Wednesday October 25 2017, Daily News Digest

chinese investors

News Comments Today’s main news: RateSetter partners with Experian. Australia publishes fintech regulation draft laws. Lending Loop hits $10M financing milestone. TD Ameritrade offers stock trading through Facebook Messenger. Abra secures $16M in Series B led by Chinese electronics manufacturer. Zero raises $8.5M for credit card that acts like a debit card. Nested raises 36M GBP. TransferWise changes its fee structure, but […]

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United States

TD Ameritrade Clients Can Now Trade Stocks on Facebook Messenger (Bloomberg), Rated: AAA

TD Ameritrade Holding Corp. customers are now able to trade equities and exchange-traded funds using Facebook Inc.’s Messenger services, according to a company statement Monday. Clients can also make deposits, access quarterly performance video statements and receive weekly alerts that rehash market moves.

Hon Hai invests in fintech start-up (Taipei Times), Rated: AAA

Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics manufacturer, participated in a US$16 million Series B fundraising program to invest in US-based digital wallet start-up Abra, the new firm said on Monday.

Barhydt said that Abra’s existing investors — Arbor Ventures, American Express Ventures, Jungle Ventures, Lehrer Hippeau and RRE — also participated in the fundraiser that closed on Monday.

The program helped Abra reach more than US$35 million in total capital, Barhydt said, but did not elaborate on potential uses of the additional US$16 million.

Zero raises $ 8.5 million for a credit card that functions like a debit card (TechCrunch), Rated: AAA

Just one-third of young adults have a credit card, according to a Bankrate survey.

A startup called Zero thinks it has a solution to this and it is gearing up to launch a credit card that functions like a debit card. The startup is also raising $8.5 million in a funding round led by ENIAC Ventures, including participation from NEA, Lightbank and others.

Biometrics is Going to Eat the Finance World (Lend Academy), Rated: AAA

In a recent survey it was revealed that 81% of people use the same password for multiple accounts with that number being even higher, at 92%, for millennials.

The introduction of Touch ID on the Apple iPhone in 2013 was a seminal moment in the history of biometrics. People could suddenly use their thumb or finger print as an identity verification tool and forgo using a password. Today, on my phone I can login to my bank account, buy music or apps, buy a plane ticket, even check my Lending Club account all with the press of my thumb.

While still primarily in the testing stage in banking, this past summer Bank of America announced the trialing of iris scanning technology from Samsung. In the UK, TSB is becoming the first European bank to start using this same technology, also with Samsung phones.

Behavioral biometrics can capture things like hand-eye coordination, pressure, hand tremors, keystroke dynamics, gait analysis, mouse use characteristics, navigation, scrolling and other finger movements.

USAA offers three variations of biometrics authentication already in their mobile app. Just this week Samsung announced a partnership with Biocatch to bring behavioral biometrics to its Nexsign biometric authentication platform.

‘We’re moving from the back end to the front end’: Cross River Bank CEO Gilles Gade (Tearsheet), Rated: A

Cross River banks some of the biggest names in fintech, including at least a dozen online lending companies like Affirm, Marlette and Rocket Loans. It has also developed payments solutions for faster, more secure and lower-cost transfers that have been integrated by TransferWise and the bitcoin wallet Coinbase, as well as Google Wallet and Stripe in the past.

It’s been almost a year since you announced your VC funding. How have you been using it?
We have absorbed the capital very quickly, managed to deploy it on the marketplace lending side. We like to retain loans from the origination platforms so instead of selling 100 percent of the origination we retain 10 percent. As our partners are growing nicely, naturally that 10 percent has kept increasing.

Can both banks and fintech vendors deliver banking-as-a-service?
We’re strong believers that BaaS has to be delivered by a bank. The fintech players need access to payment rails and they’re going to use a bank ultimately to do that. As a service, the bank could be either the facilitator of a transaction or the purchaser of the BaaS technology to provide it to consumers. There is a level playing field now — consumers can have the same functionalities in a small bank in Nebraska that they can have with a Chase or Wells Fargo.

Are banks prepared?
Most banks are not equipped or not API-driven, ubiquitous, priced properly — and the banks that are, the big banks, have been unwilling to do that because it would cannibalize some of their business or presents high risk — do they have the required compliance and adequate staff to be able to manage the operations?

What’s going on inside Almond?
Almond is our exploratory R&D lab for us to understand the aspirations of consumers. We’re trying to develop a front-end solution that could possibly be a killer app that we could white label and sell as one BaaS functionality — so that would be an online or mobile app for a bank account. We’re moving from the back end to the front end.

loanDepot Announces Agreement with Artificial Intelligence Real Estate Technology Company, OJO Labs (PR Newswire), Rated: A

Today loanDepot announced an agreement with OJO Labs, Inc. to act as the mortgage provider of its machine-powered assistant known as “OJO.” By matching OJO’s leading AI technology with loanDepot’s digital lending platform, melloTM, the combined offering will allow house hunters to access real estate and mortgage information, and get pre-qualified, through an entirely digital, mobile-first experience.

Large banks make terrible partners, fintechs say (American Banker), Rated: A

While large banks and fintechs are ostensibly working more closely together than ever, in private conversations and even publicly at a few conferences, fintech leaders have expressed increased frustration about working with bank partners.

Though they won’t name names, they claim tier-one U.S. banks string them along, fail to communicate, don’t pay anything and, worst of all, out-and-out steal intellectual property.

More seriously, fintechs claim large banks are bad at paying for new technology and services.

Parker Crockford, commercial director for the U.S. at identity verification software startup Onfido, said at the RegTech conference in early October that when he’s engaging with large financial institutions, “we get pulled into a lot of innovation conversations where they just want to pick our brains and look cool. I don’t have time for that any more. I’ll say, ‘I’m happy to give you a white paper or a 20-minute chat over the phone.’”

‘Buy The Block’ on its Way to Raising Millions of Dollars for Property Development in Black Communities (BlackNews.com), Rated: A

Entrepreneur Lynn P. Smith is the founder and CEO at Buy The Block – one of the only Black-owned platforms in the country that is dedicated to making investments in real estate as a group more accessible. The movement is presently on its way to recording massive success in funding for diverse development projects across Black communities in the US.

This enviable initiative offers every Black American an opportunity to invest as little as $100, and connect with other investors – with an added advantage of helping every member buy a piece of their first block.

Evolve Capital Partners Advises on CleanFund’s Financing Transaction (Accesswire), Rated: A

Evolve Capital Partners,Inc. is proud to announce that its client, CleanFund Commercial Capital, Inc., the leading direct provider of commercial Property Assessed Clean Energy (“C-PACE”) financing, recently announced its first closing of a $15 million equity financing round, led by Vulcan Capital affiliated entities. The financing will accelerate CleanFund’s growth across the U.S. and help the company continue to meet growing demand from commercial property owners.

Thrive Delivers Landmark Performance Gains for Horizon (Thrive), Rated: A

Thrive Inc. (Thrive) is excited to announce the compelling performance of its digital lending technology, ensuing from its multi-year technology licensing agreement with Horizon Community Bank (HCB), a leading Arizona-based FDIC insured bank and subsidiary of Horizon Bancorp, Inc.

Key Performance Highlights:

  • Application Time: Avg. of 5 minutes, as opposed to days
  • Automated Decisioning: 90% of applications are instantly decided; powered by Thrive’s configurable credit rules based algorithms
  • Time to Decision: <1 Day, as opposed to several weeks
  • Loan Booking Rate: 100%, as applicants prefer the quick digital application and decision process
  • Offer to Close: 1.5 Days, digital closing enables efficiency

Key Portfolio Highlights:

  • Portfolio Interest Yield: Above market interest rates drive loan profitability
  • Customer Acquisition Costs: <$200, driven by leveraging internal bank customers as well as new customers
  • Delinquent/Charge-Off: 0%, effective underwriting and real time loan monitoring is driving modern and powerful risk management while also compressing loan reviews
  • Monthly Origination Growth: 60%, driven by customer demand for a quick, efficient and friendly loan application experience

IBM and Zelle team up to advance P2P payments (Banking Technology), Rated: A

IBM says it has launched an “industry first” solution to support the full lifecycle of peer-to-peer (P2P) transactions, from the back office of financial institutions to the mobile device.

The project is a collaboration with Zelle, a P2P network in the US built on the clearXchange platform. Zelle now includes over 20 banks and credit unions, and is poised to reach an estimated 85 million US customers this year.

How FinTech Companies Are Closing The Banking Gap (Forbes), Rated: A

According to the World Bank, there are two billion people globally who currently have no access to banking services.There are many reasons for this: they may not have built up enough traditional credit history, they may have bad credit because of poor financial choices in the past, or they may live in an area where access to credit and other financial services are limited.

For instance, Jennifer Tescher, founder and president of The Center for Financial Services Innovation (CFSI), has helped launch financial inclusion initiatives by incubating startups addressing U.S. financial health through their Financial Solutions Lab. Some of these startups include Propel, which streamlines the food stamp process; Bee, a mobile alternative to potentially predatory financial services for low-income people; and popular startups that aim to assist with savings and debt repayment including Digit, EarnUp and LendStreet.

Founder and CEO Shivani Siroya, of California-based Tala, is trying to fix the challenge of low access to financial services by providing alternative credit scoring and instant credit delivery via mobile wallet.

Mexico, for instance, sees 38% mobile wallet use, compared to 17% overall in the US, even though 93% of Americanshave access to financial services.

3 Types Of Alternative Lenders You Need To Know About (Bisnow), Rated: A

1. Crowdfunding Platforms

Real estate crowdfunding hit $2.5B in 2015 and shows no sign of slowing down.

Platforms like RealtyShares and Fundrise offer several loan options and flexible payment terms, and cater to different asset classes. The latter prioritizes small-deal properties valued under $50M, and the former charges no fees for the first two years, or until an investment earns a 15% annualized return.

2. Nondirect Marketplace Lenders

Nondirect marketplace lending uses technology to connect lenders directly with borrowers, bypassing traditional banks, reducing barriers to transaction, and offering strong savings for borrowers and good returns for lenders. Popular for auto and student loans, financial institutions have increasingly stepped into the commercial lending role on these platforms, creating a marketplace in which loans are packaged and sent out to individuals, hedge funds, wealth advisers and banks.

3. Direct Lenders

Money360 is a direct lender with discretionary capital that ensures certainty of execution and timely closings. The lender offers loans between $1M and $20M on both bridge and permanent loans, with competitive terms and features similar to traditional lenders. Bridge loans are interest-only, and like banks, permanent loans use 25- to 30-year amortization schedules.

12 Tips to Get The Right Loan For Your Startup (Killer Startups), Rated: A

1. How much do you need for a small business loan for your startup?

Microloans work with the Small Business Association (SBA). They are for businesses that need to borrow between $35,000-$50,000 and have a limited credit history.

2. How quickly do you need access to loan funds?

If you’re positive that you need $100,000 right-off-the-bat, then an installment loan may be a better option. If you need $50,000 to start, but believe you’ll need additional capital down the road when you start to grow, you may want to look into revolving credit.

3. What is the loan going to be used for?

4. How long have you been in business?

If your business is still in the early stages, it may be difficult to secure a loan from traditional lenders like a bank since they require a positive credit history, collateral, business plan, projected financial statements, and cash flow projections.

In this situation, you may have to search for a small business loan from an alternative lender like an online lender like Lending Club.

5. Do you have collateral?

Do you have an property or inventory that you can put up as a collateral? If not, you may not qualify for a loan from a traditional lender. Instead, you may have to seek alternative funding options where you would offer accounts receivable, future sales, or a percentage of the company in exchange for the loan.

6. Eliminate your bad debt.

7. Research possible loan provider options.

Do your due diligence and seek lenders that are transparent with their rates, terms, and have positive reviews from customers.

8. Consider your niche.

9. Find a grant or contest.

10. Crowdfund Your idea.

11. Pay attention to APR, fees, and other costs.

12. Investor or capital?

Payday lender Speedy Cash files for IPO (Axios), Rated: A

The parent company of payday lender Speedy Cash has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol CURO, with Credit Suisse listed as left lead underwriter. The Kansas-based company reports $33 million of net income of $442 million of revenue for the first half of 2017, and is owned by private equity firm FFL Partners.

Islands, Bodyguards, and Mansions – How would you spend $ 1 Billion? (NJ Online Casinos), Rated: B

Our new survey finds out the top 10 ways that people across America would spend their money if they won a $1 billion jackpot, including how many would buy a mansion, and how many wouldn’t give any to charity.

  • 89% would give some to their close family
  • 49% would pay off their debts as their first act
  • 37% would give some money to their friends
  • 28% would put $100 – $500 million into savings
  • 28% would buy a mansion

Arcadia launches new online payment options (Drapers Online), Rated: B

The owner of brands including Topshop, Topman, Miss Selfridge and Dorothy Perkins has joined forces with payment provider Klarna to offer online customers the option of paying for goods 30 days after delivery, without being charged interest.

20% of millennials said they would feel less guilty if they were offered deferred payment options, while one in five were more likely to complete a purchase if they knew they could spread the cost over time.

United Kingdom

RateSetter partners with Experian to boost business credit assessment (P2P Finance News), Rated: AAA

RATESETTER has teamed up with Experian to boost its credit decision-making process as it expands its commercial finance division.

Under the partnership, Experian is providing credit reference data and analytical services to RateSetter.

This has enabled the P2P lender to increase the number of business loan applications it processes each month from 150 to more than 600.

Nested Raises £36M in Third Round of Funding (Finsmes), Rated: AAA

Nested, a London, UK-based PropTech startup, raised £36m in its third round of funding.

The round was led by Global Founders Capital.

The company, which has raised almost £50m in total funding to date, intends to use the capital to expand its business reach, initially within London and in the near future expanding across the U.K.

TransferWise changes fees for GBP transfers, introduces complicated flat transaction fees (TechCrunch), Rated: AAA

Fintech startup TransferWise has built a solid reputation when it comes to transparency. The startup just announced new fees for transfers initiated from the U.K. And it’s quite hard to understand if transfers are going to be cheaper or not after the change.

TransferWise is switching from a simple variable fee to a flat transaction fee with a lower variable fee.

Let’s take an example. If you’re trying to transfer £1,000 from the U.K. to the Eurozone. With the old fee, you’d pay 0.5 percent (or the equivalent of £5) in fees. With the new fee, you now pay 0.35 percent + £0.80, which represents £4.30. You eventually get more euros.

For a £1,000, you now pay 14 percent less if you take into account all fees. But this percentage is going to change depending on your transfer.

Because of this tiny little flat transaction fee, you’ll now pay morethan before if you transfer less than £530.

This is even worse for GBP/USD transfers. If you transfer less than £800, you now pay more than before. But it’s now cheaper if you transfer more than £800.

Is an IFISA-inspired boom coming to the P2P sector? (P2P Finance News), Rated: A

THE PEER-TO-PEER Finance Association (P2PFA) has reported yet another quarter of increased lending among members in the sector, and the figures show just how beneficial ISA manager status can be.

P2P platforms offering Innovative Finance ISAs (IFISA) have previously said that most inflows have been coming in this tax year, and the latest P2PFA data shows just how much of a boost the fully regulated firms are getting.

Lending Works and Landbay, which both received full Financial Conduct Authority (FCA) authorisation and launched IFISAs at the start of this year both recorded some of the biggest increases in loanbook sizes and lenders.

The property loan fund that won’t surprise you with a lock in (Citywire), Rated: A

For LendInvest Real Estate Opportunities, a small Luxembourg-based fund run by the former peer-to-peer lending platform LendInvest, post-referendum it has provided an opportunity.

Assets in the fund have more than doubled to £130 million since the Brexit vote as investors have viewed its investments in short-term loans to property developers as a different way to get exposure to bricks and mortar.

The fund can be held in a self-invested personal pension (Sipp) but is not an eligible investment for an individual savings account (ISA).

The real estate fund has become a key focus for LendInvest as it has moved away from peer-to-peer lending after the Financial Conduct Authority (FCA) made it clearer what it thought P2P actually meant.

The fund lends to professional investors, developers and landlords who use their property portfolio as a prime source of income, transact several times a year and operate as a business.

‘He then went into discussions with the bank because he wanted to keep the asset and let it out, so refinanced. It had a valuation of £10 million, so 100% return in 10 months. We charged 15% interest.’

With interest rates that high it is not surprising perhaps that the fund has so far achieved its annual target of an 8% net return.

Accounting and business banking fintech raises €750k in seed round (AltFi), Rated: A

UK startup Countingup has raised €750,000 led by Frontline Ventures along with private investors to support sole traders.

Uniting business banking and accounting into a single product, Countingup aims to use the funding to build an accounting bank to serve 1m entrepreneurs.

Invest in property development from just £500 (This is Money), Rated: A

A new crowdfunding platform is allowing retail investors the chance to back residential property developments by investing as little as £500.

The start-up, called Homegrown, is giving individuals the chance to invest in developments – such as a converted milk processing factory that’s being turned into flats and offices – and claims projected annual returns of around 12 per cent over roughly two years.

HOW DO I… ACCESS BUSINESS FINANCE? (BQ), Rated: A

While credit conditions have continued to improve over the last 12 months there is still an issue for smaller businesses when it comes to the best finance options available and information on how to access them. There has been rapid developments in the different types of funding available to businesses, including peer-to-peer lending, crowd funding and business angel finance, but small businesses don’t always have the time to navigate around all the types of finance available.

Businesses can discover the funding options available to them including The Start Up Loans Company by using the Business Finance Guide (published by the British Business Bank in partnership with the ICAEW, and a further 21 business and finance organisations).

Equity finance

Whether you’re starting out or experiencing a high-growth phase, equity can be an important resource to provide finance as well as broader expertise. There is a breadth of equity funding options available, including the Northern Powerhouse Investment Fund, which provides early or late stage equity finance ranging from £50,000 to £2m.

Debt finance

At any stage of its development your business is likely to need a mix of different forms of debt, all of which have their advantages for business growth. The Northern Powerhouse Investment Fund offers microfinance covering micro-finance ranging from £25,000 to £100,000 and debt finance covering larger business loans £100,000 to £750,000.

London – Still The #1 FinTech Hub (Let’s Talk Payments), Rated: A

In H1 2017, UK attracted $564 million of VC investment, up 37% on H1 2016. FinTech is worth $9.25 billion to the UK economy and now employs 60,000 people.

About 77% of UK businesses are aware of FinTech products and services and 65% have adopted at least one FinTech application, with a fifth (19%) taking on four. MarketInvoice, a London-based invoice financing firm found that these as result of using FinTech products and services, adopters reported saving (on average) over £5,500 a year.

London consistently attracts foreign direct investments (FDI) from around the world. Between 2006 and 2016, the capital has recorded investments from 67 different countries. The US, India, China, Japan and Spain together accounted for 56% of the investment. Of top source countries, the fastest-growing contributors to FDI into London are China, which has seen a tenfold increase over the last 10 years, Italy (+450%), and Canada (+400%).

Seven tips to help prepare to raise funds for your GP practice (Practice Business), Rated: B

1 Decide on equity or debt – or a combination

For example, if your business is already two-years old try Funding Circle.

Thirty per cent equity and 70% debt is a good ratio and can make the company easier to manage.

2 Test your financial model – it must be robust

3 Be realistic about your valuation

4 Decide on the appropriate people to approach

In the £1 to £5m area, try EIS/SEIS funds and VCT funds. This is where an expert adviser can be helpful in providing introductions and knowledge. For smaller amounts contact Angel Investors.

5 Make contact and ensure you follow-up

6 Prepare the right information for the right stage in the process

7 Take your team with you

Number of UK financial services trade marks surges due to fintech growth (Finance Feeds), Rated: B

According to data provided by professional services firm RPC, the number of trade marks registered by financial services firms has jumped 35% in five years – from 3,141 in 2011 to 4,228 in 2016.

Examples of fintech companies and challenger banks that have registered a number of trade marks recently include Atom Bank, Monzo, and Redwood Bank. Last year, the raft of fintech and financial services trade marks registered in the UK comprises names like “ Zentity” and “Numus Cash”.

China

A glimpse at how Qudian and China’s online micro lenders revolutionise financing (SCMP), Rated: AAA

One day in July, Carina Shi awoke to incessant phone calls by angry, loud men, seeking repayment on a 20,000 yuan loan taken out by a friend.

Unbeknown to Shi, the 20-year-old college student had been listed as the contact by a friend who defaulted on a loan borrowed from Qudian Inc, the Beijing-based online lender at the centre of the fourth-largest US initial public offering this year. Debt-collection calls only ceased after Shi called her friend’s mother in Inner Mongolia to resolve the debt.

Shi’s experience offers a glimpse into the inner workings of Qudian, a provider of micro loans that ballooned within three years into a sizeable lender offering a loans book of 38.2 billion yuan (US$5.6 billion) to 7 million active users during the first six months of 2017.

The annualised interest rate on 59.5 per cent of loans lent last year surpassed 36 per cent, according to the company. That compares with between 12 and 14 per cent among the country’s largest commercial banks.

That crackdown gave Qudian and other online lenders like Ppdai, Fenqile and Hexindai the niche to build a market, which expanded by 23 per cent in two years to 452.4 billion yuan at the end of last year.

Chinese overseas investors prefer tech stocks (Technode), Rated: AAA

China’s sizable middle class is on fire. A McKinsey & Company report projected that they would account for 76% of the country’s urban population by 2022.

When we say Chinese people are becoming increasingly tech-savvy, we don’t only refer to the fact they are the first adopters of cutting-edge technology software and voracious buyers of smart gadgets. We also have a knack and understanding for technologies to seek better investment returns. The report shows that tech stock is the most popular category for Chinese-speaking investors.

A dominating 56% interviewees said they have invested in Alibaba, which had a growth of nearly 80 percent since the start of this year. JD and Apple performed equally well to rank the second and third.

Source: Technode

As digital natives, the country’s younger generations are first-movers to the sector. The report points out that post-80s gen represents nearly half (47.2%) of the users with post-90s gen comes as a close second (36.2%).

Over 65% of Chinese traders prefer Chinese companies when investing in the US.

Over 55% of Chinese investors will hold a position for over three months, and 20.03% for longer than a year.

The Role of Punctuation in P2P Lending: Evidence from the People’s Republic of China (Asian Development Bank), Rated: AAA

Using data from Renrendai, one of the largest P2P lending platforms in the People’s Republic of China, we investigate how the amount of punctuation used in loan descriptions influences the funding probability, borrowing rate, and default. The empirical evidence shows that the amount of punctuation is negatively associated with the funding probability and borrowing rate. We propose that the use of punctuation affects the readability of a loan description and reflects borrowers’ self-control and cognitive ability.

Source: ADB.org

Download the full report here.

China’s Latest Fintech Offering Looks Overpriced (WSJ), Rated: A

Investors sent the stock of Chinese online microcredit company Qudian Inc. QD 7.00% —which literally translates as “Fun Shop”—up nearly 50% on its first day of trading on the New York Stock Exchange last week. But on Monday, following criticism of Qudian’s high lending charges in Chinese social media and newspapers, the stock tanked, dropping almost 20%.

The market does seem ripe for growth: Nonmortgage consumer loans are only around 20% of household deposits in China, according to Bernstein analysts.

Still trading at 6.6 times book value even after Monday’s share price tumble, Qudian is asking for a lot of faith compared with more-established lenders.

Source: The Wall Street Journal

Chinese P2P lenders face IPO scrutiny (International Financial Law Review), Rated: A

Online lending companies are facing a number of issues when planning an initial public offering in Greater China and the US, according to panelists at last week’s IFLR Fintech Asia conference in Hong Kong. Regulators’ attitudes towards business models,
accounting requirements and risk reserves are issues companies need to be mindful of.

Credit Industry Leader Joins China Rapid Finance Board of Directors (PR Newswire), Rated: B

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF), one of China’s largest consumer lending marketplaces, today announced the appointment of Zhou Ji‘an, Executive Director and General Manager of China United SME Guarantee Corporation (“Sino Guarantee”), to its board as a non-executive independent director.

A seasoned chief executive in the financial industry, Mr. Zhou brings to the Company more than 18 years of experience in global organizations, financial institutions and government.

European Union

3 Advices For Peer-To-Peer Investors From ‘Inspeer’ Ceo (Coinidol), Rated: A

AltFi Data Analytics, published by investment bank Liberum, shows that the ratio of operating costs to the loan portfolio at the crowdlending platforms is lower by almost 40% comparing to banks.

  • Diversification is a key
  • Know your borrower
  • Pay attention to risks
International

Creation of Billion Dollar Startups Shifting Out of US (BW Disrupt), Rated: AAA

Today, there are 214 unicorn startups globally — private companies that have reached a hefty valuation of over $1 billion.

Of these, the United States has taken the largest share of the world’s most valuable private companies, with 127 US-based startups reaching unicorn status since 2013. China follows in second place, producing 59 unicorn companies over the same time period.

Since 2013, the share of new unicorns born each year in the United States has consistently dropped, from 75 percent of all unicorn births in 2013 to less than half (49 percent) by 2015. That number sunk even lower to hit just 43 percent last year.

Chinese unicorns rising

In 2017 YTD, 16 new unicorns have been born in China.

In the third quarter of 2014, Lu.com, a finance marketplace that deals largely with P2P lending, reached a $10 billion valuation after a VC round backed by Morgan Stanley and Ping An Insurance.

Looking at companies with the highest valuations upon their entrance into the unicorn club, 7 of the top 10 spots go to China-based companies, with the US claiming the remaining 3.

Wish Finance: Small Business Lending Blockchain Platform (BlockTribune), Rated: A

BLOCK TRIBUNE: Could you tell us a bit how Wish Finance got started?

EUGENE GREEN: A decade ago I was a small businessman. Several of my closest friends are small businessmen in Asia, Europe and the US. All of them had the same massive problem, which I had – an inability to get a loan. So I founded Wish Finance to solve this major pain point.

BLOCK TRIBUNE: Where do you see the value of Wish tokens in the medium to long-term and the ultimate benefit for token holders?

EUGENE GREEN: We are not selling digital candy wrappers, but a token convertible to real company equity. The token price will go up with the company valuation, and comparable FinTech lending companies showed a fiftyfold valuation growth in only a few years. So the token holders could stand to benefit in a big way.

Better structure could protect investors in P2P market – BoJ paper (Central Banking), Rated: A

A research paper published by the Bank of Japan on October 23 suggests using specific purpose companies and specific purpose trusts to strengthen investor protection in the field of P2P lending.

P2P lending matches borrowers and lenders online without making use of traditional financial intermediaries such as banks. In recent years, the amount of outstanding loans in the P2P sector has grown significantly in the UK, the US and China.

Australia

Australia publishes draft laws for relaxed fintech regulation (Reuters), Rated: AAA

The Australian government published draft laws on Tuesday that would let financial technology companies operate without a full licence, a measure it said would encourage innovation without compromising existing levels of consumer protection.

Financial technology companies would be able to test products involving non-cash payments, crowdfunding, consumer credit and provide financial advice on pension funds, life insurance and domestic and international securities.

Industry superannuation funds need to adopt digital advice into their offering to retain those members who eventually seek advice elsewhere and inevitably leave their industry fund.

Through digital advice, super funds should begin focusing on what Cheung terms as “incremental advice”.

Instead of providing just intra-fund and single-issue advice, super funds should provide members with the ability to deal with cashflow, debt management, or protection and insurance needs, as needed.

India

Fintech Valley Vizag and Knowledge Partner KPMG Announce Finackathon 2017 (BW Disrupt), Rated: AAA

HackerEarth, a leader in innovation and talent management software, has been selected by Fintech Valley Vizag – a Government of Andhra Pradesh initiative, to host Finackathon 2017.

The hackathon will be held in two stages. The idea phase which began on September 14th is currently underway with entries set to close on October 30th. The shortlisted teams will participate in the final round to be conducted in the first week of December in Visakhapatnam. The winning teams in each category (Banks, Insurance, Capital Markets, and NBFCs) will be awarded a sum of INR 3,00,000. The winners will also be given a chance to carry out Proof of Concept (PoC) with corporates and will need to be executed in Fintech Valley Vizag. Investor network of The Fintech Valley, Vizag will be invited for Hack Day, where they will go through the prototyped solution.

The hackathon is looking for solutions across the following 5 themes:

  1. Customer Experience
  2. Process Automation
  3. Financial Inclusion
  4. Risk Management
  5. Lending
MENA

Betterpaydayloansonline.com Now Allows Getting Quick Payday Loans (MENAFN), Rated: B

Betterpaydayloansonline.com is a web-based service, which makes it possible to get quick, safe and convenient payday loans with no hassle at all.

Canada

LENDING LOOP HITS MILESTONE OF PROVIDING $ 10 MILLION IN FINANCING (Betakit), Rated: AAA

Lending Loop, a Canadian P2P lending platform, has officially provided financing of more than $10 million across the country.

The company says it has supported the expansion of over 180 small businesses through a system that allows investors to reach out to small businesses on Lending Loop’s digital marketplace.

Lending Loop’s investment model moves away from institutional or accredited investors; Canadians can even invest $50 into a pool of larger loans.

A new service is helping employers reduce turnover by paying their employees by the day (The Washington Post), Rated: A

Restaurant News reports that hourly employees can use a smartphone app to access money for hours worked and have it deposited on a debit card. The amount is limited to 50 percent of what’s earned and–to discourage impulse buying–employees only have an hour after their shift to access the money. There’s no fee for the worker, but businesses pay Instant Financial $1 per active user per month.

Barha is aiming to put a dent into the burgeoning payday loan industry, which was used by approximately 12 million Americans in 2015. His service is also being looked at as a potential recruiting and motivation tool by employers, particularly in — but not limited to — the retail and restaurant industries.

According to a recent USA Today report, almost 150,000 employees at more than 50 companies like McDonalds, Outback Steakhouse and Dunkin’ Donuts as well as other restaurants and retailers, trucking companies and staffing firms have access to the service.

GDS Link Joins Canadian Lenders Association to Support Innovative Lending; Sponsoring Canadian Lenders Summit (PRWeb), Rated: B

GDS Link, a global provider of risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business lending and leasing, today announced that it has joined the Canadian Lenders Association (CLA) as an affiliate member and will be sponsoring the Canadian Lenders Summit.

GDS Link is sponsoring the Canadian Lenders Summit, which has partnered with the CLA. The inaugural event will take place on October 26, 2017 in Toronto, Canada. Representing GDS Link is Rich Alterman, EVP of Business Development.

Latin America

Brazilian fintech Nubank offers accounts for transfers, payments (Reuters), Rated: AAA

Brazilian startup Nubank said on Tuesday it would expand from credit cards into digital accounts allowing users to make transfers, pay bills and earn more interest than average savings account, beefing up its challenge to traditional banks.

Tech-savvy millennials have been the core demographic for Nubank’s credit card, but Velez said he hoped new accounts would serve some of the roughly 60 million Brazilians – around 30 percent of the population – who do not have a bank account.

Venture capital firms including Sequoia Capital, Kaszek Ventures, Tiger Global Management and DST Global have invested $179 million in Nubank since 2013, giving it a value of $500 million in early 2016 that made it the largest Brazilian fintech startup.

Authors:

George Popescu
Allen Taylor

Derisking the Online Lending Model

Thrive and banks

According to an article in Harvard Business Review, online lenders lent an estimated $10 billion in 2016 to small and medium businesses (SMB) as compared to $300 billion by U.S. banks. A report by Morgan Stanley predicts fintech lenders will garner almost 20% of the market by 2020. The major issue facing banks is the […]

Thrive and banks

According to an article in Harvard Business Review, online lenders lent an estimated $10 billion in 2016 to small and medium businesses (SMB) as compared to $300 billion by U.S. banks. A report by Morgan Stanley predicts fintech lenders will garner almost 20% of the market by 2020. The major issue facing banks is the cost to process a loan is the same for a $100,000 note and an application for $1 million. Thus, banks have no incentive to focus on smaller loans. This led to their exodus and online lenders swarmed into the market.

The Thrive Group Inc. understands the risk-reward ratio is better in helping banks to recapture the market by getting them on the digital-first bandwagon as compared to launching a marketplace lender and struggling with credit and customer acquisition risks. Thrive describes itself as a financial technology company building a modern lending infrastructure focused on digital experiences, intelligent automation, workflow efficiencies, and real-time risk management capabilities.

Background

Founder and CEO Kunal Sehgal got his first taste of fintech when he joined Venmo (now part of PayPal), a mobile payment service in 2011. Kunal was able to understand the technological side of finance at Venmo, how it was thriving because it had married tech and user experience to make the process of transferring money frictionless. Before Venmo, Kunal worked at Rothschild in their London and New York offices as an associate in Tech M&A and debt restructuring.

Considering his entire career has revolved around amalgamating finance with technology, it was inevitable that he would launch a fintech company. Kunal joined forces with Ke Zhu, co-founder and CTO, to launch Thrive in 2015. Ke Zhu has vast experience in developing and implementing tech systems that are both maintainable and extendable. Prior to Thrive, he worked at Prosper as senior software engineer and lead developer.

The Platform

Initially, the company aimed to enter direct lending but decided against it after looking at the market where many startups were struggling to stay afloat because of high default rates, regulatory crack down, etc. Thrive pivoted and developed a platform whose main focus was to make the origination process quicker and hassle-free along with enhancing the user experience. Their first rollout focused on SMB lending and, eventually, the company will target other markets, as well. The goal is to help reduce underwriting and approval times, which will automatically slash costs associated with SMB loans, the original pain point of banks.

The Problem For Alternative Lenders

Most alternative lenders are struggling because of the high cost of capital, lack of stable flow of investment funds, and difficulty in acquiring customers. The original choice for a fintech startups used to be between becoming a balance sheet or marketplace lender. But the future is in redefining and reshaping the lending and borrowing experience. The focus has shifted to infrastructure, and fintechs partnering with banks are leveraging specialization for a win-win. The fintech focuses on borrower experience and reducing costs while the bank focuses on credit risk and customer acquisition. JP Morgan’s deal with OnDeck is a case in point.

Thrive’s First Client

Thrive was recently able to secure its first multi-year technology licensing agreement with Horizon Community Bank (HCB). Thrive will provide the bank’s cloud-based lending technology to help fast-track and complete its end-to-end small business lending process. This will cover digital applications, automated credit, ID verification, automated loan offers, and more. The bank will be able to bring down the loan processing time from weeks to days. The partnership will also open the door to acquiring customers through new digital customer acquisition channels.

This first partnership proved to be more fruitful than expected for Thrive as HCB also decided to come on board as an investor in the young startup.

Revenue Model and USP

Thrive’s first client going live is a huge validation, and the company wants to originate $5-$10 million in loans in the first year. They charge a percentage for every loan origination.

Most startups in the industry originate loans using their own platforms leaving them exposed to market vulnerabilities and risk. Thrive’s nearest competitor is Akouba, which provides SaaS solutions for community and regional banks, but the underlying difference is Akouba stops at the origination phase whereas Thrive provides the complete package right from the origination process to providing loan servicing. Servicing is integrated into the platform making it a seamless solution, and it removes the hassle of coordinating with multiple vendors. LendKey has a similar model but is focused only on student and home loans.

Conclusion

Thrive has hit upon a business and revenue model that is asset light and holds no customer acquisition or capital risk. They leverage banks’ balance sheets and use existing customer relationships for driving business. Thrive will target banks with an average size of $10-$15 billion for future growth. Mid-tier banks would find it difficult to invest resources in building a complete technology infrastructure; the only choice would be partnering with someone like Thrive to capture their SMB customer base.

Author:

Written by Heena Dhir.

Enabling Banks to Thrive at Digital Lending in a Fintech World

Thrive platform for banks

Banks have loyal customers and the cheapest source of capital in the world. No alternative lender can compete with that. But what banks don’t typically have is the tech, automation, and know-how to get the same underwriting efficiencies that online lenders rely on daily. Thrive solves that problem for thousands of institutions equipped with capital […]

Thrive platform for banks

Banks have loyal customers and the cheapest source of capital in the world. No alternative lender can compete with that. But what banks don’t typically have is the tech, automation, and know-how to get the same underwriting efficiencies that online lenders rely on daily. Thrive solves that problem for thousands of institutions equipped with capital and customers but without fintech efficiencies.

Thrive was started in 2015 as a direct lender by co-founders Kunal Sehgal (CEO) and Ke Zhu (CTO).

“We started as a direct lender focused on prime credit,” Sehgal said. “The small business line of credit was our go-to market since it’s an under-represented product in the marketplace. We spent 6-9 months building the platform to be fully-automated end-to-end. On-deck issues began emerging. We got a bird’s eye view of the structural issues online lenders have and realized that, on the direct side, the ability to attract stable debt capital to lend is very difficult and the cost of customer acquisition has not come down in a meaningful way.”

That’s when Seghal and his team decided to pivot and move into the pure technology space.

Deploying to the Cloud

Since Thrive had no existing customer base, the pivot seemed natural. Thrive began to service loans through a cloud-based platform. From there, it was a natural progression to offering the solution to banks, who need it to compete with online lenders.

“We can push out to a bank in a short amount of time because there’s no onsite or custom coding,” Seghal said. “It’s very quick and efficient. Banks don’t have internal IT teams and don’t know how to build it themselves, so they haven’t.”

One bank customer signed a contract with Thrive in February and had the software up and running by April. Traditional solutions don’t have that kind of speed to deployment.

“This new digital acquisition channel for banks can underwrite a loan in under 20 minutes,” Seghal said. “The system is fully configured for every customer.” The bank maintains control over who to underwrite and what to underwrite. The pricing is transaction- or application-based. “We wanted banks to win, not just charge an arm and a leg up front and say goodbye.”

Not Just Your Ordinary SaaS Platform

Thrive is more than a software-as-a-service platform. Seghal said his company is building the banking infrastructure of the future.

“When the bank makes money, we make money,” he said. “We want to be in partnership with the bank long-term.”

Their first bank customer loved being able to service deals directly on the platform, from origination to servicing. In fact, they were so impressed with Thrive’s product that they invested in the company. Banks are generally conservative and don’t make early-stage investments, so that alone is a testament to Thrive’s innovation capacity.

“We raised close to $800K,” Seghal said, “and there was also personal investment. Our goal now is to scale the customer base, then we’ll have the strength to raise a bigger round.”

The Thrive team witnessed a lot of pent-up demand for their product, but a year-and-a-half ago was too early, Seghal said. Today, the timing is just right. The fact that many banks are partnering with fintech companies and alternative lenders is the evidence that Seghal needs to see the opportunity.

Thrive can drive the banking experience from origination to the ways and means a borrower will interact with payment. It gives a more modern feel to the traditional bank facilitating servicing and a dashboard interface that allows banks to directly monitor loans in real time.

“Because we can automate cashflow, we have a direct link to an originating loan service account,” Seghal said. “ It can be monitored on a daily basis. You can see which loans are performing, which should be more closely monitored, etc.”

Thrive also configures the technology to be modular. They can move to consumer lending, commercial real estate, middle market lending, and more, very easily because they have central components built in. The ultimate goal is to drive efficiently beneath the hood, providing the plumbing of the system. On the front end, the applicant sees the bank’s branding, powered and enabled by Thrive, integrated into the bank’s website.”

What Thrive’s Competition Can’t Do

The depth of the platform separates Thrive from their competitors. They believe they can offer end-to-end origination, services, full experience, and risk management capabilities that their competitors don’t have. By offering pure tech as a service, they are trying to position themselves at the forefront of the game. A few years ago, fintech wasn’t on the radar and small banks didn’t focus on it. Since then, it has become clear that in order to succeed banks need to embrace the young, agile fintech companies as partners to learn from instead of treating them like hostile competitors.

“It’s very clear why they need us,” Seghal said. “Technology can help them. It isn’t a threat.” Thrive isn’t dabbling in tech plus lending. Rather, they are 100% focused on technology and have what is a clear win for both bank and customer. “We’re making banks fintech-enabled so they can provide a better customer experience and drive organizational value through the efficiency gained from technology.”

Authors:

Written with Nicki Jacoby.

Allen Taylor

Tuesday May 2 2017, Daily News Digest

Morningstar average credit spreads

News Comments Today’s main news: CFPB sues 4 online Indian-tribe lenders. Sharestates launches real estate lending white label solution. China Rapid Finance announces IPO pricing. Yirendai files Form 20-F. Today’s main analysis: Corporate credit tightens amid sluggish Q1 growth. Avant’s first 2017 ABS. Today’s thought-provoking articles: Europe on pace to set new record for fintech deals. United States CFPB […]

Morningstar average credit spreads

News Comments

United States

  • CFPB sues four online lenders operated by Indian tribe. GP:”In general India-tribe lenders attract more lawsuits. It is unclear if it is because they tend to be sloppier on compliance or lenders who are more aggressive on terms tend to partner with Indian-tribes because no bank will partner with them. In all cases being associated with an Indian-tribe seems to bear stigmata at least recently.”AT: “The CFPB is attempting to do what it was set up to do, but with attacks coming from state regulators, who knows how long it will be able to continue to do so?”
  • Corporate credits spread amid Q1 economic growth sluggishness. GP:”An interesting data point in the overall economic cycle.”
  • Avant’s first 2017 ABS. GP:”A good test of market perception of the Avant underwriting and product quality. Securitization has seen favorable investor demand. Avant retained 5% of the deal per Dodd-Frank. “
  • Sharestates launches white label solution for real estate private lenders. GP:”A sign that the market is maturing. Also a sign that cost of customer acquisition is growing as real estate crowdfunding companies get into technology sales / white labels entrusting 3rd parties to finding customers and letting them focus on the platform.”AT: “This is brilliant, and I’m not just saying that because I write for this company. Real estate is inherently local. By establishing a white label solution for real estate private lenders, Sharestates could position itself as the leader in RECF for many years to come. As far as I know, this is the first white label solution specifically for the real estate lending market. If the solution is any good, they should get a lot of participation.”
  • Colorado moves to dismiss suits. GP:”A very standard move in any lawsuit. It is unlikely to suceed.”AT: “These are interesting arguments, but I don’t see it happening. There is too much at stake to allow states to railroad online lenders and relegate them to second-class status. There needs to be a real discussion about which level of government has the power to regulate and legislate online lending.”
  • Fundrise files new Reg A+ for Income eREIT. GP:”We haven’t seen many Reg A+ fund raises in our space. I do think it is a very interesting tool for early stage companies. “AT: “This should have been expected. Selling out of shares as quickly as they did on the first round, I wonder why they didn’t file a second Reg A+ sooner.”
  • Thrive to power small biz lending for Horizon Community Bank. AT: “Perhaps we’ll see a wave of community banks getting in on the online lending act.”
  • Online lending has reached a tipping point. GP:”I think they actually mean it has reached maturity.” AT: “GDR’s Charlie Moore lays good groundwork for his argument. He makes some great points.”
  • Lendio announces annual list of top 10 best states for small business lending. GP:”There is very little transparency and public data in the SME lending space (unlike in personal lending thanks to Lending Club for example). This data is a step in the good direction. We hope more will be made available.”AT: “This is based on their own data, so it’s not objective. Interesting nonetheless.”
  • The future of finance. AT: “What’s interesting about this is the unchanging talking points from SoFi’s Mike Cagney about how banks should adopt technology, and how it would affect their businesses if they did. Short story: They could lay off more employees and cut business expenses.”
  • How Goldman Sachs is trying to erase debt stigma. GP:””
  • Leverage digital tech to forge relationships with your clients’ children. AT: “For financial advisors.”
  • Justices affirm cities’ right to sue banks under housing law.
  • SoFi personal loans review. GP:”A good summary of SoFi’s approach, which has pushed them where they are today. Most notably: no origination fee. SoFi is probably the only major online lender that has no origination fee. Avant started without an origination fee and lately had to introduce one for profitability. “
  • Celent’s corporate banking appoints Alenka Grealish as senior analyst.

United Kingdom

  • TransferWise to set up office in Singapore. GP:”Singapore is a good compromise between pro-business environment, trained workforce with good skills and price. Hong Kong is extremely expensive. Mainland China is not a good base to do business outside China. However, in the past, I found that for South East Asia a good cost/quality/location compromie was Jakarta.”AT: “I can’t think of a better place to set up office if you want to tackle the Asian markets.”

European Union

Australia

China

India

News Summary

United States

CFPB Sues Four Online Lenders Operated by a California Indian Tribe (Crowdfund Insider), Rated: AAA

The Consumer Financial Protection Bureau (CFPB) has sued four online lenders for collecting debt from consumers they allegedly did not owe. The four lenders include: Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc.

The CFPB alleges that the lenders made deceptive demands and illegally took money from consumer bank accounts for debts that consumers did not legally owe. The CFPB filed to stop the practices, recoup relief for impacted consumers, and asses a penalty on the aforementioned lenders. Each of the four lenders operate out of a single address in Upper Lake, California and is owned and incorporated by the Habematolel Pomo of Upper Lake Indian Tribe (Habematolel Pomo Tribe or the Tribe), a federally recognized Indian tribe.

The CFPB states that since at least 2012, Golden Valley Lending and Silver Cloud Financial have offered online loans of between $300 and $1,200 with annual interest rates ranging from 440 percent up to 950 percent.

Read the actual complaint here.

Economic growth for the first quarter of 2017 slowed to a 0.7% annualized rate compared with a 2.1% rate in the fourth quarter of 2016. This represents the slowest rate of economic expansion over the past three years.

On a positive note, business investment picked up rapidly.

The average corporate credit spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) tightened 2 basis points over the course of last week to +121. In the high-yield market, the Bank of America Merrill Lynch High Yield Master Index tightened 22 basis points to end the week at +375. In the equity markets last week, the Nasdaq index broke through 6000 to new highs and the S&P 500 rose 1.5%.

As an indication of how tight corporate credit spreads have become compared with their historical averages, since the beginning of 2000, the average spread of the Morningstar Corporate Bond Index has registered below the current level only 26% of the time. The preponderance of the time that the index was at a level tighter than the current credit spread occurred during the buildup to the 2008-09 credit crisis. In 2004-07, corporate credit spreads were pushed to historically tight levels as new structured investment vehicles were engineered to arbitrage the differentials in expected default risk. But once the credit crisis emerged, investors found that many of these vehicles did not perform as advertised.

Avant’s First 2017 ABS (PeerIQ), Rated: AAA

We see a bifurcation in credit performance trends between mass affluent credit card issuers, and issuers focused on mass market credit segments. Synchrony, the largest store credit card issuer, shares dropped 16% on Friday due to a 45% increase in its loan loss provision. Capital One and Discover also increased their provision by 33% and 14% respectively. By contrast, the credit card master trusts of large card issuers (AXP, BAC, JPM) exhibit delinquencies that are near all-time lows (as analyzed in prior PeerIQ newsletter) due to their focus on higher credit quality relationship customers.

On Friday, bond investors welcomed the first Avant ABS deal of the year. AVNT 2017-A was upsized to $247.8 Mn collateral and received significant interest from broader credit investors.

Avant Loans Funding Trust 2017-A (AVNT 2017-A)

Avant priced its first unsecured subprime consumer deal of 2017 on April 26th (AVNT 2017-A), its fourth rated securitization. The transaction was upsized from $192.6 Mn to $218.9 Mn due to favorable investor demand. The deal was led by JP Morgan who also structured the transaction, as well as Credit Suisse and Morgan Stanley. Avant retained 5% of the deal, consistent with risk retention requirements of Dodd-Frank Act.

Source: PeerIQ, Bloomberg, Kroll Rating

Strong Alignment of Interests

Avant’s business operating model allows for several important components that strengthen alignment of interests between Avant and institutional investors. According to Kroll Rating’s pre-sale report, as of March 31st Avant retained approximately $2.5 Bn (65%) of the $3.8 Bn in loans originated through the Avant Platform. For this transaction, Avant contributed 95% of the loans in the collateral pool.

Further, on the deal Closing Date, Avant or its majority-owned affiliate acquires and retains at least 5% of the fair value of total capital structure by Regulation Risk Retention.

Loss Assumptions

Kroll increased the weighted average cumulative net loss (CNL) rate when rating AVNT 2017-A. For loans with 36 months or less terms, the CNL was increased from 13.86% in AVNT 2016-C to 18.39% in AVNT 2017-A (“Run-off Portion”). Further, Kroll assumed 16.55% for the representative portion in its pre-sale report, suggesting an upward shift in loss assumptions for AVNT loan product.

Pricing Tighter

We observe a parallel shift in the credit curve: the A tranche was 100 basis points tighter and the B tranche was 185 basis points tighter than the corresponding tranches in AVNT 2016-C. The C tranche was priced at 450 basis points.  The C tranche (BB-rated) was fourteen times over-subscribed, reflecting credit investors’ “risk-on” mentality.

Source: PeerIQ

Trigger Talk

The exhibit conveys that trigger profiles can be very different even for similar collateral from the same shelf. AVNT 2017-A shows a much higher starting CNL profile (MOB=1) than AVNT 2016-B, starting at 1% and peaking at 25%. Although the changes in the underwriting standard is obvious, the loss trigger profile is slightly steeper, reflecting more up-front loss timing for AVNT 2017-A as compared to older deals, such as AVNT 2016-B.

Source: PeerIQ

Sharestates Launches White Label Lending Solution for Real Estate Private Lenders: Shareline Solution (Crowdfund Insider), Rated: AAA

Sharestates, an online real estate investment marketplace, has announced the launch of a new financing capability; Shareline Solution. The new service is a hybrid between lending and brokering a loan. Private lenders will have access to Sharestates lending capabilities to directly serve their clients all under their own brand. The new lending service is described as a white label, correspondent lending program that empowers private lenders to quickly launch a robust real estate crowdfunding and lending marketplace.

With this solution, Sharestates explains it will tap into more geographical regions by working directly with local, private lenders through strategic partnerships.

Colorado Moves to Dismiss Suits (Orrick), Rated: A

As we noted in a recent Alert, WebBank and Cross River Bank filed separate federal civil actions to enjoin the Administrator of Colorado’s Uniform Consumer Credit Code from enforcing state lending laws against Avant, Inc. and Marlette Funding LLC, online lending platforms that facilitate and service loans originated by the two Banks. The Banks assert that Colorado’s lending laws are preempted by federal banking statutes. On April 25, the Administrator moved to dismiss the Banks’ actions on several grounds.

First, the Administrator contends that the lawsuits do not present a federal question and thus fail to establish subject-matter jurisdiction.

Second, the Administrator argues that the Banks lack standing because their alleged injuries—including loss of revenue from the assignment or sale of their loans—are either inadequately pled or insufficiently related to the enforcement proceedings against Avant and Marlette.

Third, the Administrator argued that if the State’s enforcement actions against Avant and Marlette (which were removed to federal court) are remanded to state court, then the federal court should either dismiss or stay the action brought by WebBank and Cross River Bank’s cases based on the Younger abstention doctrine (which establishes rules against federal courts from interfering with ongoing state court or administrative proceedings).

Fourth, and perhaps most significantly, the Administrator asserts that the Banks’ preemption arguments fail as a matter of law because federal banking statutes—particularly the National Bank Act (“NBA”), 12 U.S.C. § 85, and the Depository Institutions Deregulation and Monetary Control Act (“DIDMCA”), 12 U.S.C. § 1831d—do not preempt the application of state lending laws to nonbank entities.

Fundrise Files New Reg A+ for Income eREIT (Crowdfund Insider), Rated: A

Fundrise, an online marketplace for investing in real estate, has filed a Reg A+ offer with the SEC to sell additional shares in their Income eREIT. This will be the second round for the Fundrise Income eREIT. The first round sold out raising the maximum amount allowable of $50 million. Fundrise is offering up to $41,189,280 in common shares which represents the value of shares available to be offered as of the date of the offering circular out of the rolling 12-month maximum offering amount of $50 million in the eREIT shares.

Thrive Platform to Power Small Business Lending for Horizon Community Bank (Thrive Email), Rated: A

Thrive Inc. (Thrive) is pleased to announce a multi-year technology licensing agreement with Horizon Community Bank (HCB), a leading Arizona-based FDIC insured bank and subsidiary of Horizon Bancorp, Inc.

Thrive’s proprietary cloud-based lending technology will power the complete, end-to-end small business lending process for HCB encompassing:

  • Digital applications, automated credit / financial analysis and background/verification checks, loan offers and declines, e-closings, integrated servicing, borrower interface and real-time risk management capabilities
  • Operationally, HCB will benefit significantly from improved loan processing efficiencies and reduced origination costs:
    • Loan processing time is expected to be reduced from weeks to days
    • Cost reductions of greater than 40% are expected for each loan application cycle
  • HCB will benefit extensively from new digital customer acquisition channels, while user experiences for existing and new customers will be modernized and improved

Online lending has reached a tipping point (Business Insider), Rated: A

Online lenders have been facing an uphill battle recently as investors question whether they are truly getting the loan transparency they need to confidently invest in this young industry. Investors, credit providers and ratings agencies are worried about loan data integrity as well as collateral and ownership rights behind the loans.

Phase One: Concept – The Early Days (2006-2010)

The concept of partner banks – like WebBank and Cross River – issuing loans on behalf of these platforms, quickly became an established model. These banks helped ensure the borrower regulations were met, including state licenses among others. Consumers are well protected and borrower fraud is tightly managed.

But in 2008, regulators took notice of this rapidly expanding market, and the SEC issued a statement requiring lending platforms to register and report loan financials to the Commission to protect investors. With this change, the SEC highlighted the need to treat fractional loans as securities that need to be reported.

Phase Two: Institutional Entry – Enter the Big Dogs (2011-2015)

In 2011, the landscape changed for online lenders with institutional investors, in search of yield in a near-zero interest rate environment, tossing their hats in the ring to enter this emerging industry. A $5 million investment from an anonymous institutional investor into LendingClub marked the first infusion of institutional investor capital into the online lending space.

And that was only the beginning as institutional investment continued to flow into the market, primarily from specialist hedge funds, often with lines of credit from well-known large investment banks. At this point, the industry evolved its name from Peer to Peer to Marketplace Lending and ultimately Online Lending to reflect the fact that large institutions were now funding a large portion of the loans.

Also in 2013, securitization changed the face of online lending, providing lending platforms more scalable access to capital to fund the needs of new lenders. Eaglewood Capital closed on a $53 million unrated securitization deal for loans originated by LendingClub, making it the very first securitization deal in the space.

Analytics and secondary markets began to emerge in 2015, with companies like PeerIQ, dv01 and Monja providing analytics and reporting tools to help investors better track their online lending investments. Secondary markets for these loans kicked off this same year, with the launch of both Orchard and Ldger, aiming to provide additional liquidity options for investors in the space.

Later in 2015, the first partnership between a bank and lender was forged with JP Morgan and On Deck leading the charge.

Phase Three: Maturity & Scale – The Future is Clear (and transparent!) (2016 – …)

And now we arrive at the present – a tipping point where the fate of the industry lies squarely in its ability to adopt effective risk control infrastructure for investors to bring certainty to this asset class and therefore attract new capital.

A modern fintech lending model has been using a thirty-year-old due diligence methodology, comparing loan tapes with loan agreements, both provided by the seller. It goes without saying that this method is far from modern or efficient, with no independent validation of data integrity against trusted data sources.

Today, transparency is being redefined. Online lending has undoubtedly provided greater loan data and performance reporting than investors are used to. However, loan transparency from the seller without independent data certainty has been proven dangerous.

A vital part of this infrastructure is for the industry to adopt a central loan information clearing house that focuses on ownership rights and asset certainty for each loan as well as serving as a collateral pledge registry to prevent the double pledging of assets. Increased asset certainty is helping to protect and attract capital from new larger, more risk averse investor segments. With the infrastructure changes we’re seeing emerge in the industry today, including the potential of Blockchain technology, this goal of new capital sources is closer to reality for online lenders than ever.

Lendio Announces Annual List of Top 10 Best States for Small Business Lending (PRWeb), Rated: A

In honor of National Small Business Week, Lendio, the nation’s leading marketplace for small business loans, today announced its second annual list of top 10 states for small business lending, based on lending data from the Lendio platform, which matches businesses with more than 75 lenders.

This year’s top states for small business lending are:

  1. Utah
  2. Washington
  3. California
  4. Virginia
  5. Texas
  6. Florida
  7. New York
  8. New Hampshire
  9. Pennsylvania
  10. Georgia

The ranking is based on a calculation of several key indicators, including approval rates and loan sizes, from among thousands of Lendio’s customers from April 2016 to March 2017.

1 – Utah
2016 Ranking: 3
No. SMBs: 268,872*
No. SMB Employees: 540,268*
Average Loan Size: $37,648

2 – Washington
2016 Ranking: 4
No. SMBs: 574,455*
No. SMB Employees: 1,300,000*
Average Loan Size: $24,746

3 – California
2016 Ranking: 2
No. SMBs: 3,800,000*
No. SMB Employees: 6,800,000*
Average Loan Size: $23,391

4 – Virginia
2016 Ranking: 13
No. SMBs: 706,626*
No. SMB Employees: 1,500,000*
Average Loan Size: $20,520

5 – Texas
2016 Ranking: 6
No. SMBs: 2,600,000*
No. SMB Employees: 4,600,000*
Average Loan Size: $21,003

6 – Florida
2016 Ranking: 7
No. SMBs: 2,400,000*
No. SMB Employees: 3,200,000*
Average Loan Size: $21,103

7 – New York
2016 Ranking: 18
No. SMBs: 2,100,000*
No. SMB Employees: 4,000,000*
Average Loan Size: $23,014

8 – New Hampshire
2016 Ranking: 5
No. SMBs: 132,432*
No. SMB Employees: 289,914*
Average Loan Size: $19,893

9 – Pennsylvania
2016 Ranking: 22
No. SMBs: 1,000,000*
No. SMB Employees: 2,500,000*
Average Loan Size: $17,561

10 – Georgia
2016 Ranking: 8
No. SMBs: 1,000,000*
No. SMB Employees: 1,600,000*
Average Loan Size: $16,348

*Source:

The Future of Finance: More Data, Fewer People (Institutional Investor), Rated: A

Credit Suisse is now piloting a robot named Reggie, a virtual assistant not unlike Amazon’s Alexa. Credit Suisse’s Reggie was programmed to answer regulatory questions, according to Brian Chin, CEO of global markets for the investment bank. Chin, who spoke on a panel at the Milken Institute Global Conference in Los Angeles on Tuesday, expects that the Swiss bank will be able to ultimately cut the number of calls to its call center by 50 percent. But at this point, Reggie is better at providing information for simple questions than appropriately addressing more complex inquiries.

The technology exists now to streamline labor-intensive processes such as loan underwriting. Mike Cagney, CEO and co-founder of SoFi, an online consumer lender, uses five pieces of data to provide instantaneous loan decisions. SoFi is now moving to use non-traditional information for underwriting, including data from cell phones, which it thinks will predict consumers’ future behavior. Cagney said banks could shed thousands of people if they used similar technology.

How a Goldman Sachs brand is trying to erase debt stigma (Tearsheet), Rated: A

“There’s a stigma around debt, people don’t like to talk about it,” Nicole Sbarra, a product manager for Marcus, said at an event in New York Thursday night. “It makes them very uncomfortable. And most people also don’t think of credit card debt as actual debt, they see it as a balance… [Marcus] is going to help you understand that there’s more to you than this extreme amount of debt on your shoulders.”

Keeping the brand separate, as much as possible, from Goldman is necessary, in some ways, considering the bank’s history. From 2005 to 2007, Goldman issued and underwrote mortgages and securities backed by residential loans that were borrowed by consumers with poor credit. This led to the housing bubble burst and economic recession. Last year Goldman paid out $5.1 billion for its role in the financial crisis.

Money is one of the most personal and sensitive topics for people, even people with lots of it, which is why empathy plays such an important role in building a financial product. The average American carries some $16,000 in credit card debt and about 70 percent of them don’t know there are alternative options to that credit card debt, said Michael Cerda, head of product.

Leverage Digital Technology To Forge Relationships With Your Clients’ Children (FA Magazine), Rated: A

According to various statistics, millennials and members of Generation X will inherit anywhere from $15 trillion to $40 trillion or more from their baby boomer parents by 2050. This will be the largest cross-generational transfer of wealth in history, but many financial advisors haven’t yet prepared for this opportunity.

As the relationship progresses, advisors can proactively invite a client’s children to meetings, and reach out to them to offer financial planning education at applicable stages of their lives. This education can have a big impact if it is taught using the state-of-the-art reporting, proposal and prospecting tools that come with today’s digital advice platforms. For example, when a client mentions that their teenage son or daughter just secured their first after-school job, the advisor can offer to meet with them to deliver an interactive digital presentation on how to save and invest their earnings.

Justices affirm cities’ right to sue banks under housing law (Arkansas Online), Rated: B

The Supreme Court ruled Monday that cities may sue banks under the federal law that bans discrimination in housing, but it said such lawsuits must tie claims about predatory lending practices directly to declines in property tax revenue.

The justices’ 5-3 ruling partly validated an approach by Miami and other cities to try to hold banks accountable under the federal Fair Housing Act for the wave of foreclosures during the housing crisis a decade ago.

SoFi personal loans: 2017 comprehensive review (Bankrate), Rated: B

Who is a SoFi personal loan good for?

  • Anyone with good to excellent credit. SoFi borrowers have an average credit score of 730, although credit scores range from 680 to 850, according to the company. Check your credit score for free before you apply.
  • High-income earners. SoFi borrowers have an average annual income of $114,000. Real median household income in the U.S. is about $56,500.
  • Someone who has a short credit history. SoFi has no minimum requirement for how long you’ve used credit, but rather looks at how responsible you’ve been at paying bills.
  • Someone who doesn’t need a co-borrower. SoFi, like many other online lenders, does not allow joint borrowers on a single loan. If your credit or income aren’t good enough to qualify on your own, you may want to consider using a different lender.
  • Someone who doesn’t mind an entirely online experience. The entire process takes place virtually — from applying for a loan to receiving approval to having the money deposited in your bank account if you are funded.

SoFi offers both fixed- and variable-rate personal loans that range from $5,000 to $100,000 and are repayable over three, five or seven years. Minimum loan amounts are higher in four states: Arizona, Kentucky, Massachusetts and New Hampshire.

Fees and penalties

  • SoFi doesn’t charge an origination fee.
  • Late payment fee is either 4% of the unpaid installment amount or $15, whichever is less.
  • You won’t be penalized for paying off your loan early.

Celent’s Corporate Banking Appoints Alenka Grealish as Senior Analyst (citybizlist), Rated: B

Celent is pleased to announce that Alenka Grealish will be joining the Banking practice as a Senior Analyst based in San Francisco. Her research will focus on innovation in treasury management services, trade finance, working capital finance, and the implications for customer journeys across segments, including small business. As part of her research, she will track the digitization of the financial supply chain, and the rise of fintechs and new business and revenue models.

United Kingdom

TransferWise Goes Big. Sets up Office in Singapore for Asian Expansion & Global Domination (Crowdfund Insider), Rated: AAA

I am not alone in using the service as Transferwise has grown rapidly around the world. In the UK, 10% of the people who transfer money utilize the service. A recent funding round gave Transferwise a billion dollar valuation so it has achieved Fintech Unicorn status.

Today, Transferwise is moving  around $ 1.2 billion monthly. They estimate they save consumers and businesses, around $2 million daily. Who loses out? The banks, of course.

Global remittance stands at around half a trillion dollars each year. According to the World Bank, remittances in East Asia and Pacific registered about $126 billion last year. If you add South Asia (India, Pakistan, Nepal and Bangladesh) you can add another $110 billion to that number. Transferwise setting up shop in Singapore just makes sense.

European Union

Europe On Pace for Record Year in Fintech Deals (Crowdfund Insider), Rated: AAA

CB Insights reported that European fintech firms raised over $667 million over the first three months of the year through a total of 73 deals. It’s important to note that CB Insights’ report is based only on VC-backed deals as opposed to KPMG’s Q1 report which was based on all types of deals, which is why the report released by KPMG last week showed over $880 million raised from 89 deals in Europe.

In just three months, European firms this year have already raised 60% of the total amount that was raised all of last year.

What’s also promising is the fact that early-stage investing has increased as well. Over $195 million of the amount raised in Q1 of this year was in seed and series A funding rounds. Q4 of 2016 only saw $54 million raised in those rounds.

Australia

PledgeMe Launches Lending Month of May: Seeks to Help Kiwis Learn More About Crowdlending (Crowdfund Insider), Rated: A

On Monday, New Zealand’s crowdfunding platform PledgeMe announced it was dedicating the month of May to lending related goodness.

As part of the program, the PledgeMe crew will be doing the following:

  • Explaining what it means in a super straight forward way; borrowing money doesn’t need to be as complicated as it’s been made out to be. 
  • Create case studies on how it has worked in the past.
  • Hosting a webinar to answer questions real time, and then blog about it.
  • Writing a weekly blog series showcasing how crowdlending can work for various company organizations 
  • Creating a podcast series
  • Putting together a mini-documentary on the company behind “the bubble”

Australian youth drive P2P revolution (AltFi), Rated: A

But its millennials that are driving the P2P revolution. They’re turning away from banks and property in droves and creating space for fintech disrupters, according to new research by RateSetter Australia.

The company has seen the number of millennial investors using its platform increased a startling 250 percent the past 12 months.

The average investment from millennials was only A$10,000, much smaller than the A$50,000-plus averaged by baby boomers and the ‘silent generation’.

China

China Rapid Finance Announces Pricing of Initial Public Offering (PR Newswire), Rated: AAA

China Rapid Finance Limited (“China Rapid Finance”) (NYSE: XRF) announced today that its initial public offering of 10,000,000 American depositary shares (“ADSs”) was priced at US$6.00 per ADS, with a total offering size of US$60 million. Each ADS represents one Class A ordinary share of China Rapid Finance. China Rapid Finance has granted the underwriters a 30-day option to purchase up to an additional 1,500,000 ADSs at the initial public offering price, less the underwriting discounts and commission. The ADSs have been approved for listing on the New York Stock Exchange and are expected to begin trading on April 28, 2017 under the symbol “XRF.”

Yirendai FORM 20-F (SEC), Rated: AAA

119,512,300 ordinary shares, par value US$0.0001 per share, as of December 31, 2016.

IFC and Ant Financial to enable digital financial inclusion in emerging markets (The Asset), Rated: A

IFC, a member of the World Bank Group, and Ant Financial Services Group, the parent company of Alipay, have signed a memorandum of understanding to make basic financial services more accessible in China and other emerging markets.

Under the new memorandum the two parties will strengthen their collaboration for inclusive digital finance, green digital finance, business-environment enhancement and credit-data analysis.

Ant has invested in payment and digital finance companies in India, Thailand and Indonesia.

P2P Industry News (Xing Ping She Email), Rated: A

Monthly Report of China’s P2P Lending Industry
On 1st May, Online Lending House released the monthly report of P2P lending industry. According to the report, the total business volume decreased in April due to the two minor long leaves(Qingming Festival holiday and May Day holiday). However, the trend of the industry is optimistic especially in the number of borrowers, cumulative trading volume and the development of lending platforms.

In April 2017, the loan volume is 224.92 billion RMB, and the cumulative volume reached to 4,330.12 billion RMB, however, the same figure of the corresponding period last year was 1,888.12 billion RMB. Over the past year, the volume in P2P lending industry has nearly increased by 2.5 trillion RMB. The loan balance mainly concentrates on Beijing(338.70B RMB), Shanghai(242.35B RMB) and Guangdong province(177.98B RMB) , jointly accounting for 79.26% of the country’s total balance.

Ant Financial:Alipay Model will be Replicated in B&R(Belt and Road) Countries
The globalization process of Ant Financial started since February 2015 and the business has spreaded to India, Thailand, Indonesia and the Philippines etc. “We look for local partners instead of running a branch abroad, and aim at developing countries with great demand for e-payment rather than developed countries. The immediate benefits from this mode will save 5-8 years’ research and development time.” Jia Hang, the general manager of international division, explained the company’s overall global strategy for the first time. Ant Financial also announced they would keep replicating the Alipay business to other B&R Countries.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

This week, China Banking Regulatory Commission released a documentation “Guidelines on risk prevention and control in banking industry” to regulate the small cash loans market by perfecting the in-out mechanisms, paying more attention to the supervision and decreasing operation risk.

Here are some recommendations for this round of regulatory reform:

  • At present, diverse interest rates should be permitted to coexist, but the existence of exorbitant usury must be prohibited. It is reported that the average interest rate of cash loans has reached 158%, which produces disastrous influence on the development of microfinance industry in China.
  • To reduce risk, government should make the relevant laws to conduct stricter regulation on different kinds of cash loans companies.
  • Training should be provided to microfinance organizations in order to improve operations and strengthen management capabilities.

The Beijing Municipal Administration Traffic Card, more commonly known as the Yikatong, is preparing to tap into demand for mobile payment devices, with the launch of a wristband capable of making contactless payments.

With the wearable tech industry on the rise, Yikatong believes engineering a variety of payment methods is essential to ensuring customer satisfaction. According to analysts at IDC, the wearable devices market is booming, with around 50 million units projected to be sold in 2017, which is expected to achieve a target of 78% average growth a year until 2018.

One of China’s largest online lending platform, CreditEase, has launched a private blockchain service based on ethereum.

Renren Inc., which operates a social networking service and internet finance business in China, announced to reach a strategic partnership with Ping An Bank to develop automobile finance in China.

This week, Chinese bike-sharing startup ofo announced a strategic investment from Ant Financial, but the total funding volume was not disclosed. In the future, ofo will work with Ant Financial on payments, credit and other international business expansion.

India

FinMomenta launches peer-to-peer online lending platform Tachyloans (The Hindu BusinessLine), Rated: AAA

Even as a final set of regulations is yet to be firmed up in the country’s burgeoning digital peer to peer (P2P) lending space, a Singapore-based fintech start-up FinMomenta has launched its operations to tap individuals and businesses that are considered ‘risky’ by the bigger NBFCs and banks.

The company uses a proprietary credit scoring model enabled by Artificial Intelligence and Big Data to assess the creditworthiness of applicants. It also uses e-KYC and Aadhaar for verification of the borrowers that helps lenders to automatically invest in the recommended list of borrowers, according to Khaderbad.

Tachyloans also analyses the social media profiles of its borrowers and uses psychometric analysis to understand their creditworthiness.

The platform is currently open for all resident individuals looking for loans in 50 cities across India.

Tachyloans Targets India’s Fintech Segment Which is About to Touch $ 2.4B By 2020 (BW Disrupt), Rated: A

Tachyloans has made its entry at a strategically important time in India’s burgeoning fintech sector that is forecasted to touch $2.4bn by 2020. Tachyloans uses a proprietary credit scoring model enabled by Artificial Intelligence and Big Data to assess the creditworthiness of applicants. The stronger the credit profile, lesser the credit or default risk. The company’s innovative platform electronically verifies the borrower information using the KYC (Know Your Customer) documentation provided, and qualifies them through their proprietary credit decision model.

At Tachyloans, the entire registration, application and documentation procedure is simplified for both borrowers and lenders, thereby offering complete transparency throughout the process. Unlike the traditional banks, in Tachyloans lenders can earn returns as high as 25% per annum and borrowers can avail loan at lower interest rates starting from 11.5% per annum. The background verification check of the borrowers is also done by various parameters at the backend before getting them on board.

Furthermore, FinMomenta will be looking at collaborating with banks and other financial institutions to ensure a straightforward process and faster disbursement of loans.

Authors:

George Popescu
Allen Taylor