Modern Small and Medium Enterprises (SMEs) represent a significant part of the global economy, accounting for nearly 90% of all modern businesses. Modern SMEs are large contributors to the creation of workplaces and economic growth, especially in developing countries. Although they’ve become a vital part of the financial ecosystem, these businesses are facing extreme difficulties […]
Modern Small and Medium Enterprises (SMEs) represent a significant part of the global economy, accounting for nearly 90% of all modern businesses. Modern SMEs are large contributors to the creation of workplaces and economic growth, especially in developing countries.
Although they’ve become a vital part of the financial ecosystem, these businesses are facing extreme difficulties in accessing finances. SMEs are often associated with higher risks, sizeable transaction costs, and a lack of collateral—about 50% of small business loans get rejected.
Many business owners cite this financial exclusion as a key obstacle to the growth of their venture. The common hurdles in obtaining a loan include burdensome processes, low level of transparency, and the high costs associated with searching for a loan. For instance, the research by the Federal Reserve indicates that small business borrowers spend nearly 24 hours on paperwork alone during the loan application process at a bank.
The problem is global: businesses from East Asia and Pacific regions represent the largest share (46%) of the total number of underbanked SMEs worldwide, followed by Latin America and the Caribbean (23%) and Europe and Central Asia (15%). In 2018, the finance gap between the needs of global SMEs and available funds reached $5.2 trillion, according to SME Finance Forum.
Following the financial crisis of 2008, with the idea of de-risking their balance sheets, large banks started to avoid lending to SMEs by introducing stricter requirements to receive funds. For instance, in the UK, where SMEs represent a tremendous 99.9% share of the 5.7 million businesses, the value of issued bank loans fell to £55.6 million in Q4 of 2018, a 78% drop from its maximum of £255 million in 2009.
The other reasons include the variety of regulations banks have to cope with, insufficient credit history, and the high transaction costs of underwriting and onboarding customers. All in all, providing loans to small businesses has become less of a priority for banks. “If you look at the great recession, what you’ve seen is a bounce-back of commercial lending, but lending to small businesses really hasn’t come back,” sums up Darrell Esch, Vice President of global credit at PayPal. The majority of banks are not interested in lending relatively small amounts of money on a frequent basis. Some banks have introduced a sort of a loan threshold (commonly around $100,000 to $250,000), and won’t engage in loans below this level. The others will not address requests from SMBs with less than $2 million in revenue.
But technology changed the scenery for many small and medium-sized enterprises. In comparison to traditional financial institutions, digital lending companies provide favorable terms on credits. With low-interest margins, faster approval, and without initial fees, they are scaling up quickly and already capitalizing on new scoring methods.
On the Path to Digitalization
Top decision-makers in the banking sphere are aware of the success of alternative lending companies. However, still slowed down by legacy systems, banks are only dipping their toes in digital lending. The outdated technology at banks isn’t the sole issue. At the recent Lending Fintech Europe in London, lga Zoutendijk, a career banker with several decades of experience, said that “legacy culture is a bigger problem at large banks than legacy tech and a much more difficult challenge to overcome.”
For traditional lenders, fintech is an opportunity to innovate and modernize. However, one can’t fight legacy culture alone: on their path to embrace digitalization, bank institutions need a fintech partner to bring technology, speed, and flexibility to the table.
Fintechs are looking for such partnerships as well. With all the improvements in customer experience, they predictably lack the expertise in areas such as risk management, loan monitoring, and servicing that banks have in spades. This mutual knowledge gap creates partnership opportunities. Denise Leonhard from Paypal is sure that “nobody is going to be able to do it alone. To get to the next evolution of payments, it’s going to be really partnership-driven.”
Addressing the Challenge
But what is the biggest challenge in initiating the loan process for banks? Moody’s Analytics, a financial intelligence provider, conducted a poll among bank institutions. The results revealed that 56% of bankers consider manual collection and data processing to be the greatest obstacle in the process of underwriting.
These outdated methods lack consistency, accuracy, and auditability, not to mention, they are time-consuming. This results in additional work for risk officers at a bank, and assessing an SME’s creditworthiness becomes a challenging and unprofitable task. Traditional players just can’t compete with agile, fast-moving alternative lenders and their “time-to-money” credit decisions which take less than a day.
Lending to SMEs is not profitable for banks unless they change their operational approach. The solution lies in the automation of manual processes. Banks have to adopt such solutions for enhanced data collection, scoring, and further rule-based decisions, and solve the problem of the data’s inconsistency and delay. Igor Pejic, the renowned author of Blockchain Babel, sums it up: “It is simply not possible to offer the customers the speed they need in today’s economy with manual processes.”
But what’s more important for banks, those changes mean investing in the future: alternative lending options make customer experience of SMEs convenient, transparent, and adapted to the way those businesses operate.
The Future of SME lending
Partnerships between banks and fintechs are one of the most-discussed topics in the industry as they have the immense potential to impact long-term growth, customer experience and client retention for both parties. Industry professionals agree that bank-fintech collaboration is evolving as a common industry practice that will shape the future of the lending domain.
By partnering with alternative lenders, traditional players fight the challenges associated with the process of credit risk assessment, increase the quality of the loan portfolio, and stay competitive in the SME lending sector. More importantly, they have the opportunity to offer small businesses a shortcut to finance with fast access to cash, less paperwork, and fewer rejected applications.
In return, alternative lenders benefit from partnerships by getting experience in handling a complex regulatory environment, reaching new markets, and scaling quickly. In regards to this, old-fashioned “collaboration” is the new industry trend, while “disruption” is regarded somewhat as a thing of the past. Effectively, change is almost impossible without industry-wide cooperation and consensus.
The question: is how will banks and fintechs manage their respective strengths to proceed with deeper integration in a newly-formed system? It’s important to note that these integrations shouldn’t be regarded as acquisitions by any means. In other words, the technological vision of fintechs shouldn’t be at odds with the slow processes within banking institutions: one needs to convince multiple stakeholders and departments that the partnership makes sense. Here’s Chris Skinner on the partnerships: “Banks are slow to move, particularly at the beginning. Realistically, you should consider allowing at least 12-months from the moment you engage to the moment you have a partnership agreement signed.”
However, the financial industry holds little pessimism about collaborations: 82% of top executives at banking institutions have plans to partner with a fintech within the next 5 years. That’s only a matter of time before both parties streamline their processes to completely change the dynamics of SME lending.
All in all, given the competitive advantages that come with strategic partnerships, banks and fintechs have better chances to achieve their scale ambitions and reinvent their business models.
According to the CGAP report, the global opportunity for SME credit is estimated to be around $8 trillion. At the same time, more than 50% of overall applications are being rejected regularly. If banks want to take their share of the lucrative market, they need to modernize, and that’s totally good news for small businesses, technological partners, and the whole fintech ecosystem.
Dmitri Koteshov is the digital content marketer at HES (HiEnd Systems), a fintech company behind comprehensive lending and credit scoring solutions. As a seasoned professional, Dmitri maintains a longstanding interest in providing insights on fintech software development and analyzing current technology trends.
Affirm debuts new app for shoppers. The app allows consumers to shop and check out with “virtually any retailer.” This Business Insider article highlights Affirm’s need to step up its game in order to compete with Amazon, 66 percent of whose customers begin their search for new product at Amazon. Affirm will have to offer better deals for consumers and make it easy to purchase things. With Affirm’s relationship with Walmart, that shouldn’t be too much of a challenge. However, it will be a challenge.
OnDeck today announced the results of a national survey of U.S. small business owners that finds economic issues are the most important factors in determining their choice for president in 2020.
Economic concerns arise in several dimensions, including tax policy, job growth, support for small businesses, government spending and the overall economic climate. These issues were cited as the top concerns of more than 33% of those surveyed;
Immigration was an issue of interest for 11.3% of small business owners surveyed, ranking second behind the economy as a concern.
57% of small businesses surveyed said they were either Very Optimistic or Somewhat Optimistic about the economic outlook for their businesses;
93% of those surveyed said they plan to vote in the 2020 election.
60% of small business owners surveyed said they already know who they plan to vote for in the 2020 presidential election.
Affirm’s app also allows consumers to pay at any brick-and-mortar store that accepts Apple Pay or Google Pay, which is increasingly important as 24% of consumers want the flexibility to look online and shop in-store.
Those with Apple Pay or Google Pay enabled have also seen up to 14% of transactions driven in-store, making the Affirm app a rare omnichannel solution for customer acquisition.
Since Affirm’s launch, the landscape in the POS space is radically different than it was when Affirm entered. It is, first and foremost, a much bigger and more populated space than it once was. Other startups have come to the field — Afterpay, Uplift and Sezzle for example — but also bigger and more established names in financial services. In the last 12 months alone Square, Mastercard, PayPal and Chase have all rolled out POS installment lending products or enhancements as the market continues to pick up popularity among consumers, particularly younger ones.
The upward trend in my returns continued in Q2, making it the fifth quarter in a row with increasing returns. My preliminary return for the 12 months ending June 30, 2019 is 6.20% (one investment is still not final), the best I have achieved since Q3 2017.
Afterpay is one of a number of platforms that have sprouted up over the past couple years that are willing to float customers a couple hundred or thousand dollars to shop. In addition to it, there are Affirm, Sezzle, Klarna, and Quadpay. They are positioned as a more consumer-friendly option than credit cards, a whole host of services bent on—because this is 2019—disrupting the powers that be.
Globally, Afterpay, which launched in Australia, has over 4.6 million customers and 35,000 retail partners. In the U.S., where Afterpay only launched in May of last year, it has two million customers and is available at 6,500 retailers. Over three million people use Affirm, while another 500,000 have shopped with Sezzle.
Silicon Valley promises aside, Afterpay is, at best, a platform that allows you to take out what amounts to a small loan on an item. After an approval process—Afterpay does not check a credit score; others like Affirm do—the customer pays a fourth of the price upfront and the rest is paid off in three equal installments every two weeks.
Also new is the $1,500 limit, up from $500, that Afterpay raised after Hyde-McCormick proved himself a responsible shopper and the $87.50 payments currently due every two weeks.
In its quarterly report that tracks consumer delinquency trends, the American Bankers Association said that 30-day past-due rates ticked up in eight of 11 categories in the second quarter when compared with the first quarter, but stressed that delinquencies remain well below historic norms.
Maker DAO, the most active decentralized finance app on the Ethereum network, has announced a date for its long-awaited multi-collateral DAI generation. According to observers, November 18 may be the date MKR starts accepting other assets as collateral.
Multi-collateral DAI creation has the potential to be riskier in comparison to ETH-based models. Currently, Maker is deliberately over-collateralized at above 300%, with the minimum at 150%, due to the high volatility of crypto assets.
Loans tied to more than 50 companies have lost at least 10 percentage points of face value in just three months, according to data compiled by Bloomberg. Some have dropped a lot more, with lenders lucky to get back just two-thirds of their investment if they tried to sell.
It’s hardly a full-blown apocalypse for the junk-rated leveraged loan market, which totals $1.2 trillion.
Energy is the hardest-hit sector on the list, with more than $12 billion of loans falling more than 10 cents on the dollar. Consumer and health care follow, comprising around $8 billion and $5 billion of loans outstanding, respectively.
Under the CFPB’s May proposal, debt collectors could have unlimited contact with debtors through email and text messages, though consumers could opt out of such communications. Additionally, collectors could satisfy disclosure requirements with a hyperlink embedded in an email that takes consumers to a description about how they can dispute a debt.
Voyager Digital, LLC, a subsidiary of publicly-traded Voyager Digital (Canada) Ltd (Ticker VYGR.CN), an industry-leading best execution crypto asset broker, today announced a partnership with Celsius Network, in which Celsius will manage a portion of Voyager’s digital assets.
Zopa Group – which incorporates the P2P platform and upcoming digital bank – reported a pre-tax loss of £18.295m for the year ended 31 December 2018, compared to a pre-tax loss of £5.536m the previous year.
In a survey of 2,000 consumers, 47% of people who had recently bought a car with finance are unable to identify which type of finance deal they signed up for. Zopa estimates that the average car buyer could save up to £11,000 over the course of their lifetime by working out the best finance deal available.
Customers who were mis-sold loans by the collapsed payday lender Wonga are expected to receive less than 10% of what they are owed in compensation after administrators revealed that only £41m will be put aside for claimants.
I started working in the financial industry as an FX trader before moving to trading gold and copper, both much more inefficient markets than FX. I realised that the UK property market was a hugely inefficient market in the sense that lenders and borrowers are not meeting. On the one hand, you have very experienced property developers across the country who are trying to access funds to build homes but traditional lenders are no longer active in providing development finance.
Instead, we lend in places such as Coventry, East Anglia, Doncaster, Northern Ireland. Northern Ireland is a very good example of our strategic approach to lending. Last year, we did around 80-85% of our business in Northern Ireland.
Crowdfunding a start up brings to mind the statement ‘Nothing worth having comes easy’, never truer than in the case of launching a start-up. Getting a new business off the ground will often require capital. Something which a lot of people don’t know how to go about getting.
Half of the 200 landlords approached agreed tax changes and tougher mortgage borrowing criteria have thwarted their plans to buy more properties, while 15% admitted they had been put off buying homes to rent.
A third who still wanted to invest are considering a switch from buy to let to peer-to-peer lending secured against property, while 8% have already done so.
The stock in PPDAI Group Inc (NYSE: PPDF) closed 7% higher on Wednesday, at $2.83 per American depositary share, after it announced a positive trend in funding of loans by its institutional partners and increased loan origination volume.
For the third quarter, the Shanghai-based company, which operates an online consumer finance marketplace, said in a statement on Wednesday that the volume of loans facilitated by its institutional funding partners jumped to $2.64 billion, up 91% from the second quarter. Total loan origination volume was above PPDAI’s guidance, it said, as it reached $3.51 billion, up 14% from the previous quarter.
At the conference, Business Insider Intelligence identified four emerging themes that we expect to set the tone for the space for the next year: further proliferation of partnerships between banks and fintechs, increased focus on digital banks’ sustainability, accelerated innovation and disruption from small- and medium-sized business (SMB) lenders, and more challenges ahead for the UK’s P2P lenders.
CYBG bank and price comparison site GoCompare recently partnered to offer an energy compare and switch service for all of CYBG’s B customers.
Barclays bank partnered with SMB finance fintech MarketInvoice last year to give Barclays’ SMB clients access to MarkeInvoice’s solutions.
French Banking-as-a-Service platform Treezor was acquired by Société Générale last year, as the bank looked to enhance its ability to innovate and decrease time to market.
ID Finance, the fintech operating in Europe and Latin America, saw revenue growth of over 100% in the first 9 months of 2019 and is on track to double its revenues to €90m revenue this year. The data science, credit scoring and digital finance company is now planning its first equity crowdfunding round via Crowdcube as it targets €300m+ of revenue within 2 years.
The Binance cryptocurrency exchange has launched the latest phase of its relatively new lending program. For the program’s eighth installment, Binance is sticking with the model of short-term loans, as users only have to commit their crypto for 14 days.
These underbanked markets, led by countries in Asia and Africa, have inspired fintech innovation that’s leapfrogging the technology available in the developed world. Ant Financial Services Group’s Alipay and Tencent Holdings’ WeChat Pay in China, Paytm in India, and Safaricom’s M-Pesa in Kenya are some well-known examples.
Take Facebook Inc.’s plan to launch a digital currency called Libra in 2020. The social network’s gigantic reach—more than 2.4 billion active monthly users—could draw a much wider audience to Libra than has used previous cryptocurrencies. For instance, global remittances by migrants reached a record $689 billion last year, according to the World Bank.
San Francisco-based 500 Startups staked 43 such companies in the 12 months ended June 30.
Goldman is losing $1.3 billion on Marcus, trying to build a Fintech leader. Etrade is going to lose $75 million from cutting trading fees to $0 to keep up with Robinhood. Revolut is losing £35 million on £60 million in revenue, with another £140 million burned by Atom, Monzo, Tandem, and the rest.
Generally speaking, from a deposit point of view, these are still all small businesses at £1 billion in assets (e.g., Betterment manages $20 billion).
The first is that the Robinhoods and Monzos of the world are 10x overpriced relative to the payments apps. I can sort of buy this — though money in motion is way easier to capture than money at rest. The second is that venture investors think a finance user is worth $1,500 in a digital bank.
Recent examples of blockchain’s impact on financial markets go well beyond these initial applications or P2P lending or crowdfunding.
The first wave of applications in finance and banking is being driven by easily achievable gains in actively traded assets.
MasterCard incorporated a blockchain payment system providing vendors real time, lower cost settlements on cross-border transactions. Representing a consortium of more than 40 of the world’s largest banks, fintech firm R3 launched a payment system built on DLT platform Corda, to expedite intra-bank transfers.
St. Regis Aspen, a Colorado resort, is a partnership formed with a crowdfunding site, Indiegogo, that in lieu of a traditional IPO completed a private placement via DLT financing real estate. This sale of ‘tokens’ – fractional interests in the underlying property – raised $18m, compliant with securities laws.
The RBA has cut official interest rates for the third time this year, and already a handful of lenders have responded by slashing rates across their range of variable rate home loans. Right now, if your home loan doesn’t have a ‘2’ in front of it, you’re missing out.
The online lender has announced its response to the 0.25% drop in the official cash rate though, with loans.com.au taking 0.15% off a number of variable rate home loan offers for both owner occupiers and investors.
The changes, which come into effect on October 17, will have an impact on a number of loans.com.au home loan offers including:
The growth and success of peer-to-peer (P2P) lending is a testament of the viability of risk-sharing contracts, where the investors take on some risks (for higher return) from the ventures they are financing. This way, finance will be grounded in the real economy, which is another core principle of Islamic finance.
BFS Capital, a leader in small business lending, has officially launched a data science and engineering hub in Toronto as the company accelerates its plans to develop best-in-class digital financial products for small businesses across the globe.
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half […]
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half day event included more than 500 speakers and 15 agenda themes.
Themes included :
Payments and Platforms
Banking and Personal Finance
AI and Deep Learning
Cybersecurity and Fraud
Alt Lending and Credit
Blockchain and Crypto
Digital Identity and Biometrics
And much more
While this is going to serve as a brief overview of the Conference, some of the notables who spoke, and bigger announcements, there will be special interest on Alternative lending and credit. We’ll also look at the all-important payments race.
A lot of the coverage is available on YouTube where Money20/20 has its own channel, so, if you missed the conference, you still have free access to some of the information.
Apple Co-founder Steve Wozniak is always a good bet to help you get a financial conference rolling. The business legend’s assurances that the claims that artificial intelligence (AI) and robotics, along with other forms of technology, are going to cut into human productivity are unwarranted helped to establish an ongoing theme that tech is necessary for the broader inclusiveness of our collective financial future.
Jennifer Bailey, VP Internet Services for Apple Pay, detailed some of the expansions of the new iPhone X, which include face ID security.
Other notable speakers from the first day of the conference included John Collison of Stripe, Michael Mebach, CPO of Mastercard (who spoke on how to build a seven-trillion-dollar middle class), Anand Sanwal of CB Insights, and Bill Ready of PayPal.
Day Two’s lineup of speakers was headed by none other than Virgin’s own Richard Branson, who told a remarkable story about how he created Virgin by renting a plane and selling seats to the other passengers scheduled to be on the American Airlines flight that was delayed. Sallie Krawcheck, Ellevest’s CEO and co-founder, had some valuable remarks on diversity, and Vanessa Colella, head of Citi Ventures and CIO of CitiGroup, shared some keen insights on partnerships.
Possibly the speaker from the conferences second day who made the biggest impression was Nikolay Storonsky, CEO of Revolut. The way money is moved is changing rapidly, but if Storonsky is correct in his predictions, it may change even faster. He predicts that in 10 years, two or three large fintech players will take 95 percent of banks’ business marking an industry overhaul akin to how Amazon bypassed the retail industry and Uber took on taxis.
Patrick Gauthier, VP of Amazon Pay, spoke to Tracey Davies’s central theme when he talked about the use of technology to make things simpler and more natural between the merchant and the consumer. Harley Finkelstein, CEO of Shopify, pointed out that middlemen will not be totally going away in the financial realm of the future, but they will have to “provide a disproportionate amount of value for their profit margin in the future.”
Other notable speakers included Asiff Hijri, president and COO of Coinbase, who framed the crypto world well when he spoke of the two base use cases of the space, the store of value of bitcoin and the ability to build apps on top of Ethereum, while noting that we’re still looking for that breakthrough app. His quote “Fintech before crypto, and the promise of a stablecoin…is like mobile before the iPhone came along” might be one of those “remember when” moments.
NBA legend Shaquille O’Neal also spoke on the third day of the conference. Now an advisor and advocate of Steady, the platform which helps Americans find work, says his partnership with these efforts is driven by recollections of a past where the only investments that paid off were those he embarked on in order to help others.
Much of what happened on Day Four is listed below, including the Uber/Barclays and the Grab/Mastercard partnerships, but the day also had some other mentionable happenings.
Marisol Menendez, head of open innovation for BBVA, introduced the overall winner of the 10th annual BBVA Open Talent competition, the reward going to Sedicii; founder Rob Leslie accepted the award. Sedicii provides a service that identifies data between two organizations without exposing the underlying data.
Also, adding some hope for the financial sector in general, Ripple’s Co-Founder and Executive Chairman Chris Larson stated that he thinks digital assets can help guard against another financial crisis by solving some of the key problems of global liquidity. He also predicts that a fluid digital asset (he thinks it will be XRP, of course) will make more fluid the trillions of dollars that are tied up due to the “clunkiness” of current systems.
Focus on Alternative Lending and Credit Cards
As instant payments and expanded remittance options gain more prominence in the world of payments and commerce, an app designed to speed up the remittance process, designed via Visa APIs, took top honors at the conference.
American Express and Amazon announced a partnership, which will produce a no-annual-fee business card. Cardholders (Amazon Prime members) will get to choose if they want to receive five percent rewards on any Amazon purchase (Whole Foods included) or 90-day payment terms, a reward that might benefit small businesses with cash flow issues.
Goldman Sachs’s Marcus Platform announced a new wealth management offering designed to make the financial market more inclusive for average Americans. The offering will focus on online savings accounts and personal lending, the end game being to educate customers on some of the ins and outs of the financial sector.
Grab Financial and M and A Mastercard announced a partnership that will make prepaid cards available to underbanked and underserved customers in Southeast Asia in order to bring them into the financial realm and allow them to conduct business globally.
Gregory Wright, CPO and SVP of Experian, touched on a common theme from the conference, that of businesses going forward by putting consumers first. He reinforced the platform’s focus on putting the consumer at the center of the lending decision by giving the consumer more control over his or her data to allow them to make a more informed lending decision. The goal is for lenders to make better decisions at lower risk while giving more consumers access to credit.
David Richter, global head of business and corporate development for Uber, joined with Curt Hess, CEO of BarclayCard US, to announce the unveiling of the Uber Visa card. A native app specifically designed for the Uber platform, the app will make it more engaging and enjoyable for Uber riders and Uber eaters to experience the platform. The card will also offer real-time notifications of rewards and balances, rather than customers having to wait a month for a statement as credit cards traditionally do.
Other Noteworthy Announcements
ViSync took the grand prize in the conference’s hackathon challenge. According to a Visa spokesperson, their entry, an app designed to help send remittance payments overseas, should make it easier for migrant workers to send money back to their home countries.
FICO announced an “Ultra” FICO rating. The new device will consider how people manage their checking accounts and will incorporate things like overdraft history to determine credit scores. The goal is to help younger people and others with little or no credit and people who are rebuilding their credit after a couple of setbacks.
Tracey Davies, president of Money20/20, also announced the Rise Up! program, the pilot of which took place at this event. Rise Up! seeks to increase inclusion into the financial sector on all levels. This pilot program, which will expand to other demographics in the future, focused on gender (women make up 50 percent of the population, but only 20 percent of leadership roles in the financial sector.). Of the 300 women who applied to the program, only 35 were selected. Those who were selected were privy to special seminars and one-on-one access to various leaders from the financial space.
The Payments Race
Knowing how we build points of sale, I wonder if the organizers of the original event knew just how apropos the payments race would be to the overall message of the Money20/20 events. Whether they did or not, the event serves to draw a good picture of how we use and interact with different forms of currency in our daily lives.
Closely resembling the scavenger hunt of the television series The Amazing Race, five participants were given six days to make it to Las Vegas for the opening day of the convention. They drew to see which host city will host most of their scavenging, and then they all have to make it to their city and then to Vegas. Along the way, they got points for things like the number of states they visited and the different modes of transportation they use.
The catch is this: Each participant was only allowed to use one form of payment; the options were
Team Credit Cards
Team Devices (Apple Pay and such)
The episodes—all of which can be seen on YouTube—show the obstacles in trying to perform these tasks with only the given form of payment.
As you can imagine, Team Checks had a hard time of it, and they had to rely on the goodness of many others to navigate their journey. Team Cash didn’t face as many obstacles, but travel required some finagling as they got deeper into the trip. Team Crypto had some transportation issues early on, but also relied on the kindness of others to make the necessary accommodations.
Team Credit seemed to have the most ease traveling—they just rented an RV and drove—and the representative from Team Devices said after it was all over that using only devices proved to be easier than she thought it was going to be; she did have to go to some pretty significant lengths to rent a car.
In all, the little series of videos showed the importance of various forms of payment and that we still haven’t gotten to the point where we can survive conveniently on one single form of payment; still, everything from the conference seems to speak to the reality that we’ll get there.
And how did the race turn out? Well, I haven’t seen an actual crowning, but Team Crypto was the first to get to the Las Vegas sign, which was basically the finish line—I haven’t seen anything that mentioned how each fared at the number of states visited or modes of transportation used. If Team Crypto did prove the winner, it was their second straight title.
The event will return to Vegas next year, the dates being October 27-30, 2019.
Online lender LendingClub Corp (LC.N) reported an adjusted third-quarter profit that edged past analysts’ estimates and raised its full-year earnings forecast on Tuesday, helped by record loan originations and higher transaction fees.
The company said it now expects 2018 adjusted earnings of between $89 million and $94 million, up from a previous range of $75 million to $90 million.
Fifty years ago, if you needed a loan for yourself or your business, you would typically walk into a brick-and-mortar bank, fill out a bunch of paperwork, talk to a loan officer, and wait several days or weeks to find out if you were approved. Today, this story has changed, and it’s going to look even more different in the future.
Borrowers seem to like GreenSky’s new way of obtaining credit. So far, the fintech company has served more than 1.9 million customers, providing them over $13 billion. Perhaps GreenSky’s most promising distinction is that it has also been consistently profitable with its new way of providing loan services. Its transaction volume has grown steadily from $2.1 billion in 2015 to $3.8 billion in 2017. During the same time, it grew its merchant base from 5,000 to nearly 13,000. Clearly, consumers in the 21st century like the new way of borrowing.
GreenSky estimates the home improvement industry, one of its key targets, to be just south of $350 billion annually. At a transaction volume of $3.8 billion, the fintech company has roughly 1% of the market.
The APR’s for GreenSky’s products tend to fall between 5% and 24%, depending on the borrower’s credit profile. Loan terms vary from 42 to 90 months, and customers can borrow up to $55,000. GreenSky does not cater to subprime borrowers.
Late in 2018, GreenSky announced a new partnership with American Express.
OnDeck posted gross revenues of $103 million, up 8% from the previous quarter and 23% from the prior year period. OnDeck is benefiting from higher interest income due to rate increases as well as their origination growth while being able to decrease funding costs. Effective interest yield was 36.5%, up from 33.1% last year.
Net income came in at $9.8 million for the quarter, up from a loss of $4.1 million from the prior year period.
Gross revenue of $392 million to $396 million, up from $380 million to $386 million,
Net income of $20 million to $24 million, up from $10 to $16 million, and
Adjusted Net income of $40 million to $44 million, up from $30 million to $36 million.
GreenSky reported record transaction volume in the third quarter of $1.4 billion, up 33% year over year. Revenue increased 29% to $113.9 million year over year. GAAP net income was $45.7 million.
Net revenues were $184.6 million, up 20% from the prior year period and originations were $2.9 billion, up 18% from last year. Applications also reached their highest levels, up 30% year over year.
In Q3 2018 GAAP Consolidated Net Loss was $22.7 million, or $7.3 million if you exclude $15.5 million of expenses related to outstanding legacy issues.
Total loans issued by the company now stands at over $40 billion.
Net Revenue in the range of $688 million to $698 million.
GAAP Consolidated Net Loss in the range of $129 million to $124 million, reflecting expenses related to outstanding legacy issues through the third quarter partly offset by higher Adjusted EBITDA guidance.
Adjusted EBITDA in the range of $89 million to $94 million.
October’s best mortgage offers for borrowers with the best profiles (the 95th percentile of borrowers) had an average APR of 4.61% for conforming 30-year fixed-rate purchase loans, up from 4.39% in September. The APR on refinance loan offers increased 22 basis points (bps), to 4.62%.
For the average borrower, the purchase APR for conforming 30-year fixed-rate loans offered on LendingTree’s platform was 5.27%, up 18 bps from September. The loan note rate of 5.14% is the highest rate of the year.
Consumers with the highest credit scores (760-plus, representing the 65th percentile of borrowers) received an average APR of 5.12%, versus 5.42% for consumers with scores of 680 to 719. The APR spread of 30 bps between these score ranges is the same as it was in September. For the average purchase loan amount of $233,938, the spread represents over $15,000 in additional costs for borrowers with lower credit scores over 30 years.
For the average borrower, the APR for conforming 30-year fixed-rate refinance loans increased 17 bps from September to 5.26%. The spread between credit score brackets (760-plus and 680 to 719) remained the same as last month, at 24 bps. That amounts to nearly $13,000 in extra costs over the life of the loan for borrowers with lower credit scores, given an average refinance loan of $238,447.
LendingTree today released its study on where millennials owe the most on their cars.
Even car loans are bigger in Texas. Metros in the Lone Star State dominate the top of the list: McAllen, Houston, El Paso and San Antonio have the highest median auto loan balances for millennials at $23,704, $20,925, $20,544 and $20,521 respectively.
Car capital of the world has the lowest auto debt. Ironically, Motor City has the lowest levels of millennial auto debt on our list with a median debt of $10,841 as well as the lowest average debt of $14,573.
Great Lakes area metros shine with the least auto debt. After Detroit, millennials in Rochester, N.Y., Grand Rapids, Toledo, Ohio, and Cleveland carry the lowest median auto debts, at $12,165, $12,429, $12,678 and $12,717 respectively.
New York and Ogden, Utah. These metros are on opposite ends of the spectrum when it comes to carrying any auto debt at all — New York has the lowest percentage of millennials with auto debt at 41.5 percent while Ogden, Utah has the highest percentage of millennials with auto debt (64.5 percent).
To prevent the average consumer from being charged more than $1700 in hidden markups on auto loan packages, Outside Financials opens an independent loan marketplace to facilitate transparency in auto lending and auto refinance.
Eugene Ludwig, founder and chief executive officer of IBM’s Promontory Financial Group, said artificial intelligence — already employed to help identify potential anti-money-laundering activity — is getting smarter, and can now be used to identify vulnerable groups of people who have been incorrectly labeled as high risk.
For example, Nerdwallet personal loan product page sorted loans by interest rates.
“All our consumers hated it. They wanted it sorted by monthly payments, which seems odd until you put yourself in their shoes and see what is going on month by month,” Chen said. “We have to meet them where they are. If you start by wagging your finger, that’s a good way to get them to hit the back button on their browser.”
Nerdwallet has three million members and more than 100 million visits each year, Chen said.
Riivos Mortgage, a division of Riivos, Inc., the provider of cloud-based continuous value chain management technology, today announced that NRL Mortgage, an originator serving customers coast to coast, is using the Riivos Mortgage Lending forecasting, planning and reporting application to help them analyze and capitalize on growth opportunities. NRL Mortgage is majority owned by St. Christopher’s Holdings LLC, a privately-owned holding company based in Houston, Texas.
U.S. District Judge Lee Yeakel on Tuesday reversed a previous order from June and granted, in part, the request by acting CFPB Director Mick Mulvaney and two industry trade groups to delay the payday rule’s August 2019 compliance date. They sought a delay to prevent lenders from having to comply with the old rule before the revisions are finalized.
Obtaining a banking license and then launching an actual new retail bank requires capital. A lot of capital. Enter Zopa, the U.K. peer-to-peer lending company that wants to become a bank, which today is announcing that it has closed £60 million in further funding. Only £16 million is actually new new money, having already disclosed £44 million in August, so this is effectively an extension of that earlier fund-raise.
Jaja Finance, the company on a mission to simplify the world of consumer finance, announces that it has already reached its fundraising target of £3m on equity crowdfunding platform Seedrs. The company will use the funds to expand its team and launch its digital credit card, Jaja.
Germany-based challenger bank N26 is bringing its services to Denmark, Norway, Poland, and Sweden.
“N26 passes on these cost benefits to its customers. N26 partners with the most innovative fintech and traditional financial companies to offer its customers best-in-class products such as TransferWise (foreign exchange), Raisin (savings), Clark and Allianz (insurance), auxmoney (credit) and others.”
BBVA and Red Electrica Corporation have become the first businesses in the world to deliver a syndicated loan using blockchain. The €150m deal, granted by BBVA, BNP Paribas and MUFG, was reached in record speed using BBVA’s proprietary platform- which is powered by distributed ledger technology.
In financial services, an industry where trust is a particular issue, Monzo was founded on the idea that there should be an alternative to traditional banking practices. Monzo argues that banks should get rid of punitive fees, do more to ensure customers know exactly what they can expect to pay for an overdraft, and provide greater control over how people spend their money.
Start-up Wagestream has just raised £4.5m for a business it promises will kill off the payday loan sector and the ‘payday poverty cycle’.
Bankers who regard payment technology companies such as fintechs as a problem may be missing opportunities.
Alternatives to payday lending are an example. These fintechs provide credit for nonprime customers, such as a recently divorced woman faced with a slew of new expenses. It is pricey credit, but cheaper than payday lenders. Unlike payday lenders, these companies provide credit reporting and reduced rates as a client pays off the loan. Eventually, a successful client qualifies for bank lending and leaves to take advantage of bank interest rates.
FinTech has revolutionized the way that banks and insurance companies function. Rather than prioritizing themselves and their services as in the past, banks must emphasize client needs in today’s new technological era. This focus on personalized financial services manifests itself in FinTech—a financial infrastructure for consumer enablement. As FinTech applies data and technology to financial services in an effort to address industry challenges, artificial intelligence is essential to FinTech’s existence and usage.
A division of the worldwide accounting and consulting firm PwCis currently working with a new stablecoin project that aims at developing a U.S. Dollar-based coin. The Hong Kong division will be exploring the best practices for issuing new stablecoinsworking with the Loopring Foundation.
A new piece of research, sponsored by Finastraand executed by Mercator Advisory Group, shows that small and midsized financial institutions can derive significant benefits to operational efficiency by pursuing three distinct cost-saving strategies: vendor consolidation, cloud delivery, and artificial intelligence. Based on in-depth interviews with C-level representatives of community banks and credit unions with asset size between $200 million and $5 billion, the research gauges attitudes toward and levels of adoption for each strategy.
Consolidation of vendors ultimately eliminates the need to maintain and manage multiple systems, and can improve operational efficiency by 20-30%.i
Cloud delivery brings numerous benefits including the ability to easily scale system capacity to meet demand.
Artificial intelligence (AI), which is the least adopted of the three strategies to date, promises to make processes smarter, faster and more personalized to the consumer. However, in order to reap these rewards, banks must prioritize their vendor consolidation and cloud delivery road maps.
The white paper, titled Landmark Decisioning: Using Vendor Consolidation, Cloud Computing, and Artificial Intelligence to Improve Operational Efficiency, is available here.
Persona, the blockchain-based solution for identity management,has just announced its partnership with FintruX, the P2P lending ecosystem, to streamline the onboarding process for customers while ensuring they remain in full control over their personal details.
Persona is the first identity management solution developing its own blockchain, as opposed to other projects being developed as ERC20 tokens over Ethereum.
Funding Societies | Modalku (FSMK) is the only peer-to-peer (P2P) lending platform from Southeast Asiato be included in Fintech100, an annual list of the top 100 leading financial technology innovators from around the world.
While the fault lines of the last global financial crisis have been mostly addressed, risks remain and have shifted in three ways over the past 10 years, said the Monetary Authority of Singapore’s (MAS) managing director Ravi Menon on Wednesday (Nov 7).
Meanwhile, the extension of credit has shifted from banks to non-banks – one of the areas that have not been given enough attention, said Mr Menon.
Equifax Canada and Loop today announced the launch of a credit health and monitoring platform for businesses. Launched at the intersection of Small Business Month and Financial Literacy Month, the new platform empowers Canadian small business owners and entrepreneurs alike, to improve their financial and credit health through easy-to-read credit scores, reports and resources.
It is now possible to attain a loan for Canadian Dollars (CAD) using bitcoin as collateral. The ability to use crypto as a form of collateral for fiat is a sign of further legitimacy for the sector. More providers are expected to follow suit and offer crypto loans, with a wider range of fiat currencies for a larger range of acceptable cryptocurrencies used as collateral.
In early October, TIME Magazine released its inaugural list of the top 50 Genius Companies, and two online lending companies, CommonBond and Oportun were included. The magazine asked its global network of editors and correspondents to nominate companies that are inventing the future. They then evaluated the candidates by such factors as originality, influence, success, […]
In early October, TIME Magazine released its inaugural list of the top 50 Genius Companies, and two online lending companies, CommonBond and Oportun were included. The magazine asked its global network of editors and correspondents to nominate companies that are inventing the future. They then evaluated the candidates by such factors as originality, influence, success, and ambition.
What they were looking for
A video titled How We Chose the 50 Most Genius Companies of 2018 includes snippets of interviews from founders and CEOs whose companies made the list. Viewing these gives us more insight into what the magazine saw as worthy of “genius” thought. Bob Igor, CEO of Walt Disney, talks about having “constant curiosity, constant desire for more knowledge about what is new.” Luis von Ahn, CEO of Duolingo, whose company’s goal is to give “equal access to education to everybody,” reminds us that it’s “OK to fail.” Anne Wojcicki, co-founder and CEO of 23andMe, says that “it’s not that taking risks is essential, it’s that being open-minded to a different way of looking at a problem is essential.” She adds: “Risk…is essential to creating a new path and making change.”
These are all revelations that the 50 companies represented have made, whether they are time-tested and proven companies or promising start-ups.
Notables on the list
The list has a good mix of both types of companies, those which are proven winners and those that are trying to make their mark by helping to better the world. Long proven household names like Apple, Disney, and Lockheed Martin are joined by newer companies that now define so much of our world, like Amazon, Netflix, Spotify, and Pinterest, and those who look to shape the future more differently than the past, like SpaceX, Slack, and Lishtot.
And then there are the two online lending standouts–Oportun and CommonBond.
Oportun and CommonBond are moving to make money more easily accessible for sectors of the population that need it. Oportun is working to make loans available to higher risk borrowers than those that have access to more traditional means of lending while CommonBond is looking to transform access to student loans.
Oportun is a Menlo Park California company that provides emergency loans for low-income consumers who can’t get a loan from a traditional bank and who don’t want to get into the vicious cycle of high fees and triple-digit interest rates of payday lenders.
Oportun began with a focus on serving the Latino community but has expanded to open borrowing to the estimated 45 million Americans who have little or no credit history. In lieu of credit scores, Oportun relies on other data to assess applicants, such as the length of time that a person has had the same job or address.
CEO Raul Vazquez says that Oportun is “committed to building a sustainable business that helps people shut out of the financial mainstream.”
Proven Track Record
To this point, the company has proven it can make a profit while providing $5.4 billion worth of loans to people who didn’t meet banks’ criteria. In so doing, the Oportun team has helped some 600,000 customers establish credit scores and open themselves to future borrowing by reporting successful payments to credit bureaus.
A CDFI (Community Development Financial Institution), Oportun issued its first securitization in June 2013, and it announced its twelfth securitization last week, issuing $275 million of three-year asset-backed bonds secured by a pool of its investment loans. Morgan Stanley and Co. LLC served as lead book-running manager, and Goldman Sachs and Co. LLC and Jefferies LLC were joint book-runners.
As of now, the company has loans available at retail locations in nine states: Arizona, California, Florida, Illinois, New Jersey, New Mexico, Nevada, Texas, and Utah. Online loans are also available in Idaho, Missouri, and Wisconsin.
Rates of Service
The company’s interest rates average about 35 percent, a reasonable rate for high-risk borrowers.
The Economist, Consumer Reports, and The Wall Street Journal are among the publications that have reviewed the company favorably. Oportun was even named one of the three finalists in The Wall Street Journal’s 2018 Financial Inclusion Challenge.
The team heading up the company has many notables, including Vazquez, who is the former CEO of Walmart.com. Chief Credit Officer, Patrick Kirscht, previously served as Senior VP of Risk Management for HSBC Card Services Inc., and Johnathon Coblentz, who serves as CFO and CAO, is the former CFO and Treasurer of MRU Holdings Inc. and was Vice-President of Fortress Investment Group LLC.
With the rising price of college tuition and the more than $1.5 trillion in active student loans in the United States today—more than car loans and credit card debt—the market is ripe for new players in the scholastic financial space. CommonBond has been working to put a new face on student loan refinancing since 2011.
By staying small and using technology to keep costs down, CommonBond seeks to offer borrowers refinancing rates lower than those of the federal government and private banks. The firm estimates that it saves borrowers on average $24,000 over the life of their loans.
CommonBond offers three types of loans (Undergrad, Graduate, and MBA) and repackages and refinances existing loans at lower rates.
The firm offers loan terms of five, 10, and 15 years, with amounts ranging from $5,000 to the cost of tuition. The loan cap for any borrower is $500,000. The company offers the customer a personalized rate before he or she applies. Loan origination fee is two percent, and the company charges no prepayment penalties. CommonBond’s late fees might be especially attractive to college-age students, who might not always get their payments in on time. The late fee is only the lesser of $10 or five percent of the monthly payment.
Being a father of school-age children, CommonBond is a company I could see myself using in five or six years, and I read the reviews of the company as a potential customer. The reviews aren’t all glowing, but they give me an overall feel that this is a firm I could do business with, if I so needed. Fast Company named CommonBond the Most Innovative Company in Education earlier this year, and thecollegeinvestor.com, despite thinking the rates could be more competitive, continuously puts the company on its Best Companies to Finance Your Student Loan list. CommonBond is also one of only three lenders the site recommends for finding the best student loans.
Double Bottom Line
Charitable work and philanthropy being so important in today’s world, it can’t hurt for a company to have a strong double bottom line. This is one area where CommonBond sets itself apart from others in the space. Every time a loan is funded, CommonBond covers the price of a child’s education through its “Social Promise.” The firm’s partnership with Pencils of Promise has provided schools, teachers, and technology to thousands of students in the developing world, and its commitment to social equality also distinguishes it as a true difference maker in the United States. Loans and restructuring are available to anyone with a degree from a not-for-profit American university regardless of citizenship, as long as the customer meets the other criteria.
Those of us in and around the online lending space can be heartened by the addition to these two companies to this list. We can also be heartened by the continued efforts of business founders to make funds available more easily and affordably for Americans just trying to navigate the business aspects of life. Both of these companies should be recommended to those who may benefit from their services.
Sam has a side business repairing fences and one of his bids was just approved to begin work immediately. Now he needs to come up with the money to buy supplies a few weeks before he receives payment from the customer. Because of unpaid medical bills from several years ago, he has a low credit […]
Sam has a side business repairing fences and one of his bids was just approved to begin work immediately. Now he needs to come up with the money to buy supplies a few weeks before he receives payment from the customer. Because of unpaid medical bills from several years ago, he has a low credit rating, and applications for small business loans have been denied.
Joan is an artist with a promising jewelry line. She’s invited to sell her products at a popular bridal show that will result in big sales and future business opportunities at local boutiques. However, Joan must come up with money upfront to pay for booth space, displays, and material to make the jewelry. Since Joan has high credit card debt, she can’t access traditional financing.
The FDIC says nearly a quarter of U.S. households used alternative financial services in the past 12 months. One major factor is that two out of five Americans experience income swings of more than 30 percent month to month. In fact, 15 percent of U.S. consumers — approximately 37 million adults— do not have a bank account, according to a 2016 Pew Charitable Trust Study.
These statistics underscore the need for alternative financial services to assist unbanked, underbanked, and sub-prime consumers who have credit scores under 600.
It’s clear that consumers need to be fully educated on responsible borrowing, managing finances, and budgeting. There’s a reason why the CFPB established new regulations on certain lenders, including payday loans, auto title loans, deposit advance products, and longer term loans with balloon payments.
In general, regulations seek to provide consumer protection and ensure that lenders are acting in an ethical and professional manner. The concern is regulation that impacts and limits consumers’ access to credit. In an ideal market, regulated lenders provide financial services that meet a market need. As lenders compete for business (providing credit), it becomes the consumer’s responsibility to review the options and make the best choices for themselves.
An open market will foster competition and ensure that the appropriate lenders survive. Competition fosters innovation and drives new choices for consumers without the need for externally imposed limits.
Consumers Need Access to Emergency Cash
A major consideration that can’t be overlooked is that certain customers with poor credit scores many times need access to emergency cash. If their credit scores are too low, they are not able to borrow from banks or may not be able to obtain help from friends and family.
By definition, a subprime consumer (550-620 FICO) is likely to default on a loan 50 percent of the time. That’s a costly business decision for any lender.
If the market steps in and imposes more regulations on alternative financial service providers, the likely result is that loan requirements will become more conservative. Banks and traditional financing options will remain unavailable for borrowers with the lowest credit scores, and the increased cost of doing business could push some small-dollar alternative lenders out of the market.
Now, before you jump for joy and say that this is exactly what needs to happen, consider the potential consequences.
With many Americans living paycheck to paycheck, getting laid off, medical bills, an unexpected car repair, or emergency trip to a sick relative may require quick cash. Where will the consumers with low credit ratings turn in difficult circumstances and emergency situations?
One possibility, in the absence of small-dollar lenders, is that borrowers will get loans from less desirable lenders that operate under the radar, off the grid. Consumers who are desperate to pay bills, rent and car repairs, or buy medicine and other necessities of life may turn to loan sharks and other nefarious entities.
Does this seem like an unlikely scenario? Probably not.
Another possibility is that these consumers who tried to take care of themselves by borrowing emergency cash simply give up. With fewer options to fix their temporary liquidity problems, the need for government assistance will rise. If these consumers can’t pay for car repairs, can’t get to work, and lose their jobs, the result may be increased unemployment claims. Even more troublesome, the snowball effect could increase welfare programs and housing subsidies.
The reality is that underbanked consumers and borrowers with imperfect credit need alternative financial services. There are responsible alternative financial services and lenders who can provide small-scale, short-term funding.
If underbanked consumers and borrowers with poor credit ratings aren’t permitted to access credit, social welfare programs will be required to offset the consumers’ inability to meet short-term cash needs. This catastrophic situation will increase the cost and number of citizens on social assistance. Ultimately, all taxpayers will be burdened with increases in social welfare.
The question is rather than over-regulating this sector of the credit market, doesn’t a free market on certain alternative financing options seem to be a better alternative?
Guy Dilger is vice president of marketing at Plain Green, LLC. With more than 12 years of experience designing groundbreaking marketing strategies for Fortune 500 companies and financial technology brands, Dilger is known for generating engaging content and compelling concepts that resonate with targeted consumers. Prior to Plain Green, Dilger held senior positions within fintech and retail spaces where he managed national marketing campaigns and customer-centric loyalty initiatives for Sears and Kmart. Previously, he was part of the management team at Limited Brands where his marketing work in support of Express brand included CRM, email, web-based programs and the redesign and relaunch of a private label credit card. Dilger has an MBA, as well as a bachelor of science in economics, from Southern Methodist University.
“We live in a digital world” is an understatement. The next decade, as Generation Z arrives and millennials move into prime spending years, will have profound effects on all industries. Finance, in general, and credit cards in particular, are no exception. Fintechs that can decipher the coming changes are looking at a trillion dollar industry […]
“We live in a digital world” is an understatement. The next decade, as Generation Z arrives and millennials move into prime spending years, will have profound effects on all industries. Finance, in general, and credit cards in particular, are no exception. Fintechs that can decipher the coming changes are looking at a trillion dollar industry currently dominated by traditional banking players.
The latest innovation in alternative lending can have a profound impact on how credit cards are issued, used, and managed in the financial ecosystem. LendIt USA 2018 saw a panel discussion on “Creating the Next Generation Credit Card.” The focus was on how LendUp and Petal, two venture-backed Visa credit cards, have disrupted a stagnant industry with alternate data and fast decisioning. Sasha Orloff, CEO and co-founder of LendUp, and Jason Gross, CEO of Petal, discussed the secret sauce, their insights, and future trends in the industry.
The Journey to the Credit Card Market
Around 40 million Americans do not have any credit score, and around 20 million have a very limited credit file. This results in limited access to the credit market. The disproportionate effect of this is felt by the millennial generation, immigrants, and low- to moderate-income consumers.
The 2008 financial crisis left considerable people under the age of 30 with subprime credit facilities comprising of expensive products. And though they might not have a strong credit score, their strong digital financial footprint can be leveraged to understand and examine their creditworthiness.
Alleviating such deficiencies will help genuine customers gain access to the credit they deserve. They will also be able to receive better pricing with lower interest rates, lower fees, etc. This was the main reason for Gross getting involved with Petal. What differentiates Petal from other companies is the use of pioneering technology to look into the financial “footprints” of consumers and make credit decisions accordingly. Petal can now underwrite on a more inclusive basis and leverage financial data by designing better products for its consumer base.
On the other hand, Orloff evaluated the problems faced by today’s credit card companies who reject almost 85% of consumer applications that come through their websites. This is a massive opportunity loss for all stakeholders.
Also, fintech companies are not directly issuing credit cards; rather, they are partnering with banks. This can lead to a win-win relationship where LendUP can help banks monetize this opportunity by using its proprietary technology. It is a category leader and understands the subprime space. It is currently working with two banks and has recently signed a deal with its third bank. Meanwhile, they are also looking to onboard more banking partners who want to better serve their communities.
Offering the Next-Generation Credit Card
Both companies believe there is a huge opportunity as half of America is underserved or unserved with regard to credit. The exciting part about the original credit card is the piece of plastic in the wallet can be used to build a relationship with customers by understanding their requirements and daily financial habits. With the ability to offer multiple products, credit cards should be a natural cross-selling platform for traditional banks.
When talking about the 60-year-old credit scoring system, Gross discussed how it lacks full financial information and focused only on the liability side of a person’s balance sheet. Petal’s credit scoring system takes a much more holistic view of a person’s finances and focuses on assets and cash flows. Instead of concentrating on any one part, they look at a more complete picture, which helps them assess the borrower granularly on thousands of data points. Its algorithms are powered with machine learning, which assists them in detecting further patterns for enhancing the customer experience.
Orloff cited the results from a study conducted by her company showcasing how supplementary data can be more powerful than using the traditional credit scoring data to evaluate the financial health of a consumer. Talking about the population outside the banking system, he thinks one cannot completely rely on credit scoring. Rather, it is mandatory to use alternative data points to calculate the creditworthiness of the individual.
Credit cards were the first step in understanding banking customers and their paying habits. With smartphones, banks can add a layer of intelligence that will generate insights that were not available earlier. Orloff also discussed how credit cards can now be used to attract consumers and why it is important to customize cards for the individual. LendUp’s card can now optimize according to the financial goals of each single consumer. He laments that the financial industry seems to be the last industry to keep churning out generic products for its clients.
Gross explained that consumer finance and credit scoring is an area with huge opportunities have just scratched the surface till date. Millennials aspire to do business with companies that have their best interests in mind. Companies should focus on re-inventing digital experiences and optimizing for the financial success of the customer. To design this digital experience, there is a need to leverage behavioral science and best practices of product design to make credit intuitive, transparent, and simple.
News Comments Today’s main news: LendingTree to acquire Ovation Credit Services. Revolut to enter America. Flender delays UK launch. UK challenger banks test location-based P2P payments. Ant Financial raises $10B led by Carlyle Group. Today’s main analysis: KABB 2017-1 deep dive. Today’s thought-provoking articles: How the FTC knew LendingClub was allegedly hiding fees. Elevate’s Q2 earnings estimates. UK customers trust banks, […]
Revolut is coming to America. AT: “The market is not too crowded for a UK-based unicorn. This should get interesting with Robinhood seeking to compete with Coinbase, and now Revolut wants to compete with Robinhood on its home turf. This could signal a heating up of international competition in marketplace lending. I think it’s about time.”
LendingTree, Inc. (NASDAQ: TREE) announced today that it has entered into a definitive agreement to acquire Ovation Credit Services, Inc., a provider of credit services with a strong customer service reputation. Ovation Credit Services utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit bureaus while educating consumers on credit improvement via ongoing outreach with Ovation case advisors.
The London-based fintech start-up allows users to buy and trade cryptocurrencies, making it a direct competitor to the U.S.-based Robinhood. Revolut also sees itself as a disruptor of the traditional banking industry, as it offers checking accounts, peer-to-peer payments, and international money transfers, says Chad West, the company’s chief marketing officer.
The FTC noted that the site did feature a small green dot (known as a tooltip) with a white question mark inside, which appeared next to the term “APR.” If a consumer clicked on the tooltip, a pop-up bubble appeared with a disclosure that read: “APR stands for Annual Percentage Rate and is a measure of the total cost of credit as an annual rate. The APR is comprised of the annual interest you pay at a rate of 6.99%—which is ultimately paid each month to the investors who enable your loan—and a one-time origination fee of 3.5% ($350.00) that is collected out of your loan proceeds.”
The complaint reminds lenders of the continued importance of accuracy and completeness in advertising and other marketing in order to avoid UDAAP claims, including under Section 5 of the FTC Act.
The market has responded well to LC’s earnings and the stock price has surged 17% post earnings.
OnDeck’s stock price has enjoyed a 10% rise since earnings.
Deal Deep Dive KABB 2017-1 Additional Notes
Kabbage is issuing $60 Mn in additional notes under the expandable option on its $550 Mn KABB 2017-1 deal. The additional notes classes A to D have balances of $44.4 Mn, $9.5 Mn, $3.2 Mn, and $2.9 Mn respectively. KBRA has rated the tranches A, BBB, BB, and B respectively. Kabbage issued $525 Mn in bonds originally on the KABB 2017-1 deal, and subsequently issued $25 Mn in additional notes.
KABB 2017-1 is passing all its triggers and has a weighted average yield of 42.9% and a 3-month average DQ percentage of 9.7%. The bonds are locked out from receiving principal for 36 months since issuance and the additional cashflow is used to purchase receivables that keep the weighted average receivables yield for the entire pool above 38% and individually yield at least 19%.
Jefferies Group lifted their Q2 2018 earnings per share estimates for shares of Elevate Credit in a report released on Tuesday, May 1st, according to Zacks Investment Research. Jefferies Group analyst J. Hecht now forecasts that the company will earn $0.19 per share for the quarter, up from their previous estimate of $0.18. Jefferies Group also issued estimates for Elevate Credit’s FY2018 earnings at $0.83 EPS, Q1 2019 earnings at $0.37 EPS and FY2019 earnings at $1.09 EPS.
“Soft spoken and unfailingly polite”, as Forbes noted in 2015, Laplanche claimed, with some justification, to be “transforming” the banking industry – bypassing banks to link would-be borrowers with lenders online. He swiftly established his outfit as the market leader, originating some $20bn in loans and winning copious “disruptive innovator” awards. Then came the shipwreck.
He is now focused on “what can I learn from it, what can I do better. Upgrade has been part of that.” Last year, Upgrade raised $60m – “the biggest ever series A funding round for a US fintech start-up”, backed by “many of Lending Club’s original investors”. The market is now more crowded than ever, notes the Lending Times, and “margins have shrunk”. Still, many reckon that if anyone can steer a clear course it’s “the guy credited with creating the industry in the first place”.
The world is rapidly digitizing. You look at every industry, whether it’s media publishing or entertainment and you are now seeing different value propositions being driven by software and mobile connectivity. Financial services is no different. I think you are going to see more changes in the financial services industry in the next five or 10 years than maybe we have seen in the last 25 or 30 years.
The world is rapidly digitizing. People are writing many less checks than they ever have before. Peer to peer lending, which once involved giving cash to a friend to split a bill at a restaurant, that’s now happening digitally.
In our latest map of the most well-funded American tech startup in each state, some companies with the deepest pockets were found in Florida (Magic Leap, $1.89B), Virginia (OneWeb, $2.2B), Utah (Domo, $698M), and Illinois (Avant, $655M).
Under the authority granted by the Congressional Review Act, the House of Representatives passed a measure on May 8 to roll back an Obama-era rule on auto lending practices issued by the Consumer Financial Protection Bureau (CFPB). It should be noted that the rollback pertains to a set of administrative guidelines issued by the CFPB, not a law ratified by Congress.
The House vote was 234-175, reversing a 2013 rule established by the CFPB to stop auto lenders from charging higher fees to borrowers based on their religion, sex, race, or age. The vote follows a Senate vote in April to also repeal this measure. It will now go to President Donald Trump’s desk for his approval.
The complaint alleges that the lender, one of the largest online lenders in Virginia, operated without a Virginia license, and misled borrowers about its licensure status in another state in order to avoid Virginia’s 12% interest rate usury cap. Virginia Code § 6.2-303. Specifically, the complaint alleges that the installment loan agreements’ Utah choice-of-law provisions are void, and that Virginia law, including Virginia’s usury cap, applies to the loans. The VA Attorney General also alleges that the lender attempted to collect on loans from borrowers who were in bankruptcy and entitled to protection from debt collection.
On Friday, Revolut introduced a feature called “Near Me” which lets its customers find other Revolut customers using the same feature and send them money without knowing their contact details. On Monday, Monzo rolled out a capability called “Nearby Friends.”
The use cases for location-based peer-to-peer payments among consumers may not be compelling enough for providers to consider it, said Paygility Advisors partner Deborah Baxley.
However, last month’s announcement that London FinTech Revolut is now a so-called unicorn with a $1.7 billion valuation and TransferWise working with the Bank of England and launching a ‘borderless’ card that drastically slashes transaction costs, the future for the city may be companies such as these.
Another fellow London FinTech 11:FS is also making waves offering a range of FinTech services, not least being able to ‘make a challenger bank in 12 weeks’. Here company Co-Founder Simon Taylor speaks exclusively to Forbes about what these moves and also on Swedish company iZettle’s recent IPO announcement.
UK banks were trusted by 40% of consumers in 2017, up from 29% in 2015, according to a study from Accenture. This makes banks only 3% less trusted than retailers, and ahead of insurers, independent advisers, and tech companies.
Additionally, customer satisfaction was up 5% from 65% in 2015 to 70% in 2017, suggesting banks have been doing something right in terms of customer experience in the recent years. This also brings banks ahead of life insurers and pension providers, as well as on the same level as motor insurers and home insurers, when it comes to customer satisfaction.
The Bank of England’s decision to keep the interest rates at 0.5 per cent should at least make peer-to-peer lenders smile. People are tempted to look for alternative and riskier ways to increase the value of their savings, as inflation continues to hover above BoE’s target of two per cent and traditional savings accounts offer barely any interest at all.
Mike Allan, the director of operations at LendingCrowd, said that the historically lax monetary policy created an opening for P2P lending to take off.
Over the past five or six years, investing in property through peer-to-peer and crowdfunding platforms has grown enormously in popularity. There are now lots of platforms to choose from and each offers a slightly different proposition.
Both peer-to-peer and crowdfunding platforms have different approaches, in that some allow you to put money in and spread it across a number of properties, or a portfolio run by them.
The Hangzhou-based company is said to be valued at about $150 billion in this round, the people said, requesting not to be named because the matter is private. The funding will be mostly used for overseas expansion, the people said.
Recently, the People’s Bank of China (PBOC), China’s central bank, issued a document named, “Notice on Further Strengthening the Management of Credit Information Security” (Yinfa  No. 102) (hereinafter referred to as “Document No. 102”), to further strengthen the management and security of credit information database. According to Document No. 102, credit reporting agencies and access agencies are strictly forbidden to query credit report without authorization, and unauthorized APP accessing to credit reporting systems is strictly prohibited. In addition, it is required to establish a leading group for credit information security work and make clear that the person in charge of the credit management work shall take the primary responsibility for related issue.
Of 66 peer-to-peer lending platforms surveyed by FTCR, 10 said they might close because of difficulties in meeting new compliance standards and in controlling an increase in bad loans. Among the platforms, which match lenders with borrowers online, more than 40% of those in second- and third-tier cities said business had fallen in the first quarter compared with the end of last year.
P2P lending in China had grown rapidly, extending 2.8 trillion yuan ($443.3 billion) in 2017, equivalent to 20.7% of the amount lent by banks.
A Chinese social network is finding new ways to lose friends. Renren has irked investors over plans to sell some of its assets, notably a stake in U.S. online lender SoFi, to a firm partly controlled by its chief executive.
Renren has been irritating shareholders for years. Since its initial public offering in New York in 2011 valuing it at close to $6 billion, the company has failed to live up to the hype of being China’s answer to Facebook. It is now worth just $600 million.
This latest episode also isn’t the first time boss Joe Chen has been accused of trying to enrich himself at the expense of shareholders. A non-binding 2015 bid to take Renren private for $1.4 billion never came to fruition, and the SoFi stake was a topic of dispute then, too.
Portuguese Banco BNI Europa will invest up to €15 million in Spain-based Lendrock’s online financing platform that specialises in near prime consumer auto financing.
The bank says the Iberian partnership begins with the acquisition of part of the existing loan portfolio, offering exposure to Lendrock’s loans and setting the stage for the acquisition of monthly origination volumes.
Swedish fintech iZettle announced last week that they intend on selling shares and launching an IPO in order to raise SKr2bn by listing on Nasdaq Stockholm. With plans to increase revenue by 40 per cent a year, iZettle aims to also break even by 2020.
With JPMorgan and Carnegie on their side as joint global co-ordinators, iZettle would like to walk away with at least SKr10bn ($1.1 billion) by the end of this month or June.
For the third year in a row, CB Insights partnered with The New York Times to provide an algorithmically-driven view into the question of who are the top VCs. Not swayed by narrative or a storied history in venture capital, the NYT-CBI rankings provide a current view into the best venture capitalists in the world at an individual and firm level.
Some of the top movers in 2018 include:
Steve Anderson of Baseline Ventures who moved from 10th place to 2nd due in part to a consistent knack for investing early in winners. His stellar track record saw another success in recently public ecommerce company Stitch Fix.
First-time appearances on the ranking include Shawn Carolan of Menlo Ventures (investor in Roku), Meyer Malka of Ribbit Capital (investor in Credit Karma), and Albert Wenger of Union Square Ventures (investor in MongoDB).
First, we have become addicted to technology. We live our lives staring at our devices rather than talking to each other or watching where we are going.
Second is privacy. Facebook and other internet giants are abusing our privacy rights in order to generate ad revenues, as demonstrated by Cambridge Analytica, but they’re not the only one.
Third is that the power of these firms is too much. When six firms – Google (Alphabet), Amazon, Facebook, Tencent, Alibaba and Baidu – have almost all the information on all the citizens of the world held digitally, it creates a backlash and a fear.
Global peer to peer marketplace for small loans, Bitbond, allows clients the option to transfer their loans by using bitcoin. The bitcoin startup has seen its popularity grow, with the startup managing around $1 million in loans per month for 100 clients.
The revelation was made in an interview by Reuters TV with Bitbond’s German founder Radoslav Albrecht. He said the rationale behind the move is that it will help reduce the foreign exchange cost for clients.
The fusion of big data with artificial intelligence is creating this beast called ‘data capitalism’
The world is shifting from finance to data-capitalism. The man with data is the king. Data-rich markets will destroy the existing order, money will no longer be in its pre-eminent position, labour markets will be uprooted and millions of jobs endangered, firms thrown out of business, and so on.
The rules of investment have changed over the years, and peer-to-peer lending is being viewed as an investment avenue that is expected to give returns to the tune of 18-22 percent, according to industry estimates. Bengaluru-based Finzy is trying to tap on to just that. Amit More’s background in finance had him excited about the credit opportunity in India. He teamed up with Abhinanadan Sangam, and the duo chose to set shop in the ripe Indian digital lending market. Finzy was incorporated in October 2016 with Bridge FinTech Solutions Pvt Ltd as the parent company.
Indonesia is planning to tighten regulation of its vibrant financial technology sector, imposing new rules on companies which it hopes will stand at the forefront of efforts to extend services to more of the country’s 260 million people.
Peer-to-peer lending jumped 38 percent in the first two months of 2018 from a year earlier, hitting 3.5 trillion rupiah, and OJK director Eko Ariantoro said in March that regulators “don’t want these developing fintechs to become loan shark-like businesses.”
Julo raises US$5 million in series A (Indonesia). The peer-to-peer lending startup received the funding in a round led by Skystar Capital and East Ventures. Participating investors included Convergence Ventures, Provident Capital, and Central Capital Ventura, among others.
News Comments Today’s main news: Former SoFi CEO Mike Cagney raises $50M for blockchain-based Figure. RateSetter IFISA attracts ‘high tens of millions’ of GBP. Brazilian online lender Agibank files for IPO in São Paulo. Today’s main analysis: The cities with the highest rates of mortgage denials. Today’s thought-provoking articles: Hedge funds are down in Q1. MPL’s new ways look […]
Can the USPS be a short-term lender to the underbanked? AT: “This is actually a pretty good read, and sheds some historical light on the U.S. postal service’s banking operations. Did you know Americans once held over $3 billion in savings deposits with the USPS? But can they be a lender?”
Mike Cagney, who built SoFi into America’s biggest student loan refinancer before quitting amid allegations of sexual harassment at the fintech firm, is preparing for his second act: a startup offering home-equity loans.
Cagney has raised $50 million for San Francisco-based Figure, which plans to use the blockchain to help expedite loan approvals in minutes rather than days, according to people familiar with the matter. Two global banks have agreed to finance loans and several firms have agreed to purchase them, say the people, who requested anonymity to discuss a private matter.
The Eurekahedge April 2018 report says that hedge funds were down in the first quarter of the year (-0.13%). This is the industry’s worst performance since Q1 2016.
The steepest performance-based losses by regional mandate were those of the North American funds, they lost $1.2 billion. Meanwhile, asset inflows remained net positive but were lower (17% lower) than were the net asset inflows for the first quarter 2017.
The highest performance gains by regional mandate were those of the Asia ex-Japan funds. (+0.5%). But those hedge funds were down in March, largely on rumblings of a US/China trade war.
Total assets under management for the global hedge fund industry are now at $2.48 trillion.
Last week, the Federal Trade Commission accused LendingClub, the largest of the peer-to-peer lenders, of misleading consumers with hidden fees and continuing to charge borrowers even after they had paid off their loans. Shares of the online lender fell to nearly $2.50, its all-time low.
In the first quarter, peer-to-peer lenders sold $4.3 billion in asset-backed securities, according to industry tracker PeerIQ. That was slightly down from $4.4 billion in issuance in the last three months of 2017, which was a quarterly high for the industry. PeerIQ estimates that peer-to-peer ABS securitization will hit $18 billion this year, up from $14 billion in 2017.
LendingTree delved into data from more than 10 million mortgage applications using the most recent available Home Mortgage Disclosure Act data set to find out the main reasons would-be borrowers were rejected.
Nearly one in 10 borrowers get denied for mortgages. On a national level, 8% of loan applications were denied.
Credit history and debt are the biggest barriers. The leading reasons for denial were credit history (which includes credit score) and debt-to-income ratio, which were each responsible for 26% of denied loans. These were followed by collateral at 17% and incomplete applications at 14%. All other reasons for denial were cited in less than 10% of denied mortgage applications.
Debt is a huge barrier to borrowers living in California. We found three California cities (Los Angeles, San Francisco, San Jose) had the highest share of borrowers who were denied because of their debt-to-income ratio.
Credit history is holding borrowers back in Louisville, Ky., Memphis, Tenn. and Philadelphia. Among failed applications in these three metros, we found the highest rates of denied borrowers due to their credit history.
The top reason for a mortgage denial in Houston was debt-to-income ratio, which is the share of monthly debt obligations in relation to monthly gross income. Most lenders want this number to be 43 percent or lower, per the report.
Other Texas cities ranked quite lower than Houston on the list. San Antonio was No. 18 with an 8.05 percent rate, Dallas was No. 21 with a 7.58 percent rate, and Austin was No. 27 with a 7.05 percent.
Banking apps are now among the most widely and frequently used apps, along with weather and social media, according to Citi’s second annual mobile banking study, released Thursday.
If that’s true — the study examines the behavior of some 2,000 U.S. adult consumers — that would mean people are checking their bank accounts more frequently than they use music, news and dating apps. Although, 20 percent of millennials actually use their mobile banking app while on a date, Alice Milligan, the chief digital client experience officer for Citi’s U.S. consumer bank, pointed out in a presentation of the results.
In this age of electronic communications, we often take the post office for granted, but it remains a powerful institution. As the US Postal Service (USPS) website indicates, 47 percent of the world’s mail volume is handled by the USPS; the website adds that if it were a private sector company, “the Postal Service would rank 37th in the 2017 Fortune500. In the 2017 Global Fortune 500 list, we ranked 99th.” The business employs over 500,000 career employees, has annual revenues of $69.6 billion, and operates 30,825 “retail offices” nationwide.
It is this last aspect—the ubiquity of post offices across the nation—that has spurred legislation (Senate Bill 2755), introduced last week by US Senator Kirsten Gillibrand (D-NY), that would require every post office to provide basic banking services. Interestingly, the idea of post offices offering banking services is not new. From 1911 to 1967, post offices offered savings and deposit services for Americans (although not loan products). At one time, Americans held more than $3 billion in deposits through postal banking ($30 billion in inflation-adjusted 2018 dollars). Other countries, including Japan, Germany, China, and South Korea, continue to offer banking services through their postal networks.
Daniel Maran of the Huffington Postexplains that, “Under Gillibrand’s proposal, Americans could cash paychecks and deposit money in accounts free of charge at each post office location. Deposits would be capped at the larger of two amounts―$20,000, or the median balance in all American bank accounts. The postal banks would be able to distribute loans to borrowers of up to $1,000 at an interest rate slightly higher than the yield on one-month Treasury bonds, currently about 2 percent.” By contrast, a Pew Charitable Trusts report found that average payday loan of $375 typically costs a borrower $520 in interest and fees.
Financial Engines announced on Monday that it will be acquired by private equity firm Hellman & Friedman and combined with Edelman Financial Services.
According to the announcement, Hellman & Friedman will make the acquisition in an all-cash transaction that values Sunnyvale, Calif.-based Financial Engines at $3.02 billion. Financial Engines shareholders will receive $45 per share in cash upon closing.
The best taxable robo-advisor performers in the first quarter for total portfolios were SoFi, which posted a loss of 0.14 percent; Schwab, which returned a negative 0.33 percent; and TIAA’s socially responsible portfolios, which posted a 0.45 percent loss.
The top-performing taxable robo-advisors for total portfolios over the two-year duration of Backend Benchmarking’s study are Schwab, offering 10.98 percent annualized two-year returns; SigFig, which returned an average of 10.71 percent annually over two years; and Betterment, which returned 10.24 percent.
MetaBank, a provider of payment, community banking and financing solutions, today announced an agreement with CURO, a facilitator of short-term credit to underbanked consumers. Together, the organizations will launch a new line of credit product the parties believe will be more flexible and transparent than others in the market, and well-suited for US-based underbanked consumers. CURO and Meta expect to unveil the new, joint brand and a timeline for the pilot launch later this year.
Through the credit option expected to be launched by CURO and Meta, underbanked consumers would be able to access credit with a flexible timeline for repayment. These consumers would also be able to control their cost of borrowing through transparent fees that would apply only when credit is drawn. Estimates indicate 67 million adults are considered un- or underbanked. Many of these adults typically have poor credit ratings and, as such, have difficulty securing credit or loans — this product is expected to provide a responsible credit option for many of those consumers.
LendingTree, Inc. (NASDAQ:TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced that it will participate in the SunTrust Robinson Humphrey Internet & Digital Media Conference at The Palace Hotel in San Francisco, California.
Trent Ziegler, Vice President of Investor Relations and Treasurer at LendingTree, is scheduled to present on Tuesday, May 8, at 9:10am PT and will participate in one-on-one meetings throughout the course of the day. The presentation will be webcast live and archived at
If you’re looking for a way to grow income over time, and don’t mind the risk and reward nature of investment, peer to peer (P2P) can be a great way to earn some passive income on the side. Operating much like a bank loan — but without the bank – P2P lending connects people with money (even if it’s only a few hundred dollars) with people who need it.
Cleo, the London-based fintech that offers an AI-powered chatbot as a replacement for your banking apps, continues to put together an impressive list of backers. The startup’s early investors already include Entrepreneur First, Moonfruit founder Wendy Tan White, Skype founder Niklas Zennström, Wonga founder Errol Damelin, and LocalGlobe, the seed VC firm founded by father and son duo Robin and Saul Klein, amongst others. Now TechCrunch can reveal that TransferWise founder Taavet Hinrikus has become a Cleo investor and advisor.
According to the research firm eMarketer, 76% of Chinese smartphone users made a mobile point-of-sale purchase in 2017, compared with 25% of American users. In total, 61.8% of all such transactions globally are Chinese.
In the first 10 months of last year, China processed a whopping $12.8 trillion in mobile payments, according to the state-run news agency, Xinhua — 38% higher than for all of 2016.
Though it’s not exactly an apples-to-apples comparison, the U.S. market in 2017 had just $49.3 billion in mobile point-of-sale transactions, according to Shelleen Shum, eMarketer’s forecasting director.
Start with an oligopoly
More than 90% of Chinese mobile payments run through Alipay and WeChat Pay, rival platforms backed by China’s two largest internet conglomerates — Alibaba, essentially the Amazon of China, and Tencent Holdings, owner of WeChat, the nation’s must-have messaging and social-media app with more than 1 billion users.
During an 18-month period, Ezubo swindled up to 900,000 investors out of 50 billion yuan (US$7.7 billion).
In one of the country’s highest-profile court cases, the founders of what was once China’s largest peer-to-peer lending platform, Ding Ning and his younger brother Ding Dian, were jailed for life last September.
Another 24 executives were sentenced to prison terms, ranging from three to 15 years, after disbelieving depositors mounted unprecedented protests in fintech’s biggest scandal.
“[Just] 500 P2P companies, out of the total 4,856, are likely to maintain their operations this year,” it added.
Fincera Inc. (”Fincera” or the ”Company”) (OTCQB: YUANF), a leading provider of web-based financing and ecommerce services for small and medium-sized businesses and individuals in China, today reported financial results for the year ended December 31, 2017.
Full-year 2017 Financial Highlights
Income for the year ended December 31, 2017, increased 16.9% to RMB1.0 billion (US$156.7 million) from RMB875.9 million in the prior year.
Net loss improved to RMB8.4 million (US$1.3 million), from net loss of RMB12.3 million in the prior year.
Net cash provided by operating activities increased 148.4% to RMB2.1 billion (US$326.6 million) for the year ended December 31, 2017, from RMB859.2 million in the prior year. This increase resulted in a 63.6% improvement in the Company’s overall cash position to RMB1.3 billion (US$191.5 million) at the end of 2017, compared to RMB764.8 million at the end of 2016.
Loan transaction volume across all loan types for 2017 totaled approximately RMB26.8 billion (US$4.1 billion), compared to approximately RMB24.4 billion in 2016.
In January, the International Data Corporation (IDC) reported worldwide spending on blockchain solutions would increase to $2.1 billion in 2018 from $945 million in 2017 and will grow more than 80 percent year over year to reach $9.7 billion by 2021. Most of that spend will be concentrated in the U.S., with supporting use cases mostly related to financial services and cross-border settlement, for a grand total of $242 million in 2018.
LendingClub was hit with a lawsuit by the Federal Trade Commission (FTC) last week over claims of “deceptive” practices.
Following that news, LendingClub’s stock price took a nosedive. Yesterday, it was trading at an all-time low of $2.70.
Launched in October of 2016, Marcus is Goldman’s $2 billion annual hedge on threats to its core commercial banking and trading businesses. Goldman Sachs reported on its Q1 earnings call that Marcus, since it launched, has originated $3 billion of new loans and taken in $9 billion of new retail deposits.
A new crypto lender, Nexo, will launch Monday in a market where existing participants have already withstood trial by fire.
Such lenders extend credit to those who want to own digital currency, such as bitcoin and ether, and hold onto it long-term while investing it in real estate and elsewhere. But crypto lenders have been severely tested of late as digital currency prices dropped about 70% between December and February.
The team behind Switzerland-based Nexo runs a consumer lending operation called Credissimo that has made more than a million loans to consumers of up to $2,000 in Europe.
Denver-based Salt Lending, which started crypto lending earlier this year, has made just under $40 million in loans and has had no losses, according to co-founder Blake Cohen.
Unchained Capital, which publicly launched in November, is originating “single-digit million dollars of loans per month,” according to CEO Joe Kelly. The typical loan size is $120,000; the average interest rate is 12%.
IdentityMind Global today announced that Ripio Credit Network (RCN), a global peer-to-peer credit network based on co-signed smart contracts that connect lenders and borrowers located anywhere in the world, has partnered with IdentityMind to provide KYC and AML compliance support.
The company’s research shows the average customer of one of the big four banks can save more than $2,500 a year by switching to an online deal. This has increased from a year ago, when the potential annual savings were $2,250.
Despite these savings and the fact most other services have migrated online, only 27% of consumers said they would take out a home loan with an online lender.
INDONESIAN fintech startup EmasDigi enables the investing in as well as buying and selling of gold through mobile applications with easy processes that require little time.
The idea began with EmasDigi chief executive officer and founder Claudia Kolonas selling vouchers which gave people easier access to the gold trading market.
EmasDigi is affiliated with PT PG Berjangka, which is registered and supervised by the Trade Ministry’s Futures Exchange Supervisory Board (Bappebti). This affirms EmasDigi’s commitment to consumer protection and ensures compliance with legal provisions in Indonesia.
Bangladesh is widely known as the origin of microfinance. The pioneer two NGOs, Grameen Bank and BRAC, have taken this poverty reduction tool to different places in the world, especially in Asia and Africa. This has been acclaimed by the United Nations and other international organisations. Certainly the objectives of microfinance have undoubtedly already been achieved.
Microfinance was inaugurated in the 1980s for a specific, target group of people (given their poverty level). It doesn’t have the generalised character required to reach all people.
Brazilian online lender Banco Agibank SA on Monday filed for regulatory clearance to launch an initial public offering (IPO), according to a securities filing.
Agibank follows Banco Inter SA’s (BIDI11.SA) strategy of raising capital to fund its expansion and IT investments. On Monday, Inter made its debut in São Paulo stock exchange, in the first IPO by a Brazilian retail bank in nearly a decade. In late afternoon, Inter’s units were stable at 74 reais.
The bank and its owner, Marciano Testa, will sell an undisclosed amount of preferred shares in the IPO.
Fintech Select Ltd. (“Fintech Select” or the “Company”) (TSX-V:FTEC) is pleased to announce that its financial statements for the year ending December 31 2017 have resulted in a net profit of $435k. 2017 Financial Statements and Management Discussion & Analysis (“MD&A”) will be filed on SEDAR shortly.
Reduced the Company’s liability by $7.6M including our unfavourable high-interest loan
Made a net profit of $435k for the year due to the reduced liability
Reduced interest rate of 24% per annum plus management fee to 12% on April 1, 2017, and further to 6% plus management fee on May 16 2017.
Raised $3.4M through two private placements in April and June of the year, and had access to un-restricted cash of $915k by December 31 2017
Increased its customer care service revenue
Established an advisory board with high skill sets in business and Cryptocurrency space
Filed a patent-pending for Cryptocurrency POS platform.
Developed and launched the Company’s first phase of the Cryptocurrency POS solution, which simplifies buying cryptocurrecny to the mass of consumers
Acquired software for P2P Micro Lending and initiated the project to work on required changes and enhancements to meet the regulatory required standards
Reports estimate that over one-third of the American population has no record in any of the credit bureaus and, therefore, have no credit history. Millions of Americans do not have access to financial services, and this is an even more common scenario in developing markets. Over 80% of the African population do not use lending […]
Reports estimate that over one-third of the American population has no record in any of the credit bureaus and, therefore, have no credit history. Millions of Americans do not have access to financial services, and this is an even more common scenario in developing markets. Over 80% of the African population do not use lending or banking services because they have no fixed income. The situation creates a question mark on the relevance of traditional credit scoring agencies and their impact over the larger population. Thankfully, fintech innovators are heading towards new, alternative data sources like rent payments, cell phone data, and even social media usage to evaluate credit risk. The aim is to replace traditional credit models with a more complete assessment of a prospective borrower. The focus is to create a win-win situation for both lenders and loan seekers by providing a new foundation to lenders for credit underwriting and providing millions of borrowers a chance to step up on the credit ladder.
The Current Credit Scenario
People with a low or no credit score find it impossible to prove their eligibility for loans. The most disenfranchised are minorities and women. This then creates a vicious circle as they can’t get a loan due to no score, and they can’t improve their score because no one is ready to give them credit.
Currently, the credit score of a person is calculated depending on the information in his credit reports. This information consists of the person’s name, phone number, social security number, employment information, account information, loan repayment details, and credit card accounts.
Alternative Credit Scoring Models
The following alternative credit scoring models have a different approach, leveraging their own data sources, proprietary algorithms, and technology to disrupt existing industry systems. The idea is to reach new audiences and onboard creditworthy borrowers who are lost due to the current model’s shortcomings.
FICO Score XD
FICO (Fair Isaac Corporation) is best positioned to bring the change. Its FICO is synonymous with credit scoring and is usually the most important element in deciding if a person can qualify for a loan.
FICO’s new alternative model, FICO Score XD, developed in partnership with LexisNexis Risk Solutions and Equifax, considers alternative data sources like internet and phone bills to help users who do not have credit data attain a score.
FICO Score XD 2 was able to score over 26.5 million previously unscorable consumer files
11.8 million were without any credit file and unscorable via any traditional bureau
The new system has increased coverage from 91% of applicants to almost 98% of applicants
Another scoring model has been developed by credit reporting giant TransUnion in order to integrate alternative data and provide a solution to those who do not have any credit score. It concentrates on “trended data” as compared to only considering historical data in silos. So it not only evaluates the current situation of the borrower but also the credit details for last two years for a more comprehensive credit-scoring model. It has been able to score over 60 million borrowers who were previously unscorable.
Cignifi, based in Cambridge, Massachusetts, is an interesting alternative credit scoring startup. Backed by the Omidyar Network, it provides a platform for providing credit and marketing scores for consumers (especially in the developing world) via mobile phone behavior data. Its big data engine allows the mobile network operators and insurance partners to discover eligible customers for credit cards, loans, insurance, savings, and other banking services.
Cignifi’s main focus is on “financial inclusion,” which uses risk scoring technology to serve the unbanked population who do not have credit scores. It leverages mobile and texting patterns, routine of being at workplace or home, and contact with reputable borrowers.
This India-based fintech startup offers alternate data-based credit scores for underwriting first-time borrowers using machine learning and big data analytics. It has raised $7 million in funding and uses over 10,000 digital footprints via in-house designed APIs. It has been able to help lenders attract first-time borrowers as well as reduce the processing time from days to 30 minutes.
India alone has 800 million unscored individuals, thus the market size is huge and lenders desperately need a service which can help them tap such a massive segment of the population.
Advantages of Alternative Credit Scoring Models
Access to a wider customer base: It enables the widening of the prospective borrower base. This is extremely vital for fintech lenders as it is difficult for them to compete with the big banks on pricing. But their ability to utilize new credit models and give borrowers with “thin” credit files a chance will lead to the expansion of the entire market.
Customer experience: Alternative credit scoring also automates the process of credit decisioning and allows for a more hassle-free digitally-enhanced experience. This enhances the utility to millions of borrowers who were otherwise supposed to visit their nearest branches for processing of their loan applications.
Improved underwriting process: All the alternative data adds a layer of analytics to the existing data, as well. This gives deep insight to the underwriters and helps in developing an enhanced credit-scoring model.
These alternative credit-scoring models aim to bring banking to the unbanked. This empowers lenders to reach out to individuals who were rejected for the reason that they had no/thin credit flies. The new models will shake up the industry, and lenders incorporating them into their credit underwriting process will see better traction and stronger customer loyalty, especially from those who were earlier denied credit on a faulty premise.