Thursday April 5 2018, Daily News Digest

Thursday April 5 2018, Daily News Digest

News Comments Today’s main news: KBRA assigns preliminary ratings to SoFi Consumer Loan Program 2018-2. dv01’s Q1 securitization volume hits $2.58B. Revolut releases open API. RainFin acquires stake in 4AX. Today’s main analysis: International P2P lending volumes for March 2018. Today’s thought-provoking articles: Trends on millennials and money. A tale of two fintech sectors. Amazon could become the third largest […]

Thursday April 5 2018, Daily News Digest

News Comments

United States

United Kingdom

European Union

International

India

Africa

News Summary

United States

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2018-2 (Business Wire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by SoFi Consumer Loan Program 2018-2 (“SCLP 2018-2”). This is a $544.6 million consumer loan ABS transaction.

This transaction represents SoFi Lending Corp.’s (“SoFi” or the “Company”) 14th rated securitization collateralized by a portfolio of unsecured consumer loans. SoFi currently originates personal loans through its state licenses or complies with certain requirements where a state lending license is not required.

Preliminary Ratings Assigned: SoFi Consumer Loan Program 2018-2

Class Preliminary Rating Initial Class Principal
A-1 AA (sf) $277,700,000
A-2 AA (sf) $127,900,000
B A (sf) $75,000,000
C BBB (sf) $64,000,000

DV01’S Q1 SECURITIZATION VOLUME TOPS $ 2.58B, ENCOMPASSING NINE DEALS FROM SIX ORIGINATORS (DV01), Rated: AAA

dv01 closed out Q1 with nine new securitizations, totaling $2.58 billion in total issuance. This represents a 141% increase from last year’s Q1 volume, which totaled $1.07 billion.

Deals were originated by six different lenders, including Prosper, Upgrade, LendingClub, CommmonBond, SoFi, and Marlette. Three of the deals (UPT I 2018-1, UPT I 2018-2, and CLUBC 2018-2) were trust certificates. dv01 was loan data agent on eight of the nine deals; loan level data and reporting tools for all the deals are accessible through dv01’s Securitizations portal.

Millennials and Money: 30+ Trends Financial Marketers Need to Know (The Financial Brand), Rated: AAA

Here are over 30 facts, statistics and insights about Millennials banks and credit unions need to know to serve this essential market segment more effectively.

  •  Millennials want to learn how to feel financially empowered. Nearly three quarters say they feel confident in their ability to make financial decisions, but they still want to learn more. 92% believe that being educated on personal finances is important. (Source: CSpace)
  • Millennials are so serious about their financial health that more than a third (34%) have a written financial plan, much higher than the 21% of Gen X and 18% of Baby Boomers who have done the same. However, 78% rarely or never make spreadsheets for their finances, and 35% say they’d rather vomit than make a spreadsheet to help them manage their finances. (Sources: Schwab, Varo Money)
  • Maybe Millennials don’t need help from real human beings. With 85% saying artificial intelligence could help them better manage their finances, banks and credit unions should use digital tools and AI to deliver the financial insights they crave. Nearly half of Millennials say they want their bank to be able to anticipate their financial needs and offer them timely advice (Sources: Varo Money, Segmint).
  • Millennials’ top savings priorities are emergency funds (64%), retirement (49%), and buying a house (33%). Nearly half already have $15,000 or more in savings, and 16% have a whopping $100,000 or more in savings. (Source: Bank of America)
  • When it comes to saving, Millennials still have significant headwinds: three in four college graduates today will have a heavy student debt load. (Source: ABA)
  • The average graduate from the university class of 2016 has $37,172 in student loan debt, up 6% from the prior year. (Source: Student Loan Hero)
  • Student loan debt is such a burden that 70% of Millennials say that financial circumstances were a key consideration in deciding whether or not to go to college. (Source: Harvard)

Publicly Listed Fintech Companies – a Tale of Two Sectors (Lend Academy), Rated: AAA

(KFTX) is a good place to start.

Since inception in June 2016, the index has returned 46%, outperforming the broad market S&P 500 by a whopping 24%, and even the tech-heavy NASDAQ by a meaningful 9%.

Source: Lend Academy

Amazon could become the third-biggest US bank if it wants to: Bain study (CNBC), Rated: AAA

Amazon could rival the nation’s big banks in as few as five years, capitalizing off its digital prowess and massive consumer base, according to a Bain & Company report.

Pushing customers toward a co-branded banking account also allows Amazon to cut down on transaction costs, Bain said.

Amazon could – according to Bain calculations – avoid more than $250,000,000 in credit card interchange fees every year if finds a bank willing to partner on checking accounts.

Source: Bain & Company

Why Amazon won’t enter the advice market (Investment News), Rated: A

Despite what many see as the inevitability of tech giants entering the financial advice business, the economics of doing so — as well as the intensely regulated nature of the business — make their entry unlikely, according to a new report from Cerulli.

The Boston-based research firm says that “companies like Facebook, Amazon, Apple, Netflix and Google (FAANGs) have the tools and data to excel, but face significant obstacles that will likely preclude their entry,”

One major obstacle, Cerulli says, is the relatively small size of the market. The firm estimates that the “digital advice opportunity segment” represents only about 12% of investors, or a segment “that would be difficult to scale to be of strategic interest to the world’s largest technology providers.”

The Credit Junction Secures $ 150 Million Credit Facility from MidCap Financial (Business Wire), Rated: A

The Credit Junction, the first data-driven, asset-based lender for small and mid-sized businesses, has secured a $150 million credit facility from MidCap Financial, a leading capital provider to the middle market specialty finance industry. The facility strengthens and expands The Credit Junction’s ability to deliver comprehensive capital solutions to businesses across the United States.

The Credit Junction combines traditional credit metrics with data intelligence and partners with business owners to deliver asset-based financing alternatives unique to the needs of each borrower. Since its launch in May 2015, The Credit Junction has helped businesses across the country achieve their growth objectives while supporting job creation and development in the communities they serve.

Real Estate Investment Platform, Sharestates, Changes the Game with User Experience (UX) (PR Newswire), Rated: A

Sharestates, an online real estate investment platform, announced today the launch of new online user portals that fully optimize the real estate investment process from beginning to end, providing investors with the first ever UX solutions in the real estate investment industry.

Sharestates’ unique solution was designed by the company’s development team alongside CEO and Co-Founder Allen Shayanfekr with UX and functionality in mind – now offering investors a streamlined “one stop shop” in real estate financing.

Banking Disruptors: Peer-to-Peer Lending and Payments (The Motley Fool), Rated: A

Peer-to-peer lending platforms such as Prosper and LendingClub (NYSE:LC) have changed the way people can borrow money, and apps such as Venmo and Zelle have made it easier and cheaper to send money.

In this segment from Industry Focus: Financials, analyst Michael Douglass and Motley Fool contributor Matt Frankel talk about the ways that technology is disrupting big banks, and what this trend could mean to the banking industry.

How Affirm Personal Loans Can Help You Finance Smaller Purchases (Student Loan Hero), Rated: A

The average student loan payment is $351. Between such a high monthly payment and rent, finding the money to furnish your home or buy a new computer can seem daunting.

If approved, you can now shop. When you’re ready to make a purchase, you can enter the total from your online shopping cart on Affirm’s site. You then choose an amount between $50 and $10,000. You’ll be provided virtual card information to complete the purchase. With some partner retailers, you might select Affirm at checkout instead.

LendingTree Launches Credit Analyzer, a Free Credit and Debt Analysis Tool (Lending Tree), Rated: A

LendingTree, the nation’s leading online loan marketplace, today announced the launch of its Credit Analyzer, a free credit and debt analyzer tool, which was created to help consumers avoid common credit mistakes, improve debt management skills and find the right financial products for their needs.

Credit Analyzer is a free tool that provides a deeper, instant analysis of consumers’ credit and debt situations and offers personalized recommendations based on individuals’ financial goals. The user experience is designed to make it easier for consumers to understand the most important factors that impact credit scores.

 

What will the financial services industry look like in five years? (Lend Academy), Rated: A

This article briefly touches on many of the themes being explored at our LendIt Fintech USA 2018 conference, which is now just days away:

Audits Will Go the Way of the Dodo Bird

The protocol of trust is here to stay, and it’s going to disrupt everything.

While the blockchain has not rendered audits unnecessary yet, I believe we’ll see it happen within the next five years.

Smart Contracts Are In, Long, Paper-Intensive Financial Processes Are Out

As I write this, Lending Robot is raising a private round of growth capital. The closing process, called “papering” for very obvious reasons, is just as onerous and Microsoft Word-oriented as I remember it back in the early 2000s when I was a young VC.

Fintech is Everywhere

Fintechs are enhancing the customer experience along four axes: choice, price, convenience, and predictability. They are meeting the needs of educated, aware, demanding consumers and they are attacking traditional financial institutions at every angle.

 

Five Things Fintech Startups Must Do In 2018 To Get Noticed, Adopted And Funded (Forbes), Rated: A

Here are five things the winners nailed that newcomers must do to compete:

  1. Build a seamless digital customer experience (CX) customized to each set of eyeballs, across platforms — plus, make financial services ubiquitous, instead of an unfortunate necessity.
  2. Streamline their lead generation and nurturing through automation, machine learning and AI, plus intelligent CRM throughout the customer journey. This powers faster, more accurate processes like loan origination, mortgage underwriting and credit application decisions, among others.
  3. Instead of being scared of increased regulation, embrace it as a driver of innovation.
  4. Upend an established Wall Street business model both by undercutting fees and over-delivering on performance.
  5. Find novel, values-driven ways to increase millennial participation in financial services.

Financing Small Businesses- 6 Tips For Finding An Online Loan (Bizztor), Rated: A

Online business loans are a popular option for financing small businesses. Over the years more small business owners have been turning to online lenders as banks have cut down on loans to smaller businesses.

With the assistance of technology and algorithm, online lenders are able to assess conventional credit standards like cash flow and personal credit score.

DriveWealth Raises $ 21M in Series B Funding (Finsmes), Rated: A

DriveWealth Holdings, Inc., a Chatam, N.J.-based fintech company, closed a $21m Series B funding.

The round was led by Raptor Group Holdings, SBI Holdings, Inc, and Point72 Ventures, LLC, as weel as existing investors Route 66 Ventures.

The company intends to use the funds to develop its technologies and scale its business.

Mosaic Readies New Solar Loan Deal (Global Capital), Rated: A

The San Diego-based company filed documents with the Securities and Exchange Commission on Monday for Mosaic Solar Loans 2018-1. The ABS-15G forms name Deutsche Bank and BNP Paribas as banks on the deal.

The transaction, Mosaic Solar Loans 2017-2, was priced at 185bp over interpolated swaps for the senior class, yielding 3.854%. Energy related ABS such as solar and Property Assessed Clean Energy (Pace) deals were heavily subscribed throughout last year, with strong issuance of residential Pace bonds and the first ever issuance of commercial Pace ABS from Greenworks Lending.

Laurel Road And Darien Rowayton Bank Officially Rebrand Under Integrated Laurel Road Name (PR Newswire), Rated: B

Laurel Road, an online lender and FDIC-insured bank, officially announced today that Darien Rowayton Bank and its national online lending division will rebrand under the integrated national Laurel Road brand. The new, unified Laurel Road brand represents a deep understanding of its customer base, best-in-class technology and industry-leading compliance and risk management.

Bankrupt Payday Lender Can’t Move Pa. AG’s Suit To Texas (Law 360), Rated: B

Think Finance LLC, a financial technology firm that critics say uses Native American tribes to skirt payday lending laws, failed to convince a Pennsylvania federal judge on Tuesday to move an action brought by the state’s attorney general to Texas, where it has filed for bankruptcy.

The company has been hit with lawsuits over its alleged role in several “rent-a-tribe” schemes, where a high-interest lender affiliates itself with a Native American tribe to shield itself from legal challenges.

Sarasota-Manatee ranks last for millennials buying homes (Sarasota Herald-Tribune), Rated: B

Millennials rank as the key target in the economic development world setting sights on future prosperity. A new study casts a pall over efforts to build the Sarasota and Manatee population of this prized demographic. Out of the largest 100 U.S. metropolitan statistical areas in the country, Sarasota-Manatee ranked dead last among cities favored by millennial homebuyers.

The study, conducted by LendingTree, focused on the percentages of all loan requests to the online loan marketplace that came from millennials. That figure for Sarasota fell far from top-ranked Des Moines, Iowa — 17.9 percent versus 42.4 percent. Fort Myers ranked just above Sarasota, with 19.8 percent.

The Online Lending Policy Institute (OLPI) Appoints Deputy Director (Lendit), Rated: B

Robert J. (Bob) Mullenbach, CRCM, Managing Director – Compliance Division Deputy at ProBank Austin – has been appointed as the Online Lending Policy Institute’s (OLPI) new Deputy Director. Mr. Mullenbach brings 25 years of regulatory compliance experience in billion-dollar financial institutions, regional and community banks, fintech’s, and leading consulting firms. In his current position, Bob audits clients on the myriad of regulatory requirements associated with consumer/commercial lending, bank secrecy act/anti-money laundering, privacy, and non-deposit investment products.

Microloans offer needy a better alternative (The Columbus Dispatch), Rated: B

Central Ohio chapters of the St. Vincent dePaul Society, an international charity run by Roman Catholic volunteers, give needy folks a better option through the society’s microloan program. Information is available through the organization’s website at svdpcolumbus.org.

Anyone of any faith who needs up to $500 for car repairs, school, home repairs or medical bills, can apply for a quick loan with a low interest rate and 12 to 15 months to pay it off.

Contrast that with the typical payday-loan operation, which loans a couple-hundred dollars and demands payment in two weeks. Many borrowers who are strapped enough to go to such a lender in the first place can’t pay it back that quickly. This leads to loans on top of loans, with tacked-on fees that can lead to an effective interest rate of nearly 600 percent.

SunTrust teams with fintech to offer loans for HVAC upgrades (American Banker), Rated: B

SunTrust Banks in Atlanta is teaming up with another fintech upstart to expand its reach in consumer lending.

The $202 billion-asset company said Wednesday that it has struck a partnership with the online lender Microf to offer point-of-sale loans to homeowners looking to replace aging residential heating, ventilation and air conditioning systems.

SunTrust will hold the loans on its books and a pay a fee to Microf for the referrals. Microf, based in Albany, Ga., offers the loans through its nationwide network of HVAC contractors.

United Kingdom

Revolut unleashes open API to all customers (Fintech Futures), Rated: AAA

APIs and open banking are hotter than a freshly tarmacked road in summer, and Revolut joins the mad-for-it crowd.

On its blog, the bank, which was launched in mid-2015 and offers a money transfer app, says account owners can generate sandbox and production keys, and set whitelisted IPs as an “extra layer of security”.

Away from these API days, the firm adds that over the last few months it’s been making updates to its business accounts.

New fintech fund could boost P2P sector (Peer2Peer Finance), Rated: A

At a time when investment trusts such as Victory Park Capital Specialty Lending have signalled a shift away from P2P opportunities, Augmentum Fintech’s investment adviser has hinted that P2P lenders could be included in the portfolio.

Augmentum Fintech was launched by Augmentum Capital, a venture capital (VC) firm backed by Lord Rothschild’s RIT Capital Partners, last month. The VC firm already had a 7.4 per cent holding in P2P giant Zopa worth £18.5m that has been transferred into the investment company portfolio and its founder Tim Levene, who is acting as investment adviser to Augmentum Fintech, said that the firm is well geared to the P2P sector.

FCA reveals it intervened in Collateral administration to protect investors (Peer2Peer Finance News) Rated: A

THE FINANCIAL Conduct Authority (FCA) has revealed that it intervened in the administration of Collateral because the peer-to-peer lender failed to seek its approval when it appointed an insolvency practitioner.

Wigan-based Refresh Recovery was selected by Collateral when the company shut down in February but it was revealed on Tuesday that the City watchdog was looking to appoint a different administrator.

“The Collateral companies were required to obtain the approval of the FCA when appointing an administrator,” the FCA said in a statement on Wednesday.

ISA countdown: The latest IFISAs on the market (Peer2Peer Finance News), Rated: A

March saw the introduction of tax wrappers from peer-to-peer property platforms The House Crowd and Safe as Houses, while EasyMoney, part of Sir Stelios Haji-Ioannou’s easy family of brands, launched its second IFISA offering.

Safe as Houses

The Safe As Houses ISA, which invests in loans made to Safe as Houses Group to develop, regenerate and sell on distressed properties, offers investors a return of six per cent.

The IFISA has a five-year term and requires a minimum investment of £5,000.

The House Crowd

The House Crowd’s IFISA invests in secured P2P loans and property development investments and offers a target return of seven per cent.

The House Crowd requires a minimum investment of £1,000, and new investments can be added to the IFISA in £1,000 increments, up to a maximum of £20,000 across an investor’s entire ISA portfolio.

Investors will get a fixed return paid in twice a year in October and April.

EasyMoney

The latest IFISA to hit the market before the deadline came from EasyMoney, offering target returns of 7.28 per cent. This eclipses the 4.03 per cent returns offered by its first product that launched in February.

The P2P lending platform said its new ‘balanced’ IFISA allows individuals to invest in a broader range of property-backed loans, limited to 75 per cent loan-to-value (LTV).

MINOR INVESTOR: An Innovative Finance Isa with a 7% rate is a tempting idea but tread carefully in the investing Wild West (This is Money), Rated: A

Only the peer to peer lending element can be included in an innovative Isa, not the equity version where investors take a stake in a company.

Obviously, innovative Isas don’t qualify for the savings element of the Financial Services Compensation Scheme that protects up to £85,000 per licensed bank.

Crucially, however, neither do they get the FSCS investing element that covers up to £50,000 in case your investing platform goes bust and hasn’t done what it is meant to with your money.

European Union

Robo advisors and the Data Revolution (GDPR) (AltFiNews), Rated: AAA

With just a month to go until the General Data Protection Regulation (GDPR) is implemented throughout Europe in May. We look at how the new regulatory regime will affect the nascent Digital Advice industry. Some of the upcoming regulatory changes issued from the EU and its commissioners should be positive for fintech asset managers.

With a clear focus on transparency, robo-advisors should look forward to the new era of information portability and openness.

The digital advice sector has from inception attempted to gain a competitive edge with clear transparent product engineering and pricing, but it won’t all be plain sailing and there may be headwinds ahead.

BANCO BNI EUROPA grows significantly in 2017 and attracts equity investor (Fintech Finance), Rated: A

2017 was once again characterized by the significant growth of Banco BNI Europa’s activity, increasing 41% in assets (from € 362M in 2016 to € 509M in 2017), 16% in customer deposits (from € 262M in 2016 to € 305M in 2017) and 379% in banking income (€ 2,8M in 2016 to € 13,2M in 2017). 

Net income reached € 2.3M, increasing regulatory capital to € 23.3M and the solvency ratio comfortably above the statutory limit at 13%.

International

International P2P Lending Volumes March 2018 (P2P Banking), Rated: AAA

Milestones achieved this month (overall volume since launch):

  • Landbay reached 100M GBP
  • Estateguru reached 50M EUR
  • Linked Finance reached 50M EUR
Source P2P Banking

Banking at a Tipping Point as Fintech Drives Change (Cash Lady News), Rated: AAA

According to Citigroup consumer banking currently generates around $870bn in revenues across Europe and North America, with digital innovators accounting for just 5% of that total. But if the report’s predictions are correct, by 2023, disruption by fintech companies will account for 17% of a total earnings pot of $1.200bn

Follow the Money

CitiGroup cites figures showing that global investment has risen from around $0.5bn in 2019 to just under $20bn today. And most of that investment – Citigroup puts it at 70% is focused on the key areas of personal and SME banking.

Read the full report here.

ROSCAcoin: A Self-Regulating, Autonomous and Decentralized Financial Platform for the Unbanked (BTC Manager), Rated: A

ROSCAcoin is a new decentralised autonomous and self-regulating platform built on the Ethereum blockchain. The project aims to develop an innovative financial infrastructure that allows creating solutions for people with little or no access to financial services. ROSCAcoin is set upon an ancient model of borrowing very popular in third world countries.

ROSCA, or Rotating and Saving Credit Association, is defined by a method of borrowing where a group of individuals agree to cooperate for saving and borrowing purposes within a pre-established period; is also a form of peer-to-peer banking and peer-to-peer lending. ROSCAcoin strives to introduce this method using the blockchain technology.

The platform is powered by its own currency RCA, which will be the engine of the whole ecosystem. By using smart contracts, ROSCAcoin is trying to build the ultimate financial solution for the unbanked.

“Stars are Aligned” for an Higher US Dollar Against the Swiss Franc (PoundSterling Live), Rated: B

The Dollar has risen 4.4% versus the Swiss Franc since mid-February and could be about to accelarate the move suggest analysts; this despite the sizeable global stock market sell-off which would normally be expected to support the safe-haven Franc.

Safe-haven currencies usually strengthen in times of fear, such as the present, however this does not appear to be the case with USD/CHF which has risen due to the USD outperforming CHF – not the other way round.

White Oak Signs Agreement to Acquire LDF Group (Globe Newswire), Rated: B

White Oak Global Advisors, LLC on behalf of its institutional clients (collectively “White Oak” or the “Company”), announced today that White Oak has agreed to expand its asset-based lending platform to serve clients in the U.K. and Europe through the acquisition of LDF Group (“LDF”), a U.K.-based finance company providing asset finance, business loans, commercial mortgages and education leases to small and middle-market companies.  Established in 1986, LDF is an industry leader and one of the largest independent finance providers for small businesses in the U.K.

India

Faircent brings Shalabh Gupta on-board as national sales head – lending (The Siasat Daily), Rated: A

Leading Peer-to-peer (P2P) lending company Faircent on Thursday announced that the company has hired Shalabh Gupta as national sales head – lending.

As an industry veteran with over 17 years of extensive sales experience with brands like the Times Group, Reliance Capital, HDFC Bank, and ITC Limited, Shalabh will play a crucial role in furthering the company’s impressive growth plans and vision as a part of its leadership team.

Aadhaar-Based EKYC Limitations Cause Trouble For Fintech Startups (Ink 42), Rated: AAA

Since the Supreme Court extended the deadline for linking of Aadhaar to host of services, the fintech segment has been riddled with burdens of limited Aadhaar-based eKYC. The companies have been unable to access Aadhaar database for verification of their customers.

Impact Of Aadhaar KYC On Fintech Startups

According to reports, fintech startups across the insurance, lending and broking sectors are being denied access to authentication agencies for eKYC to verify customer antecedents on the Aadhaar database amidst rising concern over data privacy.

UIDAI revokes e-KYC services for some e-wallets, online lenders (The Times Of India), Rated: A

In a move that seems to have left fintech players scrambling, the Unique Identification Authority of India (UIDAI) revoked on Tuesday their access to a dozen agencies that provide e-KYC verification and authentication services. Some of these agencies – KUAs (e-KYC user agencies) and AUAs (authorised user agencies) – will no longer be able to provide e-KYC verification to onboard new customers or authenticate financial transactions affecting e-wallets, online lenders, NFBCs and smaller fintech players.

Africa

RainFin acquires stake in 4AX (Business Tech), Rated: AAA

Fintech company RainFin has announced the conclusion of a transaction with 4 Africa Exchange Proprietary Limited (4AX), which will see the company sell to 4AX its corporate debt marketplace, in exchange for a strategic shareholding in 4AX.

RainFin’s credit marketplace technology has been utilised by companies to raise debt funding from both tradition and non-traditional sources since its formation in 2002.

Accra, Ghana to Host 2018 Startupbootcamp Africa (Tech in Africa), Rated: B

Accra, Ghana’s capital city will host the forthcoming Startupbootcamp (SBC) Africa Accelerator program. The SBC sponsors include the Old Mutual, BNP Paribas, RCS, PwC, and Nedbank. During the event, startups present to the panelists for about two hours.

Authors:

George Popescu
Allen Taylor

Thursday March 16 2017, Daily News Digest

sofi net loss triggers

News Comments Today’s main news: Blackmoon, ID Finance partnership results in $10.71 mil investment. OCC issues draft manual for FinTech charter.  Yirendai reports Q4 and full year 2016 results.Marlette cuts staff to push for profitability. Today’s main analysis: Are SoFi borrowers really defaulting more? Robo-advice stirs up more competition. Today’s thought-provoking articles:  ISA myths for robo-investors. Beijing vows to […]

sofi net loss triggers

News Comments

United States

United Kingdom

European Union

  • N26 hits 300K customers. AT: “App-only banking is taking millennials by storm. I think this will become a big deal in most of the world, particularly Europe and Asia.”

International

Australia

China

  • Yirendai reports Q4, the full year 2016 results. GP:”Yirenday originates $1bil per quarter, approx 1/2 the size of Lending Club. And reports approx. $158mil in EBITDA profit in 2016. Our understanding is that this profitability is due to being focused on lower quality borrowers than previously. To be noted as well: 97.8% was facilitated via the mobile app. ” AT: “Added bonus: See the Yirendai presentation at LendIt USA 2017.
  • Beijing vows to clean up digital small lenders.

Asia

Latin America

News Summary

 

United States

EXCLUSIVE: Blackmoon, ID Finance partnership results in 10 mil EUR investment (ID Finance Email), Rated: AAA

As reported yesterday, Blackmoon and ID Finance have integrated for packaged loans to investors. Total investments so far: 10 mil EUR, the equivalent of about US $10.71 million.

From the press release:

ID Finance has integrated with Blackmoon and is now executing investment transactions via the Russian lending platform. Blackmoon, which was cofounded by the former vice president of VK.com Ilya Perekopsky and whose backers include international venture capital firm Flint Capital, can now offer professional investors the ability to acquire portfolios of loans made to emerging market borrowers. The loans have been screened and scored by ID Finance’s advanced risk assessment system and allow Blackmoon investors to benefit from interest rates higher than traditional investment tools.

If the issued loans meet the strategies of investors that deal with Blackmoon, the system registers the fact of sale, the investor’s funds are transferred to the creditor and the transaction is deemed closed. Hence, ID Finance registers the profit by the securitised portfolio and continues servicing borrowers who are redeeming the loans now to the benefit of Blackmoon investors. In this case, Blackmoon ensures execution of transactions, analysis, accounting and investment process management for the investor and lender. ID Finance will benefit from a new steady scaled funding source from professional investors.

ID Finance is currently operating in Russia, Kazakhstan, Georgia, Poland, Spain and Brazil. Presently, the loan portfolios available to Blackmoon investors cover Poland, Georgia and Spain although additional markets may be added in the future. Thanks to ID Finance’s advanced credit scoring and risk analysis technology, investors who purchase loan portfolios via Blackmoon receive an enhanced income-and-risk ratio compared to conventional investment instruments.

For additional context, read TechCrunch and VentureBeat.

Are SoFi Borrowers Really Defaulting More? (Lend Academy), Rated: AAA

There was an article in Bloomberg earlier this week that called into question the performance of a 2015 SoFi securitization. Given that I have always held SoFi out as the gold standard in industry performance I was surprised to read about these issues. So, I did some digging and discovered that Matt Scully (the author) did not provide the complete story.

The Cumulative Net Loss (CNL) trigger for this deal in February was very low, reportedly below 3% and the actual CNL for February barely went above these low trigger points. But what is more important is that it is misleading to use this case as another example of underperformance. As I said this was a one-off deal between a motivated buyer and seller and was much tighter than subsequent deals.

One final point. Because the triggers were barely breached it is quite possible that in coming months future triggers will not be breached and the deal will cure. The reality is that triggers were not set at the appropriate level for this deal. SoFi did not set these triggers and likely did not agree with them as they were negotiated directly between the buyer and the seller. So to read anything into this particular breach is misleading.

Online Lender Marlette Cuts Staff in Push for Profitability (WSJ), Rated: AAA

Online lender Marlette Funding LLC is cutting around one-fifth of its workforce after the company decided to mothball plans to branch out into businesses beyond making unsecured personal loans, according to people familiar with the matter.

While smaller than better-known rivals like LendingClub Corp., Marlette expanded more quickly in recent years. The Delaware-based company said earlier this month that it extended more than $3 billion in loans under its Best Egg brand in its first three years in business, a milestone that took LendingClub around twice as long to reach. Marlette’s 2016 loan volume was $1.1 billion compared with $8.7 billion for LendingClub.

Robo advice gets human, stirring competition again (Financial-Planning), Rated: AAA

Over the past two years, there has been a clear divide in the assets of robo advice startups and the initial efforts of incumbent firms. But that partition could collapse, as the major players gravitate to one model and price competition takes hold.

Forming a separate cluster ranked by AUM are the independent digital startups, with Betterment the leader with over $7 billion, followed by Wealthfront, Personal Capital, and other offerings.

But by last year, firms realized that customers wanted a human touch with their digital solutions, and numerous analysts came to the conclusion that hybrid robo platforms would be the go-to model for digital wealth management.

Schwab’s hybrid seems to be aimed at the leading competition as well, undercutting Vanguard’s PAS with account minimums of $25,000 and fees capped at $900 a quarter. It’s priced aggressively enough that even industry observers such as Joel Bruckenstein, co-creator of the Technology Tools for Today conference series, wondered if it was “the beginning of the commoditization of entry level planning.”

Another factor to keep in mind: the biggest banks are reinvigorating their PFM applications and developing their own hybrid robo advice solutions, keen to keep even small retail assets rather than seeing them leak to digital wealth firms or custodians.

OCC Issues Draft Licensing Manual for Fintech Charter Applicants (ABA Banking Journal), Rated: AAA

The Office of the Comptroller of the Currency today released its long-awaited draft licensing manual for fintech companies seeking the agency’s new limited-purpose national bank charters. The manual spells out in greater detail than at any point previously how applicants can seek a charter and how the OCC will review applications and examine newly chartered fintech firms. Consistent with previous OCC statements and papers, the manual makes clear that the special-purpose charters will be subject to all applicable banking laws and regulations. It also clarifies that the special-purpose charters will not authorize deposit-taking.

The manual walks through the initial steps of applying, the chartering standards the OCC will apply, the business plan the applicant is expected to provide and the OCC’s final decision-making process. For example, the manual notes that some members of the organizing group, management and board would usually be expected to have “experience in regulated financial services” in addition to experience with the kind of novel products or services the company may propose to offer.

In response to concerns expressed by ABA, the draft manual makes clear that the agency “will not approve proposals that would result in an inappropriate commingling of banking and commerce.”

Marketplace Lending Industry Sees Efficiency, Cost, Authentication and… (Broadway World), Rated: A

Ninety percent of those involved in the burgeoning marketplace lending industry anticipate an increase in traditional bank and marketplace lender partnerships in 2017, eOriginal, Inc., the expert in digital transactions, today announced as part of the results of a survey conducted at last week’s LendIt USA 2017 Conference in New York.

Survey takers were also asked to highlight challenges to growth within marketplace lending. The top answers included regulations (47 percent) and access to capital (25 percent). When asked to focus specifically on the adoption of end-to-end digital transaction management solution, participants cited the challenges to be full adoption by partners (31 percent), lack of infrastructure (29 percent), security and privacy concerns (22 percent) and cost (17 percent).

House GOP demands that OCC slow down on fintech charter (American Banker), Rated: A

A group of House Republicans is asking Comptroller of the Currency Thomas Curry to slow down on the creation of a fintech charter.

ProducePay raises $ 77 million in debt and equity to revolutionize farm financing (TechCrunch), Rated: A

His company has just raised $77 million in equity and debt to provide financing to farmers of perishable goods. While there are all sorts of financial instruments for certain types of farmland — including billion-dollar investment funds for timberland, and certain kinds of non-perishable crops — most fruits and vegetables aren’t considered good prospects for loans.

ProducePay has come up with a model that works for those farmers whose crops can’t be siloed or stored.

ProducePay reaches out to farms to buy their crops at a price that the company sets up front, then goes out and sells those crops on the market. If the company breaks even, the farmer doesn’t owe a cent. If the company makes a profit, the profits are returned to the farmer minus a commission or percentage of the profit that ProducePay collects.

And by using the crop as collateral, Schwarzbeck’s company manages to avoid forcing farmers to put up their farms as collateral — the phenomenon that forced many farmers into bankruptcy in the 80s and hastened the advent of industrial farming.

Klarna Finds Feintuch (O’Dwyer’s), Rated: A

Swedish e-commerce company Klarna has retained New York-based Feintuch Communications as its PR agency of record for North America.

Feintuch will work with Klarna’s North American and headquarters teams to increase market support for the payments provider through an integrated PR and social media campaign.

Innovative criminals embrace online opportunities (Financial Times), Rated: A

Good innovation must therefore be differentiated from bad. And one area in which this is becoming abundantly clear is the fast expanding high-tech financial service industry, colloquially known as “fintech”. Fintech innovators boast their technologies are making financial services more convenient, more inclusive and more competitive, all the while bringing down costs.

But the spike in digital financial crime accompanying the frictionless payments systems these technologies promote suggests criminals may be innovating as quickly, if not quicker. For now at least, more fintech equals more “crimtech”.

Of particular concern is the phenomenon of “transaction laundering”. Think of the cost savings brought about by e-commerce and mobile app services for the legitimate e-retailing sector and then apply them to the world of money laundering. Whereas an old-school money launderer would face the headache of managing a bricks-and-mortar front business to launder his illicit profits, today’s online criminals need only set up a bogus online website to achieve the same effect, or else partner — on a commission basis — with a legitimate e-retailer prepared to process their illicit transactions.

With the costs so low, there are few obstacles to criminals seeking to set up their own transaction laundering fronts. Add identity fraud to the mix, and criminals might not even have to put their own reputation at risk.

Flu Season Hits Small Businesses Especially Hard — And It’s Not Over Yet (Small Biz Trends), Rated: B

The impact of the flu on small businesses is big. New data from Funding Circle shows that 47.4 percent of small businesses report being adversely impacted by the flu virus.

Almost half of all small businesses suffered loss of productivity or disruption of operations due to flu, Funding Circle found during a 2016 small business owner survey.

The U.S. Centers for Disease Control and Prevention (CDC) notes that 111 million work days are lost to the flu every year. That includes big businesses, too, of course. The financial impact of the flu each year adds up to about $7 billion, including both lost wages and slowed productivity. Since most businesses in the U.S. are small businesses, their share of those totals is considerable.

Mike Bingle, Steven Freiberg and Robert L. Joss AC Elected to SoFi’s Board of Directors (PR Newswire), Rated: B

SoFi, a modern finance company taking an unprecedented approach to lending, wealth management, and insurance, announced today the election of Mike Bingle, Steven Freiberg, and Robert L. Joss AC to its Board of Directors.

Bingle is a Managing Partner and Managing Director at Silver Lake. He currently serves on the Board of Directors of Ancestry.com, Fanatics, Gartner, and SolarWinds. Bingle has been a private equity investor for over 20 years, and he has invested in numerous financial technology companies, including having served as a Director of: TD Ameritrade, Datek Online Holdings, Inc., Interactive Data Corporation, IPC Systems, Instinet, Mercury Payment Systems, and Virtu Financial. Prior to joining Silver Lake, Bingle was a principal at Apollo Management; he also worked in the Investment Banking Division of Goldman, Sachs & Co. Bingle holds a BSE in Biomedical Engineering from Duke University.

Freiberg is also a long term veteran of the financial services sector, having held multiple positions at Citigroup over a 30 year period including serving as the Co-Chairman and CEO of Citigroup’s Global Consumer Group, and most recently as the CEO of E*TRADE Financial Corporation where he led the company back to profitability in the aftermath of the 2008 financial crisis. He is currently a Board member of Fair Square Financial, MasterCard, OANDA, Purchasing Power, and Regional Management, and a senior advisor to several companies including The Boston Consulting Group and Verisk Analytics. Freiberg holds a BS in Finance as well as an MBA in Finance from Hofstra University.

United Kingdom

The ISA myths robo advice investors should dispel this ISA Season pt.1 (AltFi), Rated: AAA

With returns on cash ISA meagre at best, many are looking to the new Innovative Finance ISA and regular stocks and shares ISAs for both income and growth.

Many experts are also expecting ISAs to play a bigger role in investors overall wealth planning, not least as the current allowance of £15,240 is set to rise to £20,000 in April. In this brave new world, however, a huge gulf of information exists.

  • Myth 1: the money is locked in
  • Myth 2: ISAs are only for people with lots of money
  • Myth 3: ISAs are just for cash savings
  • Myth 4: Stocks and shares ISAs are for seasoned investors
  • Myth 5: The ISA limit is the total limit of what I can invest this year
  • Myth 6: If I get a stocks and shares ISA I’ll have to do a tax return
European Union

App-only bank N26 hits 300,000 customers as startups across Europe race to be the finance app for millennials (Business Insider), Rated: AAA

App-only bank N26 has tripled customer numbers in little over a year, announcing on Wednesday that it now has 300,000 users across Europe.

The customer number is up from 100,000 in January 2016. N26 has customers in 17 European countries, including 30,000 in France and 10,000 in both Spain and Ireland.

The startup also announced on Wednesday that it has processed €3 billion (£2.6 billion, $3.1 billion) of transactions, with more than 60% of that total in the last year alone.

Berlin-based N26 is one of a number of app-only bank or bank-like services that have sprung up across Europe in the last few years. Many of them are competing to become the go-to bank for millennials, the generation glued to their smartphones who find bank branches as old school as sending a fax. N26 highlights in a blog post announcing the milestone that 59% of its customers are aged 18-34.

N26 has a significant war chest to take on any would-be rivals. The 200-person business has raised over $55 million, most recently raising $40 million from investors including Hong Kong billionaire Li Ka-Shing last June. N26 has said it plans to launch in Britain later this year.

International

Financial Services Application Market Projected to Grow (Broadway World), Rated: AAA

Investments in financial technology (fintech) are growing rapidly. According to a new report published by Accenture, in the first quarter of 2016, global investment in financial technology ventures reached $5.3 billion, a 67 percent increase year over year. About 62 percent of the investments went to fintech companies in Europeand Asia-Pacific. China is the world’s leader in the fintech industry. For the period of July 2015 to June 2016, Chinese FinTech investments surged to $8.8 billion, commanding the largest share of global investment in this sector, according to a report by EY.

Australia

LONG HOT SUMMER CREATES SMALL BUSINESS WINNERS AND LOSERS (The Bull), Rated: A

New research has found that 1 in 5 Australian business owners took a hit to the bottom line in this summer’s heatwave, facing a double whammy as customers stayed at home and energy bills soared.

The sweltering summer season created headaches for thousands of business owners, with almost 30% saying their business performed worse than the summer before and almost the same number unhappy with their level of trade over the period.   Some reasons cited for a drop-in business were lower foot traffic as customers stayed indoors, it being too hot to work outside, heat and rain damaging stock, and hot and bothered customers being in a bad mood.

Mr Poolman said 1 in 4 OnDeck loans were used for purchasing stock or inventory, with business expansion, more staff, marketing & advertising the other top reasons.

The weather is not the only thing impacting Australian small businesses at the moment, according to the research. Of the 300 businesses surveyed, more than half (53%) believe Australia’s high cost of housing is having a negative impact on consumer confidence – and in turn the small business community.

China

Yirendai Reports Fourth Quarter and Full Year 2016 Financial Results (Yahoo! Finance), Rated: AAA

Yirendai Ltd. (YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced its unaudited financial results for the quarter and full year ended December 31, 2016.

Starting from the second quarter of 2016, the Company changed its reporting currency from the U.S. dollar (“US$”) to the Renminbi (“RMB”), to reduce the impact of increased volatility of the RMB to US$ exchange rate on the Company’s reported operating results. The aligning of the reporting currency with the underlying operations will better depict the Company’s results of operations for each period. This release contains translations of certain RMB amounts into US$ for convenience[1]. Prior period numbers have been recast into the new reporting currency.

In the fourth quarter of 2016, Yirendai facilitated RMB 6,675.2 million (US$961.4 million) of loans to 110,785 qualified individual borrowers on its online marketplace, representing a 102% year-over-year growth; 57% of the borrowers were acquired from online channels; 37% of the loan volume was originated from online channels and 98.8% of the online volume was facilitated through the Yirendai mobile application.

In the fourth quarter of 2016, Yirendai facilitated 194,505 investors with total investment amount of RMB 7,806.9 million (US$1,124.4 million), 100% of which was facilitated through its online platform and 85.0% of which was facilitated through its mobile application.

For the fourth quarter of 2016, total net revenue was RMB 1,071.1 million (US$154.3 million), up by 137% from the same period in 2015; net income was RMB 379.8 million (US$54.7 million), representing an increase of 356% from the same period in 2015.

In the full year of 2016, Yirendai facilitated RMB 20,277.9 million (US$2,920.6 million) of loans to 321,019 qualified individual borrowers on its online marketplace, representing a 112% year-over-year growth; 57% of the borrowers were acquired from online channels; 38% of the loan volume was originated from online channels and 97.8% of the online volume was facilitated through the Yirendai mobile application.

In the full year of 2016, Yirendai facilitated 597,765 investors with total investment amount of RMB 25,038.3 million (US$3,606.3 million), 100% of which was facilitated through its online platform and 83.0% of which was facilitated through its mobile application.

For the full year of 2016, total net revenue was RMB 3,238.0 million (US$466.4 million), up 146% from the same period in 2015; net income was RMB 1,116.4 million (US$160.8 million), representing an increase of 305% from the same period in 2015.

See the full LendIt USA 2017 presentation delivered by Yihan Fang and Yang Cao, CEO and COO/CTO, respectively, of Yirendai here.

Beijing vows to clean up digital small lenders (Financial Times), Rated: AAA

Chinese authorities are preparing new rules to reduce risks caused by the rapid growth of online small-loan companies, which have emerged as among the most active lenders in the country following a crackdown on peer-to-peer rivals.

Loans outstanding among China’s 8,673 small-loan companies totalled Rmb927bn at the end of last year, according to government data. That is more than the Rmb673bn outstanding from peer-to-peer lenders, according to Online Lending House.

But even that figure understates the true scale of activity by small-loan companies because these groups are among the most active issuers in China’s burgeoning securitisation market. Securitisation of small-loan assets hit Rmb82bn in 2016, up from Rmb13bn a year earlier, according to data from Wind Info.

Traditional, offline small-loan companies are restricted to lending within their home provinces where they know local businesses. But provincial governments have approved a new wave of online small-loan companies in recent years. These new online groups are not subject to regional restrictions, opening the door to new risks.

Online small-loan approvals have become a valuable commodity amid aggressive enforcement of new rules on P2P lending announced last year. The rules cap P2P loans at Rmb200,000 for an individual and Rmb1m for a company. They also forbid peer-to-peer lenders from operating “fund pools” that allow platforms to fund payouts on maturing investment products with inflows from new product sales.

The goal of the ban on fund pools is to force P2P groups to serve as pure intermediaries that match investors with loans. Yet fund pools have been crucial to enabling these platforms to offer products with both short maturities and high yields. By contrast, small-loan companies rely on their own capital to fund loans, which means they have greater freedom to manage liquidity.

Asia

This real estate start-up will help you invest with as little as Rs50,000 (The Express Tribune), Rated: AAA

NEST, one of the finalists at the Fintech Disrupt Challenge 2016, will be offering an entry-level ticket, as low as Rs50,000 ($477), to own a small stake in a managed commercial/residential property.

Fintech Disrupt Challenge 2016 was organised by Karandaaz Pakistan and will be facilitating people with shared social demographics and interest in real estate, investing to pool money and purchase properties. Arazi Ventures CEO Umair Sheikh said the team has been working on this project for quite some time but getting past the current regulatory framework has been a major challenge.

Latin America

Startupbootcamp bets on Latin American fintech (Global Trade Review), Rated: A

Accelerator firm Startupbootcamp has launched a fintech-focused programme based in Mexico City, targeting the wealth of start-ups that have recently appeared in Latin America.

The company has teamed up with the region’s main fintech champion, Finnovista, on the project, which will be led by Nektarios Liolios, CEO and co-founder of Startupbootcamp Fintech, together with Latin American entrepreneurs Fermín Bueno and Andrés Fontao from Finnovista.

Though based in Mexico City, the programme is open to all fintech start-ups from across Latin America, with ‘FastTrack’ events scheduled to be held in all major Latin American cities from March to May 2017 to introduce companies to the Startupbootcamp team and encourage them to apply.

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

July 25th 2016, Daily News Digest

News Comments United States A good summary by PeerIQ of the latest securitizations of SoFi and Marlette with good comparisons to previous securitizations done by the same firms and other firms. Article describing as has been the trend lately, how a German fintech bank partners with Telefonica which has more accounts than CommerzBank and Postbank, […]

News Comments

United States

United Kingdom

Taiwan

Korea

Singapore

India

China

 

News Summary

 

United States

Weekly securitization update (PeerIQ), Rated: AAA

Last week saw a substantial uptick in issuance news in MPL ABS securitization space. Four deals, totaling more than $1 billion of bonds, were either priced or announced last week.
SoFi and Marlette priced a student and consumer loan deal respectively. Both deals executed at meaningfully tighter levels.
SoFi
SoFi strengthens its lead as the largest MPL ABS issuer by volume and is enjoying a virtuous cycle of lower funding costs, improved liquidity, and expansion of the ABS base. At the current pace, PeerIQ predicts SoFi may issue 8 to 10 deals this year and is on pace to be one of the largest issuers globally in certain markets.
   sofi securitization comparison
sofi securitization details and comparison
Marlette
Marlette is a balance sheet lender that originates unsecured consumer loans via the Marlette BestEgg Platform. Loans issued through the Marlette platform are originated by Cross River Bank (CRB). CRB and Marlette retain a share of loans issued through their online platform addressing potential “skin in the game” and true lender concerns.
 marlette securitization comparison
marlette securitization details and comparison
MFT 2016-1 is the second deal from Marlette this year and is backed by a $205 million loan pool. The pricing of MFT 2016-1 is about 200 basis points tighter across capital structure as compared to CHAI 2016-MF1 (Chart 1).
The consequence of better execution on IRR for equity tranche holders is significant. We find that the excess spread on MFT 2016-1 increases IRR by a whopping ~20% as compared to CHAI 2016-MF1.
Market Outlook
In our view, ABS issuance growth trends remain robust this quarter. We predict Q3 will lead to record issuance exceeding historical quarterly deal volumes including prior quarter ($1.7 billion), and last year’s quarter Q3 ($1.1 billion).
Dynamics remain favorable–a global low yield environment, the short duration of MPL ABS assets, and improved IRRs for junior tranche holders–will lead to growth in MPL ABS securitization as we have suggested in our 2Q 2016 Securitization Tracker.
Platforms that generate strong credit performance, build investor trust, and can improve the distribution of their products (via ABS or otherwise) are well positioned to grow.

Counting Down to the Bank of Facebook, (Bloomberg), Rated: AAA

The latest move in upstart finance will soon arrive in Germany, where a new mobile banking service from phone carrier Telefonica will offer checking accounts, a free MasterCard and small instant loans. Telefonica’s partnering with digital bank Fidor, effectively using its license as a springboard for financial services.

It’s a deal that makes sense on both sides. Telefonica wants to assure customer loyalty while maybe gaining a bit of revenue. Fidor needs scale: its customer base of around 100,000 in Germany is hardly the stuff of nightmares for, say, Commerzbank and its 16 million individual customers. But Telefonica’s 43 million customers is a different ballgame.

fidora n26 customers source Bloomberg

That’s not to say it’s a recipe for success — telecoms’ past forays into finance have been mixed. Vodafone’s early experiments with mobile payments in Africa were a big success. U.S. carrier T-Mobile started offering pre-paid debit cards and money transfers to customers in 2014, and ended the service this month because it faced too many competitors.

Tech Threat
A survey of bankers shows non-banks are seen as the biggest threat, ahead of start-ups or incumbents

tech threat sources

For now, the tech giants have barely scratched the surface. Apple and Google have mobile payment tools, Facebook users can send money to friends through Messenger and Amazon is pitching student loans in partnership with Wells Fargo, but they’re not exactly setting the financial world on fire. Their Asian cousins are more advanced: WeChat and Tencent can now be used to pay for everything from rent to a taxi, and Alibaba runs mutual funds.

They’re set to be the main competitors for the payments business in Europe, according to 96 percent of respondents to a Finextra/FIS survey of finance companies last year.

This doesn’t have to be just a nightmare for incumbents. It could be an opportunity. European banks could lift pre-tax profits by 40 percent in five years if they find the right way to limit the impact of disintermediation and capitalize on new tech, according to BCG Partners.

With more ventures like Telefonica’s on the way, expect the pressure to rise.

Marketplace Lending Is ‘Likely Here To Stay,’ But Needs Clearer Regulation, (S&P Global), Rated: A

Edith Ramirez, chairwoman of the Federal Trade Commission, acknowledged the significant growth of the marketplace lending industry during a June 9 forum hosted by the FTC, the first in a series of events focused on fintech. She mentioned the “rocky spring” for marketplace lending and noted reports that show flagging investor interest in the space. Still, Ramirez said that the potential benefits of the services provided by this new breed of financial institution mean that marketplace lending is “likely here to stay.”

“It’s not a good idea to look at the bank model and just port that over and drop it on,” Knight added. “They are different models and they generate different risks and the regulation should reflect that.”

Conor French pointed out that the regulatory environment in the U.K. is easier to navigate for online lenders who are overseen directly by the country’s Financial Conduct Authority.

Lauren Saunders, associate director at the National Consumer Law Center, pointed to the need to “flush out the bad actors” from the marketplace lending industry.

French of Funding Circle pointed out that the traditional lending choices in the financial services industry are not working. They are leaving many consumers “underserved and underbanked,” he said.

Jessica Rich, director of the Bureau of Consumer Protection at the FTC, said that it is “encouraging to learn that marketplace lenders are taking proactive steps to self-regulate.” Still, she pointed out that self-regulation is “not enough.”

Lending Club’s Savior Is Patrick Dunne, (Seeking Alpha), Rated:A

Lending Club hired Patrick Dunne as its Chief Capital Officer.

Patrick Dunne brings a global network of contacts to Lending Club and has experience in dealing with failed products.

Patrick led the growth of BlackRock’s iShares business, whose products often got shut down.

Patrick has worked as a strategist, whose job is to convince clients that a certain trade is attractive.

Adventurous investors may want to pick up shares on the revival of Lending Club’s growth.

SoFi Consumer Loan Program 2016-2 LLC (“SCLP 2016-2”) ( Press Release Kroll Bond Rating Agency), Rated: A

This is a $480.55 million consumer loan ABS transaction that is expected to close on August 1, 2016.

This transaction represents SoFi Lending Corp.’s (“SoFi”) second rated securitization collateralized by a portfolio of unsecured consumer loans. SoFi currently originates personal loans through its 21 state licenses or complies with certain requirements where a state lending license is not required. There was one prior unrated securitization, in which SoFi or SoFi’s institutional investors were the sponsors and the collateral was unsecured consumer loans.

Please click on the link below to access the full report: SCLP 2016-2

Collaborators Outnumber Would-Be Disruptors at Fintech Demo Event, (American Banker), Rated: A

“Fintech is destroying legacy systems and legacy attitudes,” declared Jesse Podell, the emcee and managing director of startupbootcamp FinTech New York, bounding on and off the stage in high spirits.

Five of the 10 graduates from the startupbootcamp accelerator program pitched technology designed to be used by traditional banks.

AlphaPack‘s product, Sandbox, gives banks a safe place to try out new technologies from fintech partners.

Fluent, a startup that began in Kentucky and is migrating east, has a blockchain-based platform for the $6 trillion trade finance space.

RepreZen set out to solve a longstanding problem for banks: data integration.

VendorMach provides what it calls an “early warning system” for vendor risk management. The software is designed to monitor banks’ vendors for signs of liquidity risk, data breaches and other potential issues.

Visualize Wealth has created white-label software for banks to embed in their mobile apps, to give their customers a view of their investments and an objective sense of how those investments are performing.

The Disruptors

CFX has built an online trading platform for private real estate investment trusts, a market the startup pegs at $84 billion, with 1.2 million retail shareholders.

Factury has a blockchain-based lending platform. “The lending industry is filled with fraud and inefficiency at every level,” said Arturs Ivanovs, Factury’s chief marketing officer. “It’s mostly driven by paper-based processes and human labor. Only 7% of this industry is digitized.” Distributed ledger technology will be the fundamental infrastructure for the lending industry, he said.

Consumer-Facing Plays

Seal has built mobile payments into its app providing professional agreements.

token says it’s working to make credit card fraud a thing of the past. “Our credit cards get stolen every day when we shop online,” said Yana Zaidiner, token’s chief operating officer. The firm’s mobile app lets people use a pseudo credit card and payment identity while keeping their real payment information hidden, similar to another startup called Privacy.com.

Lawnmower.io made a pitch that’s even more meta and of-the-moment than AlphaBox’s: a mobile app for investing in blockchain assets.

United Kingdom

Growth in UK marketplace lending stagnates, (Financial News), Rated: AAA

Alternative finance data provider AltFi Data estimates that UK P2P platforms will have originated between £260 million and £290 million in loans July, in line with the amount lent monthly since April.

Origination had grown rapidly up to March, when lending spiked to reach £345 million.

He said: “It’s too early to tell what the impact of Brexit has been on origination volumes in the marketplace lending industry. We do know that volume growth has been tepid for the last nine months – long before Brexit was dominating the headlines. Brexit, however, may be added to the potential headwinds facing the industry.” According to AltFi Data, the sector has been experiencing a decline in its monthly net lending growth, which measures the change in outstanding principal. Net lending at the UK’s top four platforms was £44 million in June, down 37% from the previous month.

Rhydian Lewis, the chief executive and co-founder at RateSetter, said: “In recent months there’s been a levelling-off in general borrower demand as people defer large purchases, perhaps reflecting economic uncertainty. A more longstanding thing in our sector specifically is that platforms’ focus has been on sustainability rather than growth, with, for example, the involved process of gaining full regulatory authorisation.”

Landbay: From Prelaunch to Established Platform, How Crowdfunding Fueled Business Growth, (Crowdfund Insider), Rated: AAA

John Goodall and Gray Stern launched their company, Landbay, with the help of Seedrs.  Before their website was even live, Goodall and Stern were raising seed capital on the crowdfunding platform for their vision of mortgage finance.  Their first funding round was for only £50,000 in SEIS eligible seed funding. The round closed in December of 2013 at £71,590 with a pre-money valuation of £616,667.

Jump forward three years and several crowdfunding rounds later, and Landbay, a peer to peer lending platform for secured property loans, has now financed over £42 million for hundreds of mortgages. Landbay has joined the highly respected UK P2PFA, received an investment from Zoopla and reported a  £250 million wholesale funding line provided by a European asset management firm and a major bank. Landbay is now moving forward with a strategy of balancing retail investors and institutional money and ultimately securitization. These are a step stones to furthering growth as Landbay has captured traction as a niche player in the vibrant peer to peer lending market in the UK.

We chose crowdfunding as we have found it to be an effective marketing channel to increase brand awareness and to build a network of users from day one, whilst of course raising capital!

Things are going really well at Landbay. It’s now been two years since our first loan completed, and we’ve lent a total of £42.78 million – in fact, we were 2015’s fastest growing peer-to-peer lending platform in the UK.

This startup helps people get student loans funded by grads of Harvard, Cambridge, and other top unis, (Business Insider), Rated: A

Prodigy Finance has so far lent $200 million (£152.7 million) over its platform since launch in 2008, but CEO and cofounder Cameron Stevens believes loans will total $500 million by the end of the year thanks to several big institutional clients who are set to partner with the platform.

Stevens says: “If you’re coming from India and you’ve been accepted to Harvard or London Business School or wherever it may be — all of the domestic students can access finance but if you’re coming and you’re crossing a border, none of your credit history is following you and you’re excluded from all of that.

Prodigy Finance has so far provided student loans to 4,500 people, with an average loan size of $40,000. Most of the funding goes towards post-graduate students who are looking to do an MBA or similar. Stevens says it has a 99% repayment rate on its loans.

Lending Club Scandal Provokes Major UK ‘Peer-To-Peer’ Investigation,(Forbes), Rated: A

Comment: This article brings no new point of view or additional information but summarises well the last few weeks of press in the UK on p2p.

Campaign for Fair Finance (CFF) founder Dr Roger Gewolb has welcomed the intervention of the UK Financial Conduct Authority’s (FCA) new chief executive Andrew Bailey as an investigation gets underway into peer-to-peer (P2P) lending, a relatively new internet-based way of obtaining a loan. It comes amid concerns in the US and UK about how safe the sector is and protections afforded to consumers.

The P2P lending market in the UK grew to over £2.3bn in 2015 from £1.2bn of new lending in 2014 according to data sourced directly from P2P platform loan books and proprietary BondMason research. It has been predicted that while the rate of growth will slow, a further £1bn to £1.5bn will be added in 2016.

“We want crowdfunding and peer-to-peer lending to succeed,” states Gewolb, a British American financier and consumer protection advocate. “We need an alternative to the tired old banks, but they need better oversight without regulating or legislating them out of business.”

Turning to Andrew Bailey’s first grilling before the Treasury Select Committee earlier this week on Wednesday 20 July, the new CEO of the FCA, a main UK financial regulatory body that operates independently of the government, said that he was actually concerned about the way peer-to-peer lending is sold to consumers. And, he believes lenders get very close to promising investors they will get their money back, plus the interest they have been promised.

However, this cannot in fact always be guaranteed in all instances as P2P lenders are not protected by the UK’s government-backed Financial Services Compensation Scheme (FSCS). Any funds lent through a P2P website are not covered by the FSCS, which by contrasts with safeguards traditional bank savers have for up to £75,000 (c.$100,000).

Mr Bailey also even warned that he felt there were similarities in the way UK’s P2P lenders operate to those of Northern Rock, a British savings bank that crashed mightily and had to be bailed out by taxpayers’ money during the financial crash of 2008. One wonders if it could all happen again.

Recently, other questions have been raised about how safe P2P lending actually is. Highlighting matters, Funding Knight, a UK P2P website platform that promised investors returns as high as 12% for lending money to small businesses, was rescued by investment firm GLI Finance earlier this July after falling into administration (a British form of ‘Chapter 11’). Hundreds of people had feared that they would lose all of their money when the company simply ran out of cash.

Gewolb stresses vigorously too that: “The P2P platforms are clearly competing for bank deposits from the public, and yet they are running without anything near the strict supervision, transparency, independent oversight and protection that banks in the UK are subjected to as a matter of course.” “As things stand, the P2P loans market is relatively untried, untested and not vigorously regulated. Who is looking out for the consumer if it all goes wrong?,” asks Gewolb. He has a point.

“We are here to help,” explains Gewolb. “Whilst we want the industry to survive and thrive, we fear that to date there is not the requisite amount of transparency and independent oversight needed.”

“At the same time we are concerned that there could be over reaction by the regulators and the industry could be regulated out of sight,” argues the campaigner. As the Chinese proverb goes ‘Be careful what you wish for – You just might get it’.

Taiwan

Regulatory Development of Peer-to-Peer Lending in Taiwan, (p2p Banking), Rated: A

Comment: the language in the article seems translated from Chinese. 

In order to encourage and accelerate the development of fintech industry in Taiwan, the financial authority, Financial Supervisory Commission (FSC) of Taiwan, has published Fintech Development Strategy White Paper on May 2016[i]. One of main goals is evaluating the possibility of introducing the mechanism of P2P lending into Taiwan’s capital market and providing a regime for regulating this industry.

Some business models of P2P lending are forbidden due to conflict with The Banking Act[ii] in Taiwan. Recently, it is considered to be introduced in Taiwan and evaluated by the recently established project team of the financial authority in Taiwan, Financial Supervisory Commission (FSC)[iii]. Despite the fact that the attitude toward P2P lending industry of financial authority in Taiwan is still vague, as of July 2016 there are three P2P lending platforms already providing their services in Taiwan, including Lend & Borrow[iv], Wow88[v], XiangMinDai[vi]. They have tried to design their business model to avoid potential legal risks. For better understanding of the P2P lending industry, this article tries to provide a brief regulatory overview of Taiwan in following part.

Currently, there is no any specific regulation toward this industry in Taiwan. Although there is no financial regulation of P2P lending in Taiwan, Banking Bureau of FSC has issued a statement[ix] on April 14, 2016, pointing out some legal compliance issues for P2P lending platforms, including (1) platforms should not involve in issuing any securities, (2) ensure privacy of customers, (3) activities of deposit and store-value business without licenses are forbidden, (4) illegal ways of debt-collection is forbidden.

Korea

Online Lending Takes Root in Korea, Spurring Rush for Regulation, (Bloomberg), Rated: AAA

South Korean investors beset by Asia’s third-lowest benchmark yields are embracing peer-to-peer loans that offer average rates of about 9 percent and not a lot of information about where the money winds up.

The nascent online P2P lending market more than doubled to 72.4 billion won ($63.7 million) in the first three months of 2016, Korea’s Financial Services Commission reported on July 12. Cumulatively, P2P loans made since 8Percent became the first platform in December 2014 totaled 153 billion won as of June, the Korea P2P Finance Association of 22 companies estimates.

The expansion is being stoked by South Koreans’ desperation for returns, with the yield for 10-year government bonds slumping to 1.42 percent last week. That’s lower than every Asian nation apart from Taiwan and Japan. The rapid growth has added to urgency for Korea’s government to protect investors from potential fraud, and the Financial Services Commission held a meeting Friday to start drafting industry guidelines. China cracked down last year after a site called ­Ezubao was alleged to have cheated 900,000 investors.

“You must watch out because many P2P businesses don’t clearly disclose where the investment money goes,” said Park Tae-woo, a credit analyst at Samsung Securities.

P2P lenders such as 8Percent, Funda and Midrate directly match lenders with individuals or businesses in need of money. The industry generally offers average rates of about 9 percent to 10 percent, according to the firm 8Percent. The Bank of Korea on July 14 held its benchmark interest rate at a record low 1.25 percent.

Singapore

Singapore: Crowdo gets MAS licence for P2P lending, equity crowdfunding, (Deal Street Asia) ,Rated: A

Singapore-based crowdfunding platform Crowdo has received its full Capital Market Services (CMS) licence from the Monetary Authority of Singapore (MAS) for securities crowdfunding (SCF) to deliver both peer-to-peer (P2P lending) and equity crowdfunding.

The Securities Commission Malaysia is currently in the midst of operationalising P2P financing for small and medium businesses by 2017. It has called for submissions from those interested in launching P2P financing platforms and had reportedly received about 100 submissions.

Crowdo’s platforms in Malaysia and Indonesia were started just a few months of each other. Since then, the ECF platform in Malaysia has gone on to help facilitate both the largest ECF offer in the region and the first ECF offer lead by a venture capital firm Gobi Partners. On the Indonesian lending platform, it has processed more than 600 loans with zero defaults.

“The license granted to us by MAS effectively makes us the first and only operator in Southeast Asia that can undertake P2P lending under a full license. We are here to stay and to play our part in making Singapore a truly exciting global fintech hub,” it said.

India

Should you look at alternative loans?, (LiveMint), Rated: A

There is a high rate of technology adoption in the SME segment and most of the applications get completed online, he said. Capital Float lends Rs.50,000 to Rs.1 crore, for tenors of 60 days to 4 years, with interest rates in the range of 16-19% per annum, Rishyasringa added.

w_money-lead-kBAG--414x621@LiveMint

China

The regulated evolution of P2P lending in China, (Fintech Innovation), Rated: AAA

The latest regional report on Alternative Financing published by the University of Cambridge, Tsinghua University and University of Sydney in partnership with KPMG titled “Harnessing Potential: The Asia Pacific Alternative Financing Benchmarketing Report” positions China as the world’s largest alternative finance market with transaction volume in excess of US$101.7 billion in 2015 – almost 99% of the total volume of Asia Pacific.

The online alternative finance market in China grew from US$5.56 billion in 2013 to reach US$101.7 billion in 2015 averaging 328% growth rate over two years. Peer-to-peer lending, both consumer and business together, account for about 91% of all alternative financing in the mainland.

alternative_financing_in_china_2015-600x349

Peer-to-peer (P2P) lending remains the popular option for consumers and small and medium-sized businesses (SMBs) in China that otherwise would have difficulty getting funding from banks. The lack of regular oversight during the early days of P2P lending in China has led to a mushrooming of online lending platforms with some estimates of as many as 2,595 P2P platforms in 2015. The closure of over 896 such platforms in 2015, in addition to high profile scandals such as the eZubao Ponzi scheme, has prompted the China Banking Regulatory Commission (CBRC) to released new rules.

growth_of_alternative_financing_in_china_2015

China’s CreditEase to Raise $ 200 Million for Private Equity Fund, (Bloomberg Tech), Rated: AAA

CreditEase Group, which runs a wealth manager and peer-to-peer lender Yirendai Ltd., is seeking to raise $200 million for a global private equity fund as Chinese individuals step up investing abroad.

The fund, which CreditEase started in May, invests in companies directly as well as private equity funds. Representatives from KKR and Blackstone declined to comment.

A separate $80 million pool has invested $50 million in consumer loans from U.S. Internet lenders Prosper Marketplace Inc. and Avant Inc., according to Williamson. The firm has also set up funds focusing on areas such as financial technology and real estate both overseas and in China.

CreditEase distributes products through its 3,200 wealth advisers from about 150 offices in China. The wealth business had more than $6 billion of assets under management at the end of last year. The firm is the majority shareholder of Yirendai, the first Chinese online-loan platform to obtain an overseas listing. Shares of Yirendai have more than doubled in New York trading this year.

Default Pain Turns Into Gain for China’s Debt Rating Companies, (Bloomberg), Rated: AAA

China Bond Rating Co. started selling “The Riskiest Chinese Bond Issuer List” this year and has offered more training sessions to financial institutions than in the whole of 2015. Golden Credit Rating International Co. said it had set up a new department to address investors’ inquiries and provide seminars. S&P Global Ratings and Moody’s Investors Service also reported a spike in interest from fund managers.

Chinese regulators have stepped up controls on rating firms after investors expressed dissatisfaction. The China Securities Regulatory Commission said in March it had issued warning letters to six of them on violations.

Dagong Global Credit Rating Co., Shanghai Brilliance Credit Rating & Investors Service Co., China Chengxin International Credit Rating Co. and China Lianhe Credit Rating Co. cut a record 88 bond issuer ratings in the first half of this year, compared with 57 downgrades in the same period of 2015, according to data compiled by Bloomberg. Corporate bond defaults dropped to zero in July, from one in June and five in May, amid signs that local governments are helping companies in financial trouble.

china downgrades vs upgrades chart

China Bond Rating’s Yang said there has been an “obvious” increase in foreign investor subscriptions to the firm’s list of the riskiest bonds. It provides risk appraisal on debt portfolios for investment firms, and started issuing a daily report evaluating newly sold notes from February. The firm has trained almost 1,000 people nationwide on credit risk management through 10 workshops it has held this year, up from 7 in 2015.

“The surging defaults are giving space for rating agencies to develop risk management businesses,” said Fullgoal’s Ye. “But Chinese regulators should make sure there are firewalls between a ranking company’s rating and investment advisory services.”

Luo Guang, chairman of Golden Credit, sees more defaults in the second half than the first.

China has a boom in ‘get rich quick’ schemes, instead of the economic reform it needs, (South China Morning Post), Rated: A

The Chinese government has been promoting the slogan “All People Innovate, Tens of Thousands Start Business”.  This movement is becoming a bubble with tragic consequences down the road. Starting a business is hard. Innovation is harder.

The start-up mania won’t solve China’s economic difficulties. The economy has been in the doldrums for four years because the government is not addressing the structural problems. The truth is that the investment and export-led model has run into a brick wall; the world is just not big enough for China to develop like Japan or the Asian tigers.

China’s needed reforms are not coming because they conflict with the political doctrine of concentrating economic power in the state sector. Hence one bubble after another has been stoked in the hope that a miracle would happen to the economy without the need to shrink the government.

P2P is the latest, but by no means the biggest, example of the true nature of China’s bubbles. They are about robbing the masses to enrich the few, all in the name of innovation or boosting the economy.

“Get rich quick” is the reigning ideology today, especially for the young. Nothing fits the description better than the internet bubble.

China should stop chasing pipe dreams and get back to basics. Its economy has great potential. Its per capita income could be doubled just by carrying out proper reforms: first, household disposable income should be lifted from 40 to 60 per cent of GDP; second, investment should decrease to 30 per cent from half of the economy; and third, the market, not the National Development and Reform Commission, should decide where and how much to invest.

The hard part is that all these necessary reforms depend on shrinking the state sector and limiting government power. China’s future depends on it.

Author:

George Popescu
George Popescu