An Overview of African Alternative Lending

African alternative finance

The majority of the African population is underserved and unserved when it comes to banking services. Therefore, a new crop of fintech startups are thriving in Africa by developing innovative products to accommodate the needs of the community. Accenture estimates that over one-third of mainstream financial services revenue is at risk due to disruption in […]

African alternative finance

The majority of the African population is underserved and unserved when it comes to banking services. Therefore, a new crop of fintech startups are thriving in Africa by developing innovative products to accommodate the needs of the community.

Accenture estimates that over one-third of mainstream financial services revenue is at risk due to disruption in the industry from fintech.

Africa: The Land of Opportunity

According to Disrupt Africa’s Finnovating for Africa Report, there has been a boom in fintech startups since 2015. About 301 startups were tracked, and the majority of them were set up in the last two years. They’ve collectively raised around $93 million since 2015.

The reason for this exuberance is smartphone adoption. South Africa and Kenya are the fastest growing smartphone markets in the world. As per 2015 research statistics, 88% of Africans didn’t have a bank account, but they did have smartphones. In 2015, 183 million people in Africa had a mobile wallet. That was 3 times the number of digital wallet users in the U.S. and expanding at 3 times the annual growth rate. If this trajectory continues, every African will have a mobile wallet by 2020. Numbers here clearly suggest that fintech startups have a huge opportunity staring at them.

Potential for Home Grown Peer-to-Peer Platforms

As per the Africa and Middle East Alternative Finance Benchmarking Report, Kenya and South Africa are leading the P2P business lending market in Africa. But a noteworthy point here is that 90% of online alternative lending originated from platforms headquartered outside of Africa.

Source: d/p2p-lending-potential-africa/

The third largest alt-lending model in Africa was P2P business lending, which experienced astronomical growth from a modest $2 million in 2014 to $14 million in 2015. In 2015, Kenya and South Africa were the market leaders, garnering $16.7 million and $15 million, respectively.

“(Source) The East Africa region has the largest market share of the African alternative finance market. In 2015, East Africa accounted for 41% of total African market share, while West Africa accounted for 24% and Southern Africa accounted for 19%.”

Source: d/p2p-lending-potential-africa/

Since the market is still in a nascent stage, there has been no regulatory policy for the alternative finance industry. But positive efforts have been made in recent times to develop a regulatory ecosystem that will help in developing this budding industry in the region.

The Alternative Lending Leaders in Africa

Leading alternative lenders in Africa include:

  • Aella Credit – Started in 2015 by Akin (Akinola) J, Aella Credit’s headquarters is in Mountain View, California. The firm provides instant credit solutions that eliminates the hassle of standard loan applications and enables employees to borrow at competitive and fair rates through their employers.  Company offices are located in the United States and Nigeria. They raised a paltry $150,000 as seed capital but have gone on to raise an additional $1 million. Aella Credit disbursed over $1 million in loans with a 0% default rate to about 1,100 borrowers in the course of its soft launch.
  • Branch – Branch was launched in 2015 by Daniel Jung, Matt Flannery, and Random Bares. They raised over $11 million in various funding rounds. Branch eliminates the challenges of getting a loan by using the data on borrowers’ phones to create a credit score. It encrypts the data, thus ensuring complete privacy. Branch is a for-profit socially-conscious company based in San Francisco and Nairobi.
Source: Branch
  • KiaKia – Founded in 2016 by Chiemeziem Anyadike, Olajide Abiola, and Olajide Abiola, KiaKia is headquartered in Abuja, Federal Capital Territory, Nigeria. Utilizing machine learning, big-data, predictive analytics, digital forensics, and social collateral as part of its proprietary algorithm for credit scoring and risk assessment, the company provides real-time access to consumer and SME capital to underbanked Africans. Loans offer interest as low as ₦10K – ₦200K at 0.80%, durations ranging from 7-30 days, and no collateral. It has managed to raise $50,000 in funding.
  • Microcred Group – Microcred was created in 2005 by Arnaud Ventura with the support of Positive Planet and a number of institutional investors. Its headquarters are in Paris, Ile-de-France, France. A leading digital finance player for financial inclusion in Africa & China, Microcred offers financial services to emerging client segments, particularly the unbanked with a focus on micro & SMEs. The company operates in Madagascar, Senegal, Nigeria, Ivory Coast, Mali, Zimbabwe, Burkina Faso, Tunisia, and China. The group has raised over € 99 million in various rounds of funding.
  • Musoni – Founded in 2009, Musoni is headquartered in Amsterdam. Musoni BV is a social enterprise that establishes best-practice microfinance institutions and uses technology to lower costs, reduce risk, and improve efficiency. In 2009, Musoni set up the first cashless Microfinance Institution (MFI) in the world using mobile payments for all transactions. Since then, Musoni Kenya has disbursed close to 50,000 loans to micro entrepreneurs with a total value of $12 million. In 2011, Musoni won the award for ‘most innovative use of technology’ at the Global Microfinance Achievement Awards in Geneva.
  • RainFin – RainFin was launched in 2012 by Hannes Van Der Merwe and Sean Emery. Headquartered in Somerset West, South Africa, RainFin was South Africa’s first lending marketplace. It pioneered a viable alternative for quality borrowers looking for access to finance and lenders looking for returns that are higher than fixed deposits or the stock market. It offers loans ranging from 6-24 months and at an APR starting from 10.25%.
  • FarmDrive – Founded in 2014 by Peris Nyaboe and Rita Kimani, FarmDrive is headquartered in Nairobi, Kenya. This firm is a social enterprise that connects unbanked and underserved smallholder farmers to credit, while helping financial institutions to cost effectively increase their agricultural loan portfolios.

Apart from the above-mentioned lenders, there are a few more who are trying to make their mark in the African market, such Merchant Capital, Lydia.co, and many more.

Conclusion

Africa is not a homogeneous market. It is imperative for alternative lending startups to understand the different cultural nuances so they can develop products that have utility. As the region continues its socioeconomic upliftment, more people will need access to financial services. This makes Africa an exciting market for alternative lending in years to come.

Author:

Written by Heena Dhir.

Tuesday July 11 2017, Daily News Digest

cumulative volume asset class securitizations

News Comments Today’s main news: CFPB bans banks from barring class action suits. Ballard Spahr’s response. Seedrs, Nutmeg partner with Fidor Bank on fintech marketplace. China Rapid Finance facilitates 20M cumulative loans. Auxmoney passes half-billion Euro mark. Today’s main analysis: Lend Academy looks at PeerIQ’s securitization report. Today’s thought-provoking articles: Which advisers do robos threaten? Global and regional M&A report. Faircent […]

cumulative volume asset class securitizations

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News Summary

United States

CFPB bans mandatory arbitration clauses, allows class action against banks (Housingwire), Rated: AAA

The Consumer Financial Protection Bureau revealed its new rule to ban companies from using mandatory arbitration clauses, allowing consumers to participate in class action lawsuits.

The new rule mainly pertains to consumer financial products like credit cards and bank accounts that have arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing.

However, the new rule is not applicable to mortgage finance.

So for who the rule does apply to, according to the CFPB, it applies to the major markets for consumer financial products and services overseen by the bureau, including those that lend money, store money, and move or exchange money.

Under the rule, companies can still include arbitration clauses in their contracts, but companies subject to the rule may not use arbitration clauses to stop consumers from being part of a group action.

CFPB issues final rule prohibiting class action waivers in consumer arbitration agreements; Ballard Spahr to hold July 20 webinar (Consumer Finance Monitor), Rated: AAA

The CFPB announced today that it has issued a final rule that prohibits covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action with respect to the covered consumer financial product or service.

On July 20, 2017, from 12 p.m. to 1 p.m. ET., Ballard Spahr attorneys will hold a webinar: The CFPB’s Final Rule Prohibiting Class Action Waivers: What You Need to Know.  The webinar registration form is available here.

Our analysis of the CFPB’s proposed rule and arbitration study found that the CFPB’s own data confirmed that arbitration is a faster, less expensive, and far more effective way for consumers to resolve disputes with companies than class action litigation.  The CFPB’s study showed that consumers who prevailed in an individual arbitration recovered an average of $5,389.  By contrast, the study showed that the average class action settlement for consumers who received cash payments was only $32.35.  And those consumers often had to wait as long as two years to receive the payment.  Class counsel, however, recovered a staggering $424,495,451.

Consumers who prevailed in individual arbitration thus received 166 times as much as the average putative class member.

The final rule will take effect 60 days after publication in the Federal Register and will apply to agreements entered into more than 180 days after that.

Ballard Spahr’s Comment on Arbitration Rule (Ballard Spahr), Rated: A

The rule is expected to cost the roughly 53,000 financial services companies who currently use arbitration agreements between $2.62 billion and $5.23 billion over the next five years to defend an additional 6,042 class actions that will be brought by plaintiffs. The CFPB expects those numbers to be repeated every five years after that.

CFPB’s long-awaited arbitration rule may be a short-lived victory for consumers (LA Times), Rated: A

It’s all but certain that Republican lawmakers in control of the House and Senate will move quickly to overturn the rule as part of their ongoing efforts to cripple the consumer-watchdog agency and create a more business-friendly regulatory landscape.

PeerIQ Reports on Q2 2017 Marketplace Lending Securitizations (Lend Academy), Rated: AAA

Q2 2017 was no exception with nine securitizations taking place totaling $3 billion, a 76% growth over the second quarter of 2016. This is in line with Q1 2017 where issuance was the same, but there were only seven deals. Total issuance is now $21.9 billion across 92 deals.

Other highlights provided by PeerIQ include:

  • Multi-seller club deals and self-sponsored deals have emerged at several leading platforms.
  • Dealer and rating agency participation continues to intensify.
  • New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization.
  • Delinquency rates have continued to increase across several verticals—such as subprime auto, student, and personal loans—due to exposure to riskier borrowers, a re-leveraging of consumer balance sheets, “loan stacking,” and shifting payment priority trends.
  • Initial pricing is near record tight levels.


Millennial Money Study (Fully Vested), Rated: AAA

Are Millennials really so different than their Boomer and X’er counterparts?

Given that even the oldest Millennial is a Digital Native—potentially more connected than any prior generation in history— how does this inform their financial lives? What is their relationship to money? Their relationship to earning and saving? To legacy and innovative banking products? Do they prefer “cloud banking” (banks without physical branches or ATM’s) to “terra banks” (brick and m ortar ? ltraditional branches)?

Of course, any generational cohort that is so unwieldy in size contains a multitude of opinions and approaches—in fact, Millennials are now the largest living generation, according to Pew. In this survey, we show that there are substantive differences between the mindsets of the youngest (20–24) and oldest (30–35) Millennials.

Q: Which institutions do you trust the most?

  • Among the four institutions we queried, Big Tech was the most trusted at 34%.
  • The government is the next most trusted at 25%.
  • The press is only trusted by 21% of those polled.
  • Coming in at last is the Big Banks at 20%.

Q: What institutions do you trust the least?

  • The press and the government are in a tie for least trusted at 34%, with 41% of our youngest Millennials distrusting the press.
  • Big Banks are only trusted by 24% of those surveyed.
  • Big Tech is only found to be “least trustworthy” by 8% of our sample.

Read the full report here.

Millennial Men Trust Trump on Finance; Women Don’t (BusinessWire), Rated: A

  • Millennials between 18 and 22 years of age say the Great Recession did not impact them, while those at the other end of the age bracket very greatly felt, and continue to feel, negative impact.
  • Female Millennials are significantly less likely to take a credit card than their male counterparts.
  • Having a high income, being male, and living in a city are predictive of high levels of interest in cloud banking, or banks without physical branches.

Comptroller Concerned About Banks And FinTech Partnerships (PYMNTS), Rated: A

FinTech firms — which, in many cases, appeared on the landscape as banks’ competitors because of their ability to offer faster, easier access to financial services like online credit or money transfers — are now evolving into bank partners. That is a scenario, the OCC warns, that should have banks showing particular caution.

FinTech firms and their products are still new and require greater care by banks, according to the OCC’s warning, particularly when it comes to underwriting loans for consumers and small businesses.

Why Your Phone Will Be the Key to ATMs of the Future (WSJ), Rated: A

Over the past year, lenders such as Wells Fargo & Co., J.P. Morgan Chase & Co. and Bank of America Corp. have started to roll out new ATMs that can link to customers’ mobile devices. Customers will sign in through their phones, potentially using a fingerprint, and then transmit a code to the ATM.

Other banks have shared similar difficulties with how to approach biometric data. A survey by the U.K.’s University of Oxford andMastercard Inc. published in June found that while nine out of 10 bankers wanted to take advantage of biometrics, only about a third reported a good experience so far using the technology.

Meanwhile, the need for next-generation ATMs is urgent. For one, card fraud is rising despite new security measures such as chip-enabled cards. Fair Isaac Corp. , a credit-data provider, has said it detected a 70% uptick in compromised cards being used at ATMs and merchants in 2016.

In their quest to use smartphones for biometrics, banks are relying on processes that are already well established. A customer using a phone at an ATM would authenticate her identify, using, say, a fingerprint as is the case with Apple Inc.’s iPhone and Apple Pay.

That means banks wouldn’t have to protect treasure troves of genetic templates from hackers. This is because the biometric data would be stored on individual devices, not in a central location.

That approach does shift more of the security burden to the user.

Is Realty Mogul the Easiest Way to Invest in Commercial Real Estate? (DoughRoller), Rated: A

Is it possible to get involved in large-scale real estate projects without actually buying property outright on your own? Realty Mogul proves it is.

Realty Mogul has actually succeeded at financing the first crowdfunded hotel in the country. The company famously raised $1.5 million to build the Hard Rock Hotel in Palm Springs, California, easily selling out of its offered shares in the campaign.

Accredited, non-accredited, and institutional investors can all use the tool. It actually offers tailored tools and features for all three types of investors. Users can also choose to invest in real estate loans or equity investments.

To date, users have invested over $265 million through RealtyMogul.com. Investors have used this money to successfully finance more than 350 properties. The combined value of investments is over $700 million.

ETHLend.io White Paper – Democratizing Lending (Github), Rated: A

Abstract: ETHLend.io introduces decentralized lending on Ethereum network by using ERC-20 compatible tokens or Ethereum Name Service (ENS) domains as a collateral.

Read the white paper here.

Betterment Yearns to be Amazon of FAs. Does Amazon? (Financial Advisor IQ), Rated: A

The CEO of robo-advice pioneer Betterment believes his firm can turn into the Amazon of financial services, he tells Business Insider. But if Amazon itself entered the game, it could drastically alter the wealth management industry forever, financial planners tell InvestmentNews.

But Amazon itself could get into wealth management, considering that it’s already doing $1 billion in small business lending and brisk business in payments and credit cards, InvestmentNews writes.

Now, what if Amazon partnered with Betterment?

Nearly a Third of Millennials Say They’ve Used This App to Pay For Drugs (Fortune), Rated: A

Venmo’s a handy app for those times when you need to split a check or pay a buddy back a round of beers—but according to a new survey, some Venmo devotees are using it to settle a different kind of debt: the one they owe their drug dealers.

A survey of more than 1,200 millennials by student loan marketplace LendEDU found that nearly one-third of them admitted to using the payment app to buy drugs. Notably, that’s more than the 21% who said they’ve used the app for gambling purposes.

Daniel Gorfine Appointed as Director of CFTC’s Fintech Sandbox LabCFTC (Crowdfund Insider), Rated: A

U.S. Commodity Futures Trading Commission (CFTC) Acting Chairman J. Christopher Giancarlo has appointed Daniel Gorfine to serve as Director of LabCFTC and Chief Innovation Officer. Launched in May, LabCFTC is the CFTC’s sandbox type environment for Fintech innovation.

Gorfine is well known in the Fintech and alternative lending space due to his previous roles at both OnDeck and the Milken Institute. In this role, Gorfine will be responsible for coordinating with international regulatory bodies, other US regulators, and Capitol Hill to discuss best practices around implementing digital and agile regulatory frameworks and approaches for the CFTC.

LendingTree Announces New Chief Marketing Officer, Brad Wilson (Cision), Rated: B

LendingTree® (NASDAQ: TREE), the nation’s leading online loan marketplace, today announced that Brad Wilson has joined the company as its new Chief Marketing Officer. Effective immediately, Wilson will oversee LendingTree’s brand strategy, marketing operations and consumer engagement as the company continues to expand into new financial service categories.

United Kingdom

Seedrs & Nutmeg Partner with Fidor Bank on Fintech Marketplace (Crowdfund Insider), Rated: AAA

Seedrs has announced that it will be the sole equity finance provider in a new partnership with Fidor Bank, a challenger bank that launched in the UK back in 2015. Nutmeg, an online wealth manager, will also be joining Seedrs on Fidor’s new marketplace. The two platforms are the inaugural partners with additional partners expected to be announced in the coming months. The marketplace is expected to include a number of debt based peer-to-peer lending platforms as well.

Government urged to boost British Business Bank’s P2P resources (P2P Finance News), Rated: A

THE FEDERATION of Small Businesses (FSB) has called for the government to boost the resources it gives to the British Business Bank so firms can access better information on alternative sources of finance such as peer-to-peer lending.

The report warns that many small- and medium-sized enterprises (SMEs) remain unaware or wary of alternative finance options, with respondents expressing concerns that P2P lending has not been tested through the economic cycle and that the sector remains “worryingly unregulated.”

FinTech Disruption: TransferWise Case Study (The Market Mogul), Rated: A

Gone are the days when many assumed that big banks were the only options consumers had in banking, savings and foreign exchange.

They offer this fast service at a cheap price, with amounts to around £400, costing a flat fee of £2 after that, with a fee of 0.5% on the amount sent. This proves to be transparent, easy and straight-forward, especially as TransferWise communicates with users on every step of the process.

Automatic saving bots harness artificial intelligence, data science and algorithms to challenge traditional banking with what many consider inflexible, untailored, and rather boring personal finance.

Millennials are at ease; they can simply open Facebook to manage their finances, or sit back and let the machines save for them.

For example, there are a number of neo-banks and challenger banks who directly challenge the larger banks.

Monzo bank, for example, offers this new banking outlook. It offers instant balance updates and notification on spending for transparency, with handy insights, such as why a transaction was declined.

Mergermarket Group rebrands as ‘Acuris’ (BusinessWire), Rated: A

Mergermarket Group, the provider of business intelligence and research for fixed income, transactions, infrastructure, compliance and equities, today announced that it has re-launched under the brand name Acuris.

Folk2Folk launches “locaI” ISA (Business Cornwall), Rated: A

Folk2Folk, Peer-to-Peer lending platform for local and rural business today announces the launch of its Innovative Finance ISA (IFISA), giving investors the opportunity to support British businesses within their local area whilst earning tax-free interest on their Folk2Folk loans.

Launch of AlgoMe Set to Disrupt Asset Management and Fintech (Cision), Rated: B

AlgoMe, the London-based start-up using intelligent technology for career development and job placement, has announced its official launch today. AlgoMe is a unique and compelling proposition for professionals and companies. It is designed with the user in mind, specifically the Asset Management and Fintech professional and company.

China

China Rapid Finance: 20 Million in Cumulative Loans Facilitated (Crowdfund Insider), Rated: AAA

China Rapid Finance announced on Monday it has exceeded 20 million cumulative loans facilitated since its marketplace lending platform launch. According to the lender, this new milestone demonstrates accelerating the growth of its consumer marketplace due to the fact that the number of facilitated loans has nearly doubled within the past six months from 10.7 million cumulative loans as of the end of 2016.

The news of the 20 million cumulative loan facilitated milestone comes less than two months after China Rapid Finance released its unaudited financial results for the first quarter of 2017, which revealed the following:

  • Total gross billings on transaction and service fees: Increased by 13.1% to US$16.8 million from US$14.8 million in the prior year period.
  • Gross billings from consumption loans: Increased by 336.8% to US$6.7 million in the first quarter of 2017 from US$1.5 million in the prior year period. 
  • Gross billings from lifestyle loans: Totaled to US$10.1 million in the first quarter of 2017, as compared with US$13.3 million in the prior year period. 

China Rapid Finance Exceeds 20 Million Cumulative Loan Milestone (PR Newswire), Rated: A

This milestone demonstrates accelerating growth of China Rapid Finance’s consumer lending marketplace, as the total number of facilitated loans has nearly doubled within only the past six months from 10.7 million cumulative loans as of the end of 2016. On a year-over-year basis, second quarter facilitated loans jumped by over 350% to more than 5 million, up from approximately 1.1 million loans in the same quarter of last year.

China Rapid Finance also continues to achieve a high rate of customer retention. Approximately 73% of borrowers on its marketplace were repeat borrowers as of March 31, 2017. The Company expects that its lower cost of acquiring borrowers, higher customer retention rate, and larger loan sizes for repeat customers will contribute to its long-term sustainable growth.

China’s estimated population of 500 million EMMA, who have no credit histories and substantial difficulty borrowing money from traditional banks, constitutes one of the world’s largest untapped consumer credit market opportunities.

European Union

German Consumer Lender Auxmoney Passes the Half-Billion-Euro Mark (Crowdfund Insider), Rated: AAA

German online consumer lending marketplace auxmoney announced that it has crossed a new milestone: the marketplace has granted more than 70,000 loans worth more than €500 million in cumulated volume.

Source: Crowdfund Insider

Moneypark Buys Rival Fintech (FiNews), Rated: B

Moneypark has agreed to buy DL Conseils en financement immobilier (DL), based in Lausanne, the company said in a statement today.

Moneypark’s owner, Helvetia insurance company, financed the acquisition.

Moneypark didn’t say how much it paid for Lausanne-based DL, which has been active as a business for ten years.

International

Which advisers profits are under threat from robo-advice? (FT Adviser), Rated: AAA

The highest-margin part of the financial advice business is safe from being carried out by automated services because customers value the personal touch most in these areas, a global survey has suggested.

These include creating a comprehensive financial plan, where 64 per cent thought human participation was beneficial, buying a pension, where 61 per cent thought it was beneficial, and looking to reduce a tax bill, where 58 per cent felt personal was better.

However, those advisers who focus more on fund and stock-picking face a greater threat from the march of robo-advice.

Despite perceptions that Millennials, or so-called ‘digital natives’ were less interested in interacting with people, more than half of those in this age group agreed with putting personal customer service over tech  – 53 per cent versus 65 per cent for the Baby Boomer generation.

Among the 60 per cent who believe that technology can’t replace personalised customer service, the belief is held more strongly by investors in the US and Europe, where 76 per cent and 64 per cent respectively agreed, than in Asia Pacific, where just 52 per cent agreed.

Women were more likely to agree, with 65 per cent of women agreeing that robots cannot replace advisers, against 55 per cent of men.

Global and regional M&A: H1 2017 (Mergermarket), Rated: AAA

Global M&A in the first half of 2017 has seen a 8.4% increase by value despite 1,117 fewer deals on the same period last year. H1 2017 recorded US$ 1.49tn across 8,052 deals, compared to US$ 1.38tn with 9,169 deals. Companies have been looking at ‘future-proofing’ in the wake of rapid changes to technology and politics to keep ahead of rivals. There have been 17 megadeals (> US$ 10bn) announced since the beginning of the year, versus 14 such deals in H1 2016.

As faith in the market continues to grow, European M&A has surged ahead, securing a 32.3% share of the global value. Both the US (US$ 602.6bn, 2,446 deals) and Asia Pacific (exc. Japan) (US$ 272.9bn, 1,585 deals) saw their share drop to 40.4% and 18.3% from 42.8% and 21.3% respectively. Following political uncertainty across the continent earlier in the year, European activity rose by 28.7% in Q2 to US$ 271.2bn (1,450 deals) compared to Q1 2017 (US$ 210.7bn, 1,641 deals). With 3,091 announcements in H1 2017, dealmakers generated a substantial US$ 481.9bn-worth of deals in Europe representing a 30.1% increase on the same point in 2016 (US$ 370.5bn 3,732 deals).

See the full report here.

A bizarre co-working scheme and the global rise of online real estate fraud (The Real Deal), Rated: A

An Australian in New York, Cindy, who like many other victims only spoke to The Real Deal on the condition that her name be changed, is one of more than a hundred investors from around the globe who lost their savings to what appears to be a bizarre fraud.

In reality, however, the space, along with other Bar Works locations in Manhattan, Brooklyn, San Francisco, Las Vegas, Miami and Istanbul, looks to have served as a front for Renwick Robert Haddow, a British career fraudster. Through a labyrinth of agents and websites, of emails and social media ads, Haddow and his associates orchestrated a global fraud scheme, sources said.

In the world of scams, Bar Works is relatively small. But it is a perfect example of why real estate investment fraud is on the rise around the globe, bolstered by the spread of e-commerce and social media, the lack of an international enforcement authority, the complex nature of development projects, and investors’ thirst for outsized returns.

For Ruth*, a British retiree, it began with a “very slick” Facebook ad by an investment agency called Heron Global Partners.

Prosecutors claim he raised more than $36 million from Bar Works investors and wired $16 million to foreign bank accounts that were likely tied to him or his associates. They also allege he ran a separate scheme, Bitcoin Store, that promised high returns from investments in the virtual currency.

Endeavor Company, NovoPayment, Takes Major Global Fintech Honor (Crossroads Today), Rated: B

NovoPayment, a leading financial technology service provider and member of the Endeavor network, has earned the honor of the 2017 PayAwards Best in Category in the Outstanding White-Label Platform classification. PayAwards has conferred the most prestigious recognition of excellence in payments technology worldwide for 11 years. The awards are presented annually by Paybefore, whose publications are the leading source of industry information for payments executives.

Australia

As temperatures dip and winter energy bills soar, Australian homeowners are borrowing an average of $13,230 to make their homes more energy efficient according to an analysis of thousands of RateSetter’s personal loan customers. The peer-to-peer lender says that almost one in five (18%) home improvement loans are now taken out for green renovations that will reduce their energy bills.

The analysis of RateSetter data also shows that amongst all renovators, 89% see the use of energy efficient and environmentally friendly options as important or somewhat important to their project; selecting options such as energy efficient lighting, alternative power sources and low toxicity products in their renovation.

RateSetter’s survey of loan customers also found that around four in ten (41%) current home improvement borrowers indicated that they would make additional green changes to their home over the next 12 months.

Fintech companies are unlikely to completely replace the more conventional sectors of the financial services industry as they are mostly inexperienced in financial sector operations, according to a CFA report.

The report also found that blockchain technology would bring the most significant change to the financial services industry at 40 per cent, followed by robo-advisers (22 per cent), mobile payment (19 per cent), P2P lending (eight per cent), crowdfunding (seven per cent), and other (three per cent).

Fintechs pose disintermediation threat (Financial Standard), Rated: A

The latest CFA Institute report shows fintechs specialising in blockchain, robo-advice, mobile payments and peer-to-peer lending have the highest potential to disintermediate the financial services industry.

CFA Society Sydney president Anthony Serhan said innovation in these areas will likely disrupt financial institutions together with artificial intelligence, big data and cyber security – albeit with “limited discussion.”

India

Clocking an average of Rs 3 crore a month in lending, says Faircent’s CEO (Moneycontrol), Rated: AAA

In an interview with Moneycontrol, Rajat Gandhi, CEO and Founder of peer-to-peer lender Faircent, said that lenders can analyse the credit risk of borrowers by looking at their bank statement, income tax filings and physical verification of the borrower at the residence and at the office.

“One loan does not get funded by one lender, we have a rule that no lender can fund more than 20 percent of any borrowers requirement,” Gandhi said.

Speaking about Faircent’s financial performance, Gandhi said that around Rs 20 crore worth of loans have been disbursed over the platform till now and they are clocking an average of Rs 3 crore a month in lending.

With funding from Chinese investors, LoanMeet is trying to build a loan book of Rs 100cr (YourStory), Rated: A

At present, LoanMeet provides ultra-short-term loans of (15, 20, and 30 days) to retailers to buy inventory and repay them. But while being purely in inventory financing, there are two verticals for distribution.

The first entails giving the loan directly to the retailer who buys inventory and repays the loan after selling the goods. The second model revolves around tying up with distributors from whom retailers procure their goods. This helps bring in even more retailers as consumers of loans.

LoanMeet has a retailer (consumer) app which allows businesses to upload their Aadhaar number, business registration proof, PAN number as well as bank statement for the last three months.

Asia

CB INSIGHTS, a private research company on the startup industry, has named Modalku to the Fintech 250, a group of emerging private companies working on groundbreaking financial technology.

Modalku, the pioneering fintech (financial technology) peer-to-peer lending company operating in Indonesia, Singapore, and Malaysia, is the only peer-to-peer lending company from Southeast Asia selected to be on the list.

Africa

Authors:

George Popescu
Allen Taylor

Wednesday April 19 2017, Daily News Digest

FinTech MENA

News Comments Today’s main news: SoFi raised new $105M fund.Landbay unveils March 2017 UK Rental Index.P2P-Banking launches IFISA comparison database.Personal loan applications surge in Australia. Today’s main analysis: Development of fintech in Hong Kong.Fintech startups in MENA raise $100M last decade. Today’s thought-provoking articles: OCC fintech plan uncertain as comptroller term expires.Goldman’s internal fintech revolution can’t […]

FinTech MENA

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MENA

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News Summary

United States

Online lender SoFi has a new $ 105 million fund for yield-hungry investors (CNBC), Rated: AAA

SoFi, the online lending start-up sporting a lofty $4.3 billion valuation, has just raised a $105 million fund to give outside investors another way to buy into the company’s loans.

In a regulatory filing Monday afternoon, SoFi Prime Income Fund is listed as the issuer of equity in a limited partnership. According to the filing, the fund has 33 investors that put in a minimum of $500,000 each.

Nino Fanlo, SoFi’s chief financial officer, said the fund is the first of its kind for SoFi and provides another avenue to raise capital for issuing loans. Returns after fees are expected to be in the low double digits, he said.

OCC Fintech Plan Faces Uncertainty as Comptroller Term Expires (Credit Union Times), Rated: AAA

As the term of Comptroller of the Currency Thomas Curry expires and with no replacement in sight, the OCC could be headed toward a showdown with Congress over the agency’s decision to issue special charters to fintech companies.

In March, the OCC published a draft supplement to its licensing manual, which contains existing regulations for chartering national banks.

And although Curry said the OCC will issue charters to fintech companies, his own future is in doubt. His term expired this month and President Trump has not nominated a replacement, although Joseph Otting, a former associate of Treasury Secretary Steven Mnuchin at OneWest Bank ,has been mentioned as a possible nominee.

Sens. Sherrod Brown (D-OH), ranking Democrat on the Senate Banking Committee and Jeff Merkley (D-OR) said earlier this year that authority to issue such charters must come from Congress.

Meanwhile, traditional banking and credit union trade groups are divided over the charter proposal.

Earlier this year, NAFCU said that the OCC must ensure that online lenders are subject to the same consumer protections and data standards as banks and credit unions.

The American Bankers Association has said it supports the concept of the OCC issuing fintech charters, but wanted it to ensure that companies meet the same standards as traditional banks.

For Goldman, the Fintech Revolution Can’t Come Soon Enough (NYT), Rated: A

Goldman Sachs’s internal technology revolution cannot come soon enough.

Goldman’s fledgling Main Street operation is a bright spot. With more than $115 billion in deposits, it’s already one of the top 25 banks in the United States by that measure. Marcus, as the online consumer-lending unit is called, is experiencing “demand more robust than we thought,” the unit’s boss, Harit Talwar, said recently.

Consumer lending can earn at least a 3 percent return on assets — triple what Goldman has been managing as a whole of late.

For now, lending through new web platforms remains a small industry, with just $40 billion of credit extended over a decade, according to Deloitte.

CREATING A BETTER TOMORROW (NYSE), Rated: A

Texas-based Elevate Credit (NYSE: ELVT), which recently held its IPO at the exchange, exists because of what it sees as an opportunity in the financial services market.

In between are working people, roughly 170 million residents of the U.S. and the U.K., whom Elevate refers to as “the New Middle Class.” These are people with low or no credit scores, who often have to resort to non-prime lenders in moments of personal or medical emergency.

Elevate offers three products. The first, called Rise, is an unsecured, online loan vehicle; Sunny is its U.K. counterpart, and Elastic is a line of credit issued by Kentucky-based Republic Bank, Member FDIC. While the company’s customers have credit scores typically in the 560 to 600 range, those with lower credit or no credit can also be approved, depending on what Elevate’s data analysis reveals about their reliability.

Elevate’s analytics platform, DORA, is home grown. It’s based on open-source software tools that enable model development and risk analytics. DORA inputs and outputs are monitored and evaluated to help ensure legal and regulatory compliance. Elevate’s IQ platform deploys business logic and algorithms. And driving the analytics and decision-making technology is the very human decision to create specific data sets, generated from sources that monitor non-prime customers.

The platforms draw on more than 10 different sources of consumer information, including the big three credit bureaus as well as other bureaus that specialize in non-prime customers. In addition, Elevate acquires data from LexisNexis, ID Analytics and other unique data sources to validate the applicant’s identity and to draw inferences about the applicant’s intent to repay. Elevate uses this data in ongoing tests to optimize its underwriting, to ensure that fraud and serious credit risks are more easily distinguished from acceptable risks.

In the last year, Elevate’s charge-off rates have remained steady, while its customer acquisition costs have dropped, says Rees.

Elevate also uses its nimble, data-driven underwriting model to reward its best customers. Borrowers who establish a history of on-time repayment, and who take advantage of online financial literacy tools and videos, will see their APRs drop over time. Currently, the most responsible Elevate customers pay APRs as low as 36 percent.

Is An OnDeck Acquisition On Deck? (PYMNTS), Rated: A

When OnDeck completed its IPO in 2009, it entered the public markets with a massive amount of buzz, ending the day with a share price north of $20 dollars and a valuation around $1.9 billion.

Two years out, and the banks’ lunch remains uneaten — because those alternative lenders like OnDeck have had a rather bumpy two years.  OnDeck’s share price is down 75 percent since its 2014 IPO — in the last 12 months the firm has shed 37 percent of its value.

Today OnDeck’s market cap stands at $330 million.

Marathon Partners Equity Management, LLC has owned 1.75 percent of OnDeck since the end of 2016 — and the activist investor is now pushing for a new direction, preferably one that involves a sale.

That letter apparently did not get quiet enough of a reaction from the board — OnDeck’s official response was that they “value dialog with their shareholders,” and so as of the end of last week, the campaign ramped up.

Whether or not very drastic changes are coming soon to OnDeck remains to be seen — the annual meeting for shareholders will likely be spirited.

Not Everyone Is Happy About Latest Fintech Charter Proposal (Corporate Counsel), Rated: A

Public comments are now available from companies, regulators, advocacy groups and individuals weighing in on the Office of the Comptroller of the Currency’s licensing manual draft supplement for special purpose national bank charters.

The OCC received only 17 total comments on its March 15 supplement for evaluating bank charter applications from financial technology companies, far from the 120 it received on the broader whitepaper Exploring Special Purpose National Bank Charters for Fintech Companies, which introduced the idea of the OCC granting fintech companies these bank charters back in December 2016.

“While many states have made admirable efforts to align their regulations with technological innovation, state laws by and large were drafted for a physical branch banking environment that did not envision online delivery of financial services,” wrote Robert Lavet, general counsel of San Francisco-based personal finance company Social Finance, or SoFi, in his comments to the OCC.

In her comments, personal lending company Oportun Inc.’s chief compliance officer Joan Aristei voiced no concerns with the financial inclusion standards. She wrote the guidance on this type of plan will “inform our discussions regarding how we can modify and enhance the efforts we have already undertaken,” adding that she “appreciates the OCC’s willingness to innovate and look beyond traditional measures of financial inclusion.”

New York State Department of Financial Services superintendent Maria Vullo called the OCC’s proposal for fintech charters a “hasty and misguided effort.” She said that regulation for the financial technology providers is better left to the states, not the OCC.

The Tax Implications of Real Estate Crowdfunding (Alpha Flow), Rated: A

The first thing to understand is that an equity investor in a syndication is actually a partner in partnership. Investments in syndications will generally be considered “passive” activities.

When combining all passive activities, if the investor has a net passive loss, then the remaining net loss is effectively “suspended” whereby they are carried forward to future years and subject again to the passive activity rules. If an investor has passive income then that is taxed at the taxpayer’s marginal tax rate.

In the subsequent tax year, any passive losses that carried over can offset passive income that is generated.

Crowdfunding syndications offer one additional special tax advantage and that is favorable long-term capital gains rates. When a property (apartment building, retail center, etc.) is acquired through a syndication and is held for longer than one year, the sale of the property would typically result in long-term capital gains. These gains are taxed at a rate of 15% (with certain exceptions). Any depreciation that was deducted on the property would be subject to tax rates not to exceed 25%.

MortgageHippo raises $ 2.25M to help lenders give you a mortgage online (Chicago Tribune), Rated: A

MortgageHippo, a mortgage-technology startup based in Chicago, has raised about $2.25 million in seed funding, the company announced Tuesday.

CMFG Ventures, based in Madison, Wis., led the $1.5 million round that closed last week, Saportas said. CMFG is the venture capital arm of CUNA Mutual Group, which sells insurance and investment products to credit unions. The investment closed MortgageHippo’s seed funding.

Inside Bond Street’s content marketing strategy (Tearsheet), Rated: A

Jones said the company is “passionate about building a brand,” which it does by creating editorial content. It has a blog that profiles business owners Bond Street serves across the country, like the guys behind the Two Hands cafes and restaurants or the women that launched Sky Ting Yoga in New York City; and an online magazine that looks at the cultural and economic impact of independent businesses in New York (celebrity restaurateur Daniel Boulud and artist Baron von Fancy are among many interviews that address the importance of supporting local businesses). It also has a podcast called the Nitty Gritty that features the entrepreneurs behind brands like Sweetgreen, charity:water, McNally Jackson and Smitten Ice Cream; and a series of city-specific resources for female entrepreneurs.

Jones declined to share Bond Street’s annual content marketing budget, but said the company has two dedicated employees working on content marketing, out of about 40 total employees.

Marketing has become expensive for online lenders because of the high cost of customer acquisition. Partnerships are an easy way to bring that cost down, Benton said. To date, Bond Street has partnered with WeWork to offer loans to member companies of the co-working space company; SMB-focused software companies like Booker and Front Desk to offer their clients discounted loans; and most recently, with NerdWallet, the comparison shopping site for credit cards and other financial services, to help provide small business owners with financing options.

Payix and Nortridge Software Announce Strategic Alliance (BusinessWire), Rated: B

Payix® and Nortridge Software announce they have formed a strategic alliance to help lenders connect with their borrowers and improve their ability to collect payments. The alliance allows Payix to offer real-time integration between its suite of collections tools and the Nortridge Loan System (NLS).

Payix’s collections tools include its intuitive, engaging and affordable mobile collections application, as well as web, interactive voice response (IVR), text, and collector portal applications. Nortridge clients can add the Payix solutions to their existing collections tools with virtually no IT work on their part and in just a few weeks’ time.

The Nortridge and Payix teams collaborated in the development of the seamless web services interface between the Nortridge Loan System and the Payix payment system, ensuring that transactions could be carried out in real-time and without interruption.

Payix’s collections tools are white-labelled to help lenders promote their own brands with their borrowers, and they were specifically designed for any size lender to use easily and affordably.

China Rapid Finance will be the Fifth Online Lender to IPO in the US (Lend Academy), Rated: B

In late March, 2017 we learned that Chinese online lender China Rapid Finance filed to go public, hoping to raise up to $100 million. They will list on the New York Stock Exchange under the ticker symbol XRF and will be the second Chinese online lender to go public in the United States.

Milbank Advises FinTech Lending Company College Ave Student Loans in Its $ 30 Million Capital Raise (Milbank), Rated: B

Milbank, Tweed, Hadley & McCloy LLP advised College Ave Student Loans on a $30 million capital raise.

The Milbank team was led by Corporate partner Roland Hlawaty with Corporate associate Joanne Luckey.

$ 3M Raised for Clarendon Park Apartments in Phoenix Through RealtyShares (Yahoo! Finance), Rated: B

RealtyShares, a leading online marketplace for real estate investing, today announced that its network of accredited investors has collectively funded a $3 million investment for the acquisition of Clarendon Park Apartments, a 138-unit multifamily property in Phoenix, Ariz.

The deal is sponsored by Rincon Partners, an Arizona-based owner and operator of multifamily properties focused primarily on the Southwestern United States. Rincon Partners intends to use the funds to rehabilitate and modernize the apartment interiors and amenities to potentially improve its position within the market.

The property is located in midtown Phoenix, between the city’s two largest employment corridors and close to shops, restaurants and newly developed amenities. The property itself features a swimming pool, spa, clubhouse and fitness center, as well as access to light rail within two blocks.

United Kingdom

Landbay Unveils March 2017 UK Rental Index (Crowdfund Insider), Rated: AAA

Last week, UK-based peer-to-peer lending platform Landbay released the March 2017 Rental Index. This report reveals details about the country’s rental market.

“Since March 2016, average rents in the UK have risen by 0.9% to £1,191. In England, rents were up 0.87% to £1,222; in Northern Ireland, they rose by 0.07% to £557; meanwhile in Scotland rents rose to £723 following annual growth of 1.25% and in Wales, the average rent is up 1.41% to £636. Average rents for one, two and three-bed properties hit £1,012, £1,152 and £1,321 respectively in March 2017.”

P2P-Banking Launches Database to Enable Investors to Compare IFISA Providers Easily (P2P-Banking), Rated: AAA

P2P-Banking launches a new IFISA database, that enables investors an easy comparison of offers by IFISA providers. UK taxpayers can invest up to 20,000 GBP per year tax-free in ISAs. This amount is per tax year, so a person could invest 20,000 GBP this tax year and invest 20,000 GBP in a different ISA next year. The Innovative Finance ISA, short IFISA, was introduced in 2016 with most offers becoming approved by HRMC only in the 2017/2018 tax year.

The new database of IFISA offers allows speedy selection and sorting to review IFISA products by different providers and then links to the provider’s website for in detail information. Investors can filter by interest rate, term, loan type, minimum investment amount, possibility of transfers in and out, flexible IFISA, bonus & cashback promotions and several other criteria.

Fintech synergy as challenger bank teams up with robo advice app (AltFi), Rated: A

Starling Bank is partnering with app-based wealth manager Moneybox for real-time savings.

Moneybox’s savings and investment services will be now offered by digital-only bank Starling to enable customers to easily open ISAs and round up their spending in real time.

The service will be available to Starling customers as early as the end of April.

The new service is made possible through Starling’s open APIs. The integration has two distinct features. Firstly, it allows customer data to be securely shared between the two apps, meaning transactions will appear within the Moneybox app in real time as customers spend.

Secondly, the integration with Starling means that customers will be able to set up round ups from their Starling account in a matter of seconds.

Starling Bank publicly launched its API and developer platform to enable external developers and technology companies to integrate with the banking app earlier in April, and Moneybox is the first to launch a live integration on this API.

CEO Stephen Findlay Comments on BondMason’s New SIPP Service (Crowdfund Insider), Rated: A

In response to growing demand from investors in search of better investment returns for their pensions, UK P2P service provider BondMason has launched a new Self-Invested Personal Pension (SIPP) service.

The new SIPP service offers a flexible, tax-efficient way to save for retirement and allows investors to access returns from a diverse set of approved P2P Lending opportunities. Investors can open with a lump sum from £5,000 and there is no tie-in – an investor can typically exit in full within 48 hours. The service also aims to allow SIPP administrators to easily and compliantly grant their clients access to returns from P2P Lending.

Social P2P venture hindered by wholesale crackdown (P2P Finance News), Rated: A

THE FOUNDER of ThinCats has said that the regulator’s clampdown on wholesale lending will affect projects that can be funded through his social peer-to-peer lending platform Community Chest.

Kevin Caley (pictured) launched the social enterprise last year and it funded its first loan in February 2017 for £130,000. The debt facility went to a local Birmingham finance company called ART Business Loans, which supports West Midlands enterprises.

But Caley says the Financial Conduct Authority (FCA)’s tighter restrictions on wholesale lending mean that loans like these will no longer be possible, as the money was lent to another lender.

ClearBank: a MSFT Azure B2B Fintech (Daily Fintech), Rated: A

A well kept secret of the UK B2B banking sector, is now public. Clear Bank, a clearing Bank in the UK, is ready to compete with the four UK clearing banks,

  • Barclays
  • HSBC
  • Lloyds
  • Royal Bank of Scotland (RBS).

Clear Bank is the fifth UK clearing bank and the only one that is pure B2B since it does not offer services direct to the consumer.

Back in the 60s there were 16 clearing banks in the UK. Consolidation in this part of transactional banking has left the UK currently with 4 clearing banks that process over 80 Trillion pounds annually worth of payments in the UK.

Clear Bank will be helping Challenger banks to access the payment system at the Bank of England level, at the same level as incumbents.

Clear Bank will help the 44 UK Building societies offer current account services in a cost effective way. Right now, only 2 out of the 44 offer such capabilities to their members due to prohibitive costs.

Clear Bank will boost indirectly retail banking by reducing the substantially processing costs, which will facilitate competition for incumbents in the UK.

Clear Bank will help Fintechs by providing Banking as a service through the Cloud at a very low cost. Clear Bank will be offering an API so that Fintechs can interconnect to the ClearBank Fabric.

UK Firms VC Funding Holds Steady Despite Brexit (PYMNTS), Rated: A

According to Venture Beat, U.K.-based startups raised $1.04 billion in venture capital (VC) during the first three months of 2017. That’s a slight decrease from the $1.17 billion raised during same period one year ago, but it’s above the amounts raised in each of the last three quarters.

The U.K. remains number one in Europe for VC raised, with Germany second at $779 million and France third at $665 million.

Peer-to-peer lending service Funding Circle helped push the U.K. into the number one spot, raising $97 million in VC funding and $43 million in debt funding during the first three months of 2017.

Which fintech stocks does Neil Woodford own? (The Motley Fool), Rated: A

The fintech — financial technology — sector has emerged rapidly over the last decade. The Confederation of British Industry expects it to be worth £300bn in the UK alone by 2020.

Given Neil Woodford’s long-prevailing dislike of the big banks, it’s perhaps not surprising that he’s attracted by the relatively simple business models and exciting investment opportunities in the fintech sector.

Woodford is invested in some unquoted fintech companies, such as RateSetter, a peer-to-peer lending platform, and Seedrs, which opens up venture capitalism “to anyone with an internet connection”. However, he also has two holdings that are listed on the stock market — and very interesting they are too.

P2P Global Investments (LSE: P2P) is a FTSE 250 firm with a market cap of around £700m.

VPC Specialty Lending Investments (LSE: VSL) is in the FTSE SmallCap index but is a decent-sized company with a market cap of around £290m. Its business is similar to P2P’s and like the FTSE 250 firm, considerable quantities of cash flow into shareholders’ pockets.

George Banco appoints RateSetter co-founder to board (Loantalk), Rated: A

Guarantor lender George Banco has appointed the co-founder of peer-to-peer platform RateSetter as a non-executive director.

Peter Behrens (pictured above) – who also serves as the chief operating officer at RateSetter – co-founded the platform in 2010, and has seen more than £1.8bn of loans facilitated through the company in this time.

Alternative funding options come into focus (Works Management), Rated: B

Alternative funding options will be a major theme at Business, Innovation, Technology and Efficiency (BITE) 2017 hosted by MHA Carpenter Box at the Amex Stadium, Brighton on Thursday 27 April.

Andy Davis (pictured), former editor of FT Weekend and author of the ‘Beyond the Banks’ report on alternative finance, will be one of the industry experts forming an ‘alternative funding panel’ at the free one-day conference, where he will share his expertise with local business leaders.

European Union

Why EU Passporting Is Vital For Britain’s Fintech Firms (Forbes), Rated: AAA

The impact on fintech could be significant, as an Emerging Payments Association (EPA) report Passport to the Future makes clear: “HM Treasury estimates the UK fintech market employs 60,000 people and is worth £6bn to the UK economy. Fintech is part of the UK’s financial services sector that employs 1.9 million people and contributes 10 per cent of the UK’s GDP. Payments represents over 40 per cent of financial services in revenue terms and in 2016, 40 per cent of all fintech investments were in payments companies, amounting to £10bn globally.”

In a recent survey of its members, the EPA found that 88 per cent of its members think that passporting rights are important or very important to their current businesses, while over 91 per cent think passporting is important or very important to the UK’s fintech sector and its continued growth.

As the EPA’s report states: “This could see the flight of some or part of the 5,500 licensed companies abroad and have a significantly negative impact on the UK economy.”

Alfa Finance Launches New P2P Lender DoFinance (Crowdfund Insider), Rated: A

Latvia based Alfa Finance Group has launched a new peer to peer lending platform named DoFinance.  The company stated it had invested €2 million to get the P2P lender up and running. The online lender is said to be available in all EU and EEA countries.

International

Simplex Partners with Beacon – Risk Magazine’s FinTech Start-Up of the Year (BusinessWire), Rated: A

Simplex Inc., one of Asia’s leading financial services technology firms, announced a strategic partnership with Risk Magazine’s FinTech start-up of the year, Beacon Platform, Inc.

The partnership combines Simplex’s expertise in implementing trading and risk management solutions with Beacon’s experience in building cross-asset trading and risk management platforms for industry leaders including Goldman Sachs, JP Morgan and Bank of America Merrill Lynch.

Australia

Personal loan applications surge as credit cards wane (The Sydney Morning Herald), Rated: AAA

Australians are shunning high interest credit cards and turning to personal loans for large purchases.

Driving the switch are tech-savvy consumers taking up loans from peer-to-peer (P2P) lenders, a new breed of online competitors to banks.

Credit card applications fell by almost 4 per cent in the March 2017 quarter compared with the same quarter last year, the latest report on consumer credit by credit bureau Equifax shows. That’s the biggest fall since September 2012 quarter.

Reserve Bank figures suggest that more frequent but lower value transactions are being made on credit cards.

One P2P lender is showing an interest rate on its website of 10.3 per cent on a $10,000 unsecured personal loan paid back over three years.

Banks would typically charge 13.02 per cent for a loan on the same terms, while credit cards are higher still – typically 14.15 per cent for a non-rewards credit card and 19.6 per cent for a rewards card, plus annual fees.

China

Development of Financial Technologies (Legislative Council Panel on Fiancial Affairs), Rated: AAA

This paper provides an update on the local financial technologies (Fintech) landscape and measures to support the development of the industry.

The number of Fintech start-ups operating in co-working spaces and incubator/accelerator programmes in Hong Kong increased by 60% between August 2015 (86) and August 2016 (138), according to Invest Hong Kong (InvestHK)’s Start-up Profiling Survey.

Hong Kong attracted about US$400 million of venture capital (VC) investment in Fintech companies during 2014-2016, lower than the Mainland and India (both of which are economies with huge domestic markets) but ahead of regional peers such as Australia, Japan and Singapore1 .

Universities such as The Chinese University of Hong Kong and The Hong Kong Polytechnic University will launch dedicated, publicly-funded firstyear first-degree and senior year programmes in Fintech starting from the 2017/18 academic year. Moreover, The University of Hong Kong’s School of Professional and Continuing Education has been offering a part-time, four-month programme, Executive Certificate in Internet Finance.

For payment services, the general public is increasingly receptive to new products and services, as Stored Value Facility (SVF) operators are launching new services while banks are rolling out new payment services (such as a note-issuing bank’s mobile App which enables cross-bank P2P fund transfer through mobile messaging). Building on the momentum from the introduction and development of various new payment channels in the market, the Government will strive to provide more convenient means for settling government bills and fees, such as making on-line credit card payment through digital wallets in mobile phones. HKMA will also work with the Government to explore with the industry ways of improving the payment infrastructure (such as introducing the Faster Payment System in 2018) and encouraging more standardisation in payment applications across various services providers, including the use of QR codes in streamlining the payment process, and facilitating the development of new electronic and mobile payment channels by the Government for various government services.

Read the full report here.

Alibaba’s Ant Financial Increases Bid for MoneyGram (Crowdfund Insider), Rated: A

Dallas based MoneyGram (NASDAQ:MGI), a global provider of money transfer services, has become quite popular. This past January, Alibaba’s Ant Financial subsidiary announced it had offered the firm $13.25 per share to acquire the company. The two companies had entered into a definitive agreement to merge.  Today, it appears that agreement was not quite as definitive as thought as Ant Financial has now increased the share offer to $18/share.

Last night, MoneyGram and Ant Financial announced they had updated the agreement in an effort to fend off a competing bid by Kansas based Euronet Worldwide.

Dianrong Announces New Financial Leadership Appointments (Crowdfund Insider), Rated: B

Chinese peer-to-peer lending platform, Dianrong, announced on Tuesday the following financial leadership changes, effective immediately: Xuxia Kuang, the lender’s CFO, has been named COO. Yawen Cui has joined Dianrong as the new CFO. Kuang and Cui will report to Dianrong founder and CEO Soul Htite.

MENA

‘Fintech startups in Middle East, North Africa raised $ 100m last decade’ (Venture Burn), Rated: AAA

Fintech startups in the Middle East and North Africa have raised $100-million over the last decade, yet 28% fail in their initial years, says a new report by business support organisation Wamda and online payment gateway Payfort.

The region was home to 105 fintech startups by the end of 2015 (see featured image), with half of these having been launched since 2012. In all 30 firms are situated in North Africa. The UAE leads with 30 fintech startups, followed by Egypt with 17 and Jordan and Lebanon with 15 each.

Just 10% of fintech startups in the region account for 43% of investments and employ 55% of the 1600 employees in the sector.

Africa

How to make sure your crowdfunding campaign is successful (Destiny Man), Rated: AAA

“The vast majority of the South African market activity – $13,8m – came from peer-to-peer consumer and business lending, with the remaining $1.2 million spread across microfinance, donation-based and reward-based crowdfunding,” according to a report published by the Cambridge Centre for Alternative Funding.

In order to reap the benefits of crowdfunding, it’s important to launch a great campaign. Patrick Schofield, CEO and founder of Thundafund, a crowdfunding platform that has helped several companies start or expand, says there are several things you can do to increase the chances of success for your business.

“Spend as much time on pre-campaigning planning as you would on your actual campaign. If you’re thinking of [running a campaign] for up to 45 days spend, 45 five days getting your ducks in a row,” he says.

Approaching journalists and key influencers will get you enough people who can make noise about what you’re doing.

‘Crowdfunding is the future’(Times Live), Rated: A

In an alternative funding benchmarking report by the UK’s Cambridge Centre for Alternative Finance, published last month, South Africa was identified as the potential leader in the growth of online and peer-to-peer lending models in Africa.

In 2015 South Africa represented 18% of the total African online alternative finance market, raising more than $15-million. Kenya was the only African country ahead of it, with $16.7-million raised. South Africa’s online alternative finance market focused more on business activity and less on charitable causes.

Local IT firm Khonology has partnered with the UK’s White Label Crowdfunding to develop bespoke crowdfunding platforms for entrepreneurs here.

Authors:

George Popescu
Allen Taylor

Tuesday March 21 2017, Daily News Digest

southeast asia fintech

News Comments Today’s main news: U.S. justice dept. seeks to restructure CFPB. LC increases borrower rates on riskiest loans. Goldman building robo-advisor. Funding Circle closes funding round, valued at $1B. Today’s main analysis: Southeast Asia Fintech deals hit new record. Today’s thought-provoking articles: Happy 1st birthday, Zopa Plus. First Lithuanian P2P lender. WeiyengX Fintech Review. United States U.S. justice department […]

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News Summary

United States

Justice Department Fires Salvo at Consumer Watchdog (WSJ), Rated: AAA

The Trump administration took aim at a consumer finance regulator created after the 2008 financial crisis, backing a legal effort to have the structure of the Obama-era agency declared unconstitutional.

The Justice Department, now under Trump administration leadership, filed court papers on Friday opposing the Consumer Financial Protection Bureau, an independent regulator, asking a federal appeals court to order the restructuring of the agency.

The CFPB is fighting to keep its current setup, which gives its director protection from political interference from the White House. The administration in February said that President Donald Trump believes the bureau as currently organized is unaccountable to the public.

The Justice Department said the CFPB’s structure creates separation-of-powers problems under the Constitution because the bureau director isn’t sufficiently answerable to the president.

Lending Club increases borrowing rates on riskiest loans (P2P Finance News), Rated: AAA

LENDING Club has made its largest borrowing rate increases on its riskiest loans, with further hikes expected in line with the US Federal Reserve.

The US peer-to-peer lender – the world’s largest with over £20bn of funds channelled to date – has increased the cost of borrowing most significantly for loans in the E, F and G grades, following interest rate hikes by the central bank.

Rival platform Prosper has increased borrowing rates at a “mild” pace in comparison and more evenly across risk grades, according US alternative lending research firm PeerIQ’s latest quarterly performance monitor.

Goldman building robo-adviser to give investment advice to the masses (Reuters), Rated: AAA

Goldman Sachs Group Inc (GS.N), known for advising the world’s richest and most powerful, is building a so-called robo-adviser geared to mass affluent customers, according to a job listing posted Monday on the bank’s website.

The robo platform would sit within the bank’s rapidly growing investment management division, according to the ad. The unit, which Goldman has been trying to build out in recent years to diversify its revenue, posted a record $1.38 trillion in assets under supervision at the end of 2016.

Goldman has for years grappled with how to tap into the mass affluent segment, broadly defined as those with less than $1 million in investable assets, without diluting the brand of its private wealth business which is considered a jewel within the bank, according to people familiar with the matter. Goldman’s U.S. private wealth business typically advises clients with an account size of around $50 million.

Citi FinTech CEO Yolande Piazza: We’re not too big to change (Tearsheet), Rated: A

You’ve been at Citi almost 30 years and now you’re leading Citi FinTech. How has “fintech” evolved?
There’s a common misconception that large banking organizations aren’t able to operate like a startup, that they don’t have that mentality, that they’re too big too change. The word fintech without a doubt applies to startups in the space but a lot of that is how you pull in these startup-type organizations with the big banks to create a set of financial services that are orientated to the customer.

What has that blend of different talent and experience done for your work culture?
We’ve spent a lot of time creating a nontraditional banking culture. We operate in a very agile manner with the product, development, design teams so they work together and are completely integrated. They do their work through stand-up meetings on a daily basis, we don’t have offices – I do not have an office, I sit on the floor. We celebrate failure – if someone makes a mistake they actually win prizes for sharing that, all they have to do is demonstrate they learned something from it – to really create an environment of creativity and ambition for the product and how we serve our product.

The Developer Hub also sort of brings those different talents together.
[The Developer Hub] actually covers 85 percent of the core services a customer performs. We wanted to expose many of our APIs to a much larger community, to be exposed to the services they’re working on and give them the opportunity to come to Citi to uncover and unveil where those hidden gems are, those additional opportunities.

Former Morgan Stanley COO Jim Rosenthal Joining OnDeck Board of Directors (PR Newswire), Rated: A

OnDeck® (NYSE: ONDK), the leader in online lending for small business, announced today that it will be adding Jim Rosenthal, the former chief operating officer of Morgan Stanley, to its board of directors, effective April 3, 2017.

During his tenure at Morgan Stanley, Rosenthal served in a variety of roles, including as COO of the company from 2011 to 2016 and as chairman and chief executive officer of Morgan Stanley’s approximately $130 billion national bank. In his role as COO, Mr. Rosenthal was responsible for overseeing firm-wide technology and operations, Morgan Stanley’s wealth management digital business, corporate strategy, re-engineering and expense management, technology company relations, and cybersecurity. He remains a senior advisor to Morgan Stanley.

Rosenthal has more than two decades of experience across a wide spectrum of financial services. He joined Morgan Stanley in March 2008 from the global real estate company, Tishman Speyer, where he served as chief financial officer. Prior to that, he worked at Lehman Brothers, serving as head of corporate strategy and execution and as a member of the firm’s management committee. Rosenthal began his career with McKinsey & Company, where he was a senior partner, specializing in financial institutions.

Podcast 94: Congressman Patrick McHenry (R-NC) (Lend Academy), Rated: A

In this podcast you will learn:

  • Why Congressman McHenry decided to enter politics.
  • The responsibilities of the House Financial Services Committee.
  • Why he is focused on fintech as part of his work in Congress.
  • Why entrepreneurship has been declining in small towns.
  • How fintech can help reverse this trend.
  • The legislation he is working on today to promote fintech innovation.
  • Details of his proposed Financial Services Innovation Act and why it is important.
  • Why fintech innovation has a decidedly British accent today.
  • Why regulators need to be pushed to adapt and change.
  • His thoughts on the OCC Fintech Charter and why he feels legislation will also be needed.
  • Where Congressman McHenry stands on the use of alternative data in lending.
  • What he thinks will be able to actually get done in the next four years regarding financial innovation.

Fintech banks and a rise in consumer authentication: Wepay’s Week in Payments (Wepay), Rated: B

Two developments, one in the US and one in the UK, signaled a potential shift in the banking world and Fintech.

Chris Skinner wrote about a new national bank charter in the US issued by the Office of the Comptroller of the Currency which opens the way for all kinds of organizations to try to set up banks, including big consumer brands like Walmart and Apple. Essentially they have just shown the way for these kinds of organizations (as well as payments companies like Square, WePay or Stripe) to apply for a banking license.

Meanwhile in the UK, Forbes writes about the launch of ClearBank, the first new clearing bank in the UK in over 250 years.

PYMNTS.com also has a research report out about how mobile technology may be able to help financial institutions with their AML (anti-money laundering) solutions.

United Kingdom

Funding Circle close further funding round, valued at billion (the investment observer), Rated: AAA

Investor interest in the peer-to-peer lending industry shows no sign of slowing; British site Funding Circle have just closed another round of funding, taking their total raise to $300 million.

Funding Circle recently closed another round of venture capital funding to the tune of $150 million, valuing the company at $1 billion. The new round was led by DST Global, BlackRock, and Temasek, a fund backed by the Singaporean government.

Happy 1st birthday Plus! (Zopa), Rated: AAA

A year to the month after we launched Plus, our higher return and higher risk investment offering, investors have lent out more than £100 million. That’s nearly 9,000 people investing on average £12,000.

Plus is performing in line with expectations. Individual investors will have different individual experiences, however, 73% of investors invested for an average of at least 6 months, with no loan sales, have achieved actual returns of at least 6% to date.

Classic cars, booze and planes: FCA gives investors in HNW Lending tax-free status (City A.M.), Rated: A

A peer-to-peer lender offering a high-net-worth pawnbroking service has been given the green light by regulators to market a specialist type of Isa to investors.

National IFA moves £253m to DFM after suitability review (Citywire), Rated: A

AIM-listed IFA Frenkel Topping has completed a suitability review which has seen £253 million of client assets transferred to its own in-house discretionary fund management (DFM) offering.

In May last year the national advice firm received discretionary permission from the Financial Conduct Authority (FCA), meaning it could transfer clients to its new investment company which acts as a DFM.

This review has seen £253 million of clients assets transferred to its in-house offering. The firm had £745 million of assets under advice at the end of 2016.

Lack of education hampering efforts to deliver more homes (Development Finance Today), Rated: A

It’s no secret that we aren’t building enough homes in this country.

There are a host of reasons for this, from an over reliance on large builders to a paucity of funding. The second-class status of property SMEs – compared to SMEs in other industries – is also a huge rod for housebuilders’ backs, and it’s an issue LendInvest has been keen to highlight.

But there is also a fundamental issue – often overlooked – which is serving to hamper efforts to deliver more homes. To quote Tony Blair: education, education, education.

That’s why last year LendInvest launched the Developer Academy, a two-day course for those with some property experience allowing them to hear from – and build contacts with – experts across everything from planning permission to marketing the finished properties. We have now held two separate academies in London, with further sessions planned this year: four in London and four across the regions. So far 50 prospective developers have benefitted from these courses.

European Union

First P2P Business Lender launches in Lithuania on Madiston’s Peer to Peer Lending software platform (PRWeb), Rated: AAA

With limited access to funding, small businesses in Lithuania have struggled to expand, limiting the growth of the economy. Recognising this, the Lithuanian government recently established the legislation needed to allow Peer to Peer Lenders to provide business finance loans and FinBee played an active role in its development.

Laimonas Noreika, CEO of FinBee, explained: “We were delighted to be the first P2P platform to receive our licence to help small businesses borrow to finance their growth. Our technology helped us to achieve this. When we first launched consumer lending, we chose Madiston’s software because it was ready to go with what we needed but also gave us the ability to add functionality as we grow. The first step in our expansion plan was to add business lending and the technology was there for us, Madiston has been a supportive partner throughout.”

Fintech And France’s Post-Brexit Allure (Forbes), Rated: A

It was announced today that Article 50 will be triggered on March 29th. I recently wrote about Berlin’s potential to become fintech capital of the world after Brexit, but with French officials in London scouting finance and technology companies, Paris could become the hotspot for startups.

Without passporting rights, many businesses may have to set up subsidiaries in other European countries, which is why last month, French senior lobbyists and politicians started to woo companies in the same way Nasrou is, according to Business Insider.

At the start of this year, French digital minister Axelle Lemaire did the same and in a recent interview with Business Insider, she highlighted how although British startup investment fell, investment in French technology has soared by 71% from January to September in 2016. “In the third quarter of 2016 alone, funding obtained by French startups reached €857 million ($921 million), double the amount invested in Germany and almost equaling the €919 million ($988 million) invested in the UK,” Lemaire said.

French fintech Lemon Way is going after Stripe in the e-commerce payments arena with the launch of the payments service across France, Germany, Spain, Italy and the Benelux region.

Real time electronic payments provider ACI Worldwide also announced at the end of last month that French company PSP would be targeting the SME market with the ACI PAY.ON Payments Gateway, with the goal of expanding internationally.

It is important to note how interesting all of this action is being taken so close to the time Brexit was in the process of being triggered.

Australia

New deal brings more technology to financial planners (Money Management), Rated: A

Financial compliance education and training programmes provider, Mentor Education has entered into an alliance with Suitebox in order to help financial planners become more ‘tech savvy’.

Stage 3 would provide an education portal available to students, the financial planning community and educators to promote and engage the development of new initiatives in financial services education.

China

WeiyengX Fintech Review (Crowdfund Insider), Rated: AAA

The highlights of the press conference included:

  • The central bank highly encourages and supports the development of Fintech. At the press conference, Governor Zhou Xiaochuan stressed that China has made great achievements on financial technology, and the central bank was actively working on digital currency and new technologies such as blockchain, which would promote the development of the whole finance market.

In particular, he emphasized that the development of technology would boost the payment industry by providing more payment channels.

UnionPay Launches Blockchain-Based Credit Integration and Sharing System

On March 8, China UnionPay Data Services and Gingkoo jointly launched a blockchain based credit integration and sharing system.

The system uses blockchain technology to improve inter-bank credit card points management, and it enables clients to redeem points across banks.

The system is built on Gingkoo’s Xingchain, which replaces the original credit card points management system.

CBRC to Regulate Micro-Credit Companies

China Banking Regulatory Commission (CBRC) is formulating new regulations to strengthen the supervision towards micro-credit companies.

NEXTDATA raises $10 million in Series A Funding from multiple investors

Big data company NEXTDATA has raised $10 million in Series A funding from Shunwei Capital, Crystal Stream Capital, Baidu Ventures. Previous investor 360.com also invested in this round.

The founder of NEXTDATA Tang Huijun said the fund would be used for product development, technological innovation, market development and talent introduction.

Auto Fintech Platform Daikuan Raises 20 Billion Yuan from Zhongtai Securities

On March 8, Auto Fintech platform Daikuan.com and Zhongtai Securities reached a strategic partnership. The two sides signed a strategic framework agreement involving 20 billion yuan, and they would jointly develop a batch of financing projects as asset securitization, bond issues, and structural financing.

Asia

Southeast Asia Fintech Deals Hit A New Record (CB Insights), Rated: AAA

In 2016, 831 investments went to VC-backed fintech startups, only slightly down from 2015′s record of 848 investments. And while overall investment pace slowed last year, Southeast Asia saw the greatest number of fintech deals to the region to-date.

Deals to venture-backed fintech companies in Southeast Asia — specifically Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam — rose 29% last year, from 55 in 2015 to 71 in 2016. Meanwhile, dollars fell 12%, from $177M in 2015 to $158M in 2016 as deal growth was largely driven by seed/angel stage investments.

In terms of funding dollars, 2016 averaged about $40M per quarter, down from $44M in 2015. The largest deal of 2016 went to Vietnam-based mobile payments platform MoMo, in a $28M Series B that included Goldman Sachs and Standard Chartered as investors. Other deals included a $17.5M investment to Thailand-based payments enabler Omise, a $2M investment to Singapore payments provide Coda Payments, and a $3M investment to Malaysia-based financial comparison startup Jirnexu.

 

Looking at deal share by country, over half of all Southeast Asian fintech deals went to Singapore-based companies, which is not especially surprising given the city-state’s position as a global financial hub.

Funding Societies, a P2P lending platform for small and medium enterprises, received one of the country’s larger 2016 rounds: a Q3’16 $7.5M Series A that included Sequoia Capital India and Alpha JWC Ventures as investors.

After Singapore, the Philippines took the next greatest share of deals at 14%.

 

Bank Negara to seek fintech ideas from the public (The Star), Rated: A

Bank Negara Malaysia plans to engage the public to get their ideas or wish list on what aspects of the financial services that can be improved using technology.

The bank’s Financial Technology Enabler Group (FTEG) chairman Aznan Abdul Aziz said it was initiating a call for participation known as “Fintech Hacks”.

Last year, Bank Negara issued the Financial Technology Regulatory Sandbox Framework for financial institutions and fintech players to experiment with new solutions in a live, contained environment within specified parameters and timeframes. The framework came into effect on Oct 18, 2016.

Africa

CiTi, FinTech Circle to launch ‘FinTech Academy Africa’ in SA (Ventureburn), Rated: A

The FinTech Academy Africa, a joint initiative by FinTech Circle and Cape Innovation and Technology Initiative (CiTi), will set to launch in SA on 24 and 25 April, in Johannesburg.

The academy is geared toward CEOs and the like who have a limited amount of time on their hands, but who still would like a deeper understanding of best practices in fintech.

Authors:

George Popescu
Allen Taylor

Monday March 13 2017, Daily News Digest

personal loan ABS pricing spreads

News Comments Today’s main news: AmEx lending pushes beyond credit cards. RateSetter releases performance statistic update. Yirendai presents new open tech platform. Today’s main analysis: Securitization spread analysis from PeerIQ Today’s thought-provoking articles: SoFi looks at pharmacy schools. P2P lending landscape in China. P2P lending takes hold in Africa. United States AmEx lending push goes beyond credit cards. GP:” […]

personal loan ABS pricing spreads

News Comments

United States

United Kingdom

China

Asia

Africa

News Summary

United States

AmEx’s Lending Push Goes Beyond Cards (WSJ), Rated: AAA

American Express Co. is pushing into the booming personal-loan business despite investor worries that an expanding roster of lenders may be getting into the game at too late a stage.

Such fears put AmEx executives on the defensive Wednesday at their annual investor day conference. Chief Executive Ken Chenault acknowledged the company has received questions about the timing of recent efforts to expand lending. These include through credit cards and expanding last year into personal loans—the first time the iconic card company has engaged in such lending.

But he said that AmEx is “very comfortable” because the initiative involves lending more to its existing card customers.

 

Online lenders have been using these loans to appeal to mostly creditworthy consumers who want to consolidate high-interest credit-card debt. Around three out of every five loans LendingClub has made since it began lending in 2007, for instance, went toward paying off higher-cost debt, according to data from the San Francisco-based company.

And there are plenty of credit-card customers to target. Total credit-card balances have grown to be just shy of $1 trillion, climbing steadily toward crisis-era levels. The Federal Reserve reported this week that balances in January were $995 billion.

SoFi takes a look at best-value pharmacy schools (Drug Store News), Rated: AAA

Lender and student loan refinancing company SoFi this week conducted a rundown of which pharmacy schools provide students the best bang for their buck by comparing which schools have the highest average salaries relative to their student debt, on average. It also looked at the pharmacy schools’ graduates have the highest average salaries and schools whose graduates have the highest amount of debt relative to their income.

The pharmacy school with the highest average salary was the University of California, San Francisco, which had an average salary of $145,297, which was 1.3 times the average $109,394 in debt students depart with. The University of the Pacific’s pharmacy school came in second, with an average salary of $137,639 and salary-debt ratio of 0.8. It was followed by Midwestern University – Glendale, whose graduates earn $133,867 on average; University of Southern California, with its average graduate salary of $133,328; and Harding University, with its average salary of $132,748. However, all four schools that followed the top slot had students with debt higher than their average salary, and three were below the average of all pharmacy schools.

ARCT 2017-1 as a “Cross-Over” Product between Near-Prime and Super-Prime Personal Loan ABS (PeerIQ), Rated: AAA

On the weighted-average adjusted basis, we observed flattening in the credit curve: the A tranche is 60 basis points tighter and the B tranche is 130 basis points wider than the corresponding tranches in non-prime deals (Exhibit 3). This flattening behavior is expected as the subordinate tranches on near-prime collaterals have heavier expected losses than that of prime collaterals. Comparing to the SCLP shelf, ARCT 2017-1 is priced about 40 basis points wider on the A tranche and 280 basis points wider on the B tranche. We believe that the “first-dollar” loss risk is relatively low for ARCT 2017-1 A class investors with a 0.83yr WAL.

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

REMAND DECISION IN MADDEN V. MIDLAND FUNDING RAISES QUESTIONS REGARDING CHOICE OF LAW CLAUSES IN CONSUMER LOAN AGREEMENTS (Pepper Hamilton LLP), Rated: A

On February 27, the U.S. District Court for the Southern District of New York issued a highly anticipated decision in Madden v. Midland Funding1 on remand from the U.S. Court of Appeals for the Second Circuit. The decision dashes industry hopes for a favorable ruling on the case’s choice of law issues that would blunt the impact of the Second Circuit’s 2015 conclusion that the National Bank Act (NBA) did not preempt plaintiff Madden’s state law usury claim. Just as importantly, however, the decision turns a spotlight on lenders’ ability to override state usury laws by relying on choice of law clauses in their loan agreements with consumers in certain states like New York.

In finding that New York’s criminal usury law constitutes a “fundamental public policy” of the state, the court cited the Eighth Circuit Court of Appeals’ decision in Electrical & Magneto Service Co. v. AMBAC International Corp. for the position that the “existence of a criminal provision ‘is significant because the legislature would not allow a criminal law to be bypassed by the mere existence a choice of law provision contained in a contract.’”

Pepper Points

  • The district court’s opinion should raise concern for all non-bank lenders because choice of law clauses are often relied upon in the industry as a means of overcoming more rigorous state usury restrictions.
  • As noted throughout the opinion, interpretations of state law by federal courts carry little weight as precedent.14 A future court would be free to disregard the district court’s interpretations of New York law and might arrive at a different conclusion regarding the applicability of the criminal usury cap to defaulted debt.
  • If NBA federal preemption had applied based on the assignment of plaintiff Madden’s loan to the defendants from a national bank, the choice of law issue would have been moot.
  • A future case involving bank model lending would likely have a different outcome, even within the Second Circuit, because the arguments in favor of federal preemption would be stronger than what exists in a case involving the purchase and assignment of defaulted debt due to the bank’s greater degree of ongoing involvement.

Increasing Small Business Units to Act as Building Blocks for Peer-to-Peer Lending Market (Digital Journal), Rated: A

The key trend likely to be adopted by leading players in the global peer-to-peer (P2P) lending market is to build strategic alliances to expand its small business loan divisions. For instance, Prosper Marketplace, Inc. joined hands with OnDeck and bought American Healthcare to improve its product portfolio. Similarly, LendingClub Corporation is also targeting startups by collaborating with trustworthy investors in the market.

Simplification of modes used for peer-to-peer lending such as improved online interfaces has augmented the peer-to-peer lending market in the recent years.

JPMorgan Chase to Acquire MCX ?FinTech Payments Technology for Chase Pay (IT Business Net), Rated: A

JPMorgan Chase (NYSE:JPM) has agreed to acquire MCXs payments technology to help expand Chase Pay, the mobile and digital wallet for Chase customers. MCX, a network of Americas largest merchants, was the premier launch partner for Chase Pay in October 2015. The transaction is expected to close in the coming weeks.

Participate in The 2017 Americas Alternative Finance Industry Survey (Orchard Platform), Rated: A

There’s still time to participate in The 2017 Americas Alternative Finance Industry Survey. The deadline is March, 15. Orchard believes that by participating in this high-profile and high-impact research, originators can help broaden and deepen coverage of our fast-changing industry and is supporting the survey as a key research partner for the second year.

Your platform will be prominently acknowledged and thanked in the report with logo displayed. Your data will only be analyzed and presented in aggregate format by country and model. No individual platform’s data is therefore divulged. After the survey is completed, data that you submit will be encrypted and stored safely to ensure continued anonymity and confidentiality.

The 2 Best P2P Lending Automation Tools For Investors (Forbes), Rated: A

What started as peer-to-peer has grown into a marketplace. The likes of JP Morgan and Citibank now account for over 65% of new capital.

Institutional involvement in the sector has made P2P investing highly competitive. Institutions use algorithms to select the best quality loans, snapping them up only seconds after being listed.

NSR Invest is a registered investment advisor that offers managed and self-directed accounts to P2P investors.

Investors can link their Lending Club, Prosper, and Funding Circle accounts to the website and have NSR invest for them. Depending on the NSR strategy chosen, users outperform the market by as much as 2.6% (average is 1.5%).

LendingRobot (LR) is another registered investment advisor offering fully automated P2P investing. Investors can link their Lending Club, Prosper, and Funding Circle accounts to LR. Like NSR, LR offers managed and self-directed accounts.

For managed accounts, investors can select their desired return levels that range from conservative to aggressive. Based on your selection, LR “cherry picks” suitable loans.

On average, LR users outperformed the market by 1.45% over the course of 2015–2016.

For self-directed accounts, users select loans based on criteria such as monthly income and loan purpose.

IHT Realty Seeks Crowdfunding for Jacksonville Multi-Family Deal (Globe Newswire), Rated: B

IHT Realty Crowdfunding announced on Thursday a new program that will offer investors a guaranteed six-month return regardless of how early the property sells.

Lenger Financial is offering a strong debt coverage ratio of 1.28 with an excellent after repair value (ARV) of 74 percent. The sponsor is projecting a gross annual income of $15,590 and a projected net operating income of $10,443.

Real estate crowdfunding exec is top HUD adviser (The Real Deal), Rated: B

Earlier this week, ProPublica published a list of more than 400 Trump administration officials working across the federal government’s major departments. The list includes a number of officials at the Department of Housing and Urban Development, such as its “Senior White House Advisor,” Maren Kasper. Kasper most recently served as a director at Roofstock, an Oakland-based investment platform for single-family rental homes.

Is a Bitcoin ETF a Good Investment? (Kiplinger), Rated: B

The Securities and Exchange Commission denied approval of the Winklevoss Bitcoin Trust ETF, an exchange-traded fund that would track the value of digital currency bitcoin. Friday’s highly anticipated decision came nearly four years – and a dozen amendments – after the fund was first proposed and delayed indefinitely making gaining access to the currency as easy as logging into your online brokerage account.

LendingTree Appoints J.D. Moriarty as Senior Vice President, Corporate Development (PR Newswire), Rated: B

LendingTree® (NASDAQ: TREE), the nation’s leading online loan marketplace, today announced that J.D. Moriarty will be joining the company as its Senior Vice President, Corporate Development, effective April, 2017.

In his new role, Moriarty will be responsible for business development and strategic acquisitions as the company continues to expand its footprint in the lending and financial technology industry.

United Kingdom

RateSetter Releases Performance Statistic Update (Crowdfund Insider), Rated: AAA

P2P lender RateSetter announced on Friday it has updated its performance statistics. According to the lending platform, a new set of fields on the Performance by year means investors may now view the amount lent by year, which is broken down by lending type.

PwC and Startupbootcamp chart fintech maturity (Finextra), Rated: A

In a new report, ‘The start-up view: a year in FinTech’, Startupbootcamp and PwC analyse application data from Startupbootcamp’s FinTech accelerator programme as well as the volume of deals in the UK FinTech market in 2016.

Startups are putting more emphasis on solving real customer problems using AI and machine learning.

There remains, however, a disconnect in the interest shown in this area by startups and investors, with the report showing that for many investors it is still too soon to invest in smarter faster machines. There remains, however, a disconnect in the interest shown in this area by startups and investors, with the report showing that for many investors it is still too soon to invest in smarter faster machines.

Despite Brexit, the UK should remain a global FinTech centre
UK based startups made up 34% of all applications to Startupbootcamp in 2016, up from 22% the year before, demonstrating the constant growth of innovation and wealth of talent in the UK.

Currencycloud lands M Series D (Bankless Times), Rated: A

Cross border payments platform Currencycloud has completed a £20 million ($25M) Series D round. New investor GV (née Google Ventures) joined existing investors Notion Capital, Sapphire Ventures, Rakuten FinTech Fund and Anthemis. The money will fund a global expansion.

British P2P startup lender secures 0 million worth of funds (The Technews), Rated: A

A peer-to-peer (P2P) startup based in the UK called the Fund Circle has successfully raised a capital of $100 million.

Funding Circle has successfully managed to lend over 2.5 billion pounds ($3.07mil) internationally in 2016. Currently, the company has offices located in San Francisco, Berlin, and the Netherlands. Moreover, the company has its largest market in the UK worth of $981mil.

Former bank CEO joins P2P lender (TheAdviser), Rated: A

Peer-to-peer lender RateSetter has appointed former ING Direct chief executive Vaughn Richtor to its Australian board of directors.

Mr Richtor has a wealth of experience in the banking sector, having served as the chief executive of ING Retail Banking Asia prior to becoming CEO of ING Direct.

UK PropTech Association discusses rise of technology (Development Finance Today), Rated: B

There is no ignoring the record number of proptech M&As and fundraising events seen in 2016 and this looks set to continue in 2017. Already, proptech funding activity in the UK alone has been astounding this year, with Purplebricks’ £50m raise to drive their international expansion the latest example. This comes on the back of three strong fundraises by proptech finance companies: LendInvest, Habito and Trussle.

In order to support this burgeoning sector, we launched the UK PropTech Association (UKPA) this month.

China

Yirendai Presents New Open Technology Platform at 2017 LendIt USA Conference (Crowdfund Insider), Rated: AAA

Yirendai (

Yirendai CEO on Peer-to-Peer Lending Landscape in China (Bloomberg), Rated: AAA

 

A brief look at the current state of the Chinese P2P lending industry (e27), Rated: A

Since 2007, peer-to-peer platforms (P2P) lending has mushroomed in China as a new source of fixed income for retail investors. Peer-to-peer lending is a new method of debt financing that allows people to borrow and lend money without a financial institution. Harnessing technology and big data, P2P platforms connect borrowers to investors faster and cheaper than any bank.

Last year, the country’s US$60 billion peer-to-peer lending sector was dogged by scandals and fraud due to loose oversight. This resulted in China’s authorities’ imposing new rules due to concerns about defaults and fraud among the nation’s 2,349 online lenders.

Right now, China is facing two extremes of P2P platforms going up and down: record-breaking funding rounds (Lufax US$10 billion) and record-breaking Ponzi schemes (Ezubao, US$7.6 billion).

Yirendai

The New York-listed firm, unlike its peers, has not only been expanding its business rapidly but also set its sights on disbursing loans worth 100 billion yuan (HK$ 112.8 billion) a year by 2020.

Dianrong

Just a few days ago, Dianrong made an official announcement that it is launching China’s first-ever blockchain platform, named ‘Chained Finance’ by joining efforts with FnConn, a subsidiary of Foxconn Technology Group.

Lufax

Lufax (陆金所) is the largest player in China and the third largest in the world. It is important to note that Lufax, formally known as Shanghai Lujiazui International Financial Asset Exchange, is 44% owned by financial conglomerate Ping An Insurance Group.

 

Asia

Investree on a Push to Expand Peer-to-Peer Lending Network (Jakarta Globe), Rated: A

Investree Radhika Jaya, a local startup providing a peer-to-peer lending marketplace, is looking to open representative offices in major Indonesian cities this year as part of a push to expand its lending by more than sixfold this year.

The company, which matches individual lenders with borrowers, expects to mediate Rp 400 billion ($30 million) in loans from lenders to borrowers this year, up from Rp 65 billion last year, Adrian A. Gunadi, Investree co-founder and chairman told the Jakarta Globe on Thursday (09/03).

One is a loan whose terms are custom fit for employees, who will pay it back using automatic deduction from their salary.

The other is for small and medium businesses, which supply listed companies, multinational firms, state-owned enterprises or government offices. This loan is given against these SMEs’ invoices to their clients, reducing risk revenue mismatch that could hamper the debt payment. “These way we do not directly compete with banks. We complement them,” he said.

As of Friday, Investree has processed Rp 86.7 billion in loans for 395 borrowers, most of them SMEs.

This fintech startup is disrupting Korea’s banking sector, rewriting regulation (Geektime), Rated: A

Korean financial services app developer Viva Republic announced last week the close of their Series C funding round, bringing home $48 million in new capital.

Launched in February 2015, the company’s app Toss now claims 6 million users in their native market, providing P2P transfers between friends and family. They have since added services such as loans, a financial dashboard that shows all of the user’s accounts (an important feature as Koreans have 5.4 accounts per person on average), and a credit monitoring service.

Viva Republica’s decision to look abroad for new backers should be taken as a sign that they understand that if they will want to continue to scale, they will need investors with a wider viewpoint on the potential of powerful fintech solutions than what is available to them in their home ecosystem.

Africa

P2P lending takes hold in Africa (Gadget), Rated: AAA

Africa has caught the attention of those in the ever-evolving peer-to-peer (P2P) lending sector. A recent report published by the University of Cambridge Judge Business School analyses the current position of Africa on the world’s alternative finance stage.

The report explains that crowdfunding in Africa is just beginning to gain publicity and garner attention. As detailed in the document, the third-largest model in Africa is P2P business lending, which totalled $16 million in volume over a two-year period between 2014 and 2015.

Kenya and South Africa are the market leaders, raising $16.7 million and $15 million respectively from online channels in 2015. P2P business lending had a lower average deal size, of $41,000, with an average of 24 lenders each.

The make-up of the South African market differs markedly from the rest of Africa. In 2015, the vast majority of market activity – $13.8 million – came from P2P consumer and business lending, with the remaining $1.2 million spread across microfinance, donation-based and reward-based crowdfunding.

Crowdfunding’s growing impetus in Africa (Biz Community), Rated: A

Peer-to-peer business lending is the third-largest finance model in Africa, totalling $16m in volume in 2014 and 2015, and it’s growing in popularity.

The Africa and Middle East Alternative Finance Benchmarking Report, published in February, is the first comprehensive study of the size and growth of crowdfunding and P2P lending markets in Africa and the Middle East. It includes additional chapters on the regulatory landscapes in Africa.

Need for SME finance sees arrival of FinTech lenders (Moneyweb), Rated: A

The lending landscape in South Africa is transitioning. Taking the lead from their global counterparts, there are a host of smaller FinTech lenders entering the market, bringing with them an opportunity for SMEs looking for growth funding. However, by year-end we could see yet another shift.

Back home, the growth in the alternative lending space has largely been in response to the increased demand from SMEs looking for smaller and more short-term loans. These smaller deals generally attract more interest and are often unattractive to the bigger, traditional lenders.

International uncertainty, especially around shifts in regulations under the Trump administration, could see shifts in how banks are able to lend. However, the South African Reserve Bank has traditionally erred on the side of caution and we can expect a steady hand in our regulatory outlook. Similarly, if the US interest rates tick upwards, additional risk will enter the market and lending will be affected.

Authors:

George Popescu
Allen Taylor