Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated. But the result, for those with enough heart to see it through, can be massively […]
Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated.
But the result, for those with enough heart to see it through, can be massively rewarding. It takes a certain, special type of work ethic to start something from scratch, to build something from the ground up. Many have ideas, but few can execute to fruition.
Perhaps that’s why so many veterans transition from the military to business owners. All of those characteristics mentioned above…those are just standard traits for the men and women who dutifully and proudly serve in the military. So it shouldn’t come as too much of a shock to hear that as many as 25 percent of transitioning service members aspire to become small business owners. In fact, there are more than 2.5 million U.S. businesses today that are majority-owned by veterans.
Yet veterans are at a serious disadvantage when it comes to seeing their business ideas come to light. The issue isn’t a lack of desire, skill, or intent…it’s something else. Where, exactly, is the system broken?
An Overall Decline of Entrepreneurship – Why?
It’s a topic well-discussed by Inc.com in recent years – the fact that entrepreneurship as a whole has been on the decline for decades. Some reports show the trend has been on a downward slide for nearly four decades.
Just why is the ability to fulfill that age-old American dream of starting your own business in a slump? The main answer is simple: lack of access to capital.
For millions of businesses across the nation (both veteran-owned and non), cash flow and capital are a huge struggle. The simple fact is that access to working capital is among the greatest of challenges small businesses face. All too often, business owners just can’t get funding to start or grow their businesses. The term “underbanked” represents the 77 percent of small/medium business owners who are declined by traditional banks after they apply for funding for their business ventures. And for veterans, this is even more the norm.
VOBs – Entrepreneur Assets to Our Economy
U.S. veteran owned businesses (VOBs) are an essential component of our overall economy. The leadership skill sets and values service men and women hone during their time in the military is a big part of what transforms many of them into natural leaders. They develop an uncanny ability to solve problems…many of them are able to overcome the types of challenges most small businesses face during the startup phase. And these leadership skills often carry them throughout their tenure as business owners, even years after they launch. After analyzing four year’s worth of credit data (of both VOBs and non-veteran-owned-businesses), a recent report from Experian notes that VOBs tend to have improved sustainability and longevity when compared to non-veteran-owned businesses.
There are countless other substantial benefits VOBs offer. They’re more likely to provide employees with retirement plans, health insurance, paid leave and profit sharing. They’re also 30 percent more likely than non-veteran-owned businesses to employ fellow veterans. Statistically, research consistently shows that VOBs report impressive numbers in relation to growth, employment opportunities and sales, including:
VOBs with more than two employees = over 490,000
Total number of VOB employees = 5.8 million
Annual payroll = $210 billion
Number of VOBs that are “small businesses” = 99.9 percent
6-digit sales of $100,000 or more = nearly 80 percent
Generate an annual revenue of $500,000 or more = more than 38 percent
VOBs have collective sales of = $1.2+ trillion
What does all this tell us? VOBs are a huge benefit to the economy. That’s in part what makes it so hard to ignore the other side of the story. Despite their success and contribution to our economic sustainability, many VOBs – just like most small businesses today – are struggling to make ends meet. The Small Business Association (SBA) Office of Advocacy says that over 69,000 VOBs closed as a result of inadequate cash flow.
Taking that leap of faith and starting your own business has always been a risk, for any entrepreneur, but with entrepreneurship across the board on an overall decline (for both VOBs and non-veteran owned businesses), that risk seems somehow even greater these days.
Challenges Veteran Business Owners Face
Of the many challenges entrepreneurs face when starting a new business, for most, funding is high on the list. For the majority of veterans, sources of capital can include personal savings (30 percent) and personal or business credit (nearly 11 percent).
According to the same Experian report, veterans tend to have significantly fewer mentorship options and a lack of networking opportunities. They’ve also historically had less access to capital than their non-veteran owned counterparts, says a report from the Federal Reserve Bank, who together with the SBA assessed the stats of both VOB and non-VOB small businesses.
The SBA’s Office of Advocacy partnered with the Federal Reserve Bank of New York to publish FINANCING THEIR FUTURE: Veteran Entrepreneurs and Capital Access. Their research shows that despite need being strikingly similar amongst VOB and non-VOBs, there is a glaring disparage in lending opportunities for the two groups. It’s one major reason why veteran entrepreneurship continues to see a generational decline.
The report notes that even though VOBs submitted more applications for funding than non-VBOs (47 percent versus 43 percent, respectively, submitted three or more applications), from a larger variety of lenders (online lenders, small banks and large banks), VOBs received less financing overall. During 2010 – 2017, SBA loans to VOBs increased by 48 percent, whereas they increased by 82 percent to non-VOBs. This is despite dedicated veteran-dedicated relief programs.
And some more results of those applications? It’s reported that 60 percent of VOBs still have a financing shortfall due to receiving less funds than they applied for. In comparison, only 52 percent of non-VOBs received less than requested.
The report also points out what we’ve already seen in multiple other studies, that:
“military service is highly correlated with self-employment probability,” and
“veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed”
What should all this data tell us? It’s pretty clear: we should be putting more faith and funding into VOBs.
Real-Life Success Stories
For those veterans who have been able to find funding through alternative resources, the results are both impressive and inspirational.
Just look at veteran and owner of The Texas Silver Rush, Joseph Remini. Remini creates custom jewelry and is considered a “destination” in Fredericksburg. He’s created custom pieces for the likes of stars including Santana, Ringo Starr and countless other country artists. Reliant Funding’s non-traditional funding options allowed him to purchase the silver he needed to make expensive, custom, one-of-a-kind pieces that are allowing him to make a name for himself. Remini knows that Reliant’s dedication to veterans is something unique.
“I will tell you that Reliant has given me peace of mind. I know I am with a company that cares about me, is willing to grow with me.” – Joseph Remini, The Texas Silver Rush
Christopher Adams is VBO of Cedar Creek Builders and a rental management company. When both companies were growing at a rapid speed, Adams used alternative funding to purchase and replace equipment he desperately needed for a job. Borrowed funds also allowed him to cover unexpected costs during the winter months. His success even meant he was able to purchase a personal condo without concern that it would affect his credit, and ultimately, his ability to access capital to grow his businesses. Adams is grateful for the opportunity non-traditional funding has afforded him.
“Reliant is there when you need funding. It is nice to know and have that peace of mind.” – Christopher Adams, Cedar Creek Builders
Reliant Funding is honored to represent so many veterans in small business. By eliminating origination fees for veteran and active duty service members and their families, and releasing a comprehensive resource guide for veteran owned businesses, Reliant has shown its dedication to the veteran community. We believe knowledge is power, so we’re committed to setting VOBs up with the know how to successfully navigate:
Cash flow management strategies
Funding options and how to use them
Certification as veteran owned business
Training and education opportunities
How to take and apply advice from other successful veteran business owners
If you’re a veteran or family member of a veteran looking for funding and working capital for your new or existing venture, our special offering to veterans and the debut of our VOB guide is proof of our commitment to investing VOBs.
Adam Stettner is the CEO and Founder of Reliant Funding
News Comments Today’s main news: SoFi is shopping for $1B credit line. KBRA assigns preliminary ratings to Prosper Marketplace Issuance Trust, Series 2018.2. Monzo headed to unicorn status. China Rapid Finance debuts up to $20M share repurchase program. Today’s main analysis: Forcasting cash flows using machine learning. Today’s thought-provoking articles: Report sheds light on early success of real […]
Monzo could join the ranks of European unicorns. This would do a lot to legitimize digital banking in Europe. The question is whether the rise of digital banking, and challenger banks, in the UK and Europe will ever migrate to the U.S.
Student loan refinancing company Social Finance (SoFi) is looking for a loan of its own: The company is in talks with banks to secure a revolving credit line of as much as $1 billion after posting a second-quarter loss.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Prosper Marketplace Lending Issuance Trust 2018-2 (“PMIT 2018-2”). This is a $500.5 million consumer loan ABS transaction.
Preliminary Ratings: Prosper Marketplace Issuance Trust, Series 2018-2
The price of a loan is the present value of the loan’s cashflows (after accounting for losses and prepayments), discounted by an appropriate discount rate:
Cashflow Modeling with Credit Models
The inputs of a credit model are loan attributes and borrower factors such as:
Originator of the Loan
Term of the Loan
Interest Rate on the Loan
Original Principal of the Loan
Age of the Loan (Months on Book)
Prior Loan Status
Borrower’s Credit Score at Origination
The sparse transition model assumes 7 possible loan statuses which describe the performance of the loan:
Current (or Status C)
1 Month Delinquent (or Status 1)
2 Month Delinquent (or Status 2)
3 Month Delinquent (or Status 3)
4 Month Delinquent (or Status 4)
Default (or Status D)
Paid Off (or Status P)
Once a loan arrives at a terminal absorbing state (“Defaulted” or “Paid Off”) there is no future possible transition as there are no further cashflows. Therefore, the probability of a loan remaining defaulted is 100%.
We asked Ahluwalia who will benefit from the OCC Fintech Charter and whether it was big tech, Fintechs or other.
“The long-term winner of the charter is the US consumer who will benefit from greater competition, innovation, and access to the financial system. New technology and entrants will also promote the dynamism and resilience of the US financial system,” stated Ahluwalia. “Payments companies that seek to compete with Visa / Mastercard also stand to benefit. Payments arms of firms like Google, Apple, Amazon, and PayPal would fit the profile, as well as large non-bank lenders that can demonstrate sustainable profitability de-risked their business models. Fintech lenders are a major winner as well as they’ll be able to compete on a more level playing field. Big technology firms have an opportunity to expand their role in financial services as well.”
New Research Sheds Light on Early Successes of Real Estate Crowdfunding (EquityMultiple Email), Rated: AAA
A full 65 percent of respondents plan to allocate at least 10 percent of their portfolios to real estate crowdfunding sites, with nearly 40 percent expecting to allocate at least 20 percent
More than 60 percent of respondents report typical annual returns of at least 8 percent
Respondents considered “transparency and details with respect to investment opportunities” the most critical factor in a crowdfunding platform, exceeding all other choices, including “attentive customer service” and “diversity of investment opportunities”
With respect to individual investments, “geographic focus” (i.e. where a property is located) matters less to investors than “sponsor/lender experience”, the property’s upside potential or several other factors
Of the 5,000 companies on this year’s list exactly 233 are in the financial services category. Below is a screenshot of the top 10 companies in this category. Leading the list is Fundrise, the real estate platform for individual investors, a name that would be familiar to Lend Academy readers (I interviewed CEO Ben Miller on the podcast last year). Another well known name is Fundera, the small business lending marketplace, who were the third fastest growing company in our category. I encourage you to explore the complete list here where you can search for specific companies or filter by industry, state and many other criteria.
Companies in this industry such as Kabbage, Lending Club and BlueVine have grown significantly over the past few years by offering financing to many small businesses that otherwise would not be able to get loans. Their deals are quick to approve, rarely require collateral and are usually tied in to a customer’s financial systems for close monitoring.
Last month, the Office of the Comptroller of the Currency announced that it was moving ahead with its plan to allow online lenders to apply for banking charters. When recognized as a bank, those types of financiers would no longer have to comply with state laws and would instead be subject to federal banking regulations. “Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank,” Joseph Otting, the comptroller of the currency, one of the country’s top financial regulators, told the Los Angeles Times.
Financial technology companies that lend online are sounding a cautious note on a U.S. banking regulator’s plan to offer them special federal charters because of concerns over legal challenges and requirements that are more onerous than expected.
The Office of the Comptroller of the Currency said last month it would accept applications for banking licenses from the likes of LendingClub and OnDeck Capital Inc, online lenders that do business outside the traditional banking system. They then could operate nationwide under one banking license rather than a patchwork of state-specific regulations.
Fintech executives lobbied for the license and applauded the OCC’s decision, but they are not immediately rushing in, they told Reuters.
As reported in American Banker, consumer advocacy groups are concerned that financial inclusion expectations for fintechs chartered as special-purpose national banks may not perfectly mirror the requirements of the Community Reinvestment Act.
This possibility exists because the final version of the Office of the Comptroller of the Currency’s licensing manual supplement for fintechs lacks the same level of specificity as the draft manual that was published for comment last March. Consumer advocates have been steadfast in their insistence that the substance of the CRA, which by its terms applies only to depository institutions, be applied to nondepository fintech national banks. Yet imposing CRA-like requirements on these institutions would likely result in reduced credit opportunities for low-income communities.
So when Loving heard about a company called PayActiv, a tech startup that helps companies get their workers emergency cash for very small fees, “I thought to myself, now that’s a good idea,” he says. And he signed up.
“Our data analysis showed that it was close to $150 a month being paid by the working poor — per employee or per hourly worker in this country,” says Shah. “That’s a substantial sum of money because it’s about $1,800 or $2,000 a year.”
Zelle, a Venmo-style app that lets consumers send money to friends, roommates and babysitters, is working on ways to ensure that customers can safely pay small businesses as well, according to people familiar with the situation.
Zelle, backed by Bank of America Corp., JPMorgan Chase & Co. and other banks, is beefing up its risk-assessment tools as part of the effort, according to one of the people, who asked not to be identified because the feature hasn’t been announced. The idea is to help protect users when they’re paying businesses like gardeners and hairdressers.
To meet the evolving needs of consumers, Chicago-based TransUnion has announced the launch of credit offers through a simplified, SMS-initiated, mobile experience. The technology seamlessly integrates real-time credit decisioning with consumer and device authentication, creating a secure, personalized, and dynamic user experience.
Credit Karma, based in San Francisco, has 80 million members across North America, almost half of which are millennials and 80% of which access the service via their mobile devices.
Andy Taylor, founder and CEO of Approved, says it started the firm with a “vision that borrowers could visit an open house not having even talked with a lender, find the home of their dreams, and get fully pre-qualified on their mobile device before a listing agent offered them a business card”.
With this joint mobile mentality, both firms will be looking to cash in from the crowded US mortgage market. Approved says it has done nearly $5 billion in loan originations.
RealtyShares, an online platform for commercial real estate investing, has announced that one of its investment syndicates recently exited an industrial investment property—1 Distribution Center Circle in Littleton, Massachusetts—in partnership with Novaya Real Estate Ventures, an established Boston-based operator of commercial real estate throughout New England.
Monzo, the British digital bank popular with millennials, is set to become the latest European fintech “unicorn” with a fresh round of fundraising expected to put a valuation on the company of up to $1.5bn.
The east London-based online bank, known for its distinctive pink cards, is signing up 18,000 customers a week and aims to reach as many as 4m customers in the next couple of years, according to Tom Blomfield, its chief executive.
While email is still the most common reason people use the internet, online banking is the fastest-growing use. According to a survey by the Office for National Statistics — looking at the UK population, not just internet users — 69 per cent said they banked online, almost double the proportion recorded 10 years ago (35 per cent).
The ONS began running its survey in 1998. In the case of internet usage, people were asked about their use in the January, February and April before the survey.
BEFORE the global financial crisis, banks were the lender of choice for Britain’s small businesses, and perhaps the only option they would consider.
Since then, banks have become more risk averse and are pulling back from lending in some parts of the market, especially since the EU referendum. Peer-to-peer, or rather peer-to-business (P2B), lending has stepped in to fill the gap.
The Peer-to-Peer Finance Association (P2PFA) says the industry provided £660m of new lending to businesses in the first quarter of 2018 and, since the third quarter of 2017, there has been a 35 per cent increase in net lending.
Giant American payday lenders could face legal action in the UK today after they were accused of mis-selling loans to up to a million Britons.
Paydayrefunds.co.uk are preparing legal action against Quickquid, Curo and Lending Stream after the US-payday lending giants have so far refused to disclose information on customers who could be due tens of millions of pounds back in compensation.
The company issued a letter of action six months ago, which is due to run out next Friday. Paydayrefunds.co.uk revealed they have already appointed a barrister in preparation for issuing an injunction at the High Court against the lenders.
A new cryptocurrency lending app called Lndr is planning integration with one of the most popular financial services in the world: PayPal. This integration will open the ownership to digital assets to 100 million people around the world, which can cause an unseen widespread of cryptocurrency usage even for people who never before considered using cryptocurrencies.
China Rapid Finance Limited (NYSE: XRF), one of China’s largest consumer lending marketplaces, announced earlier this week the launch of its new share repurchase program, which allows the lender to authorized the repurchase of its ordinary shares in the form of American depositary shares with an aggregate value of up to $20 million.
During a Wednesday meeting in Beijing, the China Banking and Insurance Regulatory Commission asked four managers of distressed assets – Huarong, Cinda, Great Wall and Orient – to extend their mandate to non-performing loans owed by peer-to-peer (P2P) lending platforms, according to a source familiar with the matter. The meeting was first reported by Reuters on Thursday.
In July, a total of 165 platforms reported problems, among which 65 percent had difficulties in investments withdrawal, while executives of 8.72 percent of those firms stole money and ran away, according to a report released by domestic industry website wdzj.com on August 1.
Accumulated transactions in the domestic P2P industry had reached 7.48 trillion yuan by the end of July, the report said.
On Wednesday, the China Banking and Insurance Regulatory Commission asked the country’s four State-owned asset management companies to help address rising risks in the P2P sector, according to media reports.
China’s banking regulator has instructed the country’s four state-owned bad loan managers to deal with failing peer-to-peer lending platforms, a sign of Beijing’s concern about possible financial and social instability from the shadow banking sector.
Hundreds of P2P platforms have collapsed in recent months due to borrower defaults and fraud by platform operators. The defaults have sparked panic among investors, some of whom have sought early redemption of their investments.
European markets are set to see a slew of big initial public offerings this fall. Potential mega listings – from companies such as Aston Martin, Volvo Cars and Spanish oil firm Cepsa Trading – could help Europe overcome a relatively slow first half. IPOs there have raised about $31bn in 2018 so far, compared with almost $38bn in the same period last year, data compiled by Bloomberg show.
Still, volatile markets threaten to spook investors and owners away from new share sales. Concerns that turmoil in Turkey could hurt the region’s lenders has added to pressure on European stocks from the US-China trade spat. Commodities have tumbled along with US equities, fuelling fears that the sell- off may be the start of a broader market correction.
Global spending on blockchain solutions is estimated to reach $2.1 billion this year, but for there to be a blockchain revolution, many barriers – technological, political, organisational and societal – need to be overcome first.
Currently, citizens in Europe have the lowest levels of ‘complete trust’ in traditional banks. This is worrying, given money is simply a means of exchange, built on the trust bestowed upon it.
However, some bankers will tell you the traditional financial system is ‘global’ and ‘efficient’ as it is, despite being fully aware of its flaws. In our industry, lending, if you’re currently a non-bank lender who would like to diversify your global lending potential, you will find that it is punitively expensive, time-consuming and exclusive to large funds and traders. This ultimately reduces the potential reward for non-bank lenders through fees.
Given the astonishing fact 39 percent of the world’s population are unbanked, blockchain technologies and associated crypto currencies could open the door for anyone, anywhere to lend, borrow and invest. All you need is internet access.
AUSTRALIANS have borrowed $46.6 billion in personal loans over the past 12 months, research has found, but experts claim many are unaware of how loan applications are assessed and how they may affect their own credit scores.
RateCity analysed Australian Bureau of Statistics data from the past 12 months and found personal loan numbers were up 6.4 per cent year on year, with more than half a million Australians using them to buy cars in that period. The total borrowing for new cars was $8.33 billion at an average loan size of $36,341; while a further $5.88 billion was borrowed for used cars.
On top of this, we borrowed $6.05 billion for debt consolidation and $2.54 billion for household goods, but despite the huge outlay, many borrowers are confused about how personal loans work and why they may not be offered the low interest rates they see on advertisements.
People with zero or poor credit score find it hard to get a loan from NBFCs and banks. P2P aims to serve such unbanked and underbanked population. Tell us how do you do it? NBFCs and banks also lend to people ‘new to credit’. These people typically have a financial transaction whether in form of a bank account or income data, whether salaried or self-employed, and can be validated on the risk ratios, basis the information.
Cambodia Fintech Association also reported it undertakes four major streams of work on behalf of its members, which are the following:
Champion: Advise government and regulators on policy change that supports Fintech innovation and growth
Assist: Provide research, legal/regulatory help, service provider discounts and other benefits that help our members build and scale their Startups
Match: Get customers to buy, investors to invest, and talent to get involved in Fintech solutions
Bridging: Connect ventures (capital), talents (education) and other stakeholders within the Cambodia Fintech ecosystem and provide connections to overseas hubs through our network Events and Partners
According to the Phnom Penh Post, CFA Vice President, Eddie Lee, stated that Cambodia is currently progressing in its fintech, but startups are slowly starting to surface in the country. Lee also explained that CFA has also signed a Memorandum of Understanding with the Taiwan Fintech Association, Thailand Fintech Association and Singapore Fintech Association to establish bridges with similar groups in the region. He added that the next step is to register the CFA with the Asian Fintech Network.
News Comments Today’s main news: LendingClub grows short interest. Larry Summers resigns from LendingClub board. RealtyShares intros gap financing for projects under $20M. Mark Davies steps down from RateSetter board. Today’s main analysis: Heap’s behavior attribution platform. Today’s thought-provoking articles: Can Noto sell mortgages at his new SoFi post? China banks report drop in bad loans. Chinese families rack up […]
Can Noto sell mortgages at SoFi? AT: “The former Twitter executive undoubtedly has his challenges, but SoFi wouldn’t have hired him if he didn’t show promise. Some people may be routing for his failure, but I’m looking for a big success.”
LendingClub Corp (NYSE:LC) was the recipient of a large increase in short interest during the month of February. As of February 28th, there was short interest totalling 31,244,316 shares, an increase of 11.0% from the February 15th total of 28,142,392 shares. Based on an average daily volume of 9,132,224 shares, the days-to-cover ratio is presently 3.4 days. Currently, 11.3% of the company’s stock are short sold.
Yesterday, we learned that after nearly six years Mr. Summers will be leaving the board of LendingClub. He is being replaced by leading economist and Stanford professor Susan Athey. While she is not nearly as well known as Larry Summers she still brings serious economics clout to the board.
Heap is aiming to automate insights and is starting today with the launch of Heap Behavior Attribution. The new product is the industry’s first attribution product that measures behavior and does so in a way that requires no data science or engineering resources, the company said.
The Heap Behavioral Attribution measures standard marketing channels (i.e. Google and Facebook), and also ties in a set of broad user behavior, including email, customer relationship management (CRM), shopping cart, customer success, and either-or testing platforms. Examples include user behaviors stored in Salesforce, Marketo, Shopify, Autopilot, Optimizely, Oracle, and more.
It has more than 100 employees and 6,000 customers, including Twilio, Lending Club, App Annie, Morningstar, Monotype, and Casper.
RealtyShares today announced a gap financing program that delivers subordinated financing solutions to commercial real estate owners seeking higher leverage on the financing of projects under $20 million. The suite of solutions, which includes preferred equity, mezzanine debt, and second lien loans, helps commercial real estate operators get the capital they need to buy, refinance, or renovate commercial properties.
As chief operating officer of Twitter Inc., Anthony Noto did a lot to calm the company’s perpetually anxious shareholders. On Feb. 26, however, Noto took over as chief executive officer of a financial technology startup, Social Finance Inc., or SoFi.
He’ll be facing increasingly tough competition. SoFi sees Marcus, the consumer-lending business started by Goldman Sachs Group Inc. in 2016, as the biggest threat, according to people familiar with SoFi’s thinking.
One question Noto will have to navigate is how much SoFi should use its own balance sheet—that is, hold on to the loans it originates as opposed to selling them to other investors. It currently keeps a slice of loans but sells off most of them. Holding loans allows a company to earn a stream of interest income, but investors generally put a lower value on financial firms than tech platforms.
SoFi says it plans to hold 500 events in 2018, up from 41 in 2015.
The wealth management unit, fully launched in May 2017, had $42.3 million in assets under management as of Jan. 18, according to Prosser.
Instant financing is a revolving line of credit that shoppers can apply for during online checkout, letting them spread payments out over time with low annual percentage rate (APR) offers. The option is particularly appealing to Millennials, as fewer than 33% of them carry credit cards, according to a 2016 Bankrate survey.
A recent paper from Robeco discusses whether a liquidity premium exists in the stock market. The authors, David Blitz, Jean-Paul van Brakel, and Milan Vidojevic, conclude that “the evidence for such a premium is, at best, weak.”
Less politely, these authors refer to the whole notion of a liquidity premium as having been “challenged and debunked in various studies.”
Theory and Practice
In a sense there “should” be a liquidity premium. The more illiquid a stock, the more difficult it is to trade it, which on some models means that illiquid stocks are less attractive than liquid stocks, and should command a premium. One should have to be bribed to hold an illiquid stock just as one has to be bribed to hold a risky one.
In our prior Clients & Friends Memo “Who’s My Lender?” published on March 14, 2018, we analyzed two actions brought against marketplace lenders, one against Kabbage Inc. (“Kabbage”) in federal court in Massachusetts1 and the other against Avant in federal court in Colorado.2 In that memo, we noted that the Massachusetts action against Kabbage is proceeding to arbitration, while the action against Avant was remanded to state court.
Last week, Colorado courts issued several new rulings related to marketplace lending. First, the federal court in Colorado remanded another enforcement action brought by the Administrator of the Colorado Consumer Credit Code against Marlette Funding (“Marlette”),3 which had been doing business as a marketplace lender in Colorado under the name Best Egg. Following the reasoning in the Avant decision discussed in our prior memo, the court rejected the marketplace lender’s argument that Colorado’s usury laws were subject to complete preemption under federal law and therefore the court granted plaintiff’s motion to remand. As a result, Avant and Marlette will be forced to make their arguments that a bank is the “true lender” and that the Colorado Administrator’s usury claims are therefore preempted by federal law, and any other defenses, in Colorado state court.
The FDIC announced yesterday that it had reached settlements with Cross River Bank (“Cross River”) and Freedom Financial Asset Management (FFAM). Kroll Bond Rating Agency (KBRA) believes that the settlement and related consent order have a low likelihood of adverse impact upon the credit profile of Cross River and that of its parent, CRB Group, Inc. (CRB). While FFAM represents a very small portion of Cross River’s customer base, KBRA believes any adverse regulatory action draws heightened scrutiny to Cross River and the MPL industry, a factor already considered in the current ratings. Furthermore, KBRA believes that the matters cited by the FDIC were isolated instances and is not representative of pervasive issues with Cross River’s Compliance Management System (CMS). Nonetheless, we believe that has Cross River has since adopted enhanced compliance and reporting requirements consistent with FDIC guidance and incorporated enhancements to their CMS.
VOX Network Solutions (VOX) has announced a partnership with Enacomm, Inc. (Enacomm) to bring Enacomm’s self-service solutions to VOX clients. Through the reseller agreement, financial institutions will be equipped with VPA (Virtual Personal Assistant) banking and the Enacomm Financial Suite (EFS), which includes a hosted, dynamic interactive voice response (IVR) system for personalized customer interactions.
Digits, a leading crypto company using technology aimed to combine the convenience of credit and debit card payments with the utility of cryptocurrency payments and to easily allow the consumer the ability to effortlessly pay for goods and services with crypto via their existing credit or debit card, announced today the addition of a highly respected crypto expert, David Drake, to its advisory board team.
MARK Davies has stepped down from the board of RateSetter after more than six years.
Davies, who was part of the founding management team at e-gaming company Betfair, joined the board of the peer-to-peer lender as a non-executive director in November 2011 – just 13 months after the company’s launch.
There was a time in the UK when most people were under the impression that financial advice was free. They went to see an adviser. He gave them advice. They handed over their money to him to be looked after. They never got a bill.
Only when the government changed the laws in 2012 did they realise they were paying. A lot. They just hadn’t noticed for the simple reason that they did not physically pay it to the adviser.
Brexit is officially one year away and the impact it is having, and will continue to have, on our financial lives is filling the pages of our newspapers and TV screens daily.
Since the Brexit vote in June 2016, sterling has fallen significantly in value against the euro. The pound reached a high of €1.42 in October 2015, but at the time of writing on 20 March 2018, it was worth 21 per cent less at €1.14, according to currency specialist Moneycorp.
Typical transaction costs for using your card abroad are between 2.75 and 2.99 per cent, and you will be charged a non-sterling purchase fee of up to 1.25 per cent on top.
Each time you use an ATM abroad, you can also be charged anything from £1.50 to £2 a time, so it is wise to withdraw larger sums in one go or to get a specialist overseas card that allows fee-free spending and cash withdrawals, according to Nick England, chief executive of travel money firm EasyFX.
The latest UK buy-to-let index from property finance experts, LendInvest, has shown that the Midlands appears unaffected by the UK’s current house price growth slowdown, sending three of its largest cities into the top 5 places to invest – but where came out top?
Non-performing loans ratios — a gauge of asset quality — averaged 1.57% at the four state-owned lenders, 0.15 percentage point less than at the end of 2016. “Special mention” loans with an elevated potential for default decreased 0.9% to 1.59 trillion yuan. All four banks had reported 2017 results as of Thursday.
Chinese families with their long tradition of saving money are now accumulating debt at a rate never been seen before, according to data compiled by a state-backed think tank in Beijing.
The country’s household leverage ratio – or the ratio between debt incurred by families and gross domestic product – surged to 49 per cent at the end of last year from 17.9 per cent at the end of 2008, going up about 3.5 percentage points annually, the think tank said in a report released on Thursday.
So in the period from 1993, when the data became available, to 2008, the household debt ratio went from 8.3 per cent to 17.9 per cent, with an annual rise of 0.65 percentage points.
According to its report, average disposable income could cover standard loan interest and mortgage repayments, while households were still sitting on 70 trillion yuan (US$11.13 trillion) worth of bank deposits and cash overall – enough to offset the 40 trillion yuan in outstanding bank debt.
Dianrong and China United SME Guarantee Corporation, known as Sino Guarantee, one of China’s leading guarantee companies, today announced a new lenders protection plan for Dianrong customers. The plan, which went into effect at the beginning of 2018, is designed to provide third-party protection in the event of a loan default.
Dianrong’s borrowers now have the option to purchase the Sino Guarantee lenders protection plan, which further improves the borrower’s risk and credit profile. Sino Guarantee will then use a dedicated fund account to pay lenders the loan principal and any outstanding interest in the event of a loan default covered by the plan.
Spotcap, an SME focused online lender based in Berlin, recently held a roundtable on the future of finance. Individuals from prominent firms joined with the Fintech lender to assess progress made so far. Representatives from Deutsche Bank, Figo, GP Bullhound, McKinsey along with Spotcap debated how the financial ecosystem model will evolve, the implications for the customer, and the challenges and opportunities for Fintechs and more traditional financial service firms.
Using the blockchain technology to disrupt the real estate market, Alt.Estate has a strong potential to become an industry standard for the blockchain-based real estate transactions. A strong technology stack, a go-to-market strategy with 10X leverage, a working prototype with three tokenized apartments in key geographies, strong community support, and a solid pipeline of enterprise deals all position Alt.Estate as a win-win solution for real estate developers and investors.
Estimated at $217 trillion, the real estate market is worth nearly 2.7 times the global GDP.
“ERC-20” FOR REAL ESTATE
Developed two years ago, ERC-20 has quickly become a significant industry standard for all the tokens on Ethereum. Inspired by the approach of ERC-20 developers, Alt.Estate’s Protocol aims to become an industry standard for the tokenized real estate.
When Fonta Gilliam joined the foreign service out of school, she didn’t expect it would lead her to entrepreneurship. But after seeing community lending in practice throughout her work in East Asia and Africa, Gilliam wondered what would happen if she combined these traditional practices with new financial technology.
It all started when Gilliam was working in the visa department at the embassy in South Korea.
The practice of a lending circle is a kind of informal savings program. Say you have 10 members who each put $100 into the lending club each month. One member collects the full 1,000 each month and each month the total amount rotates until 10 months has passed and the circle starts back at the beginning.
In proptech, three forms of technologies are particularly pertinent and pervasive: blockchain, augmented reality (AR) and artificial intelligence (AI). In Singapore, these technologies are already making their impact felt in the real estate industry with their adoption by startups, global corporations and the government.
Blockchain: facilitating real estate transactions
A form of distributed ledger, the blockchain is distributed across nodes, locations and even countries. Being decentralised, it eliminates the need for an intermediary to process, validate or authenticate transactions.
Artificial intelligence: extracting insights from data
The most valuable tech companies (Facebook, Amazon, Netflix, Google) are where they are today because of the trove of consumer data they possess and continue to accumulate. In the realm of technology, data is wealth, and AI is the key to unlocking this wealth. AI, as the name suggests, is teaching the computer to think like a human, making sense of the data fed to it.
Proptech: transforming real estate in Singapore
Cognisant of the need to keep up with change, the Singapore government has introduced an Industry Transformation Map (ITM) for the real estate industry. The ITM is focused on using automation, digitised contract templates, and predictive systems to streamline processes for property transactions and facilities management.
GISC uses a strict proprietary model composed of a fundamental and technical analysis strategy. So when their analysts suggested that cryptocurrency are poised to outperform in developing nations for some years to come, the company dedicated to coming up with a solution that would basically democratize lending of blockchain digital assets on a global scale.
GISC LoanCoin Network platform is designed with an aim of bridging traditional lending services to the blockchain and opening access to the non-banked. GISC LoanCoin Network is a Ethereum blockchain utility token based lending platform that will support P2P and B2B lending by eliminating intermediaries like banks and other financial institutes. It’s a platform where borrowers can interact and deal directly with the lender and GIS token holders can earn income by becoming Lenders or Guarantors.
GISC differs from other lending platforms like ETHLend and SALT in a way that GLN lends against Altcoins and this feature is yet to be introduced by any other lending platform. The platform usually takes a low, around 2% transaction fee for credit assessment/KYC-AML/ ID verification and connection through the network.
According to the Small Business American Dream Gap Report, almost 25% of all small businesses consider shutting down due to cashflow issues. With a reported 30 million SMBs in the United States, 7.5 million SMBs are at risk. Traditional banks literally vacated the SMB lending space after the 2008-09 financial crisis. Moreover, changes in minimum […]
According to the Small Business American Dream Gap Report, almost 25% of all small businesses consider shutting down due to cashflow issues. With a reported 30 million SMBs in the United States, 7.5 million SMBs are at risk. Traditional banks literally vacated the SMB lending space after the 2008-09 financial crisis. Moreover, changes in minimum wage and competition from automation, Amazon, and cash burning startups have disrupted the SMB ecosystem. SmartBiz Loans understands the pain point of the market and was launched to help minimize this funding gap.
About SmartBiz Loans
Set up in 2010 by Ryan Gilbert, SmartBiz Loans was incubated through PayPal and Venrock.
The company started as a consumer credit delivery platform and later pivoted towards small businesses. The San Francisco-based startup has raised almost $40 million in funding from a list of marquee investors including its original incubators.
Currently headed by Evan Singer, SmartBiz Loans has been the pioneer in creating the leading online marketplace for SBA loans. It partners with banks across the country and establishes a win-win situation for both small businesses and lenders by ensuring that the “tedious” process of loan application becomes as intuitive and hassle-free as possible.
What SmartBiz Loans Can Do for SMBs
Businesses across the nation struggle to meet their day-to-day requirements for working capital and maintaining optimum cash flow. SmartBiz Loasn bridges the gap between the bankers and the borrowers by avoiding unnecessary loan application rejections by banks. The startup uses artificial intelligence to act as third-party advisor to small businesses and give them insight into what happens during the credit decisioning process. It helps entrepreneurs understand why SBA loan applications are rejected so that borrowers can mitigate the chances of loan application rejection. Also, SmartBiz focuses on reducing unnecessary delays in the loan application process.
SmartBiz Lending Products
SmartBiz specializes in SBA loans for working capital, refinancing, and SBA 7(a) commercial real estate loans.
SBA loans are considered the gold standard in the industry due to their lower interest rates and longer tenures. The company’s average loans range from $30,000 to $5 million, tenure ranges up to 10-25 years for different products, and APR ranges form 6%-8.25%.
Another feather in SmartBiz Loans’ cap is the advisory services the company extends to clients through its SmartBiz Advisor service. This product is an amalgamation of all SmartBiz services and helps businesses find out how bankers view them as a potential borrower for an SBA loan while helping the business take the necessary steps to ensure SBA loan approval. From viewing the tax returns of businesses to providing them with a proprietary credit score to performing debt analysis, SmartBiz Loans recommends ways to improve their clients’ financial health.
Working the SmartBiz SBA Loan System
The SmartBiz SBA Loan system is designed to be intuitive and simple. It evaluates a borrower’s score by using AI and machine learning technology to ensure the borrower is an ideal fit for an SBA loan. Then the right borrower is directed to the right bank. On the other hand, SmartBiz Loans partners with banks and licenses its software to help them in automatic loan underwriting. Most impressive is the fact that almost 90% of borrowers referred by SmartBiz Loans are approved for bank loans. Such a high acceptance rate reduces the cost of client acquisition for banks and improves the overall borrower experience.
Dealing with Competition
According to the Singer, SmartBiz Loans is the AI-powered chief financial officer for small businesses that find it hard to hire their own CFOs. Although SmartBiz faces aggressive competition in the industry, its pace of growth, proprietary artificial intelligence and machine learning technology, and access to in-house databases, including tax data, have helped it create its own alternative lending niche.
SmartBiz Loans recently crossed originations of $500 million in funded SBA loans. It was the biggest facilitator for funding of SBA 7(a) loans in the year 2016, and it overtook JPMorgan Chase as the leading provider of SBA 7(a) loans.
Diversity of Customers
SmartBiz Loans caters to a broad customer base across 50 states. Most of the borrowers that approach the lender have been in business for 5-10 years, work with less than 10 employees, and their average annual revenue ranges between $500,000 to $2 million.
SmartBiz Loans has helped reduce the underlying gender bias in SMB funding by originating almost 17% of its SBA loans to women-owned small businesses. Also, SBA loans for veterans account for 8% of its total originations.
SmartBiz Loans and the Future of SBA(7a) Lending
Apart from boosting its other products, SmartBiz plans to delve deep into SmartBiz Advisor in order to streamline the process of making SBA credit easily available for small businesses. Though currently serving the United States, it is also looking to expand abroad in the coming years.
Creating the ideal marketplace for SBA Loans, SmartBiz Loans is the number one online marketplace for SBA 7(a) loans. Its deep domain expertise coupled with its customer service obsession make its an easy bet for future unicorn status.
There’s no doubt about it: growing a small business is no small challenge. No matter how amazing your idea or product, you’re bound to encounter some serious mountains. According to a TD bank 2017 Business Survey, some of the key challenges that small US-based businesses face today are rising interest rates and rising healthcare costs, both […]
There’s no doubt about it: growing a small business is no small challenge. No matter how amazing your idea or product, you’re bound to encounter some serious mountains.
According to aTD bank 2017 Business Survey, some of the key challenges that small US-based businesses face today are rising interest rates and rising healthcare costs, both of which can be at least partly attributed to uncertainty surrounding the state of political leadership.
And these days, more and more small businesses like startups areturning to credit cards and other forms of financing over bank loans than ever before. This is partly because someone in four businesses applying for credit were denied, and the ones who received financing did not get as much as they needed.
“… although many employer small businesses were profitable and optimistic, a significant majority faced financial challenges, experienced funding gaps and relied on personal finances. These issues were even more pronounced for the smallest firms, which were less likely to receive necessary funding and more likely to rely on personal finances to operate.”
Despite the fact that the vast majority of businesses in the United States are classified as small businesses – that is, they have employee bases of 500 or less – approximately half of all businesses fail in the first 5 years.
Many of these fail due to lack of funds and a lack of finances.
On top of that, even the businesses that succeed don’t even break even for 2 or 3 years, making financing at the outset crucial. The tricky part is that securing financing is also the most difficult part, which is why so many small businesses are denied financing. And owners are understandably frustrated.
Here are a few key reasons why small businesses are often denied funding.
An Uncertain Economic Climate
Uncertainty behind the local and regional economy is a basic stressor and reason behind the struggle many small businesses encounter. This very uncertainty is why so many businesses are likely to seek financing.
Unfortunately, this problem is also a reason why banks are less likely to give loans. When times are tight, lending is too. Banks aren’t inclined to lend when it’s possible the economy will take a dive, tanking many small businesses.
Because of this, many people are turning to personal savings, lines of credit, and even loans from family and friends.
Lack of Collateral
Collateral is some type of asset which secures the loan. This collateral can be some type of equipment, real estate, or anything else a bank could repossess and sell if the business fails to repay the loan.
It’s crucial for small businesses to list collateral on loan applications for the obvious reason of showing that they can pay it back in the case of default. The problem is that most startups don’t have much collateral like vehicles or business equipment. The result is the small business is denied a loan.
Gender and/or Ethnic Bias
Unfortunately, there appears to still be a major gap here, even though lenders are not supposed to be biased in this way. In fact, loan approval rates are much higher for white males than they are for women and minorities.
“… small businesses that were more than 50 percent owned by a woman only received 15 percent of all SBA 7(a) loan approvals; American Indian owned businesses received 1 percent; Asian owned businesses received 24 percent; African American owned businesses received 2 percent; Hispanic owned businesses received 6 percent; White owned businesses received 53 percent; and male owned businesses received 70 percent of all SBA 7(a) loan approvals.”
The sexism can be so bad that some female founder resort to extreme measures, like creating an imaginary male founder to dispel the bias.
Bad Credit History
If a business owner has a terrible credit score, there’s a really good chance they’ll be denied funding. No surprise here.
This is why it’s so important that business owners get to know their credit score before they apply for a loan. Additionally, they should focus on building a solid credit score from the get go, even if they think they won’t need a big loan.
Understanding your business credit score makes you more likely to be approved for a loan and more prepared to grow your business.
What many don’t realize is that if you’re a small business owner, you need to have both a strong personal and business credit score to secure a significant amount of financing from major banks. There’s no way around this.
According tonav.com, the ideal credit score is 680 to 720. It also helps if a business owner understands how to demonstrate a solid history of responsible money management.
If you your credit score is low, you’ll need to spend time improving it before applying for a loan.
High Operating Expenses and Slow Growth
If a business can’t adequately demonstrate growth and growth projections, they may have trouble securing adequate financing for further growth—another catch-22 situation.
According to aSmall Business American Dream Gap Report, 3 of 10 small businesses face challenges covering operating expenses. This trend is often due to the challenges of incorporating new employees as well as expanding or building inventory. Unfortunately, if they can’t cover their expenses, they’ll have difficulty securing funding
According toEntrepreneur.com, some 26 % of business owners don’t hire or expand because they don’t have the funds to do so. In turn, they resort to personal savings or loans from friends and family, despite the significant risks and high interest rates involved in these actions.
Lack of Cash Flow
In the past year or so,about 45% of businesses sought out financing, namely to cover operating expenses and expansion. This need for funding indicates a severe need for extra cash flow, which can be a huge red flag to banks.
Cash flow is not only one of the main reasons that existing businesses fail, it’s also a top reason why financing applications get denied. The reason behind this is simple: expenses come first before loans. This makes sense if you think about it on a personal financing level as well: you’re going to pay your rent and bills before you pay your loan payments. It’s simply a matter of priority.
Type of Business
According tonav.com, business owners are more likely to be denied financing if they are sole proprietors, brand new businesses, or state-approved businesses. In addition, businesses are liable to be rejected based on the type of industry they’re in.
In this game, size matters, and unfortunately the very nature of most small businesses makes them a bigger risk, especially if they are new. According to theFederal Reserve Website, smaller firms are “notably less successful at obtaining financing at large banks (45% success) than larger firms … (72% success).”
Part of the way a bank assesses a loan application is by assessing the customer base. If they’re looking at an application from a business in an industry that has a stable customer base, they are more likely to approve the application. Showing diversity in your client base is a key way to show secure projections.
Unclear Understanding of the Financing Process or Options
According tonav.com, there are at least 44 of different options for small business financing in the U.S. Depending on your area and/or industry, there may even be specialized grant options that are not widely advertised.Entrepreneur.com reports that some 20% of businesses applying for loans in the past 5 years had experienced multiple rejections and a quarter of these did not have a clear reason for the denial.
Researching and applying for these can be extremely time-consuming, which is why it’s recommended that small businesses ask the local business association for tips pertaining to their specific situation and/or industry.
All this points to a serious lack of understanding and transparency around what makes a business credit worthy. If people simply aren’t aware from the get go, or they’re asking questions but not getting clear answers, there’s obviously a problem.
To better prepare for loan applications, small business entrepreneurs need to have a clear picture of their current status, both in terms of financing and in terms of future projections.
They need to understand the context of securing funding to build accurate projections, and they can then send these projections with the loan applications to hopefully create a positive feedback loop.
But beyond that, small business owners need to thoroughly demonstrate their financial responsibility in order to have the best chance of securing crucial funding.
When you have business self-awareness, you are much more likely to succeed and to get the financing you so desperately need.
News Comments Today’s main news: Prosper closes on $50M funding round at $550M valuation. SmartBiz Loans hits $500M in SBA loans. Labour proposes debt cap that would force credit card companies to write off billions. European Central Bank considering requiring fintechs to hold more capital. RateSetter raises $10.5M. FinEX Asia’s private equity fund manager invests $50M in Prosper. Today’s main […]
Prosper closes $50M funding rounding at $550M valuation. AT: “Everyone is talking about Prosper’s 70% reduced valuation, but that may not be as negative as it seems. Lend Academy compares this with Lending Club’s decline in valuation in 2015–68%. There were some speed bumps for the industry last year, and the recent SoFi scandal will undoubtedly mar the industry this year. We’re due for market corrections, but keeping heads cool will lead to more increases down the road. Ride the waves.”
Earlier this week Prosper closed on a Series G transaction where they raised $50 million from an investment fund co-managed by FinEx Asia and LPG Capital based in Hong Kong. While Prosper would not confirm their new valuation sources said the post money valuation was $550 million. This represents a 70.5% drop in value from their high in 2015. So the rumors from last month are true.
On April 2, 2015 Lending Club was trading at $19.26 a share. Yesterday the shares closed at $6.10 which is a 68% decline in valuation. This is pretty much in line with the decrease in valuation at Prosper.
A spokesperson for Prosper told me that the money will not be used for operations but rather for new projects. Prosper is now cash flow positive with liquid assets of around $42 million as of Q2 2017. There was no dire need to get this funding round done but it will be helpful for them as they look to grow in a sustainable way.
FT Partners Advises Prosper on its $ 50,000,000 Financing Round (FT Partners Email), Rated: AAA
FT Partners is pleased to announce our role as sole strategic and financial advisor to leading marketplace lender Source: FT Partners
Download and read the full transaction announcement here.
After pocketing $50 million in a huge down round and another deal that could give an investor group a 30 percent stake in the marketplace lender, there’s really only one question for the CEO: Are you giving away the store?
SmartBiz Loans says it ranked as the leading facilitator of traditional SBA 7(a) loans under $350,000 for the 2016 fiscal year. This means SmartBiz surpassed Wells Fargo and other major banks in relation to SBA lending.
Small business loans are helpful for business owners who have no other financial options. SmartBiz Loans has announced that it surpassed $500 million in funded Small Business Administration loans. A fifth bank has joined its software platform.
According to the Buffalo News, M&T Bank leads a federal small business lending program in the Buffalo-Rochester region. The program’s overall totals have decreased from a year ago. The Small Business Administration reported 806 of the SBA 7(a) loans were originated through August. That’s down 21 percent from the previous period a year ago. Its amount of dollars were down 7 percent from last year, down to $132 million.
M&T Bank used to lead the way until August. Its number of loans dropped down to 41 percent. Its total dollars declined 11 percent to $25 million. It’s still well ahead of Wells Fargo. However, Biz2Credit, Fundera, and others have been catching up.
Matic Insurance Services (Matic), a digital insurance agency that enables borrowers to purchase homeowner’s insurance during the home-buying transaction, has forged a partnership with automated lending technology provider Roostify. The company announced the news Tuesday afternoon from the stage of TechCrunch’s Startup Battlefield, part of the TechCrunch Disrupt SF conference held in San Francisco this week. Matic was one of just six elite startups chosen to advance to the final round of the competition.
“We are interested in how companies like Y Combinator can use the blockchain to democratize access to investing,” said Sam Altman, who leads the accelerator, onstage at Disrupt yesterday. “We should try to figure that out.”
Our sources tell us YC is actually a little further along than that. Like a growing number of venture groups that are jumping into the digital currency world, the group is actively sussing out how it might use cryptocurrency to expand the investment pool.
A survey from online marketplace LendEDU found that 46 per cent of people between the ages of 18 and 34 who are saving for retirement use a financial adviser. In comparison, only 24 per cent of the 500 surveyed have used a robo-advice platform.
Around 75 per cent of respondents said they have never used an automated wealth management service, but 62 per cent of those said it was because they had never heard of robo-advice before.
Even so, millennials do not seem to trust automated wealth platforms. Of those surveyed, 51 per cent think a robo-adviser is more likely to make a mistake while managing money, while only 48 per cent think a traditional adviser is more likely to make an error.
More than 46% of respondents in a survey of 502 millennial investors saving for retirement said they had sought advice from a human advisor, according to LendEDU, a student loan refinancing company. That is almost double the 24.3% who said they had used a robo-advisor either in addition to a human advisor or exclusively, according to the survey, which was released September 19.
Angel Island Capital (“AIC”), a San Francisco-based alternative investment advisor and credit manager, today announced the appointment of Dev Gopalan as Chief Executive Officer. A seasoned financial services executive, Mr. Gopalan joins Angel Island Capital from leading global investment firm Kohlberg Kravis Roberts (“KKR”), where he served as Head of US Private Credit and was a member of the Global Private Credit Investment Committee and KKR Credit Portfolio Management Committee.
A rapidly growing peer-to-peer lender has exposed investors to a bankrupt for a second time, while a quarter of its loan book is considered to be in default, raising fresh concerns about regulation in the booming new finance market.
Sources close to Lendy Finance, which earlier this year became the title sponsor to the sailing regatta Cowes Week, spoke to The Sunday Telegraph after becoming concerned that the level of defaults revealed an ongoing weakness in underwriting checks, which is putting investors at risk to losses. The FCA is investigating how peer-to-peer lenders disclose default rates as part of a delayed consultation into the burgeoning industry.
A study of Lendy’s loan book reveals that almost 25pc of loans, worth £47.2m, are outside original terms, meaning repayments can be one day to 434 days overdue.
However, Lendy says that just 14.5pc of its loan book is “currently in default as defined by our agreements with lenders, and in line with the wider bridging and development finance market”.
What was bad, was that it became clear to me, that the interest level in combination with the non-performing loans would make it very unlikely for Bondmason to reach the projected return – at least for my portfolio. Especially with the Invoice Discounting loans there were issues.
In April 2017 Bondmason announced it would require a larger minimum investment amount of 5K (previously 1K) and raise fees for small portfolios to 1.5% (previously 1%). Dang. I was in no way interested to deposit more money. So my portfolio did not even get to celebrate 1st anniversary. In July I gave them notice to liquidate my portfolio/account. Since then I withdrew 1,013.94 GBP – only slightly more than I deposited. My account still exists as there is 20 GBP stuck in two property loans in default and also 1.41 GBP in cash.
According to the report, Starling plans to use the money to expand into other European markets, with the first of these likely to be Ireland, where it recently gained a passport — which will allow it to access EU markets after Brexit.
Goldman Sachs already has a mass-market offering in the US, after launching its online lender Marcus 18 months ago. Since its inception, Marcus has supervised over $1bn worth of loans to businesses.
Goldman Sachs will start taking deposits in the UK, but in the long run, the bank has plans to lend UK customers money through Marcus like in the US.
NatWest recently announced its plans to launch an online lender Esme Loans, allowing SMEs to quickly take unsecured loans of up to £150,000. Online lending is likely to become more crowded as Santander has also announced plans to incorporate digital banking in its services.
Conveyancing – the legal process of transferring ownership of land and property from one party to another – has changed considerably over the past 10 years.
Technology has so far failed to make inroads to improve the process – and no matter how slick your online lender or mortgage broker tries to be, everyone’s held to ransom by the law.
What is When you Move ?
Simon: Frustrations we’ve seen our clients navigate, in addition to our personal experiences, triggered something of an obsession to develop a tech solution for an industry deep-rooted in some of the most archaic practices still in use in modern-day business.
When You Move is an app that allows home buyers and sellers to see easily in real time where everyone is up to in the process – be that you, the lawyer, the mortgage broker, the valuer or the lender.
The survey found 65 per cent of 3,482 UK businesses have adopted at least one fintech solution, with 19 per cent making use of four services. These fintech products are helping the firms to save on average over £5,500 a year.
MarketInvoice estimates that 65 percent of 1.3m UK businesses are therefore making this average saving, meaning a total of £4.6bn is being saved thanks to fintech.
Adam Barrett, the head of institutional sales at Lloyd Banking Group has joined the exodus from banking to fintech. After more than 30 years in investment banking, at UBS, Goldman Sachs and Barclays, he’s just gone to peer to peer lending platform Invest & Fund.
Former Ryanair deputy chief executive Michael Cawley has been appointed chairman of peer-to-peer lending platform Linked Finance, which hooks up companies requiring capital with individuals and institutions looking to lend.
As of this month, it says it has 16,000 registered lenders on the site. Businesses to have availed of loans through the platform include Viking Splash Tours, the Irish Fairy Door Company and tech company Big Red Cloud.
Linked Finance has set a target to facilitate lending of up to €250 million in coming years. It says its lending was up by more than 240 per cent in the first half of this year. SMEs can borrow up to €250,000 on its platform.
By November 2016, we were engaged in a strategic pivot, actively shifting our focus from B2C to B2B, so we could offer our single-loan securitisation solution to major players on Europe’s lending stage.
The good news is that investors also stand to benefit from the opportunities inherent in CrossLend’s single-loan backed notes, and here’s how:
On September 21, 2017, blockchain software company ConsenSys announced the launch of a peer-to-peer (P2P) trading company, CarbonX, which will employ the Ethereum blockchain to tokenize carbon credits.
According to their numbers there are 214 Unicorns in the world. There are 24 countries with Unicorns and the US leads the way with 52% and China follows in second place with 23%.
E-commerce is number one and Internet Software & Services take second place. Fintech Unicorns are in 3rd place.
Fintech names like SoFi, Stripe, Credit Karma, Prosper, Kabbage, Avant, are on the list. Outside the US, Fintech names include Lu.com, ZhongAn, Saxo Bank, One 97 Communications, Klarna, Funding Circle, Transferwise are there.
Australian consumers will no longer face charges when using another bank’s cash point after the country’s four major banks dropped ATM withdrawal fees for domestic users amid greater regulatory scrutiny for the industry.
Former Commonwealth Bank chief executive David Murray says there remains a strong case for bank involvement in wealth management, despite the recent trend of lenders offloading life insurance and funds management assets.
CBA last week became the latest bank to retreat from “manufacturing” wealth products, selling its life insurance arm for $3.8 billion and saying it may spin off the investment business of Colonial First State in an initial public offering.
Woolworths customers will be able to use their iPhones to collect and redeem Woolworths Rewards points when shopping at the supermarket or its partners from next month. Find out how much you can collect and redeem here.
The Reserve Bank of India’s recent move to regulate peer-to-peer (P2P) lending platforms as non-banking financial companies (NBFCs) has created a grey area of sorts, spelling trouble for thousands of direct selling agents (DSA) or direct marketing agents (DMAs).
The Finance Industry Development Council (FIDC) says it is “very much possible” that DSAs/DMAs who have been providing loan facilitation (offline) services to retail and corporate borrowers, from banks and NBFCs (with whom they have signed a written contract) for the past many years, may also fall under the ambit of RBI’s P2P regulatory framework as NBFCs.
Since it was floated in January 2016, the government’s Rs 10,000-crore Fund-of-Funds for start-ups (FFS), launched in line with the Start-up India Action Plan of the Government, has made slow progress with only about Rs 70 crore having been disbursed to start-ups until the beginning of this month.
The 17 funds include Mumbai-based early-stage investor Kae Capital, which raised its second $30-million fund in February last year and is reported to have got a commitment of Rs 45 crore from the FFS. Kae Capital has investments in about 16 start-ups, including Truebil, a used-car marketplace owned by Paix Technology; peer-to-peer business loan marketplace startup Loanzen; second-hand products marketplace ListUp promoted by Gijutsu Solutions and shopping portal Fynd run by Shopsense Retail Technologies.
FinEX Asia is pleased to announce that its private equity fund manager closed an investment of US$50 million in Prosper Marketplace, a U.S. online marketplace lending platform for consumer loans.
“FinEX Asia is excited to complete the Series G financing into Prosper, a leader in marketplace lending in the U.S.,” said Maggie Ng, CEO of FinEX Asia. “Our team’s expertise is in fintech and consumer lending. Our investment strategy starts with the U.S. because of our strong network with online marketplace lenders. In parallel we are considering investment opportunities in other verticals globally.”
Founded earlier this year by Maggie Ng, a former Consumer Lending Head and Chief Risk Officer at Citibank, FinEX Asia aims to help Asian investors look for quality investment opportunities, both in fixed income and equity investments, by using its fintech platform and know-how. The investment made into Prosper is a good illustration of how such opportunities are welcomed by Asian investors and that FinEX Asia’s investment strategies are well recognized by the capital it represents.
Singapore-based fin-tech start-up FinMomenta, which entered the Indian online P2P (peer to peer) lending market early this year with its product called Tachyloans, will soon be lending to salaried professionals working in small and mid-size firms.
Called Corporate HR loans, FinMomenta aims to make lending easier for the working class. The loan size ranges from ₹50,000 to ₹5 lakh.
MicroMoney, a global fintech blockchain company and lending services provider, announces a private presale for its token-generating event for the early birds among funds and big contributors. This presale started on September 15th, 2017.
MicroMoney is a fast-growing company founded in 2015 with the offices in five Asian countries – Thailand, Myanmar, Indonesia, Sri Lanka, and Cambodia. The company plans to expand its presence to 5 more countries by 2018. MicroMoney was established as a company focused on micro-financing in the money lending industry, providing customers with online loans without any collateral requirements using machine learning algorithms.
There are still more than 2 billion of the unbanked in the world, especially in the emerging market.
CROWDCREDIT, a Japanese cross-border marketplace lending company which promises to fill in lending gaps by providing funds for lending and financial institutions including banks, is currently studying the market and possibility of business expansion in the Philippines.
In other countries, such as the United Kingdom, for example, banks receive loan applications more than their existing deposit or more than the loans that they can cater to. The case is opposite with Japan’s banks with more excess deposits than loans. With this, the basic concept of Crowdcredit is to provide this excess fund for loan to other countries that would need them.
Crowdcredit has a vast network of global partners which includes Mfx, Kobranzas, Fellow Finance, Savy, Cream Finance, Ovamba, Bondora, Mogo, Mintos, and Prestiamoci.
New LendingCalc White Paper Examines Opportunities in SE Asian Marketplace Lending (LendingCalc Email), Rated: A
Author Terry Tse Provides Practical Advice About How to Select Best P2P Platforms
LendingCalc, Inc., a direct investment platform providing global access to digital specialty finance for institutional investors, has released a new white paper examining the investment opportunities within the growing marketplace lending sector in Asia. The paper was written by newly appointed strategic adviser, Terry Tse, who served as Chief Risk Officer at the China-based P2P giant, Dianrong, and is currently Senior VP of International Development at the largest B2B payment company in China, Lian Lian Pay.
In the paper, Tse contrasts U.S. and Asian regulations and explains how the regulatory regimes in Asia impact the lending opportunities abroad. He also describes the emerging P2P business environment in Asia, which appears to be extremely well positioned for growth. In addition, Tse explains the key structural incentives Asian P2P lenders have implemented to discourage borrowers from defaulting.
The paper concludes with a number of practical suggestions to help investors navigate the socalled “Wild East” that is marketplace loan investing in Asia.
News Comments Today’s main news: Equifax CEO vows to make changes in USA Today op-ed. dv01 closes Series A with big name investors. SmartBiz Loans surpasses $500M in SBA loan funding. stREITwise rolls out first REIT, focused on institutional-quality office buildings. Klarna completes BillPay acquisition. Wish Finance intros SME lending on blockchain in Singapore. Today’s main analysis: What millennials would give […]
Millennials would rather give up voting in the next two elections than pay student loans. AT: “No one really wants to pay off a loan. We’d rather get free money and get on with our lives. But where this gets interesting is that millennials would rather get out of paying off their debt than to influence an election that could have far greater consequences to their lives for as long as it takes to pay off the debt. The question for lenders is, How can you capitalize on this sentiment?”
Working to expose Silicon Valley’s dark side. AT: “If you can get past the self-reverential tone, this piece is important to understanding how journalism works. Often, the best (or worst) stories come from tips because someone recognizes that a particular topic is of interest to the journalist. This should encourage lending firm leaders to be on their best behavior.”
There’s a new REIT in town. AT: “We’ve gone past crowdfunding websites offering REITs to crowdfunding websites specializing in REITs. A nice development.”
Last Thursday evening we announced a cybersecurity breach potentially impacting 143 million U.S. consumers. It was a painful announcement because of the concern and frustration this incident has created for so many consumers. We apologize to everyone affected. This is the most humbling moment in our 118-year history.
Equifax Security first discovered the intrusion on July 29. Understandably, many people are questioning why it took six weeks to report the incident to the public. Shortly after discovering the intrusion, we engaged a leading cybersecurity firm to conduct an investigation.
At the time, we thought the intrusion was limited. The team, working with Equifax Security personnel, devoted thousands of hours during the following weeks to investigate.
dv01, the data management, reporting, and analytics platform that offers institutional investors transparency and insight into lending markets, today announced a $5.5M Series A round, led by OCA Ventures. Ribbit Capital, Illuminate Financial, and CreditEase Fintech Investment Fund also participated in the round, joining existing dv01 investors Leucadia National Corporation and Pivot Investment Partners.
OCA advisor Jack Lavin has joined dv01’s board, and will work alongside existing board members from Jefferies LLC, a subsidiary of Leucadia National Corporation, and Quantum Strategic Partners Ltd., a private investment vehicle managed by Soros Fund Management LLC.
SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced that it has surpassed half a billion dollars in funded SBA loans. This milestone comes on the back of other recent successes for SmartBiz, including the addition of a fifth bank to its software platform and ranking as the number one facilitator of traditional SBA 7(a) loans under $350,000 for the 2016 fiscal year, over Wells Fargo and other major banks according to SBA lending data released in November, reflecting its 2016 fiscal year.
The company’s first-of-its-kind software platform automates a bank’s underwriting to cut time and costs by up to 90 percent for processing SBA loans under $350,000. By automating the underwriting process, the platform helps banks get low-cost capital into the hands of small business owners in a matter of weeks instead of months. This is vitally important to any busy, small business owner who needs capital.
The $500 million in funded SBA loans reflects not only continued growth for SmartBiz, but also for the entire market of bank-originated, small-sized business loans. Post-2008, banks reduced the number of smaller business loans they made because they couldn’t process them efficiently enough to make a profit.
A staggering 49.8% of all respondents said they would give up their right to vote in the next two presidential elections in order to have their debt forgiven
Ride-sharing services like Uber or Lyft don’t seem to matter to millennials quite as much as some of the other options in the survey. According to the results, 43.6% were willing to give up these services forever in exchange for debt forgiveness
Interestingly, 42.4% of respondents would also give up traveling outside of the country for 5 years, while only 27.0% said they would be willing to move in with their parents for 5 years
Millennials seem to value texting more than the other options – only 13.2% reported being willing to give up texting and any mobile messaging equivalent for the next year in exchange for having their debt forgiven
Only 8.2% of respondents chose to select none of the above and said they would rather keep paying off their student debt
Even before the ink was dry on an article Nathaniel wrote last year about an online lending start-up, Social Finance, and its unusual success — headlined “SoFi, an Online Lender, Is Looking for a Relationship” — he began hearing from people who painted a very different picture of what life looked like inside the company.
But in the intervening months, tales of sexual harassment and wrongdoing in Silicon Valley took center stage, in part because of Katie’s own reporting, which exposed a dark side to an industry known for growth, wealth and fantastic employee perks. Companies like Zenefits, Theranos and Uber made it clear that many venture capitalists and the companies they funded were incentivized to focus on growth at any cost, with good governance and corporate culture getting short shrift.
We are already getting more emails and phone calls that point to where the story might go from here — both with SoFi and the issue of bad behavior in Silicon Valley more broadly. These issues aren’t going away anytime soon.
stREITwise is introducing a new way to invest in real estate online commission-free by allowing direct investment on its website. Today they announced a Regulation A+ initial public offering for their first Real Estate Investment Trust (REIT) – 1st stREIT Office – which seeks to provide a diversified portfolio of institutional-quality office buildings with a revolutionary low-cost structure. Because it’s filed as a Regulation A+ offering, 1st stREIT Office will allow accredited and non-accredited investors alike the opportunity to participate.
This announcement comes shortly after 1st stREIT Office successfully raised over $20 million in a private offering to acquire the Panera Bread HQ Property in St. Louis, MO. At 99% occupancy in three separate buildings, the Panera Bread HQ Property includes over 290,000 square feet of Class “A” office space that is leased to many large tenants, including Panera Bread (World HQ), New Balance (Regional HQ), Wells Fargo, Edward Jones, Nationwide Insurance, and others.
With the Panera Bread HQ Property acquisition, 1st stREIT Office has been able to make 10% annualized dividend distributions to its existing investors. The company seeks to acquire more high-quality, stabilized office buildings in undervalued markets across the United States.
While Non-Traded REITs typically charge upfront fees of 10-15%1, stREITwise caps its upfront fee at just 3% by cutting out the middleman, eliminating financial advisor commissions, and passing the savings on to investors.
The New York firm said Tuesday that loans to wealthy clients, companies and consumers would contribute almost half the $5 billion in revenue growth it is projecting by 2020.
Harvey Schwartz, a top lieutenant to Goldman Chief Executive Lloyd Blankfein, on Tuesday said persistently low volatility in financial markets meant that the third quarter would be a “challenging” one in terms of trading. J.P. Morgan ChaseJPM 0.29% & Co. CEO James Dimon and executives at CitigroupInc. and Bank of America Corp. projected trading declines of between 15% and 20% for the quarter.
Goldman on Tuesday laid out a detailed plan to grow revenue, which has remained flat since the financial crisis. Its target of $5 billion in new revenue by 2020 hinges on businesses that have been footnotes for most of the firm’s 147-year history: lending, asset management and tending to the mundane needs of corporate clients and money managers.
Lending to wealthy clients, companies and consumers could add $2 billion of new revenue over the next three years, said Mr. Schwartz at a global financial-services conference hosted by Barclays PLC.
Online lender Lenda has announced plans to expand its reach to more states along with increased investment in its software platform, which offers a complete refinancing or mortgage origination transaction online.
Pave, Inc announces an initial coin offering (“ICO”), scheduled for mid-October to fund Pave’s Global Credit Profile project, which could provide a ground-breaking solution to the problems associated with credit reporting worldwide. Based on its deep knowledge of lending to individuals with limited credit history (“thin files”), Pave’s GCP will give consumers and credit institutions access to richer and more accurate personal financial data than traditional credit bureaus provide, while significantly improving data security. GCP has the potential to unlock access to credit for millions of people — such as millennials and immigrants — who are marginalized by the current financial system.
While the centralized systems of companies such as Experian, Equifax and TransUnion continue to perform a valuable service by acting as a reliable source of information for third parties, they are plagued with systemic problems including a lack of transparency and control over personal data, vulnerability to fraud and data theft and unnecessary administrative costs. Using blockchain and related technologies, Pave’s GCP will decentralize the storage and ownership of an individual’s financial data by placing the user in control. The GCP thereby removes the reliance on a singular record keeper making security breaches infinitely less likely.
DigiFi, an enterprise financial technology company, announced today the launch of its cloud-based digital loan origination system (“LOS”) for banks, credit unions and consumer finance companies. DigiFi’s next-generation LOS enables the automated online delivery of multiple consumer lending products through a single platform, driving better customer experiences and lower operating costs.
DigiFi’s proprietary technology was built over three years to digitize the consumer lending process, offering consumers immediate feedback and funding from any device at any time. The platform supports multiple products including Personal Loans, Credit Cards, Personal Line of Credit, and Student Loan Refinancing, and DigiFi is adding additional products, including Home Equity, Auto and Mortgages.
The platform is highly configurable, empowering banks, credit unions and consumer finance companies to utilize their own risk models, documents and procedures.
Shields, a longtime purveyor of payment technology, is the founder and former CEO of Vancouver-based Hyperwallet Systems Inc. After handing the reigns of that company over to Brent Warrington in 2015, she went on to launch Fi.Span, a provider of cloud-based platforms for commercial banks.
In the second half of the podcast, data mining expert Ellison Anne Williams also addressed the predominantly male demographic of her field. The effect it has on her approach is next to none, she said.
As the CEO and founder of data securitization startup Enveil, Williams brings more than a decade of experience in large scale analytics, information security and privacy.
The U.S. banking regulator, the Acting Comptroller of the Currency, said on Wednesday that he is not ready to accept applications from financial technology companies seeking a special purpose federal charter.
His comments underscore the broader difficulties faced by regulators globally as they attempt to keep up with dramatic changes in banking industry brought about by the increasing use of digital technologies which threaten to undermine traditional financial services businesses.
Banks may soon be experimenting with a new way to engage with customers: retail pop-ups.
Samsung’s head of sales for financial services, Reginald Jones, told Tearsheet that the company is in talks with its financial services customers about rolling out retail pop-ups “sooner than in a year.”
Those could be in a variety of formats, he said: a bus promoting a certain bank that drives a number of customers to an NFL game; a university campus presence where banks look to attract customers as they become of banking age; a shopping center that normally just has ATMs where banks could roll up for a weekend service to attract these potential new customers. Samsung, the consumer electronics giant, provides the devices that change how bank employees conduct business — to better influence the customer outcome.
Samsung has been working with bank branches for the last five years, incorporating its display screens into retail spaces as they take old signage and posters and move them to digital platforms. In some branches, greeters and bankers are also using Samsung tablets, he said.
Fintech companies around the world have moved swiftly to fill the gap left by mainstream lending institutions due to constraints related to interest rates and profit margins. Big lenders in the market are under constant pressure to increase profit margins, which limits the size of their addressable market, especially when trying to woo small and medium-sized business borrowers. Their interest rates are often high as they seek to remain competitive in the larger spectrum of the financial services industry.
One of the largest beneficiaries is LendingClub Corp. (NYSE:LC), which has seen its revenue increase 1,278% in under five years, from just over $37 million to over $500 million as of June 30 on a trailing 12-month basis.
Brazilian-based fintech companies are paying investors about 22% returns per year while borrowers are charged interest rates from as low as 1.7% to as high as 6.3% per month based on their credit profiles.
The Federal Reserve Bank of Philadelphia announced that it will hold a FinTech seminar in conjunction with the Journal of Economics and Business on September 28-29, 2017, focused on consumers, banking, and regulatory policy.
Aptly named FinTech: The Impact on Consumers, Banking, and Regulatory Policy, the conference will feature keynote speeches and research from industry experts on consumer protection; roles of alternative information; FinTech lending; blockchain-based currencies; machine learning and artificial intelligence; the new FinTech landscape; and marketplace lending and crowdfunding. The conference will also focus on the disruptive factors of blockchain technology and to what measure they continue to shape regulatory policies.
Star Mountain Capital, LLC (“Star Mountain”), a specialized investment manager focused exclusively on the large and underserved U.S. lower middle-market, is pleased to announce that industry veteran Erik A. Falk has joined the firm as a strategic personal investor and Senior Advisor.
Mr. Falk is a senior executive focused on strategic initiatives at Magnetar, a $13+ billion alternative asset management firm. Until early 2017, Mr. Falk oversaw the private funds as a Head of Private Credit within KKR’s (Kohlberg Kravis Roberts & Co.) $35 billion credit business and served on the Private Credit Investment Committee, the Leveraged Credit Investment Committee and the Portfolio Management Committee. He also oversaw KKR’s investment in Star Mountain. Before joining KKR in 2008, Mr. Falk spent eight years at Deutsche Bank where he held several roles including founding the Special Situations Group and Co-Heading the Global Securitized Products Group. Mr. Falk began his career in the Asset-Backed Securitizations group at Credit Suisse First Boston where he knew Star Mountain’s Chairman, Brian Finn, whose prior roles include Co-President of Credit Suisse First Boston and Head of Credit Suisse Alternatives (with approximately $100 billion in AUM at the time).
The UK’s annual inflation rate climbed to a higher-than-expected 2.9% in August, matching a four-year high reached in May, the Office for National Statistics (ONS) said on Tuesday, two days ahead of a key meeting by members of the Bank of England’s monetary policy committee.
The consumer prices Index (CPI) climbed from 2.6% in July, the ONS said on Tuesday. The August reading matched the highest since April 2012 and beat the 2.8% average forecast by economists polled by investing.com.
The annual core inflation rate, which strips out volatile food and fuel costs, also jumped to 2.7% from 2.4% in July, topping the 2.5% expectation by economists in an investing.com survey.
Advisory firms need to do more to attract the next generation of clients or risk selling themselves short, financial adviser Keith Churchouse has said.
His firm Chapters Financial is developing a chatbot platform for its online advice business Saidso.
The chatbot will be aimed at the generation of clients who are more comfortable with changing and emerging technology. They are usually 45 years old or younger; the typical age group of customers who already use the Saidso website, which has been operational for the past two years.
The UK City watchdog has warned investors of the “high risk, speculative” nature of initial coin offerings as their popularity booms, becoming the latest global regulator to sound the alarm.
The Financial Conduct Authority warned that ICOs are mostly unregulated and potentially fraudulent, while investors may be provided with “unbalanced, incomplete or misleading” documents by the ICO issuer.
Even if an ICO is not fraudulent, the regulator said, investors still had “a good chance” of losing their entire investment.
Advantages of platforms with a track record –I prefer platforms that have a track record and have operated at least 1 or two years.
Loan term and loan types – There are three main types: consumer loans, SME loans and property secured loans. SME loans has further subtypes like invoice financing. It can be a good idea to diversify over different loan types and different platforms.
Diversification – Diversification can be achieved faster on platforms with very many comparable consumer loans, and will take longer on property platforms which launch only few large property loans.
Autoinvest – Before you use the autoinvest I suggest to spend the first days/weeks making manual investments on the primary market to get a better understanding of the loans on offer.
Secondary market – Before you use the secondary market, I suggest you first spend some time investing on the primary market to deepen your understanding of how the platform works.
Cash drag – Investors only earn interest on money invested into loans. Cash deposited, but not (yet) invested will earn no interest.
Unsecured vs. secured loans – Consumer loans listed on platforms are mostly unsecured (exception some car loans). SME loans offer no or or some type of asset as security and property loans typically offer a first or second charge on the property as security. Usually it is preferable to lend with some kind of security offered.
Recovery process – A certain percentage of loans will default. This is normal in p2plending and nothing to worry about as long as this percentage stays in a healthy relationship to the interest offered for the risk.
Tax – If the country you live in does not allow you to offset default losses against interest income earned, it may be a good idea to invest into loans with lower interest rates, but also lower default rates, to achieve higher returns after tax than with a more risky strategy.
Final tip – Start slow. P2P lending has somewhat of a learning curve.
Klarna Bank AB (publ) today announces that the acquisition of German online payments company BillPay has been completed. This will strengthen Klarna’s position as one of the leading e-commerce payment providers in Europe and further accelerate its growth in Germany, Austria, Switzerland and The Netherlands.
However, it wasn’t clear how much money had been invested. Now Swedish tech site Di Digital has revealed that Visa took part in Klarna’s $75 million euro acquisition of Billpay, a German competitor, in February.
Out of the $57 million euro share emission that went to financing the deal, Visa paid roughly a third, or $22 million.
GoldMint is a comprehensive P2P solution that allows businesses like pawnshops to raise credit.
Recently, a Time article revealed that 28 percent of college educated millennials between the ages of 23-55 have accessed short-term lending from pawnshops and payday loan providers in the last five years.
Dmitry has had an eye on the pawnshop segment since 2015, when he noticed that while the pawnshop business was immensely profitable, it was void of technological progress. He worked with a team of four people in 2016 to address the four main issues that faced the pawnshop businesses:
realization of unclaimed pledges
funding of pawnshops (lending)
the introduction of unified standards (consolidation)
GoldMint is holding an initial coin offering (ICO) in less than a week’s time starting Sept. 20, 2017. They have published a detailed whitepaper which lays the details of their crowdsale.
We started by developing the Smart Contract. It was ideal to begin with the token escrow contract, which allows the collateral to be held securely in the Smart Contract until the borrower repays the loan. If the borrower does not repay, the lender can claim the tokens and realize any losses. We made many interesting findings during the development and wrote the white paper after Alpha DApp. We believe this is a big advantage for us since practice does not always follow theory. Also, delivering an Alpha for the Ethereum main-net is important proof-of-concept wise.
7. Do you think the system will be more popular among individuals or companies?
Hard to tell since at the moment individuals are more keen on using cryptocurrencies. ETHLend has received a lot of interest from miners who want to expand their mining facilities or purchase more rigs. There are also growing tendencies for companies to use blockchain technology. We have received inquiries about pledging some of the ICO tokens for financing pre-sale marketing efforts. What I would like to see is that merchants who use cryptocurrencies would adopt ETHLend for financing and increasing their business.
8. What is the difference between the type of crediting ETHLend offers and the scheme “have sold the possessed currency-have bought ETH for raised money”.
Good point. Since our main financing instrument is pledging digital tokens, it provides opportunity to receive ETH when one does not want to sell digital tokens. Such might be the case when one has a token portfolio, investment funds like TaaS or ICONOMI. Funds or individuals could easily keep the possession of the token positions and still get more liquidity for growing their portfolio. On the other hand, a blockchain startup might keep more tokens at their possession when pledging the token before an ICO for a loan and repaying the loan after an ICO. A strategy like that leaves more tokens for the startup to recruit more talent.
11. How much time do you think you need to launch the project in case you obtain sufficient financing?
ETHLend has an extensive roadmap that stretches to the late 2019. At the moment we are still developing the ETHLend DApp. However, we need further resources to comply with the features set in the roadmap. We are also looking to add more developers and financial experts to the team. The basic collateral based lending is available on ETHLend but there are lot of functions that require more time to develop, such as being able to borrow Bitcoin or to use the price feed for the collateral value. We aim to have a fully sophisticated DApp by the end of 2019.
14. The last tricky question: is lending good or bad?
Lending is an instrument that should be used in the correct circumstances and for the correct funding goals. Lending could be compared to other products – when consumed wrongly, they might be bad and vice versa.
Igors Puntuss, co-founder of Bulkestate.com, explained that as wages rose rapidly and with it “population welfare”, meaning disposable income and savings, people living in Baltic countries began to look for safe and profitable ways to invest their spare cash. But banks are not able to provide smaller investors with attractive interest rates on deposits and, as the market of real estate crowdfunding is far from maturing, there are opportunities to be had.
He added that high reliability does not equate to low profit, when it comes to real estate crowdfunding. The website offers an annual interest rate of 14% at a low threshold for those who are risk adverse, and the minimum investment required is just 50.00 euros at Bulkestate.com.
The latest edition of the PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, examines how APIs are helping both banks and smaller businesses address their fears and embark on new ventures in new markets.
Recent research indicates merchant anxiety over non-payments is widespread. According to a study by Payoneer, 75 percent of small- and medium-sized businesses (SMBs) have backed away from global trade over concerns of not getting paid for their services.
Wish Finance, based in Singapore, has announced the launch of its blockchain-based lending platform for small and medium businesses. The company has reportedly issued 100+ loans in 2017 during a soft launch with every loan successfully repaid and 0% default rate. Wish Finance plans to keep its entire portfolio on the public blockchain, anonymized, so investors can audit its performance at any given time.
Wish Finance is offering merchant cash advances and business loans with interest rates based on the company’s real cash flow, not assets. Wish Finance said it has direct access to POS terminals infrastructure to see real time financial transactions, which it combines with the local market data for scoring. Wish says it issues a loan in 24 hours, and then deducts a few percents of the merchant customer’s’ payments to automatically repay the loan. In this way, repayments are made seamless and effortless for SMEs. Each loan is said to be insured from customer’s bankruptcy.
The global trade finance gap has fallen from US$1.6tn to US$1.5tn, but the impact of fintech has been minimal to date.
But despite the industry’s zeal for digitisation, just 20% of firms reporting have used digital finance platforms. In line with global trends, peer-to-peer lending is the most-used fintech model (23%).
74% of rejected trade finance transactions are for SME and midcap applicants, with 29% of these being rejected over KYC concerns. Last year’s survey showed that 56% of SME trade finance proposals are rejected, compared with 10% of multinationals.
Singapore-based financial technology company Six Capital Groupresponded Thursday to complaints from users who say they’re unable to cash out from the firm’s web-based strategy game.
The game, called Tagg Switch, works similarly to how trading currencies works: Players purchase one of six types of so-called “Nodes” that represent a different currency — either the U.S. dollar, Singapore dollar, British pound, euro, yen or the Australian dollar.
There’s a new way to pay for IVF. AT: “While the focus of this article isn’t on crowdfunding in vitro, per se, it is interesting to note that both LendingClub and Prosper have offered loans for this procedure. Now, there is a tech company specializing in funding fertility treatments including egg freezing. It brings up the question in my mind, What next? Loans for tubal ligations, male fertility treatments, abortions?”
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two class of notes issued by SoFi Consumer Loan Program 2017-4 LLC (“SCLP 2017-4”). This is a $499.5 million consumer loan ABS transaction that is closing on July 5th, 2017.
Initial credit enhancement levels are 22.69% for the Class A Notes and 12.77% for the Class B Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A Notes), excess spread and a reserve account funded at closing.
Preliminary Ratings Assigned: SoFi Consumer Loans Program 2017-4
LendingClub (NYSE:LC) has announced its first first self sponsored securitization deal had closed. Announced after the market closed, Lending Club issued $279.4 million in notes backed by consumer loans originated on the LendingClub platform. The Consumer Loan Underlying Bond (CLUB) NP Credit Trust 2017-NP1 (CLUB 2017-NP1) was described as marking the start of LendingClub’s securitization program as Sponsor, Servicer and Administrator.
Kroll rated the securities that included $162.4 million of Class A notes rated “A- (sf)”, $41.2 million of Class B notes rated “BBB (sf)” and $75.7 million of Class C notes rated “BB (sf)” backed by approximately $337 million of collateral.
In a separate note, LendingClub also announced that Brad Coleman, Principal Accounting Officer and Corporate Controller, will be resigning from his position as Principal Accounting Officer to pursue other opportunities, effective on August 10.
Future Family, which officially launches on Thursday, aims to make the complicated, expensive, and emotionally fraught world of fertility treatments “accessible and affordable,” in the words of CEO Claire Tomkins, a former SolarCity executive. “We think of it as modern insurance for a woman,” she told BuzzFeed News.
Because most insurance plans don’t cover these services, fertility patients tend to have high incomes to begin with. In one survey by FertilityIQ, an online advice resource for patients, 42% reported yearly earnings between $100,000 and $199,999. But not everyone has necessarily saved enough to comfortably afford IVF, which costs around $20,000 on average, according to FertilityIQ. In a 2015 Prosper-commissioned survey of 213 US women, 84% said they had financial concerns about their treatments, and nearly half said that those concerns affected how much treatment they pursued.
Future Family’s standard IVF plan, which covers one cycle, is $250 a month, with no down payment. Customers can sign up for a minimum of 5 years and a maximum of 10 years, making the total cost at least $15,000. That would be cheaper than the national average cost of $20,000. The top-tier plan, which covers one cycle as well as egg storage, costs as much as $33,000 ($275 a month for up to 10 years).
Meanwhile, Future Family’s top-tier egg-freezing plan costs as much as $21,000, at $175 a month for up to 10 years of storage. FertilityIQ’s Anderson-Bialis estimates that, nationwide, egg retrieval and freezing costs average $16,000, while storage costs about $3,700 for five years.
Two years ago, Prosper, a peer-to-peer lending service, purchased, for $21 million, a lender with loans for fertility and other non–insurance-covered medical procedures. And in 2014, LendingClub spent $140 million on a similar acquisition. Its fertility loans range from $2,000 to $50,000, while Prosper’s go as high as $100,000.
For JPMorgan Chase, small business is big. The bank is among the third top lender of Small Business Administration loans by unit in the U.S.
As of May, Chase approved 2,375 loans in 2017 for a total $679 million. But beyond SBA loans, the bank also extended more than $24 billion in credit to 4 million small business customers in 2016 through its business banking, Ink from Chase credit card and commercial term lending. In each of the last four years, it’s extended more than $19 billion in new small business loans.
After the recession, the largest U.S. banks, Chase itself included, halted most of their small business lending, later creating the opportunity for online lenders to enter the market — like Bond Street or OnDeck. Last year, JPMorgan began using OnDeck’s technology for its Chase Business Quick Capital product, a short-term, quickly funded small business loan. It was one of the first banks to embrace a partnership-type relationship with a fintech startup, at a time when the industry narrative still focused on startups’ potential to displace banks.
As the Supreme Court noted in Omnicare, generally a plaintiff pursuing a claim under Section 11 “need not prove . . . that the defendant acted with any intent to deceive or defraud.” However, defendants in the Lending Club Litigation argued that plaintiffs’ claims under Section 11 sounded in fraud because they employed the same factual allegations to allege fraudulent conduct under Section 10(b), and therefore needed to satisfy the heightened pleading standard of Rule 9(b), which requires plaintiffs alleging fraud to state with particularity the circumstances constituting fraud.
Plaintiffs argued that their Section 11 claims were not grounded in fraud and therefore did not need to satisfy the heightened pleading standard of Rule 9(b).
Despite this holding, the Court found that lead plaintiff had “met that heightened pleading standard with respect to three of its Section 11 claims.” Id. In particular the court held that lead plaintiff adequately pleaded its Section 11 claims relating to representations at the IPO regarding (1) the strength of Lending Club’s internal controls and financial reporting, (2) its relationship with Cirrix, and (3) its data integrity and security.
Elevate Credit Inc (NASDAQ:ELVT) insider Henry W. Ramsey purchased 9,500 shares of the stock in a transaction on Friday, June 2nd. The stock was acquired at an average cost of $7.17 per share, for a total transaction of $68,115.00. Following the completion of the acquisition, the insider now owns 9,500 shares of the company’s stock, valued at approximately $68,115.
The big banks have all started to understand that the traditional way of banking is a thing of the past. Keynote speaker Yolande Piazza, CEO, Citi Fintech talked about disrupting from within, changing how they operate to enable the customer and move to a mobile first approach. She explained how this approach is radical for a bank and the layers of compliance did not make the transition smooth. They have completely rethought how they hire, 50 percent of their fintech talent is from outside the company.
Other interesting areas to note while at the event were BioCatch’s innovations in cyber security with keystroke and mouse analysis along with behavioral biometrics. New payments provider Zelle launched with 40 partners, including 34 top level banks, to allow consumers to send and receive money in minutes. Banks are starting to become innovation hubs and fintech companies, once seen as competitors in the past, are helping the banks make this transformation.
Leading fintech companies like SoFi, Lending Club and OnDeck provide a template for a better customer experience and banks are taking notice.
The Federal Reserve just published its 2016 Small Business Credit Survey examining the current small business conditions and credit environment. The Fed found that although big banks are still the major lenders, small business owners are having trouble accessing credit and are therefore looking elsewhere. However, while many small businesses are turning towards online lenders, SBA loans are largely underutilized.
Overall, 10,000 surveys were completed by employer firms across all 50 states. Of those surveyed, roughly half were profitable and almost two-thirds expected their revenues to grow over the coming year. Even job growth looked good, with 39% of small businesses expecting to add jobs within the next year.
PayPal has jumped into the alternative lending game and now finances as much as $3 billion in total small business capital. What’s more, PayPal recently increased its maximum financing limit to $125k, meaning that a majority of small businesses who applied for credit in 2016 could fulfill their financing needs with PayPal.
Online lenders like SmartBiz have a 62% approval rate, on average.
The Fed’s survey found that CDFIs had a 77% approval rate and small banks had a 67% approval rate. Both of these rates higher than many online lenders that are known to typically have some of the easier qualifications.
By comparison, the overall approval rate among larger banks is 54% and 46% among credit unions.
Facebook chatbots (kids love messaging apps!), smartphone-enabled ATMs (they spend so much time on their smartphones!) and an on-demand ATM on wheels that will come to you (Uber is the only way to get around!). Not only are these investments failing to resonate with millennials, but the money spent is also failing to plan ahead for the next generation: Generation Z.
Born between 1995 and 2010, Gen Z consumers are looking for something more than simple digital updates: They are looking for a partner that offers them solutions for all pieces of their financial life, including their pressing concern over mounting college debt. In fact, offering “digital” solutions to traditional banking products will not be enough to impress Gen Z, as they are the first to grow up in the post-digital era, giving them high standards for technological capabilities.
Gen Z is also a highly skeptical generation with little brand loyalty; if they see a well-researched, proven option available to them, they will have no hesitation jumping ship or avoiding traditional providers altogether. Whereas 45% of millennials favor loyalty programs, only 30% of Gen Z consumers do. In fact, 41% of Gen Z say they would consider banking services from digital power players like Google, Amazon, Apple or Facebook because they are brands that they interact with daily and trust.
In his first testimony to Congress, acting Comptroller of the Currency Keith Noreika is set to submit a laundry list of detailed proposals to loosen regulatory restrictions on financial institutions of all sizes — recommendations that appear to jibe with those made by the Treasury Department this month.
Noreika is offering 17 specific legislative proposals that echo the banking industry’s wish list for regulatory reform.
LendingTree, Inc. (NASDAQ: TREE) announced on Tuesday its subsidiary, LendingTree, LLC, has acquired the company behind consumer-facing media property platform, MagnifyMoney. This news comes just days after LendingTree announced it acquired DepositAccounts.com.
According to LendingTree, the acquisition purchase has a possible total consideration of $29.5 million, which consists of 29.5 million in cash at closing, and contingent consideration payments of up to $10 million.
Earlier this week there was note circulating the Orchard was in the midst of a pivot. Specifically, the report said Orchard was pivoting from a data/analytics platform to a loan trading platform. This was interesting as the secondary transaction platform for securities based on online loans has been in the works for quite some time.
“We have wanted to have a trading platform for years now,” said Matt Burton, CEO and co-founder of Orchard. “I am not certain where that came from. We have always wanted to facilitate [secondary] transactions. We still have the same vision.”
LENDonate, a fintech company, today announced the launch of its distinct hybrid, online lending platform for 501(c)(3) nonprofits. The first-of-a-kind, hybrid platform uses an innovative process that lets nonprofits source loans and donations simultaneously. LENDonate unites nonprofits with lenders, including financial institutions, philanthropic organizations, and accredited investors for quick funding of high-quality, low cost loans. LENDonate is the only marketplace lending platform that enables nonprofits to effortlessly expand their donor base while financing major projects or smoothing out uneven cash flow.
LENDonate was founded by Vivienne Hsu, CEO, a seasoned investment professional and nonprofit fundraiser. She was motivated by a desire to improve nonprofits’ access to the low-cost funding, while providing high-quality, socially impactful investment opportunities for banks and philanthropists.
Below is an exhaustive list of documents that your lender may request. Online lenders are less stringent and may ask for less, while traditional banks will want the entire suite. Also expect lenders to pull your personal credit score and your business credit score as part of the approval process.
Personal financial statement: This SBA form requires you to list your personal assets (cash, investments, real estate and cars) and liabilities (mortgages, other debts and unpaid taxes). Private lenders may ask for a similar statement.
Loan application history
Income tax returns
The Small Business Administration (SBA)—which guarantees a percentage of the loan amount to banks rather funding directly—is particularly helpful for expansion loan options. The SBA will guarantee up to 85 percent of loans for as much as $150,000 and up to 75 percent of loans over $150,000. A small SBA loan of $25,000 or less can get an 8% interest rate with a payment term of fewer than seven years. The rate on a loan over $50,000 can drop to as low as 6.5% with the same payment terms. Some banks may offer private loans, but their requirements are even stricter than those of the SBA.
Online lenders offer loans with higher rates. But the online lenders often have a faster approval process than banks originating SBA loans.
Another borrowing source on the rise is peer-to-peer lending, or marketplace lending, for businesses.
The OCC’s proposed limited-purpose charter for fintech companies was the subject of a lively discussion at the American Bankers Association’s Payments Forum today, as regulators from the OCC and Conference of State Bank Supervisors exchanged at-times opposing views.
Margaret Liu, SVP and deputy general counsel at CSBS reiterated her organization’s view that in moving forward with the limited-purpose charter, the OCC overstepped its authority under the National Bank Act (the CSBS previously filed a lawsuit against the OCC on those grounds).
Kathy Oldenborg, director of payments systems policy at the OCC, emphasized that under the limited-purpose charter, fintech companies would be held the same high regulatory standards as banks, based on the products and services they provide to consumers. She added that while much of the focus around the OCC’s work on innovation has centered on the charter proposal, “the broader initiative was… the ability to signal to banks that it’s okay to innovate. You can work with fintech companies, you can partner with fintech companies, you can buy one if you want. There’s nothing that says you can’t work with fintech companies outside this whole chartering discussion.”
Home Point Financial Corporation (“Home Point”) a national multi-channel mortgage originator and servicer, today announced the formation of its new Institutions Group. This group will include Correspondent Lending, Capital Markets and Home Point’s wholly-owned warehouse lending subsidiary, NattyMac. Led by Maria Fregosi, Chief Capital Markets Officer, the Institutions Group will be able to efficiently and effectively serve correspondent clients with services and products that capitalize on the financial resources, technology and expertise of Home Point Financial.
Cross River on OCC Comptroller’s testimony calling on clarification of the applicability of the “Valid when Made” doctrine (Cross River Bank Email), Rated: B
Cross River Bank, a marketplace leading originator and pioneer in the banking financial technology space, released the following statement on the recommendation by acting OCC Comptroller of the Currency Keith Noreika to clarify the applicability of the “Valid when Made” doctrine.
It is of the utmost importance to deliver regulatory certainty and foster innovation while providing access to credit to all consumers in a compliant, safe, and sound environment. We commend Comptroller Noreika for his testimony this morning recommending clarification of the applicability of the “Valid when Made” doctrine. Cross River remains a steadfast supporter of the Comptroller’s, and the entire regulatory agency community’s, efforts to bring clarity to the regulatory framework and advance the interests of the consumers while ensuring their protection.
Aspire Retains SenaHill (Aspire Email), Rated: B
“Aspire Financial Technologies Inc. (“Aspire”) is announcing today that it has retained SenaHill Advisors LLC (
It’s estimated that by 2025 the crowdfunding real estate industry will be worth more than $300 billion. One of the reasons for this prediction is that it provides individual investors the opportunity to participate in large real estate deals even if they only have a small amount of capital to invest. Just a few years ago things were very different as crowdfunding had yet to gain traction. In 2010 the crowdfunding industry was worth $880 million but is now worth $34.4 billion which is an incredible rate of growth.
At the Comply2017 conference held earlier this week in New York City, Scott Steckel, a member of the CFPB’s Office of Consumer Response, gave a presentation in which he detailed the CFPB’s complaint process and how the CFPB shares complaint data through its complaint database.
WELLESLEY & Co’s directors collectively pocketed £923,000 last year, while the property lender reported a full-year loss of £210,288.
Chief executive and founder Graham Wellesley was awarded the highest salary of £342,000, while co-founder Andrew Turnbull took home £244,000, according to the latest annual report filed with Companies House earlier this month.
Former Lloyds Banking Group chief executive Eric Daniels, who stepped down as non-executive chairman at the end of May 2016, received £50,000. Daniels has now joined the board of Funding Circle.
Funding Circle, which received full FCA authorisation last month, has seen new lending grow each quarter since the referendum, from £151,803 lent in the second quarter of 2016 to £182,854 in the third and £305,970 in the fourth. It lent £328,059 in the first three months of this year.
Similarly, Zopa, also now fully authorised, has seen lending increase each quarter, from £154m in the second quarter of 2016, to £175m in the third. There was £194.3m of lending in the fourth quarter and £246.4m at the start of the year.
RateSetter, the last of the big three still awaiting full FCA approval, has seen both consumer and business lending increase.
New business lending was at £59.8m in the second quarter of 2016, rising to £73.8m in the following three months before dropping to £60.5m at the end of the year. It bounced back to £72.5m at the start of 2017.
Landbay has been more mixed, with new lending dropping from £5m in the second quarter to £282,820 in the third and £193,800 in the final three months of the year. New lending was back up to £833,300 at the start of the year.
RateSetter has seen the biggest increase, taking on 9,573 up to the first quarter of 2017 to 44,402.
Funding Circle was a close second, taking on 8,604 to 59,740, while Zopa took on 6,091, taking the total number of lenders to 60,755.
Only MarketInvoice saw a drop by 47 to 220.
Zopa has taken on the most new borrowers at 41,310 since the referendum to 171,607 while RateSetter has taken 30,286 to 203,994.
Landbay and Thincats have taken on the least, at four and 34 respectively.
The FCA received 77 submissions for the second phase of the regulatory sandbox, more than applied for cohort one. 31 applications met the sandbox eligibility criteria and were accepted to develop towards testing. The current cohort consists of the 24 firms that are ready to begin testing shortly.
AssetVault enables consumers to catalogue all of their assets in a secure online register and better understand their total value. AssetVault then works with insurance providers to protect the consumer and their assets with appropriate insurance products.
Leverages artificial intelligence and data sharing to build transparency and liquidity in alternative assets (real estate, angel investments), and offers risk management and analytics services to small investors.
A mortgage eligibility tool that can be used to help consumers who are in the research phase of buying a home by increasing awareness of their eligibility, based on the lender’s affordability criteria.
FloodFlash provides event-based flood insurance, even in high-risk areas.
Insure A Thing
An alternative insurance business model where the consumer makes payments at the end of the month, based on the exact cost of claims settled during that period.
Nimbla provides flexible trade credit insurance and credit and invoice management tools to UK SMEs, via an online platform
A DLT-based payments solution enabling users to send and receive payments using a link.
We are now accepting applications from firms to be part of our third sandbox phase. Firms have until 31 July 2017 to submit their applications.
A departing rate-setter at the Bank of England has taken a final swipe at dovish Governor Mark Carney, saying record-low interest rates are no longer justified.
In her final speech as an external member of the Monetary Policy Committee (MPC), Kristin Forbes questioned the continued need for “emergency” level interest rates, as well as the “substantial amount of stimulus” rolled out in the wake of the Brexit vote, stressing that forecasts for a recession and higher unemployment after the referendum have failed to materialise.
There has been no sign of a decrease in demand for peer-to-peer finance, online platform RateSetter has told Bridging & Commercial.
“…We’ve seen steadily increasing demand from advisers, and the value of IFA-administered accounts on our platform has doubled over the last year.
“Although there are clearly hurdles – for example, direct investments in peer-to-peer lending are not currently available through investment platforms commonly used by IFAs to buy products on their clients behalf – we see no signs of decreasing appetite.”
Jane Dumeresque, CEO at Folk2Folk, explained that the FCA process was extremely tough and was not too surprised that some had withdrawn.
Today marks the Scottish launch of the LendInvest Property Development Academy, an adult education course that puts development skills at the fingertips of aspiring house builders.
The first London course was ten times oversubscribed and to date more than 120 “students” have completed our courses. Now we’ve rolled out countrywide to satisfy demand.
Sessions are led by experienced and, as importantly, local advisers who know what it takes to get small-scale property developments delivered on time and on budget.
Access to finance continues to be the biggest hurdle. A severe lack of lenders in Scotland is problematic.
Any experienced developer knows that applying for and awaiting planning permission can be a long, exhausting and expensive process. This is where it pays to do your research.
Structuring a professional team is one of the most important aspects of planning for a development, and a task that can be more complex than it first appears. There are various questions that a developer needs to ask: what are the key development costs? How long will a project take?What consultants are involved in a development project and how should they all work with one another? How do developers insure their teams against delays and accidents?
Sales and marketing are commonly regarded as an afterthought, something to worry about “later”, when in fact marketing needs to be in the forefront of a developer’s mind from the very beginning.
A survey conducted by investment management company Legg Mason has found that only 24 per cent of investors would be prepared to pay the typical hourly fee for financial advice – which works out on average at £150 per hour, according to unbiased.co.uk.
Just 10 per cent of those who answered said they would be willing to pay £150 or more, while an additional 11 per cent agreed that they would pay between £50 and £149.
Over a third of respondents (36 per cent) said they would refuse to pay for financial advice outright, while 15 per cent said they were unsure what they would be happy to pay.
Add to this, low levels of financial education, low levels of trust in financial services generally and overwhelming product choice (e.g. 2,000+ investments) and engaging customers without a human adviser is tough. That’s why, according to the industry’s regulator the FCA, of the £208 billion invested by consumers last year 78% was through advisers.
The vast majority of investment advice consumers now get from advisers is supported by online, model driven, financial technology (FinTech) which helps advisers more scientifically assess their risk profile and develop probability based investment strategies which give them a higher chance of meeting their goals at an acceptable risk level.
There are four developments now emerging, which will almost certainly change the game:
Total net revenues were US$20.9 million, a 94.3% increase from the corresponding period in 2016.
Advertising and IVAS net revenues were US$11.6 million, a 90.2% increase from the corresponding period in 2016.
Financing income was US$9.3 million, a 99.7% increase from the corresponding period of 2016.
Gross profit was US$6.4 million, a 172.6% increase from the corresponding period in 2016.
Operating loss was US$17.6 million, compared to an operating loss of US$19.2 million in the corresponding period in 2016.
Net loss attributable to the Company was US$16.2 million, compared to a net loss of US$23.2 million in the corresponding period in 2016.
Adjusted net loss(1) (non-GAAP) was US$11.0 million, compared to an adjusted net loss of US$15.9 million in the corresponding period in 2016.
P2P Industry News (Xing Ping She Email), Rated: AAA
Internet Finance Giants Ant Financial, Baidu etc., working with bank for new opportunities on fintech.
It seems a trend that internet financial giants working with traditional banks in China. Recently, Baidu built a strategic partnership with Agricultural Bank of China (ABC). The cooperation focuses on fintech areas, including co-building of financial brains and portraits of clients , precise marketing, customer credit evaluating, risk monitoring, robo-advising, etc.
Previously, both Jingdong Finance and Ant Financial Services Group have announced partnerships with banks. On 16th June, Jingdong signed a framework agreement on financial business cooperation with ICBC, planning to conduct cooperation in fintech, retail banking, enterprise credit, etc. While in the late of March, the CCB has signed a tripartite cooperation agreement with Alibaba and Ant Financial. According to the agreement, Ant financial would help CCB to boost the online credit card business. They are going to strength cooperation in offline & online channel and electronic payment business, so as to open up the credit system.
Bank of China Set Up the Inclusive Finance Division
On 20th June, the Inclusive Financial Division of BOC was founded officially. The new division aim at providing financial services in comprehensive coverage of rural and urban. According to reports, China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (ABC) have all set up their Inclusive Financial Division at the general bank level.
In accordance with the strategic cooperation agreement, the cooperation mainly focused on the field of financial technology, including the construction of financial brain and customer portrait, precision marketing, customer credit evaluation, risk monitoring, intelligent investment, intelligent customer service and other specific applications, Around the financial products and channel users and other areas to start a comprehensive cooperation.
Bank of China (BOC) and Tencent have established a joint financial technology laboratory, the lender said in a statement this week. The lab will work on cloud computing, big data, blockchain and artificial intelligence to promote financial innovations.
IDA Ireland’s head of international financial services, Kieran Donoghue, has said he is “confident” that the Republic will secure a number of wins as his organisation “aggressively” pursues the opportunity to lure financial activity from London following Brexit.
Britain’s planned departure from the EU has provided policymakers with an incentive to build a fintech hub in Luxembourg that could attract UK technology companies looking to maintain a foothold in the EU.
Prime minister Xavier Bettel has made the country’s digital transformation a priority since succeeding the long-serving Jean-Claude Juncker in December 2013. Mr Bettel launched the Digital Lëtzebuerg [Luxembourg] initiative the following year as a platform for encouraging new technology in the financial industry as well as society as a whole.
The flagship project to encourage fintech is the Luxembourg House of Financial Technology, opened with much fanfare in April with backing from the government and business groups.
Its focus is on insurance, banking and fund technology in areas such as digital investment and portfolio management, blockchain applications, payment platforms, data analytics, artificial intelligence, security and authentication.
Same day bank transfers were rolled out in the United Kingdom almost a decade ago. NACHA, the regulatory organization responsible for the ACH system, announced efforts for faster transfers two years ago. However, very few banks are actually implementing faster transfers.
Digital wallets are a key concept in bringing financial services to the unbanked and underbanked.
Multiple large banks have added bot features to their customer service toolset, and there is no limit to how far it can go. Just a few months ago at LendIt I captured a video of someone asking a computer for help picking a credit card.
Over $36 billion were poured into FinTech ventures in 2016 alone, and about a quarter of that went to banking related ventures. Payments, investments, and wealth management were other major categories for 2016 FinTech investment.
Peer-to-peer lending marketplace Harmoney announced today that $500,000,000 in lending has been transacted through the platform in just under three years of operation. 30,000 Kiwis have made the choice to join the Harmoney community with additional support from two challenger NZ owned banks TSB and Heartland.
Kiwis have borrowed for all sorts of reasons;
12,000 to pay off debt, mainly expensive Credit Card debt
4,000 have completed home improvements and renovations
3,000 have taken a special trip or holiday
Almost 2,000 have upgraded their car and;
10,000 have borrowed for a vast array of other reasons, from dream weddings, book publishing to achieving their dreams at the Paralympics.
There is a clear demand, from both industry and the regulator, to allow personalised robo-advice to be provided ahead of the FAA reforms. As a result, the FMA is consulting on an exemption to allow this to happen – the exemption consultation can be found here.
The exemption will be subject to conditions but these are very similar to those that regulators have imposed in other jurisdictions (such as Australia) where our offices have been advising on for some time. We don’t expect there to be too much objection to these.
Service: The exemption will be limited to financial advice or investment planning services and won’t cover the provision of DIMS under the FAA or the FMCA.
Product type: The robo-adviser will be limited to advice on financial products that are highly liquid or easily transferable. The FMA’s over-riding concern here is that consumers should be able to easily unwind their holdings if the robo-advice is poor or unsuitable. The proposed product list for robo-advice will be:
KiwiSaver and managed funds that are continuously offered and redeemed at a price based on the value of the scheme property
Listed equities and listed debt
General insurance products (home, contents and vehicle) and
Savings products and credit contracts (other than mortgages).
Pre-notification procedure: A robo-adviser will need to give prior notice to the FMA setting out ‘good character’ declarations in relation to senior managers and directors and giving details of any criminal convictions in New Zealand or overseas. The FMA will need to issue a no objection confirmation in relation to the good character declarations before the robo-adviser starts business.
Status disclosure: The robo-adviser will need to clearly disclose that it is relying on the exemption and that the FMA has not in any way endorsed, approved or reviewed the service.
Disclosure: Before giving advice to a client, the robo-adviser will need to give the client sufficient information to make an informed decision, including:
The nature and scope of the service and whether the service is limited to a particular range of products. This will need to include:
Clarification of the extent of human involvement
Clarification that the advice provided will depend solely on the information provided by the client
An explanation of any limits on the advice or portfolios generated by the algorithm
A concise explanation of the benefits and risks of the service.
An explanation of the fees that must be paid.
Details of how the robo-adviser is paid and disclosing any actual or potential conflicts of interest that may influence the services provided.
The current law, passed in 2008, did not contemplate digital advice, meaning that personalised advice, or advice that takes into account an individual’s financial situation or goals, can only be given by “a natural person”.
The purposes of the Financial Advisers Act (‘FA Act’) are aligned with the Financial Markets Conduct Act, which include “promoting innovation and flexibility in financial markets.”
Asset manager Global Credit Investments has hit up its network of rich Australian families and raised A$22.5 million to refinance OnDeck Australia’s small business loan book.
A press release issued by both companies said the capital raise was “significantly oversubscribed”, with wealthy Australians attracted to the returns offered by OnDeck‘s loans, typically in the high-single-digits.
Australia’s fintech industry body today released its first member ecosystem map, which helps build domestic and international understanding of the nation’s fintech strengths and diversity, particularly in wealth generation and lending.
The ecosystem map shows that wealth and investment, and consumer and business lending, are Australia’s two largest fintech sub-sectors – an outcome that is consistent with findings from last year’s.
While fintech companies proliferate in the United States, driving the expansion of a well-established financial sector with flourishing credit card and personal banking industries, Orchard Platform CEO Matt Burton is turning an eye to the east.
“In a lot of Asia, that doesn’t exist whatsoever,” Burton said at Benzinga’s 2017 Fintech Awards. “The population there are getting loans for the first time ever. There’s no credit bureaus there, so any data set that you’re able to acquire is completely proprietary.”
Credit reporting firm TransUnion yesterday said it had introduced into the Kenyan market a mobile score card that profiles borrowers using mobile lending platforms, which it will be sharing with banks and other lenders.
TransUnion Kenya Chief Executive Billy Owino said the Mobile Score Card would enable lenders access predictive and customised risk views while offering consumers alternative access to credit and an opportunity to build a positive credit score.
This wil be made possible by making use of mobile lending platforms. He added that the mobile money ecosystem has outgrown necessity-based transactions and peer-to-peer lending and is now transiting into mobile credit and loans.
News Comments Today’s main news: April US consumer credit rises $8.2B. China Rapid Finance targets 3 million new users by end of year. TSB Bank lent $50M unsecured consumer loans through Harmoney. Today’s main analysis: UK house prices fall for three months in a row. Today’s thought-provoking articles: Amazon lent $1B to merchants in last 12 months. SBA enabled on […]
April US consumer credit rises $8.2B. GP:”The origination volume in aggregate is slowing down from a 6.2% annual growth to 2.6%. “AT: “A slow-down in the increase of consumer credit does not necessarily spell trouble for the economy. If Americans increased their debt substantially in previous months, then it could simply be a sign of things evening out in the long run.”
Amazon lent $1B to businesses in the last 12 months. GP:”$1bil in origination is impressive especially giventhe time lines.”AT: “It might come as a surprise to many readers that Amazon is now acting like a bank. It shouldn’t. When you have money lying around, it makes sense to put it to work. And Amazon has plenty of money lying around. Why not lend it?”
Amazon has secretly become a giant bank. GP:”With banking come handcafts as well, I don’t believe becoming a bank is the right way for Amazon or any non financial institution.”AT: “It wouldn’t surprise me to see Google and Facebook follow. They may already be pursuing their own banking interests. I mean, beyond payments.”
SBA enabler on sprouting more loans. GP:”SmartBiz started as a consumer lender and migrated to SMB lending, a very interesting trasition process worth thinking about.”AT: “This is the most interesting read of the day.”
On June 1, 2017, representatives of the Company provided us with a computer-generated data file and related record layout containing data, as represented to us by the Company, as of the close of business on May 25, 2017, with respect to 46,766 unsecured consumer loans (the “Statistical Loan File”).
At the Company’s instruction, we randomly selected 115 unsecured consumer loans (the “Sample Loans”) from the Statistical Loan File and performed certain comparisons and recomputations for each of the Sample Loans relating to the unsecured consumer loan characteristics (the “Characteristics”) set forth on the Statistical Loan File and indicated below.
US consumer credit increased $8.2bn in April following a revised increases of $19.5bn which was originally reported as $16.4.bn.
The April increase was lower than consensus forecasts of around $16.0bn and the weakest reading since August 2011.
The annual increase slowed to 2.6% from 6.2% the previous month. Revolving credit slowed to an annual rate of 1.8% from 6.5% previously while there was a slowdown in non-revolving credit to 2.9% from 6.1%.
Amazon.com Inc has stepped up lending to third-party sellers on its site who are looking to grow their business, a company executive said in an interview on Wednesday.
The e-commerce giant has doled out more than $1 billion in small loans to sellers in the past 12 months, compared with more than $1.5 billion it lent from 2011 through 2015, said Peeyush Nahar, vice president for Amazon Marketplace. Sellers have used the money to expand their inventory or discount items on Amazon, he said.
More than 20,000 small businesses have received a loan from Amazon and more than half of those have taken a second loan from the company, it said.
Loans range from $1,000 to $750,000. Sellers have said interest rates are between 6 percent and 14 percent.
Amazon.com (AMZN) said Thursday that its Amazon Lending service has surpassed $3 billion in loans to small businesses since it was launched in 2011.
“We created Amazon Lending to make it simple for up-and-coming small businesses to efficiently get a business loan, because we know that an infusion of capital at the right moment can put a small business on the path to even greater success,” Amazon Marketplace VP Peeyush Nahar said.
When your largest client asks for a favor, you tend to do everything you can to help. For fintech company SmartBiz, that led to completely changing its business model.
The San Francisco-based company began life as an online consumer lender in 2010. However, three years in, the company switched gears to focus on small business lending.
Thus began a transition that culminated in SmartBiz selling off its consumer lending business. In place of that, SmartBiz built a bank-centric marketplace—an “ecosystem” in Singer’s words—in which SmartBiz refers qualified SBA loan applications to a network of banks. Currently the company works with five banks in the U.S.
Banking Exchange:Can you explain further why you made the switch from the consumer loan business to the small business loan market?
Singer: The stores typically needed $50,000 to $200,000, but were having a hard time obtaining financing at a decent rate. When we dove deeper, we found that starting in 2008 with the recession, many banks pulled out of the smaller end of the small business lending market.
They left for many reasons. The main one, though, is that it cost them just as much to originate a $200,000 loan as it did a $2 million loan.
We felt we could convert our existing base technology for use in small business lending. The concept, and what we have been working on since, is three-fold.
• First, it was key that we be able to tap into banks with their low cost of capital to provide well-priced loans to small business. But we had to make it economically feasible for the banks to make these loans, so we developed software that enables banks to auto-underwrite and auto-originate SBA loans quickly and easily.
• Second, small businesses want it to be easy to apply for a loan. SBA loans are typically very difficult to get—they can take months and months. So we made the process easier, automating a lot of the more difficult work, and put it online.
• Third, one of the most important things for a small business is get to a “yes.” So we created the first online SBA loan marketplace, in which we have multiple banks [currently five] looking at the loans.
BE:Do you concentrate on SBA 7(a) loans?
Singer: Yes. We’ve been focused on 7(a) loans in the sub $350,000 market for working capital. About six months ago we launched commercial real estate loans up to $5 million on the platform—also 7(a) loans.
BE:How is the underwriting handled working with the banks in your marketplace?
Singer: Unlike a traditional fintech company, which brings its underwriting model to a bank and says “Use this,” we do the opposite. We take the bank’s underwriting and digitize it. So we customize the underwriting software that each bank uses. That way we can refer the right borrower to the right bank.
BE:What percentage of applications that come into your system don’t make the cut?
Singer: I don’t think we’ve published anything on that. [SmartBiz is a private company.] It would be interesting for a new bank to note, however, that a little over 90% of what we refer to our bank partners they fund.
BE:In general, how do terms and rates in your network compare with others in the online marketplace?
Singer: All of our loans under $350,000 have a ten-year term. Most of the other players in the market—OnDeck or Funding Circle, for instance—are going to have somewhere between a one- and five-year term—most typically it’s two or three years, and at much higher cost. Our average APR is between 7% and 8%—prime plus 275 [basis points], compared with other online marketplace lenders where the average APR is as much as 44%.
BE:Are you reaching out to other potential bank partners?
Singer: Well, I’m not sure we want to add hundreds of banks. We’re picky and choosy about which bank we’re going to add on the platform. They’ve got to be a PLP [Preferred Lending Partner] with the SBA. Essentially the SBA establishes PLP banks as having delegated authority so they can make a loan decision without sending the file to SBA for approval.
What’s critical is that the bank wants to embrace technology; is focused on SBA lending; and has the mindset at the top where they want to partner with a fintech company.
AvidXchange Inc., a firm that automates bill-payment processes for businesses, said Thursday that it raised $300 million in equity from a group of new investors to bring its service to new industries, potentially acquire smaller competitors and to expand internationally.
Investors in the funding round include MastercardInc., Singaporean state investment firm Temasek Holdings Pte Ltd., Canadian pension fund Caisse de dépôt et placement du Québec and and Peter Thiel, the investor and co-founder of payments company PayPal HoldingsInc.
Since its founding, Charlotte, N.C.,-based AvidXchange has raised over $500 million, more than amounts raised by Stripe Inc., Credit Karma Inc. and other well-known fintech players.
The latest investment, one of the largest for a fintech company since lender Social Finance Inc. announced a $500-million fundraising in February, values AvidXchange at around $1.4 billion, according to people familiar with the matter.
EXIT Realty Corp. International and VA Loan Captain (www.valoancaptain.com), the #1 VA Loan Marketplace, have announced a partnership to help educate veterans on their VA Home Loan benefit. As part of the partnership, EXIT Realty will offer veterans unbiased educational content in the form of an eBook, The Ultimate Guide to VA Loans, a VA Loan Learning Center on www.exitrealty.com, and a VA Loan Marketplace powered by VA Loan Captain to increase awareness of the 0% down home loan benefit available to all those who have served in the United States Military.
In addition to educating veteran home buyers, beginning on July 4th, 2017, EXIT Realty will also offer VA Loan Captain’s VA Loan Certification (VALC) to all of its agents. The VALC Certification provides real estate agents and lenders comprehensive knowledge of the VA Home Loan benefit to establish themselves as a local expert for the largely untapped military real estate market while simultaneously helping those who served the country.
Its closely watched monthly house price index showed that the average price of a home fell by 0.2% between April and May, to £208,711. This compares with monthly declines of 0.4% in April and 0.3% in March. The annual growth rate of 2.1% is the lowest since June 2013, and compares with 2.6% in April.
The UK’s other main house price index, from mortgage lender Halifax, is also on a downward trend. It showed a 0.1% fall in April, taking the average property price to £219,649 – nearly £3,000 below the peak in December 2016.
Carmen Dixon, vice-president of PR and Communications at LendInvest, echoed Funding Circle’s sentiments on the British Business Bank.
“Whatever the background or make-up of the new government, we will be urging it progress the (already fairly advanced) commitment made by Theresa May’s government to partner with alternative lenders to lend more,” she said. “That means empowering state-backed vehicles like the British Business Bank to put more money onto alternative lending platforms that will in turn lend more into the economy.”
Meanwhile, RateSetter, one of the UK’s “big three” peer-to-peer lenders, has also called on the next government to be active in its support of the fintech sector:
“The next government must steer the country through a series of huge challenges, not least keeping us safe and managing Brexit. As it does so, it should make the most of opportunities to get behind businesses so that they can thrive, leading to more jobs, output and economic growth.”
China Rapid Finance (CRF), the Chinese financial technology business that recently listed in New York, expects to add up to 3 million users on its lending platform this year despite the government’s push to tighten restrictions on the burgeoning online lending sector.
In the first quarter of this year, the company attracted 545,000 new borrowers who obtained credit ranging from 500 yuan to 6,000 yuan (US$73.50 to US$882.50) per transaction.
To say digital payment volume in India has grown dramatically over the past few months would be an understatement. Since Modi’s demonetization policy in November 2016 the monthly digital payment volume via India’s Unified Payments Interface (UPI) has increased by almost 2300% as of March 2017.
China’s p2p regulator requires platforms must finish bank depository before the end of June. Currently, some platforms have signed depository agreement with banks. According to the latest news, Xeenho announced that they have signed the bank depository. The bank depository system docking is undergoing, which is expected to operate online in the late June.
Under the wave of Internet financial compliance, more and more fintech platforms attach importance to bank depository. According to data, 433 normal operating platforms have signed bank depository up to the end of May, accounting for 20.16% of the total. Among these platforms, 221 of them have finished the docking of depository system used online.
In response to the regulatory policy, Xeenho Wallet signed the bank depository to guarantee the independent management between funds of platform and users, so as to eliminate the risk of misappropriation.
Dr. Yang Li, CEO of Xeenho, said that the agreement of bank depository has laid a solid foundation for the future development of the company, and they will continue to proactively response to regulatory policies, aiming at achieving the goal of universal finance.
An online finance company in China bilked its investors of over $7.6 billion, that was spent on lavish gifts, salaries and buried that evidence according to authorities who described it as being a huge Ponzi scheme.
These accusations throw a big shadow over the online China finance industry, a lucrative sector that has nurtured global leaders. However, it is one that authorities are saying also has seen a number of flameouts and frauds.
In China, there has been an increase in long-term overdue payments. From 2015 to 2016 the number of corporates experiencing average payment delays of between 90-119 days increased by 25% (from 21% to 26.3%), according to a survey of Chinese corporates, conducted by Coface. The survey also shows that corporates dealing with overdue payments of 150 days or more grew by 60% from 2015 to 2016 (from 9.9% to 15.9%).
In Asia-Pacific (ex-China) invoice trading volume grew from almost nothing in 2013 to a US$116.95 million market in 2015, as noted in the Asia-Pacific Alternative Finance Benchmarking report. Within China, invoice trading in 2015 represented a US$1.46 billion market compared to only US$25.59 million in 2013.
Crowdfunding and Peer-to-Peer lending appear to be the areas which are bringing real business and willing investors together.
The World Bank has predicted the Crowdfunding industry will be worth $95 billion by 2025 and Goldman Sachs said in a report $1.2 trillion of opportunities could be addressed by Crowdfunding in the coming years.
Camden Town Brewery raised £1.5m in Equity Crowdfunding in July 2015, valuing the business at £28m. By December the company had been bought by AB InBev for £85m, netting investors a healthy return.
According to a new report published by Allied Market Research, titled, Peer to peer Lending by End-User Types and Business Model type: Global Opportunity Analysis and Industry Forecast, 2014-2022, the peer to peer (P2P) lending market was valued at $26,064 million in 2015 and is projected to reach $460,312 million by 2022, growing at a CAGR of 51.5% from 2016 to 2022. In 2015, small business loans dominated the market, whereas consumer credit loans is anticipated to grow at a robust rate, in terms of market share.
North America is leading the peer to peer lending market, followed by Asia-Pacific.
Asia- Pacific would witness the highest CAGR of 54.1% mainly led by China, owing to emergence of a number of small scale peer to peer lending service providers.
TSB Bank has finally acknowledged that it’s lending money through peer-to-peer (P2P) lender Harmoney.
The bank has disclosed this in its annual report, released on Friday, saying it has lent $50 million through Harmoney to date.
Heartland Bank, which holds a 12.59% stake in Harmoney, also lends money through the P2P lender. By December 31 last year Heartland had lent $62 million through Harmoney’s online platform. TSB has not disclosed a shareholding in Harmoney.
The key takeaways from the FSB’s report (which can be found here) are:
A growing sector: In absolute terms, the largest FinTech credit market is China, followed at a distance by the United States and the United Kingdom.
Benefits: The benefits include lower transaction costs, convenience for users, increased credit access for underserved segments of the population or business sectors, and (in relation to financial stability) a lower concentration of credit with traditional banks and more pressure on those banks to increase efficiency.
Risks: The risks include: increased financial risk in platforms due to a greater credit risk appetite; untested risk processes and relatively greater exposure to cyber-risks; swings in investor confidence impacting the financial performance of platforms; and (in relation to financial stability) lower lending standards, incumbent banks taking on more credit risk in response to competition, securitisation increasing the connection between traditional and FinTech credit and the challenges posed to the regulatory perimeter.
Business models: The nature of activity varies greatly across and within jurisdictions due to the diverse business models used. These models include: the ‘traditional P2P lending’ model (a borrower-lender matching service with the platform often providing a risk assessment); the ‘notary’ model (a matching service where the loan is originated by a partnering bank – Germany and Korea); the ‘guaranteed return’ model (the platform guarantees a return to lenders – prevalent in China); the ‘balance sheet’ model (the platform originates and retains the loans on its own balance sheet – Australia and Canada); and the ‘invoice trading’ model (factoring services to manage cash flow for the start-up and small business segments).
Sources of funding: Securitisation capital markets have become an important source of funding for FinTech credit platforms in the US. Cross-border funding is higher in Asia Pacific (ex-China). The average retail investment is around US$8,000 in China but, due to regulatory caps, only €500 in France.
Borrowers: The available data suggests that consumer loans are typically in the range of US$5,000 to US$25,000 with the US at the top end of that range. Average loans in China are much larger, at more than US$50,000.
The Monetary Authority of Singapore (MAS) has proposed to make it easier for digital advisory services providers to operate by offering some major concessions under the financial regulatory framework.
One is to allow digital or robo advisers operating as fund managers under the Securities and Futures Act to offer their services to retail investors. This could happen even if robo advisers do not meet track-record requirements, as long as they provide certain safeguards.
A MAS consultation paper released on Wednesday proposed that there would not be separate licensing for digital advice. But firms offering these services would have to comply with some safeguards.
One is that portfolios must be diversified and comprise non-complex assets.
Last year, TD Bank became the third largest SBA lender in the Maine-to-Florida region. Growing their portfolio to $1.5 billion in SBA and government-guaranteed loans has allowed them to help a lot of small business owners realize their dreams. “We’re No. 3, behind only Wells Fargo and Live Oak,” said Tom Pretty, head of SBA […]
Last year, TD Bank became the third largest SBA lender in the Maine-to-Florida region. Growing their portfolio to $1.5 billion in SBA and government-guaranteed loans has allowed them to help a lot of small business owners realize their dreams.
“We’re No. 3, behind only Wells Fargo and Live Oak,” said Tom Pretty, head of SBA lending at TD Bank. “We’re active in three main areas. It’s a great way to work with business owners to give them access to more capital than with a conventional loan. They get better terms so they can preserve the capital they have and use that money to run their businesses.”
The three areas where TD Bank helps small businesses include 7(a) loans, 504 loans, and USDA loans. Businesses use these loan programs to buy or lease equipment, set up credit for inventory and supplies, purchase real estate, acquire other businesses, buy out partners, and borrow against assets for future growth, just to name a few use cases.
How TD Bank is Different
There are three primary aspects to small business lending. They include rates, structure, and the relationship.
“We are strongest in two of three of them,” Pretty said. “We have very competitive pricing structures, and we have good relationships with our borrowers.”
That makes them the strongest bank in North America per S&P and Moody’s.
TD Bank’s flagship product is the 7(a) loan for loans of $5 million and less. Anything above that, they can lend through 504 and USDA.
“We created a process to streamline the loans from $350,000 to $5 million,” Pretty said. “Because we’re a preferred SBA lender, we need to make sure we do everything we can to do the lending.”
For loans under $350,000, TD Bank uses a streamlined human-based approach. While there are innovative automatic underwriting approaches available on the market, TD Bank is cautiously eyeing the market to see where it can meet the opportunity.
“If you get a commercial real estate loan at a conventional bank,” Pretty said, “you’ll have to put down 20 to 25 percent. With an SBA loan, it’s a 10 percent down payment. That’s significant cash preservation.”
Traditional Banking With a Unique Approach
In this day when traditional banks are partnering or starting their own FinTech and alternative branches, TD Bank has opted to remain traditional. “But we offer a lot of convenience to our customers via a retail network,” Pretty said. They’ve also got a huge presence in commercial banking through centers of influence, which refer deals from strong commercial bankers in the marketplace every day. “Most of our business comes internally from customers who may not be lending. They may be retailing or ready to buy a new business.”
Pretty said 65 percent of TD Bank’s loans come from this internal network. The other 35 percent come through cold calls, their website, or other sources.
TD Bank doesn’t turn customers away based on their loan request amount. Whether it’s a $25,000 line of credit or a $5 million fixed-rate commercial real estate loan, they try to work with each borrower to help meet their needs. If necessary, they’ll refer customers to other lenders.
“We do a lot of referrals to Axion,” Pretty said. He said they’re a preferred partner because on their non-profit status and they work with microloans.
While TD Bank is a traditional bank, they’re always on the lookout for partnerships and are interested in the FinTech sector as place to grow.
“It’s good for customers and the economy to find different ways for a business to grow,” Pretty said.
Pretty also said he expects SBA lending to grow in 2017.