Thursday February 14 2019, Weekly News Digest

OnDeck revenues

News Comments Today’s main news: SoFi invests in Apex Clearing. Zopa chairman steps down. Ratesetter ISA tops 17M GBP in first year. Assetz Capital surpasses 700M GBP in lending. Revolut denies getting Lithuanian bank license to influence politics. Today’s main analysis: OnDeck’s Q4 earnings review. Today’s thought-provoking articles: What’s happening with auto loans. How Amazon controls small businesses with lending. Banks […]

The post Thursday February 14 2019, Weekly News Digest appeared first on Lending Times.

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News Summary

United States

SoFi held talks to acquire a fintech company backing some of the hottest robo advisors as it eyes expansion beyond its lending roots (Business Insider), Rated: AAA

OnDeck Q4 2018 Earnings Review (Lend Academy), Rated: AAA

The company achieved much of what they set to do in 2018 and posted another solid quarter as they rounded out the year. Q4 2018 net income came in at $14 million on gross revenues of $109.5 million. The company ended the year with a total of $27.7 million in net income. Below is a snapshot of their Q4 and 2018 full year highlights.

As of Q4 2018 the company still had $246 million of excess debt capacity.

BB&T and SunTrust merger; Tech in Bank Earnings (PeerIQ), Rated: AAA

The Fed’s January 2019 Senior Loan Officer Survey showed that banks tightened standards for commercial real estate (CRE) loans. Overall, banks tightened standards for credit card borrowers. However, lending standards for most categories of consumer loans and C&I loans remained unchanged. Banks also reported weaker demand for both business and household loans.

Source: Federal Reserve, PeerIQ

BB&T agreed to buy SunTrust for $28.2 Bn – the first major mega-bank deal in a decade. This deal will create the sixth-largest US retail bank. The M&A is supported by a constructive regulatory environment fostered by the OCC and CFPB, among others. The previous large acquisition was the JP Morgan acquisition of Bank One in 2004.

A major motivation for the deal was the ability of both banks to pool resources to build better digital offerings. SunTrust has a FinTech focused fund and has partnered with FinTech lenders to provide home improvement and small business loans. Banks are investing billions in digital tech spend to maintain relevance with customers that are increasingly eschewing bank branches for a seamless, online, full-service banking and wealth management customer experience.

Auto Loans in High Gear (Liberty Street Economics), Rated: AAA

Total household debt increased modestly, by $32 billion, in the fourth quarter of 2018, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Although household debt balances have been rising since mid-2013, their sluggish growth in the fourth quarter was mainly due to a flattening in the growth of mortgage balances. Auto loans, which have been climbing at a steady clip since 2011, increased by $9 billion, boosted by historically strong levels of newly originated loans. In fact, 2018 marked the highest level in the nineteen-year history of the loan origination data, with $584 billion in new auto loans and leases appearing on credit reports, up in nominal terms from 2017’s $569 billion. In this post, we take a closer look at the composition and performance of outstanding auto loan debt using the New York Fed’s Consumer Credit Panel (CCP), which is based on anonymized Equifax credit data and also the source for the Quarterly Report.

Amazon’s lending perpetuates the tech giant’s control over small businesses (Tearsheet), Rated: AAA

Amazon runs a marketplace with 2.5 million sellers, 24,000 of which had more than $1 million in sales on the platform in 2018. These sellers represent the potential customer base for the company’s lending model.

From this base of borrowers, Amazon has been able to reportedly lend over $1 billion in 2017, exceeding  $3 billion in total lending volume from its inception in 2011 to 2017. As for 2018, in its annual report, the company reported receivables outstanding from their lending program of $710 million, up from $692 million a year prior.

With access to detailed information and data on each seller, Amazon is able to mitigate lending risk substantially. Seller metrics only available to Amazon are utilized to determine a small business’s creditworthiness. Sales history, product offerings, customer service feedback, and shipping metrics enable Amazon’s lending business to have better insight into how to accurately issue loans. This allows Amazon to have an understanding of the health of each small business on its seller marketplace.

Goldman Sachs, Point72 and others invest $ 44 million in business credit startup Nav (Reuters), Rated: A

Nav, a startup that gives small businesses free access to their credit reports, said on Monday that it had raised $44 million from investors including Goldman Sachs Group Inc (GS.N), Point72 Ventures and Experian Ventures (EXPN.L).

Well Fargo Outage Points to Opportunity in Digital Banking (Lend Academy), Rated: A

Wells Fargo is still digging out from a PR disaster last week when the bank went offline for a large segment of customers due to a fire alarm triggered in a server facility in Minnesota. Customers could not access the mobile app, the website or ATMs. The incident has been used to highlight how big an opportunity there is for fintech firms or more nimble banks.

What the outage shows is that bank infrastructure is still stuck in the past, analysts rightly askedwhy Wells Fargo did not have the bank running on a cloud based system.

Digital bank Chime seemed to benefit from the news with more than 10,000 accounts being opened, a record 24 hour period for the startup.

new survey by Fraedom says 80 percent of banks believe challengers have impacted their business and 30 percent say they are their biggest threat.

Susan Ehrlich of Earnest (Lend Academy), Rated: A

Our next guest on the Lend Academy Podcast is Susan Ehrlich, the CEO of Earnest. They are one of the largest student loan refinancers in the country and they also offer personal loans. Back in 2017 Earnest was acquired by the student loan servicer Navient which was itself spun out from Sallie Mae in 2014.

Government Shutdown Slows SBA Lending Volume, Approval Percentage Dipped Slightly in January (GlobeNewswire), Rated: A

Business loan approval rates dropped three-tenths of a percent at regional and community banks in December 2018. Small bank approvals dropped a full percentage point from 49.9% in December 2018 to 48.9% in January.

Small business loan approval rates for big banks remained at a record high 27% in January 2019, according to the Biz2Credit Small Business Lending Index, which examines more than 1,000 small business credit applications made via its online lending platform.

Goldberg added that since reopening on January 28, her office has guaranteed more than 200 SBA loans worth $59.3 million.

Institutional lenders climbed up to 65.1 %, a jump of three-tenths of a percent from December’s mark of 64.8%.

Loan approval rates among alternative lenders rose from 56.6% in December to 57.3% in January, a jump of seven-tenths of a percent.

Citi rolls out new personal loan, online savings account (American Banker), Rated: A

Citigroup has launched a new consumer loan product and a new high-yielding savings-account as part of its rollout of its new digital bank.

The New York bank recently introduced Citi Flex Loan, which allows select existing Citi credit card customers to convert part of their credit lines to a loan with a fixed annual percentage rate, Mark Mason, Citigroup’s incoming chief financial officer, said Tuesday at an investor conference.

Square’s banking bid avoids backlash that doomed Walmart’s (American Banker), Rated: A

As Square seeks federal approval for a Utah industrial loan company, the fintech’s bid has so far avoided the kind of loud, public opposition that marred past ILC bids by higher-profile nonbanks.

Community banks still criticize the ILC charter as a banking loophole for non-financial firms, and the Independent Community Bankers of America opposes Square’s application.

Almost 60% of small business owners launch with less than $ 25,000 (CNBC), Rated: A

At least that’s according to entrepreneurs polled recently by Kabbage, a financial services and data platform serving small businesses. More than half of those polled, or 58 percent, started their businesses with less than $25,000. A third started with less than $5,000.

These numbers track with the latest data from the U.S. Census Bureau, which found that the median cost to start or acquire a company is about $25,000. It did find fewer businesses that begin with less than $25,000, only 46 percent, though that could be due to its inclusion of new owners who purchase existing operations as well owner starting from scratch.

LoanStreet Adds Commercial Lending Features for Financial Institutions (Crowdfund Insider), Rated: A

LoanStreet, an online platform that enables traditional finance like banks credit unions and other direct lenders to streamline the process of sharing, managing, and originating loans, has added new features. The SaaS platform now offers commercial loan origination and administration solution for any size financial institution, loan or deal volume.

LoanStreet’s new lending features include:

  • Built-in collaboration tools offering the flexibility to originate the loan best suited to your borrowers’ needs without sacrificing the ability to invite other financial institutions into the deal.
  • Single access point allowing all parties, including borrowers, lenders, attorneys and auditors, continuous and secure access to the same information.
  • Integrated platform from origination to maturity avoids re-keying, duplication of efforts and eliminates transfer errors and other critical information loss that occurs over time.
  • Efficient process management enabling online, borrower self-service of key administrative tasks — including online payment acceptance — while improving internal controls and information flow.
  • Automated reporting facilitating completion of all applicable regulatory and financial entries for you and every investor.

Velocity Investments sues woman for breach of contract, seeks ,500 in damages (Louisiana Record), Rated: A

Velocity Investments LLC, assignee of Lending Club Corporation, filed a complaint against Heather Darling on Feb. 12 in the 24th Judicial District Court. According to the lawsuit, the plaintiff states that the defendant has failed to pay off the balance of $22,495.23 plus interest on a contract between the parties. The defendant is accused of sums due on an open account and breach of contract.

Online Loan Companies Are No Easy Fix for Desperate Borrowers (Real Daily), Rated: A

Lending Club is currently the largest online lender in the world. By some estimates, Lending Club, which launched in 2007, facilitated anywhere between $35 billion and $55 billion in online loans in 2018.

Now as more financial institutions are beginning to extend loans, Americans are falling even deeper into debt again. Americans, as individuals and households, owed over $13 trillion dollars, collectively, in 2018.

Best News We’ve Heard All Day: More Single Women Own Homes Than Single Men (Pure Wow), Rated: A

Online loan marketplace LendingTree reports that on average, single women own around 22 percent of homes, while single men own less than 13 percent. The study states that the gender gap in housing across the country is particularly interesting “given the average woman in the U.S. only makes 80 percent of what the average man does.” Interesting, indeed. (We can think of another word for it.)

Thoma Bravo Is Buying Digital-Focused Mortgage Company (WSJ), Rated: A

Thoma Bravo LLC has agreed to buy mortgage software firm Ellie Mae Inc. for $3.7 billion, the latest indication that challenges in the home-lending market are spurring consolidation across the industry.

The transaction will give the private-equity firm control of a company whose technology has been used to help automate the closing of millions of home loans. Based in Pleasanton, Calif., Ellie Mae handles the technology that underpins the entire home-loan origination process, and its services are used in

INSIKT Changes Name to Aura (Business Wire), Rated: B

INSIKT, a mission-driven financial technology company that offers affordable loans to hard-working families, today announced that it has changed its name to Aura to expand its focus on creating greater financial health, independence and economic stability for millions in America.

Roostify Expands Advisory Board with Investment Virtuoso (Roostify), Rated: B

Roostify, the San Francisco-based digital lending platform provider, announced today the addition of financial services consultant Marshall Lux to its advisory board. Lux, a distinguished consultant, advisor and educator, brings more than 30 years’ experience in private equity to the rapidly expanding business and reflects Roostify’s commitment to perfecting a scalable operational model and further developing an ecosystem of technology partners and strategic alliances.

LendIt Fintech USA 2019 (LendIt), Rated: B

April 8-9
Moscone West
San Francisco

HIGHLIGHTED KEYNOTES

Sallie Krawcheck
CEO & Co-Founder
Ellevest

Rob Frohwein
CEO & Co-Founder
Kabbage

Steven Streit
CEO
Green Dot

Mike Cagney
Co-Founder
Figure

United Kingdom

Zopa chairman Giles Andrew to step down after 15 years (Independent), Rated: AAA

Zopa’s co-founder Giles Andrew is to step down as chairman after 15 years at Britain’s oldest peer-to-peer lender.

Zopa appoints Virgin veteran McCallum as chairman (Finextra), Rated: A

P2P lender Zopa has appointed former Virgin Management CEO Gordon McCallum as chairman as it gears up for the forthcoming launch of its new banking venture.

Ratesetter ISA tops £175m in first year (AltFi), Rated: AAA

The peer-to-peer lending platform said its ISA accounts for one-fifth of its £830m of funds under management.

Peer-to-peer lending platform Ratesetter said it has been “blown away” by the popularity of its first ISA product, which has hit £175m of subscriptions a year after launch.

Assetz Capital surpasses £700m lending mark (Bridging and Commercial), Rated: AAA

Assetz Capital has now lent over £700m to SMEs and property developers since launching in 2013.

The P2P lending platform has enjoyed significant progression, providing over £200m of funding in the eight months since it surpassed the £500m lending milestone in June 2018.

Former Assetz Capital founder launches fintech consultancy (AltFi), Rated: A

The co-founder of one of Europe’s largest peer-to-peer lenders has launched a fintech consultancy to help young firms “avoid some of the mistakes made by the early incumbents of the industry”.

Former Assetz Capital chief credit officer Andrew Holgate will lead a team of City veterans at consultancy Equitivo, which will help growing fintech firms raise cash, focus on strategy, trim operations and boost performance.

‘There is no magic bullet, people will get P2P over time’ (FT Adviser), Rated: A

The chief operating officer of peer-to-peer platform Relendex, Max Lehrain, has concerns about the Financial Conduct Authority’s crack down on P2P lenders and crowdfunding platforms.

UK challenger bank Starling secures £75m for European expansion (Fintech Futures), Rated: A

Life is sweet for UK challenger bank Starling as it has raised £75 million in funding for its expansion plans in Europe.

It got £60 million in a Series C round led by Merian Global Investors, including the Merian Chrysalis Investment Company.

Monzo Launches First 100 Business Accounts (Crowdfund Insider), Rated: A

UK challenger bank Monzo announced on Monday the launch of its first 100 business accounts. This news comes just a few months after Monzo revealed it was considered business banking, with Founder and CEO, Tom Blomfield, stating 2019 plans included business accounts. Speaking about the new accounts, Monzo reported:

Main Street banks say fintechs like Monzo, N26 and Chime pose the biggest disruptive threat to their businesses (Business Insider), Rated: A

Main Street banks believe upstarts like Monzo, N26 and Chime, known as challenger banks, pose a significant threat to their business, according to a recent survey.

Fraedom, a credit card specialist who works with companies like Visa, SunTrust, and Bank of Montreal, surveyed bankers on what some of the biggest impacts to their business will be in 2019. The vast majority (80%) believe challenger banks have an increased impact to their business, and 30% pegged the new competitors as the biggest disruptive threat to their business in 2019.

Tandem Bank boss calls for rate cut to kick-start UK economy (AltFi), Rated: A

Ricky Knox, chief executive of app-only lender Tandem Bank called on the central bank to cut rates to kick-start growth, as currently savers are locking away cash in specialist higher interest accounts.

Peer-to-Peer Lending and Brexit (4th Way email), Rated: A

Shares plunged and the pound plummeted to a 31-year low when the UK voted to leave the EU. More recently chaotic Brexit negotiations indicate a disorderly exit that could see investors avoid traditional investments in the UK, but what does this mean for peer-for-peer lending and should lenders be worried?

Bank and P2P lending is far less volatile than equity investing, because:

  • It is short-term orientated.
  • Lenders easily diversify widely across thousands of investments – loans – as opposed to a typical stock investor who diversifies across hundreds of shares through share funds.
  • In P2P lending, buy/sell price swings, often fuelled by uncertainty, are usually irrelevant, since lenders hold loans for the full term.
  • Lenders are usually in a better place in the queue compared to equity investors when recovering losses is involved, which can mean smaller losses on individual investments (loans) that go wrong.
  • With lending being data driven, recession conditions are easier to plan for. A turbulent P2P Brexit would mean a tripling of defaulting loans in some kinds of lending and cut-price sales of borrowers’ assets. Interest rates and reserve funds are prepped for most disasters, leaving a very low chance of a sizeable overall loss on a well-diversified, low-risk lending portfolio.

Most investors in peer-to-peer lending are using platforms that are run by people with relevant banking experience. The banks, when we look at their bread-and-butter lending, have found it easy to maintain net profits even during multiple downturns over the past 20 years, which includes the Great Recession. This is across the spectrum of lending, from buy-to-let mortgages to personal loans and credit cards. Perhaps surprisingly, retail and small business lending combined was still profitable for the UK’s high street banks during the 2008 and 2009 crash.

Learn more about 4th Way here.

Mojo Mortgages secures £7million to revolutionise the UK mortgage experience (Manchester Digital), Rated: A

Mojo Mortgages, a fintech start up based in the North West has secured £7million in Series A funding to transform the mortgage experience.

Mortgage Brain boosts user numbers (Mortgage Introducer), Rated: A

Mortgage Brain welcomed over 2,000 new customers during 2018 with a host of national networks, corporate firms and individual adviser firms choosing to use one or more of its products and services.

A number of new customers – including Censeo, Intelligence Mortgage Solutions, Your Expert Group, Affinity Mortgages and Your Mortgage Solutions – as well as a number of contract renewals and user license increases, have all contributed to Mortgage Brain’s growth throughout 2018.

UK inflation below official target for first time in 2 years (Miami Herald), Rated: A

Lower energy costs as well as a waning impact from the pound’s sharp fall in the aftermath of the country’s Brexit vote have helped consumer price inflation in Britain fall below the Bank of England’s target of 2 percent for the first time in two years.

The Office for National Statistics said Wednesday that consumer prices rose by 1.8 percent in the year to January, down from the 2.1 percent recorded in the previous month. Inflation has been consistently falling since August as the effects of the pound’s decline drop out of annual comparisons. The latest decline was further accentuated by a fall in the price of electricity, gas and other fuels.

Inflation is now at its lowest since January 2017, when inflation was also 1.8 percent.

Arbuthnot Commercial ABL delivers £12m refinancing facility (Bridging Loan Directory), Rated: B

Arbuthnot Commercial Asset Based Lending Ltd. is delighted to announce it has completed a £12m refinancing for L&C Limited, trading under Red 7 Marine (“R7M”), provider of nearshore access solutions to the UK marine construction and maintenance industry, and an investee company of Perwyn Private Equity (“Perwyn”).

European Union

UK fintech unicorn Revolut forced to deny links to Russia (Business Insider), Rated: AAA

Unicorn challenger bank Revolut has strongly denied claims that its activities in securing a banking license in Lithuania are attempts to interfere in the country’s politics.

Revolut was granted a European Banking License in Lithuania in December but has since faced claims of interfering in the country’s political processes by Lithuanian Member of Parliament Stasys Jakeliūnas, chair of the Lithuanian parliament’s budget and finance committee.

German Lending Marketplace auxmoney Overtakes Midsize Banks in Consumer Loan Origination (Crowdfund Insider), Rated: AAA

Düsseldorf-based Fintech auxmoney has surpassed its targets in 2018. Loan volume increased by 74 percent compared to 2017. Raffael Johnen, Founder and CEO of auxmoney, commented:

“While the major German banks are in crisis mode, the leading German fintechs are always setting new records. With our continuously strong growth, we managed to be the first credit marketplace to catch up with medium-sized banks in Germany.”

It issued new loans totaling €551 million last year.

Auxmoney Now Stands for 0.5% of the Market of German Consumer Loans (P2P-Banking), Rated: A

German p2p lending marketplace Auxmoney announced that it has facilitated 551M EUR in consumer loans in the year 2018. Up 74% compared to 2017. Approximately 73,000 loans were financed. That would mean Auxmoney now stands for a market share of roughly 0.5% of the market.

Gymshark teams up with Klarna to announce pay later service (RLI), Rated: B

Fitness wear brand Gymshark has announced the launch of a pay later service in the UK, Sweden, Norway, Finland and Denmark. The company is now in a partnership with Klarna, a payments provider which will offer Gymshark the new payment option. The payment service will allow online shoppers to try on items at home before paying for the order.

Instantor releases report on how machine learning is revolutionising credit risk management in Europe (Fintech Finance), Rated: B

Instantor, the 3rd. fastest growing Swedish FinTech who makes tough calls easy within credit risk management presents “Credit Risk Management 2019 – How Do You Stack Up?”, a report based on a survey conducted by Instantor across Europe among top executives within leading financial organisations. The report reveals that two-thirds of these players are well underway to implementing machine learning (ML) and the majority benefits from its implementation within credit risk management.

International

30 Under 30 Europe: The Young Money Merchants Shaping Financial Markets In 2019 (Forbes), Rated: AAA

Finance is hardly known for its youthfulness, yet this year’s Finance 30 Under 30s are proving that an old industry can learn new tricks. These young venture capitalists, fintech entrepreneurs, crypto enthusiasts and Millennial bankers, with an average age of just 27, are reshaping the sector and transforming our relationship with money.

The Next Global Financial Meltdown Is Just Around the Corner (Equities.com), Rated: AAA

As Bloomberg reported last year:

Shadow banking in China has ballooned into a $10 trillion ecosystem which connects thousands of financial institutions with companies, local governments and hundreds of millions of households. The practice is now at the center of a Chinese government-led regulatory crackdown aimed at defusing financial risks that threaten the wider economy. Unlike in the U.S., traditional commercial banks drive shadow banking, or unregulated lending, in China. That’s because the banks have been able to keep shadow-banking assets off their balance sheets, thereby sidestepping regulatory constraints on lending.

About 169 million Chinese, or about 12 per cent of the population, have invested in wealth management products online, a rise of 66 per cent from two years ago, according to a Moody’s report published this month. Essentially, they are putting money into the shadow banking system.

“The picture is different in the European Union. Here, the shadow sector now accounts for perhaps 30–40% of total financial intermediation. But it is growing. Between 2012 and 2016, shadow banking as broadly measured expanded by almost 40% in the eurozone.

Atlanta-based IDology to Be Acquired by GBG for $ 300m (PR Newswire), Rated: A

GBG, the UK-headquartered Identity Data Intelligence specialist, today announces that it has conditionally agreed to acquire the entire issued share capital of IDology, a US-based provider of identity verification and fraud prevention services, for $300m (£233m) in an all-cash transaction.

Nexo lending to offer crypto-backed loans with Blockport exchange (Bankless Times), Rated: B

Blockport users will be able to use the Nexo platform to get crypto loans, offering them another alternative to selling their cryptocurrencies for fiat currencies. Instead of selling they cryptocurrency assets, Blockport users can now keep their crypto, with all potential upsides, and leverage them to get instant access to cash.

Australia

Next Growth Wave: Fintech (Seeking Alpha), Rated: AAA

In this article we look at some fintech companies, beyond investor’s normal horizon of the United States. In Australia there is a small cluster of listed fintech companies that have started to explode. Some have made gains of 400% in a year and more than 1,000% on the back of strong revenue and turnover growth. Moreover because Australian companies lack access to large scale V.C. investments, technology companies often need to capital raise through a public listing.

Zip Co. (ASX: Z1P)

Zip Co. is quite similar to Afterpay and in some ways its closest competitor with an established market position. However in addition to payment splitting, it also offers interest based loans and is different in other ways.

  • Zip Co. is smaller with a market capitalization of $380 M AUD (about $266 M USD), but still has 12,600 retail partners including most of Australia’s largest retailers, however it hasn’t yet entered the U.S. or the U.K.
  • Zip Co. has Zip Pay, which provides a payment splitting application with no interest, but with more flexibility in length of time or repayment amount than Afterpay’s solution.
  • Zip Co. also has Zip Money also provides loans for purchases above $1,000 AUD, with a 3 month interest free period, but with an establishment fee of up to $99.
  • Source: Seeking Alpha

Labor’s negative gearing policies could hurt first-home buyers (Your Mortgage), Rated: A

“Despite Australia’s tight regulations on foreign investment, other overseas property markets are tighter – including China, Canada and New Zealand,” Driscoll said. “Unlike in Australia, the Chinese lack many appealing alternative investments at home and, due to government crackdowns on peer-to-peer lending, private equity funds and with the majority of their property being leasehold, many investors are forced to look elsewhere.”

India

India’s fintech future looks bright, but it needs to find its raison d’être (India Times), Rated: AAA

Yet there is more room for growth. The market in India is still small; far more deals are being done in China, and for far higher valuations. Last year alone, venture capital investments into Chinese fintechs were more than 10 times larger than those in India, with 75 percent more deals.

Although the value of investments in India declined by 21 percent in 2018 over the previous year, the number of deals actually rose 12 percent, making 2018 the most active year on record for fintech financing.

RBI may change Rs 10 lakh lending cap on P2P platforms, say P2P players (India Times), Rated: A

Peer to Peer or P2P players are hopeful that the comprehensive financial data sought by the Reserve Bank of India might help the regulator to take some major policy decisions concerning the industry.

Asia

Hundreds of unlicensed P2P lenders still operating in Indonesia (The Jakarta Post), Rated: AAA

The Financial Services Authority (OJK) has found that 231 illegal peer-to-peer lending (P2P) providers, including those from other countries, have been operating in the country since January.

An Overview on Peer-To-Peer Lending in Indonesia (Legal Business Online), Rated: A

Two years following the enactment of Financial Service Authority (Otoritas Jasa Keuangan/”OJK) Regulation No. 77/POJK.01/2016 of 2016 (POJK 77/2016), Peer-to-Peer Lending (P2P Lending) has grown popular in Indonesia. Based on data from OJK per Oct. 2018, a total of 15,990,143,141,355 rupiah has been distributed to the borrowers in P2P Lending. It has grown 432.5% from Jan. 2018 until Oct. 2018. Until Dec. 2018, the number of P2P Lending Platform which has been registered and supervised by OJK has reached 88 companies, one of them has been given a license.

Canada

Finastra announces Siobhan Byron as new Head of Technology Enabled Managed Services (Finastra), Rated: A

Finastra has appointed Siobhan Byron as Senior Vice President and Head of Technology Enabled Managed Services (TEMS). In this role, she oversees planning and execution, sales and marketing, research and development and product management across four lines of business including Checks, Enhanced Services, Student Lending and Canadian Mortgage Technology, all in the Canadian market. She oversees more than 1,300 employees that make up Finastra’s TEMS business.

Authors:

George Popescu
Allen Taylor

The post Thursday February 14 2019, Weekly News Digest appeared first on Lending Times.

Daily News Digest

bank-fintech partnerships

Consumers are increasingly finding that new technologies are making online lending more accessible, simple and affordable. Online lending has entered the mainstream, yet it is still a long way from challenging the domination of banks in our financial lives. Online lending has also evolved from being a competitor of traditional banks to a collaborator for greater […]

bank-fintech partnerships

Consumers are increasingly finding that new technologies are making online lending more accessible, simple and affordable. Online lending has entered the mainstream, yet it is still a long way from challenging the domination of banks in our financial lives. Online lending has also evolved from being a competitor of traditional banks to a collaborator for greater success.

A LendIt 2018 panel discussion moderated by Kevin Wack, a reporter at American Banker, delved deeper into these emerging partnerships between banks and online lenders. The moderator believes that the current discussion is the 2018 version of a 2015 discussion–partnering with banks.

In 2015, the discussion revolved more around how banks should respond to the rise of online consumer lending and whether they should become a part of the revolution. But the current discussion is about how the banking industry has shaped up with the advent of online lending.

Introduction of Panel Members

Barclays: Jeremy Takle is the head of US Digital Consumer Bank at Barclays. Introducing the company, he shared that Barclays is a relatively new entrant in the US online lending segment. The company acquired Juniper Bank in 2004 and launched a consumer lending product in 2016.

Prosper: Usama Ashraf from Prosper discussed how his company emerged as the pioneer in US online lending. The Prosper platform was founded in 2006 and since has facilitatedAshraf over $12 billion in originations.

Lending Club: Sameer Gulati, the COO of Lending Club, was also a part of the panel discussion. Lending Club has done about $32 billion in loans, which runs the gamut of personal loans, business loans, auto re-financing solutions, and patient solutions.

Lightstream: Another panelist was Todd Nelson from LightStream, a company that works to extend loans for practically everything. LightStream is a branch of SunTrust, and making loans is an important part of SunTrust. It focuses on providing the same products as SunTrust but sets broader benchmarks.

Bank, Fintech, and Online Lender Competition

Gulati holds the view that there is an increasing amount of competition from banks, but this will increase opportunity for the industry. The competition will help make online lending a mainstream product. Ashraf also believes that bank competition is increasing, but marketplace lenders are the largest players in the lending space. Banks in the US have large deposits that enable them to grow the asset side of the equation at a comparatively cheaper rate.  As a result, competition is increasing, especially for personal loans.

Takle said fintech lenders are relatively new entrants in the lending space. The fintech sector has undergone a drastic transformation thanks to the changing role of technology and innovation. The huge addressable market that online lending could fill was a major factor that attracted Barclays to this market. Moreover, Goldman Sachs and other regional banks are entering into the market to tap into the huge opportunity.

Nelson believes LightStream is customer-centric. The company designs its products according to the needs of the customer. The debt products are designed to meet the clients’ requirements and to offer flexible repayment structures. When asked how different are the credit standards at LightStream, he said LightStream is a regional bank over 100 years old. The business has a modern risk appetite but is less aggressive compared to other banking companies in the space.

Credit Risk Appetite For Banks

Ashraf Wack said traditional banks have limitations pertaining to the type of risk they will take on due to their investor base.

Gulati discussed how banks are at the top end of the credit spectrum with 40% of buying volume. That comes to about $4 billion for Lending Club. The business is focused on devising ways to say yes to more people in the credit market and is dependent on non-traditional data to increase penetration in the credit markets.

Wack asked the panel to put forth their thoughts on how “Frenemy” is used as a familiar term for the banking sector and fintechs.

Ashraf said he believes collaboration between banking and fintech is critical. In the initial days, it was not clear how banks and fintechs should work together. But now the collaboration is beneficial as banks are meaningful buyers of loans and play an active role in the capital markets. The collaboration of banks with fintechs will also provide opportunities for cross-selling products.

Takle believes there are a lot of opportunities to collaborate across both vertical and horizontal segments in online lending. This allows for rapid scaling with significant funding and access to latent demand.

Bank-Fintech Partnerships

Talking about the growth of Lending Club, Gulati shared the framework for the company’s partnerships with banks. Lending Club has been able to add new product categories on the basis of its discussions with funding partners. He also thinks that protecting the intellectual property of a business is crucial to the growth of the business. At times, few partners are inspired by the business’s products and end up developing similar products.

Nelson went on to say that banks should not be thought of as a monolithic figure and advises online lending platforms not to compete with banks for customer acquisition, but to instead benefit from the combined capabilities of both spaces.

Ashraf believes these relationships usually start with one aspect and, over time, add more elements to a mutually-beneficial relationship.

The Relative Strengths of Banks and Fintechs

Ashraf said the expertise of online lending platforms in tech combined with banks’ ability to attract customers will together help the space grow.

Nelson believes that fintechs are successful in identifying the needs of the customer quickly and banks have expertise to develop scalable products to cater to these needs. He also praised billionaire founder of Prosper and Ripple Chris Larson for his long-term vision.

Talking about banking as a service and its appetite to fulfil the customer’s needs, Ashraf said that a lot depends on the product type and the space for which it is considered. There are three main ways that banks are currently considering the fintech space, he said:

  1. Regional banks are looking to access the customer base of fintechs
  2. Banks want to incorporate technology in their systems
  3. Banks and fintechs can collaborate on a variety of products

The Final Take

Takle believes there are a lot of customers who are looking to shop around for a single product. Gulati emphasized how important customer ownership is for a company. Most players operating in the space do not understand the meaning of the term nor its implementation in business.

Customers do not want to be owned. LendingClub believes that its job is to offer the products, services, and experiences but not to control the customer. If the customer’s need is matched better elsewhere, they should go there.

Prosper strives to offer the best customer experience and works to make sure that customers are well educated on the product that the business is offering.

Conclusion

Ending the panel with a final discussion on marketing partnerships, Nelson said businesses are operating in a space where there are big aggregators who commoditize products and there is massive competition on the price. Although price constitutes an important part of the entire equation, it must not be considered the only parameter. It is important that businesses understand products should not just be commodities in number but something that is a great experience for the customer and provides overall value to all stakeholders.

Author:

Written by Stephanie Vaughn.

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

The QED Matrix Helps Leaves and Mountains Become Trees

QED Matrix

Nigel Morris is a co-founder of Capital One and has led it to emerge as a multi-billion dollar behemoth. During his time at Capital One, he noticed there is a gap between banks and the fintech industry. To bridge this void, his team rolled out QED Investors in 2007 and was able to bring on board […]

QED Matrix

Nigel Morris is a co-founder of Capital One and has led it to emerge as a multi-billion dollar behemoth. During his time at Capital One, he noticed there is a gap between banks and the fintech industry. To bridge this void, his team rolled out QED Investors in 2007 and was able to bring on board some ex-colleagues from Capital One to build QED; this helped him to ensure the team hit the ground running. QED has invested in multiple startups that have not only become unicorns, but have changed the entire landscape of the financial ecosystem in which they operate. Most notable are Credit Karma, SoFi, Prosper, GreenSky, BrainTree, and ApplePie.

Fintech Opportunities and Hindrances

Morris has seen the best and worst of big banking and fintech startups. He has seen that banks have some really important assets that fintech companies lack: low-cost deposits, regulatory access, top-notch compliance, huge customer base, and high profitability. But they are trying to be everything to everyone and this is where fintech companies are gaining ground. Fintech companies, rather than offering everything, offer a specific product or service that banks haven’t developed or cannot develop because that is just not part of their DNA.

On the other hand, Fintechs have been extremely nimble and have evolved into dominating spaces that have been vacated or neglected by banks, online consumer lending and small business lending being prime examples. However, banks have accepted the hard truth and have started striking partnerships with fintech lenders.

Morris is of the opinion that both sectors had been operating in silos. Though both have “complementary sets of skills,” they have only now really started communicating and exploring opportunities together. This lack of being able to meet on common ground was more of a cultural issue than anything. Startups do not understand or appreciate the hierarchy and sometimes bureaucratic structural setup of banks, and banks obviously are extremely wary of aligning themselves with unwieldy trigger-happy startups that can land them in a regulatory mess. So this communication gap is the biggest hindrance that both sides need to overcome to make this partnership work.

Bridging the Bank-Fintech Gap

In their endeavor to bridge the gap, QED has taken massive strides in the last six months by striking groundbreaking partnerships–one with Fifth Third in Cincinnati and another with Scotia Bank in Toronto. This partnership is beneficial for all three parties involved: Banks, Fintech companies, and QED.

Fifth Third has invested heavily in QED portfolio companies like GreenSky, ApplePie Capital, and AvidXchange. The focus of the Scotia relationship is in Latin America as they have a tremendous presence in LatAm and Central American countries outside of Brazil. They are exploring multiple opportunities together in those markets and should be able to announce a groundbreaking deal soon.

The QED Matrix

Nigel Morris believes that differentiating between fintechs and banks on a single perimeter is not feasible or sufficient. That’s why he came up with the QED Matrix.

The matrix has been developed on the lines of the BCG matrix (which is used for analyzing business units). The QED Matrix is used to show the trade-offs in the business model structure of the financial service institutions. The gist of is that each quadrant has its strengths and weaknesses, so entities moving towards the center are in the best shape.

The Matrix is based on two spectrums:

  • Resilience is a function of factors like brand capitalization and product suite diversification;
  • Flexibility concerns both infrastructure and decision making, and also includes organizational design, technology, culture, talent, and much more.

Classifications of each quadrant:

  • Mountains – Firms listed as mountains are high in resilience and low in flexibility. They have resilience because businesses have product diversity, brand, capital reserves, distribution networks, and low cost of capital. But low in flexibility due to institutional inertia, low growth, technical debt, and focus on regulation and cost reduction.

Examples: Citibank, Fifth Third Bank, Suntrust etc.

  • Boulders – Firms under this quadrant represents low resilience and low flexibility. Low resilience due to lack of capital reserves or product diversification of larger banks. They also lack in flexibility due to legacy infrastructure, weak talent pipeline etc.

Examples: Regional banks, Credit unions, Community banks.

  • Trees – Trees represent high resilience and high flexibility. High resilience due to factors like product diversification and loyal customer base and high flexibility due to clutter-free organizational structure, less technical debt, and open access to talent.

Examples: SoFi

  • Leaves – Firms under this quadrant represents low resilience and high flexibility. Low resilience due to product concentration and lack of stable low-cost capital. High in flexibility due to simple organizational structure, technology infrastructure, etc.

Examples: GreenSky, Avant

Analysis

Obviously, Trees represent the best of both worlds. But the thought process behind the QED Matrix is for banks and fintechs to realize where they are in the matrix and what type of partnerships should they pursue to ensure they remain relevant in the twenty-first century. So a boulder should look to partner with leaves so that its customer base can be monetized properly. Leaves should look to partner with mountains so that they have access to cheaper capital and a diversified offering and customer base. Whatever the situation, QED is sitting in the middle of the matrix. It is not only a capital provider to fintechs, but also the creator of a platform for dialogue with banks; this should help it become the first choice for entrepreneurs looking to build a sustainable fintech business.

Read about Nigel Morris’s LendIt USA 2017 keynote titled “If I Were to Start a Bank Today, This is What It Would Look Like.”

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Written by Heena Dhir.