Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated. But the result, for those with enough heart to see it through, can be massively […]
Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated.
But the result, for those with enough heart to see it through, can be massively rewarding. It takes a certain, special type of work ethic to start something from scratch, to build something from the ground up. Many have ideas, but few can execute to fruition.
Perhaps that’s why so many veterans transition from the military to business owners. All of those characteristics mentioned above…those are just standard traits for the men and women who dutifully and proudly serve in the military. So it shouldn’t come as too much of a shock to hear that as many as 25 percent of transitioning service members aspire to become small business owners. In fact, there are more than 2.5 million U.S. businesses today that are majority-owned by veterans.
Yet veterans are at a serious disadvantage when it comes to seeing their business ideas come to light. The issue isn’t a lack of desire, skill, or intent…it’s something else. Where, exactly, is the system broken?
An Overall Decline of Entrepreneurship – Why?
It’s a topic well-discussed by Inc.com in recent years – the fact that entrepreneurship as a whole has been on the decline for decades. Some reports show the trend has been on a downward slide for nearly four decades.
Just why is the ability to fulfill that age-old American dream of starting your own business in a slump? The main answer is simple: lack of access to capital.
For millions of businesses across the nation (both veteran-owned and non), cash flow and capital are a huge struggle. The simple fact is that access to working capital is among the greatest of challenges small businesses face. All too often, business owners just can’t get funding to start or grow their businesses. The term “underbanked” represents the 77 percent of small/medium business owners who are declined by traditional banks after they apply for funding for their business ventures. And for veterans, this is even more the norm.
VOBs – Entrepreneur Assets to Our Economy
U.S. veteran owned businesses (VOBs) are an essential component of our overall economy. The leadership skill sets and values service men and women hone during their time in the military is a big part of what transforms many of them into natural leaders. They develop an uncanny ability to solve problems…many of them are able to overcome the types of challenges most small businesses face during the startup phase. And these leadership skills often carry them throughout their tenure as business owners, even years after they launch. After analyzing four year’s worth of credit data (of both VOBs and non-veteran-owned-businesses), a recent report from Experian notes that VOBs tend to have improved sustainability and longevity when compared to non-veteran-owned businesses.
There are countless other substantial benefits VOBs offer. They’re more likely to provide employees with retirement plans, health insurance, paid leave and profit sharing. They’re also 30 percent more likely than non-veteran-owned businesses to employ fellow veterans. Statistically, research consistently shows that VOBs report impressive numbers in relation to growth, employment opportunities and sales, including:
VOBs with more than two employees = over 490,000
Total number of VOB employees = 5.8 million
Annual payroll = $210 billion
Number of VOBs that are “small businesses” = 99.9 percent
6-digit sales of $100,000 or more = nearly 80 percent
Generate an annual revenue of $500,000 or more = more than 38 percent
VOBs have collective sales of = $1.2+ trillion
What does all this tell us? VOBs are a huge benefit to the economy. That’s in part what makes it so hard to ignore the other side of the story. Despite their success and contribution to our economic sustainability, many VOBs – just like most small businesses today – are struggling to make ends meet. The Small Business Association (SBA) Office of Advocacy says that over 69,000 VOBs closed as a result of inadequate cash flow.
Taking that leap of faith and starting your own business has always been a risk, for any entrepreneur, but with entrepreneurship across the board on an overall decline (for both VOBs and non-veteran owned businesses), that risk seems somehow even greater these days.
Challenges Veteran Business Owners Face
Of the many challenges entrepreneurs face when starting a new business, for most, funding is high on the list. For the majority of veterans, sources of capital can include personal savings (30 percent) and personal or business credit (nearly 11 percent).
According to the same Experian report, veterans tend to have significantly fewer mentorship options and a lack of networking opportunities. They’ve also historically had less access to capital than their non-veteran owned counterparts, says a report from the Federal Reserve Bank, who together with the SBA assessed the stats of both VOB and non-VOB small businesses.
The SBA’s Office of Advocacy partnered with the Federal Reserve Bank of New York to publish FINANCING THEIR FUTURE: Veteran Entrepreneurs and Capital Access. Their research shows that despite need being strikingly similar amongst VOB and non-VOBs, there is a glaring disparage in lending opportunities for the two groups. It’s one major reason why veteran entrepreneurship continues to see a generational decline.
The report notes that even though VOBs submitted more applications for funding than non-VBOs (47 percent versus 43 percent, respectively, submitted three or more applications), from a larger variety of lenders (online lenders, small banks and large banks), VOBs received less financing overall. During 2010 – 2017, SBA loans to VOBs increased by 48 percent, whereas they increased by 82 percent to non-VOBs. This is despite dedicated veteran-dedicated relief programs.
And some more results of those applications? It’s reported that 60 percent of VOBs still have a financing shortfall due to receiving less funds than they applied for. In comparison, only 52 percent of non-VOBs received less than requested.
The report also points out what we’ve already seen in multiple other studies, that:
“military service is highly correlated with self-employment probability,” and
“veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed”
What should all this data tell us? It’s pretty clear: we should be putting more faith and funding into VOBs.
Real-Life Success Stories
For those veterans who have been able to find funding through alternative resources, the results are both impressive and inspirational.
Just look at veteran and owner of The Texas Silver Rush, Joseph Remini. Remini creates custom jewelry and is considered a “destination” in Fredericksburg. He’s created custom pieces for the likes of stars including Santana, Ringo Starr and countless other country artists. Reliant Funding’s non-traditional funding options allowed him to purchase the silver he needed to make expensive, custom, one-of-a-kind pieces that are allowing him to make a name for himself. Remini knows that Reliant’s dedication to veterans is something unique.
“I will tell you that Reliant has given me peace of mind. I know I am with a company that cares about me, is willing to grow with me.” – Joseph Remini, The Texas Silver Rush
Christopher Adams is VBO of Cedar Creek Builders and a rental management company. When both companies were growing at a rapid speed, Adams used alternative funding to purchase and replace equipment he desperately needed for a job. Borrowed funds also allowed him to cover unexpected costs during the winter months. His success even meant he was able to purchase a personal condo without concern that it would affect his credit, and ultimately, his ability to access capital to grow his businesses. Adams is grateful for the opportunity non-traditional funding has afforded him.
“Reliant is there when you need funding. It is nice to know and have that peace of mind.” – Christopher Adams, Cedar Creek Builders
Reliant Funding is honored to represent so many veterans in small business. By eliminating origination fees for veteran and active duty service members and their families, and releasing a comprehensive resource guide for veteran owned businesses, Reliant has shown its dedication to the veteran community. We believe knowledge is power, so we’re committed to setting VOBs up with the know how to successfully navigate:
Cash flow management strategies
Funding options and how to use them
Certification as veteran owned business
Training and education opportunities
How to take and apply advice from other successful veteran business owners
If you’re a veteran or family member of a veteran looking for funding and working capital for your new or existing venture, our special offering to veterans and the debut of our VOB guide is proof of our commitment to investing VOBs.
Adam Stettner is the CEO and Founder of Reliant Funding
Chase drops OnDeck, OnDeck to pursue bank charter. It appears that JPMorgan Chase may be developing their own online banking solution, which frees OnDeck up to pursue a bank charter. This is the most interesting development we’ve seen in a while.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Upstart Securitization Trust 2019-2 (“UPST 2019-2”). This is a $358.4 million consumer loan ABS transaction that is expected to close on August 7, 2019.
MoneyLion’s “all-you-can-eat” membership pricing model has distinguished itself from the pack. MoneyLion provides customers access to financial advice, loans, and other banking service. Customer’s can enjoy the lion’s share of offerings all at a bundled rate $20/month.
The near-Unicorn FinTech announced a roaring $100 M funding round led by Edison Partners and Greenspring Associates, bringing PIC to ~$200M. MoneyLion is looking to invest in broker dealer, training, and stock-investing capabilities and further distance itself from potential copycats.
Financial advice, loans, integration of other bank accounts
Debit, checking, and savings accounts with no fees
Rounds up purchases and invests the change, financial education
The Federal Reserve’s decision to cut interest rates 25 basis points for the first time in over a decade marked a dramatic shift in monetary policy.
Now, interest rates are historically low, which leaves the central bank with little wiggle room in the event of a recession or if the economy stumbles. The current target range for its overnight lending rate is 2% to 2.25%.
In the past five years, the average interest rate charged on credit card debt has increased 35%.
Considering that the average household currently owes $8,390, credit card users would save roughly $1.5 billion in interest as a result of a quarter-point rate cut, a separate report by WalletHub found.
Elevate Credit (NYSE: ELVT) announced the exit of CEO Ken Rees today a Q2 earnings release missed on top-line numbers and the Fintech lowered guidance for Q3. Current COO Jason Harvison was selected to be interim CEO as the firm seeks a full-time replacement. Rees will remain on the Board of Directors.
Japanese online merchant Rakuten Inc. wants to open a bank in Utah to offer loans, credit cards and other financial services to customers of its existing U.S. cashback-shopping business, the company said Friday.
“We’re going to focus on that customer base we already have,” said Lee Carter, the new head of banking development at Rakuten and a former UBS Group AG executive. “That’s really the community that we want to extend additional financial services to.”
In the early days of my company, Kabbage, we struggled against requests from some potential partners. They wanted customers to be able to upload traditional loan paperwork like bank statements and tax returns.
By insisting on data connections, which in 2008 was usual, we lost some potential upfront revenue but prioritized a unique customer relationship and experience that would make us a more than $7 billion lending platform just a few years later.
Branchless bank Green Dot is launching the highest yielding bank account in the industry.
The Pasadena, California-based bank, which gained traction with prepaid cards in the dot-com era, launched a new bank account Tuesday with 3% annual interest on savings, and 3% cash back on all online debit card purchases. The average rate for savings accounts, according to Bankrate.com, is 0.1%.
The 3% rate on a savings account is the highest for any bank in the country, according to Bankrate.
I was in Detroit recently at the invitation of Rocket Loans CEO, Bill Parker. I do visits to fintech companies quite regularly but usually in the big hubs of New York, San Francisco or London. This was my first visit to Detroit for a couple of decades so I was excited to see how the city had changed. And you can’t really tell the story of Rocket Loans without also talking about the city of Detroit.
Quicken Loans is the crown jewel of the financial component of Rock Ventures. It is now the largest mortgage lender in the country, bigger than even the largest banks. They seem to be slowly moving away from that brand, though, and moving to Rocket Mortgage which has a much more modern and innovative feel.
The merchant cash advance is considered the payday loan for many in the small business lending market — and that’s not necessarily a good thing. While designed to connect small business owners to quick capital for a boost to their cash flow, the MCA has earned a reputation for some predatory behavior, like sky-high interest rates and fees.
Fashion and lifestyle blog Man Repeller is taking operations offline through a pop-up retail collaboration with Klarna. Opening at Showfields in New York on Monday, the “highly instagrammable” retail space was crafted to represent a shopper’s “dream closet,” Man Repeller said in a statement. Curated by the Man Repeller team, the temporary store includes offerings…
Visa is pitching a new way for startups in the fintech space to get to market faster by using its rails and a group of pre-approved partners.
Chiefly, the process makes it easier to integrate with Visa. It’s an attempt to put the payment processor’s network, VisaNet, at the center of a vast array of services ranging from payroll to business to business payments and online banking, online lending and even digital wallets.
Despite the enthusiasm they have received from the private equity world and the billionaire hedge fund set, a majority of investors have been mostly shut out of the conversation surrounding the Opportunity Zones initiative included in the 2017 Tax Cuts and Jobs Act.
Although there is already a flood of capital being funneled into qualified funds (upward of $40 billion according to the National Council of State Housing Agencies’ Opportunity Zone Fund Directory) Opportunity Zones remain an ongoing experiment in maximizing the benefit to both investors and the communities in which they invest.
According to Thomas McDonald, Investment Product and Portfolio Manager of the online real estate investing platform CrowdStreet, the new language is a critical move for the program.
Groundfloor, a real estate lending platform that raises its loan funds via crowdfunding from the public, announced Wednesday it raised $3 million from 1,580 investors, while also doubling its annual revenue in the second quarter of 2019.
Groundfloor is taking private real estate lending public (Groundfloor Email), Rated: B
As we close out the first half of the year, we’re excited to report accelerating growth and strong financial results for the quarter. Once again, GROUNDFLOOR more than doubled its year-over-year revenue for the quarter to $1.6 million, 1H revenue to $2.6 million and trailing 12-month revenue to $4.4 million.
The OCC received 19 comment letters on a pilot program announced in April meant to provide supervisory clarity as national banks pursue “novel activities” in which regulatory uncertainty is perceived to be a barrier to development.
Our next guest on the Lend Academy Podcast is Melissa Koide, the founder and CEO of FinRegLab. They have just published their first research report this week on the use of cash flow data in underwriting. It is the first independent research done on this topic and it is milestone for both FinRegLab and the fintech community.
Genesis, a digital asset trading and lending platform that is also a broker-dealer registered with FINRA, and a BitLicense holder with the New York State Department of Financial Services, reports that its services are booming.
According to a release from last week, Genesis’ Q2 performance was the best over as it topped $746 million in loans/borrowing – a 48% quarter over quarter increase.
Genesis states that total active loans increased to $454 million – a 149% increase over Q1.
Headquartered in Eugene, Oregon, Northwest Community Credit Union (NWCU) launched two new products earlier this year called Northwest Cash and Northwest Cash Plus, offering short-term loans from $150 to $700 and $701 to $4,000, respectively. Both products are designed to help their members deal with unexpected cash needs with an easy to use application process.
An infusion of $37 million in debt financing from BMO will help cloud-based digital banking and low-code platform company Kony “accelerate growth” in its two signature solutions: KonyDBX, the company’s digital banking technology, and Kony Quantum, its low-code development platform. The financing, courtesy of BMO’s Technology and Innovation Banking Group, adds to the more than $115 million in funding Kony has raised to date.
White Oak Commercial Finance (“White Oak”), an affiliate of White Oak Global Advisors, announced today the addition of two new professional underwriters, further increasing the company’s originations presence across the United States. Mr. Sudhir Chaudhry joins White Oak’s Los Angeles office bringing nearly 25 years of structured finance and underwriting experience. Mr. Kevin Maitland joins White Oak in Boca Raton with over 14 years of asset-based lending and commercial banking experience.
Finicity, a provider of real-time financial data access and insights, andEllie Mae, the leading cloud-based platform provider for the mortgage finance industry, today announced that Finicity’s digital Verification of Assets (VoA) solution is now available through Ellie Mae’s Encompass Digital Lending Platform.
But by investing within a large, diverse portfolio of loans (RateSetter’s portfolio is currently £875 million with 250,000+ loans) investors get the stability of scale and this makes for steady and predictable returns.
And putting this inside the ISA tax-free wrapper, it’s no wonder that in less than 18 months since launch, RateSetter’s Innovative Finance ISA has attracted more than £250 million of investments from people looking to put their money to work.
RETAIL investors are at risk of being shut out of the peer-to-peer lending sector due to the so-called 10 per cent rule that will come into force this December.
However, a number of P2P lending platforms have a minimum investment of £1,000, which would mean that individuals must have at least £10,000 in total to invest across a variety of asset classes. Official statistics indicate that most UK adults do not have this amount of money to invest, which could effectively bar them from certain platforms.
P2P lenders such as Zopa, Funding Circle and ThinCats require a minimum investment of £1,000, but the FCA’s latest financial lives survey shows that 49 per cent of UK adults, equating to 25 million people, either have no such assets or have less than £10,000 in value.
Iwoca almost doubled its loans last year, leading to its first annual profit since the small business platform was founded eight years ago.
The London-based fintech, started by chief executive Christoph Rieche (pictured, centre) and James Dear in 2012, said loan originations jumped by 91 per cent to £325m, as its lending hit the equivalent of 12 per cent of the UK’s small business overdraft market over the last year.
A digital asset lending platform is looking to set new industry standards with the launch of a framework using master agreements typically seen from incumbent capital markets bodies.
The Global Digital Assets Lending Agreement (GDALA) was developed by Lendingblock, with legal counsel and support from Norton Rose Fulbright.
The platform, targeting institutional investors, will use master agreements framework similar to ISLA’s Global Master Securities Lending Agreements, ICMA/SIFMA’s Global Master Repurchase Agreements and ISDA’s Master Agreements.
Alternative lending includes business lenders that exist outside of the traditional lending space. The different types of alternative lending these lenders provide include short-term business loans, medium-term business loans, lines of credit, invoice financing, equipment financing, merchant cash advances and more. They don’t typically include bank loans or SBA loans.
At one point in June last year, Zeng Jinpeng was more than 10,000 yuan ($1,500) in debt to a smartphone app.
Formal household borrowing rose to 54% of gross domestic product in the first quarter, up more than 4 percentage points in a year. China’s ratio is still lower than that of the U.S. (66%), Hong Kong (72%), or South Korea (100%), according to S&P Global.
Regulators last year launched a crackdown on peer-to-peer lending, which besides being a source of easy credit had also become a popular investment vehicle. The sector has shrunk to less than half its peak size as a result of forced shutdowns. Official data showed that almost 70% of China’s 50 million P2P investors were younger than 40.
Online attacks against China’s peer-to-peer (P2P) platforms have been rising. An industry report released on Wednesday shows that more than 10 million malicious attacks were encountered by the online financial sector in the first half of 2019, and gambling-related attacks accounted for over 56 percent.
China Lending Corp. (Nasdaq: CLDC) announced Monday its five-year strategic partnership with Zhong Lian Jin An Insurance Brokers Co. Ltd. in the development of consumer financing and litigation guarantee business, sending its shares up 4 percent intraday to 88 cents apiece.
The nascent cryptocurrency sector is renowned for its volatility. It’s very early days in the development of the industry and with that, various niches are emerging within its overall purview. DeFi or decentralised financing is one such area. Over many years, the world of retail and business sector lending has seen little in the way of disruption. However, that may be in the process of changing.
Firms like Ripio Credit Network (RCN), Salt Lending, EthLend, and WeTrust are emerging, providing their unique twists on financing with blockchain as a basis to their respective propositions. Within Europe too, the market is innovating. Hodl Finance is one such entity – which is harnessing this newly emerging economy to provide its unique take on financing.
New research from Klarna, a Swedish firm that offers interest-free installment payments among other payment solutions, suggests shoppers will only tolerate such aggravations for so long.
Through a survey of 2,065 shoppers conducted in May and June, Klarna found 55 percent of consumers say one bad retail experience would stop them from returning to a brand. Nearly 30 percent of consumers said they don’t find shopping as fun as it used to be.
Klarna also noted 39 percent of the 250 retailers surveyed realize shopper loyalty isn’t just driven by rewards programs. Nearly 70 percent understand they have to do more to retain customers, but just over a third of retailers are struggling to keep up with changing consumer expectations because of outdated technology and a short-term emphasis on sales.
In Asia, Africa and Latin America, the percentage of unbanked people exceed 60% in all cases. However, people in this segment of the population do own a mobile device.
The massive use of mobile phones has allowed great successes, such as that of M-Pesa in Kenya and ten other African countries, which over the past decade has enabled more than 30 million users to transfer money, take out loans and make deposits using mobile phones, from the remotest rural areas.
Kiva, with its African headquarters in Nairobi, thrives as a peer-to-peer lending website whereby millions of US dollars get lent from around the world at zero percent interest rates. In 2009, dozens of competitors of Kiva emerged based largely off their business model: get generous individuals to lend their money for a few months up to a few years all while earning no interest return as long as the funds go towards helping entrepreneurs.
And Australian businesses have access to a number business loan sources including traditional banks and online lenders, although according to online lender OnDeck, some small businesses can have trouble securing funding from traditional sources.
New research from the lender found that nearly 25% of small to medium enterprises (SME’s) that have applied for business finance with a bank have been rejected – a figure that rises to 37% of SMEs which have been operating for less than five years.
Digital lending marketplace RupeeCircle has set up a segment-wise model of credit disbursement through its P2P platform. Deserving Individuals and families belonging to certain communities who were hitherto declined loans from banks and NBFCs due to lack of sufficient credit history or lack of a proper bank account can now avail loans on the P2P platform.
Vietnam-based tech company NextTech announces a total of US$10 million injected into Next100, a fund dedicated for backing early-stage startups.
Recently, Next100 invested in VayMuon.vn, a P2P lending platform based in Vietnam, Heyu.asia, a startup that provides order consolidation and shipper services, and Teky.edu.vn, a tech academy for kids.
Brazil-based Nubank, which offers a suite of banking and financial services for Brazilian consumers, announced today that it has raised a $400 million Series F round of venture capital led by Woody Marshall of TCV. The growth-stage fund is best known for its investment in Netflix but has also made fintech a high priority, with over $1.5 billion in investments in the space. According to Nubank, the company has now raised $820 million across seven venture rounds.
Shares in Banco Inter SA surged more than 20% on Tuesday as the Brazilian online lender raised 1.25 billion reais ($329.73 million) in an offering largely sold to Japan’s SoftBank Group Corp, boosting pressure on traditional banks.
In the latest bullish development, OPay, founded by Norwegian browser company Opera and which includes lead investors such as Sequoia China, raised $50m to partly fund its expansion in Nigeria.
While sub-Saharan Africa’s number of adults with a bank or other financial account increased to 43% in 2017, up 9% from 2014, Nigeria’s banked population dropped to 40%, down 4% from 2014. Over half of Nigerian adults — 60 million people — lack access to financial services.
Under the new mobile-money framework, MTN will drive user acquisition with its large existing subscriber base and powerful agent network. With a 42% market share of Nigeria’s 163m active voice subscriber accounts, MTN has a huge pool of untapped demand as each voice subscriber represents a potential new mobile money account.
News Comments Today’s main news: 400K UK consumers may have been affected by Equifax breach. Independent Community Bankers of America letter opposing ILCs. RateSetter launches consumer hire-purchase product. Klarna partners with Wacom. Google enters digital payments in India. Payday type loans come to e-tailers in India. Today’s main analysis: Analysis of SoFi deal SCLP 2017-5 and Lending Club deal CLUB 2017-P1. […]
Did lending just change permanently? AT: “A must-read. This really gets to the heart of what the CFPB no-action letter means for alternative lending. An interesting question for me is, how could this impact the ILC discussion. Long-term, if this analysis is correct, the prospects could be good for online lenders to own banks.”
As you may be aware, ICBA recently filed a comment letter with the FDIC objecting to the deposit insurance application of SoFi Bank, an industrial loan corporation to be chartered by the state of Utah. In our letter, we urged FDIC, for safety and soundness reasons and to maintain the separation of banking and commerce, to not only deny SoFi Bank’s application but also impose a moratorium on ILC deposit insurance applications. Furthermore, we said that Congress should close the ILC loophole because it not only threatens the financial system but creates an uneven playing field for community banks.
The news that Square also intends to apply to the FDIC for deposit insurance as an industrial loan corporation has significantly increased our concerns and made it even more urgent that the FDIC immediately impose a moratorium on approving deposit insurance applications for ILCs. As we noted in our SoFi Bank letter, the ILC charter is nothing more than a loophole in the law to circumvent the legal prohibitions and restrictions under the Bank Holding Company Act.
SoFi Bank and Square are applying as ILCs and not as commercial banks because their parent companies and their affiliates do not want to be subject to the legal restrictions and supervision attendant to the BHCA. Square, for instance, already owns a point-of-sale hardware appliance business and a food delivery service and therefore could not own a commercial bank without divesting its commercial activities. For safety and soundness 2 reasons and to maintain the separation of banking and commerce, the FDIC should deny SoFi Bank’s application and impose a moratorium for at least two years on future ILC deposit insurance applications, including any application by Square.
Bank lending regulations have rarely been thought of as dynamic or exciting but last night’s ruling by the Consumer Financial Protection Bureau (CFPB) to allow a lender to begin using alternative data in their underwriting could herald the beginning of a new era in lending and how banks work.
Why is this significant?
US banks have traditionally been guided by three key pieces of legislation, the Truth in Lending Act of 1968, the Equal Credit Opportunity Act of 1974 and the Community Reinvestment Act of 1977.These three acts were created before the era of personal computers yet still guide bank lending today.Since the rise of marketplace lending, which began in 2006, where borrowers go through a platform and investors fund those loans, it is becoming increasingly apparent that many of these regulations are in need of updating.
In an overly simplistic interpretation (and I am not an attorney), the regulator is giving an online consumer lender the right to underwrite loans using ‘alternative data’ which before was not in line with how the Equal Opportunity Act is interpreted by lenders.It is not clear what data will be allowed but in a CNBC interview, Upstart co-founder Paul Gu suggested that SAT scores, college grades and even college majors are data points which are helpful in predicting loan defaults.
So assuming the change stands, what is next?
As alternative lenders have more scope to use alternative data, machine learning complex data analysis is opening up an entirely new space for investors.Gone are the days where banks only competed against each other with marketplace lenders now allowing investors to allocate capital in a similar way to banks, choosing loans to fund based on their own ideas and risk profile. For now, this is mostly impacting consumer credit, but in the years to come, look for marketplace lending to impact all areas of lending as investors get more comfortable investing in this space regulations start to adapt.
SoFi’s application to become a bank has almost no chance of approval in the wake of a sex scandal that forced out its chief executive, says a close adviser and former chairman of the Securities and Exchange Commission.
But last week’s departure of Mike Cagney, the co-founder, chairman and chief executive, has effectively killed the application, said Arthur Levitt, a former chairman of the SEC, who began advising the company two years ago.
“This departure of Mike makes that a very questionable attainment,” Mr Levitt said, referring to the charter.
He noted that the FDIC had turned down this type of application “many times” before.
We turned first to SoFi, a consumer-finance unicorn that has raised more than a billion in equity, and over $2 billion in total. The company is now down a CEO after allegations of misconduct brought censure upon its CEO, Michael Cagney, and the company’s culture.
Goldman Sachs has been pilloried for lackluster results from its trading division (paywall), so this week the bank gave investors a peek into its plans (pdf) for making more money. Surprisingly, the Wall Street powerhouse thinks it can generate as much revenue from online consumer loans—a market targeted by many fintech startups—as from buying and selling securities.
Specifically, Goldman thinks it can make $1 billion in extra revenue from its consumer lending business over the next three years, as much as it expects for its trading operations. Combined with new lending for the wealthy and companies, the bank expects to bring in $2 billion in additional sales from loans. Goldman co-chief operating officer Harvey Schwartz said it’s one of the fastest-growing lending platforms ever launched, even though he says the bank is taking its time with the nascent business. The bank’s digital consumer-lending arm called Marcus is expected to have lent out $2 billion by the end of the year.
Meanwhile, big banks have access to cheaper funds than peer-to-peer lenders like Lending Club or Zopa. With consumer deposits and the billions of dollars they routinely borrow in credit markets, banks can undercut the loan rates offered by smaller companies.
That said, Schwartz acknowledged that consumer lending isn’t immune to economic downturns, and analysts cited by Bloomberg were skeptical about Goldman jumping into a market outside its core expertise.
It might seem like it is only a matter of time before the tech giants knock on banking’s door. In fact, a recent World Economic Forum report posited that big tech companies present a greater challenge to banks than fintech startups. The report notes that regulators will accept a more “oligopolistic distribution of financial services products by tech firms.” Already, the fintech providers Social Finance and Square have applied for FDIC-insured banking charters, just as the Office of the Comptroller of the Currency continues work to develop its limited-purpose fintech charter. Are the largest tech firms next in line?
Incumbents still hold the upper hand. The risk of an Amazon or Google or Apple dominating the traditional banking sector is nowhere near a slam dunk.
In every scenario, the tech giants would need to persuade regulators to grant them some kind of charter access in order to effectively compete and level the playing field on funding costs. This would involve easing traditional limits on commercial firms owning banks, and potentially navigating opposition from members of Congress.
But more fundamentally, tech giants have had mixed experiences in rolling out financial services such as Google Wallet and Apple Pay. And despite the reported consumer skepticism of legacy institutions, banks still continue to maintain a high volume of customer relationships.
In the fallout of the Equifax breach, the leading credit bureaus are dealing with an overwhelming volume of credit freeze requests from consumers. While it is still too early to tell, it seems that the genie is out of the bottle. The breach is sparking additional focus on FinTech innovation to protect consumers (e.g., digital identity verification, disposable card numbers, etc.).
Beyond the headlines, SoFi’s growth engine continues. In Q2 2017 alone, SoFi funded $3.1 Bn in loans with $134 Mn in revenue and $61.6 Mn in adjusted EBITDA. Revenue and adjusted EBITDA were up 67% and 60% year over year respectively. The news of Cagney’s resignation coincided with SoFi marketing its latest personal loan deal which priced this Friday. Interest in SCLP 2017-5 was initially strong, however the bond priced somewhat wider than guidance.
SoFi’s Latest Consumer Lending Deal: SCLP 2017-5
After Mike Cagney’s resignation on Friday, the lead underwriter re-launched SCLP 2017-5. Since guidance was released before the critical NY Times article on Tuesday, we have a close (but imperfect) control to study the consequences of management upheaval on deal execution.
ABS investors reacted negatively to the news; the bonds priced 10 to 15 bps wider than guidance on Monday.
LendingClub’s Self-Sponsored Prime Consumer Deal: CLUB 2017-P1
This is the second self-sponsored deal from LendingClub, and it follows the success of CLUB 2017-NP1. LendingClub expects to alternate between prime and near-prime securitizations at least once a year going forward. Of the $363 Mn outstanding, approximately $100 Mn came from LendingClub’s balance sheet (a shift from prior management’s business practice); the remaining loans were contributed from investors.
The CLUB 2017-NP1 and CLUB 2017-P1 deals total to approximately $628 Mn in loans, yet LendingClub has facilitated almost $29 Bn in loans on its platform as of Q2 2017 making it a small part of LendingClub by dollars loaned but a meaningful portion of EBITDA.
Fintech has become a major force over the decade since the financial crisis, with $12.8 billion in venture capital flowing into the sector in 2016 alone. But of the nearly 500 deals that took place in the U.S. last year, less than a dozen went to companies founded by women.
“It’s lonely to be a woman in fintech, especially as a CEO,” says Rachel Mayer, cofounder and CEO of Trigger, an automated tool for investing alerts.
At Anthemis, based in London, 56% of employees are women, a remarkably equitable gender breakdown that is consistent at every level.
Former banking executive Sallie Krawcheck is following a similar playbook with her female-focused investing service, Ellevest. Since founding the company three years ago she has raised over $50 million in venture funding.
In an interview Friday, Upstart co-founder and CEO Dave Girouard explained why the fintech applied for the letter and how it works.
Is it fair to think of a no-action letter as a stay-out-of-jail-free card?
DAVE GIROUARD: We’re careful about not trying to interpret it in any way that is different than what the CFPB says it is. The letter makes it clear that they have reviewed what we do and how we do what we do and that they don’t find issue with it.
How do you feel about the agreement?
We’re pleased that the CFPB recognized the consumer advantage of alternative data and machine learning, the fact that it could make affordable credit more broadly available to more people.
So it’s not just about Upstart for sure — it’s the acceptance of these more modern techniques because they can and will benefit consumers broadly over time.
The new hire is accompanied by the completion of the company’s SOC 2 Type 2 Certification, which affirms that Sharestates now meets the security requirements and parameters for storing information on the cloud as laid out by The American Institute of CPAs (AICPA).
ReliaMax®, the complete private student lending solutions provider for banks, credit unions and alternative lenders, today announced at the 23rd Annual ABS East 2017 Conference a new whole loan trading service, ReliaMax Portfolio Placement, as an extension of its existing capital markets and liquidity programs. The ReliaMax Portfolio Placement service will facilitate qualified existing private student whole loan portfolios for sellers and buyers.
The ReliaMax Portfolio Placement service provides unique value to the private student lending marketplace in multiple ways including insurance, default prevention, credit analysis, and servicing. Some benefits include:
State-of-the-art servicing through ReliaMax helps buyers maximize the value of their portfolio, providing compliance and regulatory support and staffing to manage student loan-specific servicing requirements.
Loan insurance through ReliaMax Surety Company covers 100% principal and interest and mitigates risks, reduces defaults, and provides better cash flow.
Portfolio review and credit analysis provides guidance around the price at which the portfolio might transact.
ReliaMax has been involved in many third-party portfolio transactions. For example, in December 2106, MetaBank acquired a $151 million student loan portfolio which ReliaMax Surety Company now insures. The transaction also included the conversion of the portfolio servicing onto the ReliaMax Platform. Over the last three years, ReliaMax has provided insurance and/or servicing on 12 portfolio placement transactions.
Lendio, the nation’s leading marketplace for small business loans,today announced a partnership with Ocrolus, the emerging leader in bank statement review automation. The PerfectAudit API, powered by Ocrolus, analyzes uploaded bank statements with 99+% accuracy, replacing manual review with automation. Ocrolus technology allows lenders, for the first time, to review every potential borrower’s bank statement data automatically, regardless of whether or not the borrower provides sensitive bank login credentials.
In April, Lendio became the first lending marketplace to integrate with Ocrolus, whose clients include banks, alternative lenders, accounting firms, law firms, and government entities. The PerfectAudit API gives Lendio the ability to systematically combat bank statement fraud and conduct a hyper-accurate review for every potential borrower.
From peer-to-peer lending to online banking, the fintech industry is a rapidly growing area for technology investment. In the first quarter of 2017 alone, U.S. venture capital-backed fintech start-ups raised $1.1 billion across 90 deals, according to CBInsights Global Fintech Report. The only region to outdo the U.S. during this same period was Asia, which reported for the same group investment of $2.7 billion across 226 deals.
There exists a wide range of technologies that fall under the definition of fintech, and each is seeing significant growth. One such technology is artificial intelligence, which, according to the PricewaterhouseCoopers 2017 Global Fintech Report, 30 percent of large financial institutions are investing in. For example, another factoid from a separate PricewaterhouseCoopers report, projects that, by 2020, AI will automate a considerable amount of underwriting.
Mobile payments are another rapidly growing area of fintech, with TechCrunch reporting that there will be an estimated $60 billion worth of payments made on mobile platforms in 2017. The site also predicts that, by 2020, 90 percent of smartphone users will have made a mobile payment, which serves to underscore just how commonplace this fintech will be within a very short time.
A new report from Aon discusses the contemporary market for alternative risk premia: where it is, how it got here; where it may be headed.
The authors, Matthew Towsey and Chris Walvoord, begin with some very basic considerations of what ‘risk premia’ are. They are, on the one hand, the payments one receives for taking on a risk that others do not wish to hold (providing insurance), or they are on the other the winnings one pockets on strategies that take advantage of market anomalies.
How does NerdWallet create its content and recommendations? Do data and algorithms play a role in your platform? I’m curious about the company from a fintech perspective.
It’s actually a mixture of both — algorithms and incredibly smart, financially savvy humans power our recommendations, reviews and expert advice.
The company seems to simplify financial information for everyday consumers. Do you think NerdWallet has helped to democratize the space?
That’s the goal! I truly believe that a person that has spent no time at all thinking about personal finance and can’t afford a financial advisor, should be able to make the same quality of choice as the most financially savvy person in the country
Experts deliver new alternative investment advice and resources for individuals being impacted by the giant 2017 Equifax data breach. This includes all new episodes of SDIRA TV with national finance experts and investment advisors, as well as a side by side comparison white paper on retirement investing options.
Deeper concerns have surfaced as it was discovered three Equifax executives sold off substantial amounts of personally held stock before making the breach known.
In general, those are new untested platforms, which may or may not do well for you over time. These investments have not been time tested during a recession. In addition, I do not understand very well how investment assets are segregated in those platforms, and how things would work out if a project you invested in fails miserably.
He’s talking about fintech, which has leveled the playing field for non-New Yorks to flourish in financial services. Inspired by emerging tech trends, Raznick and Benzinga are taking stakes in Michigan’s future by spearheading the new Detroit Fintech Association.
The nonprofit trade organization will enhance the community’s exposure, connect startups with national leaders and mentors, support talent recruitment and magnify the Detroit voice in U.S. regulatory discussions. The DFA also aims to improve financial literacy in the city through work with Detroit high schools and higher education institutions.
Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a provider of real estate, mortgage and technology services, today issued the results of its inaugural Default Servicing Survey, a survey of over 200 mortgage default servicing professionals. According to the study, nearly three-quarters (71 percent) of servicing professionals surveyed predicted FHA/VA loan volumes would increase within their organizations in the next 12 to 24 months; 41 percent believed FHA loans will offer their organizations the most portfolio growth over the same time period.
According to the U.S. Department for Housing and Urban Development, FHA loans accounted for over 17 percent of newly originated mortgages in 20161 and currently constitute 35 percent of all loans delinquent for 30 or more days2. As the issuance of FHA loans grows, so does the potential increase in volume of default assets. Thus, it is not surprising that 93 percent of servicing professionals surveyed stated that foreclosure/trustee and Claims Without Conveyance of Title (CWCOT) capabilities are important factors to consider when evaluating a vendor to manage growing default portfolios.
Servicing Professionals Cite Challenges Stemming from Costs of FHA Conveyance and Managing CWCOT Programs
Servicing professionals (29 percent) cited remitting fees, costs and financial obligations associated with FHA conveyance as the greatest challenge for effective CWCOT programs. For servicing professionals working with third-party vendors to manage CWCOT portfolios, 15 percent said overall vendor management is a challenge associated with managing CWCOT programs while another 15 percent pointed to timeline delays and increased costs due to attorney oversight; 11 percent cited not having enough in-house personnel on staff to effectively manage the program.
Third-Party Expertise and Central Coordination are Critical to Successful CWCOT Program Administration
In order to overcome the financial, regulatory and oversight challenges associated with their vendors’ CWCOT programs, servicers must carefully evaluate their third-party vendor strategy to ensure vendors possess the right expertise and resources to execute the program. Most servicing professionals surveyed (97 percent) said they are exploring options including a single-vendor approach to help achieve their objectives; 91 percent identified FHA asset management experience as an important criterion for vendors. When specifically evaluating single vendors, 72 percent of servicing professionals surveyed said consistency and efficiency in managing REO properties is a very important consideration; 69 percent also pointed to compliance management.
Equifax, the US credit-reporting company at the heart of a cyber-security scandal, has admitted that as many as 400,000 UK consumers may have had their personal information stolen.
The company said that while its UK systems were not affected by the massive cyber raid that targeted information for as many as 143m Americans, UK customer data “may potentially have been accessed”, because it was stored on US systems between 2011 and 2016.
If Equifax’s forecast is borne out, the data breach will be the biggest in UK cyber history, bypassing that of payday lender Wonga, which affected more than 250,000 customers.
RATESETTER has launched a hire-purchase (HP) product for individuals looking to buy vehicles.
Consumers will be able to borrow up to £25,000, but the peer-to-peer lender expects the agreements typically to be around £6,000. The terms range between 12 and 60 months, with APRs going from 19.9 per cent to 49.9 per cent depending on the customer’s creditworthiness.
Peer to peer lender Assetz Capital is reporting it has seen a year-on-year increase of 175% in the number of property development projects funded around the UK. The online lender says this rise comes following sustained growth in the funding pool for property developments, as investors hunt for a piece of the development market.
But as new types of Isa have emerged and new rules have been introduced, the situation has become more complicated.
And some Isa features – notably “flexibility”, which allows account holders to make withdrawals and then pay the money back in during the same tax year while keeping the tax benefits – have not been introduced by all providers, which has further muddied the waters.
A Help to Buy Isa, a type of cash Isa, is also an option. First-time buyers can deposit £1,200 in the first month and £200 a month thereafter to put towards a home purchase. The Government then tops up savers’ money by 25pc.
However, you can’t pay into a normal cash Isa and Help to Buy Isa in the same year, unless you choose a provider that allows you to split the cash. Nationwide and Aldermore both offer this option; they pay 2pc and 1.75pc respectively.
The Lifetime Isa is the newest addition to the Isa family.
Consumers between the ages of 18 and 40 can use the accounts to save towards their first home or retirement. Up to £4,000 can be put away each year into either a cash Lisa or a stocks and shares version. Eligible savers can continue to contribute until the age of 50.
Hargreaves Lansdown, Britain’s biggest fund shop, and rivals including AJ Bell, The Share Centre and Nutmeg, an online wealth manager, offer investment Lisas.
Innovative Finance Isas
These Isas shield peer-to-peer investments, which allow consumers to offer unsecured loans to individuals and businesses through online platforms such as Zopa and Ratesetter, and certain “crowdfunding” investments, from tax.
Lending Works was the first to offer the new Isa, paying the same return as the firm’s existing accounts.
Zopa allows existing customers to sell their loans and buy them back within the Isa. They can also transfer their Isas with other providers to Zopa.
There are a lot more people in the world that can collectively lend micro loans on a regular basis than there are corporations that can regularly distribute loans above the value of a thousand dollars.
“A network of independent lenders committed to distributing micro loans could potentially rival long established financial organisations in terms of the combined value of peer to peer loans serviced to borrowers on a world wide scale” says Richard Ochieze, Managing Director at Ledgermark, LTD.
The case for Digital Collateral
The internet makes non repayment of loans a marvellously simple task for borrowers and as such; organisations like the Funding Circle, a peer to peer lending firm, are left wide open to have the profits of their retail investors depleted due to this lingering risk.
Traditional financial institutions have been able to maintain a fortress of checks and balances such as strict collateral requirements for both business and personal loans in order to provide themselves with a means of recourse should a borrower fail to repay his debt.
In this digital age in which peer to peer transactions are becoming the norm, this same form of protection must be made available to the average individual who wishes to loan his money out to borrowers in return for profit.
However, the question must be asked: how can a borrower pledge his house or farm as collateral via an online loans application?
Prior to the invention of the Blockchain such an asset did not exist and now that it does, the door has been opened to allow individuals based anywhere in the world to distribute and/or become the recipient of a secured micro-loan.
Robo-adviser Wealth Wizards, for example, typically charges £65 for advice on investments of up to £30,000, and 0.30%, or £300, for guidance on what to do with a £100,000 retirement savings pot.
A typical financial adviser, meanwhile, charges about £580 for telling you how to invest a £200-a-month pension contribution, or between £1,000 and £2,000 for at-retirement advice on your £100,000 pot, according to figures from UK adviser network Unbiased.
China will strengthen its supervision of overseas investment risks and capital flows from insurance funds, the insurance regulator said on Monday, adding that it will urge companies to improve their risk monitoring systems.
The China Insurance Regulatory Commission (CIRC) will step up supervision over the use of insurance funds, with focus on “chaos” such as irrational stock market fundraising and overseas acquisitions, said Guo Jing, vice head of the finance and accounting department of the CIRC.
Shanghai-based BTCC is the largest and first domestic bitcoin exchange in China. On September 14th, BTCC announced that it would immediately stop new user registration and close operation in China on September 30th.
The 2nd China Fintech Conference (2017) will be held on September 17th, 2017 in Beijing.
IDC Financial Insights announced the 2017 Fintech Rankings and Real Results at Finovate Fall New York 2017. This year, 4 Chinese companies won the honor to be named in the 2017 IDC Fintech Rankings. They are Ping An Technology (38), Hundsun Technologies Inc. (54), Pactera Technology International, Ltd. (55) and ECCOM Network System, Ltd. (64).
Last week, China’s financial and educational regulators announced to ban online lenders from offering loans to college students, and encouraged commercial banks to offer micro-credit products for the campus market. As a response to the call, Industrial and Commercial Bank of China (ICBC) has launched its own student loan product Rong e Loan this week.
Sofort has been bought by Klarna. Although everything should function as normal according to Klarna, since the switch the order is not going into “pending” after checkout — order status is “in checkout”.
This is a good place trying to get this sorted. My questions are:
Is this a new shop or one that runs for a while and worked OK before?
From the screenshot it looks like Sofort sends notifications pretty often, is that true?
The expectation is that the first of those notifications should switch the status to pending and confirming that to Sofort so that they know you got it and then they wouldn’t notify you again, right?
That’s exactly why this is failing. The Ubercart payment module wants to write into its table the value Aus sofort-Überweisung wird Klarna into the field method.
You should notify Sofort AG about this problem and I will do the same.
Today we are proud to announce a new partnership with global technology company Wacom® that further accelerates Klarna’s expansion in the U.S. Wacom is now bringing our simple retail financing solution to the world of creative interface technology and software.
Financing a purchase over time has historically been optimized for brick and mortar stores. But the online equivalent can often be an ordeal, with redirects, lengthy forms and unclear information. Our process only requires a few fields of information, and lets consumers know instantly if they qualify for the financing solution.
Digital technology has changed financial services. It has facilitated innovation, increased competition and made the mobile customer experience the key differentiator.
This embodies a strategic threat with McKinsey estimating that legacy financial institutions will see profits decline by up to 60% by 2025 if they fail to evolve, a figure which should be motivating incumbents to look outside of traditional practices for growth and sustainability.
Millennials and digital natives have turned away from traditional banks in search of mobile alternatives. They are drawn to the best products and experience, and banks with the right level of service can win over this large market. Mobile-only banks like N26 are leading the way.
SME lending also offers a significant opportunity for growth. The European Commission’s SME Performance Review estimated just under 23 million small and medium enterprises generated €3.9 trillion in value add and employed 90 million people in 2016-2016, and McKinsey has identified a $350 billion untapped lending opportunity within this sector.
One path is acquisition, which banks like BBVA have followed by acquiring companies like Finland’s Holvi and neobank Simple. This is an expensive option complicated by having to find a company with the right fit for the business.
Given the technology available, a cleaner option would be to build a digital banking spinoff which can operate like a FinTech.
The far reaching nature of the internet has allowed the myriad of local economies that exist in the world to become merged into one, global, interwoven marketplace.
Despite this, it is still incredibly difficult for people to get a loan from an international organisation – without offering some form of collateral and/or proving credit worthiness.
The average size of deposit needed to get a mortgage is 62% of annual income, and in London, it’s 131%.
As a result, only 20% of 25-year-olds own their home today compared with 46% 20 years ago – less than half.
If you have a bad (or no) credit history, it is virtually impossible to borrow from a mainstream lender.
Banks and building societies advertise temptingly low rates, but they only need to apply to 51% of successful applicants, so almost half of all borrowers pay a different rate – probably higher.
Director of Ledgermark LTD, Richard Ochieze, explains:
An alternative should be offered to people who are being let down by the traditional banking system. We believe that the Meridian system can do a lot to alleviate some of the problems that exist in today’s online lending market.
The Meridian service offers users the opportunity to procure a loan of up to one Bitcoin at a time.
To qualify for a loan users must pledge a certain amount of Meridian tokens as collateral.
Meridian tokens can be purchased during the ICO on 12 October 2017 and will then become tradable on all alternative currency exchanges.
Google is expected to launch a mobile payments app in India next week, according to several news reports. Google Tez, which means “fast” in Hindi is the anticipated name of the payments service, which Indian news outlet The Ken says is “largely fashioned on the company’s global product – Android Pay“.
As TechCrunch notes, “this is a big deal because Google hasn’t made a big push into payments outside of the US.”
In a first of its kind for India, ICICI Bank will partner with e-commercefirms to provide automated payday loan-type credit to customers at the bottom of the digital pyramid. Unlike other software-based loans, the digital credit planned by the bank will be available to non-customers and new-to-credit borrowers.
Speaking to TOI, Anup Bagchi, executive director, ICICI Bank, said that the bank would price these loans similar to credit card advances. In the West, payday loans are advances that fund the low-income individuals to make up for cash shortfalls until their salary. The difference in the ICICI Bank loan is that for the first month, the buyer will get free credit for up to 45 days. It is only if they do not pay on the due date that borrowers will be charged interest at close to credit card rates.
The bank will lend to new-to-credit customers based on their track record with the e-commerce provider.
“The RBI is concerned that this can go big and get out of control,” says Harish.
Faircent—which is backed by financial institutions like JM Financial, venture fund Aarin Capital and Mohandas Pai-promoted 3one4 Capital—is seen as the largest online P2P lender in India. Other names include Lendbox, Rupaiya Exchange and LenDen Club.
There are typically three models through which such lenders operate, says Aditya Kumar, founder and chief executive officer at Qbera.com, an online lender that began operations in February this year and claims to have a Rs 10 crore loan book. “While there are at least 30-40 P2P players, who connect lenders to borrowers, 15-20 do marketplace lending (where money is raised from banks and other financial institutions) and then there are loan aggregators who have been around for longer,” says Kumar.
While Kumar says the total P2P lending market size would be around Rs 25 crore, Rajat Gandhi, founder and CEO at Faircent, puts the figure at Rs 50-70 crore on an annualised basis.
Figures available with Peer2Peer Finance Association (P2PFA) suggest that the global P2P lending market saw cumulative lending of £8.5 billion during the first quarter of 2017, against £5.8 billion three quarters before. In the same period, the number of lenders grew by a fifth from 1.5 lakh to just over 1.8 lakh.
The discourse around P2P lending has always been centered around what it means for borrowers and the advantages they can derive. However, what gets missed is that P2P lending has the potential to be a great source of investment for the lenders contributing to their retirement fund.
P2P lending is an investment delivering multiple benefits when building a retirement plan:
1. Add Lending to your Portfolio Mix: The adage that talks of not putting all your eggs in one basket still holds true. An investor should not limit his portfolio to only a few asset class, but focus on investing across investment opportunities so that market fluctuations do not have a huge negative impact on their retirement funds.
2. Steady and high returns not Linked to Stock Markets: P2P lending adds to building such a diversified investment portfolio while delivering returns that are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, and SIPs.
Lenders on Faircent.com are earning gross returns to the tune of 18% to 24% per annum on an average by building a diversified loans portfolio.
3. Income Generation & Power of Compounding: Another reason that P2P investment does well is because investors can compound their earnings. Lenders are earning back part of their investment, both principal and return, every month.
MicroMoney co-founder and CEO Anton Dzyatkovsky on attracting new customers, recruitment issues and risks in greenfield countries.
Now that we’ve opened new offices in Myanmar, Thailand and Sri-Lanka, our decision to start with Cambodia can be seen as a definitive step which enabled us to embrace the largest community of unbanked people in the region, bringing the advantages of Blockchain as the key technology for global financial inclusion.
Cambodia is all about banks
For us as Europeans, the first surprise was the population’s absolute trust in local banks.
The US dollar is as used in Cambodia as the local currency is, and the exchange rate has remained stable for over 20 years. State regulators do not exercise particular pressure on the financial industry, and by the time we stepped into the game, 50 organizations had been involved in the consumer loan industry, each with an average capital of $1.5 mln and an ARPU of $5,000.
30-day overdue loans in Cambodia account for only 0.9 percent of the total, so the PAR ratio (portfolio at risk) is quite profitable (according to the local Central Bank).
Our Cambodian lessons
A growing share of the middle class due to the growth of GDP. For instance, Cambodian GDP grew six percent in 2016.
A market capable of generating cheap leads. We discovered all Cambodians belonging to the target audience have at least one active Facebook account, and for them Facebook often equals Internet in general: every national mobile operator provides free access to Facebook.
Dormant or non-existent competition. in Cambodia there were no paperless lending services without an escrow of land or real estate property.
Eager audience in need of a product. when we were checking out the market, we found only five percent of the population had a credit record. According to McKinsey, the number of ‘unbanked’ people in Asian region overall ranges from 65 to 80 percent of the adult population.
Collaboration at the local level. It helped us understand local customers and comply with local regulations (in this case you must be ready to assign 51 percent of your newly established company to a local partner).
Funding Societies, which started in Singapore in 2015, is one of the first peer-to-peer (P2P) financing companies to open its doors here in Malaysia in February this year. It is also present in Indonesia.
Wong, who learned about alternative financing while studying at Harvard Business School, says P2P is well-suited for the Malaysian and South-East Asian markets where there is a big gap in SME financing. He estimates financing needs for small businesses in Malaysia to be at RM80bil.
According to Research and Markets, the global P2P lending market was valued at US$26bil in 2015 and is projected to reach US$460bil by 2022, growing at a compound annual growth rate of 51.5% from 2016 to 2022.
Funding Societies has made it to the Fintech 250 list, which is recognised and regulated by Securities Commission Malaysia, to provide financing to SMEs. The company also provides flexible investment opportunities with rigorous risk assessment and returns of up to 14% per year for investors, says Wong.
So far, the company has done more than 800 deals and disbursed more than RM180mil in financing to SMEs in Malaysia, Singapore and Indonesia.
Taiwanese could soon be able to open bank accounts denominated in foreign currencies on the Internet after the central bank on Thursday gave its go-ahead to the plan.
Local banks could seek approval for the new accounts by the end of this year, or 60 days after the introduction of the new regulations, the central bank said in a statement.
Taishin, the banking arm of Taishin Financial Holding Co (台新金控) and the nation’s largest online lender by the number of accounts, told reporters that it aims to be the first applicant when the notification period begins.
News Comments Today’s main news: Lending Club increases minimum investment to open account. Consumers pay off unsecured personal loans first. American Households Return To Peak Debt, Thanks To Booming Student Loans. RateSetter sells off bad debts. Today’s main analysis: The fast lane to better small business funding. Today’s thought-provoking articles: Consumers pay off unsecured personal loans first. American Households […]
Lending Club increases minimum investment to open account. GP:”I am very surprised by this increase. Many people want to test the waters with $100 , or $200. $25 was surprisingly low but I wonder what is the cost of an account to Lending Club. It should be minimal IT costs. $1000 will probably prevent some people from testing the waters. I do not understand this move. “AT: “This is likely a move to increase stockholder profits. As companies mature, a shift in thinking occurs from attracting new customers and acquiring new accounts to increasing profits and making shareholders happy. This is a natural outgrowth of the company’s success in growing itself into maturity.”
Consumers pay off unsecured personal loans first. GP:”This is again very surprising. A must read as well. Completely counter intuitive and very important for the industry. ” AT: “Very interesting report from TransUnion with a comparison of delinquency rates between personal, auto, credit card, and mortgage loans. A must-read.”
LendingHome hires new CFO, receives Fannie Mae approval. GP:”Congratulations on the Fannie Mae, that’s the cheapest capital you can find. Not all mortgages will be sellable to Fannie Mae but this allows LendingHome to increase origination volumes in standard single family morgages tremendously by leveraging their technology unlike the usual paper bank process. “
Until today new investors at Lending Club could open an account with as little as $25. This has now changed. Going forward to open a new account at Lending Club you must deposit $1,000. The $25 minimum investment per loan still applies but you will no longer be able to start an account with less than $1,000.
The reason for this move can be explained in one word: diversification. We have written manytimesbefore about the importance of diversification and Lending Club has a page on their site dedicated to this topic. With $1,000 investors will be able to invest in 40 notes; while that is still not very diversified it is a lot better than investing in, say, four notes when someone starts with $100.
American households are back at peak debt, with new data showing the highest level of household debt since 2008.
Americans now sit on a $12.73 trillion pile of household debt, meaning mortgages, loans, credit cards, home equity lines of credit, car loans, and student debt. That figure previously peaked at $12.68 trillion in the early days of the Great Recession.
Those numbers aren’t adjusted for inflation, and $12.68 trillion 2008 dollars would be equal to more than $14.5 trillion today. And while debt number is at it’s highest ever, the economy has grown significantly in the last nine years, meaning that as a percentage of the total economy, it’s still well below its 2008 high.
“Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today,” said Donghoon Lee, a Research Officer at the New York Fed. “This record debt level is neither a reason to celebrate nor a cause for alarm.”
The makeup of American household debt has changed in a big way. Back in 2008, people held $10 trillion in housing debt; that has fallen to $9.1 trillion today. In its place, student loan debt has boomed, and car loan and credit card debt also rose.
Home loans have become harder to come by for middle- and low-income buyers in the decade since the housing crisis began. And as the recession kicked into high gear and unemployment spiked, people poured into colleges in huge numbers, looking to weather the storm. That led to a boom in the for-profit college industry — and a soaring national student debt pile.
When household debt peaked in 2008, Americans had $610 billion in student loan debt, about 5% percent of all consumer debt and 23% percent of all non-housing debt. Today, student debt balances have more than doubled to $1.3 trillion, 11% of all consumer debt and 37% of all non-housing debt.
But people are now defaulting on those student loans at at a higher rate than any other form of debt. 11% of all student debt is now more than 90 days overdue, compared to 7.5% for credit cards and 3.8% for home loans.
“The standout, however, has been student loans—with new serious delinquency flows that deteriorated steadily between 2004 and 2014 and have remained stubbornly high since then,” the Fed researchers said.
The Fast Lane to Better Small Business Funding (Lendio Email), Rated: AAA
When faced with the choice of which debts to pay and which to miss, consumers in financial distress tend to prioritize unsecured personal loans ahead of other credit products such as auto loans, mortgages and credit cards. These findings were released today during TransUnion’s annual Financial Services Summit, attended by more than 300 senior-level financial services executives from around the globe.
The most recent study incorporates unsecured personal loans for the first time since TransUnion began analyzing the payment hierarchy dynamic in 2010. Beyond personal loans, this most recent analysis is consistent with prior TransUnion studies in finding that consumers have historically prioritized auto loans over their mortgages and credit cards, and have done so consistently since at least the beginning of 2004.
Personal Loan Delinquencies* Consistently Remain Lower Than Other Loan Types
Delinquency* Rates for Consumers Possessing
Auto Loans, Credit Cards, Mortgage Loans and Unsecured Personal Loans
*Delinquency rates after 12 months for consumers who possess and are current on all four credit products at the beginning of the respective performance measurementperiod.
Recent TransUnion data show that average term lengths are much shorter for unsecured personal loans. For loans originated in Q4 2016, unsecured personal loans had an average term of 28 months. In this same timeframe, the length of auto loans averaged 60 months and mortgages averaged 230 months.
RealtyShares recently teamed up with Harris Interactive to put out the Real Estate Investing Report, surveying Americans on their investment preferences. And according to the survey results, 55 percent of millennials are interested in investing in real estate, the highest percentage of all demographics questioned. Research from Fannie Mae supports these findings, reporting that 85 percent of millennials think real estate is a good investment.
According to a recent Pew report, there are 75.4 million millennials compared with 74.9 million baby boomers.
In the RealtyShares survey results, 20 percent of millennials indicated they believe real estate has performed the best since 2000. In fact, millennials were the age group with the largest percentage with that belief. The next highest group to believe real estate outperformed the stock market since 2000 is comprised primarily of Generation X (ages 35–44), 16 percent of whom chose real estate as the top performer.
While the large down payment needed to invest in real estate is the biggest reason millennials aren’t buying real estate, thanks to online real estate investing platforms, millennials can now invest in real estate without saving tens of thousands of dollars for a down payment.
Juvo Appoints Financial Services Expert Ron Suber As Strategic Advisor (Juvo Email), Rated: A
Juvo, a pioneer in mobile Identity Scoring, today announced the appointment of Ron Suber, president of Prosper Marketplace, as strategic advisor to the company. An investor in Juvo, Suber is a prolific presence in fintech and is well known as an industry influencer around the world. In his advisor role at Juvo, he will help direct the company through its global growth, ongoing product development and expansion into new markets.
Ron’s appointment helps round out the Juvo advisory team, which includes:
Nils Puhlmann, leads Juvo’s security and privacy efforts: former Chief Security Officer & co-founder of Cloud Security Alliance
Vicente Silveira, fraud and risk management advisor: head of fraud data science at Uber
Allison Duncan, social impact advisor: founder and CEO of Amplifier Strategies
Ken Laversin, enterprise software/SaaS advisor: senior vice president, worldwide sales at Jasper
Monica Rogati, data science advisor: equity partner at Data Collective, former VP of data at Jawbone and LinkedIn data scientist
Redesign the Nationwide Multistate Licensing System (NMLS). CSBS has launched a technology effort that redesigns and expands NMLS, the common platform for state non-bank regulation. The redesign will use data and analytics to provide a more automated licensing process for new applicants, streamline multi-state regulation, and shift state resources to higher-risk cases. State regulators also will ensure transparency through NMLS Consumer Access, which was viewed 3.7 million times last year.
Harmonize multi-state supervision. CSBS has created working groups to establish model approaches to key aspects of non-bank supervision. The groups will work to enhance uniformity in examinations, facilitate best practices, and capture and report non-bank violations at the national level. To further streamline the process, CSBS will create a common technology platform for state examinations.
Form an industry advisory panel. CSBS will establish a fintech industry advisory panel to identify points of friction in licensing and multi-state regulation, and provide feedback to state efforts to modernize regulatory regimes. The panel will focus on lending and money transmission, and discuss a wide range of solutions. Individual state regulators already have been engaging the fintech industry in formal dialogue.
Assist state banking departments. CSBS education programs will make state departments more effective in supervising banks and non-banks. Updated standards and analytics will help states determine where new expertise is most needed, identify and address weaknesses, update supervisory processes, and compare themselves to and learn from other state departments. These higher standards will be validated through an enhanced CSBS accreditation program.
Make it easier for banks to provide services to non-banks. CSBS is stepping up efforts to address de-risking – where banks are cautious about doing business with non-banks, due to regulatory uncertainty – by increasing industry awareness that strong regulatory regimes exist for compliance with laws for money laundering, the Bank Secrecy Act, and cybersecurity.
Make supervision more efficient for third parties. Banks of all sizes work with a variety of third-party service providers, including fintech companies. CSBS supports federal legislation that would allow state and federal regulators to better coordinate supervision of bank third-party service providers.
Lawyers who work for and with fintechs are encouraged that the state regulators at the CSBS are at least thinking about changes to the system that they believe would modernize state regulations of nonbanks or help centralize regulation among the states.
The state banking regulators’ plan for nonbanks such as fintechs outlines six ways in which it seeks to provide “a regulatory system that makes supervision more efficient and recognizes standards across state lines” by 2020, according to a press release.
Initial actions will include: redesigning the Nationwide Multistate Licensing System, harmonizing multistate supervision, forming an industry advisory panel, assisting state banking departments, making it easier for banks to provide services to nonbanks and making supervision more efficient for third parties, according to the association.
LendUp, a socially responsible lender for the emerging middle class, and Beneficial State Bank (Beneficial State), a social enterprise bank, today announced a significant expansion of the L Card, its credit card joint venture. The move is expected to quadruple the availability of L Cards, a Visa credit card product designed by LendUp and issued by Beneficial State for consumers traditionally shut out of mainstream banking due to poor credit scores or damaged credit files. The expansion builds on the firms’ partnership that extends back to the L Card pilot in April 2015.
According to the Credit Builders Alliance, a person with subprime credit pays on average $250,000 more in interest than borrowers with good credit over the course of their lifetime — and that doesn’t even include fees on financial products. In addition, according to LendUp research, many of its own customers are currently shut out of mainstream credit card products, such as rewards credit cards (98.5%) and retail rewards cards (66.5%).
In response, LendUp created a card for Beneficial State that meets borrowers’ immediate credit needs while helping to build their long term financial health. Features include:
No over-the-limit fees or security deposits
Reporting to the three main credit bureaus
The L Card carries an annual fee of $0–$60 and APR ranging from 19.99% to 29.99%; it has a 4.8 average star review on CreditKarma.
Mountainview, Calif.-based Addepar announced on Thursday that it is purchasing AltX, an alternatives market intelligence platform.
Addepar hopes that the acquisition will boost it’s capabilities around alternative investing by enabling advisors to make better-informed decisions, said Eric Poirier, Addepar CEO, in a statement released on Thursday.
AltX’s platform uses machine learning to gather intelligence on alternative investments, incorporating reference data, public filings and news into a database of performance, holdings and key reference data for more than 17,000 funds.
Ascentium Capital LLC, the top private independent finance company in the United States by new business volume, announced surpassing $3 billion in origination volume since the Company’s inception in August 2011.
The pace of FinTech disruption is increasing in the financial industry, with about $22 billion raised by FinTech startups over the past five years, Schedler said.
Northwestern Mutual has invested in two key early FinTech leaders, Betterment and Learnvest. And with its Future Ventures program, it plans to invest $50 million in series A and series B funding rounds over the next five to six years to bring in more partnership opportunities.
Bank My Biz has 13 bank partners in Wisconsin and many more across the country, he said. So if one of those banks isn’t able to extend an equipment or working capital loan of less than $100,000 to a small business, Bank My Biz may be able to do so with its financial partner, Brookfield-based national direct lender Advantage+.
Banks earn income off the term loan and Bank My Biz earns its revenue through the interest rate spread. It charges interest rates of between 9 and 13 percent.
Looking Glass buys marketplace loans on lending sites Funding Circle, LendingClub, Peerform and Prosper. Using its custom predictive analytics software, LGI evaluates and underwrites loans it has determined are unlikely to default. The alternative investment model promises investors a less volatile environment than the equity markets.
It also runs LoansOfTheDay.com, which uses big data, predictive analytics, artificial intelligence and machine learning to distribute risk and optimize returns on peer-to-peer lending sites. LGI contributes a minimum of $25 to each loan on the site.
And its newest product is LendSight, a SaaS underwriting tool banks can use to improve their profit margins by doing predictive underwriting, while allowing Looking Glass to capture more market share, Siefkes said.
Redpoint Capital Group, LLC (“Redpoint”), an alternative investment company focused on providing financing solutions to companies in the Specialty Finance and FinTech sectors, announced today that it has added Alex Dunev as a Managing Partner. Alex will be responsible for driving Redpoint’s strategic priorities, including sourcing new investment opportunities and raising capital to deploy into Redpoint’s investment strategies. Alex will also manage Redpoint’s office in Westport, Connecticut.
Alex was previously a Managing Director in the Investment Banking Division at UBS, leading the bank’s Specialty Finance efforts in the Americas. Prior to UBS Alex also covered Specialty Finance companies at Morgan Stanley and Credit Suisse.
Mr. Cecilio and Mr. Lewis formed DiversyFund, Inc. to create the industry’s first online crowdfunding real estate platform where the company acts as the real estate developer on all of its investment offerings in order to deliver to its investors better quality control and more detailed and robust investor reporting, including monthly construction updates on each real estate project with pictures of all work in progress.
Because DiversyFund, Inc. acts as the developer and receives a developer fee that is paid at the project level, DiversyFund does not charge any platform fees, servicing fees or other sales commissions to its investors, enabling investors to keep 100% of their investment returns.
Additionally, DiversyFund, Inc. is the only crowdfunding real estate site that focuses exclusively on strong-performing Southern California real estate markets.
LANDBAY has announced that its intermediaries will now receive a retention fee for all customer renewals.
The peer-to-peer lender, which specialises in buy-to-let mortgages, said that it introduced the 0.3 per cent fee because of its ongoing recognition of the role of intermediaries in offering advice in the retention process of customers.
The notoriety and growth of crowd funding, and its variations, has gathered a great deal of attention. For good and bad. Only last year, Lord Turner warned: “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.”
While investing in VCTs has its risks, just as any investment has, these risks are for more measured and disciplined with quality offerings. Many quality VCT providers have more recently felt lumped in the same bucket as the under fire feel peer to peer (P2P) lenders and equity crowdfunders (ECFs) both of which now the subject of a clampdown by the FCA.
Despite some of the misconceptions, VCTs raised £458m in the 2015-16 tax year, making it the third highest year for VCT investment since records began in 1995. In the tax year that has just closed, most but not all were fully funded by the end of 2016-2017.
VCTs invest in small, largely unquoted, companies in the UK of up to £15m in size.
As savvy investors champion alternative commodities such as wine and watches, classic Fords have proved themselves another sound investment.
For those who think there’s no money to be made from cars, think again – total growth over the past decade was 457 per cent***. This is a bigger increase than even property, which has increased in value on average 20 per cent in the last decade and 152 per cent since 2000 across Europe*****. And it’s not just new super cars such as the latest Ford GT newly on sale in excess of $450,000 that command a hefty price tag and appreciate rapidly. Among the list of top investor car makes, Ford offers among the lowest entry costs.
In March 2016, a Ford Escort Cosworth with less than 2,500 miles on the clock sold at auction for £67,580 after originally going on sale at £22,050 in 1992. The average price of a Cosworth is now more than double that original price and the Fiesta XR2 which went on sale in 1981 for £5,150, has trebled in value since 2014 to prices well in excess of £10,000, with the best advertised at close to £20,000.******
As reported by Forbes today, Alibaba has invested in online invoice exchange marketplace Qupital, marking the Chinese e-commerce giant’s first foray into fintech investment in Hong Kong. Qupital raised a total of $2 million in its seed round.
Qupital bills itself as Hong Kong’s first and largest online invoice discounting exchange. The company aims to solve the problem of companies not having quick access to cash by allowing them to raise funds on the site through the auctioning off of unpaid invoices, essentially securitizing their accounts receivable.
Dianrong today announced a new technology agreement with Maggie Ng, a leading consumer banking executive in Asia Pacific, to launch the first global fintech marketplace connecting Asian investors with high-quality, low-volatility and largely untapped asset classes, including U.S. consumer lending. The new strategic alliance combines Dianrong’s advanced technology with Ms. Ng’s extensive consumer-lending experience.
Ms. Ng and Dianrong engineers are currently completing beta testing for the new fintech platform that will provide Asian investors with an integrated solution to access U.S. marketplace lending assets. The platform will utilize multiple U.S. marketplace lenders and a single onboarding and know-your-customer process. It will also offer advanced risk modeling capabilities, added credit enhancement and structuring features, and blockchain solutions to safeguard data integrity. Investors will also have access to real-time performance monitoring, U.S. tax-exemption filing capabilities and a secondary market for liquidity.
Fintech company QuantGroup, which was founded by several notable Chinese movie stars, is considering a US IPO, according to an article published in Bloomberg last week. The firm is looking to raise an estimated $200 million according to unnamed sources.
The Beijing-based QuantGroup is a financial services company that provides estimated credit ratings using big data.
QuantGroup joins a growing list of Chinese fintech firms in the process of launching US IPOs. Fenqile, a Chinese online shopping mall that lets customers pay in installments, is also looking to raise over $600 million through a US IPO.
Platforms for raising funds from and lending small loans to members of the public through the Internet (crowdfunding and lending platforms) have become popular in recent years. However, some financial advisers have pointed out that investors participating in crowdfunding activities are exposed to considerable risks. In this connection, will the Government inform this Council:
(1) whether it knows the number of companies currently operating local crowdfunding and lending platforms, and the number of complaints received by the authorities in the past three years concerning crowdfunding activities, with a breakdown by type of complaints;
(2) how the current legislation regulates the fundraising and lending activities conducted through crowdfunding and lending platforms;
(3) as some financial advisers have pointed out that investors provide funds through such platforms, which in turn lend the funds to borrowers, whether the authorities will, to avoid such investors breaching the law inadvertently, clarify if such investors are regarded as money lenders under the Money Lenders Ordinance (Cap. 163) and therefore are required to obtain money lender licences; and
(4) whether the authorities will conduct public education activities on the risks faced by investors participating in crowdfunding activities; if so, of the details?
No. of complaints about crowdfunding
No. of complaints about lending platforms
(as at end March)
(2) and (3) Depending on the specific structure and features of the relevant arrangement, some types of crowdfunding activities, in particular equity crowdfunding and peer-to-peer lending, may be subject to the provisions of the Securities and Futures Ordinance (Cap.571), and/or the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32).
(4) We will ensure that investors and consumers of crowdfunding and lending platforms will receive proper protection under Hong Kong’s regulatory rules and standards. In view of the rapid development of financial technologies (Fintech), the Investor Education Centre (IEC) is working on a series of articles to introduce various Fintech services/products, associated risks and regulatory framework to the public.
A Zurich-based Swiss financial technology (fintech) firm, additiv, has today raised CHF21m Swiss Francs ($21.3m) in capital from core investors including BZ Bank, acting on behalf of its clients, and the investment vehicle Patinex.
Additiv provides systems to help with the digitalization of banks, asset managers and insurers.
Additiv’s key software product is the Digital Finance Suite (DFS). It has offices in Switzerland, Hong Kong and Singapore, as well as an international network of reselling partners and customers around the world.
Additiv’s key software product is the Digital Finance Suite (DFS). It has offices in Switzerland, Hong Kong and Singapore, as well as an international network of reselling partners and customers around the world.
A sea of 300 suits is what I faced last week at the first Swiss Alternative Lending conference hosted at SIX and in partnership SIX and Lendity.
Lendity is focused on developing structures that a family office, an asset manager, a pension fund, can book on their books or a private bank can list in their private debt product offering for qualified investors. And at the same time include:
o Global exposure – US and Europe for now (USD, CHF)
o Asset diversification – Consumer, SME, real estate etc
o Platform diversification
o Tax efficiency, despite the cross-border exposure
o Regulatory compliance, despite the cross-border exposure
o Private debt without additional counterparty risk from the issuer.
Lendity is really solving a pain point for both marketplace lending platforms and for institutional investors.
For marketplace lending platforms, Lendity acts as a marketplace that matches them with institutional capital from Financial advisors, Private Bankers, Pension funds, Family offices, and Asset managers (the 5 “investor” types).
The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has published its final report on ‘ (2016/2243(INI))’.
On the other side of the coin, the report stresses the following:
Financial services legislation at both the EU and national levels should be sufficiently innovation friendly.
Fintech companies should continue to contribute positively to the development of financial intermediation.
There is scope for improvement in the means that can be used for cross-border payments (while noting the regret of the European Parliament that there is no EU-wide European-owned credit or debit card scheme).
There are no clear European rules or guidelines for outsourcing data to the could with regard to the financial sector.
It is concerned about the increased use of permissionless blockchain applications for criminal activities.
The latest ASX Australian Investor Study found the proportion of 18 to 24-year-olds who invested in the ASX over the past five years had increased from 10 to 20 per cent. The proportion of 25 to 34-year-olds had also increased, from 24 to 39 per cent.
The survey shows that 81 per cent of 18 to 24-year-olds are seeking guaranteed or stable returns, compared to 67 per cent of 25 to 59-year-old investors and 60 per cent of retirees.
Millennials have grown to recently become the largest generational cohort in Australia, with 4.9 million people, eclipsing Gen X (4.8 million) and baby boomers (4.1 million), Roy Morgan Australia says.
According to the ASX research, 44 per cent of 18 to 24-year-old investors hold cash, 31 per cent hold shares and 25 per cent have investment properties.
The ASX survey also revealed that the proportion of 18 to 24-year-old investors using professional financial advisers was 37 per cent, but Mr Mahony said the number of people who used Google to see where they should be investing was 48 per cent.
The fintech arm of Australian banking giant NAB, UBank, has unveiled a robo-advisor aimed at helping customers complete their home loan applications.
In a national first, “RoboChat” will offer real time help for online home loan applications available 24/7. The robot will answer FAQs, such as “what term do you offer on home loans?” and “do you offer redraws and how do they work?”, as well as stupid and unrelated questions with a sense of humour.
Robo advisors give users access to advice by highly qualified experts who have multiple decades of financial experience with them as against serviced by a 22-25 year sales executive, or a family member. Also, since this is available online and requires minimal human intervention, it is the best and most economical way to make customised expert financial advice available to the masses.
Capacity (Who will cater to masses?): Bank relationship managers and advisors are a privilege of the rich as reduction in distributor commissions have made intermediaries vacate the low/ medium end of the market.
Robo-advisors reduce a lot of unpleasant experience of interaction. There is no pressure for you to buy right now, in addition to having the option of doing it at your own convenience. The design and UX at certain platforms are created to engage users without being too intrusive.
Abu Dhabi Global Market (ADGM) has announced its first batch of financial technology (fintech) regulatory laboratory (Reglab) companies that will go through its new innovation center.
Now Money – UAE: provides mobile technology to allow low income migrant workers in the UAE to access banking and remittance services, which would otherwise be out of reach.
Titanium Escrow – UAE: This is an automated escrow service that aims to increase trust in counterparties and stabilize the cash cycle for small businesses.
CapitaWorld – India: A one-stop digital platform that automates the entire loan value chain from loan application to credit appraisal and post-disbursement credit monitoring. Rather than needing to physically visit multiple banks to apply for a loan, the CapitaWorld platform allows a borrower to submit a loan application just once online, and its platform will use analytics to carry out verification and credit risk scoring. It will then match the borrower with multiple banks that have signed onto the platform and ensure that the credit risk appetite matches the borrower’s profile.
Rubique – India: Rubique is an online platform that connects banks and fund seekers/borrowers via a smart financing process that links to a range of loan, credit card and financing options that attempt to bridge the gap between lenders and borrowers.
Finalytix -US: This is a robo-advisory platform for wealth management applications that seeks to help clients optimize their holdings, mitigate risks and costs, and identify new investment opportunities.
News Comments Today’s main news: Experian legislative update. P2P platforms predicted to shift to hybrid models. Millennials spend over 1/3 of take home pay on rent. WeChat Pay enters U.S.market. Today’s main analysis: Lending Club’s lost year (and a half). Alternative return metrics (Cash on Cash Returns). Today’s thought-provoking articles: Record number of banks want to partner with LC. Q1 […]
Lending Club’s lost year (and a half). GP:”A lot of interesting charts. I expect Lending Club to have no problem increasing their origination amount via partnerships with institutions like banks and go back into profit in the next year.” AT: “Seeking Alpha does not favor LC on the short-term.”
Online lenders feel the pinch. GP:”The take away: eventually all lending will be done online. I would say yes, but below a certain loan amount only, not all lending, perhaps all lending below $1mil.”AT: “Data glitches are going to happen. Security experts can reduce them, but eliminating them is near impossible. Online lenders that realize that are more apt to create the right firewalls and barriers to entry for bad actors. And, yes, all lending may eventually be done online.”
LendingTree announces top customer-rated lenders by loan product for Q1 2017. AT: “It looks like customers are still happiest with incumbents, but Lending Club and Avant are at First Midwest Bank’s back door. As Baby Boomers continue to age and more younger generations enter the market, I think we’ll see a shift to online lenders dominating in all ways, including customer ratings.”
A simple macroeconomic case for avoiding LC. AT: “I don’t agree. If LC is a good investment long-term, and I believe it is, just as Seeking Alpha stated in the previous article above, then investors shouldn’t be avoiding it. Now is the time to buy.”
Q1 Cybercrime report. AT: “It’s important for online lenders to study cybercrime tactics and get out in front of them. It may be the most important technological knowledge of all since security is a major trust issue and give players a competitive advantage.”
On April 14 the CFPB’s Office of Fair Lending and Equal Opportunity issued its annual report on fair lending. The report provides an overview of the work that the Bureau has done over the past year to provide oversight and enforcement of the fair lending laws under its jurisdiction.
In March, US Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) announced that they were seeking legislative proposals to promote economic growth. Proposals were due to the Committee on Friday, April 14. Experian worked closely with the CDIA and Chamber of Commerce to ensure that our policy priorities were included in their letters. CDIA’s comment letter recommended that the Committee take up and pass CROA reform, credit score competition and legislation to cap class action damages under the FCRA.
On April 19, GAO released a report on fintech and marketplace lending. The report was intended to provide an overview of fintech, as well as the potential benefits and challenges for consumers and small businesses.
Texas, H.B. 2333 would require a business that accepts a credit card or debit card for payment and retains any data related to the card, other than a confirmation number, for the transaction, to secure the retained information against a breach of system security. If a breach of system security occurs in which credit card or debit card information is compromised, the business shall notify the attorney general within 24 hours.
One year later, the question hangs in the air: Has Lending Club recovered?
Meanwhile, G&A expenses ballooned as the company increased spending in compliance, retention, and recruiting. Despite only releasing one product, relative engineering costs also increased significantly during the same period. The company spent $35M in non-adjusted engineering costs, an increase of $11.5M from a year prior. Why have costs expanded, even though the company hasn’t grown?
Following the Jefferies incident (and even in the months leading up to it), one of the concerns that was brought up in 2016 was regarding Lending Club’s underwriting, both in its efficacy and in its efficiency. Many institutions temporarily halted their investments on the platform during the second quarter to do more due diligence, specifically on the concern that additional loans may have had their details changed.
This issue was recognized in the first quarter of 2016, when Lending Club stated that it had begun eliminating high-risk populations from its credit policy. The company announced severalmore cuts to its underwriting throughout 2016, most recently eliminating another 6% of borrowers from its credit policy. Cumulatively, approximately 17% of borrowers who formerly qualified for loans were cut from the credit policy.
Why is credit deteriorating? Lending Club noted these deteriorating credit trends early in 2017:
“Throughout 2016 and into 2017 we have continued to observe the same trends on the Lending Club platform: indicators suggest a strong U.S. economy, but some borrowers are not offering appropriate levels of risk adjusted return.”
The delinquency rates for grades D-G do seem to be flat/trending down over the course of 2016, but delinquency rates for 36-month loans grades A-C are flat/trending up over the same period.
While not a perfect corollary, S&P/Experian consumer credit default indices also show an increase in bank card defaults over the past six months, which suggests that the increasing level of charge-offs is not limited to Lending Club.
Lending Club also noted that it is spending a significant amount more on in-house collection efforts. Servicing and Origination expenses increased $2M from 4Q 2016 to 1Q 2017.
Lending Club noted that, although its servicing portfolio balance only increased 8% year over year, the revenue collected on its servicing portfolio has increased 34%.
If we tally up our score card, we have:
Revenue has not recovered (but the company has guided investors to growth in 3Q and 4Q).
Relative spend has increased in 3 out of 4 expense categories.
Bad debts will continue to impact note investor portfolios while the 2016 vintages progress through their hazard curves, although there are signs that the increase in loan charge-offs is slowing down and/or reversing for high-risk borrowers.
As evidenced from Prosper’s annualized return calculation methodology, the return calculation can be complicated, involving several moving parts. Marketplace institutional investors appreciate the complexity and diversity of return calculations. At PeerIQ, we have had numerous conversations in the past with our clients and developed the “Cash-on-Cash Return” metric as one of several tools to monitor portfolio performance.
It varies from Prosper’s Estimated IRR by only considering realized cashflow information. Unlike Annualized Return, it eliminates complication springing from annualizing simple returns. In short, CoCR utilizes few readily available loan and pool level data points and summarizes the historical return of the investment on monthly basis.
The disadvantage of the CoCR metric is that returns are not forward-looking. Also, the declining cash-on-cash return performance (a typical characteristic of installment loan portfolios) can create confusion or frustration for retail investors. Retail investors experience strong net annualized returns in the early periods, only to experience returns consistently decline as loans season.
Data glitches are bad for any company. But they are especially terrible for online lenders that trumpet having high-quality data as a main selling point.
And now comes Prosper Marketplace, which said on Thursday that it told investors their returns were inflated because of a systems error. Annual returns for some investors were cut in half, while others declined by 2 percentage points or less.
For example, take a look at a recent securitization by Avant, the Chicago-based online lender that cut its staff by about 30 percent last year and whose loan default rates had been higher than expected. To attract investors to the nearly $220 million deal, Avant had to materially improve the underlying creditworthiness of loans by reducing their length and the amount financed and increasing their risk-adjusted yield, according to PeerIQ.
Data provider Orchard Platform said the average return on online consumer loans was 3.95 percent last year, which doesn’t seem sufficient unless the default rate was extremely low, especially compared with average returns of 6.93 percent in 2015.
The U.S. economy will slow at some point, leading to a reduction in loans and higher defaults. And eventually, all lending will be done online.
LendingTree®, a leading online loan marketplace, today released its quarterly list of the top customer-rated lenders on its network based on actual customer reviews for the first quarter of 2017. The list features the top lenders in multiple loan product categories, including Mortgages, Personal Loans, Business Loans and Auto Loans, all of which are included in LendingTree’s online loan marketplace.
Lender rankings are based on a weighted average of overall rating and the total volume of customer reviews for mortgage, personal, business and auto loans. Lenders were rated on offered rates, fees and closing costs, responsiveness, customer service and overall customer experience.
J.G. Wentworth Home Lending, LLC
CBC National Bank
Arcadia Financial Group LLC
Veterans United Home Loans
First Midwest Bank
AmeriSave Mortgage Corp
Wyndham Capital Mortgage
First Direct Lending, LLC
Personal Loans Category
First Midwest Bank
Business Loans Category
Student Loans Category
up2drive – a division of BMW Bank of North America
According to new statistics from the Mortgage Bankers Association, real estate lending is slowing down. Lenders closed $491 billion in mortgage loans in 2016, down 3 percent from the previous year. The decline in the last quarter of 2016 was even more significant, falling 7 percent in comparison with the fourth quarter of 2015.
In commercial real estate, reports show that the decline is even sharper. According to Real Capital Analytics, U.S. commercial property purchases were down 10 percent in 2016 from the previous year, and the trend seems to be continuing into 2017. U.S. investors purchased $50.3 billion in commercial property in January and February of 2017, compared to $80.1 billion during the same timeframe in 2016.
With $300 billion in loans coming due in the next 18 months, it is unlikely that the slowdown is a sign that the industry is poised for a more significant decline.
Strong outlook for marketplace lending
While banks will likely continue to have a small pullback in commercial real estate lending, the outlook for marketplace lending is strong. In 2015, alternative lenders originated 68 percent more loans than the year prior, according to the Mortgage Bankers Association. With American Banker reporting a 700 percent growth in the marketplace lending industry in just four years, this growth is poised to continue.
While commercial real estate lending as a whole may have been down slightly in 2016, the outlook for marketplace and other non-bank lenders is strong for 2017.
We believe the most commonsense case for avoiding Lending Club (NYSE:LC) as an investment is pretty simple and doesn’t involve a deep dive into the numbers. We think the reasons for avoiding peer to peer lenders can be explained simply and are relatively easy to understand. Lending Club, along with other peer to peer lenders and smaller aggressive regional banks, will likely be a poor investments in coming quarters as a shorter-term debt cycle turns over and the lowest creditworthy types of loans begin to see a spike in delinquencies and faults.
While Lending Club loves to point out to its investors and those who participate in its online marketplace that a lot of its borrowers have great credit scores, the reality of the situation is that the lowest creditworthy people who are denied loans elsewhere will drift to platforms like Lending Club in order to secure a loan they otherwise would not be able to obtain. This is just simply a function of lending markets: the least creditworthy people will find the lowest spot on the totem pole to borrow money.
Enter Lending Club, a pool of investors chasing high yield and borrowers who were likely unable to obtain credit elsewhere. We think the obvious outcome for the broader economy will be significant and continued pressure on all peer to peer lenders, not just Lending Club, going forward over the next couple of years.
Now, Max Levchin’s latest venture, the financial technology company Affirm, is seeking to bring more accountability and transparency to the banking industry through what he calls “fair and honest financing.”
According to CreditCards.com, the average amount of credit card debt is about $9,600. If you make the minimum monthly payment, you could pay more than $11,615 in additional interest during the life of the loan — which is more than you originally borrowed.
Affirm lets shoppers pay for purchases — such as a Casper mattress or Peloton bike — over time with simple-interest loans that are free of any penalty or late fees.
Last month, the San Francisco-based company completed its 1 millionth consumer installment loan.
Max Levchin: We started Affirm 5 years ago with the thesis that we could build smarter underwriting and anti-fraud technology to improve on the tired traditional systems, and therefore create financial products that are simple, transparent, fairly-priced and free of incentive misalignment that so often defines consumer banking.
Since 2014, our loan volume has grown 40+ times over, we’ve added 900 merchant partners including Expedia, Wayfair, Peloton, Casper and Eventbrite, issued more than 1 million loans, all while maintaining an industry-first Net Promoter Score (NPS) of over 70.
Max Levchin: Since 2001, the [CFPB] found that more than 29 million consumers had been harmed by illegal practices perpetrated by bad actors in the finance industry.
There are also several legal, yet equally harmful, practices being used by the industry today that are disproportionately affecting the most financially vulnerable populations.
I would also like to see the CFPB affirm a consumer’s right to access and permission their financial data. Doing so expands access to credit for the 58 million Americans considered credit invisible – those with no credit files or insufficient information in their files to generate a credit score.
Max Levchin: Over the next few years, we [plan] to offer many more services expected from a modern financial institution, while bringing transparency to the industry where too often the customer has to lose for the service provider to win.
A new era for big asset managers? Glass Steagall and fintech (The Financial Revolutionist Email), Rated: A
The current clamor for breaking up America’s big banks should serve to remind those institutions to carefully manage the newfound freedom they will enjoy if Dodd-Frank gets defanged. It should also spur them to continue to seek out new risk-detection and monitoring technologies to avoid the kinds of systematic problems that sparked neo Glass-Steagallism in the first place. Does voice trading have a future?
It’s easy to believe that with the growing role of IM/chat messages, computer on computer communications, sophisticated algos and machine learning, the telephone is destined for oblivion when it comes to trading. But in a new survey conducted by Greenwich Associates, “voice” was reaffirmed as an important element to building trust and detecting nuance between trading counterparties. That’s good news for start-ups like Apple should buy Canada or PayPal.
JPMorgan Chase has formally exited blockchain consortium R3, following in the footsteps of fellow titans Goldman Sachs and Banco Santander who split last November.
The departure comes as R3 continues to pursue fundraising efforts, looking to raise to raise $150 million from its members and strategic investors in return for a 60% stake in the business – a downgrade from its original funding target of $200 million.
Real estate tech startups like LendingHome, Fundrise, Cadre, RealtyShares and Roofstock also raised money from Chinese firms.
Between 2011 and 2015, annual Chinese investment in U.S. technology companies rose from $300 million to $9.9 billion, according to research firm CB Insights, before falling in 2016 amid a general slowdown in venture investment. The data doesn’t break down how much money went into real estate technology, but sources said it holds a special appeal to Chinese investors.
Hone is backing the real estate investment platforms Roofstock, RealtyShares and Clara Lending, the Airbnb competitor Overnight and the drone-based property inspection service BetterView, among others, making it one of the most active Chinese investors in the space. The social media company Renren invested in mortgage platform LendingHome and crowdfunding company Fundrise, among others. Alibaba founder Jack Ma is an investor in Cadre, the Jared Kushner-backed real estate investment startup.
The technology of the future that is thought capable of revolutionizing financial institutions and its regulators is already here. But with no national plan to harness it for economic betterment or regulatory transparency, it may well represent another missed opportunity to restructure the financial system.
One need only look to the evolution of the internet, with its revolutionary concepts of distributed communication that fundamentally changed how the world and its financial institutions communicate. A similar revolutionary technology, distributed ledger technology (DLT), is promising to fundamentally change how financial institutions store and report information, but only if it can become a common good like the internet.
With the CAT rollout and data collection not yet begun, a more robust and comprehensive DLT solution could be proposed, one which combines important CFTC products with those of the SEC in a shared data collection undertaking.
The U.S. needs a comprehensive fintech and regtech (regulatory technology) plan to efficiently deploy DLT.
With standardization, fintech and regtech innovation can enable virtual global views of financial data that is disbursed throughout local computer nodes (data collection points) across the globe. But this is only possible if these nodes conform to both common data standards and common networking protocols.
Shark Tank star Kevin O’Leary, also known as “Mr. Wonderful” to some, is a fan of Fintech. O’Leary is sharing the love by delivering the Keynote address at the upcoming Benzinga Fintech Awards scheduled to take place this coming Thursday in New York City (May 11, 2016). O’Leary is said to be a regular suspect at the Benzinga offices too.
O’Leary will be presenting the keynote at the pinnacle of the award celebration.
Alongside O’Leary the following executives will be presenting or participating;
Kathleen Murphy, President, Personal Investing at Fidelity Investments
UK PEER-TO-PEER lending platforms are poised to shift towards hybrid models to stay afloat, a financial services think tank claimed on Monday.
The P2P industry has re-shaped the country’s small corporate funding and investment market, putting pressure on traditional lenders to step up their game, said the Centre for the Study of Financial Innovation. But it is now facing a plateau that may require it to expand into direct lending and balance-sheet operations, as well as cutting interest rates, to become profitable.
He pointed out that SME lending growth has become relatively stagnant and that less than half of UK small businesses are aware of new online sources of finance. This casts a shadow over the volume growth that P2P lenders need to achieve to become a mass market.
And in response to the digital innovation brought about by P2P players, traditional banks have begun to change the way they address the SME market, upgrading their online services and shortening their decision-making timeframes.
Attracting borrowers and scaling up investment volumes is going to be one of the key challenges for platforms going forward, the report said, alongside proving the soundness of their underwriting during a credit downturn and investing in continued innovation in customer service.
Cash-strapped millennials renting in the UK are spending upwards of a third of their take home pay of £17,359 on rental payments, according to the latest Landbay Rental Index, powered by MIAC.
For tenants aged between 18-39 and living alone, 69% of a monthly post-tax income of £1,447 is spent on £1,012 of rent. In a shared house of two people, overall rent of £1,152 adds up to 39% of each tenant’s income, while those co-habiting in a three-bed property would each spend 30% of their monthly take home pay on a rent of £1,322.
Rents have continued to rise over the last five years, increasing by 9% across the UK since April 2012 and by 8% in London – with monthly payments remaining a huge burden on those struggling to save, despite the pace of rental growth beginning to slow since August 2015, from 2.66% to 0.82%. While rents have begun to fall in prime Central London, outer boroughs popular with millennials, such as Barking and Dagenham, Havering and Bexley have seen rents grow by 26%, 18.9% and 18.2%.
The gig economy continues to grow, with about 5 million people in the UK working as independents. It makes sense that a bank account provider would want to cash in on that and that is why Coconut has sprung up – to provide tailored banking for freelance and self-employed workers.
Customers can manage and track their income and outgoings via an app, and it even gives reminders of tax deadlines and the end of the financial year.
Increasing numbers of customers are relying on their phones for their daily banking, with data from the British Banking Association revealing that customers used their phones to check their bank balances 895 million times in 2015 alone, a number that is no doubt rocketing upwards.
A number of fintech start-ups are trying to capitalise on this trend and Monzo is one.
The app gives customers a real-time insight into what they are spending and how they are spending it, helping to budget and stay in the black. Users can access their account via an app that gives data on their daily and monthly spending, as well as the overall health of their account.
The first bank to gain a licence while being centred entirely around an app, Atom is racing ahead in the fintech current account stakes. It offers some far-sighted technological developments, including the opportunity to do away with passwords and even debit cards, instead relying on voice and face recognition.
And DiPocket is a new financial app that isn’t a bank but offers customers mobile banking facilities via a prepaid Mastercard.
UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.
The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.
The Edinburgh-based RM Secured Direct Lending trust is seeking to raise fresh capital just five months after its launch as it nears full deployment of its capital.
Launched back in December 2016, the closed-ended fund targets the SME lending space investing in loans it originates of between £2-10m. It specialises in secured debt investments and the portfolio has had a good run since its initial public offering (IPO) with most of its capital invested or moving towards deployment.
Total Net Assets are today £48.9m. Nearly £40m has been invested in a total of 11 loans, with borrowers ranging from a healthcare group, a UK high street retailer and a large UK/European forecourt provider.
So, when Royal Bank of Scotland announced in March that it would be rolling out robo-advice for mortgage applications by the end of the third quarter it was clear that that particular innovation is no longer quite so innovative.
Put simply, websites such as Nutmeg, which is by far the best-known name in the fledgling UK market, present would-be investors with a range of questions designed to ascertain their attitude to risk before directing them to a model portfolio that should suit their needs.
However, the issue, according to Stephen Martin, head of Brewin Dolphin’s Glasgow office, is that even where needs are uncomplicated, robo-advisers can only go so far because they will never be able to tease out information peculiar to individual situations.
Hollands agreed, noting that while robo-advisers are a positive addition because they are helping open the investment marketplace to a wider range of people, they cannot be seen as a like-for-like replacement for full financial advice.
While the robo-advice market in the UK remains small, covering in the region of £1.5-2 billion of assets, research from Deloitte suggests that with more and more people having to take responsibility for investing their own pensions the potential for growth is high.
The accountancy giant found that 43 per cent of 35 to 44 year olds with a pension would use robo-advice on where to invest it, with those with the smallest pension pots, who may not be able to afford traditional financial advice, most likely to go to a robo-adviser.
Business grants: In an unsettled economy, start-ups are seen to be important as a way of encouraging economic growth- this is why so many banks and publicly funded organisations are happy to support your ambitions.
Short term loans: One way in which you can look to finance your business is through a quick loan from a reputable company. Quick loans can help to offer you the perfect cash injection necessary to get your business up and running with the ability for the debt to be paid back over a series of repayments. The key with funding your business through a short term loan is in finding a loan with a low interest rate.
Crowdfunding: Peer to peer lending and crowdfunding have become an increasingly popular way for entrepreneurs to start up their own businesses.
Friends and family: Something to always consider when looking towards funding your own business is to pitch for funding from your family members and friends.
Angel investors: Angel investors can be a great source of investment and can be found in most cities.
WeChat Pay, one of the biggest mobile payment platforms in mainland China, has boosted its cross-border business by entering the U.S. market.
One in four of those aged between 18 and 27 use pay-by-credit services Ant Check Later, a personal loan and installment service under e-payment provider Ant Financial Services Group, as these freer spenders form the very core of the country’s burgeoning consumer-credit landscape.
People born in the 1990s constitute 47.3 percent of the platform’s registered users. Among them, nearly 40 percent prioritized the service as a payment option over its sister service Alipay, China’s largest mobile wallet by market share. This is 11.9 percentage points higher than those born before 1985.
Baidu Financial has announced to launch new consumer mortgage products with the aim of encroaching on consumer credit market.
The rating standards mainly include five aspects: corporate strength, enterprise qualification, operation indices, cyber security and social reflection.
In another attempt to secure a firm grasp on China’s Fintech market, Chinese tech conglomerate LeEco has turned its next venture towards insurance and fund consignment. Since 2015, LeEco has got several financial licenses on various fields: micro credit, private placement, insurance and fund. Specially, LeEco is trying to build a fintech ecosystem, which covers micro finance, equity management, fund and insurance sales.
In recent weeks, Ant Financial‘s Yu’e Bao surpassed JPMorgan’s US government money market fund to became the largest in the world, China Rapid Finance became the second Chinese P2P lender to go public on a major US exchange, and Ant Financial upped its bid to acquire MoneyGram, the second largest global money transfer provider.
On the state of marketplace lending in China
Two fintech sectors — payments and marketplace lending — are more mature than others in China, as they have been around for over 10 years, have massive scale, and operate within robust regulatory frameworks and ecosystems.
We think that, over the next decade, sectors like crowdfunding, robo-advisors, insurance tech, blockchain and blockchain-driven applications will emerge. Some are behind marketplace lending by 3 years, some by 5 years, and some are behind by even 10 years, but I think all will go through a similar process in China.
It took 10 years for marketplace lending to grow from an idea to an industry in China. Recently, there has been tightening in the market, but I believe a tighter market will help the industry become more stable and healthy.
On credit scoring in China
Regulators have adopted a strong view that credit scoring is key for China to develop its credit bureau system. It will be a very strict process.
Currently, we use eCommerce data, telecommunications data, bank and credit card data, insurance data, and social security data. Big data is very helpful, but alternative data needs to cooperate with traditional finance and credit data to make the risk evaluation model really work.
I think China will develop a multi-layer system. The core will be the credit bureau — consisting of core credit data — and around it will be different applications for different industries utilizing some industry-specific data. Around that will be additional ancillary data services utilizing big data for anti-fraud, marketing, and so forth.
Still, the core layer will look quite similar to what the US credit system looks like.
On insurance tech in China
The biggest pain point for the insurance industry in China is that it’s never sold in the right way.
We don’t need more insurance products, we need more education and intelligent matching.
Where CreditEase is investing
Chinese investors are in the process of building globally diversified portfolios. From our point of view, we help clients who already have foreign currency outside of China to invest in the US and other parts of the world.
We are still quite interested in opportunities in lending. For example, we invested in (former Lending Club CEO) Renaud Laplanche’s new venture, Upgrade. I believe there are still a lot of opportunities left over from marketplace lending 1.0. We are similarly interested in crowdfunding, insurance tech, and — not only robo-advisors — but also B2B fintech models helping the wealth management and asset management industry.
P2P Industry News (Xing Ping She Email), Rated: A
Over 60% Chinese P2P Lenders achieved profit
According to the latest statistics from Online Lending House, 28 P2P Lending platforms disclosed their financial results, accounting for 1.3% of all the platforms. In 2016, 17 (61%) platforms have achieved profit, while 11 P2P Lenders had a loss.
The data shows that the most profitable platform is Yirendai, with $1.12 billion net profit. However, another US listed platform, China Rapid Finance, has lost $0.23 billion. Excluding lost platforms and those with incomplete data, the average net interest rate of 17 platforms are 25.92%, performing well in profitability.
After the Internet Finance mania in China, more attentions now are paid to bank depository of the auto loan market. In China, with the rapid development of economy, cars gradually become ordinary people’s necessary life consumption, especially in developed areas, and almost every family owning a car.
Meanwhile, the large holding numbers and high liquidity of cars make it one of the most promising vertical field in P2P industry. It was reported that the number of car users in China are rapidly increasing, which contributed to the rapid development of the auto loan market.
According to the latest data, the total volume of Internet auto finance in China is expected to reach at 1.85 trillion RMB, driving the penetration ratio of consumer finance to about 30%.
Temenos has announced Duena Blomstrom as Chief Growth Officer for Marketplace, its online store of 100+ FinTech solutions that have been certified and pre-integrated with the Temenos Suites.
Blomstrom is well known in the FinTech sector as an analyst, entrepreneur and Angel Investor, a mentor for Startupbootcamp and Techstars, and the inventor of the Emotional Banking, EX and Bank Branding concepts. For the past 18 years, she has operated on the strategy and consulting side, be it for sales or marketing.
But banks are not easily displaced. Peer-to-peer lending, for instance, has grown rapidly, but still amounted to just $19bn on America’s biggest platforms and £3.8bn in Britain last year, according to AltFi Data, an analytics company. And some marketplaces now involve banks. Lex Sokolin, director of fintech strategy at Autonomous, a research firm, argues that music—one of the first industries to be attacked by digital revolutionaries—was fairly easily disrupted. Retailing was a little harder, but customers got used to not handling books, cameras and clothes before buying. Finance and health care, he says, are much more difficult. People are rarely inspired by financial products, says Mr Sokolin, which makes it costly to build a brand. It is easier to team up with those who already have the customers.
In the West, regulation is opening up more of the field to fintechs, both large and small. A revised European Union directive on payment services, known as PSD2, allows third parties to offer more convenient ways of paying online or to consolidate information from different accounts (with the holder’s permission) so that people can keep track of their finances. America has no equivalent, but the Office of the Comptroller of the Currency, which oversees national banks, has proposed giving special licences to fintechs.
China’s digital behemoths worry less about such things. Companies like Ant Financial, the financial arm of Alibaba, an e-commerce giant, and JD.com, another online marketplace, have masses of data about those who buy and sell on their platforms. They know their spending habits and how much cash they can spare, so an easy next step is to offer them small loans. Big Chinese banks in any case neglect consumers and small businesses, so customers feel no loyalty towards incumbent lenders. Regulators have also been willing to let online companies shift into finance.
In the ever-evolving world of cybercrime, authentication continues to be a mainstay of global digital businesses; accurately recognizing trusted returning users and promoting a frictionless online environment builds a loyal customer base and reduces attrition.
However, cybercrime is becoming an increasingly global phenomenon, operating across borders in well organized criminal gangs, with knowledge sharing and centralized intelligence. Attacks continue to evolve quicker than the tools and techniques used to detect them.
Some key attack trends analyzed this quarter include:
The multifarious attack methods used in a 2017 cybercrime attack
The evolution of attacks from single to multi-vector approaches
Identity theft is a key issue for all industry sectors as they continue to see attacks involving stolen and synthetic credentials, harvested from omnipresent data breaches
The proliferation of RATs in the financial services sector
The sophistication of bot attacks
The only effective armor is to genuinely understand who your real customers are and how they transact, by collecting and processing all the information you know about them and using this to make informed risk decisions.
To be sure, a gang of newcomers have muscled their way into their domains. Peer-to-peer or marketplace lenders, such as Lending Club and SoFi in America, or Funding Circle and RateSetter in Britain, connect people and companies that want to borrow with those that have money to lend, promising both sides keener rates. Britain’s MarketInvoice allows small companies to borrow against receivables immediately, rather than turn to a bank or wait for bills to be paid. Digital banks such as N26 in Germany, Tinkoff Bank in Russia and an array of British hopefuls are challenging incumbents.
The Islamic Fintech Alliance (IFT Alliance) has published its inaugural report on the emerging Fintech sector for the Muslim community.
Munshi is the founder and CEO of Ethis Ventures, a company that operates several platforms including crowdfunding. Mushis states that Muslims must unite to take advantage of this “unprecedented opportunity” to invigorate Islamic financial services with new forms of finance.
This week the cryptocurrency broke record-highs when it started trading above USD$1680 against the US dollar. As at May this year, the total market cap of the bitcoin market has more than doubled to US$23 billion since it hit the US$10 billion mark just three years ago.
“A lot of people say that bitcoin is very volatile. It is in the short term but if I were doing fund management for my client, I see it as a very good long term investment,” he said.
Cambridge University counts as many as 5.8 million unique users of the so-called crypto currency wallet, most of whom use bitcoin. More than 100,000 merchants and vendors now accept bitcoin as a form of payment albeit regulators warn that bitcoin users are not covered by refund rights.
Digital modes of payment are becoming ubiquitous, riding on the government’s less-cash drive after demonetisation. Yet, Instamojo, a Bengaluru-based fintech company, feels not enough is being done for small businesses.
The company wants to help India’s micro, small, and medium enterprises receive payments online in a simple, hassle-free manner, said Sampad Swain, one of its founders and also the chief executive officer. The government last year projected that the number of such businesses has grown to over 5 crore.
The only two requirements for the company’s service to work is that both parties must have a mobile number and a bank account.
“If the mango seller wants to use our platform, he has to first do an e-KYC, which takes a few minutes,” said Swain. This can be done either through a mobile application that can be downloaded from the Play Store, or on Instamojo’s website.
The seller then generates a link by providing information on the ‘purpose’ of the transaction, and the amount that the buyer has to pay. In this case, the purpose would be a crate of alphonso mangoes, and the price would be Rs 1,700, Swain explained.
Once the link is generated, the seller can forward it to the buyer by any messaging mode, like WhatsApp, Facebook, email, or even an SMS. When the buyer clicks on the link, he or she is directed to Instamojo’s website, where a number of online payment options are available.
Headquartered in Dubai, Wamda (which means “sparkle” in Arabic) is an organization that supports the entrepreneurial spirit and business initiatives in the MENA region. Along with PAYFORT, an online payment platform, Wamda Research Lab released a report that provides in-depth data about FinTech in MENA.
According to the ‘State of FinTech,’ over $100 million USD were invested in Fintech in the MENA region over the last decade, with $50 million expected for 2017 alone. In 2013, the number of Fintech startups was 46. Then, in 2015, that number increased to 105–with the United Arab Emirates leading the pack with 30 independent FinTech startups–and the overall MENA number is expected to reach 250 by 2020.
The OnDeck-Barbara Corcoran partnership offers a lot of value to both parties and is in its second year of the popular Seal of Approval contest. We talked to OnDeck Brand Ambassador Kimberly Solarz for insight into the mechanics and advantages of the partnership. Regarding the early stages of thinking with whom to partner, she said the goal was […]
The OnDeck-Barbara Corcoran partnership offers a lot of value to both parties and is in its second year of the popular Seal of Approval contest. We talked to OnDeck Brand Ambassador Kimberly Solarz for insight into the mechanics and advantages of the partnership. Regarding the early stages of thinking with whom to partner, she said the goal was selecting someone who resonated to small business owners and cut through the noise.
Since Shark Tank is popular among SMEs and the highest rated show for families, it fit the OnDeck brand well. Corcoran is a good representation of the spirit of the SME owner because she is known for grit and perseverance. People admire and respond to the fact that she turned $1,000 into one of New York’s largest real estate agencies.
As SME advocates, OnDeck’s goal was to solve the problems of access to capital and acquiring clients through marketing. In the first year of the contest (2015), “we offered $10,000 while Corcoran provided the publicity through her media and PR channels,” Solarz said.
The contest was game-changing for the three winners, catapulting their businesses to the next level in capital, guidance, and visibility. Based on that success, OnDeck extended the partnership/contest into 2016 with more channels. Corcoran is filming TV and radio commercials. She is also testing her own digital channel and is a contributing author to OnDeck’s blog.
“Our goal now is to double down on the area where she is back,” Solarz said. “She is strong on advice so we package our strategy to focus on that. Since she is a true small biz advocate, SME owners are responding to what she has to say.”
Corcoran wanted to work with OnDeck because she values OnDeck’s work, but there was a long vetting process to get her on board. “She respected what we did with SME owners and saw a gap in the finance industry,” Solarz said. “She is as passionate about us as we are about her. She is a luxury brand ambassador who does work with other companies, but not in our space. We have a category exclusivity with a confidential agreement.”
OnDeck received over 1,000 applications from SME owners for the 2016 contest, which was far more than last year’s entries. As a result, OnDeck got a lot of press that included Rachel Ray featuring the three winners on her show. Corcoran had the three 2015 winners on Shark Tank in May. Then there was repeat coverage in local outlets in the SME owners’ home towns, Denver and Baltimore.
That coverage fit the overall marketing strategy of OnDeck. “It’s all about how to reach and position ourselves,” Solarz said.
Corcoran has a significant social media following and has been able to reach an audience OnDeck could not have reached on its own. Working with partners who have a built-in SME space is good leverage.
“It’s too early to see a straight ROI from this strategy,” Solarz said, “but so far we are extremely pleased with the results. It differentiates us from a competitive point, but our space has become rapidly crowded and this has made us stand out.”
Over 1,000 applicants from all sides of life and SME experience were vetted for the 2016 OnDeck Seal of Approval Contest. The winners were chosen in collaboration with Corcoran for their uniqueness and potential for success. Each winner received $10,000 and one-on-one coaching from Corcoran.
Here are the winners:
B’More Organic is an organic smoothie company from Baltimore, Maryland dedicated to local, sustainable, family-owned farming. The owners have parents with health issues, which led to a conviction that a healthy diet leads to a healthy life. They use a sugar-free protein to help cut sugar out of the diet. The popular health food space has an increasing presence in big box grocery stores. This company hopes to overcome its challenges with Corcoran’s advice on marketing techniques.
Beau & Belle Littles makes reusable swim diapers. The Loveland, Colorado owners invented a diaper that could have less environmental impact and work for families like themselves, with water-loving toddlers who hate messy disposables. They hope to expand their reach, develop new product lines, and pinpoint the most cost-effective way to put Corcoran’s advice into action.
Hardball Cider began three years ago in Mount Bethel, Pennsylvania. Their three varieties of cider are found in local restaurants and many of Pennsylvania’s major and minor baseball stadiums. The company is a family farm situated on family land and committed to family-owned small business owners, hard cider, and baseball. They hope Corcoran can help them control expansion and scale production without losing sight of these goals.
With success in the 2015 and 2016 contests, OnDeck and Corcoran are in the process of evaluating the results. So far, all parties are pleased with the value of the endeavor, the mechanics of the process, and the advantages the partnership has offered.