Thursday July 6 2019, Weekly News Digest

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News Comments Today’s main news: 3 top execs exit SoFi. Zopa proclaims end of monogamous banking. LendInvest earnings hit the roof. Financial Conduct Authority sets new rules for UK P2P lending. Quarter of global small firms are significant fintech users. Biz2Credit raises $52M. Today’s main analysis: Alternative lenders steal business from banks. P2P lending will be […]

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United States

United Kingdom

China/Hong Kong

International

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News Summary

United States

SoFi Loses Three Top Executives (WSJ), Rated: AAA

Three top executives of Social Finance Inc. are leaving the financial-tech startup in the coming weeks, adding to the challenges the company faces as it moves through a tough environment for online lenders.

Marketing chief Joanne Bradford, head of risk Kevin Moss and Ashish Jain, the lender’s top capital markets executive, recently told Chief Executive Anthony Noto about their plans to step down from their roles. All three had been at the company prior to Mr. Noto taking the reins in early 2018.

Tech Driving Bank Earnings Growth (PeerIQ), Rated: AAA

US first quarter GDP growth was revised lower to 3.1%. There is fear that the economy is slowing due to the ongoing trade war and the length of this economic expansion. The 3 month-10 year yield curve fell to its most inverted since 2007 to -12.3 bps. Recessions have usually followed within 18 months of this curve inverting. The market is looking to the Fed to bolster economic growth with the odds of a rate cut at the September meeting now at 54%.

Source: CME, PeerIQ

Technology Driving Earnings Growth

Banks and lenders are reaping the benefits of their technology investments now. Banks like Citi have been able to offer new products and grow their deposit base, while Capital One has improved its efficiency ratio by 400 bps. Banks and lenders continue to make large technology investments for faster growth at lower cost.

Alternative Lenders Continue to Steal Business From Banks (The Financial Brand), Rated: AAA

What is less well known is the rapid growth of PayPal as a digital lending alternative. It may be time for banks and credit unions to wake up, however, as the company announced that they had crossed $10 billion in small business lending in only 5 years.

Amazon Joins PayPal as Top 5 Small Business Digital Lender

Amazon has joined PayPal, OnDeck, Kabbage, and Square as a top 5 digital small business lender. In fact, Amazon revealed that it had made more than $1 billion in small business loans to US-based merchants in 2018.

The peer-to-peer business lender, Funding Circle, also revealed its first-quarter trading update, showing that loans under management rose by 44% compared to the first quarter of 2018, while originations grew by 23% (they have originated $9.5 billion in loans).

Consumer Financial Protection Bureau Releases Rules for Comprehensive Reform of Debt Collection Industry (Debevoise & Plimpton), Rated: AAA

On May 7, the Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) released a Notice of Proposed Rulemaking (“NPRM” or “Notice”) to increase regulation of the debt collection industry.1 The much-anticipated Notice is the outgrowth of the CFPB’s 2016 Outline of Proposals (the “Outline” or the “2016 Outline”), which was a cornerstone of the Obama Administration’s efforts to protect consumers and overhaul all aspects of consumer finance (see our August 10, 2016 client alert on the Outline here). One presidential election and two CFPB Directors later, CFPB Director Kathleen Kraninger announced a more limited plan to put in place substantial protections, but which rejects some of the 2016 Outline’s more ambitious proposals. The NPRM would overhaul the industry by, for example, requiring that debt collectors make no more than seven attempts by telephone per week to reach consumers about specific debts, and allow debtors to opt out of allowing collectors to contact them via e-mail, text messages, or other media. However, the proposal fails to address many of the Outline’s calls for increased regulation of substantiation of debt, decedent debt, and transfer of information to subsequent collectors (among other things).

See the full report here.

Biz2Credit Raises $ 52M In Funding To Expand (PYMNTS), Rated: AAA

Biz2Credit, the online lending platform that helps banks and other financial institutions manage small and medium-sized business (SMB) lending processes, announced Tuesday (June 4) that it raised $52 million in venture funding.

Biz2Credit said the Series B funding round was led by WestBridge Capital.

Jared Kaplan of OppLoans (Lend Academy), Rated: A

The next guest on the Lend Academy Podcast is Jared Kaplan, the CEO of OppLoans.

Lighter Capital Introduces Suite of Alternative Financing Solutions to Fund More Startups up to $ 3 Million (Yahoo! Finance), Rated: A

Lighter Capital announced today that it has launched new financing products to better match the capital needs of growing startups. To date, Lighter Capital has provided over $150 million in more than 500 rounds of financing to over 300 startups. The company has historically provided Revenue-Based Financing and has now broadened its portfolio to include lines of credit and term loans, designed to provide startups capital over time as they need it. Unlike most venture debt, startups do not need to have raised Venture Capital to qualify for funding.

1. Lighter Line of Credit – Startups have fluctuations in capital needs, to make essential payments like payroll or wait for a big customer payment. The Lighter Line of Credit is a revolving working capital line. It enables startups to draw and return capital numerous times, to even out their cash needs.

2. Lighter Term Loan – Provides startups growth capital in a traditional structure with predictable payments. Lighter Capital will also make forward commitments, giving startups the right to get additional capital for a period of time. For example, a startup could get a $500,000 loan today and a commitment from Lighter Capital to provide an additional $500,000 over the following six months.

LendPro Unveils Dynamic Routing Capability to Streamline POS Financing (LendPro Email), Rated: A

LendPro LLC, a provider of Lending-As-A-Service (LaaS) products and platforms for retailers, today unveiled Dynamic Routing —an innovative POS financing solution that automatically matches consumer credit applications with the best-available lending option.

While alternative lending software moves credit applications through a pre-defined, inflexible process, Dynamic Routing by LendPro dynamically guides borrower application data to lenders in the merchant’s financing portfolio based on the attributes of the sale. For example, if the total price for a specific purchase is too large (or small) for a lender’s target loan size, LendPro’s Dynamic Routing system can route the applicant to a different lender. This technological innovation saves time, increases simplicity, and may help the borrower avoid an unwanted credit application.

Why it’s Time to Ask Your Wealth Manager About P2P Lending (Crowdfund Insider), Rated: A

Using a crowdfunding platform, however, 5,000 individuals might each invest $1,000 into the company. Each of those individual investors is exposed to a very small amount of risk, and the company is able to raise the funds without surrendering ownership.

Possible Finance lands $ 10.5 million to provide consumers softer, kinder short-term loans (TechCrunch), Rated: A

It’s one reason that venture capitalist Rebecca Lynn, a managing partner with Canvas Ventures  and an early investor in the online lending company LendingClub, has largely steered clear of the numerous startups crowding into the industry in recent years. It’s also why she just led a $10.5 million investment in Possible Finance, a two-year-old, Seattle-based outfit that’s doing what she “thought was impossible,” she says. The startup is “helping people on the lower end of the credit spectrum improve their financial outlook without being predatory.”

Santa Clarita Ranked Second Highest ‘Debt-Ridden’ City In California (Home Town Station), Rated: A

LendingTree, an online loan marketplace, released a report this week detailing the accrued debt of all California cities with a population of at least 50,000.

Santa Clarita ranked the second highest in auto loan debt with an average of about $21,000, and second in the state for personal loan debt, excluding mortgages, with an average of just over $6,000.

Source: Home Town Station

Cities With the Highest Percentage of Black Homeowners (Black Enterprise), Rated: A

Even though housing discrimination has been outlawed for 50 years, studies show that the U.S. black homeownership rate isn’t any higher than when the Fair Housing Act initially passed in 1968. In fact, the racial gap between white and black homeowners today is significant. According to the U.S. Census Bureau, the homeownership rate among white Americans is 73.2%, while the black homeownership rate stands at 41.1%. In comparison, 42% of black households owned their homes back in 1970, two years after housing discrimination based on race, color, religion, and national origin was outlawed.

According to the report, the U.S. cities that have the highest percentage of black homeowners are San Jose, Los Angeles, Salt Lake City, San Antonio, and Portland. On the other hand, the cities where black homeownership is lowest relative to overall population are Memphis, New Orleans, Baltimore, Virginia Beach, and Milwaukee, where the median household income for black residents is a mere $28,928.

See LendingTree’s report here.

Real Crowd Says HNW Investors Poised to Boost Real Estate Investments in 2019 (Crowdfund Insider), Rated: A

Real estate crowdfunding platform RealCrowd reports that High Net Worth (HNW) investors are looking to increase their portfolio of real estate investments during 2019. According to a survey by the Fintech platform, 53% of surveyed HNW individuals expect to make “two-to-four direct real estate investments in 2019.” Specific details on the survey process were not revealed.

This is a big improvement over year prior when just 33% planned to do the same thus an increase of around 20%.

The survey also stated that 47% of respondents’ desire to allocate more than 25 percent of their investment portfolio to commercial real estate.

WealthStone – Democratizing Access to Commercial Real Estate (PR Newswire), Rated: A

WealthStone LLC announces the launch of its new website, WealthStoneLLC.com, where technology brings increased access to institutional-quality commercial real estate investments to a wider audience, while delivering the best customer experience possible for its growing global investor base.

3 Investments That Lead to Passive Income (Realty Biz News), Rated: B

Peer-to-peer lending is a relative newcomer to the world of investments. Lending Club and Prosper were the first institutions to offer P2P loans beginning in mid-2000, and they’ve changed the way countless loans are handled. Instead of going to the bank, borrowers apply for loans from other people. People who have been denied loans from financial institutions are often approved for P2P loans at rates that are lower than those of larger financial institutions.

Sagent Lending Technologies to Transform the Lending Experience, Powered by Microsoft Azure (BusinessWire), Rated: A

Sagent Lending Technologies announced today a strategic initiative to transform the borrower and the lender experience through Microsoft Azure. Sagent will leverage the potential of artificial intelligence, machine learning, data science, and cognitive services available on Azure that will provide a reimagined experience for Sagent clients and their consumer borrowers.

BofA, Longtime Leader in Leveraged Loans, Warns of `Carnage’ (Bloomberg), Rated: A

The U.S. economy is on solid footing except for one potential trouble spot, according to Bank of America Corp.’sChief Executive Officer Brian Moynihan: leveraged loans — a business the bank has dominated for a decade.

Bank of America was bookrunner on some $317 billion of leveraged loans this year, accounting for 10.8 percent of the market share, the Bloomberg data show, which captures all leveraged term loans and revolver facilities that are either new or have been amended.

Moody’s Investors Service said covenant quality for 2018’s last quarter was close to a record low, and the rating company sees no signs of improvement this year. Federal Reserve Chairman Jerome Powell said last month that the market looks a lot like the mortgage industry in the run-up to the subprime crisis.

Digital Banks Look to Attract Older Generations (LendIt), Rated: A

One of the challenges for the challenger banks like Monzo, Starling and Revolut is to go beyond the young demographic they’ve been successful at attracting to their products; not surprisingly, less than 5% of Monzo’s customers over 60; as more bank branch close they are looking to bring in older customers who are no longer being served by traditional banks; Monzo and Starling have both added the ability to make cash deposits; Starling recently partnered with the post office and Monzo partnered with a payments service which is in 30,000 shops in the UK; these digital banks and their competitors are experimenting in how they can have more physical points of contact with customers; Revolut recently shared a plain English customer contract in a move to help their customers better understand the product.

The tech banks are using to boost deposit growth (American Banker), Rated: A

First Arkansas & Trust, for example, is using Plinqit, a goal-oriented savings app from a fintech called HTMA Holdings, in the hopes of boosting deposits.

And some banks have begun to specialize in the banking-as-a-service model to increase deposits.

Following is a look at how regional and community banks are employing tech to help in the race for deposit growth:

Wharton just released an online fintech course for the masses (Technical.ly), Rated: A

On Thursday, the University of Pennsylvania’s Wharton Online announced its new virtual fintech specialization program, “FinTech: Foundations and Applications of Financial Technologies,” for students and professionals who want to learn about the rapidly changing tech.

The four-course financial program is available via online education platform Coursera, and will detail the use of cryptocurrency, robo-advising, crowdfunding and modern investing.

BlueVine Appoints Silicon Valley Veteran Herman Man to Chief Product Officer (BlueVine), Rated: B

BlueVine, which provides small- and medium-sized businesses with access to fast and simple online financing, announced today that it has named Silicon Valley technology and engineering veteran, Herman Man, its Chief Product Officer. In this role, Man will focus on developing the next generation of BlueVine products and oversee the company’s product vision, strategy, design and execution to deliver on its mission to provide fast, fair and easy financing solutions every small business needs to thrive.

Lendio Announces New Senior Vice President of Lender & Partner Strategy (Lendio), Rated: B

Lendio announced today that Denada Ramnishta has been promoted to Senior Vice President of Lender & Partner Strategy.

Thomas M. Affolter Joins White Oak as Managing Director to Bolster Origination Efforts (Yahoo! Finance), Rated: B

White Oak Global Advisors, LLC (White Oak) is pleased to announce that Thomas (Tom) M. Affolter has joined White Oak as a Managing Director based in Chicago. Mr. Affolter will focus on originating new investment opportunities and expanding the coverage network for White Oak’s private debt funds.

United Kingdom

Zopa says fintech revolution has killed off monogamous banking (P2P Finance News), Rated: AAA

ZOPA has declared that “monogamous banking is a thing of the past”, as new research reveals that the average UK adult has a relationship with seven different financial providers.

The peer-to-peer consumer lender, which is launching a digital bank, said that the fintech revolution has changed the shape of financial services for consumers.

It cited a survey that found 71 per cent of UK adults said they do not need a relationship with their main bank, while two thirds are actively using products from banks and financial providers other than their main current account provider.

LendInvest earnings soar as it looks to disrupt ‘slow moving’ banks (P2P Finance News), Rated: AAA

ONLINE property lender LendInvest has reported an 82 per cent jump in core earnings, as it looks to disrupt the UK mortgage market.

LendInvest, which used to be a peer-to-peer lender before it shut its platform to retail investors, posted core earnings of £4m for the year ended 31 March 2019, up from £2.2m the previous year.

The firm, which is considering a stock market flotation, said that platform assets rose by 69 per cent to £788.3m over the same period, while revenue rose by 36 per cent to £72.7m.

FCA Announces New Rules For UK P2P Lending Platforms (Lend Academy), Rated: AAA

The long awaited changes to P2P lending regulations in the UK are finally here. Today, the Financial Conduct Authority (FCA) announced that the new rules for peer to peer lending platforms have been set and will come into effect on December 9, 2019.

  • Introducing more explicit requirements to clarify what governance arrangements, systems and controls platforms need to have in place to support the outcomes they advertise. These new rules focus particularly on credit risk assessment, risk management and fair valuation practices, especially for platforms with more complex business models.
  • Strengthening rules on plans for the wind-down of P2P platforms.
  • Applying marketing restrictions to P2P platforms, designed to protect new or less experienced investors. We have also clarified the practical implication of these new rules as they apply to P2P agreements.
  • Introducing a requirement that an appropriateness assessment (to assess an investor’s knowledge and experience of P2P investments) be undertaken, where no advice has been given to the investor. We have also provided guidance on what the assessment should include.
  • Setting out the minimum information that P2P platforms need to provide to investors

Assetz Capital hits bridging loans and small business lending milestones (AltFi), Rated: A

Peer-to-peer lender Assetz Capital said it has hit a double milestone, providing over £100m in bridging loans and a further £50m in small business funding, “as the appetite for alternative forms of finance continues to rise across the UK”.

The Manchester-based fintech adds that since it was founded six years ago it has lent over £780m to small firms and property developers, helping build 3,700 homes in Britain.

UK P2P sector poised for “significant further growth” (P2P Finance News), Rated: A

THE UK’S peer-to-peer lending sector is set to experience “significant further growth”, according to Standard & Poor’s.

A report released by the ratings agency this week said that the growing involvement of institutional funds and increased securitisation issuance are set to boost the industry.

Santander and eBay team up on UK loans app (Techradar), Rated: A

In an effort to fend off tech giants and newer digital rivals, Santander and eBay have announced a new lending partnership for small businesses.

The Spanish bank will begin offering loans to over 200,000 small and medium-sized businesses that sell products on eBay in the UK through its financial technology app Astro.

As £165m Lendy collapses, experts warn ‘a dozen more peer-to-peer firms will follow’ (The Telegraph), Rated: A

While investments of varying risk are available, some platforms have tempted consumers with returns of more than 12pc on high-risk projects. But the collapse of one large platform, Lendy, which offered loans on property developments, has concerned investors across the sector.

Wagestream Says One Complaint Against PayDay Lenders is Resolved for Every Three Received (Crowdfund Insider), Rated: A

Payday loan alternative Wagestream has issued a release stating the Financial Ombudsman Service (FOS) has received 47,220 complaints against payday lenders since 2018. Yet while many complaints have been received only a fraction have been resolved. Wagestream states that only one out of three are resolved or just under 17,000.

Welendus unveils rebrand as Fund Ourselves (P2P Finance News), Rated: B

WELENDUS, the peer-to-peer payday lender, has rebranded as Fund Ourselves.

ARBUTHNOT SPECIALIST FINANCE CONCLUDES FIRST LOAN COMPLETION SINCE LAUNCHING THE BUSINESS (Arbuthnot Latham), Rated: B

Arbuthnot Specialist Finance (ASFL) is pleased to announce it has concluded its first loan completion since announcing its launch in late May. The deal is a 70% LTV residential product loan on a property located less than half a mile from the University of Central Lancashire campus in Preston.

China/Hong Kong

The Escalating US-China Trade War, Part 1 (In Homeland Security), Rated: AAA

China is in debt, significantly. Part of the problem is that it is difficult, if not impossible, to assign a figure to the debt. There are Chinese statistics for official debt, but following the 2008 economic crisis, China implemented new restrictions on lending. Over the past decade, those restrictions have shifted from one type of loan to another so Chinese citizens get creative with how they borrow money for business purposes or to purchase property.

Furthermore, the economic crisis took “shadow lending” to new heights. Shadow lending can include everything from organized crime to banks obfuscating the purpose of a loan or peer-to-peer lending. China cracked down on this lending practice too, but the debt amount is significant and official numbers do not typically include shadow lending.

New US Tariffs Spell Doomsday for China’s Economy (The Epoch Times), Rated: AAA

The additional 25 percent tariff imposed by the United States on $200 billion worth of Chinese goods will trigger a new round of factory closures in China, driving economic collapse.

In the context of the blow-up of the P2P (peer-to-peer lending) and other usury, the 8.4 trillion will cause most medium and small-sized banks to fall into bankruptcy crisis.

HSBC Rolls Out Digital Wallet To Hong Kong Businesses (PYMNTS), Rated: A

HSBC has reportedly expanded its PayMe digital wallet to startups and small businesses, marking its first foray into the business payments marketplace.

European Union

ING pushes for open banking with SME financing platform and Yolt expansion (Fintech Futures), Rated: A

ING is keen to maximise the possibilities of open banking and is working with Yolt and Funding Options on bringing new features to customers across Europe.

Firstly, ING is launching a marketplace for SME financing in the Netherlands, which will open to other external financing providers, becoming the first Dutch bank in doing so.

International

We are “very close” to peak fintech, with more than 10,000 startups jumping into the boom (Quartz), Rated: AAA

According to Curve’s Shachar Bialick, the founder and CEO, an app that lets customers to link all their credit and debit cards to just one card, says there are more than 10,000 fintech startups around the world, and even he can’t keep track of them all. Some, or even most, aren’t going to make it.

Quartz: It’s been about four months since Amex blocked Curve. What are your plans now?

Bialick: Amex was never a critical part of Curve. It was always an opportunity to solve a big problem Amex has in the UK and Europe, which is access.

Curve has continued to grow in Europe without Amex.

Have we reached the peak in terms of new fintech startups?

I don’t know if we reached the peak, but we definitely are very close, because today there are over 10,000 fintechs globally. I don’t know over 90% of them.

Peer To Peer Lending To Be The Next $ 1 Trillion Industry (ValueWalk), Rated: AAA

By eliminating the need for banks, peer to peer lending allows investors to invest in individual and company debt with 5-10% returns – a far cry from the the lowly 1.5% that you’ll received in a regular CD account.

And it works better for borrowers too. Borrowers are able to take out loans with greater ease and lower interest rates, typically offered in the region of 3-4%.

The average default rate at Lending Works is only 3.2% over the last six years. And many P2P lenders allow you to choose secured loans for additional protection.

Transparency Market Research estimates the industry be worth $900 billion by the end of 2024, with an annual growth rate of 48%, up from $26 billion in 2015.

Source: ValueWalk

One quarter of world’s small firms are ‘significant’ fintech users, says report (AltFi), Rated: AAA

Fintechs are becoming the ‘new normal’ in financial services, said a survey by professional services firm EY.

Fintech adoption is by far the highest in China, where 61 per cent of small businesses use their services, followed by the US, 23 per cent, the UK, 18 per cent, South Africa, 16 per cent, Mexico, 11 per cent, with the average set at 25 per cent.

Source: Ernst & Young

See the full report here.

Tencent, Temasek Invest $ 35 Million in U.K. Open-Banking Startup (Bloomberg), Rated: A

Chinese technology giant Tencent Holdings Ltd. and Singapore government-owned fund Temasek is to invest $35 million in London-based TrueLayer.

The Fintech Bubble Floats Toward a $ 64 Billion Pin (The Washington Post), Rated: A

Trendy U.S. online payments company Stripe, worth some $22.5 billion according to private-market valuations, is joining Amazon.com Inc. and Apple Inc. in warning about the impact of EU rules aimed at getting customers to double-check payments going out from their accounts.

Adyen trades at a gob-smacking 110 times this year’s earnings, with a market value of 20.8 billion euros. That’s almost twice the worth of Deutsche Bank AG, even though the Dutch fintech only employs the equivalent of 1% of the German lender’s staff. Stripe is the sixth most expensive private company in the world, according to researchers at CBInsights.

Australia

RBA Boss Warns Banks On Undermining The Economy (SB Dirty South Soccer), Rated: A

THE Reserve Bank of Australia (RBA) has cut the cash rate to a new record low.

The online lender announced a new headline variable rate for owner-occupiers at 3.34 percent.

Authors:

George Popescu
Allen Taylor

The post Thursday July 6 2019, Weekly News Digest appeared first on Lending Times.

FICO For Microcredit Lending

Scorista

Established in Russia in 2014, Scorista was born out of the need for a reliable risk-scoring model for Russian lenders. Leveraging the skills of famed Russian programmers, Scorista has created the go-to risk management solution for lenders operating in the sub-prime short-term lending segment. How Scorista Began Maria Veikhman, a business management, IT, and risk […]

Scorista

Established in Russia in 2014, Scorista was born out of the need for a reliable risk-scoring model for Russian lenders. Leveraging the skills of famed Russian programmers, Scorista has created the go-to risk management solution for lenders operating in the sub-prime short-term lending segment.

How Scorista Began

Maria Veikhman, a business management, IT, and risk management specialist is the founder and CEO of Scorista. It took off when a few lenders in Russia realized the dearth of reliable risk managers in the market and asked Veikhman to create a risk-scoring model for their lending businesses. Scorista was born as a disruptive innovation to automate the area of credit assessment and provide clients with an instant credit decision. They believe they can help lenders achieve the desired KPIs in a very short span of time with a guarantee of results.

What gave impetus to the company was the dearth of risk management solutions for short-term lenders and payday lenders. They only have access to the FICO score, which is not a very bankable option for payday lenders.

More On Scorista

Scorista offers a broad variety of products ranging from credit assessment to underwriting plans, verification plans, individual scoring, and variable kits, which facilitate scoring and dossiers that legally provide access to complete information about the borrowers. Its prime spot is borrowers looking for less than $5k for less than 12 months. According to Veikhman, Scorista has a 93% forecast accuracy rate. This is much higher than anything available for the segment currently.

This performance has led to profitable growth with offices in China and clients in Russia, China, Kazakhstan, Spain, and Latvia. It has just launched its services in the United States. More than 142 lenders are currently using the Scorista platform, and it is processing over 500,000 applications every month. According to its website, Scorista has helped its partners earn an additional $145 million.

The company has raised an undisclosed amount of funding from Life.SREDA.

Scorista’s Business Model

Scorista’s business model is transactional-based. In Russia, Scorista charges an estimated $1K for every credit decision depending on the volume of applications. Credit lenders are provided with credit decisions instantly so that they can further approve or deny a loan. When the borrower files a loan application with the lender, the lender communicates the borrower file through an API or web interface. Its system receives the application, evaluates the same with its scoring algorithm, and provides a credit decision for approval or denial of the loan. In cases where the scoring algorithm depicts that the borrower can’t repay the loan, Scorista works out different models to predict the amount that the borrower can pay. So if a borrower is rejected for a $2,000 loan for a 3-month period, Scorista will additionally provide that he is a good bet for $1,000 for a 1-month period.

Scorista has developed artificial intelligence and machine learning-powered proprietary algorithms for its scoring systems. It keeps fine tuning its algorithms to ensure optimum performance. It is focusing only on its specialization of short-term micro-borrowers to ensure highest efficiency rates in the segment.

Competitive Advantage

The money-back guarantee is Scorista’s USP. Scorista is ready to refund the fees to its clients if they are not satisfied with its services. Others in the industry are generic players looking to cover the entire market rather than specializing in any one segment. In the name of alternative data, many peers focus exclusively on the social media footprint. However, research shows that decision-making based on social networking is not very reliable as the quality and quantity of information available on borrowers is circumspect. Moreover, about 40% of borrowers do not have extractable social media information available.

Scorista has also introduced Mindscore, a psychometric scoring method that uses a social networking profile and psychometrics to score borrowers. It helps in predicting repayment ability, and the default rate of the applicant.

According to Veikhman, using alternative data in the credit model is dependent on the country. Credit bureaus across Russia have a lot of data on borrowers, and, as such, alternative data is not able to add a lot of weight. But there are no reliable credit bureaus in China so a lot of e-commerce data from Alipay, Wechat, and other social media is put to use. The company is also using mobile data in some cases and incorporates details like the workplace of the borrower to make a credit decision.

The Russian and Chinese branches of Scorista have launched a white label product for mobile applications for lenders. It facilitates fast issuance requiring the borrower to download the application and then submit information to the lender. Scorista performs the function of scoring and the lender can directly issue money through the application, credit card, debit card, or bank account.

Integration

Scorista mainly integrates with short-term lenders and specializes in facilitating short-term loans. Although banks have a broad line of products, Scorista can work with banks that deal in short-term loans apart from full-term loans.

The sub-prime segment that Scorista specializes in is growing across the world. The global economy is not getting better, and many economists agree that it is in the last legs of the growth phase. The last recession was in 2008-09, so considering a cycle of 10 years, we are looking at a recession sooner rather than later. Also exacerbating the trend is the fact that the number of people drawing a lower than average income is increasing in every nation across the world.

Borrowers with low credit scores can improve their credit ratings by following a regular, structured repayment schedule. This will enable them to have access to better loans and banking products with lower rates of interest. Scorista,, with its credit models, helps borrowers gain that access to credit at the right time for the right amount.

Scorista’s Future Goals

Scorista is looking to expand across global markets. It is looking for partners in multiple countries to expand its offering. It is also looking to onboard well-connected financial investors who can help introduce them to their lending networks.

Scorista wants to establish itself as the FICO score for the sub-prime borrower segment. Its key differentiator is its specialization in only short-term microlending and its money back guarantee. The company has been able to build a solid business and is on the precipice of breaking into the big leagues.

Author:

Written by Heena Dhir.

Tuesday May 1 2018, Daily News Digest

Pace of Mobile Payment Adoption in China

News Comments Today’s main news: Former SoFi CEO Mike Cagney raises $50M for blockchain-based Figure. RateSetter IFISA attracts ‘high tens of millions’ of GBP. Brazilian online lender Agibank files for IPO in São Paulo. Today’s main analysis: The cities with the highest rates of mortgage denials. Today’s thought-provoking articles: Hedge funds are down in Q1. MPL’s new ways look […]

Pace of Mobile Payment Adoption in China

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

SoFi’s Former CEO Harnesses the Blockchain for Home Loan Startup (Bloomberg) Rated: AAA

Mike Cagney, who built SoFi into America’s biggest student loan refinancer before quitting amid allegations of sexual harassment at the fintech firm, is preparing for his second act: a startup offering home-equity loans.

Cagney has raised $50 million for San Francisco-based Figure, which plans to use the blockchain to help expedite loan approvals in minutes rather than days, according to people familiar with the matter. Two global banks have agreed to finance loans and several firms have agreed to purchase them, say the people, who requested anonymity to discuss a private matter.

CHINA-US TRADE WAR AND OTHER WORRIES (All About Alpha) Rated: AAA

The Eurekahedge April 2018 report says that hedge funds were down in the first quarter of the year (-0.13%). This is the industry’s worst performance since Q1 2016.

The steepest performance-based losses by regional mandate were those of the North American funds, they lost $1.2 billion. Meanwhile, asset inflows remained net positive but were lower (17% lower) than were the net asset inflows for the first quarter 2017.

The highest performance gains by regional mandate were those of the Asia ex-Japan funds. (+0.5%). But those hedge funds were down in March, largely on rumblings of a US/China trade war.

Total assets under management for the global hedge fund industry are now at $2.48 trillion.

Marketplace Lending’s New Ways Look a Lot Like the Old Ones (Bloomberg) Rated: AAA

Last week, the Federal Trade Commission accused LendingClub, the largest of the peer-to-peer lenders, of misleading consumers with hidden fees and continuing to charge borrowers even after they had paid off their loans. Shares of the online lender fell to nearly $2.50, its all-time low.

Source Bloomberg

In the first quarter, peer-to-peer lenders sold $4.3 billion in asset-backed securities, according to industry tracker PeerIQ. That was slightly down from $4.4 billion in issuance in the last three months of 2017, which was a quarterly high for the industry. PeerIQ estimates that peer-to-peer ABS securitization will hit $18 billion this year, up from $14 billion in 2017.

Source: Bloomberg

 

LendingTree Reveals the Cities With the Highest Rates of Denied Mortgage Applications (Lending Tree) Rated: AAA

LendingTree delved into data from more than 10 million mortgage applications using the most recent available Home Mortgage Disclosure Act data set to find out the main reasons would-be borrowers were rejected.

Key findings:

  • Nearly one in 10 borrowers get denied for mortgages. On a national level, 8% of loan applications were denied.
  • Credit history and debt are the biggest barriers. The leading reasons for denial were credit history (which includes credit score) and debt-to-income ratio, which were each responsible for 26% of denied loans. These were followed by collateral at 17% and incomplete applications at 14%. All other reasons for denial were cited in less than 10% of denied mortgage applications.
  • Debt is a huge barrier to borrowers living in California. We found three California cities (Los Angeles, San Francisco, San Jose) had the highest share of borrowers who were denied because of their debt-to-income ratio.
  • Credit history is holding borrowers back in Louisville, Ky., Memphis, Tenn. and Philadelphia. Among failed applications in these three metros, we found the highest rates of denied borrowers due to their credit history.


Memphis among top 10 cities for highest rates of denied mortgage applications, study says (Bizjournal) Rated: A

Memphis-area mortgage applications are denied at a rate of 12 percent, the third-highest out of 50 cities in a study by LendingTree Inc., an online loan marketplace based in Charlotte, North Carolina.

Houston among top 10 cities for highest rates of denied mortgage applications (Bizjournal) Rated: A

The top reason for a mortgage denial in Houston was debt-to-income ratio, which is the share of monthly debt obligations in relation to monthly gross income. Most lenders want this number to be 43 percent or lower, per the report.

Other Texas cities ranked quite lower than Houston on the list. San Antonio was No. 18 with an 8.05 percent rate, Dallas was No. 21 with a 7.58 percent rate, and Austin was No. 27 with a 7.05 percent.

What’s next for Citi’s mobile app (Tearsheet) Rated: A

Banking apps are now among the most widely and frequently used apps, along with weather and social media, according to Citi’s second annual mobile banking study, released Thursday.

If that’s true — the study examines the behavior of some 2,000 U.S. adult consumers — that would mean people are checking their bank accounts more frequently than they use music, news and dating apps. Although, 20 percent of millennials actually use their mobile banking app while on a date, Alice Milligan, the chief digital client experience officer for Citi’s U.S. consumer bank, pointed out in a presentation of the results.

Could the USPS Be a Short-Term Lender for the Underbanked? (Nonprofit Quarterly) Rated: AAA

In this age of electronic communications, we often take the post office for granted, but it remains a powerful institution. As the US Postal Service (USPS) website indicates, 47 percent of the world’s mail volume is handled by the USPS; the website adds that if it were a private sector company, “the Postal Service would rank 37th in the 2017 Fortune500. In the 2017 Global Fortune 500 list, we ranked 99th.” The business employs over 500,000 career employees, has annual revenues of $69.6 billion, and operates 30,825 “retail offices” nationwide.

It is this last aspect—the ubiquity of post offices across the nation—that has spurred legislation (Senate Bill 2755), introduced last week by US Senator Kirsten Gillibrand (D-NY), that would require every post office to provide basic banking services. Interestingly, the idea of post offices offering banking services is not new. From 1911 to 1967, post offices offered savings and deposit services for Americans (although not loan products). At one time, Americans held more than $3 billion in deposits through postal banking ($30 billion in inflation-adjusted 2018 dollars). Other countries, including Japan, Germany, China, and South Korea, continue to offer banking services through their postal networks.

Daniel Maran of the Huffington Post explains that, “Under Gillibrand’s proposal, Americans could cash paychecks and deposit money in accounts free of charge at each post office location. Deposits would be capped at the larger of two amounts―$20,000, or the median balance in all American bank accounts. The postal banks would be able to distribute loans to borrowers of up to $1,000 at an interest rate slightly higher than the yield on one-month Treasury bonds, currently about 2 percent.” By contrast, a Pew Charitable Trusts report found that average payday loan of $375 typically costs a borrower $520 in interest and fees.

Financial Engines Sold To PE Firm For $ 3 Billion, Plans To Combine With Edelman (Financial Advisers) Rated: A

Financial Engines announced on Monday that it will be acquired by private equity firm Hellman & Friedman and combined with Edelman Financial Services.

According to the announcement, Hellman & Friedman will make the acquisition in an all-cash transaction that values Sunnyvale, Calif.-based Financial Engines at $3.02 billion. Financial Engines shareholders will receive $45 per share in cash upon closing.

Leading Robo-Advisors Post Negative First Quarter Returns (Financial Adviser) Rated: A

The best taxable robo-advisor performers in the first quarter for total portfolios were SoFi, which posted a loss of 0.14 percent; Schwab, which returned a negative 0.33 percent; and TIAA’s socially responsible portfolios, which posted a 0.45 percent loss.

The top-performing taxable robo-advisors for total portfolios over the two-year duration of Backend Benchmarking’s study are Schwab, offering 10.98 percent annualized two-year returns; SigFig, which returned an average of 10.71 percent annually over two years; and Betterment, which returned 10.24 percent.

MetaBank, CURO to offer flexible credit to underbanked (Bankless Times) Rated: A

MetaBank, a provider of payment, community banking and financing solutions, today announced an agreement with CURO, a facilitator of short-term credit to underbanked consumers. Together, the organizations will launch a new line of credit product the parties believe will be more flexible and transparent than others in the market, and well-suited for US-based underbanked consumers. CURO and Meta expect to unveil the new, joint brand and a timeline for the pilot launch later this year.

Through the credit option expected to be launched by CURO and Meta, underbanked consumers would be able to access credit with a flexible timeline for repayment. These consumers would also be able to control their cost of borrowing through transparent fees that would apply only when credit is drawn. Estimates indicate 67 million adults are considered un- or underbanked. Many of these adults typically have poor credit ratings and, as such, have difficulty securing credit or loans — this product is expected to provide a responsible credit option for many of those consumers.

LendingTree, Inc. to Present at SunTrust Robinson Humphrey Internet & Digital Media Conference (Benzinga) Rated: B

LendingTree, Inc. (NASDAQ:TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced that it will participate in the SunTrust Robinson Humphrey Internet & Digital Media Conference at The Palace Hotel in San Francisco, California.

Trent Ziegler, Vice President of Investor Relations and Treasurer at LendingTree, is scheduled to present on Tuesday, May 8, at 9:10am PT and will participate in one-on-one meetings throughout the course of the day. The presentation will be webcast live and archived at 

8 Side Hustles You Can Start Today (NAV) Rated: B

If you’re looking for a way to grow income over time, and don’t mind the risk and reward nature of investment, peer to peer (P2P) can be a great way to earn some passive income on the side.  Operating much like a bank loan — but without the bank – P2P lending connects people with money (even if it’s only a few hundred dollars) with people who need it.

United Kingdom

 

RateSetter IFISA has attracted ‘high tens of millions’ of pounds (Peer2Peer Finance) Rated: AAA

RATESETTER has revealed that its Innovative Finance ISA (IFISA) has already attracted “high tens of millions” of pounds from investors, in less than three months since launch.

RateSetter opened its IFISA to existing customers on 8 February and to new customers on 1 March. The platform previously reported that it had seen over 5,000 IFISA accounts opened in the first month.

TransferWise founder Taavet Hinrikus invests in fintech chatbot Cleo (Tech Crunch) Rated: A

Cleo, the London-based fintech that offers an AI-powered chatbot as a replacement for your banking apps, continues to put together an impressive list of backers. The startup’s early investors already include Entrepreneur First, Moonfruit founder Wendy Tan White, Skype founder Niklas Zennström, Wonga founder Errol Damelin, and LocalGlobe, the seed VC firm founded by father and son duo Robin and Saul Klein, amongst others. Now TechCrunch can reveal that TransferWise founder Taavet Hinrikus has become a Cleo  investor and advisor.

Family Building Society And LendInvest Reduce Buy To Let Investment Rates (Residential Landlord) Rated: B

Family Building Society and LendInvest have each reduced rates on a number of buy to let mortgage deals.

Family Building Society slashed interest rates across its entire buy to let product range, whilst LendInvest has reduced rates on several of its buy to let deals.

CrowdProperty names Mike Bristow as chief executive (Peer2Peer Finance) Rated: B

CROWDPROPERTY co-founder Mike Bristow has been appointed as chief executive of the peer-to-peer property lender, taking over the reins from fellow co-founder Simon Zutshi.

Bristow, who was also a non-executive director at CrowdProperty, had been acting as interim chief executive for around two months before taking on the role on a permanent basis, effective from 1 May.

Zutshi has now been appointed as chairman of CrowdProperty.

China

Lessons From A Mobile Payments Revolution (American Banker) Rated: AAA

According to the research firm eMarketer, 76% of Chinese smartphone users made a mobile point-of-sale purchase in 2017, compared with 25% of American users. In total, 61.8% of all such transactions globally are Chinese.

Source: American Banker

In the first 10 months of last year, China processed a whopping $12.8 trillion in mobile payments, according to the state-run news agency, Xinhua — 38% higher than for all of 2016.

Though it’s not exactly an apples-to-apples comparison, the U.S. market in 2017 had just $49.3 billion in mobile point-of-sale transactions, according to Shelleen Shum, eMarketer’s forecasting director.

Start with an oligopoly

More than 90% of Chinese mobile payments run through Alipay and WeChat Pay, rival platforms backed by China’s two largest internet conglomerates — Alibaba, essentially the Amazon of China, and Tencent Holdings, owner of WeChat, the nation’s must-have messaging and social-media app with more than 1 billion users.

Peering into the murky world of China’s online P2P sector (Asia Times) Rated: A

During an 18-month period, Ezubo swindled up to 900,000 investors out of 50 billion yuan (US$7.7 billion).

In one of the country’s highest-profile court cases, the founders of what was once China’s largest peer-to-peer lending platform, Ding Ning and his younger brother Ding Dian, were jailed for life last September.

Another 24 executives were sentenced to prison terms, ranging from three to 15 years, after disbelieving depositors mounted unprecedented protests in fintech’s biggest scandal.

“[Just] 500 P2P companies, out of the total 4,856, are likely to maintain their operations this year,” it added.

Fincera Reports 2017 Year-end Financial Results (Digital Journal) Rated: A

Fincera Inc. (”Fincera” or the ”Company”) (OTCQB: YUANF), a leading provider of web-based financing and ecommerce services for small and medium-sized businesses and individuals in China, today reported financial results for the year ended December 31, 2017.

Full-year 2017 Financial Highlights

  • Income for the year ended December 31, 2017, increased 16.9% to RMB1.0 billion (US$156.7 million) from RMB875.9 million in the prior year.
  • Net loss improved to RMB8.4 million (US$1.3 million), from net loss of RMB12.3 million in the prior year.
  • Net cash provided by operating activities increased 148.4% to RMB2.1 billion (US$326.6 million) for the year ended December 31, 2017, from RMB859.2 million in the prior year. This increase resulted in a 63.6% improvement in the Company’s overall cash position to RMB1.3 billion (US$191.5 million) at the end of 2017, compared to RMB764.8 million at the end of 2016.

Operational Highlights

Loan transaction volume across all loan types for 2017 totaled approximately RMB26.8 billion (US$4.1 billion), compared to approximately RMB24.4 billion in 2016.

Source: Digital Journal
International

Can FinTech Walk The FinTalk? (PYMNTS) Rated: AAA

BLOCKCHAIN

In January, the International Data Corporation (IDC) reported worldwide spending on blockchain solutions would increase to $2.1 billion in 2018 from $945 million in 2017 and will grow more than 80 percent year over year to reach $9.7 billion by 2021. Most of that spend will be concentrated in the U.S., with supporting use cases mostly related to financial services and cross-border settlement, for a grand total of $242 million in 2018.

To put that into context, the IDC projected worldwide growth and spending on mobility solutions at 15 percent a year from a 2018 base of $1.6 trillion; on security-related hardware, software and services at 10 percent a year from a 2018 base of $91.4 billion growing to $120.7 billion in 2021 and on the Internet of Things at 14 percent a year from $772.5 billion in 2018 growing to $1.1 trillion in 2021.

MARKETPLACE LENDING

LendingClub was hit with a lawsuit by the Federal Trade Commission (FTC) last week over claims of “deceptive” practices.

Following that news, LendingClub’s stock price took a nosedive. Yesterday, it was trading at an all-time low of $2.70.

Launched in October of 2016, Marcus is Goldman’s $2 billion annual hedge on threats to its core commercial banking and trading businesses. Goldman Sachs reported on its Q1 earnings call that Marcus, since it launched, has originated $3 billion of new loans and taken in $9 billion of new retail deposits.

DIGITAL BANKS

If the blockchain is all about replacing the global financial system and marketplace lending is all about replacing traditional lenders, digital banks in the developed world are about upending the traditional banking ecosystem.

Crypto lending may be risky, but these firms say they’ve solved the riddle (American Banker) Rated: A

A new crypto lender, Nexo, will launch Monday in a market where existing participants have already withstood trial by fire.

Such lenders extend credit to those who want to own digital currency, such as bitcoin and ether, and hold onto it long-term while investing it in real estate and elsewhere. But crypto lenders have been severely tested of late as digital currency prices dropped about 70% between December and February.

Source: American Banker, Coindesk

Nexo

The team behind Switzerland-based Nexo runs a consumer lending operation called Credissimo that has made more than a million loans to consumers of up to $2,000 in Europe.

Salt Lending

Denver-based Salt Lending, which started crypto lending earlier this year, has made just under $40 million in loans and has had no losses, according to co-founder Blake Cohen.

Unchained Capital

Unchained Capital, which publicly launched in November, is originating “single-digit million dollars of loans per month,” according to CEO Joe Kelly. The typical loan size is $120,000; the average interest rate is 12%.

RCN Partners with IdentityMind Global to Provide KYC and AML Compliance for Its Protocol (PRWeb) Rated: B

IdentityMind Global today announced that Ripio Credit Network (RCN), a global peer-to-peer credit network based on co-signed smart contracts that connect lenders and borrowers located anywhere in the world, has partnered with IdentityMind to provide KYC and AML compliance support.

Australia

Research shows savings at online lenders (Broker News) Rated: A

The company’s research shows the average customer of one of the big four banks can save more than $2,500 a year by switching to an online deal. This has increased from a year ago, when the potential annual savings were $2,250.

Despite these savings and the fact most other services have migrated online, only 27% of consumers said they would take out a home loan with an online lender.

India

Fintech Startup MyLoanCare Raises Series A Funding (Inc42) Rated: AAA

Gurugram-based B2C online loans marketplace MyLoanCare has secured $977.7K (INR 6.5 Cr) equity Series A funding from Ncubate Capital Partners, a private investment arm of SAR Group family office.

The startup plans to use the funding for branding, technology augmentation and growth. MyLoancare also plans to enter new segments of the market including cards, savings and investments.

 

 

Asia

INDONESIAN fintech startup EmasDigi enables the investing in as well as buying and selling of gold through mobile applications with easy processes that require little time.

The idea began with EmasDigi chief executive officer and founder Claudia Kolonas selling vouchers which gave people easier access to the gold trading market.

EmasDigi is affiliated with PT PG Berjangka, which is registered and supervised by the Trade Ministry’s Futures Exchange Supervisory Board (Bappebti). This affirms EmasDigi’s commitment to consumer protection and ensures compliance with legal provisions in Indonesia.

Fintech microfinance, the next opportunity (Prothom Alo) Rated: A

Bangladesh is widely known as the origin of microfinance. The pioneer two NGOs, Grameen Bank and BRAC, have taken this poverty reduction tool to different places in the world, especially in Asia and Africa. This has been acclaimed by the United Nations and other international organisations. Certainly the objectives of microfinance have undoubtedly already been achieved.

Microfinance was inaugurated in the 1980s for a specific, target group of people (given their poverty level). It doesn’t have the generalised character required to reach all people.

Latin America

Brazilian online lender Agibank files for IPO (Reuters) Rated: AAA

Brazilian online lender Banco Agibank SA on Monday filed for regulatory clearance to launch an initial public offering (IPO), according to a securities filing.

Agibank follows Banco Inter SA’s (BIDI11.SA) strategy of raising capital to fund its expansion and IT investments. On Monday, Inter made its debut in São Paulo stock exchange, in the first IPO by a Brazilian retail bank in nearly a decade. In late afternoon, Inter’s units were stable at 74 reais.

The bank and its owner, Marciano Testa, will sell an undisclosed amount of preferred shares in the IPO.

Canada

Fintech Select Earns a Net Profit of $ 435k and Reduces Liability by $ 7.6m for the Year Ending Dec 31 2017 (Globe Newswire) Rated: AAA

Fintech Select Ltd. (“Fintech Select” or the “Company”) (TSX-V:FTEC) is pleased to announce that its financial statements for the year ending December 31 2017 have resulted in a net profit of $435k. 2017 Financial Statements and Management Discussion & Analysis (“MD&A”) will be filed on SEDAR shortly.

2017 Highlights

  • Reduced the Company’s liability by $7.6M including our unfavourable high-interest loan
  • Made a net profit of $435k for the year due to the reduced liability
  • Reduced interest rate of 24% per annum plus management fee to 12% on April 1, 2017, and further to 6% plus management fee on May 16 2017.
  • Raised $3.4M through two private placements in April and June of the year, and had access to un-restricted cash of $915k by December 31 2017
  • Increased its customer care service revenue
  • Established an advisory board with high skill sets in business and Cryptocurrency space
  • Filed a patent-pending for Cryptocurrency POS platform.
  • Developed and launched the Company’s first phase of the Cryptocurrency POS solution, which simplifies buying cryptocurrecny to the mass of consumers
  • Acquired software for P2P Micro Lending and initiated the project to work on required changes and enhancements to meet the regulatory required standards

Authors:

George Popescu
Allen Taylor

Wednesday March 2 2018 Daily News Digest

Alibaba and Tencent investments

News Comments Today’s main news: Vanguard partners with Raisin. Rumor alert: Upstart seeking $100M from investors. LendInvest changes commercial property products. Apple may be blocking Chinese P2P lenders from app updates. Today’s main analysis: PeerIQ’s MPL earnings insights report. (A MUST-READ) Today’s thought-provoking articles: Fintech holds promise to expand credit. How the PE lifecycle can be audited by the blockchain. How […]

Alibaba and Tencent investments

News Comments

United States

United Kingdom

China

European Union

International

Australia

Asia

Africa

News Summary

United States

Online lender Upstart is said to seek $ 100 million from investors (American Banker), Rated: AAA

Upstart, which was founded by Google veterans, is testing venture capitalists’ appetite for an investment round of about $100 million, said two people briefed on the matter.

The San Carlos, Calif.-based startup is looking to sell shares that would value the business at $500 million to $1 billion, said one of the people, who asked not to be identified because the discussions were private. This venture capitalist didn’t pursue a deal because of an existing competitive investment.

PeerIQ’s Marketplace Lending Earnings Insights (PeerIQ Email), Rated: AAA

    • Where are we in the credit cycle? Earnings calls indicate CEOs/CFOs are constructive on the health of the US consumer and see a tax reform as improving consumers’ disposable income. However, an increasing supply for credit and demand for credit, as well as re-normalization trends and increased competition are leading to higher charge-offs.
Source: PeerIQ
  • Credit re-normalization continues across all major lending groups. Credit performance this quarter is mixed. We observe improvements, and record low delinquencies from ONDK, OMF, and FinTechs in particular. LendingClub expects 31 bps lower charge-offs going forward due to tighter credit standards. At Discover – a bellwether for personal loan performance – the net charge off rate jumped 92 bps YOY to 3.62% – the largest increase in several years.
  • Card issuers are increasing loan loss reserves at a higher rate than loan growth, indicating expectations of higher losses going forward. American Express increased loan loss provisions 33% although loan growth was only 14%.
  • GS & Morgan Stanley remain comparable in market cap, revenues, and margins – are focused on lending to improve ROE. MS is doubling the size of its warehouse lending footprint. GS continues to invest in Marcus and aggressively pursue M&A. If GS executes on its strategic plan of generating, in 5 years we should observe a growth in ROE from their consumer lending activities.
  • Bank FinTech partnerships, and M&A continues. Banks are either partnering with FinTechs or investing in beefing up their technology capabilities in payments, lending, digital banking and wealth management. Banks like JP are partnering with Amazon by rolling out co-branded checking accounts and credit cards. A specter is haunting financial services – the specter of Amazon.
  • Lenders are taking actions to pass rising rates on to borrowers to protect margins and investor returns. Lenders are also trying to reduce all-in funding costs by reducing the credit spreads on their securitizations.
Source: PeerIQ

Read the full report here.

 

Fintech Holds Great Promise To Expand Credit, Says Fed’s Bank Supervision Ace (Forbes), Rated: AAA

Fintech holds great promise to expand credit, Federal Reserve Vice Chair for Bank Supervision Randy Quarles told a forum on financial services for the underserved Monday.

While promoting the advantages of algorithm credit rating and other forms of fintech, he voiced it is important for banks to understand the risks when they offer new products of their own or partner with emerging fintech companies.

Touching on another issue, Quarles said the decline in lending by small banks to small businesses can be attributed in part by entrepreneurs using big bank credit cards.

THE PE LIFECYCLE CAN BE AUDITED BY BLOCKCHAIN (AllAboutAlpha), Rated: AAA

The hyperledger fabric is an open-source cross-industry collaborative effort to create a standardized enterprise code base. No cryptocurrency is required, the network is permissioned, and the system of consensus is PBFT rather than proof of work.

That latter point is important in the finance/auditing context, and so is worthy of some explanation here. The usual system in blockchains is “proof of work.” The creator of a new “block” within the chain is required to do something mathematically laborious, a calculation, also called “mining.” This is what allows the trustless and distributed consensus that made possible the creation of “bitcoins” and the launch of blockchain as a technology.

But “proof of work” takes up a lot of computational energy, and for some non-currency uses of blockchain it is just too much trouble. So alternatives protocols have developed within the blockchain world, and one of them has the ungainly name “practical byzantine fault tolerance.” That term comes from a game-theoretical issue called the “Byzantine Generals’ Problem,” which is something like the “prisoner’s dilemma” on steroids. But it is generally best to ignore all of that and just to think of the alternative protocol as PBFT.

Avant Founders Raise $ 15 Million for Blockchain Firm, Token Sale (Bloomberg), Rated: A

The team that founded marketplace lender Avant Inc. raised about $15 million to start a firm that will use blockchain technology and digital tokens to motivate companies to share data about customer identities and credit worthiness.

The venture, which is called Springcoin but does business as Spring Labs, is building a decentralized network that seeks to allow lenders, banks and data providers to pay one another for direct access to consumer information, Spring Labs Chief Executive Officer Adam Jiwan said in an interview. Many companies are hesitant to give out customer data due to concerns about regulation and security, while others don’t have a financial incentive to do so, he said.

TD Bank in commercial lendtech revamp with nCino (Fintech Futues), Rated: A

Chalk up another big win for cloud-based lendtech vendor nCino. The North Carolina-based fintech has signed a deal with TD Bank in the US that will put nCino’s Bank Operating System to work for the bank’s corporate and commercial lending divisions, reports David Penn at Finovate.

The technology is already live with employees in the TD Equipment Finance department. nCino’s platform will give prospective business borrowers faster decisions on their loan requests, as well as add transparency to the loan process. The Bank Operating System will also enable the bank’s credit risk management, sales, and underwriting professionals to benefit from insights into TD Bank’s commercial lending portfolio and better collaborate on deals. Built on top of Salesforce.com, nCino’s Bank Operating system features CRM, loan origination, account opening, workflow, content management, business process management, customer engagement, and instant reporting all on a single platform.

How blockchain is affecting banking (Stitcher), Rated: A

In this episode the host John Siracusa and co-host Sarah Bacehowski. Interview Jason Jones co founder of the Lendit Fintech Conference they discuss how blockchain is affecting national and global banking today and how it may impact credit and lending.

Fintech’s Focus Shifts Toward Finance (CFO), Rated: A

The financial technology industry is maturing at a dizzying pace, having exceeded a combined $31 billion in total funding last year alone, according to KPMG’s recent Pulse of Fintech report.

With this sustained influx of funding, innovations within the space are moving traditional banks to partner up with fintech firms. That benefits both sides as well as customers like corporate finance departments.

On Deck Capital and Lending Club have both recently found themselves in publicly precarious situations related to risk management. On Deck has had to change its strategy several times over the years to address investor concerns. Lending Club experienced a systematic fraud issue that resulted in a CEO departure, stock-price drop, and public cynicism. Other, smaller companies have faced similar problems stemming from a deficient focus on this important role.

Top 5 Debt Consolidation Loan Companies for 2018 (Student Loan Hero), Rated: A

Using a personal loan to consolidate debt can simplify your financial life. But this move is most worthwhile if you can get debt consolidation loan rates that are lower than what you’re currently paying.

This overview can help you quickly find debt consolidation loan companies with the best rates. From there, you can find the lender that offers the best rates and terms to help you get ahead of your debt.

Source: Student Loan Hero

Omnichannel and Short-Term Lending (Lendit), Rated: A

Research conducted in late 2016 noted that three things were apt to cause the average customer to end his or her interaction with a company. These included being transferred between multiple employees when seeking a resolution to a problem, long wait times, and having to repeat themselves during a transaction process. To solve these kinds of discrepancies between customer expectations and the quality of service provided across multiple platforms, more companies are taking an omnichannel approach to the customer experience—especially in the financial services industry.

Below are three questions and answers about how this novel approach to customer experience can benefit both short-term lenders and borrowers.

  1. What does the omnichannel approach offer businesses and customers in the short-term lending industry?
  2. What obstacles stand in the way of the mass adoption of omnichannel lending?
  3. What is the best way for short-term lenders to implement an omnichannel model?

LAUREL ROAD DEBUTS TRULY DIGITAL MORTGAGE PLATFORM (PR Newsire), Rated: A

Laurel Road, an online lender and FDIC-insured bank, today debuts a truly digital mortgage product that uses the company’s secure lending technology to offer home buyers and owners personalized mortgage options at real, competitive rates. Laurel Road’s platform builds mortgages entirely online, simplifying the process with transparent fees and a customized end-to-end digital experience with human support only when customers need it.

Additional product features include:

  • Truly digital experience – Laurel Road’s mortgage product puts customers in the driver’s seat by enabling a digital-first user experience, with human support via phone or online chat as needed but never required outside of closing
  • Stated pricing – Customers who have a price range or specific house in mind can input these details upfront to generate customized options and rates
  • Maximum affordability – By inputting basic financial information, customers can determine the maximum affordable loan they’re eligible for early in the process with no commitment required
  • Added savings – Customers have the ability to earn savings off their closing costs by using the online capabilities throughout the process, such as data verification
  • Optimized for efficiency – Digitally-enabled experience and built-in incentives for options that streamline the process allows Laurel Road to invest more in customer experience and deliver mortgages in just a few weeks
  • Educational resources – Prompts integrated into the user journey will help customers establish their financial readiness and evaluate how Laurel Road can be a partner in the process
  • Expert options and clear terms and fees – Based on a customer’s preferences, 3 unique mortgage options are presented in a transparent way so one doesn’t get caught with misleading teaser rates or hidden fees
  • Soft credit pull – Laurel Road will conduct a soft credit pull during preliminary stages to avoid credit penalties when customers are still exploring options

DiversyFund Hires New Chief Technology Officer (Digital Journal), Rated: B

DiversyFund has named Mark Brogowicz as its new Chief Technology Officer as the firm ramps up its efforts to reinvent alternative investing through its revolutionary crowdfunding platform.

Brogowicz will lead the firm’s product and engineering teams. Brogowicz previously helped Los Angeles startup PeerStreet launch their product and is now looking to replicate that process in San Diego.

MassChallenge wants to pair fintech startups with finance giants (Boston Business Journal), Rated: B

MassChallenge is preparing to launch a program for startups specializing in financial services technology, or fintech — a fast-growing field that’s increasingly a top priority for Boston’s investment firms, banks and insurance companies.

While details are still being worked out, the program is expected be similar to the Boston-based organization’s accelerator for health technology startups, according to MassChallenge. That program, known as Pulse@MassChallenge, pairs later-stage startups with some of the industry’s biggest local and national players, like Aetna and Vertex Pharmaceuticals. The program provides them with mentoring, office space, and an opportunity to compete for cash prizes.

Shinnecock Partners Publishes an Investor’s Guide to Fine Art Secured Lending (PR News), Rated: B

Shinnecock Partners, a 28-year old family office boutique with significant expertise in alternative finance and fintech, has published “Creative Collateral: Lending Against Fine Art,” by the firm’s founding partner, Alan C. Snyder and co-authors/firm analysts Michael Cervino and Christian Williams. The 16-page report outlines a little-known niche investment opportunity, art-secured lending, which, as reported by Deloitte, is a $15 – $20 billion market that is growing at an annual rate of 13 percent.

The research paper covers:

  •     An overview of the market and the “buzzword” lexicon
  •     Key factors to consider
  •     Risk mitigants
  •     An investor participation road map

You can access the report at: 

Private Lending Association to Offer Class for Certified Fund Manager Designation (PR Newswire), Rated: B

The American Association of Private Lenders (AAPL) is offering the Certified Fund Manager (CFM) designation class May 9, 2018, at the Geraci Activate Conference, located at the Sofitel Hotel in Beverly Hills, California. AAPL members are eligible for the CFM designation and may register for the class at  or  The CFM designation class requires a separate registration from the Geraci Activate Conference.

Seek Capital Wins Again, #1 Customer-Rated Lender for the Business Loans Category from LendingTree in Q4 2017 (PR Newswire), Rated: B

On LendingTree’s platform, Seek Capital has a 4.9 out of 5 star rating. 57 different businesses have reviewed Seek Capital on LendingTree.

Seek Capital specializes in getting startup business loans for new businesses. While there is a large array of funding options for established businesses, new businesses are left with little to no options. Seek Capital provides solutions to this under-serviced segment of the business funding market. In 2017, Seek Capital originated close to $100 million for startup businesses in the form of an unsecured line of credit.

United Kingdom

LendInvest changes commercial property products (Mortage Introducer), Rated: AAA

Borrowers wishing to fund the purchase of, extend the lease on, or refurbish a commercial property where the use will remain commercial, are directed to the updated commercial bridging product.

LendInvest has increased the maximum term for its commercial bridging loans from 12 to 24 months, and reduced rates.

Its commercial bridging rates vary between LTV but the base 60% has been reduced from 0.90% to 0.79%.

Best refer-a-friend schemes: how you can earn up to £500 (Which?), Rated: A

NatWest has launched its first ever refer-a-friend scheme, which could earn eligible customers up to £500 – and it’s not the only company offering incentives for signing-up your loved ones.

Until 20 April 2018, eligible customers will receive up to £500 when their friends and family join NatWest. But it’s not open to everyone, with NatWest randomly selecting 300,000 customers for the test phase.

Refer-a-friend: current accounts

Earn £500 with NatWest-NatWest recently launched its first ever refer-a-friend scheme, offering existing members the chance to earn up to £500 by recommending its current accounts to friends and family.

Earn up to £500 with Nationwide-Nationwide is offering existing members the chance to earn up to £500 by encouraging friends and family to switch their current account.

Earn £25 with Vanquis -Vanquis Bank customers could earn £25 for convincing friends and family to sign up to the Vanquis Credit Card.

Earn £25 vouchers with Scottish Friendly-Customers of Scottish Friendly could earn £25 by introducing a new friend or family member to the company.

P2P securitisation boom still on the cards (Peer2Peer Finance), Rated: A

PREDICTIONS of a securitisation boom in the peer-to-peer lending sector last year failed to materialise, but analysts are still optimistic about the market.

Ratings agencies such as Moody’s predicted a boom in P2P securitisations, but the only activity in 2017 was a £208.9m Zopa deal led by investment trust P2P Global Investments.

Ratings agency S&P Global is also expecting more activity and has predicted a 30 per cent increase in securitisations from marketplace lenders around the world during 2018.

7 TECH STARTUPS THAT ARE TAKING IRELAND BY STORM (Irish Tech News), Rated: A

Pro-business policies have made the country an extremely favourable environment for startups, and the capital can lay a convincing claim to be Europe’s Silicon Valley. Here are just seven of the most interesting and highly awarded startups finding success in Ireland.

Mingo- Mingo are aiming to replicate the success of digital currencies like Bitcoin and Ethereum by floating their own currency called (quite logically) Mingocoin.

Trezeo- Firms are using digital tools to revolutionise the process of transferring and storing traditional currencies as well as digital-only ones. Trezeo are a perfect example of this mindset, and offer a product that’s of use to the everyman rather than the big financial institutions.

FlenderFlender is one of the success stories from crowdfunded investment platform Seedrs. The premise: peer-to-peer lending, where lenders can set their own rates and terms for borrowers to agree to.

Don’t Innovate for Innovation’s Sake. Understand the Need for Change. (Retail Tech News), Rated: A

Here, Luke Griffiths (pictured below), general manager, Klarna UKexplains why that means it’s crucial that retailers consider the shopping journey from browsing through to purchase, delivery, and returns.  

It’s no longer good enough for retailers to wait on the sidelines while others make the first move into innovation – something which was highlighted in a recent white paper Klarna produced in association with Internet Retailing. In it, we explored the main qualities needed to be successful in today’s ever-changing retail sector.

Retailers can’t afford to ignore more innovative payment options. This was highlighted by recent Klarna research, which found that 53% of shoppers are looking for new, easier ways to pay online; while 56% would buy more online if there was more variety in payment options available.

 

British Business Bank provides 1pm with £35m funding line (Leasing Life), Rated: A

The British Business Bank provided 1pm Group with a £35m asset finance facility which will be used mainly on hard assets through its subsidiary Bradgate Business Finance.

At the end of February 1pm has entered into a cooperation agreement with Mintos to be a loan originator on its online marketplace for loans.

1pm is the first loan originator from the UK to access the Mintos marketplace and joins approximately 30 other loan originators globally.

 

 

It’s time to crack down on high-cost credit cards, says Labour MP (The Investment Observer), Rated: B

Stella Creasy is hoping to crack down on high-cost credit cards, introducing a cap on fees and interest charges.

The Labour MP, who was credited with the caps on interest rates and fees charged by payday loan companies, will attempt to enforce similar laws for credit cards on in Parliament on Tuesday.

The FCA has ruled out capping credit card costs after reviewing the market last year.

 

China

Apple App Store Said to be Blocking Chinese Peer to Peer Lenders from Updating Apps (Crowdfund Insider), Rated: AAA

We have received some information from an insider regarding Chinese peer to peer lending platforms being unable to update their Apps in the Apple App store due to a regulatory disconnect.

The problem is that not a single Chinese peer to peer lender has passed the necessary evaluations as regulators have not yet processed any. The first batch of approvals from the Chinese authorities is due at the end of April with the deadline by the end of June. According to the source, it is even more perplexing due to the fact that having an updated iOS App is necessary to comply with the Chinese regulations and pass the tests.

The Apple enforced process is described as follows:

  • We need to update our iOS App so that we can provide updated features to customers that are in compliance with regulations
  • Local financial regulators will not allow us to complete the record-filing process if they see that we have not come into compliance across all of our platforms (Android, iOS, PC)
  • If we can’t complete the record-filing process, then we will not be allowed to update our business license to include “internet loan information agency” in permitted activities
  • If we can’t update our business license, we can’t provide the necessary documentation to App Review to have our App Update approved
  • If we can’t get our iOS app updated, then we won’t be in compliance with regulations
  • Dead-end feedback loop back to point #1….
European Union

Vanguard Teams With German Fintech Raisin (Investopedia), Rated: AAA

Vanguard, the king of passive investing and one of the world’s largest fund managers, is partnering with Raisin, the German fintech, enabling some of its investments to be sold on the fintech’s platform.

Raisin, among Europe’s largest fintechs, counting more than 100,000 customers, will offer four portfolios comprising index or exchange-traded funds from Vanguard and BNP Paribas. The Financial Times reported that the investment portfolios have annual costs on average that are less than 0.5%. According to The Financial Times, this is the first time Raisin is getting into the investment area, previously focusing its efforts on brokered savings deposits.

Banks deploy ID software for client verification (Financial Times), Rated: A

Banks have begun to implement new technologies to help verify who the customer is, though the new GDPR rules in Europe could complicate usage; the General Data Protection Regulation, which will restrict how companies collect and store data, allows for customers to ask for their data to be removed and non compliance results in huge fines; banks have started to slowly add new technology but they are still figuring out where to limit storage; new companies are trying to sell services into bank that allow them to collect information but store it in a certain way to be compliant; with new technology being developed so rapidly, governments need to ensure they keep up with innovation and clearly tell the market how to comply.

German fintech Penta launches new business banking platform (AltFiNews), Rated: A

Berlin-based Penta has announced its newest fintech “Compass”, a platform that allows incorporating businesses in Germany to deposit their share capital and open a bank account in under 24 hours.

According to Penta, incorporating a business can take up to 6-8 weeks because of the bureaucratic process of opening a bank account and registering with the correct government bodies, which is legally required in Germany. Penta’s latest proposition will allow founders to open a bank account in a process that takes less than 15 minutes, completing the whole process online for free.

 

International

BBVA-backed fintech launches global bank account (American Banker), Rated: AAA

A new fintech backed by the Spanish bank BBVA aims to do something that others before it have failed to do: simplify international payments.

The fintech, Denizen, claims it has created a “global banking platform” that allows customers to receive money in one country and pay it out in another immediately, avoiding international transfer fees and eliminating currency exchange fees.

The firm says the cross-border money movement service is the first in a planned series of products. Denizen is currently available to expatriates living in Spain and the United States. The service is set to expand in 2018, adding as many as 10 European Union countries in the second half of the year as well as the United Kingdom.

Finastra appoints new CTO to lead next wave of financial services innovation (Fintech Finance), Rated: B

Finastra today announced that Eli Rosner has joined the firm as Chief Product and Technology Officer. Eli is responsible for global product and technology strategy and will support Finastra to deliver world class products, fully integrated solutions and its open FusionFabric.cloud platform for innovation.

Eli brings more than 25 years of industry experience to the role at Finastra. He joins from NCR Corporation where he served as CTO and Head of Product Management. Based in London, Eli will lead a global team of strategy and product managers, enterprise architects, data scientists and software engineers.

Australia

Online lender launches new loan portal (The Adviser), Rated: AAA

A custom-built introducer portal designed to facilitate fast, real-time processing of loan applications for brokers has been launched by an Australian marketplace lender.

Online lender Zagga this week launched the new portal, which uses custom-built algorithms to match wholesale investors with borrowers.

Speaking to The Adviser, Zagga CEO Alan Greenstein said the portal would provide brokers with simple, fast, and direct access to the loan application process from start to finish.

Sydney Angels funds QPay $ 570k to steal millennial students from banks (Finextra), Rated: A

Australia’s first ever student marketplace app, QPay, has raised $570,000 from a series of high profile investors, including Sydney Angels and the Sydney Angels Sidecar Fund 2, to break into student banking through the release of a student-targeted QPay MasterCard.

QPay aims to use the QPay MasterCard to capture the largest cluster of millennial consumers at the point when they’re most likely to begin making serious financial decisions – when enrolled in tertiary education.

Asia

How Alibaba and Tencent became Asia’s biggest dealmakers (Financial Times), Rated: AAA

The China Music story shows just how hard it can be to say no to Tencent — and the other big player in the Chinese tech world, Alibaba. With their large resources and long-term perspective, the two Chinese groups are transforming Asia’s investment landscape, posing challenges for private equity and venture capitalists as well as the start-ups looking for funds. In some parts of the region, SoftBank, the Japanese investment group, is playing a similar role.

The reach of Tencent and Alibaba in their home market dwarfs that of the big tech groups in the US. While the latter accounts for less than 5 per cent of all venture capital flows in their home market, Alibaba and Tencent account for 40-50 per cent of venture capital flows in mainland China, according to data from McKinsey.

If the venture capital market in China has become a fierce battle between Alibaba and Tencent, in other parts of the region it is often a three-pronged competition that also includes SoftBank.

 

Can Korean entrepreneurs help create Indonesia’s next unicorn? (The Investor), Rated: A

Indonesia is home to four unicorns — startups whose value reaches over US$1 billion — Go-jek, Traveloka, Tokopeida and Bukalapak. But the world’s fourth populous country with more than 250 million potential spenders wants more such success stories.

“Currently, we have four startup unicorns from Indonesia but none are from fintech services. I hope to see the next unicorn from this field,” said Rudiantara, adding that he believes P2P lending fintech startups have a chance to become the next unicorn.

His wish may soon become a reality as Indonesia’s market potential, combined with the government’s push for creating a startup hub are attracting aspiring entrepreneurs from all around the world.

Africa

How technology is changing wealth management (Money Web), Rated: AAA

The investment world is no different. Robo-advice is but one small part of the broader fintech landscape, but it has already made a major impact on the investment space through improved access and by allowing investors to plan for specific needs without the use of a traditional advisor. Technology has also made pricing more competitive.

According to Accenture, global investment in fintech ventures tripled from just over $4 billion in 2013 to more than $12 billion in 2014.

Authors:

George Popescu
Allen Taylor