2018 Predictions for MPL, SMB Lending, and Other Alternatives

Lending Club

In just over a decade, alternative lending has evolved from a niche fintech play into a hundred billion dollar industry. 2017 was somewhat of a bumpy ride. Growing competition, shrinking bottom lines, stringent regulations, and traditional banks’ willingness to take on alt-lending using their financial muscle were the key trends that emerged last year. It […]

Lending Club

In just over a decade, alternative lending has evolved from a niche fintech play into a hundred billion dollar industry. 2017 was somewhat of a bumpy ride. Growing competition, shrinking bottom lines, stringent regulations, and traditional banks’ willingness to take on alt-lending using their financial muscle were the key trends that emerged last year. It is difficult to be sure what 2018 will bring, but here is what experts and pundits are predicting.

Marketplace Lending

Ron Suber (Founder and former president, Prosper & chairman of the board, Credible) believes the marketplace lending industry has finally grown up. Companies will focus more on cash flow, profitability, and EBITDA. He encouraged online lenders to look for a lower cost of capital if they want to compete with the like of Marcus. He is also predicting the entrance of big technology companies like Amazon, Apple, Facebook, and Google.

Peter Renton (Lend Academy) believes five of the top 25 banks will launch their own platforms. He also believes Congress will pass a Madden fix and the IRS will modernize with its own API. One startling prediction he makes that one of the top online lenders (Lending Club, SoFi, Prosper, OnDeck, or Avant) will be acquired, and he believes a major platform will be hit by a cyber attack. Like everyone else, he believes the tech giants will solidify their positions in alternative lending, and more interestingly, he says messaging apps will integrate with online lending platforms.

Krista Morgan (CEO, P2Binvestor) makes predictions for MPL sector:

  • Companies will shift their focus on business models and unit profitability as hiring and spending decrease.
  • Mergers and shutdowns will continue as equity investors remain absent. She thinks it will be a tough year.
  • Investors believe the market is set for a correction; therefore, they will be looking at short duration assets for deploying their capital. Platforms will have to shift their focus to product development.
  • 2018 will be the year of increased diversity.

Adam Stettner (Founder and CEO, Reliant Funding) predicts a year of instability. He also believes market variables will counterbalance themselves this year. The Fed is expected to increase interest rates, which will have a ripple effect in terms of rates for various types of loans. If unemployment levels remain low, it will lead to wage inflation. So the order of the day for alternative finance and small business funding companies will be adaptability, he says.

Additionally, Stettner sees a year of increased fraud, and companies will have to invest in identification tools and fraud detection techniques.

Two more predictions he points to are increased consolidation as companies overextend themselves and more disruption from big business names entering the space.

The Motley Fool is predicting a Lending Club stock price turnaround.

Juan Tavares (LendingPoint) predicts balance sheet lenders will take over, there will be more collaboration, and payments and credit will intersect more.

Small Business Lending

Trevor Dryer (Co-founder and CEO, Mirador) made predictions on small business lending:

  • Banks will continue to increase small business lending and alternative lenders will struggle.
  • Crowdfunding got a boost last year when Title III of The Jumpstart Our Business Startups Act (JOBS Act) was implemented, opening the gates for crowdfunding. Dryer believes this sector will thrive in 2018.
  • Alternative lending has removed physical barriers that makes the lending process faster and more convenient. Alternative lending will continue to be more inclusive and encourage more people to start businesses.
  • Legislative barriers will continue to fall.
  • Alternative lenders will focus on experience and relationship building. Companies able to streamline and automate the application processes will thrive.

Alternative Lending in India

Rajesh Gupta (Founder and CEO, Cash Suvidha) made the following predictions for the Indian alternative lending market.

  • A significant increase in alternative lending market share.
  • Favorable regulations, cash benefits, ease of usage, and increased internet and smartphone penetration.
  • Investors and venture capitalists will remain optimistic about the Indian alternative lending industry since it is the second most funded segment in Indian fintech.

“2018 will witness a transformation in the Indian financial landscape, all thanks to alternative lending,” he writes.

Traditional Financial Services and Alternative Investing

Kevin McPartland (Greenwich Associates) says 2018 will be the year of digital. He believes product-agnostic investing will be huge, and passive investing will gain on active investing. 2018 will also be the year that alternative data goes mainstream, he believes while data will be more important than trading. He also believes wealth management will “come out of retirement” and, finally, a ton of innovation in the financial markets as banks focus on crypto.

Chris Skinner (The Finanser Blog) writes a lot about banking’s reaction to alternative lending. He believes 2018 will be the year of artificial intelligence for banks and that banks will continue to drive digital technology deeper into their core systems. Not surprisingly, he also predicts that banks will develop more proof-of-concept operations for distributed ledger technology. Finally, he predicts the banks will develop an Enterprise Data Architecture this year to clean up their fragmented systems.

Alexander Prokhorov (FinSight Ventures) made some general predictions for fintech that apply just as well to alternative lending:

  • Software will converge with financial products in the U.S. and Europe
  • Insurtech will be more prominent
  • Artificial intelligence will transform financial services
  • There will be a lot of innovation in emerging economies such as Africa, Latin America, and Asia
  • Wealth management will pick up speed
  • Crypo assets and blockchain will take center stage for retail investing

Mitek believes 2018 will be the year of the cyber criminal and predicts there will be 150 million attempts to set up fraud accounts this year.

Don Steinbrugge, CFA (Founder and CEO, Agecroft Partners) is predicting a banner year for the hedge fund industry. He believes hedge fund assets will reach an all-time high for the 10th straight year. He also believes there will be an increase in hedge funds shutting down. And there will be an increase in cryptocurrency funds. Strategies that will gain assets, he believes, include:

  • Asia long/short equity
  • Reinsurance
  • Those that blur the lines between private equity and hedge funds

The Lending-Times Prediction

Allen Taylor (Editor, Lending-Times) believes more U.S. platforms will open the doors to non-accredited investors. Blockchain will feature more prominently in alternative lending with more platforms focused on crypto-lending including a prominent alternative lender adding cryptocurrency to its list of core services. He also believes increased specialization will lead to platforms targeting specific industries, regions/states, and other narrow target markets.


2018 will surely see the alternative lending industry enter a consolidation phase to withstand the changes in market dynamics, and companies best able to cope with these headwinds would emerge bigger and stronger.


Written by Heena Dhir and Allen Taylor.

Allen Taylor

8 Key Reasons Small Businesses Are Denied Loans

life insurance sba loans

There’s no doubt about it: growing a small business is no small challenge. No matter how amazing your idea or product, you’re bound to encounter some serious mountains. According to a TD bank 2017 Business Survey, some of the key challenges that small US-based businesses face today are rising interest rates and rising healthcare costs, both […]

life insurance sba loans

There’s no doubt about it: growing a small business is no small challenge. No matter how amazing your idea or product, you’re bound to encounter some serious mountains.

According to a TD bank 2017 Business Survey, some of the key challenges that small US-based businesses face today are rising interest rates and rising healthcare costs, both of which can be at least partly attributed to uncertainty surrounding the state of political leadership.

And these days, more and more small businesses like startups are turning to credit cards and other forms of financing over bank loans than ever before. This is partly because some one in four businesses applying for credit were denied, and the ones who received financing did not get as much as they needed.

According to the Federal Reserve Bank of New York:

“… although many employer small businesses were profitable and optimistic, a significant majority faced financial challenges, experienced funding gaps and relied on personal finances. These issues were even more pronounced for the smallest firms, which were less likely to receive necessary funding and more likely to rely on personal finances to operate.”

Despite the fact that the vast majority of businesses in the United States are classified as small businesses – that is, they have employee bases of 500 or less – approximately half of all businesses fail in the first 5 years.

Many of these fail due to lack of funds and a lack of finances.

On top of that, even the businesses that succeed don’t even break even for 2 or 3 years, making financing at the outset crucial. The tricky part is that securing financing is also the most difficult part, which is why so many small businesses are denied financing. And owners are understandably frustrated.

Here are a few key reasons why small businesses are often denied funding.

An Uncertain Economic Climate

Uncertainty behind the local and regional economy is a basic stressor and reason behind the struggle many small businesses encounter. This very uncertainty is why so many businesses are likely to seek financing.

Unfortunately, this problem is also a reason why banks are less likely to give loans. When times are tight, lending is too. Banks aren’t inclined to lend when it’s possible the economy will take a dive, tanking many small businesses.

Because of this, many people are turning to personal savings, lines of credit, and even loans from family and friends.

Lack of Collateral

Collateral is some type of asset which secures the loan. This collateral can be some type of equipment, real estate, or anything else a bank could repossess and sell if the business fails to repay the loan.

It’s crucial for small businesses to list collateral on loan applications for the obvious reason of showing that they can pay it back in the case of default. The problem is that most startups don’t have much collateral like vehicles or business equipment. The result is the small business is denied a loan.

Gender and/or Ethnic Bias

Unfortunately, there appears to still be a major gap here, even though lenders are not supposed to be biased in this way. In fact, loan approval rates are much higher for white males than they are for women and minorities.

According to gudcapital.com:

“… small businesses that were more than 50 percent owned by a woman only received 15 percent of all SBA 7(a) loan approvals; American Indian owned businesses received 1 percent; Asian owned businesses received 24 percent; African American owned businesses received 2 percent; Hispanic owned businesses received 6 percent; White owned businesses received 53 percent; and male owned businesses received 70 percent of all SBA 7(a) loan approvals.”

The sexism can be so bad that some female founder resort to extreme measures, like creating an imaginary male founder to dispel the bias.

Bad Credit History

If a business owner has a terrible credit score, there’s a really good chance they’ll be denied funding. No surprise here.

This is why it’s so important that business owners get to know their credit score before they apply for a loan. Additionally, they should focus on building a solid credit score from the get go, even if they think they won’t need a big loan.

Understanding your business credit score makes you more likely to be approved for a loan and more prepared to grow your business.

What many don’t realize is that if you’re a small business owner, you need to have both a strong personal and business credit score to secure a significant amount of financing from major banks. There’s no way around this.

According to nav.com, the ideal credit score is 680 to 720. It also helps if a business owner understands how to demonstrate a solid history of responsible money management.

If you your credit score is low, you’ll need to spend time improving it before applying for a loan.

High Operating Expenses and Slow Growth

If a business can’t adequately demonstrate growth and growth projections, they may have trouble securing adequate financing for further growth—another catch-22 situation.

According to a Small Business American Dream Gap Report, 3 of 10 small businesses face challenges covering operating expenses. This trend is often due to the challenges of incorporating new employees as well as expanding or building inventory. Unfortunately, if they can’t cover their expenses, they’ll have difficulty securing funding

According to Entrepreneur.com, some 26 % of business owners don’t hire or expand because they don’t have the funds to do so. In turn, they resort to personal savings or loans from friends and family, despite the significant risks and high interest rates involved in these actions.

Lack of Cash Flow

In the past year or so, about 45% of businesses sought out financing, namely to cover operating expenses and expansion. This need for funding indicates a severe need for extra cash flow, which can be a huge red flag to banks.

Cash flow is not only one of the main reasons that existing businesses fail, it’s also a top reason why financing applications get denied. The reason behind this is simple: expenses come first before loans. This makes sense if you think about it on a personal financing level as well: you’re going to pay your rent and bills before you pay your loan payments. It’s simply a matter of priority.

Type of Business

According to nav.com, business owners are more likely to be denied financing if they are sole proprietors, brand new businesses, or state-approved businesses. In addition, businesses are liable to be rejected based on the type of industry they’re in.

In this game, size matters, and unfortunately the very nature of most small businesses makes them a bigger risk, especially if they are new. According to the Federal Reserve Website, smaller firms are “notably less successful at obtaining financing at large banks (45% success) than larger firms … (72% success).”

Part of the way a bank assesses a loan application is by assessing the customer base. If they’re looking at an application from a business in an industry that has a stable customer base, they are more likely to approve the application. Showing diversity in your client base is a key way to show secure projections.

Unclear Understanding of the Financing Process or Options

According to nav.com, there are at least 44 of different options for small business financing in the U.S. Depending on your area and/or industry, there may even be specialized grant options that are not widely advertised. Entrepreneur.com reports that some 20% of businesses applying for loans in the past 5 years had experienced multiple rejections and a quarter of these did not have a clear reason for the denial.

Researching and applying for these can be extremely time-consuming, which is why it’s recommended that small businesses ask the local business association for tips pertaining to their specific situation and/or industry.

All this points to a serious lack of understanding and transparency around what makes a business credit worthy. If people simply aren’t aware from the get go, or they’re asking questions but not getting clear answers, there’s obviously a problem.


To better prepare for loan applications, small business entrepreneurs need to have a clear picture of their current status, both in terms of financing and in terms of future projections.

They need to understand the context of securing funding to build accurate projections, and they can then send these projections with the loan applications to hopefully create a positive feedback loop.

But beyond that, small business owners need to thoroughly demonstrate their financial responsibility in order to have the best chance of securing crucial funding.

When you have business self-awareness, you are much more likely to succeed and to get the financing you so desperately need.

This article originally appeared at Life Insurance for SBA Loans.


Written by Life Insurance for SBA Loans.

Tuesday December 6 2016, Daily News Digest

soe by credit rating

News Comments Today’s main news: SmartBiz Loans ranked No. 1 among SBA7(a) loans under $ 350K. Orchard Platform partners with Sandra O’Neill. MoneyLion raises $ 22.5M Today’s main analysis: How China’s offshore bond market is changing fast. Today’s thought-provoking articles: How people become nonprime. IPF shines light on RECF. Morgan Stanley, Origin Capital sign deal. United States SmartBiz Loans ranked […]

soe by credit rating

News Comments

United States

United Kingdom

European Union

  • Morgan Stanley signs deal with Origin Capital. AT: “This is a big deal. It could boost the alternative finance sector in the Republic of Ireland and might have a small effect on post-Brexit concerns in the UK, but not much.”



News Summary

United States

SmartBiz Loans Ranked Number One Provider of Traditional SBA 7(a) Loans Under $ 350,000 (Yahoo! Sports), Rated: AAA

SmartBiz Loans, the first SBA marketplace and bank-enabling technology platform, has ranked as the number one provider of non-Express, SBA 7(a) loans under $350,000 for the 2016 government fiscal year. SmartBiz also ranked number five among providers of under $350,000 traditional SBA 7(a) and Express 7(a) loans combined.

SmartBiz generated $200 million in funded SBA 7(a) loans through its bank lending partners, which helped them earn the top spot. The data used is based on SBA lending data released in November, reflecting its 2016 fiscal year which ended on Sept. 30. Wells Fargo Bank, which was ranked just below SmartBiz, generated $155 million in funded non-Express SBA 7(a) loans under $350,000. This is the first time a technology platform and marketplace has achieved the number one position in SBA’s ranking of 7(a) loans.

Sandler O’Neill to Partner with Orchard Platform to Provide Banking Clients with Online Lending Market Data and Analytics (Orchard Platform Email), Rated: AAA

Orchard Platform, the  technology and data provider for the online lending space, today announced that it has entered into an agreement with Sandler O’Neill + Partners, L.P., a full-service investment banking firm and broker-dealer focused on the financial services sector. Under the terms of the agreement, Sandler O’Neill will make Orchard’s full suite of products and services available to its broad group of bank and specialty finance relationships.

Orchard provides an integrated platform that empowers online loan originators and investors with access to a variety of web-enabled tools, including market data, benchmarking, investor reporting, portfolio analytics, and cash flow simulators, as well as capital markets software. Recently, banks have announced a variety of partnerships with fintech companies. By working together, Orchard and Sandler O’Neill will enable a broad range of depository institutions and specialty finance companies to evaluate and monitor the many opportunities in the online lending market today.

“Over the last 28 years, Sandler O’Neill has forged strong relationships with community banks, thrifts, and similar financial institutions by keeping them abreast of unique, compelling investment opportunities and innovative products to help them evaluate those opportunities,” said Jon Doyle, Senior Managing Principal of Sandler O’Neill. “We are excited to have the opportunity to offer our clients Orchard’s industry expertise and suite of products, which will provide them with an efficient way of evaluating the various methods of participating in online lending.”

“Partnering with Sandler O’Neill gives us the opportunity to demonstrate our unique capabilities to a broad range of depository institutions,” said Orchard’s Chief Commercial Officer Bill Ullman. “Banks are increasingly looking for ways to participate in online lending, but figuring out where to start can be a challenge. Our solutions offer a range of tools and services ideally suited to Sandler O’Neill’s clients.”

How Do People Become Nonprime? (Yahoo! Finance), Rated: AAA

Nonprime Americans are more likely to see their incomes fluctuate, have more people living in their households, and are more often focused on short-term financial planning than their prime counterparts, according to research released today by Elevate’s Center for the New Middle Class.

This latest study focuses on the factors that may lead to – or originate from – being nonprime in America, defined as having a credit score below 700. The Center concluded that one in three nonprime Americans experienced an income change by at least 25% within the last 12 months. Additional key findings include:

  • More than half of nonprime Americans report some month-to-month income volatility within the last 12 months
  • They also have more people in their households; nonprime Americans are 20% more likely to have three or more people in their households
  • They are almost twice as likely to have elderly parents in their households than prime
  • They are more than twice as likely (58% vs. 27%) to be focused on short-term financial matters than long-term ones
  • Nonprime Americans say they can go only four months with a drop in income vs. the eight months that prime respondents say they can go
  • Nonprime Americans are more likely than prime to have slipped on the economic ladder; one in three say they are worse off than when they grew up

“It’s important that policymakers, consumer advocates, media, academics and the public at large understand this group of consumers to help determine what will best serve their needs,” continued Walker. “Our hope, through research, is to shed light on unmet financial needs of The New Middle Class and provide thoughtful insights for everyone engaged.”

MoneyLion Secures $ 22.5 Million in Series A Funding Led by Edison Partners (BusinessWire), Rated: A

MoneyLion, the mobile personal finance platform that leverages machine learning analytics to enable smarter tools and credit products, today announced $22.5 million in Series A funding led by Edison Partners. The Series A financings, together with $650 million in existing debt facilities, will fuel MoneyLion’s growth and significantly expand its lending capacity. Existing investors, including FinTech Collective, Citizen.VC, Clocktower Ventures, Broadhaven Capital Partners, Montage Ventures, and prominent individual investors from the finance and technology industries, also participated in the funding round.

MoneyLion’s approach is unique in the $800 billion consumer lending industry. Personalized for each user, MoneyLion’s mobile app simplifies personal financial management, providing a single place to track spending, savings, and credit. At the heart of MoneyLion’s platform are analytical models that power recommendations to help users achieve their financial goals, ranging from building savings, improving credit health, or managing an unexpected expense with a personal loan.

MoneyLion’s loan business has been growing three-fold year-over-year in originations and volume, with over 150,000 loans originated. MoneyLion will deploy the funds from the equity round to continue investing in the technology and talent that will help the firm grow in new and existing markets.

RealtyShares Completes an Initial Close of Their Diversified Marketplace Equity Fund (Yahoo! Sports), Rated: A

RealtyShares, a leading online marketplace for real estate crowdfunding, announced today that it has closed the initial round of a first-of-its-kind diversified marketplace equity fund. The unique fund should enable investors to access a diverse portfolio of real estate investments through a single contribution.

Managed by a team of experienced real estate investment managers, this fund was created for qualified investors and institutional partners, offering the opportunity to efficiently invest in middle market real estate. Each investment is to be a part of a portfolio of 10 to 20 properties selected by RealtyShares’ team of experts. Investors can also benefit from depreciation tax benefits, a feature that can be favorable to investors looking to reduce their taxable passive income.

The fund is mandated to invest in middle market real estate transactions that are typically $50 million and smaller, encompassing deals in opportunistic pockets within primary markets (e.g. San Francisco East Bay Area) and compelling secondary markets (e.g. Austin, Texas). The RealtyShares team intends to focus investments on value-add multifamily and commercial projects in Arizona, California, Florida, Illinois, New York, North Carolina, Texas and Virginia.

Money360 Closes $ 1.9 Million Permanent Loan for Ohio Property (Marketwired), Rated: A

Money360, the leading commercial real estate marketplace lending platform, announced today that it has provided financing for a single-tenant retail building located in Dayton, Ohio.

The building, which is currently 100 percent leased to Panera Bread, is located next to the Dayton Mall and within a heavily retail-based area with tenants such as Sears, Macy’s, J.C. Penney, DSW, Office Depot, Best Buy and TJ Maxx, among others.

The $1.9 million permanent loan allowed the borrower to recoup capital previously utilized in the acquisition of the property. Additionally, the longer loan term and prepayment structure outlined in the deal provided necessary flexibility in the financing.

The recourse loan is fixed for five years at an interest rate of 4.500%, utilizing a 25-year amortization schedule and a declining pre-payment penalty.

Betterment presses Trump to keep DOL rule (Fiduciary Focus), Rated: A

Robo-adviser Betterment is reaching out to President-elect Donald Trump to keep him from gutting the Labor Department’s fiduciary rule for retirement advice.

It ran a full-page ad in Monday’s Wall Street Journal directing Mr. Trump to “stand on the side of America’s 75 million retirement savers, not the firms with deep pockets who are lobbying” to protect their interests.

Fed Outlines Approach to Monitoring Fintech (The Wall Street Journal), Rated: A

The Federal Reserve offered early clues Monday on how it plans to monitor financial innovations such as blockchain when it published a long-awaited research paper on fintech.

The Fed said the long-term impact of the technology remains unclear, urging more study on the potential risks and rewards for financial markets.

While the U.S. central bank has no direct authority over companies operating in the rapidly evolving arena of financial technology, it regulates the flow of cash through electronic payment systems that banks use to move money and is scrutinizing the new technologies’ connections to banks.

The Fed’s research document contained no firm policy conclusions, but the central bank has been visiting fintech startups to ask about their business models and is looking to shape regulatory and industry discussions, according to people familiar with the talks.

The Fed also is probing the decisions banks make after engaging with fintech startups and assessing any potential for fraud, money laundering or collusion in the chain, these people added.

LendingUSA Appoints Manoj Mathew as its New Chief Technology Officer (Yahoo! Sports), Rated: B

LendingUSA, a leading provider of point of sale financing solutions, has announced Manoj Mathew as its new Chief Technology Officer.

His previous experience includes being the co-founder and Chief Technology Officer of LendFoundry, a fintech accelerator platform for marketplace lending. He was also a co-founder and senior executive at Sigma Infosolutions, a leader in business and IT solutions for both large and small enterprises. During his time at Sigma, he was instrumental in the design and architecture of the origination platform for loanDepot, QuickBridge and the servicing system deployed for Rocketloans.

Trump Education Secretary Pick Has Indirect Stake in Student Lender (The Wall Street Journal), Rated: B

Betsy DeVos, tapped by President-elect Donald Trump to run the U.S. Department of Education, is an indirect investor in online-lending company Social Finance Inc., a startup whose fortunes hinge in part on policies crafted by the department Ms. DeVos would run.

Ms. DeVos and her husband Dick DeVos are investors in RPM Ventures, an Ann Arbor, Mich.-based venture-capital firm that was one of SoFi’s earliest backers, according to the firms’ websites.

United Kingdom

IPF report shines light on real estate crowdfunding (Property Week), Rated: AAA

In 2015, property debt and equity crowdfunding totalled $7.8bn, whereas there was $760bn invested in commercial real estate.

Real estate accounts for 5% or less of the crowdfunding markets in China and the US but it accounts for more than 20% in the UK.

The UK real estate crowdfunding market is heavily weighted towards debt, which accounts for 88% of activity. At $0.93bn, debt crowdfunding represented about 1% of all lending in the wider UK commercial real estate market in 2015.

FCA authorises peer-to-peer bridging lender (Bridging&Commercial), Rated: AAA

The buy-to-let (BTL) and bridging loans marketplace was granted regulatory approval following a 24-month application process.

LandlordInvest has now applied to HM Revenue & Customs to become an Isa manager capable of offering the Innovative Finance Individual Savings Account (IFIsa).

Only firms authorised by both regulators are permitted to offer the IFIsa product.

LandlordInvest expects to receive a green light from HMRC over the next few weeks and, if granted, will offer the IFIsa directly through its lending platform.

The firm will be looking to offer tax-free returns between 5-10% per annum.

Denheath Desserts Surpasses $ 300,000 Funding Target During PledgeMe Crowdlending Campaign (Crowdfund Insider), Rated: A

Denheath Desserts, a custard square brand from South Canterbury, has successfully secured its initial $300,000 funding target through its crowdlending campaign on PledgeMe. The company launched the initiative in late October, seeking a max of $1.2 million to accelerate its self-proclaimed “World Custard Invasion,” grow distribution and New Zealand, and start expansion plans in Hong Kong, Singapore, and New York City. 

Growth Street Will Now Accept Retail Investors on P2P Platform (Crowdfund Insider), Rated: A

Growth Street is now an FCA registered Appointed Representative.  Growth Street will now be able to accept individual investors on its peer to peer lending platform. By expanding the range of investors, Growth Street seeks to provide more businesses with a GrowthLine, its business overdraft alternative. Growth Street has partnered with Resolution Compliance to expand its activities but stated it would continue with its own direct application with the FCA.

European Union

Morgan Stanley in Origin loan push (The Times), Rated: AAA

Origin Capital, a Dublin non-bank lender, has signed a funding deal with Morgan Stanley to offer finance to the Irish commercial property market.

The partnership with one of the world’s largest investment banks is expected to target the refinancing of the tens of billions’ worth of commercial property loans purchased by investment funds such as Cerberus and Lone Star from Irish banks and Nama.

Origin will act as an origination platform for Morgan Stanley. Apart from refinancing property loans out of the so-called vulture funds, chief executive Ross Metcalfe said Origin also expected to finance companies, currently leasing, to buy properties.


These Charts Show How One Part of China’s Offshore Bond Market Is Changing Fast (Bloomberg), Rated: AAA

City-level borrowers are storming China’s international bond market.

The urban encroachment means that the country’s offshore bond market is moving down the credit ratings spectrum with a greater proportion of new issuance coming from junk-rated financing arms, according to data from CreditSights Inc.

City-level entities are less likely to garner investment-grade ratings due to their reliance on mere “implicit” support from the Chinese government. That means the share of junk-rated issuance has risen to 11 percent year-to-date from none in 2015, according to CreditSights.

This deterioration in the credit quality of bond issuers comes amid Beijing’s step-up in its efforts against central government support for local governments. China announced a contingency plan last month, ordering local authorities to repay their own debt and reiterating that Beijing won’t bail out regional governments.

Women in viral loan receipt nude pics mostly college students in small cities (Global Times), Rated: A

Women who used now-leaked nude pictures and intimate videos of themselves as collateral for online lending platforms are mostly college students, though the oldest is 47 years old, news site thepaper.cn reported on Monday.

Of the 161 women whose pictures and videos have spread online since November 30, the personal information of 144 has also been exposed, showing that around two-thirds are college students.

Most of the users are from third- or fourth-tier cities and live in villages. Less than 5 percent of them are from first-tier cities, said thepaper.cn.


Cradle’s private investment fund grows to RM190.2 mln (The Borneo Post), Rated: AAA

Cradle Fund Sdn Bhd (Cradle) is on track to drive more private investment participation to boost the ecosystem for Malaysian technology startups with co-investment funds of RM190.2 million, up from RM161.2 million as of June this year.

Chief executive officer, Nazrin Hassan, said the co-investment programme was one of the company’s efforts to help reduce government-linked companies’ dependence on government funding.

Cradle yesterday signed partnership agreements with RHL Ventures, TinkBig Venture, Biz Angel Network, EIX Group, Segnel Ventures and PlatCom Ventures, which will take part to fund Malaysian startups totalling RM14.5 million.

With the new partners on board, the number of partners has grown to 32 with total committed funds of RM190.2 million.

Global participation banking assets reached US $ 924 billion in 2015: EY (Zawya), Rated: A

The GCC region’s share of participation banking increased to 72%, as the size of assets in the Association of Southeast Asian Nations (ASEAN) countries declined during 2015.

Saudi Arabia, the UAE and Malaysia are the three largest participation banking markets, in terms of assets, representing 34.2%, 17.2%, 13.3% of the global market share respectively.

In the GCC region, FinTech innovations have the ability to enhance market access and profitability of banks, dramatically. A starting point for participation banks is to activate a bold strategy for the finance function – inclusive of advanced data analytics, robotic process automation, the cloud, artificial intelligence and block-chain.

Some of the key areas of FinTech innovations that are relevant for participation banks include: SME and peer-to-peer lending platforms, payment related innovations such as person-to-person payments, digital authentication and digital wealth management.

If banks were to consolidate with Fintech companies, it could propel participation banks to become mainstream across 20 promising markets by 2021, up from five markets today, representing a jump from 100 million customers to 250 million customers over the same period.

Digital-only banking could become a significant client segment for participation banks. There is a case for participation banks to evaluate collaborative ventures with FinTech firms to launch digital-only banks in their respective countries.


George Popescu
Allen Taylor

Monday October 17 2016, Daily News Digest

Monday October 17 2016, Daily News Digest

News Comments Today’s main news:  CircleBack stopped making new loans. Lending Club’s K8, new rates, updates. What is the state of the FinTech industry in the U.S.? Today’s main analysis : Zopa is profitable and will continue. Financial advisers should look to the Asian-American market, a sizable demographic with a lot of money. Today’s thought-provoking articles: The […]

Monday October 17 2016, Daily News Digest

News Comments

United States

United Kingdom

European Union





News Summary

United States

The State of the Industry in the USA (LendIt.com), Rated: AAA

Matt Burton, CEO & Co-Founder of Orchard; Ram Ahluwalia, CEO of PeerIQ; Kathryn Petralia, CEO of Kabbage; Phin Upham, of Thiel Capital; and moderator Peter Renton, Chairman and Co-Founder of LendIt discuss the ‘The State of the Industry in the USA’ at LendIt Europe 2016 in London on 11 October 2016.

More Banks Working on APIs in 2016, But Bureaucracy Remains a Problem (Bank Innovation), Rated: A

APIs (application programming interfaces) are fast becoming integral to the banking world, but corporate culture has not yet caught up with the technology, according to data from a survey conducted by the Open Bank Project together with Bank Innovation.

In 2015, 62% of survey respondents indicated corporate culture and bureaucracy were the most significant hindrance to the development of an open API project. In 2016, despite an increase in the percentage of banks launching API initiatives, that number climbed to 69%.

According to data from the survey, 87% of the survey’s 174 respondents consider their banks’ inability to quickly create new digital products as a major challenge to API infrastructure. And 85% of those surveyed consider compliance a “very important” or “extremely important” challenge.

Only around a quarter of bankers (24%) saw compliance as a barrier towards implementing an API initiative, as opposed to 31% of bankers who were surveyed last year.

Data also shows a surge in the number of banks that have launched an open API initiative — 30% of respondents compared with last year’s 24%. Banks planning to launch an initiative in the next 12 months led all categories, with about 39% of all respondents. Only 9% of banks said they were not considering an API initiative.

Fed paying close attention to ‘significant’ blockchain (Finextra), Rated: AAA

Distributed ledger technology may be the “most significant development in many years” for payments, clearing and settlement, according to a Federal Reserve governor who says that the central bank will publish its own blockchain paper later this year.

In a speech, Lael Brainard says the Fed is “paying close attention” to DLT, recognising its potential to transform the way financial market participants transfer, store, and maintain ownership records of digitised assets.

Money 2020 to Chart the Future Path for Payments Industry (NewsBTC), Rated: B

Money 2020, one of the leading financial and payments conference is preparing for its 2016 edition, scheduled for October 23-26. The event happening at the Venetian in Las Vegas focuses on blockchain technology, fintech, and related regulatory aspects.

Among the speakers are Brian Armstrong from Coinbase, John Beccia from Circle, Perianne Boring from the Chamber of Digital Commerce, Vitalik Buterin from Ethereum Foundation, Chris Church from Digital Asset holdings, Jacob Farber from R3CEV, Peter Kirby from Factom, Bobby Lee from BTCC, Jed McCaleb from Stellar and more.

As conventional banking and financial institutions continue to explore the use of blockchain technology in their operations, this event will bring both cryptocurrency and mainstream financial industries together. The main focus of this year’s Money 2020 event will be on regulations and innovation in fintech sector, which includes Bitcoin, blockchain technology, and cryptocurrency regulations.

Weekly Industry Update: October 16, 2016 (Peer IQ), Rated: A

The CFPB was ruled unconstitutional by the United States Court of Appeals for the District of Columbia Circuit in a landmark decision on October 11th, but rejected the idea of shutting down the agency. The appellate court focused on its unusual independence in the Executive Branch, and the use of retroactive enforcement action against PHH Corp, a New Jersey mortgage-service company (PHH Corp. v. Consumer Financial Protection Bureau, 15-1177, U.S. Court of Appeals).

The court’s decision in favor of PHH Corp. was considered a setback to the CFPB, who just last month was recognized for its role in determining Wells Fargo’s $185 million fine for opening deposit and credit card accounts without clients’ knowledge.

The second highlight was “The State of the Industry in the USA” panel. Convictions were riding high with polar opposite views on the Marcus platform. PeerIQ CEO Ram Ahluwalia found himself in the minority position making the case that a “well capitalized bank with a deep understanding of consumer credit risk” should not be underestimated.

Coincidentally, Marcus launched two days later and we recommend a Fast Company in-depth report for those following the story.

LendingClub released an 8-K providing a recap of credit and pricing changes, an update on credit performance and macro trends, a description of pricing changes, and revised loss-adjusted forecasts.

In our Q3 Securitization Tracker, we noted the increased delinquency rates for 2015 and 2016 vintages and anticipation of additional interest rate revisions. On October 14, 2016, LendingClub interest rates increased by a weighted average of 23 bps based (Exhibit 2). Rate increases are concentrated in ‘F’ and ‘G’ grade loans. A-grade loans will experience an interest rate reduction.

CommonBond is a student loan refinance online platform, targeting high credit quality undergraduate and graduate student loan borrowers. Since its inception in 2012, CommonBond has originated over $700 MM in loans through its lending partner The Bank of Lake Mills (BLM), a Wisconsin state-chartered and FDIC insured bank. BLM also back-stopped the reps and warranties CommonBond provided in the transaction.

Kabbage May Wait Out IPO Market For Continued Private Growth (Seeking Alpha), Rated: B

Atlanta, Georgia-based Kabbage was co-founded in 2009 by CEO Rob Frohwein, Marc Gorlin, and COO Kathryn Petralia. The company has raised $600 million in equity and debt financing from venture capital and strategic investors.

Kabbage raised its most recent financing of $135 million in October 2015 at a reported valuation of $1 billion. The company also increased its credit line to $900 million.

Only nine months later, the company announced the complete suspension of additional consumer loans, in the wake of increasing trouble in the sector from consumer lenders LendingClub (NYSE:LC) and Prosper Marketplace.

It detailed plans to create lending portals for two foreign banks in 2017 but has not provided any further information on that initiative.

Courting the Asian-American financial advice market (Investment News), Rated: A

By many measures, Asian-Americans are a financial adviser’s dream. They earn more than the general population, they have more financial assets and they are excellent savers.

Asian-Americans make up a fast-growing segment of the United States. In 2014, they represented 6.6% of the population, up from 4.5% in 2000, Census Bureau data show. During that time, their buying power grew 180% — faster than for any other ethnic segment in the country, according to a recent report from Prudential.

Median Asian-American household income is $87,000 versus $62,000 for the general population.

Average estimated household financial assets of Asian-Americans total $445,600, or 16% higher than the general population.

Sixty-two percent of the Asian-Americans surveyed were college-educated (including many with advanced degrees), versus 40% of non-Asians.

The report also indicated that the Asian-American market might be a ripe opportunity for advisers. Just 18% work with an adviser, compared with 26% of the general population. Despite this low proportion, 43% of Asian-Americans say they are willing to consider working with an adviser.

Asian-Americans, like the general population, rank retirement-related goals as their top financial priority.

Weekly Online Lending Snapshot – October 14, 2016 (Orchard Platform), Rated: A

It was another busy week in the online lending space. The week began for many of us in London with this year’s Lendit Europe conference kicking off on Sunday. Orchard attendees noted an increased presence this year of large U.S. institutional investors looking for opportunities in Europe. A staunch critic of online lending, former Chairman of the Financial Services Authority in the UK Lord Adair Turner, addressed the conference and seems to have softened his previous negative stance by indicating he now feels online lending could potentially add to the stability of the overall credit markets in times of crisis. Among the big news items for the week, Goldman Sachs announced the launch of Marcus, its online consumer lending platform, and the Wall Street Journal reported that Morgan Stanley is providing a $100 million credit line to San Francisco-based Affirm Inc., a provider of consumer loans at the point of sale.

CircleBack Lending Stops Making Loans, May Transfer Portfolio to Another Company (Crowdfund Insider), Rated: AAA

Simon, along with co-founder Todd Walters, are from the early days of online lending. The two entrepreneurs launched the 3rd peer to peer lending platform in the US back in 2008 – following in the footsteps of Lending Club and Prosper. Loanio started originating loans before the SEC required securities registration.  The registration requirement helped to force Loanio close up shop in 2011.  An interesting article byPeter Renton in 2011 also cited the high default rate of Loanio loans.

CircleBack Lending has stopped making loans. This is according to a report by Bloomberg. The online lender said that funding had vaporized as some borrowers failed to repay their loans.  CircleBack provides unsecured consumer credit for loans from $3000 to $35,000.

He also stated CircleBack would transfer existing loans to another company if they cannot find funding soon.

Bloomberg reported that CircleBack had higher losses than expected. Pointing to data from Morgan Stanley, cumulative losses for CircleBack loans in 2015 were pegged at 13.5%.  At one point in time, CircleBack appeared to have a promising future as itsigned a deal with Jeffries for sale and securitization of up to $500 million in loans. CircleBack had signed up Jeffries earlier this year to “explore strategic options.”

Lending Club tightens credit policies in fight to keep investor demand (Financial Times), Rated: AAA

Lending Club has tightened its credit policies for the second time in six months, as the platform battles to sustain investor demand for its loans amid spiralling losses.

The company’s business model — of arranging loans to consumers online, then selling them on to individual and institutional investors — has been under pressure in recent months, following revelations of a governance scandal that caused many big buyers to put programmes on hold.

Late on Friday the company announced that it would stop lending to certain classes of very risky customer and would put up rates for everyone else, after greater than expected losses across the board.

United Kingdom

Crowdfunding expected to replace buy-to-let (Mortgage Introducer), Rated: A

Property crowdfunding will go some way to replacing buy-to-let as the government’s tax changes stifle the market, Prime Central London property expert Jeremy McGivern has predicted.

McGivern, founder of search agency Mercury Homesearch, reckoned the growth of crowdfunding will represent the biggest change to the housing market in the next few years but warned it could have a ‘catastrophic’ outcome.

Lee Grandin of Lend2Landlord, a peer-to-peer lending platform linking landlords and developers to funders, felt McGivern may have a point if anyone is allowed to jump in and invest.

European Union

Overpopulation of unicorns is bad for the startup environment (BankNXT), Rated: AAA

The glorified unicorn hunt … it’s the latest trend on the street to be an entrepreneur. With an increasing supply (number of startups), number of VCs, corporate VCs, crowdfunding platforms et al (demand) is also increasing. Good old economics 101.

As the number of startups increases, so does the noise. As a result, the overall quality of startups has arguably gone down. It requires less capital and risk to start a business. Plus, it looks sexy on your CV.

Further fuel to the fire (in a positive way) is the shift in mindset of the large corporates towards startups. They’re much more willing to engage in a working relationship with an unknown company, or an early stage startup, often becoming that crucial first or second client. While the fee of anything under £10,000 is usually less than the cost of a coffee breakout session at its quarterly town hall, large corporations are still careful. You don’t want to bet on the wrong horse and let the winner run away with your competitors.

Lucky, the startup stack is changing to address this. Here’s how I imagine it.

Zopa’s Jaidev Janardana at LendIt Europe: “We Were Profitable in September & We’ll Be Profitable Moving Forward” (Crowdfund Insider), Rated: AAA

Earlier this week, CEO of peer-to-peer lending platform Zopa Jaidev Janardana took to the stage of the marketplace lending conference, LendIt Europe, to share details about the industry’s growth and development over the past year. During his keynote speech, “2016: Growing Up,” Janardana noted despite the fact that this year has been an unpredictable year, Zopa’s performance has grown and become profitable.


Government set to unveil new body for financial advisers (Money Management), Rated: AAA

The new independent standards body aimed at governing the financial advice industry will be set up as a part of the professional standards legislation, which is expected to be introduced to the Parliament by the Government this year to mandate standards for financial advisers, Minister for Revenues and Financial Services, Kelly O’Dwyer, announced.

The cost of establishing the new body, as a Commonwealth company, would be covered by the large banks and AMP while the chairman and directors would be appointed by the minister.

The main responsibilities would include developing and setting the industry exam, developing the code of ethics, and determining the education and development requirements for both new and existing advisers.

ABA welcomes new independent standards body (Professional Planner), Rated: A

The Australian Bankers’ Association has today welcomed the Federal Government’s announcement that it will introduce new legislation into Parliament this year to create a new independent body to set higher professional standards for financial advisers.

The banking industry is also working on additional industry standards to ensure that banks can apply the Government’s professional standards framework in their competency and training programs, human resources policies, and compliance frameworks.

Wilsons, Bell Potter in market for hot fintech Afterpay (Australian Financial Review), Rated: A

Payments company Afterpay is seeking to raise $30 million in a placement through Bell Potter Securities and Wilsons on Monday.

Afterpay shares went into a trading halt on Monday morning as its brokers started drumming up interest from potential backers.

Afterpay is seeking the equity injection to fund growth, with the payments company experiencing a strong number of retail merchants seeking its online payments technology.

Bids were due at 4pm on Monday, according to terms sent to fund managers.

Morgan Stanley’s Jeffrey McMillan says collaboration is key in fintech (The Australian), Rated: A

It makes more sense for a global banking giant such as Morgan Stanley to collaborate with innovative fintech start-ups than to try to be innovative itself, according to the bank’s chief analytics and data officer, Jeffrey McMillan.

The second annual fintech conference hosted by The Economist was titled “Collaborate or Die?” in recognition of a growing trend for fintech start-ups to work in partnership with the large ­financial institutions they once talked about disrupting.

New fintech fund H2Ocean cancels IPO plans after failing to raise enough capital (Startup Smart), Rated: B

New Australian fintech venture capital fund has been forced to cancel its planned IPO after failing to raise the minimum subscription requirement.

H2Ocean was set to become one of Australia’s first publicly-listed VC funds, but founders Ben and Toby Heap have canned the IPO after being unable to raise the $27.5 million required beforehand.

Heap says that hitting this target would have enabled them to establish a diversified global portfolio of early-stage, high-growth fintech companies that would open up the asset class to retail investors on the ASX.

But they were unable to do so with insufficient interest from institutional investors.

Because of this, Heap says they have decided to proceed as a private fund.


China Publishes List of Restrictions for Peer to Peer Lenders (Crowdfund Insider), Rated: AAA

The evolving Chinese peer to peer lending sector took another twist in the regulatory path, as the government issued a special work plan this past week. According toECNS, the plan incorporated a list of restrictions for P2P lenders to help curb investor and borrower risk. The idea is to establish a more standardized industry.

Reportedly, the Chinese government banned platforms from setting up capital pools, extending loans, and “illegal fundraising”.

The government also addressed equity-based crowdfunding platforms stating they should not fabricate targets and carry out self-financing.

China is the home to the largest online industry in the world. Thousands of platforms operate in China. A recent report pegged the number of P2P lenders at 2595 at the end of 2015.  But there has been a proliferation of fraud and poor practices, with 1263 of these platforms experiencing operational problems.  More recent numbers fromWDZJ said there were 2,202 P2P websites were in operation at the end of September.

It is clear that Chinese policy makers are attempting to walk a fine line as economic growth slows. They need the online lending sector to provide credit to sectors of the economy that dearly need it but the lightly regulated sector comes with an obvious cost.


Digital Technologies And Fintechs to Drive Financial Inclusion in Asia (FinTech News), Rated: AAA

Wth an estimated 2 billion adults and 200 million micro, small and midsize businesses(MSMEs) worldwide considered as unbanked or underbanked, financial inclusion has emerged as a critical development challenge and an opportunity for fintechs.

Asia and Africa have the highest rates of unbanked population. These populations represent 21% of China’s total population, 47% in India and 64% in Indonesia.

In Southeast Asia, there are 642 million financial excluded adults and 39 million MSMEs that are underserved or unserved by credit services, according to McKinsey and Company.

Digital financial could boost annual GDP of all emerging economies by US$3.7 trillion by 2025 with nearly two-thirds of the increase coming from raised productivity of financial and non-financial businesses and governments as a result of digital payments.


J.P. Morgan Goes Virtual (Finews.Asia), Rated: AAA

Following the launch of J.P. Morgan’s virtual branch in India last December, the bank has now opened a virtual branch in Indonesia. 

The number of clients in India using the J.P. Morgan virtual branch service has been growing rapidly and the bank is expecting strong interest in Indonesia as well. Further virtual branches for the region are slated to come online, with expected launches in Thailand and China in the near term.

Offered via the J.P. Morgan ACCESS® OnlineSM, the virtual branch is a fully integrated platform that provides a comprehensive suite of banking services that can be securely accessed from desktops and mobile devices.



George Popescu
Allen Taylor