Tuesday November 19 2017, Daily News Digest

Moody's wage growth

News Comments Today’s main news: Clarity Services integrates with Experian. Octopus Choice passes 100M GBP AUM. Funding Circle hits 100M Euro in German lending. Younited Credit tops 100K loans. Square Peg invests $8M in Airwallex. Silver Bullion hits $50M in loans. Today’s main analysis: The deteriorating auto loan quality. Today’s thought-provoking articles: China’s startup investors are a bunch of “cashed-up […]

Moody's wage growth

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Canada

Africa

News Summary

United States

Integration of Clarity Services by Experian (Clarity Services Email), Rated: AAA

As a supplier to Clarity Services Inc, we are writing to formally notify you that as of October 6, 2017, Clarity Services Inc has been purchased by Experian Holdings, Inc.

Effective January 1, 2018, purchases and invoice payments will be processed by Experian’s centralized Procurement and Accounting departments.

Source: Clarity Services

PayPal Co-Founder Max Levchin Gave a Remarkably Honest Response to Accusations About His New Startup (Inc.), Rated: AAA

To its critics, though, Affirm, which recently raised $200 million in a growth round, is engaged in something sinister, luring people into a financial trap by enticing them to buy things they can’t afford. CEO Max Levchindoesn’t agree with that interpretation at all, but he does accept some of the blame for not creating a more accurate perception.

Here’s how Affirm works: You can borrow money to make a purchase at any store that integrates with Affirm (or any store at all if you use the mobile “virtual card”). If Affirm’s proprietary credit model judges that you’ll be able to pay back the sum, then you’re offered a loan. During the next several months — up to a year — you’re expected to make monthly payments, which include interest. The APRs range from 10 to 30 percent.

The key things that differentiate Affirm from other credit options are that you get all of the information up front, stated plainly, and the interest charged by the startup is simple rather than compounding. When you make the initial purchasing decision, you know exactly how much extra you will end up paying to buy the product right now, instead of saving up over several months. There are no additional fees.

Moodys Warns Of Deteriorating Auto Loan Quality (ValueWalk), Rated: AAA

The economy is expected to expand in 2018, with projections for stock market performance clocking in at 8% basis Goldman Sachs. But not all is well –  a Moody’s report notes that specific asset sectors are struggling, particularly when it comes to  car loan quality worsening.

ValueWalk

Moody’s anticipates that US GDP growth will strengthen slightly to 2.3% in 2018 from 2.2% in 2017, with unemployment also continuing to move lower to 4.0% from 4.4%.

Auto loan quality is worst, but pockets of “challenged” loans exist across the board

Auto loan ABS issuers will likely securitize pools with attributes broadly similar overall to those in the pools backing their 2017 securitizations, even as a further decline in US auto sales pressures lenders to loosen underwriting to support volumes. We project sales will slip another 0.6% after an estimated 3.6% drop in 2017, following eight consecutive years of annual increases.

Auto loans appear to be on the front-lines of credit issues. Household debt, for instance, has increased to $13 trillion, with a significant part of that increase in auto loans. Sub-prime auto loans, in particular, are showing signs of weakness.

When looking at investment in asset-backed securities, the originator makes a difference. ABS backed by loans from online lenders such as SoFi, Lending Club Corporation, Prosper Marketplace Inc. and Marlette Funding have correlated with “prime credit quality.” But that is not the case across the board.

Source: ValueWalk

Square to small banks: Don’t lump us in with Amazon and Facebook (American Banker), Rated: A

Square, the Silicon Valley payment processor that is at the center of the fight over the tech industry’s ambitions in banking, is firing back at its small-bank critics, while also taking steps to placate community activists.

Advocacy groups that once expressed concern about the adequacy of Square’s plan to satisfy its obligations to low- and middle-income customers are now sounding more supportive of the fintech’s bid to open a bank.

Levi King of Nav (Lend Academy), Rated: A

In this podcast you will learn:

  • Levi’s background that led to the founding of Nav.
  • The products that Nav offers today.
  • How their business model works.
  • How they get small business owners interested in finance.
  • How Nav saves their customers money.
  • Why Levi thinks that small business owners may not need to be educated on finances in the future.
  • Their approach to producing content on their site.
  • The marketing channels they use to attract small business owners.
  • Levi’s thoughts on the entry on Amazon, PayPal and Square into small business lending.
  • Why proprietary data sets are going to be so important going forward.
  • The story behind the Nav brand and why they rebranded a couple of years ago.
  • The big name equity investors they have and how they closed their funding rounds.
  • What the future holds for Nav.

Traditional FAs Shouldn’t Fear AI (Financial Advisor IQ), Rated: A

Traditional wealth managers are convinced the advent of robo-advisors and artificial intelligence threatens the jobs of financial services professionals, Wendy Spires writes on WealthBriefing. But the reality is that the high-touch business of financial advice stands to benefit from AI, as do its traditional practitioners, she writes.

For example, while 71% of wealth managers believe financial advice clients are prepared to accept advice from robo-advisors, the reality is different, she writes. Self-directed investing, for example, dropped from 45% in 2010 to 38% in 2016 — during a time when the number of robos and the services they offer expanded significantly, according to Spires.

 

Working in America’s gig economy (Multibriefs), Rated: A

“The gig economy … is now estimated to be about 34 percent of the workforce and is expected to be 43 percent by the year 2020,” notes Intuit CEO Brad Smith. “We think this points to a lot of growth as we look ahead.”

Based on the most recent demographic data available from the Bureau of Labor Statistics, it appears the gig workforce is fairly evenly distributed across the age spectrum, but the highest percentages are seen at opposite ends of the scale. Individuals 65 years and older had the highest level of self-employment at 24.1 percent, while those under 35 (the so-called millennial generation) made up 18 percent.

BLS data reveals a few more interesting statistics concerning the gig workforce:

  • Men are almost twice as likely as women to be self-employed.
  • More than 30 percent of gig workers possess professional or advanced degrees.
  • Whites and Asians are marginally more engaged in gig work than are other racial or ethic groups.

In fact, data crunched by online lender Earnest and reported by Priceonomics indicates that about 85 percent of gig workers make less than $500 per month.

Consumer board seeks $ 287 million in restitution over CashCall case (Northern California Record), Rated: A

A Nov. 20 hearing featured the Consumer Financial Protection Bureau calling CashCall a purveyor of “financial snake oil” and arguing the online lender should pay as much as $287 million because they deceived customers.

How To Build The Best B2B Customer Experience (Forbes), Rated: A

In order to build the best B2B customer experience, companies should focus their effort on four principles:

  1. Invest in digital systems. Financial technology start-up Kabbage leverages new technology to approve small business loans in just seven minutes—a huge improvement over the 20 days it takes a typical bank. By simplifying the loan application process for web and mobile, Kabbage allows customers to apply for loans within minutes from anywhere in the world, which relieves a huge pain point for small businesses.
  2. Leverage data.
  3. Customize the experience.
  4. Use omnichannel to see the big picture. In fact, the average B2B customer uses six different channels as they make a decision. Customer experience happens in many places, which means companies need to create a consistent omnichannel experience.

Interesting Investments: Peer-to-Peer Lending (Equities.com), Rated: A

Peer-to-peer (P2P) lending, also known as peer lending, crowdlending, or social lending, is essentially what it says on the tin: lending money to another in an unsecured loan.

Prosper, one of the bigger companies managing P2P lending, has seen a fairly consistent return of about 9 percent through 2014, with a dip to 6.6 percent in 2012. Lending Club has seen a rise from 4.9 percent in 2009 to about 8 percent in 2014. All told, not bad ROIs.

First, you must be at least 18 years old, with a Social Security number, and live in an eligible state to even consider investing. Then, some states require that you have a minimum $70,000 gross income ($85,000 for California), and a minimum net worth of $70,000. You may not be able to invest more than 10 percent of your net worth. However, if your net worth is at least $250,000, there is no minimum income requirement.

Prosper, for example, has an annual default rate 3 to 4 percent higher across all grades. Lending Club has a 6 to 7 percent default rate.

Boston Fintech Company Cayan Is Getting Acquired for $ 1.05B (Bostinno), Rated: B

Cayan, a payment processing company that has been around the Boston fintech scene for the last 19 years, is in the process of getting acquired by Total System Services in an all-cash transaction valued at approximately $1.05 billion. The transaction is expected to close in the first quarter of 2018.

United Kingdom

Octopus Choice passes £100m AUM (AltFi), Rated: AAA

Octopus Choice has passed £100m of assets under management, following on from the launch of its Innovative Finance ISA in the summer.

Assetz Capital Makes Changes to the Great British Business & Green Energy Accounts (Crowdfund Insider), Rated: A

On Monday, online lending platform Assetz Capital announced it is doing away with the Great British Business Account (GBBA) and the Green Energy Account (GEA).

Ranger Direct Lending makes further $ 9.1m provision for Argon Credit (AltFi), Rated: A

The £232m Ranger Direct Lending fund has made a further $9.1m provision against its indirect investment in the collapsed Argon Credit lending platform.

ThinCats Reveals New Branding, Launches Updated Website (Crowdfund Insider), Rated: B

SME peer to peer lender ThinCats has launched a new website and branding designed to position itself for its next phase of growth in 2018.

Goji – Empowering Direct Lending (LinkedIn), Rated: B

Paul McMahon, former group marketing director of Aegon and UK CEO of FNZ, and Vincent Bordes, Founding Partner of Vestigo, the credit risk consultancy, will comprise the advisory board. Elizabeth McCallum joins as Goji’s Head of Marketing,  David Beacham as our Head of Distribution, and Rehan Islam as Head of Investments.

China

China’s Wild Bunch: Startup Investors Are Cashed-Up Cowboys (WSJ), Rated: AAA

In the first 11 months of this year, 3,418 new venture-capital and private-equity funds in China raised 1.6 trillion yuan ($241.76 billion), more than double the amount of 2015 and more than 10 times that of 2006, according to consultancy Zero2IPO Group. It estimates about 12,000 investment firms manage 8.5 trillion yuan in capital, an increase from 8,000 firms managing 5 trillion yuan in 2015.

Out of 221 unicorns in the world, 59 are in China, according to CB Insights. While that may lag behind the 127 from the U.S., it’s ahead of the U.K.’s 12 and India’s nine. Many Chinese investors want to invest in Silicon Valley because they think the valuations there are more reasonable.

Government agencies and local governments have announced 1,040 venture funds since 2015 aiming to raise about 8 trillion yuan, according to Zero2IPO. Much of the money is used to lure businesses to set up local offices, to help boost employment and tax revenues. The Hubei Province’s 200 billion yuan fund is believed to the largest of its kind.

Source: The Wall Street Journal

Borrowing From Multiple Online Lenders Remains Prevalent (Caixin), Rated: AAA

In China, online lenders or peer-to-peer (P2P) platforms that only facilitate lending do not have full access to borrowers’ credit information as there is no such centralized platform that shares the data.

Some borrowers take advantage of this information asymmetry to apply for loans from multiple lenders so they can roll over previous debts elsewhere, or to take out cheaper loans to repay the ones that charge higher interest rates and profit from the difference, or even become lenders on other P2P platforms themselves, according to a study by the Beijing Internet Finance Industry Association.

The association’s recent report found that among the 61 online lenders surveyed, 44% of their customers on average had borrowed from multiple sources.

The survey found that nearly 500,000 borrowers tried to profit from arbitrage by taking advantage of the different interest rates charged by different online lenders. On average, each of them borrowed from 2.36 online lenders, the survey said.

China’s war on risk hands US$ 121b loan market to big firms (The Malay Mail Online), Rated: AAA

China’s whac-a-mole approach to risk — hit it everywhere it pops up — is set to hand control of the surging US$121 billion technology-driven lending market to a small group of leaders such as Lufax Holding and the finance affiliate of Jack Ma’s Alibaba Group Holding Ltd.

Macquarie estimates credit extended by China’s fintech firms will jump more than seven-fold by 2022 to 6.2 trillion yuan (RM3.8 trillion) to pay for things like luxury and household goods or training and education. About half that market is micro-lending — typically small, short-term loans with high interest rates, Macquarie says.

China’s 10 biggest fintech companies account for 36 percent of all loans, said Dexter Hsu, a Taipeh-based Macquarie analyst. Tighter regulation could erode China’s more than 2,000 online micro-lenders and so-called P2P platforms, which directly match borrowers with investors, to less than 200, he said.

Chinese FinTech IPOs Don’t Dazzle Wall Street (PYMNTS), Rated: A

Newly listed Chinese FinTech companies in the U.S. are struggling on Wall Street, leaving investors with unexpected losses and posing as a setback to other Chinese firms hoping to go public.

“The quality of the businesses were either too early [to go public], untested or just poor,” said Anh Lu, an equities portfolio manager at T. Rowe Price in Hong Kong. “And they were asking for very high valuations on top of that.”

European Union

Funding Circle hits €100m lending milestone in Germany (P2P Finance News), Rated: AAA

FUNDING Circle has hit the €100m (£88.2m) loans milestone in Germany just two years after launch in the country.

The business lending platform says 3,000 investors have backed 1,100 German businesses and created more than 2,000 jobs since 2015.

The platform entered the European market following its acquisition of German platform Zencap in 2015. It now has operations in the UK, US, Germany and the Netherlands.

Earlier this month it said it had passed £3bn of lending in the UK and $5bn globally across all its platforms.

C’est Génial! Younited CREDIT Tops 100,000 Loans (Crowdfund Insider), Rated: AAA

Younited Credit has just surpassed 100,000 in loans since platform inception. The Paris based online lender (formerly named Pret d’Union) reported an accelerating rate of loan originations as the number has doubled since September 2016 when total loans stood at 50,000. The platform provides loans from €1000 to € 40,000. To date, Younited Credit has originated over € 650 million in loans.

BorsadelCredito.it Raises €1.6M in Funding (FinsSMEs), Rated: A

BorsadelCredito.it, a Milan, Italy-based fintech startup, raised €1.6m in funding.

The round was led by P101 Ventures, with participation from Azimut Enterprises Holding, GC Holding, Banca Popolare di Fondi and private investors.

DreamQuark wins the 2017 Fintech of the Year (Digital Journal), Rated: B

A startup company called DreamQuark, which produces Artificial Intelligence applications for financial services, has been awarded the Finance Innovation ‘Fintech of the Year’ prize.

National Personal Credit Platform Appoints Chairman (Caixin), Rated: B

The chairman of a wholly-owned central bank subsidiary, Zhu Huanqi, has been appointed chairman of a planned national personal credit-information platform, Caixin has learned from sources familiar with the matter.

International

Online Banking and Payments: Innovative Solutions on the Horizon (FinsSMEs), Rated: AAA

In the near future, online banking and payments will go through some fascinating changes beyond what has already happened over the past several years.

Advanced Mobile Payments

Today, there is increasing demand for biometric authentication apps. To ensure that consumers get what they want, MasterCard is going a step further by developing facial identification, voice recognition, and even cardiac rhythm programs. These innovative solutions will enhance the mobile payment experience for customers and retailers alike.

Growing Opportunities for Mobile Wallets

Back in 2014, Apple was the only real contender for mobile wallets. Within just one year, others followed their lead, including Samsung and Google. Then, in just a short amount of time, more big-name players joined in, such as Chase, Amazon, and Walmart. However, that was not the end. Even social media platforms started offering online payment options. With sites like Facebook that have mobile wallet solutions, people can send money and make payments.

Another prediction is that by 2025, 75 percent of all transactions will be made using mobile wallets rather than actual cash.

Greater Demand for Digital Remittances

For instance, a San Francisco-based company founded in 2001 called Xoom has experienced amazing growth because of digital remittances. In fact, it passed up MoneyGram, which speaks volumes.

Growth Potential with Peer-to-Peer Lending

For instance, having originated loans over $20 million since being founded, Lending Club ranks as one of the fiercest competitors in this arena.

How Banks Are Leveraging Chatbots for Customer Service (Crowdfund Insider), Rated: A

Bank of America: Erica

In October of 2016, Bank of America unveiled Erica, their new AI chatbot. Available in the bank’s mobile app, Erica can work with voice and text commands.

Erica uses machine learning and specially-designed algorithms to provide Bank of America services that were typically reserved for the bank’s top-tier customers. As an example, it could recommend a way to pay down more on your credit card debt to save on interest payments. Or if your checking account is close to being overdrawn, it could contact you to recommend a transfer from your savings account.

Swedbank: Nina

Customers can access Nina from the bank’s website, and it can understand a wide range of text requests using specially designed Natural Language Understanding technology.

In the first three months after Nina’s release, the software was handling an average of 30,000 customer interactions per month.  Of those early interactions, Nina was able to provide a resolution rate of 78%.

Capital One: Eno

Eno from Capital One is a chatbot program that works through SMS messaging.

You can use this AI chatbot to check the balance on your accounts, see your available credit, track recent transactions, pay bills, and more.

Wells Fargo

The Wells Fargo virtual assistant is a chatbot that the bank recently released for use with Facebook Messenger. Once a customer enrolls their account, they can then use Messenger to contact the virtual assistant for basic tasks like tracking recent transactions, balance inquiries, and finding the nearest ATM.

Digital investments: Modern ways to invest in the digital age (Bankless Times), Rated: A

The internet has brought about all kinds of new ways to invest one’s money.

  • Bitcoin
  • Peer-to-peer lending – You’re best off using a well-established site such as Ratesetter.
  • Micro-investment apps – Some apps round up all of your expenses to the nearest dollar and then put the leftover change into an account (for example, if a cup of coffee costs $3.14, this will be rounded up to $4 and the $0.86 extra change will be put into the account).
  • Social media shares
Australia/New Zealand

Australian Fintech Airwallex Secures $ 8 Million Investment From Square Peg (Crowdfund Insider), Rated: AAA

Less than one year after securing $13 million during its Series A funding round, Aussie fintech startup Airwallex announced it has received an $8 million investment from Paul Bassat’s Square Peg.

Testing a chatbot’s home loan advice gives a range of outcomes (Stuff), Rated: A

A mortgage broking firm is offering an AI chatbot to help first-home buyers understand some of the basics – but an experiment shows you shouldn’t put too much faith in any online calculators’ estimates of how much you might be able to borrow.

Squirrel has launched Alan, an online tool that answers questions like “how much deposit do I need”, “what’s an auction” and “how much can I borrow?”

Regulatory Pathway for Challenger Banks Just OK, Could be Improved (Crowdfund Insider), Rated: A

FinTech Australia has provided a comment onthe consultation paper published in August regarding authorising new entrants into the banking industry. The creation of digital challenger banks in Australia is a welcomed move but, according to FinTech Australia, needs some improvement.

India

5 Consumer Lending Trends To Look Forward To In 2018 (Inc42), Rated: AAA

This amendment to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 is a step towards standardisation and providing a visible digital identity, thereby promoting transparency in financial transactions. Another factor that is pushing financial transparency is the rise of Fintech and the subsequent new-age companies that are offering digital avenues for finance such as payment platforms, blockchain companies, alternative financers like P2P lenders and so on.

Consumer Lending Trends To Look Forward To In 2018

Alternative Lending Boom

New service providers will serve the underserved and unserved, meeting the unmet demand. We will continue to see the rise of direct lending as well as P2P lending, marketplaces, crowdfunding platforms etc.

Ease Of Access To Credit

Credit will continue to grow, thanks to the alternative lending boom. One such burgeoning space is the Line of Credit. It has gained momentum in 2017 with the metros being early adopters and is expected to expand into tier 2 & tier 3 cities in 2018.

The Rise Of InsurTech

Investment In Emerging Technologies

Blockchain will expand in putting together smart contracts, and digital identification. Already, FinTech investments in Asia increased to $5.4 billion in 2016, up 12.5% from $4.8 billion in 2015, driven mainly by China and India.

Government And Regulatory Push For Fintech

Asia

Unique Secured P2P Lender Silver Bullion Reaches $ 50 Million in Loans (Crowdfund Insider), Rated: AAA

Silver Bullion, a peer to peer lending platform based in Singapore, has reached $50 million in loan originations. The unique platform that provides secured lending based off of bullion saw more than double the lending volume in 2017 versus year prior.

Amartha Powers Micro Peer to Peer Lending in Indonesia, Focuses on Women Entrepreneurs (Crowdfund Insider), Rated: A

Amartha Founder & CEO, Garuda Typhoon Andi Putra recently commented;

“Since its establishment, Amartha has been committed to connecting the unbanked micro entrepreneurs, and investors who want to add this asset investment in a sector that is more profitable and socially valuable. The uniqueness lies in the micro-entrepreneurs or Amartha Partners, all of which are women. Today, more than 72,000 women micro entrepreneurs throughout Indonesia have enjoyed our services, with a total fund distributed more than 200 billion rupiah (US $ 15 million). “

Affin Islamic Bank lists latest sponsored venture on IAP (New Straits Times), Rated: A

KUALA LUMPUR: Affin Bank Bhd’s wholly owned subsidiary, Affin Islamic Bank Bhd, has today listed its latest sponsored venture with Segi Seri Sdn Bhd on Investment Account Platform (IAP), a shariah-compliant platform similar to crowdfunding and peer-to-peer lending platforms.

Affin Islamic said the venture plans to raise RM3.3 million on IAP to part-finance contract awarded to them recently, which is related to preparation and serving of dietetic food to an established government hospital in Malaysia for a duration of three years.

 

Canada

Another challenge is the new technology. Instant Financial Inc., a Vancouver-based startup, released an app this year that lets workers paid by the hour get their day’s earnings after a shift. It’s free for employees. Employers pay a fee. The focus so far is the hospitality industry, and includes companies such as McDonald’s and Outback Steakhouse in the United States. Instant has about 175,000 people on the service in the United States and about 5,000 in Canada. Wal-Mart has a similar product, which it sourced from another company.

Africa

A mobile banking service is transforming how the poor transfer money — here’s how it works (Business Insider), Rated: AAA

In 11 countries around the world, some 30 million people use a mobile money service that is transforming how people handle their finances.

It’s called M-Pesa, and it has lifted hundreds of thousands of people out of poverty in Kenya.

Krispo, 40, is enrolled in GiveDirectly’s experiment in basic income, a system of wealth distribution in which people receive a standard salary just for being alive.

The money comes with no strings attached. Krispo and the other villagers have received $22 a month since October 2016, and they’ll continue getting it until October 2028.

Scattered around town are M-Pesa stands, outfitted with live agents who can dispense money — essentially an ATM with a human teller.

There is a small fee for each transaction. For the amount given to GiveDirectly recipients, this fee is 30 shillings. (GiveDirectly actually wires 2,280 shillings each month — 30 shillings above the 2,250 recipients can spend — to cover the cost.)

Authors:

George Popescu
Allen Taylor

Friday May 26 2017, Daily News Digest

Friday May 26 2017, Daily News Digest

News Comments Today’s main news: Bank Q1 earnings increase by 13% to $44B while loan origination slows down. SoFi co-founder Dan Macklin exits company. OnDeck extends $100M credit facility. Prosper closes $495M securitization transaction. RateSetter confirms IPO. BBVA launches open API market. Today’s main analysis: Alt finance in Americas grows to $352B last year. Today’s thought-provoking articles: China Rapid […]

Friday May 26 2017, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

  • BBVA launches open API market. GP:”Very interesting. BBVA is pioneering what we think all banks will eventually have to do by law or to remain competitive. “AT: “Initially open only to Spanish businesses, but eventually to be rolled out internationally.”

International

Australia/New Zealand

Asia

News Summary

United States

Bank 1Q earnings jump to $ 44B, while loans fall: FDIC (FDIC Press Release), Rated: AAA

  • FDIC-Insured Institutions Earn $44 Billion in First Quarter 2017
  • Community Bank Net Income Rises to $5.6 Billion
  • Quarterly Net Income Is 12.7 Percent Higher than a Year Earlier
  • Community Bank Net Income Rises 10.4 Percent from a Year Ago
  • Annual Loan Growth Rate Slows to 4 Percent, On Par With Nominal GDP Growth
  • “Problem Bank List” Falls to 9-Year Low

“Revenue and net income growth were strong, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” Gruenberg said. “Community banks reported another quarter of solid revenue and net income growth.”

Gruenberg continued: “In the past two quarters, the industry has seen a slowdown in loan growth that is broad-based across major lending categories. This slowdown has occurred as the economy approaches the end of the eighth year of a relatively modest expansion. Still, loan growth has remained at or above nominal GDP growth.

Highlights from the First Quarter 2017 Quarterly Banking Profile

Quarterly Industry Net Income is 12.7 Percent Higher than a Year Earlier: Quarterly earnings were 12.7 percent higher than in the first quarter of 2016 due to growth in net operating revenue. Net operating revenue – the sum of net interest income and total noninterest income – was $183.6 billion, an increase of $10.9 billion (6.3 percent) from a year earlier. Loan-loss provisions totaled $12 billion, a decline of $541 million (4.3 percent) compared to first quarter 2016. Noninterest expenses of $109.2 billion were $4.5 billion (4.3 percent) higher than a year earlier, as a 2 percent year-over-year increase in employment was reflected in higher payroll expenses. The improvement in revenue also caused the average return on assets to rise to 1.04 percent from 0.97 percent a year earlier.

Community Bank Net Income Rises 10.4 Percent from a Year Ago: The 5,401 insured institutions identified as community banks reported a $522.9 million (10.4 percent) increase in net income in the first quarter. Net operating revenue was $1.5 billion (7 percent) higher, as net interest income was up $1.2 billion (7.1 percent), and noninterest income rose by $304.4 million (6.8 percent). Loan-loss provisions increased by $32.7 million (5.2 percent), while noninterest expenses were $721.9 million (5 percent) higher.

Annual Loan Growth Rate Slows to 4 Percent: Total loan and lease balances increased $358.1 billion (4 percent) during the 12 months ended March 31, compared with a 5.3 percent growth rate over the 12 months ending in March 2016. The slowdown in loan growth occurred across all major loan categories. During the first three months of 2017, total loan balances declined by $8.1 billion (0.1 percent) from the fourth quarter, as borrowers reduced their credit card balances by $43.7 billion (5.5 percent). Community banks increased their loan balances by $16.7 billion (1.1 percent) during the quarter and by $109.9 billion (7.7 percent) over the past 12 months. Still, loan growth has remained at or above nominal GDP growth.

“Problem Bank List” Falls to 9-Year Low: The number of banks on the FDIC’s Problem Bank List fell from 123 to 112 during the first quarter. This is the smallest number of problem banks since March 31, 2008, and is down significantly from the post-crisis peak of 888 in the first quarter of 2011. Total assets of problem banks fell from $27.6 billion to $23.7 billion during the first quarter.

Deposit Insurance Fund’s Reserve Ratio Remains at 1.20 Percent: The Deposit Insurance Fund (DIF) balance increased $1.8 billion during the first quarter to $84.9 billion at March 31, largely driven by assessment income, including surcharges on large banks. Estimated insured deposits increased 2.3 percent in the first quarter. The DIF reserve ratio remained unchanged from year-end 2016 at 1.20 percent, due in part to strong insured deposit growth.

SoFi co-founder Dan Macklin is leaving the company (TechCrunch), Rated: AAA

Another one of the co-founders of online lending startup SoFi is leaving the company, the company has confirmed to TechCrunch. Dan Macklin, who served as VP of Community and Member Success at SoFi, announced internally that he’ll be stepping down from his position on June 6th.

Most recently, Macklin was charged with managing the community and customer success at SoFi, which sees its member meetups and community events as a key differentiator against more traditional financial services businesses. Prior to that, he served as the company’s first VP of Business Development.

After six years, SoFi now has more than 300,000 members and has underwritten more than $20 billion in loans, according to a person familiar with the business. It’s also raised nearly $2 billion in outside funding and has about 1,000 employees.

Of course, it’s not unusual for founders to leave after a period of several years, but Macklin’s departure leaves Cagney as the last remaining co-founder at the company.

OnDeck Announces Extension of $ 100 Million Credit Facility with SunTrust Bank (PR Newswire), Rated: AAA

OnDeck® (NYSE: ONDK) announced today that it had extended its current asset-backed revolving credit facility with SunTrust Bank.

As a result of the transaction, OnDeck extended the maturity date of its $100 million credit facility with SunTrust Bank to November 2018 and decreased funding cost by 50 basis points.

Loans will continue to be made to Receivable Assets of OnDeck, LLC, or RAOD, a wholly-owned subsidiary of OnDeck, to finance RAOD’s purchase of small business loans from OnDeck. The revolving pool of small business loans purchased by RAOD serves as collateral under the SunTrust facility.  OnDeck is acting as the servicer for those small business loans.

Prosper Closes $ 495 Million Securitization Transaction (BusinessWire), Rated: AAA

Prosper, a leading marketplace lending platform for consumer loans, today announced the closing of the first securitization from the Prosper Marketplace Issuance Trust, Series 2017-1, “PMIT 2017-1.”

Approximately $495 million of notes were issued, increasing from an initial $450 million. Credit Suisse Securities (USA) LLC and Jefferies LLC served as joint bookrunners on the transaction, which was rated by Fitch Ratings, Inc. and Kroll Bond Rating Agency, Inc.

LendingTree Launches Life Insurance Comparison Platform Powered by PolicyGenius (Marketwired), Rated: A

LendingTree, the nation’s leading online loan marketplace, announced a new partnership today with PolicyGenius, a fast-growing consumer insurance startup, that will bring PolicyGenius’ term life insurance comparison shopping platform to millions of LendingTree customers.

Since the launch of its intuitive insurance shopping platform in 2014, PolicyGenius has helped hundreds of thousands of customers shop for over $100 billion in term life insurance coverage. The companies both plan to use the partnership to continue to bring choice, transparency and convenience to a traditionally convoluted and complex shopping process.

PolicyGenius empowers customers with accurate quotes, side-by-side comparison of insurance policies from dozens of the country’s top-rated insurance providers, and independent advice. The company’s proprietary tech delivers the most accurate quotes available online by evaluating a shopper’s health and lifestyle factors and matching to insurers’ underwriting rules.

The LendingClub iOS mobile app has  arrived (LendingClub Email), Rated: A

We are excited to announce that we have launched the LendingClub Invest app on iOS.

We’ve heard the feedback from our investors and have been hard at work building out a mobile experience. You can download our new iOS app here.

With our new app, you’ll be able to:

  • check your account summary
  • invest in Notes
  • move money back and forth
  • adjust Automated Investing strategies and more

LendingClub, ex-CEO must face U.S. shareholder litigation (Reuters), Rated: A

A federal judge on Thursday rejected efforts by LendingClub Corp (LC.N) and former Chief Executive Officer Renaud Laplanche to dismiss shareholder litigation accusing them of concealing material weaknesses in the online lender’s ability to monitor its operations.

The decision by U.S. District Judge William Alsup in San Francisco lets shareholders pursue most of their claims over the contents of LendingClub’s registration statement for its December 2014 initial public offering.

With $ 25 million in funding, Prumentum Group is building a “hybrid robo” wealth manager (TechCrunch), Rated: A

A new wealth management startup called Prumentum Group is coming to market with a unique value proposition, looking to combine the technology chops of a roboadvisor with the human touch of a registered investment advisor. To do so, the company has built a tech platform, raised $25 million in funding, and acquired a minority stake in a financial advisory firm.

On the one hand, the company has been working on a tech platform called BrightPlan, which is set to compete with the likes of Wealthfront and Betterment in the robo-advisory game. That platform was built by a team comprised of former employees from Silicon Valley firms like Salesforce and Cisco.

According to Prumentum co-founder and CEO Marthin De Beer, the company has taken an initial 40 percent stake in Plancorp, with the option to purchase up to 100 percent of the company through an equity exchange later.

Robo-adviser takes a stake in Plancorp (Investment News), Rated: A

Financial advice firm Plancorp has attracted a novel investor. The 34-year-old advisory firm is now partially owned by a fintech firm launching a digital advice platform later this year.

The St. Louis, Mo.-based registered investment advisory firm, which has $3.6 billion in client assets, will become the live adviser component for the hybrid robo to be known as BrightPlan.

Plancorp, which has 55 employees, has a $5,000 annual fee minimum for clients. It was one of the nation’s first fee-only advisory firms when it was founded in 1983 by Jeff Buckner, who is still one of the firm’s 14 employee shareholders that control the other 60% of Plancorp.

A Look Back at Lending Club’s 10 Years as an Online Lender (Lend Academy), Rated: A

Lending Club launched a marketing campaign and website celebrating their 10-year anniversary and outlining the major milestones for the company. What started out as a Facebook application has morphed into one of the largest online consumer lenders in the US.

In 2008, Lending Club entered a quiet period where it worked with the SEC to come up with a path to move forward. Coming out of the quiet period Lending Club began to offer its loans as securities and remains one of the few platforms open to retail investors.

The company had its first $10 million origination month in 2010. The company now originates nearly $2 billion per quarter. To put the growth into perspective, the company reviewed on average four loans per day in 2007 and it took two weeks to facilitate their first $100,000 in loans. The company now reviews around 1,700 loans daily and facilitates $100,000 in loans every six-and-a-half minutes. Originations now top $26 billion.

Other major milestones include the IPO in December of 2014 as well as product expansions into small business loans and more recently, auto refinance. As of Q1 2017 the company has successfully brought a significant amount of banks on the platform which now represent 40% of loan funding.

Venture Funds Flood Startups With Cash (WSJ), Rated: A

Investors injected $14.5 billion into U.S. venture-backed startups in the first quarter, up 37% from the previous period, according to data from Dow Jones VentureSource.

Recipients of venture funding included financial services, which saw a 15% bump in investment to $913.1 million, compared with the $792.4 billion raised in the prior quarter. Fintech startup Social Finance Inc. hauled in a big chunk of that in the latest round, raising $500 million in the period.

After a cooling period the past year, information-technology investment edged higher, hitting $3.05 billion in the quarter, up 13% from the $2.7 billion in the prior period. A slice of that, investments in software, returned to favor as well, as investors put to work $2.14 billion, up about 13% from the $1.9 billion unlocked in the previous quarter.

Understanding Online Real Estate Lending As An Investment Strategy (Forbes), Rated: A

I’ve been working in the field of online real estate investing for several years now, and the good news is that today’s technological innovations have made investing in real estate online a newly viable way to access secure, short-term investments.

For first-time investors, you should be looking for the following in any platform you consider investing your money in:

  • Lower investment minimums: In this era of peer-to-peer lending and crowdfunding, online lending platforms provide investors with access to investments at minimums as low as $1,000.
  • Risk management through quality underwriting: Before a loan is listed, online platforms should run detailed underwriting reviews on the loan offering by looking at borrower bank statements, running credit checks, reviewing asset purchase contracts, underwriting the renovation budget, etc.
  • Secure monthly income: Lending money on house flips typically comes with a lien on an asset.
  • Investment management: Online platforms don’t just help get access to investments, but also manage the same for individual investors.

A few important points to consider:

  • Illiquid investment: There doesn’t exist a secondary market today where individuals may liquidate an online investment, at will.
  • Limited correspondence with borrower: Online platforms create a barrier to direct communication with the borrower.
  • Industry maturity: The biggest unknown today is how the young industry’s underwriting guidelines will hold, should there be an economic correction.

PeerStreet partners with top-tier originators across the country and makes their loans available to registered investors. What makes PeerStreet unique is its ability to onboard partners who underwrite deal flow, allowing PeerStreet to serve as a liquidity portal for originators.

AlphaFlow is another interesting platform that diversifies a $10,000 investment from an investor across 75-100 loans originated by other platforms in the space, yielding returns from 8-10%.

Since its founding in 2004, BiggerPockets has turned into the LinkedIn for real estate investing.

Five Technology Tools And Apps That Are Reshaping The Real Estate Industry (Forbes), Rated: B

Streak CRM is a Chrome app that integrates into Gmail. This makes it a seamless integration with your existing email, which eliminates all the data entry overhead that kills your flow when you’re working your lead funnel.

RealTelligence is launching a mobile app that scores all real estate agents based on their probability of success for home sellers and buyers in their area of town and price range.

Wholesaledealslist.com is a brand new web and app platform where real estate investors can find and sell wholesale deals.

Keep an eye out for Point. They’re trying to disrupt the home mortgage by offering to buy equity in a home.

MoneyLion enhances product line to help consumers manage and improve their financial health (MoneyLion Email), Rated: B

Mobile personal finance and consumer lending platform, MoneyLion, today launched new features designed to make the financial goals of its 1 million-plus users easier to achieve. As part of the launch, MoneyLion also redesigned its website and mobile app.

MoneyLion is launching its new features to address the financial challenges consumers face today. A Federal Reserve study showed that 46 percent of Americans don’t have $400 saved for an emergency, and two-thirds of Americans were unable to pass a financial literacy test according to another study. MoneyLion’s new features have been designed to help users overcome these challenges by simplifying their day-to-day relationship with money and making it easier to build positive, sustainable financial habits.

MoneyLion has introduced the following new app features in a refreshed interface to help reduce the friction consumers face when it comes to their finances:

  • Simple, data-driven advice, wherever you go: From the moment users open the MoneyLion mobile app, they receive personalized recommendations that encourage positive financial behaviors based on their individual spending habits and credit profile. These recommendations are refreshed daily with the user’s latest data to ensure they remain aligned to their current financial situation and objectives.
  • Streamlined borrowing experience: MoneyLion’s personal loan process has been streamlined to improve speed, convenience and lower the cost of borrowing. Customers can receive a loan offer in as little as 15 seconds, access funds as quickly as the same business day, and now have even more options for reducing their interest rates.
  • New ways to improve credit health: In addition to the free credit score already available to every user, MoneyLion now offers full credit reports from TransUnion® and Equifax, and access to credit counseling and repair options. Customers can also avoid credit surprises with expanded push notifications alerting them to changes to their credit.

These latest updates build on the financial progress and behavioral changes users have already made with MoneyLion. According to data collected in 2016, MoneyLion has helped its users improve their financial health in the following ways:

  • Customers have earned over $5 million in savings via MoneyLion’s rate reduction and rewards program, which enables users to earn points for demonstrating good financial behavior.
  • Loan takers who make use of the platform’s free credit monitoring tools were 28 percent less likely to default.
  • MoneyLion’s platform and products have helped customers save on average about $46 per month on overdraft fees. It’s estimated that these fees cost American consumers about $11 billion every year according to Banks.org.
  • Users enrolled in MoneyLion’s credit health tools were 6 times more likely to see an increase in credit score than a decrease.

MoneyLion is available on Android and iPhone from Google Play and the App Store.

SimpleLoanGuide Helps People Find the Best Loan Solution (Digital Journal), Rated: B

SimpleLoanGuide (simpleloanguide.com) is based in Starkville, Mississippi. They offer matching services only but are not in any way acting as a representative or agent of their partner companies. Except for Arkansas, New York, Vermont, and West Virginia, other states may avail of their services. Completing an online form on the website does not guarantee a successful match with a lender, an offered loan with satisfactory rates or terms, or granting of the loan amount requested. Partner lenders may still verify information and compare it with national databases. A user who sends their information on the website signifies their compliance to credit check and verification.

Distributed Ledger Consortium R3 Closes Record $ 107 Million Funding Round (Coindesk), Rated: B

Global banking consortium R3 has closed the largest funding round in the history of distributed ledger technology.

Revealed today at Consensus 2017, over 40 financial institutions participated in the $107m round, including top member investors SBI Group, Bank of America Merrill Lynch and HSBC. Additional major investors include ING, Banco Bradesco, Itaú Unibanco, Natixis, Barclays, UBS and Wells Fargo, plus more from around the globe.

The funds are expected to be deployed as part of plans for global technological development and, eventually, a push to bring what the firm calls Corda Enterprise to institutions around the world.

United Kingdom

RateSetter boss confirms IPO hopes and plans to increase asset-based finance (P2P Finance News), Rated: AAA

RATESETTER’S chief executive Rhydian Lewis (pictured) has confirmed the peer-to-peer platform is eyeing an initial public offering (IPO) as a pivotal step to solidify its position as an “investor brand”.

He also said the business and consumer lender would not expect or be interested in any takeover approaches from banks as it focuses on floating the business.

Meanwhile, the firm said it is looking to step up its asset-based lending, increasing the portion of loans that are secured against tangible assets or other type of securities as opposed to personal guarantees.

Zopa to revamp peer-to-peer lending model (Financial Times), Rated: AAA

Zopa, the world’s first peer-to-peer lending company, plans to revamp its offering to investors as it launches its new Isa.

The company currently offers investors access to a “safeguard fund”, a pool of cash intended to protect investors partially from loan defaults, but will jettison this as part of its new Innovative Finance Isa offering.

The new product, to be made available from June — more than a year since the government legislated for the new Isa structure — makes it possible for investors to hold their peer-to-peer loans within a tax-efficient Isa wrapper. Investors will be offered a target return of 3.9 per cent after fees, compared to the 3.7 per cent offer on Zopa’s current “classic” investment product.

UK businesses turning to alternative finance as Brexit tightens credit conditions (The Investment Observer), Rated: A

UK businesses are turning to alternative finance to seek funding for expansion, as credit conditions tighten in the face of Brexit uncertainty.

With the UK in the early stages of Brexit and now facing a General Election, new research conducted by RateSetter Business Finance found that 32 percent of SMEs that had considered raising finance said that it was now harder than six months ago.

Peer-to-peer lending services are becoming the go-to choice for many small businesses seeking finance.

Secondary Markets Bring Promise of Efficient Markets (AltFi), Rated: A

Private transactions, both private equity and debt, have been inefficient and littered with information asymmetry due to the way the transactions have been made. The emergence of public distribution of information on private transactions seeks to change that and the quickly arriving secondary markets for private transactions can bring liquidity and efficiency to typically cumbersome asset classes.

Recently Seedrs announced the establishment of a secondary market for equity crowdfunding transactions in the UK. Private companies are among the most inefficient as an asset class, given the apparent lack of information, information asymmetry and long lock in periods. The situation in the US is no different, where private companies are even more private compared to the UK with publicly reported information even on private companies.

Private equity is however not the only sector that benefits from liquidity. From private loans in peer-to-peer markets, a liquidity offer through a secondary market offers shorter cycles in the market and more trust in the underlying asset class. Many peer-to-peer or marketplace lenders globally run internal secondary markets, as yet there is no overarching liquidity destination for the sector. Both Lending Club and Prosper have offered secondary markets in the US, but only Lending Club’s remains open for business. Last October Prosper announced the closing of its secondary market, which the company said was underutilized by investors.

City slickers (P2P Finance News), Rated: A

Institutional money already dominates the US peer-to-peer lending market and now it’s making waves in the UK. Is this a natural evolution or is it eroding the true essence of P2P?

There was a time when marketing peer-to-peer lending was straightforward – the solid certainty of a mass of consumers standing on both sides of a P2P platform was enough to make its bank-disruption mission a success story.

People lending to people was a healing and redeeming message at a time when banks were still cleaning up the mess they had scattered around the globe by mixing consumers’ savings and investors’ bets.

But then the idealism of youth needs to make room for the pragmatism of maturity, and an insidious realisation started to cloud P2P’s coming of age: retail money alone is not enough to keep the ball rolling and let platforms become believable competitors of traditional lenders.

However, justifying such a shift in the UK may prove a tougher job, as the P2P sector here is still split by the burdensome dilemma of whether to welcome money from institutional investors with open arms or relegate it to a ‘diversification allowance’ pot.

The largest US P2P lender was running a 70 per cent ratio of institutional funds when its corporate governance scandal started to unfold.

According to an industry source, the mix-up of retail and institutional money could be the main hurdle standing between some of the UK’s largest platforms and Financial Conduct Authority (FCA) approval.

In the not-so-distant future, regulators could go as far as requiring a clear separation of retail and institutional investments through P2P platforms, the source says.

It’s time to stop robo-advice mislabelling (Citywire), Rated: A

It is time that we question robo-advice. Not the concept, but the name which has been used to describe any company that offers something related to investment management, online.

The label ‘robo-advice’ is misleading for a number of reasons. There are no robots who give advice, but also, most of the firms that have been described as such do not even offer advice.

‘We prefer online or digital wealth manager,’ said Ella Rabener, UK co-founder at Scalable Capital.

Meanwhile, Nutmeg CEO Martin Stead, echoing Rabener, said: ‘We prefer to call ourselves an “online investment manager”, rather than a “robo-adviser”. We find the term robo-advice to be misleading. It evokes images of robots offering face-to-face advice and making decisions for people.

Robo-advice is a term that came out of the US and unfortunately, because of the differences in how the advice market actually functions, while it makes sense to use it there, it does not in the UK.

Talking Heads: Are you warming up to P2P? (Professional Adviser), Rated: B

Peer to peer (P2P) lending is often considered risky business, but as the industry and regulation have moved on, have advisers become more willing to recommend the products to clients?

In March, Orca CEO Iain Niblock said there has been “virtually no uptake” by financial advisers since the products were brought under the regulatory investment advice rules. At the same time he estimated 2.7 million people would be investing in the booming market by 2020.

“We Infrequently Recommend P2P To Clients” – Dennis Hall, managing director, Yellowtail Financial Planning

‘We Want It To Be Protected Under The Compensation Scheme’ – Patrick Connolly, financial planner, Chase de Vere

“An Area We Have No Intention Of Getting Into” – Ricky Chan, director, IFS Wealth and Pensions

China

China Rapid Finance Reports Unaudited First Quarter 2017 Financial Results (PR Newswire), Rated: AAA

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF), a leading online consumer lending marketplace in China, today reported its unaudited financial results for the quarter ended March 31, 2017. The Company will hold a conference call at 8 a.m. Eastern Time on May 25, 2017, or 8 p.m. China Time on May 25, 2017. Dial-in details are provided at the end of this release.

First Quarter 2017 Financial Highlights

  • Total gross billings on transaction and service fees[1] in the first quarter of 2017 increased by 13.1% to US$16.8 million from US$14.8 million in the prior year period.
  • Gross billings from consumption loans increased by 336.8% to US$6.7 million in the first quarter of 2017 from US$1.5 million in the prior year period. Gross billings from consumption loans increased to 39.9% of total gross billings on transaction and service fees in the first quarter of 2017 from 10.3% in the prior year period.
  • Gross billings from lifestyle loans were US$10.1 million in the first quarter of 2017, as compared with US$13.3 million in the prior year period. Gross billings from lifestyle loans were 60.1% of total gross billings on transaction and service fees in the first quarter of 2017, as compared with 89.7% in the prior year period.

First Quarter 2017 Operating Highlights

  • Number of new borrowers added in the first quarter of 2017 was approximately 545,000. As of March 31, 2017, the Company had reached approximately 2.0 million unique borrowers on its marketplace since inception, and the total number of loans facilitated on the Company’s platform grew to approximately 15.0 million.
  • Total loan volume facilitated on the Company’s marketplace in the first quarter of 2017 increased to US$485.0 million, primarily driven by the rapid expansion of consumption loans, which accounted for US$405.0 million of the total loan volume, while lifestyle loans accounted for US$80.0 million.
  • Total number of consumption loans facilitated in the first quarter of 2017 was 4.0 million, while total number of lifestyle loans facilitated was 6,000.
  • Repeat borrower rate[2] on the Company’s marketplace accounted for 73% of the total borrowers as of March 31, 2017.

Ant gold clothing announced to the insurance industry to open the first “auto insurance points” (01Caijing), Rated: B

May 25, the ant gold clothing announced to the insurance industry to open the first “auto insurance points”, the mass “from people” information through artificial intelligence and other technologies to dig, the owner of the portrait and risk analysis, quantify the 300-700 And so on to enhance the risk identification ability of the insurance industry.

The first batch of insurance companies, including human security, PICC Property Insurance, China Life Insurance, China Union, Taiping property insurance, land insurance, sunshine property insurance and Huaan property insurance, Ansheng balance auto insurance, follow- , The ability to use car insurance to enhance the risk of identification of the company open.

China Merchants Bank announced the use of annual profit of 1% set up Fintech special fund to support in vitro incubation (01Caijing), Rated: B

Recently, China Merchants Bank, an internal innovation fund has been in place, the amount of 790 million yuan, for the internal business units and all employees apply for financial technology innovation projects.The scope of innovation includes mobile interconnection, large data, cloud computing, artificial intelligence, security control and block chain and other fields.

According to the relevant person in charge of China Merchants Bank, “pre-tax profit of 1% of the fund is entirely incremental, for in vitro incubation, and will not squeeze the original investment in science and technology investment.”

European Union

BBVA launches Open API marketplace (Finextra), Rated: AAA

BBVA is making eight of its APIs commercially available to companies, startups, and developers worldwide, enabling the integration of customer banking data with third party products and services.

The launch of BBVA API Market comes after the Spanish bank spent more than a year working with developers and businesses to fine-tune the way the Open API service would be delivered. During this time, over 1500 businesses and developers registered with the experimental portal.
Initially only Spanish customers of BBVA will be able to benefit from the market – but the bank intends to roll the programme out to its US customers later this year, before expanding it further to include Turkey, Mexico, Latin America and beyond.
The bank says companies will be able to use the APIs to create new value added services, deliver better user experiences by improving conversion and onboarding processes, manage payments, verify identities, forward notifications or analyse consumer habits and commercial behavior, among other things.
International

Americas Alternative Finance Grows to $ 35.2 Billion in 2016 (Crowdfund Insider), Rated: AAA

The Cambridge Centre for Alternative Finance (CCAF) and the Polsky Center for Entrepreneurship and Innovation and Booth School of Business Booth School of Business at the University of Chicago have revisited the alternative finance market once again with a benchmark study. The research which covers the United States, Canada, Latin America and the Caribbean (LAC) showed continued growth in alternative finance across the region as total market volume rose to $35.2 billion in 2016 – an increase of 23% versus year prior. The report noted that the prior Americas benchmarking report had been adjusted down due to changes in the research methodology. While total volume grew the pace of growth and entry of new platforms both slowed during the year.

The research found that the United States continues to be one of the world’s top markets for Fintech including online alternative finance channels and instruments. The 2016 US market volume of $34.5 billion marked a 22% year-on-year increase from 2015. The US sector was dominated by online lending both Marketplace and Balance sheet iterations.

LAC alternative finance markets grew by 209% to $342.1 million in 2016. LAC, collectively as a regional market, surpassed Canada’s national market in 2016. The growth was mainly led by high volume markets in Mexico, Chile, and Brazil.

Canada’s alternative finance market increased 62% to $334.5 million driven by both organic growth and expanded survey coverage included in the research.

Among the key findings of the report:

  • The US, Marketplace/P2P Consumer Lending continued to account for the largest share of market volume with $21 billion recorded in the US in 2016 (up 17%).
  • Balance Sheet Business Lending became the second largest model in the US in 2016 with $6 billion originated, surpassing Balance Sheet Consumer Lending which had $3 billion.
  • Equity crowdfunding in the US, not including real estate, declined marginally in 2016 versus 2015.
  • For LAC, Marketplace/P2P Business Lending remained the largest alternative finance market segment with $188.5 million registered in 2016, an increasing of 239% over 2015.
  • In Canada, Donation-based Crowdfunding remained the top alternative finance model with $105.9 million, but balance sheet business lending became a close second, rising at a rate of 282% to $103.3 million in 2016.

See the full report here.

Australia/New Zealand

RateSetter matches investors with borrowers for clean energy (The Sydney Morning Herald), Rated: AAA

Investors will be able to lend to residents to install clean energy in their homes, such as solar panels, after a tie-up between peer-to-peer lender RateSetter and the government’s Clean Energy Finance Corporation.

He expects rates for investors and borrowers in the green loan marketplace to be around 7 per cent a year for loan terms of between three and seven years.

Loans facilitated through RateSetter will fund individual and business loans for a wide range of “green” purposes, including the purchase of solar panels and battery systems.

Government invests $ 20m in P2P RateSetter’s green lending initiative (Finder), Rated: AAA

Australian peer-to-peer (P2P) lender RateSetter has today announced the launch of a Green Loan lending market which will allow investors to fund the purchase and/or installation of clean energy products.

The Clean Energy Finance Corporation (CEFC), an Australian government body, has invested $20 million in the market to help kickstart the project.

Green Loan lending market (RateSetter), Rated: A

Lending market summary

  • Investment amount: From $10
  • Indicative term: 7 years, though loans may be 3 – 7 years in term
  • Purpose: finance for purchase of Approved Green Products
  • Loan repayment profile: monthly repayments of principal and interest

Invest through the Green Loan lending market to finance the purchase of:

  • Solar panels and batteries
  • Solar water heaters
  • Energy efficient lighting
  • Energy efficient air conditioning
  • Low emission cars and trucks
  • Air source heat pumps
  • Power factor correction
  • Variable speed and frequency drives

Five tech trends changing financial advice (Bluenotes), Rated: B

While many financial advisers have already embraced it, the use of the “cloud” will continue to expand as advisers seek to have more of their business operations and applications hosted there.

Automation has already begun to reshape financial services. Especially in the areas of regulation, financial risk management and compliance, automation is going to have a big impact. Imagine an automated program that could identify and explain alterations in risk exposure and calculate business-related and data-related causes for such changes.

With advisers holding sensitive data as well as increasing regulation around the security of customer data and communicating breaches, maintaining data security will remain a growing priority and focus.

Roboadvisers have had a contentious start in Australia, though they’re unlikely to fade away as technology advances. In fact, according to BI Intelligence, it is predicted by 2020 roboadvisers will manage around 10 per cent of the total global assets under management, equating to around $A8 trillion.

Today consumers have access to almost the same information as advisers, and in real-time from almost anywhere.

No longer are investors bound to advisers for financial information as they once were and do-it-yourself investing is becoming more popular.

This means advisers have to continue to add value by providing expert analysis and advice.

Asia

Indonesia: Govt extends P2P lending license application deadline (e27), Rated: AAA

OJK extends P2P lending license application deadline

The Indonesian Financial Services Authority (OJK) announced that it has extended the deadline for P2P lending startups to apply for a license, from the previous deadline of June 29.

Secured P2P Lender Silver Bullion Reports Topping S$ 30 Million in Loans (Crowdfund Insider), Rated: A

Silver Bullion reports it has now facilitated S$30 million in peer to peer loans secured by precious metals like gold and silver. The Singapore-based platform expects to pay out S$1 million in interest as the loans mature.

Lenders are receiving an average return of 3.83% p.a for SGD loans and 4.1% p.a for USD loans. Tenures of loans range from 1 month to 24 months. Silver Bullion reports there have been zero defaults to date.

Japan Lender Mizuho to Launch Fintech Venture (US News), Rated: A

Japan’s Mizuho Financial Group will start a venture next month to create new businesses using “fintech,” an executive said, joining a global race in financial technology that threatens to unsettle traditional players.

Japan’s second-largest lender by assets said there were already 20 projects in the pipeline for the venture, utilizing blockchain technology and artificial intelligence programs in areas such as farming and travel.

For that reason, he said the bank would limit its stake in the yet-to-be named venture to less than 15 percent, though Yamada would be its president and the bank would send staff.

Yamada did not elaborate on the projects in the pipeline but said the venture planned to conduct an export trade transaction next month using blockchain technology, allowing all parties to exchange necessary documents online instead of waiting for hard copies.

Authors:

George Popescu
Allen Taylor

Friday March 17 2017, Daily News Digest

orchard originations

News Comments Today’s main news: CreditEase Fintech Investment Fund announces new global investments. Money360 loan portfolio exceeds $200M. Funding Circle launches C shares offer for the fund. Today’s main analysis: Signs of a turnaround in volumes? Today’s thought-provoking articles: Groundfloor launches tax-deferred real estate investing. China’s yield-strapped investors spark P2P explosion. United States CreditEase Fintech Investment Fund announces new investments […]

orchard originations

News Comments

United States

United Kingdom

China

India

Asia

Africa

News Summary

 

United States

CreditEase Fintech Investment Fund Announces New Investments in Global Growth-Stage Fintech Companies (PR Newswire), Rated: AAA

CreditEase Fintech Investment Fund (“CEFIF”), a venture fund investing in growth-stage fintech companies in China and globally, announced at the 2017 LendIt USA Conference in New York that it recently participated in investment transactions in three new fintech companies. LendIt annual conferences are recognized as one of the largest global fintech industry events dedicated to connecting the global fintech and lending communities.

The three investment transactions include Series C financing round in Trumid, an electronic trading platform for the bond market, Series B financing round in WeConvene, an online corporate access management ERP provider for capital markets, and Seed Round financing round in WorldCover, an innovative peer-to-peer insurance network.

Money360 Doubles Loan Portfolio, Exceeds $ 200 Million Mark (Yahoo! Finance), Rated: AAA

Money360 has doubled its portfolio in record time, having surpassed the $200 million mark this month in closed commercial real estate loans, the company announced today.

It took Money360 more than a year and a half to hit the $100 million mark, but less than six months to increase to $200 million, and by year-end, it expects to exceed $500 million in transactions.

The $200 million milestone came on the heels of four recent loan closings totaling nearly $38 million. All of these loans represent a loan-to-value ratio of not more than 75 percent and include:

  • A $16.2 million bridge loan for a single-tenant, 71,132-square-foot office property constructed in 2006 located in Rosemont, Illinois.
  • A $12.3 million bridge loan for a single-tenant suburban office property in Auburn Hills, Michigan.
  • A $7.5 million bridge loan for two industrial buildings in Irvine, California.
  • A $1.9 million permanent loan for an unanchored, 100-percent-leased retail property in Smyrna, Georgia.

Signs of a Turnaround? A Closer Look at Orchard’s 2016 Q4 Report (Orchard Platform), Rated: AAA

Origination numbers fell consistently over the course of 2016, and we have been waiting to see whether that was going to continue or whether we would eventually see an uptick. In Q4, we finally saw an uptick.

Not a huge one. It’s about a 10% increase over Q3 numbers. And that’s still down significantly from the peak last year, about 46% from what we recorded in Q4, 2015.

Charge-off Rate Vintage Curves

Back in 2010, the size of the industry and the volume of loans originated were pretty small. There were also fewer lenders focused on subprime lending. Additionally, a larger percentage of 2010 loans had a term of 36-months. 60-month loans have grown more in later years. 36-month loans have shown a tendency to charge-off at slightly lower rates.

This introduction of new loan products for lower credit quality borrowers in later vintages—i.e. lower lending standards and longer duration loans—means that the 2010 vintage includes not only fewer loans, but the loans tended to be of a higher credit quality. Given those factors, charge-offs are bound to be lower in the 2010 vintage.

More recent years all stack together pretty tightly, within 1-2% of each other in cumulative charge-offs. However, 2014 and 2015 vintages seem to be charging off at a slightly faster rate, at least, as of this latest report.

Borrower Interest Rates

Since Q2 of 2016 we’ve seen borrower rates fall in both Q3, and Q4 by around 1.2%.

Subprime rates are significantly higher. They’re in the 25-40% range. Whereas the prime lenders are going to be in the 8% to maybe 15-20% range. We end up with a weighted average of ~16%.

GROUNDFLOOR Launches Tax Deferred Real-Estate Investing (Press Release Rocket), Rated: AAA

GROUNDFLOOR, the first and only U. S. real estate lending platform open to non-accredited investors and IRA Services Trust Company, the leading innovator of hi-tech Self-Directed Individual Retirement Account (SDIRA) solutions, today announced an initiative to maximize the benefits of tax-deferred investing for retail investors. As a result of the collaborative effort, GROUNDFLOOR will immediately begin inviting investors on their platform to fund their accounts directly through their 401(k)s and IRAs.

GROUNDFLOOR offers real estate investments with different grades that have a range of risk/reward profiles, offering returns ranging from 5% to over 20% so investors can build a diversified portfolio. In 2016 GROUNDFLOOR delivered loans with an average annualized return of 14.16%.* Compared to 2015, in 2016 loan origination volume in dollars grew by 621%, and the dollar value of principal repaid grew by 588%. Only one of the 108 loans repaid to date has returned less than 100% of the principal due back to GROUNDFLOOR’S investors.

At a time when private markets continue to deliver superior returns compared to public markets, most Americans currently saving for retirement can no longer rely solely on traditional stocks, bonds, and mutual funds for growth and yield. At the same time, many investors have been hesitant to participate in SDIRAs because of the expense, burden, and paperwork traditionally associated with the self-directed investment of tax-deferred funds.

GROUNDFLOOR and IRA Services are working together to address these issues head on: IRA Services’ real-time, cloud-based, API-driven retirement investment solution for the P2P industry – the first of its kind – streamlines the once difficult process of investing tax-deferred funds in P2P marketplaces. Meanwhile, GROUNDFLOOR is the only P2P marketplace where both accredited and non-accredited investors can directly invest in private real estate projects on terms they control, rather than turning their money over to a fund.

How Whitepages Turned Their Data into an Identity Verification Tool for Online Lenders (deBanked), Rated: A

Whitepages might be a 20-year old company but the data they’ve amassed over time can add significant value to online lenders, the company claims. Whitepages Pro, which offers identify verification, allows lenders to gauge if an individual is real.

A simple query of an individual’s name, phone number, email, address or business name will return results not easily accessible elsewhere, like how long that person’s email address has been in their system or the likelihood that the email address was generated by a bot, not a real person. A match is good, no match might not be good, they say. Their system can also do things like identify the carrier the phone number belongs to and whether or not that carrier, if it’s VOIP or something, might have a higher propensity for fraud.

Machine Learning is the Future of Marketplace Lending (Due), Rated: A

At LendIt USA, CEO Scott Sanborn shared that his team at Lending Club uses a manual process to dynamically price loans. Unsurprisingly, some loans are more sought after than others, but matching the pricing with demand is a labor-intensive process. With AI and machine learning, Lending Club and other online lenders may be able to rapidly update loan pricing automatically to maximize investor yield and industry profits while ensuring virtually every loan gets funded.

Lending Club, the dominant player in the peer-to-peer lending industry, grades loans from A to G, corresponding to interest rates from 5.32% to 30.99%. While this model is widely accepted and similar systems are used for virtually all bank and private lending, there are flaws in the model.

Airlines use complex algorithms to determine seat prices, but machine learning, commonly called artificial intelligence or AI, to better understand how people are interacting and purchasing. Rather than just increasing prices as the flight date gets closer, a computer could look for purchase trends and dynamically adjust prices on its own rather than leaning on a pre-determined schedule based on a series of inputs.

If this same logic were applied to a lending marketplace like Lending Club, it could look at trends, loan availability across multiple platforms, risk factors, and current interest rates across multiple lending marketplaces to best price loans. This ensures the best results for lenders and borrowers, as every loan would be funded and yields would be optimally set.

Small Biz Lending Approval Rates Surge at Big Banks, Institutional Investors: Biz2Credit Small Business Lending Index (Biz2Credit), Rated: A

Loan approval rates at big banks ($10 billion+ in assets) improved to new post-recession highs in February 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com.

Small business loan approval rates at big banks improved to 24.1% in February 2017, marking the seventh consecutive month of increases and the 11th time in a calendar year that approval percentages have increased. Further, loan approval rates at big banks in a year-to-year comparison are up more than one full percentage point, as they slowly creep towards the one-quarter mark.

For the first time in the last six months, loan approval rates at small banks dropped by one-tenth of a percent to 48.8% in February 2017 from 48.9% in January.

Institutional lenders’ loan approval rates improved to 63.5%, reaching a new Index high.

Loan approval rates dropped at alternative lenders in February, as they approved 58.4% of the loan requests they received, down one-tenth of a percent from 58.5% in January.

CFTC Chief Pick Says Commission Should Embrace Fintech (WSJ), Rated: A

J. Christopher Giancarlo, who Mr. Trump tapped Tuesday as the permanent head of the Commodity Futures Trading Commission, said in a speech here Wednesday he has instructed staff to examine the role the agency can play in promoting fintech in the multi-trillion-dollar derivatives markets it oversees.

Mr. Giancarlo has long argued the CFTC should do more to embrace financial technology, which he says has the potential to transform finance, in part by significantly boosting the quality of swaps data that regulators collect from the industry. He has tapped a top CFTC staffer, Jeffrey Bandman, to head the agency’s fintech efforts, according to people familiar with the matter.

‘Sick and tired of no one innovating’: Confessions of a financial tech entrepreneur (Tradestreaming), Rated: A

For the latest in our Confessions series, we spoke to a startup entrepreneur with considerable experience in the banking sector.

So banks are making more money off of high-income customers, and are pushing the startups to take the lower income ones they don’t want?
They would much rather get their tax breaks and give to charity and say they’re doing good for the country than get their hands dirty with a bunch of very subprime demographics. The fintech guys have to go to high risk. If you’re a bank, you can cherry-pick all the rich people and not have as many defaults in a downturn.

What about accelerators and incubator programs where the banks mentor startups. Doesn’t that show their goodwill?
They just steal your ideas. They’re not doing it for the good of their soul. They’re doing it to take a chunk and or steal the idea as you build it and do it themselves.

If it’s so hard to get your product to market, what’s the objective of a startup entrepreneur? Is it just to cash in when you’re acquired by a bank?
If you’re looking to make a little bit of money quick, it’s probably not a bad play, but if you’re actually looking for any kind of change in the world, and you believe in that, it’s not a good move. That’s the reason why people go into this, and I believe I’m one of them. I am bored and sick and tired of no one innovating in the space.

FinTech: Some Limits on Smart Contracts (The National Law Review), Rated: B

Milos Dunjic argues that the Capabilities of Smart Contracts are Overblown because most people misunderstand the fundamental properties of smart contracts and propose ideas that are not implementable on a practical level.

As for scalability, smart contract code must produce the identical outcome in every node that executes it. Dunjic questions whether a large number of distributed nodes all hitting a “funds transfer” API at the same time might look like a self-inflicted DDOS attack on the API. Would each call to the API receive exactly the same response from the API? Reliability must be absolute in a smart contract.

Fintech And Digital Wallets: Innovative Approach vs. Security Concerns (ValueWalk), Rated: B

In CES 2017, Samsung has declared that its Gear 2 will be outfitted with Samsung Pay, the digital wallet application of the organization. In the coming era, we can see more gadget producers integrate advanced wallet services.

Mobile payment procedures including bank transfers and cards are more secure now with the assurance of biometric validation. The unique mark scanner or face identification programming on a few handsets and platforms permit the users to enlist his biometric data with the gadget and from that point utilize them for any transaction when it needs confirmation. On account of biometric validation security vulnerabilities with mobile payment could be limited as it were. In future, we can expect the expansion of such computerized transactions with biometric confirmation constraining the security dangers and ruptures to a base.

Impact Investing Growing Among Alternative Managers (Private Wealth), Rated: B

Impact investing is growing in importance among the alternative investing community, according to a new survey by the Chartered Alternative Investment Analyst (CAIA) Association.

Assets under management in impact investments have grown 18 percent year-over-year for the past three years, according to the Global Impact Investing Network (GIIN). Total industry assets under management in traditional private equity impact investments are estimated to be around $80 billion.

United Kingdom

Funding Circle SME Income Fund launches C shares offer (AltFi), Rated: AAA

THE FUNDING Circle SME Income Fund has launched its first conversion (C) share fundraising as part of plans to raise additional capital over the next 12 months.

The placing is open until 6 April at a price of 100p per C share and the new class will list on the London Stock Exchange on 11 April.

The London-listed investment trust, which invests in loans on the Funding Circle platform, issued a new prospectus in February as it looks to issue up to 500 million new shares over the next 12 months.

China

Yirendai Appoints Chief Credit Officer (PR Newswire), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced the appointment of Dr. Yichuan Pei as its Chief Credit Officer.

Dr. Pei will be responsible for the overall management of Yirendai’s Credit Department to ensure that the credit risk of loan portfolio on the Company’s platform is within the Company’s guidelines. He will also work closely with the Company’s Chief Risk Officer, Ms. Yiting Pan, to manage the Risk Management Department. Ms. Yiting Pan is expected to transit from her current position as Yirendai’s Chief Risk Officer into a new role with CreditEase and relocate to the U.S. in the middle of 2017 due to personal reasons. Dr. Pei will take over the full responsibilities of risk management and assume the Chief Risk Officer position at end of the transition period.

China’s yield-strapped investors spark peer-to-peer explosion (Nikkei Asian Review), Rated: AAA

Peer-to-peer lending is surging in China as conventional financial products lose their appeal — creating new opportunities and substantial risks for yield-hungry retail investors.

Outstanding peer-to-peer loans — funds lent by one individual to another through the internet — stood at 885.7 billion yuan ($128 billion) in China at the end of February. That is eight times the level of barely two years ago.

Companies are getting into the game, borrowing hundreds of thousands of yuan in operating capital. Lending services are now offering to choose investments for customers. For funding riskier borrowers, lenders can expect yields on the order of 8-12%. These loans turn over quickly in many cases, often in less than a year.

China’s peer-to-peer lending balance stood at just 103.6 billion yuan at the end of 2014, according Yingcanzixun.com, a site tracking the peer-to-peer industry run by Shanghai Ying Can Investment Management Consulting. Within a year, that surged to 406.1 billion yuan. Lending could top 1.3 trillion yuan by the end of 2017, an executive with Yingcanzixun predicted.

India

V Balakrishnan’s startup Billionloans looking to raise mn shortly (India Times), Rated: AAA

Billionloans, the online lending platform founded by former Infosys CFO V Balakrishnan, is looking at raising $1 million in funding within the next few weeks as it focuses on building a Rs 1000-crore loan book in two-three years.

Because the Billionloans platform functions as a marketplace, it does not take the risk of loan defaults itself. The lending is also done by institutional lenders who have the ability to make collections in case of defaults.

Balakrishnan’s platform will use a potential borrower’s social media behaviour, device information, banking transaction history and the results of a psychometric test to determine intention to repay to issue a score to gauge credit worthiness. The platform uses Micrograam’s underlying technology to issue the score, Balakrishnan said.

 

Asia

Singapore P2P Lender Silver Bullion Hits 1000 Loan Milestone, Over SM Lent (Crowdfund Insider), Rated: AAA

Launched only 19 months ago, Silver Bullion Pte Ltd‘s bullion has secured P2P loan platform has matched 1000 loans. While it took roughly 13 months to match its first500 loans, it took only another 6 months for Silver Bullion to reach 1000 loans.

Silver Bullion’s bullion secured P2P loan platform has now matched more than S$27M in loans. In Q1 2017, the U.S dollar denominated 12-month loans were matched with an average interest rate of 4.0% p.a while the Singapore dollar denominated 12-month loans had an average interest rate of 4.2% p.a.

Africa

Crowdfunding the solution for SMEs? (Moneyweb), Rated: A

Traditional financial institutions are generally reluctant to serve SMEs due to the high costs associated when assessing these businesses, their volatile balance sheets and the inherent high risks involved with start-up companies. This lack of financing for SMEs has exposed a gap in the South African lending and borrowing market, and has encouraged development in the sphere of social lending, also known as crowdfunding.

Online marketplace lending in South Africa is becoming an increasingly popular alternative to traditional financial institutions, which for years dominated the lending and borrowing market with high interest rates, rigorous red tape, excessive bank charges and inflexible attitudes. Social lending is revolutionising the manner in which SMEs and conventional corporate citizens access funding and it is disrupting traditional understanding of how money is lent and borrowed. Crowdfunding eliminates the need for traditional financial institutions in the context of SMEs and provides consumers with a convenient and flexible online funding platform that offers competitive interest rates, low fees and charges, and advantageous terms and conditions.

Launched in 2012 as the first online marketplace lending platform in South Africa, Rainfin Proprietary Limited (RainFin) has experienced rapid growth and popularity due to its ability to match borrowers directly with lenders.

However, despite the popularity and growth of these crowdfunding platforms in South Africa, they are not free of burdens and restrictions. The National Credit Act 34 of 2005 (NCA) previously allowed an individual to lend up to R500 000 to another individual without being registered as a credit provider.

Authors:

George Popescu
Allen Taylor

Thursday January 5 2017, Daily News Digest

China P2P lending

News Comments Today’s main news: Landbay launches new landlord products. Funding Circle secures additional funding from UK government. Today’s main analysis: 4 reasons FinTech potential remains untapped. Today’s thought-provoking articles: Ron Suber says victory goes to those who change. China’s P2P lending growth slows. United States 4 reasons FinTech potential remains untapped for 2017. AT: “This […]

China P2P lending

News Comments

United States

United Kingdom

European Union

China

Asia

United States

4 Reasons The Fintech Potential Remains Untapped For 2017 (NASDAQ), Rated: AAA

What if 40% of corporate profits were generated by an industry still fundamentally reliant upon a technology introduced over 140 years ago by Alexander Graham Bell? This disruption of financial services is the focal point of the fintech revolution, integrating digital technology for the modern economy and investor.

Increasingly, fintech is questioning the viability of this antiquated business model, leveraging digital technology much as Uber, Netflix and Amazon have to disrupt static industries. Here are four reasons the fintech potential remains as yet untapped.

1) Financials are Historically Tech Averse

This technological stagnation in financials is even reflected in its price action. In this chart, the financial sector exhibits only a weak correlation to technology as compared to the S&P 500 Index, lower on average by 0.277 points. This tenuous correlation suggests a fundamental disconnect between the financial and tech industries.

2) Fintech Can Compete on a Wide Economic Frontage

Finance’s historical aversion to tech adoption fosters a vast array of market opportunities for fintech, affording a wide range of revenue streams. While digital payments is perhaps the most mature fintech segment, itself a $450 billion industry, some of the most aggressive fintech activities focus on customer origination and sales, which accounts for 60% of financial revenues.

3) Fintech Grounded in a Strikingly Efficient Economic Model

nstead of being channeled through a series of agents and middlemen, each extracting fees for the “access” they provide, the fintech tactic allows for significant cost compression. In particular, digital lenders can operate at up to a 400 basis point cost advantage over status-quo actors, gains achieved through reduced fixed costs and overhead.

These technology-inspired solutions specifically target customer origination, one of the most lucrative business segments for banks with a 22% Return on Equity. With this competition from fintech, analysts at PriceWaterhouseCoopers project that 28% of retail banking revenues will be at risk by 2020.

4) Fintech Investment Dynamics Intensifying

Considering how embryotic the fintech movement is, the industry offers a remarkably dynamic investment space. As perspective on how early in the business lifecycle fintech is, consider that venture capital accounted for 86% of all fintech investment in Q1 2016; that is roughly 7 out of every 8 dollars.  Moreover, the rate of investment into fintech is accelerating sharply reaching $22.3 billion in 2015, nearly as much as the preceding 5 years combined.

Prosper President Ron Suber: “Victory Goes to the Ones Who Change” (Crowdfund Insider), Rated: AAA

As investor demand declined, Prosper endured a decline in transaction fee revenue. The company predicted a further decrease in transaction fee revenue in the fourth quarter of 2016 vs 2015 as well.

Rumors churned that Prosper may be up for sale as it searched for capital. One casualty of the turmoil was Prosper CEO Aaron Vermut who was replaced by then-CFO David Kimball.

The one constant in the lending universe of turmoil has been Prosper President Ron Suber.

Crowdfund Insider: 2016 was a challenging year for online lending, in your opinion what were some of the biggest issues the industry encountered during the year?

Ron Suber: What I’ve learned: 

Change is the only constant. Victory goes to the ones who change and adjust best because companies evolve, technologies become outdated, regulations change, relationships morph and opportunities appear in a shifting landscape.

Crowdfund Insider: What about the securitization of marketplace lending loans?

Ron Suber: Securitizations are a critical component to the future success, growth and distribution of assets for the global online lending industry. They must be structured right from day one, consistently distributed to the appropriate investors, provide performance as expected along with transparency to continue successfully.

Crowdfund Insider: Demand for credit remains robust. How will online lending continue to be competitive?

Ron Suber: Each platform must continue to update/improve the pricing, credit, risk and underwriting models while incorporating new sources of data. The advancements in machine learning, identity/income/employment verification methods along with new borrower acquisition channels will enable the leading platforms to extend their competitive advantages.

Crowdfund Insider: What are your predictions for US online lending for 2017.  

Ron Suber: Progress will continue to be made but it will not be a straight line.

LendingTree, Inc. to Present at the 19th Annual Needham Growth Conference (Yahoo! Finance), Rated: A

LendingTree, Inc. (TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced that it will participate in Needham & Company’s 19th Annual Growth Conference at The Lotte New York Palace Hotel in New York City.

Kabbage could be the best lending option for the next phase of your biz (The American Genius), Rated: A

Alternative lending companies aren’t typically as strict as big name banks, and therefore have higher acceptance rates. The leniency from alternative lending companies is great for small businesses with financial dings or questionable credit history. Alternative lending also offers benefits such as quicker approval times, more flexibility, and less paperwork.

Small businesses must have been in business for at least a year, and earn at least $4,200 in mostly revenue. Monthly revenue, transaction volume, and credit score are also deciding factors.

Once linked, Kabbage will review the data to determine loan eligibility. Compatible banks and online services include: Chase, Bank of America, Wells Fargo, PNC, U.S. Bank, Regions, BB&T, TD Bank, USAA, Citibank, Capital One, SunTrust, Navy Federal, BBVA Compass, Fifth Third Bank, PayPal, Authorize.Net, Stripe, Sage, Square, eBay, Shopify, Yahoo, Amazon, Etsy, and Intuit.

FYI: Kabbage also looks at personal credit score, which should be at least above 550.

Although we like Kabbage overall, it is our responsibility to tell you about the things we don’t like. The biggest complaint we have is the limited amount of time small businesses have to repay their loan.

Trump, fintech win big among top 10 financial terms of 2016 (CNBC), Rated: B

According to Investopedia, the Top 10 terms of 2016 were:

5. Fintech. “The financial technology industry continues to grow with investments pouring into the industry in 2016. Often conflated with the lending industry, fintech firms are revolutionizing everything from banking and payments to insurance, advising and everything in between. As the financial sector begins to understand the full impact of fintech, 2017 looks poised to be another winner for industry.”

4. Peer-to-peer lending. “The Lending Club scandal cast peer-to-peer (P2P) lending into the spotlight, and the light doesn’t seem to be fading anytime soon. Traffic for this term has doubled in popularity since last year. P2P lending allows individuals to borrow and lend money without the use of a middleman (like a bank).”

2. Blockchain. “With technology rapidly changing the world, the hype around blockchain skyrocketed in 2016. Blockchain has been popular with apps like Venmo and other mobile banking start-ups, but now traditional financial institutions are exploring this new technology for opportunities to better interact with customers, suppliers and competitors. Investors are paying attention. Blockchain is now a top 50 term on the site.”

United Kingdom

Landbay Kicks Off 2017 By Launching New Professional Landlord Products (Crowdfund Insider), Rated: AAA

Landbay, a peer-to-peer lending platform, is now offering new products for professional landlords. The lender will now offer standard term tracker at 3.88% to 65% loan-to-value, along with offering fixed rate products from 4.2%, an HMO tracker starting at 3.98% and an expat tracker starting at 4.38%.

The launch of the professional landlord products comes just a couple of weeks after Landbay announced it received full authorization from the FCA for peer to peer lending.

A look back – the key P2P events of 2016 (P2P Finance News) Rated: A

By the third quarter of the year, UK P2P lending had hit £6.5bn, while globally the sector was valued at more than £106bn, a 271 per cent increase on the previous year. One by one, the UK’s biggest platforms reported record-breaking lending figures, while government initiatives such as the Innovative Finance ISA (IFISA) and the bank referral scheme ensured that P2P lending finally broke into the mainstream.

January

The year got off to a great start for the P2P sector, with the news that the UK peer-to-peer lending industry doubled to £2.2bn last year, with the number of borrowers increasing by 96 per cent.

In the US, Lending Club’s share price was down, and in China, Ezubao lenders were starting to question why the platform had suddenly gone quiet.

February

This was the month that China’s P2P bubble burst.

April

On 6 April, the game-changing IFISA was finally introduced, allowing consumers to make tax-free investments (up to £15,240 for the 2015/16 tax year) in P2P platforms for the first time.

May

This was the month that the Lending Club scandal broke, leading to the resignation of founder and chief executive Renaud Laplanche.

June

There is only one word to sum up June 2016: Brexit.

August

The Brexit effect finally reached consumers in August, as the Bank of England slashed the base rate to an all-time low of 0.25 per cent in an effort to increase lending and stimulate the flagging economy. These interest rates had an almost-immediate effect on high street savings accounts, and by the end of November the average cash ISA rate was just 0.73 per cent.

September

Zopa took the world by surprise when it announced its first securitisation deal at the end of September.

In the third quarter of the year, US securitisation hit a record $2.3bn with more than half of the loans now backed by assets, and Moody’s predicted that the UK is set to see a securitisation boom of its own.

October

Throughout October, banks began to tighten lending requirements, and SMEs struggled to find finance in the wake of the Brexit fallout. By the end of the month, the government launched the long-awaited bank referral scheme, which will see major high street banks refer SME borrowers to sources of alternative finance, including P2P.

December

Having announced the launch of a digital bank at the end of November, Zopa continued to ring in the changes with a full rebrand in December. Meanwhile, RateSetter completed another industry first by selling off £2.1m of bad loans to debt management company 1st Credit.

After months of consultation, the FCA finally laid out its regulatory plans for the P2P sector.

European Union

Funding Circle secures additional financing from UK government (Financial Times), Rated: AAA

Peer-to-peer lending platform Funding Circle has secured £40m from the UK government to support small businesses amid concern that the Brexit vote could constrain credit.

But the latest deal comes as doubt is cast over future support from EU states for small British businesses following the Brexit vote.

Funding Circle struck a deal before the referendum in June with the European Investment Bank, whose shareholders are members of the EU, for the bank to lend £100m.

Barclays research has found that one in five small companies believes Brexit is affecting their current or future funding requirements. The most common reasons cited were a need to start exporting to new non-EU markets, economic uncertainty and a need to replace current employees who are EU citizens.

Popular fintech Companies in Lithuania (TechBullion), Rated: B

Lithuania has made a significant progress in creating a suitable environment for the development of the Fintech sector: legal acts regulating P2P lending platforms have been adopted, simplified procedures for getting licences for the activities of payment and e-commerce institutions have been approved, and the government has approved the Draft Law on Crowdfunding.

TransferGo is Lithuanian Start-up that aims to change the way we see money transfer.

Licenced in 2016 in Lithuania, Moneta International offers an innovative and unique B2B payment and cash management.

Established in 2004, Paysera is an international electronic payment system that allows people to receive and send money all around the world, collect payment and exchange currency via the Internet or by SMS messages.

Coingate is a Bitcoin payment processor that allows businesses to accept Bitcoin and receive pay-outs in US Dollars, Euros or bitcoin.

Lenndy is the first real estate crowdfunding platform in Lithuania.

OPAY is an online payment collection system for e-commerce.

SAVY is the first P2P online lending marketplace in Lithuania focused on secured and unsecured consumer loans.

Mintos is a Latvia p2p lending marketplace that started to operate in Lithuania in 2015.

China

P2P lending growth slows amid new compliance rules (ChinaDaily), Rated: AAA

The growth rate of China’s peer-to-peer lending transaction volume dropped by nearly half in 2016, as the industry faced reshuffling amid a slew of compliance regulations.

Last year, the transaction volume of P2P lending nationwide, which involves small businesses or individuals borrowing money from online investors, exceeded 2.8 trillion yuan ($403 billion), increasing by 138 percent from a year earlier. But the growth slowed down to slightly more than half of the growth rate in 2014 and 2015, according to a report by P2P001, a Shenzhen-based financial web portal, on Monday.

As of the end of 2016, 184 P2P lenders, or 7.98 percent of 2,307 P2P lenders that were running without severe financial problems, launched a fund custody mechanism, which they established directly with commercial banks. Another 122 such companies signed a fund custody agreement with banks but had not yet launched the mechanism, the report said.

As of the end of 2016, the total loan balance of P2P lending companies hit a record high of 1.21 trillion yuan, increasing by 115.9 percent from the end of 2015.

Banking regulator encourages growth of consumer lending (Ecns.cn), Rated: A

China’s banking regulator will encourage the launching of more consumer finance companies while helping them improve comprehensive risk management.

Since the State Council agreed to launch a trial program on consumer finance companies in four cities, including Beijing and Shanghai, in 2009, the China Banking Regulatory Commission has approved the establishment of 17 consumer finance companies.

As of the end of September, total assets of consumer finance companies reached 107.72 billion yuan in China. Their total loan balance was 97.03 billion yuan and the average nonperforming loan ratio was 4.11 percent. These companies lent an accumulated amount of 208.44 billion yuan to 24.14 million clients, according to the CBRC.

Asia

Indonesia Introduces New Regulation For P2P Lending Startups (News BTC), Rated: AAA

In Indonesia, various fintech startups are active in the P2P lending sector. Until now, they have been unencumbered by existing financial regulation. But that situation will come to change, as the government issued a new regulation. Firms are required to have a minimum of Rp1bn when registering with the Indonesian Financial Services Authority. Additionally, there is a capital requirement of Rp2.5bn when applying for a business license.

P2P Lender Silver Bullion Passes $ 20M in Secured Lending (Crowdfund Insider), Rated: A

Silver Bullion is a one of a kind online lender. The peer to peer lending platform based in Singapore is a secured lender that backs up each loan with gold or silver bullion.

Launched in mid-2015,  Silver Bullion has just announced it has surpassed S$20 million in lending from around 800 loans. According to their website, loans are ranging from 2.75% to 4% interest.

Asset managers cannot afford to ignore robo-advice, digital ledger technology (The Asset), Rated: A

Cerulli Associates, a global research and consulting firm, says that managers should not ignore the spread of roboadvice and the emergence of digital ledger technology (DLT).

Cerulli expects that a hybrid robo-advice model, which allows investors to benefit from robo’s lower fees and digital efficiency while bolting on specialist face-to-face consultation, will prove popular.

Authors:

George Popescu
Allen Taylor

August 10th 2016, Daily News Digest

August 10th 2016, Daily News Digest

News Comments Today’s most interesting article are FT’s report on Lending Club’s Q2 results and a few articles on new regulations, policy and VPC’s fund and strategy in the UK section. Today’s good news: CUneXus raised $5 mil. Congratulations ! United States One of the most interesting articles on Lending Club’s Q2 results, thought through, and with […]

August 10th 2016, Daily News Digest

News Comments

United States

United Kingdom

European Union

India

Singapore

 

United States

Lending Club’s latest results tell us a lot about the online credit business model, (FT Alphaville), Rated: AAA

Lending Club released its second-quarter results yesterday. Besides the updates on repairs after its scandals earlier in the year, executives provided an insight into some broader shifts that have been bubbling under the surface for some time.

Total originations in the second quarter were $1.96 billion an increase of 2% compared to last year. The slower origination growth was due to the slowdown in investor capital that occurred post May 9. Roughly 51% of the second quarter volume was originated prior to May 9, which represented 42% of the quarter in terms of calendar days.

You can file that under statements that are meant to re-assure but reveal trends that may or may not be worrying depending on your perspective. If you take the bait, and do the maths, you find that even without the slowdown post May 9 — the date founder Renaud Laplanche left the company — Lending Club was on track for year-on-year origination growth of 46 per cent for the quarter.

That compares with y-o-y growth of 68 per cent in the first quarter, 82 per cent in the fourth quarter last year, 92 per cent in the third quarter last year and 90 per cent in the second quarter of 2015. If you assume that Lending Club’s originations would have continued at the same pace after May 9, instead of accelerating, for example, then it seems that the company’s loan growth has been slowing quarter-on-quarter for a little while.

If you take the view that very fast loan growth is desirable, then this is a bad thing. But if you think that numbers like 90 per cent don’t belong in conversations about loan growth, then it’s a good thing. Jaidev Janardana, chief executive of Zopa, told us recently that volume is “a bad metric to be worried about”.

After Brexit, the online lender began rejecting the least credit-worthy customers who would have previously received a loan and assuming a higher level of risk for customers it accepted, which resulted in a higher cost of borrowing for those people. All else equal, the changes had the effect of shaving 10 per cent off its volumes. “We should make the right lending decisions and if that means we are going to grow slower for a period of time, so be it,” said Janardana.

You can see similar things happening at Lending Club, for different reasons, as per this slide from the second quarter investor presentation:

The first thing to note there is the population reduction in the lowest rated loans.

“As this recovery gets longer, credit has become more available and these individuals in particular have shown a propensity to be building debt kind of coming into the loan and then continuing to accumulate debt after the LendingClub loan as opposed to leveraging the loan to kind of pay off their debt.”

He’s basically saying that subprime borrowers have been coming to Lending Club for easy credit, rather than debt consolidation.

The second thing to note from the slide above is the interest rate hikes.

Those two bars in the middle show how the investor base changed after the scandal. In particular, banks who were previously buying Lending Club’s loans seem to have fled in larger numbers than any other category (though, obviously, the figures in the chart are percentages rather than absolute numbers).

Sanborn talked about this on the call too, in effect providing a hierarchy of funding sources. First, he noted the “self-managed retail investors who proved to be the most resilient”. Then he talked about managed accounts, which includes funds set up to invest in Lending Club’s loans. They “initially paused” but after being paid to buy loans — “incentives,” as Lending Club calls them — many returned.

Then we get to “asset managers, insurance companies, hedge funds and securitization investors”. They “experienced a significant pause”, which is a rather passive way to say they got scared off by a major scandal involving the former chief executive. Asset managers and hedge funds, who were “the most responsive to incentives”, were the first large investors to resume buying, Sanborn said. (As a side note, “responsive to incentives” is a great bit of code to remember if you’re ever asking for a bribe.)

And finally, the banks, who have “more complex diligence and regulatory requirements”, are taking the longest to come back to Lending Club. Things on this front are likely to get tougher for online lenders. Late last month, the Federal Deposit Insurance Corporation invited comments on new proposals for how banks shouldmanage third-party lending relationships.

Online lenders like Lending Club are very unlike banks in a great number of ways, but the role their retail investors play seems awfully like the role that depositors play at banks. They both are the last line of defence and risk losing their money when it all goes wrong. In the case of a bank depositor, government insurance protects them up to a point. But if you’re a retail investor on Lending Club, you own promissory notesissued by the company rather than loans themselves, so all that protects you at present is the fact that Lending Club has no debt.

To close, here’s how much the mess that led to Renaud Laplanche’s departure cost the company (our emphasis):

GAAP net loss was $81.4 million for the second quarter of 2016, compared to a net loss of $4.1 million in the same period last year. The results for the second quarter of 2016 were negatively affected by a Goodwill impairment charge of $35.4 million related to the 2014 acquisition of Springstone, an increase in professional service fees of $14.9 million primarily due to matters identified in the board review previously announced, approximately $14.0 million in incentives paid to investors, and an increase in compensation related costs of $6.5 million associated with severance costs and a retention program.

With this Lending Club disclosure from May, shortly after Laplanche left (our emphasis again):

On May 11, 2016, the compensation committee of the board of directors approved incentive compensation packages and salary adjustments for certain named executive officers. Specifically, Carrie Dolan, the Company’s Chief Financial Officer, was granted $3.5 million in restricted stock units (RSUs), which vests quarterly over a four year period, and a $500 thousand cash award, payable twelve months from the grant date. The compensation committee also approved an increase to Ms. Dolan’s base salary to $400 thousand per year, with a 75 percent bonus target. John MacIlwaine and Sandeep Bhandari, the Company’s Chief Technology Officer and Chief Risk Officer, respectively, each received $500 thousand in RSUs, which fully vest twelve months from the grant date, and a $500 thousand cash award, payable twelve months from the grant date.

Here is the Q2 Earnings Deck for Lending Club, (Crowdfund Insider), Rated: AAA

Here is the deck.

Sanborn put an upbeat spin on the results stating they were “confident on their future”. [Comment: the moment when the CEO is anything less than upbeat it’s time to jump ship. So no surprise here. A CEO being upbeat is what I would say “business as usual”. ]

An interesting factoid shared on the call. The Board Review, initiated following the shocking departure of former CEO Renaud Laplanche, cost the company (and thus investors) $13 million.

 

CUneXus Closes $ 5 Million Series A, (Finovate), Rated: A

CUneXus, creator of sales and marketing automation solutions for lenders, quietly closed a $5 million funding round late last week. Two investors contributed to the round; both prefer to remain anonymous.

The California-based company’s total raised is now $7 million. Regarding plans for the funding, CUneXus president & CEO Dave Buerger said, “The use of funds is twofold: (1) aggressive growth and the addition of key personnel, and (2) continuous product development and improvement.”

Since launching in 2011, CUneXus has built a host of solutions for online and mobile lending and cross-selling. At FinovateSpring 2016 the company announced its recent partnership with Edmunds.com and showed off AutoXpress, a vehicle purchasing experience that takes place completely online or on mobile.

Lending Club looks for reprieve in year of bad news, (SiliconBeat), Rated: A

Comment: this is yesterday’s news, literally. As I explained yesterday, I believe the Q2 numbers for Lending Club are actually really good given the circumstances. The journalist here focuses on the profit and loss line item which is not at all a good indicator of Lending Club’s business at this time. 

The latest black eye for Lending Club came late Monday, when the company reported a second-quarter loss that ballooned from a year ago due to a big drop in loan volume. Lending Club said it lost $81.4 million, or 21 cents a share, on revenue of $103.4 million, compared with a loss of $4.1 million, or a penny a share, on $97 million in sales a year ago. Excluding one-time items, Lending Club lost 9 cents a share.

Those results fell short of the estimates of analysts surveyed by Thomson Reuters, who forecast Lending Club to lose 2 cents a share on $100.5 million in revenue. Lending Club said one of the main factors in its results falling short was that its loan volume, or the value of the loans it handled during the quarter, fell by 30 percent from a year ago to $1.96 billion. The company also said its loan volume would be flat for the rest of the year.

There was also another shake up in Lending Club’s executive ranks, as the company announced the departure of Chief Financial Officer Carrie Dolan. Dolan’s departure comes about three months after Lending Club founder Renaud Laplanche was forced to resign amid a scandal involving loans that were made against the instructions of an investor, as well as Laplanche and his family members improperly using the Lending Club platform to take out multiple loans in late 2009.

Loan originations rose 41 percent from a year ago, to $589.7 million, which Jefferson Harralson, of Keefe, Bruyette & Woods said became “more optimistic” and could offset some of the recent worries about Lending Club’s business.

PYMNTS Daily Data Dive: OnDeck Is On Track With Q2 Earnings, (PYMNTS), Rated: A

The company has altered its business model and is taking on more loans in the balance sheet. Credit performance has improved, which has increased the provision for loan losses. The company is advancing its international expansion, its partnership with JPMorgan and expects gross revenue between $73 million and $76 million in Q3.

Here are the numbers:

$69.5 million | OnDeck’s revenue, which was a year-on-year increase of 9.8 percent and $1.6 million over analyst expectations

$32 million | Provision for loan losses, almost twice the $15.5 seen this time last year

47% | The year-on-year growth in loans under management, reaching $1 billion

41% | The year-on-year growth in originations, which reached $590 million

$0.20 | Net loss per share; projections were for a net loss of $0.24 per share

Marketplace lending technology patents held invalid, (Lexology), Rated: A

On July 25, 2016, three appellate judges in the United States held that a popular online marketplace lender’s patents were invalid because they merely reflected an “abstract idea” that is not entitled to be patented or otherwise eligible for exclusive protection under American intellectual-property laws.

The judges from the Federal Circuit Court of Appeals likened the claimed inventions to a “fundamental economic concept” (i.e., an abstract idea) that served as the basis for the consumer-loan industry. They ruled that simply implementing this concept with “generic technology” to automate the process does not then make it patentable.

To read the full opinion of the Federal Circuit panel, click here.

Peer-to-peer Lending Market to Grow at CAGR of 53.06% to 2020, (News Maker), Rated: A

Comment: This is a report that is being sold. This report 1st came out about 2 weeks ago. Just a reminder. If Lending Club can still grow year-over-year despite all the problems I don’t think anybody doubts that p2p lending could very well grow at 53% CAGR for the next 4 years.

Research analysts forecast the global P2P lending market to grow at a CAGR of 53.06% during the period 2016-2020.

Browse full table of contents and data tables at

Credit unions can ‘up their game’ with the right digital lending partner, (CU Insight), Rated: A

Comment: This article is a bit of an advertisement for p2p-bank partnerships. I think it’s worth being clear and reminding the obvious to our readers: quite a few p2p lenders have such partnerships and they seem to function well.

The success of Lending Club and Prosper, despite recent setbacks, demonstrates to credit unions the opportunity to ‘up their game’ and become a part of this digital revolution. What’s more, your credit union can keep the loans on your balance sheet.

Your credit union is able to profitably fund and manage smaller dollar, unsecured loans at a fraction of the cost of manual and paper processes, often as low as $500 each.

What kind of Digital Lending Partner can help your credit union ‘up your game’ quickly? One that has proven success in digital lending, and:

  • Allows your credit union to use your underwriting controls and risk-rating standards
  • Keeps the loans on your balance sheet as earning assets
  • Accepts online applications by computer or mobile phone
  • Provides approvals in an instant, funds in just days
  • Monitors loans, deposit activity and credit information
  • Handles loan renewals
  • Provides proven safety in the cloud
United Kingdom

Britain counting on fintech for banking revolution, (Reuters), Rated: AAA

British banks, starting 2018,  will have to share customers’ data with third parties who can then show how much could be saved by using other lenders, the competition watchdog said on Tuesday. Under the new rules, banks will have to share a customer’s data with third parties, providing the customer agrees. The CMA will also require lenders to publish their maximum fee for unarranged overdrafts, which earn banks 1.2 billion pounds ($1.6 bln) a year.

New banks, consumer advocates and lawmakers, however, derided the plans as relying too much on people’s ability and willingness to use new technology.

The CMA believes setting a 2018 deadline will also boost the “fintech” sector, which uses technology to make financial services cheaper and more efficient.

The government wants to see fintech grow, but European Union countries like Germany would like to lure the sector from London after Britain voted to leave the bloc.

Only 3 percent of consumers and 4 percent of business customers change banks in any year due to inertia.

Andrew Tyrie, chair of parliament’s Treasury Select Committee which has pushed for six years to get more competition in banking, said he was not optimistic the measures will get to the heart of the problem.

Land said the Financial Conduct Authority (FCA), which capped payday loans’ interest rates, will review the overdraft measures and obstacles to new entrants to see if they improve, but Rishi Khosla, co-founder and CEO of OakNorth Bank, said this “passing of the buck” to other market watchdogs could put many fledgling companies at risk.

“The FCA should be prepared to step in with an industry-wide cap if they (the banks) do not significantly reduce the charges being paid by people who fall into difficulty,” said Money Advice Trust, a charity that helps people deal with debt.

The Financial Services Consumer Panel, which advises the FCA, said the measures rely on untested technology and consumers having to act on complex information. “At least it has given the FCA some good evidence to take on the banks.”

VPC Speciality Lending fund shifts strategy to greater balance sheet exposure after difficult Q2, (Alt Fi News), Rated: AAA

The key drivers of the recent shortfall, VPC says, was a cash drag from holding cash to cover currency hedges, and a peak in defaults, reflecting the life cycle of loans.

The portfolio is a combination of ‘marketplace’ and ‘balance sheet’ loans. Marketplace loans are originated by a platform, which earn an origination fee, with the fund lending directly to underlying borrowers targeting unlevered returns of 6 to 10 per cent, or 11 to 18 per cent on a levered basis. Balance sheet loans on the other hand are made to platforms with target returns of 11 to 16 per cent on an unlevered basis. The balance sheet loans are made through a special purpose vehicle [SPV] with the platform using the cash to originate loans.

At launch back in March 2015 balance sheet Loans were expected to be around  half of the portfolio, and currently represent 43 per cent of the invested portfolio. However, according to analysts at Numis Securities the management team at VPC believe that industry illiquidity has created attractive opportunities for balance sheet lending.

The VPC Speciality Lending Investment trust is looking to up its stake in balance sheet lending with profits from its marketplace loan holdings and move away from Funding Circle US’ exposure. More spare cash will be moved into balance sheet loans rather than marketplace loans in the VPC Speciality Lending investment trust, according to an update by the closed-ended fund’s management team.

The VPC Speciality Lending trust saw growth in its net asset value of just 0.33 per cent during the second quarter of 2016 on a total return basis, reflecting a 0.62 per cent loss in May.

According to AltFi Data, VPC Speciality Lending had outerperformed the broader UK marketplace lending space, as measured by the Liberum AltFi Returns index (the LARI) since its launch back in March 2015 until recently.

While the fund’s Q2 numbers are “below expectations”, VPC says long-term returns should be in their target range. The higher than expected losses, they add, came from the Funding Circle US loans which substantially underperformed expectations while the balance sheet loans in the portfolio experienced no setbacks and are generating coupons of between 12-16 per cent, with a weighted average coupon of 12.96  per cent

The trust is currently trading on a discount of 16.9 per cent. At launch in March 2015 it moves rapidly to a premium likes its peers in the space such P2P Global Investments. But, like its peers, it has also seen a substantial period at a double digit discount in 2016.

“We believe there is little scope for this discount to narrow until the fund consistently delivers monthly returns in line with its target. In addition, we believe the fund’s fees are high at 1 per cent of gross assets with a 15 per cent performance fee on net asset value [NAV] returns  [with] no hurdle.”

 

FCA Chief Told Parliament Committee Crowdfunding is Too Small to Be Systemically Important, (Crowdfund Insider), Rated: AAA

Financial Conduct Authority (FCA) Chief Executive Andrew Bailey basically gave a Parliament Treasury Committee a crash course on Crowdfunding 101 this past June.  The letter by Bailey was recently posted on the Treasury Committee website, along with a statement from Andrew Tyrie MP, Chairman of the Committee, who questioned “government subsidies”;

“On the basis of this correspondence, the risks associated with crowdfunding platforms appear to be restricted to those using the platforms to lend or invest. Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the SME lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products. The FCA needs to be alert to these risks. The Government may need to reconsider these tax incentives.”

There is also an element of irony here. Internet finance is broadly recognized for its high degree of transparency. Old finance is known for its obfuscation and arcane operations – the source of too many systemic problems (how soon we forget the saga of LTCM). Many in the alternative finance sector believe Fintech is empowering finance to  come out from the shadow banking past and is better labeled as sunlight banking. It remains a truism that the best form of regulation is transparency.

Roche-Saunders explained a few days back it was clear that traditional finance sees “P2P encroaching on their space.”  Yet she was confident in the abilities of the FCA to draw the line at a point where competition is enabled and alternative finance can thrive. The FCA review process is accepting comments now with a deadline of September 8th.

FundingKnight to boost loan book after acquisition, (Bridging And Commercial), Rated: A

Gary Mealing, head of property lending at FundingKnight, explained to Bridging & Commercial that the company expects a large increase in activity after GLI Finance acquired its remaining shareholding.

FundingKnight’s origins and our skills are in commercial assessment, which means we’ll be focusing heavily on businesses with a property need and we’ll also have an appetite to fund over longer periods, also for larger amounts – up to £5m.

There has been a lot of focus around commercial property funds and the pressures from their investors to liquidate, and then there is the uncertainty so far with regards to the UK economic growth post-Brexit.

European Union

Interview – Finbee the First Year, (P2p Banking), Rated: A

More than 3,000 investors have issued 2M EUR worth of loans via FinBee and none of them lost any money due to a default and our compensation scheme. P2P lending is a relatively new concept in Lithuanian lending market, so raising awareness and overcoming scepticism was one the biggest challenges that we’ve faced from day one.

Current default figures are better that we expected and projected. We expected to operate with 8 to 10 percent of non-performing loans. Currently we have 2.25 percent (it worth noting that we consider a loan to be non-performing when two monthly instalments are missed, that is when loan is 60+ days late). We also project 40 percent recovery of non-performing loans. So we expect 4.8 – 6 percent losses after recovery. Having in mind that investors now invest on 26 percent interest rate on average, they can expect 20 percent returns even without our compensation fund.

What plans and goals do you have for FinBee for the next year?

Operations in Czech republic.

India

Raghuram Rajan sets agenda for rest of his term, (Live Mint), Rated: A

Reserve Bank of India (RBI) governor Raghuram Rajan set himself a crowded agenda in the last four weeks of his term as he left interest rates unchanged in his final monetary policy review on Tuesday.

On his agenda: guidelines for peer-to-peer (P2P) lending platforms and account aggregators, new norms to improve the functioning of corporate bond markets and tweaks to the marginal cost-based lending rate (MCLR) system, which Rajan hopes would improve the pass-through of past rate cuts by the central bank.

Singapore

Digital gold and silver may be up for P2P lending soon, (Asia One), Rated: B

(P2P) lending in Singapore could soon be extended to cryptocurrencies, if a unique partnership between vault operator Silver Bullion and a gold-backed digital currency seller is inked.

Silver Bullion, a gold and silver vault that offers peer-to-peer lending backed by those commodities, is in talks with Digix Global, a company that sells asset-backed tokens – or cryptocurrency bearing rights to gold – to use these tokens to borrow funds on the loan platform, the vault operator told The Business Times.

Several borrowers use the loan to buy more bullion with it, Mr Gregersen said. Lenders, on the other hand, use the interest to pay for storage on their own silver or gold stash.

Such loans are fully backed by physical gold and silver, and lending that stretches beyond six months has a collateral-to-loan value of at least 200 per cent. This means that a loan of S$100,000 must be backed by a collateral worth at least S$200,000. The exceptions are loans with a one-month tenure, which have a collateral-to-loan value of 160 per cent.

The discussion comes as Digix Global has moved to store gold bullion that is backing its cryptocurrency with Silver Bullion. They expect to store up to US$3 million worth of gold in Silver Bullion’s vault by the end of 2016. Digix Global will be transferring its gold holdings from Malca-Amit, at Singapore’s Le Freeport.

On Digix Global, users can buy Digix tokens, each of which represents one gram of gold.

Author:

George Popescu

August 10th 2016, Daily News Digest

August 10th 2016, Daily News Digest

News Comments Today’s most interesting article are FT’s report on Lending Club’s Q2 results and a few articles on new regulations, policy and VPC’s fund and strategy in the UK section. Today’s good news: CUneXus raised $5 mil. Congratulations ! United States One of the most interesting articles on Lending Club’s Q2 results, thought through, and with […]

August 10th 2016, Daily News Digest

News Comments

United States

United Kingdom

European Union

India

Singapore

 

United States

Lending Club’s latest results tell us a lot about the online credit business model, (FT Alphaville), Rated: AAA

Lending Club released its second-quarter results yesterday. Besides the updates on repairs after its scandals earlier in the year, executives provided an insight into some broader shifts that have been bubbling under the surface for some time.

Total originations in the second quarter were $1.96 billion an increase of 2% compared to last year. The slower origination growth was due to the slowdown in investor capital that occurred post May 9. Roughly 51% of the second quarter volume was originated prior to May 9, which represented 42% of the quarter in terms of calendar days.

You can file that under statements that are meant to re-assure but reveal trends that may or may not be worrying depending on your perspective. If you take the bait, and do the maths, you find that even without the slowdown post May 9 — the date founder Renaud Laplanche left the company — Lending Club was on track for year-on-year origination growth of 46 per cent for the quarter.

That compares with y-o-y growth of 68 per cent in the first quarter, 82 per cent in the fourth quarter last year, 92 per cent in the third quarter last year and 90 per cent in the second quarter of 2015. If you assume that Lending Club’s originations would have continued at the same pace after May 9, instead of accelerating, for example, then it seems that the company’s loan growth has been slowing quarter-on-quarter for a little while.

If you take the view that very fast loan growth is desirable, then this is a bad thing. But if you think that numbers like 90 per cent don’t belong in conversations about loan growth, then it’s a good thing. Jaidev Janardana, chief executive of Zopa, told us recently that volume is “a bad metric to be worried about”.

After Brexit, the online lender began rejecting the least credit-worthy customers who would have previously received a loan and assuming a higher level of risk for customers it accepted, which resulted in a higher cost of borrowing for those people. All else equal, the changes had the effect of shaving 10 per cent off its volumes. “We should make the right lending decisions and if that means we are going to grow slower for a period of time, so be it,” said Janardana.

You can see similar things happening at Lending Club, for different reasons, as per this slide from the second quarter investor presentation:

The first thing to note there is the population reduction in the lowest rated loans.

“As this recovery gets longer, credit has become more available and these individuals in particular have shown a propensity to be building debt kind of coming into the loan and then continuing to accumulate debt after the LendingClub loan as opposed to leveraging the loan to kind of pay off their debt.”

He’s basically saying that subprime borrowers have been coming to Lending Club for easy credit, rather than debt consolidation.

The second thing to note from the slide above is the interest rate hikes.

Those two bars in the middle show how the investor base changed after the scandal. In particular, banks who were previously buying Lending Club’s loans seem to have fled in larger numbers than any other category (though, obviously, the figures in the chart are percentages rather than absolute numbers).

Sanborn talked about this on the call too, in effect providing a hierarchy of funding sources. First, he noted the “self-managed retail investors who proved to be the most resilient”. Then he talked about managed accounts, which includes funds set up to invest in Lending Club’s loans. They “initially paused” but after being paid to buy loans — “incentives,” as Lending Club calls them — many returned.

Then we get to “asset managers, insurance companies, hedge funds and securitization investors”. They “experienced a significant pause”, which is a rather passive way to say they got scared off by a major scandal involving the former chief executive. Asset managers and hedge funds, who were “the most responsive to incentives”, were the first large investors to resume buying, Sanborn said. (As a side note, “responsive to incentives” is a great bit of code to remember if you’re ever asking for a bribe.)

And finally, the banks, who have “more complex diligence and regulatory requirements”, are taking the longest to come back to Lending Club. Things on this front are likely to get tougher for online lenders. Late last month, the Federal Deposit Insurance Corporation invited comments on new proposals for how banks shouldmanage third-party lending relationships.

Online lenders like Lending Club are very unlike banks in a great number of ways, but the role their retail investors play seems awfully like the role that depositors play at banks. They both are the last line of defence and risk losing their money when it all goes wrong. In the case of a bank depositor, government insurance protects them up to a point. But if you’re a retail investor on Lending Club, you own promissory notesissued by the company rather than loans themselves, so all that protects you at present is the fact that Lending Club has no debt.

To close, here’s how much the mess that led to Renaud Laplanche’s departure cost the company (our emphasis):

GAAP net loss was $81.4 million for the second quarter of 2016, compared to a net loss of $4.1 million in the same period last year. The results for the second quarter of 2016 were negatively affected by a Goodwill impairment charge of $35.4 million related to the 2014 acquisition of Springstone, an increase in professional service fees of $14.9 million primarily due to matters identified in the board review previously announced, approximately $14.0 million in incentives paid to investors, and an increase in compensation related costs of $6.5 million associated with severance costs and a retention program.

With this Lending Club disclosure from May, shortly after Laplanche left (our emphasis again):

On May 11, 2016, the compensation committee of the board of directors approved incentive compensation packages and salary adjustments for certain named executive officers. Specifically, Carrie Dolan, the Company’s Chief Financial Officer, was granted $3.5 million in restricted stock units (RSUs), which vests quarterly over a four year period, and a $500 thousand cash award, payable twelve months from the grant date. The compensation committee also approved an increase to Ms. Dolan’s base salary to $400 thousand per year, with a 75 percent bonus target. John MacIlwaine and Sandeep Bhandari, the Company’s Chief Technology Officer and Chief Risk Officer, respectively, each received $500 thousand in RSUs, which fully vest twelve months from the grant date, and a $500 thousand cash award, payable twelve months from the grant date.

Here is the Q2 Earnings Deck for Lending Club, (Crowdfund Insider), Rated: AAA

Here is the deck.

Sanborn put an upbeat spin on the results stating they were “confident on their future”. [Comment: the moment when the CEO is anything less than upbeat it’s time to jump ship. So no surprise here. A CEO being upbeat is what I would say “business as usual”. ]

An interesting factoid shared on the call. The Board Review, initiated following the shocking departure of former CEO Renaud Laplanche, cost the company (and thus investors) $13 million.

 

CUneXus Closes $ 5 Million Series A, (Finovate), Rated: A

CUneXus, creator of sales and marketing automation solutions for lenders, quietly closed a $5 million funding round late last week. Two investors contributed to the round; both prefer to remain anonymous.

The California-based company’s total raised is now $7 million. Regarding plans for the funding, CUneXus president & CEO Dave Buerger said, “The use of funds is twofold: (1) aggressive growth and the addition of key personnel, and (2) continuous product development and improvement.”

Since launching in 2011, CUneXus has built a host of solutions for online and mobile lending and cross-selling. At FinovateSpring 2016 the company announced its recent partnership with Edmunds.com and showed off AutoXpress, a vehicle purchasing experience that takes place completely online or on mobile.

Lending Club looks for reprieve in year of bad news, (SiliconBeat), Rated: A

Comment: this is yesterday’s news, literally. As I explained yesterday, I believe the Q2 numbers for Lending Club are actually really good given the circumstances. The journalist here focuses on the profit and loss line item which is not at all a good indicator of Lending Club’s business at this time. 

The latest black eye for Lending Club came late Monday, when the company reported a second-quarter loss that ballooned from a year ago due to a big drop in loan volume. Lending Club said it lost $81.4 million, or 21 cents a share, on revenue of $103.4 million, compared with a loss of $4.1 million, or a penny a share, on $97 million in sales a year ago. Excluding one-time items, Lending Club lost 9 cents a share.

Those results fell short of the estimates of analysts surveyed by Thomson Reuters, who forecast Lending Club to lose 2 cents a share on $100.5 million in revenue. Lending Club said one of the main factors in its results falling short was that its loan volume, or the value of the loans it handled during the quarter, fell by 30 percent from a year ago to $1.96 billion. The company also said its loan volume would be flat for the rest of the year.

There was also another shake up in Lending Club’s executive ranks, as the company announced the departure of Chief Financial Officer Carrie Dolan. Dolan’s departure comes about three months after Lending Club founder Renaud Laplanche was forced to resign amid a scandal involving loans that were made against the instructions of an investor, as well as Laplanche and his family members improperly using the Lending Club platform to take out multiple loans in late 2009.

Loan originations rose 41 percent from a year ago, to $589.7 million, which Jefferson Harralson, of Keefe, Bruyette & Woods said became “more optimistic” and could offset some of the recent worries about Lending Club’s business.

PYMNTS Daily Data Dive: OnDeck Is On Track With Q2 Earnings, (PYMNTS), Rated: A

The company has altered its business model and is taking on more loans in the balance sheet. Credit performance has improved, which has increased the provision for loan losses. The company is advancing its international expansion, its partnership with JPMorgan and expects gross revenue between $73 million and $76 million in Q3.

Here are the numbers:

$69.5 million | OnDeck’s revenue, which was a year-on-year increase of 9.8 percent and $1.6 million over analyst expectations

$32 million | Provision for loan losses, almost twice the $15.5 seen this time last year

47% | The year-on-year growth in loans under management, reaching $1 billion

41% | The year-on-year growth in originations, which reached $590 million

$0.20 | Net loss per share; projections were for a net loss of $0.24 per share

Marketplace lending technology patents held invalid, (Lexology), Rated: A

On July 25, 2016, three appellate judges in the United States held that a popular online marketplace lender’s patents were invalid because they merely reflected an “abstract idea” that is not entitled to be patented or otherwise eligible for exclusive protection under American intellectual-property laws.

The judges from the Federal Circuit Court of Appeals likened the claimed inventions to a “fundamental economic concept” (i.e., an abstract idea) that served as the basis for the consumer-loan industry. They ruled that simply implementing this concept with “generic technology” to automate the process does not then make it patentable.

To read the full opinion of the Federal Circuit panel, click here.

Peer-to-peer Lending Market to Grow at CAGR of 53.06% to 2020, (News Maker), Rated: A

Comment: This is a report that is being sold. This report 1st came out about 2 weeks ago. Just a reminder. If Lending Club can still grow year-over-year despite all the problems I don’t think anybody doubts that p2p lending could very well grow at 53% CAGR for the next 4 years.

Research analysts forecast the global P2P lending market to grow at a CAGR of 53.06% during the period 2016-2020.

Browse full table of contents and data tables at

Credit unions can ‘up their game’ with the right digital lending partner, (CU Insight), Rated: A

Comment: This article is a bit of an advertisement for p2p-bank partnerships. I think it’s worth being clear and reminding the obvious to our readers: quite a few p2p lenders have such partnerships and they seem to function well.

The success of Lending Club and Prosper, despite recent setbacks, demonstrates to credit unions the opportunity to ‘up their game’ and become a part of this digital revolution. What’s more, your credit union can keep the loans on your balance sheet.

Your credit union is able to profitably fund and manage smaller dollar, unsecured loans at a fraction of the cost of manual and paper processes, often as low as $500 each.

What kind of Digital Lending Partner can help your credit union ‘up your game’ quickly? One that has proven success in digital lending, and:

  • Allows your credit union to use your underwriting controls and risk-rating standards
  • Keeps the loans on your balance sheet as earning assets
  • Accepts online applications by computer or mobile phone
  • Provides approvals in an instant, funds in just days
  • Monitors loans, deposit activity and credit information
  • Handles loan renewals
  • Provides proven safety in the cloud
United Kingdom

Britain counting on fintech for banking revolution, (Reuters), Rated: AAA

British banks, starting 2018,  will have to share customers’ data with third parties who can then show how much could be saved by using other lenders, the competition watchdog said on Tuesday. Under the new rules, banks will have to share a customer’s data with third parties, providing the customer agrees. The CMA will also require lenders to publish their maximum fee for unarranged overdrafts, which earn banks 1.2 billion pounds ($1.6 bln) a year.

New banks, consumer advocates and lawmakers, however, derided the plans as relying too much on people’s ability and willingness to use new technology.

The CMA believes setting a 2018 deadline will also boost the “fintech” sector, which uses technology to make financial services cheaper and more efficient.

The government wants to see fintech grow, but European Union countries like Germany would like to lure the sector from London after Britain voted to leave the bloc.

Only 3 percent of consumers and 4 percent of business customers change banks in any year due to inertia.

Andrew Tyrie, chair of parliament’s Treasury Select Committee which has pushed for six years to get more competition in banking, said he was not optimistic the measures will get to the heart of the problem.

Land said the Financial Conduct Authority (FCA), which capped payday loans’ interest rates, will review the overdraft measures and obstacles to new entrants to see if they improve, but Rishi Khosla, co-founder and CEO of OakNorth Bank, said this “passing of the buck” to other market watchdogs could put many fledgling companies at risk.

“The FCA should be prepared to step in with an industry-wide cap if they (the banks) do not significantly reduce the charges being paid by people who fall into difficulty,” said Money Advice Trust, a charity that helps people deal with debt.

The Financial Services Consumer Panel, which advises the FCA, said the measures rely on untested technology and consumers having to act on complex information. “At least it has given the FCA some good evidence to take on the banks.”

VPC Speciality Lending fund shifts strategy to greater balance sheet exposure after difficult Q2, (Alt Fi News), Rated: AAA

The key drivers of the recent shortfall, VPC says, was a cash drag from holding cash to cover currency hedges, and a peak in defaults, reflecting the life cycle of loans.

The portfolio is a combination of ‘marketplace’ and ‘balance sheet’ loans. Marketplace loans are originated by a platform, which earn an origination fee, with the fund lending directly to underlying borrowers targeting unlevered returns of 6 to 10 per cent, or 11 to 18 per cent on a levered basis. Balance sheet loans on the other hand are made to platforms with target returns of 11 to 16 per cent on an unlevered basis. The balance sheet loans are made through a special purpose vehicle [SPV] with the platform using the cash to originate loans.

At launch back in March 2015 balance sheet Loans were expected to be around  half of the portfolio, and currently represent 43 per cent of the invested portfolio. However, according to analysts at Numis Securities the management team at VPC believe that industry illiquidity has created attractive opportunities for balance sheet lending.

The VPC Speciality Lending Investment trust is looking to up its stake in balance sheet lending with profits from its marketplace loan holdings and move away from Funding Circle US’ exposure. More spare cash will be moved into balance sheet loans rather than marketplace loans in the VPC Speciality Lending investment trust, according to an update by the closed-ended fund’s management team.

The VPC Speciality Lending trust saw growth in its net asset value of just 0.33 per cent during the second quarter of 2016 on a total return basis, reflecting a 0.62 per cent loss in May.

According to AltFi Data, VPC Speciality Lending had outerperformed the broader UK marketplace lending space, as measured by the Liberum AltFi Returns index (the LARI) since its launch back in March 2015 until recently.

While the fund’s Q2 numbers are “below expectations”, VPC says long-term returns should be in their target range. The higher than expected losses, they add, came from the Funding Circle US loans which substantially underperformed expectations while the balance sheet loans in the portfolio experienced no setbacks and are generating coupons of between 12-16 per cent, with a weighted average coupon of 12.96  per cent

The trust is currently trading on a discount of 16.9 per cent. At launch in March 2015 it moves rapidly to a premium likes its peers in the space such P2P Global Investments. But, like its peers, it has also seen a substantial period at a double digit discount in 2016.

“We believe there is little scope for this discount to narrow until the fund consistently delivers monthly returns in line with its target. In addition, we believe the fund’s fees are high at 1 per cent of gross assets with a 15 per cent performance fee on net asset value [NAV] returns  [with] no hurdle.”

 

FCA Chief Told Parliament Committee Crowdfunding is Too Small to Be Systemically Important, (Crowdfund Insider), Rated: AAA

Financial Conduct Authority (FCA) Chief Executive Andrew Bailey basically gave a Parliament Treasury Committee a crash course on Crowdfunding 101 this past June.  The letter by Bailey was recently posted on the Treasury Committee website, along with a statement from Andrew Tyrie MP, Chairman of the Committee, who questioned “government subsidies”;

“On the basis of this correspondence, the risks associated with crowdfunding platforms appear to be restricted to those using the platforms to lend or invest. Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the SME lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products. The FCA needs to be alert to these risks. The Government may need to reconsider these tax incentives.”

There is also an element of irony here. Internet finance is broadly recognized for its high degree of transparency. Old finance is known for its obfuscation and arcane operations – the source of too many systemic problems (how soon we forget the saga of LTCM). Many in the alternative finance sector believe Fintech is empowering finance to  come out from the shadow banking past and is better labeled as sunlight banking. It remains a truism that the best form of regulation is transparency.

Roche-Saunders explained a few days back it was clear that traditional finance sees “P2P encroaching on their space.”  Yet she was confident in the abilities of the FCA to draw the line at a point where competition is enabled and alternative finance can thrive. The FCA review process is accepting comments now with a deadline of September 8th.

FundingKnight to boost loan book after acquisition, (Bridging And Commercial), Rated: A

Gary Mealing, head of property lending at FundingKnight, explained to Bridging & Commercial that the company expects a large increase in activity after GLI Finance acquired its remaining shareholding.

FundingKnight’s origins and our skills are in commercial assessment, which means we’ll be focusing heavily on businesses with a property need and we’ll also have an appetite to fund over longer periods, also for larger amounts – up to £5m.

There has been a lot of focus around commercial property funds and the pressures from their investors to liquidate, and then there is the uncertainty so far with regards to the UK economic growth post-Brexit.

European Union

Interview – Finbee the First Year, (P2p Banking), Rated: A

More than 3,000 investors have issued 2M EUR worth of loans via FinBee and none of them lost any money due to a default and our compensation scheme. P2P lending is a relatively new concept in Lithuanian lending market, so raising awareness and overcoming scepticism was one the biggest challenges that we’ve faced from day one.

Current default figures are better that we expected and projected. We expected to operate with 8 to 10 percent of non-performing loans. Currently we have 2.25 percent (it worth noting that we consider a loan to be non-performing when two monthly instalments are missed, that is when loan is 60+ days late). We also project 40 percent recovery of non-performing loans. So we expect 4.8 – 6 percent losses after recovery. Having in mind that investors now invest on 26 percent interest rate on average, they can expect 20 percent returns even without our compensation fund.

What plans and goals do you have for FinBee for the next year?

Operations in Czech republic.

India

Raghuram Rajan sets agenda for rest of his term, (Live Mint), Rated: A

Reserve Bank of India (RBI) governor Raghuram Rajan set himself a crowded agenda in the last four weeks of his term as he left interest rates unchanged in his final monetary policy review on Tuesday.

On his agenda: guidelines for peer-to-peer (P2P) lending platforms and account aggregators, new norms to improve the functioning of corporate bond markets and tweaks to the marginal cost-based lending rate (MCLR) system, which Rajan hopes would improve the pass-through of past rate cuts by the central bank.

Singapore

Digital gold and silver may be up for P2P lending soon, (Asia One), Rated: B

(P2P) lending in Singapore could soon be extended to cryptocurrencies, if a unique partnership between vault operator Silver Bullion and a gold-backed digital currency seller is inked.

Silver Bullion, a gold and silver vault that offers peer-to-peer lending backed by those commodities, is in talks with Digix Global, a company that sells asset-backed tokens – or cryptocurrency bearing rights to gold – to use these tokens to borrow funds on the loan platform, the vault operator told The Business Times.

Several borrowers use the loan to buy more bullion with it, Mr Gregersen said. Lenders, on the other hand, use the interest to pay for storage on their own silver or gold stash.

Such loans are fully backed by physical gold and silver, and lending that stretches beyond six months has a collateral-to-loan value of at least 200 per cent. This means that a loan of S$100,000 must be backed by a collateral worth at least S$200,000. The exceptions are loans with a one-month tenure, which have a collateral-to-loan value of 160 per cent.

The discussion comes as Digix Global has moved to store gold bullion that is backing its cryptocurrency with Silver Bullion. They expect to store up to US$3 million worth of gold in Silver Bullion’s vault by the end of 2016. Digix Global will be transferring its gold holdings from Malca-Amit, at Singapore’s Le Freeport.

On Digix Global, users can buy Digix tokens, each of which represents one gram of gold.

Author:

George Popescu

August 5th 2016, Daily News Digest

August 5th 2016, Daily News Digest

News Comments Brexit gave a 500% boost to CrowdLending’s volumes. I would have expected it will give a boost to the lending capital interest, but it boosted the borrower interest, perhaps because borrowers believe that the Bank of England rate reduction was passed through to them and it made borrowing cheaper. I would love to […]

August 5th 2016, Daily News Digest

News Comments

  • Brexit gave a 500% boost to CrowdLending’s volumes. I would have expected it will give a boost to the lending capital interest, but it boosted the borrower interest, perhaps because borrowers believe that the Bank of England rate reduction was passed through to them and it made borrowing cheaper. I would love to see actual survey data of the borrower’s reasons for the increase in interest.
  • In the US the P2P spring is in full bloom: Prosper and Lending Club are in promising talks to put in place financing for $10bil in loans. Glad the winter is over.

United States

United Kingdom

India

Australia

Singapore

News Summary

 

United States

 Online Lender Prosper in Talks on Billion Loan-Buying Deal, (Wall Street Journal), Rated: AAA

Online lender Prosper Marketplace Inc. is in advanced talks with a group of investment firms to sell them roughly $5 billion worth of loans over the next two years, people familiar with the matter said.

The buyers in the talks include Fortress Investment Group LLC or an affiliate, Soros Fund Management LLC and Third Point LLC, along with investment bank Jefferies LLC, the people said.

The loans would be bought at face value, but the firms are also in discussions to receive equity warrants in Prosper as they make the purchases, the people added. The potential buyers are also talking to banks about borrowing money to support their loan purchases, and a deal could wrap up in the coming weeks, they said.

In addition to the deal with the four investment firms, Prosper has also started selling loans to BBVA Compass, the U.S. regional-banking unit of Spanish lender Banco Bilbao Vizcaya Argentaria, according to a bank spokeswoman. BBVA’s venture-capital arm took an equity stake in Prosper last year.

Now, Prosper’s deal to sell loans at face value would provide a measure of validation of investors’ confidence in its underwriting ability. It also may give it a leg up on bigger rival LendingClub.

LendingClub had previously held talks for billions in loan-buying commitments with some of the same funds, including Soros and Third Point, but didn’t finalize a deal, the Journal earlier reported.

Prosper and LendingClub have raised rates they charge to new borrowers over the past few months. Loans sold in June by Prosper were expected to yield 7.4% on an annualized basis and taking into account expected losses, according to the company. That is short of 8.5% on such loan portfolios in 2013, but is still chunky when compared with U.S. Treasurys and other fixed-income asset yields at or near record lows.

Although new buyers would be a sign of confidence in Prosper, the equity warrants being discussed may lead to dilution of existing investors, including those who bought in the fundraising round valuing Prosper at $1.9 billion last year. Prosper hasn’t raised money since, while shares of publicly traded LendingClub have fallen 76% in that time.

Prosper lending in the second quarter is expected to dip sharply again from $972 million in the first quarter, which was down from $1.1 billion in the fourth quarter of 2015, according to people familiar with the company. Earlier this year Prosper cut back on marketing to new borrowers, as did other platforms, the Journal reported.

LendingClub Said in Talks With Western Asset on Loan Buying, (Bloomberg), Rated: AAA

LendingClub Corp., looking to bolster demand for the consumer debts it arranges online, is in talks with Western Asset Management Co. to set up a fund that would purchase as much as $1.5 billion of loans over time, people with knowledge of the matter said.  Western, a subsidiary of money manager Legg Mason Inc., would commit to purchasing a certain amount of the lending platform’s loans each month, said one person, who asked not to be identified because the information is private. A deal may be announced in coming weeks, the person said. The agreement isn’t final, so the terms could change and talks may not result in a transaction.

“The real question is, what does Lending Club have to give up in exchange for that firm commitment?”

Western, which specializes in fixed-income assets, had about $460 billion of assets under management as of June 30, according to its website.

Lending Club’s Q2 Earnings: A Preview, (Seeking Alpha), Rated: A

Comment: This article is trying to predict what the earnings will look like and mean.

Summary

Lending Club will break $20B in originations.

Total operating revenue is likely to be between $110M-$125M, a decrease of $27-$42M from the first quarter 2016.

The company is likely to report a second quarter loss of between $90-$120 million, or $0.23-$0.31 per share.

Data suggests that retail investors are returning to the platform.

 

What is impressive is that within two months, Lending Club reacted by reducing headcount by 179 positions (11.5% of its workforce), tightening underwriting policies, and increasing oversight.

 

Despite these quick changes, the company has made no secret that this quarter’s results will be drastically lower than previous quarters. Total operating revenue is likely to be between $110M-$125M, a decrease of $27-$42M from the first quarter 2016.

This decrease in revenue, combined with several large one-time write-downs, means that the company is likely to report a second quarter loss of between $90-$120 million, or $0.23-$0.31 per share.

The company’s cash will be decreased by a further $40 million, as the company was obliged to fund approximately 2% of loan originations from its balance sheet. From a historical perspective, this will represent the largest percentage of loans funded from Lending Club’s balance sheet since December 2011. To add perspective, in Q1’16 the company funded just under $1M from its balance sheet, or 0.05% of originations.

Though diminished, the company’s cash should remain significant at approximately $420M. This cash reserve allows the company some flexibility moving forward.

Lending Club’s credit policy has evolved since its founding in 2007. Since December 2010, most of the evolution has been in the form of loosening credit restrictions for high-risk borrowers. Loosening restrictions widened Lending Club’s target borrower market and fueled faster growth.

Investor appetite for notes is returning

While Lending Club has not yet released data files pertaining to loans released in Q2’16, a look at the retail loan inventory on their website offers an insight on investor sentiment.

 

Since July 10th note releases have returned to 90% of their former levels and inventory levels have returned to historical levels, both of which suggest that retail note investors are returning to the platform.

Stock buy-back imminent?

As a reminder, in February 2016, the board authorized $150 million to repurchase shares in the open market.

Fintech Companies Prepare for Same-Day ACH, (Bank Innovation), Rated: A

On Sept. 23 a major milestone in the journey toward faster payments will be reached: New rules will go into effect that will enable the same-day processing of ACH payments. Vendors are working to make sure banks are ready to take advantage. Adam Anderson, CTO of Q2, a provider of cloud-based banking software, said that his company will have same-day ACH capability ready to go as soon as the new functionality is turned on. The most common uses of ACH for Q2 users are payroll, person-to-person and billpay transactions, Anderson said.

“Standard ACH comes with no web hooks, no API wrapper, no KYC-AML,” said Jordan Lampe, director of communication and policy affairs for Dwolla. Standard ACH has no procedures for handling rejects and no way to help users keep their compliance updated, for example. “But it is affordable and reliable. We’re extending that business value to other areas of the company.”

“The bulk of demand for ACH is from SMBs, commercial uses, as a replacement for wire uses”

BofA Sees Digital Payments Cutting Billion Cash-Handling Cost, (Think Advisor), Rated: AAA

Bank of America Corp., which spends about $1 billion a year handling cash, will save money and require fewer employees as more customers make payments electronically, Chief Executive Officer Brian Moynihan said.

FinTech Boom Slows, But Not Over, (Financial Advisors), Rated: AAA

“Funding is down year over year, too, but there are pockets of growth and an incredible amount of innovation going on,” says Aaron Schwartz, DeNovo head of research. “When we bifurcate fintech into subsectors or trends, we see some areas that are slowing down in the later stages in the investment spectrum, and other areas that are in the early stages that show very healthy growth.”

A significant portion of Americans underserved by the financial industry are young adults, says Schwartz.

Robo-advisors might not be the wave of the future, says Schwartz.

“Robos have attracted a lot of money, but now the incumbents are stepping into the market,” Schwartz says. “We’re starting to see more activities around different types of enabling technology.”

Kickfurther in Showcase for Start Up Day Across America, (Press Release), Rated: B

Mattermark rankings recently placed Kickfurther as the 4th fastest growing company in Boulder. The Kickfurther marketplace enables consumer product companies seeking capital to grow by sharing retail opportunities with individuals interested in entrepreneurship and consumer products.

Kickfurther is a leading inventory crowd­funding marketplace that connects companies with individuals.  Since its 2015 launch, Kickfurther has funded $9.6 million of inventory in 325 Consignment Opportunities by more than 270 companies. Kickfurther users have earned, on average, more than 2% consignment profit per month on completed Co-Ops.

Money360 Hits $ 100 M in Closed Commercial Real Estate Loans, (Crowdfund Insider), Rated: A

Money360, a commercial real estate online marketplace lending platform, announced on Thursday it has officially surpassed the $100 million in closed commercial real estate loans with the completion of $15.25 million in recently closed loans.

The company also reported it has seen a 100% increase in borrower applications being rejected by banks and CMBS institutions due to the increased regulations.

The online marketplace’s recent transactions does include a bridge loan for the acquisition of a multifamily property in Tucson, Arizona; a bridge loan for the renovation of a full-service boutique hotel in Aurora, Ohio; cash-out permanent financing for a single-tenant retail building in Dayton, Ohio; and a bridge loan for the refinance of an anchored shopping center containing 206,257 square feet of rentable area in Jacksonville, Illinois.

United Kingdom

P2P lending dip blamed on economic uncertainty and authorisation process, ( Bridging and Commercial), Rated: AAA

The Peer to Peer Finance Association (P2PFA) revealed that new lending fell to £658m in Q2 compared to £715m.

New lending to businesses fell to £406m from £445m, while new lending to individuals dropped to £252m from £270m.

Rhydian Lewis, CEO and co-founder at RateSetter, put the dip down to the authorisation process adding: “In recent months there’s been a levelling off in general borrower demand as people defer large purchases, perhaps reflecting economic uncertainty.

“The main story behind these latest figures on peer-to-peer lending is the continued expansion in the number of investors and borrowers – with more than 150,376 lenders and 332,107 borrowers currently using P2PFA platforms.

Landbay recorded a £5m increase in lending compared to Q1 and John Goodall, CEO and co-founder of Landbay, felt the P2PFA’s figures showed that peer-to-peer lending was still becoming an increasingly attractive option to investors and borrowers.

Crowd lending venture records surge in interest following Brexit vote, (Herald Scotland), Rated: AAA

THE LendingCrowd funding operation has enjoyed a surge in business following the Brexit vote, which it said reflected expectations the Bank of England would cut interest rates to boost the economy.

The company said applications for loans increased by over 500 per cent in July, compared with the same month last year although many fear the June vote in favour of the UK leaving the European Union will result in a sharp slowdown in growth in the UK economy. LendingCrowd said the total value of applications rose by over 600 per cent annually in July.

The increase in activity at LendingCrowd contrasts with reports that the Brexit vote has prompted some firms to put mergers and acquisitions activity on hold until the outlook is clearer. Founded by Mr Lunn with serial technology entrepreneur Bill Dobbie, LendingCrowd made 34 loans worth a total of £1.75 million in its first year of operations, to 30 September. It signed up 1100 investors.

Funding Circle portfolio on track, (Stock Market Wire), Rated: A

Funding Circle SME Income Fund’s board notes recent market commentary on Funding Circle loan performance and reiterates guidance that the company’s portfolio of credit assets, randomly allocated to it through each of the Funding Circle marketplaces, continues to perform in line with expectations.

The company’s US credit assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

The company’s UK credit assets are projected to return in excess of 7% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle UK marketplace.

The company is on track to deliver its dividend target of 6-7 pence per share per annum and total NAV return target of 8-9% per annum once fully deployed and levered.

Zopa Relocates: Moves Into New London Bridge Digs, (Crowdfund Insider), Rated: B

Last week, the team at Zopa announced they have officially moved from their Chancery Lane office to the peer-to-peer lending platform’s new location in London Bridge.

Zopa recently announced the appointment of its new Chief Technology Officer (CTO), Ronen Benchetrit.

Tyrie raises concerns about gov’t P2P tax incentives, (FT Adviser), Rated: AAA

On 1 June, Andrew Tyrie wrote to the Financial Conduct Authority calling for closer scrutiny of the peer-to-peer lending and crowdfunding market.

Answering Mr Tyrie’s questions in a letter published today (4 August), Ms McDermott said the regulator has been watching the crowdfunding sector closely and acknowledged the sector poses risks to consumer protection.

She made it clear that crowdfunding investors are not protected if they lose their money simply because the underlying investment fails, but that Financial Services Compensation Scheme protection will apply if the P2P platform fails to meet its obligations.

Ms McDermott said the FCA considers crowdfunding a high-risk investment activity, pointing to rules which mean this type of investment cannot be promoted to investors who have not received financial advice.

The regulator has been assessing both P2P and investment-based crowdfunding firms on whether they are making the risks clear to consumers, with Ms McDermott stating that since 2014, nine out of 10 crowdfunding promotions were withdrawn or amended.

By comparison, 12 out of 27 P2P promotions have been amended or withdrawn over the same period.

She also said the financial watchdog “remains cautious” about the risks posed to consumers by P2P firms and said the sector will continue to be supervised – particularly when it comes to promotions – as it moves further into the mainstream.

Bank of England Cuts Rates: Alternative Finance Leaders Respond, (Crowdfund Insider), Rated: A

Gonçalo de Vasconcelos, CEO and co-founder of SyndicateRoom, stated investors would seek out alternative investments.

Kevin Caley, founder and Chairman of P2P lenderThinCats reflected on the interest rate announcement saying it would help business.

Angus Dent, CEO of business “crowdlender” ArchOver, called the move an act of “no confidence”.

Peter Behrens, Chief Commercial Officer and co-founder at P2P lending platform RateSetter, called the act almost inconceivable:

“Only a  few months ago, a further cut to the base rate was almost inconceivable, but here we are. This cut will further reduce returns on savings accounts which already pay very close to zero. Given this, it’s not surprising that peer to peer lending is increasing in popularity, as investors look for better returns in exchange for taking on some risk: we’ve had a hundred thousand new visits to our website in July alone.”

Frazer Fearnhead, CEO of The House Crowd, added his voice that P2P lenders stand to gain from the rate cut.

Treasury urged to clarify law to allow P2P in Sipps, (FT Adviser), Rated: AAA

Peer-to-peer lending platform RateSetter is calling on HM Treasury to clarify the law to allow such investments within a self-invested personal pension.

The Financial Conduct Authority recently expressed concern that letting savers use their pension money to invest in peer-to-peer might shift the customer base towards investors who are less experienced or knowledgeable and might not fully appreciate the risks involved.

Speaking to FTAdviser, P2P platform RateSetter’s head of investor operations Ceri Williams questioned why P2P is not available through a mainstream Sipp wrapper, when it has already been approved for Isas.

RateSetter is working with four Sipp trustees who Mr Williams said recognised this collusion issue was not a problem. It already has 50 active Sipps open on the platform, amounting to around £3m in assets, all of which have been set up over the past year.

So far it has been smaller Sipp schemes that are comfortable with the concept, with Mr Williams adding larger schemes are nervous about the “remote possibility of collusion coming to light”.

“Within a standard Sipp wrapper, many of the assets are earning next-to-nothing.

India

Peer-to-Peer Lending Platform i2ifunding Announces protection fund, (India Today), Rated: A

i2ifunding.com investors will now have protection against loan defaults by borrowers in a first-of-its-kind [Comment: many other platforms have protection funds, it is unclear what makes this fund unique at this time] investor protection fund, which will allow its investors to enjoy up to 100% protection against loan defaults.

The participation in the Principal Protection Fund is available by default to all investors who lend through the platform. There are no extra charges for the same. i2ifunding.com will set aside 5% of the disbursed loans towards the Principal Protection Fund. The company has already created an initial corpus to set up the Investor Protection Fund.

Australia

Reckon Shares Details On Its Aussie Alt-Lending Entrance, (PYMNTS), Rated: A

One of the latest entrants into Australia’s alt-fin sector is Reckon. Primarily, Reckon provides small and medium-sized enterprises with cloud accounting solutions, but now, it’s utilizing the data it has about small businesses to its advantage by partnering with alternative lending company Prospa to underwrite loans to its SME users.

Reckon’s ability to use its small businesses’ financial data to underwrite loans issued via Prospa provides lenders with a potentially more robust way of being protected. That’s because bank underwriting processes are outdated, Rabie said.

According to MarketInvoice — another alternative lender based in the U.K. — Australian businesses wait an average of 26.4 days past-due to get paid, worse than any other market analyzed. The data, researchers pointed out, corresponds with research recently released by Dun & Bradstreetthat found that $19 billion is stuck in outstanding bills to businesses in Australia every year thanks to companies taking longer than the traditional 30 days to settle their invoices.

Singapore

Silver Bullion reports first-year results for gold & silver secured P2P loans, (Press Release), Rated: A

Launched on 5th August 2015, Silver Bullion’s P2P loan platform is unique in two key ways. Firstly, it is a P2P loan platform that allows borrowers to obtain a loan using physical gold and silver bullion as collateral. This gives lenders, seeking a good rate of return, confidence that their investments are safe. Secondly, it is the only secured P2P loan platform to allow its customers to set the rate of return which they lend or borrow.

It is a secure lending platform since the loans have physical bullion as collateral. Borrowers can only borrow up to 50% of the value of the bullion they store with us. Should a borrower is unable to pay back the loan, the collaterized bullion would be liquidated and the lender receives the full principle plus interest.

Today is the first anniversary of our P2P loan platform and we are releasing the results today. We are delighted to have seen good borrowing activity this past year.

More importantly, there were zero borrower defaults and lenders received the funds due to them on time. We aim to continue making the platform secure for our lenders. This is unique and important because the most common caution against investing on a P2P lending platform is the risk of default.

Due to the safety that Silver Bullion’s loan platform gives to lenders, 72% of the matched loans were initiated by borrowers. The company has seen more than 30 loans matched consistently each month since March 2016 – a rate of more than 1 matched loan per day. Interest rates across all loan tenures currently hovers between 2.5% and 4.5% per annum. Unlike unsecured P2P lending platforms, loans matched by Silver Bullion’s lending platform are fully backed by physical gold and silver. Loans with tenures longer than 6 months begin with a collateral-to-loan value of 200%. The exceptions are loans with the 1 month tenure which have a lower collateral-to-loan value of 160%.

Author:

George Popescu