a twist, because Ethex is a not-for-profit organisation which lets you invest in companies that have a positive impact – socially and environmentally.

If you want to get involved, the platform has a minimum investment of £50, which arguably makes it more accessible to younger generations.

Trussle hires VP engineering from Funding Circle (Mortgage Introducer), Rated: B

Trussle has appointed Matthew Gretton as vice president of engineering from peer-to-peer lending platform Funding Circle.

China

Alibaba affiliates sweep top 3 spots in global fintech ranking (Asian Review), Rated: AAA

Financial technology companies linked to China’s Alibaba Group Holding took over the podium in KPMG’s latest Fintech 100 list, announced on Wednesday.

Ant Financial, which runs Alibaba’s massive Alipay e-payments network, took the No. 1 spot on the list, which was compiled with fintech accelerator H2 Ventures. Online property insurer ZhongAn Insurance and microloan provider Qudian placed second and third; both have received investments from Ant.

See the full list here.

One of China’s hottest companies rebuffs criticism about transparency (CNBC), Rated: A

Despite public criticism about a lack of transparency in some practices, Ant Financial is doing things the right way, a senior executive at the company said Wednesday.

“The demand for these securities is very healthy and continuing to expand,” Douglas Feagin, senior vice president and head of global business at Ant Financial, told CNBC’s “Street Signs.” “That, at the end of the day, is the ultimate barometer of whether you’re giving enough information to investors to invest.”

Ant Financial will use local partners in Southeast Asia: executive from CNBC.

Earnings at Some U.S.-Listed Chinese Microlenders Taper (Caixin), Rated: A

In the three months ending Sept. 30, Yirendai’s net income was down 12% to 303 million yuan ($45.7 million) from 344.3 million yuan a year ago, the company said Wednesday. Another Chinese microlender, China Rapid Finance Ltd., earlier reported a wider net loss of $4.4 million in the third quarter. Although Qudian Inc., a larger player that listed in New York last month, recently posted a four-fold increase in its third-quarter net profit from a year ago, citing better operational efficiency and its growing borrower base.

Cinda International Leads Massive Round In Chinese Fintech Company 9f Group (China Money Network), Rated: A

Beijing-based fintech company 9f Group has raised a massive new funding round from Cinda International Holding Ltd, a subsidiary of state-owned China Cinda Asset Management Co., Ltd., Focus Media Information Technology’s Chairman Jiang Nanchun, video game developer Youzu Interactive’s chairman Lin Qi and an unnamed Chinese industry fund.

The company did not disclose financial details except to say that it raised “hundreds of millions of U.S. dollars” in the latest financing deal, according to a company announcement. It is also unclear how the company is valued in the round, but 9f Group is listed on China Money Network’s China Unicorn List with a US$1 billion valuation when it last raised a US$110 million series B round in 2015.

European Union

For Spain’s banks, survival means digital (Financial Times), Rated: AAA

Santander’s Openbank has changed a great deal since it was founded as Spain’s first telephone banking service in 1995. Now a fully digital operation, its mobile app allows users to temporarily disarm a lost credit card, as well as to check whether fellow Openbank customers are buying or selling a given stock at any moment. Currently, it has some 1.2m customers in Spain and more than €8bn ($9.3bn) in assets under management.

In recent years, Spain’s two biggest banks — Santander and BBVA — have increased their financial and managerial investment in fintech, digital banking and big data. Like their peers, they are convinced that the days of branch-based lending are drawing to a close.

Spanish banks average about €15m assets under management per employee, says Daragh Quinn, banks analyst at investment bank Keefe, Bruyette & Woods. At a digital operator like Openbank, that number is close to €60m.

The digital push is on two fronts: first, a mobile app that allows customers to access almost all of the bank’s products without going into a branch. Second, a venture capital approach whereby banks invest in or partner with fintech start-ups to add products.

Online Lender Lendix Launches Flexible SME Bridge Loans in France, Spain & Italy (Crowdfund Insider), Rated: AAA

Lendix, online lender for SMEs in continental Europe, has announced the launch of a new financing product: the Flexible Bridge Loan. This product is designed to will allow a greater number of French, Spanish and Italian SMEs to benefit from the speed of execution of Lendix’s lending platform while leaving them the possibility of setting up an overall refinancing solution with other financial institutions.

The Lendix Flexible Bridge Loan is a 5-year amortizable loan with a standard commitment for the first 9 months and the possibility of early repayment at no cost for the remainder of the loan term, even in the event of refinancing by other financial institutions.

Swedish $ 370 Billion Home-Loan Market Gets New Mortgage Fund (Bloomberg Quint), Rated: A

As investors wonder whether Sweden’s housing market is headed for a correction, the country’s first mortgage fund is about to enter the $370 billion Swedish home-loan industry.

Stabelo plans to pool capital from Swedish institutional investors in exchange for fixed-income securities. That money will then be lent to home buyers. The fund starts offering its products this week and will work with Avanza Bank AB, Sweden’s largest online lender. Avanza, which owns just below 20 percent of Stabelo, will handle distribution and marketing.

International

Has P2P marketplace lending become B2P? (Cuffelinks), Rated: AAA

Due to this issue, the original incarnation of peer-to-peer lending has not lasted. As the CEO of Zopa, a UK-based P2P lender said,

“As bad debts soared, the approach was abandoned and Zopa was moulded into a ‘big sausage machine’. Its technology now links lenders with a pool of borrowers without any direct contact or the need for investors to make credit decisions.”

Australia’s major peer-to-peer lender is SocietyOne. It currently has $350 million borrowed through its platform, and is growing rapidly. In fact, loan volumes in the first three quarters of this year have totalled $141 million so far, surpassing the $139 million in loans facilitated over the entire course of 2016, as shown below.

Source: Cuffelinks
Australia/New Zealand

Exemption for personalised digital (robo) advice (Scoop), Rated: A

Following the FMA’s release of its second consultation paper on personalised robo-advice (now called digital advice), the leading law firm has published its tips for providers looking to develop digital advice platforms.

Head of Russell McVeagh’s Corporate Advisory group, Dan Jones, says the exemption is a necessary first step in putting the New Zealand financial advice regime on equal footing with overseas regimes, and may provide particular assistance to New Zealanders in KiwiSaver.

India

How P2P lending can be a route to creating financial inclusion (Daily News & Analysis), Rated: A

For years, banks have had a monopoly in lending money to businesses and individuals. However, the 2007-08 financial crisis created a havoc, rapidly-expanding the funding gap. This led to the advent of a niche fintech vertical, peer-to-peer (P2P) lending.

The geographical reach of a P2P lending platform is far superior, with the major differentiator being its online interface. Such digital financial services play an important role in supporting the objective of financial inclusion. Anybody, from the remotest areas, having access to internet, can be eligible to get/give a loan.

In the age of digitisation where almost everyone has access to internet, such platforms have the potential to change the financial graph of a country.

Are P2P platforms safe for lending and borrowing? (India Times), Rated: B

While banks and non-banking finance companies (NBFC) are the readily available sources for loans, who does the P2P platform cater to? “Unfortunately, banks in India follow mediocre credit assessment policies which are suited only for borrowers who can offer collateral or have an impeccable credit history. In practice, majority of the borrowers lie in between these extremes. Therefore, majority of Indians can borrow on P2P platforms,” says Raghavendra Pratap Singh, co-founder, i2ifunding, an online P2P lending marketplace.

RBI has put a cap on the amount that can be borrowed and lent. The aggregate exposure of a lender or the maximum that one may borrow at any point of time, across all P2Ps, shall be capped at Rs 10 lakh. Even the exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000 and the maturity of the loans shall not exceed 36 months. “More clarity from RBI is expected on how the regulator intends to monitor the compliance of this aspect and how it will fix the responsibility,” says Singh.

Risks for a lender
Since this is an unsecured loan where there is no face-to-face interaction, a P2P lender needs to be aware of the risks involved. Bubna says, “All investments involve risk. However, in comparison to equity or commodity market investments or real estate, P2P lending has lower risk as it is addressed by on-boarding high quality borrowers. Further, lenders are suggested to create a diversified portfolio of loans.”

Asia

Introducing ACE, Crowdo’s New Artificial Intelligence Due Diligence System (Crowdfund Insider), Rated: A

Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding unveiled today its proprietary Artificial Intelligence driven due diligence system, Crowdo ACE, aimed at benefiting both their borrowers and investors. Crowdo ACE takes into account a few thousand unconventional and alternative attributes and represents a new way to perform due diligence versus traditional means used by conventional financial institutions. It has already been applied to process more than 3,000 loans.

In a largely-unbanked Indonesia, Amartha uplifts women micro-entrepreneurs (YourStory), Rated: A

Twenty-six people, four nationalities, 10 days. Travelling across Southeast Asia as a Startup AsiaBerlin Roadshow delegate to explore startup ecosystems was an experience unto itself.

Amartha has so far disbursed over $13 million to 60,000 women micro-entrepreneurs and aims to improve their income, and ultimately quality of life.

Aria: Amartha is an Indonesian financial technology startup that focuses on providing affordable financial access, and mentorship to the unbanked population living below the poverty line. Amartha operates much like a peer-to-peer lending platform, and so far, has disbursed more than $13 million to 60,000 borrowers. The borrowers are mostly women micro-entrepreneurs and Amartha aims to improve their income, and ultimately alleviate their status through financial inclusion.

Aria: When we started operations in April 2016, we disbursed $40,000 a month. By the end of 2016, we were disbursing $800,000. Today, on average, we disburse $2.5 million per month. So far, we have disbursed more than $13 million, across more than 60,000 borrowers. The average ticket size of a loan now is around $300.

We charge a fee based on the profit sharing principle. Of the 22-30 percent annual interest rate paid by borrowers, we collect 11-13 percent for our revenue.

Africa

The Mauritian Financial Services Commission Issues Draft Peer-To-Peer lending Rules (Mondaq), Rated: AAA

Following the announcement of the Government on peer-to-peer lending and funding in the 2017-2018 Budget, the Mauritian Financial Services Commission (“Commission”) has issued draft rules on 10 November 2017 to regulate the peer-to-peer lending sector – as sector which has grown rapidly in other countries.

In the region, Kenya and Africa are leading in the peer-to-peer business lending market. According to a study conducted by the University of Cambridge, within Africa, South Africa had the largest number online alternative finance platforms, with $15 million raised in 2015 (The Africa and Middle East Alternative Finance Benchmarking Report, February, 2017).

Borrower and lender – a borrower must be a resident in Mauritius; however, there is no residency requirement for the lender.

Restrictions on amounts  Hence, a lender, who is a legal person, cannot lend more than MUR 500,000 (approx. GBP 11,000) in any 12 months’ period. A lender, who is a natural person, cannot lend an amount in excess of 10 per cent of his income or a maximum of MUR 300,000 (approx. GBP 6,600), whichever is lower, in any 12 months’ period.

Obligations of a P2P operator – the Peer-to-Peer operator must publish the following information on its website:

  • details of how the P2P lending will operate
  • measures to prevent money laundering and combatting terrorist financing
  • security measures to ensure data protection
  • dispute resolution mechanism.
Canada

Borrowell wins Deloitte Fast50 award (Borrowell Email), Rated: A

Borrowell has won a Companies to Watch award as part of the Deloitte Fast50 program. We are one of only eleven companies across Canada to win that award this year, and the only company from Toronto. Fast50 winners in the category for established companies include well-known names like Shopify, SkipTheDishes, Wave and Influitive. The list was announced an hour ago. 

Russia

Moscow Is On Its Way To Becoming A Smart City And Fintech Powerhouse (Forbes), Rated: A

Its citizens and businesses are also quick to adopt the latest disruptive technologies such as fintech and cryptocurrencies. Moscow has a 35 percent fintech adoption rate, higher than New York’s 33.1 percent.

Authors:

George Popescu
Allen Taylor

Monday June 19 2017, Daily News Digest

Lending Club default rates

News Comments Today’s main news: Finastra inks agreement with IBM. One number Elevate Credit shareholders are worried about. Zopa makes IFISA available to existing customers. Yirendai ready to include wealth management. Klarna wins Europe’s biggest fintech banking license. Today’s main analysis: Online lenders do a good job of identifying fraud. Today’s thought-provoking articles: Bloomberg report is critical of online […]

Lending Club default rates

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

Africa

News Summary

United States

One Number Elevate Credit Shareholders Are Worried About (The Motley Fool), Rated: AAA

Elevate Credit, Inc. (NYSE:ELVT) the newly public subprime fintech lender, delivered its first quarterly earnings report as a public company on May 8, and the results were impressive. Loan originations grew almost 40%, while revenue grew by a smaller 20%, due to the lowering of interest rates on Elevate’s high-rate loan products. Elevate’s IPO was unusual — most tech IPOs sport high growth rates but negative earnings. In the first quarter, Elevate actually delivered a net profit of $1.7 million. Adjusted EBITDA margin expanded to 16%, above the 10% margin posted in 2016 and the 4% in 2015.

The big blemish on the quarter was a high net charge-off rate  as a percentage of revenues. Net charge-offs measure the amount of principal and interest more than 60 days past due, minus recoveries from prior periods. That number shot up to 59% in the quarter, above the company’s target range of 45-55%,  and up 600 basis points year over year. While the company was still profitable, the $1.7 million in net earnings was down from $6 million in the year-ago quarter.

Management explained that the rise in loan loss provisions was partially related to a new credit score the company tested on lots of new customers at the end of 2016. As is the case with many financial companies, when new customers increase, there is often an initial uptick in defaults or loss ratios.

Bloomberg Report is Critical of Online Lenders (Crowdfund Insider), Rated: AAA

A report from Bloomberg this week takes certain online lending platforms to task regarding the fact that some online lenders are not verifying income status.  The report also says that even if there are errors in loan applications the loan may still be approved. More specifically, apparently Prosper does not verify income and employment in about a quarter of the loans. Lending Club is said to verify income in about one third of the loans.

Risk is always part of the investment equation and Orchard Platform perhaps provides the best perspective into affiliated risk of investing in loans originated online.

Online Lenders are doing a good job of identifying the frauds (even without hard income verification) (Croudify), Rated: AAA

Recently there was an article in Bloomberg (Article Link) that talked about how online lenders are not always verifying the basic borrower information like Income.

We at Croudify have been analyzing the loan data for more than 2 years and wanted to shed some light on the article and show that while the headline is true the devil is in the details and actually the platforms have been doing a very good job in identifying the fraud.

Once we had concluded that the non-verified loans are not growing as percent of population the logical next step was to check if these loans are performing worse than before. Is there a possibility that the loans without income verification have deteriorated over time and hence the red flag.

This points to a very important finding that the preliminary indicators that Lending Club is using in identifying the fraudulent behavior is not only working it is working great and is providing a performance lift to loans.

Pricey ‘fintech’ lenders put the squeeze on cash-strapped small businesses (L.A. Times), Rated: A

So Newman, 61, turned instead to an online lending company called OnDeck. After submitting a handful of bank statements, he was quickly approved for a $65,000 loan, which allowed Newman to cover his wine shipments and keep his business running.

“These loans are predatory by nature,” he told me. Think payday loans for small businesses, he said, with interest rates well over 30%.

And there’s something to that. Loans with a higher degree of risk would naturally come with higher interest rates. The question is whether such loans are being marketed honestly and fairly, and whether customers are able to make informed decisions about financial obligations.

Fairness in lending means clear and straightforward disclosure of terms and conditions. On that score, OnDeck seems to come up short.

For example, the company’s website boasts that term loans of up to $500,000 can be obtained with annual interest rates as low as 5.99%. Newman said that when he contacted OnDeck, he was hoping to get a loan at such a rate. But it didn’t work out that way.

What he got was a 12-month, $65,000 loan, plus nearly $17,500 in interest and an origination fee of $1,625. That translated to an annual percentage rate of 55%.

In fact, OnDeck told me its average annual interest rate for term loans, excluding fees, is 38%. If that’s the case, I asked why the rate most prominently displayed on their website is 5.99%.

China Merchants Bank is considered the largest industry player currently, but still its assets under management in its private banking division are worth just 1.66 trillion yuan.

Assessing the future of the financial advice industry (InvestmentNews), Rated: A

First: There will be fewer advisers, possibly many fewer. The trend line points down, and there’s nothing in the three- to five-year outlook to change that.

The future leaders of this profession see advisers serving far more clients with a greater assist from technology, as well as more reliance on outsourcing.

But those requiring expert financial advice will undoubtedly seek a more complete look at all areas where money touches their lives — and how those areas intersect. Who will need it most? A large population that isn’t necessarily today’s prime prospect pool, at least for advisers paid based on a percentage of assets: the HENRYs (high-earner, not rich yet). As investment advisers move beyond mere investments, and the field becomes a profession, compensation surely will evolve to ensure those who most need advice can get it and those giving advice can still run a profitable business.

In financial advice this will take the form of a planning quarterback who strategizes the entire financial game plan and keeps clients on track largely through automated accountability programs.

If you find this hard to believe, just wait until Google or Amazon moves full throttle into the asset management business.

Offer B2B Fintech Solutions To Help Clients Grow Their Sales (Forbes), Rated: A

In April, 2017, Pew Charitable Trusts published the results of a national survey of payday loan borrowers. The top three responses to what is most important to these borrowers in choosing where to get a payday loan were:

  • 76% – How quickly they can get the money
  • 74% – The fee charged
  • 73% – The certainty that they would be approved for the loan

The survey reveals other important consumer attitudes about payday loans. Most respondents believe that there should be more regulation of lenders, and lower interest charges. They would also prefer almost any other borrowing option or loan type to the payday solution.

Chuck Wait Tire, located in the small rural community of Mowrystown, Ohio, had never cleared more than $100,000 in monthly revenue, until they implemented Acima. The next month, they not only beat the $100,000 threshold, they killed it with a 33% monthly increase in sales from $90,000 to $120,000.

Podcast 105: Robert Morgan of the American Bankers Association (Lend Academy), Rated: A

In this podcast you will learn:

  • The core purpose of the ABA.
  • What is in the ABA Fintech Playbook and why they published it.
  • How the bank of  the future will be different to today.
  • How the ABA select their Endorsed Solutions providers.
  • The attitude of banks today regarding partnering with fintech platforms.
  • How large banks differ to small banks when it comes to partnering.
  • The needs of banks today when it comes to new technologies.
  • The official stance of the ABA on the OCC Fintech Charter.
  • The ABA’s view on the data sharing initiatives taking hold in Europe.
  • How banks, data aggregators and fintech companies are working together on data sharing.
  • How open banking could work in a similar way to Facebook logins.
  • Some of the other new technologies that are on Rob’s radar.
  • How banks of the future will be similar to banks of today.

ArborCrowd Now Offering $ 69.7 Million Commercial Real Estate Deal to Investors in Miami (Crowdfund Insider), Rated: B

Online commercial real estate company ArborCrowd announced on Thursday it is now offering a new $69.7 million commercial real estate deal to investors. The Lago Paradiso property is described as a multifamily complex located in Miami, Florida. 

According to ArborCrowd, investors now have the opportunity to own a piece of a $4 million stake in Lago Paradiso. The property now has a targeted 13 percent to 17 percent Internal Rate of Return (IRR) and a projected hold period of four to seven years.

United Kingdom

Zopa Announcement: IFISA Is Now Available to Existing Customers (Crowdfund Insider), Rated: AAA

Zopa announced on Thursday its IFISA is now available for all existing Zopa customers. Along with the IFISA, the online lender unveiled its latest peer-to-peer investment product, Zopa Core.

Zopa then explained that the Zopa Core product has a target return of 3.9% and by December will replace its products, Access and Classic, without Safeguard coverage. IFISA and Zopa Core features include:

Funding Circle SME Income fund holds steady on dividend (AltFi), Rated: AAA

The £406m Funding Circle SME Income fund has paid out its fifth dividend, the fourth consecutive quarter at the same 1.625p level, holding pay-outs in line with targets.

OFF3R Wants to Become “Money Supermarket” (Crowdfund Insider), Rated: A

At last count OFF3R hosts offers from 36 different UK platforms. Today in a report on P2PFinanceNews, OFF3R is revealing it is raising £5 million to become the “Money Supermarket” for investments. Essentially OFF3R wants to integrate today’s alternative investments with yesterday’s more traditional types.

Fiserv to buy UK mobile payments pioneer Monitise for 70 million pounds (Reuters), Rated: A

U.S. financial technology provider Fiserv said on Tuesday it had agreed to buy British financial services technology firm Monitise Plc for about 70 million pounds ($88.72 million).

AIM-listed Monetise, worth about 2 billion pounds at its peak in early 2014, blazed a trail by linking banks and mobile operators to build a business capable of handling billions of dollars in mobile payments, purchases and money transfers.

The SME’s guide to P2P (P2P Finance News), Rated: A

“The key thing is making sure that you’re looking for the right type of finance,” explains Paul Marston, managing director of commercial finance at peer-to-peer lending platform RateSetter.

A survey by the British Business Bank for 2015/16 found that 100,00 small businesses were rejected for loans by mainstream lenders – equating to £4bn of potential finance.

“If you’re an SME and go to the bank for an unsecured loan, there’s a cap of around £50,000, whereas Funding Circle will offer up to £350,000.

Funding Circle explains that it offers four key benefits for SME borrowers: speed, flexibility, efficiency and transparency.

As P2P platforms are purely online, busy business owners can apply for finance outside of working hours. “More than 50 per cent of loan applications are made outside of working hours, when a bank branch would be closed,” says Funding Circle.

While criteria varies from platform to platform, P2P loans are often more suitable for businesses that are slightly more established. For example, RateSetter offers loans to businesses that have been trading for at least three years and has at least two years of either audited accounts or formally prepared management accounts. And Funding Circle only lends to businesses that have been trading for more than two years, have a turnover of more than £50,000 and are a UK limited company.

However, there are still options for start-ups. Crowd2Fund has recently launched a ‘venture debt’ product which enables early-stage companies that are not cash-flow positive to access debt finance. Crowd2Fund argues that this can be simpler than raising equity and enables founders to keep control of their company.

Funding Xchange claims that a business using its platform can expect an average saving of £2,000 by comparing pricing from multiple providers – representing 10 per cent of the value of the average loan.

LendInvest hires second Northern BDM (Financial Reporter), Rated: B

LendInvest has appointed its second BDM for Northern England to satisfy growing demand in the region.

Sophie Mitchell-Charman joins the team from Mint where she worked as a Bridging BDM. Based in York, she will travel extensively throughout northern England, with a particular focus on deals in the North East.

China

P2P platform Yirendai ready to move up a financial league or two, including into wealth management (SCMP), Rated: AAA

Yirendai, China’s largest peer-to-peer lending platform, is looking to raise its profile even higher, with an expanded product offering, the company’s chief executive Fang Yihan has told the South China Morning Post, shrugging off any worries about a regulation-induced slowdown in the industry.

New rules governing the industry will come into force in August, and according to available drafts, these will impose a limit of 200 000 yuan (US$29,400) on lending to individual borrowers, require the lenders to carry out stricter background checks on all clients, and establish strong contractual relations with custodian banks.

Double digit returns for investors were commonplace last year, but will become harder to find.

But with its scale, larger players such as Yirendai that will be the most likely to gain a competitive advantage from the tighter rules.

China’s retail wealth management market was worth 120 trillion yuan last year, according to a report by Boston Consulting Group, which expects growth of 12 per cent annually for the next five years.

China Merchants Bank is considered the largest industry player currently, but still its assets under management in its private banking division are worth just 1.66 trillion yuan.

Yirendai is also experimenting with allowing partners to sell services other lending services via its platforms.

Yirendai Recognized as Best P2P Lending Platform in China at the Future of Finance Summit (IT Business Net), Rated: A

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced that it was awarded the Best P2P Lending Platform in China Award at The Future of Finance Summit (the “Summit”) held in Singapore on June 8-9, 2017. Yirendai is the first FinTech company in China to receive this prestigious reward.

China’s P2P Lending business volume of May reached to $ 53billion, keeping another new record. (Xing Ping She Email), Rated: A

According to a latest monthly report issued by P2P001.com, the total volume of P2P lending in China hit a new record to $53billion on May, with the month-on-month growth of 11.32%.

On May, the average annual interest rate for P2P loans was 8.34%, which has been slowly rising for three months in a row. However, the financial “deleveraging” and tighter monetary policy are still undergoing, it is unlikely that P2P lending rates will continue to rise.

By the end of May, the accumulated P2P loan balance in China has reached to $213billion, with the month-on-month growth of 6.72%. Among them, the loans outstanding on P2P loans of more than $29,850 reached to $152 billion, accounting for 71.46% of the total; the loans outstanding on P2P loans of more than $149,253 reached to $101billion, accounting for 47.43%.

In addition, there are 672 P2P lending institutions assigned depository agreement with banks up to the late May, involving 59 banks and 28 provincial and municipal lending platforms, and 286 of them have been already launched online.

China Banking Regulatory Commission issued a standard campus loan requirements (01Caijing), Rated: A

Recently, the China Banking Regulatory Commission, the Ministry of Education, Ministry of Human Resources and Social Security issued the Notice on Further Strengthening the Management of Campus Credit.

It is pointed out that commercial banks and policy banks should provide customized products for college students, training, consumption and entrepreneurship under the premise of risk control while strengthening the rectification of campus loan problems. And the standardization of financial services, together set the credit line and interest rates.

Beijing and Shenzhen drive Chinese fintech (Deal Street Asia), Rated: A

Ning Tang, CEO and founder of Chinese fintech major Creditease, believes that the current landscape will require players in the finance sector to evolve their approach amid a highly disruptive technology landscape with substantial opportunity.

What’re the assets under management and the role of the Singapore office?

Every year we help clients deploy over $100 billion of capital and the idea of coming to Singapore in 2014 was that this city was one of the bases for our internationalisation strategy.

You’ve got different entrepreneurial hubs in China – Hangzhou, Shanghai, Hong Kong, Beijing – which is the fintech capital of China? 

I’d like to say Beijing because that’s Creditease’s base. But in terms of technology innovation, not just in financial services, I think Beijing and Shenzhen are the leading cities, while some say Hangzhou as well.

Why do so many Chinese firms want to list in New York when Chinese entrepreneurs have access to very liquid stock markets in cities like Shanghai, Shenzhen and Hong Kong? 

In our experience, the US capital markets are more advanced in terms of welcoming innovative business models and companies at the growth stage despite being a pre-profit stock.

Recently, Beijing has been implementing capital controls and kerbing capital outflows from China. How has this affected Creditease’s business?  

We’re largely unaffected by these controls, as many of our wealth management clients have assets outside of China, and we help them manage those. However, with our Creditease Fintech Investment Fund,  we had some of our partners who were able to invest overseas.

There’s been a lot of movement in the Bitcoin and Ethereum markets. What’s the view of Creditease on digital currencies as an asset class and its use in marketplace lending? 

We remain interested but it’s too early at this stage. The regulatory framework and security issues around such models…I think we’d like to see more things get worked out before this asset class becomes appealing to our investor base. We help our investors do asset allocation and any asset class going into the portfolio should be a major asset class. Otherwise, it’s quite speculative and not helpful to our investors

Looking at the future of fintech in China, you have Beijing where the regulators are based. With all these centres like Shenzhen, Hangzhou, Beijing, Shanghai and Hong Kong, what is the future of all these different ecosystems? 

Quite interestingly, you’re talking about cities. I’m thinking about nations.

So different cities and nations have to assess the unique attributes they work and work on refining and enhancing those. I’m quite hopeful that Beijing will continue to be the fintech hub and with Creditease, we’ve got a presence in various places like Israel, Singapore, New York and Hong Kong, so we can access this innovation everywhere!

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

As the plan summaries, from 2011 to 2015, over 96 regulations and guidelines for the financial sector have been issued. In the next five years, another 110 regulatory updates or new regulations or guidelines will be released.

Alibaba Group Holding Limited hosted an Investor Day on June 8-9 at Alibaba Xixi Headquarters. Speakers included Jack Ma (Executive Chairman), Daniel Zhang (CEO) and other members of the senior management team.

To safeguard the interests and property rights of college students and maintain financial stability for P2P online lending market, China Banking Regulatory Commission (CBRC), Ministry of Education and Ministry of Human Resources and Social Security have jointly issued a paper to regulate the student loans market. The paper encourages commercial banks and policy banks to develop student loans business and provide standardized financial services to college students.

Ant Financial’s virtual credit card service Ant Check Later (also known as “Huabei” in Mandarin) is eyeing to link up to 4 million online and offline merchants to help them grow businesses and attract consumers who have little access to physical credit cards.

At present, third party payment service license has become an essential equipment for any Chinese company who wants to expand into financial services. On June 7, GOME Finance announced to acquire a payment service company Easy Bonus Card. GOME Finance paid up to CNY 720 million, mainly for the license, which could make the company complement the payment capabilities and accelerate the process of technological innovation.

European Union

Sweden’s Klarna wins Europe’s biggest fintech banking licence (Financial Times), Rated: AAA

Klarna has become the largest European fintech company to get a banking licence, with the Swedish group saying it wants to become the Ryanair of the sector, attacking lenders across the continent.

Valued at more than $2bn, Klarna has already captured much of the market for online payments in the Nordics and Germany, and on Monday received a banking licence from the Swedish Financial Supervisory Authority 20 months after filing for one.

The Swedish group – which had revenues of SKr3.6bn last year and was valued at $2.25bn in a fundraising in 2015 – is looking at offering customers across Europe services such as bank cards and salary accounts as well as eyeing the US for future expansion.

Crowdfunding Platform BrickVest Makes First Exit At 31% Return (Bisnow), Rated: A

BrickVest, the real estate investment crowdfunding platform, has announced that some of its investors have exited an investment for the first time, at a sizzling return.

BrickVest, the real estate investment crowdfunding platform, has announced that some of its investors have exited an investment for the first time, at a sizzling return.

The BrickVest fund invested in a portfolio of 23 retail assets in a joint venture alongside Corestate Capital.

Russian Fintech And Their Fight Against Geopolitics (Forbes), Rated: A

According to EY’s Fintech Adoption Index report last year, although Russian online adoption is lower in comparison to major financial centers like London, New York or Hong Kong, the market in this area is growing at a rapid rate. Online payments and money transfers are booming Russia, as are Moscow and St Petersburg are becoming hubs for this form of technology.

David Waroquier, Partner at Mangrove Capital Partners also highlighted that access to funding in Russia is more limited. ‘This means Russian fintech companies must have a tighter control on costs and be very efficient operationally.’

As said before, one of the trends that has exploded in Russia is mobile payments, as the EY report states that 57.6% of Russians used this service in comparison to the 17.6% globally. There are currently 56 million online mobile users over 16 in the country and according to Gfk, 53% of online users in Russia made at least one mobile payment in the last 6 months, as Dunaev said.

European Crowdfunding Network Launches Survey on Cross-border Crowdfunding & Online Lending (Crowdfund Insider), Rated: A

The European Crowdfunding Network (ECN) has launched a survey dedicated to addressing the challenges of cross border transactions in the investment space. More specifically, the ECN is seeking input on cross border crowdfunding and online lending, including peer to peer / marketplace lending.

The ECN explains:

We will focus solely on crowdfunding models that entail a financial return, notably:

  • Investment-based crowdfunding (where companies issue equity or debt instruments to crowd-investors through a platform) and
  • Lending-based crowdfunding (where companies or individuals seek to obtain funds from the public through platforms in the form of a loan agreement)

The survey is available here. 

International

Newly Formed Finastra Signs Agreement with IBM on Banking Technology, Fintech (Crowdfund Insider), Rated: AAA

Finastra, created by the merging of Misys and D+H, and IBM (NYSE: IBM) have reached an agreement to explore how Finastra can transform their banking operations with IBM Cloud and Cognitive technologies. The two companies plan to bring IBM technology into the Finastra open architecture to enrich the digital retail banking experience and bring new innovations to market.

WorldRemit adds Android Pay as secure option for migrant remittances (Reuters), Rated: A

Cross-border money transfer service WorldRemit is enabling its immigrant customer base to send money home using Android Pay, making it the first international remittance firm to run on the Google payments system, the company said on Tuesday.

Connecting with Android Pay will enable WorldRemit customers in developed markets like Europe or North America to make instant international money transfers to reach the 112 million accounts available via WorldRemit’s network of payment channels.

London-based WorldRemit says it handles about three-quarters of mobile phone-based international money transfers, a small but fast-growing segment of the global $575 billion worldwide remittance market. Recipients using WorldRemit can up pick cash or deposit money in banks or mobile money accounts or top up mobile accounts.

Traydstream launches fintech solution for paperless trade (Global Trade Review), Rated: B

New fintech player, Traydstream, has launched a solution to digitalise trade documents and automate regulatory compliance screening using artificial intelligence.

In short, Traydstream’s new solution digitalises the whole trade transaction – from invoice to Swift – and is targeted at banks as well as corporates.

Australia

Big banks and fintech start-ups face up to Jack Ma’s mobile payments juggernaut Ant Financial (abc.net.au), Rated: A

While Ant Financial says it wants to work with our banks, not against them, some are warning disruption from a global digital giant is inevitable, even if it doesn’t come from China.

Former Challenger exec Paul Rogan makes robo-advice play (Australian Financial Review), Rated: A

Paul Rogan, the former chief executive of distribution, marketing and research who stepped out of the role in February after 12 years at Australia’s largest annuities providers, is now readying to launch Retirement Essentials, an online platform that educates and assists those who are already in retirement on how to manage their money.

Mr Rogan has invested an undisclosed sum in SuperEd, the the robo-adviser co-founded in 2012 by Vanguard Australia founder Jeremy Duffield and Westpac executive and technology entrepreneur Hugh Morrow.

India

Wadhawans opens UK unit, buys stake in Zopa (India Times), Rated: AAA

Wadhawan Global Capital (WGC), which owns 38% of DHFL and is the controlling lever for the group’s financial businesses, has set up a London unit that opened its account through undisclosed -but sizeable-investments in 12-year-old Zopa.

What the future holds for the P2P lending market in India and the world (My Big Plunge), Rated: A

While the overall internet-based alternative finance industry registered transactions worth more than $57 million between 2013 and 2015, online peer-to-peer or marketplace lending saw loans with a cumulative value of over $2 million disbursed during the same period. The total loan value in the corresponding two years has grown by around $2 million, with an estimated $4.5 million worth of loans disbursed through online peer-to-peer lending platforms by the end of 2016.

But even as industry projections predict the market for peer-to-peer loans to be worth $4-5 billion by the end of 2023, this promising segment is still a long way off from achieving its true potential as a highly viable alternative investment class.

The launch of India’s Digital Stack that includes Aadhar, eKYC and digital payments is paving the way for the country’s shift towards a cashless economy.

The year 2017 is expected to be the year of financial technology, with alternative lending and investment products like peer-to-peer lending set to be driving forces for the latest iteration of the fintech revolution in India.

Faircent.com, for example, has consistently delivered net returns upwards of 18% per annum to its majority of lenders.

Asia

InvestaCrowd Updates on Real Estate Crowdfunding in Asia (Crowdfund Insider), Rated: A

About a year ago, Crowdfund Insider connected with Julian Kwan, CEO and co-founder of Investacrowd, a real estate crowdfunding platform that was established in Singapore. Kwan was born in Australia but has spent the last 17 years in Asia – most recently Singapore. Having founded multiple companies, Kwan is a longtime real estate investor, developer, and manager.  InvestaCrowd was envisioned as a vehicle to provide access to real estate investments in select markets like New York City, Sydney or London.  As with many real estate platforms, by using technology much of the process may be completed online.

A report by Cushman & Wakefield from earlier this year highlighted this fact. In a publication, Cushman & Wakefield explained;

“Compared to other countries, China ranked No. 1 among foreign investors in commercial real estate within the U.S. in 2016. China inbound investment deal volumes have grown rapidly, reaching $19.2 billion USD in 2016, a record high. Sixty-two percent of the investments, which equated to $11.9 billion USD, were deals over $1 billion USD. The five largest Chinese investment transactions were among the top ten largest transactions in the U.S. in 2016.”

Kwan told us InvestaCrowd was in the process of obtaining a capital markets license from the Monetary Authority of Singapore (MAS) – now a requirement.

But current investors are turning into repeat investors. InvestaCrowd does not focus on Southeast Asian real estate which brings better quality deals but adds a different challenge to the mix. While he likes the Singapore market it is in a bit of a pause. On the other side, he is very cautious on deals in countries like Vietnam, Indonesia or China – a country where he spent many years in the real estate sector.

Kwan said they are looking to set up a line of credit too, so as to be able to pre-fund deals.

Meet Anna Haotanto, The Fintech Queen of Singapore (IB Times), Rated: A

Singapore is one of the leading hotspots for financial tech thanks to flexible regulation plus national initiatives to fund startups and integrate blockchain innovation into the local economy. American venture capitalists at the Ethereal Summit in New York praised Singapore as a ripe market, teeming with collaboration between entrepreneurs, regulators, banks and investors. The small island nation wants more than a high-tech economy: Singapore aims to become a global fintech hub.

Haotanto is a self-made millionaire determined to make fintech more accessible for Asian women. Her online media startup, the New Savvy, targets women investors by providing 30,000 Asian subscribers with finance and career guidance. This is no ordinary women’s publication. Forbes reported her team partners with the Monetary Authority of Singapore, the Singapore Exchange (SGX) and Far East Organization to produce pragmatic content.

So her company organized the Future Is Female conference in April, along with SGX, attended by 250 women.

Africa

P2P Cash Launches Money Transfer Service to Nigeria With No Transfer Fees (Press Release Rocket), Rated: A

P2P Cash, a Georgia-based digital financial services company, has opened a new money transfer service from the US states of Georgia and South Carolina to Nigeria. P2P Cash now offers cross-border money transfers at competitive exchange rates without any transfer fees. Nigerians and Nigerian-Americans in Georgia and South Carolina can find this new service at . Customers may also download the mobile app from the Google Play or Apple Stores.

P2P Cash’s aggressive no-fee pricing position is possible because of its proprietary Smart Token technology and global disbursement network.

Authors:

George Popescu
Allen Taylor

Online ID Verification in Russia

ID Finance

With a GDP of almost $1.4 Trillion, Russia is one of the biggest markets in the world. But due to geopolitical tensions and subsequent economic crisis, it has seen a lot of volatility in its ecosystem, which is not conducive for businesses and start-ups. Even the alternative lending industry, which has blossomed all across the […]

ID Finance

With a GDP of almost $1.4 Trillion, Russia is one of the biggest markets in the world. But due to geopolitical tensions and subsequent economic crisis, it has seen a lot of volatility in its ecosystem, which is not conducive for businesses and start-ups. Even the alternative lending industry, which has blossomed all across the globe, has yet to find a major foothold in Russia and CIS countries. Hence, there is a huge undeveloped and untapped market, and to take advantage, Boris Batine and Alexander Dunaev launched ID Finance in Russia.

ID Finance History

ID Finance was founded in 2012 and in a very few years was able to carve its own niche in the financial lending segment. It has been one of the leading players in the fintech industry with core expertise in data science, non-FICO scoring, and digital finance. As a lot of fragmented data is available in developing markets, it has hired a team of data scientists to assess risk factor and detect fraud. Being able to bring transparency to markets and data presented is the company’s USP.

Further, on the knowledge drawn, three smart data lending flagship products (MoneyMan, Ammopay, and Solva) were developed for emerging markets. The company started in CIS and then expanded to Spain and Poland. It has recently rolled out in Latin America.

Expansion and Regulatory Issues

It hasn’t been smooth sailing in new markets; the company has to fend off a lot of bureaucracy and had to deal with convoluted regulatory layers to find its feet. For instance, in Brazil, it had to partner with a bank to launch in the country. Without that collaboration, it would have taken two to three years to just start.

Such markets are highly complex with a lot of bureaucracy and complicated regulatory regime. They’ve been mostly overlooked by both traditional and fintech lenders.

ID Finance has succeeded in such non-credit-mature economies and this has enabled the company to compete with established players such as Enova International, the US-based NYSE-listed fintech company.

ID Finance chose to expand in Latin America over Asia as South America has a common language and a similar legal regime whereas every Asian country is a different market in its own right.

ID Finance’s Lending Stats

ID Finance provides unsecured short-term and long-term loans, and point-of-sale financing. It is a balance sheet lender that has partnered with banks, funds, and investors for its funding requirements. Since inception, ID Finance has originated around 720,000 personal loans worth $200 million. About half of its growth was observed in 2016 as loans worth $90 million were issued as compared to $32 million in 2015. The company hopes to grow its books by two and half times this year.

The average APR is 10% per month. The company’s cost of funding is around 10%-11% per annum. It is focusing on bringing down the APR so that clients could have access to a cheaper long-term source of credit. Even the clients with bad credit history and the ones who were earlier rejected by banks can enter the formal credit channels by obtaining their initial loans from ID Finance.

Differentiator and Innovation

ID Finance is continually concentrating on R&D to bring innovative risk assessment models and has further stepped up in developing innovative solutions for both web and mobile platforms. This is what differentiates the emerging market player from the developed market players.

Today, the world is producing vast amounts of data, and this can be leveraged to help generate access to the financial services needed by the people.

In Russia, ID Finance joined hands with Experian, a leading global information service company, and developed online ID verification, which is now widely used all over the world. Continuing the same trend in Europe, it has collaborated with Instanton, a Swedish company, which has developed an ID check to cross check names and data. After tasting success in Russia and Europe, it is planning to take these products to Latin America and develop similar services that could possibly reduce the degree of fraud risk on its loan portfolios. Its mission is not only to launch new products in the market but to shape the market, as well.

Staggering Numbers

In a short period of time, ID finance has been able to capture a large chunk of borrowers; it has around 2.8 million registered clients. On top of that, in 2016, the company was able to generate $68 million in revenue with a 222% growth rate. Being profitable is a hallmark of a mature company, and ID Finance raked in around $8 million dollars in profit last year.

Another added advantage of being profitable is it is easy to attract investors. Hence, ID Finance has not found any difficulty raising funds. The company has managed to raise $59 million since inception, and the latest round of funding ($50 million) will be used for expansion across Latin America.

Customer Acquisition

ID finance is among the top non-bank financial brands in CIS and undertakes huge investment in branding and creating overall awareness to bring the client acquisition cost down. Moreover, it becomes inexpensive to acquire brand-conscious customers, and they turn out to be the most loyal clients with the best repayment rates. ID Finance also uses diversified channels to acquire customers, such as digital media (Google, Facebook), affiliate marketing, or direct marketing.

Founders

Boris Batine, the co-founder and CEO, has extensive experience in the banking sector and, prior to ID finance, he worked with Royal Bank, Deutsche Bank, and Renaissance Capital. Alexander Dunaev, the co-founder and COO, worked with Deutsche Bank.

Conclusion

The company is only five years old and has embraced the concept that profitability is the only way to move forward. Starting from a country like Russia hampered its ability to raise investor funding, and this forced it to ensure that its unit economics are strong and can grow on their own. With the latest round of funding and a core lending infrastructure already built, ID Finance can replicate its success in multiple developing countries around the world.

Author:

Written by Heena Dhir.

The outlook for sanctions against Russia under Trump: stronger or weaker?

A complete mystery, clearly, despite Wednesday’s enormous €10bn deal by Glencore and Qatar to buy shares in Rosneft.

Continue reading: The outlook for sanctions against Russia under Trump: stronger or weaker?

A complete mystery, clearly, despite Wednesday's enormous €10bn deal by Glencore and Qatar to buy shares in Rosneft.

Continue reading: The outlook for sanctions against Russia under Trump: stronger or weaker?

Election AV: the “Trump trade” that made a lot of money in 2016 (so far)

You could have doubled your money in 2016 by betting on a Trump victory in a very specific way.

Continue reading: Election AV: the “Trump trade” that made a lot of money in 2016 (so far)

You could have doubled your money in 2016 by betting on a Trump victory in a very specific way.

Continue reading: Election AV: the “Trump trade” that made a lot of money in 2016 (so far)