Wednesday February 21 2018, Daily News Digest

LendingClub originations by funding source

News Comments Today’s main news: Lending Club losses extend to Q4 2017. LendingClub to settle lawsuit for $125M. Groundfloor launches online public offering. Even Financial gets backing from American Express. LendInvest launches buy-to-let calculator online. Today’s main analysis: Lend Academy reviews LendingClub’s Q4 2017 results. Today’s thought-provoking articles: Equity sharing and home ownership. How millennials move emerging markets. Why Australia needs […]

LendingClub originations by funding source

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Lending Club extends losses for fourth straight year (Financial Times), Rated: AAA

Lending Club lost money for a fourth year in a row last year, as it wrote a big cheque to settle class-action lawsuits connected to its governance glitches of 2016.

The San Francisco-based company, the biggest listed online lender in America, said on Tuesday that net losses for the fourth quarter almost tripled from a year earlier, to $92m, as it agreed a $125m settlement to resolve civil suits stemming from the loan-mis-selling scandal that blew up almost two years ago. About $48m of the sum would be covered by insurance, the company said, with the remainder to be paid from liquid assets of about $650m.

The loss for the full year came to $154m, wider than the previous year’s $146m.

LendingClub agrees to settle shareholder litigation for 5M (American Banker), Rated: AAA

Under the agreement, which was announced Tuesday, the San Francisco-based online lender expects to pay $77.25 million. An additional $47.75 million is expected to be covered by LendingClub’s insurance, bringing the total payout to $125 million. The deal is subject to court approval.

LendingClub Corp (LC) Shares Sink on Q4 Earnings Miss (InvestorPlace), Rated: A

Lending Club also underwhelmed in its revenue as the company raked in $156.5 million during its fourth quarter, below Wall Street’s consensus estimate of $157.6 million, according to FactSet. The figure did increase 20% compared to the year-ago quarter.

On an adjusted basis, the company posted earnings of a penny per share, compared to a loss of 2 cents in the year-ago quarter.

The company also experienced a 23% annual growth in originations, which reached over $2.4 billion.

LendingClub Q4 2017 Earnings Results Review (Lend Academy), Rated: AAA

LendingClub delivered another record quarter of $156.5 million in revenue up slightly from their previous quarter. Originations were slightly down from the third quarter at $2.436 billion. They reported a GAAP net loss of $92.1 million in the fourth quarter which was affected by the class action litigation settlement expense.

Source: Lend Academy
Source: Lend Academy

LendingClub provided the below guidance for Q1 2018 and reaffirmed their guidance for 2018:

First Quarter 2018

  • Total Net Revenue in the range of $145 million to $155 million
  • Net Income (Loss) in the range of $(25) million to $(20) million
  • Adjusted EBITDA in the range of $5 million to $10 million
  • Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $19 million, and depreciation and amortization and other net adjustments of approximately $11 million

Full Year 2018

  • Total Net Revenue in the range of $680 million to $705 million
  • Net Income (Loss) in the range of $(53) million to $(38) million
  • Adjusted EBITDA in the range of $75 million to $90 million
  • Reconciling Items between net loss and non-GAAP adjusted EBITDA consisting of stock-based compensation of approximately $77 million, and depreciation and amortization and other net adjustments of approximately $51 million

Stocks making the biggest moves after hours (CNBC), Rated: B

LendingClub stock plunged 10 percent after the bell. The peer-to-peer lending company reported earnings and revenues that missed Wall Street estimates.

Groundfloor Launches Online Public Offering Amidst Increased Stock Market Volatility (PR Newswire), Rated: AAA

Groundfloor, the first issuer qualified by the U.S. Securities & Exchange Commission to offer real estate based payment dependent notes that are available to non-accredited investors, today announced that it has raised a total of $4.3 million from 687 participating investors in a combination of two recent financings, a private online bridge note closed late last year and an initial closing of its online public offering of equity. In each case, the company kicked off the invitation-only raises to customers and friends of the company with a $1M target, surpassing that in under 48 hours. Due to increased growth opportunities and strong demand, the company has today expanded the equity raise to the public.

Groundfloor is offering a total of up to 530,000 shares of Common Stock at $10 per share in its online public offering. Investor benefits include: no investor fees for life2; access to regular shareholder-only loan offerings; and invitations to attend annual Groundfloor shareholder events.

Recently increased expectations that the Fed may raise interest rates in the future has investors rebalancing their portfolios, with a shift out of equity into debt, as bond yields are expected to increase. Twelve-month bond yields have recently inched up to 1.97 percent.

By comparison, Groundfloor investors have earned an average of 13.6 percent per year over the past three years, which represents over 6x the yield of a current one year Treasury note, and over 1,000 percent more than they would have made if their money had been in a CD or savings account over this period.1 Groundfloor’s retail investors create their own portfolios of real estate debt investments in the fix and flip residential housing market, and the loans on which the investments are based are secured by a first lien position against the underlying real asset.

Real Estate Equity Crowdfunding: A New Investment Opportunity for the Investors (EIN News), Rated: A

Talking in context of real estate, there are 3 ways to invest in a crowdfunded real-estate property:

• Equity crowdfunding
• Syndicated debt crowdfunding
• Platform-issued (‘pre-filled’) debt crowdfunding

Following are the pros and cons of going for equity crowdfunding in real estate:

Pros

• High yield potential
• Lower barrier to entry: Even if you have a very less amount of money, you can still invest even in large commercial real estate projects through equity crowdfunding and enjoy the benefits of the real estate i.e., strong returns and lower volatility.
• No self-employment taxes
• Higher returns

Cons

• The risks. An investor should know how to evaluate the risk factors like local economy volatility and chances of higher than expected construction costs. Due diligence is what is required.
• Liquidity constraint: These investments need to be held up for a period of five years or so, and hence one should go for this option if this much bandwidth is available, lack of liquidity is not there, and an investor is comfortable with the invested amount to be tied up for several years.
• It’s still an early option: It is still an early option to be considered as the performance track record and validation is still not complete and individual investors are still trying to figure it out.
• Lack of control: Since it is a passive investment, the investors are not involved in the day to day activities and therefore have limited ability and control over the operations required.

RealyInvest App Empowers Beginners to Invest in Commercial Real Estate (PR Newswire), Rated: A

In a rising tide of fintech apps, RealyInvest is emerging as a new way for beginning investors to access the high-priced world of premier commercial real estate right from their smartphones.

RealyInvestors can purchase fractional shares of REITs (Real Estate Investment Trusts) for as little as $5. Investors can also own shares of commercial real estate NNN Assets, such as a building long-term leased to Starbucks, for as little as $20.

All investments, rental income and dividend earnings can be managed right on your smartphone. Fees range from $1 to $3 per month, depending on investment options.

Silicon Valley Explores a New Investment: Your Home (WSJ), Rated: AAA

A handful of companies, including those backed by marquee Silicon Valley names such as Andreessen Horowitz and Mark Zuckerberg’s philanthropic organization, are experimenting with a product that essentially lets them take an ownership position in a house along with the homeowner. The agreements, called shared-equity contracts, provide a new way for investors to get exposure to rising home prices across the U.S.

Shared-equity products are aimed at new buyers who need help with a down payment, or current homeowners looking for an alternative to a cash-out mortgage refinancing or a home-equity loan. The first use has caught the attention of mortgage-finance giant Freddie Mac ,which recently agreed to buy loans on properties where one firm,Unison Agreement Corp. , contributes to the down payment.

Landed Inc. offers these down-payment contracts to teachers and other educators. Last year, the Chan Zuckerberg Initiative , a philanthropy co-founded by Facebook Inc.’s chief executive, gave Landed $5 million to start a new fund.

The length of the contracts can vary from a few years to 30. Homeowners can repay early, including if they sell their house before the term ends. How much they end up owing depends on how the value of their home changes. Because the funds are equity, not a borrowing, they don’t require monthly payments.

Even Financial inks $ 3 mln (PE Hub Network), Rated: AAA

Even Financial, the technology platform powering financial services online, has secured a strategic investment round totaling $3 million. The round includes an investment from American Express Ventures, the strategic investment unit of American Express, as well as Plug & Play and Arab Angels.

With this investment, Even Financial will expand its team and advance its proprietary technology, which allows financial institutions and other partners to scale customer acquisition and remain competitive in the growing online financial services industry.

Fundrise Reports 2017 Performance. Total Return for the Year Stands at 11.44% (Crowdfund Insider), Rated: A

In brief, this is what Fundrise reported;

“In 2017, Fundrise investments earned an 11.44%* total return on investment, including over $16 million in dividends paid out to investors. Delivering attractive, consistent cash flow is a core part of our mission to offer you a better way to invest.”

Online SMB lending platform Yalber closes $ 20M senior credit facility (Bankless Times), Rated: A

SMB lending platform Yalber closed a $20 million senior credit facility this week, the company announced today.

Blinker Joins With Ally To Enhance The Auto Industry’s Only Peer-To-Peer E-Commerce Platform (PR Newswire), Rated: A

South by Southwest Interactive Innovation Award winner and 2018 LendIt Fintech Industry Award finalist Blinker, the only peer-to-peer e-commerce platform that provides an end-to-end solution for anyone buying, selling or financing cars, announced two major milestones for its business today:

  • Blinker is now available in the largest car markets in the US – Beginning today, Blinker is expanding its proprietary e-commerce and loan origination platform from Texas and Colorado to California and Florida, allowing millions of customers to buy, sell and finance vehicles easier, quicker and safer with other people. Thirty percent of vehicle sales across the US every year are between people, yet private-party marketplaces including Craigslist, Letgo, Autotrader, Cars.com and Facebook Marketplace don’t have services such as integrated financing or lien payoff support. Leveraging artificial intelligence and machine learning, Blinker customers get guidance and tools to complete the entire purchase process themselves, from instant vehicle valuation to real-time auto loan approval to e-signing documents to secure funds transfer, all for free within Blinker’s mobile app.
  • Blinker joins with Ally to offer best-in-class auto protection products – Blinker will now give customers the option to add Ally’s vehicle protection coverage, including Ally Guaranteed Asset Protection (GAP) and Ally Premier Protection vehicle service contracts, for their vehicle purchases in the app. GAP covers the difference between the cash value of a vehicle and what Blinker customers still owe on their loan if the vehicle is totaled or stolen. Ally vehicle service contracts cover the repair cost for over 7,400 mechanical, electrical, safety or digital components, as well as some related expenses like trip interruption, rental car coverage, towing and 24/7 roadside assistance.

Zelle users are finding out the hard way there’s no fraud protection (TechCrunch), Rated: A

Scammers have taken to Zelle, the Venmo alternative backed by U.S. banks, to defraud consumers who believe the service includes the same protections they’ve come to expect from PayPal. A number of customers report having lost hundreds, or even thousands of dollars, over Zelle, when they used it for transactions with people they didn’t know – like tickets bought off a Craigslist posting, for example.

Cyberattacks took $ 56B from U.S. economy in ’16 (American Banker), Rated: A

Malicious cyber activity cost the U.S. economy between $57 billion and $109 billion in 2016, the White House said Friday.

The estimate comes in a Council of Economic Advisers report on the impact of cyberattacks on U.S. government and industry. The report details the range of threats that U.S. entities face from actors including corporations and countries such as Russia, China, Iran and North Korea.

The council’s estimate represents between 0.31% and 0.58% of the 2016 U.S. gross domestic product. For comparison, the report cites a Center for Strategic and International Studies report that estimated the cost of malicious cyber activities against U.S. entities at $107 billion in 2013, 0.64% of GDP that year.

BlockFi Raises 1.55M in Seed Funding (Finsmes), Rated: A

BlockFi, a New York-based fintech company whose first product is a loan for cryptoasset owners, raised $1.55m in seed funding.

Backers included ConsenSys Ventures, Kenetic Capital, PJC, SoFi, Purple Arch Ventures and Lumenary.

The 2018 World’s Most Innovative Companies (Fast Company), Rated: A

03 Square

For extending the benefits of banking

19 Social Capital

For putting values into its ventures

26 Kakao Bank

For marrying social messaging with banking

31 Paytm

For pioneering the cashless economy

42 Stripe

For writing the new startup manual

47 CommonBond

For offering payback

‘Pinterest will get even bigger for us’ says fintech lender Elevate Credit (The Drum), Rated: A

Speaking to The Drum in the final instalment of a four-part video series with Falcon.io exploring social media strategies, she admitted that while it can be a challenge, using data to understand her audience’s wants and needs has helped her shape content which is likely to resonate.

Fox says she has been finding success on the unlikeliest of social media platforms – Pinterest.

“All our content is more lifestyle focused than finance focused,” she explained.

OpenClose Bolsters Software Integration and Support Teams (Send2Press), Rated: B

OpenClose, an industry-leading multi-channel loan origination system (LOS) and mortgage fintech provider, announced that it has added staff to its integration and customer support departments. The new hires will help enhance OpenClose’s existing software products, facilitate digital mortgage processes, produce fintech-level innovation and provide excellence in customer support. The company also recently added three senior software engineers to its development team.

3 Loans for Students You Should Avoid Like the Plague (Student Loan Hero), Rated: B

1. Payday loans

You usually have only a couple of weeks to repay the loan, and the typical APR is almost 400.00%, according to the Consumer Financial Protection Bureau. If you can’t pay it back and have to take out a new payday loan to pay off the first, you could end up stuck in a vicious cycle of predatory debt.

What you should try instead: payday alternative loan (PAL).

2. Auto title loans

The reality is these short-term loans also have three-digit APRs, and you typically have between 15 and 30 days to repay the loan.

What you should try instead: A short-term campus loan.

$20 / $2,000 = 1%
1% x 365 days = 3.65
3.65 / 60 = 6.08% APR

3. Cash advances

This type of loan isn’t as costly as a payday loan or an auto title loan, but it’s not ideal for two reasons:

  1. Credit cards charge a fee, typically 5% of the advance amount. So, if you withdraw $500, you’ll have to pay $25 upfront.
  2. There’s no grace period with cash advances, so interest starts accruing immediately.

What you should try instead: A 0% APR promotion. Some credit cards offer a 0% APR promotion on new purchases for a period.

United Kingdom

Funding Circle to launch two new mobile apps this year (P2P Finance News), Rated: AAA

The business lender, which currently only has an iPhone app for investors to access, monitor and manage their accounts, is now advertising for a global mobile apps product manager and for an Android developer.

Both positions are based in the UK.

“We have an ambitious roadmap for this year and want to launch two new apps (Android and iOS) for our investors,” the job advert on the Funding Circle website said.

LendInvest Announces Launch of Buy-to-Let Online Calculator for Intermediaries (Crowdfund Insider), Rated: AAA

On Tuesday, LendInvest announced the launch of its new buy-to-let (BTL) online calculator for intermediaries.

 

P2P business lending up 51% (Bridging&Commercial), Rated: A

The value of P2P business lending grew by 51% during 2017, according to new research from the British Business Bank (BBB).

The report also found that the value of SME asset finance deals was up 12%.

Although net bank lending volumes remained positive (£700m in 2017), it was weaker than in both 2016 (£3bn) and 2015 (£2bn).

The BBB found that there had been a significant increase in both the value and number of SME equity deals, up 79% and 12% respectively.

Online lenders and banks may operate as ‘joint ventures’ (P2P Finance News), Rated: A

ONLINE lending platforms may partner with banks to fund and market credit products in the future, even sharing the approval process and compliance, in one scenario outlined by global banking regulators.

A number of peer-to-peer lenders have already partnered with banks on a smaller scale. For example, Metro Bank has lent through Zopa’s platform and Santander has referred borrowers to Funding Circle. However, these tie-ups have not gone as far as the report’s scenario suggests in terms of becoming a joint venture.

Crowdfund sites ‘are not explaining the dangers’ (The Times), Rated: A

Square Pie, which started life as a stall in London’s Old Spitalfields Market, expanded with the help of a “pie bond” that promised 8% annual interest over four years. The bond was offered through one of Britain’s biggest crowdfunding platforms, Crowdcube.

A total of 324 investors signed up, lending more than £650,000 to fund Square Pie restaurants and its efforts to improve supermarket sales. Square Pie has gone into administration — the first failure of a business that issued a mini bond on a crowdfunding site.…

Crypto lending platform nears launch (AltFi), Rated: A

Lendingblock is one such business. The soon-to-launch platform is, in its founder Steve Swain’s words, “an open exchange for cryptocurrency loans”.

Lendingblock is in the middle of a three-stage Initial Coin Offering that will conclude in March. The first phase has already been completed, raising the equivalent of $500,000. The offering has a hard cap of $10m.

Number of farming building conversions falls 20 percent in a year (FarmingUK), Rated: B

The number of conversions of farm buildings into new homes dropped 20% in the last year, denting hopes that these conversions could help solve the rural housing crisis.

According to Lendy, one of Europe’s largest peer-to-peer lending platforms, only 1,511 agricultural-to-residential conversion applications were approved in 2016/17.

China

The New Year to Bring a New Flood of IPOs (CapitalWatch), Rated: A

Golden Bull Ltd., an online peer-to-peer lending platform in China, plans to offer up to $9 million in shares on Nasdaq under the ticker symbol “DNJR.” The Shanghai-based company, which was founded in 2015, provides borrowers access to short-term loans.
European Union

Finnest Expands Online Financing to Larger Corporations, Adds Institutional Investors (Crowdfund Insider), Rated: AAA

Finnest is an interesting online lender operating in the DACH countries. The peer to peer platform was launched to provide SME funding supported by individual investors but the company is now expanding by providing loans of €10 million and higher. Institutional investors such as insurance companies, funds, family offices and banks will now be able to invest in large SMEs on “FinnestPro.”

Why it’s OK that the majority of consumers don’t know about Open Banking – for now (AltFi), Rated: A

The new EU legislation on payment services – PSD2 – and the introduction of Open Banking in the UK seem to have passed the vast majority of people in the country by, according to an AltFi News article last month.

This referred to a report by Which saying that 92 per cent of consumers hadn’t even heard of Open Banking.

International

How Millennials are Moving Emerging Markets (Morningstar), Rated: AAA

Millennials in advanced economies have come under pressure in recent years, thanks to stagnating wages, rising house prices and escalating student debt. But an altogether different trend is taking place in many emerging markets where millennials are seeing their prospects rapidly improve. This in turn is creating an investment opportunity, as millennials in these countries are becoming hugely influential on the prospects for emerging market equities.

Millennials will account for half of the global workforce by 2020, meaning they will be one of the most influential groups in shaping the economy and society, including consumption habits, policy and how companies may want to market and brand themselves. They are disrupting traditional industries and companies are having to adapt. This presents investment opportunities, but it also presents new investment risks.

Latest ICO Updates on VLR Token – Valorem Foundation ICO is LIVE! (TechBullion), Rated: A

Based on ERC-20, the multilayered cryptocurrency platform will host a marketplace that allows developmental phases. The first phase focuses on micro loans (small loans), rent payments, student loans and peer-to-peer payment processing.

As trust grows on the platform, phase 2 will be implemented to cater to sales distribution, global small business investing and global commercial and residential real estate crowdfunding while the third stage will serve charity and insurance. The final phase will be dedicated to maintenance and future developments that may include additional currency adoption, feature adding etc.

Valorem (VLR) is the token offered. The exchange rate stands at 1 ETH= 1000 VLR. There is a total supply of 200 million tokens of which 150 million are available during the ICO and 50 million will be kept in reserve. Valorem will not be mined.

Wealth managers must go digital (Raconteur), Rated: B

People born between roughly 1982 and 2002 are set to receive the biggest inheritance boom of any post-war generation. The Royal Bank of Canada (RBC) estimated the figure will be around $4 trillion in the UK, Canada and United States.

An Interview with Kirill Suslov – The CEO at Finom and TabTrader Founder (NewsBTC), Rated: B

NewsBTC: Now it seems that you have no experience with banking services yet. How do you plan to cover this area?

Now I can say we understand confidently how banking works and how it should work in the crypto industry. By 2020, we’re going to have a licensed bank and transform it into a crypto one with a network of crypto terminals.

A bit sooner, in 2018, we plan to release crypto e-wallets with linked debit cards. Miners will be able to use recently mined coins right away, transferring them to their wallets immediately. We’re also designing a platform for peer-to-peer lending.

Australia

Peer To Peer Lending Increasingly Popular In Australia (compare dinkum), Rated: AAA

Australian investors and borrowers are increasingly adopting peer to peer lending platforms according to the results of survey undertaken by ASIC. The results of the survey suggest that as much as $300 million of personal and business loans were underwritten by peer to peer lenders over the course of the last fiscal year. That represents a doubling in the amount that was lent on such platforms during the 2015/2016 financial year.

Why Australia needs a better system for credit scores (The Converstion), Rated: AAA

Australia’s credit rating system is failing both borrowers and lenders. Many borrowers are unaware of their own credit scores and our research shows they have trouble applying for suitable loans. Lenders are also struggling with too little information, causing them to extend loans to those they shouldn’t and restrict loans to worthy borrowers.

Upcoming changes to Australia’s credit reporting system could remedy these issues.

Under the new credit reporting regime, both lenders and borrowers will have access to more data, such as monthly payment histories on loans and credit cards.

More innovation ahead in mortgage lending

For higher-risk borrowers, novel techniques to assess credit risk (such as analysis of social media accounts) may be the answer to distinguish good borrowers from bad.

But prior experience from an over-reliance on credit scores in the United States shows that careful assessment of borrowers remains vital.

India

Refer to these fintech startups for range of medical loans (Business Standard), Rated: A

Among all the personal the medical loan is the most crucial one which is often required on an urgent basis by the applicants.

Recently a host of Financial technology(Fintech) and Non-financing related start-ups have been launched in providing a variety of medical to the clients.

Canada

They couldn’t get loans from their banks so turned to a legitimate-looking lender online (The Star), Rated: AAA

Unable to qualify for a loan from her bank, Johnston searched online for private lenders and found a website for what appeared to be a legitimate company calling itself North Clear Credit.

Everything about it — the variety of loans offered, the glowing testimonials, the company description — seemed professional. In fact, a customer who later reported North Clear Credit to police says an officer told her the website looked legitimate.

For Johnston and Mood, the terms were appealing. The money could be paid back monthly over five years at an interest rate substantially lower than what they would be charged elsewhere.

Johnston completed an online application and was approved for a $20,000 loan.

Within a few days, Johnston and Mood had lost $3,500, and two North Clear Credit “representatives” with whom Johnston had been corresponding had disappeared.

Blackchain Announces Private Placement (Stockhouse), Rated: A

Blackchain Solutions Inc. (the “Company” or “Blackchain”) (CSE: BIS), announces a private placement of up to 3,400,000 units at a price of $0.18 per unit, for gross proceeds of $612,000.  Each unit consists of one common share and one share purchase warrant.  Each warrant is exercisable at a price of $0.22 per share for a term of two years.

Proceeds generated from this financing will be used to initiate and support the filing of multiple patents and trademarks related to the Blackchain Crypto Credit Rating API and P2P Lending Platform.

Authors:

George Popescu
Allen Taylor

Wednesday May 10 2017, Daily News Digest

DealVector

News Comments Today’s main news: GDR partners with Equifax. OnDeck shares down 3.5%. iBan raises 110K GBP on Seedrs. Hexindai implements FICO. Bitbond receives 5M Euro debt commitment. KPMG acquires Matchi. RateSetter welcomes Aussie banking reforms. Today’s main analysis: KBRA assigned prelim ratings to SoFi Consumer Loan Program 2017-3. Today’s thought-provoking articles: Consumer privacy and fintech. CreditEase CEO discusses the future of […]

DealVector

News Comments

United States

United Kingdom

China

European Union

International

  • KPMG acquires Matchi. AT: “Matchi should be on any bank’s list of platforms to check if looking for a partnership with a fintech innovator.”
  • 7 ways fintech is changing the job market. AT: “Interesting read. Takeaway for alt lenders: If you want to hire great talent, look for people with excellent skills in other industries and ready to make a career change. Look at industries that are dying, diminishing in importance, or where great talent is being replaced by automation. Fintech skill sets are often developed in other places.”

Australia

Canada

News Summary

United States

Global Debt Registry Partners with Equifax (FINalternatives), Rated: AAA

Loan data specialist Global Debt Registry has partnered with global information solutions giant Equifax that will incorporate the company’s income data into its eValidation suite of verification tools for investors and warehouse lenders in the online lending space.

The new partnership will utilize Equifax’s anonymous income data to incorporate additional loan verification data and enable benchmarking and monitoring of income inflation over time, the company said in a statement.

“It’s critical for investors to have the assurance that when they invest in online lending, the loan data is independently, externally validated,” said Charlie Moore, president of GDR.

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2017-3 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to one class of notes issued by SoFi Consumer Loan Program 2017-3 LLC (“SCLP 2017-3”). This is a $530 million consumer loan ABS transaction that is closing on May 18, 2017.

This transaction represents SoFi Lending Corp.’s (“SoFi” or “the Company”) ninth rated securitization collateralized by a portfolio of unsecured consumer loans.

KBRA analyzed the transaction using the U.S. Consumer Loan ABS Rating Methodology published on March 28, 2017. KBRA’s consumer loan methodology incorporates an analysis of: (1) the underlying collateral pool, (2) the originator’s historical static pool data, segmented by characteristics including credit quality and product type, (3) the proposed capital structure for the transaction, (4) KBRA’s operational assessment of the originator and servicer and (5) the legal structure, transaction documents, and legal opinions.

OnDeck downgraded at Stifel; shares down 3.5% (Seeking Alpha), Rated: AAA

OnDeck Capital (ONDK -3.6%) managed to reverse big early losses and close flat yesterday despite a sizable earnings miss.

It’s moved back into the red today as Stifel’s John Davis downgrades to Hold from Buy, and cuts his price target to a Street-low $4.50 from $6.

Consumer Privacy Should Be Top-of-Mind for FinTech Firms to Avoid Scrutiny (BNA), Rated: AAA

With many people underserved by traditional lending institutions, including the close to 45 million adults in the U.S. who the Consumer Financial Protection Bureau estimates are “credit invisible” or have had past credit challenges, emerging FinTech lenders and online lending platforms (FinTech firms) have established themselves as valuable lending resources for both investors and consumers.

Undoubtedly, the digital footprints (both active and passive) left by consumers online offer valuable insights about those consumers’ preferences and behaviors, which can be useful to FinTech firms in assessing whether to extend credit. But the use of the Internet, which provides unprecedented access to an extraordinary amount of consumer information (some of which might be obtained without a consumer’s consent or knowledge), has raised significant privacy questions that FinTech firms might have to confront in order to overcome inevitable regulatory scrutiny.

In the context of marketplace lending, for example, which can include peer-to-peer lending as well as funding through institutional investors, hedge funds, and other financial institutions, market analysts estimate significant growth in loan origination volumes as well as an expansion in the types of products being offered. The California Department of Business Oversight conducted a survey of marketplace lenders and found that marketplace lenders provided over $13 billion in financing to consumers in 2014, having only provided less than $2 billion in 2010.

FinTech firms should be aware of potential risks about the types of alternative data they collect and the means through which they obtain that data. As the National Consumer Law Center has warned, “the devil is in the details” as the use of alternative data can potentially raise a number of significant legal issues, most notably fair lending and privacy concerns.

Gathering information from social networking systems, in particular, can provide significant information about a consumer’s interests and preferences, as well as the consumer’s location and travel history. While Internet users can furnish actively some of this information through entry of data into a system, a significant amount of information also can be gathered passively through cookies and the tracking of user IP addresses.

With the regulatory uncertainty surrounding the use of alternative data (caveating that regulatory priorities may shift under the current administration of President Trump), FinTech firms should consider carefully assessing what data they are collecting and maintaining to ensure that they are complying with current consumer privacy regulations.

Lending Club and MPL – One Year On from Renaud Laplanche’s Ouster (Lend Academy), Rated: A

Today, I thought it would be useful to take a step back and reflect on what we have learned in the past year.

  1. The industry is bigger than one person – the industry did not fall apart because of his departure.
  2. Investors still need yield and borrowers still like installment loans – The main premise for the rise of marketplace lending is still very much in play today. It is no secret that the growth of the industry over the past five years has been driven by institutional investors seeking yield. Lending Club shared in their quarterly earnings report last week that not only are the banks back investing in loans but they are doing so at record levels.On the borrower side there has been no slowdown in demand.
  3. Banks and marketplace lenders are important partners
  4. Compliance can be a selling tool – The sense I had is that compliance was viewed as a necessary burden and not something that could be a sales tool. That changed a year ago and now an investment in compliance has been viewed as essential.
  5. Finance is just as (perhaps more) important as technology when it comes to fintech – The narrative of marketplace lending has often been about the cost savings and customer experience improvements that can be made through advanced technology. I have seen many presentations that talked about how the legacy technology of banks are causing such inefficiencies and that fintech companies can solve this with better technology. All that may well be true but the bottom line we have learned is that in the lending business we should be focused on finance first. If you get that wrong the greatest technology in the world will not matter.

How technology mitigated a crisis in student loan ABS (American Banker), Rated: A

These programs slow the rate of repayment on Federal Family Education Loans, putting the bonds they back at risk of technical default if the securities fail to pay off at maturity. When Moody’s Investors Service and Fitch Ratings raised the alarm early in 2015, eventually putting some $100 billion of bonds under review for downgrade, the market sold off heavily. New issuance ground to a halt.

Yet Navient and Nelnet, the two largest student loan servicers, avoided downgrades on some $18 billion of FFELP bonds. They did so using a strategy that, at first, did not seem promising: extending the maturities of the bonds.

Their efforts were aided by DealVector, an online registry of asset ownership and messaging platform, which helped the two servicers identify holders and collect votes. Over the past year, the two servicers have sent about 165 tranches out for consent; some 60% of those were successful, and about 10% are still in process. The total original face value of tranches passed to date exceeds $18 billion.

Like other kinds of financial assets, FFELP bonds are held “in street name” by a brokerage firm, bank, or dealer on behalf of a purchaser, obscuring their true ownership. This isn’t just a problem for consent solicitations; it also imposes large costs on determining an appropriate price for a security, forming creditor classes, and many other events requiring communication among deal participants.

Real Estate Lender Zeus CrowdFunding Offers Industry’s First Loyalty Program (BusinessWire), Rated: A

Zeus CrowdFunding, the fastest real estate crowdfunding site in America, will offer borrowers a new incentive unmatched in the rapidly growing financial sector: the real estate crowdfunding industry’s first loyalty program. Repeat borrowers with the company can borrow up to 80 percent of a property’s after-repair value (ARV).

The program is called LoyaltyZ, and its mechanics are simple. On a borrower’s first loan with Zeus CrowdFunding, they’re eligible to receive up to 75 percent loan-to-value (LTV) of his or her approved project’s ARV. With each loan that they finish paying back to Zeus CrowdFunding, the borrower will receive one more point on their LTV on their next loan—up to 80 percent of the ARV. On a borrower’s second loan from Zeus CrowdFunding, for example, he or she is eligible to borrow up to 76 percent of the ARV; on his or her third loan, up to 77 percent, and so on. Beginning with his or her sixth loan, a repeat borrower can borrow up to 80 percent of the ARV on every loan.

Zeus CrowdFunding Founder and Chief Acceleration Officer Steven Kaufman says that LoyaltyZ was designed for real estate borrowers interested in completing multiple projects as quickly as possible. No additional sign-up or commitment is required of them.

Fintech Firms Primary Targets for Cybercrime Attacks (Think Advisor), Rated: A

Fintech firms are prime targets for cyberattacks, according to research revealing 130 million fraud attacks detected in just a 90-day period with the growth in attacks outpacing transaction growth by 50%.

Data revealed 50% more cybercrime attacks originating from all of Europe than U.S., the single most attacked nation, and increasing cyberattacks from South America.

The Q1 2017 Cybercrime Report also revealed that attack vectors and patterns are more evolved and malicious, including:

  • Remote access Trojans, which contain a strong footprint in the financial services industry.
  • Identity-spoofing attacks target fintech firms through peer-to-peer loans, global remittance and potential loopholes in new and emerging platforms. ThreatMetrix research showed an 80% increase in digital wallet transactions year-on-year as well as a 180% increase in associated bot attacks, typically used to mass test identity credentials.

According to ThreatMetrix, fraudsters use bots to mass test identity credentials and infiltrate trusted user accounts. New attack trends disclose fraudsters targeting emerging and fintech industries, which they view as more vulnerable to attack.

Read the report on cybercrime here.

Auto Loan Portfolio Marketplace with Automated Decisioning (BusinessWire), Rated: A

defi SOLUTIONS announces the launch of defi EXCHANGE, a secure, online portfolio marketplace where sellers of auto loan portfolios can access multiple buyers and manage the entire sales process. defi EXCHANGE improves efficiencies and profitability by automating and enhancing processes, revolutionizing the way auto loan portfolios are bought and sold.

With defi EXCHANGE, buyers no longer need to build their bulk deal evaluation outside their lending platform in spreadsheets and with manual processes that require extra data scrutiny and attention. Sellers no longer need to provide sensitive consumer data to many potential buyers and then follow up manually. defi EXCHANGE eliminates processing inefficiencies and allows for the complete evaluation and pricing provided by a Loan Origination System.

defi EXCHANGE resulted from the purchase of SellYourBulk.com, the first-ever auto loan marketplace that began operations in 2015.

IBM’s Watson ‘is a joke,’ says Social Capital CEO Palihapitiya (CNBC), Rated: A

IBM isn’t at the forefront of artificial intelligence, Social Capital CEO and founder Chamath Palihapitiya told CNBC on Monday, and he certainly isn’t a fan of IBM’s Watson.

“The companies that are advancing machine learning and AI don’t brand it with some nominally specious name that’s named after a Sherlock Holmes character.”

Digital Banking Inspiration from FinTech Disruptors (Silvercloud), Rated: A

Peer-to-peer payment systems like Venmo gained traction amongst the millennial generation and are beginning to make their way to the broader consumer population as banks consider the appeal in this convenient, paper-free payment approach.

Startups like Branch.co, ZestFinance and MyBucks are using AI and machine learning to offer low-rate payday lending loans. By relying on data and algorithms, these startups believe they offer a faster, more accurate and unbiased way to determine a consumer’s credit worthiness and their corresponding interest rate. Similarly, by removing the loan officer from the equation, these FinTechs can save on costs and ensure a profit from their low rate loans.

The importance of embracing mobile technology is not new in the banking sector. But what is new is how certain FinTech startups like Moven are using the mobile platform to offer services that help consumers better manage their money. Moven, which is an online bank of sorts that works alongside traditional banks, is giving consumers insight into their spending habits — offering them tools to see where their money is going and how they can better prepare for the future. It’s all about transparency and putting the consumer in control of their financial health.

While the technology to create automated investment advice is not new, access to it (by those who are not wealth managers) is. It’s simpler, more accessible and cheaper for the consumer.

Witnessing the success of FinTech robo-advisory startups, and the unmet need they are filling within the market, banks have begun jumping into this market.

If You Can’t Beat ’Em, Join ’Em. Why Banks are Starting to Partner with FinTechs.

Today there are more than 2,000 FinTech start-ups as compared to 2015 when there were only 800. This is why many banks and credit unions have changed their approach; instead of competing with the FinTechs, they are trying to partner with them.

At SilverCloud, we are helping banks and credit unions do just that — give their customers and members the ability to access all the information they need through digital banking channels without ever having to pick up the phone. We are helping banks and credit unions evolve with the demands of customers by providing an engaging digital experience that lowers support costs and drives more revenue through a better experience for the customer and member.

FIN Opposes Elements of CHOICE Act (Crowdfund Insider), Rated: A

Last week Financial Innovation Now (FIN), an alliance of companies which includes Fintech behemoths innovator Amazon, Apple, Google, Intuit and PayPal, spoke out against language used in the Financial CHOICE Act that would repeal debit swipe fee reform. In a letter penned by FIN Executive Director Brian Peters and addressed to US House of Representatives Speaker of the House Rep. Paul Ryan and Minority Leader Rep. Nancy Pelosi, FIN identifies debt reform’s promotion of payment innovation and tech advancement, identifying that “lower debit fees and improved routing choice have meaningfully spurred competition and technological development. Payment innovators are building on this opportunity to deliver real solutions to the marketplace, and more is on the way. This innovation should not be foreclosed.”

A Quick Guide to P2P Lending (IT Business Net), Rated: B

No system is perfect, and like any form of lending, P2P is not without its challenges. Many people are worried about the regulation of the P2P system, since it is fairly new, and laws have not come into effect to control the industry. Additionally, many Americans are worried about financial cyber security with all-online platforms, since data breaches are a frequent occurrence around the globe. Some of the biggest challenges, however, are on a smaller scale. Though P2P lending platforms don’t have the same requirements for borrowers that banks do, credit score can be an issue for some borrowers. It’s currently not possible to use a business credit score, meaning that poor personal credit could affect potential borrowers’ ability to get a loan at a decent interest rate.

Kingdom Trust Completes ‘Consider The Alternatives’ eBook Series (PR Web), Rated: B

Kingdom Trust, a leader in Self-Directed IRA, alternative asset and institutional custody solutions, recently completed its Consider the Alternatives eBook series. The collection of eBooks illustrates the investment potential of the four main alternative asset classes held on the firm’s platform: real estate, precious metals, private lending and private equity.

United Kingdom

iBAN Completes Seedrs Funding Round With More Than £110,000 in Funds (Crowdfund Insider), Rated: AAA

On Tuesday, iBAN completed its equity crowdfunding campaign on Seedrs with over £110,00 in funds.  The online lender was founded last year and launched the initiative in early January with a mission to raise £100,000 for its new crowdlending app, iBAN Wallet.

Interview with Managing Director of LandlordInvest (P2P Banking), Rated: A

LandlordInvest is a UK-based peer-to-peer lending platform for residential and commercial mortgages.

What are the three main advantages for investors?

  1. Security – I personally would not invest in unsecured loans given the risks and the potentially very lengthy enforcement process to reclaim part of the capital, if any at all.
  2. Returns – We offer returns of up to 12%, although we recently funded a loan with a rate of 19% to investors.
  3. Diversification

What are the three main advantages for borrowers?

  1. Manual underwriting – For us, the most important part of our assessment is that the borrower has a verifiable track-record and that the security is enforceable in the event of the default.
  2. Speed – we recently assessed a loan, had it fully funded and completed in two days.
  3. Online application with a simple online control panel

You recently launched an IFISA product. How has the investor uptake been so far and was it a big advantage to be in the forefront of approved providers?

The demand for our IFISA has been good. IFISA account holders, although only around 20% of the total registered investors, account for 50% of all funds on the platform. As such, IFISA account holders usually deposit more than non-IFISA account holders and also invest more.

What was the biggest challenge in launching LandlordInvest and what have been challenges since?

The biggest challenge has been operating under a “real” P2P model, i.e. no pre-funding of loans.

Which marketing channels do you use to attract investors and borrowers?

We use a multichannel approach including, establishing good relations with the press, having an interactive presence on various forums and blogs, affiliate marketing programs and social media presence.

I hear you are planning a secondary market? Will that work with premium and discounts or at par? What other features do you plan to roll out this year?

We are indeed developing a secondary market and expect to launch it in the beginning of May this year. Investors will only be able to sell loan or loan parts at par. Investors will also be able to sell parts of loans.

£266 bln of SME Turnover Delayed by Late Supplier Payments (Crowdfund Insider), Rated: A

The growth prospects of SMEs are being potentially stalled due to late payments, according to new research of over 1,000 SMEs commissioned by Crossflow Payments, the Fintech platform delivering supply chain finance solutions.

Keypoints from the research:

  • £266 billion is held up as 15% of SME annual turnover is subject to late payment
  • Over half (55%) of SMEs who receive payment late for invoices admit payment is regularly late by ten days or more, as a quarter (23%) of SMEs cite late payment problem
  • 3.4 million jobs could be created by solving the late payment problem, as two in three (63%)
  • SMEs would hire up to five new members of staff if their working capital improved
  • Businesses experiencing Brexit payment crunch, as one in ten (10%) SMEs have also witnessed worsening in payment terms since 2016 EU Referendum
China

CEO Of Chinese Fintech Firm Creditease On The Future Of P2P Lending In China (Forbes), Rated: AAA

Sara Hsu: Do you think that P2P [peer to peer lending] firms like yours are helping to make China’s financial system more market-based?

Ning Tang: The bigger picture is that P2P and fintech help the financial system to become more comprehensive. Fintech helps make the financial system more comprehensive, and helps make bank services more efficient.

Hsu: Many P2P companies have failed. What are some of the risks that P2P companies face?

Tang: There are three major risks. One is the platform itself. Is it legit? Is it legal? In many cases, you see fraud. The second risk is on the borrower, the credit quality side. Even if it’s a legit market place, if it cannot assess risk, it will not be sustainable. The third risk is on the lending side—is the source of capital sustainable?

Hsu: What is the impact of regulations on the industry?

Tang: Our experience is that it will make the industry more stable, healthier, and in the coming 10-20 years, it will be a much better industry.

Hsu: Do you advise other P2P firms in terms of credit risk?

Tang: In terms of pooling data together, we are partners. We made it possible for other market place lenders and new finance companies to access our data.

Hexindai Implements FICO’s Decision Engine (PR Newswire), Rated: AAA

Hexindai Inc. (“Hexindai” or “the Company”), a fast-growing consumer lending marketplace in China, today announced that it has entered into an agreement with Fair Isaac Corporation’s (FICO) to implement its decision rules management solution, BLAZE ADVISOR.  Implementation of this decision engine will allow the Company to automate the loan origination approval process, greatly shorten the decision-making time, and lower operational risks, all of which should help drive the Company’s risk management to a higher level. The Company expects to launch the system in the fourth quarter of this year.

European Union

Bitcoin lending platform Bitbond gets €5M debt commitment to boost loans (Crypto Ninjas), Rated: AAA

Bitcoin SME marketplace loan platform Bitbond today announced that it received a commitment from Obotritia Capital to fund loans worth €5 million. Additionally, Obotritia invested an undisclosed amount of equity in acquiring a stake in Bitbond.

With the debt commitment, SME loans from European prime borrowers will be funded instantaneously on Bitbond. This will reduce the time it takes for business owners to apply and receive a loan to 30 minutes.

Over 1,700 loans worth €1.4 million were originated through Bitbond since its launch in 2013. 90,000 users from 120 countries registered with the service to date.

International

KPMG acquires Matchi, global fintech innovation and matchmaking platform (Crossroads Today), Rated: AAA

KPMG International has announced the acquisition of Matchi, a leading global fintech innovation and matchmaking platform that connects financial institutions, including banks and insurance companies, with leading-edge financial services technology solutions and companies worldwide.

The Matchi platform includes more than 700 curated fintech solutions and a database of more than 2,500 fintech companies that financial institutions can work with to apply innovative fintech capabilities to solving their business problems and pursuing new market opportunities.

Fintech companies and solutions are reviewed and undergo a curation process in order to qualify to appear on KPMG’s innovative Matchi platform. Financial institutions are able to search for a specific company or solution, or they can use the platform’s proprietary “Innovation Challenge” capability to present specific problem statements to the global fintech market and receive recommendations on solutions from Fintech innovators.  In this way, financial institutions are able to access and unlock the leading edge technology and deep customer insight of the world’s best fintech firms for their own operations.

Since its inception in 2013, Matchi has connected more than 100 leading banks and insurance companies with fintech innovations, including solutions in next generation payments, regtech, blockchain and P2P insurance.

7 Ways Fintech Is Changing The Job Market (Huffington Post), Rated: A

Fintech grew 11 percent in 2016 making it a $17.4 billion industry.

The revised Payment Services Directive (PSD2) in Europe takes effect in 2018. PSD2 enables users to allow third parties access to bank accounts.

  1. Remote work becoming more viable – Due to the perks of working remotely, many professionals have also opted to become independent contractors over regular employment.
  2. More payment options for employees – There are now even a variety of ways to get paid due to the rise of payment services and digital currencies. Some companies now offer wages in Bitcoin as an alternative to traditional currencies. Some freelancers based in countries where cross-border payments are difficult even take gift cards as payment.
  3. Fintech-empowered rewards and benefits – Aside from digital currencies, the growth of brand loyalty cards also now gives employers options to reward staff.
  4. New technical skills required
  5. Soft skills are increasingly important
  6. More job cuts in traditional institutions likely – Last year, Bank of America laid off 8,400 jobs as the bank invests more in digital initiatives. Brick-and-mortar banks branches even face closure as online and mobile banking grow. In addition, major developments in artificial intelligence and machine learning now allow for the automation of tasks across business functions. Chatbots are now being used to function as front liners in sales and support. Robo-advisors also challenge the competence of human financial advisers. Job cuts are inevitable as these technologies mature.
  7. More opportunities with startups – Those who are displaced from traditional institutions may look into retooling and transitioning to fintech ventures instead. Fintech is a growth industry and there are a variety of segments to venture into. Currently, most fintech ventures are in payments, investments, lending, and personal finance though others are already working on insurance and foreign exchange.
Australia

RateSetter welcomes Australian banking reforms (P2P Finance News), Rated: AAA

RATESETTER’S Australian division has welcomed the country’s banking reforms unveiled in the Federal Budget on Tuesday.

Changes imposed in the major fiscal event include a bumper levy on the country’s biggest banks, an “open banking” scheme to give customers greater access to their banking data and measures to boost competition and accountability in the sector.

The Productivity Commission, an independent review and advisory body created by the Australian government, published its recommendations for banking reforms on Monday ahead of the Federal Budget. The organisation suggested that banks build APIs to enable data sharing with customers.

Canada

Flexiti Financial Appoints COO, CRO to Growing Executive Team (Sys-Con Media), Rated: A

Flexiti Financial, a leading provider of point-of-sale (POS) financing and payment technology for retailers, today announced the appointment of Jerome Peeters as Chief Operating Officer (COO) and Colin Franks as Chief Risk Officer (CRO) to its senior executive team. Both positions are newly created and come at a critical time for Flexiti Financial as the company continues to experience rapid growth in the consumer financing space.

Mr. Peeters joins Flexiti Financial from B2B Bank, where he served as Vice-President, Operations and Client Services. Prior to this, he spent four years at Sears Canada in a series of progressive senior marketing and operational roles within Sears Financial Services and the broader company. Before joining Sears, Mr. Peeters was Senior Director, Marketing and Change Management at CIBC, supporting the President’s Choice Financial business.

Mr. Franks was most recently Chief Risk Officer, Canadian Credit Cards at JP Morgan Chase where he managed Risk across several retail partners including Sears, Amazon and Best Buy. Before joining JP Morgan Chase, he spent over nine years at MBNA managing all aspects of the Risk lifecycle and eventually becoming Director of Strategic and Risk Planning.

Authors:

George Popescu
Allen Taylor