Wednesday May 30 2018, Daily News Digest

refinancing

News Comments Today’s main news: GreenSky sets shares at $23 each, sold 38M. Elevate Credit doubles floor space. Tandem hits 100K clients. Lidya raises $6.9M in Africa. Today’s main analysis: PeerIQ recounts TransUnion Summit 2018. Today’s thought-provoking articles: An orthodontist racks up over $1M in student loans. CompareCards releases credit card fee report. The worst is over for Chinese microlenders. […]

refinancing

News Comments

United States

United Kingdom

China

Other

News Summary

United States

Fintech GreenSky raises more than US$ 800mln in its IPO (Proactive Investors) Rated: AAA

The online lender priced its shares at US$23 each, raising a total of US$874mln in its first day of trading. The company sold 38 million shares, surpassing its expectation of 34 million shares.

Elevate Credit doubles space with ‘super floor’ in Addison office building (Dallas Business Journal) Rated: AAA

Elevate Credit Inc. will expand at Spectrum Center in Addison, doubling both the size of its footprint and the capacity for employees who can work in the office.

The fast-growing company is growing from 26,000 to 52,000 square feet in the 614,000-square-foot office complex.

VantageScore win, TransUnion Summit 2018 (PeerIQ), Rated: AAA

The House passed the Economic Growth, Regulatory Relief, and Consumer Protection Act which reforms the Dodd-Frank Act and provides significant oversight relief to small banks. Below are some of the main provisions of this bill:

  1. One of the most notable shifts lost in the headlines is that the legislation requires Fannie Mae and Freddie Mac to evaluate and consider alternative credit scores to FICO. The change introduces competition to the credit scoring market and is a big win for VantageScore.
  2. Regulatory Capital relief:
  3. The threshold for a Systematically Important Financial Institution has been raised to $250 Bn in assets from $50 Bn, which will exempt a number of regional banks. These banks will no longer be subject to onerous CCAR tests and reduce their compliance burdens. Banks with less than $10 Bn in assets are also exempt from the Volcker Rule – a win for Jeb Hensarling’s (R-TX) campaign to provide relief for community banks.
  4. Banks with less than $3 Bn in assets will have a lower frequency of regulatory exams, banks with less than $5 Bn in assets will have fewer reporting and compliance requirements, and all banks with less than $10 Bn in assets will have the same capital ratio.
  5. Lenders can now charge subprime borrowers higher rates for auto loans.

TransUnion Financial Services Summit 2018

Delinquencies in auto loans have picked up recently to 4.3%, with subprime auto doing worse. (The drop in auto performance can be attributed to longer auto loan terms, higher LTVs, lower used car re-sale prices, and the “Lyft effect”).

Source: TransUnion

If a loan is prepaid before the 12-months mark the originator loses money as the net interest margin is not enough to compensate for the origination and servicing expenses. Only 23% of prepaid loans are refinanced, and most consumers go for a longer tenor loan with a higher balance.

Source: TransUnion

Mike Meru Has $ 1 Million in Student Loans. How Did That Happen? (WSJ), Rated: AAA

Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans, according to the Education Department. Five years ago, 14 people owed that much.

Silver Hill Funding’s Leslie Smith is Targeting the Underserved in the SBL Space (Commercial Observer) Rated: A

In March, Smith oversaw the formal launch of Commercial Direct, an online small-balance loan customization platform that’s a division of multibillion dollar real estate investment firm Silver Hill Funding, a subsidiary of Bayview Loan Servicing.

Commercial Direct’s lending strategy targets small business owners, entrepreneurs and investors who are relatively new to the commercial real estate arena or are looking to expand or diversify their portfolios. The platform finances commercial and residential condominiums, among many other asset classes, and closes loans in 30 days or fewer, according to Commercial Direct’s website.

With the backing of Silver Hill—which has funded more than 20,000 transactions since its founding—and Bayview Loan Servicing, the platform is off to a strong start.

Fintech adds another S.F. office (San Fransciso Business Journal) Rated: A

After snapping up a new headquarters last year, fintech company Affirm leased up 46,000 square feet in 550 Kearny St. in San Francisco with landlord Brickman.

The new space is around the corner from the company’s headquarters in 650 California St., where it leased 86,225 square feet.

Does Your Business Need More Space? A Lender Weighs In On Why And How To Expand (Forbes) Rated: A

In this post, I speak with Victoria Treyger of 

For Your Money, Which is Better: The Algorithm or the Adviser? (Kiplinger) Rated: A

The reality is, the rapid growth and early-stage adoption of financial technology (FinTech) indicates an industry disruption is underway. Algorithm-based, digital advisory technology has brought us the increasingly popular “robo-advisers,” which replace human advisers with software programmed to understand and advise on clients’ needs. Robo-adviser firms have witnessed triple-digit growth since 2013. Research firm Cerulli Associates reported they had about $60 billion in assets under management (AUM) at the end of 2016, and could amass an estimated $385 billion by 2021.

Are we in the Golden Age of Fintech? (Fintech TV), Rated: A

Dubbed the ‘Mayor of Fintech’, Ron Suber discusses the current fintech landscape, and what technology has him excited about the future.

Watch this video interview with Ron Suber.

Can your side gig fund retirement? (CU Insight) Rated: A

Almost 40% of respondents in a recent Betterment survey said they feel unprepared to save enough to maintain their lifestyle during retirement. As a result, they have become members of the growing gig economy by either supplementing their full-time job or relying solely on their independent work/temporary contracts.

According to “The Gig Economy and Future of Retirement” survey, 76% of those 55 and older were using earnings from a second job to save for retirement, as were 65% of people 35 to 54. In addition, 42% of gig workers under 35 say they’re moonlighting to help save for retirement.

Online lender Earnest gathered data from tens of thousands of loan applicants to learn just how much people are actually earning from their gig. They found 85% of people take home an average of $500 per month from their side hustles.

CompareCards Releases 2018 Credit Card Fee Report (PR Newswire) Rated: AAA

CompareCards by LendingTree today released the findings of its studyon credit card fees that compared the fees of a representative sample of 200 credit cards that are in Americans’ wallets.

Source: Lending Tree

Highlights from CompareCards 2018 Credit Card Fee Report:

  • Two cards — both no-frills credit cards from credit unions — had only a single fee. One card in the survey had as many as nine fees.
  • Credit union-issued credit cards have 2.73 fees per card, lower than 4.48 fees for cards issued by banks.
  • The most common fee levied by issuers is the late payment fee: 99.5 percent of cards impose this fee, averaging $36.02.
  • The average balance transfer fee, among cards that allow them, is 3.46 percent.
  • The average cash advance fee is 3.99 percent.
  • Foreign transaction fees, overall, average 1.48 percent, including cards that have no fee. But if cards assess the fee, most of the time the fee is 3 percent of the purchase price.
  • When compared with smaller credit card issuers, larger credit card issuers assess higher cash advance fees (4.11 percent, versus 3.86 percent) and balance transfers fees (3.49 percent versus 3.42 percent), on average.
  • However, average foreign transaction fees are lower at larger credit card issuers (1.22 percent, versus 1.76 percent at smaller issuers).

RBC Wealth Management – U.S. launches new digital alternative investments platform (PR Newswire) Rated: B

RBC Wealth Management-U.S., one of the nation’s largest full-service wealth management firms, is taking some of the mystery and difficulty out of alternative investing with a new digital alternative investment platform for high-net worth clients.

Developed in partnership with Artivest, an award-winning alternative investment management and technology solutions provider, RBC Wealth Management’s cloud-based investment platform gives financial advisors and their clients access to leading private equity and hedge funds across sectors, stages and styles.

Five Firms Hit by ‘Crypto-Sweep’ in Alabama as Regulators Step up Operation (Bitcoin News) Rated: B

Cease and desist letters have been sent to three Los Angeles based companies. The second firm form California, Leverage, has advertised itself as a crypto lending platform offering to investors a variable, daily interest. This case is again about an unlicensed security, the ASC said.

5 Ways to Get ‘Free’ Money From Your Employer Without a Raise (Student Loan Hero) Rated: B

2. Use your company’s 401(k) matching program

Saving for the long term can be a challenge: 69% of millennials surveyed are not saving for retirement, according to online lender Earnest. Although it can be hard to think about setting aside money when you have to manage student loan payments, it can help with future financial goals — especially if your employer offers a match on retirement plans.

United Kingdom

Tandem reaches 100,000 clients, signs for Form3 paytech (Banking Tech), Rated: AAA

SMEs: a neglected opportunity for UK big banks (SME Magazine) Rated: AAA

Big banks are neglecting the SME market opportunity due to a variety of factors. One of the main problems is the onboarding process, where in many cases the ownership structure can be unclear, leading to difficulties around initiating relationships with SME businesses.

Second, the nature of the SME growth model makes it difficult for banks to determine the value of the business opportunity. This poses problems when it comes to granting credit facilities to SMEs, as they are seen as higher risk for conducting business with.

Third, banks follow bigger sources of revenue and SME profitability is lower than larger organisations.

Finally, existing legacy software systems prevent large banks from servicing SME customer demands which go beyond traditional offerings. For example, the desire to integrate P2P lending, blockchain, mobile wallets, and accounting and legal functionality all as one end-to-end service.

Why scaleups still shy away from debt and equity growth funding (Real Business) Rated: A

Some £2.9 billion was claimed in R&D tax credits during 2015-16, according to HMRC, with the average amount of relief claimed via the SME scheme increasing from £56,223 to £61,514.

Despite a dip in deal numbers in 2016, the crowdfunding boom returned. Beauhurst data claimed £8.27 billion was invested in 2017 – more than double the previous year.

Department store numbers fall by quarter (Drapers) Rated: B

A report by peer-to-peer lending platform Lendy found that the number of large department stores fell from 240 in 2009 to 180 in 2016. The total number of shops fell from 407,000 to 403,000 during the same period.

Lendy said department stores had been more negatively affected than the rest of the high street by online shopping, as the heavy debt burdens carried by their owners had hampered their own investment in ecommerce and store refurbishment.

China

Worst Is Past for Microlenders — Analysts (Caixin Global) Rated: AAA

Effects of a late-year regulatory crackdown on Chinese online lenders has most likely run its course by now, analysts said, even as shares of U.S.-listed companies continue to feel some lingering fallout.

Shares of online lenders Qudian Inc. and LexinFintech Holdings Ltd. have tumbled by 24% and 17% respectively since the firms released their first-quarter results a week ago, wiping out over $1.4 billion in combined market value. Yirendai Ltd., the first Chinese peer-to-peer (P2P) lender to list in the U.S., saw its shares fall by 4% a day after releasing its earnings results after trading on Thursday.

To curb excess in the 1 trillion yuan ($156 billion) unsecured short-term loan industry, regulators issued rules in early December that capped annual interest rates on loans at 36%, barred lenders from offering loans to borrowers with no source of income, and tightened scrutiny over funding sources.

Australia

Credible Lab CEO Stephen Dash likens ASX to ‘junior Nasdaq’ (Australian Financial Review) Rated: A

Credible Labs Inc founder and chief executive Stephen Dash said he had chosen an ASX listing for the company, which allows users to sort through US student loans, because a large number of the company’s early investors were based in Australia and Asia.

India

How the Fintech Industry is Drawing Young Talent in the Country (Entrepreneur) Rated: AAA

The fintech industry is creating new and exciting opportunities for the country’s workforce in such areas as payments, retail baking, peer-to-peer debt financing, personal finance, asset management, institutional investments, remittances, and financial research. However, the primary enabler for all these segments is data. The volume of data that is being generated and leveraged by the digital banking and financial services industry is massive and unprecedented. As a result, the demand for technically trained data scientists is growing rapidly among fintech companies. With an increasing number of people in the country consuming fintech products, data scientists are required to manage large, complex sets of data and organise them to facilitate faster and enhanced delivery of various services to consumers.

Acko Gets $ 12 mn funding from Amazon, others (Elets Online) Rate: A

Online insurance startup Acko General Insurance Co. has raised $12 million (around Rs 80 crore) in a new round of funding led by e-commerce giant Amazon, an official statement revealed.

The latest funding infusion that saw participation from Ashish Dhawan, angel investor and founder of private equity fund ChrysCapital and existing investor Catamaran Ventures, the family office of Infosys co-founder NR Narayana Murthy, takes Acko’s total external funding to nearly $42 million.

In recent times the online lender that has joined hands with cab aggregator Ola to offer in-ride insurance to riders is said to be exploring venturing into travel insurance and healthcare space.

Asia

Singapore Has Fintech Dreams, But It’s Short on Tech Talent (Bloomberg) Rated: A

Singapore’s goal of becoming a high-tech financial hub is running into real-world problems of labor supply and demand.

Technology startups in many countries are fighting to attract skilled workers like software engineers. Yet in the tiny city-state of Singapore, with a population of 5.6 million, the dearth of talent is particularly acute. The nation’s universities and polytechnic schools churn out what the government estimates are 400 graduates a year with the right qualifications, well short of plans to add 1,000 financial tech jobs annually, according to the Singapore Fintech Association.

Africa

Lidya Scores $ 6.9 Million in Series A Investment (Finovate), Rated: AAA

Nigeria-based digital bank Lidya landed a fresh round of funding this week. The bank pulled in a Series A round totaling $6.9 million, an amount that marks the round as one of Nigeria’s largest tech investments. Combined with the $1.25 million Lidya received last March, today’s round brings the bank’s total funding to $8.2 million.

Authors:

George Popescu
Allen Taylor

Thursday January 18 2018, Daily News Digest

mobile banking user growth

News Comments Today’s main news: Marcus passes the $2B loan origination mark. Varo Money secures $45M in Round B. Funding Circle’s fund announces Citibank deal. Qudian enters budget auto financing. PeerStreet intros 30-day notes. Today’s main analysis: Investing in Mintos’ secondary market. Today’s thought-provoking articles: Mobile banking is more important than ever. Credit score changes would force banks to help […]

mobile banking user growth

News Comments

United States

United Kingdom

China

International

India

APAC

News Summary

United States

Goldman Sachs’ Online Lending Platform Marcus Has Originated Over $ 2 Billion in Loans, Deposits Rise to Over $ 5 Billion (Crowdfund Insider), Rated: AAA

Meeting a prediction from this past June set by Goldman Sachs CEO Lloyd Blankfein, online lending platform Marcus topped $2 billion in loan originations. Additionally, Marcus reported online deposits of over $5 billion. Deposits and consumer lending have now been combined under a single brand, thus, in reality, creating a challenger bank for the future.

Overall, Goldman Sachs (NYSE:GS) reported net revenues of $32.07 billion and net earnings of $4.29 billion for the year ended December 31, 2017.

Diluted earnings per common share were $9.01 compared with $16.29 for the year ended December 31, 2016. Goldman reported a Q4 loss of $5.51 per share. The results were impacted by a tax related expense of $4.4 billion. Without this expense, Goldman said earnings per share would have been $5.68.

Varo Money Closes $ 45M Series B Financing Round (Varo Money Email), Rated: AAA

Mobile banking is more important than ever (Business Insider), Rated: AAA

As we’ve seen for the past few quarters, mobile banking is continuing to rise, but the rate of growth is decelerating as offerings mature.

  • JPMorgan Chase 

    How a 23-year-old Max Levchin got Peter Thiel to invest in PayPal in under 24 hours (Business Insider), Rated: A

    Levchin told Shontell, “I saw [Thiel’s] name on the pinboard, wandered into a class that was taught by him, which turned out to be more like seminar with six people in the room. So it was a very small group of people. One: I couldn’t sleep because it would be obvious, but two, he was actually pretty interesting. So I stayed awake and chatted him up afterwards.”

    That turned out to be a good move. Here’s Levchin:

    “In the inimitable Peter Thiel fashion, we basically spend about 20 minutes talking after his lecture, and he said, ‘Well, what are you doing in Silicon Valley?’ I said, ‘I just got here two weeks ago. Probably gonna start a company.’ He said, ‘Oh, great. We should meet for breakfast.’

    “We met the next day. He said, ‘All right, so what companies are you thinking of starting?’ I had two ideas that I was concurrently thinking about. I described No. 1., No. 2. He said, ‘No. 1 is better; you should do that.’ ‘OK.’ ‘I’d like to invest.’ It was less than 24 hours later. Peter was a committed investor in my new project.”

    Credit score changes would saddle banks with risk to help nonbanks (American Banker), Rated: AAA

    Recently, the Federal Housing Finance Agency has been evaluating whether to allow originators that sell loans to Fannie Mae and Freddie Mac to use something other than the currently mandated FICO model. Specifically, the FHFA is evaluating whether originators can also use the VantageScore model offered by a company owned by the three credit bureaus — Equifax, Experian and TransUnion.

    VantageScore contends that its model will provide credit scores on more than 30 million additional consumers and make 7.6 million of these scores eligible for a loan sold to Fannie or Freddie because of the model’s supposed ability to more accurately assess blemished and dormant credit histories and accommodate thin credit files that most often effect younger consumers. VantageScore also argues that, since the model consolidates data from all three credit bureaus, it eliminates scoring differences caused by data discrepancies. The result, the company maintains, will be expanded home ownership, a more vibrant housing market, more consistent underwriting and faster economic growth.

    The major proponents of the alternative credit scoring model are large nonbank originators and credit reporting firms — companies that make their living from the quantity of loans they originate, not the quality. Their business models shield them from ongoing credit risk and require ever-increasing volumes to achieve scale economies. In short, nonbank originators generally don’t eat their own cooking — either in the form of loans or in the form of securities backed by the loans they originate. Therefore, they have everything to gain from this FHFA change, and very little to lose.

    PeerStreet Announces New Investment Product “30-Day Notes” (Crowdfund Insider), Rated: AAA

    On Wednesday, PeerStreet announced the launch of its new investment product, 30-Day Note, to provide increased liquidity for accredited investors at 30-day terms. According to the online lender, the 30-Day Notes product was launched quietly in October as a pilot program, is now offered monthly.

    Axial Members Surpass $ 25 Billion in Closed Middle Market Deals (Axial Email), Rated: A

    Axial, the deal network for the middle market, today announced its members have closed more than $25 billion in deals on 2,000-plus M&A and growth capital transactions since Axial’s launch in 2010. To facilitate these closed transactions, Axial arranged more than 2.1 million private member-to-member deal connections. Nearly one-third (650) of the total transactions closed in 2017.

    In 2017, the revenues of businesses that privately transacted using the Axial deal network ranged from $2.9 million to $610 million, with EBITDA ranging from negative $19 million to $223 million. Top sectors of deal flow activity include Business Services, SaaS, Healthcare IT, Distribution & Logistics, and Manufacturing. Notably, 24% of all growth capital transactions attempted in 2017 were in the Technology sector, more than doubling year-over-year from 10% in 2016.

    Worthy Peer Capital Receives SEC Qualification for 5% Money Market Alternative (Worthy Financial Email), Rated: A

    Worthy Financial, Inc., a modern personal finance company that delivers alternative investment products and digital savings solutions to a wide-range of retail investors, is pleased to announce that its subsidiary Worthy Peer Capital, Inc. has been qualified by the U.S. Securities and Exchange Commission (SEC), under Regulation A+, to bring a new liquid peer-debt product to the entire investing ecosystem.

    The new Worthy Bond offers all investors – including non-accredited investors – a 5% fixed return. Although the bonds have a 36 month term, they can be cashed in at any time for those with imminent liquidity needs, thereby serving more as an alternative to traditional money market products. Bonds may be purchased at .

    Democrats Add Momentum to G.O.P. Push to Loosen Banking Rules (The New York Times), Rated: A

    But unlike the $1.5 trillion tax overhaul, which passed along party lines, the effort to loosen the post-crisis rules is somewhat bipartisan. A group of Senate Democrats has joined Republicans to support legislation that would mark the first major revision of the 2010 Dodd-Frank Act, a signature accomplishment of President Barack Obama that has been deemed “a disaster” by President Trump.

    The bill would allow hundreds of smaller banks to avoid certain elements of federal oversight, including stress tests, which measure a bank’s ability to withstand a severe economic downturn. Under current law, banks with assets of $50 billion or more are considered “systemically important financial institutions” and therefore governed by stricter rules. The bill would raise that threshold to institutions with assets of $250 billion or more, leaving fewer than 10 big banks in the United States subject to the stricter oversight.

    Banks with assets of $50 billion to $100 billion would be immediately freed from those requirements. Financial institutions with $100 billion to $250 billion in assets, such as BB&T and American Express, would no longer be subject to tougher rules after 18 months, although the Federal Reserve would retain the authority to periodically conduct stress tests on those firms.

     

    The One Big Reason It’s So Hard to Refinance Your Student Loans (Money), Rated: A

    More than half of borrowers who applied for refinancing in 2017 were turned down, according on a report released Wednesday by LendEDU, a student loan marketplace that tracked 32,000 applications to eight refinance companies.

    Using data from users of the LendEDU marketplace, the report found that 58% of 2017 refinance applicants were ultimately rejected. And those who passed muster had very high FICO credit scores—the average approved applicant had a score of 764. Nationally, the average credit scoreis 700 out of 850; anything above 720 qualifies as excellent.

    Refinancing companies are currently advertising fixed interest rates that start at about 3.5%. Yet the average on refinanced loans in 2017 was 5.56%, LendEDU found.

    Source: Money

    Bill Gates made these 15 predictions in 1999 — and it’s scary how accurate he was (Business Insider), Rated: A

    Gates’ prediction: “People will carry around small devices that allow them to constantly stay in touch and do electronic business from wherever they are. They will be able to check the news, see flights they have booked, get information from financial markets, and do just about anything else on these devices.”

    No. 3: Instant payments and financing online 

    Gates’ prediction: “Automated price comparison services will be developed, allowing people to see prices across multiple websites, making it effortless to find the cheapest product for all industries.”

    The Top Ten Fintech Predictions for 2018 (Crowdfund Insider), Rated: A

    10. Resurgence of Peer to Peer Lending and the Emergence of A New Asset Class

    We’ve seen coin-backed lending such as Salt Lending. There will be many more platforms that will attempt to solve solvency and liquidity issues with lending in fiat currency backed by coins.

    9. Alternative Internet

    The cost of a simple PayPal transaction might go up dramatically because it was routed through Comcast’s fiber. You may have to pay an additional $3.99 a month for an “Online Banking” package if you want to do online banking…

    8. Banks will rule again

    Most of the online platforms (payments or lending) plus secondary markets are at the mercy of banks. Without a bank charter, you are simply limited on growth.

    6. Baby Boomer Financial, Inc.

    The youngest baby boomers are approaching retirement age. The baby boomer generation is about 75 million people (on par with Millennials) in the US and represents a vast amount of wealth in this country. They want to transact, invest, bank and most importantly transfer their wealth in a responsible way. I predict that there will be Fintech startups specifically addressing the needs of this generation of folks.

    4. Mass Adoption of Zero Latency Payment Clearance/Credit.

    Over the past few decades, we went from a cash society and in-person / in-branch interviews to “same-day” ACH (direct deposit) and next day loan funding. I predict that in 2018, we will see instant credit approval and funding.

    3.  Social Networks Venture Into Credit.

    I am making another prediction that Facebook or Snapchat will venture into extending credit.

    2. Vertical Integration.

    WeWork will get into the Working Capital lending business. And dare I say Indeed, Monster, and LinkedIn, will start lending money based on your resume and activities within your professional connections?!

    BlackRock makes impact a necessity for companies (ImpactAlpha), Rated: A

    Larry Fink flips social impact from a luxury to a necessity for every company. The chief executive of BlackRock, the world’s largest asset manager with $6 trillion under management, served notice on corporate CEOs their companies “must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.” Fink made his point as clearly as possible: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

    Would a bank payday loan be any safer? (Daily Journal of Commerce), Rated: A

    Thanks to a recent regulatory change, it now may be possible for banks to offer small, short-term loans that could be a lot less dangerous for borrowers. Whether banks will actually do so remains to be seen.

    Standard Chartered creates fintech investment unit (Fintech Futures), Rated: B

    Standard Chartered has established a new business unit, SC Ventures, to invest in fintechs and other start-ups.

    Christopher Blake Joins Cross River Bank Loan Team (Long Island Press), Rated: B

    Veteran loan officer Christopher Blake joined Cross River Bank, where he’ll serve clients in Long Island, Queens and Brooklyn in the lender’s Commercial and Multi-Family Real Estate division, the company announced Tuesday.

    Freefly has teamed up with three fantastic financing partners (Freefly), Rated: B

    AFFIRM FINANCING

    Ideal for individuals looking to finance their Freefly purchases.

    SCL EQUIPMENT FINANCE

    A flexible lender designed for U.S. business, sole proprietors, and independent contractors.

    GLOBAL FINANCE

    A creative lender with options for businesses in the U.S. and many countries across the globe.

    United Kingdom

    Funding Circle’s fund unveils Citibank deal (P2P Finance News), Rated: AAA

    FUNDING Circle’s listed fund has inked a deal with Citibank, whereby the financial institution indirectly channels £50m to small businesses through the peer-to-peer lending platform.

    The transaction was announced by the Funding Circle SME Income Fund (FCIF) on Wednesday.

    Under a rather complicated structured finance deal, Citibank’s London branch will advance a senior, floating rate loan of £50m through two Irish special purpose vehicles. The facility matures in December 2026.

    Funding Circle SME Income Fund Limited (London South East), Rated: A

    The Board is pleased to announce that the Company has entered into a formal agreement with Citibank, N.A. London Branch (“Citibank London”) to establish a funding transaction to make loans to ?UK small businesses through the Funding Circle platform?. The transaction will serve to support the Company’s target dividend yield of 6-7% per annum.

    Under the terms of the agreement Citibank London will provide �50 million of funding into the transaction, by entering into a senior, floating rate loan. The Company will contribute a portfolio of existing UK small business loans at par, and in return shall receive ?approximately �50 million of cash to be deployed in accordance with its investment policy, and junior notes.

    Fintech firms struggling to get a foothold with established lenders (The Irish Times), Rated: A

    Banks and other financial institutions remain extremely wary of working with fintech firms, particularly in Ireland where few are willing to give start-ups the endorsement they need to help secure business elsewhere.

    Andrew Patrick White, founder and chief executive of FundApps, a regtech firm that provides compliance and regulation monitoring services to asset managers and hedge funds, said many financial institutions were afraid of fintech solutions because of a fear that they would be used to replace staff.

    “Your grandmother probably has more sophisticated apps on her iPad than many banks have inhouse,” Mr White added.

    Your morning briefing (PaymentsSource), Rated: A

    ‘All-in-one’ cards get another shotCurve has debuted a card in the U.K. that allows consumers to switch a card used to fund a payment after they have left the store. Through the card’s “back in time” feature, card preferences can be changed for up to two weeks, a system the company is selling as a financial management tool. Curve, which is being offered for free with a $60 premium option with more rewards, works like a regular card and is usable anyplace that accepts Mastercard. While all-in-one cards have struggled to gain traction over the years, more than 100,000 people signed up during the card’s testing phase and spent more than $120 million, according to a release.

    OnePlus’ fraud hit: Electronic equipment company OnePlus became the latest to get hit with card fraud, with consumers reporting unauthorized transactions and the company disabling credit card payments but still allowing PayPal transactions. The company is doing a complete audit of its systems and is looking for alternative payment options.

    When we asked, which, if any, Isas have you used over the 2017/18 tax year, nearly a third (32%) said they’d only used a Stocks and Shares Isa.

    This was followed by nearly a quarter (24%) who’ve only used a Cash Isa, and 17% who use a mixture of different Isas.

    This decline in Cash Isa savings is likely to be attributed to poor cash savings rates and the introduction of the personal savings allowance in April 2017.

    Interestingly, Innovative Finance Isas – used for peer-to-peer lending – don’t appear to have taken off, with just 3% of those who voted in our poll only using this savings vehicle.

    Source: Moneywise

    Name Change for Funding Knight as GLI Finance Updates to Sancus Funding (Crowdfund Insider), Rated: B

    As part of an ongoing strategic update, GLI Finance has renamed peer to peer lending platform FundingKnight to Sancus Funding Limited with immediate effect. GLI Finance, an AIM listed company, has also transferred ownership to Sancus BMS Group Limited.

    China

    Qudian is Moving into Budget Auto Financing (CapitalWatch), Rated: AAA

    The newly listed peer-to-peer lending company in China, Qudian (NYSE: QD), has moved into auto-purchase financing, a new business initiative called “Dabai Auto,” according to the company.

    Launched in late November 2017, Dabai Auto is currently targeting Qudian’s existing high quality users, who have been approved with credit lines, but have not actively transacted in small cash installments. The company also announced that it plans to spend around RMB 100 million ($15.5 million) to promote Dabai Auto through online and offline channels. The offline channels would include Qudian user engagement and delivery centers that are located in the shopping districts of over 100 cities across China.

    HNA-owned P2P lending platform doing business normally, executive says (Global Times), Rated: A

    Payments of investment products on jbh.com, an online peer-to-peer (P2P) platform owned by HNA Group, remain normal and there have not been any capital losses since the platform was set up three years ago, an executive of the company said on Wednesday.

    Payments for all maturing investment products on jbh.com are being made as normal, sina.com.cn reported Wednesday, citing Xia Aobi, president of jbh.com.

    International

    Funding Circle and Lufax: Two High Profile IPOs for 2018 (Lend Academy), Rated: AAA

    Neither IPO is a surprise as both companies have indicated their intentions before. But we now have a clearer indication on the timing. First off the rank will likely be Lufax. The South China Morning Post reported that Lufax is planning to do their IPO in Hong Kong in April at a possible valuation of US$60 billion. This would be more than three times the valuation of their previous funding round in 2016.

    The Funding Circle news actually broke just before the New Year with this article from Sky News. They reported that the company was preparing to hire advisors in the first steps towards an IPO. They are supposedly going to interview investment bankers this quarter with a possible listing in London in late fall which would put us in the latter part of the third quarter.

    A successful Funding Circle IPO, one where the valuation rises after it goes public will be very good for the marketplace lending industry in both the UK and the US. We have had little good news here in the last couple of years when it comes to the public markets and I would very much like to see a success story here.

    Investing on the Mintos Secondary Market – Hint One (P2P-Banking), Rated: AAA

    On the Mintos p2p lending marketplace the majority of investors invest on the primary market into loans, either manually or via autoinvest. But for the 29% of investors that do invest on the secondary market picking loans presents them with a huge choice of about 125,000 offers (no typo, really 125K loan parts on offer!).

    Source: P2P-Banking

    For the shown loans there is a very high probability that they will miss the payment and therefore run an additional 60 days until they are repaid under the buyback guarantee. If that happens the remaining actual loan duration would be 62 or 63 days and the impact of the 0.1% discount on the YTM would be much smaller. The resulting YTM would be somewhere around 11 to 13%. So they would not be a good buy and there are much better offers on the secondary market.

    Source: P2P-Banking

    With two weeks remaining the effective YTM for a buyer is not 36% but rather around 12%. Again there are offers with better YTMs on the secondary market.

    Chinese tech groups undermine banks’ dominance of finance (Financial Times), Rated: AAA

    The recent refusal by US regulators to sign off on Ant Financial’s $1.2bn acquisition of Dallas-based money transfer firm MoneyGram International does not signal the end of the Alibaba-affiliated payments group’s US financial ambitions.

    On one level, the scuppered deal suggests that Chinese companies, whether state-owned or otherwise, will have an ever harder time winning approval for US acquisitions. The move also confirms that the Americans now believe that the definition of national security — their basis for scrutinising overseas deals — embraces anything related to information and data.

    But Ant Financial’s attempted US play also shows how much technology is undermining the dominance of traditional global titans, especially in the financial sphere. It is especially noteworthy that many of the upstart challengers to banks and other legacy companies increasingly either have a Chinese face or Chinese capital behind them. That, in turn, underscores how some Chinese players have leapfrogged into prominence across the world.

    Blockchain is revolutionizing the loan industry – a look at Valorem… (Global Crypto Press), Rated: A

    Smart contracts are providing the solution to the trust issues that are usually the main concerns in the micro loan industry.  Whether it be student loans, cars, or any other kind of micro lending – blockchain technology provides what’s needed to move away from the banks, and towards a peer to peer lending model.

    Volerem Foundation is building the infrastructure to facilitate exactly this.

    India

    Govt should think of new ways to boost sectors like P2P lending: LenDenClub (India Info Online), Rated: A

    Additionally, we also expect the government should think of new ways to boost sectors like P2P lending. Eg.- Enable tax exemption for the lenders on P2P lending platforms, under section 80C. This will result in raising the trust bar and credibility, leading to more and more people investing in such platforms. It will also bring in a good enough capital infusion in the P2P lending space.

    Introducing Syndicates for India (Angel.co), Rated: A

    Today, we are announcing Syndicates for India, a new way for investors in India to invest alongside experienced angels and VC funds that invest in India’s vibrant tech ecosystem.

    To date, over 1,800 startups have raised more than $700M through Syndicates on the AngelList platform, receiving more than $6B in follow-on funding.

    APAC

    Gov’t urged to increase ceiling for individual investment in P2P lenders (Yonhap News Agency), Rated: AAA

    A business lobby of peer to peer (P2P) finance firms said Thursday it has asked financial regulators to raise the annual ceiling on individual investment in P2P lenders.

    The Korea P2P Finance Association has asked the Financial Services Commission (FSC) to increase the limit to 100 million won (US$93,632) per year from the current 10 million won, an association official said.

    ZorroSign Among Top 25 FinTech Companies (PR Newswire), Rated: B

    ZorroSign, Inc., today announced the company has been recognized among the top 25 FinTech companies in Asia-Pacific (APAC) by CIO Outlook. The honor spotlights organizations that are fundamentally disrupting the way companies in the global finance sector do business. ZorroSign offers unique secure eSignature, end-to-end Digital Transaction Management, and post-execution fraud protection solution. With security being on top of mind for financial services providers, ZorroSign Document 4n6 (Forensics) Token technology offers a major advantage to its customers.

    Authors:

    George Popescu
    Allen Taylor

Friday January 5 2018, Daily News Digest

small business lending

News Comments Today’s main news: Wealthfront gets backing from Tiger Global. Funding Circle partners with Kansas bank. Elevate customers see rise in credit scores. NextCapital raises $30M for digital advice platform. London tops tech funding. HMT Treasury says P2P lending not deposit-taking. Yields lower in Euro zone as MiFID II begins. Today’s main analysis: FT Partners’ CEO monthly alt lending market […]

small business lending

News Comments

United States

United Kingdom

European Union

International

India

Asia

News Summary

United States

An investing startup that grew by $ 100 million in a single day just got some big name backing (Business Insider), Rated: AAA

Wealthfront, a robo-adviser with more than $9 billion under its management, announced Thursday that Tiger Global, the New York investment firm, would lead a $75 million fundraising round.

Wealthfront plans to use the new capital to enhance its Path platform, which allows users to view all of their financial accounts.

“Path’s appeal to young people propelled our growth such that people under 45 now represent 85% of our clients,” Wealthfront cofounder Andy Rachleff said in a statement.

FT Partners’ CEO Monthly Alternative Lending Market Analysis  (FT Partners), Rated: AAA

As FT Partners wraps up 2017 and looks forward to 2018, we are extremely proud of our accomplishments. Celebrating over 16 years in business, we executed a record number of deals, significantly expanded our team, continued our global expansion and won a number of industry awards during the past twelve months. We are confident that 2018 will be another successful year for the Firm and we are incredibly thankful to our clients and friends across the industry.

In case you missed it, we recently published our latest in-depth, 200+ page industry report: “

Source: FT Partners

Read the full report here.

Business-Loan Growth Fell Off a Cliff in 2017 and No One Can Figure Out Why (WSJ), Rated: AAA

Business-loan growth fell to its lowest levels since the aftermath of the financial crisis in the final weeks of 2017, a puzzling development that could weigh on bank earnings later this month.

Bank loans to companies grew 1.1% from a year earlier as of Dec. 20, up slightly from a 0.8% rate the prior week, according to Federal Reserve data. That Dec. 13 level was the lowest since spring 2011, when banks were just starting to lend to companies again after the financial crisis.

The readings likely cement 2017 as the worst year for this type of lending in recent history. The average weekly rate of business-loan growth was 2.7% for 2017 through Dec. 20, compared with 9.3% in 2016 and double-digit growth in the two years before that.

Looking at 2018: A Discussion with Ron Suber (Crowdfund Insider), Rated: AAA

“[People] from the banking industry from the tech industry. We have grown up,” said Suber. “We had some people that were great from the early days but were not good for long term growth. There has bee a major turnover in the leadership at many of these companies. My call is that companies are focusing on cash flow, profitability and EBITDA for the first time. Earnings on GAAP basis … I think that is great for the industry. You are seeing companies generate cash. [In the past] Prosper did $400 million in month and it lost money. Now it is doing, say $200 million a month and it is making money. They are being run to be profitable businesses. That is the takeaway from 2017.”

Suber says that today, Prosper makes money every quarter. They have $100 million on the balance sheet and it gets higher every month.

“We are seeing lots of money coming in from Asia to buy loans now. More than ever,” added Suber.

LendingClub, a reporting company, has had a tough two years as its stock has tanked while Wall Street looked elsewhere for growth.

ELEVATE ANNOUNCES BOOST IN CUSTOMER FINANCIAL HEALTH (BusinessWire), Rated: AAA

More than 140,000 customers of Elevate’s RISE product have seen an improvement in their credit scores. Additionally, more than 35,000 RISE customers are now eligible to receive at least a 50 percent reduction in their APR and more than 13,000 customers are eligible to receive RISE’s lowest rate.

More than 160 million Americans are either non-prime or “credit invisibles,” without any credit score. These customers account for almost two-thirds of the U.S. population, yet are significantly underserved by the traditional financial industry.

RISE loans are originally priced to risk. Customers are eligible to receive 50 percent off of their rate on subsequent loans after 24 months of payments, eventually achieving a further reduction to 36 percent. Today, more than 35,000 customers have received or are eligible to receive a 50 percent rate reduction and more than 13,000 customers are eligible for an APR of 36 percent.

About the Data

Elevate worked with a major credit bureau to which it reports, gathering anonymized data on RISE customers. Elevate reviewed credit scores of customers from the customer acquisition point up to two quarters after loan completion.

The number of customers who have reached the necessary number of payments to receive a rate reduction was calculated by tabulating the number of accounts at the number of payments necessary.

  • 24 months of payments are required to receive 50 percent off of the customer’s original APR
  • 36 months of payments are required to reach 36 percent

NextCapital Raises $ 30M for its Digital Financial Advice Platform (ChicagoINNO), Rated: AAA

NextCapital officially announced Thursday that it has raised $30 million in new funding to grow its enterprise digital advice platform.

The Series C round brings the company’s total funding to more than $52 million. The round was led by Oak HC/FT, and included additional investments by Manulife Financial, Transamerica Ventures, Vermont Seed Capital Fund and Route 66 Ventures.

FSOC Annual Report on Financial Stability Highlights Marketplace Lending (Lend Academy), Rated: A

Last month the Financial Stability Oversight Council (FSOC) released their annual report. This 165-page report highlights potential risks to our financial system by looking at new developments and providing recommendations to improve financial stability.

Section 4.14 of this year’s report deals with new financial products and there is an entire section on marketplace lending. Here is their conclusion about our space:

Although marketplace lending has the potential to reduce costs and expand access to credit, the extent to which these benefits have been realized thus far is unclear. Furthermore, the marketplace lending model has not been tested through a full credit cycle. There are risks that misalignment of incentives could exist on these platforms.

Can blockchain technology revive peer-to-peer lending? (American Banker), Rated: A

The original premise of online peer-to-peer lending platforms was simple and democratic: A single mom from Kalamazoo, Mich., could post her story explaining why she needed $5,000 to pay off her credit card, and a retired electrician in Illinois could read it, decide to fund her loan and receive interest far exceeding what he could get on his savings account.

LendingClub and others that proffered this people-helping-people model quickly found they needed to make changes.

 

Unbanked vs. Underbanked: Who they are and how they differ (MicroBilt), Rated: A

Slightly more than two-thirds of households in America frequently make use of traditional banking services, according to the Federal Deposit Insurance Corporation. But that leaves 33 percent of people in the U.S. who don’t, a significant percentage by any measure.

Unbanked

As the title implies, unbanked Americans are those who don’t make use of any banking services whatsoever. This includes debit cards and checking accounts, as well as savings accounts. In 2015 – the most recent year for which data is available – the unbanked represented 7 percent of U.S. households, translating to approximately 23 million individuals, including children, the FDIC reported. The percentage of unbanked households in the U.S. is down slightly from 2013, when it was 7.7 percent.

Families have a plethora of rationales for why they opt to go without banking services, but it’s usually due to what they do not have in terms of savings. Nearly 57 percent of unbanked households cite this as their prime reason, according to the FDIC report.

Underbanked

Around 20 percent of Americans are underbanked, according to the FDIC, which means they have either a checking or savings account, though rarely both. Households are also usually given the underbanked distinction if they’ve used alternative financing options during the previous year, such as money orders or rent-to-own services. Around 67 million Americans are underbanked, or the equivalent of 24.5 million households, based on 2015 figures from the most up to date FDIC survey.

As far as demographics are concerned, millennials are among the most likely to be underbanked, with 31 percent of them under the age of 24, according to federal figures.

‘We don’t need to stay in the student market’: How BankMobile wants to grow its offering and replicate its model (Tearsheet), Rated: A

BankMobile, the digital-only bank that offers checking accounts to students, wants to start offering them credit.

The three-year-old Customers Bank subsidiary launched a personal loan product for its customers at the end of December, but that was just the first of a suite of credit products the bank plans to roll out this year as part of its “customer-for-life” strategy, according to Luvleen Sidhu, president and chief strategy officer.

BankMobile has 1.8 million customers to date and has opened about 300,000 new accounts each year in the student demographic through its university partnerships.

Why are you expanding into credit now?
We’re just looking at our demographic. Many in our current customer base are living paycheck to paycheck — that’s why personal loans make sense.

How do you plan to expand your products after the personal loan?
We have a lot of products to introduce on the credit side: credit cards in the second quarter, student refinancing in the second quarter, auto loans and home equity by the second half of next year.

You’re partnering with Upstart on credit products. What are the advantages of that approach?
In the longterm you could say it’s more expensive to partner but those costs outweigh the fact that we get to market much faster.

How has competition changed since BankMobile launched?
It’s accelerated. Challenger banks and Neobanks like Moven, GoBank, Simple and Varo continue to flourish and grow. Digital banks like Ally, USAA and Captial One 360 have really done a push in 2017 attracting millennials, tweaking their product, tone, messaging, branding to make sure they start penetrating that segment. Traditional banks are finally realizing the branch based customer acquisition model is not sufficient.

Banks compete for tech talent by helping on student loans (American Banker), Rated: A

Banks spend not only a lot of time thinking about how to attract millennial customers, but also how to get millennials to work for them.

Though banks might be hard-pressed to offer similar wages — average starting salaries at Uber, Pinterest, and Airbnb are all over $220,000, according to Paysa — they can offer something most tech companies don’t: a student loan repayment benefit plan.

Inside Citizens Bank’s branch redesign strategy (Tearsheet), Rated: A

Banking giants like Citi and Capital One with much more money and resources at hand have been making branches look more like lounges, coffee shops or museums as they figure out what to do with them with less foot traffic, but in 2018, smaller institutions could start to make a move on their plans.

The Providence, Rhode Island bank is transforming its branches into digitally-connected community centers, Johnson said.

Citizens currently has 1,200 branches, and the bank is in the second year of a 10-year plan to reduce its branch footprint as lease expiries take effect. It’s replacing paper pamphlets with digital tools, like a digital retirement checkup platform customers can use while meeting with bankers. The bank can also project digital content onto the walls of a meeting room — a nod to the digital-first habits of some younger customers. Citizens is on an ambitious track to reduce its retail footprint by as much as 50 percent — a “do more with less” approach that over the long term that will save occupancy costs, CEO Bruce Van Saun said in an earnings call last year.

How banks use behavioral economics to win over customers (American Banker), Rated: A

When a major international bank was looking to improve the response rates for its credit card mailers in 2017, rather than changing the graphics or upgrading the paper stock, it turned to a firm that could offer guidance on how consumers make decisions.

It was trying to tap into the insights of behavioral economics, a discipline that uses psychological observations about human behavior to analyze and predict how people will act.

A Fight Over the Credit Score Lenders Use for Your Mortgage (WWJ), Rated: A

Banks and rival lenders are butting heads over the credit scores used to decide millions of mortgage requests by U.S. home buyers.

Now, a federal agency is weighing whether to step into the fight, which revolves around a longtime requirement for lenders who sell mortgages to Fannie Mae FNMA -3.17% and Freddie Mac FMCC -3.31%to gauge most borrowers using FICO scores. The Federal Housing Finance Agency’s ultimate decision could have wide-reaching ramifications for the mortgage market and home buyers across the U.S.

Many nonbank lenders, which in some recent quarters have accounted for more than half of the mortgage dollars issued in the U.S., want the ability to use a credit score provided by a company owned by credit-reporting firms Equifax Inc., EFX +0.00% Experian EXPGY 0.23% PLC and TransUnion . TRU 0.80% These lenders argue the alternative score would open the mortgage market to a greater number of people and lead to more mortgage approvals, helping to boost home sales and the economy.

That is where VantageScore Solutions LLC, the scoring firm that Experian, Equifax and TransUnion launched in 2006, says it can step in.

The company says it can assign a credit score to about 30 million more consumers than FICO. Roughly 7.6 million of those consumers would potentially be eligible for a Fannie or Freddie mortgage, VantageScore says.

Envestnet Finalizes Acquisition of FolioDynamix for $ 195 Million (Finovate), Rated: A

Wealth management intelligence solutions company Envestnet has finalized its acquisition of Actua Corp’s FolioDynamix, a wealth tech solutions company, this week.

PropertyMetrics helps real estate investors create more accurate proformas (Realty Biz), Rated: A

With that in mind, a company called PropertyMetrics has built a web based platform that’s designed to help investors come up with a proforma that includes evaluation and analysis. With PropertyMetric’s software it’s possible to analyze any property in minutes, from any device. This means investors can quickly generate a quick cash flow proforma, perform a cash flow analysis and generate PDF reports from anywhere, in a matter of minutes.

10 favorite stocks for 2018 from top-ranked stock newsletter writers (MarketWatch), Rated: A

Michael Brush, Brush Up on Stocks

I also recently suggested Lending Club Corp. LC, +0.98% in part because of the huge buying by Chinese technology and internet expert Tianqiao Chen, who founded the online gaming company Shanda Interactive Entertainment years ago while he was in his 20s.

He owns around 20% of Lending Club, an online peer-to-peer lending platform. LendingClub recently tightened its lending standards, which hurt loan growth, so the company missed earnings estimates and guided down. But it still expects 15%-20% annual revenue growth over the next few years. This seems plausible given how many people with OK credit would like to refinance their credit card debt with loans. Lending Club estimates $300 billion to $350 billion in credit card debt could potentially be refinanced in this way.

An Online Lending Task Force is Coming to New York (deBanked), Rated: A

An online lending task force DFS study will be coming soon to New York, according to legislative records.

Chippewa Cree Tribe Settles BEH Gaming Ltd Lawsuit (PRWeb), Rated: B

Plain Green, LLC, the online resource for the short-term financial needs of underbanked and subprime consumers, today announces a successful settlement with BEH Gaming Ltd related to loans to the Chippewa Cree Tribe and Chippewa Cree Tribe Development Corporation. Plain Green’s settlement and payment of the debt to BEH releases the Chippewa Cree Tribe and Chippewa Cree Tribe Development Corporation from all liability. The settlement amount is under seal of court order.

The agreement settles a lawsuit filed by Florida-based BEH Gaming Ltd in 2014 (Case # DV-14-142 in the 12th Judicial District Court in Hill County, Montana) to repay loans to expand Northern Winz Hotel and Casino.

Portland ad agency lands $ 126M LendingTree account (Biz Journals), Rated: B

Advertising agency R2C inked a deal late last month to become the new media partner for LendingTree Inc.

LendingTree is an online loan marketplace for financial needs like auto loans, small business loans and credit cards headquartered in Charlotte, N.C. AdWeek reports that the company had a media budget of $126.5 million in 2016, and spent nearly $61 million during the first half of 2017, though R2C won’t manage LendingTree’s entire media budget.

Growing your business? These 3 financing mistakes can cost you big (News-Journal), Rated: B

1. Not understanding the true cost of your loan

When shopping for a business loan, it’s easy to become overwhelmed by fast-talking salespeople, endless strings of acronyms and confusing terms. If it’s unclear how much you’ll really pay for financing, that’s a good sign you should walk away, Hodges cautions.

2. Getting trapped in daily or weekly repayment cycles

Term loans are often the better option, Hodges says. They allow businesses to borrow a set amount of money for a specific purpose, like hiring new staff or stocking up on inventory. The funds are then paid back over a set amount of time, with consistent monthly payments and no surprise fees.

3. Not knowing what you deserve

After seeing countless small businesses get stuck with credit products they couldn’t afford or understand, a coalition of small business advocates, lenders and online credit marketplaces came together to launch the Small Business Borrowers’ Bill of Rights. As the first-ever gold standard for responsible business lending, the Bill of Rights outlines the rights and safeguards that small businesses should expect from finance providers.

3 Behaviors To Keep Credit in Good Standing (MicroBilt), Rated: B

Source: MicroBilt
United Kingdom

London was top destination for tech funding in 2017 (Reuters), Rated: AAA

London was the top city in Europe for technology investment last year, with more funding going into companies in the British capital than into firms based in Paris, Berlin and the next seven cities combined, data showed on Friday.

Tech firms in London attracted 2.45 billion pounds ($3.3 billion) in venture capital funding in 2017, about 80 percent of the 2.99 billion pounds invested in Britain as a whole, according to data compiled by funding database PitchBook for London & Partners.

Fintech, or financial technology, was the most popular segment for investors, attracting a record 1.34 billion pounds in venture capital, the data showed, led by major rounds for TransferWise, Funding Circle and Monzo.

London’s tech scene pulls in record £2.5bn in 2017 venture capital bonanza (City A.M.), Rated: AAA

London’s tech venture capital investment reached another all-time high in 2017 as firms raked in four times more cash than Paris, the nearest European rival.

Softbank’s $502m (£392m) investment in game development platform Improbable was the biggest single investment during the year, but it was London’s burgeoning fintech firms which led the way with a record haul of investments.

European cityLondon Total funding raised (£)

2.45bn

European cityParis Total funding raised (£)

564.97m

European cityBerlin Total funding raised (£)

456m

European cityStockholm Total funding raised (£)

360.27m

European cityMadrid Total funding raised (£)

65.38m

European cityAmsterdam Total funding raised (£)

212.18m

European cityDublin Total funding raised (£)

117.45m

European cityHelsinki Total funding raised (£)

56.98m

European cityCopenhagen Total funding raised (£)

40.23m

European cityLisbon Total funding raised (£)

2.43m

Treasury clarifies whether P2P lending constitutes deposit-taking (AltFi), Rated: AAA

HMT Treasury has passed an order confirming that straight-forward peer-to-peer lending does not constitute deposit-taking.

The order relates to the now-infamous “Dear CEO” letter, sent in March 2017, in which the FCA effectively ordered P2P platforms to cease and desist with all wholesale lending activities. The rationale was that a business borrowing money in order to lend that money on constitutes a form of deposit-taking. This was deemed illegal, per article 5, paragraph 1 of the regulated activities order.

How angel investors support UK start-ups (Growth Business), Rated: A

Investing in start-ups is becoming increasingly popular and accessible in the UK. The attractiveness of that market has come from two main factors: the success of a number UK start-ups built over the past two decades (ASOS, Just Eat, Zoopla, Funding Circle) which are showing the way for many more to come and the supportive policies implemented by the various governments over the same period to encourage investment in ventures.

These schemes have proven to be extremely popular with private investors who every year invest over £1.5 billion into high growth ventures under SEIS and EIS.

So how do you get started with investing in start-ups if you are new to this market?

Your first option is to invest through online equity crowdfunding platforms (ECF) such as Seedrs, Crowdcube and Syndicate Room, which showcase dozens of investment opportunities from start-ups looking to raise equity funding from the public. The advantage of ECF websites is that they are convenient and accessible to anyone with investment tickets starting at £10.

If you consider yourself to be a more sophisticated type of investor looking to build a portfolio of investments with tickets of more than £5,000 per company, then you should probably think about joining an angel syndicate.

A third option to get started is to invest through a start-up fund.

High numbers using expensive credit to buy basic household appliances (Ekklesia), Rated: A

Research found almost 60 per cent of people on a low income turn to more expensive forms of credit to purchase home appliances because they do not have the means to pay up front or access to affordable credit. Seventeen per cent say they used a credit card to make the purchase, 10 per cent used an overdraft and 10 per cent used a store card. More worryingly, significant numbers said that they used high cost credit to buy home appliances, with 13 per cent relying on hire-purchase and eight per cent saying that they used a payday loan.

Blockchain-based banking startup Babb names Paul Johnson as CIO (Finextra), Rated: B

Blockchain-based banking startup BABB (Bank Account Based Blockchain) has appointed banking technology veteran, Paul Johnson who previously lead one of the UK’s leading challenger banks, Aldermore, as CIO to spearhead the development of the world’s first decentralised bank.

European Union

Euro zone yields edge lower as MiFID II kicks in (Reuters), Rated: AAA

Germany’s 10-year government bond yield fell 2 basis points to 0.44 percent DE10YT=TWEB, off two-month highs hit on Tuesday after weekend comments from the European Central Bank’s Benoit Coeure that there was a “reasonable chance” ECB stimulus will not be extended this year.

Most core euro zone bond yields were down 1-4 bps on the day, with the gap between Italian and German 10-year bonds yields tightened to 160 basis points as Italian yields dropped as much as 6 bps to 2.03 percent. IT10YT=TWEB

Ireland meanwhile kicked off its annual funding drive by raising 4 billion euros with a syndicated 10-year bond, covering around a quarter of its issuance target just three days into the year.

P2P platform bosses offer cautious support for pan-EU licences (AltFi), Rated: A

“Opt-in passports” are the way forward, says Lendix co-founder Patrick de Nonneville.

The EU Commission is laying the groundwork for a licence that will allow European crowdfunding and peer-to-peer lending platforms to operate across the bloc.

“We think it’s a great development that will be useful for us,” said Patrick de Nonneville, chief operating officer at French marketplace lender Lendix.

Raffael Johnen, CEO and co-founder of leading German marketplace lender auxmoney, offered his thoughts.

“Getting closer to a single digital market will further boost the creation of true European fintech champions.”

International

Online lender Funding Circle inks partnership with Kansas bank (American Banker), Rated: AAA

Funding Circle, an online lender that operates in four countries, is partnering for the first time with a U.S. bank.

On Thursday, the 7-year-old company announced a deal with Intrust Bank in Wichita, Kan., under which it will sell $20 million worth of its small-business loans to the $5 billion-asset institution.

This Cryptocurrency Inventor Has Suddenly Become One of the World’s Richest Men (Money), Rated: A

Cryptocurrency has a new king. His name is Chris Larsen, and he’s the co-founder and former CEO of Ripple, which created the digital token known as XRP. He’s now one of the world’s richest billionaires, thanks to XRP’s incredible hot streak.

XRP, a cryptocurrency intended for international transactions, has had a meteoric rise this winter. Its value went from $0.25 a coin in mid-December to $3.16 as of Wednesday, according to Coinmarketcap. It’s currently the second biggest cryptocurrency behind Bitcoin.

Forbes reports that, as a result, Larsen almost instantly became worth $37.3 billion (based on XRP’s Monday exchange rate).

India

BCCL invests in fintech company FinREQ in an ads-for-equity deal (Medianama), Rated: AAA

Bennett, Coleman & Co Limited (BCCL), the publisher of the Times Of India and the parent of Times Internet, has acquired an undisclosed stake in online loan company FinREQ.

As such, it looks like the investment in FinREQ is an ads-for-equity deal.

FinREQ was founded in 2011 and has tie-ups tie-ups with nationalized, co-operative, foreign, private banks, NBFCs and Housing Finance Companies. The company provides a variety of loans ranging from overdrafts, import & export finance, supply chain financing, loans against property (LAP), loans against share, lease rental discounts and others.

Online lending platform EarlySalary raises $ 15.7 mn in Series B round (VC Circle), Rated: A

Pune-based Social Worth Technologies Pvt. Ltd, which runs online lending platform EarlySalary, has raised Rs 100 crore ($15.7 million) in a Series B funding round led by Eight Roads Ventures India, a company statement said.

Invest smart with these asset class investment options (ANI), Rated: B

Fixed Depositsinvestment in goldReal Estate and many other traditional options are losing grounds when trying to woo the new age investors.

A research from the Transamerica Center for Retirement Studies indicated that nearly three-quarters of millennials are saving for retirement and that we started doing so at an earlier age than previous generations.

Peer-to-peer (P2P) lending in India currently gives a net return of 18-22 percent to lenders.

Asia

Commencement of Online Lending Service for Small Businesses That Leverages Accounting Big Data and AI Technology (Orix), Rated: A

ORIX Corporation (“ORIX”) and Yayoi Co., Ltd. (“Yayoi”) announced today that the ALTOA Online Lending Service, which leverages accounting big data and AI technology, will commence its operation through the jointly established entity, ALTOA, Inc. (“ALTOA”).

The ALTOA Online Lending Service is an online lending service that provides small amount, short-term loans for small businesses through a new credit model that leverages the credit know-how of ORIX, the accounting big data of Yayoi, and the AI technology of d.a.t. Inc., who is a partner in this venture.

Authors:

George Popescu
Allen Taylor

Thursday December 7 2017, Daily News Digest

Robinhood

News Comments Today’s main news: Credible raises $50M in Australian IPO. Kabbage considers IPO. Blockchain project gives New York homeless a digital identity. Funding Circle surpasses $5B global lending, $1B to U.S. businesses. RateSetter publishes 2016-17 accounts. Starling Bank gets full FCA, PRA approval. N26 launches premium debit card, partners with WeWork. Revolut rolls out bitcoin services. Vietnam gets first P2P lending platform. IOU […]

Robinhood

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Canada

News Summary

United States

Kabbage Mulling An IPO (Seeking Alpha), Rated: AAA

According to FT Partners, the FinTech market saw a record 412 financial deals during the third quarter of 2017. One of the largest deals in the quarter involved a $250 million investment by Softbank (OTCPK:SFTBY) in billion-dollar unicorn Kabbage (Private:KBGE).

Kabbage generates revenue from the fees on the loans. It expects revenue of over $200 million in 2017, roughly double the revenue in 2015. The company claims to have a loss rate lower than the rest of the industry, and that its direct lending business had turned profitable in the fourth quarter of 2016. It expected the whole business to be profitable in the second half of this year.

Kabbage plans to use the funds for expansion into Asia and build new products like insurance and payroll services. It will also be positioning the company for a possible IPO.

Securitizations Securing the Future (Lending Club), Rated: AAA

As we near year’s end, we’re excited to announce that LendingClub has closed its third self-sponsored securitization. The $330 million transaction saw immediate traction and has further increased access to consumer credit for the stable and scalable pool of investor capital in the liquid Asset-Backed Securities (ABS) investor market.

Of note, with 48 total securitization investors this year, over two-thirds 34 are new to LendingClub, including insurance companies, hedge funds, a bank and a pension fund.

We Analyzed 7 Of The Fastest-Growing Personal Finance Apps Of All Time To Figure Out The Secrets To Their Success (CB Insights), Rated: AAA

Ninety-two million millennials will soon be in what Goldman Sachs calls their “prime spending years.” In aggregate, they command $1.3 trillion in annual spending.

(Bankrate found 83% of millennials don’t think they’ll ever retire: they simply “don’t think they’ll have the money” to do so.)

Source: CB Insights

For three of the tools we looked at — Mint, Level Money, and Check — we studied how their product evolved all the way up to their acquisition (by Intuit, Capital One, and Intuit, respectively).

Source: CB Insights

What follows are the results of our analysis — six secrets to success in the world of personal finance management.

1. Use pre-launch marketing to build both trust and hype

Mint had by far the most significant growth in its valuation — from $0 to $170M in just two years.

Source: CB Insights

2. Making the first experience valuable

Keeping users around is hard: according to Localytics, the average mobile app loses 80% of its users within just three days of download.

The best apps retain about 70% of users after three days. The next-best retain about 60%.

Source: CB Insights

3. Design for The Specific User You Want

Source: CB Insights

Millions Are Hounded for Debt They Don’t Owe. One Victim Fought Back, With a Vengeance (Bloomberg), Rated: AAA

A few minutes later, Therrien’s phone buzzed. It was the same guy. He gave his name as Charles Cartwright and said Therrien owed $700 on a payday loan. But Therrien knew he didn’t owe anyone anything. Suspecting a scam, he told Cartwright just what he thought of his scare tactics.

Therrien had been caught up in a fraud known as phantom debt, where millions of Americans are hassled to pay back money they don’t owe. The concept is centuries old: Inmates of a New York debtors’ prison joked about it as early as 1800, in a newspaper they published called Forlorn Hope. But systematic schemes to collect on fake debts started only about five years ago. It begins when someone scoops up troves of personal information that are available cheaply online—old loan applications, long-expired obligations, data from hacked accounts—and reformats it to look like a list of debts. Then they make deals with unscrupulous collectors who will demand repayment of the fictitious bills. Their targets are often poor and likely to already be getting confusing calls about other loans. The harassment usually doesn’t work, but some marks are convinced that because the collectors know so much, the debt must be real.

The problem is as simple as it is intractable. In 2012 a call center in India was busted for making 8 million calls in eight months to collect made-up bills. The Federal Trade Commission has since broken up at least 13 similar scams.

This New Blockchain Project Gives Homeless New Yorkers A Digital Identity (Fast Company), Rated: AAA

Three thousand homeless people in New York are about to receive a special holiday gift: a free smartphone that allows them to manage their digital identity, access shelters and food pantries, and make use of financial services.

The project comes from Blockchain for Change, a New York City startup that has developed a mobile app called Fummi that’s preloaded on the phone. It has teamed up with Life Wireless, which provides phones to low-income groups using federal subsidies. Also involved are NYC service providers like Urban PathwaysPart of the Solution (POTS), Hakook, and the Robin Hood Foundation.

Life Wireless is distributing the phones, starting in the Bronx. The service groups create the blockchain identities for individuals. Once on the system, they can then open an account, receive money, and track their activity.

Blockchain for Change has raised more than $500,000 in a seed round, but it’s also planning a public initial coin offering where it hopes to raise up to $50 million. It generates revenue by charging fees to users at a rate of $3 per month.

On Earnings Calls, Which Tech Company Are Senior Execs Most Obsessed With? (CB Insights), Rated: A

More than Google, Apple, or Facebook, there’s one company that CEOs and public company execs are talking about the most. We analyzed earnings call transcripts to identify the new king of technology.

Amazon has been mentioned nearly 3000 times in the last year.  That’s more than Facebook, Apple, and Microsoft combined.

Source: CB Insights

 

Global Debt Registry joins Wall Street Blockchain Alliance (Finextra), Rated: A

Global Debt Registry (GDR), the asset certainty company, today announced its membership to The Wall Street Blockchain Alliance (WSBA).

WSBA is an industry non-profit trade association created for financial market professionals, by financial market professionals. The alliance engages market participants, regulators, policymakers and technology innovators to advocate the adoption of blockchain’s distributed ledger technology.

Discover Enables Apple Pay Cash (PYMNTS), Rated: A

Discover has announced that transactions made with Apple’s new Apple Pay Cash card will leverage the Discover Network.

The card is part of the new Apple Pay functionality, which allows U.S. customers to quickly, easily and securely send and receive money among friends and family. When Apple customers receive money on a supported device, the money is added to their new Apple Pay Cash card. They can use the money instantly to pay someone or to make purchases using Apple Pay in stores, apps and on the web.

Payday lender Curo to launch in New York with $ 620m valuation (Financial Times), Rated: A

One of America’s biggest payday lenders is launching on the stock market with a $620m valuation, cashing in on mounting hopes that the Trump administration and Republicans in Congress will ease regulatory restrictions on the sector.

Curo Group, which targets “underbanked” consumers and is behind WageDayAdvance in the UK as well as Speedy Cash in the US, begins trading on the New York Stock Exchange on Thursday.

Shares in the private equity-backed company were priced on Wednesday evening at $14 per share, according to Bloomberg data.

Jury Convicts Online Lender Of $ 220M (Mondaq), Rated: A

Recently, a Manhattan federal jury convicted Richard Moseley Sr., the head of an online network of payday lenders and loan servicers, on charges of wire fraud, aggravated identity theft, and violating the Racketeer Influenced and Corrupt Organizations Act and Truth in Lending Act, among other counts.

Moseley was convicted due to his leadership role over a vast and complicated system of interrelated companies that collected over $220 million from more than 600,000 borrowers and deceived regulators in the process. Convincing state and federal regulators and even his own lawyers that his companies were based offshore and not bound by U.S. law, Moseley coordinated a network of lenders and loan servicers that routinely misled both consumers and regulators.

Instamotor Customers Can Now Apply for Financing While Shopping For A Used Car (BusinessWire), Rated: A

Instamotor, the free online used car marketplace, announced today that its customers can now apply for and receive financing for vehicles on its platform.

An estimated 54% of used car buyers need financing according to Experian. By working with leading direct-to-consumer automotive lenders, Instamotor will become one of the few true automotive marketplaces to enable its users to shop for a used car and secure the financing more than half of them will need, all conveniently integrated in one place.

Loans enabled through Instamotor will be available to consumers with FICO scores as low as 500, which are people who commonly have trouble receiving optimal loan terms through traditional financing methods. Also, the application is optimized to be completed entirely in the comfort of one’s home rather than in a dealership office or credit union.

Lendio Opens New Franchise in Nashville (Crowdfund Insider), Rated: A

Marketplace lending platform Lendio, recently announced its has opened its new franchise located in Nashville, Tennessee. Lendio revealed that its franchise program makes accessing business loans easy by helping small business owners skip the legwork of looking for a small business loan.

Progressive Leasing and Marqeta Partner to Power New Lease-to-Own Financing Experience (BusinessWire), Rated: A

Marqeta, the open API payment card issuing platform, and Progressive Leasing, a virtual lease-to-own company and a division of Aaron’s, Inc., today announced a technology partnership that will enhance the checkout process for Progressive Leasing customers.

As one of the largest players in the lease-to-own industry, Progressive Leasing sought a partner who could support their needs today and provide innovative solutions to help build their future payment checkout roadmap. Through the partnership, Marqeta will enable Progressive Leasing to issue virtual cards at the point of sale and work with them to create additional innovative payment offerings.

With the partnership, Marqeta will enable Progressive Leasing to take advantage of a wide range of modern features, including virtual card issuance, tokenization, and its patent-pending Just-in-Time (JIT) Funding, allowing Progressive Leasing to authorize and reconcile transactions in real time.

Real estate crowdfunding expands into more niche markets (Curbed), Rated: A

To those unfamiliar with real estate crowdfunding, the Fair-Haired Dumbbell development in Portland may be just the kind of wacky, esoteric project one envisions when imagining what happens when strangers pool funds online, crossing Kickstarter with construction. A pair of six-story towers connected by a skybridge, the commercial project does in fact resemble a hand weight, with an ostentatious, colorful Italianate pattern sprawled across the facade for extra impact.

Funded in part by investors who pooled money via the Crowdstreet crowdfunding platform, the building, located in a former industrial neighborhood called Burnside Bridgehead, is also open for business and looking for tenants. It’s the city’s first crowdfunded building, and a sign that the growing world of real estate crowdfunding has developed and matured since a 2012 change in investment regulations made these platforms possible.

While reliable numbers about this growing and fragmented market prove difficult to come by, research firm Massolution estimated the global market for real estate crowdfunding surpassed $3.5 billion in 2016.

Hope grows that a larger SEC crackdown on ICOs is coming — and soon (TechCrunch), Rated: A

More than $3 billion has been raised through so-called initial coin offerings so far in 2017.

That wait-and-see stance looks to evolve into much more action in 2018, suggest those who’ve either spoken with the Securities and Exchange Commission or otherwise have a vested interest in its rulings. (The SEC isn’t commenting publicly on its specific plans.)

Just Friday, a new division of the agency that’s focused on ICOs filed charges against an outfit called PlexCoin that reportedly raised $15 million from thousands of investors by promising a 1,354 percent return in 29 days or less.

Credit score row as FICO chief hits out at banks over ‘Fako’ rivals (Financial Times), Rated: A

A row has erupted over credit scoring after the head of FICO, the company whose metric underpins trillions of dollars in lending decisions in the US, hit out at some lenders for supplying customers with a rival measure he dismissed as “Fako”.

The group that supplies lenders with the rival assessment, VantageScore, hit back, saying Mr Lansing was spreading “misinformation aimed at discrediting FICO’s only real competitor”.

The spat points to the opacity of credit scoring, a crucial part of America’s consumer finance economy that is in the spotlight after the huge data loss at the credit reporting company Equifax.

Tips for Reducing College Costs (Earnest Email), Rated: B

Source: Earnest

Roostify to Integrate With Black Knight’s LoanSphere Empower Loan Origination System (BusinessWire), Rated: B

Roostify, a provider of automated mortgage transaction technology, today announced that it has signed an agreement with Black Knight, Inc. (NYSE:BKI) to integrate its platform with Black Knight’s LoanSphere Empower loan origination system (LOS). The integration will enable Empower users to add further efficiency and transparency to the loan origination process – from application to closing.

Envestnet | Yodlee Incubator Unveils New Class of Fintech Disruptors (Business Insider), Rated: B

Envestnet | Yodlee(NYSE: ENV) today announced the members of the newest Envestnet | Yodlee Incubator class.

The members of the 2017–2018 Envestnet | Yodlee Incubator class are:

  • Amplifunds helps donors find non-profits that match their interests and performance expectations.
  • Datasine turns transactional data into psychometric insights, allowing banks to better serve their customers.
  • Golden helps families care for their senior parents’ financial health, wealth and security.
  • Peanut Butter offers a cloud-based software to help employers attract college-educated talent by managing student loan assistance programs.
  • Starbutter AI makes text and voice chat Artificial Intelligence (AI) agents that help consumers pick financial products like credit cards and mortgages.
  • Stessa enables property owners to manage, track, and communicate performance of their real estate assets.
  • Tangello improves home affordability by bridging the gap between renting and buying and offering a flexible, lower cost, and quicker way to finance homes, directly from mobile devices.
  • Veryfi provides mobile-first bookkeeping software that empowers business owners by automating the tedious parts of accounting through AI and machine learning.

AutoGravity Names Sheng Wang As Chief Technology Officer (PR Newswire), Rated: B

AutoGravity has announced the appointment of Sheng Wang as Chief Technology Officer (CTO) to drive the company’s global engineering efforts. Wang joins AutoGravity’s executive team with responsibility for leading product and engineering to deliver a trustworthy and innovative car buying experience that empowers the consumer.

Prior to her appointment as CTO, Wang led AutoGravity product development as the company’s first Director of Product, building cross-functional teams to develop and launch the award-winning AutoGravity platform, as well as branded platforms for Volkswagen Credit and Kia Motors Finance. Wang joined AutoGravity with more than fifteen years of leadership experience in the technology industry and an uncompromising dedication to building dynamic teams and high-impact products that people love.

QCash Financial Wins Financial Times Future of Fintech Awards for the Innovation Category (BusinessWire), Rated: B

QCash Financial, a Credit Union Service Organization (CUSO) providing automated, cloud-based small-dollar lending technology for financial institutions, announced that it was selected as the winner of Financial Times Future of Fintech Innovation Award.

The FT Future of Fintech awards recognize pioneering companies able to demonstrate innovative ideas capable of creating lasting change in the financial services sector on a global scale. Financial Times offers an Innovation Award for newer Fintech companies that are bringing out novel solutions. QCash Financial was awarded the Innovation Award.

United Kingdom

Funding Circle passes $ 5 billion lent globally, including $ 1 billion lent to US businesses (PR Newswire), Rated: AAA

Funding Circle today announced that investors have lent more than $5 billion globally to small businesses through the Funding Circle platform. This has supported a network of 40,000 businesses across the UK, USAGermany and the Netherlands and helped to create more than 100,000 new jobs.*

Today’s news follows a record November for Funding Circle globally with the business facilitating more than $260 million of lending, including $175 million in the UK (£130m), $70 million in the US and $15 million in Continental Europe (€14.5m). Together this has helped thousands of business owners to access fast, transparent finance to grow their businesses, and will lead to an estimated 7,500 new jobs.

With US businesses now having accessed more than $1 billion in funding through the platform, Funding Circle becomes the first lending platform anywhere in the world to have facilitated more than $1 billion across two markets.

Your December Review – Insight and Analysis (Funding Circle), Rated: AAA

Your lending has reached £3 billion in the UK! November was also a record month, with £129 million lent to small businesses in the UK.

Over half of Brits (56%) think they have the skills to run their own business, but only 13% believe they’re entrepreneurial.

Source: Funding Circle
Source: Funding Circle

RateSetter Publishes 2016-2017 Accounts (Crowdfund Insider), Rated: AAA

On Wednesday, UK peer-to-peer lending platform RateSetter released its accounts for the year ending on March 31, 2017. The online lender reported that revenues were £23.7m, up 38 percent from 2015-16; loans under management grew by 23 percent, from £581m to £714m; the number of active lenders grew by 36 percent from 31,036 to 42,049; and, over the same period, the number of active borrowers grew 27 percent from 161,000 to 204,000.

Peer-to-peer lender RateSetter’s losses jump as it takes a hit from bad loan to ad company (Business Insider), Rated: A

RateSetter booked a pre-tax loss of £23.3 million in the year to March 2017, compared to a £5.3 million in the previous year. The company operates a peer-to-peer platform that matches retail investors with individuals looking to borrow money.

Operating losses were £9.2 million last year but the figure was pushed higher by a one-off write-down relating to a loan the platform made to Adpod Limited, an advertising business RateSetter lent £12 million.
‘A resilient business’
RateSetter’s accounts also show that revenue rose by 38% to £23.7 million. Loans under management rose by 23% to £714 million. The number of active lenders on the platform rose by 36% to 42,049 and the number of borrowers rose by 27% to 204,000.

Goodwill impairment helps push Ratesetter further into to the red (Verdict), Rated: A

A goodwill impairment pushed pre-tax losses for RateSetter down to £23m in the year ending March 2017, despite revenue growth of 38% to £23.7m.

The company, which launched a consumer vehicle and commercial assets HP offer this year, saw a rise of 36% in the number of lenders and 27% of borrowers. However, operating losses of £9.2m were further weighed down by a £14.1m goodwill impairment on a loan to advertising company Adpop.

In 2015 Vehicle Trading Group, a company operating in motor finance for consumers and dealerships, used a wholesale facility from RateSetter to lend £12m to Adpop. Both Vehicle Trading Group and Adpop subsequently went into financial difficulties, and RateSetter then bought the two companies.

RateSetter thus decided to back Adpop’s repayments of third party loans, preventing its provision fund from absorbing the hit, as it normally would in case a borrower defaults.

Starling Bank Receives Full Regulatory Approval from FCA & PRA to Offer Broad Portfolio of Financial Products (Crowdfund Insider), Rated: AAA

Starling Bank has been granted approval by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) to offer customers a wide array of financial products by the mobile only bank.  Starling Bank received a licence to operate as a bank by the Bank of England in 2016. The digital only challenger bank will now be able to provide; mortgages, consumer loans, ISAs, and other investment products via their App. No bricks and mortar necessary.

Barnett backs P2P Global Investments for recovery (Citywire), Rated: A

P2P Global Investments (P2P), the largest of the listed alternative lending funds, has won the backing of Invesco Perpetual’s Mark Barnett, its largest shareholder, for the turnaround plan it outlined last week.

The future of advice is ‘Fintegration’ (Professional Adviser), Rated: A

The financial advisory sector has seen much change in the past few years, much of it driven by new technologies and a wave of new market entrants. While we are seeing consolidation and innovation in response, this is just the start. So if you thought the merry-go-round was slowing down, then grab hold tightly because it is only going to accelerate.

‘Fintegration’ – the integration with fintech services – is emerging as an important factor.

What is common to both groups is their appetite for financial online and digital services – from online banking and mortgage management to peer-to-peer lending platforms. There is no doubt we will shortly see the fully integrated dashboard becoming commonplace.

China

China targets booming online lending as crisis fears build (Hong Kong FP), Rated: AAA

The 24-year-old secretary is among millions of Chinese who have turned to proliferating online companies that dish out quick loans — and are worrying the country’s leadership.

Jia started accumulating her debt when she was in college, turning to tech titan Alibaba when she could not get a credit card.

The ease of a few taps on her phone and a four minute wait led Jia to borrow and borrow and when she was finally able to take out a card, she used it to repay Alibaba’s affiliate Ant Financial.

But her debt reached roughly US$9,000 this summer, and her monthly interest payments eclipsed her meagre salary.

‘Lending nirvana’ 

Alternative lending, with loans that can be wired to accounts within minutes, has taken off in China and accounts for 85 percent of the global market, according to a University of Cambridge report.

European Union

N26 launches a premium debit card for ‘the digital customer,’ partners with WeWork (TechCrunch), Rated: AAA

N26, the European mobile banking service, today announced the launch of N26 Metal, the company’s premium MasterCard-affiliated debit card “tailored to the needs of digital customers” at TechCrunch Disrupt Berlin. N26 Black customers in Germany, France, Italy and Austria will be able to sign up for the new NFC-enabled card, which obviously features a metal core made from tungsten and that makes the card weigh a lot, starting December 14.

It’s also worth noting that this is the first metal card in Europe that supports contactless payments.

What better company to partner with then than co-working and real estate startup WeWork. Using the N26 Metal service, N26 customers will also be able to join the WeWork network and get credits to reserve workspaces and conference rooms.

International

Currency trader Revolut’s offer to those champing at the bitcoin (The Times), Rated: AAA

Revolut, which provides foreign currency services to consumers and small businesses, said that from today its users would be able to buy bitcoin and other “cryptocurrencies” using 25 conventional currencies.

BFS Capital has Extended Over $ 1.7 Billion in Financing to Businesses across the US, UK and Canada (BusinessWire), Rated: A

Marking its 15th anniversary year, BFS Capital, a leading small business financing platform, announced it has now extended over $1.7 billion in financing since funding its first deal in 2002. The company also reported that over 75 percent of its originations have occurred in the last five years and more than 25 percent took place in the last 18 months. For full year 2017, BFS Capital expects to generate more than $300 million in originations, a new annual high.

Recent Origination Milestones in Online Lending (Lend Academy), Rated: A

Today, Kabbage announced they had crossed the $4 billion mark. They have now lent to more than 130,000 small businesses which they claim is the largest customer base of any online small business lender.

This week LendingHome announced it had crossed $2 billion in mortgage loans for homeowners and real estate investors.

Funding Circle UK crossed the £3 billion (approx. $4 billion) mark in small business lending for their UK business.

LendingClub quietly announced total small business originations of $500 million since 2014 in a recent blog post.

Emerging markets are under pressure, but I’m buying the dip (CNBC), Rated: A

The Chinese government instituted tough new regulations on online consumer lending platforms, which are made up of payday loans and peer-to-peer lending. Some of them are associated with large holdings in the emerging markets exchange-traded fund like Ant Financial, an Alibaba Group affiliate.

While much of this is a continuation of the Chinese debt bubble, the move suggests that it has gotten out of the regulators’ control.

We see a global trade boom continuing to drive emerging markets as global Purchasing Manager indexes show continued growth in demand for manufactured goods. For example, Korea is already registering signs of slowing Chinese demand but is still showing 9.6 percent year-on-year growth for November exports. However, we continue to watch the tone out of Washington, since a shift toward more protectionism could put a dent in this.

Viola FinTech is a new $ 100M Israel-based VC fund targeting fintech startups around the world (TechCrunch), Rated: B

Viola, the Israel-based technology investment group, is launching new independent VC fund targeting fintech startups from anywhere in the world. Dubbed Viola FinTech, the “cross-stage venture fund” has an initial closing of $100 million but will extend that towards $120-150 million. It is backed by global banks, insurance companies and asset managers from North America, Europe, APAC and Israel, including Scotiabank, The Travelers Companies, Inc and Bank Hapoalim.

Australia/New Zealand

San Francisco’s Credible Raises $ 50 Million in Australian IPO (Bloomberg), Rated: AAA

San Francisco-based financial technology company Credible Labs Inc. is going public, but not on a U.S. exchange.

The startup, a consumer loans marketplace, raised $50 million (A$66 million) in an initial public offering on the Australian Securities Exchange, according to a statement Thursday.

The IPO values Credible at A$300 million, about 50 percent higher than the valuation it got in its last fundraising round, according to people familiar with the matter, who asked not to be identified as the details aren’t public.

Yellow Brick Road Adds Prospa to Lending Panel in Boost to Aussie Small Business (Crowdfund Insider), Rated: A

Yellow Brick Road has added online lender Prospa to its lending panel. The move was described as an effort to diversify its lending offerings for Australian small business customers. Yellow Brick Road is a full service wealth management company that offers products and services for home loans, financial planning, insurance, superannuation, and investments.

Marketplace lenders must ‘start educating’ SMSFs on opportunities, discipline (Nestegg), Rated: A

Speaking to Nest Egg, CEO of fully licensed marketplace lender Zagga, Alan Greenstein said that self-directed investing is now a “very, very big part of SMSF investment” and that according to Zagga research, well over 30 per cent of SMSFs at a sophisticated wholesale level are self-directed investors.

Pointing to a recent whitepaper produced by Zagga, Mr Greenstein said SMSFs tend to be invested at either end of the spectrum; very high risk and high yielding opportunities, or very low risk opportunities.

He said that Zagga’s newly launched ZAG Fund offered a middle ground, with a targeted net return of 6.5 per cent.

Ngā Tangata Microfinance breaking hold of predatory lenders (Scoop), Rated: A

With loan capital provided by Kiwibank, Ngā Tangata Microfinance (NTM) provides no-interest loans to qualifying clients for family well-being and relief from high-interest debt.

An evaluation conducted by the University of Auckland’s Centre for Applied Research in Economics found NTM’s no-interest loans were crucial in helping low-income clients break the cycle of debt caused by predatory payday and fringe lenders.

Partnering with local budgeting advisors, NTM has now disbursed more than $660,000 in no-interest loans to more than 300 clients, with 70% of the support being for relief from high-interest debt. It is estimated these loans had potentially saved clients a total of more than $1 million in interest and additional costs. Requests for help continued to trend up – 30% more NTM loans were approved in the past 12 months compared to the previous year, amounting to nearly 130 loans worth $275,000.

India

Loans are easy to get, but are they for you? (livemint), Rated: AAA

When you buy a phone, you have the option to pay for it then or pay later. You have this option even when you are buying grocery or paying bills. Credit these days can be available relatively easily, even for amounts as low as Rs1,000. In fact, in a country where you need to have a good credit history and credit score to get loans from banks, you can now get loans on your phone—even if a bank would not lend to you.

According to data from the Centre for Monitoring Indian Economy Pvt. Ltd (CMIE), personal loans (incremental numbers) increased 179% and credit card outstanding rose 34.63% in value during April to October period in FY 2017-18. In comparison, incremental numbers during the same period for housing loans showed negative 32.7%.

Source: livemint

HDFC Bank Ltd saw a 35.75% growth in personal loans and 44.50% growth in credit card business in the second quarter (on a year-on-year basis). ICICI Bank, in its second quarter results this financial year said that its personal loan book saw a 40.1% year-on-year growth and the credit card business grew by 36.5%. And this is true for the non-banking finance companies (NBFCs) as well. Bajaj Finance Ltd saw a 42% growth in consumer lending in the same period.

Asia

Vietnam launches first peer-to-peer lending platform (XinhuaNet), Rated: AAA

Vietnam has launched its first peer-to-peer lending service Vay Muon, enabling people to borrow and lend money without having to go through a financial institution.

Matching lenders and borrowers via a smartphone application, the lending platform does not require mortgages and one-on-one meetings, local VTV online newspaper reported on Thursday.

First-time loan requests will be reviewed and disbursed within four hours and subsequent requests will be handled in just half an hour.

‘Korean startups should do what they are good at to get funding’ (The Investor), Rated: A

Korean startups flock to Silicon Valley hoping to become the next Facebook or Google. However, setting up a business from scratch where thousands of new startups come and go every year, is not easy, and becoming a “unicorn” is near impossible.

One fundamental reason is because they can’t get enough funding, according to Tim Chae, head of the Korean unit of US accelerator 500 Startups.

First of all, a company should either run a business in a certain sector for which Korea is widely famous worldwide, such as beauty and e-sports segments, rather than roll out me-too services and products.

Datarius Cryptobank Participates at BlockShow Asia 2017 (Digital Journal), Rated: B

On November 29–30 a large-scale event — Block Show Asia 2017 — was held, and Datarius Cryptobank participated in this event.

Datarius Cryptobank is a unique project. This is a first social cryptobank built on base of the distributed register technologies using neural networks and artificial intelligence. The main attractive features of the project for investors and future customers are the lowest transaction fees, as well as P2P-lending.

Canada

IOU Financial Surpasses US$ 500 Million in Loans Originated (Cision), Rated: AAA

IOU Financial Inc. (“IOU” or “the Company”) (TSXV: IOU), a leading online lender to small businesses (IOUFinancial.com), announces today that it has facilitated more than US$500 million in financing to thousands of merchants and small businesses across the United States and Canada since launching its lending platform.

Authors:

George Popescu
Allen Taylor

A New Generation Requires a New Credit Score

alternative credit scoring

When FICO first introduced the credit score in the 1980s, it had good intentions: To level the playing field for consumers and make decisions easier for lenders. Nearly 30 years later, we still use the exact same model. And while it’s never been perfect, its flaws have become much more apparent in recent years as […]

alternative credit scoring

When FICO first introduced the credit score in the 1980s, it had good intentions: To level the playing field for consumers and make decisions easier for lenders.

Nearly 30 years later, we still use the exact same model. And while it’s never been perfect, its flaws have become much more apparent in recent years as consumers’ financial habits have started to evolve.

Currently, we use a traditional credit score to gauge creditworthiness for untraditional consumers, and this situation has created serious limitations. Fortunately, a solution is well within reach, and it comes in the form of a new, alternative credit score.

Unpacking the Value of Alternative Credit Scoring

In order to meet the evolving needs of consumers, it’s time to introduce a new type of credit score — one that looks at data beyond traditional financial institutions in order to understand the creditworthiness of the growing number of consumers who choose to manage their finances in new ways.

While there’s no single prevailing model for alternative credit scoring, many have already been introduced with great success. These models typically rely on a combination of the following activities as a way to gauge consumers’ propensity to pay bills:

  • Traditional loan repayment behavior
  • Non-loan payment data (e.g. utility or rent payments)
  • Cash flow information
  • Home, job and lifestyle stability information
  • Education and employment data
  • Online behaviors
  • Personal and professional connections

Some of the most common data points used to understand these activities include:

  • Checking and savings account transactions to understand cash flow based on income, spending habits and account balances
  • Utility bill, rent, cable and/or mobile phone payments to understand intent to make payments and typical payment patterns (early, on-time, late)
  • Mobile phone location to verify home and work addresses as a way to understand stability
  • Social media activity to assess home, job and lifestyle stability, education and occupational attainment, online behaviors and personal and professional connections

While the latter two data points (mobile phone location and social media activity) are considered less reliable than bank account and bill payment data, some alternative credit scoring models have used them with success.

Ultimately, with the right data in place, these alternative models can prove just as trustworthy as the traditional FICO credit score and provide several benefits for consumers and lenders alike.

Trust in Alternative Credit Scoring Models

The trustworthiness of alternative credit scoring is extremely important, as lenders must be able to rely on these models to limit their risk. Fortunately, there are several data points that have proven their worth.

According to a recent study on the predictive value of alternative credit scores by the Center for Financial Services Innovation, utility bills and rent payments are among the most reliable data points used in alternative credit scoring models. The fact that these data points are easy to collect only makes them all the more appealing.

The study also reports that many consumers who would be unable to obtain a loan using traditional credit scoring models actually represent prime or near-prime credit risk for lenders, making alternative models that can generate scores for most adults an ideal solution to safely broaden access to credit.

Of course studies are one thing. How all of this works in practice is quite another. So far, though, the results have been positive. Consider the case of TransUnion, which now uses an alternative credit scoring model that it calls CreditVision Link. The firm has over three billion non-traditional data points for more than 260 US adults including property, tax, and deed records; and checking, debit, or payday lending information. TransUnion has used these alternative data points to accurately score more than 90% of applicants who would have been unscorable under the traditional model.

Benefits of Alternative Credit Scoring Models

Once lenders establish trust in alternative credit scoring models, both lenders and consumers can begin to reap the benefits.

For lenders, the benefits of alternative credit scoring typically include:

  • Enhanced predictions due to access to more timely and holistic information on consumers’ spending habits and payment behavior
  • Lower costs and increased efficiency due to the use of less expensive data sources and faster data collection methods
  • Reduced discrimination due to the use of automated data collection, which removes the need for manual and discretionary decision making

For consumers, benefits of alternative credit scoring typically include:

  • Increased access to credit due to the use of data points beyond traditional financial behavior that fail to capture information on the millions of unbanked and underbanked consumers
  • More accurate portrayal of creditworthiness due to the use of more timely information, which can make it easier for consumers to build credit
  • Better service due to a more efficient and less discretionary processes

When all is said and done, FactorTrust, the alternative credit bureau, reports that underbanked US adults represent $105 billion in untapped opportunity for lenders while VantageScore Solutions finds that alternative credit scoring could help approximately 7.6 million consumers who are currently unscorable reach a credit score of 620 or higher.

Why It’s Time for a Change

Why exactly do we need to introduce a new model for credit scoring? There are many factors driving the need for change, but they are largely led by Millennials who are unlike any generation before them. There’s no shortage of articles that try to pick out defining characteristics of the Millennial generation, good and bad — they’re digital, they’re narcissistic, they support brands with a cause.

And whether or not these broad strokes actually define Millennials, one thing that is certain is that this generation approaches many different everyday challenges in their own unique way. Perhaps the best example of this is how they manage their finances.

A New Financial Mindset

Not too long ago, everyone “banked.” We opened checking and savings accounts and we used credit cards — it was just the norm. Those who didn’t follow this pattern typically did so due to dire financial circumstances.

Today, however, we live in a different world. We live in a world shaped by a great recession in which many people were failed by the very banks that they trusted to keep their finances safe. This experience hit particularly hard for Millennials, who came of age in the throes of the recession.

As a result, many Americans (led by Millennials, but not confined to this generation) have started to re-think how they handle their finances.

Growing Financial Options

In addition to world events shaping a new financial mindset, so too has the rise of technology.

Today, consumers have far more options than they once did for how to store and spend money. For instance, many online options now exist that help consumers manage their money and retain access to it digitally, all without any involvement from traditional financial institutions. One of the best examples of these options is Amazon Cash, which enables consumers without credit or debit cards to load cash directly to their Amazon accounts via kiosks at retailers like CVS.

A Change in Banking Status Norms

As a result of a new financial mindset and the growing number of non-traditional financial options, a change in banking status norms has set in.

According to the FDIC, 27% of US households are unbanked or underbanked. Those terms are defined as follows:

  • Unbanked: No one in the household has a checking or savings account.
  • Underbanked: The household has an account at an insured institution, but also goes outside of the banking system to alternative financial providers for services and products like money orders, check cashing, international remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shop loans, and auto title loans.

A large portion of consumers who fall into this group cited non-financial reasons for retaining an unbanked or underbanked status including a lack of trust in banks, privacy concerns, and high or unpredictable bank account fees.

Although the growing number of financial options may make it easy for these unbanked and underbanked households to get by without engaging traditional financial institutions, this status poses a major problem when it comes to credit.

From obtaining a loan with which to buy a house or underwriting for insurance to gauging responsibility when applying for a new job, credit scores are used for a variety of purposes. As a result, credit counts for a lot when it comes to mobility in the US economy.

However, because of how credit scores are traditionally calculated, those who are unbanked and underbanked are typically credit invisible (meaning they have no file with any of the major credit bureaus) or credit unscorable (meaning they have a file with at least one of the major credit bureaus but the information is either too little or too stale to generate a reliable score). Today, 45 million US adults are credit invisible or credit unscorable.

Essentially, this means that the growing group of unbanked and underbanked consumers is severely limited when it comes to activities like buying a house.

It’s Time to Embrace Alternative Credit Scoring Models

Under the status quo, the vast majority of lenders use the traditional FICO credit scoring model. However, this model prohibits 45 million US adults from obtaining credit due to their banking choices rather than the risk they pose to lenders, and seriously limits upward social and economic mobility as a result. Perhaps the most concerning part of this problem is that the overwhelming majority of these credit invisible and credit unscorable consumers are actually good candidates to receive credit.

At a time when more and more consumers are choosing to go outside the traditional financial system, whether it’s because of a lack of trust in banks, the growing number of alternative financial options, or anything else, it’s clear that we need a new type of credit score.

Fortunately, the solution is well within reach. Many firms have already created alternative credit scoring models based on data points like checking and saving account data and utility bill, rent, and mobile phone payment history, and these models have proven their trustworthiness time and again.

Best of all, alternative credit scoring models provide benefits for lenders and consumers alike by enhancing creditworthiness predictions, making the credit application process more efficient and less expensive, and expanding access to credit in a risk-averse way.

Author:

Written by Sanjoy Malik, CEO, Urjanet

Tuesday April 25 2017, Daily News Digest

UK digital lending

News Comments Today’s main news: VantageScore to include trending data or excessive credit capacity. Patch Homes exits beta, raises $1.5M. Chinese industry news. Today’s main analysis: The debate over U.S. fintech regulation. UK digital lenders can grow with more tech innovation. Today’s thought-provoking articles: FC lending impact, borrower stories. United States VantageScore to include trending data or excessive […]

UK digital lending

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News Summary

United States

Major changes coming to how your credit score is calculated (CNBC), Rated: AAA

The math behind your credit score is getting an overhaul, with changes big enough that they might alter the behavior of both cautious spenders as well as riskier borrowers.

The new method is being implemented later this year by VantageScore, a company created by the credit bureaus Experian, TransUnion and Equifax. VantageScore handled 8 billion account applications last year, so if you applied for a credit card, that score was likely used to approve or deny you.

Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. So a person who is paying down debt is now likely to be scored better than a person who is making minimum monthly payments but has been slowly accumulating credit card debt.

An important metric in calculating credit scores has been the portion of their available credit people are actually using. A person with $5,000 in credit card debt with a $50,000 limit across several cards could score better than someone with $2,000 in debt on a $10,000 limit because of that ratio.

But VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly.

Taking civil judgments, medical debts and tax liens out of the equation comes after a 2015 agreement between the three credit bureaus and 31 state attorneys general.

People with those items on their credit reports now could see a bump of as much as 20 points. But it won’t help much if they also have negative marks like delinquencies and debts that have gone to collection.

Mortgages, though, won’t be affected.

An obscure regulatory debate has put the entire U.S. fintech community on edge (TechCrunch), Rated: AAA

An obscure request for comments on regulatory standards, released by the Office of the Comptroller of the Currency (OCC) last March, has since evolved into a complex turf war between the states and Washington, DC.

The debate centers around a proposal made in December by Thomas J. Curry, the Comptroller of the Currency, in which the OCC details a program for fintech companies to apply for charters as “special purpose national banks.”

Though fintech can still be thought of as a relatively young industry, it is growing quickly enough that it may soon determine how most people save, exchange and invest their money. This proposal comes at a time when the world — from the U.K. to Germany to India to Korea — is evaluating what kind of guard rails the fintech sector needs.

With this in mind, the OCC wants to take the first step to create a uniform, nationwide set of standards for fintechs. But what should have been an uncontroversial first step instead unearthed a slew of objections from a complex web of stakeholders. These parties quickly raised concerns about stifling innovation, overstepping the limits of federal authority and understanding the nuances of fintech, among many others. At the very heart of this battle is the question of what fintech really is. And as evidenced by the debate, that question is much harder to answer than it may seem.

Financial malpractice is just as pernicious today. In its first five years, from 2011 to 2016, the new Consumer Financial Protection Bureau (CFPB) received more than 900,000 consumer complaints about financial services providers.

Fintechs themselves have not been free from fraud and scandal. The publicly traded TrustBuddy, based in Sweden, was forced into bankruptcy for massive misappropriations of investor funds. Cincinnati-based SoMoLend came under similar fire for misleading investors. And China’s peer-to-peer lending sector has spent years battling its way out of the shadow of massive fraud that has tainted the industry.

Weirdly enough, fintech companies, which will arguably be the most impacted by the charter, have been relatively quiet. The strongly vocal opponents of the charter have been an alphabet soup of state regulators, who view this move as a broad overreach of federal authority:

  • New York: DFS Superintendent Maria T. Vullo in January released a stern public comment letter to the OCC. In it, she argued that banks with national charters don’t have to abide by some state lending rules, and this charter could allow payday lenders to sign up for protections meant for tech companies.
  • Florida: OFRC Commissioner Drew Breakspear called the charter a “solution to a problem that does not exist.”
  • Ohio and Oregon: Senators wrote in to the OCC saying this would complicate existing state fintech laws and initiatives.
  • California: Jan Lynn Owen, the commissioner of the CA DBO, argued that the proposal would complicate the DBO’s efforts to compile data on online marketplace lenders — such as fintech firms SoFi, Lending Club, Funding Circle and Prosper — in order to separate them from payday lenders.

Even so, to give some credit to regulators, there are still very real reasons this charter could easily hurt the not-nascent-but-not-yet-matured fintech sector in many ways:

  1. Bureaucracy: The OCC has granted only one national bank charter in the last six years. Would it move quicker to enable fintechs? It’s difficult to see how it would.

  2. One-size-fits-all: Fintechs are too diverse to be included in a charter generally drafted to legitimize deposit-holding institutions. As The Hill notes, this charter could lump together “payday lenders, marketplace lenders, and peer-to-peer payment companies” with robo-advisers, bank service providers, insurance tech, stock market apps, etc… Should they all be treated as banks?
  3. A competitive moat: Though the charter could narrow the gap between fintechs and banks, allowing fintechs to compete nationally instead of applying for state-by-state licenses, it could also lead to a “thinning of the herd” by being too cumbersome or expensive for young companies. This could easily stifle innovation.
  4. More compliance risks: Fintechs could find themselves written into a narrower and narrower regulatory box, increasing the chances they’re shut down for benign compliance missteps.
  5. Balkanized regulators: Similar to the CFPB’s “no action letter,” which promises the bureau won’t take action against companies that meet its standards, gaining a charter from the OCC still won’t shield fintechs from other regulators who may have different rules.

Predictably, it seems national regulatory agencies such as Moody’s are in favor of the charter. Credit unions, which see the charter as a way to level the playing field with fintechs, are also in favor. The Conference of State Bank Supervisors is against it. It seems everyone but fintechs themselves has an opinion on the charter.

Despite the heated pushback against the OCC’s charter plan, there are still very good reasons for centralized, consistent and national oversight of the fintech industry. As ex-Treasury Secretary Tim Geithner notes in Stress Test, his excellent memoir of the financial crisis, one of the reasons the Great Recession was so bad was that the “safeguards for traditional banks weren’t tough enough […] but what made our storm into a perfect storm was nonbanks behaving like banks without bank supervision or bank protections.”

Then what would a good set of national fintech regulations look like?

  1. It would set basic underlying consumer protections. For instance, no fintech firm should be allowed to misrepresent its fees — and this is something that shouldn’t vary by state.

  2. It would preserve state sovereignty.

  3. It would recognize the heterogeneity of fintech. Most fintechs disintermediate banking services, each tackling only one of a wide range of services. On top of that, some fintechs (Zopa, SoFi) are themselves starting to build banks, while others (Moven, Monzo, Atom) want to be “bank-lites.” A banking charter runs the risk of being too broad (and weak) or too narrow (and inflexible). Regulation should be flexible enough to encompass new fintech models as they develop, without risking losing its teeth.

  4. It would promote innovation while following the Hippocratic Oath of first doing no harm.

Like many black markets, alternative finance and shadow banking would be safer if it were brought into the light and monitored.

Patch Homes Exits Private Beta and Raises $ 1M to Revolutionize Home Equity (Patch Homes Email), Rated: AAA

Patch Homes, a home equity financing platform that creates a way for existing homeowners to cash out equity at 0% interest with no monthly payments, today announced it is coming out of private beta in California. The company recently secured $1.0 million in seed funding, led by prominent venture capital firms and fintech angel investors, including Techstars Ventures, KIMA Ventures, Eric DiBenedetto and Airbnb co-founder Nathan Blecharczyk, among others.

“There’s a problem with the current home financing market, in that 67% of homeowner wealth is trapped in home equity,” said Sahil Gupta, Co-founder of Patch Homes. “Most homeowners are asset-rich but cash-poor, and we want to help bridge that gap and solve their cash flow problems. Our model offers home equity financing without any monthly payments, allowing homeowners to tap into their home equity and use their money the way they choose, whether to pay down debt, invest in their future, or make needed home improvements. Each Patch Homes’ product should be a step toward making homeownership a more affordable, accessible and liquid investment.”

In exchange for 0% interest, Patch Homes shares in future appreciation or depreciation of the home value. The model allows customers to receive capital from investors to finance their home equity, without interest rates or monthly payments, in exchange for a fraction of future home value change. Both the homeowner and investor will see a profit when the home appreciates in value and Patch Homes will share in downside loss with homeowners, should the house decrease in value.

Each contract has a 10-year term, although homeowners have the option to exit the contract by selling or refinancing their home at any time before that, without any penalty or exit fees. In the meantime, homeowners can use the cash newly freed up from home equity however they choose.

“What’s unique about Patch Homes is that it’s solving a problem for more than 40% of US homeowner population,” said Eric DiBenedetto, an investor in Patch Homes, an early backer of Lending Club and an active real estate investor.

The company has reached several key milestones in the past year, including launching a digital financing portal for homeowners and bringing investor capital to the company platform.

“Throughout our beta program, we saw homeowners engage deeply with the product and debt-payoff was among the top reasons for cashing out equity” said Sundeep Ambati, Co-founder of Patch Homes. “We’re excited about bringing a new approach to the way Americans look at financing their homes. There is over $4.5 trillion in untapped home equity across millions of homeowners in the US. They want something that is suited to their needs and financial circumstances.”

The seed funding will enable Patch Homes to expand its team and geographical footprint, and continue to develop its innovative solution and assist with marketing efforts. Patch Homes currently serves homeowners in California, with plans to expand to additional states before the conclusion of the year.

KBRA Upgrades and Affirms Ratings on Avant Loans Funding Trust 2016-B (KBRA Email), Rated: A

Kroll Bond Rating Agency (KBRA) upgrades the rating on two classes and affirms the rating on one class of notes issued under the Avant Loans Funding Trust 2016-A (AVNT 2016-A), a consumer loan ABS transaction which closed on April 28, 2016.

The current credit enhancement levels are 86.62% for the Class A notes, 47.01% for the Class B notes, and 23.86% for the Class C notes. Credit enhancement consists of overcollateralization, subordination of junior notes, cash reserves, and excess spread. While losses are above KBRA’s base case loss expectation to date, the continued deleveraging and build in credit enhancement outweighs an increase in loss levels. The transaction has breakeven loss multiples which are sufficient for an upgrade of the rating on the Class A and Class B notes and an affirmation of the rating on the Class C notes.

Read the report here.

CommonBond Launches Student Loans for Undergraduate, Graduate Students (Yahoo! Finance), Rated: A

CommonBond, a leading financial technology company that helps students and graduates pay for higher education, today announces the launch of student loans for undergraduate and graduate students. This launch makes CommonBond the first and only company in the country to offer a full suite of student loan solutions, including loans for current students, refinance loans for graduates, and employer student loan benefits for employees.

“Since CommonBond first helped pioneer student loan refinancing nationwide, we’ve seen very little innovation in the student loan industry,” said David Klein, CEO and co-founder of CommonBond.

CommonBond’s new in-school loans provide:

  • Competitive interest rates: CommonBond’s rates are among the most competitive in the industry, with variable rates starting at 2.87% APR with autopay discount and fixed rates starting at 5.50% APR with autopay discount.
  • Flexible repayment options: CommonBond offers four different repayment options for students in school: deferment, fixed monthly payment, interest-only payment, and full monthly payment.
  • Award-winning customer service: CommonBond knows that paying for college is the first major financial decision that many students make, and provides best-in-class care for prospective and current members.
  • An industry-first social mission: CommonBond enables its members to drive social good when taking out a student loan. For every student loan funded by CommonBond, the company also funds the education of a child in need through a partnership with Pencils of Promise.

CommonBond is also introducing an interactive tool that helps students understand the financial impact over time of different student loan options, enabling them to make informed financial choices.

CommonBond has funded more than $1 billion in loans to date.

LendKey Releases State Of Student Loan Refinancing Report (PR Newswire), Rated: A

LendKey, the lending-as-a-service provider for banks and credit unions, today released its Student Loan Refinance Report, its second in a series that highlights borrower trends across banks and credit unions. This latest report focuses on the state of student refinancing including the borrower demographic, their lending preferences and loan performance. Key findings show that the student refi market is healthy for banks and credit unions, as well as borrowers, who save an average of 2.2% in annual interest expense after refinancing.

“The LendKey report found that students who refinance significantly reduced their student loan debt over the life of the loan, a substantial amount considering the average student debt is $37,000 for the class of 2016,” said Salil Mehta, SVP of Credit Risk & Analytics, LendKey. “The overall health of the student refi industry proves how beneficial such products are to financial institutions and their millennial customers.

The report leverages data from LendKey’s network of 275 bank and credit union partners nationwide, and examines a seven-year span of borrower data from 2011 – 2017. Key highlights of the report include:

  • Loan originations: LendKey’s clients totaled $770+ million in originations; outstanding loan balance was close to $620 million.
  • Borrower savings increased: Borrowers saved an average of 2.2% in annual interest expense over the life of each loan.
  • Borrower age increased: Average age of a borrower has increased slightly over the years; in 2016 the average age at the time of refinance was 28.7 years for a borrower with an undergraduate degree and 34.3 years for a borrower with a graduate degree.
  • More graduate students are refinancing: In 2016, borrowers with a graduate degree represented close to 30% of originations compared to 20% in 2011.
  • Delinquency rates have dropped: Loan performance has improved over the past seven years as delinquency and default rates have dropped. The report found that 30-89 and 90+ day delinquencies are currently 2.2% and 0.5%, respectively.

Student loan debt now exceeds $1.3 trillion and is the largest non-real estate debt among US consumers.

LendKey partners with banks and credit unions to offer a complete online lending solution, including a customized refinancing product. LendKey’s services include loan acquisition, loan origination and loan servicing through a white-labeled platform hosted by the financial institution.

To access the full report, visit: 

SmartBiz Loans Adds Five Star Bank to Technology Ecosystem (SmartBiz Loans Email), Rated: A

SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced the addition of Five Star Bank (www.fivestarbank.com) to the Company’s unique technology ecosystem. SmartBiz Loans’ intelligent technology platform will match Northern California-based Five Star Bank to the right customers in a fraction of the time, allowing the bank to originate SBA loans more efficiently while increasing the likelihood that small business owners using SmartBiz® will receive funding.

The partnership underscores the ability for banks and fintech companies to work together in more creative and collaborative ways to better meet customer needs by combining the speed and agility of new technology with the security and infrastructure of traditional banks. SmartBiz Loans’ focus on regulatory compliance along with their deep knowledge of banks’ unique business requirements, make it an attractive partner for banks looking to expand their reach and ability to underwrite SBA loans.

SmartBiz’s full-stack, intelligent technology platform creates an environment of data stewardship in which banks’ data is protected and analyzed to the highest standard. It incorporates elements of artificial intelligence, machine learning and big data analytics to bring agility and efficiency to underwriting and originating government-backed SBA loans. By automating each bank’s underwriting criteria, SmartBiz eliminates weeks of work for banks, and allows banks to originate more loans to customers they may not have previously served while cutting banks’ processing costs by up to 70 percent. On average, 90 percent of the loan applications SmartBiz refers to its bank partners are approved.

PeerRealty Founders Shift Energy to Secondary Market Platform CFX Markets (Crowdfund Insider), Rated: A

Following the announcement that real estate crowdfunding platform PeerRealty had been sold to Brelion, founders Jordan Fishfeld and Juan Hernandez are shifting their energy to solving a pressing issue in the alternative finance space: creating a secondary market for alternative assets including securities sold on real estate crowdfunding platforms.

CFX Markets is described as an end-to-end digital marketplace that is directly integrated with alternative asset issuers, broker-dealers and transfer agents to streamline the process of secondary market trading of alternative assets.

CFX Markets is not alone in targeting this emerging opportunity. Traditional marketplaces such as OTC Markets, NASDAQ and NYSE have each expressed a certain amount of interest in providing liquidity for new asset classes.

Andy Rachleff, Co-founder and CEO, Wealthfront (Stitcher), Rated: A

Christophe Williams (MBA ’18) chats with Andy Rachleff, co-founder and CEO of Wealthfront. Andy discusses a wide range of topics in FinTech, investing, and how to grow tech companies. He goes in-depth on Wealthfront’s competitive advantages in automated investing and how he approaches product/marketing strategy to grow sustainably. Also covered are Andy’s background in venture capital, the process of founding Wealthfront, and how he sees disruptive innovation affecting financial service incumbents.

The Five Key Elements for New Lending Club and Prosper Investors (Lend Academy), Rated: A

April is officially Financial Literacy Month here in the United States so with that in mind I am providing this resource for new investors in Lending Club and Prosper.

  1. Diversify Your Investment
  2. Expect Defaults
  3. Keep Your Cash Balance Low
  4. Automate Your Investing
  5. Avoid Taxes by Investing Through an IRA

Why the future of credit could lie in ‘social vouching’ (Tearsheet), Rated: A

For Kundu and others working in the space, ‘inclusion’ is more about creating a another kind of credit system that’s based on social vouching and support. Inspirave’s platform, Kundu said, brings in the notion of a social network of friends and family that can help an individual reach their financial goals and in turn, help vouch for the individual. Instead of a formal credit score, the idea of using a social network of referees acts as a powerful counterpoint to traditional credit assessment systems that exclude millions of Americans who don’t have bank accounts or credit cards.

“We don’t think of traditional due diligence of loan underwriting, a formal business plan or technical due diligence,” said Kelly Chan of Kiva U.S., a nonprofit that’s the U.S. arm of a global online marketplace for crowd-funded small-scale loans. “We’re looking to a social community knowing you have a group of supporters to back you or vouch; for example, ‘Sally is a wonderful mother worthy of Kiva loan.’”

The notion of ‘social underwriting,’ Chan said, can create economic opportunities for Kiva’s 3,700-strong community, many of whom are small-business owners.

GAO’s Fintech Report Highlights Data Security, Lack of Clarity on Regulatory Oversight (National Law Journal), Rated: B

Other risks aside from data security cited by the GAO in fintech include:

Marketplace lending: The GAO said payment terms presented by fintech companies in this area must be transparent because “it can be difficult for small businesses to understand and compare loan terms such as the total cost of capital or the annual percentage rate.”  The study also suggests there is a risk that small business borrower protections could be overlooked.

Mobile payments: The GAO study indicates that potential risks associated with mobile payments are similar to those found with traditional payment products. The report states that if a smartphone is hacked, lost or stolen or “if a company does not sufficiently protect mobile transactions,” that could be problematic. Another concern is that consumers could deposit or send money to the wrong person with P2P payments.

Digital wealth platforms: Insufficient or incomplete information from customers could cause trouble for digital wealth platforms.

Distributed ledger technology: “The Financial Stability Oversight Council noted that market participants have limited experience working with distributed ledger systems, and it is possible that operational vulnerabilities associated with such systems may not become apparent until they are deployed at scale,” the report said.

Find out how startups are transforming real estate investing at Disrupt NY (TechCrunch), Rated: B

First up is Ryan Williams, CEO of Cadre, a company that provides a marketplace of investment opportunities for real estate investors. Founded in 2014, Cadre does all the sourcing, due diligence, decision-making and management of investments it makes available, providing a greater level of transparency and oversight to potential investors than was previously available.

Also joining us is Eddie Lim, CEO of home equity platform Point. His company enables homeowners to unlock the value of real estate they own by selling equity to investors rather than accruing debt by refinancing their homes.

Bankruptcy Atty Bruce Feinstein Speaks About The Risks of Online Lending Services (PRWeb), Rated: B

A sudden need for money, like an unexpected medical expense, can lead people to seek a quick source of cash. Online lending services have been eager to fulfill this need, offering fast loans without a credit check. But these loans often come with a slew of consequences, such as high interest rates, hidden fees, and contracts that drag out payments.

“Predatory loans like these can have APRs of over 300%,” explains Mr. Feinstein. “People end up paying several times the cost of the original loan without knowing it, leaving them with no choice but to file for bankruptcy.”

There are some protective laws in effect – for example, the Military Lending Act protects active duty members from being charged interest rates higher than 36% on most consumer loans, including payday loans.

United Kingdom

UK digital lenders can harness growth opportunities with more tech innovation (S&P Global), Rated: AAA

While the U.K. government regulates and champions these lenders, their loan origination growth has trailed that of their U.S. peers. Lower amounts of equity funding to build out technology and continued use of more human processes compared to U.S. digital lenders are some of the reasons for this divergence. Now is the time for U.K. platforms to embrace technological innovation in order to capture future growth opportunities.

A new report by S&P Global Market Intelligence estimates that as of the end of 2016, nine key digital lenders in the U.K. had originated £6.69 billion in loans since their respective inceptions. The nine largest platforms covered in our 2016 U.S. Digital Lending Landscape had originated the equivalent of £53.69 billion from their respective inceptions through the end of 2016.

Using data from venture capital database Crunchbase, we see that as of the end of 2016, nine major U.S. digital lenders, excluding Square Inc.’s digital lending platform, had received $3.49 billion in equity funding. This allowed them to invest more in costly technological build-ups, while their U.K. peers had received only $470.6 million in equity funding through the same date.

In the fourth quarter of 2011, only four of the nine lenders in our report were originating loans. Total originations for that quarter came in at just £27.2 million. Quarterly originations for these nine lenders grew 33.79% year over year to £803.6 million in the fourth quarter of 2016. During the second quarter of 2016, originations dropped due to uncertainty related to Brexit but rebounded in the third quarter and continued to grow.

Meanwhile digital lenders saw SME loan originations increase 23.9% year over year in the third quarter of 2016, followed by an 81.8% year-over-year jump to £357.5 million in the fourth quarter.

Digital lenders in the U.K. could enjoy significant growth as new account options and continued political and regulatory support boost awareness of and participation in the industry. With these prospects on the horizon, digital lenders will need to invest in technology and automate some processes that humans currently handle.

Your April Impact – Lending Impact and Borrower Stories (Funding Circle), Rated: AAA

This month we hit more than 60,000 investors, big and small, lending to businesses through Funding Circle. Together your lending is having a real impact on the UK economy. Already in 2017 you’ve helped more than 5,000 businesses access much needed finance to grow and prosper.

Firstnet create 100 new jobs in Leeds

To facilitate the launch of their new data centre, Firstnet Solutions Ltd borrowed £74,480 in October 2016.

Paralympian goes for gold with a Funding Circle loan

Husband-and-wife team Peter and Linda Norfolk are well-experienced in achieving excellence. Nicknamed ‘The Quadfather’, Peter Norfolk OBE is a double paralympic gold medal and multiple Grand Slam winning wheelchair-tennis player, while Linda was Head of Physio for the Paralympic GB team at the Athens Games.

To hire two new members of staff, Equipment for the Physically Challenged (EPC) borrowed £30,000 in 2016.

Flux wants to make paper receipts obsolete (TechCrunch), Rated: A

Flux, a London-based fintech startup founded by three early employees of foreign exchange and banking app Revolut, is on a mission to make store receipts truly digital.

The company, which is de-cloaking this week with a pilot in East London, has built a software platform that bridges the gap between the itemised receipt data captured by a merchant’s point-of-sale (POS) system and what little information typically shows up on your bank statement or mobile banking app.

To be clear, this isn’t digitising paper receipts with OCR, but — by partnering with merchants, their payment processor/POS systems, and banks — making item level receipts digital in the first place. Flux’s first live integration is with EAT and Bel-Air on the merchant side, and digital-only bank Monzo.

“We are… building a software layer that is agnostic to the financial institution or retailer that it plugs into,” Cusden-Ross says. “We connect retailers via a software plug-in to their point of sale and to the consumer via an integration to their mobile banking app. Flux automagically links receipts to your bank card as you pay. Receipts are stored in the same place your transactions live today, your bank statement. Just open up your bank app and you’ll find all the receipts as well as any loyalty right there, it’s seamless and intuitive”.

LendInvest completes its first Scottish refurbishment loan (Development Finance Today), Rated: A

Launched in February, the new product is lent against a borrower’s gross development value (GDV) to provide more leverage for the developer and reduce the capital needed up front.

Upon completion of the refurbishment, the property will be a two-storey house with three bedrooms and is expected to be sold for around £375,000.

The loan was based on 70% GDV over nine months at a rate of 1.1% per month.

International

Alternative Finance And The Rise Of The Fintech Unicorn (Forbes), Rated: A

China’s fintech sector certainly boomed last year especially after Alibaba’s payments company Ant Financial set records with a $4.5 billion funding round. The impact of Brexit is yet to be seen on the UK and Europe as a whole, but investors are still seeing the potential for financial technology  in the region, according to the report. G.P. Bullhound highlights that the UK could  be described as a standout leader because of three fintech unicorns, or companies that are valued at over $1 billion: Funding Circle, Paysafe and Transferwise.

Despite Asia’s leadership and growth in the alternative finance space, the same could be said about the European market.

Statistics revealed in the report that alternative finance is currently the most successful fintech vertical, ahead of digital payments, digital banking, insurtech and asset management. While in China eight of the 13 fintech unicorns are operating in the alternative finance field, the term ‘alternative’ is somewhat less relevant in the UK and G. P. Bullhound claim that this is because these regions are held back by traditional systems. Perhaps this is why China is forging ahead in the financial technology race?

China

Industry News-China (Xeenho Email), Rated: AAA

In China, 55 P2P lending platforms cooperating with insurance companies, accounting for 1/6 of all the platforms. Currently, the types of insurance applied in P2P are mainly surety insurance and safety insurance for personal account. However, the insurance is not unlimited. According to a drafted document from China Insurance Regulatory Commission: if the policy holder is a natural person, the maximum coverage is 1 million RMB.

China launched special rectification action on Cash Loan business

To implement the special rectification of risks of P2P Lending required by P2P Remediation Office, the first tier cities including Beijing, Shanghai, Guangzhou and Shenzhen have been starting an all-round investigation of Cash Loan. Last Thursday, the Association of Internet Finance of Shenzhen promulgated documents to asks platforms submit details of Cash Loan business monthly.

On April 18th, a Cashless Alliance led by Alipay launched in Hangzhou, China. UN Environment and Ant Financial advocate a low-carbon business together with other 15 alliance members. As one of the sponsors, the parent company of Alipay, Ant Financial announced that they will provide 6 billion RMB to help the process of cashless in two years. The efficiency of business will be promoted by 60% by using the cashless pay and data sharing. Every 3580 payment equals to the plant of a bell hammer. The existing Alliance members including: Alipay, Carrefour(China), CAH, HUAQIANG Group, OFO Inc., BESTORE etc. Now, the alliance is open for all the global businesses and organizations.

The Challenges China’s Fintech Sector Will Need To Tackle For Longterm Growth (Forbes), Rated: A

Venture capital investment in Chinese financial technology firms surpassed $6.7 billion in 2016. The reason for this is simple: China is home to the largest markets for digital payments and online lending. About 40% of consumers use new payment methods. As a result, China boasts the world’s four largest fintech “unicorns,” or startups valued at over $1 billion, including Ant Financial, Lufax, JD Finance and Qufenqi. These firms received large amounts of funding in 2016, with Ant Financial alone receiving $4.5 billion.

China Rapid Finance, a peer to peer lending company, has been approved for listing on the New York Stock Exchange and is planning to raise $100 million for its IPO. Chinese fintech firm CreditEase signed an agreement to provide up to $1.4 billion in funding to American real estate firm Tishman Speyer through sales of its wealth management products.

China’s fintech industry faces some major challenges, however. First is a shortage of skilled workers, and second are increased regulations, particularly in the digital loan sector.

Companies face difficulties in filling positions for software developers and product managers.

The China Banking Regulatory Commission published the Guidelines on Depositing and Managing Online Lending Capital in February, requiring user funds be deposited into commercial banks, transactions be approved by both borrower and lender, and clear records of transactions be recorded. This will help to curb the risky behavior of industry firms, about 60% of the roughly 5,000 which fail to comply with regulations.

Sailing Capital Leads $ 60M Round In Chinese AI Firm SenseTime (China Money Network), Rated: A

Sailing Capital International (Shanghai) Co., Ltd., a RMB-denominated investment and loan fund created under the support of the Shanghai Municipal Government, has led a US$60 million series funding round in SenseTime, a Beijing-based artificial intelligence start-up.

Founded in 2014, SenseTime says its face recognition technology has an error rate below one in 100,000. It also provides text, vehicle and image recognition to mobile Internet companies, financial services and security companies.

India

‘Fintech Disruption In Lending Space Is Very Slow Now’ (Entrepreneur India), Rated: A

The peer-to-peer (P2P) lending space is fast becoming popular in India and abroad as a viable option for borrowers and lenders. The model’s success lies in its ability to connect borrowers, who are in dire need of money with lenders, who are ready to provide for higher returns.

According to Rajat, the disruption by the fintech sector is very slow right now.

“It would be false to state that the fintech companies are eating into the role of banks and NBFC. The sector can really grow very fast. In the next five to 10 years, we will observe a lateral shift in the trend with more and more customers moving to the digital mode, especially for financial services that lend itself to the digital platform like music industry,” he added.

Asia

Visa’s new partnership to develop FinTech talent in Singapore (Human Resources Online), Rated: A

With an increased prominence of fintech in Singapore, demand for locals with the relevant knowledge and skills have gone up. In order to nurture future talent in the industry, Visa today announced a partnership with local polytechnics and Singapore FinTech Association.

According to a press statement, as part of this partnership, students from the five polytechnics in Singapore will have the opportunity to engage with payment experts from the global payments technology company.

“Through this initiative, students will attend learning sessions conducted by Visa representatives and be involved in business case challenges. We hope to inspire our young talent to join this exciting community,” she added.

Authors:

George Popescu
Allen Taylor