Tuesday April 3 2018, Daily News Digest

FT Partners

News Comments Today’s main news: SoFi issues $2.6B in ABS notes in Q1 2018. GreenSky files for IPO. China’s P2P lenders brace for more regulations. FinanZero raises $3.6M. Today’s main analysis: FT Partners’ CEO alternative lending market analysis. Today’s thought-provoking articles: Cities with highest share of cash-out refinance borrowers. Retailers grow financial services capabilities. India’s unsecured instant loan interest rates […]

FT Partners

News Comments

United States

United Kingdom

China

International

Australia

India

Other

News Summary

United States

SoFi Issues a Record $ 2.6 Billion in ABS Notes in the First Quarter of 2018 (PR Newswire), Rated: AAA

SoFi announced today that it completed $2.6 billion in loan securitizations in the first quarter of 2018, a 35% increase over the prior-year period and its largest-ever quarterly ABS issuance volume.

In Q1 2018, SoFi completed a total of three securitization transactions: two student loan ABS offerings ($960 million SOFI 2018-A Notes and $869 million SOFI 2018-B Notes) and one consumer loan ABS offering ($774 million SCLP 2018-1 Notes). The SoFi 2018-B Notes marked the first time SoFi included medical residency loans as a part of the collateral.

LendingTree Ranks Cities with the Highest Share of Cash-Out Refinance Borrowers (PR Newswire), Rated: AAA

LendingTree today released the findings of its study on where cash-out refinancing was most prevalent in the past year.

Cities with the highest share of cash-out borrowers

Source Lending Tree

Cities with the highest cash-out loan amounts

Source Lending Tree

Fintech Firm GreenSky Files Confidentially for IPO (Wall Street Journal), Rated: AAA

Financial-technology firm GreenSky LLC has confidentially filed paperwork with the Securities and Exchange Commission for a sizable initial public offering that could come as soon as this summer, according to people familiar with the matter.

The Atlanta company, which operates a lending platform that enables retailers, health-care providers and home contractors to offer loans to their customers, could seek to raise $1 billion at a valuation of roughly $5 billion, some of the people said.

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

This month’s report features an exclusive interview with Manu Smadja, co-founder and CEO of MPOWER Financing, an alternative lender that enables high-potential international students to finance their education. In our conversation with Manu, he discusses the inception of MPOWER, along with the unique opportunities and challenges of lending to this market.

M&A

Source: FT Partners

Read the full report here.

Max Levchin To Participate In A Keynote Fireside Chat At LendIt Fintech USA 2018 (PR Newswire), Rated: A

LendIt Fintech announced today that Max Levchin, Co-founder and Chief Executive Officer of Affirm, a financial services technology company that is reimagining consumer credit and banking, will be featured in a keynote fireside chat on April 9. The world’s most prominent and emerging fintech CEOs from Wall Street to Main Street will gather April 9-11 at Moscone Center in San Francisco to focus on the hot-button topics and issues exploring the future of finance.

In a session titled The future of credit: Reimagining the financing ecosystem, Levchin’s keynote fireside chat will delve into how the retail industry has evolved and how retail experiences are continuing to grow beyond the capabilities of traditional credit and lending. Levchin will share his thoughts on why the industry needs to reimagine the financing ecosystem from the ground up in order to unlock the future of credit. Levchin will also discuss why Affirm is committed to reinventing credit, starting with the belief that it should help improve consumers’ financial lives in addition to financing their purchases.

Kabbage: Small Businesses Turning To Mobile Lending In Big Numbers (Payment Week), Rated: A

Sometimes, businesses need ready cash to get from “the latest bills” to “the next paid invoice,” and that’s where lenders are coming in. A new report from Kabbage says that small businesses are turning to mobile devices to get in on that lender funding in increasing numbers.

Kabbage surveyed almost 150,000 small businesses, and found that loans accessed by mobile device had increased better than three-fold, over 360 percent, of what they were back in April 2014. While the total numbers went through the roof, the value of the loans accessed went through the roof and over the treetops, having increased over 1,220 percent.

Why Marcus Has Changed Everything (Orchard Platform), Rated: A

Fast forward almost 18 months and Marcus is the fastest growing online lender in history. They have lent $2.5 billion in this time to 350,000 customers and have 700 employees spread across three offices. Not only that, but they have grand ambitions in the space. Goldman Sachs CEO Lloyd Blankfein has repeatedly talked about the importance of Marcus to the future of Goldman Sachs.

According to a recent article in the Wall Street Journal the consumer banking business of Goldman Sachs is expected to generate $1 billion in revenue for the firm by 2020. That is significantly more revenue than LendingClub is expected to generate in 2018 as an 11-year- old business.

We have heard that Barclays and PNC Financial will be launching their own lending platforms in 2018 and there are rumors that many other large banks are going to do the same.

Most people probably don’t know Goldman Sachs offers a savings account with excellent perks — and anyone can use it with just $ 1 (Business Insider), Rated: A

Marcus— named after the Goldman Sachs founder Marcus Goldman — allows any adult (except in Maryland, where Marcus is not yet available) to create a savings account.

The big selling point for Marcus is the 1.5% annual percentage yield offered. Whereas interest rates for many banks have plummeted to as low as 0.01%, Goldman Sachs’ savings accounts create significant interest.

There is also no minimum amount needed to open an account with Marcus, and a deposit of even $1 allows users to earn the 1.5% APY.

Ohio Insurtech Root Insurance Completes Series C Round With $ 51 Million in Funding (Crowdfund Insider), Rated:A

Root Insurance, an Ohio-based car insurtech company, announced last week it secured $51 million in funding through its Series C round, which was led by Redpoint Ventures, with Scale Venture Partners and existing partners Ribbit Capital and Silicon Valley Bank Capital Partners. 

Root will use the new funding to expand into additional states and continue to invest in technology that significantly improves the customer experience.

That Fast Online Loan Could Have Super-high Interest Rates and Hidden Fees That Bankrupt Your Business (Entrepreneur), Rated: A

recent lawsuit against fintech small-business lender Kabbage Inc., charging that it partnered with a bank in order to offer interest rates that exceeded the legal limit, highlights the need for more regulatory oversight of the growing number of online lenders signing deals with small businesses.

Online lenders are getting more scrutiny.

The recent Massachusetts federal case brought by a small business against Kabbage (and its partner Celtic Bank) highlights why non-bank fintech lenders should be regulated. The suit alleges that Kabbage used its relationship with Celtic — which “rented” its balance sheet to Kabbage — as a basis to charge interest rates that violated usury laws.

How Credit Karma is using data to become a central finance hub (Tearsheet), Rated: A

It’s not a bank, but it uses customer data to help banks find customers.

Currently valued at $4 billion, Credit Karma has 80 million customers — half of whom are millennials. The company joins a growing number of financial startups like Clarity Money, SoFi, Chime and Varo Money that are aiming to become one-stop shops for customers’ finances. The field is growing increasingly competitive. Meanwhile, banks are bundling personal finance advice into their mobile apps. But Credit Karma has two advantages its competitors often struggle with — scale and data — and it’s using a chatbot to lock in the relationship with the customer.

A Chase Sapphire experiment is getting revived and expanded after the trial run blew away expectations with millennials last year (Business Insider), Rated: B

Last year, ahead of the spring homebuying season — the busiest of the year — JPMorgan Chase engineered an experiment to gain an edge in the mortgage-lending competition.

So the bank targeted its Sapphire customers, offering another 100,000 in rewards points if they closed a mortgage with the bank — a bonus worth as much as $1,500.

HNW Clients Warming Up To Digital Advice (Financial Adviser), Rated: A

In its report, “The Cerulli Edge—U.S. Retail Investor Edition, 1Q 2018 Issue,” the researcher found that more than one-quarter of investors over 70 who have $2 million to $5 million in investable assets said they would consider online-only engagement. Beyond that, high-net-worth investors in general seemingly are more receptive to digital advice platforms.

In 2015, Cerulli found that 38% of investors with investable assets of $2 million to $5 million said they were willing to engage with digital providers. Last year, that number jumped to 46%. And among investors with $5 million-plus in investable assets, those numbers went from 30% in 2015 to 38% last year.

Why borrower experience will be the principal driver of bank revenue in the lending market (Lendit), Rated: A

Tech giants such as Google and Amazon have rewritten the rulebook for consumers when it comes to what they can reasonably expect from their service providers. Consequently, bank offerings are being judged to the same standard as the most innovative digitally native products in the world.

The benefits of improved customer experience

More generally, banks must focus on improving user experience to remain competitive as digitally native fintech products flood the marketplace. Focusing especially, the motivations for improving customer experience can be described as:

  •  Differentiation Financial services can no longer lean on long-standing relationships and brand positioning to generate new customer business.
  • Positive brand response in addition to research, some customers will also emphasize the emotive impression they receive from a product when making purchasing decisions.
  • Coping with an economic downturn During a recession or other global economic hardship businesses are placed under increased financial strain. Services viewed positively by their existing clients will stand a better chance of retaining their clients as well as growing their client base during the downturn.

Pindrop Introduces New Biometric Solution: Tongueprinting (Finovate), Rated: A

Banking Technology’s Anthony Peyton reports that the Atlanta-based anti-fraud and authentication specialist has unveiled Tongueprinting, a technology that analyses every person’s unique tongue as its newest biometric engine. Banking Technology is Finovate’s sister publication.

The idea is for Tongueprinting to stop fraudsters from taking over legitimate accounts by spoofing the call centre with automated bots, social engineering, and knowledge-based authentication questions.  

HomeUnion Launches Crowdfunding Platform for Individual Investors (Business Wire), Rated: A

HomeUnion, the leader in online residential real estate investing, has launched a crowdfunding platform that allows investors to purchase stakes in funds of single-family rental (SFR) properties on its website. Starting with a minimum investment of $10,000, retail investors now have the ability to acquire interest in the HomeUnion Fix-and-Flip Fund. The fund enables consumers to invest in SFR assets acquired for fix-and-flip purposes in seven HomeUnion markets: Atlanta, Austin, Charlotte, Chicago, Dallas, Raleigh and Tampa.

Upstart tests buyer appetite with riskier loans, more sub notes (Global Capital), Rated: A

Online lender Upstart is the latest marketplace loan company to broaden the risk profile of its ABS, announcing a deal this week offering more subordinate bonds and backed by a higher proportion of longer term loans.

The California-based lender, founded by ex-Google employees, uses an underwriting model which incorporates data points beyond borrowers’ FICO scores, utilizing other factors such as schools attended, areas of study, academic performance and work history.

Is low pay hurting banks in the battle for tech talent? (American Banker), Rated: A

Conversations about pay in the banking industry typically focus on whether executives at the top are paid too much or workers at the bottom are paid too little.

But new data available as a result of the Dodd-Frank Act is drawing rare attention to the compensation of employees in the middle. In what will become an annual exercise, publicly traded U.S. companies are now required to disclose annually the median pay of their employees.

Information and Data Integrity: A Two-Way Street (Lendit), Rated: A

For many businesses, data is an important aspect of decision management. When you are choosing with whom to do business, you rely on the validity of data to guide you. If it proves faulty, you may be steered into accepting bad customers or rejecting good ones, which can seriously affect your bottom line. For consumers, inaccurate data can be equally harmful—leading to the appearance of having bad credit, denials of services or products or worse, flagged as potentially fraudulent.

Spanning both digital and real worlds, and encompassing data about identity, financial characteristics, behaviors and more, an integrated view is the foundation of enhanced insights that can ultimately improve financial outcomes. TransUnion understands the importance of current, accurate data and gives its customers access to information—including both highly-regulated and publicly available forms of alternative data—that creates powerful, comprehensive views of consumers.

Here’s Why Millennials Are Choosing Personal Loans (Lendit), Rated: A

When it comes to millennial spending habits, it looks as though they’re rounding a corner to a new kind of credit. With the vast treasure trove of accumulated data available, credit bureaus like TransUnion are seeing spikes in personal loans compared to Generation X’s spending habits in the early 2000s. It’s a tremendous opportunity for marketers to capture a demographic that expects more from their lender.

The Overarching Trends

The newly minted adults of Generation Z are at the very beginning of their financial journey, but millennials are at the age where they’re expected to make major purchases. As they struggle with the economy and student debt, they’re making different financial choices along the way.

Adopting New Technology

Lenders are turning to financial technology (fintech) to help peddle their products, which millennials are all too happy to use. Ironically, applying for a personal loan without the face-to-face connection can be far more attractive than the traditional application process.

A Decline in Credit Card Usage

Right or wrong, credit cards have long been linked to perpetual debt in many people’s minds. In 2009, the CARD Act was introduced to place stricter limits on the marketing of credit cards at college campuses. Debit cards have become more of the rule as opposed to the exception, leaping from 8 billion transactions in 2000 to 60 billion in 2015.

Small Business Confidence Is Up, What Does that Mean? (Lendit), Rated: A

The year 2017 saw small business owners across the United States grow more optimistic about the future than they’ve ever been—at least since the creation of the Optimism Index by the NFIB in the 70s.  “2017 was the most remarkable year in the 45-year history of the NFIB Optimism Index,” said NFIB President and CEO Juanita Duggan.

The Tax Bill Could be a Boon for Small Businesses

Sole proprietorships, partnerships, and S corporations are all examples of what are called pass-through businesses; and make up roughly 95 percent of all U.S. businesses. They also happen to be many of our customers at OnDeck, and other online small business lenders. One of the main components of the new tax bill is a 20 percent tax deduction for those businesses, where business owners can “shield” 20 percent of their business income from flowing through to their personal income tax returns.

Cincinnati-based financial tech startup raises $ 1.2 million (Cincinnati Business Courier), Rated: B

A Cincinnati-based financial tech startup that aims to help users secure low-dollar loans without having to resort to a payday lender raised $1.2 million in venture capital.

Mayor proposes employee loans to offset predatory lenders (Santa Fe New Mexican), Rated: B

A few months after a new annual 175 percent cap on small-loan interest rates in New Mexico went into effect, Mayor Alan Webber is proposing a short-term loan program to help municipal workers avoid payday lending businesses viewed as predatory by consumer advocates.

BlockFi Gives Hodlers Another Option to Borrow Against Crypto Assets (BitcoinMagazine), Rated: B

Options for borrowing and lending with cryptocurrencies are on the rise. One of the latest start-ups to join the likes of SALT and Unchained Capital is BlockFi, a New York City–based startup that issues loans backed by bitcoin and ether to individuals, companies and institutions in 35 U.S. states.

BlockFi takes cryptocurrency as collateral, offering interest rates on loans of around 12 percent. This is generally lower than unsecured loans and higher than loans secured with traditional assets such as securities or real estate.

eBus to offer visitors financial advice, credit reports (The Repository), Rated: B

The eBus is a mobile classroom which is equipped with 14 personal computers and satellite technology staffed by Fifth Third bankers and representatives from nonprofit community organizations. On the bus, visitors can request a credit report and review it with a professional; receive a personalized evaluation of finances; receive internet banking and bill pay demonstrations; speak with nonprofits about housing, money management and business advice; receive consultation on foreclosure prevention; and conduct online job searches.

United Kingdom

Scots ‘side businesses’ generate £1.7bn a year (The Scotsman), Rated: A

More than 500,000 people living in Scotland have started a side business, generating a collective £1.7 billion a year out of more than £33bn UK-wide, according to new research.

Online lender Sunny said many of those north of the Border turning to side businesses are doing so to help with the cost of bills, savings and debts, and bring in an average of £272 a month on top of their main income.

That represents a 20 per cent increase from when they first started their business.

China

China’s P2P lenders brace for renewed regulatory crackdown (Financial Times), Rated: AAA

China will soon be rolling out new licensing requirements for p2p lenders; The system will kick off in April with approvals slated to come at the end of this month, but many lenders aren’t aware of the filing process; in 2016 and 2017 many p2p lenders shut down and according to data there are around 2,000 remaining; it is expected that many of the 2,000 will not pass the new requirements; the new rules won’t allow platforms to guarantee loan payments and also limit loans to individuals and businesses; it will also require that platforms use custodian banks.

China Rapid Finance Executives Selected to Speak at LendIt Fintech USA 2018 (PR Newswire), Rated: A

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF) announced today that the Company will participate as a sponsor and exhibitor at the upcoming LendIt Fintech USA 2018, to be held between Apr 9th and 11th in San Francisco, California.

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On March 28th, cross-border payment company iPayLinks announced that it had completed, at the beginning of this year, a hundreds of million-yuan B1 round of financing led by Tencent and followed by Legend Capital.

NIFA Issues a Self-Discipline Convention for Debt-Collection Practitioners

The five-chapter convention is mainly applying to regulate the behavior of overdue debt collection within the Internet Finance industry by establishing several basic principles (e.g. observing laws and regulations, prudential regulations, protecting privacy, and strict self-discipline). In other words, the document outlines a framework of debt-collection regulation in terms of discredited punishment, business management, personnel management, information management, outsourcing management, and complaints.

China’s internet lenders fall foul of data privacy rules (Financial Times), Rated: A

More than half of Chinese internet finance lenders are failing to comply with data privacy regulations, research has found, raising risks for investors as China steps up the implementation of laws to protect consumer data.

The breaches include collecting phone numbers from users’ contact lists, which can be used to mount harassment campaigns and shame users into repaying debts.

The survey of 200 finance apps by Renmin University and Nandu Personal Data Protection Research Centre, a Beijing think-tank, ranked 111 apps as having “low” compliance.

It found that almost half — 95 apps — wanted to read users’ text messages, while 97 of them wanted access to users’ contact lists, despite such access not being necessary for the app’s functioning.

International

How retailers are growing their financial services capabilities (Tearsheet), Rated: AAA

Amazon isn’t the only retailer encroaching on the financial services space. It may be the scariest — just the rumor of it entering a company’s space will send its stock price down — but ultimately, Amazon only cares about getting more buyers and more sellers to join its platform.

Overstock’s Raj Karkara, vp of loyalty and financial services, echoed that sentiment earlier this year, saying that offering financial services or connecting customers with financial services providers is a natural extension of its retail function of buying and selling consumer goods.

Rakuten
Rakuten is Japan’s largest e-commerce site and has slowly been growing outside of the country. It has a footprint in media, video-on-demand, mobile messaging, e-books, travel, fashion, marketing and even sports. It also operates the largest online bank in the country.

Overstock
For the past few months, e-commerce company Overstock.com has been quietly building out FinanceHub, a sort of marketplace for financial services that includes existing Overstock credit cards and insurance products; loans by LendingTree, Prosper and Sofi; a robo-adviser for automated investing; and, most recently, a discounted trading platform.

Sainsbury (and Tesco)
Amazon may not be interested in becoming a bank but that doesn’t mean it can’t succeed in stealing customer attention from them. The U.K.’s largest grocers have all opened banks attached to their brands —  Sainsbury’s and Tesco.

ETHLend (LEND) Token – Will It Go Down After Kyber Network Partnership? (Hot Stocked), Rated: A

ETHLend has recently partnered up with Kyber Network. The ETHLend (LEND) Token has reached a market capitalization of 45.69 Million US dollars in the last 24 hours. The token traded 9.50%higher against the U.S. dollar during the last 24 hours ending at 10:30 AM EDTon April 2nd. That rise might be as a result of the partnership. ETHLend aims to become another decentralized and secure financial marketplace, but targeting peer to peer lending agreements via Blockchain and Smart Contracts.

Source CoinMarketCap

 

Australia

SMALL BUSINESS LOANS IN AUSTRALIA: SHOULD YOU SEEK FINANCE FROM A BANK OR AN ONLINE LENDER? (Dynamic Business), Rated: A

Considering the small business sector employs nearly half the national workforce and contributes around $380 billion to Australia’s GDP [1], it’s easy to see why it’s frequently referred to as the ‘engine room’ of the economy.

Like all engine rooms, the sector requires sufficient fuel – in this case, working and growth capital – to not only keep running but also accelerate. However, poor access to capital remains a significant barrier to small businesses, accounting for a majority of failures in the sector.

Part of the reason is that banks are reluctant to lend to small businesses in circumstances where the borrower doesn’t have bricks-and-mortar security – especially if a short-term loan is sought.

APRA rejected CBA home loan data as inaccurate and incomplete (Financial Review), Rated: B

Commonwealth Bank was being pressured by the prudential regulator to appoint external consultants and fix its flawed home lending data almost 2½ years before the Hayne royal commission began exposing the big four for sloppy administrative errors and irresponsible lending.

The Australian Prudential Regulation Authority’s frustration with the failure of Australia’s biggest home lender to accurately identify what proportion of its loans were taken out by property investors and its level of exposure to big borrowers has been revealed in evidence tendered to the banking royal commission and published in a massive dump of more than 100 documents late last week.

India

Interest rates on unsecured instant loans are high (LiveMint), Rated: AAA

Financial institutions and fintech companies have launched multiple small credit products in India in the past 1-3 years. It is now possible to get loans even on your mobile phone. But how do you pay for this convenience?

P2P lending platform

Peer-to-peer lending companies such as Faircent, i2ifunding and Lendbox connect lenders and borrowers on their platforms. Usually, the lender is an individual and not a financial institution. The interest rates are between 15% and 36% per annum and the loan amount can range from Rs50,000 to Rs5 lakh. The interest rate is decided based on the credit profile of the customer. Usually, the P2P lending companies take into account your Cibil credit score. The loan tenure is 3 months to 24 months.

Fintech eco-system is moving to blockchain and AI: Rajat Gandhi, Faircent (Economic Times), Rated: A

A lot of players have come into the fintech space. There are wallet players, then there are PPI, P2B, crowdsourcing and other payment players as well. So, regulation is one of the key challenges the private players are going through. What is your take on it?

Surprisingly, the Indian regulators, I would say, are strict. You can see the example of NBFC P2P licences regulation. It is a good rule-based model. In fact, the players themselves were pushing for some kind of regulation because financial markets need them. It’s not like e-commerce or running a taxi where the risks are not that high.

India’s Finzy Raises $ 1.3 Mln At Pre Series A Funding (Reuters), Rated: A

Finzy, India’s fastest growing peer to peer lending platform, has raised USD 1.3 million in first round of Pre Series A from investors in the industry. A second round of fundraising is expected to close with pre-identified set of investors within the next 60 days.

Latin American

Brazilian Loan Marketplace FinanZero raises USD 3.6 million in Series A Funding Round (PR Newwire), Rated: AAA

FinanZero is a leading marketplace for consumer loans in Brazil. The business is an independent broker for loans, negotiating the customer’s loan application with several banks and credit institutions, to find the loan with the best interest rate and terms for the consumer. FinanZero handles the lending process from start to finish.

The Series A round was led by Swedish publicly listed investment company, Vostok Emerging Finance, with participation by other Swedish investors, including Webrock Ventures and Zentro Founders.

Africa

Fintech is central to Nigeria’s future success (Financial Times), Rated: A

Central to this opportunity is an acceleration in the development of a modern banking and financial services sector. We are already seeing huge breakthroughs in digital banking and the adoption of fintech-based services by Nigerian consumers — be they retail or business customers. But this expansion must be encouraged by policies that will see greater inclusion of women and rural communities into mainstream banking activity.

Asia

Meet the most disruptive fintech startup in South Korea (Forbes), Rated: AAA

Viva Republica is the most disruptive fintech startup in South Korea. Since the 2015 launch of its simple peer-to-peer payments app Toss, banks are finally revamping their user experiences and customers have easier access to financial products. South Korea’s mobile payments have more than quadrupled in that time to $4.6 billion, according to Bank of Korea data.

The startup, funded at $76 million, hasn’t stopped there. After PayPal joined a $48 million investment in Toss in March, Toss has grown from a simple money-transfer app to a diverse consumer-finance platform generating Viva Republica’s $20 million in expected revenue in 2017. Toss thus joins Asia’s ranks of fast-growing mobile P2P payment services, reaching a $12 billion transaction volume in 2017.

Authors:

George Popescu
Allen Taylor

Tuesday April 3 2018, Daily News Digest

FT Partners

News Comments Today’s main news: SoFi issues $2.6B in ABS notes in Q1 2018. GreenSky files for IPO. China’s P2P lenders brace for more regulations. FinanZero raises $3.6M. Today’s main analysis: FT Partners’ CEO alternative lending market analysis. Today’s thought-provoking articles: Cities with highest share of cash-out refinance borrowers. Retailers grow financial services capabilities. India’s unsecured instant loan interest rates […]

FT Partners

News Comments

United States

United Kingdom

China

International

Australia

India

Other

News Summary

United States

SoFi Issues a Record $ 2.6 Billion in ABS Notes in the First Quarter of 2018 (PR Newswire), Rated: AAA

SoFi announced today that it completed $2.6 billion in loan securitizations in the first quarter of 2018, a 35% increase over the prior-year period and its largest-ever quarterly ABS issuance volume.

In Q1 2018, SoFi completed a total of three securitization transactions: two student loan ABS offerings ($960 million SOFI 2018-A Notes and $869 million SOFI 2018-B Notes) and one consumer loan ABS offering ($774 million SCLP 2018-1 Notes). The SoFi 2018-B Notes marked the first time SoFi included medical residency loans as a part of the collateral.

LendingTree Ranks Cities with the Highest Share of Cash-Out Refinance Borrowers (PR Newswire), Rated: AAA

LendingTree today released the findings of its study on where cash-out refinancing was most prevalent in the past year.

Cities with the highest share of cash-out borrowers

Source Lending Tree

Cities with the highest cash-out loan amounts

Source Lending Tree

Fintech Firm GreenSky Files Confidentially for IPO (Wall Street Journal), Rated: AAA

Financial-technology firm GreenSky LLC has confidentially filed paperwork with the Securities and Exchange Commission for a sizable initial public offering that could come as soon as this summer, according to people familiar with the matter.

The Atlanta company, which operates a lending platform that enables retailers, health-care providers and home contractors to offer loans to their customers, could seek to raise $1 billion at a valuation of roughly $5 billion, some of the people said.

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

This month’s report features an exclusive interview with Manu Smadja, co-founder and CEO of MPOWER Financing, an alternative lender that enables high-potential international students to finance their education. In our conversation with Manu, he discusses the inception of MPOWER, along with the unique opportunities and challenges of lending to this market.

M&A

Source: FT Partners

Read the full report here.

Max Levchin To Participate In A Keynote Fireside Chat At LendIt Fintech USA 2018 (PR Newswire), Rated: A

LendIt Fintech announced today that Max Levchin, Co-founder and Chief Executive Officer of Affirm, a financial services technology company that is reimagining consumer credit and banking, will be featured in a keynote fireside chat on April 9. The world’s most prominent and emerging fintech CEOs from Wall Street to Main Street will gather April 9-11 at Moscone Center in San Francisco to focus on the hot-button topics and issues exploring the future of finance.

In a session titled The future of credit: Reimagining the financing ecosystem, Levchin’s keynote fireside chat will delve into how the retail industry has evolved and how retail experiences are continuing to grow beyond the capabilities of traditional credit and lending. Levchin will share his thoughts on why the industry needs to reimagine the financing ecosystem from the ground up in order to unlock the future of credit. Levchin will also discuss why Affirm is committed to reinventing credit, starting with the belief that it should help improve consumers’ financial lives in addition to financing their purchases.

Kabbage: Small Businesses Turning To Mobile Lending In Big Numbers (Payment Week), Rated: A

Sometimes, businesses need ready cash to get from “the latest bills” to “the next paid invoice,” and that’s where lenders are coming in. A new report from Kabbage says that small businesses are turning to mobile devices to get in on that lender funding in increasing numbers.

Kabbage surveyed almost 150,000 small businesses, and found that loans accessed by mobile device had increased better than three-fold, over 360 percent, of what they were back in April 2014. While the total numbers went through the roof, the value of the loans accessed went through the roof and over the treetops, having increased over 1,220 percent.

Why Marcus Has Changed Everything (Orchard Platform), Rated: A

Fast forward almost 18 months and Marcus is the fastest growing online lender in history. They have lent $2.5 billion in this time to 350,000 customers and have 700 employees spread across three offices. Not only that, but they have grand ambitions in the space. Goldman Sachs CEO Lloyd Blankfein has repeatedly talked about the importance of Marcus to the future of Goldman Sachs.

According to a recent article in the Wall Street Journal the consumer banking business of Goldman Sachs is expected to generate $1 billion in revenue for the firm by 2020. That is significantly more revenue than LendingClub is expected to generate in 2018 as an 11-year- old business.

We have heard that Barclays and PNC Financial will be launching their own lending platforms in 2018 and there are rumors that many other large banks are going to do the same.

Most people probably don’t know Goldman Sachs offers a savings account with excellent perks — and anyone can use it with just $ 1 (Business Insider), Rated: A

Marcus— named after the Goldman Sachs founder Marcus Goldman — allows any adult (except in Maryland, where Marcus is not yet available) to create a savings account.

The big selling point for Marcus is the 1.5% annual percentage yield offered. Whereas interest rates for many banks have plummeted to as low as 0.01%, Goldman Sachs’ savings accounts create significant interest.

There is also no minimum amount needed to open an account with Marcus, and a deposit of even $1 allows users to earn the 1.5% APY.

Ohio Insurtech Root Insurance Completes Series C Round With $ 51 Million in Funding (Crowdfund Insider), Rated:A

Root Insurance, an Ohio-based car insurtech company, announced last week it secured $51 million in funding through its Series C round, which was led by Redpoint Ventures, with Scale Venture Partners and existing partners Ribbit Capital and Silicon Valley Bank Capital Partners. 

Root will use the new funding to expand into additional states and continue to invest in technology that significantly improves the customer experience.

That Fast Online Loan Could Have Super-high Interest Rates and Hidden Fees That Bankrupt Your Business (Entrepreneur), Rated: A

recent lawsuit against fintech small-business lender Kabbage Inc., charging that it partnered with a bank in order to offer interest rates that exceeded the legal limit, highlights the need for more regulatory oversight of the growing number of online lenders signing deals with small businesses.

Online lenders are getting more scrutiny.

The recent Massachusetts federal case brought by a small business against Kabbage (and its partner Celtic Bank) highlights why non-bank fintech lenders should be regulated. The suit alleges that Kabbage used its relationship with Celtic — which “rented” its balance sheet to Kabbage — as a basis to charge interest rates that violated usury laws.

How Credit Karma is using data to become a central finance hub (Tearsheet), Rated: A

It’s not a bank, but it uses customer data to help banks find customers.

Currently valued at $4 billion, Credit Karma has 80 million customers — half of whom are millennials. The company joins a growing number of financial startups like Clarity Money, SoFi, Chime and Varo Money that are aiming to become one-stop shops for customers’ finances. The field is growing increasingly competitive. Meanwhile, banks are bundling personal finance advice into their mobile apps. But Credit Karma has two advantages its competitors often struggle with — scale and data — and it’s using a chatbot to lock in the relationship with the customer.

A Chase Sapphire experiment is getting revived and expanded after the trial run blew away expectations with millennials last year (Business Insider), Rated: B

Last year, ahead of the spring homebuying season — the busiest of the year — JPMorgan Chase engineered an experiment to gain an edge in the mortgage-lending competition.

So the bank targeted its Sapphire customers, offering another 100,000 in rewards points if they closed a mortgage with the bank — a bonus worth as much as $1,500.

HNW Clients Warming Up To Digital Advice (Financial Adviser), Rated: A

In its report, “The Cerulli Edge—U.S. Retail Investor Edition, 1Q 2018 Issue,” the researcher found that more than one-quarter of investors over 70 who have $2 million to $5 million in investable assets said they would consider online-only engagement. Beyond that, high-net-worth investors in general seemingly are more receptive to digital advice platforms.

In 2015, Cerulli found that 38% of investors with investable assets of $2 million to $5 million said they were willing to engage with digital providers. Last year, that number jumped to 46%. And among investors with $5 million-plus in investable assets, those numbers went from 30% in 2015 to 38% last year.

Why borrower experience will be the principal driver of bank revenue in the lending market (Lendit), Rated: A

Tech giants such as Google and Amazon have rewritten the rulebook for consumers when it comes to what they can reasonably expect from their service providers. Consequently, bank offerings are being judged to the same standard as the most innovative digitally native products in the world.

The benefits of improved customer experience

More generally, banks must focus on improving user experience to remain competitive as digitally native fintech products flood the marketplace. Focusing especially, the motivations for improving customer experience can be described as:

  •  Differentiation Financial services can no longer lean on long-standing relationships and brand positioning to generate new customer business.
  • Positive brand response in addition to research, some customers will also emphasize the emotive impression they receive from a product when making purchasing decisions.
  • Coping with an economic downturn During a recession or other global economic hardship businesses are placed under increased financial strain. Services viewed positively by their existing clients will stand a better chance of retaining their clients as well as growing their client base during the downturn.

Pindrop Introduces New Biometric Solution: Tongueprinting (Finovate), Rated: A

Banking Technology’s Anthony Peyton reports that the Atlanta-based anti-fraud and authentication specialist has unveiled Tongueprinting, a technology that analyses every person’s unique tongue as its newest biometric engine. Banking Technology is Finovate’s sister publication.

The idea is for Tongueprinting to stop fraudsters from taking over legitimate accounts by spoofing the call centre with automated bots, social engineering, and knowledge-based authentication questions.  

HomeUnion Launches Crowdfunding Platform for Individual Investors (Business Wire), Rated: A

HomeUnion, the leader in online residential real estate investing, has launched a crowdfunding platform that allows investors to purchase stakes in funds of single-family rental (SFR) properties on its website. Starting with a minimum investment of $10,000, retail investors now have the ability to acquire interest in the HomeUnion Fix-and-Flip Fund. The fund enables consumers to invest in SFR assets acquired for fix-and-flip purposes in seven HomeUnion markets: Atlanta, Austin, Charlotte, Chicago, Dallas, Raleigh and Tampa.

Upstart tests buyer appetite with riskier loans, more sub notes (Global Capital), Rated: A

Online lender Upstart is the latest marketplace loan company to broaden the risk profile of its ABS, announcing a deal this week offering more subordinate bonds and backed by a higher proportion of longer term loans.

The California-based lender, founded by ex-Google employees, uses an underwriting model which incorporates data points beyond borrowers’ FICO scores, utilizing other factors such as schools attended, areas of study, academic performance and work history.

Is low pay hurting banks in the battle for tech talent? (American Banker), Rated: A

Conversations about pay in the banking industry typically focus on whether executives at the top are paid too much or workers at the bottom are paid too little.

But new data available as a result of the Dodd-Frank Act is drawing rare attention to the compensation of employees in the middle. In what will become an annual exercise, publicly traded U.S. companies are now required to disclose annually the median pay of their employees.

Information and Data Integrity: A Two-Way Street (Lendit), Rated: A

For many businesses, data is an important aspect of decision management. When you are choosing with whom to do business, you rely on the validity of data to guide you. If it proves faulty, you may be steered into accepting bad customers or rejecting good ones, which can seriously affect your bottom line. For consumers, inaccurate data can be equally harmful—leading to the appearance of having bad credit, denials of services or products or worse, flagged as potentially fraudulent.

Spanning both digital and real worlds, and encompassing data about identity, financial characteristics, behaviors and more, an integrated view is the foundation of enhanced insights that can ultimately improve financial outcomes. TransUnion understands the importance of current, accurate data and gives its customers access to information—including both highly-regulated and publicly available forms of alternative data—that creates powerful, comprehensive views of consumers.

Here’s Why Millennials Are Choosing Personal Loans (Lendit), Rated: A

When it comes to millennial spending habits, it looks as though they’re rounding a corner to a new kind of credit. With the vast treasure trove of accumulated data available, credit bureaus like TransUnion are seeing spikes in personal loans compared to Generation X’s spending habits in the early 2000s. It’s a tremendous opportunity for marketers to capture a demographic that expects more from their lender.

The Overarching Trends

The newly minted adults of Generation Z are at the very beginning of their financial journey, but millennials are at the age where they’re expected to make major purchases. As they struggle with the economy and student debt, they’re making different financial choices along the way.

Adopting New Technology

Lenders are turning to financial technology (fintech) to help peddle their products, which millennials are all too happy to use. Ironically, applying for a personal loan without the face-to-face connection can be far more attractive than the traditional application process.

A Decline in Credit Card Usage

Right or wrong, credit cards have long been linked to perpetual debt in many people’s minds. In 2009, the CARD Act was introduced to place stricter limits on the marketing of credit cards at college campuses. Debit cards have become more of the rule as opposed to the exception, leaping from 8 billion transactions in 2000 to 60 billion in 2015.

Small Business Confidence Is Up, What Does that Mean? (Lendit), Rated: A

The year 2017 saw small business owners across the United States grow more optimistic about the future than they’ve ever been—at least since the creation of the Optimism Index by the NFIB in the 70s.  “2017 was the most remarkable year in the 45-year history of the NFIB Optimism Index,” said NFIB President and CEO Juanita Duggan.

The Tax Bill Could be a Boon for Small Businesses

Sole proprietorships, partnerships, and S corporations are all examples of what are called pass-through businesses; and make up roughly 95 percent of all U.S. businesses. They also happen to be many of our customers at OnDeck, and other online small business lenders. One of the main components of the new tax bill is a 20 percent tax deduction for those businesses, where business owners can “shield” 20 percent of their business income from flowing through to their personal income tax returns.

Cincinnati-based financial tech startup raises $ 1.2 million (Cincinnati Business Courier), Rated: B

A Cincinnati-based financial tech startup that aims to help users secure low-dollar loans without having to resort to a payday lender raised $1.2 million in venture capital.

Mayor proposes employee loans to offset predatory lenders (Santa Fe New Mexican), Rated: B

A few months after a new annual 175 percent cap on small-loan interest rates in New Mexico went into effect, Mayor Alan Webber is proposing a short-term loan program to help municipal workers avoid payday lending businesses viewed as predatory by consumer advocates.

BlockFi Gives Hodlers Another Option to Borrow Against Crypto Assets (BitcoinMagazine), Rated: B

Options for borrowing and lending with cryptocurrencies are on the rise. One of the latest start-ups to join the likes of SALT and Unchained Capital is BlockFi, a New York City–based startup that issues loans backed by bitcoin and ether to individuals, companies and institutions in 35 U.S. states.

BlockFi takes cryptocurrency as collateral, offering interest rates on loans of around 12 percent. This is generally lower than unsecured loans and higher than loans secured with traditional assets such as securities or real estate.

eBus to offer visitors financial advice, credit reports (The Repository), Rated: B

The eBus is a mobile classroom which is equipped with 14 personal computers and satellite technology staffed by Fifth Third bankers and representatives from nonprofit community organizations. On the bus, visitors can request a credit report and review it with a professional; receive a personalized evaluation of finances; receive internet banking and bill pay demonstrations; speak with nonprofits about housing, money management and business advice; receive consultation on foreclosure prevention; and conduct online job searches.

United Kingdom

Scots ‘side businesses’ generate £1.7bn a year (The Scotsman), Rated: A

More than 500,000 people living in Scotland have started a side business, generating a collective £1.7 billion a year out of more than £33bn UK-wide, according to new research.

Online lender Sunny said many of those north of the Border turning to side businesses are doing so to help with the cost of bills, savings and debts, and bring in an average of £272 a month on top of their main income.

That represents a 20 per cent increase from when they first started their business.

China

China’s P2P lenders brace for renewed regulatory crackdown (Financial Times), Rated: AAA

China will soon be rolling out new licensing requirements for p2p lenders; The system will kick off in April with approvals slated to come at the end of this month, but many lenders aren’t aware of the filing process; in 2016 and 2017 many p2p lenders shut down and according to data there are around 2,000 remaining; it is expected that many of the 2,000 will not pass the new requirements; the new rules won’t allow platforms to guarantee loan payments and also limit loans to individuals and businesses; it will also require that platforms use custodian banks.

China Rapid Finance Executives Selected to Speak at LendIt Fintech USA 2018 (PR Newswire), Rated: A

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF) announced today that the Company will participate as a sponsor and exhibitor at the upcoming LendIt Fintech USA 2018, to be held between Apr 9th and 11th in San Francisco, California.

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On March 28th, cross-border payment company iPayLinks announced that it had completed, at the beginning of this year, a hundreds of million-yuan B1 round of financing led by Tencent and followed by Legend Capital.

NIFA Issues a Self-Discipline Convention for Debt-Collection Practitioners

The five-chapter convention is mainly applying to regulate the behavior of overdue debt collection within the Internet Finance industry by establishing several basic principles (e.g. observing laws and regulations, prudential regulations, protecting privacy, and strict self-discipline). In other words, the document outlines a framework of debt-collection regulation in terms of discredited punishment, business management, personnel management, information management, outsourcing management, and complaints.

China’s internet lenders fall foul of data privacy rules (Financial Times), Rated: A

More than half of Chinese internet finance lenders are failing to comply with data privacy regulations, research has found, raising risks for investors as China steps up the implementation of laws to protect consumer data.

The breaches include collecting phone numbers from users’ contact lists, which can be used to mount harassment campaigns and shame users into repaying debts.

The survey of 200 finance apps by Renmin University and Nandu Personal Data Protection Research Centre, a Beijing think-tank, ranked 111 apps as having “low” compliance.

It found that almost half — 95 apps — wanted to read users’ text messages, while 97 of them wanted access to users’ contact lists, despite such access not being necessary for the app’s functioning.

International

How retailers are growing their financial services capabilities (Tearsheet), Rated: AAA

Amazon isn’t the only retailer encroaching on the financial services space. It may be the scariest — just the rumor of it entering a company’s space will send its stock price down — but ultimately, Amazon only cares about getting more buyers and more sellers to join its platform.

Overstock’s Raj Karkara, vp of loyalty and financial services, echoed that sentiment earlier this year, saying that offering financial services or connecting customers with financial services providers is a natural extension of its retail function of buying and selling consumer goods.

Rakuten
Rakuten is Japan’s largest e-commerce site and has slowly been growing outside of the country. It has a footprint in media, video-on-demand, mobile messaging, e-books, travel, fashion, marketing and even sports. It also operates the largest online bank in the country.

Overstock
For the past few months, e-commerce company Overstock.com has been quietly building out FinanceHub, a sort of marketplace for financial services that includes existing Overstock credit cards and insurance products; loans by LendingTree, Prosper and Sofi; a robo-adviser for automated investing; and, most recently, a discounted trading platform.

Sainsbury (and Tesco)
Amazon may not be interested in becoming a bank but that doesn’t mean it can’t succeed in stealing customer attention from them. The U.K.’s largest grocers have all opened banks attached to their brands —  Sainsbury’s and Tesco.

ETHLend (LEND) Token – Will It Go Down After Kyber Network Partnership? (Hot Stocked), Rated: A

ETHLend has recently partnered up with Kyber Network. The ETHLend (LEND) Token has reached a market capitalization of 45.69 Million US dollars in the last 24 hours. The token traded 9.50%higher against the U.S. dollar during the last 24 hours ending at 10:30 AM EDTon April 2nd. That rise might be as a result of the partnership. ETHLend aims to become another decentralized and secure financial marketplace, but targeting peer to peer lending agreements via Blockchain and Smart Contracts.

Source CoinMarketCap

 

Australia

SMALL BUSINESS LOANS IN AUSTRALIA: SHOULD YOU SEEK FINANCE FROM A BANK OR AN ONLINE LENDER? (Dynamic Business), Rated: A

Considering the small business sector employs nearly half the national workforce and contributes around $380 billion to Australia’s GDP [1], it’s easy to see why it’s frequently referred to as the ‘engine room’ of the economy.

Like all engine rooms, the sector requires sufficient fuel – in this case, working and growth capital – to not only keep running but also accelerate. However, poor access to capital remains a significant barrier to small businesses, accounting for a majority of failures in the sector.

Part of the reason is that banks are reluctant to lend to small businesses in circumstances where the borrower doesn’t have bricks-and-mortar security – especially if a short-term loan is sought.

APRA rejected CBA home loan data as inaccurate and incomplete (Financial Review), Rated: B

Commonwealth Bank was being pressured by the prudential regulator to appoint external consultants and fix its flawed home lending data almost 2½ years before the Hayne royal commission began exposing the big four for sloppy administrative errors and irresponsible lending.

The Australian Prudential Regulation Authority’s frustration with the failure of Australia’s biggest home lender to accurately identify what proportion of its loans were taken out by property investors and its level of exposure to big borrowers has been revealed in evidence tendered to the banking royal commission and published in a massive dump of more than 100 documents late last week.

India

Interest rates on unsecured instant loans are high (LiveMint), Rated: AAA

Financial institutions and fintech companies have launched multiple small credit products in India in the past 1-3 years. It is now possible to get loans even on your mobile phone. But how do you pay for this convenience?

P2P lending platform

Peer-to-peer lending companies such as Faircent, i2ifunding and Lendbox connect lenders and borrowers on their platforms. Usually, the lender is an individual and not a financial institution. The interest rates are between 15% and 36% per annum and the loan amount can range from Rs50,000 to Rs5 lakh. The interest rate is decided based on the credit profile of the customer. Usually, the P2P lending companies take into account your Cibil credit score. The loan tenure is 3 months to 24 months.

Fintech eco-system is moving to blockchain and AI: Rajat Gandhi, Faircent (Economic Times), Rated: A

A lot of players have come into the fintech space. There are wallet players, then there are PPI, P2B, crowdsourcing and other payment players as well. So, regulation is one of the key challenges the private players are going through. What is your take on it?

Surprisingly, the Indian regulators, I would say, are strict. You can see the example of NBFC P2P licences regulation. It is a good rule-based model. In fact, the players themselves were pushing for some kind of regulation because financial markets need them. It’s not like e-commerce or running a taxi where the risks are not that high.

India’s Finzy Raises $ 1.3 Mln At Pre Series A Funding (Reuters), Rated: A

Finzy, India’s fastest growing peer to peer lending platform, has raised USD 1.3 million in first round of Pre Series A from investors in the industry. A second round of fundraising is expected to close with pre-identified set of investors within the next 60 days.

Latin American

Brazilian Loan Marketplace FinanZero raises USD 3.6 million in Series A Funding Round (PR Newwire), Rated: AAA

FinanZero is a leading marketplace for consumer loans in Brazil. The business is an independent broker for loans, negotiating the customer’s loan application with several banks and credit institutions, to find the loan with the best interest rate and terms for the consumer. FinanZero handles the lending process from start to finish.

The Series A round was led by Swedish publicly listed investment company, Vostok Emerging Finance, with participation by other Swedish investors, including Webrock Ventures and Zentro Founders.

Africa

Fintech is central to Nigeria’s future success (Financial Times), Rated: A

Central to this opportunity is an acceleration in the development of a modern banking and financial services sector. We are already seeing huge breakthroughs in digital banking and the adoption of fintech-based services by Nigerian consumers — be they retail or business customers. But this expansion must be encouraged by policies that will see greater inclusion of women and rural communities into mainstream banking activity.

Asia

Meet the most disruptive fintech startup in South Korea (Forbes), Rated: AAA

Viva Republica is the most disruptive fintech startup in South Korea. Since the 2015 launch of its simple peer-to-peer payments app Toss, banks are finally revamping their user experiences and customers have easier access to financial products. South Korea’s mobile payments have more than quadrupled in that time to $4.6 billion, according to Bank of Korea data.

The startup, funded at $76 million, hasn’t stopped there. After PayPal joined a $48 million investment in Toss in March, Toss has grown from a simple money-transfer app to a diverse consumer-finance platform generating Viva Republica’s $20 million in expected revenue in 2017. Toss thus joins Asia’s ranks of fast-growing mobile P2P payment services, reaching a $12 billion transaction volume in 2017.

Authors:

George Popescu
Allen Taylor

Thursday May 4 2017, Daily News Digest

auto loan originations

News Comments Today’s main news: Banks pull back on car loans as used-auto prices plummet. Trump’s expected OCC pick, a banker, signals paradigm shift. Elevate Credit rated a buy. RateSetter rejigs relationships with former wholesale lending partners. China Rapid Ffinance raises $60M in IPO. Today’s main analysis: Goldman Sachs embraces banking’s bland side. Global money transfer. Today’s thought-provoking articles: German […]

auto loan originations

News Comments

United States

United Kingdom

European Union

International

Australia

China

India

Asia

News Summary

United States

Banks Pull Back on Car Loans as Used-Auto Prices Plummet (WSJ), Rated: AAA

Wells Fargo & Co., one of the largest U.S. auto lenders, last month reported a 29% fall in its auto loan originations for the first quarter from a year earlier. The decline, the biggest for the San Francisco-based bank in at least five years, was part of a common refrain in quarterly announcements from lenders including J.P. Morgan Chase & Co. , Ally Financial Inc. and Santander Consumer USA Holdings Inc.

Bankers’ caution is increasingly showing up in car sales, which Tuesday came in worse than expected for April. The declines are mostly occurring in lending to riskier borrowers, in particular those with low credit scores, where lending had ramped up for years.

Some banks, including regionals Fifth Third Bancorp and  Citizens Financial Group Inc.,  are beginning to retreat from higher-quality “prime” auto loans as new risks emerge.

Some anticipated the market would cool off after record new car sales in 2015 and 2016. But banks are also posting higher losses on defaulted auto loans, hit by a mix of more borrowers falling behind on payments and the declining value of used cars.

When lenders repossess cars, they resell the vehicles and use the proceeds from the sale to recover as much of the unpaid balance as possible. Declining values mean that lenders are recouping a smaller share of those balances. Lenders who are repossessing cars tied to prime auto loans that were securitized in 2015 are recovering about 51% of the unpaid loan balances on average, down from 56% for 2014 loans and 65% for 2011 loans, according to S&P Global Ratings.

Car loans have been among the fastest-growing consumer lending categories since the last recession.

 

Mimecast Limited versus Yirendai Ltd. Head to Head Compare (CMLVIZ), Rated: AAA

We will compare the two companies on revenue growth, earnings, revenue per employee, operating margins, free cash flow and valuation.

  • Yirendai Ltd. has larger revenue in the last year than Mimecast Limited.
  • YRD is showing a profit while MIME has negative earnings over the last year.
  • YRD generates substantially larger revenue per employee ($344,000) than MIME ($202,000).

  • Both companies are growing revenue. Yirendai Ltd. is growing revenue massively faster than Mimecast Limited.
  • For every $1 in revenue, the stock market prices in $6.42 in market cap for MIME and $3.66 in market cap for YRD.

Goldman Sachs Embraces Banking’s Bland Side: Lending Money (WSJ), Rated: AAA

The firm has been opening its checkbook for the past several years to finance corporate takeovers, lend against mansions and art, and make personal loans for things such as kitchen remodels and fixing broken windshields.

It is exploring new credit businesses such as trade finance, equipment leasing and extending credit that consumers use for online purchases, according to people familiar with the discussions.

Loans outstanding across Goldman have doubled to $95 billion since 2011, filings show. Real-estate loans are up 10-fold. Business lending has tripled, while loans in its private-wealth division, secured by everything from stock portfolios to rare artwork, have quadrupled. Goldman doesn’t report revenues tied to lending, which remains a small part of its overall business.

 

Elevate Credit Inc (ELVT) Now Covered by William Blair (The Cerbat Gem), Rated: AAA

They set a “buy” rating and a $12.00 price objective for the company. Compass Point reissued a “neutral” rating and set a $9.00 price objective on shares of Elevate Credit in a report on Tuesday, April 18th. One analyst has rated the stock with a hold rating and four have assigned a buy rating to the stock. The company has an average rating of “Buy” and a consensus price target of $11.00.

Shares of Elevate Credit (NASDAQ:ELVT) opened at 7.64 on Monday. Elevate Credit has a one year low of $7.00 and a one year high of $8.86. The firm’s 50 day moving average is $8.05 and its 200-day moving average is $8.05. The firm’s market capitalization is $99.33 million.

State Regulators Mount Counter-Offensive Seeking to Stop OCC’s Fintech Charter (Lexology), Rated: A

Clearly, CSBS is mounting a legal counter-offensive to the OCC’s attempt to license entities historically regulated by the states. While state and federal regulators currently are arguing as to who should control the regulatory sandbox, the true focus of regulatory concern should be on the development of innovative financial services, consistent with safe and sound operations, with viable and effective consumer protections. While, historically, payments companies and lenders have been regulated by the states, the OCC’s SPNB Charter has sparked a dialogue as to whether the current regulatory system for fintech operations is viable. Innovation of financial services may also require innovation of financial services regulation. Rather than trying to pigeon-hole financial services into traditional regulatory models, perhaps it is time for regulators, at both the federal and state level, to act in concert to develop a system of licensing, regulation, and enforcement for financial products and services that is efficient, not redundant, and minimizes the regulatory burden on financial institutions while it provides for the continued protection of consumers. Setting aside the merits of the pending suit, the right policy prescription will likely involve the federal and state governments working together to minimize the regulatory burden while appropriately protecting the safety and soundness of FinTechs and provide necessary consumer protection.

Trump’s Expected OCC Pick Signals Shift at Regulator That Could Ripple Through Financial Markets (WSJ), Rated: A

President Donald Trump’s expected move to replace the Comptroller of the Currency signals a change in direction at the bank regulator that could ripple through the financial markets, from private-equity buyouts to financial technology—and even municipal securities.

Comptroller Thomas Curry, whom people familiar with the matter say could be replaced as soon as this week, is a career regulator appointed by President Barack Obama. Mr. Curry used his office to tamp down on what he viewed as overly risky lending practices in the banking industry.

His expected replacement—Joseph Otting, a former chief executive of OneWest Bank—would be the first former banker to hold the comptroller’s job since the 1990s.

Wall Street Pushes Back on Mnuchin’s Idea of Ultralong Debt (WSJ), Rated: A

A committee of Wall Street advisers is pouring cold water on a proposal by U.S. Treasury Secretary Steven Mnuchin to issue superlong 50-year and 100-year U.S. government bonds, arguing that the big pension funds and insurers expected to buy the securities won’t have much interest.

The committee meets quarterly, in advance of a regular release by the Treasury on its plans for financing the U.S. debt. Currently, the U.S. Treasury issues no debt longer than 30 years. Mr. Mnuchin has argued that ultralong bonds could be a useful tool for locking in today’s low borrowing costs for a very long time. Last month, the Treasury requested the advisory committee analyze the viability of bonds longer than 30 years.

The 30-year bond strengthened Wednesday, after the advisory committee cast doubt on the idea 50- and 100-year bonds. The yield on the 30-year Treasury dropped to 2.963% from 2.982% on Tuesday, according to Tradeweb. Yields fall as bond prices rise.

A key question for the Treasury is what types of investors would buy ultralong bonds, especially if the members of its advisory committee aren’t interested. Relatively few individual investors have 100-year or even 50-year investing horizons.

Real Estate Crowdfunding to Take Center Stage at Crowd Invest Summit (Yahoo! Finance), Rated: A

Crowd Invest Summit, the country’s largest crowdfunding investment conference, taking place on September 6 th and 7th at the Los Angeles Convention Center, has today announced that it will be expanding its focus on Real Estate crowdfunding.

Since the signing of the JOBS Act in 2012, Real Estate Investing has been the fastest growing segment of the new Crowdfunding Industry. According to Fundingtree.com, over $3 Billion Dollars has been raised so far.

Crowd Invest Summit is the largest investment focused crowdfunding event in the country. It was founded by pioneers in the equity crowdfunding sector Josef Holm and Alon Goren. The conference was developed with the vision that every American – whether accredited or not – can now become equity investors.

Nav raises $ 13 million to help small businesses with credit scores (TechCrunch), Rated: A

Goldman Sachs is leading a $13 million investment in Nav, a startup that helps small businesses with financial advice and credit scores. Billionaire Steven Cohen’s Point72 Ventures is also investing, along with Clocktower Ventures and the CreditEase Fintech Investment Fund.

This follows $25 million that was invested in the company last year, and is considered part of the same Series B round, bringing the total to $38 million.

Characterizing Nav as a Credit Karma for small businesses, King believes his startup will “materially decrease the death rate of small businesses in the U.S.” They currently have over 200,000 customers, most of whom don’t pay anything for their credit score, but can opt to pay about $20 per month for added financial advice.

Data Suggests That Venmo Is Winning Mobile Payments (Seeking Alpha), Rated: A

  • 68% of mobile payments users are using Venmo most often.
  • Venmo processed $6.8B in mobile payments in Q1.
  • Rapid smartphone adoption, alongside a large unbanked population, makes the theme of mobile payments an attractive investment.

In the days leading up to the quarter, a new survey of 2,170 Millennials found that Venmo is leading the category. The researchers asked the following question: “Which of the following mobile payment apps do you use most often?”

Researchers found that 44% of respondents answered “Venmo”, 1% of respondents answered “Square Cash”, 14% of respondents answered “My bank’s mobile payment app”,and 4% of respondents answered “Other”. However surprisingly, 35% of respondents answered “I don’t use a mobile payment app”.

Colorado versus Fintech (OLPI), Rated: A

On February 15, 2017,  the Administrator of the Uniform Consumer Credit Code for the State of Colorado (“Colorado”) sued Avant and Best Egg (in separate actions), claiming in both actions that they violated Colorado’s usury rate and entered into loan agreements containing a governing law provision other than Colorado.

Shortly after, WebBank and Cross River separately sued Colorado seeking Declaratory Judgement and Injunctive Relief.

On April 25, 2017, Colorado filed a Motion to Dismiss both Complaints for Declaratory Judgment and Injunctive Relief.

Colorado initially argues that WebBank’s action for declaratory judgement should be dismissed based on the well-pleaded complaint rule. There seems to be two issues with this position: (1) WebBank was purposely left out of Colorado’s initial complaint (although this theory might apply if Avant brought the federal action for declaratory judgment), and (2) diversity jurisdiction does apply as to Avant and WebBank vis-a-vis Colorado.

Second, Colorado argues that WebBank’s action should be dismissed because WebBank’s injury is too attenuated. Colorado does not directly address WebBank’s contention that the suit challenges WebBank’s overall business model.

Finally, Colorado argues that “interest exportation does not preempt the application of state usury laws to non-banks as a matter of law.”   Colorado seems to acknowledge WebBank’s right to preempt Colorado’s usury rate based on DIDA (the Depository Institutions Deregulation and Monetary Control Act of 1980 – extending the National Bank Act’s preemption to FDIC-insured state banks).  Colorado argues that WebBank is trying to assign its preemption to Avant – that Avant is the lender.

Colorado also argues that the valid when made doctrine is not applicable because “there is no ‘subsequent usurious transaction’ between WebBank and Avant that is alleged to invalidate a consumer’s loan obligation.  Instead, Avant merely purchased the subject consumer loans from WebBank.”  This is a difficult argument to follow.  Colorado sued Avant claiming that Avant loans are usurious and Avant, and not WebBank, is the true lender.  Colorado points out that Avant buys the loans from WeBank within two business days of the loans being made.  Relying on Midland in the Avant action, Colorado states that Avant cannot “enforce a bank’s federal interest rate exportation rights when they purchase loans from banks (or purchase loan receivables) because banks cannot validly assign such rights to non-banks.”   It seems to imply that Colorado is not saying the loans are invalid (due to Avant having a Supervised Lender’s License), but rather the loans just need to be limited to the Colorado usury rate –yet, as noted, the argument is difficult to follow.

What fintech is going to do to banking (Financial Times), Rated: A

  • Fintech is ultimately about taking away frictions.
  • I guessed that there was a 25 or 30 per cent chance that 10 years from now, there was about a 25 per cent chance that there would be a fintech company with the kind of $250bn market cap that some big American banks have. I do not expect that in the foreseeable future fintech will have the kind of existential impact on banks that Netflix has had on Blockbuster. But I do think in some areas fintech companies are likely to have the kind of effect Skype has had on the big telephone companies — forcing drastic reductions in pricing and profit margins on some key products.
  • I was quite serene about the impact of fintech on financial stability.
  • By providing for faster settlements, more transparency, and diversification, fintech is likely to have as many stabilising as destabilising effects.
  • If the large banks of today are not as large five or 10 years from now, I think it is more likely to be because of bad lending, heavy regulation or market pressures to break up because the whole is valued less than the sum of the parts than because of disruption from fintech. I say this because much of what fintech does depends on the banking system and because I doubt that over this horizon banks can be completely disrupted.

FinTech Funding in New York Declines (Cryptocoins News), Rated: A

In the report from data provider CB Insights, The Global FinTech Report: Q1 ’17, it found that during the first three months of the year, fintech funding to venture capital-backed New York companies dropped by 35 percent on a quarterly basis. However, while financial technology deals in the state rose by 26 percent from Q4 ’16, it registered a 33 percent drop below the same quarter last year.

During the first three months there were three New York City companies – Namely, Trumid, and Payfone – who were among the top ten U.S. financial technology backed deals.

Namely raised $50 million in Series D funding from Altimeter Capital, Scale Venture Partners, Sequoia Capital, Four Rivers Group, Matrix Partners, and Greenspring Associates.

Trumid raised $27.6 million in Series D funding from Thiel Capital, and Payfone raised $23.5 million in Series E funding from BlueCross Blue Shield and Andrew Prozes.

First Associates Implements AI to Enhance Customer Satisfaction and Boost Portfolio Performance (PRWeb), Rated: A

First Associates has announced today that it has implemented A.I. enabled speech analytics as part of its third-party loan and lease servicing. The speech analytics platform facilitates higher quality customer interactions while ensuring compliance with financial industry regulations.

Using speech analytics, First Associates monitors, scores and provides agent feedback on 100% of voice interactions with consumers using data-driven benchmarking. Traditional loan servicing management techniques call for a 1% sample size of voice interactions using human quality assurance agents to assess quality and effectiveness. The company has already seen significant improvements across quality and performance metrics from the implementation.

Adams Business Credit Rebrands as Context Business Lending (PR Newswire), Rated: A

Adams Business Credit, a national asset-based lender, will rebrand as Context Business Lending, bringing the firm in unison with the family of businesses and affiliates under Context Capital Partners, an alternative investment firm. The newly named Context Business Lending will continue to focus on providing flexible working capital solutions for businesses that do not qualify for traditional bank financing.

Context Business Lending typically provides loans of up to $15 million for lower middle-market businesses that may be experiencing some type of challenge, which may include: rapid growth; seasonal fluctuations; supply chain and vendor pressure; operating losses/negative net worth; turnaround and restructuring; merger or acquisition and debtor-in-possession financing. The firm is sector agnostic and works with businesses in the manufacturing, distribution, wholesaling and service sectors.

‘Hybrid’ Approach To Robo Investing Models a Winner (Insurance News Net), Rated: A

Investors who rely on “robo-only” investment models are making a big mistake, financial advisor tells InsuranceNews.Net.

McElwee provides three specific reasons why that’s the case:

  • Robo advice assumes that the past is destined to repeat itself.
  • People make bad financial decisions when they are under financial stress.
  • Questions, questions, questions. Robo advisors build financial profiles of clients based on a set of questions designed to reveal how a client thinks about risk, return, and financial planning.

MoneyLion Shortlisted for Top Industry Award (MoneyLion Email), Rated: B

 May 11th.

Usage of MoneyLion’s app nearly quadrupled in the second half of 2016, allowing them to track $12bn in transactions from more than one million users. To date, users have saved over $5 million in rate reductions through MoneyLion.

De Rito Partners Chooses RealtyShares for Acquisition of Shops at Fry’s Marketplace Shopping Center (Yahoo! Finance), Rated: B

RealtyShares, a leading online marketplace for real estate investing, has just announced an $800,000 commercial equity investment in Mesa, Arizona, funded through the company’s network of accredited investors. The deal is sponsored by De Rito Partners, one of Arizona’s largest retail investment and brokerage firms.

De Rito Partners acquired the property in 2016, and is seeking to capitalize on a temporary tenant turnover in a formerly fully-leased retail property. The firm intends to use the funds raised through RealtyShares to invest in tenant improvements and implement a leasing strategy to achieve market-level rents.

The property is shadow-anchored by a Fry’s Marketplace, one of the largest grocers by sales in the Phoenix metropolitan area according to Chain Stores Guide. The shopping center is comprised of more than 20,000 square feet of rentable retail space, and is currently leased to tenants including Starbucks, H&R Block and Subway. It is located at the intersection of two major thoroughfares, four miles from downtown Mesa.

De Rito Partners owns 20 properties, manages approximately 1.9 million square feet of retail space, represents 180 shopping centers in a leasing agency capacity, and is currently developing a Fry’s Marketplace-anchored shopping center and a strip center located in Chandler, AZ.

Download a complimentary copy – ALTERNATIVE CREDIT GUIDEBOOK (NN Investment Partners), Rated: B

United Kingdom

RateSetter rejigs relationships with former wholesale lending partners (AltFi), Rated: AAA

The acquired motor finance companies are Vehicle Stocking Limited and Vehicle Credit Limited. Both firms were acquired out of their parent company’s administration, and both have previously received wholesale funding from RateSetter. RateSetter will now lend directly to these companies’ customers.

The size of these two motor finance firms’ combined loanbooks is roughly £30m. These portfolios are said to be “performing well”, and we’re told they would have continued to be serviced had RateSetter not stepped in.

Another of RateSetter’s former wholesale lending partners is George Banco, a guarantor lender with a representative APR of 49.7 per cent. RateSetter has now taken an equity stake in the company, and will lend directly to its 10,000 customers.

Lendy: 2017 is the Year that P2P Lending Finally Matures (Crowdfund Insider), Rated: A

Lendy, a UK based peer to peer lending platform in the secured property sector, believes 2017 is the year for P2P lending to finally mature. Management says that P2P will shift from alternative finance to “main challenger to the traditional banks.”  But to accomplish this goal, P2P lending platforms must build upon best practices and operate more like mainstream lenders while providing rigorous due diligence and superlative service.

Lendy advocates on four key steps in providing a better service than traditional financial firms:

  • Initial due diligence – carry out an extensive ‘know your customer’ (“KYC”) process when they first source a loan.
  • Legal panel – after the loan has passed the first stage it is then reviewed by a legal panel. Solicitors ensure that a legal charge is properly made against each security property, and that each of the security properties has good title.
  • Valuation – use a highly rated independent firm to value security properties.
  • Credit checks – put each lending proposition under extensive scrutiny to determine its viability.

Robots and responsibility (FT Adviser), Rated: A

Robo-advice has become a widely-known concept in the financial advice community over the past 12 months, as more and more firms launch their own proposition.

In addition, it is important to have someone understanding the algorithm from the client experience, and for advisers to grasp the inputs into the algorithms.

One of the areas that needs to be tackled, according to Mr Strachan, is the grey area between fully automated guidance and full-on advice.

The report, The Next Frontier: The Future of Automated Financial Advice, outlines the amount people will be prepared to pay for the use of a robo-adviser. By the far the largest cohort said they would be prepared to pay £125, with popularity rapidly declining the more the price goes up.

Automated advice on investing £11,000 charged at £225 only received support from 16 per cent of people, while a £360 fee saw support from 6 per cent.

Fintech startup Curve names Callum McCaig as its first PR hire (Gorkana), Rated: A

London fintech startup Curve has made its first PR and comms hire with the appointment of Burson-Marsteller’s Callum McCaig, as the business prepares to scale out of ‘beta’ and launch its digital banking platform to the mass market. 

Curve has raised £3m in seed funding from investors, including Seedcamp and the founders of Transferwise, Betfair, Azimo and Google Wallet, and plans to announce a Series A funding round later this year.

MarketInvoice joins UK FinTech Financial Crime Exchange (Finextra), Rated: B

MarketInvoice, the world’s largest peer-to-peer online invoice finance marketplace, has joined the UK FinTech Financial Crime Exchange (FFE), a joint initiative by think tank RUSI and risk consultancy FINTRAIL, launched today.

The FFE brings together FinTech firms who have agreed to collaborate, by sharing best practice and pooling information on financial crime typologies to protect their customers and strengthen their sector’s ability to detect and counter the global threat of financial crime, including money laundering, terrorist financing, bribery and corruption, tax evasion and market manipulation.

The UK FinTech sector is at the forefront of the global FinTech revolution, contributing £7b to the UK economy.

European Union

German Crowdfunding Association Urges Regulator Not to Exclude Real Estate from Crowdfunding Regulation (Crowdfund Insider), Rated: AAA

Invited to defend their views vis-à-vis the financial commission of the parliament, representatives of the German Crowdfunding Association have challenged the government’s position and presented substantial counterarguments.

As a reminder: crowdfunding regulation at European Union (EU) level was so far deemed “premature” by EU authorities and is therefore not included in the Capital Markets Union, the EU’s effort to harmonize capital market regulations at EU level. Hence, each EU country currently issues its own regulation which creates a legal patchwork and hinders cross border deals.

The German government’s report firstly notes that German real estate projects represent 10% of the successful projects and 33% of the capital raised through crowdinvesting, that is €36 million. Projects are typically residential property development, mostly construction, the reminder being renovations. German real estate crowdinvesting nearly doubled in size last year while the growth of startup crowdfunding slumped.

The government finds this trend negative. It justifies its proposal to exclude real estate from the scope of the crowdfunding exemptions as follows:

  • The large share of real estate in crowdinvesting represents a deviation from the intention of the legislator which was to foster the funding of high-growth startups.
  • There is no lack of funding for real estate projects. Social real estate, for example, can be funded through schemes that are specific to social housing. 
  • Real estate crowdinvesting could be considered as a form of deregulation of real estate finance which could, bearing in mind the role played by real estate in the 2008 financial crisis, create a price bubble, and ultimately pose a threat to financial stability.

The Crowdfunding Association and crowdinvesting platform leaders found many of the government’s arguments “incomprehensible” and offered point-by-point rebuttals:

  • Crowdfunding counters price bubbles and real estate overheating. The current real estate market boom is in no way due to crowdfunding, which is much too small to influence market prices, but rather to macroeconomic factors such as the currently low interest rates.
  • Crowdfunding helps finance real estate SMEs and innovative entrepreneurs. There is no sensible criterion for distinguishing real estate financing from other types of business financing.
  • The risk of subordinated debt instruments is not specific to real estate. It would therefore be more appropriate to open crowdinvesting to all securities, including profit sharing securities, rather than to exclude real estate from crowdinvesting.

Currently, the German crowdfunding market is disproportionately small. It is surpassed on the Continent by the French market (28% smaller GDP) and dwarfed by the UK market (15% smaller GDP).

This guy is quickly but quietly building Sweden’s next fintech giant – already operating in 65 markets (Business Insider), Rated: AAA

Johan Tjärnberg is quietly building a fintech business that may prove as successful as Klarna. During 2016, his payments company, Bambora, grew 20% to revenues of SEK 2 billion.

Bambora is a platform that aggregates hundreds of payments services, and it’s currently available in 65 markets. Bambora’s clients can even choose to use Klarna as their payment service.

During 2017 the business will expand to North America, where the number of merchants using the service will increase by 10,000 over the year. That will boost the sales of the group by 30% to EUR 260 million, Johan Tjärnberg said to Bloomberg News.

Currently, the company has about 100,000 clients, of which 30,000 are located in the US and Canada.

Can a Public-sector Organization Become a Fintech Disruptor? (ValueWalk), Rated: A

In 2010, Klaus Regling, the head of the euro-area rescue fund for the European Stability Mechanism (ESM), asked me to join the board. I agreed, and said that I wanted to build the Google of the public sector. He looked at me and asked: “Why Google? We can be better than that.” And of course, he was right.

The ESM provides financial assistance to Eurozone countries that have lost market access. It was set up at the height of the euro crisis. Without the ESM, countries such as Greece would have defaulted, and the euro would have broken up. The ESM is the institution that kept the euro together during the crisis. Our total lending capacity is $742 billion. We have provided assistance to five countries: Greece, Ireland, Spain, Portugal and Cyprus. In all, we have provided $281 billion in loans, which is three times as much as the IMF over the same period of time.

Here is how we are planning to move forward to build a modern public institution.

Digital at Heart

First of all, we wanted a lean model, and so we kept only the strategic functions in-house, like funding, economics and investments. We outsourced support functions and non-strategic functions as much as we could. We were the first financial institution worldwide to use a fully cloud-based trading system.

Secondly, we wanted to leverage new technology where possible.

Finally, our workforce of tomorrow, made up of millennials, is the first in our field to consist almost entirely of technology natives.

A Public Sector-driven Fintech solution

Europe has launched the capital markets union, an ambitious effort to harmonize corporate, tax, and bankruptcy laws across the countries of Europe. The differences between these laws are vast because of centuries of history in the 28 members of the European Union. Now we hope to make the laws more similar, because it would create a truly pan-European financial market. For example, the union would break down borders for private equity investment and venture capital, and open up an alternative channel of funding for small- and mid-sized enterprises. Thus, it would reduce Europe’s heavy reliance on bank lending.

The ECB idea is about the centralization of settlement and payment processes for securities. This is a very important initiative, and one that could be complemented by a similar initiative for the primary issuance of securities. It is worth considering a European public sector issuance platform to help distribute debt more efficiently: a fintech solution, driven by the public sector.

One could even think of using new technologies, such as blockchain, to set up the new issuance platform.

International

P2P MONEY TRANSFERS TO DRIVE DIGITAL PAYMENT GROWTH AS MARKET APPROACHES $ 3.9 TRILLION IN 2017 (Juniper Research), Rated: AAA

A new study by Juniper Research has found the value of digital payments will approach $3.9 trillion this year, representing an increase of more than 14% on last year’s total. While the bulk of transaction value (55%) will be accounted for by online retail purchases for physical goods, P2P (Person to Person) money transfers will see the largest year-on-year net increase in value ($200 million).

The new research – Digital Payment Strategies: Online, Mobile & Contactless 2017-2021 – argued that the US would see particularly strong growth, with the bank-backed Zelle Network expected to build on its successful debut in 2016 as additional banks come on board.

The research also emphasised that the demonetisation policies employed by India’s government had encouraged a surge in mobile wallet adoption and, with it, sharp increases in both P2P and mobile retail transactions.

Global Money Transfer (FT Partners), Rated: AAA

Download this must-read report here.

Australia

CFA considers AI, robo-advice in exams (Financial Standard), Rated: AAA

The CFA Institute believes artificial intelligence, fintech and robo-advice will have the greatest impact on the financial services industry – to the extent it is considering including such topics in its examinations.

An overwhelming majority (70%) of CFA members globally who took part in a study said affluent investors will be positively affected by automated financial advice tools in the form of reduced costs, improved access to advice product choices.

Respondents (46%) however, were concerned about automated financial advice algorithms being the biggest risk emanating from robo-advice, followed by mis-selling (30%) and data protection concerns (12%).

China

VC-backed China Rapid Finance raises $ 60m in US IPO (AVCJ), Rated: AAA

China Rapid Finance (CRF), a VC-backed peer-to-peer (P2P) lending platform, is trading up 32% on its IPO price following an offering on the New York Stock Exchange that raised $60 million.

The stock closed on May 2 at $7.90, giving the entire company a market capitalization of around $448 million.

India

P2P funding platforms or traditional banking systems (India Info Online), Rated: AAA

India’s P2P Lending sector is poised to grow at a rapid pace thanks to favourable demographics, rising computer literacy, internet connectivity and the ongoing wave of digitalisation among others. With the higher economic growth, the credit-backed consumption growth may jump too.These could be the possible triggers for the growth of P2P Lending Industry.

There is no official assessment suggesting the size of the market in India. But it is estimated to be around Rs 200 Cr. The P2P lending industry may grow 25 to 30 times over next 5-6 years. Talking about the interest rate, the yield on 10-Year Sovereign benchmark bond hovers in the range of 6.45% to 6.95%.

However, it is also important to note that the P2P Lending sector is unregulated.

On the other hand, in P2P lending projects, investors can earn in the range of 14% p.a. to 30% p.a. on a reducing balance method. In P2P Lending, interest rates are decided depending upon the creditworthiness of borrowers.

Asia

5 Korean Fintech Startups to Watch in 2017 (Seoul Space), Rated: AAA

Blocko is a blockchain technology startup that developed the platform called CoinStack v3.0 and was able to raise $1.3 million in their series A funding led by Samsung Venture Investment Corporation.

Korean fintech startup company Honest Fund is a P2P crowdfunding company that raised over $6 million in funding led by KB Investments, Shinhan Capital, Hanwha Investment, and others.  It is a peer to peer personal loan lending service that connects borrowers and lenders directly without the need of banks.  These funds will not impact the borrower’s credit rating and will charge between 5% to 15%with the average being 9%.  They offer a different personal credit review model compared to the banks that only look at a person’s credit rating.

PeopleFund is the first Peer-to-Peer lending platform through a Bank in Korea focused on unsecured personal loans.  In 2015 alone PeopleFund has processed over $13 million in loans.

8 percent is a P2P lending company that raised over $13 million.  Their APR is set at 8 percent which is why the company is called 8 percent.  Established in late 2014 this P2P lending company has become the pioneer in this industry.  8 percent reviews an application and based on credit score and other measures.  It is cheaper for clients to use 8 percent than a bank and therefore 8 percent has been able to grow every month.  Loans for startup employees and a bridge for big companies have been their new model in 2016.  They made news in 2016 for getting funding of $10 million from KG Inicis, one of the leading payment gateway companies in Korea.  Bringing together investors and creditworthy borrowers are what 8 percent brings to the table.

Viva Republica runs a money transferring service called TOSS which raised over $48 million in funding from Altos Ventures, Goodwater Capital, Paypal, and KTB Network. They are known for Toss, which is a financial services platform that makes payment system easier by only asking users for 1 password to go along with three easy steps.  The max they can transfer per transaction is $430 which makes everyday payments easy.  Now they have over 6 million registered users in Korea and Toss has already processed over $3 billion in transactions. Toss now does credit scoring as well as micro-loans and is looking into cross-border money transfers and loan brokerages.

Authors:

George Popescu
Allen Taylor