Thursday April 12 2018, Daily News Digest

Thursday April 12 2018, Daily News Digest

News Comments Today’s main news: Upgrade to issues ABS–but when? FCA warns Funding Circle clone. Funding Circle Netherlands approved for Guarantee SME Credit Scheme Participant. Today’s main analysis: The metro areas with the most fraud alerts. Today’s thought-provoking articles: The regulation of marketplace lending (A MUST-READ REPORT). LendIt, PitchIt award winners. Is China Rapid Finance close to profit? GDPR consent […]

Thursday April 12 2018, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Ex-LendingClub chief’s new venture set to issue ABS (GlobalCapital), Rated: AAA

Upgrade is said to have a private warehouse facility in place and is looking to debut a securitization in the coming months, according to two people familiar with the matter.

According to an April 2017 press release, Jefferies is advising the company on its capital markets strategy and is….

LendingTree Ranks Metros with the Most Fraud Alerts (PR Newswire) Rated: AAA

With millions of Americans affected by data breaches every year, such as recent revelations at Uber and Equifax, LendingTree decided to look at anonymized data from a sample of the over 7 million My LendingTree users to see where people are most likely to have asked a credit bureau to place a fraud alert on their credit report.


Key findings of the study:

  • The average rate of fraud alert requests among all cities reviewed is 6.4 percent.
  • Las Vegas and Houston tie for the highest rate of fraud alerts, at 13.6 percent.
  • Miami and New York are close behind, tied at 12.9 percent.
  • Rochester, N.Y. has the lowest rate of people requesting fraud alerts at 2 percent. Nearby Buffalo, N.Y. has 2.6 percent.

The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler) Rated: AAA

So-called “true lender” litigation remains one of the most significant risks facing the marketplace lending industry. These are cases involving a claim by a borrower or regulator that the “true lender” of a loan funded by a Funding Bank for a marketplace lender is the marketplace lender rather than the
Funding Bank. Often such litigation involves asking the court to look past the form of the loan transactions to their substance in order to ascertain which party, the Funding Bank or the marketplace lender, holds the predominant economic interest in the loans. The aim of true lender claims is to subject
the marketplace lender to federal and state regulation as a non-bank lender, enabling the claimant to pursue actions based on failure to comply with state lender licensing or usury laws.

Read the full report here.

LendIt Fintech Names PitchIt Competition Winners And Second Annual LendIt Industry Award Winners (PR Newswire) Rated: AAA

Out of eight PitchIt finalists, the judge’s winner was CreditStacks, a company that offers U.S. based premium credit cards to prime, new-to-credit customers. The audience winner was Narmi, a fintech company the helps credit unions and banks deliver a unified experience with modern and secure online banking, mobile banking and websites.

Below are the second annual LendIt Industry Award winners, per category:

Fintech Innovator of the Year

Affirm

Executive of the Year

Anthony Hsieh, Founder & CEO, loanDepot

Fintech Woman of the Year

Kathryn Petralia, Co-founder & COO, Kabbage

Blockchain Innovator of the Year

ConsenSys

Most Innovative Token Economy

AxiomZen

Top Consumer Lending Platform

Yirendai

Top Small Business Lending Platform

Kabbage

Top Real Estate Lending Platform

LendInvest

Emerging Lending Platform

LendingUSA

Excellence in Financial Inclusion

Oportun

Most Promising Partnership

LendingClub + Opportunity Fund

Most Successful Cross-Border Partnership

Kasisto + DBS Bank

Most Innovative Bank

Cross River

International Innovator of the Year

IrisGuard

Top Enterprise Technology Company

ThreatMetrix

Top Emerging Technology Company

MoneyLion

Top Professional Services Company

Millennium Trust

Most Innovative Mobile Technology

Juvo

Top Fintech Equity Investor

Edison Partners

Best Journalist Coverage

Tony Zerucha, Managing Editor, Bankless Times

Top Investment Bank in Fintech

FT Partners

To modernize consumer lending, it had to strip systems to the core (American Banker) Rated: A

Replacing core systems can be an expensive and risky proposition for banks, but KeyCorp has decided the time is now to replace an antiquated legacy system.

The $138 billion-asset bank announced at the Oracle Industry Connect conference in New York this week that it plans to ditch its existing lending platform in an effort to digitize and modernize the lending process.

Appeal could jeopardize CFPB win in landmark tribal sovereignty case (Reuters) Rated: A

Online lender CashCall filed a notice of appeal Tuesday in a Consumer Financial Protection Bureau enforcement action that set precedent on whether consumer lenders can evade state interest rate caps by affiliating with Native American tribes and invoking tribal sovereignty. In 2016, U.S. District Judge John Walter of Los Angeles granted partial summary judgment to the CFPB, holding that CashCall was the true lender, rather than a company owned by a member of the Cheyenne River Sioux Tribe, so state laws govern CashCall loans. The company’s notice to the 9th U.S. Circuit Court of Appeals, filed by its lawyers at Latham & Watkins and Skadden Arps Slate Meagher & Flom, indicated that CashCall will challenge the landmark summary judgment decision on tribal sovereignty, as well as other rulings by Judge Walter.

Judge Walter, however, concluded that the bureau hadn’t shown it was entitled to any restitution and that CashCall had not knowingly flouted consumer protection laws. He awarded the bureau only $10.3 million in penalties.

Optimizing Mortgage Loan Lifecycles With Fintech (the M Report) Rated: A

Integrated properly into both the trading and operational side of the mortgage lifecycle, fintech can not only increase margins but also allow for lenders to originate more loans in less time and in a more efficient and secure manner. Additionally, by using fintech throughout the mortgage lifecycle, each phase of management is enhanced and therefore produces optimized outcomes leading to better investment returns, while still providing the borrower with a great customer experience.

A “High Level” Tech-Enabled Residential Mortgage Lifecycle*

Source The M Report

*This chart is provided as a “high level” example of what types of fintech can optimize the lifecycle. It is not to be considered a complete integration or feature roadmap.

 

Big Banks Using Non-Bank Middlemen to Lend to Subprime Borrowers (Low Cards) Rated: A

If a borrower has a low credit score and needs a loan for a $12,000 vehicle, this would not be of interest to a large bank such as Wells Fargo. But it would be an option for a non-bank lender like Exeter Finance. Exeter would screen the applicant and approve the loan at their discretion. Then, Wells Fargo would extend a loan to Exeter. The bank is still profiting from a sub-prime loan, but they are giving the money to another lender.

This does not eliminate risk on Wells Fargo’s end. However, it does push the burden onto the non-bank lender, according to The Wall Street Journal.

Two’s company (Breakingviews) Rated: A

Silicon Valley is giving two of its most noted fintech outcasts a second chance. Former Social Finance boss Mike Cagney and erstwhile LendingClub Chief Executive Renaud Laplanche are each back with new loan ventures after losing their jobs to scandals.

Between them, both men created what are now the two largest fintech lenders, having originated or facilitated some $63 billion between them in the past few years.

Blockchain makes online lenders taste own medicine (Nasdaq) Rated: A

Blockchain is giving online lenders a taste of their own medicine. The likes of Prosper, Social Finance and On Deck Capital found cryptocurrency technology trying to steal the limelight at their annual get-together in San Francisco this week. It’s a case of the disruptors being disrupted.

United Kingdom

FCA issues warning about Funding Circle clone (Peer2Peer Finance News) Rated: AAA

THE CITY watchdog has issued a warning to consumers about a clone of peer-to-peer lender Funding Circle.

The clone, Funding Circle Loans, had set up a website purporting to be the P2P platform.

Its website, , has since been suspended.

Prestige Funds partners for Innovative Finance ISA bond (The Armchair Trader) Rated: A

Prestige Funds, a specialist direct lending manager, is partnering with UK-based Goji to launch a Renewables Lending Bond which is eligible for inclusion in an Innovative Finance ISA (IFISA). IFISAs are a new, tax-free way for investors to access investment opportunities that are not available on stock exchanges.

The Goji Renewables Lending Bond will include a yield target of between 5.5% and 6.5% over three and five year terms. Interest payments on the bond will be supported by UK government subsidies, such as Feed-in-Tariffs.

The need for speed for loan approvals and payments (Credit Strategy) Rated: A

Arguably, consumer lending has come full circle.

But today’s consumer lenders are having to contend with raised customer expectations. “Empowered borrowers,” says consultancy firm PwC, expect not only a simple, but also a fast loan process.

Consumer lending research published by PwC found that other than economic factors (interest rates and closing costs) or “having an existing relationship,” the speed of the process was the most important factor for borrowers in choosing a lender.

 

Higher salaries giving fintech sector edge over traditional banking (Finextra) Rated: B

The threat from Brexit has also called into question how Britain has – and will – deal with the country’s departure from the European Union in terms of its strong worldwide financial standing. With this in mind, Joblift has analysed and compared the UK’s Fintech and traditional banking sectors over the last 12 months. The analysis shows that traditional banking has felt the effect of the competition from Fintech and the upcoming Brexit with vacancies decreasing by 3% monthly, while Fintech seems to be flourishing, with a huge growth of 9% monthly, in the face of these challenges.

China

China Rapid Finance: Is It Close To Making A Profit? (Seeking Alpha) Rated: AAA

China Rapid Finance (XRF) went public on NYSE on April 28, 2017, as the beginning of the IPO wave for China P2P companies in 2017. The company focuses their business on meeting the credit demand for EMMAs (Emerging Middle-class Mobile Active consumer) in China.

  • China Rapid Finance (XRF) has experienced a business shift from lifestyle loans (larger in size) to consumption loans (smaller size), which will lead to bigger impact from regulatory hammer;
  • Q4 earnings results didn’t satisfy investors and stock price dropped 15% in two days after the ER release;
  • Despite of the short term concerns, operating efficiency has significantly improved in 2017, which makes the profitability outlook of the firm very positive.
Source: Seeking Alpha
European Union

Ministry of Economic Affairs and Climate Approves Funding Circle Netherlands As Guarantee SME Credit Scheme Participant (Crowdfund Insider) Rated: AAA

The Ministry of Economic Affairs and Climate (EZ) has reportedly approved Funding Circle Netherlands as a Guarantee SME Credit (BKMB) scheme participant.

According to AltFi, for participating firms, which are typically major banks, the BKMB provides guarantee of up to 75% of the loan amounts that fit within its criteria. 

GDPR and financial advice: Consent for data processing (Professional Adviser) Rated: AAA

A firm could be in trouble with the Information Commissioner’s Office (ICO) if an individual makes a complaint about being marketed to by a firm and there is no consent in place, since this constitutes a breach of the GDPR.

Article 6 – lawfulness of processing

Processing shall be lawful only if and to the extent that at least one of the following applies:

a. the data subject has given consent to the processing of his or her personal data for one or more specific purposes;

b. processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract;

d. processing is necessary in order to protect the vital interests of the data subject or of another natural person;

f. processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require protection of personal data, in particular where the data subject is a child.

International

Mega-deals continue to shape Asian market

After rounding off 2017 at a remarkable high bolstered by megadeals, Asia continued to see large deals in Q1 2018.

Global Q1 2018 key highlights

  • Global VC investment rose from US$46 billion in Q4’17 to US$49.3 billion in Q1 2018, a solid increase buoyed by five US$1 billion+ megadeals.
  • The number of global VC deals declined for the fourth straight quarter, falling from 3,286 in Q4 2017 to 2,661 in Q1 2018. The number of VC deals has dropped by half since reaching a peak of 5,480 deals in Q1’15.
  • The Americas set a new record for VC investment in Q1 2018, with US$29.4 billion raised across 1,782 deals. Asia raised US$14.6 billion across 317 deals, and Europe raised US$5.2 billion across 548 deals.
  • Corporate participation in global VC deals set a new record for the second straight quarter, rising from 18.5% in Q4 2017 to 21% in Q1 2018.
  • New and old unicorns – companies valued at over US$1 billion – attracted a significant amount of funding with US$14 billion across 32 deals. Two unicorns went public late in Q1 2018: cloud-based security provider Zscaler and cloudstorage provider Dropbox, with both companies seeing positive results to date. With Spotify set for a direct listing in April and UK-based online loan provider Funding Circle planning to go public later this year, the IPO market may be opening up.

How global fintech trends will impact your banking (Bank Rate) Rated: A

In the last few years, the U.S. has seen the launch of a whole crop of neobanks, consumer-friendly startups that are trying to change the way we manage our money. A bunch of neobanks have appeared in Europe, too (they are called challenger banks across the pond), and it seems like they are all eyeing the U.S. market.

Last year, French firm Revolut, which includes a crypto wallet and free international transfers among its features, announced its plans to expand into the U.S. Germany’s N26 recently raised $160 million from venture capital investors to fuel a U.S. expansion. Meanwhile, British startup Cleo, which is more of an AI-powered budgeting tool than a challenger bank, recently began offering its product in the U.S.

What’s Happening with P2P Lending Blockchain Startups in 2018 (Equities) Rated: A

That is why startups like Alchemy, SALT, Eth-Lend and Celsius can be game-changers not only in peer-to-peer (P2P) lending, but for the future of the American economy as well. Based on blockchain technology, these startups are committed to creating a safe, global, and accessible source of P2P lending.

The debt is then pooled into Collateralized Debt Obligations (CDO’s) which are then organized by risk and made available to purchase on the platform. This not only provides an easy and secure source of P2P funding, but creates a sustainable ecosystem and investment opportunity for anyone on the network.

Africa

The future of financial advice is tech and touch (Moneyweb) Rated: A

There is a lot of conversation around investing digitally, right now. Supporters of the idea suggest that investors should cut out their brokers or financial advisors and take their money online by investing through digital platforms. The argument goes that while an advisor might give your investments a bit of an edge in terms of growth, the fees they charge tend to negate the value that they add.

Since both financial advisors and technology have such an important role to play in supporting individuals in making the right financial decisions, and in the convenience of access to information about their spread of financial products, I recommend a “touch-and-tech” model of engagement.

MENA

Dipping Into Digital (Global Finance) Rated: AAA

The MENA fintech sector is booming, with more than $100 million raised by start-ups in the last decade. Dubai-based digital research network Wamda’s State of Fintech report released last March predicted the total for just that year would reach $50 million, an increase of 270% over 2016.

Although online payments, remittances, crowdfunding and peer-to-peer lending attracted the largest tickets, fast-growing fintech subsectors include cryptocurrencies, artificial intelligence and digital wallets.

In 2017 some of the major deals included a $20 million capital injection in Saudi Arabia’s online payment solution PayTabs; a $10 million round by three investors, including UK firm Gocompare, for Emirati price-comparison platform Souqalmal; $13 million for Emirati Cloud HR and insurance platform Bayzat; $5 million for Emirati peer-to-peer lending company Beehive; and $3.5 million for Emirati comparison website Yallacompare.

Lebanon was one of the first MENA countries to invest massively in the digital economy. Back in 2013, the central bank, Banque du Liban, issued a circular guaranteeing up to $400 million worth of investments in innovative technologies, later raising that amount to $600 million. Today, the country is home to 15 funding institutions, as well as a myriad of accelerators and start-up support programs.

New Realities, New Technologies (Global Finance) Rated: B

Surprisingly, the UAE accounts for 70% of the investments in areas such as digital banking services, cryptocurrencies, ecommerce and fintech start-up deals. For a nascent market, the growth rate is explosive, with dozens of new start-ups launching every year. So far, online payments, remittances, crowdfunding and peer-to-peer lending have attracted the largest investments. Late last year, Bahrain introduced the world’s first shariah-compliant fintech consortium.

Authors:
George Popescu
Allen Taylor

Wednesday January 31 2018, Daily News Digest

eloans

News Comments Today’s main news: Spreads narrow on SoFi’s SCLP 2018-1 consumer loan ABS. DiversyFund raises $1M. Ranger Direct Lending sees arbitration delay. Klarna partners with Maplin. BNI Europa partners with Funding Circle on German SME lending. Western Union opens tech center in India. Today’s main analysis: Banco Popular reboots Eloan. Today’s thought-provoking articles: Marketplace Lending Association executive director’s testimony […]

eloans

News Comments

United States

United Kingdom

China

European Union

International

APAC

News Summary

United States

Spreads narrow on SoFi’s 1st consumer loan ABS of 2018 (Asset Securitization Report), Rated: AAA

Strong demand and higher credit enhancement allowed Social Finance to offer lower spreads on its first consumer loan securitization of the year, even after upsizing the deal to $850 million from $650 million originally.

Four tranches of rated were issued, resulting in an advance rate of 91%, according to a person familiar with the transaction. The amount of overcollateralization in the deal will gradually build from 9% to 16%.

Two senior tranches of notes rated AA + by KBRA were issued. The Class A-1 tranche, which has a shorter expected life, pays 50 basis points over the Eurodollar synthetic forward curve, in from 57 basis points on the comparable tranche of the previous transaction. The Class A-2 tranche pays 75 basis points over the interpolated swaps curve, in from 90 basis points on the previous deal.

 

Ranger Direct hit by arbitration delay and manager uncertainty (Citywire), Rated: AAA

The New Year rally in Ranger Direct Lending (RDL) shares has come to an abrupt halt after the listed loan fund, which is backed by fund manager Mark Barnett, said arbitration to settle the legal dispute between it and Princeton Alternative Finance had been extended by around two months.

The £119 million investment trust has been locked in an argument with Princeton, a New Jersey-based investment fund in which it is the leading investor, over its exposure to Argon Credit, a US peer-to-peer lending platform that collapsed in December 2016.

Uncertainty over the exposure to Argon – which represents 14% of its £217 million net assets – and doubts over the due diligence by its adviser Ranger Alternative Management (RAM) have hobbled the shares. They fell over 23% last year but had rallied since the end of December when they hit a record low discount of 32% below net asset value. From 704p at the start of the year they recovered to 767p last week but have dropped 4% or 31p today after yesterday’s announcement. Although still wide, the discount has narrowed to just under 13%.

Relx pays £580m for digital identity company (Financial Times), Rated: A

Relx, the UK-listed information and analytics group formerly known as Reed Elsevier, has struck its biggest deal in a decade with the £580m purchase of ThreatMetrix, an online identify verification business.

ThreatMetrix has one of “largest repositories of online digital identities”, according to UBS analysts, and has built a database containing 1.4bn unique online digital identities from 4.5bn devices in 185 countries.

GLI Finance scores £50m funding line from HoneyComb fund (AltFi), Rated: A

The funding line has a term of 3 years and comprises a £50m revolving credit facility, of which £20m will be drawn and deployed immediately.

Ezbob Raises £15M in Expansion Capital (Finsmes), Rated: A

Ezbob, a London, UK-based E-lending company, raised £15M in funding.

Da Vinci Capital Management Ltd. reportedly made the investment at a post money valuation of £100m.

Meet The Lenders That Need Your SME’s Money More Than You Need Theirs (Forbes), Rated: A

in particular, the UK’s peer-to-peer lending platforms are now crying out for new customers.

Today, however, more than 30 lending platforms, including all the large small business lenders, offer their own IFISA or are on the verge of launching a product. For investors, moreover, the returns available from these schemes looks very attractive: annual yields of 10 per cent or more in some cases look phenomenal when set against the backdrop of bank and building society accounts typically paying less than 0.5 per cent a year, even if there is a risk of losses on IFISAs if borrowers default.

Augmentum Capital to seek public listing to back fintech start-ups (Financial Times), Rated: B

Augmentum Capital, the venture group backed by Lord Rothschild, is planning to list a financial technology investment fund in what would be one of the sector’s biggest initial public offerings in a decade.

It is understood to be applying for admission to London’s main market in March and will seek to raise up to £125m with the sale of new shares.

China

China’s financial risk worse than in US before financial crisis, says former finance minister (Today Online), Rated: AAA

The level of risk facing China’s financial system could be higher than was seen in the United States before the global crash, according to a former Chinese finance minister.

“China’s ratio of M2 [a broad measure of money supply] to gross domestic product has surpassed 200 per cent, which is more than twice that of the United States, yet the average Shanghai interbank offered rate is 4.09 per cent, far higher than the 1.1 per cent in the US.”

According to official figures, the M2 money supply at the end of December was 167.68 trillion yuan (S$34.75 trillion), or 203 per cent of China’s nominal GDP in 2017.

Chinese P2P lending platform Senmiao Technology sets terms for $ 14 million US IPO (NASDAQ), Rated: A

Senmiao Technology, an early-stage Chinese marketplace for peer-to-peer lending, announced terms for its IPO on Tuesday.

The Chengdu, China-based company plans to raise $14 million by offering 3.3 million shares at a price range of $4.00 to $4.50. At the midpoint of the proposed range, Senmiao Technology would command a market value of $109 million.

European Union

Klarna signs Maplin for online pay-later (Finextra), Rated: AAA

Today, leading payments provider Klarna has announced a partnership with Maplin – the UK’s number one specialist technology retailer. Maplin customers will now be able to use Klarna’s Pay later and Slice It services, allowing them to order online and receive the very latest Smart Home tech, security/CCTV products, top quality drones and so on, and then pay for them either at a later date or spread the cost over time.

Pay later enables online and mobile Maplin customers making purchases of £200 or less to receive their products and pay for them 30 days later, with no interest or fees.

BNI Europa to fund German SME loans via Funding Circle (Finextra), Rated: AAA

The Portuguese online bank Banco BNI Europa and Funding Circle have entered into a strategic partnership to support the growth of small and medium-sized businesses in Germany.

Investment will support the funding needs of c. 600 companies and thereby help to create c. 1,500 new jobs

Banco Popular reboots Eloan for new era in online lending (American Banker), Rated: AAA

Banco Popular is relaunching E-loan (it dropped the hyphen from the name) to serve as its “fintech arm,” a stand-alone brand offering solely digital products.

Launched in 1997, Eloan re-enters a market where fintechs now account for over 30% of personal loan originations, according to TransUnion. The brand will compete for clients alongside well-financed upstarts like LendingClub as well as new offerings from banks such as Marcus from Goldman Sachs.

 

Spendesk Raises €8 Million to Expand Its Platform for All Company Purchases (Payments Journal), Rated: A

Spendesk, a fintech solution that helps businesses manage their spending, has raised an €8 million Series A round led by Index Ventures, with participation from existing investors. The funds will be used to accelerate product development and expand across Europe.

ABN Amro, ING and Rabobank hit by cyberattacks (Fintech Futures), Rated: B

Three Dutch banks, ABN AmroING and Rabobank, suffered a series of DDoS attacks last weekend (27 and 28 January).

During the attack, internet banking, mobile banking, its website and Ideal were unavailable or extremely slow on 27 January from around 8pm to 12.15am CET and on 28 January from 12pm to 2pm CET and after 7pm CET.

International

 

CHECQIT, the P2P Lending Platform Aiming to Empower the Unbanked (The Merkle), Rated: A

According to the World Bank’s Global Findex report, nearly 2 billion adults and 160 million small businesses from all over the world do not have bank accounts. Efforts to approach them to traditional financial institutions have not been enough, limiting their economic growth potential.

Only 14% of adults living in the Middle East hold a bank account, opposed to the 94% of citizens from first world western countries that do. Developing regions with underserved communities such as India and sub-Saharan Africa comprise, when combined, nearly 32% of the world’s unbanked and underbanked population.

As a response to this issue, Nassim Benzekri and his team developed CHECQIT, an Ethereum-based, decentralized, peer-to-peer lending platform that allows users to grow their collaterals against a fast-guaranteed loan.

Finastra acquires Olfa Soft SA (Realwire), Rated: B

Finastra has acquired Olfa Soft SA and its cutting edge FX e-trading platform for banks and financial institutions. The move enables Finastra to deliver a unique end-to-end real-time eFX trading solution for banks’ treasury departments, covering distribution, position-keeping, post-trade and payments.

India

Western Union Opens Tech Center In India (Bank Innovation), Rated: AAA

Cross-border payments company Western Union is opening a technology center in India, which will focus on biometrics, machine learning, and robotics, the company announced yesterday.

The center, located in Pune, Maharashtra, will have over 1,000 employees all focused on building these “innovative digital and retail customer experiences globally,” the company said in a press release.

Rubique announces strategic partnership with Optacredit (Outlook), Rated: AAA

Rubique, a marketplace lending platform for individuals and SMBs, entered into a strategic partnership with OptaCredit, an Artificial Intelligence-powered, data-driven online lending platform focused on providing unsecured credit to salaried professionals across India.

With its Online PLUS technology led model and proprietary matchmaking algorithm, Rubique will enlist the company on its online marketplace for applicants to avail viable loan products from OptaCredit’s offerings.

P2P Lending Set to Explode in 2018 (PR Newswire), Rated: AAA

RBI’s much awaited official guidelines for Peer to Peer (P2P) lending platforms to bring them into the ambit of non-banking financial companies (NBFCs) is set to boost online lending. It is fast emerging as an investment option for retail lenders. The NBFC-P2Ps will act as an intermediary to provide an online platform to lenders and borrowers to transact on mutually agreeable terms. RBI has defined P2P lending as a form of crowdfunding that entails issuing unsecured loans to borrowers via an online portal in its 2016, ‘Consultation Paper on Peer to Peer Lending’. However, P2P lending is different from other crowdfunding activities in being a purely debt product, in which multiple lenders fund borrowers as personal loans or small business loans. Most of the P2P platforms in India such as IndiaMoneyMart curate their borrowers after conducting KYC checks, credit assessment, and due diligence before listing them on their loan exchanges.

On the positives, the regulation has made P2P lending platforms accountable to furnish credit repayment/non-repayment information to all 4 credit bureaus, thereby increasing transparency in the credit rating system. The credit rating agencies have records on about 150 million population but P2P lending platforms are also going to bring customers hitherto relying on private money lenders. This presents a huge opportunity to close the credit information gap. It will also reward sub-prime borrowers with a better credit score for showing improvement in loan repayment behaviour.

As many first time or retail borrowers take loans from money lenders or payday companies which charge interest as high as 5% to 20% per month, P2P platforms like IndiaMoneyMart are bridging the gap by making credit not only accessible but affordable. Bangalore-based IT consultant, Tanmay Thorat* (name changed) was paying over 300% interest to payday loan companies and approached IndiaMoneyMart for a small ticket size loan of INR 1 Lakh secured at rate of 13% annualized interest in March 2016required to settle his credit card debt and pay rent deposit.

The expectation from the Union Budget 2018 is immense in the BFSI segment, especially after RBI regulation. Experts hope that essential financial services will have GST rates revised from 18% to 5% or nil.

Budget 2018: how can we enhance the growth of startups in India? (YourStory), Rated: A

Most importantly, the fund of funds for startups (FFS) has begun to take shape with as much as Rs 1,100 crore being disbursed to SIDBI for allocation to venture funds. As of September 15, 2017, 17 venture funds have raised Rs 605 crore from SIDBI and as many as 72 startups have received about Rs 318 crore funds. The Department of Industrial Policy and Promotion (DIPP) has also recently announced that this number will be increased to Rs 2,400 crore by the end of the next fiscal.

For instance, the startup space has reportedly seen a decline of 53 percent in seed funding and 25 percent in venture funds in 2017.

Listed below are four suggestions for Budget 2018.

  1. Abolish angel tax
  2. Encourage Indians to fund India
  3. Extend tax holiday
  4. Standardise and simplify   

10 things FM Arun Jaitley can do to boost access to capital via digital lenders (Financial Express), Rated: A

  1. Allow a lower MHP for servicing short-term needs of MSMEs
  2. Raise rate caps under MUDRA scheme: The RBI currently has capped the final rate that can be charged above the refinance rate offered by MUDRA at 3% for banks, 6% for NBFCs and 10%-12% for MFIs, depending on portfolio size. Since most of the new lenders incur high opex, this cap should be increased in the Budget 2018 to 10-12% in line with MFIs, for loans up to Rs 5 lakhs, and 8-10% for loans from Rs 5-25 lakh value.
  3. Extend the SIDBI net
  4. Make P2P platforms more attractive: A cap of 5% of net worth for lenders and a maximum individual loan amount of Rs 25 lakh for the borrowers would make these platforms attractive for both lender and borrower.
  5. Expand access to MSMEs
  6. Introduce PSU Banks turndown program
  7. Raise eKYC-based lending limit: The cap for lending through OTP based eKYC should be increased from Rs 60,000 to Rs 5 lakh.
  8. Promote eSign
  9. Mandate eMandate
  10. Increase the flow of data for lending
APAC

Lancers raises $ 9.2m venture round (Deal Street Asia), Rated: AAA

Tokyo-based Lancers, which operates a crowdsourcing platform under the same name, has closed a JPY 1 billion ($9.2 million) round from Tokyo-listed enterprises Persol Holdings and Shinsei Bank.

The investment sees Lancers concluding business partnership contracts with both companies concurrently and will also see it commence its new financing business targeting freelance workers, which the company claims comprise 17 per cent, or 11.22 million workers of Japan’s entire working population.

The addition of Shinsei Bank as an investor will see Lancers, Persol and Shinsei collaborate to develop and provide a new loan service to individual workers who need equipment investment or education/training upon starting a new business.

Crowd Realty closes $ 5.2m Series A (Deal Street Asia), Rated: A

Tokyo-based property crowdfunding portal Crowd Realty has closed its Series A round at JPY 580 million ($5.2 million) from Tokyo-listed Mitsubishi Estate, Shinsei Corporate Investment, Shinsei Bank, and Mizuho Capital, based on an account from The Bridge.

The Series A round saw two tranches: a follow-on investment of JPY 230 million subsequent to a JPY 350 million investment from Mitsubishi Tokyo UFJ Bank, Mitsubishi UFJ Capital, and Kabu.com Securities.

SSC warns against investing in cryptocurrencies (Viet Nam News), Rated: B

In a notice issued on its website on Monday, SSC said that the market now had companies operating in fintech, including cryptocurrency, initial coin offering, crowdfunding, peer-to-peer lending and blockchain. These were new products that had not been regulated, SSC said, thus posing high risks.

 

Authors:

George Popescu
Allen Taylor