Wednesday December 6 2017, Daily News Digest

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News Comments Today’s main news: Kabbage lends $4B to over 130K small businesses. RateSetter loses 23M GBP in ad investment. RateSetter to launch IFISA in February. Klarna, WorldPay partner on invoice and credit-based payments in Europe. Two new crypto-asset backed fiat loan platforms. Toss to expand into southeast Asia. Today’s main analysis: LendingTree’s monthly mortgage offer report. Today’s thought-provoking articles: […]

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United States

Kabbage Delivers $ 4 Billion to More Than 130,000 Small Businesses (Kabbage Email), Rated: AAA

Kabbage, Inc., a global financial services, technology and data platform serving small businesses, has extended over $4 billion to more than 130,000 small businesses, serving the largest customer base than any online small business lender. These landmarks represent an approximate 30-percent increase in total funding and total customers served since the company’s last milestone announcement in April 2017. With over 1.5 million live data connections with its customers, Kabbage’s high growth is attributed to its fully-automated lending technology as it continues to be a trusted lending partner to tens of thousands of small businesses across all industries in all 50 U.S. states.

Robert Sharpe also joined the company as its chief operating officer. Sharpe has more than 20 years of executive leadership in North America, Europe and Asia. He has successfully held various C-level positions, including president, chief executive officer and chief operating officer with multiple global consumer goods companies, each serving tens of thousands of customers and generating billions of dollars in revenue. With an additional ten years of commercial banking and corporate finance experience, Sharpe will be responsible for Kabbage’s continued growth and operational oversight as the company expands internationally and scales its services to serve more and larger small businesses.

During 2017, Kabbage reached major milestones, including:

LendingTree Releases Monthly Mortgage Offer Report for November (PR Newswire), Rated: AAA

LendingTree today released its monthly  Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.

Source: PRNewsfoto/LendingTree
  • November’s best offers for borrowers with the best profiles had an average APR of 3.75% for conforming 30-year fixed purchase loans, unchanged from October. Refinance loan offers were down 1 bps to 3.69%. Mortgage rates vary dependent upon parameters including credit score, loan-to-value, income and property type.
  • For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were down 1 bps to 4.30%, the lowest since November 2016. In contrast, the loan note rate of 4.18% was unchanged from October when it reached the highest since July. We prefer to use the APR as lenders often make changes to other fees in response to changing interest rates.
  • Consumers with the highest credit scores (760+) saw offered APRs of 4.16% in November, vs 4.43% for consumers with scores of 680-719. The APR spread of 27 bps between these score ranges was 5 bps wider than in October and the widest since July 2016. The spread represents nearly $13,400 in additional costs for borrowers with lower credit scores over 30-years for the average purchase loan amount of $233,127. The additional costs are due to higher interest rates, larger fees or a combination of the two.
  • Refinance APRs for conforming 30-yr fixed loans were down 2 bps to 4.24%. The credit score bracket spread widened to 19 from 16 bps, amounting to $9,500 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $235,973.
  • Average proposed purchase down payments have been rising for 8 months and reached $62,409.
Source: PRNewsfoto/LendingTree

Learning About Machine Learning (PYMNTS), Rated: AAA

Certainly, the mountains of data are becoming larger by the day. Seven years ago, the total amount of information produced on a global scale passed one zettabyte. The scale shakes out thusly: If a single cup of coffee holds a gigabyte, then the Great Wall of China stores a zettabyte. In just three years, the tally will be 44 zettabytes, or 44 Great Walls of China, as estimated by global market intelligence firm IDC.

Along with the impressive growth in data created, stored and used on a global scale, so too is AI poised to grow in leaps and bounds. It will create nearly $37 billion in annual revenues for companies of all stripes, sizes and sectors, according to market intelligence firm Tractica.

Within that figure, machine learning is a sector that will see $15.3 billion in revenue in 2019, as noted by BCC Research and cited by business process outsourcing company TeleTech, with an average annual growth rate of 19.7 percent. The savings for U.S. companies could be as high as $60 billion in 2020, Forbes noted. In addition, AI is expected to add $8.3 trillion in economic activity for the U.S. by 2035, according to projections by business management consultancy Accenture.

Consider a financial institution processing credit card information. The transaction data is passed to the machine learning system as soon as it is entered at the terminal or point of sale, and the system then analyzes the transaction against the system on which it has been trained. The historical data offers a way to glean what “normal” behavior of a transaction looks like.

To combat a payments fraud adversary that is evermore fluid with bad actors’ tactics and operates in a card-not-present (CNP) world, the machine deployed by a financial institution must be able to “explain” what it is doing, Feedzai said. The “learning” should result in explaining the reasoning so the logic behind the decisions is transparent and meets compliance needs.

Banks Build Line of Defense for Doomsday Cyberattack (WSJ), Rated: AAA

U.S. banks have quietly launched a doomsday project they hope will prevent a run on the financial system should one of them suffer a debilitating cyberattack.

The effort, which went live earlier this year and is dubbed Sheltered Harbor, currently includes banks and credit unions that have roughly 400 million U.S. accounts.

While most people worry about their money being stolen in a hack, banks fear something more sinister: an attacker destroying, or even simply locking, data.

Such moves could cripple a bank, leaving it unable to operate for hours, days, or perhaps much longer.

Source: The Wall Street Journal

LendingClub Introduces New Certificate Investment Vehicle (Lend Academy), Rated: AAA

On Friday of last week, LendingClub announced that it closed a new kind of transaction. It was a whole loan transaction structured as a tradable pass through security called a CLUB Certificate.

This was an initiative that was investor led. Basically, they had a potential investor who did not want to invest in whole loans. They are not for everyone, given they are an illiquid investment that has a duration of several years. What this investor wanted was a security that acted like a whole loan but one that had liquidity.

While LendingClub would not share details of this deal we did learn that these were both three and five year loans of one particular loan grade. They customized this deal to meet the investors exact requirements.

LendingClub claimed that this was a first of its kind deal in marketplace lending but in my research I discovered this piece on Asset-Backed Alert from April 2016 that talked about a similar structure that Prosper was working on last year.

How Technology is Streamlining the US Lending Sector (NewsGram), Rated: A

However, when the lending process is digitized the amount of paperwork is reduced dramatically. This is because account activity, credit history, income history as well as tax compliance can be fed into the system with the click of a button. This has made the collection and verification of information quite easy. Besides streamlining the application process, the amount of time it takes to get a loan has also reduced.

In addition, some lenders have developed some innovative mobile solutions that enable customers to submit an application from anywhere. The most outstanding feature about mobile loans is that there is a constant interaction between the lender and the borrowers. This goes a long way in improving service delivery.

Courtesy of technology advancements, now it’s possible to view the status of your loan application as well as your account status with a lender. This helps borrowers to stay updated during the entire online installment loans process. In addition, you can get instant communication about any requests that a lender may have that is critical to the borrowing process.

Time to address banks’ skepticism about data sharing (American Banker), Rated: A

When bankers complain about the security risks of sharing data with fintechs, they get an eye roll. Such complaints tend to be regarded as a cover for an ulterior motive: unwillingness to give customer details to competitors.

But when Chair Sheila Bair, a former chairman of the Federal Deposit Insurance Corp., recently warned of the security risks of sharing customer data with third parties, it made some people stop and think.

Big banks hope early bet on Alexa will pay off (American Banker), Rated: A

After a number of months of testing and refining an alternative way to bank, Ally Bank launched Ally Skill. “It was ready for prime time,” said Diane Morais, president of consumer and commercial banking at Ally Bank. Since mid-November, a customer can ask Alexa — in their own words — what their balance is, what the price of something costs in hours worked, and notably, to move money.

Since Capital One announced its skill in March of 2016, U.S Bank, American Express and several credit unions announced Alexa skills in addition to Ally. Others have been testing Alexa, including bank innovator USAA. Even smaller banks are readying to launch skills. FIS, one of the biggest bank vendors that has been testing Alexa since 2016, said about a dozen of its thousands of bank customers are on track to roll out a bank skill for Alexa by Christmas. Most recently, Amazon announced Alexa for business, and Capital One is one of its launch partners.

Mortgage providers and wealth managers are also exploring ways to offer their services over such conversational devices.

A brand-new cybersecurity watchdog just shut down a $ 15 million cryptocurrency scam (Business Insider), Rated: A

US regulators appear to be paying more attention to the opaque world of initial coin offerings.

The Securities and Exchange Commission announced Monday it halted a fraudulent ICO “falsely promising” over 1,000% returns. The regulator said this was the first case filed by its brand-new cybersecurity unit, aptly named Cyber Unit.

Trump pick plans radical shake-up of consumer protection agency (Financial Times), Rated: A

US banks and other financial companies are preparing for a lightening of their compliance burden in areas from payday lending to mortgages as President Donald Trump tightens his grip on a powerful regulator set up to protect consumers.

“Virtually the entire range of regulations previously adopted by the CFPB could be subject to review,” says Quyen Truong, a former senior figure at the agency who is now a partner at law firm Stroock & Stroock & Lavan. “There’s no particular set of rules that would be considered sacrosanct.”

In an early sign of his intent, Mr Mulvaney instituted a 30-day freeze on new initiatives within hours of assuming office.

Reforms that Mr Cordray had yet to introduce that would extend the CFPB’s reach into new areas, including mooted restrictions on small business lending, are now unlikely to see the light of day.

Payday Lending And The New CFPB (PYMNTS), Rated: A

As we noted when we first covered the final draft of the payday lending rule, Congress retains the power to keep the rule from ever making it into the books, so to speak, through the power of the Congressional Review Act. The CRA not only would prevent the payday lending rule from going into effect, but it would also prevent any similar rule changes from being considered for the next five years.

After some dormancy on the issue, the House of Representatives passed a CRA resolution Friday that would effectively kill the payday lending rule in its cradle.

The move comes as a bi-partisan effort – somewhat surprising, given the general tenor of Congress at present, particularly when it comes to consumer protection issues – with three Republican and three Democrat co-sponsors.

Mulvaney has won the first round in court, as a U.S district judge rejected English’s request for a temporary restraining order to prevent Mulvaney from taking over. But English has said she intends to fight on and will seek a preliminary injunction against Mulvaney and the administration.

Congress has only 60 legislative days from the publication of the rule in the federal register to invoke the CRA, and the rule passed on Nov. 17.

Madden ruling was a step backward. Congress should fix it (American Banker), Rated: A

I have been, far more often than not, on the same side of policy issues as the leading consumer and civil rights groups. But I disagree here: Madden is not just legally wrong; it is also bad public policy, because it moves us further away from creating a more effective and inclusive financial system. Bipartisan, bicameral proposals have already been introduced in Congress to fix Madden. Congress should pass them.

U.S. News magazine cites LendingPoint in ‘Best Personal Loans’ list (LendingPoint), Rated: B

We’ve been named to the “The Best Personal Loans of 2017” list by the prestigious U.S. News and World Report.

U.S. News named LendingPoint best for “Fair to Good Credit With Merit-Based Qualifications.”

LendingTree Selects Gordian Knot Analytics Group’s Comprehensive Segmentation Subscription Service (Guru Focus), Rated: B

LendingTree (NASDAQ: TREE), the online loan marketplace, announced today that it has entered into a multi-year subscription for segmentation analysis and database scoring with Gordian Knot Analytics Group, utilizing their unique segmentation methodologies and proprietary machine learning toolset. Gordian Knot offers proprietary marketing analytics machine learning tools that help LendingTree more effectively target and engage with the right consumers to drive the business forward and maximize value for current and future customers.

FinTech Leader OppLoans Named 6th Best Place to Work Nationally (Daily Telescope), Rated: B

Socially responsible online lender OppLoans received top rankings in Glassdoor’s 2018 Best Places to Work award. The start-up was named the sixth-best place to work nationally for small- to medium-sized businesses.

The review-based rankings serve as a capstone to a stunning year of growth for OppLoans. Accolades include rising over 200 positions to reach number 219 on the Inc. 500 list, earning an A+ rating from the Better Business Bureau, being named the third-fastest growing technology company in Chicago by Built In Chicago and launching OppU, a free, standards-aligned online curriculum that teaches personal finance skills.

PeerStreet’s Brew Johnson Named 2017 HousingWire Vanguard Award Winner (BusinessWire), Rated: B

PeerStreet, a marketplace for investing in real estate backed loans, is honored to announce that its Co-Founder and CEO, Brew Johnson, has been named to HousingWire’s 2017 list of Vanguard Award winners. HousingWire’s 2017 Vanguard Award recognizes top leaders from all areas of the mortgage industry, including those in lending, real estate and investing.

Why Do I Have an Affirm Payment Due After I Returned a Phone? (Republic Wireless), Rated: B

If Affirm was used to finance a purchase from the Republic Online Store, all carted items, including shipping, must be financed through Affirm. Shipping charges are not refunded by Republic Wireless. This means that you will still be responsible to Affirm for any shipping costs you financed and interest that has accrued.

United Kingdom

Peer-to-peer lender Ratesetter loses £23m after ad investment flops (The Times), Rated: AAA

Ratesetter slumped to a £23 million loss for the year after a disastrous investment in an advertising business.

The loss was due in large part to a £14 million write-off on Adpod Limited, which the lender ended up owning after using its own capital to prevent a huge default on its peer-to-peer loan book from hitting investors.

The loss is sharply higher than the previous year’s figure of £5.3 million.

RateSetter to launch IFIsa in February (Bridging&Commercial), Rated: AAA

Peer-to-peer lending platform RateSetter expects to launch its Isa in February 2018.

Once the Isa launches, customers will have until 5th April 2018 to invest the 2016/17 Isa allowance of £20,000.

Lloyds Banking Group and Royal Bank of Scotland to close branches (Business Insider), Rated: AAA

Two of the UK’s largest banks, 

Source: Business Insider

Orca accepted into regulatory sandbox scheme (p2P Finance News), Rated: A

PEER-TO-PEER investment platform Orca is one of 18 firms that have been accepted into the third phase of the Financial Conduct Authority’s (FCA) regulatory sandbox scheme.

The FCA received 61 submissions for the third phase of the scheme, of which 18 met the eligibility criteria and were accepted to move towards testing.

One of the successful applicants is Orca, which is developing an intelligent peer-to-peer investment platform which lets users diversify across multiple P2P platforms, lending sub-sectors and borrowers.

Personal Finance App Squirrel Now Processes £1 Million A Month (Crowdfund Insider), Rated: A

Squirrel, a personal finance app designed to help users have more control over their money, announced this week that it now processes £1 million a month. The company reported that it processed its 10 million last week.

Squrriel is currently seeking £400,000 through its equity crowdfunding campaign on Crowdcube. Funds from the initiative will be used to continue the expansion of Squirrels platform.

How an MBA entrepreneur made his multiple-account bank card add up (Financial Times), Rated: A

Israeli Shachar Bialick spent the first decade of his working life founding and backing start-ups before he dropped everything to move overseas and take an MBA.

He started Curve, a fintech company, to simplify personal finances with a single bank card for multiple accounts from different providers.

“We have too many cards, too many accounts, and too many products and services we use to manage our money,” he adds. “Curve is my biggest, most ambitious business so far. We are aiming to create an entirely new category in the banking system.”

Curve has raised $12m in venture capital funding and added corporate partnerships to extend the services it offers, such as an expense filing system provided by Xero, the online accountancy service.

Aire partners with retailer N Brown as more retailers become lenders for shopping middle class (Aire Email), Rated: A

Aire, which provides a more accurate way for lenders to understand and score new applicants, today announces a first-of-its-kind partnership with online retailer N Brown, as research data reveals the ‘new norm’ of UK shoppers choosing to spread the cost for their retail purchases over time.

The new agreement will see Aire provide its augmented credit assessment technology to support N Brown, which operates online stores such as JD Williams, in analysing the full picture of online customers and the true benefits and risks that come with them. Aire combines technologies of Artificial Intelligence with data science and deep knowledge of credit, which will enable N Brown to reach a wider group of customers without increasing its risk. After recent announcements about new partnerships in the p2p lending and car finance spaces, Aire’s expansion into the retail sector means that it is adding another new market to its portfolio in under six months.

Key insight:

–          New partnership between Aire and online retailer N Brown for customers who choose to open a new credit account

–          Aire adds retail finance to its growing portfolio

–          New research finds that UK adults pay off on average of £40 per month for retail purchases

–          9% of UK adults increased their monthly commitments in the last two years

Research shows in-store crowds are biggest stress factor for christmas shoppers (DIY Week), Rated: A

The new research by Swedish payments provider Klarna delves into the views of more than 2,000 consumers, and reveals that Brits today are so stressed out in the extended run up to Christmas that they’re overwhelmed when the day itself arrives.

In-store crowds were the number one stress for a quarter of respondents, whilst finding the perfect gift was the biggest source of stress for 20% of those surveyed.

These pressures could have a big impact on the bottom line of merchants if they’re not addressed; more than a third of consumers have previously walked out of a shop in frustration as a result. This is not just a bricks and mortar issue – 1 in 10 respondents have abandoned their online basket in frustration when the process is too complex, suggesting there’s still work to be done to smooth the purchase process online.

FinTech Marketplace Wealth Migrate Continues Expansion with New UK Office (GlobeNewswire), Rated: B

Wealth Migrate, (KPMG Global Fintech Top 50), a global online real estate marketplace, today announced the opening of a new office in the U.K. and the appointment of a new country CEO, as the firm continues to build on its global presence as part of a strategy to meet growing demand from investors.

To better serve its community of investors in this region, Wealth Migrate has opened a new office in London.

Adding to the news of this expansion, Wealth Migrate additionally announced the opening of their U.A.E. office and the appointment of a new U.S. based CEO this week.

To head up the new office, Wealth Migrate has appointed Ken Williams as its CEO of Wealth Migrate, U.K.

China

Runaway borrowers the new face of China’s personal credit boom (SCMP), Rated: AAA

China’s online lending boom has sent a steady stream of new clients to Guangzhou lawyer Luo Aiping in recent months: the parents and siblings of young men trapped or ruined by usurious debts.

Zeng Hong, from Hunan province, is a typical client. She went to Luo for help because she had been harassed by calls from debt collectors for months after her 27-year-old brother ran away, leaving behind a two-year-old son and more than 300,000 yuan (US$45,400) in debts.

Zeng wanted to help repay her younger brother’s loans, but 300,000 yuan is a big sum for a poor family and her husband strongly opposed her plan. She approached Luo to ask whether the debts and interest her brother had incurred were legal.

China Launches Massive Debt Crackdown (ValueWalk), Rated: AAA

You see, in an effort to fuel economic growth over the past few years, China has taken on a lot of debt. Since 2008, China’s debt as a percentage of economic output has increased from around 160 percent to around 280 percent at the end of 2016. (By comparison, the total debt in the U.S. as a percent of economic output is upwards of 300 percent.)

Source: ValueWalk

Why it matters: China is BIG and getting bigger

With a GDP of US$11.2 trillion, China is already the world’s second-largest economy (it will soon be the largest), and it has the second-largest stock market. The country will also soon have the world’s biggest middle class, totalling over 550 million people by 2022. To put this in perspective: That’s 1.7 times the entire population of the U.S.

Consumer loans (such as peer-to-peer (P2P) lending and payday loans) have grown rapidly recently. For example, consumer loans jumped 300 percent compared to last year.

SoftBank’s Son Eases Lufax Peer Pressure (Bloomberg), Rated: AAA

Lufax, the online wealth manager that’s among the world’s biggest startups, has hired five banks to work on a Hong Kong initial public offering of as much as $5 billion, according to IFR.

Lufax is the world’s 10th-largest unicorn, or startup worth at least $1 billion.

Source: Bloomberg

Lufax had a loan balance as of Sept. 28 of more than 158 billion yuan ($24 billion), more than three times the 43 billion yuan held by China’s second-biggest P2P lender, New York-listed Yirendai Ltd., according to wdzj.com, a Chinese website that tracks online financiers.

DAILY BRIEFING (TechNode), Rated: B

What happened: The Ping An-backed online wealth management firm Lufax has hired five banks to work on an up to $5 billion Hong Kong IPO.

Why it’s important: A major player in China’s P2P lending market, Lufax will join a number of fintech companies that go public in recent months. It was eyeing an IPO as early as last year but later delayed the process due to market challenges and regulatory uncertainties, the CEO told Bloomberg last year. —Rita Liao

China’s Lufax picks banks for up to $5 bln Hong Kong IPO – Reuters

CreditEase Received Top Rankings in Global FinTech Investment by CB Insights and FT Partners (PR Newswire), Rated: A

CreditEase, a world-class financial technology conglomerate based in Beijing, China, specializing in inclusive finance and wealth management, announced today that its venture fund, CreditEase FinTech Investment Fund (“CEFIF”) has recently been ranked No. 7 by CB Insights as “Top 10 Most Active VC Investors in Global FinTech Companies” and No. 1 by FT Partners as “Most Active FinTech Investors (Corporate VC)”.

Source: CB Insights FinTech Report_Q3 (PRNewsfoto/CreditEase)

How This Chinese Fintech Company Is Innovating by Leasing Cows (Fortune), Rated: A

Particularly, Ning Tang, CEO of fintech firm CreditEase, is lending consumers cows in a bid to reach those living in rural areas who might have limited access to credit and financing.

The rural population accounts for 48% of China’s total, with agriculture accounting for about 8.6% of the the nation’s Gross Domestic Production in 2015, according to the World Bank. Income in rural China has also been on the rise, with urban income narrowing to 2.7 times that of rural income from 3.3 times in 2009. And though migration toward the city has been on the rise and the nation’s dependence on farming and livestock is on the slide, rural populations and agriculture are still a significant part of the country’s economy.

IN CHINA, THE CHARACTERS FROM THE SHOW APPEAR IN THE COMMERCIALS, TOO (AdAge), Rated: A

iQiyi, which is backed by Chinese internet giant Baidu, adopted the tactic first and developed it into a commercial product when it broadcast the 1930s tomb-raiding adventure tale “The Mystic Nine” last year. The first batch of advertisers ranged from iQianjin, a peer-to-peer lending app, to PepsiCo, which showed characters chowing down on Lay’s and gulping Pepsi.

The other major services, Alibaba Group’s Youku Tudou and Tencent Holdings‘ video platform, have embraced the tactic too. At iQiyi, the cost for embedding one such commercial in an episode ranges from $150,000 to $530,000, depending on projected viewership, Yuan says.

European Union

Worldpay Partners with Klarna to Launch Invoice and Credit Based Payments in 6 Key European Markets (PR Newswire), Rated: AAA

Worldpay, a global leader in payments, has announced that it will partner with Klarna, a leader in invoice and credit based payments, to further enhance its product portfolio. From today, Worldpay customers trading in AustriaFinlandGermanythe NetherlandsNorwaySweden and the United Kingdom, and wishing to accept payments on invoice or instalments, will be able to use Klarna’s invoice and credit based payments from Worldpay. This will help eCommerce businesses to improve conversion rates by up to 20% and provide a fast and smooth checkout process.

These new payment options will allow consumers to decide when to pay for the items once they have received their goods. Instead of a request for credit or debit card details at the point of checkout, consumers are prompted for their email address and postcode, ensuring a quicker checkout process and leading to lower cart abandonment. The solution allows consumers to manage the terms of their payment, be it 14-day payment by invoice, by fixed or flexible instalments, spreading the cost over several months.

The move into credit and invoicing payments follows demand from customers wanting to expand the breadth of payment methods offered. Worldpay is one of the first payments companies to deploy this new payment integration, providing superior market coverage as well as faster time to market since there is no need for a new plug-in when  legacy technology is updated.

Fintech deposit marketplace hits 100,000 customers (AltFi), Rated: A

Savings specialist Raisin continues to gain momentum. The savings account marketplace now has itself 100,000 customers. The company is also integrated with more than 40 banks, from across 18 European countries, including a number of challenger banks and even an online lender (Younited Credit). SolarisBank is its newest partner.

ConsenSys Ventures has made its first four investments (TechCrunch), Rated: B

But the companies the fund is backing come from some relatively seasoned entrepreneurs. BlockFi, the firm’s lending for liquidity startup, was founded by Zac Prince — a serial startup founder whose previous idea was the lending platform for the underbanked, Cognical.

Up to 5% Cashback On Long-Term Investments Offered by Mintos (P2P-Banking), Rated: B

Lativan p2p lending marketplace Mintos just launched a cashback campaign running for the remainder of December. Investors investing in new loans with a term of at least 24 months on the primary market will receive a cashback of 2% to 5% depending on term length. The cashback will be credited within 6 days says Mintos.

Important: To be eligable an investor needs to enroll once for the campaign by clicking on the promotion banner inside the Mintos dashboard.

International

Salt and Coinloan Promise Crypto-Asset Backed Fiat Loans (Bitcoin.com), Rated: AAA

Typically, when we think of taking a loan, we think of going to a bank, filling out a ton of paperwork and then getting denied the loan unless a guarantor or cosigner signs as well. However, blockchain banking startups like Salt and Coinloan aim to change this by creating a peer to peer lending platform on the blockchain. These platforms allow users to leverage their bitcoin and other cryptocurrencies as collateral for fiat loans.

Salt hails from the land of the free, a.k.a Denver, Colorado, USA.

On the other hand, Coinloan has Baltic roots and is headquartered in Estonia.

Salt will be starting straight out of Denver, Colorado and is set to launch their blockchain backed lending platform, BTC collateralized loans and loan fund by the end of 2017. In 2018, they will be launching ethereum collateralized loans in Q1, credit cards in Q2 and altcoin collateralized loans in Q3.

By contrast, Coinloan is still currently running their ICO. By 2018, they hope to obtain payment licences in Q2, develop mobile applications for IOS and android by Q3 and enter the Asian market in 2019.

Lendoit & RSK creates a decentralized BTC lending future together (Live Bitcoin News), Rated: A

In about 2 weeks, Lendoit will launch its official token Pre-sale, but it can’t wait to reveal the secret that will change the future of decentralized BTC lending, which the company has entered together with the largest and most promising blockchain-based project, The RSK Project.

Right from Argentina is Rootstock or popularly called RSK. This company is well-known for its open-source smart contract stage which has a 2-dimensional peg to Bitcoin. Amazingly, RSK uses merge-mining to reward bitcoin miners and give them the chance to be part of the smart contract ecosystem.

The Goal? To ensure that the highest level of functionality and value is added to the entire bitcoin ecosystem through the use of smart contracts, increased scalability, and near-instant payments.

Lendoit removes all intermediaries in the lending process, creates a trusted and secure platform for participants through the smart contract, and gives users a decentralized, anonymous platform where upscaling, lending, and borrowing are done hassle-free.

Source: Live Bitcoin News

PNC Live On New Real-Time Payments Network Using Finastra (Payment Week), Rated: A

PNC, a top-10 US bank by assets, is live on RTP, The Clearing House’s new US real-time payments system, using Finastra’s payment services hub, Fusion Payments.

“The ability to make an immediate payment at any time, on any day of the week, with a real-time confirmation of the payment significantly transforms the way businesses and consumers make payments in the United States. Emerging technologies such as RTP are creating opportunities for banks and clients to re-imagine our business models.”

Trulioo Recognized As a Global Leader in Digital Identity Verification (PRWeb), Rated: B

Trulioo, the global identity verification provider, is delighted to be recognized as the global identity verification leader in a recent comprehensive report published by Let’s Talk Payments (LTP).

India

Why America could miss out big time on India’s fintech revolution (TechCrunch), Rated: AAA

Morgan Stanley expects India’s digital payments penetration to increase from 5 percent today to 20 percent, and the e-commerce market to reach $200 billion, with 475 million e-commerce shoppers, adding up to a GDP upwards of $6 trillion — all by 2027.

India now has 800 million mobile phone users with 430 million having internet connectivity. According to Morgan Stanley, the number of internet users is expected to grow to 915 million by 2027.

Source: TechCrunch

In 2016, China’s digital payments were already 50 times America’s. Alibaba and Tencent understand ecosystems better than anyone else in the world, including American companies.

Asia

After success at home, Toss sets sights overseas (Korea JoongAng Daily), Rated: AAA

After emerging as one of the top fintech start-ups in Korea, Viva Republica, the company behind Korea’s top peer-to-peer transfer app Toss, is zeroing in on Southeast Asia as its next target market.

“While more than 70 percent of the population is using smartphones, their financial services are equivalent to that of Korea in the 1980’s. Our goal is to bring our story and product to Southeast Asian countries such as the Philippines and Vietnam and to improve the level of financial services in the market.”

As of November this year, the accumulated transactions through Toss reached 10 trillion won ($9.2 billion). In November alone, the platform handled more than one trillion won, a feat that comes just two and half a years since it launched in February 2015. The company said its annual sales will come to 20 billion won by the end of this year and reach the break-even point sometime next year.

M’sian regulators likely to enforce licensing for cryptocurrency exchanges (The Star), Rated: B

Malaysian regulators are looking to clamp down on initial coin offerings or ICOs by expanding the definition of “securities” in existing laws, according to industry sources.

The regulator is also likely to require some form of licensing for cryptocurrency exchanges to operate on Malaysian shores.

Mexico

Mexican Senate passes fintech law (Reuters), Rated: A

Mexico’s Senate on Tuesday approved a bill that would regulate its fast-growing financial technology sector, including crowdfunding and cryptocurrency firms, paving the way for a vote by the lower house.

The bill, which seeks to promote financial stability and defend against money laundering and financing of extremists, is expected to pass in a final lower house vote by Dec. 15, said three sources familiar with the measure.

Authors:

George Popescu
Allen Taylor

Thursday July 6 2017, Daily News Digest

most active angel investors

News Comments Today’s main news: CAN Capital begins funding small businesses after funding from Varadero Capital. What happened to BizFi?. Zhong An applies for Hong Kong IPO. P2P lending hits 1T won in South Korea. Funding Societies named to Fintech 250. Today’s main analysis: Key trends in modern finance. Angel investors total nearly one third of active fintech investors. […]

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News Summary

United States

CAN Capital is Back in Business as it Receives Funding from Varadero Capital (Crowdfund Insider), Rated: AAA

CAN Capital, an online lender in the SME lending space, is back in business following a recapitalization by Varadero Capital, an alternative asset manager in New York City and currently manages about $1.3 billion. The specific deal terms were not disclosed.

CAN Capital announced it will immediately begin funding existing small business customers that are eligible for a renewal and will start funding new customers by working with select sales partners.

CAN Capital said it will start with two products available in all 50 states, term loans and merchant cash advances with funding amounts from $2,500 to $150,000.

This tiny Florida bank says APIs could make it a national player (American Banker), Rated: AAA

Surety Bank in DeLand, Fla., is making what many would consider a risky move. It’s ditching its legacy core vendor for a cloud-based startup core provider with just a handful of clients.

The bank has signed with Nymbus, a startup in Miami, to replace its core system early next year. James said he was attracted to the open platform that relies on application programming interfaces to connect with a variety of providers.

By embracing APIs, Surety will not be beholden to any one vendor and can partner with fintechs and other third-party providers in a quick and efficient manner.

FTC shuts down Blue Global for sharing consumers’ loan-application data (VentureBeat), Rated: A

The Federal Trade Commission said it halted the operations of Blue Global Media after the company earned millions of dollars by falsely promising to match them with low-rate loans.

The FTC’s complaint alleged that, starting in 2009, Blue Global set up sites such as cashmojo.com, clickloans.net, and 100dayloans.com, which promised to connect consumers with more than 100 “trusted lending partners” and find the one offering them the best loan terms.

The complaint alleged that complete applications were sold, without consumer consent, “to any potential buyer without conditions and with little regard to how it would be used.”

In a settlement, Blue Global faced a judgment of $104 million. Both Blue Global and Kay filed for Chapter 7 bankruptcy, listing the FTC as a creditor.

Just One Third of OnDeck Borrowers Need Human Intervention (Bank Innovation), Rated: A

At the initial stages of a loan application, “100% of our applicants get algorithmic decisions,” Katzenberg explained. The algorithm then “spits out” one of the three decisions: the applicant is either declined; approved and can move on to the booking stage; or pending and needs further investigation. “In this case, the algorithm picks up on something, or the loan value is larger than our average, or maybe it’s a random test of the model,” he said.

Currently, about one third of OnDeck’s loans experience a manual intervention.

NASB Financial, Inc. Announces North American Savings Bank Named Top VA Mortgage Lender (Cision), Rated: A

NASB Financial, Inc. (OTCQX: NASB) announced today that its subsidiary institution, North American Savings Bank, F.S.B. (“NASB”), was recently named a Top VA Lender by LendingTree, a leading online loan marketplace.  Criteria for the award included loan volume, quality, and customer service.  LendingTree noted that “NASB customers benefit from fast and easy processing, low rates, and excellent customer service.  The company is also well known for their professionalism, and their ability to get the job done, even in unusual or stressful circumstances.”

What Happened to Bizfi? (deBanked), Rated: A

This past week, Bizfi gave their remaining employees a 90-day warning notice, according to sources familiar with the matter. Some of those riding out their potentially last 90 days are anxiously awaiting the outcome of nonpublic negotiations to salvage parts of the company’s legacy, if it can be done at all.

Everything You Would Want to know About Crowdvouching (Live Bitcoin News), Rated: A

The decision to lend money is made on the basis of a form outlining the borrower’s financial history. Users share the risks, and depending on whether the individual returns the money or not, they can lose or earn from $1 to $10.

The default rate also decreases with an increase in accountability. As noted by Eugene Lobachev, Suretly’s founder, the default rate on Suretly is 2-3 percent lower than the market average.

Suretly primarily targets short term loans of up to one month, and has been designed to cater all borrowers, including the ones with poor credit rating.

LendingClub Appoints Ken Denman to its Board of Directors (Cision), Rated: A

LendingClub (NYSE: LC), America’s largest online marketplace connecting borrowers and investors, today announces Kenneth Denman as the newest member of its Board of Directors. Effective June 28, 2017, Denman joins as a Class One director and will serve on the Audit and Compensation Committees.

Denman, a venture partner at Sway Ventures, has served as a CEO for over fifteen years leading corporate transformations for the likes of Emotient, Inc. (acquired by Apple in January 2016), Openwave Systems, Inc. (now Unwired Planet), and iPass, Inc. He has held executive roles at MediaOne Group, Inc., US WEST Communications Group and the Battelle Memorial Institute Laboratory.

Will Everything Eventually Be On the Blockchain? (YouTube), Rated: A

Dan Larimer of EOS thinks so.

Summer Fintech Reading Ideas (Lend Academy), Rated: B

  1. Blockchain Revolution by Don and Alex Tapscott
  2. Augmented: Life in the Smart Lane by Brett King
  3. The FINTECH Book: The Financial Technology Handbook for Investors, Entrepreneurs and Visionaries by Susanne Chishti and Janos Barberis
  4. Platform Revolution by Geoffrey G. Parker, Marshall W. Van Alstyne and Sangeet Paul Choudary
  5. The Unbanking of America: How the New Middle Class Survives by Lisa Servon – Lisa Servon is a University of Pennsylvania professor who has spent time working behind the counter at a check cashing store and a payday lender. She provides profiles of the kinds of people who use these services and why they choose to access credit outside the traditional banking system. She also shares some of the work that innovative companies are doing to address the unique challenges of the underbanked.
United Kingdom

Two thirds of Brits have no idea what their credit score is, according to research (The Sun), Rated: AAA

A poll of 2,000 adults in the UK found that more than four in 10 have never tried to find out their credit score, and it’s been longer than a year since checking for nearly 20 per cent.

The survey revealed that the most common use for credit cards was to buy expensive one-off items, although an incredible four in 10 use it to buy anything, as if it was just a debit card of containing free money.

One in 20 have had their applications for a mortgage rejected – and even been denied a mobile phone contract, due to their poor credit history.

More than half of the country doesn’t know exactly how much they owe on credit cards and loans, although estimates suggest that, on average, each Brit has £1,780 worth of credit card debt.

RateSetter to launch hire purchase loans (P2P Finance News), Rated: AAA

RATESETTER has announced plans to start offering Hire-Purchase (HP) products for commercial and individual borrowers later this month.

While details on the interest rates and underwriting criteria are yet to be released, the company has confirmed that the HP loans will pay into its Provision Fund, just like every other loan on its platform.

The loans will be financed from RateSetter’s existing investment markets, so all new and existing lenders can take advantage of the hire purchase agreements.

The funding gap: why tech SMEs need alternative finance (Business Matters), Rated: AAA

UK tech start-ups are receiving a lot of attention in the press. They’re something we’re rightly proud of – the UK is a centre of innovation. Tech investment in the UK was £6.8bn last year, which is more than double that found in any other country in Europe. France, in second place, only secured £2.4bn.

But there are a lot of tech companies in the mid-market who find it much harder to get access to the finance they need. Once a business graduates from sexy start-up full of promise and astronomical growth models into a steady going concern, it often becomes more difficult to attract the interest of investors.

In short, many mid-market tech companies are ignored by VC because they’re not edgy enough and declined by the banks because they’re not secure enough. But these mid-sized companies are the backbone of the UK’s tech scene, the crop of successful brands which made it out of the initial scrum and built a steady income and a route to profitability. Real success for the UK tech sector means helping these companies keep going on that route – so how do they find the money to grow?

By going down the peer-to-peer lending route, mid-market companies can get access to funding much faster, with a far greater level of flexibility and a much lower minimum threshold for borrowing.

MORTGAGEGYM APPOINTS FORMER DEUTSCHE BANK COO (Business Cloud), Rated: A

Mortgage robo-adviser MortgageGym.com has appointed a former COO of Deutsche Bank as an adviser after he invested in the company.

Henry Ritchotte, who was also a member of the management board of Deutsche Bank AG, has joined with immediate effect after putting in £500,000.

Vantiv Offers $ 10 Billion Towards Acquisition of London Fintech Firm Worldpay (Crowdfund Insider), Rated: A

Worldpay Group, a British payment processing firm, announced on Wednesday that Vantiv has offered $10 billion towards the fintech company’s acquisition.

UK remains European leader for tech investment in year since Brexit (PCR), Rated: A

In total, some £2.4 billion worth of venture capital funding has been pushed into Britain’s technology companies since the vote, according to research from London & Partners, a branch of the London Mayor’s office. This was more than double the investment made in Germany and three times the amount poured into France. London in particular is securely established as the tech-centre of Europe, with 554 deals totalling £1.8 billion being made in the last 12 months. In comparison, Berlin has tied up £775 million worth of deals and Paris has secured £557 million in venture investment.

The research found that the first half of 2017 had seen a record £1.1bn of venture capital funding into London start-ups. For the UK as a whole it was £1.4bn, the third biggest on record.

Online lending platform works for Galway SMEs (Galway Advertiser), Rated: A

Thirty-nine Galway businesses have raised funds through Linked Finance’s online lending platform.

Linked Finance, a peer-to-peer lending company, says it has raised €1m for Galway-based businesses, including Revive Active, Walsh’s Bakery and Schoolbooks.ie, aimed at facilitating growth.

At Auto Trader, Coe steps up as Glithero steps down (Aim Group), Rated: B

Sean Glithero, chief financial officer (CFO) of Auto Trader Group PLC, will step down from his position later this year, and a successor has already been lined up.

Auto Trader nominated chief operating officer Nathan Coe as the successor of Glithero. 

The pros and cons of crowdfunding (City A.M.), Rated: B

For investors

Crowdfunding platform Seedrs has produced an annual return between 14.4 per cent and 49.1 per cent, once tax relief is taken into account.

  • Unlinked to markets  The other thing to bear in mind is these types of investments aren’t listed on a stock exchange, meaning they are not correlated to the markets. This can be good from a diversification point of view, because crowdfunding investments are not exposed to the same market wobbles.
  • Different platforms, different risks

For businesses

  • Range of requirements
  • Life after the fundraise – “Without a proper structure in place, and a platform that provides support post-fundraising, the complexity and administrative burden of managing a crowd of investors can be a very real drain on time, money and resource for companies.”
China

Lessons from China’s Peer-to-Peer Lending Boom (Federal Reserve Bank of SF), Rated: AAA

In this episode of our series on financial technology, we sat down with Ning Tang, founder and CEO of CreditEase.

Nicholas Borst: Ning, thank you so much for joining us today. China appears to be at the forefront of the global fintech revolution. What are the main factors why fintech is developing so quickly in China?

Ning Tang: I think several key drivers. One is that compared with the US market, which is more mature, China is still developing. I mean China’s financial system, our credit system. So, the demand is bigger in China, like from small business owners, from micro-entrepreneurs, from consumers, and rural people. So, that’s one.

Secondly, China has adopted technologies such as mobile internet much earlier than the US.

Also, the regulators have played a very important and positive role in promoting market development in a healthy, stable way.

Nicholas Borst: Ning, could you tell us a little bit about how the alternative lending sector in China has developed?

Ning Tang: I think in China, traditionally, banks looked at collateral, a physical good as collateral. Many small entrepreneurs, small businesses don’t have such physical goods. They have intangible value in their data, electronic data. For instance, we have a partnership with eBay, helping Chinese merchants who actually sell goods to US consumers, this segment access financing. They have no physical goods, assets, as collateral, but their data is very valuable. So, we work with eBay and their merchants. Whenever they have a financing need, yet they can provide their data to us, and our credit evaluation engine can real-time assess a credit quality, and match that need with investor money. This is very cool. Many such needs are time-sensitive. It cannot wait for several weeks to allow the borrower to go to a branch office and submit tons of documentation, wait for several weeks. No, that’s not possible.

Nicholas Borst: Are a lot of fintech companies in China sharing information?

Ning Tang: Yes. After we took the first step, some tried first by just using our data first. Then they realized that this is indeed a great system. More and more joined, and now we have over 500 industry players. All kinds of players, like banks, insurance companies, also P2P marketplace lenders, alternative lenders, and all exchange data in this system. At the same time, I expect that the Chinese regulators will step up their effort to create this more comprehensive national credit bureau system, and grant credit bureau licenses to credit bureaus in coming years.

Sean Creehan: Could you talk a little bit about the role of regulators, and the evolution of alternative lending in China?

Ning Tang: A key driver is that the regulators have played a very positive, conducive role in making that happen. They understand that there are a lot of unfulfilled needs in China’s financial system. They also understand that technology and business model innovations can help China do a better catch-up job, potentially doing some leap frog to make financial services more accessible, more cost efficient, more friendly.

For example, in marketplace lending, the regulators made it very clear early on, it’s actually a peer-to-peer like relationship. It’s not like a banking relationship where people make deposits.

About one year ago, we started to have more official regulations on marketplace lending, on payment, and also other sectors of fintech. But more for marketplace lending and payment. These two more mature sectors. I expect that other sectors, like crowdfunding, robo-advisor, insurance tech, and so on, will go through a similar path in coming years. Meaning like the industry will work very well with the regulators creating a healthy and robust industry landscape.

Listen to the full podcast.

Online insurer Zhong An applies for US$ 1.5bn Hong Kong IPO  (SCMP), Rated: AAA

Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, which counts Alibaba and Tencent among its investors, is seeking to raise US$1.5 billion by listing in Hong Kong.

If the deal goes through, Zhong An will be the first financial technology company to be listed in Hong Kong.

European Union

Robo.Cash & Latvian Alternative Financial Services Association to Jointly Develop P2P Tech (Crowdfund Insider), Rated: A

ROBO.CASH and Latvian Alternative Financial Services Association have announced their intent to develop peer-to-peer technologies in Latvia.

The group, founded by Sergey Sedov, specializes in PDL-loans (Pay day) and Installment-loans. The company reports that more than 1.2 million loans have been issued since inception.

International

Key Trends in the World of Modern Finance (AltFi), Rated: AAA

Key Trend #1: Mobile payment remains in play

Key Trend #2:  Prioritizing Cyber Security

The recently published survey by American Express revealed that 37% of consumers who tried mobile wallets have stopped using them over security concerns, while 73% of retailers reported persistent or increasing levels of fraudulent online sales.

Key Trend #3:  Partnerships

Apple Pay:  Gaining momentum

Apple Pay is now supported by 1,938 banks and credit unions across the US, although most of them are regional in scope. In Europe, UK is leading the way with 24 banks (including Danske Bank), while Japan (133) and China (73) show the greatest integration in Asia-Pacific.

Alipay:  Going global 

Alipay users will now have an access to four million retailers across the US. First Data is the largest provider of payment solutions worldwide, processing 45% of all US credit and debit card transactions with 80% market share in gas and groceries.

Key Trend #6:  Move towards balance sheet lending model

Consumer lending remained a dominant, accounting for 61% market share, although it appears to be slowing down.

Angel investors make up nearly a third of the total number of active FinTech investors since 2014 (Fintech Global), Rated: AAA

There were 1,666 active angel investors in FinTech since the start of 2014. This translated to 32.3% of the total number of unique investors in the sector during that period. The remaining 67.7% comprised of VCs, investment banks and other financial institutions. The group of angel investors backed 1,010 deals, 16.6% of all deals in the FinTech sector since 2014. 521 of the total number of angel backed deals contained more than one individual investor, while 16.3% of all deals had four or more angels participating as co-investors, showing that most angels prefer to share the investment risk.

 

Abu Dhabi Shakes on FinTech Investment Pact with China (Cryptocoins News), Rated: B

The UAE’s second largest financial free zone has entered a partnership with a Chinese counterpart to enable fintech development and investment opportunities in both countries.

The two authorities will collaborate over investment opportunities together and a notable objective includes the strengthening of FinTech ecosystems in both markets in an era of digitization.

Asia

P2P lending hits record 1 tln won (Yonhap News), Rated: AAA

Peer-to-peer lending in South Korea surpassed 1 trillion won (US$870 million) last month, marking a rapid growth as yield-hungry investors funneled more money in the alternative lending scheme, industry data showed Thursday.

According to data compiled by the Korea P2P Financial Association, lending between peers was tallied at 1.16 trillion won at the end of last month.

The average interest rate of such loans stood at 14.68 percent.

Funding Societies Named to the 2017 Fintech 250 (Funding Societies Email), Rated: AAA

CB Insights named Funding Societies to the prestigious Fintech 250, a select group of emerging private companies working on groundbreaking financial technology. CB Insights CEO and co-founder, Anand Sanwal, revealed the Fintech 250 companies during The Future of Fintech, a gathering of the world’s largest financial institutions, best fintech startups, and most active venture investors.

“We are humbled to be named amongst the Fintech 250 globally and be the only digital lender on the list from Southeast Asia.” said Funding Societies co-founder Kelvin Teo. “Funding Societies currently serves Singapore, Malaysia and Indonesia, where it is known as Modalku, or My Capital in Bahasa. While each country is vastly different and requires us to rethink from scratch, it is a region we’re passionate in. We believe technology advancement in financial services can truly benefit societies here.”

Fintech startup Omise raises $ 25M in ICO that bucks ‘money grabbing’ trend (TechCrunch), Rated: A

Omise, a fintech startup based in Thailand, has closed $25 million in new financing via a token sale, more commonly know as ICO, that closed today. In doing so, it become the most established tech company to date to take this financing route.

The company, which has raised over $20 million to date from traditional VC investors, held the token sale to raise capital to develop a decentralized payment platform — Omise Go — that it hopes will disrupt the current banking system. The idea is to enable any Omise Go user to share funds through the network without the need for a bank account and without incurring fees or incurring cross-border costs. Beyond peer-to-peer payments, the company plans to sign up retail partners to extend its utility into purchases, and open the system up to other payment players, too.

Omise’s core business is enabling online payments, much like Stripe, in Thailand, Japan and Indonesia, but it became interested in the blockchain a few years ago, CEO Jun Hasegawa told TechCrunch in an interview.

The company has sold an initial 65.1 percent of the total float of OMG via this ICO, with a further five percent of the tokens will automatically be given to anyone who owns Ethereum in what is known as an ‘airdrop.’

Omise capped its token sale at $25 million, eschewing the ‘gold rush’ mentality which has seen other companies raise tens of millions of U.S. dollars more as ICOs have gained a reputation for giving backers huge financial gains quickly.

Africa

Crowdfunding the delivery of 17M mass housing units in Nigeria (Business Day Online), Rated: AAA

Over time, investors responded to this new opportunity, and more than five decades after their creation the U.S. stock exchange REITs industry has grown to a $1 trillion equity market capitalization (Nigeria $224M as at 2014 according to the NSE) and nearly $2 trillion in real estate assets.REITs in the U.S. and increasingly around the world now regularly provide investors with the opportunity for meaningful dividends, portfolio diversification, valuable liquidity, enviable transparency and competitive performance.

REIT was established in Nigeria following the enactment of the Investment and Securities Act (ISA) of 2007.

However, in a 2015 comparative (academic) study, Olarenle and others found when they compared REIT dividend payouts in Nigeria to global rates, that Nigeria REIT (N-REIT) underperforms, usingMalaysia REIT (M-REIT) asa benchmark both in terms of average return 4.8% and risk adjusted return -6.77% per annum against the Malaysia REIT 7.5% and 2.47% respectively. They recommended increased capitalization, market transparency and external management as options for N-REITs performance enhancement, all of which can perhaps be correlated to the maturity of the Nigerian REIT market.

Authors:

George Popescu
Allen Taylor

Monday January 16 2017, Daily News Digest

Monday January 16 2017, Daily News Digest

News Comments Today’s main news: OCC must tap breaks on FinTech charter plans. White House publishes framework for FinTech. Today’s main analysis: The key to successful P2P investing. Today’s thought-provoking articles: Shanghai office vacancies rise. Did India’s online lenders reap the benefit of a note ban? The rise of digital lending in Indonesia. United States PeerIQ highlights […]

Monday January 16 2017, Daily News Digest

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United States

United Kingdom

China

India

Asia

United States

Weekly Industry Update (Part 1): January 14, 2017 (PeerIQ Email), Rated: AAA

The FASB Fair Value Hierarchy in ASC 820 categorizes assets across three levels based on inputs to valuation techniques used:

  • Level 1 assets have actively traded markets; and valuation inputs are direct quoted prices for identical assets or liabilities.
  • Level 2 assets include valuation inputs other than quoted prices that are observable for the asset, either directly or indirectly.
  • Level 3 is the most unobservable level and requires many assumptions and estimates. Since a two-way market is not available, fair value is often based on models in which there are few, if any, external observations.

Under ASC 820 guidelines, the fair value of an asset reflects the exit price that would occur in an orderly market.

Current Alternative Pricing and Valuation Approach

Asset managers employ a number of informal approaches to valuation – several of which have limitations.

Amortized Cost: This approach values a loan at its outstanding balance at purchase price plus accrued interest. It may overstate loan price during the early period of the loan’s life, as it does not account for loan status (e.g., delinquency).

Haircut Matrix: Loans are valued at outstanding balance plus accrued interest, with haircuts applied to loans based on their stage in the delinquency queue. The size of the haircut is calibrated to historical loan performance. The haircut-matrix approach improves on an amortized cost approach by incorporating loan status, yet still suffers from major deficiencies ignoring A) changes in a borrower’s credit profile at loan level, B) seasonality of loans, and C) credit spread and interest rate risk premium, and D) a forward-looking view on cashflows.

Loan Loss Provisions: Banks holding loans in the hold-to-maturity book create a provision or accrued liability based on expected losses on the pool.

Asset managers can no longer rely on informal processes to value illiquid securities. A consistent and transparent valuation framework is necessary to promote investor confidence, market integrity, improve comparability of returns, and meet fiduciary and regulatory obligations.

The Key To Success In Investing In P2P Loans — With Useful Tools (Forbes), Rated: AAA

P2P loans have less volatility, a low correlation, and yield much higher returns compared to other fixed-yield investments. Median adjusted returns average 7% on a 36-month loan.

The P2P lending nature means that you must build a portfolio of hundreds of loans where each loan is a fraction of the total portfolio.

Lending Club, Prosper, and Funding Circle have all released statistics that show diversified portfolios give the greatest return and minimize risk.

Prosper also has statistics that show since July 2009, every portfolio of 100 notes or more has had positive returns.

With the recent influx of institutional money, MPL has become much more competitive. The best-quality loans can be snapped up within minutes of being posted.

Loan filtering can help investors consistently outperform the market. Based on back testing from NSR, the most effective filters are: loan grade, credit inquiries in the last six months, and loan purpose.

In the next table, you see how the annual income filter can affect returns on D- to HR-rated loans on Prosper.

Another great tool is LendingRobot, a registered investment advisor offering fully automated MPL investing for individuals.

OCC must tap breaks in trying to grant charters to FinTech lenders (The Hill), Rated: A

The Office of the Comptroller of Currency’s desire to add financial technology firms to its regulatory repertoire, if implemented without a sufficient foundation, could stall the U.S. financial system’s path to innovation and set it back by decades.

Currently, FinTech companies must work with governments on the state level to serve their customers and stay in business. Seeing how operating on a state-by-state basis could cause discrepancies, it seems putting all FinTech companies under the supervision of one federal regulator, as the OCC is suggesting, would streamline rulemakings and enforcement.

The goal of modernizing the OCC is well received, but the agency must take a more deliberative approach before deciding the future of a very complex and still developing industry.

From what we know right now, unless the OCC takes time to fully understand and address the complexities of the FinTech sector, as well as its current weaknesses and strengths, their hasty decision to bring FinTech companies under the same umbrella as banks could trigger unintended consequences for consumers and the U.S. financial system – something the U.S. economy cannot afford.

White House publishes Framework for FinTech (IBS Intelligence), Rated: A

The White House has released a whitepaper, A Framework for FinTech, which “expresses the forward-leaning posture of this Administration to innovation and entrepreneurship, generally, and FinTech in particular.”

The document lays out 10 principles, which, for example, encourage stakeholders to start with the consumer in mind, promote safe financial inclusion and financial health, build in cybersecurity, data security and privacy protections and protect financial security.

Online lenders seek more influence under Trump (The Salt Lake Tribune), Rated: A

The companies increasingly are joining lobbying groups that want laws changed to make it easier for them to attract new borrowers and investors as they look for ways to grow and limit future regulatory scrutiny.

The ability of the lenders to get what they want in Washington likely will have a significant impact on the future of the industry.

The desire to influence U.S. policy comes as regulators and lawmakers step up their scrutiny of marketplace lending. Online U.S. loan volume is expected to reach $120 billion by the end of the decade, up from $20 billion in 2015, according to Morgan Stanley research.

The State of Real Estate Crowdfunding (Lazy Man and Money), Rated: A

The road hasn’t always been easy. While a handful of companies have grown impressively, many others have fallen by the wayside, as many investors and real estate companies have been cautious in pursuing real estate crowdfunding. Those without the requisite experience in tech and real estate have struggled to find scale. Still, the young industry continues to grow impressively year over year.

While growth slowed somewhat in 2016 (likely in response to top-of-market trepidation) the 40% figure is still robust, and the U.S. accounted for a large share of the $1bn of overall industry growth this year.

The trend of division and specialization among real estate crowdfunding platforms is likely to continue, with the potential for consolidation in the advent of a dip in the market.

Deadline Nears for Comments on Proposed OCC Fintech Charter (Crowdfund Insider), Rated: B

The Office of the Comptroller of the Currency is still accepting comments on the proposed Fintech Charter for financial firms looking to operate with a federal charter. The deadline was initially set for January 15th but one report says the OCC has pushed the date back to January 17th to accommodate the long weekend.

The Fintech Charter has the potential to be a powerful tool for aspiring innovative financial firms that seek to compete on the national level.  But opposition is mounting from traditional financial firms that have become comfortable with the sizeable regulatory moat that has blocked most competition.

Fitch Ratings posited that a Fintech Charter could harm agility and add cost to innovators.  Moody’s took the other side of the argument stating a Fintech charter may aid marketplace lending platforms.

LendIt Forums are mini conferences (Bankless Times), Rated: B

A prominent lending and fintech conference is offering mini conferences to people interested in leaning more about the space.
LendIt Forums are free learning events for asset managers, real estate investors, financial advisors, commercial bankers, lending innovators, and venture capitalists.
The first LendIt Forum, Ask Us About…Marketplace Lending 101 takes place on Wed., Jan. 18 at 2 pm ET. Participants can ask questions to LendIt chairman and CEO Peter Rention and Crowdfund Insider founder and CEO Andrew Dix.
United Kingdom

WorldPay Founder Nick Ogden to Launch Fintech-Focused Challenger Bank (Finance Magnates), Rated: AAA

Nick Ogden, the founder of payments provider WorldPay, is gearing up to launch a new challenger bank in the UK after receiving approval by financial regulators, according to a Financial Times report today.

Ogden is planning to launch ClearBank in the coming months and will serve as chairman, according to filings with the Financial Conduct Authority. Former Royal Bank of Scotland senior manager Charles McManus will be chief executive.

Peer-to-peer lending set for growth in 2017 (Moneywise), Rated: A

“We expect a second explosion in the number of people lending and the amount lent in 2017, due to IF Isas [Innovative Finance Isas],” says Neil Faulkner, co-founder and managing director.

But while returns of “3%-7%,” and even “12%, [which] have been possible through short-term, asset back loans,” 4th Way expects to see these rates fall in 2017, “benefiting borrowers at the expense of lenders”.

China

Shanghai Office Vacancies Rise as P2P Lending Declines (Crowdfund Insider), Rated: AAA

Apparently, the slowdown and consolidation of the Chinese peer to peer lending industry is having an impact on the real estate market. Colliers International is reporting that Shanghai Grade A office space experienced a rise in average vacancy due to the widespread withdrawal from peer to peer lending platforms.

Combined with increasing inventory, office space in Shanghai experienced the highest full year supply in five years. The drop in demand also constrained the annual rental growth rate. The correction was said to be strongest in Puxi, where P2P tenants have clustered in the past two years.

Overall, the Shanghai office sector remained the most active investment market in China during 2016. Thirty-eight large-scale transactions totaling more than RMB 70.6 billion were completed during the year.

The China P2P Lending Market is Finally Slowing (Crowdfund Insider), Rated: A

Today with stricter rules coming and Chinese officials becoming more vigilant against bogus online lenders, the industry is finally slowing.  One of the rules requires online lenders to work with custodians for investor funds.  According to an article in China News, at the end of 2016, 184 of the 2300 P2P lenders had established such a relationship. Another 122 were in the process of signing a custodial agreement but the majority still have not complied with the law. According to an article in China News, transaction volume dropped by almost half in 2016.

China Rapid Finance Adds to Awards Haul with Hurun Honor (BusinessWire), Rated: B

China Rapid Finance Limited (“CRF” or “the company”), China’s largest consumer lending marketplace in terms of number of loans facilitated, added to its recent haul of awards and recognitions by being named to Hurun Report’s “2017 China New Finance Top 50.”

India

Did online lenders really reap the benefit of note ban? (BusinessToday), Rated: A

Online credit providers such as pay day loan companies and peer to peer (P2P) lending platforms are growing at a rapid pace and are reaching, where formal finance is unable to reach. While three years ago there were only two P2P lending platforms in the country, as of April 2016 the number had risen to 30, as notified by the RBI.

These platforms are reporting healthy double digit growth rates in disbursals as well as registrations month after month. The monthly average cumulative lending of P2P lenders has shot up from Rs 20-30 lakh to Rs 5-6 crore in just 3 years’ time. 

However, this is bright side of the story. While, number of loan seekers shot up, job losses and delay in salary payments have been the cause of concern for the lenders. Post the event, lenders have become cautious of the credibility of the borrowers, who might come across more hurdles before getting a loan.

Asia

Outlook 2017: Rise of Digital Lending in Indonesia (JakartaGlobe), Rated: AAA

Digital lending firms anticipate rapid growth this year, banking on a new regulation on information technology-based lending by the Financial Services Authority, or OJK, that will give these companies a firm legal basis to operate in Indonesia.

Lending through services such as Investree, Kredivo, UangTeman and Doctor Rupiah to name a few, could reach Rp 1 trillion ($75 million) this year, which represents a nearly seven-fold increase from last year according to an OJK estimation. While this amount is still small compared to the nearly Rp 4,200 trillion in outstanding loans held by conventional banks, the authority sees potential in these digital services that could fill a gap in small business financing, currently under-served by banks and financing companies.

By regulating how digital firms handle and store customers’ data, the OJK addresses confidentiality issues that are central to any lending business.

Authors:

George Popescu
Allen Taylor