Tuesday October 3 2017, Daily News Digest

blooom

News Comments Today’s main news: blooom passes $1B in assets under management. SoFi rolls out new deal. DBRS assigns provisional ratings to SoFi Professional Loan Program 2017-E LLC. The P2P Power 50. PeerStreet funds over $500M in loans with zero losses to investors. Today’s main analysis: LendingClub, Prosper after 10 years. FT Partners’ CEO monthly alternative lending market analysis (a […]

blooom

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United States

blooom Becomes Fastest Independent Robo-advisor to Pass $ 1 Billion in Assets Under Management (BusinessWire), Rated: AAA

According to monthly Securities and Exchange Commission (SEC) ADV filings, blooom, inc. reached $1 billion in assets under management (AUM) faster than any other independent robo-advisor. blooom achieved this milestone faster than Betterment and Wealthfront – and with less capital raised.

blooom, a first-of-its-kind robo-advisor, helps anyone with a 401(k) or comparable employer-sponsored retirement plan. blooom’s mission is to make “do-it-for-you” financial advice available, simple and affordable, regardless of the client’s account size.

The $1 billion AUM milestone is one of many key achievements for blooom over the past year.

  • In mid-2016, Sheila Bair, FDIC Chair under two U.S. Presidents and “the second most powerful woman in the world in 2008 and 2009” by Forbes, joined the company as an Advisory Board Member.
  • In February 2017, blooom raised $9.15 million in Series B funding and surpassed the $500 million mark in AUM.
  • Since 2014, as part of its free product evaluation, blooom has analyzed the health of more than $2 billion of individual 401(k) plan balances.
Source: BusinessWire

SoFi rolls out new deal amid exec reshuffle (GlobalCapital), Rated: AAA

SoFi filed documents with the Securities and Exchange Commission on Friday for the upcoming deal, under its SOFI shelf. Deutsche Bank, Goldman SachsJP Morgan, Bank of America Merrill Lynch and Morgan Stanley have been named in the documents as banks on the deal.

DBRS Assigns Provisional Ratings to SoFi Professional Loan Program 2017-E LLC (DBRS), Rated: AAA

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of notes issued by SoFi Professional Loan Program 2017-E LLC (SoFi 2017-E):

— $72,850,000 Class A-1 Notes at AAA (sf)
— $303,000,000 Class A-2A Notes at AAA (sf)
— $161,000,000 Class A-2B Notes at AAA (sf)
— $55,000,000 Class B Notes at AA (sf)
— $34,500,000 Class C Notes at A (sf)

SoFi Unlikely To Damage Digital Lending Sector (Market Intelligence), Rated: AAA

The recent exit of Social Finance Inc. CEO Mike Cagney represents the third departure of a big-name digital lending CEO since the start of 2016. Social Finance, more commonly known as SoFi, was long considered a bright spot in the digital lending industry after making it through a rough 2016 unscathed.

Everything unravels

Heading into 2016, investors started to notice higher-than-expected defaults on loans from large marketplace platforms, especially in lower-graded loans. In order to compensate for these higher losses, some lenders increased interest rates to keep investors on their platforms. For institutions that had been purchasing loans and packaging them into asset-backed securities, the underperformance of loans in previous securitizations became a concern. By April, Citigroup Inc. was having trouble marketing a new securitization of loans from personal-focused lender Prosper Marketplace Inc., leading the two firms to end their partnership. Without this important source of capital, Prosper saw originations fall 55.5% during the second quarter of 2016.

Source: Market Intelligence

Past problems lead to a brighter future

Digital lenders entered 2017 with a renewed focus on operational efficiency and loan quality. For some, these measures are starting to pay off. LendingClub and On Deck both reached targeted profitability measures in the second quarter of the year. Prosper has reignited loan growth thanks to a $5 billion commitment to fund new loans, and the company reported positive adjusted EBITDA for the second quarter. Ex-LendingClub CEO Renaud Laplanche has launched a new personal-focused lender called Upgrade. Student-focused lender Earnest has taken a different approach and according to Bloomberg is seeking a buyer for its business. Originations have started to rebound as large lenders in the industry regain confidence in their models and continue to ramp up volumes.

Source: Market Intelligence

Lending Club and Prosper Data: 10 Years In (Lend Academy), Rated: AAA

Lending Club and Prosper have both been around over 10 years now. A lot has changed since both companies were founded, including the performance of the loans. In this blog post we’ll share the performance of each platform over the last 10 years. The fact that we have access to this data set is one of the things that makes marketplace lending unique. The screenshots from this post are taken from NSR Invest, a marketplace lending robo advisor that is also a sister company to Lend Academy.

Lending Club Data

For Lending Club investors, most loan grade returns peaked in 2013. As you look at this chart it is worth noting that the 2017 numbers are somewhat meaningless because the loans there have not seasoned yet.

Source: Lend Academy

Prosper Data

Prosper launched in 2006 as the first p2p lending platform in the U.S. Initially, they operated with a very different model allowing deep subprime borrowers on to their platform.

When they relaunched Prosper grew very slowly, they needed to prove out their platform to the many retail investors who had lost money in Prosper 1.0. Even in 2009 and 2010 originations were just $8 million and $27 million respectively. Prosper began to scale significantly in 2011 and onwards.

Prosper’s C grade loans are the closest to Lending Club’s D grade loans so this is the best side by side comparison.

Source: Lend Academy

FT Partners’ CEO Monthly Alternative Lending Market Analysis (October ’17) (FT Partners), Rated: AAA

Source: FT Partners

September was another active month for the FT Partners team as we announced three significant FinTech transactions and the appointment of two additions to our senior team.

We are pleased to announce our role advising:

  • Source: FT Partners

    Download the full report here.

    PeerStreet funds over half a billion in loans, maintains zero losses to investors (PeerStreet Email), Rated: AAA

    PeerStreet, the real estate investing platform for real estate debt, has just hit the milestone of having funded half a billion in loans and with zero losses to investors since the company launched in 2015.

    Platforms in the P2P and crowdfunding space are seeing increasing competition and scrutiny, but PeerStreet has continued to offer investors access to quality loans and high yields, earning the public testimonial of some high-profile users, such as 

    College Ave Student Loans Completes $ 161MM in Inaugural Securitization (BusinessWire), Rated: A

    College Ave Student Loans, the leading next-generation student loan marketplace lender, announced it has completed a $161 million securitization of private student loans, its first securitization. The CASL 2017-A transaction, completed over the summer, received an ‘A’ rating from DBRS and a ‘BBB’ rating from S&P for its highest-rated senior notes. The transaction was four-times oversubscribed. Barclays was the underwriter on the transaction.

    The securitization also marks a year of growth for College Ave Student Loans. To date, the company has secured more than $2 billion of committed loan purchasing power from multiple sources.

    Why are Amazon, PayPal meeting with bank regulators? (American Banker), Rated: A

    Technology giants like Google, Amazon, Facebook and Apple are showing an increasing interest in engaging with federal banking regulators, a move that underscores Silicon Valley’s growing involvement in the financial services arena.

    Amazon lobbyists met with the Office of the Comptroller of the Currency starting in the second quarter of 2016, and again this year to discuss “issues related to mobile payments and payment processing, financial innovation, and technology,” according to publicly available lobbying disclosures.

    PayPal, meanwhile, met with OCC officials in the second, third and fourth quarters of last year to discuss “mobile payment innovation” issues related to underserved customers and remittances and money transfers, according to its disclosures.

    Vestwell Raises $ 8 Million in Series A Funding led by F-Prime Capital Partners (Business Insider), Rated: A

    Vestwell, the industry’s first and only fiduciary-backed retirement platform for the financial advisor community, today announced $8 million in Series A Funding led by F-Prime Capital Partners, the venture capital group associated with the parent company of Fidelity Investments, with participation from Primary Venture Partners, FinTech Collective, and Commerce Ventures. Launched in late 2016, Vestwell received $4.5 million in its initial Series Seed of financing in September 2016.

    So far this year, the company has signed over 50 registered investment advisor (RIAs) firms, as well as independent broker-dealers, asset managers, and bank/trust custodians, with plans to onboard several thousand advisors this year.  The funding will be used to grow the team while further enhancing the technology.

    YieldStreet Adds Three Tech Disruptors to Its Advisory Board (YieldStreet Email), Rated: A

    YieldStreet, the fintech company seeking to change the way we invest and accumulate wealth, announced the addition of three new members to its advisory board: Ron Suber of Prosper Marketplace, Alexandra Wilkis Wilson of Gilt, and Mitch Jacobs of OnDeck.

    The three new members join an elite team of advisors whose deep expertise spans technology, investing, policy and financial services. The current members include economic policy expert Donald Marron Jr. of the Urban Institute, Rahul Gupta former Group President of Fiserv (NASDAQ: FISV), Mark Gerson founder of GLG, former House  Majority Whip Tony Coelho, and Todd Deutsch formerly of Goldman Sachs.

    The Risk Of Playing Alt Lending’s Rate Limbo (PYMNTS), Rated: A

    And while there are myriad explanations, one clear issue – according to Quick.me CEO Ola Okeshola – is the simple fact that access to capital for small businesses has dried up significantly since the Great Recession, as banks have either gone out of business or lost interest in lending to that sub-segment of the market.

    FinTech, Okeshola said, can offer SMBs streamlined access to funds in ways that are unprecedented. That’s the good news: There is a large, hungry and addressable market out there.

    The more challenging news is that finding ways to address that market isn’t necessarily as easy as flipping a switch – it’s addressing the right problem in the right way.

    For small business loans, he explained, giving an SMB a low interest rate or a very fast approval time nearly guarantees they will sign on, regardless of how much it cost the alt lender to acquire that customer.

    In Quick.me’s case, that means working with POS providers as their referral source, to basically cut their customer acquisition costs as much as possible. Because they can’t make money back spending hundreds of millions to acquire customers, they instead decided to explore how to work with someone who’s already spent that money.

    The Source Code: Max Levchin (Marketplace), Rated: A

    Max Levchin knows a thing or two about money. He helped found PayPal almost 20 years ago, and his new startup, Affirm, is in the business of lending.


    Source available: Finance Industry Files Lawsuit to Overturn CFPB Arbitration Rule (Ballard Spahr Email), Rated: A

    A coalition of chambers of commerce and consumer financial services associations, including the U.S. Chamber of Commerce and the American Bankers Association, filed a lawsuit in federal court on Friday seeking to block the implementation of the Consumer Financial Protection Bureau’s final arbitration rule. The rule would prohibit the use of class action waivers in consumer financial services arbitration agreements. Class action waivers preclude consumers from participating in class action lawsuits and instead require them to individually arbitrate their disputes with companies.

    Fintech startup Curve partners with accounting software Xero to make filing expenses ‘frictionless’ (TechCrunch), Rated: A

    Curve, the London fintech startup that lets you consolidate all your bank cards into a single card and track your spending, has partnered with accounting software Xero to remove much of the friction involved in filing expenses. The move is part of the newly-launched ‘Curve Connect’ feature that will see Curve connect to a growing list of third-party apps and services to make managing your money easier.

    Specifically, the Xero feature gives you the option to connect the Curve app to Xero so that spending on your Curve card (and therefore any of the underlying cards you’ve linked Curve to) can be automatically added to the accounting software without the need to enter each expense manually.

    Here’s How Blockchain Will Change the Financial Services Industry (Business.com), Rated: A

    The blockchain is, essentially, a vast, distributed ledger capable of recording anything of value. It can record deeds, rental agreements, equities, contracts, money, titles and, realistically, any kind of asset. These records can be stored and moved privately between two parties independent of any financial intermediary. It is essentially a peer-to-peer transaction tool that does not rely on an intermediary for verification or identification of the involved parties.

    If financial intermediaries are not required for transactions, banks are the supposedly biggest losers in this equation.

    Lawyers, investment bankers, and venture capitalists come with high attached costs, but the emergence of peer-to-peer lending schemes and equity crowdfunding schemes have derailed this market for over a decade.

    First Data, Live Oak team up on fintech startup to take on big banks (Biz Journals), Rated: A

    A New York technology firm and a North Carolina banking company have joined forces on a startup that could help community banks compete with mammoth firms such as Bank of America and Wells Fargo.

    Checking account fees surge. Here’s how to dodge them (Bankrate), Rated: A

    There is a paradox in banking right now: Fees have never been higher, but it’s also easier than ever to sidestep them.

    The average cost of an out-of-network ATM withdrawal is $4.69, up 2.6 percent from a year earlier, according to the 2017 Bankrate checking account survey. Meanwhile, overdraft fees rose 1 percent to $33.38.

    But if you tweak your habits, assess priorities and lean on technology, you can dodge these charges altogether.

    Overdraft fees

    Source: Bankrate

    Link a savings account. This will serve as a backstop to your checking account. Your bank may charge you to move money when you overspend, but that fee might be $5 to $10, McBride says — significantly less than the cost of an overdraft. If you have an alert on, you can move money from your buffer account into your checkingwithout a charge.

    Instead, look for no-fee or low-fee accounts, like those offered by online banks and fintech companies, like Dave.com, Chime and Qapital.

    ATM fees

    The average ATM surcharge — the fee levied by the other bank — was $2.97, up 2.4 percent from a year earlier, according to our survey. The average fee banks charge to use another bank’s ATM was $1.72, up nearly 3 percent from a year earlier.

    Source: Bankrate

    If it is unwilling or if you want better options, shop around for other accounts. Some online banks not only have no out-of-network fee, but cover a set amount — say $15 — of ATM surcharges each month.

    Tamarack Launches 5 Clients with Lease/Loan Origination Accelerator (Monitor Daily), Rated: A

    Tamarack Consulting, a provider of independent software solutions in the equipment finance and commercial lending industry, has taken five new clients live on Salesforce utilizing Tamarack’s proprietary Lease/Loan Origination Accelerator.

    With more than 40 Salesforce clients utilizing the Lease/Loan Origination service, Tamarack added VFI Corporate Finance, TEAM Funding Solutions, Centra/4 Hour Funding, BSB Leasing and Dimension Funding to its list of clients that launched through the Lease/Loan Accelerator and are now processing leases and loans via Salesforce.com.

    Tamarack’s Lease/Loan Origination Accelerator on Salesforce is a scalable solution offering users the ability to automate work queues, increase throughput of loans without additional head count and customize notifications from lead generation through to funding.

    Average CEO Pay at Big RIAs Nears $ 800K (Financial Advisor IQ), Rated: B

    If you’re trying to break away or simply want to see what the big boys are doing on The Street in terms of compensating key employees, then Fidelity has some salary benchmarking figures that might be of interest.

    In a new research report, the asset manager and custodian surveyed large RIAs and multi-family offices to see what they’re paying in 20 different job categories.

    Participants were handpicked by Fidelity and required to have at least $1 billion in assets under management. Compensation ranges from CEOs getting on average $458,900 in base pay — $797,300 with cash and other bonuses included — to $285,200 for a typical big company chief investment officer ($469,600 total).

    By contrast, chief financial officers have “a significantly lower portion of their compensation based on incentives,” the survey adds. Base pay for a typical CFO is listed at $243,100 with total compensation topping $328,000.

    Angelo State University Students Graduate With Very Little Debt (San Angelo Live), Rated: B

    Angelo State University has been ranked among the nation’s top 150 “Public Colleges That Give Students the Least Private Student Loan Debt” by The Student Loan Report (SLR), a news and information guide dedicated exclusively to college student loans and financial aid.

    ASU is ranked No. 57 in the nation, which puts ASU in the top 12 percent of the 480 public colleges in the U.S. that left students with private student loan debt. According to the SLR rankings, only 3 percent of ASU graduates leave school with outstanding private student loan debt, and their average debt load is $14,431.

    The fintech name generator (Vested Ventures), Rated: B

    Vested has launched a fintech name generator with categories for banking, investment management, lending, payments, personal finance, tax & accounting, wealth management, blockchain, private equity, insurtech, and more. Check it out here.

    United Kingdom

    What’s £38m of “other expenses” between friends? (Financial Times Alphaville), Rated: AAA

    Take Funding Circle, for example.

    The accounts showed sales up 59 per cent to £50.1m, while its operating loss worsened at a slower rate of 30 per cent to £51.8m.

    Despite the progress, operating expenses at £103m still stand at double the company’s sales.

    Rent on land and buildings, as well as depreciation and amortisation, make up another £9m or so of operating expenses.

    Source: Financial Times

    The P2P Power 50 (P2P Finance News), Rated: AAA

    So, who are the key players influencing the UK’s P2P sector? The inaugural Peer2Peer Finance News Power 50 list aims to identify the big names in the industry who have helped it grow into a force to contend with over the past decade and who will play a key role in its future.

    Our top 10 list gives particular acknowledgement to the most influential individuals that we believe have helped establish the P2P brand or will be the biggest drivers in its future.

    Source: P2P Finance News
    Source: P2P Finance News

    Read the full list of P2p powerbrokers.

    £200m UK SME funding programme launched by ThinCats (RealBusiness), Rated: A

    Lending platform ThinCats and parent company ESF Capital have introduced a £200m SME funding programme for British growth businesses.

    The launch of the SME funding scheme by ESF and ThinCats will support loans from £100,000 right up to £5m for leaders looking for an injection to take their companies to the next level.

    The company is joined by New York-headquartered Waterfall Asset Management, which has added £70m to the pot, a firm that currently manages $6bn of assets.

    Why financial services should be terrified of dispensing wealth management robo-advice (Banking Technology), Rated: A

    Robo-advice costs less than “bricks & mortar & human” services, hopefully harvesting a bigger market. Today it primarily invests clients’ money in mainstream investments aimed at generating attractive risk-adjusted returns over time.

    With mutual distributed ledgers (aka blockchains), there are going to be immutable versions of what was advised, what happened, and what the robo-code at the time decided. Robo-advice with blockchain leaves a permanent trail.

    London-Based Fin-Tech Platform Nebeus Championing Banks as Public Utilities (Business Insider), Rated: A

    London-based Nebeus.com – a crypto-currency platform enabling customers to buy, sell, store, remit, lend and borrow crypto-currency funds – is launching a pre-ICO campaign to fund its ambitious plans.

    Developed over the last three years, the company currently operates as a crypto-currency wallet, allowing consumers to buy, remit, loan, borrow and exchange. They are also proud to have recently joined LEVEL39 – the world’s most connected community for finance, cybersecurity, retail and smart-city technology businesses.

    Having raised over £1.5M GBP in private funding in previous years, the company wants to open up its platform to third-party developers; creating a ‘supermarket’ of financial products and services based on blockchain and smart contracts, while providing full transparency and security as it serves individual, corporate and developer communities.

    Download the Nebeus whitepaper.

    Landbay makes five new hires following record lending month (Financial Reporter), Rated: A

    Landbay has reported a record month of buy-to-let lending in September, with a total of £6.31 million lent across 31 mortgages.

    In response to the growth, as well as to the new PRA regulation surrounding portfolio landlords, Landbay has made five new hires.

    Among them, James Cooper-Smith and Joela Jenvey both join the lending team as Senior Lending Officer and Key Account Manager respectively, while Wing Chan joins the wider team as Operating Manager.

    How To Raise Finance For Your Business (The Voice), Rated: B

    1. THE SOURCE

    Equity has massive implications for dilution – so don’t ignore the debt option.

    2. THE FINANCIAL MODEL

    Put your figures into a spreadsheet and test them. Try out different scenarios – see what happens to the numbers.

    3. THE VALUATION

    To get a sensible, realistic idea of the value of your company, compare the most recent valuations for transactions in the space.

    4. THE MONEY

    For example, Sola Bank and Baldetton Capital work in the £100million arena. Whereas EIS/SEIS and VCT funds generally work in the £1-5million sphere. For smaller amounts contact angel investors.

    5. THE CONTACTS

    6. THE DOCUMENTS

    It is essential to prepare a one-page summary of the opportunity. Too much information is not helpful.

    China

    CBRC cautions on surging consumer loans (China.org), Rated: A

    China’s top banking regulator on Friday warned surging consumer loans may pose potential risks to the country’s lending system.

    It also cautioned against a fast rise in consumer leverage ratio.

    Recent inspections on banks by CBRC branches and the People’s Bank of China, the central bank, have found that some consumer loans were used to make a down payment for home purchases or as an investment, rather than using them for travel, education, home renovation or to buy consumer durables.

    International

    Souqalmal.com raises $ 10m in Series B funding with investment from UK’s GoCompare (The National), Rated: A

    Price comparison website Souqalmal.com has raised US$10 million in Series B funding to expand its regional presence and increase its offline service offering, with leading UK firm GoCompare joining the funding round.

    GoCompare Group, which operates the popular UK comparison site GoCompare, is a minority investor in the funding, which is led by Saudi-based Riyad Taqnia Fund (RTF), with UAE Exchange Group also participating.

    Asia

    TrueMoney finds a niche in Myanmar’s mobile fintech space (Myanmar Times), Rated: AAA

    TrueMoney, one of the newest additions to the string of fintech firms vying for a slice of the mobile money market in Myanmar, is upping its game in the face of rising competition.

    TrueMoney, a Thai company, provides mobile financial services allowing users to deposit cash in mobile accounts online or at physical point-of-sale outlets and transfer cash equivalents to a network of agents domestically or overseas.

    In ASEAN, TrueMoney is the only fintech company to have established a mobile money network in Thailand, Cambodia, Vietnam, the Philippines, Indonesia and Malaysia, allowing users to transfer money between these countries.

    TrueMoney is also the only mobile payments firm that allows Myanmar workers in Thailand to send money home, all within the hour.

    Around 80 per cent of the population do not have bank accounts in Myanmar, where most prefer to carry large wads of cash. With mobile money technology, many operators see the country leapfrogging bank accounts altogether.

    Middle East

    This UAE Startup Secured an Investment of US$ 5M, and is Planning on Expanding to Saudi Arabia (Startup Magazine), Rated: A

    The leading MENA’s peer to peer lending platform, Beehive, has managed to secure US$5 million investment as part of a Series A round Riyad TAQNIA Fund.

    Up to now, Beehive has successfully arranged the lending of over US$ 35 million (AED 130 million) to more than 200 business finance requests. In addition to that, it also registered more than 5,000 international investors.

    Authors:

    George Popescu
    Allen Taylor

Thursday June 8 2017, Daily News Digest

Funding Circle loans

News Comments Today’s main news: Goldman Sachs now highest-interest paying bank for savers. Zopa to build challenger bank in Barcelona.  KBRA releases comprehensive surveillance report for American credit acceptance receivables trusts. CreditEase Wealth Management expands to Singapore. Today’s main analysis: Funding Circle June review. Today’s thought-provoking articles: OCC posts FAQ on fintech questions. Addepar raises $140M in quiet […]

Funding Circle loans

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KBRA Releases Comprehensive Surveillance Report for American Credit Acceptance Receivables Trusts (KBRA), Rated: AAA

Kroll Bond Rating Agency (KBRA) takes rating actions on 8 American Credit Acceptance Receivables Trust.  In total, 15 notes were affirmed and 15 were upgraded. The data used are as of the April 31, 2017 collection period. No rating actions were taken on American Credit Acceptance Receivables Trusts 2017-1 and 2017-2, since these transactions have less than 6 months of seasoning. The rating actions reflect the fact that losses are in-line with KBRA’s initial loss expectations and credit enhancement has built for each class of notes. The breakeven loss multiples for each class of notes were sufficient for their respective affirmations and upgrades.

Credit enhancement for each transaction consists of overcollateralization (“OC”), subordination of junior notes, cash reserves, and excess spread. Each transaction has either met or is building to their respective target OC. The collateral for all the transactions has amortized from their initial pool balance since closing.

OCC Posts FAQ That Addresses Fintech Questions (Crowdfund Insider), Rated: AAA

The Office of the Comptroller of the Currency (OCC) is out with an FAQ to supplement a Bulletin (2013-29). Several of the items address Fintech specifically, as well as marketplace lending.

9. How can a bank offer products or services to underbanked or underserved segments of the population through a third-party relationship with a Fintech company?

Banks may partner with Fintech companies to offer savings, credit, financial planning, or payments in an effort to increase consumer access. In some instances, banks serve only as facilitators for the Fintech companies’ products or services with one of the products or services coming from the banks.

10. What should a bank consider when entering a marketplace lending arrangement with nonbank entities?

When engaging in marketplace lending activities, a bank’s board and management should understand the relationships among the bank, the marketplace lender, and the borrowers; fully understand the legal, strategic, reputation, operational, and other risks that these arrangements pose; and evaluate the marketplace lender’s practices for compliance with applicable laws and regulations. As with any third-party relationship, management at banks involved with marketplace lenders should ensure the risk exposure is consistent with their boards’ strategic goals, risk appetite, and safety and soundness objectives. In addition, boards should adopt appropriate policies, inclusive of concentration limitations, before beginning business relationships with marketplace lenders.

Read the full FAQ here.

THE REAL ESTATE START-UP JARED KUSHNER CO-FOUNDED IS NOW WORTH $ 800 MILLION (Vanity Fair), Rated: A

In May, real-estate investing start-up Cadre found itself in the limelight when The Wall Street Journal reported that Jared Kushner, President Donald Trump’s son-in-law, had failed to disclose his investment in the three-year-old company when he became a senior adviser to Trump. Jared and his younger brother, Josh, are both listed as the company’s co-founders, along with Ryan Williams, who met Josh Kushner at Harvard. Before Trump’s inauguration, Jared Kushner stepped down from Cadre’s board and sold some of his stake in the company, Bloomberg reports.

Now, the company has raised $65 million in funding, valuing Cadre at $800 million. The biggest firm to invest in the new round of funding is Silicon Valley heavyweight Andreessen Horowitz, which joins a number of institutional investors, including Vinod Khosla, David Yu, George Soros, and Trump adviser Peter Thiel in backing the real-estate tech start-up.

Cadre is just one Kushner-connected start-up in the tech world. Before he divested from his assets, Kushner had a $30 million stake in Thrive, his brother’s venture-capital firm, which invests in companies that include Slack, Glossier, Juicero, and, of course, Cadre.

Statement by Con Hurley, Executive Director, Online Lending Policy Institute (OLPI) (OLPI Email), Rated: A

“At a time when some are calling to reimpose the strictures of the Glass-Steagall Act on banks, no one is calling for a return to the days on interstate restrictions on banking activities. Yet, this is precisely what the misguided federal court decision in the Madden case would achieve.

The U.S. House of Representatives is expected to ratify the longstanding law and custom of banking in the U.S. that a loan, once made, is valid regardless of subsequent buyers or assignees of that loan. The Online Lending Policy Institute salutes this action. Further, OLPI urges the Senate to make this part of its reform legislation.”

Summary:
The CHOICE Act 2.0 introduces amendments to the National Bank Act, Federal Deposit Insurance Act, Home Owners’ Loan Act, and Federal Credit Union Act to clarify that the interest rate of a loan that is valid when made by a national bank, state-chartered insured depository institution, federal savings association, or federal credit union shall remain valid regardless of whether the loan is subsequently sold, assigned, or otherwise transferred to a third party. These amendments would overturn the 2015 decision of the Second Circuit Court of Appeals in Madden v. Midland Funding, which suggested that loans held by non-bank entities may be subject to state usury laws even where the loans were originated by national banks for which such laws are preempted. The Madden decision has created some uncertainty in the secondary markets for bank-originated loans.

InstaLend expands to three new states (PR Newswire), Rated: A

Today, InstaLend announced successful growth of its real estate crowdfunding platform, expanding to Pennsylvania, Illinois, and Georgia. As of June 1, 2017, investors in these three states, as well as New Jersey, will be able to participate in passive residential real estate investments through InstaLend’s online crowdfunding platform.

For any given project, InstaLend funds between 80 and 90 percent of the total project’s cost (acquisition + renovation) in the form of a senior debt loan. The capital provided by InstaLend is sourced through its network of crowd investors, and borrowers commit between 10 and 20 percent of total project cost as common equity.

RealtyeVest Lowers Minimum Investment Requirement for All Real Estate Offerings (PR Newswire), Rated: A

RealtyeVest lowered their required minimum investment amount today to just $5,000 for all offerings on their real estate crowdfunding platform for accredited investors. Previous minimum investment amounts ranged from $15,000 to $50,000, depending on the real estate project. The new $5,000 threshold is intended to draw first-time investors to experience RealtyeVest’s high-caliber performance with a nominal financial commitment.

RealtyeVest connects commercial and residential real estate owner-operators with investors. Their one-stop platform, realtyevest.com, provides a simple, secure, and transparent digital dashboard for accredited investors to partake in exclusive high-yield investment opportunities. New investors can complete the simple accreditation process right on the RealtyeVest website and become accredited within approximately 24 hours.

Payscape CEO Jeremy Wing On The Fintech Company’s Expansion and Move To Midtown (Hypepotamus), Rated: A

Payments to the people — it’s the motto and guiding principle behind Payscape, an Atlanta-based Fintech company that provides small to mid-size business owners with technologies that help them accept payments, streamline business, and increase cash flow. Payscape has grown exponentially since its inception in 2004 — their commitment to consistently developing and iterating new products that serve their customer base has allowed them to expand to 14 offices. They’ve processed 125 million transactions to the tune of $7 billion.

CEO Jeremy Wing and his team have had a busy 2017 thus far. The company invested $50 million to expand their operations, add 200+ jobs, and relocate to Midtown for access to talent and strategic partners. Most recently the team launched a new software product — Payscape Registration, an online registration management system with integrated payments. It’s already on the wish list of a few major universities, including Cornell University.

Q2 2017 was big for Payscape. Tell me more about your product launch and how it will add to Payscape’s current features.

Our new product includes a mobile app for event registration and payments, enhanced communication features such as text and an integration marketplace that will make it easier to connect other SaaS technologies with our platform.

You’re investing $50 million on an expansion and relocation to Midtown. What prompted your decision?

Midtown is the center of the Atlanta Fintech hub. It’s near Tech Square and Georgia Tech, and strategic partners like NCR, ParkMobile, Equifax, TTV, TechSquare Labs and Flashpoint. We not only look to partners to grow businesses, but as a major talent acquisition tool.

We also love the infrastructure for live/work/play. Most of our team will be using alternative transportation to get to our new headquarters.

With Fintech Changing Financial Services, Where Does Regulation Fit In? (San Francisco Fed), Rated: B

Which rules and regulations apply to products that use new financial technologies? The Federal Reserve is taking steps to make answers easier to find.

Take last fall’s Consumer Compliance Outlook. The Fed included a list of existing laws, regulations, and supervisory guidance that fintech firms and their depository institution partners might find relevant.

That’s why San Francisco Fed fintech advisors are available for in-person and virtual consultations with fintech firms and their depository partners.

6 Tips for Getting the Best Deal on a Mortgage (The Fiscal Times), Rated: B

Here’s what you need to know to score a mortgage in today’s market:

  1. Start the process early. You can make the process easier by having your financial documents — including tax returns, bank statements and pay stubs — in order and ready to share with your lender. More than half of borrowers recently surveyed by FreeandClear.com said that the paperwork was the most challenging part of the mortgage process. Pull your credit report, too, to make sure that there aren’t any errors or surprises that could haunt you.
  2. Shop around. Get quotes from at least three lenders, including a national bank, a local bank or credit union and an online lender.
  3. Understand private mortgage insurance. Any time you have a down payment of less than 20 percent, you’ll need to pay mortgage insurance on the loan, which will push up your monthly bill.
  4. Ask about all your loan options.
  5. Consider locking in your rate. On a median-priced home, an increase in mortgage rates from 4 percent to 5 percent would add $100 to the monthly bill, according to Zillow.
  6. Remember you don’t need to borrow the max.
United Kingdom

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

Summer has arrived, and it’s been another exciting month. We’ve been given full authorisation from the UK regulator, the Financial Conduct Authority – another step forward to offering industry-leading, tax-free returns with the Funding Circle ISA, which we plan to launch later this year. You can read the full story in this article.

You’ve helped more than 8,500 small businesses access finance in the last 6 months…

Source: Funding Circle

Totalling over £610 million lent

To see a breakdown of the loans defaulted last week simply click on loans defaulted 1st June 2017.

Assetz Capital Launches Property Secured Investment Account (P2P-Banking), Rated: A

P2P Lending marketplace Assetz Capital today announced the launch of another account type. The Property Secured Investment Account (PSIA) is marketed as a way to invest exclusively in property backed loans with automatic diversification intended to help investors spread their risk across a diverse range of lending.

The target rate for the Assetz PSIA account is 5.5%.

Alternative lender Liberis announces fintech integration with Xero (AltFi), Rated: A

Leading UK-based merchant cash advancer Liberis has partnered with accounting software firm Xero. The deep integration will open up seamless access to Liberis‘ funding products for Xero users.

A specialist in small business accounting, Xero has over one million subscribers in more than 180 countries. Those users will now be able to access Liberis’ merchant cash advances in-app or on-site.

These advances can be managed in real-time using the Xero technology platform, giving businesses an accurate overview of their cash-flows.

Folk2Folk Announces Multiple New Hires as Part of National Expansion Plans (Crowdfund Insider), Rated: B

Specialist business peer to peer lending platform Folk2Folk has hired a new Chief Marketing Officer (CMO) and four Business Development Managers (BDM). Folk2Folk specializes in secured loans for businesses across the UK. The platform matches local businesses looking for finance with investors looking for a great return.

China

CreditEase Wealth Management Expanded in Singapore to Poise for Fintech-driven Globalization (PR Newswire), Rated: AAA

Leading Chinese Fintech and wealth management company, CreditEase announced today the opening of its new Singapore office in the Asia Square Tower. The new office opening was hosted by CreditEase Founder and CEO Ning Tang, CreditEase senior executives, distinguished guests from Blackstone, KKR and Tishman Speyers and other strategic partners.

Tang forecast an explosive development in crowdfunding, robo-advisor, insurance tech and blockchain innovations in the coming decade, while reiterating the company’s willingness to share its Fintech achievements and the “development dividend” to continuously create value for clients.

CreditEase Wealth Management opened its Singapore office in October 2014 with a focus on global real estate finance and investment. Its global property FoF products have been very popular among high-net-worth Chinese clients. When it obtained an asset management license from the Monetary Authority of Singapore (MAS) in 2016, it marked the cornerstone for further business expansion in the country.

In addition to Singapore, CreditEase operates overseas offices and affiliate offices in Hong Kong, New York, and Tel Aviv. Domestically, the CreditEase wealth management network covers over 40 mainland cities, and in in 2016 the company was awarded “Best Non-Bank Private Wealth Product” by The Asian Banker.

Hong Kong’s Central Bank Inks FinTech Pact with Shenzen in China (Cryptocoins News), Rated: A

The Hong Kong Monetary Authority (HKMA), the defacto central bank, is co-operating with the neighboring city of Shenzhen in China over developments in financial technologies or FinTech.

Given the geographical proximity between the two cities, the bilateral co-operation is certain to promote FinTech activity and adoption in two of the most prosperous cities in the region. Shenzhen is among the largest and the wealthiest cities in China, one that links Hong Kong to the Mainland.

P2P Lenders Disclosing Financial Data in NIFA’s Information Disclosure System (Xing Ping She Email), Rated: A

National Internet Finance Association (NIFA) launched the Information Disclosure System on June 5th, and the first 10 P2P lenders were known to disclose financial data in the system, including Wei Dai Network, Lufax, Souyidai.com, etc.

Now, we can search for basic and operating information of the above P2P lenders on the website of NIFA. And 8 of them have disclosed financial information as follows.

European Union

Zopa to build new challenger bank from development centre in Barcelona (Finextra), Rated: AAA

Zopa, the innovative finance company, today announces the opening of a development centre in Barcelona, Spain.

The new hub will initially focus on building the technology to support the launch of Zopa’s next generation bank and developers will work on developing payment gateways, credit card processing, and deposit systems.

Swiss Fintech Giant Cuts a Third of its Jobs (finews.com), Rated: A

Martin Saidler has built Centralway Numbrs with a considerable personal financial investment, achieving a most respectable response from investors. The firm is a global distribution platform for banking products, a super market for customers of retail banking services ranging from loans to car insurance and funds.

Centralway Numbrs in the final week of May abruptly terminated the contracts of about 50 of its staff. The people affected are programmers and other technical staff. Reason for the cuts are high development and personnel costs.

The company still doesn’t generate significant revenues with its banking app and the platform. Therefore, the fintech has to cut costs, eliminating jobs in Zurich or moving them elsewhere.

Centralway Numbrs says the reduction of jobs in Zurich is part of a restructuring process. Jobs will go in Zurich, but the company continues to hire programmers across the world who work from home – so-called remote workers, the company told finews.com.

Centralway Numbrs says the reduction of jobs in Zurich is part of a restructuring process. Jobs will go in Zurich, but the company continues to hire programmers across the world who work from home – so-called remote workers, the company told finews.com.

Centralway Numbrs has reached its first agreements with three companies this year, generating an initial return: Postbank, Norisbank and SWK Bank, three German companies which make their products available via the platform. These contracts aren’t enough to make the platform viable though.

Fashion magnate takes $ 225M+ stake in Swedish payment unicorn Klarna (TechCrunch), Rated: A

Payments startup Klarna is ramping up its valuation again as it picks up a new, strategic investor. Last valued at $2.25 billion in 2015, the company today announced that Brightfolk, controlled by fashion tycoon Anders Holch Povlsen, is becoming a “qualified owner” of Klarna — that is, buying up at least 10 percent of the company.

At Klarna’s $2.25 billion valuation, Brightfolk’s 10 percent+ stake is valued at $225 million or more. But while the company is not commenting on any of the financial terms of today’s deal, TechCrunch understands that this is an “up” round, with the valuation now higher than $2.25 billion.

Banks’ homegrown efforts dominate Poland’s fintech scene (Financial Times), Rated: A

Poland’s most popular mobile payments service was not created in a garage or innovation lab. It was designed around a conference table by the heads of country’s six biggest banks, who had decided the market needed a new service.

Poland’s most popular mobile payments service was not created in a garage or innovation lab. It was designed around a conference table by the heads of country’s six biggest banks, who had decided the market needed a new service.

In 1989, when communist rule ended, the country had just two retail banks, both of which were state-controlled. International banking groups and new private Polish banks quickly joined the fray.

Today, services such as free real-time online payments are standard, contactless payment is available in almost every shop throughout the country and customers have a choice of apps for organising their finances.

International

Suretly, a Crowdvouching Alternative to Peer-2-Peer Lending Announces ICO (Coinspeaker), Rated: A

Suretly is a unique crowdvouching platform that offers an alternative to conventional P2P lending practice. The crowdvouching model followed by Suretly works in conjunction with microfinancing organizations where investors can vouch for a borrower by offering assurance to repay a portion of the loan amount in case of default. In return for their guarantee, they will receive compensation based on the borrower’s credit rating.

Suretly mainly targets short-term loans and the platform is already dubbed as the “Tinder for Microloans.”

Suretly’s crowdfunding campaign is set for July 2017 launch, and it will be managed by the platform’s Singapore fund. The ICO follows a highly successful Pre-ICO round that raised over $350,000 in less than 48 hours.

The company has already set up its operations in Russia and has plans to enter the US market in Q4 2017.

SUR Token ICO

Suretly is planning to raise between $1.5 – $8 million USD in the next round of financing by selling 15% of its existing shares. Funds raised through the crowdsale will be used to accelerate integration into new markets and countries, spearheaded by a new, soon to be set up legal entity in Singapore.

Going Beyond Payments at the Point of Sale: AEVI and Moroku Partner to Mobilize Small Merchants (PR Newswire), Rated: A

AEVI and Moroku today announced a partnership to bring their all-in-one small merchant POS software Marrakash to AEVIs Global Marketplace; a B2B app store for smart Point of Sale (SmartPOS) devices. Marrakash is designed with the next generation of banks in mind, delivering a single solution for their small retail and hospitality merchants that seamlessly integrates their business, products, customers and payment systems into one easy-to-use platform. The partnership will leverage AEVIs open solutions and global support infrastructure to target multiple vertical markets including the hospitality, food and drink, retail andfinancial service industries.

Based in Sydney, Australia, Moroku is a pioneering Fintech firm that is providing the finance industry with engaging banking and payment experiences through gamification. AEVI’s Global Marketplace will now also feature Moroku’s Marrakash, POS software that enables small mobile merchants to grow and run their business entirely from a single SmartPOS device.

Marrakash is already in operation today with merchants in Australia, India, North America and the UK. Voted runner-up at the New Zealand Payment Innovation awards, Marrakash enables businesses to display a full product catalogue, create bespoke customer loyalty schemes and take secure card payments on the go. This gives merchants the control and freedom to run their business and take payments however, and wherever, they need. Having Marrakash available on AEVI’s Marketplace will allow vendors across the globe using AEVI-enabled POS hardware to download and add the app directly to their SmartPOS device. The strategic partnership will increase Marrakash’s speed to market in key US and European territories where AEVI already have a strong, and ever-growing, presence.

GLI Finance Owned Sancus Finance Launches New Financing Platform (Crowdfund Insider), Rated: A

Sancus Finance, a specialist financial services provider, has launched a new funding platform for businesses looking to participate in financing on their site. The new platform is part of a series of developments designed to improve the overall service offered to both funders and businesses. Sancus is part of AIM listed GLI Finance. Sancus BMS Group, the parent of Sancus Finance, has provided in excess of £578 million of funding to SME’s and their owners and has operations in the UK, Ireland, Jersey, Guernsey, Gibraltar & the Isle of Man.

Australia

Australian P2P Lender Credit Crowd Joins Blockchain Lending Platform Othera (Crowdfund Insider), Rated: A

It was announced recently that Australia-based P2P lender, Credit Crowd, has joined Othera’s Blockchain Lending Platform and Digital Asset Trading Exchange. By joining Othera’s platform, Credit Crowd is seeking to evolve its P2P lending market by digitizing the trading of P2P loans on the block chain.

Founded in 2012, Credit Crowd provides short-term mortgages to borrowers as well as a marketplace for retail and institutional investors. The company claims to have originated over $100 million in loans to finance over 50 projects for its borrowers since being founded.

India

Addepar raises $ 140M amid relatively quiet year for fintech funding (PitchBook), Rated: AAA

Addepar, a B2B fintech company that offers a data-driven operating system for wealth advisors and other financial professionals, has raised $140 million in a VC round led by Valor Equity Partners, 8VC and Harry McPike. Valor Equity Partners is an existing backer, and 8VC, the venture firm led by Addepar co-founder Joe Lonsdale, previously invested in the company through its predecessor firm, Formation 8. Addepar had raised about $67 million prior to this round and was most recently valued at $292 million in 2014.

Much of the new funding will go toward research and development.

Among the other companies in the financial services industry that have raised significant equity funding in 2017 are online lender SoFi ($453 million in March) and Robinhood, the provider of a mobile stock-trading app ($110 million in April).

Overall, funding in the fintech industry is on pace for a

Canada

Crowdfunding real estate projects in the GTA (Mississauga), Rated: B

NexusCrowd, a Canadian real estate crowdfunding platform, has a number of projects on the go through crowdfunding, including a $12 million real estate redevelopment project announced in 2015 boasting three properties — one in Mississauga.

Asia

Thailand’s Kasikorn Bank launches $ 30M ‘Beacon’ fund for fintech (TechCrunch), Rated: AAA

Roll up, roll up, there’s a new fintech VC fund in Southeast Asia town. Today, Thailand-based Kasikorn Bank announced its inaugural tech fund which is 1 billion THB, just shy of $30 million, in size.

Kasikorn, which was founded in 1945 and is one of Thailand’s major banks, is calling the fund Beacon — think lights on top of lighthouses — and it is aimed at giving the firm first-mover advantage on global tech through startups based in Thailand and overseas. Thanapong Na Ranong, formerly with InVent, a VC affiliated with mobile operator AIS, will lead Beacon VC.

The capital, which is 100 percent from the bank, will go towards direct investments in startups and also contributions into VC funds as an LP. Kasikorn said today that it has already backed Dymon Asia, a fintech fund headquartered in Singapore that is targeting a $50 million final close, and put money into Bangkok-based FlowAccount, its first direct investment in a startup.

Going forward, it is targeting three to five deals per year ranging from seed-plus to Series A stage with a target across all aspects of fintech. The firm aims to lead or co-lead investments with a typical check size of $500,000 to $3 million. It did not disclose what portion of the fund is reserved for follow-on deals, but the capital itself is anticipated to last between four and six years.

Eight Indonesian fintech startups officially registered under OJK (Deal Street Asia), Rated: A

Peer-to-peer lending startups Investree, Amartha, and KoinWorks are among eight Indonesian fintech startups that have been officially registered under the Financial Services Authority (OJK) in May 2017.

As of June 5, 2017, Investree claims to have successfully disbursed Rp 148 billion unfunded loan with 592 total loans, 17.5 per cent average rate of return, and zero default.

Amartha started in 2010 as a micro-finance institution. Six years later, it changed into a P2P lending marketplace. Today, Amartha claims to have facilitated over $6 million in loans to over 30,000 women micro-entrepreneurs while maintaining a 7-year long 0% default rate.

Indonesia’s fintech sector is currently the second biggest in the region after Singapore.

Authors:

George Popescu
Allen Taylor

Wednesday May 3 2017, Daily News Digest

funding circle

 News Comments Today’s main news: China Rapid Finance goes public at $350M valuation, down from C round valuation of $1bil. VPC Specialty Lending Investments annual results continues to disappoint Morty launches fully-automated mortgage marketplace. Barclay’s opens Europe’s largest fintech site in London. Airwallex wins $17M funding. India to see fintech regulations soon. Today’s main analysis: National survey shows instant […]

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United States

United Kingdom

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International

European Union

Australia

India

News Summary

United States

Elevate Announces Expanded Elastic Funding Capacity (BusinessWire), Rated: AAA

Elevate Credit, Inc. (“Elevate”) announced today that Elastic SPV, which purchases loan participations in the Elastic line of credit product originated by Republic Bank & Trust Company (“Republic Bank”), increased its debt facility with Victory Park Capital from $150 million to $250 million. This is the first step in a two-step process to further increase and diversify the funding capacity for the Elastic line of credit product.

During the second quarter of 2017, an additional SPV will be created as another funding source for the Elastic line of credit product. This additional SPV for Elastic would provide additional funding, diversified funding sources and further lower the cost of funds.

SoFi’s first PR campaign answers the question, ‘How do I ask for a raise?’ (PRWeek), Rated: AAA

Starting May 15, SoFi staffers will participate in an online series that will offer users tips on communicating their value in the workplace and tell inspirational stories. The company will hold workshops in eight U.S. cities including New York, Chicago, Seattle, San Francisco, and Washington, DC, on negotiating pay raises, non-monetary benefits, and other topics. Career expert Nicole Lapin will appear at the New York event.

The average SoFi student loan customer is about 33 years old and has a student loan balance of about $75,000, more than twice the national average. A SoFi survey also found 50% of young, college-educated professionals had not negotiated their own salaries, and 54% said they don’t know their “market value.”

PayPal launches a small biz toolset, ‘Business in a Box,’ with WooCommerce & Xero (TechCrunch), Rated: AAA

PayPal today launched a new service, called Business in Box, aimed at bringing more U.S. small business owners to its payments platform. The service, which was developed in partnership with WooCommerce and Xero, offers merchants a suite of tools for running their online businesses, including an online storefront, accounting tools, the ability to apply for working capital from PayPal and, of course, support for taking payments either online or offline, via PayPal.

Business in a Box is largely aimed at first-time business owners who already know what they want to sell and have a roadmap in mind, as well as at established offline businesses that want to make the move online.

Often, these business owners would otherwise turn to an e-commerce platform, like Shopify, Magento, BigCommerce or WooCommerce, to establish their online presence and take advantage of other add-ons that can help them with other aspects of their business, like running promotions, marketing, order management, shipping, social media and more.

The company also noted today that PayPal Working Capital has now helped more than 115,000 businesses worldwide access more than $3 billion in loans and cash advances since the service launched in 2013.

National Survey Shows Instant Financing Will Drive Business to Online Retailers (PR Newswire), Rated: AAA

American consumers appear to be warming up to instant financing options when purchasing goods and services online. According to a new national survey, three quarters (75 percent) of consumers indicate they would be likely to select an online retailer that offered instant financing compared to another that did not; 28 percent would be very likely to change merchants in order to use instant financing.

Instant financing is an easy-to-use, revolving line of credit that consumers apply for within a merchant’s online checkout. It allows consumers to spread purchases over time with low APR financing offers, and provides an alternative to credit and debit cards when paying for an online purchase.

The online study was fielded between April 10 and 13, 2017 by Researchscape International on behalf of Klarna North America (www.klarna.com). The survey of 2,024 consumers, ages 18 and older, was designed to better understand the behaviors and attitudes of consumers towards instant financing. Consumers were quota-sampled using 32 different cells (gender by age by region) to closely match the overall national population.

In terms of how instant financing might impact their spending while shopping online, 39 percent of consumers indicated they would spend more money on a purchase if they had the option of instant financing compared to 42 percent who would not and 19 percent who did not know if they would spend more money.

Smartphone owners, 88 percent of consumers who responded, were asked about the ease and willingness to enter certain types of personal information when applying for instant financing. Among the information seen to be “too much trouble” to enter were Social Security number and bank account numbers (51 percent each), and credit card numbers (40 percent). On the other hand, just over a tenth of consumers found it to be too much trouble to enter an email address (11 percent), birthday (12 percent) or spouse’s name (12 percent).

Other key findings of the survey include:

  • Nearly half of respondents (47 percent) would like to be presented with an instant financing option while shopping online
  • Just over a quarter of consumers surveyed (28 percent) have used instant financing while 68 percent have not and 4 percent were not sure if they had

Beyond probing consumers’ thoughts regarding availability, the survey also asked about the convenience and ease-of-use factors of instant financing. For instance, a majority of consumers (52 percent) expect to wait three or more minutes to be approved for instant financing. Twenty-eight percent would expect to wait two minutes and just 20 percent would expect to wait under a minute. Klarna’s approval process typically provides an approval in under a minute with only simple, top-of-mind information required.

This infographic illustrates the impact of instant financing on consumers’ purchasing decisions as revealed in a survey conducted by Klarna in April 2017. (PRNewsfoto/Klarna)

Morty launches fully-automated mortgage marketplace (PRNewswire), Rated: A

Focused on empowering homeowners to make smarter decisions about their mortgages, today Morty (www.himorty.com) launches its fully-automated mortgage marketplace, where homebuyers can shop, compare — and close — any loan option from among its network of lenders. Morty is initially rolling out with 10 major lenders across 10 markets in the United States, with plans to expand nationally by the end of 2017.

Leveraging the founding team’s diverse experience and learning first-hand from homebuyers during its initial pilot, Morty was able to identify pain points from start to finish and prove the benefits of a marketplace model. In the over one thousand real-life loan scenarios it has run for homebuyers, Morty has observed rate and fee variances across lenders that can add up to tens of thousands of dollars in fees and monthly payments.

Morty is creating an entirely new model: access to any lender or mortgage product within a single, unified mortgage process from first click to closing day.

Here’s how it works:

  • Homebuyers create a simple financial profile by linking their income, assets, employment, and property information and describing their homeownership goals.
  • Morty’s pricing engine algorithmically matches the homebuyer’s profile with each lender’s eligibility and pricing guidelines to show accurate, customized quotes, inclusive of all lender fees and closing costs.
  • Borrowers see their loan options in full transparency and compare across lenders and products.
  • Never once leaving the Morty platform, the homebuyer chooses a loan and Morty automates the process all the way to the closing table.

In addition to its launch, Morty also announces that it has raised $3 million in funding led by Thrive Capital with participation from SV Angel, FJ Labs, Corigin Ventures, MetaProp, Techstars and several angel investors.

RealtyeVest Is the One-Stop Platform for Real Estate Investing and Project Financing (PR Newswire), Rated: A

RealtyeVest, Formerly IHT Realty Group, officially unveiled their new brand and optimized website. Destined to become one of the largest real estate crowdfunding platforms in the US, the new RealtyeVest website () provides a simple, secure and transparent platform for accredited investors, real estate developers and owner-operators.

“Our decision to rebrand from IHT Realty Group to RealtyeVest was a result of listening to feedback from our strategic partners and observing best practices in the industry,” said Daniel Summers, CEO. “We believe our new name better represents the essence of our business, and we are excited about the innovative technology that powers our new online marketplace. We spared no expense in the new build, providing a win-win to our investors and Sponsors.”

RealtyeVest is an online marketplace that connects investors and Sponsors (real estate owner-operators) to crowdfund exclusive real estate investments. Their platform allows its members to browse, research and make informed investment decisions on these exclusive properties.

Lending IPOs Find Cautious Investors Amid Consumer Credit Fears (Bloomberg), Rated: A

China Rapid Finance Ltd. on Friday became just the second consumer lender this year to list in the U.S., following Elevate Credit Inc. earlier in April. Although they do business on opposite sides of the world, the duo has much in common: Both face investor questions about the reliability of their borrowers, both begin trading amid a particularly iffy time in the credit cycle and — perhaps consequently — both slashed their IPO price days before going public.

When LendingClub Corp. went public in 2014, some hailed the event as the dawn of a new era for finance. Shares have since fallen 60 percent from the IPO price.

“China Rapid Finance is coming to the market during a turbulent time in the China peer-to-peer industry as regulators roll out more controls to clean up what has so far been chaotic growth in the past few years,” MCM Partners analyst Ryan Roberts wrote in a note on the stock’s first initiation, a buy rating. “The company reduced the pricing range by about 40 percent, which we suspect reflected tepid demand from backers,” the note said.

Both recent IPOs are now trading up from their reduced offering prices by nearly 25 percent. MCM says the IPO valued China Rapid Finance at 4.7 times its book ratio. William Blair on Monday said that Elevate Credit is trading at 7.5 times its 2018 estimated earnings per share.

This Startup Wants to Be the Amazon of Real Estate (Inc), Rated: A

Even so, the 29-year-old Williams is a force, as is his company. Since launching, Cadre has generated nearly $1 billion worth of deals, raising close to $70 million in funding from high-profile investors such as Peter Thiel, Goldman Sachs, and Jack Ma.

So Williams set up a website where he could analyze these homes using a tax parcel ID–which tracks the value of a property over time–and measured this against what they were selling for. Using the data, and bolstered by the cash of wealthy Harvard alums including the Kushners, he started buying dozens of properties and flipping them for three times their original price. “By the time I graduated, I was at a crossroads: Do I scale this business nationally, or do I do tech banking at Goldman Sachs?” he recalls thinking.

Williams decided to do both. He pulled 18-hour days as an investment banker–and then would quietly work on his startup from the comfort of a supply-closet-size room by night. Real estate, he figured, was a valuable asset that ought to be made available to more (and more average) investors.

Cadre is an e-commerce site for investing in real estate. It connects customers–primarily wealthy individuals, referred to as “qualified purchasers”–to property deals across the U.S. (Cadre requires a minimum investment of a few hundred thousand dollars; that’s somewhat less than what a traditional fund requires, but likely more than what you’d pay to buy into a real estate investment trust, or REIT, which trades like common stock.) Williams declined to comment on what exactly the company charges its investors–it asks for an upfront fee and a recurring subscription rate–though notes that it’s in the range of a “couple hundred basis points.” A fund, by contrast, will typically take 2 percent of the investment, and then 20 percent of profits over time.

Although Cadre faces competition mainly from the traditional brokers, a growing number of startups have emerged in the real estate leasing space, such as 42Floors, a San Francisco website that lists commercial real estate and office rentals, and Rofo, an online marketplace for property listings and potential tenants that can facilitate lease deals without broker intervention.

NCAP Notice to Clients regarding Public Record Standards (Experian Email), Rated: A

In 2015, Equifax, Experian, and TransUnion announced the National Consumer Assistance Plan (NCAP), a set of initiatives designed to improve the accuracy of credit report information, as well as to provide consumers with a better experience interacting with the nationwide Credit Reporting Agencies (CRAs).

In June 2016, the CRAs announced enhanced public record data standards for the collection and timely updating of public record data reported on consumer credit reports.  The enhanced standards require: (i) minimum consumer identifying information (name, address, social security number and/or date of birth) (“PII”) and (ii) minimum collection frequency for public records (at least every 90 days).  These enhanced standards will apply to new and existing public record data on the CRAs’ respective consumer credit reporting databases. As previously announced, these enhanced standards are effective July 1, 2017.

Based on information provided by our public record vendor about the data available from courts and recorders’ offices, we expect bankruptcy public record data will continue to meet the enhanced collection and reporting standards. However, civil judgments and approximately half of tax lien data are not expected to meet the enhanced standards.

During the week of July 10, 2017, the CRAs will remove from their databases previously collected public record data that does not meet the enhanced PII standards. This includes the removal of all judgment public records and the portion of tax liens not meeting the enhanced standard. Public record data will also be monitored for adherence to the enhanced PII and collection frequency standards after July 1, 2017.

Despite the anticipated loss of significant volume of public record data from credit files, impact analysis conducted by the CRAs, as well as leading scoring model companies using CRA data, show a modest risk scoring impact and minimal loss in predictive performance as a result of these changes.

Please contact any member of your Account teams with questions you may have or forward questions to:

Robo Advice: Better Than No Advice? (Forbes), Rated: A

The proliferation of Robo-Advisors bringing low priced financial services out into the market has received significant buzz over the past few years.

When it comes to managing your money, minimal human intervention can be good or bad. The good comes when the algorithms and mathematical rules produce an asset allocation that is sensible for the purpose for which it is intended. The good also comes when the “human advisor” interjects personal preferences and judgments that are in the clients’ best interest.

Now, let’s analyze the downside, which can be a very deep and chasm. How we consider money, how we use money, how we value money, and what we believe about money is very human, indeed, and cannot be solved by mathematical equations.

For those who are looking for an asset allocation and a low-cost entry into investing, Robo advice can be a great place to start.

Helping Clients Determine Risks in Alternative Investments (Wealth Management), Rated: A

Alternative investments constitute a growing $7 trillion industry and more than 10,000 hedge funds have money in alternative platforms. Yet, most retail investors are just learning about these lucrative asset classes.

To illustrate the difference for clients who may not be familiar with alternative investments, ask them to imagine this scenario. A successful real estate flipper has bought and sold 25 properties in five years. After finding a great deal on a house in foreclosure, he applies for a bank loan to purchase it. The bank declines, spooked by four open mortgages he holds on current projects.

He’s never defaulted, but the bank still judges him as overleveraged because his loan-to-value ratio is 50 percent. It doesn’t fit into the bank’s rigid evaluation box, which has become even more stringent after the 2008 financial crisis. The perceived risk is much higher than the actual risk.

Then, he approaches an alternative lender who sees he’s willing to put his own money into a property in a desirable neighborhood and to offer a personal guarantee. The decision comes down to actual risk. Can this property fall in value by 50 percent in nine months? Will the borrower flip it in nine months for a handsome profit? By understanding the data and the flipper’s borrowing track record, the lender concludes that he will flip the house and fronts the capital.

FLEETCOR to Acquire “Cambridge Global Payments,” a B2B International Payments Provider (BusinessWire), Rated: A

FLEETCOR Technologies, Inc. (NYSE: FLT), a global provider of fuel cards and workforce payment products to businesses, announced today that it has signed a definitive agreement to acquire Cambridge Global Payments (“Cambridge”), a B2B international payments provider.

Lantern Credit Appoints Ricardo Gomez-Acebo to Board of Managers (BusinessWire), Rated: B

Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, adds Ricardo Gomez-Acebo to its Board of Managers. He joins Chairman John Mack, Vice Chairman John Sculley, James Held, Seth Johnson, Kevin Knight and Chad Swensen on the Lantern Board.

Gomez-Acebo has more than 30 years of experience in the Spanish and International Retail Banking sector, holding various executive roles at Spanish banks Banesto and Banco Santander including General Manager of Europe for Banesto. Gomez-Acebo led business development with strategic financial partners at Banco Santander and most recently is heading risk management for the bank.

Incumbent financial services’ millennial strategy (The New Yorker via CB Insights Email), Rated: B

Attorney Jonathan Frutkin Featured Speaker at Washington D.C Crowdfunding Conference (Benzinga), Rated: B

Radix Law’s principal attorney, Jonathan Frutkin, will be a featured speaker at the “Fourth Annual Conference and Workshop for Crowdfunding USA” scheduled for May 4 to 5 at the National Press Club in Washington D.C. Frutkin is the author of the book Equity Crowdfunding: Transforming Customers into Loyal Owners.

United Kingdom

RateSetter upgraded transparency to “top-tier” level, says 4th Way (P2P Finance News), Rated: AAA

RATESETTER’S upgraded data disclosure on its loan book and expected losses has brought its transparency to a top-tier level, according to peer-to-peer lending research firm 4th Way.

Based on the amended methodology, expected cumulative losses now stand at £18.06m, which paired with the current £22.44m provision fund buffer result in a 124 per cent coverage ratio – six per cent higher than last reported.

RateSetter’s data table now provides a clear estimate of the losses expected over the lifetime of its loan book, spelling out the losses that have already materialised and future expected losses for each year of origination, as well as a detailed breakdown of different types of arrears, provision fund adequacy levels, and investors’ expected returns.

Sharing the voice of British small businesses (Funding Circle), Rated: AAA

What we discovered is that small businesses are going for growth, unfazed by the uncertainty caused by last year’s referendum result and the snap election. Nearly 70% of UK small businesses expect their turnover to increase within the next 12 months – half of whom expect a steady increase of between 6 and 20%, and only 6% expect turnover to decrease.

Small businesses, who already account for 60% of private sector employment, will continue to drive much needed job creation this year. More than half of the businesses we spoke to are planning to hire at least one new full-time member of staff over the next year. With more than 5 million small businesses across the country – this could mean the creation of millions of new jobs in the next 12 months!

When asked what their one policy priority is in the run up to the election, tax was by far the most important issue. With business rates mentioned specifically nearly 300 times, 40% said that they want the new Government to focus on this area after the election. The second most important policy area, according to a quarter of businesses, was of course Brexit.

To date investors have lent £2.2 billion to more than 23,000 UK small businesses.

 

UK SMEs set to back Tory leadership (P2P Finance News), Rated: A

A vast majority of the 2,300 firms interviewed by the country’s third largest small- and medium-sized enterprises (SME) lender are poised to throw their weight behind Theresa May’s party as the best positioned to deliver Brexit, despite half of them opposing the separation from the 28-nation bloc in the referendum last year.

The research also confirmed that UK SMEs have quickly shrugged off Brexit-induced economic worries, as seven in 10 firms expect to deliver stronger profits in the next 12 months and only six per cent forecast a drop in turnover over the same period.

Flender is granted its P2P credit license (AltFi), Rated: A

Peer-to-peer friends and family lender, Flender announced it has now received its full authorisation from the FCA and has also launched operations in Ireland.

The platform says it has funded loans of over €900,000 since its soft-launch, without any marketing or advertising. It has seen demand from companies in a wide range of industry sectors including construction, F&B, energy companies, retailers and more. It reports that it has attracted over 750 registered users, 138 campaigns submitted with 11 currently live on the platform.

RateSetter Partners with George Banco, Acquires Two Motor Finance Businesses (Crowdfund Insider), Rated: A

RateSetter previously provided financing to George Banco. RateSetter will now lend directly to George Banco’s growing customer base with George Banco generating the leads.der George Banco. RateSetter has also acquired an equity stake in the George Banco company.

Additionally, RateSetter has acquired specialist motor finance providers Vehicle Stocking Limited and Vehicle Credit Limited out of their parent company’s administration. RateSetter will rebrand both businesses and invest in them to build on its current motor finance capabilities. RateSetter previously provided wholesale finance to these businesses.

UK P2P Lender Growth Street Celebrates Marketplace Rate Drop, Signals Increased Momentum (Crowdfund Insider), Rated: A

Growth Street’s marketplace rate dropped on Monday from 6.5% AER to 6.4% AER, rewarding borrowers with a 10bps drop in their costs of funds. The UK P2P lender attributes the drop to the momentum it has built on its platform, welcoming over 700 investors to date since the launch of its investment offering in November.

FUNDING CIRCLE REVIEW (Orca Money), Rated: A

Loans are split into a minimum of £20 chunks or loan parts allowing investors to achieve a high level of diversification when investing relatively low amounts. Funding Circle suggests lending to a minimum of 100 businesses to achieve a 1% exposure to any one business. When investing a minimum of £2,000, Funding Circle’s auto-bid function will achieve this level of diversification automatically.

Borrowers across Funding Circle are all small to medium sized businesses (SMEs), borrowing between £5,000- £1million for loan terms of 6 months to 5 years.

Funding Circle is the only peer-to-peer lending platform of scale which operates across multiple geographies. The P2P platform has expanded from the UK to the USA, Germany and Spain. 74% of Funding Circle’s group (Funding Circle Holding Limited) revenue in the period ending the 31st December 2015 came from its UK business (Funding Circle UK Limited).

VPC Specialty Lending Investments Annual Results Continues to Disappoint (Crowdfund Insider), Rated: A

VPC Specialty Lending Investments PLC (LSE:VSL.L) released 2016 annual results last week and according to Chairman Andrew Adcock, results continue to disappoint. Shares in the fund that invests in various online lending assets continue to trade at a significant discount to the net asset value per share. As of December 31, 2016, VPC had deployed 87% of its NAV (with its cash holding of 13% temporarily elevated due to the recent sale of the Funding Circle U.K. portfolio). During 2016, VPC generated an NAV return of 0.85% for the Ordinary Shares and distributed dividends of 6.00 pence per Ordinary Share relating to the income earned during the year.

Going round in circles (Bridging&Commercial), Rated: B

The recent news that peer-to-peer lending platform Funding Circle plans to stop all property development lending by mid-2018 came as something of a surprise.

Risk is always a factor in construction, but it is how that risk is managed that is important. Funding Circle’s withdrawal could allow other lenders to enter this space, and increased competition will be no bad thing in giving developers greater choice.

While we appreciate that there are always certain areas of the market that give cause for concern, many of our clients have a clear appetite for further growth. While demand is strong, and developers continue to be starved of funds by traditional lenders, the market for alternative finance – and peer-to-peer lending particularly – will come to the fore.

China

Former Unicorn China Rapid Finance Goes Public at a $ 350M Valuation (Lend Academy), Rated: AAA

The IPO price was set at $6.00 and the company raised $60 million which was adjusted down from their anticipated raise of $105 million. Back in 2015, it was reported that the company had a pre-money valuation of $1 billion after closing a $35 million Series C. The company is now valued at $350 million.

At time of writing shares were trading around $7.10 per share.

The fact that China Rapid Finance and Yirendai before them chose to go public in the US is significant. In a recent Lend Academy podcast with Yirendai CEO Yihan Fang, she stated that they felt the US was more educated on marketplace lending. This coupled with the fact that Ning Tang (Founder of parent company CreditEase) and other management members had experience in the US and were more comfortable with the US capital markets led to their decision to list in the US.

Another company that could seek a US IPO is Ppdai.com who last year said it could go public in the first half of 2017.

P2P Industry News (Xing Ping She Email), Rated: A

Financial Company of XIAOMI Raised A Round of 100 Million RMB

Today, FuMi Tech, MI’s related eco-chain company, announced it has finished A round of financing and raised 100 million RMB. This round of financing led by Buddhism Capital, with MoBai Capital and the previous investor ShunWei Capital participated. The fund will be continuously used to improve users’ experience.

WeBull, one of the products of FuMi Tech, providing trading services of US and HK stocks, and supporting real-time quotes of global stock, foreign exchange, funds and derivatives markets of over 20 countries. In fact, FuMi Tech has previously raised a joint investment of 50 million RMB from MI and ShunWei Capital.

China’s State-owned Commercial Bank Breaking the Ice between P2P platforms

Recently, China Construction Bank(Guangdong Branch) has launched its P2P funding depository product “Dragon depository”, and currently the bank has reached agreements with several P2P lending platforms.

According to an insider of CCB, the two critical measurements for their P2P cooperators are: bad debts and overall strength of the platform.The participation of CCB will promote the compliance process and bring a sustainable development of P2P lending industry.

NDRC(National Development and Reform Commission): Promote the Construction of Asia Credit System

The first Asia Credit Rating Agencies CEO Fair & Systemic Risk International Seminar was held in Beijing recently. Hongwan Chen, the deputy director of the financial department of National Development and Reform Commission, said that the regional cooperation across Asia is important for it could accelerate the Construction of Credit System in the area. He also advise to build credit record for local companies incorporated overseas and foreign investors, and set up a “blacklist” about those seriously illegal enterprises.

China Rapid Finance a consumer lending force in China (Bankless Times), Rated: A

Dr. Wang completed his Ph.D in statistics at the University of Chicago in 1995 before moving on to Sears Credit where as head of analytics he developed models employing credit bureau data while also overseeing the creation of a credit data warehouse. He returned to China, where in 2001 he founded  China Rapid Finance which began by developing credit scoring and decisioning models that helped companies issue more than 100 million credit cards.

In 2010 they made the move into marketplace lending, where they teamed up with more than 100 Chinese internet companies to analyze and score data that allowed them to preselect customers.

Seven years later China Rapid Finance has become China’s leading online consumer credit marketplace after facilitating 15 million loans to two million borrowers, beginning with small amounts for short durations and growing into longer-term loans for larger amounts.

EMMAs total 500 million and have been underserved by traditional credit providers, who focus on the 300 million super prime people who work for government or large institutions, Dr. Wang explained. He estimates China’s consumer credit coverage at roughly one-fourth that of the United States. While roughly 60 per cent of Americans have credit coverage, that rate is 16 per cent in China.

EMMAs are prime and near-prime consumers who are educated and have stable employment in the services and with startups and SMEs, but they have little credit history and cannot obtain bank credit.  They also largely stayed away from the notorious shadow banks, a large (no one knows precisely how large) opaque industry which helped fuel both real estate and small consumer loans.

International

International P2P Lending Volumes April 2017 (P2P-Banking), Rated: AAA

Funding Circle leads ahead of Zopa and Lendinvest. The total volume for the reported marketplaces adds up to 445 million Euro.

Milestones reached this month are:

  • Younited Credit crossed 500 million Euro loan volume since launch

European Union

Barclays Opens Europe’s Largest FinTech Site in London (Yahoo! Finance), Rated: AAA

Barclays has today opened its flagship open innovation site, Rise London, in Shoreditch. It is Europe’s largest co-working space dedicated to financial technologies (FinTech).

Rise, created by Barclays, brings together from across the world a carefully curated community of FinTech startups, along with our corporate clients and other experts, to work on Barclays’ customer and business opportunities and together help to create the future of financial services.

Rise London will house more than 40 FinTech companies, along with Banking and Technology teams from Barclays, and will serve as a gathering place for leaders in the FinTech and venture capital communities. Rise London will play host to more than 200 hours of learning, workshops, hackathons and networking on a monthly basis.

Australia

Melbourne fintech Airwallex just won $ 17 million funding from Mastercard, Sequoia and Tencent (Business Insider), Rated: AAA

Australian cross-border payment startup Airwallex has secured US$13 million ($17.4 million) in a funding round to continue its expansion overseas.

For Sequoia — the 45-year-old firm famous for investing in famous tech brands such as Apple, Google and AirBnB – the deal represents its Chinese arm’s first investment in an Australian startup.

Airwallex founder and chief executive Jack Zhang told Business Insider that the company, which already can make payments to 100 countries, will use the cash injection to expand its physical presence in locations such as London, Shanghai, Hong Kong, Indonesia, Malaysia and Taiwan.

FinTech Australia Reflects on First Year (Crowdfund Insider), Rated: A

FinTech Australia, the advocacy group promoting all things fintech related in Australia, celebrated its one year anniversary by sharing its “Year of Review.”

India

India to see regulations for fintech space soon: KPMG report  (Outlook), Rated: AAA

The government is expected to come out with regulations for fintech (financial technology) space as the industry is likely to witness increased payments and lending activities, a study said today.

Over the next quarter, insurtech may come into its own in India, according to the report.

Citing Paytm attracting Asia’s largest funding round of USD 200 million in March quarter, it said AI and blockchain may be big bets for investors apart from payments, open data and data analytics.

Over the quarter, investment into Asia’s fintech space hit USD 492 million across 33 deals, as per the report.

SoftBank Said in Talks to Invest $ 1.4 Billion in India’s Paytm (Bloomberg), Rated: AAA

SoftBank Group Corp. is in talks to invest about $1.4 billion in India’s One97 Communications Ltd. in a deal that would value the owner of the country’s largest digital-payments provider at about $7 billion, according to people familiar with the matter.

The deal is not yet finalized and the terms may yet change, said the people, asking not to be identified because the matter is private. One97 Communications, whose Paytm unit has seen business surge as India took most of its paper bills from circulation, has also had discussions with two other investors, one of the people said. The company was last valued at $4.2 billion, according to research firm CB Insights.

3 Alternative Lending Trends That Have Made Fintech Startups Popular (Inc42), Rated: A

Traditional banks have left quite a few gaping holes when it comes to unsecured loans, especially for salaried people who are not employed in companies that they classify as A/A+ category.

Quick Personal Loans

Customers, it appears, are warming up to online alternative lending portals, and it is predominantly due to the speed with which the loan application is processed, verified and approved. Tedious documentation, in addition to ambiguous rules and non-transparency in the whole process that a customer faces with banks, has made entrepreneurs reinvent lending for salaried employees. The ease and convenience of digital (and painless) transactions are considered priceless. There are lenders such as Qbera, which disburses personal loans up to INR 5 Lakhs in 24 hours.

Alternative Fixed Income Products Become More Popular

2016 saw RBI releasing a set of directives regarding P2P loans in India. The paper recommends NBFCs status for P2P lenders, which is almost consistent with what the P2P sector has been demanding. This liberal approach helps to protect the interest of all stakeholders without choking innovative ideas. P2P lenders are hoping for these recommendations to become regulations after the budget announcement, which will give the arena a facelift.

Short-Term Payday Loans

You don’t get instant cash from banks and online payday loan providers often save the day. As they are offered for shorter tenures compared to online personal loans, it gets repaid more quickly, which is a definite plus. You can even opt for monthly, fortnightly, weekly or daily loans.

Authors:

George Popescu
Allen Taylor

Friday April 28 2017, Daily News Digest

10-year Treasury yields

News Comments Today’s main news: U.S. VC fintech investment rises to $1.2B. P2P Global Investments sees NAV bounce. Kuflink receives FCA authorization. Robo-advisor launches in Luxembourg. OnDeck Canada partners with Lightspeed. Ant Financial plans expansion into Japan. Today’s main analysis: Behind the 2017 bond-market rally. Today’s thought-provoking articles: China P2P industry news. Xero: Best overall fintech. Brazilians embrace robo. Who leads Africa’s fintech, […]

10-year Treasury yields

News Comments

United States

  • U.S. VC fintech investment rises to $1.2B. GP:”Total raise if you include non-VC sources is $1.5bil. New record since Q1 2016. Focs continues on lending and robo. “AT: “What I find interesting is in the report itself: The biggest deals of the quarter – SoFi’s Series G round, UniRush M&A, Zenbanx M&A, ProducePay early-stage, and Kensho Series C2 are the top 5 in the U.S. Also in top 10 are CommonBond and Upstart. Get the report here.”
  • Behind the 2017 bond-market rally. GP:”A very interesting piece worth reading to understand market reactions to the world and in fact cost of capital.”
  • Banks loosening up internally to work with startups. GP:”There is always a risk in relaxing control which translates into a cost, usually fines. To be practical, if the cost of the fines is significantly lower than the return from the business perhaps the fines become just the cost of doing business. On the other side, a regulator regularly fining a financing institution usually has a major impact on the institution reputation which has nonnegligible effects on the business. It is a very difficult to quantify where to relax by how much and the cost of doing so, especially the indirect costs. “AT: “What’s interesting are smaller banks are now starting to see the light.”
  • Mark Cuban backs an app that saves people overdraft fees. GP:”I don’t know anybody who never paid an overdraft fee. There shouldn’t be any overdraft fees, transactions should just be rejected by the bank. Or there should be a real product to compensate for it that has a reasonable cost, in line with the cost of a loan or or a credit card.”AT: “Overdraft fees are a huge frustration for a lot of young people learning how to manage their finances as an adult. It’s a part of growing up. The best solution is to learn how to balance a checkbook, but an app that does it for you on the fly isn’t a bad idea because most young people aren’t that great at balancing checkbooks.”
  • OCC: Fintech charter not a ‘ticket to light-touch supervision’. GP:”The OCC has always been very clear that the fintech charter is not light-touch; if anything it is the same-touch as for a bank while enabling them to offer a smaller amount of services. “AT: “When you’re being sued, the best course of action is to offer some sort of consolation. But you can’t say too much or it will be used against you.”
  • Chatting with PeerStreet’s founders. AT: “Expecting every type of real estate loan to go through a marketplace platform is a tall order, but I like the way BJ thinks.”
  • Debt is a deal-breaker for millennials considering marriage.
  • Quovo raises $10M in Series B. GP:”Quovo offers a series of finance APIs to enable innovation. Worth a look for sure.”
  • Robinhood hits 2 million users, raises $110M in Series C. GP:”RobinHood offers free stock trading. The consolidation that happened in the stock-brokers market from charging a large commission to free is an interesting lesson. The main driver of this cost cutting has been electronic and online trading which pushed brokers to seek an alternative business model, which happens to be in many cases selling order book data or ancillary services and products. “
  • Bitcoin values increases as SEC reconsiders ETF decision. GP:”I continue to believe that cryptocurrencies are a good remittance system. There is also a slew of new ICOs happening. And last but not least Ethereum and the smart contract world are also seeing a very large increase in demand. The main barriers to cryptos seem to be unclear regulation, unclear business model, and security risks.”AT: “It will be interesting to see if the SEC overturns its own decision to turn down the Bitcoin ETF.”
  • Easy Solutions launches AI anti-fraud service. GP:”Detection abnormal behavior on a credit card has been in place for sometimes. Government agencies have also been using abnormal behavior detection on large data for sometimes. Perhaps there is still space for improvement. “

United Kingdom

China

  • Top 5 P2P lending ratings. GP:”In China a lot of websites are trying to rate online lenders. And there is a rating of raters. Here people take a position of the top raters. Most lenders pay money to the rating websites to be rated in a process which can not always be impartial. Caution is advised and perhaps an index of the average rating per lender accross many rating websites is needed. “
  • MaizinJinfu raises Series B. GP:”Congratulations!”

European Union

Australia

India

Canada

South America

Africa

Asia

  • Ant Financial looks to expand into Japan. GP:”Japan is a mature financial system where the mentality is very conservative. I hope Ant has a Japan-adapted plan for the expansion which takes into account Japanese mentalities. In my experience this means at the minimum having Japanese employees, in Japan, and having everything done the Japanese way from the way the contracts are bound to the way you treat your customers. Japan is open to foreign products, but only if they have been well tested and are mature. In fact they seek them. I have brought multiple companies to Japan succesfully.”

News Summary

 

United States

VC Investment in Fintech Rises to $ 1.2 Billion in US: KPMG (Think Advisor), Rated: AAA

U.S. venture capital investment in fintech companies rose to $1.2 billion in the first quarter, the highest activity since last year’s first quarter, according to KPMG International’s Pulse of Fintech report, released Thursday.

Non-VC fintech investment in the U.S. reached $300 million, resulting in a total of $1.5 billion in fintech investment in the U.S. for the quarter.

“Payments and lending continue to attract the most funding globally, although we’re seeing increasing interest in a variety of technologies,” Brian Hughes, national co-lead partner in KPMG U.S. venture capital practice, said in the statement.

“In addition to continued growth in regtech and insurtech, areas such as artificial intelligence, machine learning and Internet of Things are gaining increasing investor attention.”

Next quarter, it said, robo-advisory, artificial intelligence and data analytics look to be “hot investment areas.”

KPMG reported that private equity firms in the U.S., including not-technology-focused ones, are proving robust actors in the late-stage fintech arena, with $1.2 billion in total deal value across 11 deals in the first quarter.

During the same period, however, U.S. fintech M&A got off to a slow start at just $200 million across 24 deals.

The West Coast continued to account for the largest concentration of U.S. fintech investment, with 67.6% of total value of deals in the first quarter and 39% of the total number of deals.

Get the report here.

Behind the 2017 Bond-Market Rally (WSJ), Rated: AAA

When the yield on the 10-year U.S. Treasury note fell to a record low in July, many investors agreed that the developed world was stuck in a “new normal” of ultralow growth, inflation and interest rates. Stronger U.S. economic data in subsequent months helped chip away at that view, lifting yields. They got another boost from Mr. Trump’s victory, as investors bet on a turn to expansionary fiscal policies–including an overhaul of the tax code–that would boost growth and inflation and allow the Federal Reserve to raise rates at a faster pace.

While the yield on the 10-year note is still well above its level on Election Day, that is partly because the Fed has raised short-term interest rates twice since then.

Banks are loosening up internally so they can work with startups (Tearsheet), Rated: A

With public confidence in them in the U.S. below 50 percent across the political spectrum, banks have a branding problem — one that gets even more problematic when they have to work with those outside the industry.

Wells Fargo is one of the banks that has taken active interest in facilitating dialogues with startups. While most most major banks have accelerator programs, Wells Fargo said one of the focuses of its startup program is helping banks understand startup culture and vice versa. Wells Fargo’s accelerator program mentors companies for six months and provides up to $500,000 of equity investments for selected companies. The companies may also work on proof of concepts across different business lines within the bank after the completing of the program.

For smaller banks, a focused approach ensures that the relationship will be productive. Boston-based branchless virtual bank, Radius Bank, has a staff member dedicated to partnerships with startups who carefully vets each startup for compatibility.

Mark Cuban is backing an app that’s trying to help people avoid overdraft fees (Business Insider), Rated: A

The billionaire has invested in a new app called Dave that aims to predict coming expenses for users to help prevent them from overdrafting on their bank accounts.

Once Dave connects with a user’s checking account it forecasts the account’s lowest possible balance in seven days based off the person’s spending habits.

Users are notified when their seven-day forecast is negative. That way they can be proactive and potentially avoid overdrafting and being burdened with bank fees.

According to a report by CNN Money, the top big banks – Chase, Wells Fargo, and Bank of America – raked in over $5 billion in ATM and overdraft fees in 2016. In total, overdrafts cost customers $36 billion a year.

OCC: Fintech Charter Not a ‘Ticket to Light-Touch Supervision’ (ABA Banking Journal), Rated: A

Gardineer emphasized that fintech firms granted a national bank charter would undergo the same supervision process and be held to the same capital, liquidity and consumer protection standards as OCC-supervised banks. She added that state laws on fair lending, debt collection and other things would still apply, just as they do for nationally chartered banks. Her comments came after a lawsuit filed earlier this week by the Conference of State Bank Supervisors, which said that in moving forward with the limited-purpose charter, the OCC overstepped its authority under the National Bank Act.

Chatting with Brew & Brett, Co-Founders of PeerStreet (Simple Innovative Change), Rated: A

Brew Johnson was in real estate law by chance back in the mid-2000’s, which is when he happened upon the dismal reality that our housing market was built on a house of cards through his deep research and desire to figure out what was going on. He knew something needed to change, and he had a plan for how to do it.

When the time was right he brought in Brett Crosby, Co-Founder and COO of PeerStreet to take his tech background from building Google Analytics to help revolutionize the housing market with a new approach to financing the mortgage markets.

BJ: A lot of what we’re doing at PeerStreet is informed by what I learned during that time as a real estate attorney within the securitization market.

Fast forward to 2013, and all the barriers to entry that existed in 2008 had been significantly reduced. After the market crash, government regulation started to favor the startup community, and with the advancements in technology, I felt that it would be a lot easier to create a company like this.

BJ: For me, it was about seeing the movement in marketplace lending, and the growing comfort in investing in this asset class through a new type of platform. This sudden shift in comfort coinciding with easing regulation led to a huge boom for private lending.

The reason we believe it’s so important to build a tech-enabled platform like this is because there are more independent lenders now than ever, and they’re scattered around the country, leading to a significant amount of fragmentation in the market.

What PeerStreet does is use technology to make sense of this fragmentation, and then layer a whole level of positives onto it.

BC: In other spaces like consumer credit, auto loans, and student loans, the location of the lender is not important so it’s possible to lend from a central position. In the mortgage and real estate development space, however, having local knowledge matters a great deal.

BJ: Since we partner with and provide capital to local lenders who lend to small businesses, who in turn lend to other small businesses or real estate entrepreneurs in their communities, we’re enabling our investors to support the value chain of local economies. Essentially, we are investing in communities and helping to promote the up-cycling of housing stock in those areas.

BC: The reality is many of the new business models may go out of business because they are simply taking too much risk on their loans. We’re positioning PeerStreet for the ups and downs of the American economy.

BJ: We think every type of real estate loan will go through a platform like ours eventually, so we are taking a very measured approach to how we decide to move into each of those asset classes.

Deal Breaker?! Dating and Debt (CBN News), Rated: A

According to a new study from online personal finance company, SoFi, debt is a big deal breaker to 20 percent of Millennials (ages 25-35).

“It depends on what they are paying for with their debt. If she has 10-15k in cc debt for B.S. that’s obviously a red flag. If it’s student loans, I can’t complain. If she’s not paying on any of it, run,” said another.

SoFi also looked into how much Millennials cared about a person’s future earnings when deciding whether to date them or not.

According to SoFi, Millennials don’t think debt needs to come up right away. 58 percent say it only needs to be talked about when the relationship gets serious.

Finally, SoFi asked Millennials if they would dump someone over debt. A majority, 55 percent, said no. (Still, 24 percent said they may not consider marrying someone with more than $100,000 in debt.)

Quovo Raises $ 10 Million in Series B Funding to Fuel Fintech Platform Expansion (Crowdfund Insider), Rated: A

Quovo, a Fintech company that leverages data to provide insights alongside connectivity for financial accounts, has raised $10 million in Series B funding.  Existing investors FinTech Collective and Long Light Capital were joined by F-Prime Capital and Napier Park Financial Partners to provide the capital. As one would expect, the cash will be used to fuel platform growth and build out the suite of data analytics offers which include the newly launched bank authentication API and Quovo Connect module.

Robinhood Hits Two Million Users & Raises $ 110 Million During Series C (Crowdfund Insider), Rated: A

California-based fintech company Robinhood announced on Wednesday it not only has reached two million users, but it also secured $110 million during its recent Series C funding round, which was led by DST Global, with participation from NEA, Index Ventures, Ribbit Capital, Thrive Capital and Greenoaks Capital. This brought the company’s total funding to $176 million.

Bitcoin’s value increases as the SEC reconsiders its ETF decision (The Merkle), Rated: A

Not long ago, the three-year effort put in by the Winklevoss twins to bring the Bitcoin ETF to the market was blocked by the SEC, after the agency ruled against them. What followed was a major crash bringing along a 15% decrease in Bitcoin value.

The initial Winklevoss proposal was to list the Bitcoin ETF on the Bats BZX exchange, which is one of the largest equities market operators in the United States. The exchange then decided to file a petition with the SEC, kindly asking the exchange commission to review last month’s decision. Luckily, the petition was accepted, therefore the SEC will proceed to reconsider their decision.

Optimism in the market has appeared all over again, and the price of Bitcoin again the U.S. dollar is further increasing due to these new speculations. Precisely, it has managed to increase to $1,294, from $1,251 in a single day.

Easy Solutions Launches Artificial Intelligence Anti-Fraud Service (Yahoo! Finance), Rated: B

Easy Solutions, the Total Fraud Protection company, today unveiled its new Detect TAArtificial Intelligence (AI) Fraud Assessment Service for banks and other financial institutions. Artificial Intelligence delivers a competitive edge to any business that leverages it effectively, and it is already being applied by leading financial institutions to improve fighting fraud.

United Kingdom

P2P Global Investments sees NAV bounce, expands into alternative credit (AltFi), Rated: AAA

The £833m P2P Global Investments fund saw its net asset value [NAV] rise 0.55 per cent in March, including a 0.16 per cent uplift from its share buybacks, prompting a boost to its latest quarterly returns.

Its latest numbers, however, show a boost in returns with total NAV return for Q1 2017 of 1.18 per cent, while its discount has narrowed to 15 per cent.

Kuflink’s P2P Lending Platform Receives FCA Authorization (Crowdfund Insider), Rated: AAA

On Thursday, Kuflink received full authorization from the Financial Conduct Authority (FCA) for its peer-to-peer lending platform. According to the registration, Kuflink has been given permission to provide regulated products and services, which includes accepting deposits, provide credit to consumers, offer investment advice, and arrange deals with investments.

B&C Awards 2017 shortlist announced (Bridging&Commercial), Rated: A

The top brokers, lenders and individuals in the bridging, commercial, development finance, peer-to-peer and specialist banking markets have been shortlisted and are now in the running to win one of the industry’s most prestigious awards.

The shortlist includes new categories ‘Best Use of Fintech’, ‘Specialist Product of the Year’ and ‘Best Bridging Lender Newcomer’.

Last year’s Bridging Lender of the Year, Octopus Property, has been shortlisted again in 2017 for the coveted title and will be up against fellow nominees Precise Mortgages, Together, Amicus, Funding 365, Masthaven, MTF and LendInvest.

The brand new category ‘Alternative Lender of the Year’ brought in scores of votes, with Assetz Capital, Funding Circle, LendInvest, RateSetter, Lendy and Kuflink making the shortlist.

Pariti adds second online lending partner (AltFi), Rated: A

Pariti, the personal finance management app which helps users to manage their debts, has teamed up with Lendable to broaden its range of loan options. Pariti made leading marketplace lender Zopa its first lending partner in September of last year. Pariti users looking to consolidate their debts will now receive offers from both lenders.

China

P2P Industry News (Xing Ping She Email), Rated: AAA

Top Five P2P Lending Ratings in China
Rating is an important reference for investors. A senior industry player taking the following as the top five P2P lending rating agencies in China: Online Lending House Rating, Xeenho Rating, Net Credit Eye Rating, Rong 360 Rating and Dailuopan Rating.

Online Lending House Rating
Online Lending House is one of the biggest P2P lending portal sites in China. It has been engaged in platforms’ rating since August 2013. Up to now, Online Lending House has issued 44 rating reports maintaining over 100 rated objects.

Xeenho Rating
Xeenho Rating is the first rating agency from the buyer’s perspective, and it was launched by the P2P lending funds Xeenho in October 2016. Yet it has issued its fifth report, with a selection of around 45 P2P lending platforms. The rating is neutral for it stand on the investors’ side, so its rating could be more reliable. Actually, Xeenho’s risk-control management keeping the Zero Bad Debt in the industry.

Net Credit Eye Rating
Net Credit Eye Rating is similar to Online Lending House Rating in terms of contents’ provision. It was launched in September 2015 and has issued 18 periods of reports with over 70 P2P lending platforms.

Rong 360 Rating
Rong 360 Rating is quarterly issued, so far it has 8 periods of rating reports on 70 platforms. Rong 360 includes a wider range of content compared by other agencies, therefore some low rating results may exists.

Dailuopan Rating
Dailuopan launched its own ratings services mainly based on big data method. It started from May 2016, and has issued 10 periods of reports on over 500 P2P lending platforms.

Jack Ma: We need a reliable credit system on P2P lending industry
On April 23rd, the 2017 Annual Summit of China Green Companies was held in Zhengzhou. Jack Ma attended the occasion and said, “Only when a reliable credit system has been built, the real P2P business could be exist.” He also pointed out that new finance is to create a share-benefited and fair environment for residents, which should reach the effect that “an old woman has the same rights with a bank CEO .”

In fact, Jack Ma has previously said that the P2P lending should based on three elements: data, credit system and risk control system with big data. Unlike the negative view on P2P lending five years ago, this time Jack Ma show an optimistic attitude to the industry.

MaiziJinfu Raises Series B Funding (Yahoo! Finance), Rated: A

UniFi ‘s parent company Shanghai Wheat Asset Management Co., Ltd. (“MaiziJinfu”, “Maizi” or “the Company”), a China -based Internet-based financial information service provider, today announced that it has received Series B funding,  at the Internet Finance Development and Innovative Application Forum (IFDIA), which was co-hosted by Money Weekly in Shanghai .

European Union

FINANCIAL ADVICE FROM A ROBOT LAUNCHES IN LUX. (Delano), Rated: AAA

From about $19bn under management by robo advisors in the US in 2014, this figure has since quadrupled. However, this is still small compared with traditional financial services. For example, the Luxembourg wealth management industry alone had four times these assets under management in 2015. Nevertheless, these are early days.

The grand duchy is now part of this trend with the launch of the KeyPrivate service by Keytrade Bank Luxembourg. Residents and non-residents alike can use the service. You tap in how much you want to invest, for how long, and with what risk profile, and then there’s a questionnaire to check that you have the necessary financial means.

The site will then design a portfolio based on 12 funds invested principally in shares and bonds in different international markets.

After investment, each portfolio is reviewed automatically by the robot to take the latest market developments into account. KeyPrivate chose exchange-traded funds (ETFs) to power this system. Not only is it easier and cheaper to move in and out only of ETFs than with standard funds, but these “tracker” products seek to mirror industry benchmark indexes that tend to give average returns.

The minimum investment is €15,000, and the service is provided at “a fee that is two or three times cheaper than a traditional wealth manager,” said Thibault de Barsy, CEO of Keytrade Bank Luxembourg. It is a flat fee on total assets of 0.75% plus VAT per year. There is no up-front fee, nor is there an extra charge even if the client rebalances their portfolio.

Australia

Xero wins Best Overall Fintech award (Xero), Rated: AAA

We feel humbled to be awarded the Best Overall Fintech platform by the Fintech Breakthrough Awards. It also provides validation that we’re truly changing the lives of our more than one million subscribers.

Award organizers report $36 trillion in digital payments will be processed by the end of 2017. In the past 12 months, Xero alone transacted $1.2 trillion worth of economic activity.

The very foundation of a small business owner’s financial web is secure bank integrations. These enable banking, accounting and business management to come together. Xero is building a strong, global financial web, working with 110 financial institutions and 500 ecosystem partners around the world.

Millennials fast losing interest in low-rate accounts (LendIt), Rated: A

  • Poor rates on savings accounts, pricey property and stock market volatility is leading to an influx of millennial money to P2P lending
  • The number of millennial investors has increased by >250% over the last 12 months as young savers join older investors in seeking out alternatives to traditional saving and investment products
  • Surge in millennial money has helped RateSetter reach $100m of loans funded in record time for an Australian lending platform
  • 80% of all lenders expect to increase the amount invested within the next 12 months
Source: RateSetter

RateSetter: Millennials are driving P2P growth in Australia(P2P Finance News), Rated: A

The London-headquartered P2P platform, which launched its Australian division to the public in 2014, argues that poor rates on savings accounts, high property prices and stock market volatility have pushed people aged 18-35 towards P2P lending.

RateSetter Australia said that its number of millennial investors had grown by 250 per cent over the last 12 months and now accounts for 58 per cent of total active investors.

India

Here’s all you want to know about alternative asset class – P2P lending (Financial Express), Rated: A

What P2P lending offers investors
– P2P lending in India currently gives a net return of 18-22%
– Borrowers repay principal & interest every month so there is a steady cash flow
– Investors can pursue legal recourse against the borrower in case of defaults
– By diversifying your investment across different borrowers, you will begin to mirror the overall default rate of the platform

P2P lending is like investing in debt; the capital risk is lower, and there exist ways to mitigate it. In case a borrower defaults, investors can pursue legal recourse against the borrower.

Cash in on P2P lending (Telengana Today), Rated: B

A good percentage of people in the world are involved in digitally enabled peer-to-peer exchange. This form of exchange has expanded dramatically in recent years, moving beyond simple retailing and free file exchange to personal, human-intensive services such as hosted accommodation, urban and city-to-city transportation, and peer-to-peer lending.

Here is the basic premise of P2P lending: People sign up on a P2P lending platform like PeerLend as a borrower or as a Lender. A borrower submits an application for a loan by providing his details, and KYC documents. The platform back office team performs a credit assessment of the profile and determines his credit worthiness.

From a lender’s perspective, peer to peer lending allows them to directly lend to other people by having them register on the platform by providing their ID and address proof. They also provide the bank account details that they will use to transact on the platform.

Interest rates – Various P2P platforms in India are charging a one-time registration fee ranging between Rs.500/- to Rs.1,500/-, and a loan servicing fee ranging from 3.5% to 6% of the loan amount.

Canada

OnDeck Canada Partners With Lightspeed (Yahoo! Finance), Rated: AAA

OnDeck Canada, a leading online lender to small businesses in Canada , and Lightspeed, a cloud-based point-of-sale platform for independent retailers and restaurants, have announced a partnership that will allow Lightspeed users to secure OnDeck loans. The new offering will be available to Lightspeed customers in Canada and the US providing up to $500,000 (US) term loans and $100,000 (US) lines of credit.

This strategic partnership between OnDeck and Lightspeed, who each share a focus on assisting small businesses, is a major step forward for Canadian businesses, especially those retail, restaurant, and e-commerce companies that can now acquire OnDeck financing to support their investment in the Lightspeed point of sale (POS) solution.

OnDeck loans will also enable Lightspeed clients to take advantage of growth opportunities such as buying inventory, purchasing equipment, and boosting their customer experience.

OnDeck’s advanced lending technology and staunch dedication to customer service has enabled it to deliver more than $6 billion dollars in capital to over 60,000 businesses across the United States , Canada , and Australia.

South America

Magnetis sees more Brazil investors embracing robo-advisory (NASDAQ), Rated: AAA

Magnetis Gestora de Recursos Ltda, Brazil’s first fintech asset manager, expects demand for affordable access to automated investment advice to surge in coming years as interest rates decline and economic uncertainty persists.

As the central bank undertakes the most aggressive rate cutting cycle in eight years, demand for cheap financial advice has fueled a surge in trials for robo-advisers, an automated form of passive money management that identifies a client’s risk-taking preference.

Since March 2015, Magnetis has conducted 30,000 trials for clients eager to understand a platform providing access to 15,000 different domestic tradable assets.

Growing scale has helped Magnetis cut management fees to 0.4 percent, well below the 0.8 percent to 1 percent that banks and brokerages typically charge customers.

Africa

Banks vs startups: Who leads Africa’s fintech innovation? (This is Africa), Rated: AAA

Only an estimated 34 percent of Africa’s adult population has any form of formal bank account. This is an improvement from a decade ago. Much of this progress can be credited to the growth of mobile and agent network-based banking solutions.

To scale up the trend, banks need to figure out how to effectively join Africa’s fintech innovation ecosystem.

A number of banks have launched bespoke accelerator programmes in a bid to reach out to African entrepreneurs and startups. Barclays, Standard Bank, Citi, and DBS Bank are just a few.  Others seek to partner directly with startups to develop new products and services.

In Cape Town, for example, Barclays has launched a business accelerator programme called Rise in a bid to encourage mutually beneficial collaboration between banks and startups.

Others agree. In east Africa, KCB Bank has partnered with more than 10 startups on projects and is involved with multiple projects supporting entrepreneurship in the region. This is bearing fruit: the bank’s mobile banking app was built by a startup.

Peach Payments took part in the Barclays accelerator in 2016. Upon completion, it signed a proof of concept with the bank to explore further collaboration.

However Keith Jones, co-founder at Sw7, believes that despite their efforts banks have so far failed to develop a mechanism to effectively engage with startups.

While the intent is there, he says, the strict corporate mindset of financial institutions has meant they are slow to adapt to new solutions and models. They can also have a tendency to “smother” small businesses rather than help them to thrive.

6 artificial intelligence startups in Africa to look out for (VentureBurn), Rated: A

South African startup DataProphet last year received a significant investment of an undisclosed amount from Yellowwoods Capital Holdings to expand its international offering. As part of the deal, DataProphet will act as the advanced analytics partner for the group.

The startup, based in Cape Town, has developed various machine-learning interventions, mainly for the finance and insurance sector.

Nigerian startup Kudi.ai has developed a chatbot which allows users to make payments and send money to friends and family in Nigeria via messaging. The company is a graduate of the YCombinator Winter 2017 batch.

The company uses AI to understand user requests, drive conversations, understand user spending habits and prevent fraud.

The startup has put together a business-to-business solution too, which it is piloting with banks and telecommunication companies.

Founded by former equity-derivatives specialist Annabel Dallamore (pictured here) together with Julian Dallamore and Mark Karimov in 2013, Johannesburg startup Stockshop.co.za offers a number of artificial intelligence solutions to financial institutions such as banks and insurance companies.

The startup has also developed a bot interface that completes real-time identity verification checks on behalf of banks and financial institutions in line with requirements under the Financial Intelligence Centre Act (FICA).

The startup has also developed a solution that uses an algorithm that pairs financial behaviour, spending and other data along with emotional cues and provides clients with assistance around financial matters such as payments, administration, rewards, education, analytics and tracking.

It’s also launched a micro-insurance platform in April that is unique to the African market.

Asia

Ant Financial Eyes Japan (Finews), Rated: AAA

China’s Ant Financial Services Group has said it wants to increase operations in Japan and is actively seeking a partner there.

With a deal in Korea already in the bag after a $200 million investment in South Korea’s mobile platform company Kakao Talk, the focus has turned to the world’s thrid-largest economy Japan.

Authors:

George Popescu
Allen Taylor 

Wednesday April 26 2017, Daily News Digest

robo-advisors deal share

News Comments Today’s main news: Wela pairs AI with financial advisors in mobile app. KBRA assigns prelim ratings to Avant Funding Trust 2017-A. Assetz Capital to launch property-only, longer-term accounts. Mint Bridging ups development as FC exits market. China Creation Ventures leads $16M IceKredit round. Today’s main analysis: Affordability of houses in U.S. cities relative to income. Today’s thought-provoking […]

robo-advisors deal share

News Comments

United States

  • Wela launches mobile app pairing AI with real financial advisors. GP:”In online lending the equivalent would be mixing AI underwriting and human underwriting. “AT: “It won’t be long before everyone is managing their finances with mobile apps: Household income, investments, savings, college education expenses, you name it. Artificial intelligence will be a major part of that movement.”
  • Kroll assigns preliminary ratings to Avant Loans Funding Trust 2017-A. GP:”Avant continues to securitize and the securitization continues to perform well. This is great news for Avant and their peers.”
  • Affordability of houses in major U.S. cities relative to income. GP:”Afforability of housing, as it is the largest budget item in most people’s budget, is correlated with all kind of useful parameters like affordability,etc. However, the correlation is not always in the direction one would expect: if housing is cheap it could mean people have no credit/only expensive credit options/no good income , etc. “AT: “While interesting data, this says nothing about whether these markets are good investment markets for real estate. Rather, its says a lot more about whether John Q. Homeowner can afford to buy a home in these markets. Looking at median incomes, I’d say the majority of income earners all across the country would have a difficult time buying a home in most of these markets. But the data can also be misleading. For instance, in Dallas, the median house value is $162,300, but the average middle-class home purchaser can get a home for half that. Medians don’t give a realistic view of on-the-ground reality, in my opinion.”
  • Upgrade to hire up to 300 in Phoenix. GP:”Renaud Laplanche is hiring up to 300 people after barely opening doors. Lending Club I believe has about 1,000 employees. In my personal experience in growing companies I made the mistake of hiring too many too fast and I now prefer to see what I can do with as few people as possible.” AT: “Upgrade is expanding fast. I wonder why they chose Phoenix.”
  • Reliamax now services $275M in private student loans. GP:”A decent size portofolio. We encourage as much transparency as possible. I wish more companies published their portofolio size and numbers.”
  • RIP MPL? AT: “This is an apologia for Misys, which I think is trying too hard to convince people that banks can compete with fintech companies on technology. One problem: They haven’t proven it yet, and it doesn’t appear as if they are working at it real hard. In order for the premise to be true, community banks will have to follow the larger banks in adopting emerging technologies, and very few of them are. I don’t even think it’s on their radars.”
  • Lending Technologies introduces Leads2Lend. GP:”We have on our database close to 20 tech companies who provide platforms to lenders. How many more will enter this space? Is this a crowded space yet?”
  • Banks to overhaul their technology. AT: “There are some valiant efforts here, but big banks are not agile. I don’t see these changes happening as rapidly as their digital competitors in fintech can operate.”
  • How the CRE industry is adapting to fintech.
  • Comparative look at REITs and MPL. GP:”REIT is very tax efficient.”
  • Roostify names Frank Gelbart as CRO.

United Kingdom

European Union

China

International

  • Mapping robo-advisors around the globe. GP:”Robos market is well correlated with online lending.” AT: “That the wealthiest nation in the world would lead in WealthTech funding is not surprising. But this is about investment. U.S. consumers have not adopted robo-advice as quickly as consumers in other nations, especially Asia.”
  • Fintech patents jump, U.S. leads. GP:”I am surprised China comes in as #2.” AT: “I think U.S. creators care more about protecting their intellectual property than creators in other parts of the world, or it could be that the U.S. mechanism for protecting patents is much more sophisticated and effective than in other parts of the world. Either way, you can’t judge the size of the fintech sector by patents alone. Otherwise, the UK would be way down the list.”

Australia

News Summary

United States

Wela Launches World’s First Financial Advice App Pairing Artificial Intelligence with Real Advisors (Yahoo! Finance), Rated: AAA

Wela today announces its free mobile app changing the way financial advice is delivered by pairing real financial advisors with Artificial Intelligence (AI) through the personification of its digital advising algorithm, Benjamin. The first true digital advisor, Benjamin utilizes AI to track users’ daily, weekly and monthly spending habits and provides personalized advice based on their financial needs and goals. Unlike other free consumer finance apps on the market, Wela pairs AI capabilities with a human touch, offering access to real financial advisors via phone, video chat or in-person at no additional cost.

The Wela iOS app enables users to track all their financial accounts in one place, protecting user privacy by leveraging bank-level security, as well as 256-bit SSL encryption and two forms of secure authentication. Capable of aggregating data from more than 13,000 financial institutions, Wela’s digital advising algorithm, Benjamin, uses linked account information to run a complete analysis, helping users take steps toward financial health based on three main pillars: creating an emergency reserve, paying off debt, and implementing an investment strategy. In addition to Benjamin’s foundational metrics, the algorithm delivers custom insights on demand, helping users stay on track to reach their short- and long-term goals.

Wela’s in-app budgeting tool, Benjamin, makes budgeting tangible and prevalent on a day-to-day basis. Once Benjamin is activated, the onboarding process begins with the creation of a personalized ‘Daily Spend Limit’. Benjamin then compares that number to actual daily spending and other transactions so users can understand how they are progressing toward the customizable goals they have set for themselves within the app. With real-time analysis of daily spending, rather than an end-of-month review, users are empowered with a better budgeting method and reassurance in their progress.

“Wela is the first free app to give comprehensive financial advice in real time in real-world scenarios personalized for you,” said Matt Reiner, Wela CEO and co-founder.

KBRA Assigns Preliminary Ratings to Avant Loans Funding Trust 2017-A (Yahoo! Finance), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Avant Loans Funding Trust 2017-A (“AVNT 2017-A”). This is a $192.6 million consumer loan ABS transaction that is expected to close on May 4, 2017.

This transaction represents Avant, Inc.’s (“Avant”, the “Servicer” or the “Company”) fourth rated securitization collateralized by a trust certificate backed by unsecured consumer loans originated through its online marketplace lending platform (“Avant Platform”). There have been four prior unrated securitizations, in which Avant or Avant’s institutional investors were the sponsors and the collateral was unsecured consumer loans originated under the Avant Platform.

Avant has a strategic partnership with WebBank, whereby WebBank, a Utah chartered industrial bank, originates loans through the Avant Platform. Avant utilizes technology and customized scoring models to assign credit grades. The Avant website is designed to provide customers with an easy interface and quick online loan decisions at competitive rates compared to traditional lending platforms.

Avant retains a portion of loans originated through the Avant Platform. Avant does not fund loans through a peer-to-peer platform, but instead partners exclusively with institutional investors for whole loan sales.

Affordability Of Houses In Major U.S. Cities (Relative To Income) (Investment Zen), Rated: AAA

Using median income data from the U.S. census and median home prices from Zillow, this map shows how many years of median income it costs to purchase a median house in each of these cities.

DETROIT

#1

  • Median House Value: $38,200
  • Median Household Income: $25,764
  • Amount of Income Needed to Purchase: 1.5x

SAN FRANCISCO

#27

  • Median House Value: $1,147,300
  • Median Household Income: $81,294
  • Amount of Income Needed to Purchase: 14.1x

California finance startup opening downtown Phoenix office, hiring up to 300 (Biz Journals), Rated: A

San Francisco-based financial services startup Upgrade Inc. is opening its first expansion office in downtown Phoenix, with plans to potentially hire up to 300 people.

The startup is opening an operations center in July on two floors of the Renaissance Square Building One at 2 N. Central Ave.

ReliaMax Now Services $ 275 Million in Private Student Loans (Yahoo! Finance), Rated: A

ReliaMax, the complete private student lending solutions provider for banks, credit unions and alternative lenders, says it services $275 million in loans, an increase of nearly 670 percent from the close of 2015, driven by portfolio conversions that helped banks, credit unions and alternative lenders enter the private student loan asset class.

The ReliaMax loan servicing platform was built with the latest technology and exclusively for private student loans, making it unencumbered by the infrastructure constraints facing other student loan servicers whose platforms were designed to principally serve federal student loans or other consumer loans.

Marketplace lending RIP? (Bankless Times), Rated: A

Once banks master financial technology, the marketplace lending industry is in deep trouble, Jean-Cedric Jollant believes. And the bad news is that’s starting to happen.

“The (fintech) challengers made the move by trying to build a hybrid model where they may not own 100 per cent, 50 per cent or even zero per cent of a loan, but the need the technology to do that,” Mr. Jollant said. “They need new underwriting material and servicing software which they don’t necessarily have.”

Once more banks embrace new technology, they will be able to capitalize on a long list of advantages they have over marketplace lenders, Mr. Jollant said. Their abilities to process payments, service credit and onboard customers are superior. Close the technology gap and the banks can provide much better service at competitive rates.

“So (the marketplace lenders) are just intermediaries. Eventually they will not be able to compete with banks. The only difference between what the marketplace lenders are doing today and the banks really is the underwriting model and that gap will be breached really fast.”

Mr. Jollant believes the venture capital industry will soon begin to sour on marketplace lenders, possibly as soon as later this summer. Those surviving that will then have to withstand the next downturn, which many models have yet to be tested by.

Lending Technologies Corp Introduces Leads2Lend CAM Solution (PR Newswire), Rated: A

B2B fintech firm Lending Technologies Corp, a pioneer in loan origination technology, announces Leads2Lend, its new marketing platform for alternative lenders. Produced in cooperation with Lead One Marketing, Inc. the Leads2Lend program provides alternative finance companies with an all-in-one digital solution to identify and engage with potential new customers—ultimately leading to a stronger bottom line.

The Leads2Lend platform combines Lending Technologies Corp’s white-label customer acquisition management (CAM) technology with a digital marketing program that connects alternative finance firms with new clients. Using Lending Technologies Corp’s proprietary digital onboarding and loan building tools, designated agents can individually download leads and create bespoke lending solutions for the clients. Other functionalities include tools to expedite credit decisions and facilitate loan package construction.

Lending Technologies Corp’s white-labeled CAM technology, serving customers in the U.S. and Switzerland, provides a fully digital, mobile-responsive, end-to-end process for banks and alternative finance companies that allows lenders to save time and money while reducing the risk associated with underwriting loans to small- and medium-sized enterprises. Lending Technologies Corp provides a seamless, paperless solution to all users and gives loan officers the latest digital tools for lenders to issue credit decisions—all with a comprehensive back end.

An omnichannel overhaul in 5 steps (American Banker), Rated: A

U.S. Bank and Bank of Montreal have begun multiyear overhauls of their websites, mobile apps, call centers and ATMs.

Fix what’s broken. Both U.S. Bank and Toronto-based BMO are starting with the “dissatisfiers” — the things that vex customers or make them give up on one channel (say, mobile) and switch to another (such as the call center). JPMorgan also made this part of its approach when it rewrote its mobile app last year.

Make incremental enhancements. 

U.S. Bank’s mobile app was improved 27 times in the past two years, with the help of so-called agile development methods.

BMO also has adopted agile development. “Gone are the days when our tech people took months and months and built detailed requirements,” Badarinath said.

Create a “unified customer experience.” For years, banks have talked about having a consistent experience across mobile apps, websites, branches, ATMs, video kiosks, call centers and text messages. Yet you would not want to talk with a teller the same way you tap on a mobile app or withdraw cash from an ATM.

This fits with recent Javelin research that found most consumers would prefer to apply for credit cards in digital channels: 48% said online, 13% mobile, and 34% said they would prefer a branch. For a checking account it was 41% online, 8% mobile and 49% in a branch.

Today, only 8% of successful applications start and finish in a smartphone or tablet.

Establish an innovation team.

BMO has a group whose job is to look for interesting fintechs the bank can partner with to augment his group’s work.

Test emerging technologies.

And it is exploring options for using chatbots to let people use text messages to request and perform transactions.

Gaston envisions using augmented reality to help customers who want to purchase a car, a house or a boat understand their options.

He foresees using machine learning in the bank’s decisions about online accounts.

How is the CRE Industry Adapting to the Emergence of Fintech Solutions? (NREI Online), Rated: A

NREI recently spoke with Frank Muhlon, head of transactions at CrediFi Corp., to hear more about what’s ahead for this segment of the market.

Frank Muhlon: For sales and financing, technology allows for faster and broader market reach, meaning you have the ability to get to multitudes of investors and lenders. Being able to get to those people faster is really helping to drive the business.

The other area is risk mitigation and the opportunity to reduce your risk, which goes hand-in-hand with more transparency and more information.

Frank Muhlon: At its heart, it has always been a people business and I really don’t foresee that changing. But tech and innovation have been a hallmark of commercial real estate for some time. Eight to 10 years ago we went through a significant and humbling downturn and going through that adversity brought innovation and numerous opportunities. Institutional capital, debt and equity capital got reshuffled, and it presented some opportunities in the marketplace.

I think there is a segment of our industry that is not completely convinced that tech is necessarily disrupting our business in the way that it is disrupting other industries.

Frank Muhlon: In the last five years, the crowdfunding space has grown. There were fewer than 10 pioneering real estate platforms focusing mostly on equity investment. Now there are arguably over 100 sites covering the entire capital stack.

Five years ago, crowdfunding as a whole was a few billion [dollars] in activity globally. In 2016, it was well over $50 billion. Real estate is a more modest piece of that, but it has grown substantially as well. There was about $3.5 billion in activity on real estate crowdfunding sites in 2016. That has been a tremendous growth market, and alternative financing and lending is seeing similar trends.

The online lending industry was about $40 billion last year and it could be upwards of $1 trillion in the next five years.

Frank Muhlon: CredifX is the first cloud-based and data-driven commercial real estate financing marketplace for borrowers, brokers and lenders. The platform focuses on loans of $1 million and up across all major property types nationally. We leverage technology to match loan applicants with financing based on their criteria and the extensive loan product offerings in our lender network.

Comparative look into REITs and Marketplace Lending (Realty Biz News), Rated: B

One reason to invest in REITs is the favorable tax treatment and dividend payouts. Unlike investing in businesses where you expect to see increasing profits from continued growth, 90% of the profits have to be issued in dividends from investments in REITs. Instead of waiting for a business venture to show profits before receiving a dividend, investors get their share quarterly or annually in regular dividend checks.

With Marketplace lending, investors can expect to receive monthly disbursements throughout the lifetime of the loan. Principal investments are typically returned to investors between 6 months to 24 months, depending on loan payoff dates and loan extensions. Servicing fees vary by marketplace lending platform, but typically range from 1% – 3%, compared to REIT management and servicing fees from 3% – 15%.

Finally, REITs instantly diversify your portfolio resulting in better returns. In one REIT you may be invested in a commercial building, an apartment building, and a couple of warehouse distribution centers. The more diverse the portfolio, the better the returns, and the better the hedge against volatility.

While this style of diversification may work to the benefit of experienced REIT investors. marketplace lending allows portfolio diversification controlled by the investor.

Roostify Names Frank Gelbart as Chief Revenue Officer (Yahoo! Finance), Rated: B

Roostify, a provider of automated mortgage transaction technology, today announced it has named Frank Gelbart as Chief Revenue Officer. Frank will be responsible for driving new and existing revenue streams as well as managing partner relationships for Roostify.

United Kingdom

Assetz Capital to launch property-only and longer-term accounts (P2P Finance News), Rated: AAA

ASSETZ Capital is launching two new investment accounts to capitalise on the surge of demand it has experienced on both the investor and the borrower side.

The peer-to-peer lending platform is expanding its account range to seven offerings, adding a longer-term and a purely property-backed account to its existing 30-day access, quick-access, green-energy, “great British business” and manual loan accounts, it told Peer-to-Peer Finance News.

The longer-term account will offer investors an interest rate of about 4.75 per cent over one-year investments, while the new specialist account, which caters for investors who want to focus exclusively on loans secured against property rather than other assets, will target returns of around five per cent.

Mint Bridging ups development lending as Funding Circle exits market (Financial Reporter), Rated: AAA

Mint Bridging has reported an “influx” of development finance business after Funding Circle announced plans to stop lending in this area earlier in the month.

Its product ranges can accommodate up to £5,000,000 at 80% LTV, with heavy refurbishment projects up to 100% of the purchase price & 100% of the refurbishment costs.

P2PGI keeps NAV growing through UK asset-backed market (P2P Finance News), Rated: A

P2P GLOBAL Investments (P2PGI) continued to shore up its finances in March, posting a 0.55 per cent increase in net asset value, from 0.38 per cent in February, which brings first-quarter growth to 1.17 per cent.

The P2P investor’s shift away from US and unsecured assets, as well as a share buyback last month, was the main driver of the improvement.

US consumer assets now dropped to 45.1 per cent of the London-listed fund’s portfolio, down from 46 per cent a month earlier and 48.4 per cent at the start of the year.

The firm is targeting a further reduction to 30 per cent of total investment, to boost its focus on UK property and asset-backed products, where it said new origination from partnering with P2P lenders has increased significantly in the last quarter

Growth Street Reports Rapid Growth as 600 Investors Sign Up in Just 5 Months (Crowdfund Insider), Rated: A

Peer to peer lender Growth Street is reporting solid growth. The online lender said it has captured over 600 investors since platform launch at the end of 2016. Growth Street is a platform that provides online financing options for UK SMEs. The company also touted its review on 4thWay that categorized the P2P lender as one of the lowest risk platforms in the industry.

High earners log-on for robo-advice (Finextra), Rated: A

The demand for robo-advice rises with income, despite it being widely seen as a low-cost financial advice solution, according to Deloitte, the business advisory firm.

Deloitte’s research shows over half (51%) of people earning £45,000 to £70,000 would use a robo-adviser for investments, compared with just 30% of those on incomes under £15,000.
Demand is highest amongst millennials, but the research suggests other age brackets could be interested in using robo-advice. Over two-fifths (43%) of 35-44 year old workers with a pension would use robo-advice on pensions, as would one-quarter (24%) for the 45-54 year olds and a fifth (21%) of those aged 55 and above. Also, 35% of defined contribution pension holders – more than three million people – would be willing to pay for robo-advice to invest their pension pots, with demand highest (45%) among those with the smallest pensions pots, many of whom cannot afford traditional advice.

An MBA Graduate Left Banking To Launch Online Lender Spotcap Overseas (BusinessBecause), Rated: A

When Niels Turfboer enrolled in the MBA program at IE Business School in Madrid, he looked beyond a traditional career in banking. He decided to join the fast-growing fintech industry instead.

Having worked at institutional lenders for over a decade, his MBA training enabled him to spot an opportunity in the business banking space. Four years after graduation, he joined fintech startup Spotcap as managing director.

Spotcap offers working capital lines of credit — up to £250,000 — to small and medium-sized companies online. Spotcap has a run rate of £100 million in loans per year. The company operates in Spain, the Netherlands and Australia. Spotcap also opened a branch in the UK last year, despite Brexit. The business employs 100 people and has raised €75 million in venture capital.

Q. Did you know you wanted to work in fintech before the MBA? 

I’m a traditional banker. I worked for over a decade in the banking industry. But I wanted to be more entrepreneurial. There were opportunities to be entrepreneurial in banking, but after the crisis, this was gone. I chose a very particular school — IE — because it is known for having a strong focus on innovation and for being entrepreneurial. A large part of the MBA course is focused on teaching people to build and run a company.

Q. You’ve launched in the UK. After the Brexit uncertainty, are you reconsidering?

No. We moved in after Brexit. We were surprised at the result, but having analysed the situation, we concluded it’s not a negative. I see downsides, but not for our business model. We know there will be two years of deal making and uncertainty over trade barriers and freedom of movement. It tends to be bad for the economy, and this has had an impact. But we already had this knowledge moving into the market. We might be able to be more selective about lending to companies in industries that are hit hardest by the uncertainty. We are not going to do cherry picking, but we might take precautions in lending money. At the same time, during uncertainty banks are risk-averse and take a step back, and that opens up opportunities for the alternative finance sector to fill that gap.

Q. Is the MBA curriculum relevant to entrepreneurs?

Yes, at least the MBA I’ve done. At IE, 30% of the courses I did had an entrepreneurial focus.

The House Crowd Celebrates Five Years of Property Crowdfunding (Crowdfund Insider), Rated: A

Manchester property crowdfunding, the House Crowd,  is celebrating five years of operations having raised more than £44 million since it launched it 2012. According to the platform, the House Crowd now serves over 15,000 investors who have received over £9 million in returns. The House Crowd received the ‘Crowdfunding Platform of the Year’ award at this year’s inaugural Property Wire Awards, in recognition of its position in the alternative finance industry.

Lend and earn annual returns of up to 6% with Kuflink (Property Investor Today), Rated: B

The Kuflink Group is offering investors an opportunity to earn up to 6% a year through its peer-to-peer (P2P) lending platform, while also providing short-term finance for those looking to invest in property.

When it comes to the option to lend against various properties on Kuflink’s P2P platform and earn up to 6% gross pa for short-terms, up to 12 months usually, interest is paid monthly.

Secondly, Kuflink offer short-term lending against property for business purposes for terms of up to 24 months.

European Union

The FT 1000: The complete list of Europe’s fastest-growing companies (Financial Times), Rated: AAA

7 Optal United Kingdom Fintech 6,161%

 

21 iZettle Sweden Fintech 3,036%

 

46 Epos Now United Kingdom Fintech 1,579%

 

65 Lemonway France Fintech 1,260%

 

78 RateSetter United Kingdom Fintech 1,176%

 

146 Innofis Spain FinTech 781%

 

150 Fonix United Kingdom Fintech 761%

 

167 orderbird Germany Fintech 703%

 

198 YouPass France Fintech 615%

 

242 Trustly Sweden Fintech 501%

 

335 Prepaid Financial Services United Kingdom Fintech 367%

 

433 Paymentsense United Kingdom Fintech 261%

 

763 Smart Currency Exchange United Kingdom Fintech 114%

 

780 Deus Technology Italy FinTech 110%

 

923 HPD United Kingdom Fintech 76%
China

China Creation Ventures Leads $ 16M Round In SME Credit Firm IceKredit (China Money Network), Rated: AAA

China Creation Ventures, a newly founded venture firm established by several former KPCB executives, has led a RMB110 million (US$16 million) series A round in IceKredit Inc., a Shanghai-based credit assessment service provider catering to small and medium-sized enterprises (SMEs).

Founded in 2015, IceKredit applies machine learning algorithms and big data related technologies to make all-rounded credit evaluations for individuals and SMEs in China.

Its products include an SMEs credit evaluation system and an individual credit assessment system, which consists of an anti-fraud engine, personal credit portrait and missing customer contact information restoration.

China’s new illegal fundraising topped $ 36 billion last year (Daily Mail), Rated: AAA

Chinese authorities vowed on Tuesday to step up a crackdown on illegal funding scams, after reporting 5,197 new criminal cases last year involving 251.1 billion yuan ($36.5 billion), state-run Shanghai Securities News reported.

More than 30 percent of illegal fundraising cases were related to private investment and financial intermediaries, including unlicensed investment advisers and providers of third-party wealth management products, the report said.

Moreover, financial fraud spread last year from China’s east to rural areas, where funds approached unsophisticated Chinese farmers, the office of the joint meeting said.

Last year China approved the arrest of 9,441 people on suspicion of illegal soliciting public deposits and prosecuted 14,745, according to a separate Shanghai Securities News report on Tuesday.

P2P Giant Dianrong is Preparing for Full Blockchain Integration (Coindesk), Rated: A

Already, Dianrong has co-founded a blockchain lending platform called Chained Finance; now, less than a week after the firm hired IPO expert Yawen Cui, he has revealed comprehensive plans to swap over much of the startup’s services to a blockchain.

By January of this year, Dianrong had released a statement showing that 3.62 million investors had originated a total of ¥16.2bn in loans last year alone, a 148% increase over the previous year, and its fourth year of growth.

Then, last month the firm revealed it had joined Taiwan-based Foxconn to launch Chained Finance, a blockchain trade finance platform built using technology from the Linux Foundation-led Hyperledger Project.

P2P Lending News (Xing Ping She Email), Rated: A

P2P Lending Funds Depository Cooperation Fair was held in Chengdu
On 24th April, “P2P Lending Funds Depository Cooperation Fair”was held in Chengdu by NIFA. The Fair is aiming at building bridges between P2P Lending institutions and banks.
Owing to the Fair, over 11 commercial banks, including Xingwang Bank, Ping An Bank, Beijing Bank, Shanghai Bank, Baoshang Bank, etc., reached agreements with over 50 P2P Lending institutions and five fintech companies. Officials from People’s Bank of China (Chengdu branch), Bureau of Finance of Sichuan Province, Chengdu financial services office and other relevant departments attended the Fair, with nearly 170 participants.
Chinese:
中国互联网金融协会首办P2P存管对接洽谈会
4月24日,中国互联网金融协会在成都举办“全国网贷机构资金存管对接洽谈会”。据悉此次洽谈会在网贷行业尚属首次,旨在搭建网贷机构与银行的沟通桥梁,促进双方合作。据透露,本次对接洽谈会共有新网银行、平安银行、北京银行、上海银行、包商银行等11家商业银行,与到会的全国50多家网贷机构、5家金融科技公司实现了对接洽谈。参会人数近170余人。人民银行成都分行、四川省金融工作局、成都市金融服务办公室等相关部门领导出席会议。

P2P Lending industry may acquire a bank-like license in the future
On April 22nd, China Fintech 50 Forum(CFT50) was found in Beijing. According to Yang Dong, the vice president of Renmin University Of China Law School and the director of Fintech and Internet Security Research Center(FTCS), who involved in making CBRC Regulations on P2P lending industry, revealed that although P2P is currently playing the role of Internet information intermediary, it may develop to a bank-like institution acquiring a new type of license and the industry also has huge space in the future.
Chinese:
行业整顿后,P2P或将获得类银行牌照
4月22日,在中国金融科技50人论坛成立现场,参与银监会网贷管理办法等新规制定的中国人民大学法学院副院长、金融科技与互联网安全研究中心主任杨东透露,尽管目前P2P定位于网络信息中介,但P2P下一步的发展可能会发放许可,是类似银行的新型牌照,未来的政策空间很大。

The scale of cash loan over 600billion RMB, who will be knocked down by regulations?
Due to the low threshold, lacking of supervision and disorderly development, problems such as violent collection, high commissions and usury, etc., cast a shadow on cash loan.
According to the instructions of the State Council and the requirements of Internet Financial Risk Special Rectification Office, cash loan has been incorporated into the rectification work of controlling Internet financial risk. In addition, Notice on carrying out the rectification work of “cash loan” business activities and its supplementary documents have been issued. Regulators also began to start the cash loan risk investigation.
Chinese:
现金贷规模超6000亿元 上千家平台谁会被监管重拳击倒?
由于门槛低、缺乏监管,无序发展所带来的暴力催收、砍头息、高利贷等问题在现金贷背后投下一片阴影。
根据国务院领导批示及互联网金融风险专项整治工作领导小组办公室要求,现金贷已纳入互联网金融风险专项整治工作,并下发了《关于开展“现金贷”业务活动清理整顿工作的通知》和《关于开展“现金贷”业务活动清理整顿工作的补充说明》两份文件。各地监管部门也由此开始启动现金贷风险排查。

Half-hearted crackdown dents case for Chinese P2P (NASDAQ), Rated: A

A half-hearted crackdown dents the investment case for Chinese peer-to-peer lending. While P2P lender China Rapid Finance is set for a $100 million initial public offering in New York, the timing looks bad. Sector heavyweight Lufax, last valued at $18.5 billion, is unlikely to list soon.

Instead, lending has accelerated and there are still more than 2,000 online platforms in operation, according to industry tracker Wangdaizhijia. Loan volumes in March hit a new record of 251 billion yuan ($36 billion), bringing the total outstanding to 921 billion yuan – up 83 percent in a year.

Shoddy local enforcement is the obvious culprit. Provinces and cities interpret the rules differently, according to an industry insider.

Investors are cautious too. China’s only U.S.-listed lender, Yirendai <YRD.N>, trades at just above 6 times forward earnings, down from more than 15 times last summer.

E.Sun launches new AI chabot to offer futuristic financial advice (The China Post), Rated: B

E.Sun Bank’s (玉山銀行) AI Chatbot (玉山小i) is the latest artificial intelligence financial advisor that Taiwan-based banks have launched to assist locals with any finance-related issues.

The AI Chatbot utilizes the IBM Watson Conversation Service to interpret commands and generate responses, local media reported.

At this stage, the AI Chatbot’s responses are limited to inquiries regarding exchange rates, mortgage assessments, and credit card recommendations. It has yet to acquire the knowledge to answer questions regarding personal financing.

International

Mapping Robo-Advisors Around The Globe (CB Insights), Rated: AAA

Since 2012, private robo-advisors have raised over $1.32B globally across 119 equity investments. Robo-advisors make up the largest sub-category of companies in wealth tech and account for roughly 30% of total funding.

Three of the earliest robo-advisors firms and largest in terms of total funding are Betterment, Personal Capital, and Wealthfront. Though they lead in the US, expanding internationally is a challenge because of the complex international regulatory environment, differing investment practices, and other barriers to entry.

US-based robo-advisors have received 57% of the global deal share since 2012. Germany took second with 9%, followed by the United Kingdom, and China.

The two largest robo-advisor deals outside the US went to Wacai, a robo-advisor and personal wealth management technology company based in China.

The third and fourth biggest deals went to UK-based Nutmeg, with a $37.5M Series C in Q4’16 preceded by a $32M Series B in Q2’14 that included Armada Investment Group, Balderton Capital, Pentech Ventures, and other investors.

Fintech patents jump in “arms race” between banks and startups: These are the 10 countries filing the most (City A.M.), Rated: B

Global fintech patents have grown by 49 per cent in the past five years, reaching 9,545 in 2016 according to official global filings.

The US led the way in terms of numbers of fintech patents with 4,523, more than double the number of the next country, China. The UK boasted more fintech patents than any other country in Europe, ranking seventh with 89 patents, in areas such as banking, exchanges, investment, insurance and payments architecture.

The top 10 countries filing fintech patents

  1. US
  2. China
  3. Korea
  4. Australia
  5. Japan
  6. Singapore
  7. UK
  8. Russia
  9. Canada
  10. Germany
Australia

Fintech firms that walk the talk (The Australian), Rated: A

The rush to judgment about the disruptive power of fintech is premature, given it’s not even clear which part of the financial services value chain will be most affected.

Also, no matter how you cut it, the fact remains that by the end of last year there were 39 fintech companies around the world with valuations in excess of $US1bn, including Xero, which offers cloud-based accounting software for small and medium-sized businesses and is the sole Australasian representative.

Not surprisingly, the dominant vertical where 16 of the 39 companies with valuations in excess of $US1bn ply their trade, is so-called alternative finance, which includes marketplace lending and crowd-funding.

“Consumer lending in the US is a $US1.5 trillion opportunity, and in Australia it’s $100bn and the leading players are yet to crack $1bn.

Authors:

George Popescu
Allen Taylor

Thursday April 13 2017, Daily News Digest

small business fintech lenders

News Comments Today’s main news: Small businesses hate fintech lenders more than big banks. All is not well in the world of student loans. UK equity crowdfunding investments set new record in March 2017. Lending Works registers 8.8M GBP in ISA since launch. Today’s main analysis:  VC funding report. Small biz lending approval rates. Today’s thought-provoking articles: Portfolio review – […]

small business fintech lenders

News Comments

United States

  • All is not well in the world of student loans. GP: “There are many parallels between credit crisis in general: investors wrong feel of safety is, I think, the main one. And in this case student debt can only be releaved in bankruptcy in very exceptional cases, in short, nearly never. So investors feel that student debt is safe. The same way as mortgages perhaps? I think we are far away from a crisis or bubble. However student debt is growing and questions have to be asked of where this is going and why. Brian from BlueElephant told me one day that any market that is being skewed by government intervention from its normal equilibrium should be avoided as the price doesn’t reflect the risk. Is the government skewing the student debt market? Certainly. I have no issue with the risk in the student debt market, I am worried about the price pressure from non-profit participants. ”  AT: “Lenders need to get better at judging risk and cutting down on defaults.”
  • Small biz lending approval rates. GP: “We now see for a few quarters an improvement in small bank’s approval rate for small business loans.”AT: “Small banks and institutional investors are doing better at approving loans than big banks and alt lenders. I wonder what this means. Could be a trust issue.”
  • Small businesses hate fintech lenders more than big banks. GP:”As a small business you have a choice to borrow money below 10% from a bank, a product you will not qualify for, or to borrow moey from MCAs and fintech at rates often above 20%, a product you will nearly always qualify for. Who do you have more? The people who have a great product they don’t want to sell to you or the ones who have an expensive product you have no choice but to buy? To me this is a huge issue for the SME fintech lending sector. This means that as soon as credit from any other institution is anywhere close to being competitive the small businesses will not use a fintech offering. The second question is why are fintechs ranked so low? My personal believe is that it’s due to the onerous terms fintech usually charge small businesses especially in comparison to banks.  “AT: “This is interesting. Significant is the fact that this data comes from successful applicants, not non-borrowers. Driving this data could be the varied nature of borrower profiles. Small banks are likely lending to prime borrowers whereas online lenders are heavily weighted toward sub-prime borrower who likely expect to be treated like prime borrowers and can’t get a loan from a bank. This requires further investigation.”
  • VC funding report Q1 2017. GP:”Unaccredited investors had no scalable legal way to invest in private stocks before. The money inventory for unaccredited investors is fixed or at best stable given the wage stagnation, and the small inflation. And I think crowdfunding also includes more entertainment thant the stock market with the benefit of often also receiving a product. “AT: “I think it’s interesting that fewer people in the U.S. are investing in stocks? Does that mean they are investing in crowdfunding asset classes?”
  • Elevate Credit not trading at elevated price. GP:” I would compare them to Yirendai more. “AT: “The comparison to Square is interesting.”
  • Should fintech startups buy banks? GP:”If you want a bank, there is rent, buy or build. These approaches are standard business questions. The real question is should you work with a bank or not. Why not an insurance company? Why not with another deposit taking structure that is not a bank? ”  AT: “I don’t see why not. The most likely targets would be community banks, if they can get there before the big banks swallow them up.”
  • Diversification 101 in MPL. AT: “Basic investing advice.”
  • Podcast: Economic analysis of real estate, Part 2.
  • Redfin vets raise pre-seed round, launch digital mortgage platform.
  • Opus releases new version of OpusNotes.

United Kingdom

European Union

International

Asia

News Summary

United States

All is Not Well in the World of Student Loans (Lend Academy), Rated: AAA

It is clear that burdensome student debt is now holding many people back financially. Student loan debt now stands at a staggering $1.3 trillion (as of the end of 2016) an increase of 170 percent over the preceding 10 years. There are three contributing factors to this increase:

  1. More students are taking out loans.
  2. The loans are for larger amounts.
  3. Borrower repayments have slowed down.

Borrowers are now leaving school with over $30,000 in student loan debt and they are defaulting more. This is particularly true of those borrowers with balances of $100,000 or more. Over 20% of borrowers who left school in 2010 or 2011 owing that amount have already defaulted on this debt (a default means they are at least 270 days past due). That is an astonishingly bad default rate.

Small Biz Lending Approval Rates Improve at Institutional Investors and Small Banks, Stall at Big Banks in March 2017 (Biz2Credit), Rated: AAA

Loan approval rates at institutional investors and small banks improved in March 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Big banks’ ($10 billion-plus in assets) loan approval were stagnant in the last month, but remained at an all-time Index high. Meanwhile, loan approval rates at credit unions and alternative lenders continues to falter.

Small businesses hate fintech lenders more than big banks (Financial Times), Rated: AAA

On Tuesday, the Federal Reserve Bank of New York released its 2016 small business credit survey, which gives us an idea of the experiences of over 10,000 firms across the US. As Matt highlighted yesterday, one of the things we learn from the research is that small business expectations doesn’t tell us much about the economy. But we also get some information on how small business owners view various sources of credit. The results for fintech startups, specifically online lenders, are not as great as you might expect:

So, the hype about streamlining processes and building better customer experiences is not all hype, though they do just slightly worse in terms of transparency.

But there is something going on with the cost of credit provided by online lenders, and the terms they demand. The survey defines ‘online lenders’ as “nonbank alternative and marketplace lenders, including Lending Club, OnDeck, CAN Capital, and PayPal Working Capital”, so there are potentially two things going on here.

One is that online lenders typically have a higher cost of capital than banks, and so they also charge higher interest rates, which is what drives the dissatisfaction. The second is that online lenders are targeting riskier businesses, who wouldn’t be able to borrow from a bank. That would suggest the higher level of dissatisfaction about repayment terms and interest rates arises from the fact they are lending to businesses that generally encounter high borrowing costs, no matter who they are borrowing from.

Venture Capital Funding Report Q1 2017 (CB Insights), Rated: AAA

US VC-backed companies saw $13.9B in total financing across 1,104 deals in Q1’17, up 15% and 2% from Q4’16, respectively.

While Asia saw an increase in unicorn births from Q4’16, North America remained flat with a total of 3 new unicorns. Notably, Europe has not seen a new VC-backed unicorn since the first quarter of 2016.

Source: Gallup

Elevate Credit: Not Trading At An Elevated Price (Seeking Alpha), Rated: A

The fintech has funded more than $4 billion in loans for 1.6 million customers by using machine learning to lower fraud scores while providing quick lending decisions based on data inputs for a high-risk borrowing group.

Revenues grew 34% to $580 million last year while operating income expanded to $48 million, up from $9 million in 2015. The fintech is still losing money; that typically is a large negative in the recent IPO market, though other offerings have rallied despite large losses.

In total, Elevate sold 14.26 million shares at $6.50 including the over allotment amount. The company raised about $81 million after fees.

The company has a fully diluted market cap of only $350 million using a share count of 41 million and nearly 4 million of outstanding stock options.

The reality is that Square had a very subdued IPO similar to Elevate Credit. The initial price range target was $11 to $13 while the actual offer price dipped to only $9, though Square jumped back to that original price range trading around $12 for most of the first month as a public company.

Should fintech startups buy banks? (Tearsheet), Rated: A

Banks buying startups isn’t anything new. But for financial tech startups, looking for scale at any cost, perhaps the solution would actually be to buy a bank, according to a growing number of observers and experts in the industry.

There are almost 6,000 FDIC-insured banking institutions in the U.S. as of the end of 2016 and 1,541 of them have less than $100 million in assets, including a sliver of failing banks that need saving. With average common equity around $12.5 million for a healthy bank of that size, a well-established startup could pay $25 million and get fully licensed to be deposit taking.

Part of the reason startups haven’t been able to scale, at least in the retail banking world, is that so-called innovations are usually just different ways for people to interface with their banks, while core banking transactions – deposits, loans, mortgages and payments – generally remain the same on the backend. In other words, there hasn’t truly been an Uber for banking, said Pascal Bouvier, a venture partner at Santander Innoventures. Most fintech startups operate at the thin outer layer of banking.

The valuation gap between fintech startups and banks makes it difficult to structure a deal, he said. Banks tend to be valued more through historical earnings and the price of tangible book value, whereas fintech startups, because of their perceived high growth potential, often tend to have higher earnings multiples.

Diversification 101 in Marketplace Lending (LendingClub), Rated: A

While loans are issued in amounts between $1,000 and $40,000, Notes can be purchased for as little as $25.

If you invested $2,500 in only one borrower and that borrower becomes late and the loan eventually charges off, you could potentially lose 100% of your total investment amount. If you invested $25 in 100 different borrowers your potential loss on any single Note would be limited to 1% of your total investment amount.

 

Episode 6 – Economic Analysis of Real Estate, Part 2 (RealCrowd), Rated: A

In this episode listeners will learn about:
– How rising household income impacts multifamily investments
– How property tax factors into decision making
– Where to access data on real estate markets
– What asset class RealSource is pursuing in this current economic climate 

Redfin Veterans Raise Pre-Seed Round and Launch Digital Mortgage Platform “Approved” (Yahoo! Finance), Rated: A

Approved launched its digital mortgage platform today, aimed at radically simplifying the home loan experience for lenders and borrowers nationwide. The company raised $1 Million in pre-seed funding led by Social Capital and Precursor Ventures to support the launch.

Lenders in the pilot saw an average 50% reduction in the time it took to get those documents.

Approved technology includes:

  • DocCast™: Automatically collect original bank statements, W2s, 1099s, 1040s and paystubs.
  • DocVision™ Camera Scanning: Allows borrowers to securely “scan” documents using their mobile devices.
  • White-labeled Dashboards: A delightful and frictionless platform for borrower and lender collaboration.
  • Digital Document Library: Support for all popular loan programs.

Opus releases new version of OpusNotes (Hedgeweek), Rated: B

Opus Fund Services, a provider of hedge fund administration services, has launched new release of the OpusNotes loan accounting platform for marketplace lending vehicles.

United Kingdom

Latest OFF3R Index Data Reveals Significant Increase in Equity Crowdfunding Investments in March 2017 (PR Web), Rated: AAA

This record breaking figure smashed the previous monthly high, set back in July 2015, by over £13 Million. This made March 2017 the most successful month for the total amount raised via equity crowdfunding platforms in the young life of the asset class in the UK.

According to the data from OFF3R, equity crowdfunding had a very strong finish to 2016 but had so far had a slow start to the year.

The data revealed that March 2017 was a strong month for the sector. Just over £300 Million was lent in March via the platforms that form the P2P element of the OFF3R Index, including Zopa, Ratesetter and Funding Circle. This was marginally higher than February’s data but slightly down from January’s year to date high.

Lending Works Announcement: £8.8 Million Has Been Invested In ISA Account Since February 2017 Launch (Crowdfund Insider), Rated: AAA

UK-based peer-to-peer lending platform Lending Works announced on Wednesday £8.8 million has been invested into the company’s Individual Savings Account (ISA) since its launch on February 8th.

Lending Works reported given that there are no limits on transfers of ISA funds accumulated in previous financial years, the largest individual investment to date within a Lending Works ISA stands at £154,190, while the average amount invested among the 815 ISA investors currently stands at £10,769.

Fintech founder: I would not set up in London today (Financial News), Rated: A

The founder of one of London’s best-known fintech startups has said that he would not choose London as a location to set up his business today, as he has “no idea what Brexit will mean”.

Taavet Hinrikus, the chief executive and co-founder of online FX service TransferWise, urged the UK government to quickly secure access to talent and trade with Europe in a post-Brexit world.

Funding Circle’s Desai: use P2P for monetary stimulus (P2P Finance News), Rated: A

UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.

The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.

Boost Capital Secures New £15m Credit Line (Boost Capital Email), Rated: A

No end to Boost Capital’s growth spurt as the business funding specialist secures new £15m credit line to meet small business loan demand.

An extra £15m will now be available to UK small businesses, after alternative business lender Boost Capital secured a new credit line from American Investment Firm Atalaya Capital Management.

Ex-Aldermore director joins SME lending platform (Bridging and Commercial), Rated: B

SME lending platform Growth Street has announced the appointment of a new commercial director and general counsel.

Chris Weller will serve as commercial director, having formerly held the role at Aldermore Bank from 2013-14 before becoming sales director for invoice finance until 2015.

Meanwhile, general counsel April Nardulli joins from P2P platform RateSetter, having served as senior regulatory counsel, regulatory lawyer and interim compliance manager since her appointment in 2015.

European Union

Finbee Experiences – My Portfolio Review (P2P-Banking), Rated: AAA

A year has passed since I last wrote about the portfolio I built on Finbee. Currently I have invested 1,027 Euro in 35 loans. 32 are current (965 Euro), 2 are late (23 Euro) and one is in default (38 Euro), but rates for this loan are paid to me by Finbee’s compensation fund. The average interest rate of my loan parts is 31%.

My self calculated yield (XIRR) is 31.5%. This is the highest I achieved on any p2p lending marketplace over a longer duration of time. Calculating the result again, this time with assuming a full write-off of the defaulted loan gives a yield of 29.4%.

Why banks are reluctant to enter the roller coaster of FinTech (JAXenter), Rated: AAA

Blockchain, NFC, Peer to peer lending are just a few of the options traditional banking could have fully adopted. This would have had a tremendous impact on the way we exchange transactions, do business and live our lives. However, I cannot name a big bank that has jumped on the bandwagon and delivered a fully-fledged product in this area. Just the opposite — the stories I hear are, for example, about two of the top executives of BNP Paribas in Bulgaria leaving the company to start their own Peer to peer lending platform called Klear. Why didn’t they initiate this project inside the organization?

I think there are two factors causing this:

  • Internal factor: Company culture in the traditional banking
  • External factor: The public image of banks is all about security, while innovation relates to risk.

Usually, new banking products need a lot of IT involvement — for each new type of deposit/loan you need someone to implement tens of forms and wizards.

How to enable innovation in banking

We have a good example of consortium of banks coming up with a radical move to start a joint blockchain project. This way none of the big players risks their own reputation.

Another way to announce innovative projects is by strongly focusing on the physical design and digital UX of the innovation because, believe it or not, the mass client judges how reliable something is by the external look of it.

Former HSBC banker Lake joins fintech revolution (Financial News), Rated: B

Spencer Lake, a former HSBC banker who led the group’s global capital financing business, has joined a fintech firm that boasts the UK bank as one of its main clients.

Lake has been named vice-chairman of Fenergo, a Dublin-based firm that makes what it calls client lifecycle management software, according to a statement from the company on April 12.

International

How fintech startups are helping SMEs choose who they do business with (Daily Fintech), Rated: A

According to Xero, 38 percent of small business owners indicate late payments cause them to delay payments to their suppliers, while 15 percent claim this often sees them delaying wage payments to staff, along with other benefits.

62 percent of businesses would not survive more than three months if all invoices went unpaid, while nearly 25 percent wouldn’t last a month.

Xero’s Live Contacts, a partnership with the local arm of credit bureau Equifax (formerly Veda) is one such data driven solution. As part of a paid-up Xero subscription, businesses can now see a credit risk indicator against a contact in their database, helping them to better assess whether to do business or not, or even risk adjust payment terms.

At the other end of the data spectrum, CreditMonk in India allows businesses to add a review of a creditor’s payment behaviour via its platform.

Asia

SINGAPORE-based Marvelstone Capital, which is a data-driven asset management company, is planning to launch its robo advisor platform for family offices in Asia in the third quarter of this year.

According to Cho, the robo advisor platform is being developed with Singaporean fintech startup Smartfolios, which is focused on building next-generation advisory and thematic investment technologies. The robo advisor will be available on desktop and mobile for Marvelstone Capital’s clients.

To give an idea of the market size of family offices in Asia, Cho cites a report that says that overall, the billionaires in the Asian market have about US$400 billion of assets at their disposal, which equates to an average of about US$3.6 billion per individual, which in turn makes all of them potential clients of family office solutions or even owners of single family offices. (Source:

Cho explains that family offices with below US$1 billion assets under management are the underserved family offices.

He adds that second priority countries will be Korea, China, Taiwan and Japan and that the third priority will be emerging markets such as Myanmar and Vietnam.

30 Under 30 Asia 2017: The Top Young Venture Capitalists And Fintech Entrepreneurs (Forbes), Rated: AAA

Val Yap founded PolicyPal — a Singapore-based smartphone app that helps users never miss a premium by tracking all their insurance on one dashboard.

MoolahSense Adds Invoice Financing to List of Services (Crowdfund Insider), Rated: A

Singapore-based MoolahSense, a marketplace lending platform, has added invoice financing as a new product line. The new service will allow SMEs to access financing to address short-term capital needs of up to $15,000. For investors, a nominal interest rate of up to 12% may be earned. An invoice backed loan would mature in 15 to 90 days’ time and investors would be able to receive returns in a relatively shorter period of time.

Authors:

George Popescu
Allen Taylor

Monday April 3 2017, Daily News Digest

PeerIQ mpl securitization

News Comments Today’s main news: Activist investor pushes for new strategy at On Deck. Why Zopa is building a bank. Landbay reduces product rates & fees. Unicorn India Ventures invests in SmartCoin. SGX partners with Crowdo, PwC. Alternative Circle raises $1.1M.  Today’s main analysis: Q1 2017 MPL securitization tracker from PeerIQ. Today’s thought-provoking articles: New York case is a win […]

PeerIQ mpl securitization

News Comments

United States

United Kingdom

European Union

Australia

China

India

Asia

Africa

News Summary

 

United States

Marketplace Lending Securitization Tracker Q1 2017 (PeerIQ), Rated: AAA

  • Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.9 Bn this quarter with cumulative issuance now totaling $18.0 Bn across 80 deals.
  • The movement towards rated securitizations at larger transaction sizes continues. All deals were rated in this quarter, with record-sized consumer deals from SoFi, a large multi-seller deal from Marlette (where 45% of loans were funded by affiliates of GS and Cross Rive Bank), and the first prime paper deal from Lending Club. All deals this quarter had at least one rating.
  • New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization.  In 1Q2017, we saw spreads tighten in riskier tranches, indicating strong investor appetite for MPL ABS paper in the market.
  • Bank and non-bank platform partnerships continue to emerge. Over 15 banks are purchasing loans from marketplace lenders.
  • Our year-end forecasts volumes for new issuance of $11.2 Bn remain on-track. New issuers and repeat issuers are increasing deal activity.
  • 3rd party solutions are emerging to improve investor confidence. Originators are relying on 3rd party solutions to address “stacking”, perform data verification, loan validation, and improve investor confidence.
  • We expect higher volatility from rising rates, regulatory uncertainty, and an exit from a period of unusually benign credit conditions. Platforms that can sustain low-cost stable capital access, build investor confidence via 3rd party tools, and embrace strong risk management frameworks will grow and acquire market share.

 

Activist Investor Pushes for New Strategy at On Deck Capital (WSJ), Rated: AAA

Marathon Partners Equity Management LLC, a New York hedge-fund firm with about $275 million in assets under management, is pushing On Deck to shed millions of dollars in expenses to get to profitability, said Mario Cibelli, a managing partner at the firm, in an interview. Mr. Cibelli said he would also like On Deck to explore a potential sale or other alternatives that could increase shareholder value.

On Deck in February reported a record loss of $85.5 million in 2016 and burned through half of its cash, ending the year with a balance of $80 million. The New York-based company launched an initiative to eliminate 11% of its workforce, find other cost savings and get to profitability in 2018.

But Mr. Cibelli argued that the proposals don’t go deep enough. “The current strategy is not the right one and needs to be changed,” he said. Marathon has been buying shares in On Deck since last year, amassing a stake of 1.75% of the company as of the end of 2016, according to FactSet.

NEW YORK CASE IS A WIN FOR THE MERCHANT CASH ADVANCE INDUSTRY (Pepper Hamilton LLP), (Pepperlaw.com), Rated: AAA

On March 16, the Supreme Court of New York, Nassau County, issued a decision in IBIS Capital Group, LLC v. Four Paws Orlando LLC. The decision reaffirms the position consistently taken by New York courts that “For a true loan it is essential to provide for repayment absolutely and at all events [and where] the payment or enforcement [of an agreement to repay funds advanced] rests upon a contingency, the agreement is valid even though it provides for a return in excess of the legal rate of interest.”

Under section 190.40 of New York’s Penal Code, a person cannot intend to charge, take or receive interest on a loan greater than 25 percent. In this case, plaintiff IBIS advanced funds to defendant Four Paws under an agreement for the purchase and sale of future receivables. Four Paws subsequently refused to honor its commitment to pay IBIS on the basis that the payments called for a usurious rate of interest. IBIS sued Four Paws for breach of contract, and Four Paws asserted criminal usury as an affirmative defense.

The court further said that, even if the agreement had created a loan, there would be no violation of New York’s criminal usury law because Four Paws could not show that IBIS intended to charge a usurious rate of interest. To this end, in order to commit criminal usury, a person must enter into the agreement knowing that they are charging interest that exceeds 25 percent.

Ex-Xero boss Chris Ridd to lead cloud financial adviser platform Myprosperity (Financial Review), Rated: A

The former Australian CEO of accounting software firm Xero Chris Ridd will join cloud financial adviser platform myprosperity as its new CEO, after he and MYOB founder Craig Winkler backed its first external fund raising round.

The company provides an online platform, which is targeted at helping households manage their finances by using cloud technologies to connect data feeds from numerous sources, and provide a real-time picture of overall wealth and financial health. It sells most commonly to accountants and financial planners, who then use the platform to advise clients.

The company capped its capital raising at $2.5 million, saying it needed to take on the funds to ramp up its sales and marketing efforts, now that it has established itself, with more than 250 advisers and 10,000 subscribers signed up.

The top 10 US tech companies that pay the most when poaching employees (SCMP), Rated: A

3: Lending Club, the peer-to-peer lending site, pays on average a 48 per cent premium to poach. Employees were earning on average US$128,457 at their previous job and increased to US$183,469.

5: Groupon pays on average a 38 per cent premium to poach. Employees were earning on average US$137,390 at their previous job and increased to US$175,233.

Bank of America to commit $ 1.5M to Charlotte’s fintech initiative (Biz Journals), Rated: A

Bank of America Corp. (NYSE:BAC) will commit $1.5 million over three years to Charlotte’s fintech initiative, according to sources close to the matter. The bank confirmed the investment to the Charlotte Business Journal Wednesday.

Will Using Artificial Intelligence To Make Loans Trade One Kind Of Bias For Another? (NPR), Rated: A

Digital lending is expected to double in size over the next three years, reaching nearly 10 percent of all loans in the U.S. and Europe. There are now some 2,000 digital startups, many of which are using artificial intelligence to analyze the troves of data created every day.

Digital lenders are pulling in all kinds of data, including purchases, SAT scores and public records like fishing licenses.

Government research has found that FICO scores hurt younger borrowers and those from foreign counties because people with low incomes are targeted for higher-interest loans. Girouard argues that new, smarter data can make lending more fair.

If artificial intelligence can weed out good borrowers from bad just by looking at things like Web browsing history, suddenly it doesn’t matter if you live in a low-income neighborhood or your family just immigrated. But it does open the door to new, 21st century versions of redlining.

But what if you’re just buying M&Ms or prefer using cash? An algorithm doesn’t know that. Left unchecked, computers could create all sorts of unintended bias.

Some companies have correlated late-night Internet use with bad loan repayment. But does that mean night owls should pay a higher interest rate?

Comparing Costs For A Marketplace Loan Vs. A Bank Loan (NASDAQ), Rated: A

Since the early 1980s, the finance rate on personal loans at commercial banks for a 24-month loan has steadily dropped. At its height in 1981, the average reached 19.21%. Today, borrowers can expect to pay 9.45% according to the Federal Reserve Bank of St. Louis. However, many borrowers will face a higher rate given the average U.S. credit score of 695. At this score, a borrower will likely face an interest rate of 13.5% to 17.5%. Accessing these rates means having a minimum FICO score of 660 in many cases.

Remember, the origination fee is deducted from the loan amount. Therefore, if you borrow $15,000 at a 2% origination fee, you are only getting $14,700. Origination fees can reach as high as 6%.

Online lenders offer speed and flexibility that is not possible with traditional banks. Those in good credit standing can access capital for as low as 5.7% making the loans more competitive than the neighborhood bank.

Some of the most competitive providers like SoFi and Discover Personal Loans require no origination fee and users can borrow up to $100,00. Additionally, there are no prepayment fees. If we compare a borrower with a strong credit score at a bank versus an online lender, then the rates are 9.45% and 5.7% comparatively. Moreover, the absence of fees makes the savings even better.

6 Real Estate Startups Poised To Disrupt The Industry (Forbes), Rated: B

Using public records, comparables and other metrics, Bowery creates custom, data-driven reports that offer in-depth information to find the most accurate property appraisal value possible.

And if you’re on a lease and you need to leave town for a while, subletting your space without stress is just as difficult. Flip aims to make managing or finding subleases a breeze.

Ravti, a Y-Combinator-backed startup, brings intelligent software to building owners and operators reducing costs by 18 to 30 percent on capital replacements through direct procurement.

OnTarget helps construction projects wrap up successfully and on schedule. The cloud-based app allows property investors, managers, contractors and other vendors to connect through an online dashboard. This gives managers a simple and effective option to ensure everything is on track and information to respond appropriately when delays put the project schedule at risk.

Enertiv is focused on giving property owners and managers access to real-time energy use information around the clock. Through its proprietary platform, clients can view energy use by location with live data and prior period comparisons. Its weather overlay shows how a change in temperature translates to an increase or decrease in usage, letting you know instantly if you need to make money-saving adjustments.

As an event management option, the company turns a boring apartment building into a bustling lifestyle center. With fitness classes like yoga, pilates and fitness bootcamps, and a mix of social and professional events, hOM communities see a 15 percent higher tenant retention rate than the national average. Property managers and agents can use hOM to reduce turnover and related costs, helping owners improve overall profitability without overspending on gyms, pools, hot tubs and other amenities.

Venture Capital Funnel Shows Odds of Becoming a Unicorn Are Less than 1% (CB Insights), Rated: A

We followed a cohort of over 1,000 startups from the moment they raised their first seed investment to see what happens to them empirically.

Just over 70% of startups stall at some point in the VC process and fail to exit or raise follow-on funding.

Of the 1,098 tech companies we tracked that raised seed rounds in the US in 2008-2010, less than half, or 46%, managed to raise a second round of funding.

  • 306 (28%) of companies that raised a seed round in 2008–2010 exited through an M&A or IPO within 6 rounds of funding.
  • Less than 1%, 10 (0.91%) companies from our seed cohort ended up becoming unicorns valued at $1B+. Some of these companies are the most-hyped tech companies of the decade, including Uber, Airbnb, and Slack.
  • 61% of companies that raise a follow-on after their initial seed are then able to raise a second follow-on round after that.

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The Evolution of Crowdfunding Could Change Everything (Industry Leaders), Rated: A

According to the annual Massolution Crowdfunding Industry Report, the total equity crowdfunding volume worldwide in 2015 peaked $2.56 billion. The number is expected to triple in 2017 and will be roughly in the neighborhood of $4-5 billion.

While venture capital investment holds a steady $30 billion per year, equity crowdfunding is expected to surpass angel capital by 2020. According to the World Bank, the crowdfunding market as a whole will hit $90 billion in volume by 2020.

The launch of Crowdemand, Inc., has got crowdfunded fashion shopping up and running.

With the launch of crowdfunded insurance by American International Group, we saw the first of kind in the crowdfunding industry. Currently, AIG only sells coverage on the platforms, however, it is soon poised to offer insurance protection to all investors using the platform.

With real estate crowdfunding on sites like RealtyMogul.com, anybody can raise more than $200 million to crowdfund a real estate property.

Pebble E-Paper Watch Kickstarter campaign originally started out as a corporate crowdfunding initiative, raising $10,266,845.

Similarly, IBM has developed its own crowdfunding platform called iFundIT, through which employees in the IT department can develop and pitch potential projects on the company’s internal social network. Employees are given up to $2,000 of IBM money, which they can use to promote their products.

Is regtech the new fintech? (Computer Weekly), Rated: B

With mobile apps, banking automation and blockchain already transforming financial services, financial institutions are now looking to regulation technology, or regtech, to meet compliance requirements.

The key differentiator of regtech is agility. regtech allows the use of advanced technologies to extract, transfer and load data sets that are cluttered and tangled to create consumable information. This is done quickly and efficiently, giving businesses the agility to solve real-world problems and stay ahead of the competition.

Example: Onfido delivers next-generation background checks, helping financial services organisations and other businesses verify the identity of any person remotely using machine learning technologies.

Example: Scaled Risk is a financial software that integrates in-memory analytics and big data to provide real-time, scalable, and flexible risk management solutions for banks and other financial services companies.

Example: FundApps, a cloud-based platform, automates shareholding disclosures by organising regulatory information, combining regulatory compliance content with technology.

United Kingdom

Zopa’s Jaidev Janardana: Here’s Why We’re Building a Bank (Crowdfund Insider), Rated: AAA

“Legacy technology and poor customer service has disappointed consumers. That’s why we’ve seen a wave of start-up banks emerge, with greater focus on delivering a high quality customer experience through technology. This is what Zopa does in the peer-to-peer investment and loans space.”

Jaidev noted that along with the bank, Zopa will be expanding its customer offering as well. He and his team are planning to offer FSCS-protected deposit accounts for savers, P2P investments, including IF ISAs for investors, and personal loans, car finance, and credit cards for people looking to borrow.

P2P Lending Platform Landbay Reduces Product Rates & Fees (Crowdfund Insider), Rated: AAA

UK-based peer-to-peer lending platform Landbay has reportedly reduced its product rates and fees. According to various sources, Landbay’s rates are now starting at 3.39% for a 2-year fix and 3.59% for a 5-year fix, with arrangement fees up to 75% on standard products, which were cut from 1.75% to 1.5%.

Landbay’s products are available through the lender’s distribution partners, which are Atom, Brightstar, Complete FS, Connect Mortgages, Mortgage for Business, The Buy to Let Business and TBMC.

Five reasons fintech fears London may lose its crown after Brexit (Financial News), Rated: A

The UK fintech sector represented approximately £6.6 billion in revenue in 2015 and attracted around £524 million in investment, according to EY.

Startups say they are “apprehensive” and “worried” about the possible damage that Brexit may cause.

FN talks to key fintech founders and other entrepreneurs of their top five Brexit concerns and why they worry for London.

1. Talent

Jan Hammer, a partner at venture capital firm Index Ventures, said: “What we fear and are concerned about is that post-Brexit Britain will lose access to talent.”

More than 30% of the 250 chief executives and founders of fintech startups that are members of Innovate Finance are non-British, and others employ many European staff.

2. Funding

Funding has already dipped since Britain’s decision to leave the EU. A survey conducted by Tech London Advocates, a 4,500-strong industry body of key players, found that one in 10 of London’s tech sector has experienced investors holding off or withdrawing from a funding round since last summer.

3. Financial passport trading

Unfettered trade within the European Union is essential for most fintech companies and many worry the loss of the EU financial passport will result in a mountain of red tape.

Many are already looking to open offices in Luxembourg, Ireland and The Netherlands to give their business a European headquarters.

4. Government support

One fintech entrepreneur who asked not to be identified, said the fintech community has lost many of the relationships it had with Downing Street and Whitehall: “There was a proper massacre of the Cameroonians when the regime change happened.”

5. Reducing uncertainty

One company providing software using artificial intelligence to the asset management industry who asked not to be identified said that it experienced a potential German buyer holding off because it wanted to see how Brexit will play out.

HSBC partners with Tradeshift as banks increasingly see fintech as friends (Business Insider), Rated: A

HSBC announced on Thursday that it is partnering with Tradeshift to offer working capital to companies that use its platform. Tradeshift offers a cloud-based software platform to help companies keep track on their entire supply chain in one place. Lanng likened it to Facebook, connecting up all companies that do business together, directly or indirectly, in one place. Founded in 2010, it already has over 1.5 million companies connected to its platform on both the buy and supply side and processes $500 billion in trade over its platform each year.

European Union

EstateGuru launched its third market – Lithuania! (EstateGuru Email), Rated: AAA

In March, EstateGuru funded its first Lithuanian investment opportunity on the platform and thereby launched in the Lithuanian market.

The launch of the Lithuanian market established EstateGuru as the only peer-to-peer lending platform in the entire world to facilitate property-backed business loans in three countries. In addition to the newly added Lithuanian market, the company also provides secured real-estate loans in Estonia and Latvia, with several following destinations under preparation.

Klarna is working on a new personal finance service to rival banks and fintech apps (Business Insider), Rated: A

Swedish fintech giant Klarna is preparing the launch of a new product line that will directly compete with personal finance apps like Qapital and Tink, reports Breakit.

Meeting of Government Pension Fund Managers Considers P2P Lending Allocation (P2P-Banking), Rated: A

At an informal meeting of 21 government pensions funds in Geneva, Switzerland, the topic of alternative lending was for the first time on the agenda. A representative of the Australian Future Fund said, that investing to p2p lending marketplaces might be an interesting strategy in order to reduce the systemic risks that banks pose. However it would be much to all early to take this step now.

Australia

The ‘booming’ NSW economy that 100,000 people have joined (Western Advocate), Rated: AAA

The sale of goods and services via peer-to-peer technologies generated $2.6 billion in revenue for the NSW economy last year, recording growth of nearly 70 per cent, according to the research from Deloitte Access Economics commissioned by the finance department.

But the Deloitte report finds that financial services and peer-to-peer lending are the fastest growing part of the state’s collaborative economy.

Financial peer-to-peer businesses, including lending companies such as SocietyOne, a platform that connects lenders with borrowers more than tripled their yearly revenue last year. The number of people who derived income from collaborative financial services enterprise also rose more than 150 per cent.

An estimated 38,000 NSW homes are listed on the short-term accommodation rental service Airbnb, according to company estimates. The average user earns about $4700 a year from renting out their home for 28 nights a year.

China

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

On March 21, Ant Fortune, the investing app of Ant Financial Services Group (Alibaba Group’s finance affiliate), unveiled a B2C platform “Caifu Hao”, which would allow third-party financial institutions to set up shops inside the app.

On March 21, JD Finance announced to launch the blockchain based assets management system, which would be operated within JD Finance’s Assets Cloud Factory. With the aid of the system, consumer finance companies were first to settle in the Assets Cloud Factory.

On March 20, InsurTech Company Xiaoyusan, founded by Tencent, closed on RMB 100 million in Series B funding led by Matrix Partners and Tasly Capital. Its first two rounds of financing were led by Sequoia Capital and AV Capital.

India

Unicorn India Ventures makes maiden investment in fintech with SmartCoin (India Times), Rated: AAA

Early-stage venture fund Unicorn India Ventures, which is set to close its maiden fund in the range of Rs 100 crore, has made its first investment in the fintech space, leading a round of about half-a-million dollars in Bengaluru-based microlending startup SmartCoin.

The startup offers loans starting from Rs 1,000 and is targeting individuals beyond the salaried class, including cab drivers, delivery persons and kirana store owners, and has tied up with a few nonbanking finance companies (NBFCs).

Can’t Pay Your Car Loan? Here’s What To Do So You Don’t Default (Lifehacker), Rated: B

If you’re in danger of defaulting on your car loan, you’re not alone. Subprime borrowers are falling behind at the highest rate since 2010 . Before you default, make sure you’ve explored these possible options , though.

  • Talk to your lender: See if you can extend the length of your loan for a smaller monthly payment, negotiate your interest rate, or even get a 30-day deferral (which is basically more time to pay off your loan).
  • See if you can sell it or trade it in: Do you have equity? Check the car’s value. If it’s higher than the amount you owe, yes, you have equity and you may be able to sell your car and pay off your loan.
  • Find someone to take over your payments: There are peer-to-peer lease exchange sites like Swapalease andLeaseTrader .
  • Refinance your car loan: There are also peer-to-peer lending sites likeLending Club and Prosper where you may be able to get a better loan than you’d get with most traditional lenders.
Asia

Singapore stock exchange inks partnership with P2P lending company, wants to educate about access to capital (Yahoo! News), Rated: AAA

Aimed at helping startups find access to capital, Singapore’s stock exchange (SGX) signed two separate Memorandums of Understandings (MOUs) with separate stakeholders in the startup economy.

The agreement that can be considered unique to our modern economy is an MOU signed with Crowdo, a regional lending platform with P2P and equity crowdfunding options. To date, it has financed about 2,000 projects.

PwC is a global professional services company. The firm brands Venture Hub as a ‘one-stop shop’ for entrepreneurs and investors to find solutions and services to help build partnerships.

The MOU with SGX is meant to promote Singapore as an attractive hub for startups and educate global players about the opportunities in Asia (with Singapore as a hub). The two sides will also arrange dialogue and thought leadership in the ecosystem.

Yo Shibata, Co-Founder of Crowdport, Updates on “Social Lending” Status in Japan (Crowdfund Insider), Rated: A

According to a recent article in TechinAsia, 52% of Japan’s personal assets, or more than $15 trillion, are held as cash.

Yo Shibata: Marketplace lending in Japan started around 2008 as peer-to-peer lending, where borrowers were primarily individuals.

The default rate has been very low (close to zero among major CFPs for three years).  Annual investment amount has grown from $140 million USD in 2014 to $540 million USD in 2016.

Yo Shibata: Interest rates of bank savings in Japan is around 0.01〜0.1% (ARR). On the other hand, Japanese consumers are concerned that they might not be able to have a large enough pension after they have retired.

Yo Shibata: I had little knowledge of lending before starting Crowdport. To me, 8% ARR in Japan with close-to-zero default rate was “too good to be true”.

Yo Shibata: We are starting by providing quantitative and qualitative analytics on CFPs and their funds. On the quantitative analysis, we collect all the public data from all the funds released every day and provide free-to-use tools to investors to compare against historical data points.

Orchard Platform: Asia Is ‘Light Years’ Ahead In Innovation (Benzinga), Rated: A

Among the 27 “unicorn” companies in the planet, eight of them are based in China and valued at a combined $96.4 billion. Ant Financial, Alibaba Group Holding Ltd BABA‘s affiliate, leads the group with a $60 billion valuation.

By comparison, 14 fintech unicorns are United States-based and valued at a combined $31 billion.

Law Firms in Singapore and Malaysia Launch FinTech Practice (Cryptocoins News), Rated: B

Singapore-based Allen & Gledhill and Malaysia-based Rahmat Lim & Partners, which is also an associate firm of Allen & Gledhill, announced that they would be establishing fintech practices for both countries.

Last November, it was reported that U.K. law firm, Addleshaw Goddard, was offering free mentoring and legal advice to fintech startups through a new scheme worth up to £500,000.

Global law firm Steptoe & Johnson LLP, is another law practice that has embraced the legal issues fintech companies experience by launching a multidisciplinary blockchain practice with lawyers involved across the globe.

Africa

Kenyan fintech startup Alternative Circle raises $ 1.1m funding (Disrupt-Africa), Rated: AAA

Kenyan fintech startup Alternative Circle has raised US$1.1 million in funding from international credit risk management company Creditinfo Group to help it achieve a wider geographical footprint.

Alternative Circle will in July launch its mobile-based credit facility app Shika, which allows users to access mobile loans and uses a decision engine to identify creditworthy borrowers.

The funding arrangement with Creditinfo will see the startup benefit from the larger firms expertise in classic and alternative credit risk management.

Authors:

George Popescu
Allen Taylor

Thursday February 23 2017, Daily News Digest

robo-advice

News Comments Today’s main news: RealtyMogul unveils new retirement investment options for MogulREIT. Funding Circle tops 2B GBP in lending. Today’s main analysis: Jury still out on robo-advice. Today’s thought-provoking articles: Twino enters Spanish market. China Lufax shifting its business focus. Savills bullish on global REITs. United States RealtyMogul adds retirement investment options to MogulREIT & new assets. […]

robo-advice

News Comments

United States

United Kingdom

European Union

Australia

China

Asia

Africa

United States

RealtyMogul.com Unveils New Retirement Investment Options for MogulREIT I & Adds Two New Assets (Crowdfund Insider), Rated: AAA

Real estate crowdfunding platform RealtyMogul.com announced on Wednesday it will now be accepting retirement funds from self-directed IRAs as a new investment option for its MogulREIT I trust. The funding portal reported that the new investment option would allow investors to gain exposure to commercial real estate and enjoy potential benefits of passive income in their retirement accounts.

In addition to the investment options, RealtyMogul.com also announced a new feature that allows investors in MogulREIT I to automatically reinvest their dividends, thereby offering the possibility of compounded returns, making the REIT even more investor friendly. The platform noted the addition of two new properties to its REIT including Parkway Plaza, a $3.4 million mezzanine debt investment related to the acquisition of a office complex with national tenancy located in San Antonio, Texas.

Everything You Need to Know About Real Estate Crowdfunding (Dough Roller), Rated: A

In a sense, crowdfunding is doing for real estate investing what Lending Club and Prosper are doing for personal loans. They are acting as online peer-to-peer marketplaces that match investors with borrowers, often under better financial terms than what they can get through traditional lending institutions, such as banks.

The platforms are primarily used by individual investors. However, they are growing more popular with institutional investors, such as banks and insurance companies.

Real estate crowdfunding offers a  number of great benefits. But real estate crowdfunding is not without its drawbacks either. Some of those include:

  • Capital calls. Due to the complexity of real estate projects, an investment may require more capital than originally anticipated.
  • You must typically be an accredited investor.
  • Investments aren’t liquid. Real estate investments tend to be long-term in nature, and are not traded on national exchanges. Once you commit money to an investment, you will usually be required to remain invested until it matures.
  • Your investment isn’t guaranteed. Though you can make higher investment earnings, you can also lose your initial investment.

RealtyShares is an online real estate investment platform that focuses its business on smaller projects. These include things like single-family house fix-and-flips, rather than large projects, such as retail shopping centers or apartment complexes.

RealtyMogul is an online real estate capital marketplace. The platform was launched in 2013 and now has more than 100,000 investors holding more than $250 million in real estate, and has paid out $55 million to investors.

PeerStreet is open to accredited investors who can invest in high-quality private real estate loans. Those loans are typically secured by first liens on real estate.

6 Ways to Make (Legit) Money While You Sleep (PalmBeachPost), Rated: B

Also known as “marketplace lending,” peer-to-peer lending is the practice of individuals loaning money to others in place of a bank or other financial institution. In recent years, platforms like Prosper and Lending Club have made these crowdfunded loans more widely available to borrowers and opened the possibilities for investors.

“New, technology-driven intermediaries have been coming in and replacing banks to make small loans to businesses or individuals, and they offer many comparative advantages,” Brown says.

Remember, though, that while investing through a peer-to-peer marketplace can pay off, there are still risks involved and borrowers may default on their debts. One way to protect yourself, Brown says, is by requiring that borrowers’ credit quality is above a certain level, depending on your appetite for risk. You can also reduce risk by diversifying your investment across many different loans.

How Xero + Kabbage power a bright idea (Xero), Rated: B

By combining Xero’s business insights with Kabbage’s flexible access to funding, Adam and Jamie can effectively understand and manage their cash flow needs to avoid dipping into their profits as they grow.

United Kingdom

Funding Circle Has Topped £2 Billion in Lending (Crowdfund Insider), Rated: AAA

SME lender Funding Circle has reportedly topped £2 billion in lending. The SME marketplace lender is closing in on UK’s largest online lender Zopa that announced in January it had surpassed the £2 billion mark. Of course Funding Circle is an international operation with lending occurring in the US and elsewhere in continental Europe. So far, Zopa has satisfied itself with just the UK market.

The jury is still out on robo-advice (Pensions expert), Rated: AAA

For those unable to afford the cost of face-to-face financial advice, robo-advice, which provides algorithm-based digital financial advice with minimal human intervention, offers a lower-cost alternative, but the new technology comes with its own caveats.

Eighty-three per cent of consumers are concerned about cyber security, with 89 per cent of consumers saying it was important for them to recognise and trust the online brand, according to research conducted by Altus Consulting.

By 2020, many retirees will be asset-rich, cash-poor and “much more engaged digitally than they have been in the past”, Evans explained.

Robots cannot replace face-to-face advice

However, Evans noted that many people are not going to be able to afford this, resulting in robo-advice inevitably becoming a necessity. “Robo-advice will become the default for the mass market” and artificial intelligence “will have a large part to play in how that pans out in the next few years”, he said.

Buy to Let Club adds MTF and LendInvest to bridging panel (Financial Reporter), Rated: A

Buy to Let Club has added MTF and LendInvest to its panel and appointed an in-house bridging specialist to extend its offering to Club members.

The panel expansion has been accompanied by the appointment of a new in-house bridging specialist, Victoria Barnard, to further improve Buy to Let Club’s offering to its members.

P2P lending news midweek roundup (altfi), Rated: A

UK P2P business lending Growth is still in rude health as proven by AltFi Data’s number crunching, in the same week that Funding Circle tops £2bn mark.

In the funds world, P2P GI has continued its share buyback strategy while the SME Loan Fund may be about to see an investment management change by New York-based SQN.

European Union

Twino enters Spanish market (ArcticStartup), Rated: AAA

Peer-to-peer lender Twino has started to offer investors short-term Spanish consumer loans, offering its investors a chance to further diversify their portfolios, the Latvian startup said on Wednesday.

The Spanish short-term loans will have a maximum duration of one month and will offer investors a return rate of 8% per annum. The loans will be covered by Twino’s  buy-back guarantee, which protects investors from borrower default risk.

Australia

Savers may be turning backs on bank deposits (RNZ), Rated: A

The country’s biggest banks, ANZ, and ASB, saw deposits shrink in the September quarter.

The associate professor at the School of Economics and Finance at Massey University, David Tripe, said savers turned to other investment classes to bolster returns, including property and stocks.

The banks took notice.

They slowed lending by voluntarily tightening lending restrictions on investors following a Reserve Bank consultation paper released on 19 July, and excluded foreign income from affordability calculations for home loans.

They also boosted deposit rates.

KPMG’s John Kensington suspects the dip in bank deposit growth will be temporary.

But he thinks savings habits may be changing.

Mr Kensington added that some younger New Zealanders were turning to riskier, but potentially more lucrative, investments like peer-to-peer lending to get a foot on the increasingly unaffordable housing market.

China

Top P2P lender shifting to new business (China Economic Review), Rated: AAA

China’s Lufax, short for Shanghai Lujiazui International Financial Asset Exchange Co., is valued at $18.5 billion, far more than peers like San Francisco-based LendingClub. At the end of October, it had an estimated 13% share – the largest – of China’s $109 billion market for matching small borrowers with lenders. But the company is pivoting away, shifting into China’s booming retail-investing market with online accounts that let clients trade stocks, mutual funds and fixed-income products.

Asia

Savills bullish on global REITs in face of market uncertainty (The Asset), Rated: AAA

Investors are looking to global REITs (real estate investment trusts) as an alternative asset class in the face of market volatility and uncertainty in 2017.

Although investors can invest directly into individual REITs, by providing them with a fund that invests in a portfolio of global REITs, Savills gives them more liquidity, better distribution, and more diversification compared to if they invest directly into individual REITs.

Most REITs generally provide about 5% return annually and a steady income stream that is not subject volatility and market uncertainty.

Savills recently won two mandates to invest in Japanese real estate. These mandates, with a combined total of US$600 million, were awarded by an existing client and a new client.

Malaysian uses Harvard business know-how to crowdfund for SMEs (Free Malaysia Today), Rated: A

A Malaysian-born entrepreneur and his Indonesian business partner have started a crowd-funding company to provide financial assistance to local small and medium enterprises (SMEs).

Harvard business school graduate Kelvin Teo has embarked on an online lending platform called Funding Societies Malaysia which hopes to help Malaysian SMEs thrive and allows the average person an opportunity to become an investor.

Teo and his partner, Reynold Wijaya, whom he met at Harvard, started the company in June 2015. In less than two years, the company has arranged more than 400 loans in Singapore and Indonesia, worth a total of almost RM90 million.

Today, Teo launched the Malaysian chapter of his company, targeting 200 SMEs in 12 months, with an average of RM100,000 to RM200,000 per loan.

Africa

How these two SA startups made it onto the world’s best 100 fintech companies list (SME South Africa), Rated: AAA

Zoona and Wealth Migrate, have just been named in the 2016 Fintech100, an annual top 100 Fintech Innovators list that compiles the leading 50 established fintech companies across the globe, as well as the most intriguing 50 ‘Emerging Stars’.

Who is Zoona: Launched in 2009, Zoona is a Cape Town-based money transfer company operating primarily in Zambia and other Sub-Saharan countries.

2012: The company raises US$4 million in an international Series A round led by Omidyar Network and Quona Capital allowing the business to not only expand its planning horizon but also giving them resources to concentrate on ideas and innovations that, according to CEO Mike Quinn, resulted in a big inflection point in their growth.

2016: Having grown from a team of 2 to over 150 people with 25 nationalities across four countries, Zoona successfully raises $15-million (R200-million) in a second round of financing led by the International Finance Corporation (IFC), a member of the World Bank Group, as well as first round investors Accion, a global nonprofit and pioneer in the field of financial inclusion, and Omidyar Network, an impact investment firm started by eBay founder Pierre Omidyar.to scale our operations into new markets and develop new innovative products.

Who is Wealth Migrate: This is a global online real estate investment marketplace that was launched in 2010 and aims to give investors direct access to real estate investment opportunities in markets around the world. It is, according to research firm Massolution, the tenth-largest global real estate crowdfunding platform.

2015: Wealth Migrate raises $3.99 million (USD) in a seed round of funding from real estate, technology and other investors.

2015: With offices already in Singapore and Hong Kong, Wealth Migrate open new offices in Shanghai further expanding its reach into the lucrative Asian market, according to founder Scott Picken.

2017: The platform’s management team is hoping to use the power of crowdfunding to fill the funding gaps present in many prime real estate markets.

Authors:

George Popescu
Allen Taylor

Tuesday November 1 2016, Daily News Digest

online lending fraud

News Comments Today’s main news: SoFi received a license to start selling life insurance. CRB raises $28m from Andreessen Horowitz, Battery Ventures, and Ribbit Capital. Today’s main analysis : The growth of robo-advisors in asset allocation. Why online lending is making fraud easier. Today’s thought-provoking articles: Lend Academy’s Peter Renton on P2P lending. The rising freelance debt collection […]

online lending fraud

News Comments

United States

  • SoFi received a license to start selling life insurance. GP: ” As covered previously, life insurance might be both a new product to sell to the existing customer base in order to raise the return on investment for customer acquisition but also a great source of capital for lending”.
  • Andreessen Horowitz, Battery Ventures, and Ribbit Capital invest $28mil in Cross River Bank. GP ” As the Wall Street Journal puts it, it is highly unusual for VCs to invest in banks due to regulatory hurdles. For example, if you own more than 10% of a bank you become a bank holding company. On the other side, CRB has been extremely innovative, and not afraid to take risks which is a unique attitude for a bank. Come hear CRB talk at the Lending Times event on Nov 10 in New York. “
  • Why online lending is making fraud easier. AT: “Like any nascent industry, online lending has to figure out its weak spots. Where the balance between the upside and the downside? While speedy loans without a lot of hurdles to jump is a positive in many ways, there are still risks for the lender. Lenders have to manage that risk effectively by installing controls that can help them determine the good risks from the bad.”
  • What Peter Renton thinks about peer-to-peer lending. AT: “The takeaway here is that the market is maturing. P2P lenders that focus solely on growth may find themselves hitting a brick wall. It’s time to hone the processes, improve customer service, and focus on become efficient, and proficient, in a specialty.”
  • FDIC says its time to improve the credit quality of marketplace lending.

United Kingdom

  • How robo-advisor growth is impacting asset allocation. AT: “We are now starting to see traditional investment advisors adopting robo-advice. Charles Schwab, Vanguard, and Fidelity have got into the action in the last couple of years, and BlackRock’s purchase of FutureAdvisor are early indications that the entire industry is moving toward algorithmic-based asset management at least in part. Look more competition.”
  • XERO CEO says London will remain the leader in FinTech. AT: “I don’t disagree, but it’s clear that Brexit has already impacted the FinTech scene in Europe and the UK, and it will likely continue to do so, in the short term at the least.”

European Union

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United States

SoFi To Start Selling Life Insurance, (PYMNTS), Rated: AAA

Online lending is making fraud easier (Business Insider), Rated: AAA

The speeds at which online lenders offer loans and access to funds, as well as poor ID checking practices, are likely contributing to a practice widely associated with fraud.

within 15 days are four times as likely to later be identified as fraudsters with no intent to repay — a third loan makes borrowers 10 times as likely to be fraudulent, according to WSJ.

However, processing applications faster typically means fewer background and ID checks. Online lenders also tend to pay out funds very quickly — often less than 24 hours after a loan is approved. This means that a fraudster can access a significant volume of funds before suspicions are raised.

Lend Academy Founder Peter Renton On Peer-To-Peer Lending (Forbes), Rated: AAA

In 2010, Peter Renton founded peer-to-peer lending site Lend Academy and, in 2013, cofounded online lending conference LendIt. Having a years-long perspective on the changes in sector, at the Money 20/20 conference in Las Vegas last week, he gave his thoughts on what he called “a learning year.”

What’s your take on the events this year? Before, if you weren’t growing 100% year, people would think, What’s wrong with you? And now, they think, I wonder if they’re OK, they’re growing really fast.

But if investors are more savvy and the industry is realizing compliance is important, that could make it even more attractive.  Expected yields going forward are higher than they were a year ago. And we have a more robust system when it comes to internal procedures and compliance.

But on the flip side, more products are becoming available to consumers that could compete. The reality is that personal loans and small business lending are not easy to underwrite because they’re small-dollar loans. It’s not like a $300,000 home loan. So banks aren’t really good at doing that. You can do what Goldman Sachs did and start from scratch and build yourself, but if you’re trying to do something quickly — Goldman Sachs took 18 months — then partnering with an existing platform could be the way to go.

Speaking of small business lending, what do you think of the SMART BoxThe SMART Box discloses everything upfront — like a truth in lending statement that you get when you do a home, car or LendingClub loan, etc. It discloses the APR, total cost of loan and the terms. They realize the lack of transparency is a negative. They’ll either be mandated by legislation or will have to do it themselves.

What other trends do you see on the horizon? If you’re looking down the road, ultimately, some of these companies will be niche lenders, specializing in things like small business, real estate or wedding loans, and others will be fintech companies like I just described, and lots of others will stay in lending but want to diversify into multiple product lines.

I think blockchain is going to have a dramatic impact on peer-to-peer loans. Loans often get bought and sold, and it would be great to have a semi-public ledger of them — all the way from the original loan documents to every payment that has come in, whether it’s been bought or sold. All of that in a public ledger has a lot of potential, and secondary markets can really take off. But we’re a long way away — it’s not going to happen next year. This is a trend for 2018 and beyond.

FDIC’s most recent guidance should improve the credit quality of marketplace loans (Moody’s), Rated: A

The Federal Deposit Insurance Corporation’s (FDIC) most recent proposed risk management practices for banks that lend through third-party relationships would strengthen bank oversight of marketplace lenders and, in turn, the credit quality of loans originated on their behalf, Moody’s Investors Service says in a new report.

Origination standards will improve where bank oversight of marketplace lenders is not as strong as the FDIC has proposed, if its guidance is adopted, Joseph says in “Marketplace Lending ABS – US: FDIC Proposal Would Improve Credit Quality of Marketplace Loans Originated Through Partner Banks.” The proposed guidance clarifies the parameters for banks’ third-party lending risk and compliance management, which should help reduce risky practices by tightening internal controls and underwriting.

United Kingdom

Robo-Advisors’ Growth Is “Uberization” Of Asset Allocation (ValueWalk), Rated: AAA

Even though robo-advisors currently allocate 100% to passive strategies, they may be a major disrupting force in asset allocation, believes Bernstein. Inigo Fraser-Jenkins and colleagues said in their October 31 research piece titled “Fund Management Strategy: Robo advisors’ threat to fund managers – R2-D2 or Terminator?” that they believe robo-advisors are more R2-D2 as they currently manage only a small portion of invested assets.

Fraser-Jenkins and team highlight that robo-advisors match investors’ stated risk tolerance with an asset allocation by considering asset class returns, variances and covariances. The analysts opened a series of robo accounts to make an assessment of robo-advisors. The Bernstein analysts point out that currently robo-advisors invest 100% in passive strategies. They argue that as barriers to entry for the actual part of robo-advisory are very low, more established finance brands with a broad distribution capability could well exploit the potential.

XERO CEO: London’s fintech scene is ‘world class’ and will stay that way post-Brexit (Business Insider), Rated: A

The CEO of £1.4 billion accountancy software giant Xero says London is a world leader in fintech — financial technology — and will remain that way post-Brexit.

However, many fear that Britain’s vote to leave the European Union could disrupt the growing sector by putting off investors and talent.

Drury says he thinks London’s fintech sector will survive the turbulence of Brexit, saying: “I think the UK is [a world leader in fintech] and I think it is for a few reasons. One, it’s very dense. This is a world banking sector and it’s very, very dense. You see it with the amount of fintech companies starting here, they get to scale quite quickly. The US is relatively fragmented. I think that’s why the UK finch solutions are some of the top in the world.”

European Union

First personal peer-to-peer lender set to launch in Ireland (Irish Times), Rated: A

An Irish fintech start-up is hoping that people across the State will start lending and borrowing not from a credit union or bank, but from each other.

Initiative Ireland, founded by father-and-son team Padraig and Padraig Rushe, is aiming to bring the first personal peer-to-peer lending platform to Ireland.

The company plans to create 25 new jobs in Wicklow over the next three years. It is currently looking to raise €2 million in equity investment in Ireland through the Employment and Investment Incentive Scheme (EIIS).

Under the terms of the scheme, eligible investors will be able to earn up to 40 per cent in income tax relief on investments in the company of up to €150,000. These funds will be used by the company to fund its 2017 commercial launch in Ireland, ahead of a planned UK expansion.

France’s 2nd Regulatory Reform Enlarges the Scope of Crowdinvesting & Crowdlending (Crowdfund Insider), Rated: A

The first French regulation of crowdfunding was issued in October 2014. It was then revised in the spring of 2015. In March 2016, before 500 people gathered for the annual meeting of Financement Participatif France, the French Crowdfunding Association, Emmanuel Macron, then French Minister of Economy, announced a second wave of reforms, a series of measures designed to enlarge the scope of securities and loans that can be offered through crowdfunding. These keenly awaited reforms now become effective with the implementing decree n° 2016-1453 dated October 28, 2016, which was officially published yesterday.

Crowdinvestment platforms registered with the financial markets and securities regulator, the Autorité des marchés financiers (AMF) as Conseil en Investissement Participatif (CIP, equity investment advisor) can now allow projects to seek up to €2.5 million in equity funding while they were limited to €1 million before.

 Australia

Australia regulator on lookout for big banks buying fintech startups (Reuters), Rated: A

Australia’s competition regulator will closely monitor any plans that involve the nation’s big banks buying up smaller financial technology rivals or striking blockchain cooperation deals, Australian Competition and Consumer Commission (ACCC) Chairman Rod Sims said on Monday.

The Big Four – Commonwealth Bank of Australia (CBA) (CBA.AX), Westpac (WBC.AX), National Australia Bank (NAB) (NAB.AX) and Australia and New Zealand Banking Group (ANZ) (ANZ.AX) – have to date faced limited competition from fintech rivals in areas like foreign exchange, transaction processing and peer-to-peer lending.

Sims said the ACCC was also keeping an eye on developments in blockchain technology, which works as an internet-based transaction processing and settlement system that eliminates any need for third-party verification. Sims said depending on the nature of the cooperation on blockchain, the big banks might have to seek ACCC permission for such projects.

China

China’s Loosely Regulated Online Lending Has Inspired an Army of Freelance Debt Collectors (Fortune), Rated: A

As peer-to-peer (P2P) online credit services grow in China, lax regulations and a tendency of late repayment could potentially give rise to a whole derivative industry of what some are describing as on-demand debt collection.

One online platform is making borrowers’ personal information publicly available, attracting concern that the data could be misused, according to the South China Morning Post.

Chinese news website The Paper reports that hundreds of groups of freelance debt collectors have emerged on Chinese social media, dubbing the phenomenon a”gray chain of debt collection.” Users in these groups would share “best practices” from bombarding borrowers with frequent phone calls to posting public notices around their homes or even swarming them with “beggars,” practices that a Chinese lawyer told The Papercould veer into illegal territory.

Asia

Fintech Holds The Key To Myanmar’s Future (Forbes), Rated: AAA

As recently as 2013, CNN described Myanmar’s banking system as “outdated and debased, open for decades to abuse by the previous regime, and shunned by about 90 percent of the population.”

But the circumstances are changing, thanks to Wave Money and other financial tech platforms that are democratizing financial services in the country. Access to online services has skyrocketed in Myanmar in recent years, with mobile phone penetration reaching at least 50% and 80% of first-time phone buyers choosing smartphones. Mobile phone penetration was roughly 10% in 2014.

Unfortunately, transferring money at traditional banks can take hours at a time and can only be done during regular operational hours. This leaves workers in the difficult position of choosing between lost productivity and getting money to their families.

Financial inclusion is essential to economic development in emerging markets such as Myanmar. Widespread implementation of digital finance systems “could increase the GDPs of all emerging economies by 6 percent, or a total of $3.7 trillion, by 2025,” according to the McKinsey Global Institute.

Financial inclusion is essential to economic development in emerging markets such as Myanmar. Widespread implementation of digital finance systems “could increase the GDPs of all emerging economies by 6 percent, or a total of $3.7 trillion, by 2025,” according to the McKinsey Global Institute.

Authors:

George Popescu
Allen Taylor

Friday September 8th 2016, Daily News Digest

Friday September 8th 2016, Daily News Digest

News Comments Today is by far the busiest and most interesting day of this past week: News: SoFi expects to make a $80mil profit in 2016, is raising $500mil eyeing entering the EU, and much more info here with numbers and strategy discussion. Klarna launching online lending to thousands of online retailers. Great data on […]

Friday September 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

New Zealand

News Summary

 

United States

Online Retailers Are Proof of Marketplace Lending’s Sustainability, (American Banker), Rated: AAA

Recent news and commentary have been anything but optimistic on the future of marketplace lending. But are the negative projections simply drummed up by traditional banks or is there a real reason to be concerned?

According to Morgan Stanley, global marketplace lending grew at a compounded annual growth rate of 123% from 2010 to 2014 and is expected to grow at a CAGR of 51% from 2014 to 2020. Given that real global economic growth is closer to 3%, what explains marketplace lending’s more pronounced growth?

When pondering this subject, I find it interesting to see how other industries have fared as technology and investment have brought the end user greater value and transparency. The sector of the economy which has seen the most visible change has been that of retail where the consumer is shopping less at stores and malls while spending more online.

The trend is rapidly affecting many of the largest retail chains and malls around the country. The change in consumer behavior is all too clear to retailers like Macy’s, which recently announced the closure of 15% (100 of 668) of its stores. The bottom line is that technology combined with forward-thinking investment by some of the larger online sellers has significantly changed consumer behavior.

According to a Gallup poll last year, customers using bank branches dropped by 50% between 2011 and 2014. One function that kept many customers going into bank branches was to deposit checks. Since 2014, many banks have rolled out mobile deposit apps, further accentuating the fall in foot traffic to branches. And how does this impact lending? Traditionally, lending was one of the banking roles always done in person, whether it was a personal line of credit or a mortgage.

There are reasons for marketplace lending investors to still be encouraged. Investor returns on the main platforms have been strong, with historical yields between 5.20% and 8.37%, depending on the grade of the loan. With U.S. interest rates at or close to zero, we have seen investors searching for alternatives to equities that offer both yield and diversification and for many, they are finding this in marketplace loans.

Additionally, assuming that online lenders stay clear of overly leveraged securitization, which we saw accentuate the financial crisis, marketplace lending has the potential to reduce systemic risk by spreading exposure across many investors rather than having it sit with a small number of big banks.

What’s Next if Payday Loans Go Away?, (Morning consult), Rated: AAA

Stronger regulation of payday lending could increase the use of financial technology such as online marketplace lending, said William Michael Cunningham, founder of Creative Investment Research, which studies trends in banking in black communities.

As the Consumer Financial Protection Bureau prepares to finalize proposed rules cracking down on payday lenders, critics and proponents alike are speculating on what would fill the need for short-term, small-dollar loans.

Payday lending has garnered criticism from progressive Democrats, such as Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, who argue that the practice preys on the poor, trapping low-income borrowers in a cycle of deepening debt.

If payday lending were to become less profitable because of the rules, it could result in increased use of installment loans, advocates say.

The proposed CFPB regulation — with a comment period ending in October — would require lenders to confirm that borrowers are able to repay a loan, aiming to prevent borrowers from being stifled by high-interest rates and monthly payments.

Payday loans have become a major source of credit in low-income African-American communities as black-owned banks and other, more highly regulated depository institutions, have slumped, Cunningham said in an interview.

“For a lot of black people in a lot of communities, they don’t have a good alternative to the high-cost payday lending,” he said.

“A lot of free-market guys say, ‘This is just a legal product, and if people want to use it, then they should be able to use it,’,” Cunningham said. “To me, that’s crazy talk.”

“One could make the case that CFPB should take some of that fine money that they’re getting from these financial institutions and create a fund to create responsible depository institutions serving some of these communities,” he said.

“I think it’s the question of whether they’re regulating the product or intending to eliminate the product,” said Dennis Shaul, chief executive of the Community Financial Services Association of America, a trade group for short-term lenders.

A Pew Charitable Trusts report in August said that installment lending can still be harmful.

Shaul’s group took aim Tuesday at the CFPB, saying it “buried and ignored” a slate of positive testimonials about payday loans. CFPB did not provide a comment on the allegations. The portion of borrowers overwhelmed by payday loans — who have borrowed for an excessively long period and are mired in a cycle of renewing them — is arguably small, at 15 percent to 20 percent, Shaul said.

Klarna launches its first credit product with new U.S. partnerships,(TechCrunch), Rated: AAA

Now Bigcommerce, Shopify, Magento, Demandware, OpenCart, and Cybersource (that together account for over thousands of online merchants) will be offering credit lines through Klarna. For the European fintech unicorn (currently valued at $2.25 billion and already profitable), it’s a big deal.

Klarna already provides “try before you buy” services that allow shoppers to pay after delivery (rather than paying upfront with a card or bank account), but this is actually the first time that the company can extend a line of credit online.

The company already has a banking license in Europe and is currently working with WebBankon lending in the U.S., however, it’s also considering making a bigger splash in the States by buying its own bank.

SoFi Looks to Raise $ 500 Million in Latest Test for Fintech, (Wall Street Journal), Rated: AAA

Privately held SoFi hopes to raise about $500 million in equity to fund new growth initiatives among mass-market borrowers and international markets, according to the people and a presentation reviewed by The Wall Street Journal.

To manage through the tougher environment, online lenders including LendingClub, Prosper Marketplace Inc., and Avant Inc. eliminated hundreds of jobs, started charging their customers more to borrow and mothballed projects to expand into new products or countries.

Now, SoFi is looking to branch out from its main student-lending business into the territory from which many of those lenders are backtracking. While it has historically focused on borrowers with pristine credit histories—the company refers to them as Henrys, or “high earners not rich yet”—SoFi is considering lending to prime borrowers with slightly lower but still good credit scores.

“Between Brexit impacting U.K. student loans to the insatiable demand for [euro]-denominated assets, the macro tailwinds support European expansion,” according to the presentation, referring to Britain’s vote in June to leave the European Union.

Unlike many fintech startups, SoFi expects to be profitable this year. Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, are expected to be $81.3 million in 2016 and $262.5 million in 2017, compared with a loss of $2.8 million in 2015, according to the presentation.

The company expects to take in $357.4 million in revenue in 2016 and $638.1 million in 2017, up from $114.7 million in 2015, according to the presentation. SoFi soon could pass LendingClub in revenue if current projections hold. LendingClub’s revenue is expected to be $469.7 million in 2016 and $569 million in 2017, according to consensus estimates of analysts polled by Thomson Reuters.

Longer term, SoFi has said it wants to compete against the largest financial players by expanding into credit cards, deposit accounts, insurance, and wealth management. SoFi projects that it will extend about $10.5 billion in student, mortgage, and personal loans this year and about $17.5 billion next year, up from $5.2 billion last year. LendingClub’s 2015 loan volume was $8.4 billion.

A fundraising of a half-billion dollars wouldn’t be SoFi’s largest. Last year, SoFi raised more than $1.2 billion in new equity from investors, including Japanese internet giant SoftBank Group Corp. and hedge fund Third Point LLC. The SoftBank investment valued the company at around $4 billion, The Wall Street Journal previously reported.

RiverNorth Gets Approval From SEC for Marketplace Lending 40-Act Fund, (Lend Academy), Rated: AAA

Comment: we covered the launching of RiverNorth. What we missed was that it was a public fund, aka a 40-act fund.

The fund will be listed under the ticker RMPLX and will be available through several major fund platforms over the next few months. They can raise up to a billion dollars with the new fund although the initial investment will be lower with new investors coming in over time.

The fund structure is setup as an interval fund and there will be a NAV that is priced each day. Investing is similar to that of an open-ended fund as investors can purchase at the NAV price on any day, but the liquidity is similar to that of a private fund. Liquidity is offered quarterly and the total redemption amount will vary from 5% – 25% of the fund as determined by the board of directors based on market conditions, liquidity of the fund’s assets and shareholder servicing considerations

The fund also intends to use leverage.

From the filing:

The Fund currently intends to use leverage for investment and other purposes, such as for satisfying repurchase requests or to otherwise provide the Fund with liquidity.  Under the 1940 Act, the Fund may utilize leverage through the issuance of preferred stock in an amount up to 50% of its total assets and/or through borrowings and/or the issuance of notes or debt securities (collectively, “Borrowings”) in an aggregate amount of up to 33-1/3% of its total assets.

The other two important factors for investors are eligibility and expenses. There is a $1 million minimum investment which will apply at the individual investor level if the investor does not have an existing relationship with a RIA. If the investor does have a relationship with an advisor, the minimum would apply to the advisor which could lower the minimum investment per individual. As is noted in the prospectus:

 The Fund expects that the Shares will be initially offered primarily to clients of registered investment advisers and other institutional investors.

Fees for management expenses are 125 bps, although it is waived to 95 bps for the first two years of the fund.

It’s great to finally see the 40-Act funds get off the ground and open up investing in marketplace lending to more investors here in the US. It will be interesting to see how well the RiverNorth fund is received

 

Orchard Platform Is Disrupting Financial Services From The Inside Out, (Forbes), Rated: A

Since its appearance on Forbes’ first annual Next Billion Dollar Startups list last year, the New York-based Orchard Platform has grown its team by at least 200%, partnered with over 20 new loan originators, and continued expanding internationally. But beyond that, Orchard has been working to develop exactly what marketplace lending needs to transition from this year’s growing pains into adulthood: a secondary market.

Orchard’s general mission is simple—become a turn-key solution to both sides of the marketplace lending table. But to fully accomplish that is a much more difficult task involving close collaboration with the same entities that are anathema to many startups: regulatory bodies and financial institutions.

For the past two years, Burton and Orchard have worked closely with the SEC to clarify regulations surrounding marketplace lending and launch what would become the first-ever secondary market in the space. Burton and his team applied for Orchard’s broker-dealer registration, clearly articulated their objectives, and have since moved in lock-step with FINRA to educate them on the industry, all while building out their relationships with policy leaders in D.C.

In a whitepaper on marketplace lending published this past spring, the U.S. Treasury Department made clear that there is a need for a secondary market.

While Burton argues that the LendingClub faulty loans were an isolated incident, and investors have continued to show confidence in its products, the incident exposed the danger of allowing the hype of a still-growing asset class to get ahead of its reality.

September 12, 2016.

This transaction represents SoFi Lending Corp’s. (“SoFi” or the “Company”) third rated securitization collateralized by a portfolio of unsecured consumer loans. SoFi currently originates personal loans through its state licenses or complies with certain requirements where a state lending license is not required. There was one prior unrated securitization, in which SoFi or SoFi’s institutional investors were the sponsors and the collateral was unsecured consumer loans.

The Golden Ratio of P2P, (NSR Invest Email), Rated: B

P2p is a non-volatile, uncorrelated asset with one main risk: the risk that unemployment goes up.

In finance, we call this a “sensitivity.” The good news, my friends, is that a p2p portfolio’s sensitivity to unemployment is a manageable risk. But how? By keeping the default rate in your portfolio as low as possible, of course!

Comment: An article that started well but was very disappointing afterward.  I think that by saying  ” by keeping the defaults” low is like saying “by waving a magic wand”. What you probably want to talk about is how default to unemployment correlation curves vary by loan grade. So you need to take into account that curve to predict default in rising unemployment markets and buy today consequently. 

Promise Financial Launches Digital Cosigner Loans, (PR Newswire), Rated: AAA

Promise Financial, the marketplace lending platform focused on life event financing, announced today that it has launched a digital cosigner loan product. In addition to the company’s individual loans, which primarily serve prime-credit consumers, cosigner loans allow Promise Financial to serve a wide range of non-prime consumers.

“Cosigner loans are a terrific option for consumers who have limited credit experience or have had credit difficulties in the past, but need and deserve access to borrower-friendly financing.”

FutureVault Launches the Most Sophisticated Digital Filing Cabinet and Safety Deposit Box Ever Built at Finovate in New York City, (Email), Rated: B

Comment: The most outrageous title and claim for the week, maybe even for the month. Perhaps a little bit of modesty would help. I would recommend avoiding phrases like “ever built” unless you can clearly prove it is the case. It is difficult to prove that nobody else has ever built this product in-house or commercialized it, ever.

 United Kingdom

FCA circles on P2P platforms with September ‘business model’ inspections, (Alt Fi Credit), Rated: AAA

The Financial Conduct Authority (FCA) will spend the next month in site visits to the larger p2p and crowdfunding platforms with the goal of better understanding their business models , according to two people familiar with the matter.

“The authorisation department has asked us lots of questions like ‘do you have disaster recovery’…and on the other hand they are coming and asking ‘how does your business work’,” said another top industry figure also requesting anonymity.

It is broadly accepted that the FCA is more skeptical of the nascent industry than the UK Treasury which is seen as being very enthusiastic for P2P and fintech as a whole, particularly during the past six years under George Osborne’s former chancellorship.

The FCA has also said that it might take steps to mandate the disclosure of performance data: “Based on the outcome of the review, to help potential investors better understand the risks, we could consider whether to mandate additional disclosures, for example setting out how many businesses that raised funds have since failed and how many have had successful pay-outs,” it said in the review.

China

Tse and Meller — Chinese companies lead the way in fintech innovation, (Nikkei), Rated: A

Financial technologies companies backed by Chinese venture capital raised $2.4 billion in the first quarter of 2016, according to accounting firm KPMG. This represented a 49% share of global fintech investment in the period, bigger than that of North America and Europe combined.

Ant Financial Services Group, Alibaba Group Holding‘s fintech affiliate, itself raised $4.5 billion in April, making it the largest round of funding for a fintech company in the world.

Four out of the five largest fintech companies in the world by valuation are now in China, according to Jason Jones, chief executive of lending industry events group LendIt: Ant Financial; Shanghai Lujiazui International Financial Asset Exchange, or Lufax, which operates as Lu.com; Zhong An Online Property and Casualty Insurance and JD.com‘s JD Finance.

According to the Mintai Institute of Finance, nearly 80% of small- and medium-sized enterprises in China are not adequately served by banks.

Ant Financial developed Sesame Rating, China’s first credit scoring system.

Chinese entrepreneurs’ willingness to experiment means products and services hit the market quickly and evolve quickly. Initially, AliPay, Ant Financial’s payment service, was used only as a payment method for Alibaba’s e-commerce platform. Now, AliPay can be used at brick-and-mortar stores, for utility bills and even for overseas shopping.

China has become fertile ground for fintech solutions. Online wealth management has gained traction among young middle-class consumers. As more risk-tolerant investors, they tend to favor equities and mutual funds over traditional savings accounts. At $66.9 billion in 2015, China’s peer-to-peer lending market is now the world’s largest and more than four times the size of its U.S. counterpart.

China’s internet giants have some of the most sophisticated fintech ecosystems.

Tencent founded WeBank, China’s first online-only bank, in 2014. WeBank offers the consumer, corporate and international banking services. By May 2015, it had launched a personal credit line service to select users without guarantee or collateral through Tencent’s QQ and WeChat messaging platforms. Unlike Ant Financial, WeBank acts as a platform connecting borrowers and lenders directly rather than from its own balance sheet, allowing it to avoid credit risk.

Chinese fintech companies are now starting to expand overseas. In September 2015, Ant Financial acquired a majority stake in Paytm, India’s biggest online payment company, to gain access to a massive population just beginning to embrace mobile payments.

Most Online Lending Platforms Do Business Without License, (Caixin Online), Rated: A

There were 2,235 peer-to-peer (P2P) financing sites in China by the end of August, but only 242 of them had obtained an Internet Content Provider (ICP) license from local telecom regulators, according to data compiled by Yingcan Zixun, which tracks the industry.

Draft rules by China’s banking regulators in August said online lenders should get an ICP license from their local telecom regulatory authority after registering with the government finance office. It’s a requirement that reinforces an internet regulation issued in 2000 that demands a license for all for-profit Internet information service providers.

ut, in practice, few online financing platforms follow the rules.

European Union

The European alternative finance industry is lagging far behind the US and the UK, (Business Insider), Rated: A

Comment: we saw the Cambridge report for Alternative Finance report yesterday. This is just a reminder for our readers with a pop title from Business Insider.

The European alt finance industry’s market volume was €1 billion ($1.1 billion) in 2015, up 72% from €594 million ($668 million) the year before. In comparison, the UK industry’s market volume was €4 billion ($4.5 billion) in 2015, up 84% YoY, while the market volume in the US was €34 billion ($38 billion), up 213% from 2014.

New Zealand

Xero teams up to get into finance game, (Stuff), Rated: AAA

Wellington startup Fuelled has teamed up with accounting software provider Xero to launch a new lending service.

Fuelled will advance Xero customers up to 90 per cent of the money they are owed on invoices, for up to 90 days, at annual interest rates of between 9 and 15 per cent.

Fulcher said the partnership with Xero was important because it enabled Fuelled – with borrowers’ permission – to look at customers’ accounts and see their financial position, including their bank statements.

Xero rival MYOB has also moved into the financing industry, which MYOB chief executive Tim Reed said was a natural extension for its business. Earlier this year it took a minority stake in the Australian arm of United States small business financier OnDeck, which has lent US$5 billion to businesses in North America and Australia since it was founded in 2007.

MYOB customers that applied for loans through OnDeck had to provide much less information than they would when applying for a bank loan, because of the information MYOB already had on their businesses, he said.

New Zealand Online Lender Harmoney Tops 0 Million in Less than 2 Years, (Crowdfund Insider), Rated: A

Harmoney, a New Zealand based peer to peer lending platform, has surpassed $300 million in lending just shy of their 2 year anniversary of consumer lending.

Interest rates start at 9.99% today. Lenders have averaged a realized return of  approximately 13% (net of fees and losses) since platform launch. Harmoney is the largest “Australasian” peer to peer lending marketplace providing loans from $1,000 and $35,000. The company is gearing up for growth in Australia.  Harmoney was launched with NZ $100 million of lending capital from institutions including Blue Elephant Capital Management & Heartland Bank. Heartland Bank is a shareholder in Harmoney.

As of March 2016, Harmoney reported a loss of $14.2 million before tax on revenues of $8.6 million.

Author:

George Popescu