Thursday April 4 2019, Weekly News Digest

soft spending

News Comments Today’s main news: Affirm raises $300M. LendingClub charged with privacy violation. Funding Circle issues 187M GBP securitization. Zopa legacy portfolio drags. Fellow Finance facilitates 18.2M euros in March loans. Today’s main analysis: March 2019 debt report from LendingTree (A MUST-READ). Today’s thought-provoking articles: Interview with SoFi CEO Anthony Noto. The slowing U.S. economy. […]

The post Thursday April 4 2019, Weekly News Digest appeared first on Lending Times.

soft spending

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United States

United Kingdom

European Union

International

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News Summary

United States

Max Levchin’s Affirm raises $ 300 million (Axios), Rated: AAA

Affirm, the consumer credit startup led by PayPal co-founder Max Levchin, has raised around $300 million in Series F funding at a $2.9 billion post-money valuation, Axios has learned from multiple sources.

PayPal co-founder’s fintech company scores $ 300 million, plans massive hiring in S.F. (Biz Journals), Rated: A

Flush with a monstrous funding round, this San Francisco-based fintech company plans to ramp up its hiring from 580 employees to 850 by the end of the year – and the bulk will be in the Bay Area.

FTC Privacy and Data Security Report for 2018 (JDSupra), Rated: AAA

  • LendingClub, a peer-to-peer lending company, was charged with failing to deliver adequate privacy notices to consumers required by the Gramm-Leach-Bliley Act’s Privacy Rule and Regulation P. The FTC’s complaint alleged that “LendingClub violated these rules by failing to provide its customers with clear and conspicuous notice before collecting consumers’ financial data and by failing to deliver the notice in a way that ensured that consumers received it.” Customers were instead forced to follow a series of links before being able to review the privacy policy, a method the FTC deemed to be improper.

Anthony Noto of SoFi (Lend Academy), Rated: AAA

The CEO of SoFi talks priorities, innovation, company culture, competition and what it will take to build a world class financial services firm

Read the full transcript of the interview here. Interview by Peter Renton.

US Economy Slowing (PeerIQ), Rated: AAA

US 4th quarter GDP growth slowed to 2.2%, as what is shaping up to be the largest expansion in US economic history starts to lose steam. Consumer spending also slowed in January, rising by just 0.1% MoM. The Fed’s preferred inflation gauge, PCE, rose by just 1.4% YoY, justifying the Fed’s decision to keep rates on hold. Overall signs point to a slowing economy in the late stages of an expansion.

Source: Bloomberg, PeerIQ

LendingTree Debt Report – March 2019 (LendingTree), Rated: AAA

After a brief respite in mid-2018, the debt-to-income ratio for consumer debt rose once more, reaching 25.41% by the end of 2018. That falls just shy of the all-time high of 25.49% set one year earlier.

Household wealth saw a $5 trillion decline last quarter

Losing $5 trillion of wealth may sound disastrous, but that’s what happened to American households last quarter. According to the Federal Reserve, total net worth of U.S. households fell from $108 trillion to $104.3 trillion in the last quarter of 2018. The loss was the biggest quarterly drop since the depths of the great recession of 2008.

PayPal Makes Its First-Ever Investment in a Blockchain Startup (CoinDesk), Rated: A

Announced today, PayPal has joined the extension of a Series A funding round in Cambridge Blockchain, a startup that helps financial institutions and other companies manage sensitive data using shared ledgers.

Neither PayPal nor Cambridge Blockchain disclosed the investment amount, but recent filings with the SEC indicate that Cambridge Blockchain has raised a total of $3.5 million in new equity from several investors over the past nine months. That follows the $7 million close of its Series A in May of 2018, and brings the total capital raised to $10.5 million.

Zillow is now a mortgage lender, launches Zillow Home Loans (HousingWire), Rated: A

Zillow announced Tuesday that it is launching its own mortgage lending operation, which it is calling Zillow Home Loans.

A payday lender in disguise? New York investigates the Earnin app (American Banker), Rated: A

As early wage access programs such as Even, PayActiv, FlexWage, ZayZoon and DailyPay gain traction, some other apps are copying their style while using a more traditional payday-loan model — sparking attention from law enforcement agencies in the process.

That’s what happened to Earnin, which is often referred to and bills itself as an early wage access provider, which give employees access to their paychecks before they are deposited. The New York Department of Financial Services launched an investigation of the firm over concerns it may be skirting state lending laws by, among other things, requiring tips from users in lieu of disclosing fees.

Crypto Lending Platform BlockFi’s Interest Account Customers Receive Their First Interest Payments (Bitcoin Exchange Guide), Rated: A

Leading crypto lending platform BlockFi recently announced that their Interest Account customers received their first interest payment for their Bitcoin [BTC] and Ethereum [ETH] deposits.

Since their public launch on March 5, BIA has grown by over 400% and counting. Approximately 75% of BIA clients have a balance of less than 5 BTC or 150 ETH. Their median account balance is $7,000 USD.

Crypto lenders push no-tax perk of leveraging bitcoin for cash (American Banker), Rated: A

Former Wall Street trader Edgar Fernandez used some of his bitcoin as collateral to borrow nearly $100,000, a move that let him keep his cryptocurrency and avert a tax bill on the newly acquired cash.

Genesis Capital, a cryptocurrencies lender in Jersey City, New Jersey, an affiliate of Genesis Trading, says it handed out more than $1.1 billion in cash loans and borrowed virtual cryptocurrencies in 2018. That total volume doubled in the last quarter of 2018 from the volume of the previous two quarters. Other lenders have also said they are doing more transactions, including Nexo, a cryptocurrencies lender that says it has loaned $330 million since launching last April.

Atomic Capital Goes On The Attack With New Crypto Loan Offer In The Market (Bitcoin Exchange Guide), Rated: A

The asset tokenization company, Atomic Capital, is making a very aggressive loan offer in the crypto lending field. Back on Wednesday, the firm will be giving USD loans for 85% of the value of the Bitcoin (BTC) or Ethereum (ETH) used as collateral. In this way, the firm will be offering the most generous loan-to-value (LTV) in the space.

Just to put it into comparison, BlockFi offers a maximum LTV of 50%. Celsius Network, meanwhile, is giving customers 25%, 33% or 50% LTV.

Atomic will be charging interest rates of 11% and 13%. This is much more than the 4.5% or 8.95% that other competitors offer.

New $ 4.8m funding for SME bank Novo (Fintech Futures), Rated: A

Novo has raised $4.8 million in venture seed financing to make banking accessible for small businesses by launching no-fee FDIC-insured digital banking.

Blend seeks to deepen bank ties with account opening product (American Banker), Rated: A

Blend is aiming to expand its customer base of banks and credit unions with a digital account opening product that it says takes some customers as little as two minutes to complete.

The account comes in addition to the mortgage products the digital loan origination fintech already offers and can stand on its own or be integrated as a package, the company said Tuesday.

Will Millennials Bring Non-banks into Their Finances? (deBanked), Rated: A

According to an Accenture surveyfrom five years ago, 34% of millennials said they would bank with Apple if such a product were available.

Best low cost franchises to get into (BM Magazine), Rated: A

Business Services Franchise

Success Member Inc.: It is the leading online loan marketplace that connects consumers with banks, credit partners and multiple lenders both nationally and internationally. They offer training with an expert to this industry of 33 years, along with a lifetime one-on-one dedicated support.

Minimum Cash Required:$25,000

  • Training and Support: Yes
  • Financing: Yes
  • SBA Approved: Yes
  • Home-Based: Yes

Goldman Sachs’ Marcus Loses Product Head (PYMNTS), Rated: A

Marcus, the consumer bank operated by Goldman Sachs, has seen its head of product Michael Cerda quit his job.

Tradeweb Raises $ 1.1 Billion in Year’s No. 2 IPO in U.S. (Bloomberg), Rated: A

Tradeweb Markets Inc. raised $1.1 billion in the second-largest U.S. initial public offering this year, after again increasing the number of shares it was selling and then pricing them above the marketed range.

Tradeweb’s IPO is also the biggest for a financial services company in the U.S. since online lender GreenSky Inc. raised $874 million in May.

Class Action Lawsuit Filed Against Brendan Ross, Direct Lending Investments, and Others (deBanked), Rated: A

A class action lawsuit has been filed in California against Direct Lending Investments, LLC (DLI), Brendan Ross, Bryce Mason, Frank Turner, Rodney Omanoff, and Quarterspot Inc. alleging breach of contract, breaches of fiduciary duty, aiding and abetting breaches of fiduciary duty, and fraudulent inducement.

Read the full complaint here.

AI-Powered Asset Manager Pagaya Goes
After Real Estate (Institutional Investor), Rated: A

Pagaya, which manages money using algorithms created with artificial intelligence, has raised $25 million in a series-C financing round led by Oak HC/FT, a health care and financial technology venture firm.

The fund raise will support the company’s move into real estate, corporate credit, mortgages, and other asset classes.

White Oak Commercial Finance Adds Origination Talent in Texas (AP News), Rated: B

White Oak Commercial Finance (“White Oak”), an affiliate of White Oak Global Advisors, today announced the appointment of Andrew Bae to Director of ABL Originations, concentrating on Texas and the Southwestern U.S. region. Mr. Bae brings nearly 20 years of experience in commercial finance, most recently leading the establishment of the Dallas office for ExWorks Capital, a senior secured debt fund.

Charles Schwab Now Offers Investment Advice Digitally via Subscription (Subscription Insider), Rated: A

Clients pay a one-time fee of $300 and then $90 a quarter.

United Kingdom

Funding Circle back in securitisation market with £187m deal (P2P Finance News), Rated: AAA

FUNDING Circle has entered the securitisation market for the third time, with a £187m portfolio of UK loans originated by the peer-to-peer business lender.

Alternative asset manager Pollen Street Capital is the equity sponsor of the deal, having backed Funding Circle’s last securitisation eleven months ago.

While Funding Circle operates in the UK, the US, Germany and the Netherlands, the loans included in the securitisation are just from the UK.

Zopa legacy portfolio drags on P2PGI performance (P2P Finance News), Rated: AAA

P2P GLOBAL Investments (P2PGI) has blamed its poorly-performing legacy Zopa portfolio for its latest net asset value (NAV) dip.

The alternative finance-focused investment trust generated a NAV of just 0.31 per cent in February 2019, down from 0.45 per cent in January, and 0.75 per cent in December. This brings the trust’s annualised NAV to 3.7 per cent.

Will more challenger banks evolve as banking as a service providers? (Tearsheet), Rated: A

Starling Bank recently raised £75 million to fund a European expansion. As part of that announcement, the UK-based challenger said it had signed on three new clients to its banking as a service.

According to Starling, it has 20 institutional clients on its BaaS platform, which it launched in August 2018. Payment volume through the service is doubling month over month.

Monzo, following Revolut and N26, mulls new £11 per month premium offering (AltFi), Rated: A

Digital challenger bank Monzo crowned a bumper year in 2018 by coming first for customer service in an independent survey, stealing the title from regular winner First Direct. But will its growing legion of coral card-carriers ever pay for its expanding array of services?

The bank, which is now testing a new paid-for premium offering, thinks they might just do so. ‘Monzo Plus’ – as it is being called – even allows users paying a monthly fee to have Monzo cards in colours other than its famous ‘hot coral’ colour.

How to join the rush for a last‑minute Isa (The Times), Rated: A

There are now just over 48 hours left to make the most of the annual tax breaks on offer in an individual savings account (Isa). This year’s £20,000 allowance expires at midnight on April 5 and you can’t carry it over so it’s a case of use it or lose it.

Monevo Review – An Excellent Place to Begin Your Loan Search (DoughRoller), Rated: A

Through Monevo, you’ll be matched with loans of up to $100,000 with interest rates ranging from 3.99% to 35.99% APR; finding this many competitive options could take you hours to do individually. With Monevo, you can do it in about 60 seconds.

FCA warns that P2P Isas are ‘high risk’ (Money Observer), Rated: A

The Financial Conduct Authority (FCA) has warned that mini-bonds and peer-to-peer loans held within the Isa wrapper are “high risk”.

Payday lending isn’t over yet – and now its victims are being shortchanged yet again (Independent), Rated: A

The administrators of WageDay Advance, which went under in February, have started contacting thousands of former customers owed compensation through being mis-sold loans by the company to urge them to join a growing list of creditors.

Compared with Wonga, WageDay was more of a piranha fish than a shark – but the problems it has created aren’t all that different.

Five ways to add IFISA diversity (P2P Finance News), Rated: A

THIS WEEK is the busiest of the year for ISA providers and ISA savers alike. As the end of the tax year approaches, investors and savers are rushing to make the most of their annual ISA allowance, while ISA managers scramble to convince them that theirs is the right product.

I trust bricks and mortar and want to invest but what’s the best way to create an income from property? (This is Money), Rated: A

People are still making money from property and always will, sometimes lowering their exposure by jointly investing with friends and family, or looking at peer-to-peer lending. Investing locally can give first time investors more confidence as they know their own postcodes, and can keep an eye on what’s going on.

Finastra welcomes Sharon Doherty as Chief People Officer (Techapeek), Rated: B

Finastra today announced the appointment of Sharon Doherty, as Chief People Officer. Doherty joins from Vodafone, where she held the position of Global Organization and People Development Director. In her new role at Finastra she will have global responsibility for making Finastra the most loved and inclusive employer in the Fintech industry.

China

Regulators to pilot P2P lender registration program in back half of 2019 (technode), Rated: AAA

China is expected to start piloting a registration program for online peer-to-peer (P2P) lending platforms in the second half of this year. Regulators plan to start requiring P2P lenders in pilot cities, located in more developed regions, to register with the monitoring system. Regional and national players will have to meet certain requirements on registered capital, risk reserves, and lender risk compensation in order to be registered in the system. Regulators aim to roll out the national registration system by 2020.

European Union

Fellow Finance’s platform facilitated 18,2 million euros of loans in March (GlobeNewswire), Rated: AAA

In March Fellow Finance investors funded business and peer-to-peer loans worth around 18,2 million euros. Cumulative loan volume grew over 415 million euros and the total number of investors grew to 12 031. You can always check the real-time peer-to-peer lending statistics on our website: www.fellowfinance.com/for-investor/statistics.

Finleap acquires German challenger bank Penta (Fintech Futures), Rated: A

European fintech ecosystem Finleap has acquired Berlin-based digital sector banking solution Penta, reports Jane Connolly.

CoinLoan Enables Borrowers to Obtain Fiat Currency Using Cryptoassets as Collateral (Cardrates), Rated: A

In a Nutshell: In the wake of the 2008 financial crisis, peer-to-peer (P2P) lending arose as an alternative to credit offered by traditional banks. At the same time, blockchain-based cryptocurrencies like Bitcoin also emerged. Now, CoinLoan is bringing the two together through its P2P lending platform that lets borrowers use cryptoassets as collateral for obtaining fiat (or traditional) currency. Lenders provide capital with a guarantee from CoinLoan that they will be repaid in full. Borrowers gain access to funds without needing to dispose of their cryptoassets or prove their creditworthiness.

International

Women in Fintech Demolish Glass Ceiling (Lend Academy), Rated: AAA

Valerie Kay, Chief Capital Officer at LendingClub, is responsible for overseeing LendingClub’s Investor Group. She addresses the need for diversity, inclusion, mutual respect and collaboration. She emphasizes the vital importance of diversity to drive better workplaces, happier customers and more profits.

Andrea Gellert, Chief Revenue Officer and Chief Marketing Officer of online small business lender OnDeck, says she sees good progress being made by Fintechs in finding female candidates at all levels including C-Suite and board positions. She points out, “There are more female founders than there used to be. We are moving at a much more accelerated pace than previous industries did in terms of female management.”

Onfido scores $ 50 million investment (Finextra), Rated: A

Onfido, the global identity verification provider, today announced it has raised $50M in funding, bringing the total investment in the company to over $100M.

Australia

Australian neobanks target scale of UK rivals without growing pains (AltFi), Rated: AAA

Sydney-based digital bank Volt promises to offer a faster more personalised service than the country’s big four incumbents – National Australia Bank, Commonwealth Bank, Australia and New Zealand Banking Group and Westpac.

Melbourne-based small business bank Judo launched last June lends between A$250,000 to A$5,000,000, and is process of applying for a banking license from the Australian Prudential Regulation Authority.

Brokers urged to seize opportunities in SME space (TheAdviser), Rated: A

According to research from small business lender OnDeck Australia, which involved a survey of 331 business with an annual turnover of less than $5 million, 25 per cent of SMEs plan to seek additional finance over the next 12 months.

India

P2P lending (Invest in India), Rated: AAA

India currently has about 30 online P2P lending platforms. Some of these are Faircent, i2ifunding, Lendbox etc. In 2018, as many as 11 P2P players received the RBI licence to operate as an NBFC – P2P company. RBI in its master directions has defined NBFC – P2P as a non – banking institution which carries on the business of a peer – to – peer lending platform. The estimated P2P lending to be generated in India over the next 5 years is pegged at around $ 4 bn. Whereas in China, the P2P lending book currently is around $ 100 bn.

Southeast Asia

SINGAPORE-based  leading SME lending platform Validus Capital (Validus) and Lighthouse Canton, an independent asset management and family office advisory services firm, jointly announce the reopening of the LCV Trade Finance Fund (the Fund) with additional capacity of US$14.8 million (S$20 million; RM60 million).

Canada

OnDeck merges Canadian ops with Evolocity (Finextra), Rated: AAA

OnDeck (NYSE: ONDK), the leader in online lending to small business, today announced it has completed the transaction combining its Canadian operations with Evolocity Financial Group (Evolocity), a Montréal-based online small business lender. The combined companies are majority owned by OnDeck.

South Africa

For South Africa’s first challenger bank, conversational AI isn’t just a nice-to-have (Tearsheet), Rated: AAA

South Africa’s TymeBank has launched Max, an AI-powered conversational assistant designed to help consumers learn about personal finance.

For South Africa’s first challenger bank, conversational AI is an important piece of its product roadmap.

Latin America

Why Fintech Startups Are Rapidly Becoming Unicorns in Latin America (Next Billion), Rated: AAA

Fintech was the #1 sector of venture capital investments in Latin America last year, and experts are estimating that the LatAm fintech market will exceed $150 billion by 2021.

In the past few years, over 300 fintech startups have been born in Mexico alone, coming in just second to Brazil, which boasts nearly 400 startups in its own fintech sector.

Authors:

George Popescu
Allen Taylor

The post Thursday April 4 2019, Weekly News Digest appeared first on Lending Times.

Wednesday March 14 2018, Daily News Digest

equity factor returns

News Comments Today’s main news: H&R Block, LendingTree partner on credit score access. KBRA assigns preliminary ratings to LendingClub’s CLUB Credit Trust 2018-NP1. Ant Financial consumer lending hits $95B. Non-Standard Finance buys guarantor loans business. EU rolls out new crowdfunding rules. Today’s main analysis: LendingTree’s mortgage savings tracker, mortgage rate competition index. Does strong economic growth equate to high factor […]

equity factor returns

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

News Summary

United States

H&R Block, LendingTree partner to empower clients to improve their financial well-being (Nasdaq), Rated: AAA

As part of continued efforts to help clients better understand their financial situation, H&R Block (NYSE:HRB) is partnering with LendingTree (NASDAQ:TREE) to provide clients convenient access to their credit score, LendingTree Academy and more. H&R Block clients can now seamlessly enter LendingTree via their MyBlockaccount, which is a private, secure, online portal clients can use year-round to access and add tax documents and personal information.

LendingTree Introduces New Mortgage Savings Tracker and Mortgage Rate Competition Index (PRNewswire), Rated AAA

LendingTree today announced the release of its Mortgage Savings Tracker and Mortgage Rate Competition Index. The LendingTree Mortgage Rate Competition Index is a new measure of the dispersion in mortgage pricing and will be released weekly. Built on top of the Mortgage Rate Competition Index, the Mortgage Savings Tracker will bring a new transparency to mortgage shopping by highlighting the significant savings that are available to potential borrowers for both purchase mortgages and refinancing.

Source: PRNewsfoto/LendingTree

 

Source: PRNewsfoto/LendingTree

Findings from the inaugural report:

  • Across all purchase loan requests on LendingTree (we looked at refinance loan requests separately) in 2017, we found an average Mortgage Rate Competition Index of 0.46 — this was the average spread between the lowest and highest APR offered by lenders.
  • It may not sound like much, but over 30 years translates to $21,000 in additional costs on a $300,000 loan.
  • The index was wider in the refinance market, averaging 0.55. Potential borrowers there could have saved an average of $26,000 had they shopped around to find the lowest rate.
  • Ringing in the new year, the index widened to 0.59 for potential purchase borrowers, translating to a potential savings of just over $27,000.
  • For potential refinance borrowers, again, the index was even higher at 0.63. That could result in a savings of almost $30,000. The savings increased because lenders are reacting differently to the overall uptick in rates.
  • The most recent data for the week ending 3/11/2018 showed potential savings of $26,780 for purchase and $27,616for refinancing.

See LendingTree white paper on the Mortgage Rate Competition Index here.

KBRA Assigns Preliminary Ratings to Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1 (Business Wire), Rated AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1 (“CLUB 2018-NP1”). This is a $301.727 million consumer loan ABS transaction that is expected to close March 21, 2018.

Source Business Wire

LendingClub trims CE on next near-prime consumer loan ABS (Asset Securitization Report) Rated: AAA

As in the past, LendingClub itself contributed only a small portion (7.55%) of the collateral for the Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1 transaction from loans it held on balance sheet, but this time only three unaffiliated parties were invited to contribute the remainder of the collateral.

source American Banker

CLUB 2018-NP1 will issue three classes of notes totaling $301.727 million. Credit enhancement for the senior $180.7 million tranche of Class A notes is 49.5%, down 30 basis points from the senior tranche of the previous transaction, which carried the same A-rating. However, enhancement for the BBB-rated Class B tranche has risen by 5 basis points to 37.4% and enhancement for the BB-rated Class C tranche has risen by 35 basis points to 15.35%, per Kroll.

DOES STRONG ECONOMIC GROWTH EQUATE TO HIGH FACTOR RETURNS? (All About Alpha), Rated: AAA

In this research report we initially focus on the Value, Size and Momentum factors from Fama-French, which are constructed as dollar-neutral long-short portfolios based on the top and bottom 10% of the US stock market. The data includes companies with small market capitalisations, excludes transaction costs and is available since 1926. We expand the factor set by the Low Volatility, Quality, Growth and Dividend Yield factors based on our own data, which is available since 2000. These are created via long-short beta-neutral portfolios and only include stocks with a market capitalisation of larger than $1 billion. Portfolios are rebalanced monthly and each transaction occurs costs of 10 basis points.

EQUITY FACTORS & REAL GDP GROWTH: 1947 – 2017

The chart below shows the returns of the S&P 500 and three factors (long-short) since 1947 sorted by positive and negative quarters of real GDP growth.

It’s worth highlighting that there were only 7 quarters of negative real GDP growth since 2000, so the results have to be taken with caution.

DIVERSIFICATION FOR AN EQUITY-CENTRIC PORTFOLIO

New Media Announces Strategic Alliance with Kabbage (BusinessWire), Rated: B

New Media Investment Group Inc. (“New Media” or the “Company”, NYSE: NEWM), one of the largest publishers of locally based print and online media in the United States as measured by number of publications, announced today that it has entered into an agreement with Kabbage, a pioneering financial services, technology and data platform serving small businesses. This alliance is intended to bring awareness of simple access to working capital through Kabbage’s fully automated online lending platform to more than five million small and medium sized businesses (SMBs) that do business in New Media’s markets.

AI as new tool in banks’ crime-fighting bag? (American Banker), Rated: A

But a funny thing has happened on the way to what should be an AI-led revolution — banks have been worrying what their regulators would say if they filed fewer suspicious activity reports, especially if their rivals continue to submit far more.

source: American Banker

“All the banks are worried that if they use machine learning, the number of SAR filings will go way down and the regulators will say, what happened?” Saleh said. “How come your SAR filings fell by 50%? Maybe there’s money laundering you’re not catching.”

Should Banks Become the New ‘Payday’ Lenders? (LendEDU), Rated: A

In early March, the Florida state legislature approved revamping regulations for payday loans, voting to allow payday lenders to make larger loans for a longer period of time.

The bill aims to allow alternative lenders to make installment-type loans up to $1,000, with a 60- to 90-day repayment period. The current law caps loans at $500 for a period of seven to 31 days.

The Pew Charitable Trusts’ proposal suggested that small banks could instead provide loans with payments capped at 5 percent of a borrower’s paycheck.

According to The Pew Charitable Trusts’ research, the average payday loan customer borrows $375 over five months and pays $520 in fees, while banks and credit unions could profitably offer the same amount over the same period for less than $100.

Bank regulators vow more flexibility in vetting fintech partnerships (American Banker), Rated: B

Senior leaders at the Federal Reserve, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, who all spoke at a banking conference in Orlando, Fla., said they have been working with examiners to be more understanding of the budding partnerships forming between banks and fintech firms — and how to examine those relationships going forward.

Clinc wants to solve financial institutions’ AI problems (Business Insider), Rated A

Clinc, a US-based provider of conversational AI technology for financial institutions (FIs),announced the launch of a new self-service platform, Spotlight, that enables FIs to train and deploy sophisticated conversational AI software in-house, independently of vendors.

source: Business Insider

Spotlight is available in over 80 languages, and can be integrated into any digital channel, including contact centers, mobile apps, and Alexa, Google, and Facebook Messenger, allowing FIs to create a consistent user experience. Spotlight is already being used by USAA and Isbank, one of Turkey’s largest banks.

MoneyLion Plus Takes An Innovative Approach to Encourage New Investors to Save (Lend Academy), Rated: A

As a nation we are chronically bad at saving and while the savings rate went up for a time after the financial crisis it is back down near 2005 levels now which was the all time low.

MoneyLion is trying to do something about this.

I interviewed CEO Dee Choubey on the Lend Academy Podcast just over a year ago but they have made some great strides since then. I caught up with him again recently to get an update. Today, over 2.2 million people have downloaded the MoneyLion app and 1.3 million people have connected their bank account.

Behavioral biometrics company BioCatch closes $ 30M round (Bankless Times), Rated: A

Behavioral biometrics provider BioCatch today announced it has closed a $30 million financing round led by Maverick Ventures with additional participation from American Express Ventures, NexStar Partners, Kreos Capital, CreditEase, OurCrowd, JANVEST Capital and other existing investors.

What Makes Warren Buffett Such an Influential Leader? (Industry Leaders), Rated: A

A data scientist at Orchard Platform, Michael Toth, who has also worked with BlackRock as portfolio analyst has evaluated Buffett’s shareholder letters annually at Berkshire Hathaway for personal growth as a sole investor. Using statistical computing, Toth quantified and highlighted Buffett’s positivity penchant for many years according to CBNC.
And results from the analysis revealed that Buffett has the ability to balance both realism and optimism. The dataset also taught Toth about the reasons why Buffett is a legendary investor and as well as an influential leader.
Only five of the forty shareholder letters analyzed showed a negative score of sentiment, and most interestingly, they all correspond perfectly to five periods of downturn in the economy.

What’s next for neobank Chime (Bankrate), Rated: B

Since its 2014 launch, the San Francisco-based startup has emerged as one of the leaders in the so-called neobank space. Earlier this year, it announced it has 750,000 accounts opened to date, and is now adding new accounts at a rate of 100,000 a month.

How Fintech Advances Are Creating New Opportunities for Micro-Businesses (NewsTimes), Rated: B

Those solutions benefit business owners, ranging from freelancers, to founders of startups, to leaders of burgeoning small businesses and other enterprises.

Lending is one of the most critical areas where fintech has filled a gap for small businesses. As smaller businesses often don’t need a considerable amount of money when they seek loans, they’ve struggled to get any financial assistance. That’s because banks and other lending institutions often don’t see any profit in providing loans of less than $100,000.

United Kingdom

 

Former RateSetter-backed lender ‘transforms’ new owner’s guarantor loans business (Peer2Peer Finance), Rated: AAA

Non-Standard Finance bought the guarantor loan provider last August for £53.5m, which included a minority stake owned by RateSetter.

The London-listed firm said on Tuesday that the acquisition has “transformed” its guarantor loans business, helping that division’s loan book to grow by 35 per cent. It said the acquisition contributed to the group’s overall operating profit rising 497 per cent to £2.7m in its latest annual results.

Tandem Bank to buy Pariti in UK fintech tie-up (Financial Times), Rated: A

Digital bank Tandem has agreed to buy fellow British fintech group Pariti, as it looks to head off rising competition from established lenders taking advantage of new legislation that gives them greater access to customer data.

New rules that came into force in January allow companies such as Tandem and Pariti to access customer data from other lenders if the individuals give consent.

AltFi London Summit Preps for Event this Month as UK Alternative Finance Continues to Grow (Crowdfund Insider), Rated: A

The 5th Annual London Summit is scheduled to take place on March 26th during a time of significant change in the UK. Brexit jitters along with dramatic regulatory changes such as Open Banking and PSD2 has created a varied and dynamic environment. Yet alternative finance continues to grow with AltFi estimating that UK loan origination volumes increased by 41.9% to £14.1 billion in 2017. During 2018, this number is predicted to jump by £7 billion.

Speakers already confirmed include Samir Desai, CEO and co-founder of Funding Circle, Ricky Knox, CEO and co-founder of Tandem and Anne Boden, CEO and founder of Starling Bank.

 

Eight luxurious Holywood homes get £3m in funding from peer-to-peer lending firm (Belfast Telegraph), Rated: B

Eight luxury homes being built in the hills of Holywood have received £3m in peer-to-peer (P2P) funding.

Cobain Group, which is behind The Twisel Brae development, received the funding from lender Assetz Capital.

The eight detached properties, styled by designer Kris Turnbull, will range from 2,200 to 4,000 sq ft in size, and cost between £575,000 and £800,000.

China

Ant Financial Consumer Lending Reaches $ 95 Billion (Bloomberg), Rated: AAA

From the start of 2017 until this month, Ant’s consumer lending has doubled via its Huabei and Jiebei units even as the government reduces quotas for new asset-backed securities that can underpin such loans, one of the people said, asking not to be named as the matter is private. The loans can incur annual interest rates as high as 15 percent, although they are normally less than that, another person said.

Controlled by Alibaba Chairman Jack Ma, Ant has become a financial giant that was said to be valued at $60 billion and currently has more outstanding consumer loans than China’s second-biggest bank.

China’s Financial Disintermediation And M2 (Trade Captain), Rated: A

The past few weeks have been deluged with important events in Asia, but we don’t want the data to be washed away in the flood. In particular, note that China’s liquidity conditions continue to tighten, pointing to a further slowdown in nominal GDP growth over the next two years. Granted, M2 growth bounced back in February, and should edge higher in coming months, due to favourable base effects. But it remains historically low. Moreover, growth in our broader gauge of liquidity likely will continue to slow.

WeChat: the real Beast from the East (The Finanser), Rated: A

 

Mobile payments is another area where Tencent is thriving. WeChat Pay, a mobile payment system integrated into the app, holds 40% of China’s whopping US$12.77 trillion mobile payment market. Kickstarted by China’s virtual red packets exchange that supplanted the tradition of giving monetary gifts during Chinese New Year, WeChat Pay has seen impressive growth since its launch in 2013. Its monthly offline commercial transactions jumped 280% year over year in 2017 while social payment transactions grew 23%. Along with Alibaba’s Alipay, the service is making cash and plastic obsolete in China.

European Union

New rules put forward to help crowdfunding platforms grow across EU (Bridging & Commercial), Rated: AAA

These proposals – which are part of the European Commission’s fintech action plan – will enable crowdfunding platforms to offer their services EU-wide and improve access to this form of finance for start-ups and SMEs.

At present, it is difficult for many crowdfunding platforms to expand into other EU countries, but once these proposals have been adopted by the European Parliament and the Council, the proposed regulation will allow platforms to apply for an EU label based on a single set of rules.

Future Finance Closes €40 million Investment Round (PR Newswire), Rated: A

  • Future Finance completed €40 million Series C round with existing investors.
  • Investors remain excited about Future Finance’s ability to disrupt the UK student lending market.
  • Equity injected will be used to fund loans and hire top talent in LondonDublin and Chicago.

Start-up to stardom, Bondora turns 10 years old (Bondora) Rated: B

In the height of the global financial crisis, Bondora was officially founded on 11.03.2008. While it may have seemed counter-intuitive to most to create a new financial platform at this time, there was a clear need to serve customers who had been failed by the banks and disrupt the wider financial ecosystem.

International

Higher yields driving marketplace lending uptake among institutions, finds study (AltFiNews), Rated: AAA

According to a new study, marketplace lending is here to stay. That’s among the major findings of the Greenwich Marketplace Lending research study, conducted August to October 2017. It is based on the fact that 52 per cent of institutions currently investing in the asset class believe that marketplace lending will be a significant part of the financial system in the next 10 years.

Greenwich Associates interviewed 74 investors from pension planners to asset managers to compile its results. These investors control more than $3.5 trillion in assets between them. When the research was conducted, 21 of the firms were investors in marketplace loans, while 53 were not.

Of those investing in the asset class, 67 per cent cited higher yield as their primary reason for investing. Diversification and low correlation (48 per cent), access to consumer or small business credit (43 per cent) and low volatility (33 per cent) were also cited as important drivers.

Australia

 

Why Smart Aussies Are Dumping Banks for Online Loans (Mozo), Rated: B

Everything is online these days – including some of the best value home loans around. In fact, Mozo has taken a look at our database, and found that 1 in 2 home loans with a rate under 4% are offered by online lenders.

And when we crunched the numbers, we found that by switching from the average big four bank variable rate to the best deal around from an online lender, a typical borrower with a $300,000 home loan could save as much as $2,596** every year!

Square Peg In $ 200m Round Hole (Channel News), Rated: A

Paul Bassat’s venture capital outfit Square Peg Capital is said to be looking to raise more than $200 million as it seeks to add more investments to its portfolio interests in graphic design group Canva and online lender Prospa. Melbourne-based Square Peg, which was backed in its early days by billionaire James Packer, invests across Australia, Israel and South-East Asia.

India

Faircent.com bolsters its leadership ranks with two key appointments (India Times), Rated: AAA

P2P lending major, Faircent.com on Wednesday said it is strengthening its leadership team with industry veterans Vikas Prasad and Mayank Bishnoi coming on board. Prasad has joined the company as Head – Planning, Processes & Control, while Bishnoi has taken over as Head – Customer Experience.

“As the largest player in the rapidly-growing P2P lending industry, Faircent.com is currently at a critical juncture of its growth journey. More and more Indians from across multiple geographies are associating with our platform, both as lenders and as borrowers,” said Rajat Gandhi, Founder & CEO – Faicent.com in a statement.

Regulations for fintech companies in India: A dire need (Qrius) Rated: A

FinTech small business lending is currently developing with promising potential to complement and emerge as a healthy alternative to brick and mortar banking. The number of small businesses turning to FinTechs or non-traditional lenders has exploded over the past couple of years with many economies reporting a sharp increase in the number of small businesses turning to marketplace lenders in 2017. Marketplace lending accounts for 0.08% of the $96 trillion global corporate and household outstanding debt. Growing at an average 123% a year since 2010, Morgan Stanley forecasts that it will reach $290 billion by 2020.

FinTech lenders are forced to pay a commission to introducers or brokers which goes up to 4% of the loan amount which is normally passed on to clients.

Asia

Grab to offer loans, insurance with new fintech platform Grab Financial (The Straits Times), Rated: AAA

Grab will now offer loans and insurance with its new fintech platform – Grab Financial – the ride-hailing company announced on Tuesday (March 13).

This new platform will encompass all of Grab’s fintech offerings, including payment services, rewards and loyalty services, and financial services, among others.

To provide loans to consumers, micro-entrepreneurs and small businessess across South-east Asia, Grab has embarked on a joint venture (JV) agreement with Credit Saison Co, one of Japan’s largest consumer financing companies.

Initial offerings include accident, hospitalisation and other critical insurance coverage to Grab’s 2.6 million drivers, accessible through the Grab driver app.

FintruX advisor Yash Mody explains the platform’s future plans (Finder), Rated: A

Basically, FintruX is building a truly global peer-to-peer lending platform, and it’s secure, it’s fast, it’s easy. Lenders and borrowers don’t have to worry because the platform does all the work for them. They basically set their criteria and then they don’t have to think about it. They don’t have to auction and they don’t, you know, it’s not a cumbersome process. So that’s why we think it’s a new way of doing business.

And obviously, there’s a lot of regulation in this area. So how scalable is it? Are you going to run into lots of different regulatory issues with, issues lending loans between countries?

Yeah, so we’ve taken great care to make sure that we’re within regulation. We have four lawyers on board and advisers and all that, and we’re very cognisant of what’s required. As a first stage, we’re not going to be doing cross-border lending. So let’s say, for example, we’re going to launch in Singapore and Canada, so it would be a loan that’s in Canada from a lender and a borrower in Canada.

Indonesia eyes fintech regulation to avoid ‘loan shark-like’ practices (Reuters), Rated: A

Indonesia’s financial regulator said it was considering setting a cap on interest rates and the size of loans offered by fintech firms, in a move aimed at minimizing the risk of defaults.

The emergence of these peer-to-peer (P2P) lending platforms, offering loans ranging from as little as a few hundred dollars to several thousands, has so far been welcomed by Indonesia, Southeast Asia’s biggest economy where tens of millions of people have little or no access to bank credit.

More than 300,000 people have borrowed from these firms, with total loan distribution reaching 3 trillion rupiah ($218 million) as of January, versus 247 billion in December 2016, according to data from the Financial Services Authority (OJK).

Venture financing investments in the software segment receiving highest attention in Japanese enterprise market (Global Data) Rated : A

In 2017, venture financing (VF) investments in the software segment constituted 46% of the total deal value in the Japanese enterprise market, according to GlobalData, a leading data and analytics company. On the other hand, 38% of the total number of VF deals in the country was in the software segment.

source Global Data

VF investments in the IT service segment constitute 38% of the total deal value in 2017. The IT service segment investments are primarily focused on consumer facing enterprises, such as online lending, social networking, online media publishing, e-commerce, and online dating, among others. As Japanese technological advancements are on the forefront of global market, VF companies are investing in Japanese technology enterprises in order to expand their operations and achieve business growth.

New Business Models, Emerging Tech Enabling FinTech Companies to Improve Financial Inclusion (PRNewswire), Rated: A

FinTech companies are making significant progress in promoting financial inclusion through innovative business models, products and increased use of emerging technologies such as digital identity, Internet of Things (IoT), Artificial Intelligence (AI) and machine learning, says a new report co-authored by CreditEase, IFC, a sister organization of the World Bank and member of the World Bank Group, and Stanford Graduate School of Business. The report, “Financial Inclusion in the Digital Age,” was launched today during Money20/20 Asia in Singapore.

Over two billion unbanked adults in the world, representing 38 percent of all adults globally, do not have access to basic financial services and another 57 percent have basic accounts but do not have access to a full range of services that include diversified savings and investments, low-cost payments systems, insurance, or credit.

Peer to Peer lending increasingly popular in Vietnam (VietNamNet), Rated: A

In 2012, P2P outstanding loans worldwide totalled $1.2 billion, while the figure rose to $64 billion in 2015 and is expected to reach $1 trillion by 2025.

A big advantage of the P2P model is the high information security level based on BigData technology which encrypts, stores and controls customers’ information.

Analysts said with the advantages of the model, plus current conditions in Vietnam, P2P could replace black credit, or lending at very high interest rates, which is illegal in Vietnam.

According to the World Bank, 79 percent of the population in Vietnam cannot access official financial services.

Vietnamese P2P lending startup Tima seeks to close Series B round by June (Deal Street Asia), Rated: B

Tima claims to be the first P2P lending startup in Vietnam. Launched in 2015, the platform has seen cumulative money from its lender partners reach over $900 million. In 2016, Tima closed a seven-digit US dollar Series A funding from an undisclosed Singapore fund to accelerate its growth in the local market.

Authors:

George Popescu
Allen Taylor

Friday February 10 2017, Daily News Digest

Friday February 10 2017, Daily News Digest

News Comments Today’s main news: Will US rate rise hit P2P lending? US deregulation is no threat to P2P lending. Today’s main analysis: Apple users have higher credit scores, loan amounts than Android, Windows users. Today’s thought-provoking articles: Australian MPL update. United States Will US rate rise hit P2P lending sector? GP:” If savings accounts […]

Friday February 10 2017, Daily News Digest

News Comments

United States

United Kingdom

European Union

Australia

India

United States

Will US Rate Rise Hit Peer-to-Peer Lending Sector? (Morningstar), Rated: AAA

Rising interest rates in the US could hit this sector – but Simon Champ, manager of P2P Global Investments (P2P) told journalists in London on Wednesday that he is not unduly concerned about the effect this will have on returns.

“As the average life of the loans we own is very short – that is about one to three years –  we are able to steer the book even if economic policy changes. We can get back 3-4% of loans in a month, coming back in cash and reapplying that to other loans. So we are not worrying about what is happening in the US as we have the ability to move the trust weighting to different areas as a fiduciary,” he added.

Champ admitted that the current economic climate has helped to grow peer-to-peer lending services.

Champ also stressed the “amazing transparency” peer-to-peer lenders vehicles have, when compared to the banking sector. However, he believes in the long term, banks and peer-to-peer lending platforms will coexist comfortably within the same market.

Sachin Patel, global co-head at Funding Circle SME Income Fund (FCIF) echoes Champ’s views, saying that peer-to-peer lending provides another channel for small businesses to access finance.

Apple Users Have Higher Credit Scores, Loan Amounts and Better Rates than Android, Windows (PR Newswire), Rated: AAA

LendingTree® (NASDAQ: TREE), the nation’s leading online loan marketplace, analyzed over 2 million purchase mortgage and personal loan requests to better understand how Americans are shopping for their loans. The findings show that 41 percent of purchase mortgage shoppers and almost half (48.53%) of personal loan shoppers use a mobile device to shop and compare loan offers from different lenders. Additionally, the analysis suggests a correlation between a user’s device, credit score, and loan amount.

Overall, potential borrowers using a Mac computer have the highest average credit score in both the mortgage (FICO average 722) and personal loan (FICO average 683) categories, along with the highest average loan amount in each. In 2016, the average loan amount for Mac users was $274,412 for a mortgage and $14,650 for a personal loan, much higher than the national average of $226,554 and $11,921, respectively. The average down payment amount for borrowers using a Mac in 2016 was $66,865 while the national average came in at approximately $45,830.

Because Mac users averaged higher credit scores, they also received a lower interest rate offer on a 30-year fixed rate mortgage loan. Although interest rates increased in the last few weeks of 2016, the national average 30-year fixed interest rate for 2016 was roughly 4.04% when Mac users, with a higher average credit score, where offered an average rate of 3.93%.

Following closely behind Mac users are Apple iPad users, averaging the second-highest credit score and second-highest loan amount in both mortgage and personal loan categories, despite being one of the least-common devices used to submit loan requests. Naturally, iPad users received the second-lowest interest rate offer for a 30-year fixed rate mortgage loan, 3.95% in 2016.

On the other side of the spectrum, Android users averaged the lowest credit scores and lowest loan amounts in both the mortgage and personal loan categories. Unfortunately, this also means average interest rates offered to Android users were higher than the national average.

Data was analyzed from over 2 million loan requests and funded loans facilitated by LendingTree and through My LendingTree between January 1 and December 31, 2016.

Peer lenders are packaging loans and selling them to Wall Street (CNBC), Rated: AAA

But as the industry is growing, so are its funding needs. That’s where big Wall Street banks are stepping in.

P2P platforms increasingly are bundling loans together and selling them off to institutional investors as “asset-backed securities.”

Total ABS issuance for 2016 in peer lending came to $7.62 billion, according to S&P Global Market Intelligence analyst Eric Turner.

However, the practice of ABS issuance in the marketplace lending arena began only around 2013, when the total was a meager $257.1 million. That means issuance is about 30 times what it was just four years ago. The 2016 total also represented a 72.4 percent increase over the previous year.

Among platforms, SoFi leads the way in ABS offerings, with the firm accounting for 58.4 percent of the 2016 total. Avant and Earnest were other big issuers during the year, while Lending Club was fourth.

How One Female Fintech Founder Beat The Odds—And Raised Millions For Child Support App (Fast Company), Rated: A

When former Silicon Valley exec Sheri Atwood landed $4 million in crucial Series A venture capital funding for SupportPay, an app designed to streamline child care payments, a lot of attention was focused on her personal story. She was a divorced mom and child of a painful broken marriage—so the show-me-the-money skirmishes were familiar territory.

Last year in the U.S. just a handful of fintech companies founded by women raised Series A or Series B funding. In New York, there were two investment platforms—Sallie Krawcheck’s Ellevest ($9 million) and Wise Banyan ($3.5 million), and insurance broker PolicyGenius ($15 million). And in California there was online lender ApplePie Capital ($16.5 million), along with SupportPay ($4.1 million). Overall, billions poured into the sector.

What did they see that you think other investors missed?

They saw the need and also the social benefit it was providing. Especially here in the Valley, investors are more than willing to fund the 22-year-old white male problems. But all these problems facing the typical American over the age of the 30: No one is willing to do it. Unfortunately everybody is looking for a Mark Zuckerberg. When I say that I code, I’ve been tested in meetings. I wonder, have you ever asked a guy this? I passed their test.

What did it take to pull of your Series A?

We closed $4.1 million in December, led by Fenway Summer Ventures. It was incredibly difficult, compounded by the fact that the world changed. When we raised our seed capital, the consensus was to focus on user growth. Just get users on board, get them active and using the product. We weren’t focused on revenue. Then around March of last year, revenue became investors’ only focus. It required a huge shift in product, in strategy, in development. The whole rules of the game changed. At the time we were giving the product away for free, with the idea that eventually the it would be a monthly subscription. Our focus had to become getting users to convert to paid. We turned on revenue in June and started collecting revenue in July. That’s when we could start having conversations.

P2P lending to benefit from rising growth and inflation? (ValueWalk), Rated: A

Since the election, financials have gained about 18% and industrials are up 11.5%. Contrast this to the 1% rise in consumer staples and utilities.

Since the election, the S&P Small-Cap 600 is up 16%, with the S&P 500 up 7%. If Trump delivers on his trade threats, firms that earn a large share of their revenues from US sales will outperform multinationals.

P2P lending is a great source of fixed income. Its investors are currently averaging 7% returns on 36-month loans and 9% on 60-month loans.

P2P lending will also benefit from rising growth and inflation. If the economy improves, more borrowers will apply for loans. As investor appetite for risk increases, they will seek higher returns, which MPL offers.

How Fintech Can Take Off Without Getting Hampered By Regulations (Fortune), Rated: A

However, today’s rules regulating various licenses and charters are incredibly outdated and not well-suited to the Fintech world. For example, the way banking licenses are issued by state was established years ago when bric-and-mortar stores did not compete with online retailers.

If the OCC is going to start granting charters to fintechs, it will have to step out of its comfort zone and accept a certain amount of failure. For a fintech charter to deliver on its promise of making financial services more inclusive, efficient, and capable, it should be made available to a wide variety of firms. Many of these firms will ultimately not make it. Not only is that ok, it is necessary.

If the OCC sets a zero failure rate goal, and achieves it, something went wrong. If none of the firms chartered by the OCC fail, then either the OCC simply chose firms that were so entrenched that failure was not an option, or the OCC created a chartering regime that was so cumbersome and difficult that only firms that had already made it would apply. Either outcome is undesirable.

The OCC should instead focus on making certain these firms have a credible plan for protecting their customers in the event of failure. For example, a lending platform should have a plan to allow the borrowers to continue to make payments on the loan and the lender to receive those payments, even if the platform goes bust. If the customers are protected, the success or failure of any given fintech firm should not be a regulator’s concern.

Merrill Lynch Rolls Out Robo-Advisor (Financial Advisor), Rated: B

Merrill Lynch has launched its robo-advisor, paving the way for the wirehouse to capture clients for whom traditional financial advice is too expensive, the Wall Street Journal writes.

Merrill Lynch is the first among big brokerages to unveil a robo-advisor, the Journal writes. Wells Fargo plans to start piloting a digital service this year and UBS has also announced plans to release a robo platform.

United Kingdom

Funding Circle’s Patel: US deregulation is no threat to P2P (P2P Finance News), Rated: AAA

US PRESIDENT Donald Trump’s plans to deregulate financial services are no threat to peer-to-peer lenders, Funding Circle’s global co-head of capital markets has said.

“Trump has been quite open about his plans for deregulation, but I think that’s more with regard to investment banks,” said Sachin Patel (pictured) at a media roundtable held by the Association of Investment Companies.

“However, if he does deregulate retail financial services, that’s not the only way we compete with banks. It’s not just regulatory capital considerations, we can offer other advantages such as speed of transactions.”

UK footwear giant schuh partners with leading online payments provider Klarna (Retail Times), Rated: A

European payments provider Klarna has announced a partnership with 

What is the real potential of crowdlending? (Misys), Rated: A

Unbiased removes Innovative ISA tweet after criticism (Citywire), Rated: B

Last week, Unbiased posted a link on Twitter to an article with information about innovative finance ISAs. The article listed the benefits and risks of using the savings vehicle.

However following the tweet, many were quick to criticise Unbiased.

In response to this backlash, Unbiased contacted Phil Young, director of director of Threesixty support services, on Twitter to say it was ‘an internally written piece, for information only’, and that it took the post down ‘until we can review the facts’.

European Union

Austrian fintech startup Finnest raises €1 million, opening Slovakia office (Tech.eu), Rated: AAA

Austria fintech startup Finnest has announced a funding round of €1 million led by Maxfield Capital along with existing investors Speedinvest and a number of angels.

Vienna-based Finnest is a loan platform for SMEs and is currently active in the DACH region with plans to launch in its first non-Germany speaking market in the coming months. It will open an office in Slovakia later in February.

Finnest is addressing a segment that has been underserved so far, according to Maxfield Capital general partner Alexander Turkot: SMEs with annual turnover of at least €10 million that are trying to attract additional investment.

Interview with Ivalyo Ivanov, CEO of Iuvo Group (P2P-Banking), Rated: A

Iuvo is the first South-East European P2P platform that allows its users to buy parts of loans. All loans listed on the platform are issued by originators (registered non-banking financial institutions). We give our users the opportunity to generate an annual return up to 12% on their investments while simultaneously provide our originators with the chance to develop their businesses.

What ROI can investors expect?

The expected annual return depends heavily on the choices our investors make, but the return a well-balanced portfolio should make is on average between 7 and 12%.

How reliable is the credit rating / credit history data available for the Bulgarian loans?

Bulgaria has a very well developed non-banking financial sector and a great deal of experience with consumer loans. The quality of the scoring process is without a doubt on a very high level and there are no reasons to think that would change any time soon. Of course, as I’ve already said, thorough audits are made before we consider any originator joining us.

How is the company financed? Why did you select to start the company in Estonia?

Iuvo is financed through business angels. We chose Estonia as it has been the cradle of P2P lending in the past years and we believe the best way for us to grow and develop is to be where the best platforms are.

Is Iuvo Group open to international investors?

In order to open an account with us individual investors must be at least 18 years old, have a bank account in the European Union (or third countries that are currently considered as having equivalent AML/CFT systems to the EU), and have their identity successfully verified by Iuvo’s back office team.

Australia

Australian Marketplace Lending Update (The National Law Review), Rated: AAA

In a recent report on licensing applications the Australian Securities and Investment Commission (ASIC) revealed that it has granted 7 Australian financial services licences (AFSL) and 3 Australian credit licences to marketplace lenders between January and June 2016. A further 3 AFSL applications are currently being considered. Previously, 6 licenses were granted between 1 July 2015 and 31 December 2015. This indicates that the number of entrants to the Australian market continues to grow.

Unlike other jurisdictions such as New Zealand, Australia does not have specific marketplace lending legislation. Marketplace lenders have had to adapt to fit within the existing financial services framework.

Australian crowdfunder, DomaCom has signed an exclusive distribution deal with a New York-based real estate crowdfunding platform, Prodigy Network.

The deal aimed to expand investment opportunities for Australian investors wanting to invest in US real estate assets.
India

P2P lending marketplace Rupaiya Exchange aims to increase financial inclusion (The Tech Portal), Rated: B

Rupaiya Exchange intends to increase financial inclusion by enabling common man an access to credit. It enables borrowers to take personal as well as business loan through this virtual marketplace.

With the use of multiple data extraction, analysis techniques, and proprietary scoring mechanism, they score every individual and not rely only on the traditional credit checks. Through the use of technology, they want to provide credit to credible borrowers and bring down their cost of borrowing.

Authors:

George Popescu
Allen Taylor

Thursday December 15 2016, Daily News Digest

consumer confidence index

News Comments Today’s main news: Fitch says OCC charter could harm innovative firms. UK’s Govt. bank funds almost 10% of MarketInvoice’s loans. Rakuten invests EUR10M in Kreditech. Today’s main analysis: CCI highest since before great recession. Today’s thought-provoking articles: Bank SME lending surges, alt-lenders flop. Vaya, RateSetter launch online mobile shop. United States OCC FinTech charter could harm agility, […]

consumer confidence index

News Comments

United States

  • OCC FinTech charter could harm agility, cost of innovative firms. GP:” Absolutely everything has a good side and a bad side, including OCC’s new fintech charter. It goes without saying that getting an OCC charter is more onerous than no regulation at all. But is it more or less onerous than partnering with a FDIC Bank ? I think that only once a few fintech companies jumps the gun and get a charter will we be able to compare. In my eyes even if it is more onerous, the benefits of being independent and not at the merci of a life-or-death partner (the FDIC bank) is worth a lot and if I would advise fintechs to setup a separate structure and test the waters with an OCC charter while continuing to operate as they have been so far with their primary structure.”
  • Consumer confidence high. AT: “This is political commentary, but it’s not just political commentary. There is a great deal of insight here regarding the economy on the whole and consumer confidence in the economy specifically, especially regarding investments. If Halbert is correct and consumer confidence leads to increased investments in equities and stocks, how will that affect alternative investments? My guess is, there will be a negative correlation. Remember, part of the reason for the rise in alternative investing has been the decline in the stock markets. On the other hand, millennials are full of surprises, so continued distrust of banks may keep alternatives interesting to a segment of the investor class. Any way you look at it, the next four years should be an interesting run.”
  • Bank SME lending surges, alt-lenders flop. GP:” The interesting number here is the 23.7% approval rate for traditional bank’s SME loan approval rate in Nov 2016. It seems high to me but if it is true, and it could be, that is much higher than the single digits numbers we all had in mind I believe. “. AT: “It’s possible this renewed faith in bank lending is tied to consumer confidence in the economic outlook.”
  • Possible credit score changes for 2017. AT: “The initial comment on this Reddit thread has been redacted. Judging from some of the comments, it likely had something to do with medical bills being removed from credit scores if paid off.”
  • SmartBiz Loans to offer up to $5 million SBA 7(a) CRE loans.
  • InterNex Capital’s asset-based loans now available to small businesses through Bizfi.
  • RECF is here and thriving.

United Kingdom

European Union

Canada

China

News Summary

United States

Fitch: OCC Fintech Charter Could Harm Agility & Cost of Innovative Financial Firms (Crowdfund Insider), Rated: AAA

Fitch Ratings is out with a note on the recently announced Comptroller of the Currency (OCC) Fintech charter. The OCC has crafted a document to allow digital banks to become regulated entities by receiving federal bank charters. Fitch is of the opinion the Fintech charter could have significant impacts on the operating strategies and regulatory environments of these innovative firms. And the impact may not be all good.

As for benefits, some Fintech firms such as marketplace lending platforms may no longer have to partner with banks to facilitate loan origination.  This echoes a similar comment that Moody’s made just a few days back. A Fintech banking charter may also reduce uncertainty regarding state usury rate caps that have become a more prominent issue recently following the Madden versus Midland decision in June, which stated that agreed upon interest may not be enforceable in certain circumstances.

A special purpose digital bank charter may not allow for insured deposit-taking, which would require FDIC approval and regulation, but in Fitch’s opinion, it could be an initial, gradual step in that direction.

Consumer Confidence Highest Since Before Great Recession (ValueWalk), Rated: AAA

The US Consumer Confidence Index has been soaring since the end of the Great Recession, and it hit another recent new high last month. The Conference Board reported Friday that its Consumer Confidence Index rose to a surprising 107.1 in November, versus the pre-report consensus of 101.1, the highest reading since 2008.

On the other hand, the Commerce Department reported that 3Q GDP rose by 3.2% in the 3Q as reported on November 29. That surprising estimate will be revised again on December 22. But if the next GDP estimate confirms that GDP growth is above 3%, we will need to upgrade our outlook for the US economy going forward.

The post-election surge in the major stock market indexes also has buoyed feelings about equities, with 40% saying now is a good time to invest, up 10 points from before the election. Here again, Democrats became somewhat more negative on stocks while Republicans grew significantly more optimistic.

Those differences are also clear in the choice for what Americans believe are the best investments right now. While real estate remains the top choice for the third straight year, stocks gained the most ground at the expense of gold, real estate and Treasuries. For now, the shine is off of gold for Republicans and they, along with Independents, have grown more favorable toward equities.

Virtually everyone expects the Fed Open Market Committee to raise its short-term interest rate by 0.25% at the meeting today and tomorrow. Fed Funds futures put the odds at 97%. While the first rate hike last December sent stocks sharply lower, stocks are today at yet another new record high.

Investors are aggressively seeking alternative investments to generate income in today’s continued low interest rate world. While the US equity markets have soared to new highs since the election, many are wary of an overdue downward correction. That’s understandable.

Bank SME Lending Surges, Alt-Lenders Flop (PYMNTS.com), Rated: AAA

Reports Tuesday (Dec. 13) said Biz2Credit’s latest index showed surges in traditional banks’ SME loan approval rates in November, hitting 23.7 percent. According to researchers, eight out of the past nine months have seen loan approval rates for small business applicants increase among traditional, large banks.

Even small banks have seen their loan approval rates tick up to 48.8 percent.

At the same time, Biz2Credit found continuing declines in alternative lending activity for SME borrowers. November saw a decline in SME loan approval rates among alt-lenders, down to 59.2 percent in November, according to the report.

Growth of consumer borrowing slows a bit (News Journal), Rated: A

Total borrowing rose $16 billion, the Federal Reserve reported Wednesday. The October increase was the smallest since June.

Revolving credit, which covers credit cards, increased $2.3 billion in October. The non-revolving category, which covers auto loans and student loans, rose $13.7 billion in October.

Possible Credit Score Changes for 2017 (Reddit), Rated: A

I had over 12 collections on my credit as of a year ago and about 8 of them were hospital bills. What I did was write each creditor a letter saying essentially: “I dispute this debt. I don’t not recall this debt in anyway and it was not me. However, I am willing to pay the debt in full if you will agree to remove the debt from all credit bureaus. If you agree to these terms please send me on company letterhead the terms. Once I receive the agreement I will send payment by certified mail the same day I received your letter. If you do not accept these terms I am asking you to send me all proof that this debt is mine and I will dispute it further. You and I both know that paying this debt without you agree g to remove it from my credit report will not benefit me at all and I may as well wait until it falls off naturally.”

I now have 3 collections left, the rest were removed and

I’m working on the last few. You don’t even have to offer to pay 100% I’ve seen others offer 50% for a pay for delete and it went through. I offered 100% because I have the funds and I really wanted it off my credit report.

Edit 2: one of the collections was for capital one. They sent me a letter saying they denied my pay for delete request. Then about a month later they sent me another letter saying since I requested proof of the debt and they couldn’t provide it they are removing the debt from my credit report and my balance is $0. So they denied the request then started to assemble the proof and couldn’t find it. Was pretty funny.

SmartBiz Loans Announces New Online SBA Commercial Real Estate Loan Offering up to million (BusinessWire), Rated: A

SmartBiz Loans, the first online SBA marketplace and bank-enabling technology platform, has announced that they will now offer SBA 7(a) Commercial Real Estate (CRE) Loans up to $5 million to eligible business owners based in the U.S.

The CRE loans are now available through SmartBiz for purchase or refinance through an automated, mobile-optimized online flow that allows eligible businesses to pre-qualify online (even on their mobile phones) in less than five minutes without impacting their credit score. Loans are available for amounts between $350,000 to $5 million with 25-year repayment terms, variable rates as low as 5%, no balloon payments and no prepayment penalty after the first three years. Unlike traditional bank commercial real estate loans, SmartBiz SBA 7(a) CRE loans do not require re-qualifying every three to five years.

The loans are available to small-business owners based in the U.S. with a personal credit score of 675, a minimum of three years in business and $250,000 or more in annual revenue.

InterNex Capital’s Asset-Based Loans Now Available to Small Businesses through the Bizfi Marketplace (BusinessWire), Rated: A

Today, Bizfi (www.bizfi.com), the premier fintech company with a platform that combines aggregation, funding and a marketplace on a single platform for small businesses, expands its business lending capabilities through a funding partnership with InterNex Capital, an asset-based digital lender. The partnership will allow small to mid-sized businesses in manufacturing, wholesale, trucking, business and consulting services to apply for and access an asset-based revolving line of credit from $250,000 to $5 million through the Bizfi marketplace at www.bizfi.com.

Along with short-term financing, equipment financing, SBA loans, and many other products, small businesses that require $250,000 or more can easily and quickly apply for the revolving line of credit online. In addition to InterNex, the Bizfi platform features 45 lenders providing financial options to small businesses in the United States. Bizfi also acts as a direct lender on the platform.

Real Estate Crowdfunding is Here and Thriving For Investors (Realty Biz News), Rated: B

As a real estate investor, are you staying current with the latest investing technology? Just like all modern industry, the real estate industry continues to evolve and how investments are made has a new technology that is on the cutting edge for real estate investors, welcome to real estate crowdfunding.

Both dealmakers and lenders found a strong interest in private financing following the Great Recession. Dealmakers needed access to capital that the banks quit providing. Qualified investors and individuals with 401k funds to invest quickly became attractive. For money investors, more reliable and more secure investments (real estate) outside of the stock and bond markets also became attractive. Now, with crowdfunding, this match becomes even more powerful as more investors (beyond qualified investors) are able to participate in the market.

United Kingdom

Government cash funds almost 10% of peer-to-peer MarketInvoice’s loans (Business Insider), Rated: AAA

The taxpayer-backed British Business Bank is providing a major boost to fintech MarketInvoice, new figures show.

9% of loans by value made over MarketInvoice’s platform to date have been financed by money from the government-backed British Business Bank, according to a Freedom of Information request seen by Business Insider.

The bank has provided the cash for £93.2 million-worth of loans on the platform, out of a total of just over £1 billion made by the platform.

New crowdfunding platforms following peer-to-peer lending are riskier than many realise (Express.co.uk), Rated: AAA

The new breed of crowdfunding platforms that have followed in the wake of P2P are far riskier than many realise.

City regulator the Financial Conduct Authority (FCA) is looking to crack down on these crowdfunding platforms to protect savers who do not understand the dangers.

It is lining up tough new regulations after warning that some platforms fall short of its demands to be “clear, fair and not misleading”.

The best-known platforms are Zopa.com, which has taken £1.89billion from savers since 2005, and RateSetter.com, which has taken almost £1.6billion since 2010.

Their interest rates have dipped lately, but Zopa still pays a variable 3.1 per cent and RateSetter pays 2.9 per cent.

Hannah Maundrell, editor-in-chief of , says P2P platforms need a robust fallback plan so people do not lose money if the company goes bust: “They will also have to carry out more thorough checks on borrowers.

“Some do, but the FCA’s rules could make it compulsory.”

Vaya, RateSetter get together to launch online mobile shop (ITWire), Rated: AAA

Mobile service provider Vaya has teamed up with peer-to-peer lending platform RateSetter to launch an online mobile phone shop.

Vaya says it has worked with RateSetter to provide fair financing terms and an easy online sign-up process for mobile phone customers – combining “some of the sharpest handsets on the market with the choice of outright purchase or wallet-friendly payment terms over 12 or 24 months”.

The two companies say they are bucking the trend of telcos locking people’s mobile plans up with their handset repayments.

Taplend: Viktor Ihnatiuk (Startups.co.uk), Rated: A

Taplend is a financial help service. With our app, people can get up to £2,500 in a few minutes, provided by friends or lending companies.

The problem we are solving is a fairly common one for all of us – situations when you need money urgently, but cannot get it immediately. The mechanism of Taplend is a very simple one: after the user downloads the application, he sets the desired amount of money and return terms, submits detailed information and sends a request via the service to his friends or credit companies.

After the request is accepted, it takes a couple of minutes for the money to come to the user’s bank account or mobile wallet.

While working in the p2p lending area, we noticed that the average time to get a loan through such a platform is around three days, under affordable rates. It is clear that millions of people have the urgent need for money.

Our business model can be split into two parts:

  1. We let friends help each other with money under a 0% interest rate. Taplend would be useful for these people, who might face the strong need for the financial assistance to be provided as soon as possible. In other words, Taplend is a p2p money transfer tool for friends to help each other. In this case, we charge a small split fee from transactions between the users.
  1. Besides asking from friends, Taplend lets the user request the loan from our partners – financial institutions. In this case, we let the user to choose the lender among the list of companies, after this we provide him with specific loan application form (depends on the lender).

When the user finishes filling the application form, we send this data to the lender. If everything is ok with this data, the user gets his request approved, receives the money and the lender pays Taplend a lead generation fee.

Denheath Desserts Closes PledgeMe Crowdlending Campaign With Nearly 0,000 in Funds (Crowdfund Insider), Rated: A

Denheath Desserts, a custard square brand from South Canterbury, has officially closed its crowdlending campaign, which raised nearly $369,001 from 161 investors, on PledgeMe. Denheath Desserts currently produces 10,000 custard squares per day from its Timaru factor.

The UK alternative finance industry is still not transparent enough (City A.M.), Rated: A

One of the most important risks when it comes to crowdfunding and online lending, which will be fairly obvious to anyone with investment experience, is asset risk.

Then there is the risk in the instrument. What do you get for your money? Share, bonds, a loan contract? Are there other lenders? Are you senior or junior? Is the investment secured?

Crowdfunding should not say it is transparent, but be transparent. You don’t think people are funny because they tell you they are comedians. You think they are funny when they tell you a joke that makes you fall off your seat.

That means being transparent about fees for starters. How does that platform get paid? By the lender, the borrower or a bit of both? When does it get paid, and do they take a spread?

Platforms should earn their fees – and yes, those should be completely and clearly set out too.

Appropriateness tests and caps on the amount of investment are just some of the other methods that platforms can implement to help manage risk. Each of these are worth an article in their own right, but the most important thing for investors to be aware of, for now, is that not all platforms offer the same levels of disclosure and protection.

European Union

Rakuten invests EUR10m in Kreditech (Finextra), Rated: AAA

This is another landmark investment in fintech by Rakuten, a leader in internet services and global innovation headquartered in Japan. Rakuten joins Kreditech’s outstanding group of backers, including J.C. Flowers and the World Bank’s International Finance Corporation. Michael Piechalak of the Rakuten FinTech Fund will join the Board as an observer.

Kreditech aims to invest the new funding into further developing its partnership business. The company has launched its Lending-as-a-service in spring 2016. Renowned partners such as PayU (Naspers) are making use of Kreditech’s POS financing integration.

Firm seals biggest-ever Irish P2P loan (Independent), Rated: A

Irish peer-to-peer (P2P) lending firm Linked Finance has completed the country’s largest ever P2P loan, raising €150,000 for serviced workspace provider Iconic Offices.

The loan, which is double the size of the previous biggest amount raised by Linked Finance, will be used to fit out Iconic Offices’ location at Herbert House, Dublin 2.

Linked Finance, which targets the non-bank SME-lending sector, said the loan was fully subscribed in less than 20 hours.

EstateGuru’s average historic return highest in the market! (EstateGuru Email), Rated: B

In December, EstateGuru’s average historic return reached the level 13.4% (since December 2014), which is the highest return among crowdfunding platforms for secured property loans.

Within two operational years, EstateGuru has offered its investors the chance to invest in 95 secured property loans with a record high annual average historic return 13.4%,“ said EstateGuru’s founder and CEO Marek Pärtel.

In comparison, some of Europe’s most popular and most established crowdfunding platforms like LendInvest, PropLend and Saving Stream have an annual average return of respectively 7.06%, 9.39% and 12%.

EstateGuru has managed to offer its investors the best returns due to high-quality projects and additional bonuses (e.g when the loan is repaid earlier, the borrower is obligated to pay the minimum 3-4 months interest). Our platform allows both professional and still experimenting investors earn equally great returns. Moreover, our more eager investors can take advantage of our affiliate program,“ Marek Pärtel added.

EstateGuru’s more than 5600 investors from 34 countries have earned a cumulative interest revenue €648,421 and more than €15 million worth of loans have been funded. Largest investment portfolios on the platform exceed €700,000 and the investors have not lost a single euro on the EstateGuru platform throughout its entire history. EstateGuru’s priority is to offer its investors secured and high-quality investment opportunities in Estonia and abroad.

Canada

NCFA Publishes Research on Alternative Finance in Canada (Crowdfund Insider), Rated: AAA

The National Crowdfunding Association of Canada (NCFA) has published a report on the status of crowdfunding and other forms of alternative finance including online lending.

The report tallied numbers for 2015, tracking 100 online platforms including both rewards and investment, stating that Canada reached $133 million in total volume. This amount is predicted to increase to $190 million during 2016.

The NCFA is not totally complimentary of the current crowdfunding ecosystem. Earlier this year, one industry insider labeled the regulatory approach as a “mess”. Another called it “dead in the water.”

China

eToro Announces Key Strategic Partnership for China with Lufax Holding (Finance Magnates), Rated: A

One of the leading social trading networks in the foreign exchange and CFDs space, eToro has announced that it has signed a strategic partnership with Lufax Holding Ltd. The cooperation agreement between the firms is aiming to boost eToro’s profile with Chinese clients.

Authors:

George Popescu
Allen Taylor

Economists disagree on some basic facts about America’s weak recovery

Some new economic research argues America’s slow recovery since the financial crisis had nothing to do with household deleveraging or unusually weak business spending. Instead, it can be entirely attributed to changes in demographics, weakness abroad, and fiscal austerity. But does it make sense?

Continue reading: Economists disagree on some basic facts about America’s weak recovery

Some new economic research argues America's slow recovery since the financial crisis had nothing to do with household deleveraging or unusually weak business spending. Instead, it can be entirely attributed to changes in demographics, weakness abroad, and fiscal austerity. But does it make sense?

Continue reading: Economists disagree on some basic facts about America’s weak recovery

Yes, the early 1990s really were bad

If you remember the early ’90s, other than, I would say, 1928, there was nothing even close. The conditions facing real estate developers in that early ’90 period were almost as bad as the Great Depression of 1929 and far worse than the Great Recession of 2008. Not even close.

— Donald Trump, via Vox

This statement has gotten some (undeserved) criticism. Here’s the Associated Press with a “fact check”:

Continue reading: Yes, the early 1990s really were bad

If you remember the early ’90s, other than, I would say, 1928, there was nothing even close. The conditions facing real estate developers in that early ’90 period were almost as bad as the Great Depression of 1929 and far worse than the Great Recession of 2008. Not even close.

— Donald Trump, via Vox

This statement has gotten some (undeserved) criticism. Here’s the Associated Press with a “fact check”:

Continue reading: Yes, the early 1990s really were bad

The great American make-work programme

People enjoy work. Even those who don’t enjoy what they do enjoy the feeling of agency and being able to provide for others. For a world to work where a universal basic income accounts for the bulk of the consumer spending for many people, something else needs to account for the social side of work. It is disappointing to think that we’d have to create make-work for people, but it may be the hard truth.

–Ryan Avent, September 6, 2016

Disappointing indeed, but the reality is rich countries have been dealing with this problem for decades. A staggering 96 per cent of America’s net job growth since 1990 has come from sectors known to have low productivity (construction, retail, bars, restaurants, and other low-paying services were responsible for 46 percentage points of total growth) and sectors where low productivity is merely suspected in the absence of competition and proper measurement techniques (healthcare, education, government, and finance explain the remaining 50 percentage points):

Continue reading: The great American make-work programme

People enjoy work. Even those who don’t enjoy what they do enjoy the feeling of agency and being able to provide for others. For a world to work where a universal basic income accounts for the bulk of the consumer spending for many people, something else needs to account for the social side of work. It is disappointing to think that we’d have to create make-work for people, but it may be the hard truth.

–Ryan Avent, September 6, 2016

Disappointing indeed, but the reality is rich countries have been dealing with this problem for decades. A staggering 96 per cent of America’s net job growth since 1990 has come from sectors known to have low productivity (construction, retail, bars, restaurants, and other low-paying services were responsible for 46 percentage points of total growth) and sectors where low productivity is merely suspected in the absence of competition and proper measurement techniques (healthcare, education, government, and finance explain the remaining 50 percentage points):

Continue reading: The great American make-work programme

Stop pretending America’s housing boom had nothing to do with lending standards

Why did Americans (and Spaniards and Irish) borrow so much against housing in the 2000s, only to find themselves stuck with more debt than assets? It sounds like a simple question, but it’s surprisingly difficult for economists to agree on an answer.

The standard approach is to attribute the excesses to changes in the behaviour of lenders, who, for whatever reason, became much more eager to give mortgages to people they previously would have avoided with terms they previously would have considered reckless. (For more on the European cases, see here.)

For example, about a third of all mortgage debt originated in 2005 and 2006 was either subprime or “alt-A”, according to data from Inside Mortgage Finance, compared to the stable 1990-2003 average of about 10 per cent. Subsequent experience tarnished these product segments so badly they effectively disappeared.

Continue reading: Stop pretending America’s housing boom had nothing to do with lending standards

Why did Americans (and Spaniards and Irish) borrow so much against housing in the 2000s, only to find themselves stuck with more debt than assets? It sounds like a simple question, but it's surprisingly difficult for economists to agree on an answer.

The standard approach is to attribute the excesses to changes in the behaviour of lenders, who, for whatever reason, became much more eager to give mortgages to people they previously would have avoided with terms they previously would have considered reckless. (For more on the European cases, see here.)

For example, about a third of all mortgage debt originated in 2005 and 2006 was either subprime or "alt-A", according to data from Inside Mortgage Finance, compared to the stable 1990-2003 average of about 10 per cent. Subsequent experience tarnished these product segments so badly they effectively disappeared.

Continue reading: Stop pretending America’s housing boom had nothing to do with lending standards