Wednesday April 4 2018, Daily News Digest

Wednesday April 4 2018, Daily News Digest

News Comments Today’s main news: OnDeck files first ABS in two years. Funding Circle opens second Denver office. LendingClub settles with Massachusetts regulator. OFF3R founder to launch personal investment assistant. China Rapid Finance reports unaudited Q4, full year results. Today’s main analysis: Strengthen your fraud prevention strategy. (A MUST-READ REPORT FROM LexisNexis) Today’s thought-provoking articles: True lender litigation is […]

Wednesday April 4 2018, Daily News Digest

News Comments

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United Kingdom

China

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India

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News Summary

United States

OnDeck makes ABS return (Global Capital), Rated: AAA

The lender filed documents with the Securities and Exchange Commission for the upcoming deal on Tuesday. Deutsche Bank, Credit Suisse and SunTrust are leading the deal, according to the deal documents.

OnDeck spent the last two years holding a greater percentage of its loans.

Funding Circle Expands U.S. Operations with New Office in Denver (PR NEwswire), Rated: AAA

Funding Circle today announced it is expanding its U.S. operations with a second office in Denver, Colorado. With the move Funding Circle will look to hire around 290 new employees in the Denver area over the next two years to support the company’s growth.

LendingClub settles with Mass. banking regulator for $ 2M (American Banker), Rated: AAA

LendingClub has settled with the Massachusetts banking regulator to the tune of $2 million over claims that the company made unlicensed loans in the state.

The state division of banks said that the San Francisco-based LendingClub made over 46,000 loans to Massachusetts consumers without a license since 2011, when it surrendered its small loan company license as a condition of a consent order. The division also said that it found additional unlicensed lending activity at Springstone Financial, a wholly owned subsidiary of LendingClub that has its main office in Westborough, Mass.

“True Lender” Litigation on the Rise: Recent Litigation and Enforcement Actions (JDSupra), Rated: AAA

Over the last two years the financial industry has seen an uptick in litigation and enforcement actions aimed at banks and their non-bank lending partners. These actions have primarily challenged the validity of the bank partnership model that is used by many non-bank lenders to generate consumer and small dollar business loans.

Bank and Non-Bank Lender Partnerships

Although the structure of a bank and their non-bank lending partners can take many forms, the typical relationship involves the non-bank lender identifying loan opportunities for the bank, which then originates the loan and either immediately assigns the loan to their non-bank partner or another third-party. By partnering with banks, non-bank lenders avoid certain regulatory and licensing requirements in states where their bank partners operate.  In return, banks are able to utilize their relationships with their non-bank lending partners to generate leads for additional loans.

Colorado’s Uniform Consumer Credit Code Administrator Takes Action

In January 2017, the Colorado’s Uniform Consumer Credit Code (“UCCC”) Administrator, Julie Meade, filed two substantially similar complaints in Colorado state court against Marlette Funding, LLC, and Avant of Colorado, LLC. The complaints alleged violations of the UCCC based on the theory that Marlette and Avant were the “true lender,” not their bank partners, in a series of loans made to Colorado consumers, which loans contained interest rates that exceeded Colorado’s usury laws.

Broad Reaching Implications

The CashCallMadden, and other related actions threaten the traditional bank partnership model that the financial industry relies on to originate, buy, sell, and transfer loans.

Legislative Fix Coming?

There is currently at least one bill pending in the House and Senate that, if passed, would address both the “true lender” issue and the consequences of the Madden decision.

Why It’s No Surprise That Online Lender GreenSky Would Weigh An IPO (Forbes), Rated: AAA

Now, the company is challenging a near-sacred belief in Silicon Valley these days that staying private for longer is better. GreenSky has filed confidentially for an IPO, according to 

Strengthen Your Fraud Prevention Strategy (LexisNexis), Rated: AAA

Key Findings

  • The cost of fraud is sizeable for retail, eCommerce, financial services and lending organizations. Every $1 of fraud costs organizations in these industries between $2.48 and $2.82 – that means that fraud costs them more than roughly 2 ½ times the actual loss itself. Fraud cost as a percent of revenues ranges between 1.58% and 2.39%.
  • The eCommerce, financial services and credit (rather than mortgage) lending sectors are getting hit somewhat harder.
  • The digital space, either as a transaction channel or type of good being sold, is a high risk for even more negative fraud impact. Regardless of industry segment, the percent of average monthly fraud attempts is higher for these types of organizations. For those using the online channel, this is the result of more fraudster focus on the anonymous purchasing environment, particularly leveraging the nocard-present opportunities compared to EMV chip barriers at physical points of sale.
  • Yet, digital channel / digital goods selling organizations are not fully leveraging the value of risk mitigation solutions. Identity verification remains a challenge and common type of fraud; there is only moderate use of advanced identity verification solutions among these  organizations.
  • These issues will only increase as more firms adopt the mobile channel. Larger merchants / firms tend to be the pioneers of the mobile channel.
  • Findings show that retailers, eCommerce merchants and financial services and lending firms which layer solutions by identity and fraud transaction solutions
Source: LexisNexis

Read the full report here.

U.S. Insurtech Oscar Secures $ 165 Million Through Latest Investment Round Led By Brian Singerman & Founders Fund (Crowdfund Insider), Rated: A

Oscar Health, a U.S.-based insurtech, announced last week it has raised $165 million through its latest investment round led by Brian Singerman and Founders Fund. Founded in 2013, the company stated it is focused on utilizing technology, design, and data to humanize healthcare.

5 Major Ways Banks Are Getting Disrupted (The Motley Fool), Rated: A

The peer to peer lending term is kind of a loose term nowadays. Like Michael said, a lot of the bigger banks have started to copy this business model, so it’s not exactly peers loaning to peers anymore. But, at its heart, Prosper was actually the first mover on this. A lot of people think it was Lending Club but Prosper actually got there a little bit earlier. But, Lending Club was definitely the big one that got the banking industry on its toes in terms of peer to peer lending.

Marcus by Goldman Sachs is one of the newest ones. Goldman is getting into consumer banking a little bit. On the business side, you have companies like Funding Circle, which is a really interesting concept, because business lending is a big pain in the neck, especially in certain industries.

The Lending Game: Streamlining Customer Experience (Lendit), Rated: A

Lending, much like dating, has been brought online in the past decade with the aim of streamlining the process and dramatically reducing the time spent for both parties. But as the backend systems involved become more complicated to include more data and decisioning points, how do lenders continue to create a simplified customer experience that will bring good customers back for that “second date”?

New Fintech IPO on the Horizon with GreenSky (Lend Academy), Rated: A

So who is GreenSky exactly and what do they do? We wrote about the company earlier this year when we learned of their $200 million funding round from PIMCO which made them the most valuable company in the online lending space. The company has a unique model where they partner with merchants and contractors to offer financing at the point of sale. They view themselves as more of a tech company since they do not actually lend any money. This capital light business model has likely led to much of the success they have seen. Instead of lending their own money GreenSky has relationships with about 15 banks. On the tech side, the process is paperless and all done through a mobile device.

What Borrowers Do When Payday Loans Go Away (Lend EDU), Rated: A

For South Dakota consumers, payday loans used to be available at storefronts, but since late 2016, this access and annual interest rates have been cut.

 

Although South Dakota limited payday lending, it didn’t outlaw it. And some borrowers are hitting online lending agencies found through Google searches under “payday loans”—a familiar option for South Dakota consumers, according to KELO. This alternative carries risks such as a lack of oversight and inconsistent regulation; however, this is a national issue with these lenders.

It may be too early to write off robo start-ups (Investment News), Rated: A

News that robo-adviser Wealthfront’s valuation dropped was read by many in the financial advice industry as the writing on the wall for direct-to-consumer digital advice startups.

Scott Smith, the director of advice relationships at research firm Cerulli Associates, said the stories surrounding Wealthfront are proof that the market is favoring a hybrid advice approach. While the number of people who want a purely digital advice platform could grow over time, the majority of assets are still held by people over the age of 40 who want human assistance with their financial decisions.

As for Betterment, the company says it isn’t experiencing any headwinds at all.

Why banks have trouble selling real-time payments (Tearsheet), Rated: A

Real-time payments have landed in the U.S., but banks are still figuring out how to sell them to corporate clients. BNY Mellon, U.S. Bank, Citi, JPMorgan, PNC and SunTrust are the only banks using the Clearing House’s new real-time payments system.

One challenge is simply the legacy infrastructure on which most financial services companies today are built. Companies that provide ERP systems like SAP or Oracle have built their systems in a batch processing world and need to also become real-time.

In the age of PayPal, Venmo and Square Cash, it’s easy to forget that most transactions that take place day-to-day aren’t happening in real time. They feel like they are, but they really just move money from one PayPal user’s balance to another. Moving that balance from PayPal’s banking partner to the customer’s own bank account is still a multiday process.

U.S. banks are not that far away from ubiquitous real-time payments, according to Ward, who said he thinks 90 percent of banks will have implemented real-time payments by the middle of 2019. PNC hasn’t met too many challenges itself trying to sell RTP, Ward said, but clients are still figuring out the best way to take advantage of it and whether they prioritize the needs of customers or suppliers.

MetaBank Announces Partnership with Health Credit Services to Originate Personal Healthcare Loans (Markets Insider), Rated: B

MetaBank; a wholly-owned subsidiary of Meta Financial Group, Inc. (NASDAQ: CASH) (“Meta”) today announced a new, three-year agreement with Health Credit Services (“HCS”), a technology driven, patient financing company. MetaBank will approve and originate loans for elective procedures for HCS provider offices throughout the country. HCS will work with its provider partners to market the loans, as well as provide servicing for them. Over the course of this relationship, MetaBank expects to originate at least several hundred million dollars in personal loans.

 

Amber Baldet Leaving JPMorgan Blockchain Team to Start New Venture (CoinDesk), Rated: B

Amber Baldet, who oversaw development of JPMorgan’s permissioned blockchain platform, Quorum, is leaving the financial institution, according to an internal memo sent Monday by the bank’s head of blockchain initiatives, Umar Farooq.

United Kingdom

The robo-adviser of robo-advisers (Fn London), Rated: AAA

The story of robo-advisers is an old one, or so thinks Lex Deak, serial entrepreneur and creator of a new breed of online wealth management tool. Deak, who was the brains behind the launch of peer-to-peer lending aggregator Off3r, is rolling out a new online service that he claims will bring web-based investment to the masses and “battle the bias and bullshit that has dogged the investment sector for decades”. The new service, called Personal Investment Assistant — or Your Pia — uses artificial intelligence to help investors sift through a range of robo-advisers, wealth management platforms and IFA networks.

Big names on the board
Todd Ruppert, the former president and chief executive of T Rowe Price — who is no stranger to backing fintech start-ups — is taking a seat on the Pia board. He will be joined by Daniel Sauva, head of creative and buzz at money transfer service TransferWise, and Nigel Webber, who was global chief investment officer at HSBC Private Banking. Gayle Schumacher, a Coutts executive, is taking a seat, too.

 

A new Innovative Finance Isa (IF Isa) has launched offering a whopping 7.28% annual interest rate. The easyMoney ‘Balanced’ IF Isa allows you to invest in peer-to-peer lending – where your money is lent to individuals or small businesses – within an Isa wrapper, so your returns are tax-free.

The target rate of 7.28% is a guide to what return you can expect from investing in multiple property-backed loans, all of which have a maximum 75% loan to value.

The firm offers two different IF Isas: its ‘Conservative’ IF Isa, has a 4.05% targeted annual return with a minimum investment of £1,000. It is “aimed at investors who are looking for something more than the paltry rates offered by cash ISAs”, says Mr Candole.

 

China

China Rapid Finance Reports Unaudited Fourth Quarter and Full Year 2017 Results (Benzinga), Rated: AAA

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE:XRF), operator of one of China’s largest consumer lending marketplaces, today reported its unaudited financial results for the fourth quarter and full year ended December 31, 2017.

Fourth Quarter 2017 Highlights:

  • Positive operating cash flow of $15.8 million
  • Total gross billings up 186% year-over-year
  • Facilitated 6.2 million loans with total loan volume of $1.03 billion
  • Added 627 thousand new borrowers, up 17% from the end of Q3 2017
  • Added approximately 10 thousand new investors to reach over 23 thousand investors
  • GAAP net loss of $3.9 million
  • Non-GAAP adjusted profit before income tax expense of $1.1 million

Full Year 2017 Highlights:

  • Year-end cash balance of $94.9 million, up from $74 million immediately after the IPO
  • Total gross billings up 102%
  • Added 2.9 million new borrowers, up 202% from the end of 2016
  • Facilitated over 23 million loans with total loan volume of $3.3 billion

Chinese P2P lenders get confidence boost with protection plan (Enterprise Innovation), Rated: AAA

China’s marketplace lending is bracing for regulation around “record filing” systems that kicks into effect this month (April 2018). However, said new regulations may not be addressing altogether the problem of runaway credit that is growing on the back of cash loans and microlending market.

Source: Enterprise Innovation

Technological Innovation and Anti-Fraud Technology in a Maturing Fintech Sector (Lendit), Rated: A

The current most prominent methods of financial fraud are organized fraud, regional fraud, and targeted-occupation fraud. Various criminal and fraudulent organizations, including organizations developing illegal software, hacking databases for sale, and batch registration, have been working together to increase profits. However, their golden times are over now.

An insider once commented, “Certain P2P platforms only have a user retention rate of 20% following promotional events due to malicious users while the remaining 80% became inactive. Platforms spend a lot of money on marketing which has directly led to continually rising costs in customer acquisition.”

  1. Hexindai’s risk control technology has laid a solid foundation for anti-fraud progress
  2. Introducing new technologies to enhance anti-fraud capabilities

 

International

HSBC partners with FinTech and asset managers for cloud-based data platform (Global Custodian), Rated: A

HSBC Securities Services has partnered with FinTech firm FINBOURNE, asset manager Fidelity International and hedge fund Altana Wealth to design a new cloud-based investment management platform.

The four organisations will collaborate to design a shared, cloud-based data utility that aims to reduce operating cost and improve the quality of information for in-house and client use.

The platform, named LUSID, is aimed at replacing existing in-house software and hardware, and achieve advanced standards of data handling for institutional clients.

 

Australia

SME lender gives insight on changing landscape (Broker News), Rated: AAA

Small business lender OnDeck Group is hosting an event centred on SMEs and the changing lending landscape in Australia.

Taking place on 17 April, CEO Noah Breslow, will host a select group of brokers, aggregators and finance partners, with special guest Stephen Koukoulas, Managing Director of Market Economics, and Economic Advisor to illion (formerly Dun & Bradstreet).

OnDeck has now loaned over $8 billion to 80,000 small businesses across the United States, Canada and Australia, making it one of the largest online SME lenders globally.

India

Cryptocurrency-backed Lending Startup BlockFi Eyeing Indian Market, CEO Reveals in Interview (Crypto-News), Rated: AAA

Borrowing against cryptocurrencies is becoming a big new trend in the industry. A number of startups have sprung in crypto-backed lending space, which include SALT, CoinLoan, Ethlend, Unchained Capital and most recently Nuo Bank. Now a new startup with similar offering is eyeing the Indian market from New York. The startup, called BlockFi, offers cryptocurrency backed loans to individuals and companies both in 35 states of USA as of now. However, it’s planning to expand internationally very soon, and in that expansion it sees India as a major opportunity. This was revealed by none other than company’s CEO Zac Prince in a recent interview to Bitcoin Magazine.

SME loans marketplace Namaste Credit raises $ 3.8 million (Fortune), Rated: AAA

Namaste Credit, a digital marketplace and technology platform for SME loans, has raised $3.8 million in a Series A investment round from Nexus Venture Partners.

The company intends to use the corpus raised to grow its geographic footprint, enhance its technology and data analytics platform, and further scale its business.  The company also plans to significantly increase its channel partner program across India and further expand its technology licensing partnerships with lenders globally.

 

 

Namaste Credit raises $ 3.8 million from Nexus Venture Partners (LiveMint), Rated: A

Owned by Delhi-based Opendoors Fintech Pvt Ltd, Namaste Credit is a digital platform which serves as a marketplace for borrowers and lenders. It focuses exclusively on small and medium enterprise (SME) customers.

“SME credit is seriously constrained due to lack of reach and relevant data to assess credit-worthiness of borrowers. Namaste Credit’s technology, combined with its channel partners and lender network, is already making a significant impact on facilitating credit to SMEs in a win-win manner for all,” said Anup Gupta, managing director at Nexus Venture Partners, in a statement.

Asia

3 Fintech Companies Answers Jokowi`s Challenge on Student Loans (Tempo.Co), Rated: A

Last month, state-owned banks was not up for President Joko Widodo’s (Jokowi) challenge to provide students with the option of student loans. However, companies of Fintech (technology-based financial services providers) responded positively to the president’s challenge.

Danacita and Koinworks are Fintech peer-to-peer lending companies that focus on funding the education sector. Meanwhile, Danadidik is an academic funds provider that is on crowdfunding as its main financial backing.

The three platforms also provide a long-term loan for university students with a tenor from four to six years. Each of these companies applies varying methods of repayments from 9 percent- 20 percent low installments up to profit sharing a student’s wage once they have found jobs.

Authors:

George Popescu
Allen Taylor

Wednesday April 5 2017, Daily News Digest

Wednesday April 5 2017, Daily News Digest

News Comments Today’s main news: Colorado targets Marlette, Avant on ‘True Lender’ grounds. CRB sues Colorado. SoFi raises variable student loan refi rates. Kabbage extends $3B in funding to over 100K small biz customers. RateSetter adds expected losses committee. P2P Global Investments considers change of loan fund manager. Dango RECF platform celebrates 1M investors. Today’s main analysis: International P2P lending statistics. […]

Wednesday April 5 2017, Daily News Digest

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United States

Colorado Attorney General Pursues ‘True Lender’ and ‘Madden’ Actions Against Major Non-Bank Online Lenders (JD Supra), Rated: AAA

On February 15, the Colorado Attorney General filed substantially similar, separate amended complaints in the U.S. District Court of Colorado against Marlette Funding LLC and Avant of Colorado LLC, alleging violations of Colorado’s Uniform Consumer Credit Code based on “true lender” and loan assignment cases. Both actions were originally filed in state court on January 27, 2017, and both were subsequently removed to federal court — on March 3, 2017 and March 9, 2017, respectively. In each instance, the complaint cites CashCall, Inc. v. Morrisey, 2014 W. Va LEXIS (W. Va. May 30, 2014), and Madden v. Midland Funding, LLC, 786 F.3d 246 (2d Cir. 2015), as legal authority for claims alleging usury and other violations of Colorado’s Uniform Consumer Credit Code.

The amended complaint filed in Mead v. Marlette Funding LLC d/b/a Best Egg asserts that Marlette paid all costs, including legal, marketing and other expenses, incurred by Cross River Bank in originating Best Egg loans. In addition, the complaint asserts that Cross River “bears no risk that it will lose its principal in the event consumers default on the Best Egg Loans that it sells to Marlette or to Marlette’s non-bank designees” because: (i) Marlette maintains a bank account in favor of Cross River in the amount of Marlette’s anticipated purchases; (ii) Best Egg loans originated by Cross River are sold to Marlette within two business days; (iii) the parties’ contract specifies that Cross River has no liability to Marlette for sold loans, and (iv) Marlette is obligated to indemnify Cross River “against any claim that any aspect of the Best Egg lending program violates the law.”

The amended complaint filed in Mead v. Avant of Colorado LLC, in turn, similarly asserts that Avant and not WebBank, which originated the subject loans, bears all cost and expenses, including the costs of evaluating loan applications and credit reports and the costs associated with dispersals of loan proceeds.

Cross River Bank Sues State of Colorado (Over the Transom), Rated: AAA

News Summary:

  • On April 3rd, Cross River Bank filed a Declaratory Judgment Action (Federal District Court) against the State of Colorado to protect its federal statutory and contractual rights to freely extend credit and to freely sell those loans on a nationwide basis
  • Previously (in January 2017), the Colorado Attorney General sued Marlette Funding in an attempt to prohibit Marlette from enforcing loans validly made by Cross River and validly sold by Cross River to Marlette
  • Cross River filed the declaratory judgment action in support of Marlette Funding (an MPL partner), and the broader bank-platform model
  • According to Cross River General Counsel, Arlen Gelbard, “the Colorado Attorney General is attempting to undermine the concept of federal preemption, and with it 150-years of established banking law.”
  • More specifically, Colorado’s action violates Federal Deposit Insurance Act (Section 27) and National Bank Act, as well as the “valid when made” doctrine
  • “It is clear to us that Colorado’s lawsuit against Marlette intentionally did not name Cross River as a party because Colorado knows that Cross River’s actions are protected by its status as a state-chartered, federally regulated Bank, which affords complete preemption over state law”

The Issue – Federal preemption/uncertainty:

  • The federal preemption provisions which allow small banks like Cross River to compete with larger entities, have come under attack by several states and in some recent court cases such as Madden v. Midland Funding and other so-called “True Lender” cases.
  • While we believe these cases were wrongly decided as a legal matter, the broader impact has been to encourage states and other plaintiffs to disregard or undermine key legal doctrines of federal preemption and loans as being “valid when made”, leading to market uncertainty.
  • The characteristics of the Cross River model are very different from many others in the marketplace, where the named lender has little to no involvement in the origination process and retains no “skin in the game”
  • This lack of certainty about what loan terms apply to subsequent purchasers has broad, adverse ramifications for US banking and financial markets. Specifically, certain investors have moved away from this asset class, which has reduced liquidity in the market.
  • “Although the action taken by the Colorado Attorney General is being positioned as one to protect the consumer, the actual result will likely have a negative impact on consumers and small businesses, as their access to this important source of credit is significantly reduced.”

SOFI RAISES THE VARIABLE STUDENT LOAN REFINANCING RATES (lendedu), Rated: AAA

The Federal Reserve’s interest rate increase last month is starting to show up in some loan products including student loan refinancing. Fixed rate borrowers are safe for now, but those with variable interest can expect to pay more.

As of April 1st the interest rate on a variable student loan at SoFi increased both on the low and high ends of the range. Borrowers will now pay anywhere from 2.565 percent to 6.490 percent interest on a variable refinance loan. That compares with 2.365 percent to 6.29 percent interest just a month ago. The interest rate on SoFi’s fixed rate products held steady at 3.375 percent to 6.74 percent from March to April.

Kabbage Extends $ 3 Billion in Funding to over 100,000 Small Business Customers (IT Business Net), Rated: AAA

Kabbage®, a pioneering financial services, technology and data platform, announced it has extended more than $3 billion to small businesses across all 50 U.S. states, covering every industry. The company has also now served over 100,000 small businesses through its platform, representing the largest customer base of any online small business lender.

ApplePie Capital CEO & Co-Founder Denise Thomas Makes Marketplace Lending Success Look Easy (Crowdfund Insider), Rated: A

“We have gained a foothold within the industry by partnering with 42 brands to date. Moving forward we will continue to innovate…”

Erin: You recently signed new investors plus funding capital, thus standing out in a challenging market. Please share details about your MO. How long did it take to raise the money?

Denise: It took five months. The two main sources of funding we closed were new strategic partners and existing investors. Our strategy was to continue to tell our story and educate investors about franchise debt as an asset.

Erin: Please share your experience about dealing with a prominent Bay Area VC saying, “You don’t look like Fintech.”

Denise: Statistically, there are far more men running fintech companies, clearly there are some biases out there around that. A study released by Peterson Institute for International Economics in 2016 found that “An increase in the share [on executive teams and boards] of women would be associated with a 15% rise in profitability.” At the end of the day, you want people in your board room who are supportive.

Erin: You have spoken quite positively about your relationship with Fifth Third. How and why does ApplePie’s relationship with this bank differ from others?

Denise: As opposed to our other loan purchasers, Fifth Third has made a strategic investment in our company and holds a stake in the growth of our business. They co-led our B round with QED Investors, with whom they have now also partnered to make strategic investments in VC-backed fintech companies. They have a long term vision for our industry and provide their expertise to create better financial solutions and a superior experience for our borrowers.

Erin: ApplePie Capital’s loans are backed by personal guarantee and unsecured. Personal assets are not required to back loans. Tell me more…

Denise: In franchising, there is a blueprint for the business owners to follow, in terms of cost analysis and every other aspect. This is measurable and people have a path to multi-unit ownership. We look at each brand and evaluate the sustainability of the business model, which has proven itself over the last 25 years through historical SBA data.

5W Public Relations Named Agency of Record for Sharestates (Yahoo! Finance), Rated: A

5W Public Relations, one of the 15 largest independently owned PR firms in the US, has been named PR Agency of Record by Sharestates, an online real estate investment marketplace that is an industry leader in crowdfunding for individual and institutional investors.

Could Real Estate Crowdfunding Help Millennials Retire Sooner? (Realty Biz), Rated: A

Real estate crowdfunding has proven a popular choice for one of the most fickle investing groups in the marketplace: Millennials.

On the surface, it seems improbable. Millennials investing in real estate? This is a group that has been loathe to purchase homes, with less than a third of Millennials becoming homeowners compared to 64 percent of the general population. After a little analysis, however, there are powerful reasons why real estate crowdfunding appeals to Millennials—enough that more are certain to join the crowd of investors in the coming years.

The stereotype, of course, is that Millennials are all underpaid with limited skills and few opportunities. That’s not reality, but even if it were, real estate crowdfunding has very low barriers to entry. Some of the best and most successful crowdfunding portals allow for investment minimums as low as $5,000. That lets Millennials get into the real estate investment game much earlier than previous generations.

Second, real estate crowdfunding is an investment option that allows Millennials to bypass banks. Having come of age during the Great Recession, many Millennials don’t trust financial institutions or Wall Street firms. They do, however, see the need to protect their money from the kind of financial breakdowns that hurt their parents’ retirement plans nine years ago by investing in hard assets. Real estate crowdfunding offers the chance to do just that.

PayPal Directors Hit With Class Action Suit from Shareholders Over Venmo (Crowdfund Insider), Rated: A

On March 24, 2017, shareholders of PayPal Holdings Inc., the parent company of mobile-payment provider Venmo, filed a derivative suit against its directors in the District Court of Delaware. A derivative suit is a form of class action in which shareholders can sue company officers or directors on behalf of the company.

The plaintiff shareholders claim in the suit that the directors of PayPal willfully or recklessly caused PayPal to make false or misleading statements which led to direct damages against PayPal. The false and misleading statements are alleged to have been made in PayPal’s quarterly reports, annual reports, and proxy statements which failed to disclose any of the alleged unfair and deceptive business practice or the fact that those practices would lead to increased regulatory scrutiny.

View the filing here.

Over 250,000 Shoppers And 1,400 Dealers Turn To AutoGravity (PR Newswire), Rated: A

AutoGravity, the FinTech pioneer transforming car shopping and finance with advanced mobile technology, today revealed that over a quarter million users – more than half of whom are millennials – have downloaded AutoGravity iOS and Android apps for car shopping and financing. AutoGravity also confirmed that its network of partner car dealerships has grown to more than 1,400 franchise dealers.

Since launching in 2016, AutoGravity has achieved significant growth across the United States, securing partnerships with the nation’s top automotive lenders, as well as four of the top five national dealer groups, representing all new and used car brands available in the country.

  • New cars remain popular with boomers. AutoGravity data shows two-thirds of car shoppers ages 50+ who pursue financing do so for new vehicles. In contrast, only half of AutoGravity car shoppers ages 18 to 25 who pursue financing do so for new vehicles
  • Japanese brands perform in California. Japanese economy and luxury car brands are more searched relative to American brands in California (as compared to the US overall)
  • Economy cars continue to be a popular choice. Economy brands rank in the top four most searched for vehicles across the US – luxury car brands round out the top seven
  • Millennials more cost sensitive than Gen X. Among car shoppers seeking financing on AutoGravity, millennials look to borrow ~15% less (finance amount requested) and seek to contribute ~25% less (cash down payment) relative to car shoppers ages 36+

Why FutureAdvisor orphaned its B2C book of business and other learnings at CFA Society’s robo-panel in San Francisco (RIABiz), Rated: A

The bad news: Selling robo financial advice to millennials — at least until they grow up and start acting like boomers — is a fool’s game.

Cianciolo provided the fullest update yet on FutureAdvisor since the firm’s eye-popping sale to BlackRock in 2015. See: Why BlackRock’s purchase of FutureAdvisor for $152 million could be a deal of destiny.

The robo — once the No. 3 retail player behind only Wealthfront and Betterment — no longer takes assets to millennials.

Standing up for retail and millennials was Zhang, a millennial herself, who questioned whether Roy and Ciancolo were being unduly pessimistic in capitulating to established players.

Jemstep had a brief period where it went for retail business but veered quickly to the B-to-B market.  “Can somebody [create a viable B-to-C robo advisor]?” Cianciolo asked. “Sure but you’re taking double and triple risks.”

Jamie Dimon Pushes for Simpler, More Coordinated Bank Regulations (WSJ), Rated: A

J.P. Morgan Chase JPM 0.33% & Co. Chief James Dimon laid out his wishlist of regulatory changes in his annual shareholder letter Tuesday, calling for simpler and better coordinated rules that could help to spur more lending and in turn economic growth.

Any changes are likely to help the bank. Mr. Dimon wrote that the “anticipated reversal of many negatives and the expectation of a more business-friendly environment” in addition to the bank’s results are among the reasons its stock price jumped about 30% in 2016.

Mr.. Dimon has previously said that rules should be coordinated among agencies, simplified and consistent, but in Tuesday’s letter spelled out what that meant for the first time.

He said banks have too much capital and that could be used instead to safely finance the economy.

Mr. Dimon reiterated that the so-called “gold plating” of international standards by U.S. regulators should be eliminated. Making U.S. rules stronger than international rules was in some cases a priority of Federal Reserve Governor Daniel Tarullo, who was the central bank’s regulatory point person but is stepping down this week.

Mr. Dimon also suggested reforms to the mortgage market since the housing sector has been “unusually slow to recover.”

Bond Street Partners With NerdWallet (Bond Street), Rated: A

Today, we are thrilled to announce that we’re partnering with NerdWallet to help more small business owners access fair and affordable financing. According to the Federal Reserve Bank, only 1 in 5 businesses that apply for a loan from a big bank are approved.

Together, we’ll create resources, guides and webinars to support the growth of businesses. In addition, entrepreneurs will now be able to access financing from Bond Street via NerdWallet’s Small Business Loan Tool.

Prominent Fintech Marketing Firm Leverage PR Sold to Caliber Corporate Advisors (Crowdfund Insider), Rated: B

Leverage PR, a prominent marketing firm engaged in the crowdfunding and Fintech sector, has been sold to Caliber Corporate Advisors.  Founded by Joy Schoffler, a well-known and highly visible participant in the emerging industry of financial innovation, shared the news with Crowdfund Insider, explaining she expects to remain engaged with the firm but in a different role.

Leverage PR was founded in 2010 and was the first marketing firm to recognize the potential of alternative finance.

United Kingdom

RateSetter continues to boost transparency with new expected losses committee (P2P Finance News), Rated: AAA

RATESETTER has set up a new committee on expected losses as part of a review of the way it monitors and reports on credit risk.

The panel, which will come into effect later this month, comprises the peer-to-peer lender’s chief executive Rhydian Lewis, its chief finance officer Harry Russell and various heads of consumer and commercial credit risk.

Boosting expected losses data is the latest of a batch of strategic changes RateSetter has put in place to price risk more accurately following higher-than-expected losses on its 2014 and 2015 loans.

Peer-to-peer loan fund considers change of manager (Financial Times), Rated: AAA

The UK’s first peer-to-peer loan fund is to review its investment manager as a swath of funds struggle to generate returns from the emerging asset class.

The listed fund, P2P Global Investments, buys loans from websites matching interest-paying borrowers with lenders in the UK, US, Europe and Australia, as well as holding stakes in the platforms.

It is currently managed by MW Eaglewood Europe, an asset manager majority-owned by UK hedge fund Marshall Wace. In a short announcement to the stock market on Tuesday, the board said it would review the arrangement following discussions with Eaglewood and “significant shareholders” and would update the market in due course.

Oakam Brings Gamification and Rewards to Consumer Finance with New Mobile App Feature (BusinessWire), Rated: A

Oakam has enhanced its mobile app with the launch of Oakam Grow, a new feature that uses gamification to make consumer finance more engaging, rewarding and inclusive. Oakam Grow builds on the UK-based consumer lender’s application of behavioural science to encourage the development of positive credit habits, and supports its strategy to bring digital disruption to the largely analogue micro-credit industry.

Oakam Grow gamifies the experience for Oakam’s mobile app users through the application of social currency theory, which enables customers to share in the financial upside of their responsible credit behaviour. Customers earn points when making repayments via the app or referring friends, redeemable for loan repayments, cash-back, store vouchers, lower rates on future loans, or to socially vouch for friends in the loan application process. Oakam’s award-winning mobile app first launched in 2015, and today more than 55 per cent of its customers are regular users. The addition of Oakam Grow will further drive app downloads and engagement.

Oakam has seized on the opportunity to disrupt the £1.8 tn global micro-lending industry through the use of AI, machine learning and cognitive science. The century-old industry has seen little innovation since its founding and today relies on the same analogue processes that keep cost-to-income ratios above 50 per cent, and prices high for consumers. The industry’s network of around 200,000 doorstep loan agents globally also leaves consumers with poor or no credit history, vulnerable to misleading offers and predatory practices.

Oakam’s omni-channel model, comprising its digital properties and UK retail network, confronts both the issues of inefficiency and consumer protection.

RateSetter Business Finance Adds Relationship Manager Amanda Sharp (Crowdfund Insider), Rated: A

RateSetter has appointed Amanda Sharp as Regional Relationship Manager for London and the South East. Sharp previously spent 35 years with RBS Group.

How to navigate the P2P maze (FT Adviser), Rated: A

Against a backdrop of rising inflation and continued low interest rates, it is no surprise that a growing number of the UK’s financial advisers are looking for ways to make their client’s money work harder.

And there is one solution in particular that has caught the attention of eagle-eyed advisers: peer-to-peer (P2P) lending.

Assuming current Bank of England inflation at 2.3 per cent, according to latest figures, and interest rate forecasts, money deposited in the average high street savings account today will shrink in real terms after both one and two years.

In fact, some high street bank cash savings accounts are offering just 0.01 per cent in savings – less even than the current Bank Base Rate of 0.25 per cent.

Even in its slowest year yet, 2015, the sector grew by over 80 per cent according to one report (Nesta, Pushing Boundaries: the 2015 UK alternative finance industry report).

P2P lending is likely to grow even faster as more and more P2P lenders receive their full FCA authorisation – heralding the arrival of the ‘Innovative Finance ISA’ (IFISA), which will almost certainly add to the momentum the sector is experiencing.

European Union

Why Stockholm is creating more unicorns than London per capita (elite business magazine), Rated: AAA

The result of the Swedish government’s tech drive of the 1990s is that while Silicon Valley may be the undisputed champion of the world when it comes to producing unicorns, Stockholm comes a close second. According to SparkLabs, the seed-stage fund, the Californian city has produced 10.7 unicorns per million inhabitants, the Nordic city produced three and Tel Aviv, which came third, birthed 1.2. So it’s no wonder the European Digital City Index ranked the metropolis as Europe’s second best city after London when it comes to supporting its digital entrepreneurs. “In Stockholm, we’re really freaking good,” says Stark.

But even though access to a solid infrastructure has proven vital in fostering this thriving entrepreneurial community, it isn’t the only factor. Equally important for the success of Sweden’s startups is the fact that that the nation has a population of just under ten million, which means new enterprises have to be thinking about international expansion from the get-go.

‘Shadow banks’ step into the spotlight (Financial Times), Rated: A

The growing influence of alternative capital is most evident in the US — in April 2015, nonbank lenders accounted for more than half of new government-backed mortgages. Banks are still the biggest lenders in Europe, but rivals are emerging. Many of the new players are linked to the securitisation industry, where loans are packaged up and sold on as bonds to capital markets investors.

Private equity-funded upstarts have quietly taken a more active role in the UK’s securitisation market, which used to be dominated by big banks.

Today one of the largest users of securitisation in the UK is not a bank. The Northview Group, which writes mortgages under the Kensington brand and is funded through securitisation, describes itself as a nonbank challenger lender.

A wave of nonbank lenders, including companies such as Munt and Dynamic Credit, have appeared in the past few years. These players now account for close to a fifth of new Dutch mortgages, according to IG&H, a consultancy. This is up from almost nothing just a few years ago. The companies take capital from institutions and lend to homeowners.

Technology companies that facilitate lending between investors and businesses make up another area of growth in shadow banking, and they are becoming more adventurous in the services they offer.

Funding Circle is one of Europe’s best known peer-to-peer lending platforms, where retail users can invest in loans made online. It lends £100m a month in the UK and is expanding in Europe.

As with other forms of shadow banking, European P2P lending lags far behind the US market. Investors who use Funding Circle, which is also active in North America, said they were disappointed last summer with the performance of US loans written by the company. The concerns followed losses that investors made on P2P loans securitised by OnDeck, a nonbank lender.

International

Statistic of International P2P Lending Services March 2017 (P2P-Banking), Rated: AAA

The total volume for the reported marketplaces adds up to 532 million Euro.

Milestones reached this month are:

  • Mintos crossed 150 million EUR in originations since launch
  • Moneything reached 50 million GBP since inception

Australia

Agri-lending helped drive SocietyOne to a new loan record (Finder), Rated: AAA

Peer-to-peer (P2P) lender SocietyOne has announced a new lending record, passing the $250 million lending mark in March of this year. Part of the lender’s success is due to increased demand for its two agri-lending products, which, combined with a surge in personal loans over the post-Christmas and New Year period, saw an additional $45 million lent to customers.

China

China P2P industry lending nears Rmb1tn despite crackdown, new regulations (Financial Time), Rated: AAA

Growth in China’s peer-to-peer lending sector has proven resilient in the face of new regulations and a year-long crackdown by authorities on online financing, with total P2P loans blowing past the Rmb900bn ($130.7bn) mark last month.

Outstanding P2P loans came to Rmb920bn at the end of March, according to new figures released today by lending platform Wangdaizhijia.

Month-on-month growth in outstanding loans slowed compared to before the new regulations were introduced in August, from 5.7 per cent in July 2016 to 4 per cent last month.But when viewed in renminbi terms, growth has ratcheted up, with the industry tacking on an average Rmb35.6bn a month in the seven months since regulations were introduced, compared to an average rise of Rmb29.1bn in the seven months ended August.

China curbs ‘Wild West’ P2P loan sector (Financial Times), Rated: AAA

Peer-to-peer lending in China is at an inflection point as state regulators aim to transform it from a “Wild West” industry rife with fraudsters into a respectable market in which legitimate lenders can offer funds to willing borrowers.

With their offer of attractive fixed returns over short periods, P2P investments appear similar to saving products that reputable commercial banks offer as an alternative to low rates available for deposits. P2P yields are typically higher than those available from banks, making them an easy sell to investors.

Since 2011, 3,556 platforms have collapsed, according to Online Lending House, a website that tracks the sector. In a third of the cases, law enforcement agencies closed the platforms or their owners or managers simply disappeared.

Asia

Dangoestate.com Real Estate Crowdfunding Platform Celebrates 1,000,000 Investors (Digital Journal), Rated: AAA

Dango estate, the now five months old Singapore based investment platform is growing by leaps and bounds. The mood at their three offices around the world was very high yesterday as they celebrated the 1,000,000’th investor on the platform.

Dango estate has achieved great success in the crowdfunding industry in the shortest time, the platform has already funded more than $500,000,000 in loans worldwide and delivered over $350,000,000 in principal and interest to investors, with yields as high as 10%.

Authors:

George Popescu
Allen Taylor

Friday March 31 2017, Daily News Digest

Kabbage On Deck

News Comments Today’s main news: BlackRock bets on robots to improve stock picking. Orca launches beta platform to stream P2P market investment. Quint raises 10M GBP for recapitalization. Monzo raises 2.5M GBP via Crowdcube. RegTech Association launches in Australia. Lending fraud trial begins in China. Yirendai announces intent on performance bond agreement with PICC P&C. Today’s main analysis: The strategic case […]

Kabbage On Deck

News Comments

United States

United Kingdom

European Union

Australia

China

Asia

News Summary

United States

BlackRock Bets on Robots to Improve Its Stock Picking (WSJ), Rated: AAA

BlackRock Inc. BLK +0.96% has started a shake-up of its stock picking business, relying more on robots rather than humans to make decisions on what to buy and sell.

Seven stock portfolio managers are among several dozen employees who are expected to leave the firm as part of the revamp, a person familiar with the matter said.

The changes are the most significant attempt yet to rejuvenate a unit that has long lagged behind rivals in performance. Clients have pulled money from the actively managed stock business in three of the past four years even as BlackRock’s total assets climbed to a record $5.1 trillion. BlackRock had $275.1 billion in active stock assets under management at the end of December, down from $317.3 billion three years earlier.

The Strategic Case For a Kabbage/On Deck Deal (Market Intelligence), Rated: AAA

On Deck Capital Inc. is unlikely to be tempted by a takeout offer from privately held competitor Kabbage, but a combination of the two digital lenders could make strategic sense.

A combination of these two companies would create the largest digital lender focused on small and medium enterprises in the U.S., with an estimated combined 2016 loan origination amount of $3.82 billion.

While a few years ago this would have seemed like an odd pairing, recent changes to On Deck’s business model have moved it closer to Kabbage. On Deck itself has had a tough time as a publicly traded company, with shares falling about 80% since its IPO. The company has struggled to rework its business strategy and create a clear path for profitability, despite growing annual originations from an estimated $15.9 million in 2008 to $2.40 billion in 2016.

By leveraging their existing technology to develop white-label solutions for banks, both companies have found a new source of higher-margin revenue. A combination of what are arguably the most advanced underwriting systems in the SME lending space would only accelerate licensing deals, which could eventually become a significant portion of revenue.

Appeals Court May Tackle `True Lender’ Debate Affecting Fintechs, Online Lenders (Bloomberg BNA), Rated: AAA

A federal appeals court may offer guidance on “true lender” analysis and how it affects bank partnerships with marketplace lenders and fintech companies ( Cons. Fin. Protection Bureau v. CashCall Inc. , 9th Cir., 17-cv-80006, petition for interlocutory appeal 1/13/17 ).

At issue is a petition by CashCall Inc., an online lender based in Orange, Calif., that’s now before the U.S. Court of Appeals for the Ninth Circuit. CashCall wants the Ninth Circuit to hear a mid-case appeal from an August ruling in a deceptive practices case that said it was the “true lender” in an arrangement with Western Sky Financial, a self-described tribal loan company.

In general, “true lender” analysis scrutinizes relationships between banks and nonbanks to discern which party actually makes the loan to a consumer.

PeerStreet Integrates with Wealthfront via Quovo to Provide Improved Access and Transparency (Yahoo! Finance), Rated: A

PeerStreet, an award-winning platform for investing in real estate backed loans, has announced an integration with Wealthfront, the most trusted automated investment service among young people with nearly $6 billion assets under management. This integration was made possible by the rollout of Wealthfront’s new financial planning experience, Path, which allows Wealthfront clients to receive financial advice and planning for all of their accounts.

As customers’ financial lives become increasingly complex, having all investments across platforms in one place provides consumers with more comprehensive information. PeerStreet users have sought out integrations with platforms like Wealthfront. Both PeerStreet and Wealthfront were able to quickly respond to their clients’ needs using Quovo, the industry leader in financial account connectivity. Using its account aggregation engine, customers investing on both platforms can view their PeerStreet positions within the context of their greater Wealthfront investment portfolio.

How crowdfunding is democratizing real estate investing (Marketplace.org), Rated: A

Rodrigo Niño is founder and CEO of a platform called Prodigy Network, which uses crowdfunding to build commercial real estate, like the tallest skyscraper in his home country of Colombia. Marketplace’s Molly Wood talked with Niño about crowdfunding.

Niño: I have to say that it is different because you would argue that traditional equity funding is easier because you deal only with one institution that gives you a check for the total equity that you require for a building, and you don’t need to deal with thousands of investors like we do. On the other hand, the top-down approach was one of the bigger issues in the crisis of 2007. We learned that the model of giving your money to experts that would know better didn’t work. So we like to believe that we act as curators of that collective wisdom of the crowd, and that they need to understand what they do.

Niño: I think that the model will spread and because this industry was ripe for disruption. You know, I think that the commercial real estate industry in the United States is even larger than the stock market. And now, thanks to technology and the JOBS Act, I believe that the public has access to incredible assets because it’s very understandable and very predictable. If you think about it, people cheat and lie and bricks don’t. So, that was exclusive to a select few, and now it is available to everybody.

This Real Estate Startup Is Exploiting Zillow And Airbnb’s Blind Spot (Forbes), Rated: A

Airbnb currently lists over 2.3 million homes, averaging more than 500,000 nightly stays across 65,000 cities. In 2016, the home-sharing giant snatched headlines after raising over $555 million from Google Capital and Technology Crossover Ventures, in pursuit of a reported $850 million round, raising the company’s valuation to $30 billion. This valuation positioned Airbnb as the second most profitable tech startup after Uber.

Founded in 2011 by Bill Lyons, Revestor is a digital real estate search engine that uses proprietary data and live listings to help sync realtors and potential investors with desired residential properties. While other services allow users to search real estate based on specific property details, Revestor lets users search based on investment criteria. This approach works to ensure the most profitable use of available funds, helping homebuyers track the projected resale value of their property over time. Thus, real estate investors can use various tools to determine whether a property matches their firm investing goals.

Bill Lyons: Per a 2016 National Association of Realtor’s study, 51% of home buyers found their home without using an agent. Additionally, over 90% used the internet to research the home they were buying.

Bill Lyons: The riches are in the niches. Everyone has their niche, and Revestor’s niche is that 25% of the business is investors.

Bill Lyons: Crowd funding for real estate is on the rise with companies like Patch of Land and RealtyMogul. I can see Revestor playing a key role in analyzing investments for private groups of individuals.

Investors Want Financial Advice From Both Robots and Humans, Says Accenture (Fortune), Rated: A

But a new study by consulting firm Accenture finds that clients across all ages and economic brackets want robots and humans together, not one instead of the other.

The findings follow news on Tuesday that BlackRock (BHK, +0.08%), the world’s biggest money manager, was laying off some portfolio managers in favor of spending more on data-mining techniques that could improve investment performance.

However, the market is changing so rapidly that study respondents said online tools they considered to be “bells and whistles two years ago” are now expected, Thompson said.

Robos Advisors Face Potential Collapse, Says FinTech CEO (FA Mag), Rated: A

John Ndege, founder and CEO of Pocket Risk, is predicting a collapse in the world of robo-advisors.

On Tuesday, Ndege announced a complete re-launch of his software, Pocket Risk 2, a digital risk tolerance questionnaire that attempts to holistically measure an individual’s risk tolerance and capacity.

Rather than an engine of efficiency, Ndege presents Pocket Risk as a tool to make financial advice more effective. According to Ndege, trust and awareness are the largest barriers between the advice industry and new client acquisition, not technology. Thus, advisors would be better served focusing on delivering financial plans rather than building the next great client portal or onboarding application.

Garnet Capital Advisors Announces $ 100 Million Consumer Loan Sale (Newswire), Rated: A

Garnet Capital Advisors, LLC is announcing the launch of a sale of $100 million of consumer loans on behalf of the National Credit Union Administration (NCUA).

Clarity Trends Report Presents the Evolution of the Subprime Market (Clarity Services), Rated: B

Clarity Services, the subprime industry’s largest credit reporting agency, today announced the release of its 2017 Subprime Lending Trends report. More than just a demographics report, it offers exclusive insight into emerging consumer trends that can help lenders reach the consumer where they are.

The report is based on a dataset containing exclusive performance data on 16 million loans from the past four years.

United Kingdom

Orca Makes a Splash: Launches Beta Platform to Streamline P2P Market Investment (Crowdfund Insider), Rated: AAA

Orca, an independent data, research and analysis provider in the UK P2P lending market, launched a new platform which aims to help financial advisers and sophisticated investors to better “seize” opportunities within the P2P market. The platform, by offering unique standardized metrics to compare P2P investments, will allow users to perform in-depth due diligence on P2P investments, benchmark them, and make risk-adjusted, informed investment decisions or recommendations.

The Belfast-based platform noted that the P2P market has seen tremendous growth in the past two years, increasing by 40% in 2016 and estimates that by 2020 around 2.7 million people will be investing in P2P.

Through Orca’s relationships with UK P2P lending providers, the platform has translated millions of loans, covering 90% of the UK P2P professional market.

Quint raises £10 million to fund recapitalisation (Finextra), Rated: AAA

NORTH West headquartered Quint Group, a leading international, highly innovative fintech group operating in the consumer finance market, has secured a £10m financing deal from Manchester based Tosca Debt Capital to fund its recapitalisation.

Quint is the company behind the UK’s fastest growing consumer price comparison site MoneyGuru.com*. It also owns and operates a portfolio of mutually beneficial and strategically aligned financial technology businesses in the consumer credit sector, including business-to-business lending marketplace and platform, Monevo, consumer credit reporting and financial management services such as Credit Angel, as well as its data business, Monevo Data Services which develops and provides cutting edge credit, risk, marketing and analytical data to the financial services sector.

Digital Bank Monzo Raises £2.5 Million backed by 6,800+ Investors via Crowdcube (Crowdfund Insider), Rated: AAA

Digital bank Monzo has broken a platform record on Crowdcube. The challenger bank has raised £2.46 million supported by 6,800 plus investors. The offer on Crowdcube is for 2.83% equity at a valuation of £84.75 million. The number of investors that have participated in the Monzo offer is the most ever on Crowdcube.

The challenger bank is raising a total of £22 million in the Series C investment round, including a £19.5 million investment from Thrive Capital, £5 million from Passion Capital and £1.5 million from Orange Digital Ventures, alongside the £2.5 million of equity crowdfunding on Crowdcube.

Saving Stream Rebrands as Lendy (P2P-Banking), Rated: A

What was formerly Saving Stream is now called Lendy. The operator of the marketplace has been Lendy Ltd. already, it was just trading as Saving Stream for investors. Now under the new domain Lendy.co.uk the company has brought together its services for investors and borrowers citing feedback by users.

The announcement email sent, reads:

Following feedback from users, we are integrating the Saving Stream platform under the Lendy brand. This is in order to simplify the brand and make accessing the crowdfunding platform easier for all our clients.

Lawrence Wintermeyer, CEO of Innovate Finance, Says Triggering of Article 50 Puts Fintech at Risk (Crowdfund Insider), Rated: A

Theresa May has signed the letter that will formally separate the UK from its 43 year membership in the European Union. As the UK initiates Article 50, Lawrence Wintermeyer, CEO of Innovate Finance – the advocacy group that supports all things Fintech – is out with a cautionary statement. Wintermeyer fears that Brexit may undermine the UK’s dominance in disruptive finance as it may be unable to attract the necessary skills to remain the global leader in financial innovation.

Editor’s note: The EU was organized on November 1, 1993, making it 23 years old.

25% Of Singles Think They’ll Never Be Able To Retire (Grazia Daily), Rated: A

If you want to feel thoroughly depressed about your future financial prospects, we have a disheartening new stat for you: according to a new survey from peer-to-peer lending platform Lending Works, 24 percent of single adults believe that they will never be financially secure enough to retire in their old age.

After surveying over 1,500 UK adults who are yet to reach retirement age, Lending Works found that financial security is more of a worry for those of us who aren’t in a relationship.

19 percent of those who are married or living with their partner reported the same concern. More drastically, 40 percent of the singles said they are currently unable to save money each month to plan for the future, in comparison to 29 percent of those who are married or co-habiting.

Extra! Extra! Daily Mail teams up with IFA to launch advice firm (Citywire), Rated: A

National advice firm Alexander House has partnered with the parent company of The Daily Mail to launch a new firm called Timber Finance.

According to the website Timber will charge an initial fee of 1% with a minimum amount of £750. It will also charge an ongoing fee of 1% per years for advice.

Insurtech the Rising Star of the FinTech Movement (Huffington Post), Rated: A

A recent report released by the lab examines the insurtech sector specifically, and explores the investment landscape in the sector.  The report analyzed over 450 deals conducted over the last three years, and reveals a particular focus in the sector on technologies such as AI and IoT.  Indeed, deals in these two areas alone increased by 79% in 2016.

The insurance industry is targeting technologies such as AI and the IoT specifically to help it deliver more personalized service to increasingly demanding customers.  The technologies both help provide insurers with more data to assess risk, and then help them do the calculations to underpin that assessment.

What to expect from the NACFB CFE 2017 (Bridging&Commercial), Rated: B

The NACFB has revealed that both Funding Circle and LeaseTeam Solutions Ltd will be supporting the event as the Association celebrates its 25th anniversary.

LendInvest’s property development academy expands to the North (Development Finance Today), Rated: B

Academy courses will now be held for the first time in Manchester on 25-26th May, Edinburgh on 22-23rd June, Birmingham on 7-8th September and Bristol on 9-10th November.

European Union

Prosper President Ron Suber Shares Insight & Perspective with French Fintech Industry (Crowdfund Insider), Rated: AAA

Ron Suber, the President of the US marketplace lender Prosper, was interviewed today by Cédric Teissier, the CEO of the French factoring platform Finexkap, at the annual conference of the  France Fintech association, titled “Fintech Revolution 2017 – Here to Stay”. Cédric Teissier asked Ron Suber as head of a worldwide pioneering and leading online lender to share his advice and his vision for the benefit of French fintech startups.

Asked about consolidation in the US market. Ron Suber pointed out that there are 3,000 online lenders in China and 300 in the US. These lenders serve diverse categories of borrowers from student to larger SMEs, from super-prime to subprime. Consolidation will happen because it is all but easy to master the three legs of online lending: the investors, the borrowers and the platform’s operational efficiency in risk management.

There are 14 different ways to find borrowers such as direct mail, partnerships, promotion etc. But out of ten prospects, only two will come to loan origination. Startups must focus on conversion efficiency to start making money. Prosper is 10 years old and next quarter will be its first profitable quarter. Generating cash is the most powerful way to dissipate doubts.

“My vision of where we are going is that of a portal where any of us can go to invest in any currency and any country, a portal similar to the Amazon or Priceline of finance. We are only in the first or second inning of this revolution. I used to buy CDs. My kids never do. Soon they will say: “I can’t believe that you used to go to the bank to get money.”

Compliance for Fintech Companies: What Your Website Visitors Have a Right to Know (Martindale), Rated: AAA

Between 2010 and 2015, total global investment in FinTech amounted to $49.7 billion. The most popular FinTech areas are those of payment and lending services (consumer and retail), block-chain services, such as bitcoin, and cybersecurity and cloud-based services, such as market monitoring and tracking.

Compliance with the Distance Marketing of Consumer Financial Services Directive is regulated by the Malta Financial Services Authority (MFSA). Failure to comply with the provisions in the Distance Marketing of Consumer Financial Services Directive may result in an administrative fine of up to €93,000 on the supplier, or the manager, secretary, director or other person responsible for the supplier’s activity.

Under the Electronic Commerce (General) Regulations, implemented through S.L. 426.02 in Malta, the financial institution shall only send direct marketing by electronic means if certain conditions are met.

The First Hall of the Civil Court in Malta may fine up to €4,658.75 for any breach of the provisions relating to comparative and misleading advertising.

Financial institution websites must ensure compliance with the Data Protection Act and the EU Directive on the Protection of Personal Data, and the Directive on Privacy and Electronic Communications. In Malta, the Data Protection Commissioner may impose fines of up to €23,300 for breach of any provisions within the Data Protection Act, and €50 for each day the violation persists, and/or to imprisonment of up to six months.

Australia

Catching FinTech Winds, RegTech Association Launches in Australia (Cryptocoins News), Rated: AAA

The RegTech Association has officially launched in Australia and is aiming to aid the regulation technology sector just like fintech is changing financial services.

According to a report from Finder, the Association will promote good corporate practice in compliance management and boost regulatory compliance outcomes.

Fintech investment in Australia increased in 2016 while the rest of the globe saw a decrease in funding. In a report from KPMG, last year saw total fintech investment amount to $US656 million across 25 deals compared to $US185 million across 23 deals in 2015.

The rise of regtech – the ‘little sister’ of fintech (Finder), Rated: A

The RegTech Association, which aims to shine a light on regulation technology, officially launched last night with an industry-first event in Sydney for key industry influencers including stakeholders from major banks, start-ups and industry regulators.

“What we’re really looking to do is facilitate collaboration between a group of Australian financial services stakeholders who we think can use these new technologies, and this growing crop of innovators who are building regtech businesses. And we hope that by bringing them together we can create a bit of an ecosystem in Australia around regtech,” Symons said.

China

1.5b yuan lending fraud trial begins (Shanghai Daily), Rated: AAA

A high-profile financial fraud trial — involving 1.5 billion yuan (US$220 million) of investor savings — started at Xuhui District People’s Court of Shanghai yesterday.

Fifteen former employees of the now-defunct online peer-to-peer lender Jinxing Investment were on trial. Ji Jianhua, the company’s chief financial officer, was accused of illegally raising funds, and 14 senior managers have been accused of illegally absorbing public savings.

Prosecutors said there were still 400 million yuan of repayments that weren’t made in the wake of the case being exposed.

More than 200 investors gathered in court in Xuhui for the hearing yesterday, many of them elderly investors. Trials of the 14 senior managers would be held at a later date, the court said.

Yirendai Announces Agreement of Intent on Performance Bond With PICC P&C (Crowdfund Insider), Rated: AAA

Chinese marketplace lending platform Yirendai (NYSE: YRD) announced on Thursday it has entered into an agreement of intent with the Beijing branch of PICC Property and Casualty Company Limited (PICC P&C).

Yirendai reported that under this new agreement, PICC P&C would provide Yirendai with a performance bond for certain loans facilitated through the online marketplace. PICC P&C will also reimburse lenders within the agreed scope should any losses incur due to the Company’s failure to perform adequate due diligence during the credit underwriting process.

Financial Inclusion, Regulatory Protection, and My Recent Trip to China (Orchard Platform), Rated: A

by Matt Burton, Co-Founder & CEO, Orchard Platform

Let me just begin by saying that I’m no expert on China or Southeast Asia, but I am committed to learning and keeping up. The market is incredibly complex and is advancing very fast. Based on my last two trips, I’m floored by how quickly the market is developing.

It’s also pretty clear that the development in the region, particularly in the financial services and technology sectors, is happening at a staggering pace and scale. As of September 2016, China had 8 of the 27 current fintech “unicorns” at an estimated US$96.4 billion total valuation with US$9.4 billion in capital raised—including the four largest valuations globally: Ant Financial (US$60 billion), Lufax (US$18.5 billion), JD Finance (US$7 billion), and Qufenqi (US$5.9 billion). To help put those numbers in perspective, the U.S. is home to 14 fintech “unicorns” at an estimated US$31 billion combined valuation with US$5.7 billion in capital raised.

The region is also seemingly light-years ahead in terms of innovation and adoption of these new technologies by a large base of underbanked and unbanked consumers—something I learned first-hand by being on the receiving end of scowls from the various vendors I interacted with when I tried to pay with cash. Mobile payment is everywhere, and is the preferred method of transacting at the point of sale.

China’s approach to fintech has been to focus on financial inclusion over financial protection, and this has led to rapid innovation and incredible growth.

Another takeaway? A significant area where the U.S. is ahead of China in this space is on the capital markets side. Most lending platforms in China are still funding loans using the peer-to-peer model. However, in my discussions with lenders, that does seem like something that is shifting. Some of the bigger platforms indicated that they are now seeing 20% to 30% of their originations purchased by institutional investors.

Asia

Now seek financial advice from Marvelstone Capital’s ‘robo advisor’ (Techseen), Rated: A

Marvelstone Capital, a Singapore-based data-driven asset management company, has announced the launch of a licensed ‘robo advisor’ platform for family offices in Asia in Q3 this year. The platform is being developed in partnership with Smartfolios, a Singapore-based fintech startup and will be available on desktop and mobile for Marvelstone’s clients.

Authors:

George Popescu
Allen Taylor

Why Online Lenders Need Strong Legal Counsel

online lenders need legal counsel

Non-bank financial services are being scrutinized similar to banks. This highlights the fact that the Consumer Financial Protection Bureau (CFPB) plans to hold online lenders to the same legal standards as other financial institutions involved in lending. The bureau gets a lot of information from lending companies themselves. It has executed “Project Catalyst,” which aims […]

online lenders need legal counsel

Non-bank financial services are being scrutinized similar to banks. This highlights the fact that the Consumer Financial Protection Bureau (CFPB) plans to hold online lenders to the same legal standards as other financial institutions involved in lending. The bureau gets a lot of information from lending companies themselves. It has executed “Project Catalyst,” which aims to help innovative consumer financial products meet regulatory requirements. The bureau also started the “no-action letter” initiative, which allows companies to seek pre-approval for product testing.

The CFPB recently fined LendUp a record $1.8 million for violating multiple provisions of the Consumer Financial Protection Act. Having the right law firm from the beginning is not only essential, but it’s a survival tool for lending startups struggling with complex legal issues with multi-state permissions, aggressive advertising, data security, and other issues that could get a lender caught in the crosshairs of regulation.

Venable LLP is a leader in compliance and regulatory litigation and does a lot of work in areas dealing with CFPB, enforcement, and investigations. A well-respected law firm ranked 66 on AmLaw’s top 100, the firm has close to 600 attorneys in multiple countries. Alexandra Megaris, an attorney at the firm, explained to Lending-Times the complicated scenario facing young startups. She advises companies on regulatory investigations and government enforcement matters with a focus on consumer protection, consumer finance, and advertising issues. She works with banks and non-banks to prepare for and navigate supervision examinations by the CFPB and other regulators, including advising companies on building and enhancing compliance management systems.

A Look at CFPB Case Studies

Megaris said the CFPB’s focus is on enforcement. Legal actions lead to big headlines, so attention is skewed towards enforcement. She believes that, though examination and supervision get less attention, they have the biggest impact on the FinTech ecosystem.

Though the CFPB has initiated many feel-good proposals, it has not been extremely amicable to the sector like other regulators. Many enforcement matters start out as examinations. Unlike investigations, examinations expect an “open kimono” policy. That is, they can access everything (even privileged documents). She also believes the CFPB has taken a lead over the FTC in becoming the most active regulatory agency in the FinTech lending segment.

LendUp was required to pay a restitution of $1.8 million to borrowers and another $1.8 million as a penalty. The CFPB found that LendUp misled consumers through false advertisements and other means with regard to the true cost of lending, shifting performers to lower APR loans and failing to report credit information to the bureaus. She also said this ruling puts the onus of responsibility on advertisers and marketers. Usually, the courts have held that affiliate messaging is the responsibility of the company. Now, the lead generator might also be obligated to make sure that information is being utilized by the end lender.

T3Leads and Lead Publisher is a case where the CFPB sought monetary relief, including disgorging the founder of Lead Publisher of his profits and banning him from the financial products and consumer leads industries. CFPB Director Richard Cordray issued a statement that said, “This is a reminder to the middlemen who traffic in personal information: If you ignore warning signs that those buying this data are violating the law, you risk the consequences for the harm you are doing to people.”

These cases show that CFPB is not going soft on Silicon Valley for any abuse of consumer rights. The entire FinTech industry will need to ensure it is compliant with the relevant laws, and that every vendor is responsible for how the information is utilized by the down chain.

Online Lenders Can No Longer Operate Without Sound Legal Advice

The True Lender Doctrine is another potential minefield for lenders. In the case of Cashcall, CFPB argued the company was the actual “true lender” and implied that its operations were unauthorized. Furthermore, the CFPB said, any legal structuring was deceptive and improper. The case hinged on the fact that, though payday loans were originated by tribal entity Western Sky Financial, the de-facto lender was Cashcall because the tribal entity had no monetary interest in the loans. Cashcall wanted to shield itself from state usury laws by processing transactions through an exempt tribal entity. Megaris has seen multiple litigations on the True Lender Doctrine and is not surprised to see that courts have ruled differently on similar sets of facts. This creates huge uncertainty for companies on whether their day-to-day operations are legal or not.

All this indicates that FinTechs are currently operating in a legal gray zone. It is essential to have compliance experts on board from the beginning. This will ensure that all products created are vetted by a professional well versed in what is allowed under the relevant laws. Advertising, affiliate network and purchase, and sale of users’ personal data are other corporate actions which need to go through an attorney to make sure the company is not participating in anything prohibited. Startups won’t be able to defend themselves by saying they could not afford such services or that the infractions took place when they were only a five-person team. LendUp got to know that the hard way. Other lenders are advised to learn from LendUp and firm up the legal side of the lending business.

Authors:

Written with Heena Dhir.

Allen Taylor