Friday April 6, 2018 Daily News Digest

Friday April 6, 2018 Daily News Digest

News Comments Today’s main news: SoFi to roll out deposit accounts, debit cards next month. PeerStreet raises $29.5M. Welendus loanbook hits 100K GBP in 3 months. Weidai plans $400M IPO. Instamojo to expand into SME lending. Today’s main analysis: Banks slow fintech investment, revert to their own digital infrastructure plans. Today’s thought-provoking articles: Credit bureaus aren’t going anywhere yet. Blockchain […]

Friday April 6, 2018 Daily News Digest

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

SoFi Plans to Start Rolling Out Deposit Accounts Next Month (Bloomberg), Rated: AAA

Social Finance Inc. said it will start offering deposit accounts and debit cards to some customers next month, the first major new product under Chief Executive Officer Anthony Noto.

The San Francisco-based company is looking to branch into various financial services as Goldman Sachs Group Inc. ratchets up pressure on SoFi’s profitable center of personal loans. The startup unveiled a banking-like product, called SoFi Money, in January and began accepting applications to a waiting list.

Majority of Millennial Women Have Money to Invest, But Fear Holds Them Back (Markets Insider), Rated: A

The biggest driver of the investment gap between men and women isn’t knowledge or other financial obligations, but fear, according to a new study by SoFi and professional networking site Levo League (Levo).

However, while millennial women are extremely active in managing their financial status, and over 50%+ have the means to invest each month, the study found the majority of millennial women do not to invest due to fear (56%). Furthermore, the study results indicated the top two reasons why millennial women do not invest is because they don’t know where to start (25%+) and because they are paying down their debt (25%+).

Credit bureaus aren’t going anywhere. For now (American Banker), Rated: AAA

The breach of personal data on more than 143 million customers Equifax revealed in September was followed in mid-March by the news that an executive insider-traded stock before the public was notified about the breach. This week, Equifax acknowledged it had sent erroneous breach notification letters to an undisclosed number of people.

 

 

LendingTree Personal Loan Offers Report – March 2018 (Lending Tree), Rated: AAA

Lenders offered personal loan borrowers less money than they did last month, while offered APRs were mixed. Rate and loan amount offers varied widely among consumers, depending on factors including, but not limited to, credit score, income, and current debt obligations.

Excellent credit (760+ score): Offered APRs to consumers with a credit score of 760+ averaged 7.42% in March.

  • The average best APR offered to all borrowers with credit scores of 760 or above was 7.42%, a decrease of 2 basis points from the prior month, and down 22 basis points from the same period one year ago.
  • At $22,644, the average loan amounts offered with the best APRs to all borrowers with a score of 760 and above was down 4.61% ($1,045) from February, but up over 17.60% ($3,986) from the same period one year ago.
  • The top 10% of offers, presented to borrowers with the best profiles within this group, had offered APRs of 4.87% on average, and loan amounts of $35,669. A borrower with this APR and loan amount would save $3,021 by consolidating debt with a 10% APR over a three-year term.

Good credit (680 – 719 score): Offered APRs to consumers with a credit score between 680 and 719 averaged 15.89% in March.

  • The average best APR for all borrowers with credit scores of 680 – 719 was 15.89%, up 20 basis points from last month and 139 basis points from a year earlier.
  • At $15,993, borrowers with scores of 680 – 719 saw the amounts offered with the best APRs decrease by 175 basis points ($279) in the last month, but increased by 242 basis points ($386) from March 2017.
  • The top 10% of offers, presented to borrowers with the best profiles within the 680 – 719 credit score range, had an average best APR of 7.00%, offered with an average loan amount of $23,822. A borrower with this APR and loan amount would save $3,250 by consolidating debt from a 15% APR over a three-year term.

The most common reasons for seeking a personal loan are credit card refinancing and debt consolidation. These two categories comprise 63% of all loan inquiries.

Source: Lending Tree
Source: Lending Tree

LendingTree Mortgage Offers Report – March 2018 (LendingTree), Rated: AAA

  • March’s best offers for borrowers with the best profiles had an average APR of 4.25% for conforming 30-year fixed purchase loans, up from 4.22% in February. Refinance loan offers were up 11 bps to 4.24%. Mortgage rates vary dependent upon parameters including credit score, loan-to-value, income and property type.
  • For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were up 5 bps to 4.85%. The loan note rate hit the highest since March 2016 at 4.75% and was also up 5 bps from February. We prefer to emphasize the APR as lenders often make changes to other fees in response to changing interest rates.
  • Consumers with the highest credit scores (760+) saw offered APRs of 4.72% in March, vs 4.99% for consumers with scores of 680-719. The APR spread of 27 bps between these score ranges was unchanged from February and still near the widest since this data series began in April 2016. The spread represents over $14,000 in additional costs for borrowers with lower credit scores over 30 years for the average purchase loan amount of $238,593. The additional costs are due to higher interest rates, larger fees or a combination of the two.
  • Refinance APRs for conforming 30-yr fixed loans were up 6 bps to 4.83%. The credit score bracket spread remained at 24 bps, amounting to nearly $13,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $239,668.
  • Average proposed purchase down payments were little changed at $62,758.
Source: Lending Tree

PeerStreet Raises $ 29.5 Million to Further Transform Real Estate Investing (Business Wire), Rated: AAA

PeerStreet today announced the close of a Series B funding round of $29.5 million to continue driving the company’s mission of democratizing access to real estate debt.

The Series B round was led by World Innovation Lab. Existing investors Andreessen Horowitz, Thomvest, Colchis Capital, Felicis Ventures, and others participated along with new investors Solon Mack and Navitas Capital. The raise will accelerate PeerStreet’s growth. Specifically, PeerStreet will be broadening the type of real estate loans it cultivates from its network of lenders and hiring more world-class talent.

RealtyMogul Closes $ 2.75 Million Equity Investment in Plano Multifamily Portfolio (Business Wire), Rated: A

RealtyMogul announced that it has completed an investment in a $11.9 million multifamily apartment portfolio in Plano, Texas, consisting of 156 units.

The property was acquired through a partnership with Comunidad Realty Partners, a dynamic real estate investment firm specializing in multifamily apartment communities in densely-populated Hispanic neighborhoods. Comunidad reports to have owned and managed over $600 million in multifamily assets overall, comprised of approximately 8,200 units. RealtyMogul has invested with Comunidad Realty Partners on five previous transactions.

Stripe launches a new billing tool to tap demand from online businesses (Tech Crunch), Rated: A

Stripe  has made its name by providing developers with a simpler way to start charging customers and handling transactions, but today they hope to take another step by launching a billing product for online businesses. That’ll allow them to handle subscription recurring revenue, as well as invoicing, within the Stripe platform and get everything all in the same place. The goal was to replace a previously hand-built setup, whether using analog methods for invoicing or painstakingly putting together a set of subscription tools, and make that experience as seamless as charging for products on Stripe.

While this is a tool that’s a natural fit for something like Stripe, it’s certainly one that’s created a substantial business opportunity. Last month, Zuora — an enterprise subscription services company — filed to go public amid a fresh wave of enterprise IPOs that included Dropbox and Zscaler (and also, to a certain extent, Salesforce’s big acquisition of Mulesoft). Zuora’s subscription services revenue continues to grow, showing that Stripe will certainly have competition here, but also that there’s a large market opportunity.

Enhancing the Business Value of Loan Pricing Systems (Loan Pricing Pro), Rated: AAA

Today, FinTech companies, marketplace lenders, traditional banking institutions and many other types of innovative new lending platforms are using loan pricing systems to sharpen their focus on balancing shareholder returns with customer pricing sensitivities and market demands.

The lending landscape is changing, but the need to achieve an adequate rate of return while delivering fair and accurate pricing, remains a constant.

Source: LoanPricingPro

Read the white paper in full here.

Five Ways for FinTech Lenders to Achieve ROI on a Loan Pricing System Investment (ProBank), Rated: A

There are a variety of strategies to consider ensuring attaining a reasonable return on your investment in a loan pricing system. We’ll cover each of these in the form of short case studies that we’ve taken from one or more of our existing clients’ actual experiences.

  1. Enhanced Loan Yield Quantitative analysis can be easily used to measure the effectiveness of the loan pricing system implementation on a pre-test / post-test basis. The technique used relies on the same Funds Transfer Pricing (FTP) methodology which a robust loan pricing system uses to calculate loan profitability. To illustrate this, we’ll use a recent client implementation of LoanPricingPRO at a $1 billion lender.
    Source: Probank Report
  2. Increased Collection of Loan Fees In today’s highly competitive environment with historically low rates and generally weak loan demand, loan fees are often sacrificed, or at least underutilized as a tool for increasing profitability. As a general rule, the shorter the loan term, the more powerful the impact of loan fees on loan profitability and ROE.
  3. Decline in Lost Opportunities-Lenders using LoanPricingPRO® usually have a higher batting average when measuring the number of new loan clients against the total number of requests received or applications taken.
  4. Active Portfolio Management-When implementing a loan pricing system with an interface to the organization’s core data systems, significant new reporting capabilities are attained. Lenders are able to receive reports on and track trends in loan officers’ portfolios.
  5. Improved Discipline, Accuracy & Pricing Consistency-As has been shown, it is possible for senior management teams and lenders working
    together and aided by an accurate and appropriately calibrated loan pricing system, to significantly improve the return performance and growth rate of the lending client base.

Read the full report here.

 

A Third of Americans Would Forfeit Their Voting Rights For a 10% Pay Raise, Says Study (Time), Rated: A

More than a third of Americans would give up their right to vote for a 10% annual pay raise, according to a new survey.

The peculiar findings come from a survey conducted by LendEDU, an online student loan marketplace, that polled 1,238 working Americans. In exchange for the hypothetical pay bump, about 35% of these employees said they would sacrifice their voting rights for life. In addition, just over 9% of respondents said they would give up their children’s (or future children’s) right to vote for life for the make-believe raise.

But those aren’t the only big sacrifices the respondents would make for a 10% annual salary increase. More than 12% said they would break up with their partners, and nearly 19% said they would give up their health insurance for the next five years. Forty percent would forfeit their dental care for five years for a raise, and nearly 18% would say goodbye to their Social Security benefits.

Source: Lend EDU

DepositAccounts.com Releases 2018 Top 200 Healthiest Banks and Credit Unions in America (Benzinga), Rated: A

DepositAccounts.com, a subsidiary of LendingTree, today released its list of the 2018 Top 200 Healthiest Banks and Credit Unions in America.

Source: Deposit accounts

If You Can’t Beat Them, Join Them — How Banks, Fintech And Tech Players Can Win Together (Forbes) Rated: A

As tech giants like Amazon, Facebook and WeChat set out on their quest to be all things to all people, eroding the boundaries between industries, banks that want to maintain and grow their market share need to rethink the rules of competition.

While a growing number of banks have acquired fintechs to avoid fading into the background (

12 Best Bank of America Personal Loan Alternatives (Student Loan Hero), Rated: A

Bank of America offers various loans — but not personal loans

Bank of America’s loans, however, are limited to two specific types:

Some online lenders with competitive interest rates on personal loans include:

LendingClub and Prosper, for example, are both in the peer-to-peer lending space. LendingClub has fixed personal loan rates ranging from 5.99% – 35.89%. You’ll need to check your rate with Prosper directly since it varies depending on your credit and borrower profile.

Marlette Funding Welcomes a New Advisor with a Focus on Innovation (LendEDU), Rated: B

Marlette Funding, LLC, recently appointed Marshall Lux as an advisor to its board of directors and company. Marlette Funding is the parent company of Best Egg, which is a lending platform that offers unsecured personal loans.

Jeffrey Meiler, chief executive officer of Marlette Funding, said Lux’s considerable experience in financial services and his expertise in the consumer market make him a good fit for the company.

FinTech Veteran Ethan Schwarzbach Joins inFactor To Head inFactorIQ Platform (PR Newswire), Rated: B

inFactor Corp, an integrated financial technology company providing liquidity solutions across the spectrum of non-bank lending, has announced today that Ethan Schwarzbach has joined the company to head up the company’s new inFactorIQ platform.

Mr. Schwarzbach joins inFactor from Orchard Platform where he most recently served as a Manager on the Business Development team. Orchard Platform is the leading provider of data, technology, and software to the online lending industry.

SOLO FUNDS ALLOWS YOU TO SEAMLESSLY BORROW FROM YOUR PEERS (Black Enterprise), Rated: B

According to a recent statement, SoLo’s founders uniquely understood the plight that American workers were facing every day because they too were once in their shoes. It is not uncommon to seek a small loan from friends and family, but the founders were not seeing a quick and easy lending solution to help facilitate the process.

Traditional banks don’t lend small dollars, and payday lenders charge excessively high interest rates that for many in emergency situations are almost impossible to pay back. There was simply no affordable way to get a small dollar loan. The team thought that the limited resources for small-dollar loans only plagued the minority communities like the ones they were raised in, but that was wrong; they discovered a more mainstream problem. According to the statement, 78% of American workers live paycheck to paycheck and 47% of the country can’t cover a $400 emergency expense without borrowing from someone else or selling a personal asset.

Liquid FSI Adds Key Board Member (deBank), Rated: B

Liquid FSI, a direct lender and creator of the Convert2Pay platform, which provides on-demand payment for medical invoices, added Barry Blecherman to its Board of Advisors.

While a few recent graduates of the NYU Tandon School of Engineering were helping the Liquid FSI team with some algorithms for their technology platform, they mentioned Blecherman, a professor of Finance and Risk Engineering at the Tandon School.

United Kingdom

Welendus loanbook hits £100,000 in just three months (Peer2Peer Finance News), Rated: AAA

WELENDUS investors have funded £100,000 of short-term loans in just three months of its beta stage, the platform has announced.

Nadeem Siam (pictured), founder of the platform, says a full launch of the product is planned soon but Welendus has already built up more than 4,000 users.

Klarna: 53% of retailers say “always on” sales are damaging profits (Tamebay), Rated: A

Research by payments provider Klarna shows that discounting is no longer confined to the traditional winter and summer sales. The new rules of retail mean discounting has become a fluid and unpredictable phenomenon with over half (57%) of consumers expecting regular sales.

The research of 500 British retailers highlighted the negative impact this can have on the bottom line of merchants. Over half of retailers surveyed (53%) say the “always on” nature of sales is having a negative impact on profits – 11% said discounting cost them over £25,000 throughout 2017. This isn’t felt just by smaller retailers, but merchants of all sizes – in fact, it’s those with 100-239 employees that feel the burden most with 66% saying constant discounts are impacting profits.

Investing Show: What you need to know about crowdfunding, peer to peer, and Innovative Finance Isas (This is Money), Rated: A

Stewart Cazier, of alternative lending platform Thincats, details what investors need to know about peer to peer, crowdfunding and Innovative Finance Isas on the Investing Show.

He explains to Simon Lambert, of This is Money, and Richard Hunter, of Interactive Investor, how alternative lending works, what investors need to consider, how to diversify and why it’s important not to consider it risk-free or put all your eggs in one basket.

Five questions for: Samantha Bamert, CEO of AskIf (Money Week), Rated: A

Ask Inclusive Finance (AskIf) is a commercial enterprise with an ambitious social mission – to close the sizeable funding gap for loans to financeable small companies unable to secure funding from banks. Smaller estimates suggest this funding gap could be upwards of £2.2bn per year.

Other research estimates much larger numbers. AskIf is a platform lender bringing together funders, a network of lending partners and the borrowers themselves. By providing support and funding to small companies, we’ll enable job creation, economic value and opportunity in many communities across the UK.

JP Jenkins – Continued New Initiatives (PR Newswire), Rated: B

JP Jenkins reports that its co-owner, Peterhouse Corporate Finance, has closed its 200th capital raise in the past three years, with a total funding of circa £200m for smaller growth companies.

Significant new capital has recently been provided by Malcolm Burne, a substantial shareholder and Executive Director, to expand the JPJ franchise further. The Company has also entered into partnership & collaborative agreements with US Capital Partners, private placements, Equidate a US private companies Stock Market, and Primary Markets an International Unlisted Exchange.

China

Chinese Online Lender Weidai Plans $ 400 Million IPO (Bloomberg), Rated: AAA

Chinese peer-to-peer lender Weidai Hangzhou Financial Information Service Co. is planning an initial public offering that could raise about $400 million, according to people with knowledge of the matter.

There hasn’t been a major listing of a Chinese financial technology company in the U.S. or Hong Kong since LexinFintech Holdings Ltd., which raised $124 million in a downsized U.S. IPO in December, according to data compiled by Bloomberg. Qudian Inc., which completed a $1 billion IPO in October, has since fallen 52 percent from its offer price.

European Union

Insurance and the Open Banking wave: seven use cases (Holland Fintech), Rated: A

Source: Holland Fintech

INNOPAY has defined a first set of use cases for insurance companies. The use cases have been mapped on the most important value levers for insurance to capture relevancy and see where exactly the use cases drive value. The mapping is presented in figure 1 and a first description of the cases is given below.

  1. New (cyber)insurance product for a new client segment: insure TPPs in PSD2 landscape: data sharing through third parties implies new (cyber) risks and thus accountability in case of data breaches.
  2. Better deal engines: PSD2 provides third parties access to payment account information data (AIS). This data can be mined and relevant insights on customer behaviour can be extracted. This behaviour can then be for example spending on insurance to see if a better offer can be made to the customer or looking for patterns which can imply a better risk profile and thus better pricing on insurance products for the customer.
  3. Improve personalised advice: next to mining, the data can be used to improve personalized advice. Although TPPs are by law only allowed to present the account information of customers, insurance companies can use that information to give advice about their financial situation.
  4. Optimise claims management: together with other data sources, account information that is shared by customers’ banks can be used to create new data sets that could be used to improve reconciliation and reimburse the right amount to customers and gain better insights on possible fraud (by looking at for example customer spending patterns).
  5. Up to date customer records: although there is no Open Banking standard yet and all banks are developing their own view and strategy on opening up data beyond PSD2 compliance, there are already good examples insurance companies can build upon.
  6. Expanding service proposition to providing accounts: with the possibility to execute a transaction (PIS) on behalf of the customer or to check available funds (CAF) the functional scope of PSD2 is limited.
  7. Digital identity verification: banks can help in identifying a person during a digital onboarding or digital identity verification process. This functionality is for example already operated by the banks in The Netherlands under the iDIN scheme.

Swiss Crowdlender Banks on Blockchain (Finews), Rated: B

A Swiss crowd-lending platform is using the blockchain technology to improve the way it brokers loans to companies. It will also introduce tokens as a currency of valuation.

Swisspeers, a Winterthur-based platform specialized in loans to small- and medium-sized companies is registering transactions on the Ethereum blockchain. The company is going to use the so-called Smart Contract developed specifically for its purposes, Swisspeers said on Thursday.

International

Not just dumb pipes: Fintech investment slows as banks try to gain back control (Tearsheet), Rated: AAA

Banks’ investment in fintech companies is slowing down as they refocus on improving core banking infrastructure, according to a report by CB Insights.

The Banks in Fintech report, released this week, found that banks have been foregoing big investments and partnerships over the past five quarters with a preference for building products in house — particularly in lending, payments and personal financial management. In both the U.S. and Europe banks spent more of their architecture investment dollars on capital markets software companies than blockchain startups.

Source: CBInsights

KPMG’s Pulse of Fintech report for the fourth quarter of 2017 noted that while deal activity among venture capital and private equity firms remained steady compared to 2016, the earliest stage of VC financing could see fewer deals and a volume decline in particular segments like online lending in the coming year. It’s a sign of the industry’s maturity; banks are showing their efforts to “fight fintech with fintech,” Lindsay Davis, an intelligence analyst at CB Insights, said in a presentation.

Source: Tearsheet

Blockchain Integration Is Leading to a Revolution in Global Trade (The Market Mogul), Rated: AAA

In every step of the trade financing process, blockchain technology seems to offer an efficiency boost in commodity transactions and the global supply chains. From contract generation level, which includes time-consuming reviews of the operation by the Letter of Credit issuing bank, to the settlement level, which often proves problematic due to payment platform incompatibility, fintech offers smart solutions.

Although credit fintech is on the rise, blockchain was mostly used for peer-to-peer lending and that the trade financing gap persists, according to the Asian Development Bank. 70% of financial institutions which responded to the survey claimed that the technology would allow for greater exposure to SME risk, mostly because of significant cost reduction in compliance and due diligence.

Mambu unleashes digital marketplace (Fintech Futures), Rated: A

Software-as-a-Service (SaaS) banking engine provider Mambu has launched its digital marketplace to offer cloud-enabled apps, products and tools for banking and lending.

Mambu Marketplace offers a choice of global and localised solutions which can be integrated with the SaaS engine. Its offerings are based on an API-driven architecture.

Will fintech realize its potential for financial inclusion? (LinkedIn), Rated: A

But it’s increasingly clear that many of the financially underserved are also technologically underserved. The GSMA’s Mobile Economy 2018 reports that nearly 40% of the world’s 5 billion mobile subscribers have no internet access; most of the offline, live in the low- and middle-income countries that could benefit the most from digital financial services. Many mobile subscribers live outside of 3G or 4G signal range, which slows service or limits what they can do with their devices. Many unconnected users must contend with poor network performance, high connectivity and handset costs, poor digital literacy, or a lack of locally relevant content.

Digital lending innovations: Small businesses face a $5 trillion financing gap. Inefficiencies in customer acquisition and analysis prevent lenders from making reliable lending decisions and entrepreneurs from getting the financing that they need. But new technologies and data sources can help small businesses: Mexico’s Konfio analyzes thousands of data points – including biographic information, financial history, electronic invoicing, and social media usage – to make lending decisions quickly and inexpensively.

India

Instamojo plans to expand into SME lending, logistics: CEO Sampad Swain (Livemint), Rated: AAA

Online payment solution provider Instamojo Technologies Pvt. Ltd plans to expand into business loans, logistics and advertising services for small merchants, as more small and medium enterprises (SMEs) turn to digital means to sell and market their product, a top company executive told Mint.

Bengaluru-based Instamojo, which focuses primarily on SMEs, currently has 400,000 SMEs using its payment service, and it is also targeting to onboard at least 1 million SME customers by the end of FY19, the company’s chief executive Sampad Swain said in an interview.

Peer to Peer (P2P) Lending – a Niche in the Financial Ecosystem (PR Newswire), Rated: A

Investment avenues are available either in the form of instruments per se (e.g. equity stocks, bonds, etc.) or as vehicles for participating in the instruments e.g. Mutual Funds, Portfolio Management Services, Alternate Investment Funds, etc. Some of the vehicles are available in small ticket sizes, e.g. Mutual Funds, whereas some require a sizable ticket e.g. PMS (Rs 25 lakh) or AIF (Rs 1 crore). There is a differentiated investment avenue, which is neither a tradable instrument nor a structured vehicle, but a facilitator for retail investors. This is called Peer to Peer (P2P) Lending where there is an online intermediary, which brings the lender and borrower together to facilitate direct lending by the lender to the borrower on mutually agreed terms. This is an online marketplace where the digital platforms like e.g. IndiaMoneyMart would conduct due diligence and credit assessment of the borrower and connect the two individuals.

Asia

Outsmarting the traditional experts with the aid of AI (Asia Asset Management), Rated: A

FinEX Asia offers Asian investors access to US consumer credit assets

Asian institutional investors often find it difficult to gain exposure to US consumer credit assets because of the diverse array of such products and a lack of investment channels.
Canada

Canadian Fintech PayBright Announces  E-Commerce Financing Solution is Now Available on IBM Websphere (Crowdfund Insider), Rated: AAA

Canadian fintech lender PayBright announced on Thursday its e-commerce financing solution is now available for merchants operating the IBM Websphere Commerce platform.

According to PayBright, the e-commerce solution integrates with merchant’s e-commerce platforms and provides Canadian customers with an additional payment option at checkout. Upon selecting PayBright as a payment method, customers can finalize their purchases in a matter of seconds. Merchants then receive their funds directly from PayBright the next business day with no credit risk. Customers then pay for their purchases in affordable monthly installments over time, with interest rates as low as 0%. 

Authors:

George Popescu
Allen Taylor

Larger loans from more investors: Swiss Federal Council adjusts rules around Crowdlending

Swiss crowdlending

Switzerland makes the lives of fintechs easier. The Swiss Federal Council has implemented a new set of rules concerning the fintech industry which fulfils important desires of the sector. Particularly one change was very important for crowdlending platforms such as swisspeers: On August 1, 2017, an old rule within the banking law around the maximum […]

Swiss crowdlending

Switzerland makes the lives of fintechs easier. The Swiss Federal Council has implemented a new set of rules concerning the fintech industry which fulfils important desires of the sector. Particularly one change was very important for crowdlending platforms such as swisspeers: On August 1, 2017, an old rule within the banking law around the maximum of investors per counterparty was abrogated. This rule limited the number of investors per loan to a maximum of 20. An environment without the restriction of the number of investors enables crowdlending platforms to grant larger loans.

What does this mean in practice?

For companies: Larger Loans

Larger loans become feasible as a single loan can be financed by more than 20 investors. Thus, a wider investor base gains access to financing larger loans while the prospect of success for these kind of projects increases.

In this way, companies that carry out commercial-industrial operations do not risk violating the Banking Law by taking out loans up to 1 million Swiss Francs from more than 20 investors. According to a study published by SECO (the Swiss State Secretariat for Economic Affairs), currently 75 percent of all Swiss SMEs take out loans worth less than one million Swiss Francs. Due to the change in regulation, companies will be provided with broader financing opportunities.

For investors: Better diversification thanks to smaller investment tranches

Investors are given the opportunity to finance loans with smaller investment tranches. Up to now, the necessary minimum investment was derived from the desired loan amount divided by 20. Thus, an amount of 10’000 Swiss Francs was not uncommon for an investment tranche. That does not need to be the case anymore. Even larger loans can be accessed with smaller tranches. Hence, investors can better and easier diversify their portfolios. This further promotes the distribution of the investment risk and makes crowdlending also interesting for investors with a smaller target portfolio size.

For the national economy: Greater stability

From the perspective of the national economy, crowdlending is less risky than the banking business. There is no leverage as within banks’ balance sheets and no term mismatch between assets and liabilities. In contrast to the banking business, loans do not constitute non-interest-bearing savings of investors. Through crowdlending money flows directly from investors to enterprises. Investors in turn receive fair interest payments for bearing the credit risk. Therefore, money is productively deployed in the national economy and the overall system is not strained with newly created risks.

Conclusion: ’Thank you’ to our Federal President Mrs. Leuthard. We will stay on the ball!

We at swisspeers and our SME customers are very satisfied with the adjusted regulation.

These adjustments form great prerequisites for pushing our business further. The access to loans is becoming easier for Swiss SMEs. Together with our investors we contribute to a strong SME economy in Switzerland.

Author:

Written by Alwin Meyer (CEO and co-founder of swisspeers).

July 21st 2016, Daily News Digest

News Comments A lot of news today, and today we have an especially good international section. Please do pay attention to the Australian, Singapore and China sections in particular. (And Lending Times technical team reports that yes, Mailchimp has not answered any of the multiple requests for support from a paying client in 17 hours. […]

News Comments

  • A lot of news today, and today we have an especially good international section. Please do pay attention to the Australian, Singapore and China sections in particular.
  • (And Lending Times technical team reports that yes, Mailchimp has not answered any of the multiple requests for support from a paying client in 17 hours. We will send today’s newsletter by hand again using the older design template.)

United States

United Kingdom

European Union

Switzerland

India

Singapore

Australia

China

News Summary

 

United States

The marketplace lending market has received an influx of positive news recently, (Peer IQ), Rated: AAA

The WSJ reports that Moody’s removed Class C mezzanine bonds issued by CHAI 2015-PM1, 2015-PM2, and 2015-PM3 from downgrade review and confirmed Ba3 rating.

At the time of downgrade review in February, Moody’s cited a faster build-up of delinquencies and charge-offs than expected. Moody’s also increased the expected cumulative lifetime net loss from 8% to 12% (bringing revised estimates in-line with platform and market expectations).
As of the June 15, 2016 distribution date, losses on the CHAI 2015-PM1, 2015-PM2 and 2015-PM3 pools have reached 3.6%, 1.5% and 0.5%, respectively.
Improvement in Credit Spread on MPL ABS bonds
The ratings action was presaged by the ABS market which showed spread tightening from 1000 to 400 bps. Readers may seek to review the May month-end newsletter to see the analysis cited in the WSJ report:
PeerIQ credit spread on MPL ABS bonds
Leading up to the CHAI 2016 PM-1 offering in April, the culmination of ratings actions, regulatory chatter, delinquency fears, and volatile credit markets created an inhospitable environment for new deals. The auction resulted in limited participation and wide initial pricing–10.26% coupon priced to 12.5% yield on the CHAI 2016 PMI-1 C tranche.
Investors that bought the CHAI C tranche at new issuance without any leverage would have seen about 15% price appreciation in 3 months. Investors that performed the up-front credit work and applied analytics to separate the signal from headlines were able to earn outsized returns.
Dislocation creates opportunity
Ironically, the dislocation in recent months has created substantial investor interest in MPL ABS and whole loans. The CHAI 2016-1 PM1 offering prompted investors that were historically dismissive of marketplace lending to do a double-take
Repeat ABS investors are now looking upstream to capture additional whole loan economics.
Large asset managers with double-digit return objectives in a negative to low rate world are looking to strike bargains with platforms. There is still much more to be done. Nevertheless, the climate for establishing relationships with platforms may be as good as ever.

Little Change in LendingClub Loans Since Madden Decision, (BNA), Rated: A

So far, LendingClub loans haven’t changed in average interest rate or risk, either in the 2nd Circuit or nationwide.

Both the total number and value of loans and the amounts arranged through the company have only grown, not diminished, while average FICO scores measuring a borrower’s credit rating remain consistent, and internal loan grades have remained the same. One exception is that the average value of borrowers’ previously requested FICO score did increase steadily since the decision, even though FICO scores at the time of loan issuance did not.

LendingClub has also continued to arrange loans to borrowers in the 2nd Circuit that surpass the interest rate caps in those states. The Madden decision does not prevent national banks from providing loans above a state’s interest rate cap. Instead, it applies to debt collection agencies that purchase those loans.

Lending club changes after Madden vs Midland

As a result of the court’s decision, LendingClub in February renegotiated terms with WebBank—the Utah bank that originates all of the loans through the online service (40 BBD, 3/1/16)

Under the new arrangement, WebBank maintains ongoing accounts for the borrowers and receives regular payments from LendingClub—called “loan-trailing fees”—rather than a single lump sum fee on every loan it originates. The loan trailing fee is based on the total amount serviced by the bank and a “loan fee factor.” A LendingClub representative told Bloomberg BNA that the company does not publicly disclose the amount of the loan fee agreement with WebBank.

Different picture for Prosper

Prosper loan volumes

Representative for Prosper attributed any changes in lending to general market fluctuations but would not comment further for this story.

A 2009 paper from the Federal Reserve Bank of Atlanta said that loans sold into the secondary market through originate-to-distribute underperformed other loans by 9 percent. A 2010 academic paper funded by the FDIC’s Center for Financial Research also implicated the originate-to-distribute model in the subprime crisis.

Author and University of Michigan Finance Professor Amiyatosh Purnanandam told Bloomberg BNA that part of the problem with the originate-to-distribute model is that once the debt is sold, the originating bank has nothing at risk and the debt buyers don’t always have the skill in evaluating good borrowers as national banks do.

Jefferies revives stalled Lending Club bond: sources, (Reuters), Rated: AAA

Comment: We covered these news last week as well. At that time it was more of rumor. It seems it’s real news now.

Jefferies has revived its stalled Lending Club loan securitization in a club-style deal it has begun to pre-market to only a few select investors, two buyside sources with knowledge of the trade told IFR.

The bank is now looking to sell a two-tranche trade that could offer yields in the 4.25%-7% range, one of the investors said.

The top class of notes of slightly less than one-year were about 60% subscribed, while a longer 2-year tranche was already fully covered, the investor said.

The near-prime loan securitization was shelved after Lending Club said it had repurchased a US$22m pool of loans sold to Jefferies under Laplanche’s watch that included falsified documentation.

Goldman Sachs also hit pause on its potential bond sale of prime Lending Club loans.

But bankers told IFR that Goldman could now look to revive its bond deal, if the Jefferies trade finds favor with investors.

Goldman Sachs Sets Its Eyes on Retail Banking (GS), (Investopedia), Rated: AAA

Fast Start
According to the Wall Street Journal, more than 20,000 new customers have opened internet bank accounts with the Goldman unit since it launched three months ago. Unlike other Internet-only retail banks that tend to offer a wide range of services, Goldman’s products are geared towards long-term savings, and it solely offers its customers the option to open traditional savings and certificate of deposit (CD) accounts. As of July 20, 2016, the bank’s interest rate on online savings accounts was 1.05% while its interest rate on a 5-year CD was 1.85%. In many cases, these rates are a lot higher than what traditional banks pay their customers. For example, Wells Fargo (WFC), Citibank (C), Bank of America (BAC) and Chase (JPM) all pay less than 0.03% APY on regular savings accounts. GS Bank can offer above-average interest rates to its depositors because they do not have the overhead expenses of a typical brick and mortar bank. (See also, The Pros And Cons Of Internet Banks.)

Retail Diversification
For Goldman Sachs, savings accounts may not be as exciting as the main investment banking business. Yet, the company still benefits from expanding into retail banking, enabling Goldman Sachs to diversify its customer base and tap into a segment of the market, retail investors, that they have been unable to serve in the past. GS Bank will also help boost Goldman’s overall liquidity, and keep the company compliant with new regulations calling for more liquidity from financial institutions. Around the same time GS Bank was launched, the Federal Deposit Insurance Corporation (FDIC) proposed new rules that would require banks to own sufficient ‘‘easy-to-sell’’ assets that would be able to cover any and all liabilities coming due within a one year period. (See also: The History Of The FDIC.)

The Realities Of Alt-Lending Regulation Begin To Set In, (Pymnts), Rated: A

Comment: we covered this yesterday as head news. However it is so important that we would like to remind our readers just in case.

“I suspect more regulation will come to the space, and I think that will suit us well,” said PayPal VP and General Manager of Small Business Lending Darrell Esch in an interview with Forbes last year.

When asked by PYMNTS whether he was concerned about incoming regulation on the space, OnDeck Vice President of External Affairs and Associate General Counsel Daniel Gorfine simply stated, “No, not concerned.”

Reports from Bloomberg BNA this week, however, could signal a shift in how alternative lending players are reacting to the incoming threat of regulation.

“Strong evidence indicates that small business loans under $100,000 share common characteristics with consumer loans yet do not enjoy the same consumer protections,” the Treasury stated in its May report. “Treasury is willing to work with members of Congress to consider legislation that addresses both oversight and borrower protections.”

“I would have to do everything differently,” said CAN Capital Chief Legal Officer Parris Sanz in an interview with the publication. “I can’t give you a rundown of all the various moving parts that would be affected, but I can tell you for sure that it would be significant.”

In a separate interview with Bloomberg BNA, Richard Eckman, a partner at Delaware-based Pepper Hamilton LLP, said alternative lenders are probably wise to pay attention to this possibility.

REFILE-Marlette gets second ever online loan ABS over the line, (Reuters), Rated: AAA

Marlette Funding got its second-ever bond backed by personal loans easily over the line on Wednesday, but investors said the primary market was still wary of deals from the online lending industry.

Marlette’s deal narrowed its pricing from guidance, but investors said global low rates had turned all types of US consumer debt-related assets with yield into a hot commodity.

And similar deals from a year ago were pricing far tighter.

Marlette priced its top US$149m of 1-year Single A (rated by Kroll) notes at 225bp over EDSF, tighter than a 235bp-250bp area guidance, two investors said.

Last July, Citigroup cleared its top class of A3 (rated by Moody’s) bonds – one notch lower – of Prosper Marketplace loans at 140bp over EDSF, according to IFR data.

Riskier Ba3 notes from Citigroup priced at 385bp over interpolated swaps, whereas Marlette’s BBs Wednesday printed at a whopping 825bp over swaps.

By another measure, the BBs were about 75bp more than a deep subprime auto ABS sold this week by lender Consumer Portfolio Services, according to IFR data.

“Marlette’s business model ensures an alignment of interests among the company, the originating bank and institutional loan buyers,” Kroll Bond Ratings wrote in its presale report.

The hunt for yield, meanwhile, has prompted two banks with exposure to online loans to revive postponed deals in the primary market, buyside sources said.

Non-bank Jefferies has rekindled a roughly US$140m bond deal of near-prime Lending Club loans, which was shelved for two months after Laplanche stepped down from Lending Club.

Bankers said that Goldman Sachs could also look to bring out its paused prime-quality Lending Club deal after Jefferies.

United Kingdom

Oxford economist John Kay: Where the opportunities are for fintech, (Alt Fi Credit), Rated: A

Large scale financial services firms are still ripe for disruption, according to the economist John Kay, who believes the City of London and other major financial centres have taken a wrong turn.

Kay explains that he sees four main ways that fintech can be successful and help the real economy by disrupting financial services.

These are firstly; the payments system This is the system that enables the payment of wages and salaries as well as bills. Secondly; capital allocation. This how peoples’ savings become invested in the physical assets and infrastructure of a country. Risk management is third, i.e mitigating the risks of everyday life such as insurance. Lastly is wealth management in a broader sense.

Technology will take over a lot this spectrum and he argues wealth management “is an area of major disruption”, encompassing P2P lending/investing, robo-advice and other discretionary investment services. However, he says payments is the one that will most clearly disrupt things and change our lives. He thinks cash will “seem crazy” in 20 years’ time.

Kay has a sizeable investment in online investment management firm Nutmeg, however, which is one of the dominant players seeking to disrupt the fund management and wealth management industries although they have yet to announce a P2P/market place lending function.

City regulator warns on peer-to-peer lending, (Financial Times), Rated: A

Chris Philp, a Conservative MP on the Treasury committee, said many consumers do not understand the dangers they are exposed to through P2P.

He said the way P2P sites are paid fees without taking on the risk of loans on a balance sheet is akin to the securitisation of subprime loans before the financial crisis.

Mr Bailey said in response, “I agree with you on the risks”.

Mr Bailey noted that although some platforms have so-called reserve funds to pay out to investors in the event that borrowers default, there is “no guarantee in that fund”.

European Union

Renowned investor Peter Thiel increases investment in leading European fintech, Deposit Solutions, (Press Release), Rated: AAA

Prominent venture capital firms today announce they have invested €15 million in European fintech company Deposit Solutions GmbH, a fast growing fintech innovator operating in the €9 trillion market for retail deposits in Europe.

The key highlights include:  PayPal co-founder and Facebook’s first outside investor, Peter Thiel, and German leading fintech investor FinLab jointly increase their share in the company  US investor Greycroft Partners, the global growth fund of e.ventures as well as Valar Ventures come on board as three new partners  The funding round increases the valuation of Deposit Solutions to €110 million.  This is the second successful investment round for Deposit Solutions within a year, following last year´s investment into the Company of €6.5 million. Since then the valuation of the company more than quadrupled.  The funds raised will be used to further develop the proprietary technology platform and continue Deposit Solutions´ international expansion, having already recently expanded to the UK and Switzerland.  Deposit Solutions will increase the number of employees at its UK HQ in the City of London and is expected to launch its retail platform in the UK in 2017.

“We are seeing substantial demand from banks looking to offer their clients attractive deposit products under the existing account relationship. As a result we have gained access to millions of clients and billions of deposit appetite in a very short amount of time. This in turn is very attractive to banks wanting to raise deposits through our platform.”

Max von Bismarck, Chief Business Officer and Managing Director of Deposit Solutions, said: “We address an important structural problem in European banking today for banks and retail customers: Many banks are unable to offer attractive interest rates to their clients. At the same time other banks find it difficult and costly to gain access to retail deposit funding. Our platform provides a solution for both while savers find it easier to get access to better rates.”

ECrowd! Spanish Crowdlending Platform Receives License by the CNMV, (Crowdfunding Insider), Rated: A

Debt-based crowdfunding platform ECrowd! is one of the first Spanish sites to receive a formal operating license from the Comision del Mercado de Valores (CNMV), the securities regulatory agency in Spain. ECrowd!, based in Barcelona, has joined Crowdcube Spain, Lendix and MyTripleA in receiving official approval as a Collaborative Finance Platform under regulations enacted in 2015.

They were on track to achieve 100% growth during 2016. [Comment: Some authors have issues with important verb tenses, it is unclear if the author meant they are or they were.]

Switzerland

The era of Crowlending opens new market for startups, (Startup Ticker), Rated: AAA

In Switzerland significant growth in Crowdlending was achieved in the previous year. The Crowdfunding monitoring report 2016 published by theUniversity of Applied Sciences Luzern early this year reported a significant increase in the total amount of money raised through Crowdlending in the year 2015. A total sum of CHF 7.9 Million was collected through crowdlending with a growth rate of +126%. 266 campaigns were financed. Crowdlending has continued to become more popular not only among start-ups but also among investors.

The crowdlending market in Switzerland is booming and has opened new opportunities for entrepreneurs. New startups operating crowdlending platforms are been established and many projects have been successfully financed. Today, there are 7 crowdlending platforms: the pioneer Cashare for both SMEs and private ventures, CreditGate24 for private and institutional investors, creditworld for both private and on SME loan, Lend, splendid that is specifically focusing on education loans,swisspeers for SMEs and Wecan.fund for SMEs. Other platforms – such as Miteinander-Erfolgreich and Raizers – also operate alongside other models as crowdlending platforms.

India

India’s Mywish Marketplaces raises $ 15 M to expand to new financial products, (Tech Crunch), Rated: AAA

This isn’t a huge round compared to what other companies have closed, but it is entirely strategic. The capital was proved by Franklin Templeton, the U.S. banking giant with more than $700 billion in assets under management. Puru Vashishtha, who is board director at Mywish Marketplaces, told me in an interview that the company didn’t need to raise the funds and it wasn’t short of interest, but it did so for growth opportunities and was very deliberate with the capital that it did close.

“We were chased by a lot of venture capitalists and investors globally,” Vashishtha said. “Because we were profitable, we did not need to raise a lot and didn’t want to dilute too much too soon — that’s one of the reasons we chose Franklin Templeton. Also, Franklin Templeton has built a very big emerging market business, we want to leverage the experience and leadership of their team.”

To backtrack a little, Mywish Marketplaces operates Deal4Loans, a price comparison and loan aggregation website in India. Its products include credit cards, home loans, business loans and personal loans.

Like Credit Karma in the U.S. and countless others worldwide, it works with banks, credit card companies and other financial institutes to help drive customers, while for its users, it tries to provide a holistic look at financing option and which one suits best for each case. The Deal4Loans site claims to have served more than 6.3 million “satisfied” customers, while the company says it has dispersed a total of $2 billion loans in the last six years at a current rate of $400-$450 million per year.

So why is this profitable company — profitable from day one, it claims — raising money?

I hinted at it earlier, but Mywish Marketplaces wants to expand into more verticals with new financing products for Indian consumers.

P2P lender Faircent makes strategic C-suite appointments, (Economic Times), Rated: B

India’s largest peer- to- peer (P2P) lending marketplace, Faircent.com, on Wednesday announced the appointment of Shivam Gupta, who was a part of the global risk management team of Standard Chartered Bank based in Singapore, as chief risk officer and Karun Thareja, who was a part of the leadership at an analytics startup called WyzMindz, as head of marketing.

Thareja, on the other hand has extensive experience in Marketing, Sales and Business Management spanning more than 20 years. His domain expertise includes Analytics, Enterprise Systems, Contact Center Management and Process Management. In his prior roles he has led multi-fold growth in business units at companies like IBM, Microsoft, Oracle, Dassault Systems and NIIT.

Singapore

Online lending platform to offer investor insurance, (Straits Business), Rated: AAA

Online peer-to-peer funding platform Validus Capital has partnered home-grown insurance provider EQ Insurance to offer investor protection on some of the financing it provides to small and medium-sized enterprises (SMEs).

It will be the first platform in Singapore to provide investor insurance on its invoice financing services, the company said.

The platform, which was founded last year, has had a zero-per-cent default rate to date thanks to its “rigorous due diligence”, the company said. In the last few months, the company has had 27 SMEs approved for invoice financing services, each with an average revenue of $5 million.

Mr Prakash Somosundram, co-founder of Pealo – an aggregated marketplace for SMEs to access working capital – said the firm is looking into investor protection products. “This will definitely help us to attract more investors, and more people will see this form of investing as an asset class,” he added.

Pealo’s platform was launched in January – 300 SMEs have signed up and there are 46 live campaigns under way.

Mr Brian Teng, chief executive of InvoiceInterchange – which allows SMEs to put up their unpaid invoices for auction – also said the platform hopes to eventually make insurance available to investors.

Mr Teng declined to reveal how many SMEs have used the platform, but said there is significant room for invoice financing to grow as a source of funds for SMEs here.

“The penetration rate of invoice financing in Singapore is still low when compared with nations like Britain and the United States,” he noted. The company has funded $4 million of invoices since its launch in 2015.

Mr Roger Crook, chief executive of Capital Springboard – which runs a crowdfunding platform for invoice financing – said more than 100 SMEs have used the service.

The platform has funded over $85 million worth of invoices over the past year, with over 50 accredited and institutional investors taking part.

Australia

Online home loan marketplace exceeds billion in loans, (Broker News), Rated: AAA

HashChing, an online home loan marketplace, has surpassed $1 billion of home loans as momentum builds for the Sydney fintech company. The platform officially launched in August 2015 with just a few brokers on board across Australia. Now, more than a billion dollars’ worth of loans have been received and more than 1,200 mortgage brokers across the country have signed up. The platform works as an online marketplace connecting consumers to mortgage brokers.

“Customers aren’t just looking to save time. The key to our success is that our offer extends far beyond convenience. We’re able to offer pre-negotiated home loan deals from different lenders with equal features, the same products, but with an even better rate,” Sodhi, co-founder and CEO said.

Narang, co-founder and CIO added: “Our broker registration process has been automated to make it really easy and quick by allowing them to digitally sign the contract which instantly activates their account and saves the paper clutter at both ends.”

As the platform continues to build momentum, Sodhi and Narang have welcomed Claire Wivell Plater of The Fold Legal to their advisory board. Wivell Plater is a long standing member of the Business Advisory Committee to ASIC’s Licensing Division and was recently appointed to the Treasurer’s Fintech Advisory Group.

Narang explains HashChing 2.0 will involve more intelligent use of analytics for a better consumer experience.

China

How Chinese Search Giant Baidu Is Getting Deeper Into Banking, (Fortune), Rated: AAA

Chinese search giant Baidu is investing more deeply in financial technology startups as it seeks to expand its own lending efforts.

On Monday, Baidu announced an investment in ZestFinance, a startup taking on the credit scoring industry by using machine learning and a wide variety of data about borrowers to rate their ability to repay loans.

While the amount of the backing was not disclosed, Baidu also invested Bitcoin payments startup Circle Internet Financial last month, the Nikkei Asian Review reported on Wednesday.

Both investments followed Baidu’s decision last year to form an online bank in partnership with Citic Group’s banking unit. The new bank would be the first in China that “truly understands both the Internet and financial services,” Baidu CEO Robin Li said at the time.

Baidu had also made several notable hires from the finance sector, the Nikkei paper reported, including executives with experience from American Express , online financial marketplace Lufax, and Everbright Bank in China.

While online lending sites like Lending Club LC -0.22% have faltered in the United States, the market is strong in China. The peer-to-peer lending market reached almost $67 billion last year, the largest in the world, Nikkei reported citing data from Citigroup.

Baidu will use ZestFinance’s credit rating technology to assess the creditworthiness of its own users. Unlike the U.S., China lacks centralized credit bureaus, and only a small portion of the population has a credit card.

Author:

George Popescu
George Popescu