Friday January 26 2018, Daily News Digest

marketplace lending

News Comments Today’s main news: SoFi completes $960.2M student loan securitization. Robinhood adds zero-fee crypto trading, tracking. Goldman partners with Cadre. South Korea earmarks 11.2T won for midrange borrowers. Today’s main analysis: Buying overdue loans at discount on Mintos’ secondary market. Today’s thought-provoking articles: What RateSetter will look like without unsecured commercial loans. AltFi Data predicts strong U.S. MPL […]

marketplace lending

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United States

SoFi Completes $ 960.2 Million Student Loan Securitization (Crowdfund Insider), Rated: AAA

Online lender SoFi announced on Thursday the closing of its $960.2 million offering of SoFi Professional Loan Program 2018-A Notes (SoFi 2018-A). According to the lending platform, the offering reflects underlying collateral of more than $1billion in student loans and is SoFi’s largest ever securitization, as well as the first by any fintech lender to reach the billion-dollar collateral mark.

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2018-1 (BusinessWire), Rated: A

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by SoFi Consumer Loan Program 2018-1 (“SCLP 2018-1”). This is a $591.5 million consumer loan ABS transaction.

Preliminary Ratings Assigned: SoFi Consumer Loan Program 2018-1

Class Preliminary Rating Class Principal
A-1 AA+ (sf) $320,000,000
A-2 AA+ (sf) $142,500,000
B A (sf) $81,000,000
C BBB (sf) $48,000,000

A Knife in Twitter’s Back Could Bring A Happy Ending to SoFi Investor’s Wild Ride (Inc.), Rated: A

And the reason that departure could make me better off is that I invested in SoFi in December 2014 when the company was valued at $1 billion. The last time SoFi raised money – in 2017 – it was valued at $4.3 billion.

There are five reasons I invested in SoFi  — of which these four are the most important.

1. It was targeting a huge market

SoFi started out targeting the $1.2 trillion student loan industry and in 2014 announced an expansion into the $12 trillion mortgage market.

 2. Its management team had excellent industry knowledge

 3. It knew what ailed stakeholders and provided a remedy

Of the 15,500 borrowers who had taken out about $1.3 billion worth of loans in 2014, SoFi estimated that it had saved the average borrower $11,783.

 4, It looked like it could reach $100 million in revenue

In November 2017, Bloomberg reported that in the third quarter of 2017 SoFi’s adjusted operating revenue rose 8.2% to $145.3 million in the third quarter while its adjusted earnings totaled $56.1 million.

Moreover, SoFi added 55,000 members in the quarter to a total of 400,000 – having completed “more than $3.52 billion in loans in the period and completed three securities offerings totaling more than $1.5 billion,” according to Bloomberg.

Scandal-rocked SoFi says it has foundation for full recovery (American Banker), Rated: A

He points to the $12.9 billion in loan originations SoFi did last year. The company sold more than $2 billion of those loans.

“All our investors are still buying, and we’ve added many new investors post Mike leaving,” Jain said. “All our lenders continue to lend to us and they’ve shown interest in lending us more. In the face of adversity, we did all we could.”

Source: American Banker

6 Awesome Benefits of SoFi Parent Student Loans (Student Loan Hero), Rated: A

If your child is a college student, you can borrow money to help offset their education costs with a SoFi Parent Loan. According to the company, borrowers can save $3,637 over the life of the loan compared to a federal Parent PLUS Loan, on average.

If you took out a federal Parent PLUS Loan, you could face interest rates as high as 7.00%.

  1. Low interest rates – Depending on your credit score and income, you could qualify for a much lower rate with SoFi than you would with a federal student loan. SoFi student loans have fixed interest rates as low as 3.25% and variable rates as low as 2.58%.
  2. No origination or application fees – For borrowers who received their loans after October 2017, that fee is 4.264 percent of your loan amount. On a $10,000 loan, that means you’ll have to pay a fee of $426.40, adding to the cost of your child’s education.
  3. Career support
  4. Wealth advisors
  5. Member discounts – If you have a SoFi parent student loan and go on to take out a personal loan, mortgage, or another student loan with the company, you’ll receive a 0.125 percent interest rate discount on the new debt.
  6. Customer support

Loan Program Plans to Offer Students Prepaid Bank Cards (The New York Times), Rated: A

The Department of Education plans to provide students with a prepaid card that would hold surplus loan money that is not needed for tuition, giving the government and financial services providers a firsthand look at how students are spending those dollars.

Robinhood adds zero-fee cryptocurrency trading and tracking (TechCrunch), Rated: AAA

No-commission stock trading app Robinhood will let you buy and sell Bitcoin and Ethereum without any added transaction fees starting in February, compared to Coinbase’s 1.5 to 4 percent fees in the US. And as of today Robinhood will let all users track the price, news, and set alerts on those and 14 other top crypto coins, including Litecoin and Ripple.

Former Ripple Exec Invests $ 57.5 Million in Uphold (CoinDesk), Rated: A

Digital money platform Uphold today announced it has received a $57.5 million investment from former Fed Reserve senior analyst and Ripple chief risk officer Greg Kidd.

Goldman Sachs Teams Up With This Silicon Valley Upstart in Commercial Real Estate (The Motley Fool), Rated: AAA

Goldman’s strategic investments group, which makes venture-capital-like investments, now owns 80 portfolio companies.  One such company is Cadre, a fintech company involved in online commercial real estate investing that Goldman funded in its Series B, C, and D funding rounds. The start-up, which happens to be led by some Goldman alumni, also just received a $250 million investment from Goldman’s private wealth clients.

Cadre also charges its LPs less than a typical private real estate fund. These funds usually charge a management fee, often around 1.5%, as well as a 20% cut of the profits above an 8% “preferred” return to LPs. On Cadre’s website, it advertises a 1% “transaction fee” (I assume that’s based on a per-deal fee, like a broker would get) and then a similar 1.5% management fee, but no incentive fee. Cadre claims this fee structure will increase investors’ invested rate of return by over 2% compared with a typical fund, all other factors being equal.

Instant cash out comes to Venmo (Business Insider), Rated: A

Venmo, the PayPal-owned digital peer-to-peer (P2P) transfer service, is within 30 minutes) cash out their Venmo balance for a flat $0.25 fee.

Trump administration prepares to roll back key financial protections for consumers (MarketWatch), Rated: A

The new leadership has taken over at a time when consumers are struggling with credit-card, auto loan and student loan debt. They’re also worried about their personal data, after a 2017 breach at the credit reporting agency EquifaxEFX, +0.81%   exposed personal information of more than 145 million U.S. adults, including their Social Security numbers and financial accounts.

Mulvaney requested zero dollars for his second-quarter budget

The bureau already had $177 million in reserves, enough to cover the $145 million the bureau projected it would need during the second quarter, he said.

USA consumer bureau delays prepaid card rules into 2019 (AliveForFootball), Rated: B

The Consumer Financial Protection Bureau today finalized changes to its final rule on prepaid products, including an overall delay of the rule’s effective date until April 1, 2019 – an extension long sought by the American Bankers Association. The bureau also made changes meant to boost compliance with the rule and loosen rules on linking credit cards to prepaid accounts or “virtual wallets”.

The rule requires companies to disclose fees on prepaid cards and cooperate with consumers who discover unauthorized charges or errors.

Mastercard eyes biometric totality by 2019 (Fintech Futures), Rated: A

Mastercard says all consumers will be able to identify themselves with biometrics such as fingerprints or facial recognition, when they shop and pay with Mastercard by April next year.

StreetShares lands $ 23M for expansion, will look for new office space (Washington Business Journal), Rated: A

The veteran-oriented online lender will beef up staff and look to expand its government contracting offerings.

REIT Industry Veteran Talks About What to Expect from the Sector in 2018 (NREI Online), Rated: A

NREI: More specifically, what’s your take on how publicly-traded REITs will perform this year? Will 2018 be better overall than 2017?

Aaron Halfacre: In 2017, publicly-traded REIT performance was anemic relative to the S&P 500. I think that can be largely attributed to a few factors: big demand for large-cap “infotech” names driving the broader market, a meaningful sell-off in retail REITs and general market hesitation on REITs in front of the tax bill and Fed decisions. On a relative basis, publicly-traded REITs are well-positioned in 2018, not only from the fundamentals picture, but from a value perspective.

NREI: What about non-traded REITs?

Aaron Halfacre: I think 2018 could be as strong, or stronger, than what we saw in 2017. Personally, I am excited about the industry changes in the non-traded REIT space. It is a good thing to see Blackstone and Starwood entering the space while some of the traditional fee-hungry shops have bowed out—a good advocacy trend for the individual retail investor. Institutional-grade real estate choices without the… fee structures of yesteryear, combined with greater valuation transparency and an investment that is not correlated to the broader equity market — that’s a positive story for all of us who aren’t part of the 1 percent.

‘AI isn’t just technology, it’s good judgment’: Cathy Bessant on why banks need humans (Tearsheet), Rated: A

Bessant is transforming B of A into a technology firm and leading it into a future that requires humans to apply immense computing power to immense amounts of data — an artificial intelligence future. But like any every other technology executive, she’s facing a shortage of talent with science, technology, engineering and math backgrounds. The result is often departments hiring from other departments.

Bank of America will spend $600 million this year on cyber defense alone. It employs 1,200 people whose jobs are dedicated to nothing else but information security, although the company makes that “the job of every single employee,” Bessant said. But the caliber of the talent the bank hires is just as important as the technology it invests in, since they’ll be the ones that determine how to work responsibly with AI.

Bank of America Enters Car Subscription Space With Volvo (Auto Finance News), Rated: A

All of Volvo Car Financial Services’ loan and lease originations end up on Bank of America’s balance sheet, Hollodick explained, including subscriptions to Care by Volvo, which starts at $600 a month for an XC40 compact crossover.

2,000+ bank branches closed in US in 2017 (Fintech Futures), Rated: B

US banks accelerated their pace of branch closures in 2017, shutting down 2,069 locations (an 18% increase compared to 2016), according to CoStar, a US-based commercial real estate news site.

3 Industries that can benefit from alternative credit data (MicroBilt), Rated: A

Although alternative credit remains a murky, unfamiliar concept to some, its adoption is slowly but steadily spreading. Some sectors may be particularly well-positioned to benefit from its use, and businesses under those umbrellas should consider adopting them if they haven’t yet done so.

Rally Rd collects $ 2.6 mln seed (PE Hub), Rated: A

Rally Rd., A marketplace for making investments in collector cars the same way you buy & sell stock, announced that it has raised a $2.6 million seed round investment from leading venture capital firms and individual investors.

The Unconventional Way This Man Paid Off $ 70,000 in Student Loans (Student Loan Hero), Rated: A

When Ray Laureano and his wife graduated from college, they left school with a staggering amount of student loans. Between the two of them, they were over $200,000 in debt.

Ray and his wife paid off over $70,000 in just one year.

A radical debt repayment strategy

Instead, he talked to each loan servicer and entered the lower-interest loans into forbearance; in other words, he paused payments on those loans.

With his other debt payments on hold, he put all of his extra money toward just one loan with the highest interest rate. When that loan was fully paid off, he tackled the next highest-interest debt, and so on.

Ray estimates that they will be debt-free by March 2020.

Enacomm Inks Reseller Agreement with Telvoyant (GlobeNewswire), Rated: B

Data intelligence and advancements in communications technologies are helping financial institutions dramatically improve the customer self-service experience. Enacomm, Inc., a leading provider of intelligent interactions and customer authentication technologies for banks, credit unions and credit card companies, today announced a new partnership with Telvoyant, a premier telecom consulting firm providing comprehensive telecom solutions for business, non-profit organizations and government institutions. Through a reseller agreement between the two companies, Telvoyant’s bank and credit union customers will be able to take advantage of Enacomm’s 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.

United Kingdom

What will RateSetter look like without unsecured business lending? (P2P Finance News), Rated: AAA

Consumer loans still make up the lion’s share of RateSetter’s £2.2bn loan book, while its commercial arm – both secured and unsecured – makes up 9.8 per cent, equating to £223.4m.

Of 2,213 commercial loans in total, including those that have been paid and repaid, 1,622 were unsecured and 591 secured as of the end of last year.

But its secured loans tend to be larger. 42.5 per cent of the value of RateSetter’s commercial loan book are listed as unsecured. This represents £95.1m worth of unsecured business loans compared with £128.2m of secured business loans.

UK Federation Of Small Businesses Says AltFin Is Just Heating Up (PYMNTS), Rated: A

The not-for-profit Federation of Small Businesses (FSB) has been a vocal proponent of faster SMB payment times, greater access to more robust banking services and tighter regulation in support of small businesses across the U.K. Most recently, the FSB announced plans to join the alternative finance world and establish the FSB Funding Platform, a marketplace lending portal through which small businesses can access funding from more than 100 lenders.

The FSB’s own research on small business finance, outlined in its Q4 FSB Voice of Small Business Index, found that fewer SMBs were concerned about their access to finance in Q4 2017 than they were in the same quarter of 2016. For the first time since Q1 2012, the FSB’s credit availability index has surpassed its credit affordability index.

And yet, according to the report, small business confidence fell into negative territory, with 73 percent of SMBs reporting a rise in the cost of doing business.

Does cutting-edge technology require a new approach to insurance? (techworld), Rated: A

Digital Risks, an insurtech startup launched in 2014, focuses solely on providing insurance to startups working in the digital, media and tech space.

“We insure things like challenger banks, peer-to-peer lending, payments, medtech, teleadvice, fraud detection, cyber security software, and sharing economy businesses,” Rose adds. “The general focus is around technology.”

Digital Risks doesn’t provide insurance itself – rather, it acts as a broker between companies and a group of about 20 different underwriters.

Lendinvest backs £12m Leeds-based PRS scheme (Specialist Lending Solutions), Rated: B

The specialist property finance lender has completed a £12.5m financing deal with KMRE Group to build 111 new homes in Kirkstall, in a private rental sector (PRS) scheme.

The whole development will be managed as a PRS scheme, and was forward sold before construction commenced to a £300bn investment management group.

International

AltFiData Predicts Strong Growth for Marketplace Lending in the US in 2018 (Lend Academy), Rated: AAA

Today, leading data analytics provider for marketplace lending, AltFiData, released the total origination numbers for the UK, Europe and the USA. They are predicting solid growth for the industry in all three regions in 2018. The new loan volume for the USA in 2018 is expected be $38.9 billion, a year on year increase of 46%.

Still, I think 46% growth is a little on the high side for the four companies covered here but I expect we will get close to those numbers. Interestingly, AltFiData is expecting the UK industry to grow at 43%, slightlty slower than the USA, and Continental Europe to grow at 73% off a much smaller base.

Investing on the Mintos Secondary Market – Hint 2 – Buying overdue loans at discount (P2P-Banking), Rated: AAA

I get a result of 349 loans with various discounts and an YTM of up to 14%. Not surprising for me, many of the loans listed at the top are Mogo loans.

Source: P2P-Banking

If these loans do pay up and then run till regular maturity date, then he recieves a yield of 12.4% to 13.8%. Decent, but not very high compared to other Mintos loans.

However there is a chance of at least 50% that these loans will default and are bought back within the next 30 days. If that happens to a loan, that a buyer bought at 0.3% discount, it will boost his yield very roughly by more 3.6% (0.3% for 30 days multiplied by 12 to get annual effect). Likely it is more because the next payment date will be less than 30 days away. But even taking 3.6% the yield will be around 17%.

The loan with the 0.6% discount would mean a boost of very rougly 7.2% yield on top (0.6*12). So that could lead to about 20% yield.

Global Venture Capital Investment Market – Top 3 Trends by Technavio (BusinessWire), Rated: A

According to Technavio analysts, the global venture capital investment market will grow at a CAGR of more than 27% during the forecast period.

The three emerging market trends driving the global venture capital investment market according to Technavio research analysts are:

  • IPO market gains momentum
  • Growing portion of new investments in China and India
  • Increased participation from mutual funds, hedge funds, and banks in the VC market

In 2017, a lot of major startups such as Cloudera, China Rapid Finance, and Okta came up with IPOs. Most of the companies issuing IPOs were technology-focused and were software and cloud service providers.

During the forecast period, the Americas was the leading venture capital investment market with a market share of more than 56%, with the US being the leading country in the region.

Source: BusinessWire

Crowdfunding – Raising Billions (BW Disrupt), Rated: B

Equity crowdfunding has also become legal in countries like United Kingdom, France, Austria, Germany, Netherlands, Australia, Hong Kong and the U.S. with President Obama legalizing the equity crowdfunding by signing the JOBS Act into law.

Source: BW Disrupt

The Crowdfunding statistics for 2017 reports a global amount raised for $34 billion, broken into $25 billion through peer-to-peer lending, $5.5 billion through reward and donation and $2.5 billion through equity crowdfunding. The projection of the crowdfunding industry is expected to grow over $300 billion by 2025.

Australia/New Zealand

Big banks, biased financial advisers, and the three tricks to avoid them (The NewDaily), Rated: AAA

This week the big banks got more bad press when the corporate regulator ASIC declared that their huge networks of financial advisers were failing to operate in the best interests of their customers.

The report, which covered the financial advice arms of the Commonwealth Bank, Westpac, ANZ, NAB and AMP, found that an astonishing 75 per cent of advice provided was not in the best interests of customers.

And in 10 per cent of cases, consumers were actually worse off than they would have been if they hadn’t got advice.

PledgeMe announces new crowdlending-inspired platform in the works (bizEDGE), Rated: A

PledgeMe has jumpstarted the year with the announcement of the launch of a new lending platform they will be offering.

The Ta Koha platform will be based on a crowdlending model in partnership with the Māori Women Development Inc (MWDI).

India

Innovative products pay off for e-lending startups (ET Rise), Rated: A

After payments, digital lending as a space is at the vanguard of innovations, driven by a clutch of startups seeking to take formal lending to a customer segment that never got easy credit from banks.

From a digital EMI card to instant personal loans and a line-of-credit product, new-age disruptors such as Stashfin, Kissht, and Antworks, along with their established peers Paysense and Moneytap, are trying to generate traction through innovative lending products. Mumbai-based Kissht is financing consumption requirements of low-income households with a digital EMI card that can be used to make payments directly.
“There are around 40 online merchant partners and 2,000 points of presence accepting the Kissht EMI card across businesses like electronic stores, furniture shops and others,” said Krishnan Vishwanathan, chief executive of Kissht. Another Delhi-based startup, Stashfin, is also targeting consumers with income levels between ?20,000 and 1 lakh per month.
Asia

W11.2tr earmarked for midrange borrowers (The Korea Herald), Rated: AAA

South Korea’s Financial Services Commission said Thursday it plans to circulate a combined 11.2 trillion won ($10.6 billion) this year for local retail borrowers that hold midrange credit scores while having trouble finding corresponding loans.

The FSC pledged to pour a combined 8 trillion won into state-run loan products sold at banks, including those designed for refinancing. The remaining 3.2 trillion won will be spent to encourage private banking institutions to develop and sell midrange loan products this year, and the volume of support is expected to gradually increase, according to the plans.

By 2022, the government’s annual financial support for five commercial banking groups — Shinhan, KB, KEB Hana, NH and Woori — will increase by 2.5 times to 2.4 trillion won from 2017, according to the plans. Direct banks Kakao Bank and K Bank received 900 billion won in 2017, and the volume will increase by 3.5 times to 3.1 trillion won in 2022.

Africa

SelfKey Receives Regulatory Sandbox License in Mauritius (Crowdfund Insider), Rated: B

SelfKey, a blockchain-based digital identity firm, has obtained a Mauritius’ Regulatory Sandbox License (RSL), according to information provided by the company. This license will allow SelfKey to develop their self-sovereign digital identity wallet and financial services marketplace under supervision and scrutiny of the Board of Investment of Mauritius.

Authors:

George Popescu
Allen Taylor

Monday December 4 2017, Daily News Digest

mortgage delinquencies by credit score band

News Comments Today’s main news: Lending Club closes first-of-kind MPL transaction. Zopa the first P2P lender to lend 100M GBP in one month. Marcus’s personal loan hits the mark. China issues new rules for cash loan market. Lexinfintech delays IPO. China Rapid Finance posts quarterly earnings. Today’s main analysis: Mortgage delinquency case study. International P2P lending volumes. Today’s thought-provoking articles: China […]

mortgage delinquencies by credit score band

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United States

LendingClub Closes First-of-Its-Kind Transaction in Marketplace Lending (PR Newswire), Rated: AAA

LendingClub (NYSE: LC), America’s largest online marketplace connecting borrowers and investors, today announced that it has closed a first-of-its-kind transaction in marketplace lending — a whole loan transaction structured as a tradeable, pass-through security called a CLUB Certificate*. This first milestone transaction totaled $25 million with an institutional investor seeking a liquid vehicle with which to access the consumer credit asset class.

The CLUB Certificate transaction consisted of whole loans structured as a pass-through security. The instrument trades in the over-the-counter market with a CUSIP and is efficiently cleared through the Depository Trust and Clearing Company (DTCC).

Lending Club diversifies with pass through deal (Global Capital), Rated: A

The $25m transaction was purchased by an institutional investor seeking “a liquid vehicle with which to access the consumer credit asset class”, chief capital officer Patrick Dunne told GlobalCapital, though he declined to reveal pricing information or the buyer’s identity.

The inaugural CLUB certificate consists of whole loans structured as a pass-through security, and trades in the over-the-counter market with a CUSIP number, and cleared through the Depository Trust and Clearing Company (DTCC).

Unlike a securitization, the certificate only pools three year and five year loans of a particular grade that the investor is looking for.

Goldman Sachs’ Marcus Personal Loan Hits the Mark as Other Lenders Struggle (LendEDU), Rated: AAA

When Goldman Sachs launched Marcus, a personal loans product, a little over a year ago, it set an aggressive goal: lend $2 billion by the end of 2017. And while competing online lenders have reported a series of losses since then, Goldman announced this month that Marcus has hit that milestone.

Marcus offers loans from $3,500 to $30,000 on an unsecured basis, meaning they don’t require collateral such as a car or house. Borrowers must make monthly fixed payments, and interest rates range from 6.99 percent to 23.99 percent. On the Marcus website, a sample loan of $15,000 at 13 percent APR is estimated to cost a borrower $19,312 at the end of a 48-month term.

While Marcus has been soaring, other online lenders have been struggling. Lending Club, Prosper, and OnDeck all reported losses over the past 18 months.

Donuts at the CFPB, LC’s Pass-Through Security, Mortgage Delinquency Case Study (PeerIQ), Rated: AAA

On Friday, Lending Club completed a first-of-its-kind transaction in marketplace lending by selling a whole loan pass through security. The transaction size was for $25 Mn and was sold to a single institutional investor. LendingClub held 5% to comply with risk retention rules. The transaction is notable for the following reasons:

  • Expands the market. The pass-through security reflects the same risk and return characteristics of a whole loan pool.
  • Lower Financing Costs. Additionally, as market liquidity grows, the CUSIPs may enjoy lower-cost repo financing as an alternative to higher-cost credit facilities.
  • Secondary Markets. The product addresses certain investors’ demand for secondary market liquidity.
  • Valuation. The price discovery generated from markets in CUSIPs will enable valuation agents such as PeerIQ and Duff & Phelps to calibrate pricing to observed trades in the market.

Mortgage Delinquencies and the 2008 Crisis

Following the integration of TransUnion’s deep datasets on the PeerIQ platform, we examine the historical delinquencies for mortgages over the last 15 years. As seen below, we find that Mortgage delinquencies increased meaningfully, across all credit scores, one-year before the financial crisis.

Source: PeerIQ, TransUnion

We also show that the rise in delinquency levels above corresponds to the rise in Debt-to-Income levels (and other underwriting statistics – not shown) leading up to the crisis.

Source: PeerIQ, TransUnion

There’s a gift for student lenders in the education bill (American Banker), Rated: A

After the 2016 elections, there were high hopes that student lenders (and servicers) would benefit from a more favorable environment regulatory environment and expanded lending opportunities.

Until recently, however, there was not much to show in either respect. While the industry cheered the Department of Education’s decision in August to stop sharing servicing data with the Consumer Financial Protection Bureau, higher education did not appear to be a high priority for the Trump administration.

Ethan Senturia of Dealstruck (Lend Academy), Rated: A

Our latest guest is Ethan Senturia. He was the CEO and Co-Founder of Dealstruck, an online small business lender that was founded in 2013 and shut down in late 2016. Ethan talks about his journey as the CEO of Dealstruck and what led to its demise. He does not sugar coat anything and he takes a great deal of personal responsibility for everything that happened.

His has written a book about this journey called Unwound: Real-time Reflections from a Stumbling Entrepreneur and it is being released on Amazon today.

Beware Those Sketchy Loans Advertised on Instagram (Lifehacker), Rated: A

We’ve warned readers before about new, slick credit companies like Affirm, which want to replace credit cards with on-the-spot loans integrated right into online purchase pages. For all their talk of helping consumers, these companies aren’t much more than friendly loan sharks, re-branded to offer a “premium experience,” but still dangerous and even predatory.

But as Cagle points out, Affirm’s median interest rate of 19 percent is above the median credit card rate, and retailers use the company to build, and then aggressively advertise, the model of buying expensive products on credit. For all of Affirm’s talk of responsibility and helping consumers make better choices, their third most-popular buying category is fashion.

Affirm seems to be making the problem worse. As Cagle puts it: “Affirm is not just meeting a demand, but creating one, encouraging shoppers to buy and spend more. Affirm claims an average 75 percent boost in order values across all its merchant partners.”

MiaDonna Lifts AOV 36%, Repeat Purchases 17% With Financing Option (Retail TouchPoints), Rated: A

With a young, tech-savvy consumer base, MiaDonna, an online jewelry retailer specializing in ethically sourced lab-grown diamonds, wanted to be up-to-the-minute with its payment options as well. The retailer selected financing company Affirm, enabling shoppers to pay in three-, six- and 12-month increments.

MiaDonna, which now makes approximately 20% of its sales through Affirm, noted that shoppers using the service are both spending more and coming back. Affirm users make 17% more repeat purchases, with average order values (AOV) that are 36% higher compared to non-users.

The company’s target consumer is females aged 18 to 34 who are in a relationship and are close to getting engaged or married (within six to 12 months).

Marketplace Lenders Should Remember Experience Can Be Replicated, Experts Say (Bank Innovation), Rated: A

“The borrower experience at a marketplace lender is better than [the experience] at a bank, and that’s why it’s here to stay,” Don Davis, portfolio manager for Prime Meridian Capital Management, said today. during a panel discussion at the 3rd Annual Investors conference for Marketplace Lending, pointing to the ease of the online lending experience for borrowers.

Coinsource Adds 18 Bitcoin ATMs in Atlanta, Among Ten Most Unbanked US Cities (Bitcoin.com), Rated: A

The Texas-based bitcoin ATM network, Coinsource has deployed 20 new machines in the state of Georgia, marking its single largest installation to date. 18 bitcoin ATMs have been installed in the city of Atlanta, and 2 machines in the nearby college town of Athens.

survey by the Federal Deposit Insurance Corporation (FDIC) found that 7% of households (9 million) in the US are unbanked and an additional 19.9% of households (24.5 million) are underbanked.

“Atlanta, Georgia is in the top ten of most unbanked cities in the country, and more than one in ten households have no involvement with traditional banks. Around 30% of residents are underbanked, meaning they might have to check accounts, but have to rely on other kinds of services like pawn shops, check-cashing and payday loan companies to get cash and credit,” Clark said.

To maximize exposure to potential clients, the ATMs were set up near high traffic areas, as well as close to the Georgia State University and Emory University in Atlanta, and the University of Georgia in Athens. 16 of the new machines are for buying bitcoin only, while 4 have both buy and sell functionality.

The state of Georgia now has a total of 101 bitcoin ATM kiosks, making it the third largest US market for bitcoin ATMs behind the cities of Chicago and New York.

Data Science is Becoming the Most Important Skill in Fintech (Lend Academy), Rated: A

The world generates some 2.5 quintillion bytes of data every day.

Chris Skinner penned this interesting piece last week claiming the critical importance of data in banking:

Data is the new air, and the banks that breathe the best will win. In other words, banks that really get data analytics, and can apply machine learning to gain deep customer insights are the ones that will survive.

Data scientists are going to be needed in many areas of fintech businesses such as customer acquisition, cybersecurity, customer service – even compliance. For online lending businesses the other two critical areas are underwriting and collections.

Glassdoor releases an annual 50 Best Jobs in America report and for the second year in a row Data Scientist had the top spot.

Elevate Credit, Inc. to Present at KeyBanc Capital Markets Consumer Conference and Jefferies Consumer Finance Summit (BusinessWire), Rated: B

Elevate Credit, Inc. (NYSE:ELVT), today announced that it’s CEO Ken Rees and CFO Chris Lutes will present at the following upcoming conferences:

CU urges lawmakers to oppose repeal of CFPB’s payday loan protections for consumers (ConsumersUnion), Rated: A

Consumers Union, the policy and mobilization division of Consumer Reports, today urged Congress to not repeal a rule adopted by the Consumer Financial Protection Bureau (CFPB) in October that would protect consumers who take out high-cost payday, installment and auto title loans. Under a Congressional Review Act resolution introduced today in the House of Representatives, the CFPB’s new rule could be repealed by lawmakers before it goes into effect in mid-2019.

New House bill would kill consumer watchdog payday loan rule (CNBC), Rated: B

A congressional resolution introduced Friday in the House would kill the CFPB’s new rule aimed at making sure borrowers of so-called payday loans can afford to repay their debt.

Consulting for regulatory approvals to open a peer to peer lending platform in USA (Upwork), Rated: B

I need an expert who can help with regulatory approvals to open a peer to peer lending platform in USA. You can be a lawyer or financial consultant who have experience in the domain and knows what’s involved. You must have experience related to lending industry.

United Kingdom

Zopa zooms ahead to become the first peer-to-peer group to lend out £100m in a month (City A.M.), Rated: AAA

The financial services firm lent £100m to low-risk borrowers in the UK last month, a 48 per cent increase on November 2016.

Zopa said it has lent more than £900m in 2017 to the end of November, with the increase in lending volumes being driven in part by its integration with price comparison websites.

It expects to have lent out £3bn in total by January 2018.

P2P platforms rush to launch innovative finance Isas (Financial Times), Rated: AAA

Peer-to-peer lenders including Funding Circle and RateSetter have set dates for the launch of their innovative finance Isas, but high demand and a clampdown from providers on the highest risk borrowers will slow the process for new investors.

This week, Funding Circle became the latest to launch an IF Isa.

Yet the platform, which facilitates lending to small businesses, will not be rolling out its IF Isa to new investors immediately to make sure it can match new loans to borrowers. Instead, it is opening access to its 74,000 existing lenders in batches. Those who have used the platform for the longest and who lend most frequently will be offered first chance to apply.

RateSetter also confirmed this week that it had set a February launch date for its IF Isa after receiving authorisation from the Financial Conduct Authority (FCA) in October. The platform, which facilitates loans to businesses and consumers, says it expects to raise £500m in the first full tax year after opening, but would only offer the IF Isa to existing investors in the short term. The platform said it had made that choice to reward loyal customers.

No Christmas cheer for P2P sector as Brexit pushes FCA review into 2018 (P2P Finance News), Rated: A

PEER-TO-PEER lending platforms will need to wait until at least the new year for the outcome of the Financial Conduct Authority’s (FCA) post-implementation review as Brexit and other market issues have taken priority at the City watchdog, Peer2Peer Finance News has learned.

However, it can also be revealed that a snippet of the industry data compiled by the Cambridge Judge Business School’s Centre for Alternative Finance (CCAF) for use in the FCA report will be unveiled before Christmas.

Crowd For Angels Launches £50 Million Bond Investment Opportunity (Crowdfund Insider), Rated: A

On Thursday, peer-to-peer lending platform Crowd For Angels reportedly announced the launch of its £50 million bond investment opportunity. This news comes less than a year after Crowd for Angels launched its first crowd bonds, which are described as specially created secured, high-interest products act are eligible for the platform’s IFISA.

According to P2P Finance Newsthe online lending portal is looking to raise the funds for a Liquid Crypto Bond, which will pay investors 3% over five years. The investors will then receive cryptocurrency tokens through an Initial Coin Offering (ICO) that may be traded on external exchanges or used for project investments on the Crowd For Angels peer-to-peer lending platform.

Brits to spend £1bn worth of work hours planning for Christmas (London Loves Business), Rated: A

With less than a month to go for Christmas, a new research from online lender Sunny has found that the number of hours Brits spend planning for Christmas and buying gifts online while at work are worth £1bn, with over 15m Brits admitting to planning for Christmas during work hours.

Whether at work or at home, Sunny’s research demonstrates a clear gender divide, with women most likely to take on the task of planning for Christmas. Almost a third (31%) of men admit they don’t spend any time planning meals and a quarter (24%) say they don’t do any cooking or preparing of meals, compared to only one in seven (15%) women. Men also don’t make time for Christmas cards, with a fifth (20%) not giving any time to writing them versus fewer than one in ten (9%) women.

Money saver Men who have tried this Women who have tried this
Shopped around online for gifts to make sure I’m getting the best deal 35% 51%
Started next year’s shopping in the January sales 12% 22%
Re-gifted presents 9% 26%
Used coupons/vouchers to buy food and drink for the Christmas period 24% 36%
Participated in secret Santa rather than gifting everyone 7% 16%


P2P platform appoints ex-Barclays manager
(Bridging&Commercial), Rated: B

RateSetter Business Finance has appointed Richard Steele as its regional manager for the Midlands.
The peer-to-peer lending platform said Richard brought experience to its team having previously served at Barclays as a relationship manager and BCRS Business Loans as a business development manager.

Revealed – the 25 people doing the most to spread the PropTech word (EstateAgentToday), Rated: B

This year the list was compiled in association with the UK PropTech Association, the trade body set up in February; in addition to property investment platform LendInvest, two UKPA figures – chairman Eddie Holmes and Estate Agent Today contributor and PropTech consultant James Dearsley – were on the judging panel.

Dan Hughes, director of data and information product management for RICS, has been named the top PropTech Influencer of the Year.

Professor Andrew Baum of Oxford University took second place, after authoring PropTech 3.0, a much-discussed document in the field of PropTech.

Third was digital strategist Antony Slumbers, while fourth was Gary Chimwa, the organiser behind Future:PropTech events.

You can see the full list of 25 here and the top 10 International Influencers here.

RICS director tops proptech influencer list (Development Finance Today), Rated: B

Dan Hughes of the Royal Institution of Chartered Surveyors (RICS) (pictured above, right) has topped LendInvest’s PropTech Influencer List for 2017.
In fourth place was Gary Chima, the organiser behind Future:PropTech events, and in fifth was Dominic Wilson, managing partner of proptech start-up incubator Pi Labs.
China

China issues new rules to clean up runaway cash loan market (SCMP), Rated: AAA

China on Friday issued new rules to clean up its controversial cash loan and online micro lending market, including prohibiting lending to people without an income and putting a curb on the total charges on runaway credit, according to an official notice seen by the South China Morning Post.

It ordered therefore, that with immediate effect, all organisations and individuals must obtain a licence to conduct lending business. All lending institutions must also state clearly a comprehensive charge, which includes interest rates and various fees charged for different categories of offerings for the loan.

The tightened controls attempt to curb a common practice where online lending platforms bypass the maximum legal interest rate charge of 36 per cent with additional add-on fees.

Lenders are also banned from rolling over the credit more than twice and must put a cap on the cost of each loan.

Funds from online micro loans are also banned from being used to speculate in stocks and pay for property down payment. In addition, asset management products offered by financial institutions and banks are disallowed to invest in products securitised by cash loans, campus loans – loans granted to students with no regular incomes – or property down payment loans.

Online micro lenders expanded by 23 per cent in two years to 452.4 billion yuan (US$68.4 billion) by the end of 2016.

China’s debt crackdown hits cash loan providers (Reuters), Rated: A

On Friday, China’s financial regulators introduced new measures aimed at restricting the industry, which is estimated to be worth 1 trillion yuan ($151.5 billion).

The number of repeat borrowers is rising, which could signal financial stress on borrowers, analysts say. The companies, however, say the repeat lending is just a sign of the attractiveness of their platforms.

Online consumer lending in China, of which cash loans are a significant portion, dwarfs similar activity in the rest of the world combined, accounting for over 85 percent of all such activity globally last year, according to a recent report by the Cambridge Centre for Alternative Finance.

The boom in micro-lending comes as lenders seek to cash in on rising incomes in a country where credit card penetration remains at about one-third of the population, according to data from the central bank, which says about half a billion consumers don’t have a credit score.

And the online cash loan sector is projected to reach 2.3 trillion yuan by 2020, according to the research firm iResearch.

Outstanding household debt in China equalled 45.5 percent of gross domestic product at the end of the first quarter, according to the Bank of International Settlements, compared to 27.9 percent five years ago.

Lexinfintech delays U.S. IPO pricing as China reins in micro-loan sector (Reuters), Rated: AAA

Chinese consumer lending firm Lexinfintech will delay the pricing of its planned Nasdaq IPO to conduct more due diligence, a source with direct knowledge of the situation said – a move that comes after Beijing issued new rules to tighten control of the micro-loan sector.

The source, who was not authorized to speak to the media and declined to be identified, did not say how long the IPO was likely to be delayed.

China Continues Its Quest For A Credit Ranking System (PYMNTS), Rated: AAA

China is on the hunt for a homegrown alternative to the U.S.-based FICO score credit ranking system as it attempts to keep up with the rapid expansion in consumer loans being offered through mobile.

Lacking such a single system, online lenders instead use a patchwork of methods to assess consumer credit worthiness, including things like online questionnaires and analysis of consumer data such as individuals’ eCommerce purchases.

The National Internet Finance Association of China — a two-year-old agency closely aligned with China’s central bank — is tasked with the job, but has offered little in the way of specific detail about how the three-year-old search for a system is progressing — past noting in a brief report late Monday that “this would complete an important rung in procedural order.”

China’s “Social Credit System” Will Rate How Valuable You Are as a Human (Futurism), Rated: AAA

In a contentious world first, China plans to implement a social credit system  (officially referred to as a Social Credit Score or SCS) by 2020.

Every citizen in China, which now has numbers swelling to well over 1.3 billion, would be given a score that, as a matter of public record, is available for all to see. This citizen score comes from monitoring an individual’s social behavior — from their spending habits and how regularly they pay bills, to their social interactions — and it’ll become the basis of that person’s trustworthiness, which would also be publicly ranked.

The companies that are implementing SCS include China Rapid Finance, which is a partner of social network giant Tencent, and Sesame Credit, a subsidiary of Alibaba affiliate company Ant Financial Services Group (AFSG). Both Rapid Finance and Sesame Credit have access to intimidating quantities of data, the former through its WeChat messaging app (at present with 850 million active users) and the latter through its AliPay payment service.

According to local media, Tencent’s SCS comes with its QQ chat app, where an individual’s score comes in a range between 300 and 850 and is broken down into five sub-categories: social connections, consumption behavior, security, wealth, and compliance.

THE CHINA RAPID FINANCE LTD – (XRF) POSTS QUARTERLY EARNINGS RESULTS (Bangalore Weekly), Rated: AAA

China Rapid Finance Ltd – (NYSE:XRF) announced its quarterly earnings results on Thursday. The company reported ($1.01) EPS for the quarter. The company had revenue of $10.46 million during the quarter.

Alibaba launches $ 7bn bond issue (Capital.com), Rated: A

Chinese e-commerce giant Alibaba has launched a bond issue aimed at raising $7bn just three years after selling $8bn of debt.

The bonds are being offered in five tranches – 5.5-year, 10-year, 20-year, 30-year and 40-year.

Proceeds from the sale will be used to invest in long-term growth.

Private equity funds found to be investing in banned digital currencies offerings (SCMP), Rated: A

Beijing’s municipal financial regulator has warned private equity (PE) funds not to continue investing in initial coin offerings (ICOs), a practice banned by the mainland’s central bank three months ago.

Huo Xuewen, chief of the Beijing Bureau of Financial Work, said in a report published on Sunday that some of the funds had been found taking part in ICOs – fund-railings by the issuers of digital currencies such as bitcoin – outside the regulatory framework and he pointed out it was a wrongdoing that the regulator would seek to weed them out.

He added the authorities now plan to set up a strict monitoring system to track operations and investments by PE funds.

P2P Lender Hexindai: A Discussion with CFO Johnson Zhang Regarding the Recent IPO (Crowdfund Insider), Rated: A

Hexindai (NASDAQ:HX), a China based peer to peer lender, became the most recent Chinese online lender to trade on a US exchange early last month. The company will report fiscal year results this coming Tuesday before markets open. Last month, Hexidai become another Chinese online lender to list their shares on the US markets in a successful IPO that raised approximately $50 million with each ADS priced at $10/each. The market cap of Hexindai stands at over $550 million today with shares in the company having traded between $10.90 and $17 since the IPO.

We asked Zhang why his company decided to list on the NASDAQ.  Zhang explained that in comparison to Hong Kong the US capital markets is wider and has more comparitive companies. Zhang noted that Yirendai and other online lenders now trade on US exchanges.  NASDAQ was selected because Hexindai is more tech focused. 

Zhang said a key component of their competitive advantage is their sophisticated risk management. Their application pass through rate is equal to just 25% of submitted applications and their default rates are very low.

Their second competitive advantage is their extended off line channels. For example, if a customer goes to a travel agency and wants to book a trip, the agency may say they have a financing solution and will provide the application to Hexindai and then they will determine whether or not they should provide a loan to the borrower.

“For our last fiscal year there were 200,000 borrowers and 110,000 active investors. An average loan size is 80,000 RMB. The typical use of the loans are for personal use like overseas traveling, continuing education or housing renovation. We believe loan proceeds are for self investment. Their life. For their job to become better. We help the emerging middle class.”

International

International P2P Lending Volumes November 2017 (P2P-Banking), Rated: AAA

Funding Circle reaches the milestone of 3 billion GBP loans originated since launch.

I removed Comunitae, because of the stop due the fraud case.

Source: P2P-Banking

The Market Maker’s Guide to Decentralized Exchange (Airswap), Rated: AAA

Market making is generally an ongoing process that includes ingesting data, generating a price, and placing an order on an exchange.

Source: Airswap

Decentralized exchange promises two major benefits:

  • Security and control
  • Global marketplace

Unlocking the ability to transact globally, through a decentralized exchange, will affect society in profound ways. Global information transfer birthed the term “globalization”. Global asset transfer will birth some new term that we all haven’t yet thought of, and in the end the borders that blockchain break down will be greater than the borders we saw the internet break down.

Decentralized exchanges will succeed, likewise, when there is liquidity and usability, both of which do not exist yet on any solution.

Source: Airswap

Micro-finance: do good and turn a profit (MoneyWeek), Rated: A

The ultimate example of this is the “micro-finance” movement. The idea is that you lend money to a micro-finance institution that in turn lends the money to ordinary folk (frequently women) in the developing world for practical projects that generate returns for investors. Investors hope to get back all of their money plus a return – net returns of around 2% a year aren’t uncommon.

The only trouble is that while micro-finance does score highly in terms of “impact”, it is often not so much crowd-based as “command-and-control” in style. In other words, it’s usually a credit institution making the actual lending decisions and you invest via their pool of funds.

Now, however, we have the crowd revolution and the rise of alternative finance and peer-to-peer (P2P) lending. In the Netherlands, this has given rise to companies such as Lendahand, which provide a marketplace for investing in individual projects for a defined return, usually via some form of bond. Over here in the UK, Ethex provides a similar marketplace for investors to back individual projects with real impact.

So, why not marry micro-finance, the crowd, and renewable energy into one product? That’s the idea behind a relatively new website called Lendahand, a joint venture between the Dutch platform and Ethex. The platform is working with local providers such as SolarNow in Uganda as part of its Energise Africa initiative to provide finance for solar panels. This is done via unsecured bonds that pay out 5%-6% a year for a period of between one and three years, with interest usually paid every six months (along with some of the debt, which is amortised as it is repaid).

Top 100 fintech companies revealed (Banks.am), Rated: A

First, second and third place, on this year’s Fintech100, are occupied by Chinese fintech firms: Ant Financial, which owns Alipay payments platform; ZhongAn, which uses big data to automate online property insurance; Qudian, an online electronics retailer offering monthly instalment re-payments.

The fourth and fifth places are occupied by Oscar, which seeks to radically transform health insurance through technology and Avant, the fastest-growing marketplace lending platform for short-term consumer credit.

The sectorial breakup of the Fintech100 is as follows: 32 lending companies, 21 payments companies, 15 transaction and capital markets, 12 insurance companies, 7 wealth companies, 6 regtech (regulatory technology-Banks.am) & cyber security companies, 4 blockchain and digital currencies companies, and 3 data and analytics companies.

Fintech100 includes a broad range of fintech companies from 29 different countries.

SelfKey Will Greatly Aid the Expansion of the FinTech Sector (Cryptocoins News), Rated: B

One blockchain based startup, SelfKey, is creating a blockchain-driven decentralized digital identity system that gives users full control over their personal information. The platform allows individuals to create their own secure personal identity wallet that stores important identity documents. This wallet also stores KEY tokens, which can be used to purchase services on the SelfKey marketplace. These services, which range from passport applications to opening bank accounts, don’t control users’ data–users do.

Users have the key, so to speak, that releases their own data.

Australia/New Zealand

CollinStar Holdings to Acquire BiWang Group in a 100 Million US Dollars Buyout (BusinessWire), Rated: AAA

On December 2, 2017, CollinStar Holdings paid $ 100 million US dollars to acquire the entire BiWang Group, including BW.COM.

AUSTRALIAN FINTECH LAUNCHES ALTERNATIVE FUND (Money Management), Rated: A

Australian fintech and fully licensed marketplace lender, Zagga has launched its Alternative Growth Fund aimed at wholesale investors, including self-managed super funds (SMSFs), which will target net returns of 6.5 per cent per annum.

The fund, which would have the minimum investment for wholesale investors of $50,000, was designed to add scale to the Zagga business model which uses a bespoke algorithm to match wholesale investors with borrowers, the firm said.

Banking gap widens as tech-savvy consumers look to new products (News.com.au), Rated: A

Peer-to-peer lender RateSetter has examined big bank profit margins and found that while they are paying record low rates on deposits their lending rates for personal loans and credit cards continue to climb.

“You can drive a bus through the spread between bank deposits and consumer lending rates,” said RateSetter CEO Dan Foggo.

“Publicity stunts such as dropping fees on ATMs are little more than a smokescreen for the poor value,” he said.

  • Online savings account rates have dropped from 6.55 per cent to 1.6 per cent;
  • Bonus saver account interest rates have fallen from 4.8 per cent to 1.85 per cent, but;
  • Credit card interest rates have climbed from 18.6 per cent to 19.75 per cent, and;
  • Unsecured personal loan rates rose from 13.8 per cent to 14.5 per cent.

FMA statistics show the fledgling NZ P2P lending sector is serving banks and fund managers well (Interest), Rated: A

But the Financial Markets Authority’s first statistical report on P2P lending, issued this week, highlights just how little actual P2P lending there has been in NZ to date.

The useful and informative FMA report details that there are 20,744 investors registered with licensed P2P services. At 207,230, there are about 10 times as many borrowers registered with P2P services. The volume of investors, or savers, versus borrowers sounds unbalanced and it is. But the bulk of money being lent through P2P platforms is coming from banks and institutional, or wholesale, investors.

Far and away the biggest NZ P2P lender is Harmoney. According to the FMA report, as of June 30 the total value of Harmoney loans outstanding was just under $239 million. The five other active P2P lenders had a shade under $50 million worth of outstanding loans between them.

India

Customers without credit scores can take the digital journey to get loans (livemint), Rated: AAA

Mumbai-based CreditVidya, a fintech start-up, uses alternative data sources to assess fraud and risk. It has recently raised $5 million Matrix Partners and had previously raised $2 million from Kalaari Capital. The money is being used for product development and hiring manpower. A lot of the investments are going into research and development and setting up the team right, which will include data scientists from the US. The plan is to have a total of 146 employees by end of 2018, said the founders of the company.

Currently you work with over 20 banks and non-banking financial (NBFCs) who are looking to assess customers of small unsecured credit. What is the quality of these banks and NBFCs?

Rajiv Raj: We have a mix of small and big banks and NBFCs. We have big banks such as State Bank of India, ICICI Bank Ltd and Axis Bank Ltd. There are many micro services that these companies use.

Abhishek Agarwal: We are also in talks with an MNC (multinational corporation) banks. Right now, 10 relationships are with large banks and NBFCs, out of the 27, and remaining are in mid- and small-sized banks. Every bank is focused on retail loans and in that pie on unsecured lendings. Personal loans, consumer durables and two-wheeler loans are the segment where there has been a tremendous rise.

Recently, P2P regulations came out. These companies will have to start reporting to credit bureaus. Has any P2P platform approached you to use alternate data?

Agarwal: We are currently working with three P2P lenders. Here again, it is for risk assessment of first-time borrowers. People who are digital savvy and want to access this facility, are first-time borrowers and under 35 years. Cibil’s (a credit bureau in India) penetration in the 25-35 age group is poor. Hence, 75-80% of the cases will have a no Cibil score.

Raj: These are thin-file customers who don’t qualify for loans.

Why are the traditional credit bureaus not using alternative or digital data to assess customers?

Raj: One, there is a regulatory issue. Two, they have never done this before.

Agarwal: Experian (a credit bureau) in the US has been around for the last 40 years. Digital lending in the US exists for the last 12 years. Experian never used alternative data in the US. It is not in their DNA. All the traditional bureaus in India are heavily influenced by their parent companies in the US. There is no product that the bureaus have launched in India that is only for the Indian market. They haven’t done anything that is new and specific to India.

While analysing customers, what parameters do you use to evaluate credit worthiness?

Agarwal: You look at five types of fingerprints—social finger print (anything you put on social media), device fingerprint (such as SMS), browser fingerprint (anything that identifies your device), click stream fingerprint (how fast you type) and biometric fingerprint (the physical fingerprint).

Fintech Trends to Watch Out for in 2018 (Entrepreneur), Rated: A

With a continuation to the credit line onboarding the digital trend, the next year will see more and more people borrowing using data, believes Vikram Sud, former APAC operations and technology head of Citibank and also ex-group COO of Kotak Mahindra Group.

Algorithm-based investments will see a hike, interactive brokers too will grow in numbers, while the cost of availing them will keep dropping.

While the majority of fintech users today rely on wallets and prepaid investments for transactions, many in the industry believe that that is set to change.

Citing a 360 degree financial inclusion and a future of uniform payments globally, Himaghna Dey Sarkar, Chief Expansion Officer, ToneTag spoke about how they are enabling sound-based payments. The app listens to the frequency of tones in the existing EVC machines, and enables transactions directly to the merchant’s bank account.

Sud believes that we are moving closer to a stage where the cards business is at a risk. With more and more retail lending options like buy now and pay later, Sud said that the line of credit will become more prominent.

A little bit of data can go a long way! (ETCIO), Rated: A

Imagine there being minimal record of your existence – your credit history and identification papers being almost non-existent. Unfortunately, this is not a movie plot but a reality that millions across the world have to grapple with. Both developing and under-developed economies have their fair share of people who have no formal credit footprint. These are people who have never borrowed from or interacted with formal banking channels in their lives. This lack of interaction with banking channels is one of the primary reasons that these people do not possess sufficient format documentation, a primary requirement of banks. The repercussion of this is that there is minimum information available about their credit history and when they do approach a lender for capital; more often than not they are deemed ineligible and are turned away.

Over the last few years, digital lending platforms have emerged as viable sources of credit for such borrowers.

By 2022, over 70% of India’s population is expected to own a smart phone. With a current smart phone user base of 300 million, smart phone penetration in rural India is growing at a much faster pace as compared to the urban India. This means that each one of us is generating reams of digital data giving online lenders a glimpse into our habits and preferences.

Asia

Integrated finance services in e-commerce (TelecomAsia.net), Rated: A

Again there is speculation in the US over whether companies like Amazon, Facebook, Apple or Wal-Mart could acquire a banking license.

If you go to buy items online, you might need finance for your purchase. The easiest solution nowadays is probably to use a credit card to make the payment. Then, depending on your card, you have more time and flexibility to make the payment. The problem is the actual annual interest rate of the card is easily 30% to 40%. You could get a loan with much lower interest rates, but it is complex to get a loan quickly when you are buying something.

Now we see a situation FinTech that integrated finance solutions are easily available for all kinds of retail services and they offer also a smooth customer experience. This is part of a much bigger development in the finance industry. Finance services are no longer their own isolated islands, but they can be components in any service.

Fintech competitiveness depends on AI technology (The Korea Times), Rated: A

Limiting individual investment in peer-to-peer (P2P) financing at 10 million won ($9,220) is a typical one. The ban on non face-to-face contracts on discretionary investments in the asset management field also limits the domain of fintech startups online. It is necessary to change perspectives in modifying regulations to something that will help new fintech companies.

Fintech can be classified into three areas: well-known money transfer and payment; P2P finance represented by cloud funding; and asset management represented by robo-advisors. The common technology necessary for all three is artificial intelligence (AI).

In P2P lending, supervised learning can be used in P2P for credit scoring and anticipation of expected returns. For asset management firms, reinforcement learning can be used for automated portfolio building.

Canada

National Bank of Canada capped off a better fiscal year with strong fourth-quarter profit as the Montreal-based lender enters a new phase of an aggressive plan to redefine itself.

And chief executive officer Louis Vachon said the bank is now shifting from a phase of heavy cost-cutting and job losses to one that reduces costs by using technology to automate more of its processes.

The bank is spending a total of $750-million a year on technology, about $350-million of which goes to new projects.

Profit from the core personal and commercial banking segment was $239-million in the fourth quarter, compared with $191-million a year earlier, as loans and deposits grew and deposit margins improved. The wealth-management arm also posted a 29-per-cent increase in profit to $110-million.

Provisions for credit losses – the money set aside to cover bad loans – rose to $70-million in the fourth quarter, from $59-million a year ago. But the increase effectively belonged to Credigy Ltd., a U.S. subsidiary that specializes on buying distressed loans at discounted prices.

The bank expects Credigy will continue to grow, but is tapering its appetite for unsecured consumer debt as it winds down an agreement that saw the firm buy $1.3-billion in prime loans from Lending Club, a U.S.-based online lending firm. Credigy will instead look at doing more deals for secured loans with lower spreads but also lower losses.

Africa

Kenyan, Nigerian startups make global Fintech 100 (Disrupt Africa), Rated: AAA

They include two Nigerian startups, namely payments company Flutterwave and financial management app Riby. Kenyan insurtech startup GrassRoots Bima also makes the list.

Authors:

George Popescu
Allen Taylor