The Broken Promises of Peer to Peer Lending

The Broken Promises of Peer to Peer Lending

About a decade ago, peer to peer lending came on the scene. It was designed as a way for people to borrow money not just from banks or other lending institutions, but from individual investors. Anyone could go onto a platform like Lending Club or Prosper, and fund any of the loans on its platform. […]

The Broken Promises of Peer to Peer Lending

About a decade ago, peer to peer lending came on the scene. It was designed as a way for people to borrow money not just from banks or other lending institutions, but from individual investors. Anyone could go onto a platform like Lending Club or Prosper, and fund any of the loans on its platform. They could fund entire loans, or invest in fractions.

This new technology promised to cut out the middle man and enable the everyday depositor to make a bank’s return on their money instead of it sitting in a savings account generating 1%.

Peer to peer promised new methods of assigning risk by utilizing technology to gain more information on borrowers. New data points gave underserved markets like millennials another chance to access new capital.

By streamlining the process, fewer expenses to originate these loans would result in better margins for originators, smaller barriers to entry, more competition, and ultimately more innovation. With more transparency, individual investors would have all the information they needed to buy loans that would be paid back.

Everybody was supposed to win.

But it didn’t work out that way. What went wrong?

In their zeal to revolutionize lending, the peer to peers fell short. They were unable to execute working solutions to overcome the following challenges:

Too many middlemen.

Online lenders were able to streamline some of the steps and automate others, reducing costs. They still need lawyers. They still need credit rating services. They still need accountants, auditors, brokers, salespeople, and more middlemen to make their platform work.

Even though onboarding and underwriting are now more efficient, there are still huge expenses in acquisition, cost of capital, and servicing. The added value in the new lending model only brought down costs marginally, and not significantly.

Failure to Diversify.

A new breed of lender was hatched when platforms empowered ordinary customers to lend their savings out at 7-20% rather than parking in a standard checking account. This brought a diversity of investors and interests to this new form of lending.
It fizzled out too soon. To raise $100 million, a lending platform would have to encourage 10,000 customers to transfer $10,000 from their personal accounts to their platform. That requires an army of salespeople, all earning commissions. A bank, or large financial institution could fund $100 million in loans with a single order.

Which is exactly what they did.

They began to wield disproportionate power over the lending platforms. Peer to peer was supposed to offer everyone the same opportunity. The banks were able to muscle their way into control by scaling up the platform companies in a way no retail investor could. The banks began to demand to see the loans before everyone else. They were able to cherry pick the most attractive loans, leaving the pits for everyone else.

As lending platforms grew, hedge funds rushed in to provide lending capital. They saw the opportunity while interest rates for low. They could raise money at low rates, while personal loans still demanded higher interest, creating high margins. This created a single flow of capital to the online lenders, thus creating a concentration risk where all the money was coming from one place.

Hedge funds don’t originate personal loans, so they funded online originators to get into this market. This drove peer to peer away from lending to the people, and more towards lending for the hedge funds. The biggest sign was when lending platforms stopped offering fractional loans, which was a great opportunity for smaller investors.

Market Share over Monetization

Most lending platforms started with venture capital funding. The marriage between finance and technology, is complex. The traditional strategy of early stage tech companies is to prioritize gaining market share over profitability. With financial institutions, the bottom line is always, the bottom line: profitability comes first, then scale up.

Peer to peer lenders applied the tech model to a financial industry. As a result, standards for accepting new borrowers were relaxed, loaning money to less qualified people. By the first quarter of 2016, default rates skyrocketed. This resulted in a higher risk premium on everyone. The hedge funds pulled back all at once.

Supply kept on coming in, but they were unable to unload it to enough investors once the hedge funds pulled out. They had to pivot to securitization. The small investor gradually got edge out of the buy side.

Lack of Transparency

In giving retail investors the chance to loan money to people, they were supposed to have access to all the details involved in pricing the loan. As costs to maintain this lending model continued to rise, online lenders were only giving out enough information on potential borrowers to satisfy regulators. Too much uncertainty increased the level of risk for potential lenders within the platform.

Conclusion

Despite the innovations in user experience, underwriting, and measuring risk, online lenders are still struggling to fulfill their vision to revolutionize lending by increasing inclusion and reducing costs. Since mid-2016, the barriers of entry have risen dramatically for originators, as well as smaller investors. With less diversity in the market, liquidity remains a barrier to growth. The inability of both platforms and investors to offload loans from their balance sheet has caused a stagnation in the industry.

The winner takes all momentum has reasserted itself, and the big players have retained their title.

Authors:

Gilad Woltsovitch is the Co-Founder and CEO at Backed Inc., responsible for designing the company’s first-class platform, UX and UI. Before Backed, Gilad co-founded iAlbums, a semantic curation engine for media players in 2010 where he served as the company’s CEO from 2011-2014. In 2013, Gilad also served as the entrepreneur in residence for Cyhawk Ventures and joined the Ethereum project, establishing the Israeli Ethereum meet-up group. Gilad holds a Masters of Art Science and Bachelors in Sonology from the Royal Conservatory of The Netherlands in The Hague, University of Leiden.

 

Wednesday November 29 2017, Daily News Digest

Qudian

News Comments Today’s main news: Fiduciary rule delayed–again.SoFi prepares sixth student loan refinance ABS.LendingTree secures $250M amended, restated credit facility.Indonesian tech investments hit $3B YTD. Today’s main analysis: Qudian bounces back. Today’s thought-provoking articles: Will Mulvaney back consumers or payday lenders?American consumers say financial crisis had no impact on their lives.Online education startup promises to […]

Qudian

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United States

DOL Officially Delays Start of Fiduciary Rule (The National Law Journal), Rated: AAA

The Labor Department on Monday announced the official 18-month extension for the start of key provisions of the fiduciary rule.

President Donald Trump directed the Department to prepare an updated analysis of the “likely impact” of the fiduciary rule on access to retirement information and financial advice.

The extension will be published in the Federal Register on Wednesday.

SoFi readies sixth student loan refi ABS (GlobalCapital), Rated: AAA

SoFi is has entered the post-Thanksgiving pipeline with its sixth student loan refinancing transaction this year, in line with its plans to issue 12 securitizations in 2017.

The California-based online lender filed documents with the US Securities and Exchange Commission on Tuesday. Credit Suisse, Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley are banks on the deal, according to the deal documents.

SoFi Tackles Consumer Debts in New Ad Push (Lend Academy), Rated: A

While relaxing over the Thanksgiving weekend you might have noticed a new trend occurring in television while watching the games: six second ads.

SoFi is focusing their message on the consumers lifestyle, presenting an understanding as to why someone needed to increase their credit card debt.

They also placed a Black Friday circular with several national newspapers which you can see in the photo below. The ad is a clever take on the typical sales fliers we all see around this time of year. But instead of an ad featuring low prices we see an ad touting much higher prices. The message is that if you are buying gifts on credit cards this holiday season and carrying a balance you will be paying a lot more than the advertised price. It is a message focused on smart spending, giving a better look at the true costs of products when financed.

Would Trump’s CFPB Pick Mulvaney Back Consumers Or Payday Lenders? (International Business Times), Rated: AAA

Demonstrators gathered outside the Consumer Financial Protection Bureau (CFPB) in Washington D.C.  Wednesday to protest President Trump’s decision to appoint White House budget director Mick Mulvaney to director of the agency.

As a Congressman, Mulvaney accepted $55,500 in contributions from payday lenders during his four successful runs for Congress, including $26,600 during the 2016 election cycle,  according to the National Institute on Money in State Politics. Before he was tapped to lead President Donald Trump’s Office of Budget Management, Mulvaney took $115,200 from the securities and investment industry, and another $96,564 from the insurance industry in the 2016 cycle, both more than any other industry, according to the Center for Responsive Politics. This record, along with comments Mulvaney made indicating he would shutter the agency if given the opportunity, has led critics to question whether Mulvaney’s priority will be consumers — or the companies the agency is responsible for regulating.

Payday lenders appear to want Mulvaney to lead the CFPB.

Note to Mick Mulvaney: Donuts do not a CFPB director make (The Washington Post), Rated: A

President Trump’s hostile takeover of the Consumer Financial Protection Bureau, by contrast, relies on the rather less cherished legal principle of habeas cuppedia, Latin for “you shall have the pastries.”

Under the statute that created the CFPB, the watchdog agency set up after the 2008 crash to police lending abuses, it should now be rightfully run by Leandra English, the deputy director who succeeds the just-resigned director, Richard Cordray, until the Senate confirms a permanent replacement. Trump found another statute that he says lets him appoint Mulvaney. English filed suit to defend her legitimacy, Mulvaney submitted doughnuts, and a Trump-appointed federal judge, to nobody’s surprise, ruled in Trump’s favor.

Ten Years Post-Financial Crisis and Americans Say It Had No Impact, According to Hartford Funds Survey (BusinessWire), Rated: AAA

New data released today by Hartford Funds revealed that a decade after the Great Recession, Americans are unclear how the economic event impacted their life and financial behavior.

The majority (40 percent) of respondents said that the financial crisis had no impact on their life, yet large numbers reported that they avoid the market (42 percent) and have altered their spending and savings habits (46 percent). Others (26 percent) shifted their retirement timeline and plan to work longer then they’d hoped, and 25 percent had to change jobs or take on additional jobs.

The majority (40 percent) of respondents said that the financial crisis had no impact on their life, yet large numbers reported that they avoid the market (42 percent) and have altered their spending and savings habits (46 percent). Others (26 percent) shifted their retirement timeline and plan to work longer then they’d hoped, and 25 percent had to change jobs or take on additional jobs.

STRATEGIC ADVANCES IN THE USA FUEL MONEVO’S GROWTH (BQLive), Rated: A

The company’s growth is set to continue with ongoing success in the US, Monevo’s newest territory.

Personal loan originations in the US reached new heights by the end of 2016. Total balances reached $102bn for the first time, $14bn higher than the end of 2015. The number of consumers with personal loans at the end of 2016 was 15.82 million.

Fifteen US lenders, including Lending Club, Sofi, and Prosper have joined Monevo’s roster of over 150 personal loan lenders across the world.

GETTING STUDENT FINANCIAL AID MAY BECOME WAY EASIER WITH NEW FAFSA APP (Newsweek), Rated: A

Just like Uncle Sam, Education Secretary Betsy DeVos wants you…to be able to apply for financial aid on your phone.

DeVos said Tuesday that the government plans to launch an app for the Free Application for Federal Student Aid, or FAFSA, which some 20 million people fill out every year in hopes of getting grants, loans and other money for college or career training. It’s all part of a plan to make the FAFSA much simpler to submit.

HouseCanary Announces $ 31 Million Series B Funding, Comprised of PSP Growth and Existing Investors (HouseCanary), Rated: A

HouseCanary, the data analytics and valuation platform for real estate professionals, today announced it has closed a $31 million series B funding round, bringing the company’s total funding to $64 million to date. Investors in the round include PSP Growth, the venture and growth equity arm of PSP Capital, a private investment firm founded by entrepreneur and former Commerce Secretary Penny Pritzker, as well as Alpha Edison and other existing investors.

Investors can now value over 100 million properties with a median error of 2.5% or less. Lenders and appraisers use HouseCanary technology to reduce the time it takes to complete an appraisal from more than 25 days to less than a week.

Your Sneak Peak of the LendIt Fintech USA Agenda (LendIt), Rated: A

Fintech

How secure is your data? Recent hacks and breaches have re-stressed the importance of the data security and customer information. This track will help young startups and big box financial institutions verify customers, understand data security and utilize tools to improve efficiency. The future of technology is in robotics, machine learning and biometrics, not grasping these changes will make your business extinct.

BlockFin Summit

Bitcoin. Blockchain. Cryptocurrencies. ICO’s. Everyone’s talking about them, but how will these new age concepts change the future of money?

Digital Banking

Banks are looking to fintech partners to transform their business for the digital revolution. This track will explore the crucial role of mobile banking, smart ATM innovations, chatbots’ role, and the digital transformation at all levels—from branch to infrastructure to data storage.

Lending

Learn how to scale your growth like Lending Club, increase access to credit like LendingPoint, and utilize mobile-only technologies like MoneyLion.

Source: LendIt

The secret to reeling in cybersecurity talent at three big banks (American Banker), Rated: B

There will be 3.5 million unfilled cybersecurity jobs by 2021, up from 1 million last year, according to the research firm Cybersecurity Ventures. Meanwhile, Frost & Sullivan estimates 1.8 million cybersecurity jobs will go unfilled by 2022, a rise of around 20% since 2015.

The military is skilled at producing what Gary McAlum, the chief security officer at USAA, calls “Jedi Knights.”

Wells Fargo is making a big push to hire veterans, said Rich Baich, its chief information security officer. He has held several positions in the Navy, the North American Air Defense Command, the National Reconnaissance Office and the FBI.

As of August more than 8,500 veterans worked at the San Francisco bank, and at any given time it has 200 team members on active duty.

United Kingdom

LendingTree Enters into a $ 250 Million Amended and Restated Credit Facility (PR Newswire), Rated: AAA

LendingTree (NASDAQ: TREE), a leading online loan marketplace, announced today it has entered into an amended and restated $250 million five-year senior secured revolving credit facility that will replace LendingTree’s previous $125 million credit agreement.  The amended and restated revolving credit facility provides increased borrowing capacity and improved pricing, along with greater strategic and operational flexibility. The facility can be used to finance working capital needs, permitted acquisitions, capital expenditures, and general corporate purposes.

The amended and restated revolving credit facility will be governed by a maximum net leverage covenant of 4.50x, with step downs to 4.00x over time. Additionally, the amended credit facility contains an accordion feature under which the borrowing capacity can be increased by $100 million or a greater amount, subject to certain conditions.

Why a blockchain startup called Govcoin wants to ‘disrupt’ the UK’s welfare state (MENAfn), Rated: A

The UK chancellor’s recent Budget reminded us that systemic problems continue to plague the government’s delayed roll-out of universal credit – a single monthly welfare payment that will replace six separate benefits.

Govcoin, intent on ‘disrupting’ welfare state provision, has been working with the Department for Work and Pensions (DWP) since early 2016 to develop a solution for welfare payments.

‘Claimants can – voluntarily – download an app, which enables them to create virtual jam jars and apportion money to them. Whether that’s ‘rent’, ‘gas and electric’ – it’s entirely up to them,’ said Kay in an last autumn.

Govcoin will financially empower benefit claimants. But its distribution model involves benefits being paid – not in pounds and pence – but in the form of a cryptocurrency similar to . Govcoin promises to allow claimants to pay for goods and services – such as utilities – linked to the system.

Peer-to-peer Bitcoin lending fund launches (P2P Finance News), Rated: A

Called Bond, the fund lets accredited investors buy securities known as “Bond Units” in an asset portfolio that holds a mixture of property bonds, real estate and cryptocurrency assets.

Each Bond Unit, which digitally represents an equity share of Bond’s asset portfolio, will be issued on the Bitshares Blockchain and traded via the Bitshares decentralised exchange.

The portfolio has 30 per cent exposure to P2P Bitcoin lending; 30 per cent to property bonds and real estate; and 30 per cent to digital currency learning website the Billion Hero Campaign. The remaining 10 per cent is invested in alternative cryptocurrencies.

China

Banker Bulls Still Like Qudian, Despite China’s Crackdown (Barron’s), Rated: AAA

After losing more than 40% of its market value last week — as Chinese regulators tightened rules for online consumer lending — Qudian is seeing a 16% bounce today in its American depositary receipts (ticker: QD), to a recent $14.

Source: Barron’s

China’s fintech is still in its infant phase (TechNode), Rated: A

One of the Chinese fintech players that made their way to the US public market is Rong360 Inc’s Jianpu, an online platform for discovery and recommendation of financial products. The founder and CEO Ye Daqing recently joined its investor James Mi, founding partner of Lightspeed China Partners, on stage at TechCrunch Shanghai to discuss why the fintech is booming in China and what opportunities lie ahead.

There are many fintech companies that are quite controversial because some of them have damaged the reputation of the market. But two of the [fintech] companies you invested in have both filed for an IPO recently. James, what’s your view [on the market]? What makes you such a good investor, landing two IPOs?

Mi: Lightspeed mostly invests in early-stage companies. We usually look at their development in 3-5 years down the road.

We were actually very prudent about P2P. When we finished looking at all the companies we ended up choosing PPDAI because it was offering a real online solution. No offline sales. And this type of business contributes to the society.

Why are so many Chinese [fintech] companies going IPO in the US recently?

Ye: China will see ten to twenty years of significant growth in fintech and micro-finance. The level of digitalization of finance in China is much lower than that of e-commerce, which took more than ten years to reach 14%. Digital finance is currently at less than 5% penetration. In four to five years, or even longer, fintech will surpass retail. For example, lending, car mortgage, credit cards, and insurance.

Let’s look at another buzzword, that is artificial intelligence (AI). Every single industry nowadays is talking about AI. What will happen when AI meets fintech? 

Ye: The financial industry is actually a data industry, wholly relying on data to make risk control decisions and take care of customer service and marketing. Take our platform for example—it has nearly 70 million registered users, more than 2,500 partnered financial organizations, with 170,000 types of products, and each product is facing a changeable set of challenges and varying user behavior.

European Union

Nutmeg and Revolut investor launches new European fund (AltFi), Rated: A

A leading investor in Series A-stage technology companies, Balderton Capital has closed a total of $375m in its latest fund with a new generation of European tech in its sights.

Flender’s lenders throw €400,000 towards €2m funding round (SiliconRepublic), Rated: A

Dublin fintech Flender is hurtling with fierce velocity towards a funding round worth more than €2m, with involvement from some of its customers, who have already pledged €400,000.

“Initially, we offered €100,000 to them but this quickly overfunded and we increased this to €400,000.”

International

An online education startup thinks it can save bankers from losing their jobs to machines (Quartz), Rated: AAA

The attack on banking jobs has been relentless. British banks are set to close almost 800 branches this year, after shutting nearly 600 in 2016. The CEO of Deutsche Bank, Germany’s largest bank, warned that the company could afford to lose half of its staff to automation. Swiss bank Nordea announced at the end of last month that it was cutting a tenth of its staff, and its CEO said the banking industry could cope with half its current number of personnel. Consultancy Greenwich Associates estimates that 15% of the finance industry’s jobs are at risk of being lost to AI-driven alternatives.

In addition to teaching, Nguyen Trieu is leading by example with the launch of an AI-enabled mobile savings app, which is in the early planning stages.

But there’s a big difference in fintech scenes across the world.

The mindset and the way people use technology and fintech is very different. If you’re in Hong Kong, you have WeChat on your phone and you use it on a daily basis. Here, you don’t use fintech on a daily basis. Some people might use Revolut but they still have a traditional bank account. Here, fintech is seen as innovations on top of existing financial services whereas in Hong Kong, fintech is finance.

So the course is for everyone, everywhere?

And not just for people in finance. When we did the beta test only 40% of the users were from the finance industry—the rest were from tech, or were entrepreneurs or consultants.

So automation, AI, machine learning, and the like are all coming for your job if you don’t retrain?

Banks are thinking today about cutting thousands of jobs and increasing their technology budgets. To me, it is is absurd for a CEO of a bank to think this way.

So, what finance jobs most at risk right now?

In general, anything that can be automated will be automated. But right now, compliance is at risk. Over the past few years there’s been a lot of investment in compliance and KYC [know your customer], because regulators wanted the investment and it was a way for banks to demonstrate they were doing their part after the financial crisis. Now, that has totally changed. It’s starting to cost a lot and regulators have said we want you to show that you are being efficient, not just hiring a lot of people.

Exclusive Interview with Bloom Co-Founder Jesse Leimgruber (ChipIn), Rated: A

Bloom is a global decentralized credit scoring system available to anyone – even the unbanked and underbanked. Bloom’s flexible ecosystem will allow users to have access to credit services which work globally and are extremely secure and transparent thanks to the blockchain’s inherent features.

First off, why did you decide to use the blockchain in building Bloom? 

People shouldn’t be forced to rebuild credit from scratch when they move to a new country. Billions of people around the globe are still considered “credit unscorable,” forcing them into taking out dangerous, informal loans.

To make matters even worse, many governments generate credit scores based on religion, political affiliation, and voting status, instead of data. Even in the United States, 45 Million Americans (including many financially savvy millennials) still do not have a credit score.

What do you think is the biggest problem Bloom will solve and why is the problem important to solve?

3 Billion people cannot access credit, largely due to artificial restrictions from governments.
Tell us more about how BloomID works behind the scenes. The most interesting part about is the vouching process; how does this work and how does Bloom ensure that vouches are not manipulated or faked in any way?
BloomID is the Bloom protocol’s method of both establishing a reliable identity as well as forming the basis of creditworthiness for users who are newly entering the Bloom network. BloomID allows organizations who store information about individual identities to attest to the identity of a Bloom user and mark that information on the blockchain for future re-use. A user’s friends, family, and peers can help an individual bootstrap creditworthiness by vouching for their ability to act responsibly with credit. This is like a reference, similar to co-signing.

Is Bloom already working with notable businesses or firms? Are there any future partnerships in process? If yes, can you explain briefly about it?

We’ve been in touch with 100’s of lenders and partners. We’ve announced quite a few. Peer to peer lending, traditional fiat businesses, crypto lenders… we’re working with people on the whole spectrum.

For example: Self Lender is a credit building lender we are working with, Everex, Lendoit, and ETHLend are crypto lenders. We’re working with partners for anti-fraud such as TypingID.

Download the Bloom white paper here.

Exclusive Interview with ETHLend CEO Stani Kulechov (ChipIn), Rated: A

ETHLend is a Decentralized Lending Innovation using the Ethereum platform as its base.

First off, why did you decide to use the blockchain in building ETHLend?

Finance is where blockchain technology was conceived, and it is in finance that blockchain technology is arguably most transformative. It intrinsically offers greater visibility, scalability, and efficiency – and potentially at a lower cost.

By providing a means of authorizing fully trackable and verifiable transactions, it also offers the potential for truly open-source many-to-many lending. Presented in these terms, it may well seem like a threat to peer-to-peer firms. If blockchain removes the need for marketplaces, why should borrowers and lenders pay fees to these platforms? ETHLend promotes less fees, transparency, and integrity amongst borrowing and lending.

What do you think is the biggest problem ETHLend will solve and why is the problem important to solve?

In today’s world, you are at the mercy of banking institutions for borrowing and lending. We all know the bank pays out minimal interest on investment accounts and charges maximum interest on borrowing. We have partnered up with Bloom who provides credit scoring capabilities so both borrower and lender build a reputation amongst the ETHLend community which is usable elsewhere on the blockchain.

Why do you think the shift from traditional lending to P2P lending is happening right now?

Market research tells us that there are countries at the moment which are paying from 0.5 to 5 percent. For example, here in Finland, it is quite common to have a secured mortgage loan with an interest of 0.4 to 0.8 percent on bank’s marginal. On the contrary, In Brazil, the interest rate tops to 32 percent and Russians pay on average of 11 percent and in India 10 percent (take note that today’s numbers may differ).

The differences in interest rate mean that with a higher interest rate, people and businesses have less access to finance.

Source: ChipIn

Alternative investment LPs want more transparency and co-investment opportunities (HedgeWeek), Rated: A

More than 140 LPs responded to the survey, of whom approximately 52 per cent were based in North America, 31 per cent in Europe and 15 per cent in Asia Pacific. Nearly one quarter (22 per cent) were public pension plans, 15 per cent were consultants and 13 per cent were either endowments or family offices.

Intralinks is a leading financial services company with over USD31 trillion of transactions executed on its platform and over four million users. It has the largest community of GPs and LPs and is used by over 1,000 private equity, real estate and hedge funds on a daily basis. Over USD1 of every USD2 raised globally for private equity was facilitated using Intralinks for a total of USD317 billion in 2016 and 13 out of the 20 largest funds were raised on its platform.

More than one third of investors confirmed that their current allocation was more than 30 per cent, with nearly two thirds confirming that they planned to increase their allocation to alternatives over the next 12 months by 1 to 10 per cent.

Gold, Silver Storage & Lending For Hard Assets in the World’s Safest Jurisdiction (Palisade-Research), Rated: A

Gregor discusses Silver Bullion SG a company he started in Singapore where individuals can securely store their gold and silver. They just hold your precious metals and validate their authenticity. They do this without counterparty risk as your assets are marked, segregated and you hold the title. The company holds over 230 million in hard assets.

Using peer to peer lending you can withdraw up to half of your holdings in loans at low-interest rates.

GoCardless Tops Juniper Leaderboard for Fintech: A Sector Worth More Than 0 Billion in 2018 (BusinessWire), Rated: B

A new study from Juniper Research ranks GoCardless as the current clear leader in the fintech market. GoCardless enables simple payment processing and integration with many popular services, and Juniper believes that its potential for efficient, borderless commerce is disruptive and far-reaching.

Juniper’s Fintech Leaderboard Ranking

1. GoCardless

2. Onfido

3. Square

4. Lemonade

5. Kabbage

India

CROWDFUNDING SET TO GROW (Daily Pioneer), Rated: AAA

Crowdfunding activity in India is driven increasingly by mobile applications and payments. This trend is likely to witness exponential growth.

Rs 300 crore, the Indian crowdfunding industry is at a nascent stage compared to the global standards with the total amount of money raised via crowdfunding in 2016 at USD 738.9 million.

Asia

Investment in Indonesian tech start-ups reaches $ 3bn year-to-date (Oxford Business Group), Rated: AAA

Indonesia’s tech start-ups have been catching the eye of investors, having raised close to $3bn in funding in the year to September 13, a substantial increase on the $631m received in 2016.

Chinese firms are prominent among the foreign investors in Indonesia’s start-up boom, according to research firm CB Insights: Alibaba committed $1.1bn to online marketplace Tokopedia in August, and in May JD.com and Tencent Holdings invested $1.2bn in ride hailing motorbike service Go-Jek, which utilises mobile payment services.

Alternative financing posts 1462% growth

Last year Indonesia posted one of the highest growth rates in the Asia-Pacific region in alternative finance activity. The segment’s total market size expanded by 1462% to $35.4m, according to a report by the University of Cambridge, Monash University and Tsinghua University published at the end of September.

The study found that peer-to-peer (P2P) business lending had come to dominate Indonesia’s alternative finance market, accounting for just over 60% of the 2016 total, with P2P consumer lending representing 18% of the figure, or $6.5m.

Fostering collaboration and growing market opportunities

Indonesian tech start-ups attracted the second-highest amount of investment in South-east Asia between 2012 and September 13, at $4.6bn, behind Singaporean companies, which raised $7.3bn over the same period.

Fintech Challenge seeks to bolster financial inclusion in Vietnam (Nhan Dan), Rated: A

A programme entitled ‘Fintech Challenge Vietnam’ has been launched by the State Bank of Vietnam (SBV), with the aim of fostering innovation in financial services that promote greater financial inclusion in Vietnam.

Fintech Challenge Vietnam has been organised by the SBV with the support of the Mekong Business Initiative and sponsorship by the Vietnam Bankers Association and the Vietnam Fintech Club.

VN Central Bank launches first-ever fintech challenge (VietnamNet), Rated: B

The focus of the Fintech Challenge is on fintech solutions that can improve the offer of financial services to the underserved and unbanked.

The challenge is an opportunity for Fintech companies from both inside and outside Việt Nam who are interested in collaborating with commercial banks to pilot and scale solutions that improve financial services in the following categories: electronic payments, e-KYC (Know Your Customer)/e-Identification, open APIs, blockchain and peer-to-peer lending to apply.

The deadline for application is January 18, 2018, at fintech.mekongbiz.org.

OJK to issue new fintech regulation in March (The Jakarta Post), Rated: B

The Financial Services Authority (OJK) aims to issue a regulation on financial technology (fintech) businesses by March next year amid robust development of the industry, OJK deputy commissioner Nurhaida said Tuesday.

Authors:

George Popescu
Allen Taylor

Friday August 25 2017, Daily News Digest

alternative investing

News Comments Today’s main news: Ellevest raises $32M to target women investors. eOriginal, Notarize close first digital mortgage closing. OFF3R launches SIPPS portal. Zopa reduces higher-risk lending. China issues draft rules on illegal fundraising. TWINO adds second Russian originator. African university to offer fintech degree. Today’s main analysis: Should P2P lending investors worry about default rates?Early-stage fintech investment in UK, Germany. Today’s […]

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United States

Wall Street alum Sallie Krawcheck just raised $ 32 million for her investing platform (Business Insider), Rated: AAA

But the uncertainty and risk that comes with the markets is very often a major deterrent, especially for women, who invest at a much lower rate than men in the US.

To combat this, former Wall Street executive Sallie Krawcheck launched Ellevest in 2016, a digital investing platform that puts female investors’ money in low-cost ETFs based on a pick-and-choose set of goals, like starting a business, buying a home, having children, and retiring comfortably.

This week, the startup raised $32.5 million in its latest round of funding, according to CNBC. Tennis superstar Venus Williams, who is a champion of equal pay and opportunity for women both on and off the court, was among Ellevest’s first investors.

Just 28% of women are willing to take on high risk to get a good return on their investment, compared to 45% of men, according to a 2015 report by BlackRock.

Man finds it can be hard to return $ 6,000 (WoodTV), Rated: AAA

When 53-year-old Wyoming resident Duane La Varier found $6,180 had mysteriously appeared in his bank account, he never dreamed how hard it could be just trying to give money away.

He said he and his wife never filled out any applications and never sought any kind of loan.

The deposit a week ago had come from a company called LendingClub.

“I said, ‘I did not apply for this loan. Just take it back, just take it all out of my account.’ They said no.”

LendingClub is not the actual lender — it represents lenders — but Dudum said the company will take the hit for the $6,000 loan and its fees.

eOriginal and Notarize Make Digital Mortgage the New Reality (Broadway World), Rated: AAA

With its launch of Notarize for Mortgage, the company’s proprietary signing and remote notarization platform, Notarize recently completed the first-ever online mortgage closing. By integrating directly with eOriginal’s electronic vault, they enable lenders to leverage a joint solution that takes only a few short days to set up and launch before borrowers can start closing loans online. Together, Notarize and eOriginal allow lenders to quickly provide a seamless digital experience spanning the entire closing process all the way through registration with MERS (Mortgage Electronic Registration System, Inc.) and sale into the secondary market.

Connecting lenders, title agents, borrowers and notaries online 24 x 7 to digitize the closing process, the Notarize for Mortgage platform is approved by both Fannie Mae and Freddie Mac, underwritten by national title underwriters, and was launched with five lender customers and numerous warehouse lender and mortgage servicer partners. The platform is available to lenders online or via modern APIs that allow them to integrate an online closing process directly into their existing tools, automating their closing operations entirely.

eOriginal’s platform of integrated solutions delivers a fully digital mortgage and supports every type of digital closing strategy.

TRANSPARENCY IN ALTERNATIVE INVESTING (All About Alpha), Rated: AAA

In February of this year, the Economist Intelligence Unit surveyed 200 senior asset managers and institutional investor executives to learn what factors are most important in the way they make their decisions. Several different types of institution were involved, including hedge funds, private equity firms, insurance companies, and nonprofits.

New Business Models – and Transparency

The 2008 global financial crisis of course had a negative impact on the alternative investments industry.

New business models have arisen to supply demand across the spectrum of investors, including those investors eligible for and interested in alternatives. Publicly traded limited partners are one important example.

Who will win the robo advisor IPO race? (Financial-Planning), Rated: AAA

It’s been a decade since the launch of the industry’s leading independent digital advice platforms — Betterment, Wealthfront and Personal Capital.

The question that now remains for all three: who will cross the IPO finish line first?

In terms of assets, the trio has kept their positions in the market respectively, with Betterment leading all independents with over $10 billion in AUM, followed by Wealthfront’s $7.4 billion and Personal Capital’s $4.9 billion.

Collectively, the three count just over 420,000 clients and over 548,000 accounts, according to SEC filings and company statements.

Personal Capital, which always tailored its services for HNW clients before lowering its account minimums (and then raising them up again) claims its average client account size is roughly $380,000; users with more than $1 million in investable assets, the company says, comprise about 40% of its AUM.

Source: Financial-Planning.com

Online Lenders Featured in the Inc. 5000 (Lend Academy), Rated: A

Every year Inc. pulls together a list of the top 5000 fastest growing private companies in the United States. This year there were around 250 companies that made it in the financial services category and there are several familiar names on the list.

Other lenders readers may recognize are Lighter Capital (634), FastPay (1653), National Funding (2030), and ZestFinance (2202).

How Debit Activity Can Benefit Lenders in a Cashless Society (Clarity Services), Rated: A

With nearly half the American population carrying a subprime credit score, rent-to-own companies, online installment, storefronts and others are embracing new tools to intelligently navigate a market that has been largely overlooked.

  • Cash is only 14 percent of the share of transactions by value of payments (The Federal Reserve System Cash Product Office).
  • While the average American spends roughly $100 per day – not counting the purchase of a home, motor vehicle or normal household bills (Gallop), half of us are walking around with less than $20 cash (Bankrate.com).
  • If given the choice between a cashless and cash-only shop, most consumers in the wealthiest countries prefer the cashless option (ING Group/eZonomics).
  • Nearly 40 percent of Americans said that they would be happy to go completely without cash. (ING Group/eZonomics).

The top 7 startups from Y Combinator S’17 Demo Day 2 (TechCrunch), Rated: A

Standard Cognition is using machine vision to build the checkout of the future. Called autonomous checkout, the technology will allow shoppers to grab what they want and walk out of a store without having to go to a cashier. Standard Cognition believes it tech will enable those companies to save money and reduce theft.

Dharma Labs is building what it calls the first “protocol for debt on blockchains.” Citing the popularity of ICOs, the startup believes there’s a “proven demand for cryptoassets that look and act much like equity.” So Dharma has built a mechanism for decentralized peer-to-peer lending. “Anyone in the world can borrow and anyone in the world can lend.”

Emailage Raises $ 10m in Growth Equity Funding (Finsmes), Rated: A

Emailage, a Chandler, AZ-based provider of global fraud prevention and identity verification using email address scoring, raised $10m in growth equity funding.

The round was led by Anthos Capital, with participation from Radian Capital, Wipro Ventures, Mucker Capital and Tallwave Capital.

The company intends to use the funds to expand existing partnerships, further advance its email address-based predictive scoring system, and accelerate growth in North America, EMEA, LATAM and other key markets.

How to Expand Your Business Online by Offering More Products or Services (Kabbage), Rated: A

Hopefully, increased revenues will help ease cash flow problems and in the end, improve profits. Other advantages of growing business may include the chance to bring in more qualified employees, acquiring more customers and improving credit scores.

Expand service areas

Companies that provide services to homes or other businesses may find that their hometown or neighborhood has a limited customer base.

Expanding to nearby locations is one of the most common ways that local businesses grow into regional businesses. This also allows the company to add some more geographic areas to a business website, directories, and social pages to show up in more local searches.

Expand services

Most small business owners have to work to manage cash flow, and this task is much tougher when revenues are only high for a few months but operational costs last all year.

These are some ways to expand services both offline and online:

  • One good way to promote this kind of service online could be through holding webinars with tax tips for small businesses or even individuals. Some tax preparers might also produce books or videos for sale to help startups and small businesses manage tax planning better.
  • Some of these plucky entrepreneurs have learned to keep business flowing by offering holiday specials for getaways. Others have opened their facilities up to host seminars or workshops for organizations.
  • He kept his local business website to attract repair customers, but he also added an online store to sell products to the DIY crowd all over the country. He promoted this online store by creating some how-to videos.

This credit card alternative could be bad for your wallet (WSBTV.com), Rated: B

The problem is that these instant loans encourage impulse spending — and it doesn’t have to be a pricey vacation! Affirm will spread payments over a period of 12 months for loans of $100 or more.

To put that in perspective, you could easily pay more than $15 in interest on just a $100 loan!

LENDINGCLUB INVESTOR REVIEW: THE BEST PEER TO PEER LENDING SOLUTION (The College Investor), Rated: B

Over the last 8 years, 150,000 investors have lent over $26 Billion in personal loans through the peer to peer LendingClub platfrom. On average, investors in the top grade loans earned 5-7% annualized with strong cash flow.

As an added bonus, LendingClub allows you to invest as little as $25 per note. That means it’s easy to spread your risk across dozens or even hundreds of loans.

First, you need to meet some strict investor requirements.

  •  Income requirements: Must earn $70,000 annually ($85,000 in California)
  • Net Worth Requirements: Must have a net worth (exclusive of your home value) of $70,000 ($85,000 in California). People with a $250,000 net worth do not have to abide by the income requirements ($200,000 in California).
  •  Kentucky residents must be accredited investors (earn $200,000 annually or have a net worth of $1 million)
  •  Residents of Alaska, New Mexico, North Carolina, Ohio, Pennsylvania cannot invest in LendingClub
  •  No more than 10% of your net worth can be investing in lending club notes
  •  $1,000 minimum investment

LendingClub charges $100 per year for their self directed IRA accounts, but they waive that if you maintain $5,000 of investments in your first year or $10,000 in subsequent years.

Once you select your loans, LendingClub will help you evaluate the risk on your portfolio of loans. They will even provide a projected rate of returns based off of history.

Source: The College Investor

TD Auto Monitors Fintech Startups (Auto Finance News), Rated: B

TD Auto Finance is keeping a close eye on fintech startups as it evaluates “opportunities that might exist” for auto refinance and private-party transactions, President and Chief Executive Andrew Stuart told Auto Finance News.

TD Auto is already “in discussions” with several fintech players to evaluate “where that might go,” Stuart said.

5 Things To Know Before Taking A Loan Online (ValueWalk), Rated: B

If you’ve considered taking a personal loan online here’s what you need to know:

  1. More accessible – Smaller, newer financial firms have stepped in to fill the gaps left behind by traditional banks since the crisis.
  2. Tailored products – You can tailor the specifics of the loan, such as the timeline for payback and the purpose of the loan. Businesses can use everything from inventory to invoices without the need for a personal guarantee.
  3. Pricing Variety – Whether the payments are amortized monthly or weekly. Whether the effective annual rate is as attractive as you expected.
  4. Less Regulation – Alternative lenders and online loan providers are not regulated by the FDIC the same way as traditional banks.
  5. More awareness – The lack of regulation means alternative online lenders have more flexibility to provide custom lending solutions. They can be as innovative as they want with these financial products. However, you need to be more careful when dealing with an online lender. Look into their history, get assurances from the company, and do your best to educate yourself about their business.
United Kingdom

OFF3R launches new SIPPS portal (P2P Finance News), Rated: AAA

OFF3R has launched a new channel dedicated to Self Invested Personal Pensions (SIPPs), the tax-free vehicle for pension savings.

The investment aggregator’s SIPPs portal launched on Tuesday 22 August with an initial list of three pension providers: Hargreaves Lansdown, IG, and True Potential Investor. It details the various fees and investment thresholds of each platform, as well as information on the different management styles.

Zopa reduces higher-risk lending (Bridging and Commercial), Rated: AAA

Zopa has revealed it is taking steps to attract more lower-risk customers as it continues its reduction in higher-risk lending.

Zopa has reduced the amount of lending in its higher return D-E markets, which are included in its Plus product.

The Plus product was designed for investors who were willing to accept more risk for higher returns, with rates of between 6-7%.

Zopa expects that the lower-risk approach will mean the targeted returns for new investments in the Plus product will be 4.5%.

“For example, the proportion of D and E loans in the Plus product would go from 30% until now, to 10-15% in the future.”

Peer-to-peer lending: should you worry about default rates? (Your Money), Rated: AAA

Neil Faulkner, managing director of peer-to-peer research and ratings agency 4thWay, explains that investors should pay close attention to published bad-debt figures (which cover loan write-offs as well as simple defaults) of the different platforms.

Zopa

When a loan is approved, Zopa makes an assumption about its likelihood of falling into default over the lifetime of the loan, and then revises this default expectation over the lifetime of the loan.

Source: YourMoney.com

Zopa divides up investor money between many borrowers matching the risk profile specified at the outset by the investor, to spread the risk. If a borrower misses four months of repayments, then a recovery process begins.

RateSetter

The headline rate to note is that over its lifetime, 98.31% of loans are up-to-date – in order words, around 1.7% are in some form of arrears.

Funding Circle

Funding Circle is a little different in that you are lending to businesses rather than people. Over the lifetime of the site, it says that around 2% of loans have turned bad.

Lending Works

To date, Lending Works has an actual bad debt rate of 1.1%.

Assetz Capital Update: Investors Have Earned £25 Million to Date (Crowdfund Insider), Rated: A

Assetz Capital has shared that investors in aggregate have earned gross returns of more than £25 million on their investments in approximately four years. Assetz Capital says lenders earned an average of 8% gross interest across all Assetz Capital loans since platform launch, before allowances for tax or any losses not covered by a provision fund.

Currently, Assetz Capital has about 20,000 registered and active investors. The returns since the launch of the platform were generated from over £309 million lent to UK businesses from a range of industries looking to raise funds, including SME, bridging and development sectors.

ThinCats plans staggered IFISA roll-out before end of 2017 (P2P Finance News), Rated: A

Earlier this month, ThinCats received full authorisation from the Financial Conduct Authority (FCA), which allowed the firm to apply for ISA manager status from the HMRC. While a launch date has not been officially set, Stewart Cazier, head of retail, told Peer2Peer Finance News: “I’m definitely thinking 2017. I’d be very disappointed if it didn’t happen this year.”

Innovate Finance CEO steps down (AltFi), Rated: B

After two and half years at the helm of the fintech member association, Innovate Finance, Lawrence Wintermeyer has stepped down.

Wintermeyer is leaving to pursue other opportunities, he said.

China

China issues draft rules in crackdown on illegal fundraising (Reuters), Rated: AAA

China issued draft rules targeting illegal fundraising on Thursday, as the authorities step up a campaign to crack down on risky and illicit behavior in the country’s financial sector.

The draft rules, issued by the law office of China’s State Council, call for participants engaged in illegal fundraising to cover the losses stemming from those activities.

Regulators will guide financial institutions and non-bank payment service providers on tightening up their supervision of suspicious fund flows, the draft rules said.

Financial institutions and non-bank payment service providers, if found to be negligent, will be subject to having their illegal income forfeited. They will also be subject to a fine of more than 1 time but less than five times of the illegal income, the draft rules said.

The executives responsible for the illegal activity will be removed and banned from entering the financial industry for a certain period of time and could be subject to fines of between 50,000 yuan and 500,000 yuan each ($7,507-$75,072), the rules said.

China Rapid Finance Posted a $ 13.5M Net Loss in Q2, but Very Close to Profitability (Xing Ping She), Rated: A

Recently, China Rapid Finance (NYSE:XRF) released an unaudited financial report for the second quarter of 2017. In the second quarter, the company reported a gross income of $24.5 million, up 59% from a year earlier, and their net income was $15.2 million, up 9 percent year on year. The company posted a net loss of $13.5 million in the second quarter, compared with $5.9 million in the same period last year, as the cost of including customer incentives increased.

However, the company still held the “Low and Grow” business strategy. Compared to the profitability, there are more concerned about gross income. Through analysis of the company’s financial and business data, we can find that some business data is changing and the potential for profit is increasing.

Better Buy: SINA vs. Weibo (The Motley Fool), Rated: A

Chinese internet companies SINA (NASDAQ:SINA) and Weibo(NASDAQ:WB) are closely tied to each other. SINA holds a 46% stake in Weibo, deriving 72% of its top line from the Chinese Twitter clone (as Weibo is referred to by some).

Weibo’s greater gains have made it more expensive with a trailing price-to-earnings (P/E) ratio of 132 as compared to SINA’s 30.

SINA relies on Weibo for 70% of its revenue, which means that investors can still enjoy the latter’s rapid growth via a stock with a lower valuation. Additionally, SINA’s non-Weibo business has started gaining some traction of late, with the company witnessing 8% year-over-year growth from this segment in the latest quarter.

While there is no denying that Weibo’s growth is still impressive — as the 28% year-over-year jump in its monthly active users boosted its advertising revenue by 72% last quarter — at the same time, there will be a limit to the company’s growth given its negligible presence outside China and the competition from the likes of Tencent‘s (NASDAQOTH:TCEHY) WeChat.

Fluid Wins LendIt Choice Award – Aug 2017 (FluidFi), Rated: B

Fluid, a California based FinTech & AdTech startup announces today that it received LendIt LangDi Fintech Choice Award from LendIt Conference in Shanghai, China.

European Union

Latvian P2P Lender TWINO Adds Second Russian Originator (Crowdfund Insider), Rated: AAA

Latvian peer-to-peer lending platform TWINO has reportedly added a second Russian originator to its platform since its December 2016 launch.

According to P2P Finance News, over 40% of TWINO’s investors have funded Russian loans.

Early-Stage Fintech Investment In The UK & Germany Goes To Insurtech, Banking (CB Insights), Rated: AAA

Year-to-date, European fintech companies have raised close to $2.6B across 295 deals, meaning that at the current run rate 2017 could see 500 deals and $4.5B in total funding by year end. For perspective, funding to European fintech companies is already 30% higher in 2017 YTD than the 2016 total.

 

UNITED KINGDOM

UK early-stage fintech financing has remained above 15 deals quarterly since Q2’14. Total disclosed funding has been a bit choppier: at $27M, Q4’16 was the lowest quarter since Q2’14, while the following quarter (Q1’17) saw the third-highest total funding at $81M and the largest number of deals at 33. Most recently, Q2’17 figures fell to $41M across 16 deals.

For example, Monese, which provides banking services for immigrants and expats, raised a $10M Series A in Q1’17, while Wirex, which allows for the holding of fiat currencies and cryptocurrencies in a single account on its personal banking platform, raised a $3M Series A in the same quarter.

Insurance is trending up across Europe at large, with more than 20 early-stage deals closing for approximately $50M year-to-date.

GERMANY

Funding hit its peak in 2016 as well, at $135M, well above the previous high-water mark of $46M in 2013 and more than 4X the $31M total for 2015. 2017 is on pace to surpass 2016 early-stage fintech financing figures, with 22 deals and $83M year-to-date.

Germany has also seen an increase in early-stage deals to small business banking and API-focused mobile banking platforms. Financing rounds to this group have increased steadily since 2015, which saw 5 deals close for $17M and was followed by 7 deals in 2016 (for a much smaller $6M).

Klarna (Hortonworks), Rated: A

Klarna uses Hortonworks Data Platform (HDP) and Hortonworks DataFlow (HDF) to help drive its deep data mining and AI, and to thus mitigate risk for buyers and sellers.

International

San Francisco and Berlin have new competition for the capital of ‘fintech’ (CNBC), Rated: AAA

Dubai has seen a surge of interest from fintech startups and banking assets over the last three years, according to the emirate’s financial center’s management body.

It’s fast becoming a destination for financial technology startups because of its location, private investment and innovation.

He told CNBC that the financial services industry contributes about 12 percent to Dubai’s total gross domestic product and it is expected to increase to 18 percent by 2024.

Increased appetite for fintech investment in Dubai from CNBC.

AXIS Capital Partners with Plug and Play Tech Center (BusinessWire), Rated: A

AXIS Capital Holdings Limited and its operating subsidiaries (“AXIS Capital”) (NYSE:AXS) today announced it has partnered with Plug and Play, a global digital startup innovation platform headquartered in Silicon Valley. By joining Plug and Play’s InsurTech platform, AXIS will gain access to world-class digital insurance startups and will provide mentorship and technical support, along with underwriting and actuarial expertise, to help turn their ideas into products or services.

To help address the rapid and transformative changes underway within the (re)insurance industry, AXIS will work with property and casualty, life/health and general InsurTech startups that have been accepted to Plug and Play’s InsurTech program. This 12-week program attracts applications from hundreds of startups from around the world that utilize technology, data and analytics to develop innovative new business models, products and services.

AXIS will focus on the areas of Insurance, Reinsurance, Health, IoT (Internet of Things), FinTech and Mobility, with leaders from different business areas serving as program mentors and technical advisors.

Australia

Digital advice embraced by all ages (Financial Standard), Rated: AAA

Superannuation fund member engagement via Decimal’s digital financial advice software increased 37% in the past year, latest quarterly statistics show.

Decimal’s digital insights report for the June quarter shows 2366 members in its superannuation client base decided to engage with super via the digital advice channel over a 12 month period, up from 1731 the year prior.

Total funds under advice increased to $8.4 billion, up 72% year-on-year, and Decimal Software chief executive Nick Pollock said compound growth is stimulating for the super sector.

“The insights show that 43% of all logins were by women, 28% of logins took place outside of business hours, with 31% of those logins happening between 10pm and 6am,” Pollock said.

Australian fintech launches industry census (AltFi), Rated: A

Australian fintech has launched an expanded industry census, which will seek to unpack key issues like how to expand overseas and gender diversity and help set lobbying and policy priorities.

Working on the census, consultancy firm EY, and industry group FinTech Australia, have asked Aussie fintechs to complete it by 3 September.

FinTech Australia Reveals Initial Speaker Line Up for Inaugural Fintech Fest (Crowdfund Insider), Rated: B

FinTech Australia and Next Money, along with the State Government of Victoria, a gearing up for their inaugural week long Fintech event –  Intersekt. The Fintech festival will be taking place in Melbourne, Australia from October 27 to November 3rd if you happen to be in Australia.

Confirmed speakers for Intersekt so far include:

  • Anthony Thomson, founder of the UK’s Metro and Atom Banks (and the current chairman of Atom Bank). Atom Bank is one of the leading UK Challenger banks.
  • Ron Suber, called the “godfather of Fintech” due to his globe-trotting reputation for promoting online lending and all things Fintech. Suber recently joined the leadership team at Credible, the multi-lender marketplace for student loans. Suber is also President Emeritus of Prosper Marketplace and holds a broad portfolio of Fintech investments.
  • Megan Caywood, chief platform officer for the UK’s mobile only Starling Bank, who has delivered a range of major customer experience improvements.
  • David Birch, an international thought leader in digital identity and digital money and author of “Before Babylon, Beyond Bitcoin”
  • Van Le, who is the co-founder of Xinja, which is on track to be Australia’s first independent, 100% digital bank made for mobile.
    Lucy Liu, co-founder and chief operating officer of Melbourne-based payments company Airwallex who was this year named as one of Forbes’ 30 Under 30
  • Emma Weston, CEO and co-founder of AgriDigital, which provides a blockchain-enabled, integrated commodity management solution for the global grains industry
India

Over 40% Indians act on financial advice given by spouse, RBI report shows (Zeebiz), Rated: AAA

Key Highlights:

  • Over 50% Indians think that their children will take care of them financially after retirement
  • 44% Indians do not think they will ever retire from work 
  • An average of 66% of randomly selected adult household members have a bank account.
Source: Zeebiz

The report found that the average Indian household holds 84% of its wealth in real estate and other physical goods, 11% in gold and the residual 5% in financial assets.

Source: Zeebiz

The report said that 44% Indians have not thought of retirement as “people like me cannot retire from work,” they said.

Only 13% people surveyed were actively saving for their retirement while 33% had absolutely no planning for retirement.

Only around 5% people had money invested in financial assets for their retirement planning while gold formed nearly 10% of this fund.

India’s Domestic Workers Have A New Ally In This Innovative FinTech Startup (Forbes), Rated: A

The team at SERV’D has a simple but ambitious goal: to organize India’s unorganized domestic workforce. That means bringing financial inclusion to millions of unregistered workers via a mobile contract and payment app.

The lack of written contracts also makes it difficult for low-income domestic workers to build a financial history. Without that, they struggle to save money or obtain insurance, which all but guarantees they will remain in poverty. Exclusion from formal financial services bars people from accessing health insurance, bank accounts, and can even inhibit them from finding affordable housing.

SERV’D seeks to replace the verbal work agreements made between customers and their hired help. Instead of tenuous oral contracts, the fintech startup wants employers and employees to create digital agreements on the SERV’D app. The platform also allows them to make digital payment transfers so neither party has to worry about dealing with cash.

Most importantly, the online payment trail creates traceable income records for poor, unbanked workers. With enough proof of income built up, they will eventually be able to open bank accounts and access financial products that are currently beyond reach.

Ezetap’s fresh funds are the latest VC dollars flowing to Indian fintech (PitchBook), Rated: A

Mobile payments startup Ezetap is the latest Indian fintech company to pull in new equity financing. The company has raised $16 million from investors including JS Capital Management, Social Capital and Horizons Ventures.

Fintech NBFC “Prest Loans” Forays Its Operations In Rajasthan (BusinessWorld), Rated: B

Prest Loans the new age FinTech NBFC, providing online loans to small businesses and MSME segment has expanded its operations by opening new office in Rajasthan.

Asia

LATTICE80 & FINOLAB Sign MOU on Fintech (Crowdfund Insider), Rated: AAA

LATTICE80, a Singapore based non profit Fintech hub backed by Marvelstone Group, has signed a Memorandum of Understanding (MOU) with FINOLAB in Japan to mutually boost their Fintech ecosystems and global networks. Marvelstone is a global VC group based in Singapore.

This Fintech bridge will seek to create a passporting system for Fintech’s in each country to expand into new markets.

PH startups urged: Aspire to be unicorns (Cebu Daily News), Rated: AAA

Aldo Carrascoso, founder and chief executive officer of GlycoProX Biosciences, Veem, and Jukin Media & Verego, said that focusing on becoming “unicorns” detracts the purpose of why people launch startups in the first place.

Lee argued that the first unicorns were founded in the 1990s, Google Inc. being the clear “super unicorn” of the group with a valuation of more than $100 billion. Many unicorns were also born in the 2000s, although Facebook Inc. is the decade’s only super unicorn.

Other prominent unicorns today include Uber, Airbnb, Dropbox, Spotify, Pinterest, and Lazada, to name a few.

Treading the path toward that level takes mindfulness of revenue, a good business model, addressable market, and a product-market fit, said Carrascoso.

Benjamin cited Xoom, a San Francisco-based digital money transfer or remittance provider, which traces its foundations to serving clients between the Philippines and the US.

Since then the company has expanded to India and Mexico, among others, and was bought by PayPal for $890 million. Today, they do $9.1 billion in money transmissions and are operating in 18 countries with a demand for money remittance services.

The search for a unicorn is on (Sunstar), Rated: A

THE Philippines may have its own “tech unicorns” or technology businesses valued at $1 billion in the future. But experts says more work and collaboration is needed to achieve this dream.

To date, no Philippine tech startup has managed to meet the goal of being a billion-dollar company.

Globally, the US and China lead in numbers, having produced the most number of unicorns like Facebook, Uber, Airbnb as well as Xiaomi and Alibaba. Meanwhile, Malaysia in Southeast Asia has produced two unicorns in Grab and the Lazada Group.

First, he said Philippine startups need to know how to be fundable. Instead of aiming to be a unicorn, he advised local startups to become a “cockroach” instead, one that characterizes strong survival skills, or a rhino, “big and realistic.”

Getting payments to pay off (The Edge Markets), Rated: A

“A key advantage of e-wallets is the low cost. You can make payments and transfer money at much cheaper rates than in conventional payment systems,” explains Gunther Zhen, the founder and CEO of iPayLinks Financial Information Service (Shanghai) Co Ltd.

For China, this is certainly the case. While incumbent payment systems that rely on Visa, Mastercard and UnionPay charge merchants an estimated 2.5% to 3% MDR (merchant discount rate), new rivals like Alipay charge between 0.7% and 1.2%.

In Malaysia, however, the landscape could be different as the current MDRs are already quite low. Bank Negara Malaysia’s Payment Card Reform Framework has slashed the MDR on debit and credit cards since July 2015 when it took effect.

Today, domestic debit cards have an MDR of only 0.56% while for international debit cards, it is 0.96%. Credit cards are still relatively expensive with an MDR of 1.35%, but that is expected to drop drastically by 2021 when Bank Negara will cap interchange fees (the largest component of MDR) at 0.48% — less than half the 1.1% ceiling imposed today.

Just look at Touch ’n Go Sdn Bhd, which booked RM15.3 million of interest income in 2015 on RM429.3 million worth of deposits in card balances. And this is merely from the relatively small balance in each card.

Alipay creation, Yu’E Bao, is one of China’s most popular internet-based funds. It had amassed RMB1.43 trillion as at end-June. By comparison, Bank of China, one of the four major commercial banks in the country, had total deposits of RMB1.6 trillion as at end-2016.

Pundi-Pundi Raises $ 4M in Pre-A Funding (Finsmes), Rated: A

Pundi-Pundi, a Jakarta, Indonesia-based mobile payments and micro-loan startup aiming to create a cashless environment in South East Asia, closed a $4M pre-A round of funding.

Africa

UCT to offer fintech-focused degree from 2018 (BusinessDay), Rated: AAA

The University of Cape Town (UCT) has become one of the first tertiary institutions in Africa to offer a degree specifically designed to equip students with the critical skills and knowledge to embrace the technological revolution in the financial services sector.

One of its key focus areas will be blockchain technology, or the distributed ledger system, that has given rise to new crypto-currencies such as bitcoin and ether.

The crypto-currency market is reportedly now worth more than $50bn and the use of virtual currencies is gaining traction in SA.

UCT has sought to tackle this problem by offering a new master’s degree in data science with a specialisation in financial technology, said Georg, who is also the course convener. The programme is due to commence in 2018.

Authors:

George Popescu
Allen Taylor

Wednesday June 21 2017, Daily News Digest

Mountain View

News Comments Today’s main news: DBRS takes rating actions on SoFi consumer loans. Relendex secondary trading platform tops 1M GBP. Xeenho closes new round of financing. Today’s main analysis: The current state of MPL in Japan. Today’s thought-provoking articles: Vanguard takes robo-advice to $65B. Female entrepreneurs more cagey about post-Brexit. 5 ways financial apps are changing banking. United States […]

Mountain View

News Comments

United States

United Kingdom

China

European Union

Australia/New Zealand

Asia

Africa

News Summary

United States

DBRS Takes Rating Actions on SoFi Consumer Loan Programs (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today reviewed seven ratings from four SoFi Consumer Loan Program U.S. structured finance asset-backed securities transactions. Of the seven outstanding publicly rated classes reviewed, six were confirmed and one was upgraded. For the ratings that were confirmed, performance trends are such that credit enhancement levels are sufficient to cover DBRS’s expected losses at their current respective rating levels. For the rating that was upgraded, performance trends are such that credit enhancement levels are sufficient to cover DBRS’s expected losses at their new rating level.

RATINGS

Issuer Debt Rated Rating Action Rating Trend Notes Published Issued
SoFi Consumer Loan Program 2016-1 LLC Class A Notes Upgraded AA (sf) Jun 20, 2017 US
SoFi Consumer Loan Program 2016-2 LLC Class A Notes Confirmed A (sf) Jun 20, 2017 US
SoFi Consumer Loan Program 2016-3 LLC Class A Notes Confirmed A (sf) Jun 20, 2017 US
SoFi Consumer Loan Program 2016-5 LLC Class A Notes Confirmed A (sf) Jun 20, 2017 US
SoFi Consumer Loan Program 2016-2 LLC Class B Notes Confirmed BBB (sf) Jun 20, 2017 US
SoFi Consumer Loan Program 2016-3 LLC Class B Notes Confirmed BBB (sf) Jun 20, 2017 US
SoFi Consumer Loan Program 2016-5 LLC Class B Notes Confirmed BBB (sf) Jun 20, 2017 US

Vanguard rides robo-advice wave to $ 65B in assets (InvestmentNews), Rated: AAA

While much of the financial services industry has been fretting for the past few years over how to compete in the age of digital-advice platforms, The Vanguard Group Inc. appears to have cracked the code in a steady climb to more than $65 billion under management on its two-year-old robo.

Vanguard’s Personal Advisor Services, which is four times the size of the next-largest robo-platform, is a hybrid that incorporates human advisers and is starting to look like the blueprint for the way to leverage digital advice.

CleanCapital Closes Investment Round Led by FinTech Leaders and Pioneers (CleanCapital Email), Rated: A

CleanCapital, an online marketplace for clean energy investing, announced today the closing of the first round in Series A funding, as part of an ongoing capital raise. The new capital will allow CleanCapital to implement their technology roadmap and continue scaling operations, growing its team, and expanding opportunities for clean energy investing. CleanCapital’s proprietary platform has benefits that are two-fold, by creating opportunity for investment and increasing ease for project owners to exit their current portfolios. By reducing barriers both for the flow of capital and access to investments, CleanCapital is accelerating clean energy deployment.

To date, the team has financed over $40M of solar projects and more than 20 MW in operating solar assets. They have also received funding from industry leader John Hancock Life Insurance to finance numerous assets. CleanCapital has created a unique algorithm to efficiently scrub and value projects so that only the best investment opportunities are included in investment portfolios.

Investors include FinTech leaders and pioneers such as Ron Suber, President of Prosper Marketplace, Jon Barlow, Founder of Eaglewood Capital Management, and Bradley Pattelli, Former Chief Investment Officer of LendingClub. In addition, the company was recently selected to be featured on leading startup fundraising platform SeedInvest which historically has accepted just 1% of startups applicants.

Transparency A Growing Concern for Alternative Investing (Plan Sponsor), Rated: A

The study shows transparency continues to lead all investment considerations and has significantly grown in importance following the financial crisis of 2008.

“Degree of transparency” was cited as very important by 63% for alternative and 62% for traditional investments. It was also cited as the most important post-investment consideration by 21% for traditional assets and 17% for alternatives, compared to 9% and 3%, respectively in pre-crisis.

Tech Gap Widens Between Haves, Have-Nots (Financial Advisor IQ), Rated: A

The gap between independent RIAs who are keeping up with evolving technologies and those who aren’t is widening. And that’s stunting growth for advisors who aren’t acting proactively to keep on top of a rapidly evolving marketplace.

At least that’s what Fidelity finds in a new study published Tuesday looking at industry trends in high-tech adoption. As part of its research into firms using the latest electronic tools – including everything from interactive website software to advanced CRM programs and integrated back-office systems – the custodian has developed a list of tech-savvy “eAdvisors.”

Fintech Brings Residential Real Estate To The Web (NASDAQ), Rated: A

However, there are a number of limitations that come with completing the mortgage application process entirely online. You likely won’t be able to complete the process online if you’re applying for a jumbo mortgage (for which the limit is $417,000 in most of the United States); if you’re self-employed with various sources of income; if you or a tax advisor manually prepared your taxes; or if you don’t have online accounts with all of your financial institutions.

Still, the option to purchase real estate quickly and easily online is very attractive for foreign buyers, investors, and modern, web-savvy homebuyers. Although completely online real estate transactions only represent a small fraction of the more than $2 trillion in annual real estate transactions worldwide today, the demand is growing, and it seems likely that a substantial percentage of homes will be purchased completely online within just a few years.

Selling a home online offers a number of notable advantages. Perhaps most importantly, you avoid using a real estate agent so you don’t have to pay the usual 3% to 6% commission.

The key disadvantage of a fully online transaction, of course, is the possibility of making some kind of mistake during the process that could cost you a chunk of money, or even the chance to purchase your dream home.

Suretly Brings Crowdvouching to the Lending Market, Announces ICO (Inside Bitcoins), Rated: A

New York-based financing startup Suretly has announced that its crowdfunding campaign is set for July 2017 launch. Suretly offers a safe new way to obtain a personal loan, through its unique ‘Crowdvouching’ platform.

Unlike traditional P2P lending platforms which require investors to co-sign for a percentage of the loan, Suretly’s crowdvouching system requires a much larger number of backers to secure the loan and in doing so, substantially reducing the individual risk of all parties. Suretly is currently focused on short-term loans, and the platform has already been called the “Tinder for Microloans.”

The company’s ICO will give all investors an opportunity to purchase the platform’s SUR tokens and contribute towards the growth of the crowdvouching project.

GDS Link Joins Marketplace Lending Association (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 leasing, today announced that it has joined the Marketplace Lending Association (MLA) as an associate member.

Lending Club’s Dolan Joins Metromile in California as Chief Financial Officer (Insurance Journal), Rated: B

San Francisco, Calif.-based Metromile has named Carrie Dolan chief financial officer.

Dolan most recently served as CFO of Lending Club, an online credit marketplace connecting borrowers and investors. Prior to Lending Club, Dolan was with Charles Schwab & Co, where she was senior vice president and treasurer and CFO of Schwab Bank. Early in her career, Dolan held various financial positions at Chevron.

Eight Fledgling Fintech Providers Win Capital with CFSI Awards (Paybefore.com), Rated: B

Eight fledgling fintech companies have won $250,000 each from the Center for Financial Services Innovation.

  • Blueprint Income, which offers a pension anchored on “a simple, pre-determined income stream backed by insurance companies.”
  • Dave, whose product “alerts consumers ahead of an upcoming overdraft and can instantly advance up to $75 at 0 percent interest to prevent overdraft fees.”
  • EverSafe, which monitors bank and investment accounts, credit cards and credit reports, and then alerts older consumers and their relatives to irregular activity.
  • Grove, which offers personalized financial advice and comprehensive financial plans that are “within reach for everyone.”
  • Nova, a firm that “has built the world’s first cross-border credit reporting agency by building data partnerships across the globe,” a product that can help immigrants gain credit.
  • Point, described as “an alternative to traditional home equity loans and home equity lines of credit.” The company buys into a fraction of a consumer’s property, paying today for a share of the home’s future appreciation.
  • Token Transit, a mobile app that “enables low-income riders to have convenient access to the transit passes they need. Riders are able to pay using a credit, debit or a prepaid debit card.”
  • Tomorrow, which provides “long-term financial security to busy millennials and working families.”
United Kingdom

Relendex’s Secondary Trading Platform Tops £1 Million (Crowdfund Insider), Rated: AAA

Relendex, a secured peer to peer lending platform, has announced that its secondary market trading has surpassed the £1 million mark.

Relendex says this indicates that lenders have embraced the secondary platform. On the Relendex Resale Marketplace investors are able to buy and sell Loan Parts at par with no fees charged.

Female entrepreneurs more cagey about post-Brexit prospects (P2P Finance News), Rated: AAA

A poll by the peer-to-peer lender shows that less than half as many female business owners are confident about the success of their businesses post-Brexit, compared to their male counterparts.

The research, conducted by RateSetter Business Finance, has revealed that only 10 per cent of women business leaders believe that leaving the EU will be positive for their business.

This contrasts with 21 per cent of male business owners who have an optimistic outlook about their ventures after Brexit.

Additionally, 32.7 per cent of female business owners want to find a lender that understands their business and business model, compared with just 19 per cent of men.

TrueLayer raises $ 3M Series A to provide fintech companies with easy access to bank APIs (TechCrunch), Rated: A

TrueLayer, a London startup that’s built a developer platform to make it easy for fintech companies to access bank APIs — and ride the PSD2 gravy train — has raised $3 million in Series A funding. The round was led by Anthemis Group, with participation from existing investor Connect Ventures, and will be used by TrueLayer to expand its team and increase coverage of supported banks before opening up beyond beta testers later this year.

Launched in private beta in February, the TrueLayer developer platform currently supports things like account verification, KYC processes, and accessing transactional data for account aggregation, credit scoring, and risk assessment. It is available in the U.K. and Simoneschi says TrueLayer will expand to other EU countries later in 2018.

Soldo, a London fintech startup that offers a multi-user spending account, raises M led by Accel (TechCrunch), Rated: A

Soldo, the London-based fintech startup that offers a multi-user spending account, first launched for consumers and since tailored to businesses too, has raised $11 million in Series A funding. Venture Capital firm Accel led the round, with participation from Connect Ventures, InReach Ventures, U-Start and R204 Partners.

Creathor Venture and private investors invest CHF 2.5 million in PropTech company Allthings (IT Business Net), Rated: A

Creathor Venture, a pan-European venture capital firm, together with a circle of experienced private investors from the real estate industry invest CHF 2.5 million in German-Swiss property tech company Allthings Technologies AG. Allthings connects tenants, owners, property managers and developers of living and commercial property through a modular communication and service platform.

Zorin hires ex-Funding Circle underwriter (Bridging & Commercial), Rated: B

Colin Chung (pictured above) has been recruited as an associate director in the credit risk team, while Katy Katani (pictured below) has joined as head of business development.

Colin was previously at Funding Circle, where he was a senior property underwriter, and has over 10 years of experience in real estate finance.

China

Xeenho Closed a New Round of Financing for its Business Transformation (Xing Ping She Email), Rated: AAA

On Jun 20th, Xeenho announced to have finished their third round of financing. This round of financing was led by Hongshang Capital, with Jade Value and Hunan Culture & Art Industry Group participated. The financing amount was again reached to tens of millions of yuan. All the funds have been in place, and they are in the process of handling business changes.

Started as one of the first P2P loan funds in China, Xeenho has an accumulated volume of nearly 3 billion RMB to date. The excellent risk control and the big data application in fintech constitute the core value of Xeenho. Based on its self-developed IFRM risk control and big data system, Xeenho keeps the record of Zero Bad Debt, which makes the company developed as a guidance for due diligence, P2P rating, research report, P2P asset portfolio allocation for clients and investors.

In 2016, Xeenho launched a new Robo-Adivisor product – Xeenho Zhi Tou, attracting capital for different P2P platforms, and Xeenho provides guarantee in this process. In the late of the same year, Xeenho set up self-media platform – Xing Ping She, aiming at building an industrial ecosphere and providing services which is specially designed for specific fintech companies.

This A round of financing would be a fresh start to Xeenho. Dr. Yang Li, the co-founder and CEO of Xeenho said, “After A round of funding, we will continue to focus on business in big data mining, equity investment and information consultation, and explore to develop new business at the same time. We hope to realize the development of collectivization in the next three years, so as to build a complete system of financial ecology and become one of the leading fintech companies.”

European Union

Bank to the future: five ways financial apps are changing banking (Banking Technology), Rated: AAA

  1. Banks will face stiff competition from new wave of fintech start-ups – In the UK it is firms like Bean, Ernst, Moneybox, Pariti and Plum, to name just a handful, and this picture is repeated across Europe.
  2. New open data initiatives will mean unparalleled access to consumer data – In the UK, PSD2 is being delivered by the Open Banking project. Alongside this the Treasury is running the Pensions Dashboard project, which will liberate customer data on long-term retirement savings in the same way.
  3. New services will revolutionise who people trust for financial advice
  4. Personal finance dashboards (PFDs) will open the way for long-term savings as well as short-term financial management – Pensions dashboards already exist in many other European states including Denmark, the Netherlands and Sweden.
  5. The workplace will be key to the new market – In practice, the workplace is likely to be a highly successful channel for such services complementing employers’ pensions and employee benefits delivery. In the UK, auto-enrolment means nearly all employees will soon be members of a workplace pension scheme.
Australia/New Zealand

Robots closer to getting go-ahead to give financial advice to humans (Stuff), Rated: AAA

Getting personalised financial advice from a “robot” may be a step closer to becoming reality.

The Financial Markets Authority has asked for feedback on whether it should use its powers to allow personalised financial advice generated by a computer programme or algorithm.

Under current law, personalised advice, which takes into account an individual client’s financial situation and goals, can only be delivered by a human being.

Asia

The Current State of Marketplace Lending in Japan (Lend Academy), Rated: AAA

Marketplace lending growth in Japan has been slow compared to the U.S., Europe and China but that has started to change in the past three years. The market has been almost doubling each year and we expect this trend to continue through 2017. Investment volume was $140 million in 2014, $310 million in 2015 and $530 million in 2016. We estimate it to reach $1 billion this year.

Marketplace lending, also commonly referred as “social lending” in Japan, started as p2p lending around 2008 but struggled due to high default rates, which sometimes reached 30%. Since Japanese lending law prohibits interest rates above 15% in most cases, a 30% default rate was not sustainable for those businesses.

The industry average APR increased to 8.4% from 5.7% in two years, mainly due to newer entrants that were charging higher APRs. Default rates in the past three years have been close to zero due to platforms being more selective on who they lend money to.

Based on our research, average spread (i.e. margin) for crowdfunding platforms in Japan is 4%-5% annually. Typically crowdfunding platforms are lending at 13% and funding at 8%. Based on this margin, a crowdfunding platform needs to service portfolio of between $50 – $100 million to be break-even. Only a few crowdfunding platforms have reached this scale, however given the current market growth, many players will achieve this volume after 1-3 years of being in business.

Africa

Consumer lending has dropped to ‘almost zero’ under new regulations – Rainfin CEO (Ventureburn), Rated: AAA

Consumer lending on marketplace lending platform RainFin has ground to a halt since the new National Credit Regulations threshold came into effect on 11 November, the company’s chief executive Sean Emery said yesterday.

Under the new threshold, lenders who lend even one cent to consumers have be registered with the National Credit Regulator to do so.

Authors:

George Popescu
Allen Taylor