Wednesday April 25 2018, Daily News Digest

banking the nonbanks

News Comments Today’s main news: Wells Fargo still the largest bank to lend to nonbanks. Digit adds credit card payments to app. UK finance chief calls for regulatory crackdown on tech giants. Humaniq implements smart biometrics identification. Today’s main analysis: World Bank releases Global Findex Database. Today’s thought-provoking articles: Credit history, debt ratio are biggest constraints for would-be homeowners. Lending […]

banking the nonbanks

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United Kingdom

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News Summary

United States

Wells Fargo Leaves a Potential Subprime Smudge on Its Way to Squeaky Clean (Bloomberg) Rated: AAA

Sloan provided some evidence for that argument last week when the bank paid a $1 billion fine to regulators to close an investigation into abusive practices in its auto lending and mortgage unit.

But a look at one of its lending businesses suggests that exposure to questionable practices isn’t so much an oversight as a business decision. Wells Fargo, according to reports over the past few years, is by far the largest lender among the big banks to payday loan companies and others that make high-interest loans to subprime borrowers, including some that regulators have accused of predatory practices.

Source: Bloomberg

Banks don’t have to report how much they lend to subprime lenders, which falls broadly into the category of nonbank lenders. Wells Fargo, at the end of last year, had by far lent the most to nonbank lenders, with $81 billion in outstanding loans. Citigroup was the bank with next largest exposure, with just $30 billion outstanding.

Source: Bloomberg

Credit History and Debt Ratio are Biggest Constraints for Would-Be Homeowners (PR Newswire) Rated: AAA

LendingTree today released the findings of its study on the cities with the highest rates of denied mortgage applications and why mortgage shoppers in those areas have been denied.

Since the financial crisis, mortgage lending standards have tightened as underwriting has become more stringent. There are numerous reasons why a lender could deny a loan, from poor credit score to prior bankruptcies, but other reasons can include a lender’s inability to verify a borrower’s employer.

Source: Lending Tree

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, and to see if location has any correlation for rejection.

Fintech firm Digit adds credit card debt payment to savings app (American Banker) Rated: AAA

Digit, maker of one of the first apps to help people save by automatically sweeping modest amounts of money from checking into savings, is turning its attention to credit card debt.

The app can now be set to automatically make an extra payment every month on a user’s credit card, the fintech announced Tuesday.

At the end of January, the Federal Reserve reported that U.S. consumers had $1.03 trillion in credit card debt.

Breaking Away From The Bi-Weekly Payroll Tradition (PYMNTS) Rated: A

Today, this payroll schedule means an estimated 70 percent of employees in the U.S. live paycheck-to-paycheck – and many struggle to make necessary purchases or payments in the days leading up to payday. It’s also linked to the rise in the payday loan industry, which has more U.S. storefronts today than McDonald’s, according to data from Pew. Lenders make a collective $7 billion in fees, according to analysts, and they stem from more than $46 billion worth of payday loans issued each year.

According to Steve Barha, CEO of Instant Financial, the rise of the payday loan industry and overdrafts certainly comes with its controversies, but it’s no mistake that the industry exists in the first place.

Unison Reports 1000% Growth Year over Year in Home Ownership Origination Volume (Crowdfund Insider) Rated: A

Unison, a unique financing platform for home ownership investments, is reporting strong year-over-year growth. According to the company, following a solid 2017, the origination volume for the first quarter of 2018 has grown and increased 1000 percent over the comparable period last year. This is due in part to an expansion of the management team and the availability of their service in ten new states.

Unison says these new hires will help extend their company into more states. In April alone, Unison HomeOwner and HomeBuyer programs will be available in 10 additional states including Florida, Georgia, Ohio, Michigan, Minnesota, Nevada, Colorado, North Carolina, Missouri and Delaware, bringing its total footprint to 22 states plus Washington D.C. Unison expects to broaden its reach over the course of 2018 to over 70 percent of U.S. single family residential housing units.

Mulvaney response to CFPB data security gaps baffles cyber experts (American Banker) Rated: A

Acting Consumer Financial Protection Bureau Director Mick Mulvaney has repeatedly pointed to data security as a defect in the agency’s supervisory program, but security experts are scratching their heads over the bureau’s response to such problems.

Mulvaney has said hundreds of CFPB-related data breaches justified his announcement in December that the agency would halt collecting personally identifiable information from companies it supervises.

Elevate vs. LendUp Payday Loans: Everything You Need to Know (Student Loan Hero) Rated: A

Pros of a LendUp payday loan
Getting cash fast is the main reason you’d choose a company such as LendUp. But they have some other benefits, as well.

  • If you pay your installment loan on time, you could boost your credit score.
  • The lender has an incentive program called the LendUp Ladder. You’re awarded points as you take out LendUp loans and repay them on time. As you accumulate points, the lender will reward you by allowing you to borrow at progressively lower rates.

For the sake of a side-by-side comparison, we’ll focus on Rise. Here are some pros of a Rise loan.

  • You can apply for a seven-day payment extension if you can’t pay on time.
  • The company will provide you with free access to your TransUnion credit score.
  • If you borrow from the company more than once, your interests rates could decrease.
  • Rates are lower than those offered by payday loans.
Source: Student Loan Hero

Chase customers can now use their voices to unlock their accounts (Tearsheet) Rated: A

Chase card members’ voices will soon be their passwords when they call for help.

The bank is debuting a voice-authentication feature for credit card customers dialing the call center this spring to reduce the customer burden of having to remember multiple passwords and answer cumbersome security questions. The initial launch would only be for credit card customers, but the bank plans to expand the feature to all customers by the end of the year, a spokeswoman said.

 

Hedge fund billionaire Steve Cohen’s venture capital group is on a fintech tear (CNBC) Rated: B

On Tuesday, Point72 Ventures will announce it led a $3 million investment in a startup called Extend, which has built mobile technology business owners can use to share their corporate credit cards with employees and freelancers without handing over the actual cards.

Earlier this month, the venture capital arm was a co-lead in a $29.4 million round for a New Jersey startup, DriveWealth, that has developed a mobile site for investing in exchange traded funds and stocks, and it led an $18.5 million investment in Silicon Valley-based DeepScale, which is developing autonomous driving technology.

United Kingdom

UK finance chiefs call for regulatory crackdown on tech giants Financial Times) Rated: AAA

Two of the financial technology executives involved in the FT debate — Funding Circle chief executive Samir Desai and Rhydian Lewis, his opposite number at RateSetter — agreed that GDPR was a welcome protection for consumers.

UK Fintech Humaniq Implements Smart bioID System to Further Strengthen Outgoing Transaction Security (Crowdfund Insider) Rated: AAA

UK-based fintech Humaniq announced on Tuesday it has implemented additional bioID settings that will act as an extra safeguard be integrated into Humaniq app, which the company reports has already had more than 100,000 downloads in the Google Play store.

Humaniq also revealed that the total transaction volume has reached 400,000 HMQ in more than 250,000 transactions per month. The company noted with the introduction of an additional layer of biometric authentication, this means over 10,000 transactions will be totally secured from fraud, benefitting over 100,000 users of Humaniq App.

Regtech start-up ClauseMatch lands £3.6m funding (Fintech Futures) Rated: A

ClauseMatch, a UK-based start-up in the regtech space, has raised £3.6 million ($5 million) in its Series A funding round.

ClauseMatch, specialises in smart document management. It is a graduate of Barclays’ accelerator programme, Techstars, and has Barclays and Intesa Sanpaolo on its customer list.

Could a credit card cap protect chronically broke Brits? (Guardian) Rated: B

A credit card cap is needed to protect “chronically broke” Britons struggling to make repayments on high interest loans, ministers have been told.

Labour’s Stella Creasy warned that credit card firms were pushing millions into debt in the same way payday lenders did before action was taken to prevent anyone having to pay back more than double what they borrowed.

The Walthamstow MP made the comments as she moved an amendment to the Financial Guidance and Claims Bill which would require the Financial Conduct Authority (FCA) to take tougher action on credit card firms.

Ministers must extend cap on payday loans to other high credit that’s targeting poor, vulnerable Brits, MPs say (The Sun) Rated: B

MINISTERS should “learn the lessons” of the payday loan cap and extend it to cover other forms of high-cost credit such as credit cards and doorstep lending, MPs have demanded.

In a boost for The Sun’s campaign to stop millions of families falling prey to doorstep and legal high street loan sharks, MPs called on the Government to take tough action to stop the nation “drowning in debt” and protect “chronically broke” Brits.

China

Hong Kong Approves Dual-Class Shares, Paving Way for Tech Titans (Yahoo Finance) Rated: AAA

Hong Kong Exchanges & Clearing Ltd. approved the biggest change to its initial public offering rules in two decades, putting it in a position to battle New York for some of the world’s hottest companies.

Technology firms that have shares with different voting rights will now be allowed to go public in Hong Kong, overturning rules that barred the likes of Alibaba Group Holding Ltd. from considering the former British colony. Businesses will be able to apply under the new regime starting April 30, HKEX said Tuesday.

 

European Union

Swedbank invests €3m in banking tech vendor Meniga (Fintech Future) Rated: AAA

Meniga, a white-label digital banking solutions provider, has received a €3 million equity investment from its customer, Swedbank.

The two firms partnered in 2017 to improve Swedbank’s digital customer experience through a personal finance activity feed and data aggregation platform. The new solution is intended to “give customers better control over their daily finances and a more personal, engaging experience than today”, according to Meniga.

The bank’s view of Open Banking (The Finanser), Rated: A

Another conversation about Open Banking, and an interesting point was raised by one bank. They said that they had been mapping financial moments – getting married, buying a house, having a baby, crashing your car, etc – and had started to reimagine the whole customer experience in those moments using APIs.

For example, I bring up my banking app 3-4 times a day. The bank probably thinks it’s love them as I bring up their app so often. Well I don’t love them at all. I’m just going into the app so regularly because, as a small business, I want to see if my customers have paid yet.

International

World Bank Releases the Latest Global Findex Database (Lend Academy) Rated: AAA

The Global Findex Database and accompanying report give a clear indication of how fintech is impacting access to financial services globally.

Source: World Bank

Globally, about 1.7 billion adults remain unbanked—without an account at a financial institution or through a mobile money provider. Because account ownership is nearly universal in high-income economies, virtually all these unbanked adults live in the developing world. Indeed, nearly half live in just seven developing economies: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan.

Fifty-six percent of all unbanked adults are women. Women are overrepresented among the unbanked in economies where only a small share of adults are unbanked, such as China and India, as well as in those where half or more are, such as Bangladesh and Colombia.

Read the full report here.

US fintech funding boomed at the start of 2018 — but early-stage funding is drying up in Europe (Business Insider) Rated: A

VC-backed fintech companies raised $5.4 billion across 323 deals globally in the first quarter, according to CB Insight’s latest fintech report, released on Monday.

The figures were supported by a big uptick in deal-making activity in the US. US fintechs raised $2.1 billion across 147 deals. Notable investments include a $165 million funding round for insurance startup Oscar in March and a $110 million capital injection for San Francisco’s Collective Health in February.

Source: CB Insights

While deal activity spiked in the US and Asia, it fell to a 5-quarter low in Europe with just 63 first quarter deals.

The slump was largely down to a decline in early-stage funding deals and came despite several $100 million-plus funding rounds for European challenger banks N26 and Atom. European fintechs raised $933 million in the first quarter.

 

Will Beijing Manage to Survive the US-Chinese Trade War? (Sputnik International) Rated: A

Beijing has kicked off a number of measures aimed at bolstering its economic growth, Chinese researcher Liu Dan told Sputnik. According to Liu, the country’s internal difficulties have not been triggered by the US tariff war unleashed by the Trump administration on China.

One should not overestimate the impact of Sino-American trade frictions on China’s economy, says Liu Dan, a researcher at the Chongyang Institute for Financial Studies (RDCY) of Renmin University of China.

Australia

Lending continues to rise Down Under for RateSetter Australia (Peer2Peer Finance) Rated: AAA

PEER-TO-PEER lending platform RateSetter continues to pass lending milestones in Australia as its loanbook reached A$250m (£136.5m).

The firm, which is the only Australian P2P lender open to retail investors, also announced that it now has more than 10,000 registered users on its site.

RateSetter has doubled its investor base in the country within a year, which it says is due to customer dissatisfaction with Australian banks.

P2P lender’s growth due to consumer ‘rebellion’ (Australian Broker) Rated: A

Peer-to-peer lender RateSetter has attributed its recent rapid growth to consumers actively rebelling against the big banks.

The amount invested by these investors has increased by 14% over the last 12 months, with average investment now sitting at close to $40,000.

Asia

House hunting? Soon you can crowdsource your downpayment via blockchain and smart contracts (E27) Rated: AAA

For millennials, this presents a major barrier to homeownership. While 70% of Chinese millennials have already managed to purchase their first real estate, only 35% of their Malaysian peers have followed suit according to HSBC data. For 64% of millennials around the world a combination of low income and soaring property prices make the prospects of owning a house rather gloomy. A lot of them also do not qualify for traditional loans and do not have the family support for making that downpayment.

Add to this new concept the technology of blockchain, and you have a method by which borrowers can access an alternative down payment funding source, and an immutable record of each borrower-lender agreement is permanently recorded. This serves four purposes:

  1. Blockchain eliminates the traditional borrowing method, with its middlemen and fees. The repayment details are worked out between the borrower and the individual lender.
  2. Blockchain democratises borrowing, because credit scores, history, etc., are not factors in obtaining the loans. If a borrower can show basic ability to repay, an individual lender will be willing to put up the money at an interest rate that is mutually agreed upon.
  3. The borrower-lender arrangement is codified and recorded in a blockchain that is secure and permanent. Both borrower and lender have the security of knowing that their agreement cannot be changed except by mutual agreement.
  4. Re-payments are also recorded in the blockchain environment, so there is never a question about the amount or the ultimate meeting of a borrowing obligation to any individual lender.

Authors:

George Popescu
Allen Taylor

Helping Home Buyers Make Down Payments for a Dream Home

unison home ownership

One of life’s biggest dreams is owning a home, but lack of funds, especially for down payment, proves to be a major stumbling block for some would-be home owners. A recent report by the US Census Bureau shows the home ownership rate decreased to 63.7% in 2016, the lowest yearly average in 50 years. Millennial […]

unison home ownership

One of life’s biggest dreams is owning a home, but lack of funds, especially for down payment, proves to be a major stumbling block for some would-be home owners. A recent report by the US Census Bureau shows the home ownership rate decreased to 63.7% in 2016, the lowest yearly average in 50 years.

Millennial lack of savings is well documented, creating a catch-22 for prospective homeowners. Home buyers want to put a substantial portion of the sales price down to ensure monthly mortgage payments are sustainable, but on the flip side, they don’t want their entire net worth sitting in one illiquid asset. Unison not only understands the pain point of the consumer, but has created a new category of home ownership by investing in homes through Unison’s HomeOwner and HomeBuyer products.

An Upstart Trades Cash for Home Equity

Unison (earlier FirstREX), founded in 2005, is headquarters in San Francisco, California with a team of 70 employees and regional sales managers. The company launched its homeownership investment product in 2007, through which it has so far managed to invest more than $300 million. The initial capital invested was raised from pension funds and endowments.

Founder Thomas Sponholtz, Unison CEO and chairman of Unison, was co-head of the fixed income group at Barclays Global Investors prior to Unison. At Barclays, he was instrumental in the development of the first fixed income ishares (ETF). A year later, James Riccitelli, joined Thomas as Co-CEO and they launched the initial product at Unison. Riccitelli started his career with Nomura Securities in New York, a leading securities and investor banking company. He later headed the Nomura venture fund that focused on Fintech start-ups.

Residential real estate in the US is the largest asset class with a 2016 total value of $23.9 trillion, out of which $13.7 trillion is made up of household equity and the rest comprised of debt and mortgages. The mortgage side is becoming a commodity but there is a massive dearth of products targeting homeowner equity. The underlying idea behind Unison was to target the residential real estate market on a massive scale by concentrating a financial product that allows homeowners a way to fund their home purchase or to earn equity through a home ownership investment.

Unison is not a lender. Rather, it is licensed along similar lines as a real estate broker and provides a feasible platform to purchase real estate. In the last 10 years, Unison has revolutionized home ownership investing. Its flagship products include a product for home buyers and a product for home owners.

Product for Home Buyers

The Unison HomeBuyer program paves the way for people who wish to buy their home by providing half of the down payment required. On top of that, the contribution is not considered a loan. Rather, it is an investment that can be held for up to 30 years and gives Unison 35% of the upside or downside of the home equity. It is a true partnership where both the company and home owner win or lose together in a varied ratio.

This product is apt for the new-age American who doesn’t like to save but is capable enough to afford the EMI of home ownership. By sharing the down payment 50-50 in home purchase with the buyer, Unison lessens the burden of Loan to Value (LTV) for the home buyer. This mitigates the requirement for mortgage insurance on the homeowner’s part, thereby lowering monthly installments by 15%-20%.

Product for Home Owners

Unison HomeOwner program provides a special platform for existing homeowners to tap into their home equity without adding to their debt or payments on a home equity loan (HELOC). Unison provides a lump sum amount in cash, in some cases up to 20% of the home value, to empower homeowners to have access to their equity. The samount received can be used up for to 30 years as a cash cushion for financial stability, to pay off debt, for remodeling of a home, and for investing in a child´s education. In exchange, Unison participates in sharing the downside risk and upside potential in the change in the home’s value whenever the owner decides to sell.

Unison takes a second lien position on the property and usually does not require approval from the first lien holder. To ensure all parties are on the same page, the company works only with lenders that have pre-approved Unison. This relationship is of great value to the lenders as it enables lenders to offer different products and to tap a larger category of prospective buyers who lack cash for the entire down payment. Unison has already worked with eight well-known lenders such as Guild and Freddie Mac, and enables the customers to pre-qualify for a regular mortgage while offering a homeownership investment.

Unison does not get any tax benefit or write offs from property taxes, and mortgage interest still goes to homeowners. It also helps the homeowner reduce his capital tax burden when the house is sold as the investment returns are shared between Unison and the homebuyer.

Unison for Retirees

Unison is also a godsend for retirees. It provides an opportunity for buyers who are looking to downsize by putting a share in the down payment for the new home and enabling the retiree to have much more cash to meet their medical and other expenses. Unison specializes in helping people survive on retirement income while maintaining equity in their homes by giving them an option to sell their home equity for cash that can be used up to 30 years without payment of any EMI.

Unison operates in 13 states and plans to expand to many more. The company is the category leader, and its unique proposition and ability to hold pure equity for such long terms creates a valuable moat for the business.

Author:

Written by Heena Dhir.

Wednesday February 22 2017, Daily News Digest

Marcus

News Comments Today’s main news: OCC addresses risk management for bank-MPL relationships. IFISAs dogged by further delays. Radial integrates with Klarna. Bitbond raises $1.2 mil. Today’s main analysis: Marcus marks the end of traditional banking. Today’s thought-provoking articles: 3 upcoming changes to private student lending. The Pulse of FinTech infographics. United States OCC establishes risk management expectations for bank-MPL […]

Marcus

News Comments

United States

United Kingdom

European Union

International

Australia

News Summary

United States

OCC’s Third-Party Risk Management Expectations for Bank Relationships with MPLs (Pepper Hamilton LLP), Rated: AAA

On January 24, the Office of the Comptroller of the Currency (OCC) issued a new bulletin, OCC Bulletin 2017-07 (Supplemental Examination Procedures for Risk Management of Third-Party Relationships). The stated purpose of the bulletin is to assist bank examiners in evaluating the third-party risk management practices of national banks and federal savings associations (collectively, banks). For the most part, Bulletin 2017-7 reinforces existing OCC supervisory expectations. In several notable respects, however, the bulletin breaks new ground, including by addressing relationships with marketplace lenders.

In establishing risk management expectations for relationships between banks and marketplace lenders in its new bulletin, the OCC is following the lead of the Federal Deposit Insurance Corporation (FDIC), which issued its own supervisory expectations for these relationships in late 2015. As in the case of the FDIC’s guidance, the OCC bulletin broadly defines the term “marketplace lender” to include any “companies engaged in Internet-based lending businesses (other than payday lending).”2 Specific examples of marketplace lenders stated in the OCC Bulletin include online companies that make small business loans, consumer loans, student loans and real estate loans.3

If a bank plans to contract with a marketplace lender to “perform some, if not all operational functions, including processing, underwriting, closing, funding, delivering, and servicing of loans,” OCC Bulletin 2017-7 requires the bank to have sufficient support “systems, controls, and personnel [in place] to adequately support the volume of planned loan origination, servicing, or collection activities.”4 In addition, if the bank is considering contracting with a marketplace lender to originate or purchase loans, the bank must determine whether the lender’s underwriting methods are “new, nontraditional, or different from the bank’s underwriting standards.”5 Finally, if the bank will be investing directly or indirectly in, or will be providing warehouse lines or other credit facilities to, any third-party lender, including a marketplace lender, the bank must determine whether the third-party lender’s underwriting standards are consistent with the bank’s own underwriting standards.6

Goldman Sachs’ Recent Move Marks The End Of Traditional Banking (Newsmax), Rated: AAA

At the end of 2016, Goldman Sachs launched a new online lending platform called Marcus. The move into online lending by one of the most successful investment banks in the world is a telling move for two reasons.

First, it’s a good indicator of the post-financial crisis banking industry.

Second, rising compliance costs—combined with over seven years of zero-interest rate policy from the Fed—was a bad environment for bankers.

Peer-to-peer lending has grown from nothing a decade ago to be a $26 billion industry in 2015. However, it still only accounts for 2% of the market for unsecured consumer credit.

Goldman Sachs is using Finacle, a software program owned by Infosys, to run the Marcus lending platform. With this software, Marcus customers will be able to fully customize their loan parameters within guidelines set by the bank.

Gone are the days of negotiating with a banker on loan terms. The Finacle software is fully automated and will process the transactions in real time. It’s a fully operational “bank within a bank” that only relies on approximately 200 Goldman employees, according to Bloomberg.

Marcus is not a peer-to-peer lending platform. Instead, Goldman will be making loans against its own balance sheet. This will give the bank more flexibility with setting competitive loan terms and fees.

According to a Morgan Stanley report published in 2015, the effective annual interest on the peer-to-peer lending platforms analyzed was on average 6.8% lower than those offered by banks.

All the while, P2P lending platforms have historical net annualized returns between 5% and 10%. Compare that to investing in a 5-year US Treasury note that yields less than 2% today, below the reported rate of inflation, and can you see why Goldman Sachs got involved with online lending.

3 Upcoming Changes in Private Student Lending (US News), Rated: AAA

In fact, the day after Trump was elected to office, the stock price for Sallie Mae Corp., a large student loan lender, shot up nearly double from $7.10 per share on Election Day to $12.47 on Feb. 15.

For prospective private student loan borrowers, here are a few expectations that experts say consumers may see in the next year or two as a result of changes at the federal level.

1. More lenders entering the private student loan market: Matherson says easing of lending restrictions will lead to more lenders entering the marketplace over the next two years.

Experts say large commercial banks that left the private student lending market after the 2008 financial crises may also return.

2. Interest rate hikes for both variable and fixed-rate private loans:The Federal Reserve is signaling that it’s on course to raise the short-term interest rate this year.

Lending experts say they expect to see a 1 percent rise in interest rates for private student loans over the next two years. Those increases, they say, will affect both variable and fixed-term rates on private education loans.

3. A growing number of start-ups offering income-shared agreements: Under an income-shared agreement or ISA, students use funds from an investor to pay for college and in turn agree to make payments based on a percentage of their income for a set period of time after they graduate.

Casey Jennings, chief operating officer at nonprofit 13th Avenue Funding, which works with low-income students, says clarification of the legislation will make it much easier for financial and educational institutions to enter this space.

Prosper Marketplace President Ron Suber Joins Unison as an Investor and Strategic Advisor (PR Newswire), Rated: A

Unison Home Ownership Investors, the leading provider of home ownership investments, announced today that Ron Suber, president of Prosper Marketplace, has become an investor in the company and has taken on a significant advisory role as the company is experiencing a period of unparalleled growth, opportunity and availability.

A financial services industry veteran, Suber brings to Unison a wealth of experience across multiple disciplines. As an influencer in the financial technology space, Suber will look to grow the home ownership investment category through his relationships with marketplace lenders, mortgage companies, realtor groups and banks.

LendIt Announces 2017 PitchIt Finalists (PR Newswire), Rated: A

LendIt, the world’s largest show in lending and fintech, today announced eight finalists for its fifth PitchIt @ LendIt competition. In partnership for the first time with 500 Startups, the world’s leader in investing and mentoring, and sponsored by Marqeta, PitchIt is a leading global competition for fintech startups to earn mentorship, endorsement and exposure to institutions, investors and broad visibility.

This year’s finalists were chosen from nearly 300 high caliber applicants covering all areas of fintech including insurtech, blockchain, payments, online lending, credit and artificial intelligence.

The eight 2017 PitchIt finalists are:

  • Nova Credit
  • StackSource
  • Alloy.co
  • Qwil
  • Aella Credit
  • Real Atom
  • Float Credit
  • WeTrust Platform

The finalists will pitch their concepts at LendIt USA 2017 on March 7 to a panel of judges from the venture capital community including: David Teten, ff Venture Capital; Kareem Zaki, Thrive Capital; Ben Malka, F-Prime; and Joel Monegro, Union Square Ventures.

Kabbage preps small business loan deal (Global Capital), Rated: A

Online small business lender Kabbage is marketing a $500m securitization of loans to small and medium sized businesses which will be used to refinance an existing deal from 2014.

Guggenheim is the sole lead of the $500m deal, which is expected to officially begin marketing to investors in the week of March 6.

Kroll Bond Ratings has assigned an A rating to the $370.37m ‘A’ notes, and BBB to the $79.37m ‘B’ notes.

Marketplace deals readied, with innovations (Structured Credit Investor), Rated: A

Kabbage is marketing its first marketplace loan ABS of the year and its second since inception. Meanwhile, SoFi is in the market with its second consumer loan ABS – SoFi Consumer Loan Program 2017-2 – backed by US$343m of consumer loans and comprising several elements that differ from its previous securitisation.

Kroll Bond Rating Agency Assigns Preliminary Ratings to Arcadia Receivables Credit Trust 2017-1 (BusinessWire), Rated: A

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to two classes of notes issued by Arcadia Receivables Credit Trust 2017-1 (“ARCT 2017-1”). This is a $213.137 million consumer loan ABS transaction that is expected to close March 6, 2017.

This transaction is the first rated securitization of prime unsecured consumer loans facilitated by LendingClub Corporation’s (“Lending Club” or the “Company”) proprietary technology platform supporting an online marketplace that connects borrowers and investors by offering a variety of loan products originated by issuing banks through the platform, www.lendingclub.com(the “Lending Club Platform” or the “Platform”).

Why big banks are helping financial tech startups (Tradestreaming), Rated: A

Finlab, short for Financial Solutions Lab, is an 8-month startup accelerator program funded by JPMorgan Chase and run by the Center for Financial Services Innovation. It just sent out its third call for applications from financial technology startups working on tools for underserved populations. It’s an example of how banks are now partnering rather than competing with startups — a trend that’s grown quickly over the past couple of years.

Finlab began two years ago, and winners get $250,000 of capital, one-on-one mentorship and networking opportunities. About eight or nine winners are picked each round. Winners participate in a series of workshops across the country on how to grow their businesses, including a session on regulation.

Big banks are likely to keep supporting these programs — not only for relationship building, but also because startups are working on areas major banks aren’t addressing, said Gilbert.

4 Real Estate Crowdfunding Trends You Should Be Watching (Forbes), Rated: A

Real estate is one of the fastest growing markets to take on the concept of crowdfunding and apply it in a new way.

Here are four emerging trends in real estate crowdfunding to watch this year.

  1. Regulation Brings Crowdfunding to Maturity. Today, crowdfunding has matured and investors are more intrigued than they are skeptical. This is due, in large part, to the JOBS Act and the enactment of Regulation A+. It legitimized the industry and it has been growing ever since.
  2. Foreign Investment in Real Estate Is Booming. According to The Guardian, a recent U.S. real estate study showed that Chinese investors have poured $110 billion dollars into the U.S. market in the last 5 years (both commercial and residential). This investment is set to double in the next 5 years. Because of foreign investment expansion in the U.S., it’s relatively safe to assume that a portion of those dollars will go into alternative funding options like real estate crowdfunding.
  3. Wealthy Millennials Are Investing Their Money Differently. However, with the influx of unicorn technology companies and the increase of millennial millionaires, the need to put their money somewhere is still very much on their minds. Real estate crowdfunding has the potential to help them share the wealth while staying true to their sensibilities.
  4. Crowdfunding for Retirement. Those considering real estate investing, especially through crowdfunding platforms, could potentially improve their rate of return with tax efficient strategies, more specifically IRA’s. Real estate crowdfunding platforms allow those saving for retirement to invest in real estate right from the golf course, with just a few clicks on their phone or tablet.

PeerStreet’s CEO Brew Johnson Talks Real Estate Crowdfunding Market (Forbes), Rated: A

The company was founded by former Google executive Brett Crosby and real estate attorney Brew Johnson. By the end of 2016, the company originated more than $200 million.

Johnson: The biggest differentiators between PeerStreet and other players are pretty simple: (i) our platform is very focused on one asset – first-lien debt. We think creating this focus at the outset is important in delivering value to users. And most importantly, (ii) we don’t originate loans directly to borrowers, but rather we aggregate loans from a distributed network of lenders, curate those loans, and then make it easy for investors to invest in them.

Johnson: We exceeded $200 million in origination volume by the end of 2016. Our KPIs are based on loan volume and quality.

Johnson: We maintain focused on our core asset: short-term, first position lien loans. Our data continue to show that this asset provides favorable risk-return profiles for investors, so 2017 is about growing our loan volume in order to serve even more investors.

Johnson: I think there are opportunities of various sizes across the industry. That said, a couple that I find particularly interesting are the potential implications for a more robust rating and credit scoring of alternative lending investments across platforms and those of creating a truly efficient secondary market or exchange that enables investors to seamlessly trade in and out of positions.

Misys Targets Offerings for P2P Lending (Intralinks), Rated: B

Traditionally focused on treasury and capital markets solutions, Misys revised its focus to include solutions that would allow banks to branch into peer-to-peer (P2P) lending, as well as an offering for machine learning that would detect anomalies in trading patterns.

Altisource’s Premium Title Announces Integration with LendingQB’s Loan Origination System (Yahoo! Finance), Rated: B

Premium Title, a national provider of title and escrow services, announced today its integration with LendingQB’s end-to-end, browser-based loan origination system (LOS). The integration can help provide customers with the ability to obtain title and settlement quotes faster, place orders with Premium Title and receive a title fee certificate guaranteeing fees for 30 days, all without leaving the LendingQB platform.

This integration, gives Premium Title clients the capability to experience a seamless and more efficient process within the LendingQB LOS platform. Lenders using LendingQB can receive an automated quote for title services and a title fee certificate guaranteeing title fees, which auto-populates into the LOS. LendingQB can also maintain the loan estimate and any adjustments in fees associated with the loan, assisting with TRID compliance and faster disclosure timelines.

United Kingdom

Innovative Finance Isas dogged by further delays (Financial Times), Rated: AAA

The Innovative Finance Isa was officially launched by former chancellor George Osborne in July 2015, putting peer-to-peer lending platforms — where individual investors are matched with interest-paying borrowers — on a level playing field with traditional savings and investment products which can be held within an Isa wrapper.

A year on, the FCA has still yet to grant the bulk of peer-to-peer lenders, including the three largest — Zopa, Funding Circle and RateSetter — the authorisation they need to launch an Innovative Finance Isa in time for the new tax year in April.

These three peer-to-peer platforms account for more than 40 per cent of the UK’s market share by loan origination, according to AltFi data, having lent nearly £6bn combined.

Chatbot savings app Plum partners P2P lender Ratesetter (Finextra), Rated: AAA

British AI-powered savings Facebook Messenger chatbot Plum is to start steering users that are willing to take on risk in exchange for higher interest rates to P2P lender Ratesetter.

According to Moneyfacts, the average UK rate on easy-access accounts is 0.15%, while the average return earned by RateSetter investors to date is 4.7%.

The money goes into users’ Plum savings account but the Ratesetter deal means that people can also now choose to earn a better rate – if they are willing to take on the associated risk.

Zopa Named Best Personal Loan Provider & Best Alternative Finance Provider at the 2017 British Bank Awards (Crowdfund Insider), Rated: AAA

Zopa, the UK’s very first peer to peer lending platform, announced on Monday it was named Best Personal Loan Provider & Best Alternative Finance Provider at the 2017 British Bank Awards.

This news comes just a few weeks after Zopa was named Personal Loan Provider of the Year at the Consume MoneyFacts Awards for the fourth year in a row.

Zopa recently announced it topped £2 billion in lending.  According to information provided by the online lending platform, as of today, the lender matched over 246,000 borrowers to 75,000 investors to provide access to capital in the form of loans.

RateSetter Borrowers Have Paid Back £1 Billion, Investors Have Earned £63 Million (Crowdfund Insider), Rated: A

Online lender RateSetter has said it has now collected £1 billion in capital repayments from borrowers since its first loan back in 2010. Overall, RateSetter has originated approximately £1.75 billion in loans while paying out £63 million in interest.  The average interest rate ranged between 3.1% on the Rolling market and 6.0% for the 5 Year market. In 2016, total lending was pegged at £668 million.

Awareness of P2P drops north of London (P2P Finance News), Rated: A

AWARENESS of peer-to-peer finance products among small- and medium-sized enterprises (SMEs) is at its lowest in the Midlands and the north of England, the British Business Bank (BBB) has revealed.

The figures, revealed in its latest annual Small Business Finance Markets report, showed fewer than 40 per cent of firms in the Midlands were aware of P2P lending, compared with almost 60 per cent in London.

Around half of firms in the south of England were aware of P2P, while just 40 per cent of firms in the north had come across it.

Despite the varying levels of awareness, the report found annual lending through P2P platforms increased by 34 per cent to £3.9bn in 2016. Business lending made up £1.3bn of that amount.

SME Loan Fund plans break with GLI in bid for scale (Citywire), Rated: A

The SME Loan Fund (SMEF +), the small directing lending investment trust set up by GLI Finance, plans to break ties with its founder in a bid to gain scale.

The trust launched in 2015 amid a boom in peer-to-peer lending launches, yet was able to raise just £12.4 million capital. Assets currently stand at £53 million, mostly from an initial portfolio of loans transferred by GLI Finance (GLIF +) as part of the launch.

The SME Loan Fund said that GLI had agreed to sell its 48% stake in the trust through a placing. Should the placing prove successful, the SME trust will switch management from Amberton Asset Management, 50% owned by GLI. If it is not, the board will propose the wind-up of the trust.

GLI Finance, an investment trust in its own right, said it would use the money from a share sale to repay a £14.9 million loan to strengthen its balance sheet.

Most board members of P2P trusts have skin in the game (P2P Finance News), Rated: A

THE MAJORITY of board members of peer-to-peer investment trusts have “skin in the game”, research has revealed.

Canaccord Genuity research has assessed the pay and investments of board members of investment trusts. The analysis included funds focused on the P2P sector.

It showed that the highest annual pay packet among P2P investment trusts is £50,000, taken by the chairmen of the Funding Circle SME Income Fund and Victory Park Capital (VPC) Specialty Lending.

Samir Desai, co-founder of the Funding Circle platform, who sits on the investment trust’s board, has put £152,775 into the fund.

This is the highest among its board members, followed by £110,349 invested by non executive director Frederic Hervouet. The Funding Circle SME Income Fund board chairman Richard Boleat takes the highest annual fee on the board at £50,000 and has invested £5,157.

The trust’s board members Jonathan Bridel and Richard Burwood, both non-executive directors, have also invested £5,157 and their annual fee is £40,000 and £30,000 respectively.

Desai does not take a fee and Hervouet has an annual fee of £35,000.

European Union

Radial payments platform integrates with Klarna (Finextra), Rated: AAA

Klarna, one of Europe’s leading payments providers, and Radial, the leader in omnichannel commerce technology and operations, today announced a new partnership to further expand Radial’s payment options.

The integration of Klarna with Radial’s Payment platform enables clients and prospects to offer a financing option at checkout to give customers more choice and could give retailers a 58 percent higher order value.

Financing a purchase over time has historically been optimized for brick and mortar stores. The online equivalent, however, can often be an ordeal, with redirects, lengthy forms and unclear information. Klarna’s process only requires a few fields of information, and lets customers know instantly if they qualify for the financing solution.

International

Bitbond raises $ 1.2 million to grow SME lending platform (Finextra), Rated: AAA

Global SME lending platform Bitbond today announced the closing of an equity funding round of $1.2 million (€1.1 million).

This round brings Bitbond’s raised equity capital to a total of $2.3 million.

Led by mobilike founder Şekip Can Gökalp, a number of business angels contributed to the round. Among them were Fyber founders Janis Zech and Andreas Bodczek as well as Kreditech co-founder & CEO Alexander Graubner-Müller.

Bitbond will use the additional funds for further product development and to grow its user base in markets which are underserved by traditional lenders. Over 1,600 loans worth $1.2 million were originated on Bitbond since its launch. 76,000 users from 120 countries registered with the service to date.

Infographics – The Pulse of Fintech – Q4 2016 (KPMG), Rated: AAA

According to The Pulse of Fintech, after 2015’s record-setting $46.7 billion in global funding to fintech companies, 2016 brought reality back to the market with an almost 50 percent slide in fintech investment.

Australia

Australia weathers fintech slump (The Australian), Rated: A

Global investment in fintech companies almost halved last year as “froth” comes out of the burgeoning industry and investors wait to see if they can successfully disrupt incumbents such as banks and insurers, according to a new report.

Fintech investment funding declined to $US24.7 billion ($32.17bn) last year from a bumper $US46.7bn in 2015, driven by fewer merger and acquisitions, and private equity investments, KPMG found.

However, the less mature Australian fintech industry bucked the trend as investment soared to a record high of $626 million last year, up from $185m in 2015 and $461m in 2014.

In contrast, corporate venture capital arms — those owned by banks and other incumbents — played a bigger role in the market, expanding investment to $US8.5bn from $US4.9bn. Australia’s institutions, including National Australia Bank, are increasingly investing in fintech via internal VC arms.

Authors:

George Popescu
Allen Taylor