In an era where blockchain is transforming the financial landscape, loans against cryptoassets will emerge as an essential financial service allowing investors to retain ownership of their cryptocurrencies along with offering them much needed liquidity. In fact, this is already happening. SALT Lending SALT Lending’s co-founder, Blake Cohen, started working on blockchain technology in 2014. […]
In an era where blockchain is transforming the financial landscape, loans against cryptoassets will emerge as an essential financial service allowing investors to retain ownership of their cryptocurrencies along with offering them much needed liquidity. In fact, this is already happening.
SALT Lending’s co-founder, Blake Cohen, started working on blockchain technology in 2014. Shawn Owen joined with Cohen and spent the next year surveying the evolving blockchain landscape. The blockchain universe lacked a host of products and services required to support the growing sector, but their Eureka moment came when they saw there was no lending product that allowed blockchain assets to be collateralized for lending in fiat currencies.
Cohen is now the chief business development officer. His background in real estate coupled with a family history in hard money lending helped him realize the problem of liquidity in the crypto world. After spending a few months conducting a thorough feasibility study where he evaluated the technology barriers, regulatory hurdles, and market size of the crypto market, he realized there was a massive business opportunity. He and Owen incorporated SALT Lending in June 2016 and launched its operations in June 2017.
The company is based in Denver, Colorado. The one year between incorporation and launch was spent building the technology and in business development. The platform enables cryptocurrency owners to take a loan using their cryptocurrency as collateral thereby safeguarding their investments, which can be reclaimed at any time after the repayment of the loan. This allows them to monetize their blockchain investments without having to sell them off. Salt facilitates liquidity for borrowers, but they still get to enjoy the upside (or downside) in the price of their original investments.
The platform went public at the Consensus conference held in New York in 2017 and received an overwhelming response. It started official disbursement of loans in December 2017.
Funding Crypto Lending
Initially, SALT Lending was funded through family and friends and raised an amount in the region of $1 million. Last year, it went on with a membership sale denominated in utility tokens – SALT. The same was considered as a revenue event and not a fundraising initiative. The sale of tokens is still going on. In the discounted round, it had raised an amount of $42 million.
The thought process behind issuance of membership tokens was that ICO is a misleading term and usually confused with IPOs (Initial Public Offering). Membership tokens offered by the company will bring the interested population to the company’s platform without requiring it to spend huge amounts of money on marketing. The idea seems corollary to an IPO, but the difference is that IPOs create shareholders in the company whereas only a small percentage of ICOs are securities giving contributors ownership rights. The majority of ICOs generate utility tokens that are to be utilized in the business ecosystem of the company.
How the SALT Lending Platform Works
The biggest driver behind the platform is its in-house technology. The automated platform operates on Ethereum-based smart contracts that facilitate crypto loans backed by blockchain assets as collateral. Membership, premier, and enterprise versions of products offered by the company allow investors to receive loans in USD or any other currency depending upon selection of the package.
The blockchain assets of borrowers are secured by the company’s proprietary custodian technology. The proprietary multi-signature wallet regularly monitors the blockchain assets from origination till release thereby reducing the risk. The multiple signer features provide borrower and lender with a private key along with a third-party custodian; this ensures that there can be no misappropriation of the collateral.
With a view to minimize the default risk, SALT Oracle Wallet regularly tracks the value of collateral assets and generates alerts in case of a drop in value below a certain specified limit, which will further trigger liquidation of the collateral. Each loan originates with an LTV of about 60%. In case of a drop in valuation, the system will automatically liquidate a certain portion of the collateral to reach the original LTV, but only after notifying the borrower.
Products offered by the company facilitate borrowers with a maximum of 36 month term loans with interest rates ranging from 10% to 20% depending upon the LTV. Very few companies are offering loans with such favorable conditions. The first product offered by the company was in the form of fiat loans backed by crypto assets.
At present, SALT Lending is working with over 70 full-time employees, has processed 17,000 loan requests, and has 12,000 active SALT members. To date, it has originated loans worth $40 million.
The customer base is widely distributed across different segments. The comapany also serves small investors who are keen to invest in cryptocurrency and do not want to sell their assets for temporary liquidity issues. The purpose of loans may vary from customer to customer. Some may use a loan to repay student loans, rent a home, or invest in other assets, while corporate lenders may require a loan to expand their business and introduce additional revenue streams.
SALT Lending’s Future Plans
Lending against crypto assets is still an immature market and no complete set of solutions is currently available. Regular adoption of technological updates in the blockchain and fintech world is helping the company to fully automate each aspect of the operations and scale the business to new and emerging markets.
Custody of blockchain assets is one of the main issues that needs to be addressed. No platform or solution provider is providing a user-friendly experience in this respect. According to Cohen, this year will bring a drastic change in custodial architecture, and SALT Lending will be at the forefront of this progress.
Borrowers under the cryptocurrency mechanism have no issue with respect to the comparatively high interest rate because the appreciation in value of the underlying asset is expected to indemnify the high finance charges. Sale of such underlying assets results in high amount of capital gains and, therefore, borrowing against these assets provides a more tax efficient solution for crypto investors.
The industry at present is in price discovery mode. Economic pricing policies, daily reviews, and revisions in terms of lending will help SALT Lending establish a long-term market.
Different industries and asset classes are moving to the blockchain technology. SALT Lending is on its way to creating a platform that will bring together the crypto and fiat worlds where crypto assets can be used in the normal course of business.
One target for the company is to analyze and understand the needs of its customer base and respond accordingly. One such need is to make available lines of credit backed by a crypto portfolio. The company is also continually looking to partner with investors who will bring capital to meet the ever-increasing demand for loans in the industry.
Block & Leviton LLP (www.blockesq.com), a securities litigation firm representing investors nationwide, announces that a new class action lawsuit has been filed against Lending Club Corp. (“Lending Club” or the “Company”) (NYSE: LC) and certain of its officers and directors alleging violations of the federal and securities laws. Class members interested in serving as lead plaintiff are reminded of the July 2, 2018 lead plaintiff deadline.
The lawsuit, filed in the United States District Court for the Northern District of California (No. 3:18-cv-02599), alleges that throughout the Class Period, defendants made false and/or misleading statements when they stated that Lending Club customers would receive a loan with “no hidden fees.” On April 25, 2018, the Federal Trade Commission (“FTC”) filed a complaint alleging that Lending Club knowingly charged consumers hidden fees, contrary to their public disclosures.
Lending Club was fully aware that thousands of consumers applied for loans with no knowledge of the obscure origination fee. In fact, Lending Club received “[a]t least tens of thousands”12 of complaints directly from consumers about the hidden fees. Indeed, Lending Club’s own training materials for customer service representatives listed “I didn’t receive the full loan amount” as one of the two most common complaints that representatives were trained to address.13 Consumers “frequently complained that they only discovered the fee after [Lending Club] disbursed their loan proceeds, when they noticed that the amounts disbursed were smaller than they were expecting.”14 Once consumers became aware of the fee, many elected to cancel their loans, often “preferring a loan from a competitor or no loan at all.”15
We continue to accelerate growth at scale, expanding our ecosystem for sellers and individuals. In the first quarter of 2018, total net revenue was $669 million, up 45% year over year, and Adjusted Revenue was $307 million, up 51% year over year. This is an increase from the fourth quarter of 2017, when total net revenue and Adjusted Revenue grew 36% and 47%, respectively, year over year. Gross Payment Volume (GPV) was $17.8 billion, up 31% year over year. Net loss in the first quarter was $24 million, which is an increase of $9 million from a net loss of $15 million in the first quarter of 2017. Adjusted EBITDA was $36 million in the first quarter of 2018, compared to $27 million in the first quarter of 2017. We achieved an Adjusted EBITDA margin of 12%, which reflects our reinvestment in the business to drive long-term growth.
Goldman’s Marcus has scaled extraordinarily fast having provided $2.4 billion in consumer loans; some analysts have expressed concerns on the credit quality of the loans Marcus has been making; Blankfein on Wednesday noted that a poor credit environment could bring new risks but he isn’t concerned with their timing into the market; the bank has a long-term view on their consumer focused business and believes they can manage it through the ups and downs.
Private lenders hold just a fraction of the outstanding student loan debt in the U.S. — about 7.7 percent as of last year. But those companies have plans to grow their student loan holdings.
The PROSPER Act, House Republicans’ opening bid to update the Higher Education Act, would raise undergraduate lending limits and add new annual limits for graduate student borrowing. Those students would have their total annual borrowing capped at $28,500 annually. Currently, graduate students can borrow up to the cost of attendance.
Graduate loans also offer a higher loan volume for private lenders. As Quinlan noted to investors, grad students make up 16 percent of the borrower market but hold 40 percent of student loan debt. So the average borrower holds more debt, they’re older, and they’re better educated, too, making it more likely that they will pay off their loan.
The recent end of Promise Financial personal loans leaves brides- and grooms-to-be with one less borrowing option. The company, which focused solely on financing weddings through unsecured personal loans, stopped funding new loans in January 2017, reported Bloomberg.
A group in Springfield, Mass., has applied to form a new bank. The group hopes to raise $25 million to $30 million in initial capital. If it opens, Green Apple would become the first new bank in Massachusetts since 2008, according to the state’s Office of Consumer Affairs and Business Regulation.
The application notes that Green Apple, which aims to open by the end of this year, would focus on small-business banking, commercial real estate lending, personal banking, renewable energy, local agriculture businesses and the food security sector.
Credit unions aren’t paving the way. Nor are they pioneering the ability to serve the underbanked. Seriously. Many are doing great things, that’s for sure, yet the fundamental change is originating from tech firms. And they’re not doing it alone (more on that later).
Although CreditCards.com lists the national average APR on a credit card at 16.38% as of January 2018, the rates on three-year unsecured loans are only 9.22% for credit unions and 10.09% for banks as of March 2018, according to the National Credit Union Association.
An online lender might provide an even lower personal loan APR, with FreedomPlus offering rates starting at 4.99% and SoFi at 5.37%.
Virginia alleges one of the nation’s largest online lenders made more than $47 million of illegal, high-interest-rate loans that put Virginians on the hook for tens of millions of dollars in interest and fees.
The state is suing Net Credit, which sells personal loans for up to $10,000 and charges interest rates of as much as 155 percent, for violating the state’s consumer protection laws.
The lawsuit also alleges that Net Credit has lied to Virginians about the legality of its loan terms and that it has continued to automatically debit money from customers’ bank accounts after they’ve filed bankruptcy and won a court-ordered freeze on debt collections.
The Online Lending Policy Institute (OLPI) today announced that it will partner with Detroit-based financial media outlet Benzinga for the Benzinga Global Fintech Awards Gala (BZ Awards) in NYC on May 15, 2018.
Real estate source platform, Infabode, has successfully secured its initial £750,000 funding target on equity crowdfunding platform Seedrs from more than 150 investors. Founded in 2013, Infabode reported that it connects its community of users with industry information from the real estate sector on one customizable online platform. Infabode’s platform has more than 450 content providers and over 17,000 members.
The council identifies only 36% of the population as “white British”. Dalston Junction, a now-trendy part of the borough, buzzes with a down-at-heel sort of cosmopolitanism: a Caribbean bakery; the Halal Dixy Chicken shop; the Afro World wig-and-extensions parlour; dozens of outlets for Lycamobile (“call the world for less”) and for money-transfer firms.
Competing with this last group is a branch of Oakam, a British lender set up in 2006. It advertises itself as an “alternative to doorstep lenders”, the traditional financiers for those beneath the bar set by mainstream banks. Originally aimed at recent immigrants, it extended its reach to the rest of those “lacking access to basic financial services”—a group it puts at 12m across Britain. A report published in March 2017 by a House of Lords committee estimated that 1.7m adult British residents have no bank account; 40% of the working-age population have less than £100 ($140) in cash savings; and 31% show signs of financial distress.
Revenues jumped 41 per cent in the six months ending in March to £74.1m compared with £52.4m over the same period of the prior year. Pre-tax profits rose 86 per cent to £19.5m.
Corporate broking and advisory revenues were up 76 per cent year on year to £50.9m, boosted in part by a growth in fees from M&A advisory work, a growing sector for some City brokers. However this compared with a weak comparative period, and fell 10 per cent below a record performance in the second half of last year.
61% of UK savers acknowledge possibility of higher returns and better interest rates with IFISAs, but majority still don’t understand the service
Over a third (36%) of UK savers would place their money in an IFISA if they had the money available.
While a large proportion acknowledge the prospect of higher returns (61%) alongside the allure of the tax-free wrapper and greater diversification, the IFISA is still a hard sell, according to research undertaken by P2P lending service ArchOver. In truth, the majority of UK savers (57%) still don’t fully understand the service.
Ripio Credit Network (RCN) — a global credit network based on cosigned smart contracts — has released an entirely new version of its NanoLoanEngine, the driving mechanism behind its protocol. The upgrade, which is called Basalt, includes significant improvements that will offer lenders and borrowers more flexibility. The company also claims that the new engine lowers costs.
Basalt changes how interest is applied to the network’s loans and eliminates nearly all maintenance fees associated with those transactions.
What HOLD (HOLD) allows you to do is simple, if you don’t want to sell your crypto or you want to “HODL” but at the same time you need cash, then HOLD is the platform for you. By creating an escrow that will lock up your funds as a collateral, HOLD will then send you a credit card of that amount in fiat, which means that you can have liquidity without selling your crypto assets.
How HOLD (HOLD) can have major advantages over SALT
What you might be thinking is that SALT already provides these types of services but the major advantage of HOLD platform is the almost instant credit card that will be issued for you to use in any store making adoption of crypto as payment a closer reality. This is a very important middle step towards businesses accepting crypto as payment.
Athens-based digital-first insurer Hellas Directhas teamed up with banking alternative Revolutto build “microinsurance, by-the-day products.”
Also, according to the press release, “the partnership will allow Revolut and Hellas Direct to push their offering into new markets and enable them to leapfrog some of the traditional barriers of growth and expansion by using the core competencies of each partner.
BuzzFeed reports that the Commonwealth Bank lost 12 million customers’ data after magnetic tape backups containing their personal financial history from 2004 to 2014 went missing. It just lost them. They may have literally fallen off a truck. And the bank didn’t even bother telling its customers about the incident.
While said losing-of-data was only publicly revealed this week, it took place back in 2016, when the Commonwealth Bank hired a subcontractor to destroy the backup tapes while decommissioning a data center. After it didn’t get a receipt of the tapes’ destruction, the bank investigated and discovered that the tapes were nowhere to be found.
Enter Bamboo, a West Australian startup whose mission is to make a cryptocurrency investment platform for the rest of us.
Bamboo brings together two new ideas. One complicated (cryptocurrency) and one a bit more simple (microinvesting). As platform Raiz (previously Acorns Australia) describes on their site, microinvesting works by transferring “spare change automatically from everyday purchases into a diversified portfolio”. For example, if you were to buy a coffee for $4.80, Raiz would round the sale up to $5.00 and then invest the $0.20 for you.
Noida-based OYE Fintech, which operates a consumer-focused lending platform called OYE! Loans, has raised $2.25 million (about ₹15 crore) from GAIN Credit, Inc. OYE! Loans currently serves new-to-credit and new-to-workforce consumers with simple, timely and affordable One Year EMI loans (hence the brand OYE!), with ticket-sizes ranging between 10K and 1L INR.
The company leverages alternative data to assess risk on customers who have thin or non-existent footprints on the credit bureau. The loan application to disbursal process is largely online, enabling for quick turn-around times of less than 2 business days – an attribute that has strengthened its growing reputation as a lender-of-choice within its target markets.
Interest rates on bank deposits are at a decade low, and those on small savings schemes are close to a 40-year low. This has forced people to look for alternatives, one of which is peer-to-peer, or P2P, lending.
News Comments Today’s main news: Wells Fargo still the largest bank to lend to nonbanks. Digit adds credit card payments to app. UK finance chief calls for regulatory crackdown on tech giants. Humaniq implements smart biometrics identification. Today’s main analysis: World Bank releases Global Findex Database. Today’s thought-provoking articles: Credit history, debt ratio are biggest constraints for would-be homeowners. Lending […]
Sloan provided some evidence for that argument last week when the bank paid a $1 billion fine to regulators to close an investigation into abusive practices in its auto lending and mortgage unit.
But a look at one of its lending businesses suggests that exposure to questionable practices isn’t so much an oversight as a business decision. Wells Fargo, according to reports over the past few years, is by far the largest lender among the big banks to payday loan companies and others that make high-interest loans to subprime borrowers, including some that regulators have accused of predatory practices.
Banks don’t have to report how much they lend to subprime lenders, which falls broadly into the category of nonbank lenders. Wells Fargo, at the end of last year, had by far lent the most to nonbank lenders, with $81 billion in outstanding loans. Citigroup was the bank with next largest exposure, with just $30 billion outstanding.
LendingTree today released the findings of its study on the cities with the highest rates of denied mortgage applications and why mortgage shoppers in those areas have been denied.
Since the financial crisis, mortgage lending standards have tightened as underwriting has become more stringent. There are numerous reasons why a lender could deny a loan, from poor credit score to prior bankruptcies, but other reasons can include a lender’s inability to verify a borrower’s employer.
LendingTree delved into data from more than 10 million mortgage applications using the most recent available Home Mortgage Disclosure Act data set to find out the main reasons would-be borrowers were rejected, and to see if location has any correlation for rejection.
Today, this payroll schedule means an estimated 70 percent of employees in the U.S. live paycheck-to-paycheck – and many struggle to make necessary purchases or payments in the days leading up to payday. It’s also linked to the rise in the payday loan industry, which has more U.S. storefronts today than McDonald’s, according to data from Pew. Lenders make a collective $7 billion in fees, according to analysts, and they stem from more than $46 billion worth of payday loans issued each year.
According to Steve Barha, CEO of Instant Financial, the rise of the payday loan industry and overdrafts certainly comes with its controversies, but it’s no mistake that the industry exists in the first place.
Unison, a unique financing platform for home ownership investments, is reporting strong year-over-year growth. According to the company, following a solid 2017, the origination volume for the first quarter of 2018 has grown and increased 1000 percent over the comparable period last year. This is due in part to an expansion of the management team and the availability of their service in ten new states.
Unison says these new hires will help extend their company into more states. In April alone, Unison HomeOwner and HomeBuyer programs will be available in 10 additional states including Florida, Georgia, Ohio, Michigan, Minnesota, Nevada, Colorado, North Carolina, Missouri and Delaware, bringing its total footprint to 22 states plus Washington D.C. Unison expects to broaden its reach over the course of 2018 to over 70 percent of U.S. single family residential housing units.
Acting Consumer Financial Protection Bureau Director Mick Mulvaney has repeatedly pointed to data security as a defect in the agency’s supervisory program, but security experts are scratching their heads over the bureau’s response to such problems.
Mulvaney has said hundreds of CFPB-related data breaches justified his announcement in December that the agency would halt collecting personally identifiable information from companies it supervises.
Pros of a LendUp payday loan
Getting cash fast is the main reason you’d choose a company such as LendUp. But they have some other benefits, as well.
If you pay your installment loan on time, you could boost your credit score.
The lender has an incentive program called the LendUp Ladder. You’re awarded points as you take out LendUp loans and repay them on time. As you accumulate points, the lender will reward you by allowing you to borrow at progressively lower rates.
For the sake of a side-by-side comparison, we’ll focus on Rise. Here are some pros of a Rise loan.
You can apply for a seven-day payment extension if you can’t pay on time.
The company will provide you with free access to your TransUnion credit score.
If you borrow from the company more than once, your interests rates could decrease.
Rates are lower than those offered by payday loans.
Chase card members’ voices will soon be their passwords when they call for help.
The bank is debuting a voice-authentication feature for credit card customers dialing the call center this spring to reduce the customer burden of having to remember multiple passwords and answer cumbersome security questions. The initial launch would only be for credit card customers, but the bank plans to expand the feature to all customers by the end of the year, a spokeswoman said.
On Tuesday, Point72 Ventures will announce it led a $3 million investment in a startup called Extend, which has built mobile technology business owners can use to share their corporate credit cards with employees and freelancers without handing over the actual cards.
Earlier this month, the venture capital arm was a co-lead in a $29.4 million round for a New Jersey startup, DriveWealth, that has developed a mobile site for investing in exchange traded funds and stocks, and it led an $18.5 million investment in Silicon Valley-based DeepScale, which is developing autonomous driving technology.
Two of the financial technology executives involved in the FT debate — FundingCircle chief executive Samir Desai and Rhydian Lewis, his opposite number at RateSetter — agreed that GDPR was a welcome protection for consumers.
UK-based fintech Humaniq announced on Tuesday it has implemented additional bioID settings that will act as an extra safeguard be integrated into Humaniq app, which the company reports has already had more than 100,000 downloads in the Google Play store.
Humaniq also revealed that the total transaction volume has reached 400,000 HMQ in more than 250,000 transactions per month. The company noted with the introduction of an additional layer of biometric authentication, this means over 10,000 transactions will be totally secured from fraud, benefitting over 100,000 users of Humaniq App.
A credit card cap is needed to protect “chronically broke” Britons struggling to make repayments on high interest loans, ministers have been told.
Labour’s Stella Creasy warned that credit card firms were pushing millions into debt in the same way payday lenders did before action was taken to prevent anyone having to pay back more than double what they borrowed.
The Walthamstow MP made the comments as she moved an amendment to the Financial Guidance and Claims Bill which would require the Financial Conduct Authority (FCA) to take tougher action on credit card firms.
MINISTERS should “learn the lessons” of the payday loan cap and extend it to cover other forms of high-cost credit such as credit cards and doorstep lending, MPs have demanded.
In a boost for The Sun’s campaign to stop millions of families falling prey to doorstep and legal high street loan sharks, MPs called on the Government to take tough action to stop the nation “drowning in debt” and protect “chronically broke” Brits.
Hong Kong Exchanges & Clearing Ltd. approved the biggest change to its initial public offering rules in two decades, putting it in a position to battle New York for some of the world’s hottest companies.
Technology firms that have shares with different voting rights will now be allowed to go public in Hong Kong, overturning rules that barred the likes of Alibaba Group Holding Ltd. from considering the former British colony. Businesses will be able to apply under the new regime starting April 30, HKEX said Tuesday.
Meniga, a white-label digital banking solutions provider, has received a €3 million equity investment from its customer, Swedbank.
The two firms partnered in 2017 to improve Swedbank’s digital customer experience through a personal finance activity feed and data aggregation platform. The new solution is intended to “give customers better control over their daily finances and a more personal, engaging experience than today”, according to Meniga.
Another conversation about Open Banking, and an interesting point was raised by one bank. They said that they had been mapping financial moments – getting married, buying a house, having a baby, crashing your car, etc – and had started to reimagine the whole customer experience in those moments using APIs.
For example, I bring up my banking app 3-4 times a day. The bank probably thinks it’s love them as I bring up their app so often. Well I don’t love them at all. I’m just going into the app so regularly because, as a small business, I want to see if my customers have paid yet.
The Global Findex Database and accompanying report give a clear indication of how fintech is impacting access to financial services globally.
Globally, about 1.7 billion adults remain unbanked—without an account at a financial institution or through a mobile money provider. Because account ownership is nearly universal in high-income economies, virtually all these unbanked adults live in the developing world. Indeed, nearly half live in just seven developing economies: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan.
Fifty-six percent of all unbanked adults are women. Women are overrepresented among the unbanked in economies where only a small share of adults are unbanked, such as China and India, as well as in those where half or more are, such as Bangladesh and Colombia.
While deal activity spiked in the US and Asia, it fell to a 5-quarter low in Europe with just 63 first quarter deals.
The slump was largely down to a decline in early-stage funding deals and came despite several $100 million-plus funding rounds for European challenger banks N26 and Atom. European fintechs raised $933 million in the first quarter.
Beijing has kicked off a number of measures aimed at bolstering its economic growth, Chinese researcher Liu Dan told Sputnik. According to Liu, the country’s internal difficulties have not been triggered by the US tariff war unleashed by the Trump administration on China.
One should not overestimate the impact of Sino-American trade frictions on China’s economy, says Liu Dan, a researcher at the Chongyang Institute for Financial Studies (RDCY) of Renmin University of China.
For millennials, this presents a major barrier to homeownership. While 70% of Chinese millennials have already managed to purchase their first real estate, only 35% of their Malaysian peers have followed suit according to HSBC data. For 64% of millennials around the world a combination of low income and soaring property prices make the prospects of owning a house rather gloomy. A lot of them also do not qualify for traditional loans and do not have the family support for making that downpayment.
Add to this new concept the technology of blockchain, and you have a method by which borrowers can access an alternative down payment funding source, and an immutable record of each borrower-lender agreement is permanently recorded. This serves four purposes:
Blockchain eliminates the traditional borrowing method, with its middlemen and fees. The repayment details are worked out between the borrower and the individual lender.
Blockchain democratises borrowing, because credit scores, history, etc., are not factors in obtaining the loans. If a borrower can show basic ability to repay, an individual lender will be willing to put up the money at an interest rate that is mutually agreed upon.
The borrower-lender arrangement is codified and recorded in a blockchain that is secure and permanent. Both borrower and lender have the security of knowing that their agreement cannot be changed except by mutual agreement.
Re-payments are also recorded in the blockchain environment, so there is never a question about the amount or the ultimate meeting of a borrowing obligation to any individual lender.
In a small business survey, it was recorded that even with the advent of new-age online lending platforms, small businesses find it difficult to raise debt capital. The survey also revealed that 45% of the loan applications were rejected more than once, and 23% were unaware of the reasons their applications were rejected. The situation […]
In a small business survey, it was recorded that even with the advent of new-age online lending platforms, small businesses find it difficult to raise debt capital. The survey also revealed that 45% of the loan applications were rejected more than once, and 23% were unaware of the reasons their applications were rejected. The situation is similar for consumer lending and other lending verticals.
It is important to assess how smart contracts can help alleviate the issue and create a sustainable solution for all stakeholders.
The Smart Contract Makes and Entry
Cryptocurrency has brought smart contracts into the limelight. The ‘smart contract’ concept was introduced over two decades years ago, but it has gained popularity only now with the advent of Ethereum. A smart contract has similar features to an ordinary contract but differs in the sense that it is digital, with specialized algorithms and other computer programming codes. Basically, it is a software program which stores the terms of an agreement, verifies fulfillment automatically, and executes once the terms are met.
Initiating business relations using the concept of smart contracts enables both parties involved to transact directly with each other without the dependency on any third-party service.
For instance, in a crowdfunding platform, the project teams share their projects and gather money from the supporters until the goal is attained. If this platform is centralized, a third-party service like an agent or a broker will be required between the product team and the supporters. So, they will have to pay some additional fees to the third-party and trust it for the validation of all terms and conditions.
Smart contracts carry out the same crowdfunding process (including sharing projects, setting goals, gathering collections, etc.) without any third-party support. So, we can prepare a program which a smart contract will execute according to the defined conditions within it. Therefore, if the project completes the funding target before its deadline, money will automatically go to the product team, but if the project fails for some reason, the money will then be returned to the supporters automatically.
Since, lately, all smart contracts are usually based on the blockchain platform, data gets stored on a distributed ledger. Therefore, no one party controls the money, replacing the third-party concept. It can now be structured in a way that everyone involved, rather than one single nodal authority, can evaluate the results of the contract.
Smart contracts are extremely useful for projects that need to have conditional funding. For example, a lender to a small business promises to increase the funding limit as soon as the borrower hits a particular revenue number. In today’s world, this will be a lengthy process of checks and permissions, but with smart contracts, it involves automatic disbursal. This not only improves the experience of the borrower but also reduces major administration costs for the lender.
Advantages of Using Smart Contracts in Lending
Smart contracts come with many benefits, some of which are listed below.
Smart contracts consist of terms and conditions which are visible and accessible to all the participants of the agreement, enhancing transparency to its customers. Banks have among the lowest net promoter scores among all industries. Ensuring a system which is transparent and auto executes saves all participants a lot of effort and bureaucratic friction.
As the contract is made up of computer codes, transactions are carried out quickly with no manual submission of documents/paperwork. For alternative lenders, with their focus on making everything digital, this adds another layer of functionality over traditional lenders.
As it operates automatically over computer networks, there is a remote chance of a clerical mistake. Consider a situation when your interest rate will automatically reduce if you pay your installment on time for six consecutive months. With smart contracts, this lowering of interest rate is not left to a human (or even the bank, which has no incentive to lower the interest rate).
Storage and Backup
Whenever a contract or a transaction is entered into, all the details get stored permanently in the ledger. In case of a future need, the data will be available for any legal or technical evaluation.
In manual contracts, there are chances of miscommunication. With the degree of automation in smart contracts, there is a very low chance for misconception or miscommunication.
In smart contracts, data is protected by the use of data encryption techniques to store the transaction details, which makes smart contracts a very secure way for carrying out transactions.
During the contract implementation, there is no need for third-party support in the form of agents, brokers, or middlemen. This helps save additional fees passed to rent-seeking middlemen who do not really add value to the transaction.
An Application of a Smart Contracts in Lending
ETHLend, founded by Stani Kulechov, is leveraging smart contracts to enable peer-to -peer crypto lending. The platform can be accessed through any browser, and loans may also be requested in digital currencies. ETHLend basically provides USD-pegged loans with .
For instance, at the beginning of a contract, a person lends $1,000 worth of ETH for 10% interest to the borrower. The details pertaining to the same get noted permanently in the smart contract. Now, the lender expects to receive $1,050 at the end of the loan term. The smart contract performs the transaction details at the predetermined time. In the end, the lender receives the complete $1,050 without worrying about the price volatility of ETH.
Smart contracts will soon disrupt the lending sectors, bringing in digitalization, building trustless contracts, simplifying processes, and saving time and money. Smart contracts herald a new future for lending that is focused on automation and scalability while allowing lenders to tap the bottom of the pyramid funding scheme that was earlier too expensive for even alternative lenders to process. It may or may not involve digital currencies, and with future advancements to the technology, the alternative lending sector can look for new and better ways to incorporate smart contracts into their business models.
News Comments Today’s main news: Prime Meridian announces new opportunities fund. TransUnion launches startup credit kit. SoFi hires Goldman head of mortgage securitization as CFO. Upgrade intros new personal credit line. The Axiom Group ready to invest $50M into charge-off portfolios. S. Korean P2P loans increase 10.3% in March. Today’s main analysis: The highs and lows of Bank Negara’s 2017 […]
Upgrade launches personal credit line. AT: “More significant perhaps is the $100M in loan originations per month the new Laplanche company is doing. However, the hybrid personal loan-credit card product is a unique line of credit offering that could boost that business volume.”
Prime Meridian Capital Management (PMCM) a Registered Investment Advisor (RIA) specializing in marketplace lending strategies across three alternative credit verticals in four funds, today introduced the Special Opportunities Fund.
The new fund, due to launch in the second quarter 2018, will invest in multiple high yielding alternative credit verticals including litigation finance, life settlements, targeted high yielding, niche real estate, small business, and consumer loans.
To meet the needs of startups and their investors, TransUnion (NYSE:TRU) today launched the Startup Credit Kit at LendIt Fintech USA 2018, giving new companies faster access to cutting-edge alternative and trended credit and fraud prevention data.
With TransUnion’s Startup Credit Kit, new businesses can more quickly gain access to depersonalized consumer credit data to better explore the market for untapped opportunities. It also helps new businesses determine the viability of their products by analyzing real-world depersonalized consumer credit data. This allows startups to focus their resources on high-potential market segments and product opportunities while allowing them to prove their concept to raise funding in the early stages of the startup lifecycle.
Online lending startup Upgrade, led by cofounder and CEO Renaud Laplanche, announced that it’s now initiating $100 million in personal loans a month, with an average loan size of about $10,000. The one-year-old company has reached $60 million in annualized revenue, Laplanche says, and by the end of 2018, he expects to hit a $100 million revenue run-rate and become profitable.
Upgrade also announced a new product called Personal Credit Line, a hybrid of a personal loan and credit card. Consumers can get approved for up to $50,000 in credit, and they can draw down on the line as needed, paying interest only on what they’ve borrowed. The credit line has a fixed length of 12 to 60 months and a fixed interest rate, and it forces consumers to pay part of the loan principal every month.
The first online lending firm Renaud Laplanche founded, LendingClub, targeted consumers with hefty credit card balances, offering them the opportunity to refinance at a lower interest rate.
In his latest venture, Laplanche hopes to lure customers before they rack up big credit card bills. Upgrade, the San Francisco-based online lender that he founded in August 2016, is rolling out a new product that is designed for folks who are anticipating big expenses but are not sure exactly how much they will need to spend or when.
The Axiom Group announced today at LendIt Fintech USA that it has obtained $50M in capital to finance the purchase of charge off portfolios with a focus on consumer loans and credit cards, specifically in the FinTech lending space.
This increase in capital will allow The Axiom Group to pursue large portfolios and monetize those portfolios immediately for the lender/seller partners. By selling bad debt portfolios, FinTech companies can utilize the income for further lending, as well as reduce their risk associated with the challenges of collecting on charged off accounts.
Some 13 months later LendingClub, which Sanborn has run since a mis-selling scandal cost predecessor Renaud Laplanche his job in 2016, remains just a lender. Its stock has lost around a third of its value in the past year.
On Deck’s shares are effectively flat over the same period. But boss Noah Breslow had to slash costs last year after credit losses. He now plans to boost revenue by expanding into portfolio management and loss mitigation, and finding more bank partnerships.
Privately held Social Finance has done the most to diversify, adding consumer and mortgage loans as well wealth management to student-loan refinancing.
SoFi is now the biggest player. It extended $12 billion of new loans last year, 50 percent more than erstwhile leader LendingClub, and its adjusted EBITDA is two-thirds higher at $126 million, according to the Wall Street Journal. Yet each pales in comparison to JPMorgan’s retail unit, which lends around 10 times as much and enjoys lower funding costs thanks to customer deposits.
Marlette Funding, LLC, the owner of consumer lending platform Best Egg, announced on Monday the year-end results and key accomplishments for first quarter 2017. According to Marlette Funding, during the past year, Best Egg experienced origination growth of 66%, significantly reduced its customer acquisition costs, and ended 2017 with three straight quarters of net income positive on a GAAP basis. Best Egg has reportedly exceeded $5 billion of prime loans and celebrated its fourth birthday.
Launched in 2014, Marlette Funding, through its consumer brand Best Egg, describes itself as a financial technology provider on a mission to find better ways to make money accessible to allow people to “enjoy life.”
Elevate Credit, Inc. (“Elevate”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced that it will release its first quarter 2018 financial results after the market closes on Monday, April 30, 2018. Ken Rees, Chief Executive Officer, and Chris Lutes, Chief Financial Officer, will also host a conference call on the day of the release (April 30, 2018) at 5:00 pm ET to discuss Elevate’s financial results.
While blockchain doesn’t offer a perfect remedy to the problems afflicting the industry, it does provide a model that minimizes some of them. The first major improvement the technology brings is transparency. Blockchain’s distributed ledger technology (DLT) provides two major upgrades to the current model—it decentralizes the storage of information, and it makes all transactions immediately available across all nodes of the chain. The first upgrade means that companies and lenders can no longer manipulate information or engage in shadowy practices with data, as it is shared across an entire network and not under their exclusive supervision.
Nav, a free platform that helps small business owners build, protect and leverage their financial data, announced the launch of Business Banking Health Check, a feature to help small business owners make more informed decisions on their cash flow. Nav is the only place entrepreneurs can access their personal and business credit scores, along with cash flow insights to provide greater transparency into how lenders view their
creditworthiness and enable greater access to capital.
According to Pepperdine’s Capital Markets Report, insufficient credit profiles and cash flow are two of the primary reasons banks reject business loan applications. Nav’s platform uses these data sets to help business owners manage their fundability, while also doing legwork for lenders by matching its small business customers to their most-qualified funding options.
Lendio announced today at LendIt Fintech USA that it has facilitated nearly $60 million in loans through its lender turndown program.
Lendio’s lender turndown program allows lending partners to offer a marketplace of loan options to customers that do not fit the lender’s credit box; this allows lenders to turn a decline response into a potential loan offer for the small business owner.
Lendr Online, LLC. announced today at LendIt Fintech USA that it is has launched a new business debit card product to service its growing client base. The ability to fund business owners in real-time via an instant access virtual Mastercard followed up with a traditional plastic card utilizing the latest in EMV chip security, will further enhance its brand and solidify Lendr’s position as a premier financial services firm.
Ocrolus, a New York City-based provider of solutions to analyze financial documents, raised $4m in Series A funding.
The round was led by Bullpen Capital with participation from QED Investors, Laconia Capital Group, ValueStream Ventures, RiverPark Ventures, Sam Hodges (co-founder, Funding Circle), Vince Passione (CEO, LendKey), Ram Ahluwalia (CEO, PeerIQ), Bill King (former head of securitization, JP Morgan), Hugh Nguyen (CEO, ClearServe) and Tanya Barnes (managing director, Golden Seeds), among others. In conjunction with the funding, David Arcara of Laconia Capital Group and Nick Adams of Differential Ventures will be joining Ocrolus as board members. Paul Martino of Bullpen Capital, Amias Gerety of QED Investors and Karl Antle of ValueStream Ventures will be board observers.
Nelnet (NYSE: NNI) is bringing a new servicing option to Fintech lending platforms. Nelnet Loan Servicing will leverage the experience, scale, and personnel of its existing servicing business with technology enhancements to meet the unique needs of Fintech companies with primary and backup servicing.
U.S. investment firm General Atlantic is in talks to buy a minority stake in closely held Brazilian online lending startup Geru Tecnologia e Serviços SA, according to two sources with knowledge of the matter.
Other investors may join General Atlantic, the sources said, adding that Geru’s partners have spent the last few weeks visiting funds in San Francisco and New York to raise about $50 million.
IDValidation will be showcasing their governmental verification solutions to the lending community and Stops 100% of Synthetic Identity Theft.
IDValidation’s Consent Based SSN Verification Allows Financial Institutions Direct Access to the Main Frame Database of the Social Security Administration to Accurately Verify the Validity of a Social Security Number and Stop Synthetic Identity Theft. Toyota Financial Services has conducted a successful pilot. IDValidation has become the forerunner in providing this vital tool to the Financial World helping mitigate
Fraud & ID Theft.
Bringing a new layer of convenience to financial transactions with its customers, LendingPoint, the company working to revolutionize access to consumer credit, announced today it has entered into an agreement with TabaPay that will integrate debit cards into LendingPoint’s financing platform.
Beginning immediately, LendingPoint will allow borrowers to use debit cards for loan payments they make online or over the phone. LendingPoint will be able to verify account ownership and balance of its applicants through the TabaPay platform. Then later this year, LendingPoint will also be able to instantly disburse loans to approved borrower accounts through their debit cards, 24/7/365, or credit card payoffs. Those inbound and outbound debit-card disbursements and collections will happen instantaneously and are free for the borrower.
Silicon Valley-based FinTech Social Enterprise Harvesting Inc, launches its innovative credit scoring system for financial institutions to assess farmers creditworthiness and facilitate agriculture financing .
Harvesting’s Credit Risk System is an Artificial Intelligence (AI) powered platform which leverages on traditional & alternative data sets and allows financial institutions to build, deploy and monitor credit business in the cloud, within a fraction of time & resources it takes today. It’s easy to use interface with advanced feature engineering flexibility allows credit risk manager to create best of the breed custom credit risk model for the organization on a cloud infrastructure. It allows credit risk manager of any size of financial institutions to leverage the power of AI and increase acceptance rate and reduce defaults.
Global Kinetic announced today at LendIt Fintech USA, that it will be integrating Entersekt’s Connekt functionality into the FutureBank platform. FutureBank’s unique ability to abstract the complexities in legacy core banking systems and customize digital channels through its technology platform helps banks and disruptive FinTech companies work together more efficiently. The growing digital banking market in the US has become vulnerable as consumers are frustrated by poorly designed mobile apps that often have weak security implementations and limited payment functionality. The FutureBank platform can now offer converged payment acceptance through Connekt.
PENSCO Trust Company (“PENSCO”) announced today at LendIt Fintech USA, the launch of Custodian Connect, an API-driven capability that seamlessly connects investment platforms to PENSCO enabling uninterrupted opening and funding of an IRA from within the platform.
Spring Labs, which is building the Spring Network, a blockchain-based network being designed to allow lenders, banks, and data providers to securely and efficiently exchange data with one another, today announced its founding industry advisory board. The industry advisory board comprises a group of industry leaders in finance, credit, and compliance, with members including Sheila Bair, the former Chair of the U.S. Federal Deposit Insurance Corporation (FDIC); and Nigel Morris, Co-Founder and former long-time President of Capital One, and co-founder of QED Investors, a leading investor in global financial technology companies.
This news of the industry advisory board comes on the heels of Spring Labs announcing a $14.75 million seed fundraising round, one of the largest initial venture rounds to-date for a blockchain startup.
Alternative Investment fund administrator MG Stover & Co. (MG Stover) announced today a partnership with software technology firm CoinVantage as part of its strategy to grow its digital asset fund administration business and deliver world class solutions to its clients.
As Cross River Bank approaches its 10th anniversary, the leader in the emerging FinTech market is demonstrating a surge in growth and surpassing significant milestones as it grows its customer base, offerings and strategic partnerships designed to revolutionize the banking infrastructure.
In its monthly market commentary, VPC said that the fall in revenue was due to a combination of factors including a “one-time fee earned in January and a shorter day count”. Capital losses were attributed to VPC’s exposure to Elevate Credit – a US-based provider of short-term loans, and securitisation residuals.
In 2017, Suretly token-holders were inspired by the idea of a crowdvouching platform – an international exchange for micro-guarantees, where people can make money by helping others borrow. In the beginning of 2018, the project made something that many other ICOs were not able to deliver: the demo version of its product. To become a guarantor (or a ‘voucher’, in the crowdvouching terminology), an individual needs to download the Suretly mobile application, where he can find borrowers’ loan orders, vouch, and get receive a sum of money in return (a fee).
On April 9, Suretly releases the first version of the new app, available to all users registered for its testing period. The borrowers’ behavior is based on the real data of past periods, and, therefore, users can learn different vouching strategies and practice them in future.
Unlike p2p lending, Suretly does not lend money directly, but rather serves as an intermediary between financial institutions, borrowers, and co-signers. Suretly users vouch for a small part of a loan sum and guarantee that the loan will be repaid in the case of a borrower’s default. Liability for each loan is divided among all vouchers and each voucher’s approval serves as an insurance of the loan. In order for the loan to be approved, the entire amount must be guaranteed by the vouchers.
RCN announced today at LendIt Fintech USA that it will showcase how global lending through peer-to-peer technology is possible using blockchain technology and cosigned smart contracts.
With billions of people all over the world excluded from traditional banking & financial services, Sebastian Serrano (CEO), will explain the company’s successful history in Latin America since it was funded and how RCN can contribute to the world’s economy by providing credit and financial inclusion through blockchain technology and cosigned smart contracts.
Technologies such as blockchain underpin the fintech revolution, paving the way for a whole groundswell of new start-ups that have targeted markets underserved by banks through better user interfaces and user experience (UX) as well as through digital marketing and branding.
A case in point is Revolut, a London-headquartered start-up with offices in Dublin. It turns out that cash-savvy young workers have no time for bank fees and are less forgiving of banks than older generations, and are flocking to these challenger banks.
Examples include: Zurich’s Advanon, an online platform for invoice financing for SMEs; Dublin’s CurrencyFair, which allows individuals and businesses to send funds to bank accounts worldwide; Stockholm’s Klarna, which provides online payments for e-commerce sites; and London’s Monzo, a start-up bank that has amassed more than 20,000 current-account holders and more than 500,000 people using its distinctive ‘hot coral’ cards.
Creditas, the leading digital lending platform for secured loans in Latin America, has published the updated report “The disruptors paradise: Understanding the Brazilian lending space” at the Lendit USA 2018 conference.
With roughly US$ 150 billion in net interest margin, Brazilian consumer debt represents a unique opportunity to significantly increase debt availability and reduce the 30%+ banking spread. The report summarizes the reasons behind the high spread of the Brazilian ecosystem and the evolution during the last decade.
Nova Credit announced today at LendIt Fintech USA that it partnered with Transunion to serve creditworthy newcomers to Canada who may otherwise miss out on credit opportunities due to a lack of Canadian credit history.
The new product—TransUnion Global Credit Connect powered by Nova Credit—provides newcomers to Canada with a platform to import their historical credit information and have their international credit reports delivered to end-users such as banks, in a streamlined, standardized format. The foreign credit score is mapped to a Canadian equivalent score so that it can be consistently applied.
The Mohammed bin Rashid Fund (MBRF) for SME – the financial arm of Dubai SME, itself an affiliate of Dubai’s Department of Economic Development (DED) – has expanded the partnership agreement with Beehive, the MENA region’s first regulated peer-to-peer lending platform, which will cross the $50 million mark of total funding for SMEs across the platform this month.
Following a successful initial launch, MBRF and Beehive have broadened the scope of the agreement to increase the credit guarantee to AED750k and also offer Sharia Compliant Invoice Finance, a short-term finance option for businesses wishing to improve cash flow.
The combined loans of peer-to-peer (P2P) lenders in South Korea reached almost 2.3 trillion won ($2.1 billion) last month amid burgeoning demand for the debt financing service that allows individuals to borrow or lend money online without going through an official financial institution.
According to Korea P2P Finance Association on Monday, the accumulated loans of its 65 members reached 2.296 trillion won as of end of March, up 213.6 billion won or 10.26 percent from a month ago. By sector, total loans on real estate project financing reached 768.5 billion won, real estate mortgage 611.5 billion won, and other mortgages 472.4 billion won, and credit loans 443.2 billion won. The members’ average loan interest rate was 14.32 percent.
THERE is a chance the economy will grow as much as 6% this year, according to Bank Negara Malaysia’s 2017 annual report, which was released on March 28. Not only is that ahead of 2017’s stronger-than-expected 5.9% gross domestic product growth, the central bank’s baseline projection of 5.5% growth for this year is at the higher end of the official 5% to 5.5% projected in the Economic Report 2017/2018, which was released just five months ago.
In fact, working numbers in the annual report indicate 5.67% growth for 2018 — exceeding the government’s projection last October, although just short of 2017’s spectacular 5.9% reading.
While last year’s growth beat everyone’s expectations (including the central bank’s working number of 4.57%), it is worth noting that 2016’s actual GDP growth of 4.2% was very close to the central bank’s working number of 4.1% when official projections were between 4% and 5%.
News Comments Today’s main news: SoFi hires Noto to be CEO. StreetShares secures $23M in equity to reach military, veteran market. Zopa fills positions for bank launch. Dianrong raises $70M. Yirendai signs onto Internet Finance Industry Credit Information Sharing Platform. Tera Funding sets Korean fundraising record. Today’s main analysis: FT Partners publishes 2017 InsurTech Almanac (a must-read). Today’s thought-provoking articles: […]
SoFi hires Anthony Noto. AT: “This is good news for SoFi, and appears to be a solid career move for Noto, who has quite the pedigree. We’re anxious to see how he brings his experience to the table and how it will impact SoFi’s future.”
In Noto, SoFi has chosen a fast-rising executive in the tech industry. Noto, 49, was one of the most respected bankers at Goldman Sachs before becoming the chief financial officer of the National Football League and then Twitter.
Shares of Twitter slid on Tuesday morning after the online lending startup SoFi announced that Anthony Noto, Twitter’s chief operating officer, will be joining the company as its new CEO, effective March 1.
Twitter has suffered from several departures of key executives in the past two years as the company struggles to bring value to shareholders.
Noto, who worked on technology, media and telecom deals at Goldman Sachs Group Inc. before joining Twitter in 2014, brings to the job a background in tech and finance. Beyond Twitter’s nascent revival, his turnaround abilities are largely untested. But given his history of taking companies public — including Twitter — a SoFi IPO is very much a possibility, according to people familiar with the situation. Furthermore, they say, it’ll be nice to have an adult in the room after all the recent turmoil.
SoFi Wealth, launched last year and harbored ambitions to quickly manage $100 million in assets, Bloomberg News reported in October. It grew slowly until last quarter, when it tripled its assets from September to $42.3 million as of Jan. 18, spokesman Jim Prosser said. The average account holds about $4,300. Other digital wealth startups have north of $10 billion under management.
2017 was a very active year for the InsurTech sector globally, with the most financings ever (over 200) and more than $2 billion in financing volume
While the total announced financing dollar volume for 2017 was lower than in the prior two years, when excluding rounds over $50 million, the volume reached a record high of approximately $1.3 billion
Of the four largest financings this year, two were in the Online Health Insurance space (Bright Health and Clover Health), one was in the Telematics space (Nauto) and one was in Online P&C Insurance (Lemonade)
2017 also featured another wave of mid-range to larger financing rounds for InsurTech companies founded in the last several years, including Next Insurance’s $35 mm Series A, The Zebra’s $40 mm Series B, Health IQ’s $35 mm Series C, PolicyGenius’ $30 mm Series C and Trov’s $45 mm Series D
Europe had significant increases in financing activity, the largest out of any region this year — financing volume and deal count both grew by more than 2x; the region also recorded its largest InsurTech financing ever: BIMA’s $107 million raise led by Allianz X, which was the fifth largest financing globally in 2017
Among the cohort of InsurTech companies founded since 2010, this year marked two milestones:
First IPO: China-based ZhongAn (SEHK:6060) raised approximately $1.5 billion
Largest acquisition: Guidewire acquired Cyence for $275 million
Hippo, the California-based insurtech company that is transforming home insurance for savvy homeowners, announced on Monday it secured $25 million in Series B funding round, which was led by Comcast Ventures and Fifth Wall. The investment comes less than two weeks after Hippo announced it formed a strategic partnership with Spinnaker Insurance Company.
OnDeck (NYSE:ONDK), the leader in online lending for small business, will report its fourth quarter and full year 2017 financial results on Tuesday, February 13, at approximately 7:00 a.m. EST. The company will host a conference call to discuss the results at 8:00 a.m. EST that same day.
The conference call will be webcast live on the company’s Investor Relations website or listeners can access the call toll free by dialing (833) 227-5836 for calls within the U.S., or by dialing (647) 689-4063 for international calls. The Conference ID passcode is 5468078.
StreetShares Secures $ 23 Million Equity Funding to Scale for the Military and Veteran Market (StreetShares Email), Rated: AAA
StreetShares, Inc., the leading small business funding and government contract financing company serving the military and veteran market, announced today it has completed its Series B funding round, raising $23 million in fresh equity capital. The Series B round was led by a $20 million investment from Rotunda Capital Partners, LLC, and included an additional $3 million from existing investors, including veteran-focused venture firm, Stony Lonesome Group.
LD Holdings Group, LLC, parent company of loanDepot, the nation’s second largest non-bank consumer lender, today announced continued expansion beyond its profitable mortgage and personal loan businesses. In Q1, a newly formed venture, mello Home, will connect pre-approved homebuyers with verified real estate agents in their local market, and help consumers find and hire home improvement and other pros.
Many financial services companies, both startups and incumbents, talk about the importance of customers’ financial education but how they integrate it into their own offerings often manifests as no more than a dedicated content marketing section or blog. Acorns itself has an online magazine called Grow that features news, financial how-tos and interviews with celebrities like Kevin Durant, Ian Kahn and Tony Robbins.
For personal banking customers of First Bank, the largest community bank headquartered in North Carolina, transferring money to family and friends is now as simple as hitting “Cent.”
On January 22, First Bank launched Cent, its new quick-money transfer tool, allowing personal banking users of the bank’s mobile banking application to send money to anyone, anytime, anywhere in the U.S., regardless of if the recipient banks with First Bank or not. And there are no fees.
Peer-to-peer lending has become one of the most important sources of online financing. Unfortunately, there are some shadowy operators out there, using Facebook Messenger and other less traditional avenues to hook in victims.
The scam works like this: You’ll be contacted out of the blue and offered peer-to-peer financing, then asked to pay an arrangement fee or fork out for background checks. You’ll never see the promised cash and you could lose quite a bit of money, as well as data that can be used for identity theft.
4. The credit repair scam
Most young businesses have an inadequate credit score. It’s a simple fact of life. However, there are plenty of predators out there who’ll be keen to convince you that they have the expertise and tools to transform your score—in return for a hefty fee, of course.
5. The loan broker scam
Loan brokers exist to identify the right products for your business, make introductions to lenders, and prepare the paperwork to ensure a smooth process. There are plenty of legitimate and professional brokers, who get paid a commission from lenders for arranging loans; unfortunately, there are also quite a few sharks, who charge upfront fees for the same service.
Online and Alternative Investing Will Remain Strong: The amount of investors using online investing and alternative options will continue to remain strong, especially for both Baby Boomer and Millennial investors. Online investing exposes investors to a larger number of companies driving innovation, and, many online investors are starting to realize an ROI from their online investing activities. In spring 2017, the number of people who lived in a household that used an online investing/stock trading service within the last 12 months amounted to 15.79 million.
LendingTree®, the nation’s 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 fourth 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.
Payday lending can be a useful service. A two-week loan of $500 at 400 percent annualized interest can make sense if, say, you need to fix your truck to get to work. Unfortunately, the industry has long made much of its money by trapping customers in a series of consecutive loans that can end up costing many times the amount borrowed. A patchwork of state laws has done little to combat such practices.
Payday lender World Acceptance Corporation announced in a press releaseMonday that it received a letter from the CFPB stating that the financial watchdog had closed its nearly four-year investigation into the company’s marketing and lending practices. The company, which is headquartered in South Carolina, has given at least $4,500 in campaign donations to Mulvaney, who represented South Carolina in the House for six years before becoming President Donald Trump’s budget director last year.
Sorry, boomers, but the world of banking and insurance isn’t so interested in you anymore. You’re getting too old to buy insurance and too conservative with your investments. And your time horizons are too short to be very profitable to the investment world. The financial services industry is aiming at millennials now.
–Six in 10 millennials are hesitant to discuss their situation with friends because they are embarrassed that they make less money or are ashamed of poor financial decision in their past.
–Only 12 percent of millennials feel very prepared for their financial future.
–Only one-third of millennials feel like they make enough to pay for bills and also save for the future.
Money360, a technology-enabled direct lender specializing in commercial real estate loans, today announced that effective immediately, Todd Ruppert, former CEO and president of T. Rowe Price Global Investment Services, has joined the company’s Board of Advisors.
According to a report by WalletHub, young people struggle with low credit scores partially because they don’t have the time behind them to establish wealth and experience.
Set Up Automatic Payments
Get A Low-Limit Credit Card – Charging small items to a credit card and then paying it off in full every month builds credit in no time. You can find offers for these at creditcards.com and similar sites, with many offering cards with a $300 limit or so.
Piggyback Off Of Others First – By becoming an authorized user on someone’s credit card, you can start building credit from their payments.
Build A Credit History – It is not uncommon to get a 0% or 2% auto loan these days, and this way of building credit history is brilliant.
P2P lender Zopa has begun building the executive team for the launch of its new challenger bank later this year, appointing a CFO, chief risk officer and chief customer officer.
Chief financial officer Steve Hulme joins from Tandem Money where he was CFO for the last two years. Before Tandem, Hulme served as CFO for PayPal’s global credit business and as CFO for Capital One’s UK and Canadian business.
He will be joined by former TSB man Phillip Dransfield as chief risk officer. Dransfield has a 20-year track record in risk management taking in two of the counttry’s largest high street banks.
The left-field appointment of chief marketing officer goes to Clare Gambardella from health and fitness brand Virgin Active.
Major banks are scrambling fast to not only comply with the regulation by opening up their APIs, but are also looking to leverage the new open landscape to separate themselves from their competitors and avoid being bitten by these fintech startups.
Take HSBC UK, which has proved itself to be an early mover when it comes to PSD2 by announcing a new beta app which will allow customers to see all of their accounts on one screen, even if they are with a rival bank.
However, UK challenger banks like Monzo and Starling, as well as some other fintech startups listed below, have been working towards the idea of open banking for some time now.
According to a blog post by Simon Vans-Colina, an engineer at Monzo, the new API, which they are calling the AIS API, “will be made available to particular companies, that have been granted authorisation as AISPs.
As CEO Christoph Rieche explained to our sister site Techworld, real-time access to customers’ transactional data, which the banks have traditionally held onto for current accounts, is very valuable to his company.
“In a utopia consumers can start to grant affordability criteria to a lender, provide transaction data to a savings mechanism like Chip, or income data to a mortgage lender,” he said. “You can choose exactly which data you want which third parties to access, so it puts control into the customer’s hands.”
Founder Francesco Simoneschi likes to compare TrueLayer to Twilio or Stripe, two companies that provide simple, secure and regulated access to core infrastructure (be it telco networks or payments infrastructure, respectively) through a core API.
So TrueLayer sits between the new breed of fintech companies looking to deliver value from newly opened customer financial data, and underlying banking infrastructure, charging a small fee for access to the API.
Cofounder Edoardo Moreni wrote in a blog post at the time: “Emma is currently building the banking app for millennials (iOS and Android), a mobile-only solution that helps consumers avoid overdrafts, find and cancel subscriptions, track debt and save money.
Research among 200 SMEs by recruitment specialist Tindall Perry found while 74 per cent of finance directors describe their knowledge of alternative finance as average or above, only a quarter suggested that they were comfortable with accessing crowdfunding, with P2P lending also scoring less than 50 per cent.
In contrast, 85 per cent of companies said that they understood how best to access asset-based lending, while invoice finance, trade finance and venture capital all saw a positive response rate of between 55 and 75 per cent.
Speaking at the World Economic Forum, the annual gathering of the global elite in the Swiss ski resort, she said: “We have far fewer tools to deal with any event that happens.” Richards predicted an upset could occur “somewhere where none of us are looking”, and highlighted peer-to-peer lending as an example.
Current financial conditions have echoes of the pre-crisis era, according to Jes Staley, chief executive of Barclays, speaking at the same event. While he said he believes banks are much less of a threat to stability than a decade ago, he warned that current benign conditions may not last.
Dianrong today announced additional Series D round funding of US$70 million that was led by ORIX Asia Capital Limited, a wholly-owned investment vehicle of ORIX Corporation, and included CLSA, the overseas platform of CITIC Securities, China’s largest investment bank, which in turn is a part of CITIC Group, one of China’s largest conglomerates.
Orix Corp has invested $60 million in peer-to-peer lending platform Dianrong, in what is the Japanese financial firm’s first investment in a Chinese fintech venture as it looks to tap into the fast-expanding sector, sources said.
Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a fintech company in China, announced today that it has connected to the Internet Finance Industry Credit Information Sharing Platform (“the Platform”) established by the National Internet Finance Association of China (“NIFA”). The Platform was established to serve as an industry wide credit data sharing database in aims of reducing credit risk, improving the credit environment and promoting the healthy development of the internet finance industry. Currently, all leading online lending platforms are required to upload their operating credit data to the Platform’s database and members can only make manual inquiries on the Platform through its webpage. Yirendai has been selected by NIFA to participate in a pilot project to enable automatic queries and the Company expects to launch an automated query function in its system shortly.
Payments company GoCardless Ltd., which employs 170 people in London, will open a Paris office in February, said chief product and technology officer Carlos Gonzalez-Cadenas. Online lender LendInvest Ltd. said it will make a “concerted effort” to hire additional engineers in London this year, while Salesforce.com Inc.-backed software company Anaplan Inc. says hiring engineering talent is its current priority.
Faes said about 30 to 40 percent of its hires come from major financial institutions, adding that 100 percent of the team’s small risk and compliance team came from banks. For MarketInvoice Ltd., another British online lender, about three-quarters of its 85 employees — roughly a third of which are software engineers and data scientists — came from a large corporate in the financial services or accountancy space, said CEO and co-founder Anil Stocker.
Europe’s fintech industry, which includes challenger banks and online-only lenders, has rapidly expanded over the past 10 years. Traditional financial institutions have faced intense competition as a result, with former Barclays Plc CEO Antony Jenkins saying in July last year that banks could face obsolescence in five to 15 years.
According to a report published in September last year by Innovate Finance and Magister Advisers, VCs poured around $8bn into fintech startups and early stage companies across the continent between 2010 and 2017 and over the course of that period, deal sizes rose significantly. In London – generally considered to be Europe’s Fintech Hub – figures published in January by London and Partners found that the UK’s fintech sector attracted £1.24bn in 2017 alone.
Established in 2006, the Amsterdam-based company is currently valued at around $2.3bn and has has built a portfolio of more than 4,000 clients, including Netflix, Facebook, Uber and Spotify, plus retailers such as River Island and Superdry.
Hyperledger Fabric is a permissioned blockchain platform contributed by IBM and provides plug-and-play modular blockchain components. You can see the commit history visualization of fabric project. Fabric runs chaincode which is comparable to Ethereum’s smart contracts. The consensus protocol is pluggable.
Transaction Flow Let’s see how nodes work together to execute a transaction. For now, let’s assume that the chaincode is already installed on the Peers.
Step 1: Transaction requests are proposed by a client. The client must be connected to the required number of peers according to the endorsement policy. A proposed Transaction is forwarded to Peers for Endorsement.
Step 2: Each endorsing peer simulates and validates the transaction. Peers reply with their Endorsement and certificate if they agree that the transaction is permitted.
Step 3: The client receives results from different Peers and can thus verify agreement among the Peers. Upon verification, the client forwards the transaction to the OS.
Step 4: Determining a well-ordered sequence of transactions is the task of the Ordering Service (OS). The OS generates transaction blocks containing validated transactions in the order they are deemed to have occurred, writes them to the ledger and then broadcasts them to all peers that a new set of blocks are now available on the ledger.
All well and good but, in a move that I am fairly sure was carefully orchestrated by the banking community, nearly all of the mainstream media greeted the launch of Open Banking with fear and scaremongering.
Nevertheless, the FinTech community are far more advocates of the new regime:
GLOBAL fintech group Longfin Corp is planning to make its Ziddu cryptocurrency smart contracts available for peer-to-peer lending.
Ziddu.com provides smart contracts which are available on cryptocurrency Ethereum’s blockchain and can be used as alternative finance solutions within trade finance and FX markets, without the need for a middleman or underwriter.
Currently, there are over 2 billion people worldwide who find it difficult to access traditional banking services, often because they are new to the country or do not qualify for credit. I, too, was one of those people. When I arrived in the UK, I didn’t have a proof of address and credit history required to open a bank account, and just like many others in a similar position, I was left in a ridiculous catch-22 situation. I needed a bank account to get a job and a place to live but, in order to get a bank account, I was required to have a place to live and a job.
Monese is laying the foundation of how banks will work in the future by bringing the accessibility and convenience to levels that weren’t possible just a few short years ago. You can now bank locally in 20 different countries, in a matter of a few minutes — all you need is a mobile phone and your passport. You can literally open an account in your home country or an international IBAN in another country whilst standing in a supermarket queue.
Over 270,000 people have signed up to Monese and every day 1,000 more are joining us.
Fresh from the success of a well-received ICO that raised $10 million, blockchain start up Karma has now announced open access to its peer-to-peer (P2P) lending platform via the use of its native KRM token, which also began trading on CoinLink exchange on January 11th, 2018.
NeoGrowth Credit, a lending startup focused at SMEs has secured Rs 300 crore of equity funding from LeapFrog Investments, and existing investors like Aspada Investment Company and Quona Capital through Accion Frontier Inclusion Fund, reports The Economic Times. The report adds that as part of the investment, LeapFrog’s partner Michael Fernandes will join NeoGrowth’s board.
Tera Funding, a real estate P2P lending company in Korea, announced that it has secured KRW10bn (approx. US$9.3M) through its series A funding round from Woori Bank, Atinum Investment, SBI Investment and Premier Partners on 8 January 2018.
It is the largest single series A investment for Korean P2P lending start-ups, and this comes as a pleasant surprise for the industry as such decision to invest in Tera Funding was made after a thorough due diligence amid general public’s increasing worries about the industry with rising defaults and arrears mainly incurred by late-comers who take riskier approach.
Having said that, the advent of cutting-edge technologies is pushing banks to change the way they operate. While they have been able to survive many revolutions in the past, they cannot remain aloof to blockchain, one of 21st century’s biggest revolutions.
Lending Times News
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News Comments Today’s main news: SoFi, Lending Club gear up for a busy quarter. RateSetter drops unsecured business loans. Zopa’s targeted returns rise to 4% and 4.5%. Monzo to phase out prepaid cards. Funding Societies surpasses SGD 100M in SME crowdfunding in SE Asia. Today’s main analysis: CEO optimism grows worldwide. Today’s thought-provoking articles: Which car brands borrowers stretch […]
Up to four transactions from marketplace lenders SoFi and Lending Club are slated to hit the market this quarter, including prime and non-prime consumer and student loan refinancing offerings.
SoFi is preparing to bring at least one consumer loan offering and possibly one more refinanced student loan offering over the next two months. The planned offerings could be in the range of previous transactions, said a source familiar with the company’s plans.
Shares of Twitter dipped on Monday after it was reported that Twitter’s chief operating officer, Anthony Noto, may leave the company for an offer to become the CEO of Social Finance, or SoFi, an online lending company.
Twitter’s stock was down 1.16% on Monday at $23.39 per share.
A recent LendingTree survey found that 27 percent of Americans plan to purchase a car in 2018. To discover if consumers are more likely to stretch their available incomes to own certain brands, LendingTree looked at people who found auto loans on the LendingTree.com platform in 2017 to buy used vehicles.
Contrary to popular assumptions, the results revealed that people aren’t going broke to buy used luxury cars. In fact, buyers of the most expensive cars seem to handily afford them.
On the other hand, LendingTree found Buick owners have the hardest time affording their car payments — not because they’re indulging in particularly expensive vehicles but because their income tends to be on the lower side, meaning they use a larger share of take home pay to cover their monthly payments.
Car Makes Borrowers Stretch the Most to Buy Used
Estimated Monthly Payment as a Percent of Estimated Monthly Income
The online small-business lender Fundbox says it is integrating its automated lending service with several software programs commonly used by its borrowers — and it’s a move that could hold a lesson for banks.
What’s striking about what Fundbox is doing, and the reason bankers could learn from it, is it is capitalizing on the concept of open banking — allowing a piece of a lender’s products and services to be accessed through a third party — in a way that few U.S. banks have.
Capital One comes the closest — its application programming interfaces let third parties offer services like prequalifying customers for Capital One credit cards and sharing its reward information.
When Wall Street compares one of Jack Dorsey’s two public companies to Amazon and Google, you’d expect them to be talking about the one in the tech sector — Twitter. But on Friday, Nomura analyst Dan Dolev said that Square, Dorsey’s payments company, is the one that resembles today’s tech giants in their early days.
Dolev thinks that these new initiatives will massively increase the number of payments Square processes by a long-term compound annual growth rate of 20%. Dolev also says that this growth will provide a 40% to 45% boost to earnings margins.
Loan origination solutions company defi SOLUTIONS just closed on $55 million in funding. The Series C round comes from Bain Capital Ventures, offering social proof along with a stamp of approval for defi’s suite of loan services. This is the Texas-based company’s first round of financing.
The primary capital portion of the investment will be used to accelerate product development, expand resources and facilities, and grow the number of employees by nearly 50% this year.
Recently disclosed results showed Citigroup, JPMorgan Chase, Bank of America and Wells Fargo took a combined $12.5 billion hit from soured card loans last year, about $2 billion more than a year ago. The FT reported.
Reuters recently warned that U.S. banks, already under pressure from slower loan growth and low interest rates, could be facing yet another challenge as a rising number of Americans fall behind on their credit card payments.
U.S. consumer credit outstanding rose in November by the most in 16 years as credit-card balances surged, recent Federal Reserve data showed, by $11.2 billion, to $1.023 trillion.
The news marks a significant month for Manhattan’s sometimes-struggling fintech scene, with MoneyLionhaving raised a whopping $42 million during its Series B in early January. And while these numbers are a drop in the bucket compared to the U.S. fintech industry surpassing $5 billion in Q3 ’17, the momentum is already being felt, and it comes as a welcome change for the city.
At the top end, some personal financial advisorscharge an annual fee plus investing expenses as a percentage of your assets under management, typically about 1% to 1.5%. As a result, these advisors often require that new clients have an account minimum of $250,000 in assets.
By comparison, robo-advisors — which use algorithms to build and manage a client’s investment portfolios and require little human interaction — charge fees from 0.45% to 0.70% of the amount managed. And many will take on new clients with $0 to open an account.
The downside of robo-advisors: Investment choices are more limited — often a small selection of low-cost index funds or exchange-traded funds — than the asset choices that full-service brokers and advisors may provide. And while many offer financial advice via email, chat or phone consultations, those hybrid services are likely to come at an additional cost.
The Tanda app, launched by the company Friday and available on Android and shortly on iOS, does exactly what its name implies. It lets you join groups of people to work toward savings goals together, in tandem: Each user pays an agreed-upon amount into a pot, choosing when they receive the money. Those who need it soonest pay a fee, and those who wait the longest receive a two-percent bonus. Yahoo Finance takes eight percent of the first payout and seven percent of the second payout, according to Android Police.
Yahoo Finance isn’t the first to think to monetize a more formal version of this sytem—the site eMoneyPool has been available to the public since 2013, servicing over $3 million, and the apps KyePot and Cashare serve a similar purpose. On Tanda, users receive a trust score, with higher scores allowing users access to larger money pools, up to $2,000.
In a national ranking, Dayton ranks relatively low for factors Lending Tree deems indicative of a competitive housing market. Prospective buyers in this area have relatively low average down payments, among other factors Lending Tree placed in the ranking.
On the list of 100 cities with the “most competitive home buyers,” Dayton ranks overall at 96, below Augusta, Ga. and above El Paso, Texas. Youngstown Ohio is last on the list at No. 100. San Francisco, Calif. is first.
In 2016, Fannie Mae named FormFree its first designated vendor for automated asset verification as part of the Day 1 Certainty initiative. Since then, FormFree has signed more than 800 lender clients, including 70 percent of the nation’s top 40 mortgage originators, and accepted over 1.25 million orders for the company’s flagship AccountChek® Asset Report. The company also increased its total number of technology integrations and reseller partnerships to over 100, making AccountChek available for more than 90% of mortgage transactions nationwide.
Peer to peer lender RateSetter said its commercial lending vertical will focus solely on secured lending in its commercial finance vertical. Following a review of its commercial finance operations, RateSetter said it would move to “simplify” its commercial finance by funding only property backed or asset backed loans.
RateSetter said it will continue to maintain a diversified approach to lending into consumer, business and motor finance markets, however, the commercial finance offer will no longer include unsecured business finance.
Challenger bank Monzo has announced it will close its popular prepaid Mastercard in early April, although its half a million customers can still enjoy valuable travel perks if they upgrade to Monzo’s current account.
Until this month, Monzo cards also offered fee-free cash withdrawals from foreign ATMs. However, this has now been capped at £200 of overseas withdrawals within a rolling 30-day period, and customers pay a 3 per cent fee if they exceed this limit.
While the UK remained the largest alternative finance market in Europe by far, at €5.6bn (£4.9bn), the rest of Europe began to play catch-up as it grew its own market by 101 per cent, the data from the university’s Centre for Alternative Finance showed.
Excluding the UK, Estonia ranked first for alternative finance volume per capita for the second year in a row, at €63, followed by Monaco and Georgia.
Britain’s start-up revolution is stalling, with the number of businesses created last year falling for the first time in almost a decade.
There were 5.5 per cent fewer start-ups in 2017 compared with 2016, according to research by DueDil, a financial analysis company. It found that 647,923 new businesses were started last year — down from 685,928 in 2016, bringing to an end what had been annual increases since 2008.
A £600 loan repaid over six months would typically cost an extra £330 to repay to a door step lender and over £500 to repay via a payday lender. Repaying via a social lender could easily halve this cost.
Hollywood actor and social activist Michael Sheen has supported the launch of a new £1 million fund set up by the Carnegie UK Trust and features in a new short film called Speaking out for Fair Credit.
“The need for ethical alternative providers is clear, whether they be on our local high streets or available online. But it’s not just about creating more providers – we need to do more to enable them to compete with the high cost providers and to provide vital financial support to communities across the UK, putting people before profit.”
It is estimated that around 150,000 people in Scotland borrow £250m from high cost lenders like pay day loan firms, door step lenders and rent-to-own shops annually.
Excluding the United Kingdom, which remained by far the largest alternative finance market in Europe at 5.6 billion euros, online alternative finance grew 101 per cent in Europe to 2.06 billion euros from 1.02 billion euros a year earlier. The UK’s market share in Europe declined to 73 per cent in 2016 from 81 per cent a year earlier as other markets grew faster.
France (444 million euros), Germany (322 million euros) and the Netherlands (194 million euros) are the three largest European alternative finance markets outside the UK, followed by Finland (142 million euros), Spain (131 million euros), Italy (127 million euros) and Georgia (103 million euros).
Peer-to-peer consumer lending is the largest alternative finance segment in Europe for the third year in a row, at 34 per cent, followed by peer-to-peer business lending (17 per cent), invoice trading (12 per cent), equity-based crowdfunding (11 per cent) and reward-based crowdfunding (nine per cent).
Fifty seven percent of business leaders say they believe global economic growth will improve in the next 12 months.
Optimism in global growth has more than doubled in the US (59%) after a period of uncertainty surrounding the election (2017: 24%). Brazil also saw a large increase in the share of CEOs who are optimistic global growth will improve (+38% to 80%). And even among the less optimistic countries such as Japan (2018: 38% vs. 2017: 11%) and the UK (2018: 36% vs. 2017: 17%), optimism in global growth has more than doubled since last year.
According to a September 2017 report from the Asian Development Bank (ADB), the trade finance gap remained relatively steady at $1.5 trillion in 2016 compared to a record high $1.6 trillion gap the year prior.1 MSMEs remain hardest hit by gaps in trade finance: the ADB report attributed 74 percent of rejected trade finance requests to MSMEs and midcap firms in 2016, compared to just 57 percent in 2015.2
ADB says this is despite fintech investment in trade finance that exceeded $13 billion in 2016 – more than half of the estimated $24 billion in total 2016 fintech investment cited in a separate report from the International Chamber of Commerce (ICC).3 Some experts – including Steven Beck, Head of Trade Finance at ADB – say fintech efforts may need to be redirected before their impact on import-export trade finance can be fully realized.4
Funding Societies, the leading peer-to-peer (P2P) lending platform in Southeast Asia, welcomed the start of the year by crossing the SGD 100 million mark in total crowdfunded SME loans across Singapore, Indonesia and Malaysia. In line with the platform’s goal of responsible growth, Funding Societies expanded its crowdfunding book by 400% in 2017 while maintaining a default rate of 1.5%.
According to statistics by the Ministry of Planning and Investment (MPI), SMEs contributed approximately 48% of Vietnam’s GDP in 2012. Moreover, based on research by the United Nations Economic and Social Commission for Asia and the Pacific, since SMEs are usually labour intensive they employed 77% of Vietnam’s labour force.
The Ministry of Planning and Investment in their survey in 2012 of SMEs ability to access financing indicated that approximately 30% of SMEs in Vietnam could not get any financing from financial institutions and another 30% that could get financing faced numerous difficulties in accessing funds.
The 2015 survey found that the percentage of firms having bank loans in 2015 for micro-sized firms was 40%, small firms 62%, medium firms 74% and 81% for large firms. Access to bank services in 2015 also took into consideration how common it was for these enterprises to give bribes to the bank staff: Micro (64%), small (56%), medium (49%) and large firms (39%). The percentage of firms that experienced how interest rates and other lending conditions applied to private businesses are always more difficult than those for SOEs: micro (74%), small (71%), medium (65%) and large (48%).
News Comments Today’s main news: SoFi seeks to poach Twitter COO for CEO slot. Zopa increases investor interest rates. SoftBank considers IPO in London. TransferWise launches borderless bank account. Spotcap partners with BAWAG Group for same-day financing. Today’s main analysis: Super high-interest loans in California have boomed. Today’s thought-provoking articles: How online branding can help businesses get a loan. Today’s […]
SoFi offers Twitter COO top slot. AT: “I’m sure they’re making a lucrative offer, but the indication here is that Anthony Noto may decline. I would imagine this would be a good move for him, a high-profile move in a growing industry with a chance to make a historical mark. Of course, if Twitter counters with a more lucrative offer to keep him, then the ball will be in SoFi’s court.”
How businesses can use online branding to get a loan. AT: “To my knowledge, no alternative lender in the U.S. is using social media as the primary source of credit data. It’s more than they use alternative data as additional information to traditional metrics, but this could change.”
California’s super high-interest loans are booming. AT: “I’d be curious to see how they’re doing in other states, as well. Given that Texas-based Elevate Credit is one of the top three lenders in this segment, it’s likely that other states have seen a similar increase in these types of loans.”
Anthony Noto, a top Twitter Inc. executive, is in discussions to become the next chief executive of Social Finance Inc., according to people familiar with the matter, as the online lender grapples with accusations of improper workplace culture.
The San Francisco-based company has offered the job to Mr. Noto, currently Twitter’s operations chief and before that a top Silicon Valley banker atGoldman Sachs GroupInc.,people familiar with the matter said. Mr. Noto is likely to make a decision in the coming days, the people said.
He may turn down the offer, as terms haven’t yet been completed, or Twitter might lobby hard to keep him, especially with CEO Jack Dorsey splitting his time between the social-media service and Square.
An increasing number of the largest online lenders, such as Kabbage (a ValuePenguin affiliate) and Funding Circle (also a ValuePenguin affiliate), are relying on online data in addition to traditional data points to gain a fuller picture of a business’s health.
Kabbage, which recently received $200 million in funding from Credit Suisse, uses a fully automated underwriting process (involving no humans) to approve applicants and requires business owners to link online accounts, which run the gamut from bank accounts to vendor accounts, to complete an application.
Even traditional lenders are getting in on this trend. JPMorgan Chase (a ValuePenguin affiliate), which recently renewed its partnership with online lender OnDeck (also a ValuePenguin affiliate), the largest online lender to small businesses, uses the latter’s underwriting technology, which considers online data points, to help it offer online business loans.
Not long ago, personal loans of this size with sky-high interest rates were nearly unheard of in California. But over the last decade, they’ve exploded in popularity as struggling households — typically with poor credit scores — have found a new source of quick cash from an emerging class of online lenders.
These pricey loans are perfectly legal in California and a handful of other states with lax lending rules. While California has strict rules governing payday loans, and a complicated system of interest-rate caps for installment loans of less than $2,500, there’s no limit to the amount of interest on bigger loans.
In 2009, Californians took out $214 million in installment loans of between $2,500 and $5,000, now the most common size of loan without a rate cap, according to the state Department of Business Oversight. In 2016, the volume hit $1.6 billion. Loans with triple-digit rates accounted for more than half, or $879 million — a nearly 40-fold increase since 2009.
The number of loans between $5,000 and $10,000 with triple-digit rates also has seen a dramatic 5,500% increase, though they are less common. In 2016, loans of that size totaled $1.06 billion, with $224 million carrying rates of 100% or higher.
Many of the loans can be tied to just three lenders, who account for half of the triple-digit interest rate loans in the popular $2,500-to-$5,000 size range. LoanMe, Cincinnati firm Check ‘n Go and Fort Worth’s Elevate Credit each issued more than $100 million in such loans in 2016, as well as tens of millions of dollars of loans up to $10,000 with triple-digit APRs.
Within this large document, there are four key actions being proposed:
Affordability test: This imposes two burdens on payday lenders. First, conducting an affordability analysis would increase the cost of underwriting a loan. Second, people generally turn to payday lenders when they are broke.
Limit payday rollovers
Exemptions made for alternatives to payday lenders, including credit unions and community banks: If a lender derives less than 10% of its revenue from payday loans, it is exempt from some of the most onerous rules. This particular restriction is odd. Why is the hated payday lending product acceptable, so long as the institution making the loan only generates 9.99% of its revenue from such activities? Are high rates and frequent rollovers acceptable when coming from a bank? Or is there a presumption that payday lenders are evil while bankers are not?
Limit on the number of times a checking account can be debited. This rule limits the lender to two unsuccessful debit attempts. Afterwards, the lender can only attempt to debit the account if it receives authorization from the borrower.
The outrageously high APRs paid on payday loans can make anyone’s stomach churn. But why are APRs so high? I believe there are three main drivers:
Risks are high: The people using payday loans are very high risk borrowers.
Price competition is absent: For a payday loan, people value speed and access.
Good behavior does not get rewarded: Payday lenders generally do not report to credit bureaus.
The Consumer Financial Protection Bureau on Thursday dropped a lawsuit against four payday lenders.
Since 2012, two of the firms — Golden Valley and Silver Cloud Financial — offered online loans between $300 and $1,200 with interest rates of up to 950%. The other two firms — Mountain Summit Financial and Majestic Lake Financial — also offered similar terms on loans, according to the bureau.
BofA added about 2 million users to its digital channels, predominantly to mobile. The bank’s active digital users jumped from 32.9 million to 34.9 million annually, an increase largely driven by mobile banking users, which increased by 2.6 million users year-over-year (YoY).
Engagement is rising too. Mobile channel usage rose 34% YoY to reach 1.3 billion interactions in the quarter.
BofA consistently updated its digital and mobile offerings throughout 2017, adding contactless ATM functionality, for example, and integrating tools like the popular peer-to-peer (P2P) offering Zelle. These innovations have likely contributed to rising interactions.
Just under 30 percent of U.S. households are underbanked or unbanked, according to the FDIC. What these terms mean has been up for debate and subject to misconceptions. Let’s look at some of the most pernicious myths regarding underbanked Americans and debunk them:
The person-to-person payments service Zelle differentiates itself from rivals by promising users that transactions sent over its network will clear in near-real time. Yet in recent months, the service has faced a number of complaints from consumers who say they are having problems sending or receiving money or setting up accounts in the first place.
Zelle has acknowledged the problems, but says the occasional delay is the price some users will have to pay as the big banks’ rival to PayPal and Venmo aims to create one of the industry’s strictest fraud-prevention programs.
One of the biggest (and most unique) new companies working in the online lending space is Loanable – a platform that brings together crowdfunding and peer-to-peer lending, but with a twist.
According to Bernard Worth, who created Loanable along with co-founder Justin Straight, there is a whopping $1.3 trillion in American student loan debt.
This system, which just launched in October of this year, is designed specifically for loans from friends and families. Loanable is an innovative way to get a low-interest loan from multiple friends and family members, without of lot of the awkwardness and tension that’s typically involved with borrowing from people you know.
The friends and family loan set-up process is pretty straightforward. You simply need to enter some information:
The full amount of the loan
Each lender’s name, address and email
The borrower’s name, address and email
The interest rate – which is usually between 2% and 10% for friends and family loans
With tax season around the corner you might have noticed a deluge of Jon Hamm commercials for interest free tax refund advance loans. This is a newer product used by tax preparation firms to build their customer base around tax season.
Zopa, one of the largest peer to peer lenders in the UK, has announced an increase in interest rates paid to investors. Zopa currently offers two diversified investment tiers: Zopa Core and Zopa Plus. Returns have increased from 3.7% for Core and 4.5% for Plus respectively. The higher rate reflected by Plus is indicative of an increase in risk profile. Zopa said this is the first time target returns have increased since 2015.
Softbank Group, the Japanese technology conglomerate, is considering the sale of 30 per cent of the shares in Softbank Corp, a subsidiary that is Japan’s third-biggest mobile phone operator, in an initial public offering.
The mega-deal could raise up to two trillion yen (£13 billion) and may take place this year in Tokyo and London, with the proceeds channelled into investments in new technology businesses, the newspaper Nikkei reported last week.
Research from an independent senior recruitment specialist firm, Tindall Perry, reveals that 74 per cent of finance directors describe their knowledge of alternative finance as average or above. However, only a quarter said they were comfortable with accessing crowdfunding or peer-to-peer lending.
In contrast, 85 per cent of companies said that they understood how best to access asset-based lending (ABL), while invoice finance, trade finance and venture capital all saw a positive response rate of between 55 and 75 per cent.
Despite this, traditional bank lending remained the funding of choice for financial directors, with 83 per cent suggesting that they would approach their bank for finance in the first instance.
Envestnet | Yodlee has launched a single API solution to make it easier to comply with the UK’s PSD2 and open banking API specifications for account information services, reports David Penn at Finovate (FinTech Futures’ sister company).
“We’ve recruited more than 1,000 specialised consultants across BCG working on topics which didn’t exist just five years ago,” says Mr Morel. They are technologists, data scientists and process specialists who help banks decide what to prioritise and how to design and implement solutions. Most of those newcomers work in financial services, including 100 who work with UK institutions.
In fact, with real estate crowdfunding services like Fundrise Reviews you can invest with as little as £500 in commercial real estate. Something that means you could be looking at a return of over 10 per cent, not bad for such a small investment.
Peer to peer lending is another fantastic option for investors that have a smaller pool of capital to work from.
The past New Year’s Day holiday might not have been a time of celebration for some Peer-to-Peer (P2P) investors in China.
Several Chinese online lending platforms announced a repayment delay or liquidation amid tightening government regulations.
On Dec. 26, 2017, a Beijing-based online lending platform ishoutou.com made an online announcement that it was going into liquidation due to compliance risks. It promised to pay back all loans by 30 percent, 30 percent and 40 percent respectively in the three months from February to April.
However, the company owner, Yang Yinghua, went missing the next day.
And yet it is Orange that has launched one of the most audacious attempts to break into mainstream banking and challenge tarnished incumbents. A couple of months ago Orange Bank was launched with a mission to attract 2m clients and shake up the staid world of French finance.
The shift to smartphone banking should put telecom operators, handset makers and the big technology groups in a strong position to go head to head with the traditional banks.
Springhouse today announced that it has received Morningstar Credit Ratings, LLC’s MOR RV2 residential-vendor ranking as an asset valuation provider. Morningstar’s forecast for the ranking is Positive.
As a member of the Altisource Portfolio Solutions S.A. family of businesses (“Altisource”), Springhouse leverages Altisource’s shared services.
Eiffel Investment Group actively supports the development of digital lending throughout Europe.
We are excited to sponsor the first EUROPEAN DIGITAL LENDING AWARDS.
The event will take place on February 1st, 2018, in Paris (25 Rue du Petit Musc, 75004 Paris) at 7 pm. If you would like to attend, please send us an email at email@example.com (advanced registration is mandatory).
Launched in January, the company’s ‘borderless’ account – coupled with a debit card – allows users to hold up to twenty-eight currencies. Once signed up, account holders can carry out transactions in a currency of their choice as they travel around the world.
But there are other new players in the market. For instance, Revolut – which styles itself as a digital banking alternative, offers a prepaid debit card that allows users to hold up to sixteen currencies. Again, transactions can be carried out in the currency of choice.
Meanwhile, WorldFirst – a foreign exchange broker serving companies and relatively wealthy individuals – last year announced that it was launching a World Account, Aimed at SMEs, the new account offers the ability to open local bank accounts overseas and hold dollars, sterling and euros.
To Illustrate the potential demand for its service, Worldfirst cited research suggesting that small and medium-sized companies were carrying out foreign-exchange trades to a value of £76bn every month.
According to Bank of America’s Year-end Millennial Snapshot, 49% of Millennials believed that the Great Recession drastically altered their attitudes about banks, specifically with regard to their saving, investment and expenditure.
According to PwC’s Global FinTech Report 2017, FinTech startup funding is over $40 billion in cumulative investment, growing at a compound annual growth rate (CAGR) of 41% over the last four years.
Embrace the Millennial Banking Revolution
59% of Millennials interviewed by BNY Mellon says they’ve never come across a financial product specifically meant for them. A report by The Millennial Disruption Index cited that all the four leading banks in the US are among the least-loved brands by millennials.
AlfaToken, a service enabling startups and innovative entrepreneurs to create their own ICO tokens and smart contracts without coding skills, is gearing about to conduct its Initial Token Offering with the help of ICOBox, the world’s leading provider of ICO solutions. AlfaToken plans to offer services in 14 smart contract areas, from initial coin offerings and real estate rentals, lending and insurance, to business process management, smart homes and property transfers.
Founded in 2017, AlfaToken identified a gap in the ICO market where initial coin offerings are forecast to rise from 43 in 2016 to 537 in 2017, according to coinmarketcap.com. In particular, the company perceived an opportunity for its Ethereum smart contracts in the real estate rentals market, worth $2.8 billion (Airbnb forecasts), in the peer-to-peer lending market (including mortgages), worth up to $180 billion according to Business Insider, and also the insurance market valued at $4.5 trillion according to a 2016 report by the Institute of International Finance.
Every digital financial transaction you’ve ever made in your life has had to go through a bank or large financial institution at some point. They authorise, facilitate and record the transaction, often taking a cut along the way. Blockchain essentially replaces the middleman in this process. It’s international, unregulated, instant and unhackable.
94% of economists surveyed by finder.com.au in November 2017 expect blockchain will have widespread use in the financial sector and economy.
2. Biometric payments
Although biometric payments are increasing, finder.com.au research shows 60% of Aussies – over 11 million people – either feel uncomfortable using biometric identification when logging on to their mobile banking apps, or aren’t really sure about it.
3. The end of our low-interest world
Australia’s cash rate sat stagnant throughout 2017 at a record low of 1.5%, producing low savings rates, cheap mortgages and escalating property prices.
4. The declining human face of banking
A sharp rise in mobile and online banking has meant Australians are less likely than ever to need to visit their local branch. We expect the number of branches to fall further in rural, regional and remote areas.
5. The rise of one-to-one lending
For example, the average three-year term deposit in December 2017 paid 2.55% interest. However, peer-to-peer lender RateSetter are currently offering 7.4% for the same period.
6. The disappearance of ATMs and cheques
The number of ATM withdrawals per month has fallen from a high of 73 million in 2010 to just 47 million in 2017.
It has been noted that youngsters are averting eyes towards quick personal loans with lesser interest rates rather than the credit cards, says Aditya Kumar, founder of Qbera, a Bengaluru based fintech company. They recently compiled a stats on spending on travel loan trends in 2017. “Millennials, covering more than 50 percent of the Indian population are constantly looking for online digital platforms to plan their finances for holidays; unlike their predecessors who’ve always relied on savings. It has been a regular practice to narrow down their search to fintech lenders for financing their travel needs,” he adds.
According to his company’sstatistical report, out of 1700 applicants of travel loans till last year November, the age of 728 applicants is below 28 years and 105 female applicants within the age span of 20-28 years (both single and married), he adds.
The Financial Services Authority (OJK) is planning to issue a policy in financial services institutions, including guiding principles for Digital Financial Services Providers that include registration and licensing mechanisms as well as the application of regulatory sandbox and policy on crowdfunding.
Not only has the US Federal Reserve started to raise interest rates – a move mirrored by China’s central bank and the Hong Kong Monetary Authority with more developed countries expected to follow suit – but a market correction may be in the works following a strong run in both the US and Malaysian stock markets.
Yet despite its prices taking a plunge recently, its demand is still going strong. Similarly, ethereum, ripple, litecoin and Zcash continue to enjoy the mania status garnered by anything related to cryptocurrency. Equally enticing opportunities are abound with the rapid growth of equity crowdfunding (ECF) and peer to peer (P2P) lending platforms.
Russia’s biggest lender Sberbank plans to help small firms raise funds from private investors with a peer-to-business platform, three sources familiar with the plans said, competing with two other ventures that support the cash-starved companies.
The state bank’s foray into p2b lending suggests it sees a revival in fortunes for small businesses as consumer spending picks up.
It also reflects the commitment of chief executive German Gref to enhance the bank’s use of new technology.
The integration of blockchain technology into multiple facets of our world could greatly streamline many industries that affect our day-to-day lives, and financial lending is the ideal forum. A natural progression of P2P lending, blockchain application can make the entire lending process more seamless and greatly reduce the amount of time the process takes. Here […]
The integration of blockchain technology into multiple facets of our world could greatly streamline many industries that affect our day-to-day lives, and financial lending is the ideal forum. A natural progression of P2P lending, blockchain application can make the entire lending process more seamless and greatly reduce the amount of time the process takes.
Here are a few of the players in the early days of this promising technology.
SALT (Secured Automated Lending Technology)
According to its website, SALT is the only platform built to facilitate loans secured by blockchain assets.
“Distributed ledgers represent a paradigm shift in the storage and transfer of assets and, for the first time in history, there is a perfect form of collateral: blockchain assets,” the website reads.
Basing loans on blockchain assets makes creditworthiness no longer an issue. Writing for Forbes, Roger Aitken reported that SALT asserts that, by focusing on the borrower’s assets instead of their credit score, it is able to “dramatically reduce the complexity and cost of the loan process.” SALT seeks to streamline every step of the loan process, facilitating a new blockchain-backed lending market.
The investor retains the value of their holdings, with any earnings or losses that occur to the wealth during the process reverting completely to the borrower.
Among the potential assets to blockchain-based coin lending are that it is a realm where crypto wealth is recognized. Company CEO Shawn Owen, speaking with Forbes, said “if you’re a holder of blockchain assets, a lot of your financial wealth is not being recognized by lenders.” This technology is poised to open those funds to be leveraged and also break down geographic constraints while bringing the potential for the unbanked and underbanked into the financial world.
SALT offers three value tiers and products.
The basic membership package affords one up to $10k in term financing, paid only in USD; terms go from three to 24 months
The premier package offers up to $100K in term financing with a line of credit. This can be paid in USD, Euro, GBP, JPY, and RMB. Term lengths are anywhere from one hour to 36 months.
The enterprise package provides access to over $1M of term financing and a line of credit to be paid in an ad hoc currency selection, dictated by metered terms. This package offers two benefits that the premier package doesn’t–API integration and cold storage enterprise wallets.
All three packages offer no pre-payment penalties, market data and educational resources, and loan management web portals. The premier package offers access to the SALT hardware wallet, customizable loan terms, and early access to new products. These are not offered with the basic membership package.
All member lenders are Regulation D accredited investors, and while credit checks are not done on borrowers, SALT undertakes full Anti-Money Laundering (AML) and Know Your Customer (KYC) verification checks.
The loans, which sport interest rates in the 10 to 15 percent range, are not transferable via the blockchain, as they become securities and are thus transferable through existing financial channels.
EthLend is an Estonian-based fully decentralized P2P lending platform on the Ethereum blockchain for lending Ether as tokens for collateral. The platform uses any ERC20 token. All lending on the platform is facilitated through the use of smart contracts, a feature unique the Ethereum blockchain.
The company’s Twitter feed from January 3 reports that it has reached nearly $600K USD in lending volume. The company offers address-to-address loans that are sent within minutes, with no middle men, assuring that no one, not even EthLend, can stop one’s lending or borrowing.
With a roadmap that goes into Q4 2019, the company seems to have a well-plotted vision. Included in that roadmap are:
Q1 2018—Plans for a Decentralized Credit Rating (DCR), which will draw on Credit Tokens (CRE) and previous loans on EthLend to create a decentralized credit rating that can be used for other Decentralized Applications (DAPPs) as well
Q2 2018—The addition of bitcoin to the DAPP
Q2 2018—CRE from third party services, such as uPort and Civic, which can be used when the borrower doesn’t have enough previous loans
Q4 2018—the incorporation of the lending of other altcoins and tokens
Q3 2019—expansion beyond Ethereum to other distributed ledger networks
Rating the company, CrushCrypto.com says “use cases may seem limited for now, but we believe as tokenization of real assets becomes more prevalent, EthLend has a good chance to become a market lender in this space.”
A pre-ICO lasting from September 25th to October 25th of last year sold 62.5 million LEND available at a sale price of 1 ETH = 25K LEND. The ICO, which ran from November 25-30, saw the company raise $17.86M USD, essentially 100% of the $17.9M goal.
In Q4 2107, the company opened up to USD-based loans and installments.
The platform is not without some aspects that may cause concern for some industry insiders. Certain functions are only accessible with LEND tokens, such as featured loan listings and email marketing for new loan requests. Also, EthLend is currently only available through the Eidoo ICO search engine.
On the upside, only dealing with crypto-to-crypto borrowing means there will be fewer regulation restrictions when those start to be handed down. Also, some insiders fear that other blockchain lending platforms that deal in fiat currencies might be swallowed by the banks, as they do open their transactions to become securities.
Celsius is a New York-based NPO based on the Ethereum blockchain, which extends instant credit through a decentralized P2P network. The network is akin to a membership organization that consists of both lenders and borrowers. Members must complete a Celsius profile to join.
Celsius touts itself as the “first crypto wallet that allows users to earn interest (7%) on their held coins” and allows borrowers to use cryptocurreny as collateral to gain access to USD loans. Using a token called a DEG, Celsius deals in BTC, ETH, and USD and uses smart technology to bind the lender/borrower relationship.
Borrower’s metrics are ascertained by using the Celsius Score, a digital credit score calculated by using various traditional metrics, such as FICO scores and mortgage history, as well as non-traditional ones such as Uber and Amazon histories. Lenders choose their borrowers using this score to determine risk.
An NPO acting in the best interests of its users through lower fees and no hidden fees, Celsius’s ultimate goal is to give credit to large blocks of the public who are underserved by banks.
ICO Bench rates Celsius at 2.8 out of 5. The central reason for the less than stellar mark centers around the company being long on marketing, but less so in technology terms.
Some Other Players
Seven banks, including BNP Paribas, HSBC, ING, BNY Mellon and State Street, have joined forces with R3 and Finastra to develop a blockchain-powered marketplace for syndicated loans. The first pilots have already been successfully completed.
With the early support of seven global banks (two of which do not yet wish to be named), the platform will cover 10% of the syndicated loan market when live next year.
An expansion under the Russian LightFin.ru brand, Inspeer deals in crypto and fiat. The company serves three million regional customers and processed 200,000 loans in its first year.
For those who like to be in the know a little earlier, there is LendingBlock, a securities lending platform for crypto and digital assets. Users can lend and borrow cryptocurrencies against collateral of other cryptocurrencies in a completely decentralized and private manner. Watch for a Q1 token presale and a Q3 launch. LendingBlock is not currently working with fiat currencies.
The business of cryptocurrency lending is looking like the Wild West. There are some promising players to consider, and more if you look. SALT has Erik Voorhees associated with it, who founded Coinapult and gambling site SatoshiDice. He is a long-time cryptocurrency and blockchain advocate.
Do your own homework to make informed choices, but if crypto lending is in you future, start your research with these platforms.
News Comments Today’s main news: CreditEase Fintech Investment Fund announces new global investments. Money360 loan portfolio exceeds $200M. Funding Circle launches C shares offer for the fund. Today’s main analysis: Signs of a turnaround in volumes? Today’s thought-provoking articles: Groundfloor launches tax-deferred real estate investing. China’s yield-strapped investors spark P2P explosion. United States CreditEase Fintech Investment Fund announces new investments […]
Machine learning is the future of MPL. GP:” Machine learning plays a role but I am not sure it will be enough to define MPL.” AT: “The interesting thing here is that LC is still using a manual process to price loans, but there is a convincing argument why they shouldn’t.”
CreditEase Fintech Investment Fund (“CEFIF”), a venture fund investing in growth-stage fintech companies in China and globally, announced at the 2017 LendIt USA Conference in New York that it recently participated in investment transactions in three new fintech companies. LendIt annual conferences are recognized as one of the largest global fintech industry events dedicated to connecting the global fintech and lending communities.
The three investment transactions include Series C financing round in Trumid, an electronic trading platform for the bond market, Series B financing round in WeConvene, an online corporate access management ERP provider for capital markets, and Seed Round financing round in WorldCover, an innovative peer-to-peer insurance network.
Origination numbers fell consistently over the course of 2016, and we have been waiting to see whether that was going to continue or whether we would eventually see an uptick. In Q4, we finally saw an uptick.
Not a huge one. It’s about a 10% increase over Q3 numbers. And that’s still down significantly from the peak last year, about 46% from what we recorded in Q4, 2015.
Charge-off Rate Vintage Curves
Back in 2010, the size of the industry and the volume of loans originated were pretty small. There were also fewer lenders focused on subprime lending. Additionally, a larger percentage of 2010 loans had a term of 36-months. 60-month loans have grown more in later years. 36-month loans have shown a tendency to charge-off at slightly lower rates.
This introduction of new loan products for lower credit quality borrowers in later vintages—i.e. lower lending standards and longer duration loans—means that the 2010 vintage includes not only fewer loans, but the loans tended to be of a higher credit quality. Given those factors, charge-offs are bound to be lower in the 2010 vintage.
More recent years all stack together pretty tightly, within 1-2% of each other in cumulative charge-offs. However, 2014 and 2015 vintages seem to be charging off at a slightly faster rate, at least, as of this latest report.
Borrower Interest Rates
Since Q2 of 2016 we’ve seen borrower rates fall in both Q3, and Q4 by around 1.2%.
Subprime rates are significantly higher. They’re in the 25-40% range. Whereas the prime lenders are going to be in the 8% to maybe 15-20% range. We end up with a weighted average of ~16%.
GROUNDFLOOR, the first and only U. S. real estate lending platform open to non-accredited investors and IRA Services Trust Company, the leading innovator of hi-tech Self-Directed Individual Retirement Account (SDIRA) solutions, today announced an initiative to maximize the benefits of tax-deferred investing for retail investors. As a result of the collaborative effort, GROUNDFLOOR will immediately begin inviting investors on their platform to fund their accounts directly through their 401(k)s and IRAs.
GROUNDFLOOR offers real estate investments with different grades that have a range of risk/reward profiles, offering returns ranging from 5% to over 20% so investors can build a diversified portfolio. In 2016 GROUNDFLOOR delivered loans with an average annualized return of 14.16%.* Compared to 2015, in 2016 loan origination volume in dollars grew by 621%, and the dollar value of principal repaid grew by 588%. Only one of the 108 loans repaid to date has returned less than 100% of the principal due back to GROUNDFLOOR’S investors.
At a time when private markets continue to deliver superior returns compared to public markets, most Americans currently saving for retirement can no longer rely solely on traditional stocks, bonds, and mutual funds for growth and yield. At the same time, many investors have been hesitant to participate in SDIRAs because of the expense, burden, and paperwork traditionally associated with the self-directed investment of tax-deferred funds.
GROUNDFLOOR and IRA Services are working together to address these issues head on: IRA Services’ real-time, cloud-based, API-driven retirement investment solution for the P2P industry – the first of its kind – streamlines the once difficult process of investing tax-deferred funds in P2P marketplaces. Meanwhile, GROUNDFLOOR is the only P2P marketplace where both accredited and non-accredited investors can directly invest in private real estate projects on terms they control, rather than turning their money over to a fund.
Whitepages might be a 20-year old company but the data they’ve amassed over time can add significant value to online lenders, the company claims. Whitepages Pro, which offers identify verification, allows lenders to gauge if an individual is real.
A simple query of an individual’s name, phone number, email, address or business name will return results not easily accessible elsewhere, like how long that person’s email address has been in their system or the likelihood that the email address was generated by a bot, not a real person. A match is good, no match might not be good, they say. Their system can also do things like identify the carrier the phone number belongs to and whether or not that carrier, if it’s VOIP or something, might have a higher propensity for fraud.
At LendIt USA, CEO Scott Sanborn shared that his team at Lending Club uses a manual process to dynamically price loans. Unsurprisingly, some loans are more sought after than others, but matching the pricing with demand is a labor-intensive process. With AI and machine learning, Lending Club and other online lenders may be able to rapidly update loan pricing automatically to maximize investor yield and industry profits while ensuring virtually every loan gets funded.
Lending Club, the dominant player in the peer-to-peer lending industry, grades loans from A to G, corresponding to interest rates from 5.32% to 30.99%. While this model is widely accepted and similar systems are used for virtually all bank and private lending, there are flaws in the model.
Airlines use complex algorithms to determine seat prices, but machine learning, commonly called artificial intelligence or AI, to better understand how people are interacting and purchasing. Rather than just increasing prices as the flight date gets closer, a computer could look for purchase trends and dynamically adjust prices on its own rather than leaning on a pre-determined schedule based on a series of inputs.
If this same logic were applied to a lending marketplace like Lending Club, it could look at trends, loan availability across multiple platforms, risk factors, and current interest rates across multiple lending marketplaces to best price loans. This ensures the best results for lenders and borrowers, as every loan would be funded and yields would be optimally set.
Loan approval rates at big banks ($10 billion+ in assets) improved to new post-recession highs in February 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com.
Small business loan approval rates at big banks improved to 24.1% in February 2017, marking the seventh consecutive month of increases and the 11th time in a calendar year that approval percentages have increased. Further, loan approval rates at big banks in a year-to-year comparison are up more than one full percentage point, as they slowly creep towards the one-quarter mark.
For the first time in the last six months, loan approval rates at small banks dropped by one-tenth of a percent to 48.8% in February 2017 from 48.9% in January.
Institutional lenders’ loan approval rates improved to 63.5%, reaching a new Index high.
Loan approval rates dropped at alternative lenders in February, as they approved 58.4% of the loan requests they received, down one-tenth of a percent from 58.5% in January.
Mr. Giancarlo has long argued the CFTC should do more to embrace financial technology, which he says has the potential to transform finance, in part by significantly boosting the quality of swaps data that regulators collect from the industry. He has tapped a top CFTC staffer, Jeffrey Bandman, to head the agency’s fintech efforts, according to people familiar with the matter.
For the latest in our Confessions series, we spoke to a startup entrepreneur with considerable experience in the banking sector.
So banks are making more money off of high-income customers, and are pushing the startups to take the lower income ones they don’t want? They would much rather get their tax breaks and give to charity and say they’re doing good for the country than get their hands dirty with a bunch of very subprime demographics. The fintech guys have to go to high risk. If you’re a bank, you can cherry-pick all the rich people and not have as many defaults in a downturn.
What about accelerators and incubator programs where the banks mentor startups. Doesn’t that show their goodwill? They just steal your ideas. They’re not doing it for the good of their soul. They’re doing it to take a chunk and or steal the idea as you build it and do it themselves.
If it’s so hard to get your product to market, what’s the objective of a startup entrepreneur? Is it just to cash in when you’re acquired by a bank? If you’re looking to make a little bit of money quick, it’s probably not a bad play, but if you’re actually looking for any kind of change in the world, and you believe in that, it’s not a good move. That’s the reason why people go into this, and I believe I’m one of them. I am bored and sick and tired of no one innovating in the space.
As for scalability, smart contract code must produce the identical outcome in every node that executes it. Dunjic questions whether a large number of distributed nodes all hitting a “funds transfer” API at the same time might look like a self-inflicted DDOS attack on the API. Would each call to the API receive exactly the same response from the API? Reliability must be absolute in a smart contract.
In CES 2017, Samsung has declared that its Gear 2 will be outfitted with Samsung Pay, the digital wallet application of the organization. In the coming era, we can see more gadget producers integrate advanced wallet services.
Mobile payment procedures including bank transfers and cards are more secure now with the assurance of biometric validation. The unique mark scanner or face identification programming on a few handsets and platforms permit the users to enlist his biometric data with the gadget and from that point utilize them for any transaction when it needs confirmation. On account of biometric validation security vulnerabilities with mobile payment could be limited as it were. In future, we can expect the expansion of such computerized transactions with biometric confirmation constraining the security dangers and ruptures to a base.
Impact investing is growing in importance among the alternative investing community, according to a new survey by the Chartered Alternative Investment Analyst (CAIA) Association.
Assets under management in impact investments have grown 18 percent year-over-year for the past three years, according to the Global Impact Investing Network (GIIN). Total industry assets under management in traditional private equity impact investments are estimated to be around $80 billion.
THE FUNDING Circle SME Income Fund has launched its first conversion (C) share fundraising as part of plans to raise additional capital over the next 12 months.
The placing is open until 6 April at a price of 100p per C share and the new class will list on the London Stock Exchange on 11 April.
The London-listed investment trust, which invests in loans on the Funding Circle platform, issued a new prospectus in February as it looks to issue up to 500 million new shares over the next 12 months.
Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced the appointment of Dr. Yichuan Pei as its Chief Credit Officer.
Dr. Pei will be responsible for the overall management of Yirendai’s Credit Department to ensure that the credit risk of loan portfolio on the Company’s platform is within the Company’s guidelines. He will also work closely with the Company’s Chief Risk Officer, Ms. Yiting Pan, to manage the Risk Management Department. Ms. Yiting Pan is expected to transit from her current position as Yirendai’s Chief Risk Officer into a new role with CreditEase and relocate to the U.S. in the middle of 2017 due to personal reasons. Dr. Pei will take over the full responsibilities of risk management and assume the Chief Risk Officer position at end of the transition period.
Peer-to-peer lending is surging in China as conventional financial products lose their appeal — creating new opportunities and substantial risks for yield-hungry retail investors.
Outstanding peer-to-peer loans — funds lent by one individual to another through the internet — stood at 885.7 billion yuan ($128 billion) in China at the end of February. That is eight times the level of barely two years ago.
Companies are getting into the game, borrowing hundreds of thousands of yuan in operating capital. Lending services are now offering to choose investments for customers. For funding riskier borrowers, lenders can expect yields on the order of 8-12%. These loans turn over quickly in many cases, often in less than a year.
China’s peer-to-peer lending balance stood at just 103.6 billion yuan at the end of 2014, according Yingcanzixun.com, a site tracking the peer-to-peer industry run by Shanghai Ying Can Investment Management Consulting. Within a year, that surged to 406.1 billion yuan. Lending could top 1.3 trillion yuan by the end of 2017, an executive with Yingcanzixun predicted.
Billionloans, the online lending platform founded by former Infosys CFO V Balakrishnan, is looking at raising $1 million in funding within the next few weeks as it focuses on building a Rs 1000-crore loan book in two-three years.
Because the Billionloans platform functions as a marketplace, it does not take the risk of loan defaults itself. The lending is also done by institutional lenders who have the ability to make collections in case of defaults.
Balakrishnan’s platform will use a potential borrower’s social media behaviour, device information, banking transaction history and the results of a psychometric test to determine intention to repay to issue a score to gauge credit worthiness. The platform uses Micrograam’s underlying technology to issue the score, Balakrishnan said.
Launched only 19 months ago, Silver Bullion Pte Ltd‘s bullion has secured P2P loan platform has matched 1000 loans. While it took roughly 13 months to match its first500 loans, it took only another 6 months for Silver Bullion to reach 1000 loans.
Silver Bullion’s bullion secured P2P loan platform has now matched more than S$27M in loans. In Q1 2017, the U.S dollar denominated 12-month loans were matched with an average interest rate of 4.0% p.a while the Singapore dollar denominated 12-month loans had an average interest rate of 4.2% p.a.
Traditional financial institutions are generally reluctant to serve SMEs due to the high costs associated when assessing these businesses, their volatile balance sheets and the inherent high risks involved with start-up companies. This lack of financing for SMEs has exposed a gap in the South African lending and borrowing market, and has encouraged development in the sphere of social lending, also known as crowdfunding.
Online marketplace lending in South Africa is becoming an increasingly popular alternative to traditional financial institutions, which for years dominated the lending and borrowing market with high interest rates, rigorous red tape, excessive bank charges and inflexible attitudes. Social lending is revolutionising the manner in which SMEs and conventional corporate citizens access funding and it is disrupting traditional understanding of how money is lent and borrowed. Crowdfunding eliminates the need for traditional financial institutions in the context of SMEs and provides consumers with a convenient and flexible online funding platform that offers competitive interest rates, low fees and charges, and advantageous terms and conditions.
Launched in 2012 as the first online marketplace lending platform in South Africa, Rainfin Proprietary Limited (RainFin) has experienced rapid growth and popularity due to its ability to match borrowers directly with lenders.
However, despite the popularity and growth of these crowdfunding platforms in South Africa, they are not free of burdens and restrictions. The National Credit Act 34 of 2005 (NCA) previously allowed an individual to lend up to R500 000 to another individual without being registered as a credit provider.