Friday November 24 2017, Daily News Digest

Lend Academy investment accounts

News Comments Today’s main news: Revolut sings 1 millionth customer. KBRA assigns preliminary ratings to Lending Club’s Consumer Loan Underlying Bond Credit Trust 2017-P2. Funding Circle to launch Isa. Orca is launching investment platform. Chinese regulators investigating potential Qudian data leak. China cracks down on shadow banking. China tells provincial goverments to halt microlender approvals. Swiss consortium adopts single digital identity for […]

Lend Academy investment accounts

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India

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United States

Goldman Sachs Faces Doubts About Loss Rates at New Online Lender (Newsmax Finance), Rated: AAA

As Goldman Sachs Group Inc. lends more money to Main Street, one question won’t go away: How many borrowers will pay them back?

A recent example it gave suggests the firm expects loan losses to be lower than what some rivals are seeing, and half of what many credit-card lenders experienced the last time the economy went south.

The bank is counting on its consumer push to deliver $1 billion in revenue growth over the next three years. While the firm looks to attract borrowers with better credit than many rivals, others think it may be underestimating the risks of a business where it’s the upstart.

My Quarterly Marketplace Lending Results – Q3 2017 (Lend Academy), Rated: AAA

If you have been reading these posts in the past year or so you will have noticed a steady decline in my returns, primarily caused by underperformance in my LendingClub accounts.

Earlier this year I adjusted my strategy and started investing across the entire risk spectrum but it is a bit like steering a battleship. Given my many thousands of notes it takes a while for any changes to show up in my portfolio returns.

My trailing 12 month returns for the year ended September 30, 2017 across all my accounts was 6.64%.

Source: Lend Academy

My main LendingClub account has performed poorly over the past 12 months. My TTM return is at a paltry 1.64%, my lowest return ever. All of my LendingClub accounts are below 5% and all have shown reduced returns over the past year.

Prosper continues to perform quite well. My three accounts are all returning between 7% and 8% which I consider quite respectable. My average interest rate of the loans I have invested in is just under 20% but returns have been quite consistent recently in the 7-8% range.

Source: Lend Academy

PeerStreet is a real estate platform focused on fix and flip properties. These are short term loans, typically between 6 and 24 months, and they are backed by the property. I use their automated investment tool to invest in only those loans that are paying 8% or more, up to a 75% LTV and a duration up to 24 months.

My first new entrant this quarter is AlphaFlow. They are a real estate platform that build diversified portfolios of fix and flip properties for you. What I like about AlphaFlow is that they deploy your money quickly, my entire investment was fully deployed in a matter of days. And they diversify across 75-100 properties, my own portfolio currently has 83 investments in 22 states with an average LTV of 68%.

Finally, as I do every quarter I want to end by highlighting the net interest number which for the last 12 months stands at $46,631.

Get the lowdown on the full range of Peter Renton investments here.

KBRA Assigns Preliminary Ratings to Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P2 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P2 (“CLUB 2017-P2”). This is a $330.0 million consumer loan ABS transaction that is expected to close December 6, 2017.

Preliminary Ratings Assigned: Consumer Loan Underlying Bond (CLUB) Credit Trust 2017-P2

Class Preliminary Rating Expected Initial Class Principal
A A- (sf) $239,400,000
B BBB (sf) $34,600,000
*C BB (sf) $56,000,000

This transaction is LendingClub Corporation’s (“LendingClub” or the “Company”) third rated sponsored securitization and the second sponsored securitization consisting of “prime” unsecured consumer loans facilitated by LendingClub’s proprietary technology platform supporting an online marketplace that connects borrowers and investors by offering a variety of loan products originated by issuing banks through the platform, www.lendingclub.com (the “LendingClub Platform” or the “Platform”).

The transaction has initial credit enhancement levels of 35.45%, 26.05% and 10.83% for the Class A, Class B and Class C notes, respectively.

China War on Online Loans Makes Waves in New York: QuickTake Q&A (Bloomberg), Rated: A

Chinese President Xi Jinping’s campaign to reduce risk in the financial system is being felt in New York. The assault on the sector threatens to stymie any new listings of such lenders on New York’s stock exchange — as well as spelling trouble for investors in the handful of companies that have already listed.

Joseph Otting Has a Lot on His Plate as the New Comptroller (Crowdfund Insider), Rated: A

Joseph Otting, a former banker and CEO of OneWest Bank, was approved by the Senate in a party line vote last week to take over the helm at the Office of the Comptroller of the Currency (OCC).

If Otting decides to stand up to the banking hyperbole it won’t be an easy task.

All of this begs the question: who will gain if Fintech is allowed to compete with banks?

One-Third of Small Business Owners Work Half of the Major Holidays (Small Business Trends), Rated: A

One-third of small business owners work at least three of the six major holidays in the US.

Kabbage’s new survey reveals several work/life balance issues related to the sacrifices small business owners are willing to make. The research involved surveying 400 small business owners, with 67 percent stating they expect to increase revenues by the end of the year. More than half of the small business owners interviewed said they anticipate an increase in revenue of 10 percent or higher.

The survey found that 60 percent of small business owners only take one full vacation a year, while 23 percent take less than two holidays off annually. Furthermore, when on holiday, 75 percent of small business owners continue working.

Consumers Say Hedge Fund Financed Illegal Tribal Lending (Law360), Rated: A

Vermont residents on Tuesday hit a hedge fund with a proposed class action in federal court alleging it helped concoct a sham tribal payday lending scheme meant to skirt laws preventing companies from charging consumers exorbitant interest rates while hiding behind tribal sovereign immunity.

Plaintiffs Jessica Gingras and Angela Given accused the firm, Victory Park Capital Advisors LLC, of striking a deal with payday lender Plain Green and the Chippewa-Cree Tribe of the Rocky Boy’s Reservation to use the tribe’s name in exchange for a small…

Payday Lenders Try Legislative Run Around State Laws, CFPB Regulation (Chicago Crusader), Rated: A

The same deception that hides the real cost of predatory, consumer loans is reflected in the title of pending legislation in both the House of Representatives and in the Senate. The Protecting Consumers’ Access to Credit Act of 2017 (H.R. 3299 and S. 1624) would allow payday lenders, high-cost online lenders, and other predatory lenders to partner with banks to make loans that surpass existing state interest rate limits.

How the Fed Can Help Families Living Paycheck to Paycheck (Real Clear Markets), Rated: A

The next Chairman of the Federal Reserve System (Fed) confronts a deep and growing problem: rising inequality. A new Fed Chair could combat this problem in an unexpected way by implementing real-time payments. The few days between checks clearing are a major driver of why it is so expensive to be poor. They are also unnecessary given technology and easily removable with some regulatory will. Real-time payments could save billions of dollars for American families living paycheck to paycheck.

The check casher costs $20, but two overdrafts cost $70. Check cashing is a $2 billion a year business and represents yet another cost born by those who have less.

The technology for real-time payments has been around for a long time. The United Kingdom adopted real-time payments in 2008. Japan, Poland, Mexico and South Africa all have the technology in place today. Financial technology (FinTech) firms like PayPal are offering real-time payments for customers who exist on both ends of their system. But unless your employer will migrate to using a FinTech for payroll, you need the banking system to modernize.

Peer pressure (BreakingViews), Rated: A

The Federal Reserve’s eggheads are usually a pretty reliable bunch. So when researchers at the central bank’s Cleveland branch recently published a study asserting that peer-to-peer loans were defaulting at rates reminiscent of subprime mortgages a decade ago, it seemed to confirm the worst fears about the budding online-lending market. But industry critics and academics questioned the researchers’ data, forcing the Fed to pull the paper.

It’s not easy to come by good data for this nascent field of finance, which makes the botched study all the more regrettable.

SoFi Among Companies To Buy Six-Second Ads During Fox’ Thanksgiving Game (Sports Business Daily), Rated: B

Duracell and personal finance company SoFi have “snapped up” some of the six-second spots Fox has set aside for its Thanksgiving broadcast of Vikings-Lions, while Disney will “air a mini trailer for ‘Star Wars: Episode VIII The Last Jedi,'” according to Anthony Crupi

United Kingdom

Fintech group Revolut signs up its millionth customer (Irish Times), Rated: AAA

Revolut, an app-based banking alternative which has over 50,000 customers in Ireland, has now signed up 1 million customers globally and claims it has saved users over £120 million (€134 million) in fees.

London-based Revolut said it is now signing up between 3,000 and 3,500 new users every day, an increase of 50 per cent growth from three months ago.

Users have now made over 42 million transactions since the company officially launched in July 2015 with a total transaction volume of $6.1 billion.

In an email to its customers seen by Moneywise and confirmed directly with Funding Circle, the provider says it will allow existing customers to invest in an Isa from Thursday 30 November.

It has yet to announce a launch date for new customers and says this is because it is anticipating strong demand for the product. For the same reason, customers will not be able to transfer existing Isas to Funding Circle when the product is launched.

Customers must deposit at least £1,000 to open an Isa.

Funding Circle borrowers back joining European Free Trade Agreement post-Brexit (P2P Finance News), Rated: A

MORE THAN half of small business owners want the UK to join the European Free Trade Agreement (EFTA) once Brexit is complete, Funding Circle research has found.

A survey of 1,254 borrowers on the peer-to-peer lending platform found 57 per cent would support EFTA, also known as the ‘Norway option,’ as it provides a regional free trade area comprising of Iceland, Liechtenstein, Norway, and Switzerland.

Orca to unveil diversified P2P portfolios for investors (P2P Finance News), Rated: AAA

PEER-TO-PEER analysis firm Orca is set to launch an investment platform.

The proposition will automatically build portfolios of P2P investments across more than 50 per cent of the market.

The portfolios would include major lenders across the consumer, business and property lending space such as Zopa, Funding Circle and Assetz Capital.

Digital wealth manager start-up Fountain secures seed investment (AltFi), Rated: A

Fountain, a digital wealth management platform aiming to “empower” investors to achieve their financial goals has secured seed round investment.

The cash, an undisclosed sum, came from a number of City figures led by Patrick Day, chairman of Day Cooper Day, a specialist pensions provider.

Peer to Peer Lender ThinCats to Rebrand as Next Phase of SME Funding in UK (Crowdfund Insider), Rated: A

ThinCats unveiled a new brand last week at an event attended by more than 100 business leaders. The gathering took place at the National Space Centre in Leicester but the new branding will not be officially launched until mid-December.

Robo-guidance or electric dreams? (FT Adviser), Rated: A

Effectively, FG17/8 is the new bible for everyone interested in developing a new automated (digital /robo /telephone-based) advice solution. Or it is a checklist for those who have already trodden down this well-worn path.

Do note though – as if you did not already know – the paper “contains general guidance and is not binding”, is not “exhaustive”, must not be read in isolation of the handbook, and does not address any potential changes that might arise from the implementation of the Insurance Distribution Directive. (Heaven forbid anyone would actually take any accountability for what is between the covers).

Two years. Two years. To pull together in one document the working practices that professional firms already follow with their eyes closed?

Three-quarters of advisers unthreatened by robo-advice (Financial Reporter), Rated: A

New research shows that 78% of financial advisers are confident robo-advice offers no threat to their business, despite nearly half expecting more demand for robo-advice over the next 12 months.

The research from Aegon found that the degree of concern felt by advisers correlates to the typical size of their client portfolios, with advisers whose client portfolios are at the lower end of the scale more alert to the threat from the lower cost option of robo-advice.

For advisers with client portfolios of more than £200k, 88% feel it offers no threat to their business, and even for portfolios of up to £100k, the figure remains high at 73%.

While the majority of advisers believe robo-advice is no threat to their business, a third (31%) do point to robo-advice and similar digital services as one of the top challenges to the wider industry over the coming two years, a little behind Brexit (40%).

China

China Regulators, Police Probe Qudian Client Data Leak (Bloomberg), Rated: AAA

Chinese regulators and police are investigating a potential leak of data from online lender Qudian Inc., according to people with knowledge of the matter.

Officials are probing allegations that data from more than a million students who are clients of Beijing-based Qudian was leaked and possibly sold online, said the people, who asked not to be named discussing private information.

The probe’s initial findings show that at least part of the leaked data match information clients had provided to Qudian, the people said. Investigators are checking whether the data came from Qudian, if the company was aware of the breach, and whether it took necessary measures to ensure the safety of personal information it collects.

China Commences Crackdown on Shadow Banking (The Epoch Times), Rated: AAA

Chinese regulators introduced major rules on Nov. 17—the scale of which has been compared to the U.S. Dodd-Frank Act—to unify regulations for the asset managementindustry and curtail shadow banking activities.

The rules are broad-based, covering China’s $15 trillion of asset management products issued by all financial institutions.

For example, the rules will prohibit asset managers from promising guaranteed rates of return to investors, and require issuers to set aside 10 percent of their fees from managing client assets in escrow, to serve as a buffer against losses.

For publicly offered funds, total assets cannot exceed 140 percent of the funds’ net asset value. The same ratio is set at 200 percent for privately offered funds.

China Urges Local Governments To Halt New Internet Microlender Approvals (PYMNTS), Rated: AAA

China is regulating micro loans on the internet, with a high-level Chinese government agency issuing a notice urging provincial governments to halt approval of new web-based online lenders.

The firms are lending to consumers in China that have been turned down by Chinese banks. However, interest rates on these tiny loans can be very high — something borrowers don’t realize.

China’s Micro-Lender Assault Threatens Path to U.S. Listings (Bloomberg), Rated: AAA

According to the International Financial News, China plans to purge the country’s 157 online micro-lenders, leaving only large state-owned companies and the biggest internet firms intact with licenses. Few of the existing lenders will survive, said the newspaper, which is managed by the official People’s Daily.

A comprehensive cleansing of the industry, which offers almost immediate unsecured loans over the Internet, often at high interest rates, would escalate earlier moves to crack down on the sector and its estimated $152 billion of loans. News that China has halted further approvals for online micro-lenders has already pummeled the New York shares of firms like Qudian Inc. and PPDAI Group Inc.

“It would seem to be an enormous, enormous risk to try an IPO with that hanging over your head,” said Christopher Balding, an associate professor at Peking University HSBC School of Business. “It would most likely put a halt to any IPO plans of these companies now.”

Source: Bloomberg

China Online Lender Qudian’s Fast Track From NYSE Darling To Dog (Forbes), Rated: AAA

The listing of online lender Qudian at the New York Stock Exchange on Oct. 18 heralded the birth of a new China billionaire, 34-year-old chairman and CEO Luo Min. The stock rose by as much as 43% that day, giving Luo a fortune worth $2.2 billion amid optimism about industry prospects.

Five weeks later, more than half of Qudian’s value has been wiped out and he’s on the verge of dropping from the ranks of the world’s billionaires altogether. Qudian fell 16% last night and at yesterday’s closing price, Luo’s fortune (which he shares in a trust with family) was worth $1.02 billion. Investors in other China fintech stocks got socked yesterday, too.  Jingpu Technology plunged 12.9% to $5.75, way below it IPO price of $8 from last week.   China Rapid Finance fell 6% yesterday and PPDai fell a whopping 24%.

Debt: The secret sauce of Alibaba’s Singles Day success (Technode), Rated: A

One of most notable online lending players aptly named Huabei (花呗, Just Spend) comes from the company that invented Singles Day—Alibaba.

To help them give away money to uncle Jack Ma, as hand-choppers have joked, this year Huabei has raised its credit limit to almost 80 percent during the promotion activities before Singles Day, allowing users to spend an extra RMB 2200 on average.

Huabei is the credit card of millennials, it targets the young and the unbanked. According to a report published recently, 86% of Huabei users belong to the generations born after the 80s and 90s (in Chinese). The fact that the 60% of them never owned a credit card is a good illustrator why online lending has experienced such a meteoric rise in China.

According to Huabei data, 38% of users choose to repay their debt in 12 monthly installments (in Chinese).

Credit Suisse-Backed Online Lender to Plan $ 500 Million IPO (Bloomberg), Rated: A

WeLab Ltd. has picked banks to advise on a Hong Kong initial public offering that could raise about $500 million, according to people with knowledge of the matter. The China-focused lender, whose backers also include billionaire Li Ka-shing, is aiming to list as soon as next year, the people said, asking not to be identified because the information is private.

An Overdone Payday Mayday (Bloomberg), Rated: A

Stop panicking about China’s online lenders. The real target of the crackdown is rogue local governments.

Financial News said government entities can’t issue new licenses for internet micro-lending beyond the 157 institutions that already have them. The consequences were immediate: Zhejiang Busen Garments Co., for one, said in a filing Thursday it’s terminating plans to set up an online lender.

As of September, there were 8,610 micro-lenders with 970 billion yuan ($147 billion) of loans outstanding. Many of those weren’t licensed by national regulators such as the People’s Bank of China or the China Banking Regulatory Commission, which have strict rules.

Rather, authorization was handed out by local governments, most of which have no fintech expertise, to companies claiming to be affiliated with state-owned enterprises.

Source: Bloomberg

Mobile payment users in China exceed 520m (GB Times), Rated: A

Ant Financial, Alibaba’s financial affiliate, has announced that China now has more than 520m mobile payment users, reports state-owned news agency Xinhua.

report released by the People’s Bank of China detailing the country’s payment system in the second quarter of 2017, notes that Chinese banks dealt with 8.6bn payments from mobile services during that period – up 33.84 percent from last year.

The combined value of mobile payments increased by 33.8 percent to 39.2tn yuan (around US$6tn).

How fintech companies create an alternative capital market in China (The Asset), Rated: A

IN China, an alternative capital market is taking shape with the rise of fintech companies, where fintechs are the intermediaries linking borrower and lenders. Moreover, fintechs are edging into the credit rating space, leveraging on their big data capabilities.

One core competence of fintech companies is their IT stability in the areas of payments and cloud computation. The strength of their IT infrastructure makes the technology players resilient under extreme conditions. During the recent Singles’ Day sale on November 11 – China’s online shopping bonanza equivalent to that of the US’ Black Friday – Alibaba’s Alipay processed a peak of 256,000 transactions per second and Alibaba Cloud processed as many as 42 million instructions per second.

European Union

Swiss Consortium Adopts Single Digital Identity For Online Purchases (PYMNTS), Rated: AAA

A consortium of nine large companies — including UBS, Credit Suisse, Swisscom, Swiss Post, SIX, Raiffeisen, Swiss Railways, Zuercher Kantonalbank and Mobiliar — will enable Swiss consumers to use a single digital identity when making eCommerce purchases.

According to a report in Reuters, the idea behind the project is to get to a point where consumers can use one login to make purchases at shops, buy train tickets and engage in banking activities online. The group aims to create a joint venture in 2018.

Exclusive Interview with Lendoit CEO Ori Erez (Chipin), Rated: A

Lendoit is a Decentralized P2P lending platform, which connects borrowers and lenders from all over the world in a trusted, fast and easy way using the advantages of Smart Contracts and the Blockchain technology.

What do you think is the biggest problem Lendoit will solve and why is it important?

The lending industry is not efficient because it’s controlled by centralized financial organizations that set the interest rates according to their own interest. It’s not fair that honest borrower from Brazil is paying 60% interest rate while borrower from Japan pays around 1%.

Lendoit uses three types of scoring:

  1. Local rating provided by a local supplier from the borrower’s state. Lendoit is working to create cooperation with some entities in various countries to provide this service.
  2. International scoring providers that are using innovative methods such as scanning social networks and scanning the borrower’s e-mail.
    Lendoit is working to create cooperation with these International entities.We have already signed / in the process of signing with several companies in the scoring area, such as FriendlyScore, BLOOM, LENNO, and others, as noted in Lendoit’s WhitePaper.
  3. In the Lendoit eco-system platform, there is a special Smart Contract: a Reputation contract that retroactively checks each borrower who takes a loan, and set reputation score according to his or her historical activities within the platform

My P2P Lending Investment Portfolio at Bondora is now 5 Years Old (P2P-Banking), Rated: A

5 years have passed since I first started to invest into p2p lending at Bondora in October 2012. I still have 604 loans in my Bondora portfolio with an outstanding principal of 7,467 Euro at an average interest rate of 23.78%. Of these 2,746 Euro are in current loans, 778 Euro in overdue loans and 3,941 Euro in 60+ days overdue loans.

Bondora shows a net return of 19.0% for my portfolio. In my own calculations, using XIRR in Excel, assuming that 30% of my 60+days overdue and 15% of my overdue loans will not be recovered, my ROI calculations result in 17.2% return. Even if I assume total loss on all outstanding loans that are 60+days overdue my ROI calculation results in 15.6%.

Source: P2P-Banking

Finbee Expands into Czech Market (P2P-Banking), Rated: A

FinBee, a Lithuania based p2p lending platform, has started to expand internationally by launching in the Czech Republic. By 2020, FinBee plans to begin operations in another two European countries.

FinBee will provide personal lending services for residents of the Czech Republic as well as for investors from across the entire European Union.

International

Investors divide in peer-to-peer lending (Silicon Republic), Rated: AAA

Banks – local banks, in particular – have traditionally been the main and sometimes the only source of external capital for SMEs. However, increasing regulatory requirements have lowered the probability for SMEs to obtain access to bank financing.

P2P lending is part of the wider universe of crowdfunding. This is a bigger market than many people expect. For example, a 2016 paper for the European Commission reported that crowdfunding expanded by 167pc in 2014 and reached $16.2bn. North America remains the largest market ($9.5bn), followed by Asia ($3.4bn) and Europe ($3.3bn). While there are no accurate figures on the Irish market, Orca Money reports that the UK P2P market had £9.6bn cumulative lending since 2010, £1bn of which was in Q1 2017. In 2016, Orca Money reported that the UK P2P market comprised 177,000 retail investors with consumer (46pc), business (35pc) and property (19pc) borrowers.

P2P platforms have been very cautious about the loans they offer to investors, with most of them being classified as low-risk. This has resulted in low default rates and acceptable positive returns for investors. The potential for positive returns has attracted institutional and professional investors (eg investment banks, venture capitalist etc) into the game and created a disproportionate capital supply and demand. Such a trend is particularly visible in the US and UK, the two largest P2P markets, but it has recently emerged in smaller markets like Australia and New Zealand and is likely to occur, to a greater or lesser extent, in all regulated markets, including Ireland.

The lack of a clear regulation has arguably prevented the growth of the Irish P2P lending market by discouraging both investors and small businesses to participate. A clear regulatory framework is necessary to ensure transparency and to increase investors’ confidence in P2P lending markets.

Initial coin offerings: regulation and the risks (Lexology), Rated: AAA

On 12 September 2017, FCA published a consumer warning on initial coin offerings (ICOs), stating that they are ‘very high-risk, speculative investments’, and that ‘there is a good chance of losing your whole stake’ as a purchaser.

Earlier in September, the People’s Bank of China had denounced ICOs as ‘illegal fundraising’ and issued a ban that caused the value of cryptocurrencies such as Bitcoin to plummet. The following day, Canadian regulators accepted a firm offering ICOs into its regulatory sandbox as part of its broad goal of supporting innovative fintech projects. The European Securities and Markets Authority has been the latest to denounce ICOs, echoing the FCA’s warning to consumers that ICOs are ‘very risky and highly speculative investments.’

By applying the conditions from SEC vs Howey, the US Supreme Court test for determining whether transactions qualify as investment contracts (and by extension, securities), the investigation found that the tokens emergent from the DAO’s ICO are securities and thus could fall within the US regulatory perimeter.

The SEC made the classification by fulfilling the following criteria from the Howey test:

  1. Investment of money
  2. Reasonable expectation of profits
  3. Derived from the managerial efforts of others
  4. Investor voting rights were limited

FintruX Network: Making Unsecured Loans Highly Secure (BTCManager), Rated: A

The FintruX Network has been established to transform unsecured loans to highly secured loan without any hurdles to borrowers and investors. The platform has unique blockchain approach of global P2P lending highways which proposed to raise $30 million by selling digital tokens.

 

 

The FintruX Network aims to enhance credit enhancements by introducing cascading levels which involves:

  •         Additional collateral
  •         A local third-party guarantor
  •         Cross-collateralization
  •         Fintrux ultimate protection reserve
Australia

Financial services industry to get its Groundhog Day commission of inquiry (Financial Review), Rated: A

But it was probably not as long as the minimum two years contemplated by O’Sullivan and the Greens for the proposed Banking and Financial Services Commission of Inquiry.

It should not be a problem if the three judges have no background or experience in fintech, cryptocurrencies, blockchain, peer-to-peer lending, equity crowd funding and payment systems riding off messaging services such as those offered by WeChat, Facebook, Apple and Google.

After all, this is not about the future. This inquiry is about spending more than $200 million looking in the rear view mirror.

The age of algorithmic advice (Financial Standard), Rated: A

Futurist and chief executive of global consultancy firm Tomorrow, Mike Walsh, told the 2017 Financial Planning Association Professionals Congress that sweeping technological change driven by complex algorithms is nothing to fear as it’s simply “not unique.”

Walsh said financial planners’ fear-based thinking that technology will replace jobs must shift to ask how will jobs need to change.

India

YES Bank diversifies funding sources (The Asset), Rated: AAA

INDIA’s fifth-largest private sector bank, YES Bank, is raising a total of US$400 million in two transactions in the offshore syndicated loan markets as it further diversifies its funding sources.

The first transaction is a five-year loan amounting to US$250 million raised from a group of Taiwanese banks, led by CTBC Bank, Bank of Taiwan, Mega International Commercial Bank and Land Bank of Taiwan. The deal was upsized from the initial target of US$200 million as YES Bank exercised the green shoe option following an oversubscription of US$355 million from 13 other banks.

BankBazaar CEO Honored at India FinTech Awards 2017 (Finovate), Rated: B

Adhil Shetty, CEO of BankBazaar, was recognized by the India FinTech Awards 2017 earlier this month. Shetty was named Fintech Leader of the Year at the event, which featured more than 200 attendees, more than 40 speakers, and 20 shortlisted startups from six countries.

Africa

Millennials happy to take financial advice from robots (IOL), Rated: AAA

Millennials are not only developing a healthy appetite for financial advice, they are also more likely to trust digital advice from automated investment services than older generations.

  • Results from the study showed that in Europe 32% of online adults between the ages of 18 and 37 say they “rely on financial advice from professionals”, compared with 29% of older generations.
  • At least two-thirds of US Millennials were willing to share personal data in order to obtain better service from their financial institution.
  • Only 38% of US Millennials are confident that a bank or credit union will offer them valuable financial advice, compared with 46% of their older counterparts.
Canada

Upcoming ICO for Global Migrants and Their Unbanked Families (Digital Journal), Rated: AAA

The migrant and their unbanked families in emerging and frontier markets have been suppressed for the longest time without any access to basic services, financial or otherwise. Approximately 2.4 billion people in poverty worldwide are often excluded from free movement or basic rights which often leads them to corruption and crime, including slavery, human trafficking and in extreme cases, death. Migrants far too often are denied basic financial tools.

LALA World (“LALA”) is a wholesome ecosystem for the unbanked, starting with the migrants and their families back home. The base of this ecosystem is the LALA Wallet platform. By creating a whole new peer-to-peer infrastructure, LALA aims to revolutionize the way individuals, small businesses and micro-entrepreneurs transact, make domestic and cross-border payments, borrow money and associated products like insurances, cards, wealth and other general banking products.

LALA World Products from their Ecosystem

LALA Transfer – A Peer-to-Peer local and global remittance backed by crypto as well as fiat.
LALA Bill Pay – Local and International bill payments for you and your family.
LALA Lends – Domestic and International peer-to-peer lending via crypto and fiat, individual and small businesses.
LALA Card – Crypto and Fiat card synced to your Wallet and usable at millions of PoS globally.
LALA Kit – Contains a mobile phone with pre-loaded LALA Wallet, LALA Insurance, LALA Card, partners’ products, etc.

ICO Pre-sale – Nov. 25-Dec. 15, 2017 (discounts available).
ICO – Jan. 5-Feb. 5, 2018

Authors:

George Popescu
Allen Taylor

Monday November 13 2017, Daily News Digest

p2p lending credit score

News Comments Today’s main news: SoFi cancels plans for Australia, Canada. SoFi completes largest consumer loan securitization to date. Elevate launching credit card for sub-prime consumers. Funding Circle posts record month. Zopa developing IFISA transfer features. PPDai debuts weakly in New York. WeLab raises $220M for expansion. Australia upgrades RateSetter. Today’s main analysis: Three Myths of Peer-to-Peer Lending. Today’s thought-provoking articles: Cleveland […]

p2p lending credit score

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News Summary

United States

SoFi drops plans to enter Australia, Canada (Death Rattle Sports), Rated: AAA

Online lender Social Finance Inc said on Thursday it is pulling back from expanding into Australia and Canada as previously planned, choosing instead to focus on improving its core lending products like student loans and mortgages in its home market.

The San Francisco-based company will also drop its plans to push into asset management, according to a letter from its interim CEO to shareholders and seen by Reuters.

SoFi Completes Largest Consumer Loan Securitization to Date (Crowdfund Insider), Rated: AAA

On Friday, SoFi announced it has completed a $727 million issuance of SoFi Consumer Loan Program 2017-6 (“SCLP 2017-6”) notes, making it the largest offering of securities backed by consumer loans and is SoFi’s 11th ABS transaction this year, bringing the lender’s total issuance for 2017 to $6.1 billion. 

Fintech Company Elevate Launching a Credit Card for Sub-Prime Consumers (LendEDU), Rated: AAA

Elevate, a fintech lender from Texas, recently announced it wants to try out the credit card business according to Business Insider. On Monday, the company released its plans for 2018 which included a variety of new products and a possible partnership with a bank.

One of the products that Elevate is looking to release is a credit card with a third-party bank by next year. The card would be potentially geared toward subprime borrowers, which constitutes a large group of Elevate’s customer base.

Another company, Petal, is trying to offer a new credit card in 2018. It’s goal is to increase the availability of credit cards to consumers who are lacking credit.

Fed researchers compare P2P lending to subprime mortgages (Finextra), Rated: AAA

The peer-to-peer lending industry has the potential to destabilise consumer balance sheets, with loan performances bearing a striking resemblance to the subprime mortgage market before the 2007 crisis, warns a new paper from the Cleveland Federal Reserve.

And things could get much worse, warn the Fed researchers after looking through credit bureau data on 90,000 people who took out P2P loans between 2007 and 2012 and comparing them to 10 million traditional borrowers.

The researchers conclude that, in fact, P2P loans do not achieve these things and actually resemble “predatory loans” in terms both of who takes them out and the impact on borrowers’ finances.

Source: Finextra

Peer-To-Peer Loans Remind The Cleveland Fed Of An Obscure Historical Episode Known As ‘The Subprime Mortgage Crisis’ (Dealbreaker), Rated: A

Are consumers really better off skipping the local BofA branch and instead filling in a few online forms and having an algorithm spit out an interest rate? Are all these newfangled credit-rating tools helping to serve those traditionally brushed aside by the big boys? Is P2P good?

Researchers at the Cleveland Fed have an answer to all these questions: No.

Source: Dealbreaker

The pattern is worse for those with credit card debt; compared to the control group, P2P borrowers see a 47 percent increase in credit card debt after getting an online loan.

Meanwhile LendingClub has posted exactly two quarters of profit since going public in 2014. Its last earnings report sent shares down 20 percent.

Federal Reserve Cautions on Peer to Peer Lending (Crowdfund Insider), Rated: AAA

According to the authors, Yuliya Demyanyk at the Cleveland Federal Reserve, Elena Loutskina at the University of Virginia, and Daniel Kolliner at the University of Maryland, peer to peer loans resemble predatory loans in terms of the consumer market they serve and impact on consumer finances.

Among their findings:

  • Credit scores of P2P borrowers fall substantially after taking out a loan when compared to peers who did not take out a P2P loan.
  • Loan delinquency rates are more than 50% higher for P2P borrowers two years after the loan origination when compared to peers who did not take out a P2P loan.
  • P2P borrowers exhibit a 47% increase in credit card balances after obtaining P2P credit when compared to similar non-P2P borrowers.

Read the full document here.

Federal Reserve of Cleveland Makes Some Dubious Claims in a Report on P2P Lending (Lend Academy), Rated: AAA

[Side note: This report seems to be using P2P lending to mean the broader online lending industry beyond just Lending Club and Prosper so keep that in mind when you see me using the P2P lending term in this article].

One of the things I disliked most about this new report was the how opaque their analysis was. They just said they used data provided by TransUnion “in which we observe about 90,000 distinct individuals who received their first P2P loan between 2007 and 2012.”. They provide no indication as to which platforms this data is based upon and then we see this very strange chart below showing supposed delinquency rates by year.

In 2006, the only consumer P2P lending (or any significant online lending) platform in existence in this country was Prosper and their 2006 vintage was terrible. This data was all publicly available at one point and I reported that of the 28,936 loans issued during those initial two and a half years 10,456 loans defaulted, a 36% default rate. Subsequent vintages at Prosper performed much better. When I see the table above showing those numbers I have to question the entire data set of the report because obviously their 2006 data is wrong.

Online loans leave consumers deeper in debt, Fed research says (American Banker), Rated: A

The study, published Thursday, is likely to spark intense debate. One of its findings is that consumers who take out online loans, sometimes called peer-to-peer loans or marketplace loans, likely have access to traditional banking services.

“We are scratching our heads,” Nathaniel Hoopes, executive director of the Marketplace Lending Association, an industry trade group, said in an email, “because the Philadelphia and Chicago Federal Reserve recently conducted a more granular study and reached the opposite conclusion as this Cleveland Fed research.”

In 2010, digital lenders originated $249 million in unsecured personal loans, according to a recent study by the credit bureau TransUnion. By last year, the annual loan volume had grown more than ninetyfold.

The study finds that the consumers who took out online loans grew their other debts by about 35% more over the next two years than did their counterparts who did not take out the loans.

Source: American Banker

 

Square’s new strategy is paying off. Its stock is up 175% this year (KITV), Rated: A

Square is trying to upend the way people pay for stuff and change the way businesses handle money.

Clearly, its strategy is working: Square’s stock is up 175% this year. That’s more than 11 times the S&P 500’s 15% growth.

The company cashed in on those subscription services, which generated around $65 million in revenue — up more than 80%.

It is also making big money from its largest merchants. Almost half of the $17.4 billion in payments Square handled last quarter came from merchants with more than $125,000 in annual sales.

It has lent small businesses more than $300 million.

The CFO of Goldman Sachs keeps talking about becoming the Google of Wall Street (Business Insider), Rated: A

A Harvard Business School case study on the bank’s digital strategy was presented as part of the executive MBA program last week.

The case study runs through some of the history of Goldman Sachs’ efforts to switch to thinking like a tech company, some of the tension it has caused, and the payoffs.

Travel Companies Start Lending Consumers Money to Book Trips (Skift), Rated: A

Several major sellers of travel, such as Expedia, United, JetBlue, Southwest, and Lufthansa, are testing extending credit to U.S. consumers to enable them to pay for their vacations over time rather than up-front.

Paying for a trip in monthly payments primarily appeals to consumers with average credit ratings who are willing to accept short-term, interest-based loans.

But consumers with high credit scores also appear to be getting tempted into splurging on luxury trips if companies lend them credit on attractive terms.

The new installment products — called layaway when paid off prior to trip and a loan if paid off after — have been common in developing countries.

A few fintech startups — most prominently Affirm, Airfordable, and UpLift — are hoping that their services will make delayed payment for travel fashionable.

THE DOWNLOW ON UPLIFT

This year, UpLift said that its average 12-month travel loan through travel brands was $2,420, said CEO Brian Barth in an interview. For “highly-qualified” borrowers, it has typically charged 8.99 percent annual percentage rate, he said.

Consumers participating in UpLift’s loans had an average FICO (Fair Isaac Corp.) score of 692. Scores range from 300 to 850. UpLift has lent money to customers with FICO scores as low as 475.

AFFIRM’S PROMISE

Affirm said that its travel partners see a 20 percent increase in customer conversions, on average, by offering its product.

PeerIQ’s Q3 Public Lender Tracker (PeerIQ Email), Rated: A

The tracker, a new release from PeerIQ’s research and analytics team, examines credit performance trends across publicly traded banks, FinTechs, and card issuers. We also deep-dive into the earnings of Lending Club and OnDeck. Stay tuned for a release this week and scroll down for an excerpt.

Real Estate Crowdfunding Platform Groundfloor Preps for Reg A+ Offer (Crowdfund Insider), Rated: A

Groundfloor has filed a Form 1-A with the Securities and Exchange Commission indicating its intent to sell shares in the real estate crowdfunding platform.  According to the filing, GroundFloor is offering up to 2.5 million in Common Stock at $10 per share. Interestingly, the Groundfloor offering circular indicates the company intends to limit the offer and sale solely to accredited investors – even though under Reg A+ issuers may sell to both accredited and non-accredited investors alike (although in other parts of the document it appears they will accept non-accredited investors).

Real Estate Crowdfunding: Trends to Watch in 2018 (Realty Biz News), Rated: A

Real estate crowdfunding is a growing industry of great interest for realtors and investors. A report on Crowdfunding for Real Estate by crowdsourcing.org anticipated a $3.5 billion growth for real estate crowdfunding in 2016, and experts project that the industry will grow to over $300 billion by 2025.

Source: Realty Biz News

Digital mortgages advancing, but borrowers still want more speed (National Mortgage News), Rated: A

Despite digital mortgage advances, borrowers think it still takes too long to get a loan, J.D. Power finds in its annual customer satisfaction ranking of originators.

The most frequently used method for submitting a mortgage application for both refinances and purchases was online for the first time, according to the survey. Forty-three percent applied digitally, up from 28% a year ago.

But satisfaction with online submissions declined 8 points and borrowers also gave online submission a satisfaction score 10 points below that of in-person applications.

Online Lender Pioneer, SellersFunding Launches Algorithm to Streamline Funding for Amazon Merchants (Sys-Con), Rated: A

As sales from Marketplace outpace Amazon’s own sales, sellers need increased funding for things like, advertising and purchasing inventory.

The SellersFunding model interprets data like products, prices, payments, customer reviews and feedback. With more than fifteen billion single data points on tap, all rigorously tasked, the company’s model can boast high levels of accuracy.

Small Banks Vow To Protect Regulations Keeping Retailers And Tech Giants Off Their Turf (PYMNTS), Rated: A

But those laws may be up for reconsideration, as Keith Noreika, the acting Comptroller of the Currency, has raised the possibility that those laws are in need of review and possibly revision.

Needless to say, the nation’s small banks and their representatives are less than thrilled.

“If Walmart wants to be a bank, that’s fine, as long as they make the appropriate investments to protect the parts of the banking system that are so critical,” said Kelly King, chief executive at regional lender BB&T Corp.

King added that he was “absolutely opposed” to the idea of a limited banking license.

LendingTree, Inc. to Host Analyst and Investor Event on December 13, 2017 (Business Insider), Rated: B

LendingTree, Inc. (NASDAQ: TREE) today announced it will host an Analyst and Investor Event on Wednesday, December 13, 2017 in New York.  The company will host in-person attendees at the Nasdaq MarketSite, 4 Times Square, New York, NY10036. Doors will open for registration at 10:00 a.m. Eastern Time and presentations will begin promptly at 10:30 a.m.

United Kingdom

Funding Circle posts record month (Bridging&Commercial), Rated: AAA

Funding Circle is celebrating a global record month after lending over £120m to businesses throughout October in the UK alone.

In total, 1,721 UK businesses accessed finance last month via the lending platform, which directly and indirectly created 4,400 jobs.

More than 8,900 small businesses have accessed finance through Funding Circle in the last six months, totalling over £630m in loans.

Funding Circle: Investors can expect 5pc returns in a recession (P2P Finance News), Rated: A

A FUNDING Circle loan portfolio would still deliver returns of close to five per cent in a severe recession, the platform claims.

The peer-to-peer business lender has stress-tested its loan book, using a model similar to what the Prudential Regulation Authority (PRA) uses for banks, to see how two example portfolios would stand up against a severe recession similar to the one in 2007/08.

Even with these assumptions, the projected annual returns after fees and bad debt but before tax were 5.3 per cent for portfolio A, and 4.9 per cent for portfolio B, Funding Circle said.

Unusual ways to invest when you don’t have much money (AOL.com), Rated: A

Microinvesting

The Money Box mobile app launched this time last year, allowing savers to invest in stocks including Netflix, Unilever and Disney with as little as £1 to spend.

There are, though, fees to pay: after three months, users must pay £1 a month to subscribe to the service, plus 0.45% a year on the value of their investments.

Other services for investing small amounts are available from Nutmeg, which has a minimum of just £500, while Hargreaves Lansdown has a minimum ISA investment of £25 a month.

Peer-to-peer lending
Peer-to-peer lending schemes can offer a high return, with some claiming rates of more than 7%.

Crowdfunding

Two of the bigger equity crowdfunding operators are Seedrs and Crowdcube, both of which allow a minimum investment of just £10.

Funding Circle joins Women in Finance Charter (P2P Finance News), Rated: B

FUNDING Circle is among the latest round of firms to have signed the Treasury’s Women in Finance Charter, which aims to tackle gender inequality in senior roles.

The Treasury announced on Friday that a further 26 companies have signed up to the Charter, increasing the number of employees covered by the Charter to over 600,000.

Zopa developing IFISA transfer features (P2P Finance News), Rated: AAA

ZOPA is working on ways to let investors transfer their existing holdings into its Innovative Finance ISA (IFISA).

Andrew Lawson (pictured), chief product officer for Zopa, said some investors have already been selling old loans and buying new ones to fund the tax-free product.

However, the lender is now working on a one-off option for customers with more than £1,000 in its Classic or Access account to move that money into an IFISA, keeping the Safeguard coverage intact and without paying sale fees.

How do P2P platforms balance investor and borrower numbers? (Bridging&Commercial), Rated: A

New peer-to-peer platforms should put as much effort into attracting borrowers as they do promoting and obtaining inward investment, according to Kuflink.

Stuart Law, chief executive at Assetz Capital, claimed: “A number of long-established peer-to-peer platforms have more investors than borrowers, meaning they have been closed to new investment, while the company tries to find more loans.

Stephen Findlay of BondMason added: “I think there is generally an oversupply of capital for the available investment opportunities, across most markets.”

Peer-to-peer lending: is it too late to profit? (The Telegraph), Rated: A

Peer-to-peer (P2P) lending has grown dramatically since the financial crisis. In 2005 when Zopa, the first lending “platform” was launched, loans totalled just £1.5m.

But last year total lending was £3.2bn with Zopa, Funding Circle (which counts the British government as an investor) and RateSetter controlling two-thirds of the market.

Rates offered by P2P firms have dropped: investors can earn 3.7pc with Zopa Core and 4.5pc with Zopa.

Risks are also rising. When Zopa launched it only offered loans to 0.5pc of applicants, said Neil Faulkner of 4thWay. Now its approval ratings are in line with traditional banks, which give loans to 20pc of applicants.

UK tech founders planning swift exits (AltFi), Rated: A

A new report from equity crowdfunder VentureFounders has found that most tech founders in the UK intend to exit within 2-5 years, despite recognising the risks of exiting too early. Fully 56 per cent of the entrepreneurs surveyed by VentureFounders expect to sell their business for £50m or less.

The UK Robo-Advice Innovation Forum: key takeaways (Banking Technology), Rated: B

Conclusions

  • The banks are coming and will quickly take market share. With Nutmeg claiming majority market share with less than 50,000 customers, banks accessing millions of customers will quickly grow the market.
  • Exchange-traded fund (ETF) providers and investment managers interacting with advisors can create even more value. The “man and machine” approach may be best.
  • Developing a pensions or SIPP product could triple the total addressable market (TAM) showing a clear route to profitability for the currently loss-making robo-advice community.
  • A pension offering could see LDI frameworks finally reach the retail market.
  • The digital asset management community doesn’t like the term “robo-advisor” as confusingly many do not give “regulated advice” and of course and disappointingly, there are no robots!
China

Ppdai Makes Weak Debut in New York (Caixin), Rated: AAA

Ppdai, which operates an online platform connecting small investors and lenders, priced its initial public offering at $13 a share, well below the $16-$19 target. At that level, the company raised about $220 million, compared with its maximum goal of $350 million.

The shares then opened higher and rose as much as 10% in early trading in New York. Ppdai finished its first day trading at $13.06.

Online Lender WeLab Raises $ 220 Million for Expansion (Caixin), Rated: AAA

WeLab, an online lender in Hong Kong and the Chinese mainland, said it has raised $220 million in new funds from investors including Alibaba Hong Kong Entrepreneurs Fund and International Finance Corp.

Part of the new funds will be used to expand outside Greater China, WeLab said in a statement.

China Fintech IPO Fever Wanes as Regulators Weigh Crackdown (Bloomberg), Rated: AAA

PPDAI priced its offering a week after news that Chinese regulators are considering a crackdown on the country’s cash microlenders in response to claims that some have charged excessive interest rates. The initial public offering of Qudian helped trigger the regulator’s review of the sector, people with knowledge of the matter said earlier this month.

PPDAI priced its sale of 17 million American depositary shares at $13 apiece, after marketing them at $16 to $19 each. The stock started trading Friday in the U.S.

While Chinese law already limits lending rates to 36 percent annually, regulators are considering drafting rules to specify the cap applies to the cash microlending sector, people with knowledge of the matter said this month. In its IPO prospectus, PPDAI said total borrowing costs for some of its loan products exceed that level after adding in transaction fees.

ZhongAn shares have risen 28 percent from their IPO price, outpacing the 5.3 percent gain in the Hang Seng Index over the same period.

CreditEase CEO Ning Tang Discussed Fintech-Driven SME Economy at APEC CEO Summit 2017 (Business Insider), Rated: A

CreditEase, a Beijing-based leading financial technology conglomerate specializing in inclusive finance and wealth management, announced that its Founder and CEO, Mr Ning Tang, participated in the annual Asia-Pacific Economic Cooperation (“APEC”) CEO Summit event, in Da Nang, Vietnam on November 9.

“Over the next decade, tens of millions of SMEs in China will focus more on the quality of their growth, technological innovation, and sustainable development. We at CreditEase has been committed to empowering these SMEs as well as the real economy with technology breakthroughs and new business models ever since the company’s establishment,” said Mr Tang. “Going forward, we will continue to leverage our FinTech strengths in inclusive finance and wealth management to enhance SMEs’ overall financial capabilities and create more value for society.”

Higher rates for addresses in caps – online lender WeLend reveals how it determines your creditworthiness (SCMP), Rated: A

If you are looking to take out a loan from online lending platform WeLend to buy the iPhone X, be warned – should you use only upper-case letters when filling out the address field in your application, you could be charged a higher interest rate.

“We actually match how people fill out addresses with the probability of [them] declaring bankruptcy after a certain number of years,” said Simon Loong, the founder and chief executive of WeLab, the Hong Kong company that operates WeLend.

“The probability of [an applicant] declaring bankruptcy is highest when they fill in their address in capital letters,” he said.

n Hong Kong, the company relies primarily on a user’s credit history and interaction data. In mainland China, where less than 30 per cent of the population has a credit score, WeLab relies much more on unstructured, mobile data.

Yet another observation WeLab has made is that delinquency rates tend to correlate with loan application times – if a user applies for a loan between 1am and 6am, they are more likely to default on a payment than users who apply in the day, Loong said.

Food Delivery Platform Ele.me is Heading to the Micro Lending Market (Crowdfund Insider), Rated: B

On November 8th, Chinese leading food delivery platform Ele.me quietly marched into the micro lending market. The loans ranges from RMB 500 yuan to RMB 2000 yuan with terms of either 7 days or 14 days. This is a collaborative product with Lixiadai.com which means borrowers apply this loan on Ele.me will be directly led to Lixiadai.com. 

Nearly two months ago, the stock app jointly set up by JD Finance and four other brokerages stopped operating. According to JD.com, the suspension of the operation is due to a system upgrade. Yet, as reported by the media, the app was actually halted for procedural noncompliance in account opening and trading.

Chinese FinTech CFO on IPO Day: Mobile, Blockchain Will Drive Industry Innovation (Cheddar), Rated: B

Ho fills Cheddar in on why there is such a massive opportunity in peer-to-peer lending in China. He notes that companies capitalized on the governments unwillingness to hand out small loans to individuals.

European Union

Klarna adds pay-later feature at Swedish stores (PaymentsSource), Rated: AAA

Sweden’s Klarna made its mark with a pay-later model for e-commerce shopping that’s spread to other European countries and the U.S., and now it’s piloting the same concept for in-store purchases.

In partnership with the Danish payments technology firm Nets, Klarna has developed a feature that appears on payment terminals at certain stores giving consumers the option to pay for a purchase later—fully or in part—before completing the transaction, Klarna said in a recent blog post.

FinScience Closes €1M Seed Funding Round (FINSMES), Rated: A

FinScience, a Milan, Italy-based fintech startup, closed €1m seed funding round.

FinScience has developed a platform that gives simple access to alternative data to people who work in financial industry.

USING AI TO FIND THE NEXT TECH UNICORN (BusinessCloud), Rated: A

A technology-focused venture capital firm is using artificial intelligence (AI) to look for new European investment opportunities and find the next tech unicorn.

Andreas Thorstensson is tech partner and investment adviser at EQT Ventures, which went live in 2016 and is part of global private equity group EQT.

EQT Ventures has been using Motherbrain internally for almost two years, with the platform now responsible for up to 30 per cent of the fund’s deal flow.

ETHERECASH TOKEN PRE-SALE A HUGE SUCCESS (Bitcoinist), Rated: B

Some of the Etherecash features and benefits:

  • Peer to Peer Lending Crypto Backed: Lend to borrowers internationally with Border Free Loans.
  • Get Higher Returns Than Typical Bank Deposits.Borrow 70-80% of crypto value, without needing to liquidate any assets.
  • Worldwide Money Transfer: Send money to anywhere in the world using Etherecash. Money transfer has never been easier, more secure and most of all private.
  • Multi-Crypto Debit Card:Etherecash is the first of its kind, enabling users to put multiple currencies on a single debit card. Use it just like a normal debit card for making payments, shopping online or ATM withdrawals in local currencies. It can be used in any country while traveling to mitigate international charges and conversion fees.
International

Disruptive innovation in equity crowdfunding (Deloitte), Rated: A

A 2017 report from Deloitte and the World Economic Forum, “Beyond Fintech: A pragmatic assessment of disruptive potential in financial services,” studies the disruptive forces shaping the future of equity crowdfunding. Read on to explore key takeaways for the equity crowdfunding segment, and consider what these findings mean for your business.

Get the full document here.

Kony Announces Digital Banking Marketplace Expansion (Crowdfund Insider), Rated: A

Kony, Inc., the leading enterprise mobility and digital applications company, today announced it is expanding its global partner ecosystem with financial technology solutions featured on the Kony Digital Banking Marketplace.

4 Emerging Fintech Trends Relevant to Every Entrepreneur (Elevator Pitch), Rated: B

FinTech is disrupting the traditional financial services, such as: money transfers, loans, mobile payments, asset management and fundraising. According to Statista, Transaction Value is expected to show an annual growth rate (CAGR 2017-2021. of 20.5 percent resulting in the total amount of U.S.$6.9 billion in 2021.

1. Multi-currency digital wallets

A recent example is CashDash, a mobile app that allows you to buy, collect and return foreign currency.

2. Payments security advances using biometrics

3. Cryptocurrencies

4. Robo-advisors and automated wealth management services.

According to the consulting firm A.T. Kearney, assets under management by robo-advisors will grow by 68 percent annually to a whopping $2.2 trillion in the next five years.

How Fitness Pros Are Pushing Payments (PYMNTS), Rated: A

In an effort to offer rideshare workers faster access to their wages, First Data recently launched a new solution that delivers the money directly onto a debit card.

collaboration between Ingo Money, Visa and digital lending platform OnDeck will allow SMBs that request loans through OnDeck to have the funds disbursed directly to their business debit cards in real time.

A group of 13 Australian banks announced a joint effort to allow customers to get real-time payments beginning on January 26, the nation’s Australia Day holiday. With the service in place, bank customers can exchange money between contacts in a matter of seconds using identifiers such as mobile numbers and email addresses, instead of sensitive data like bank accounts.

YES Bank’s fintech survey to study ecosystem worldwide (The Hindu Business Line), Rated: B

YES Bank is all set to launch a first-of-its-kind fintech survey. Called India Fintech Opportunities Review, the study will cover India and a few major fintech markets in the world.

A research initiative of YES FINTECH, which is the bank’s innovation programme to accelerate fintech start-ups, the survey will cover more than 1,000 firms globally, said Amit Shah, Head-Strategy, Yes Bank.

Australia

RateSetter gets upgraded Down Under (P2P Finance News), Rated: AAA

RATESETTER’S Australian operations have been given a higher rating by SQM Research.

The independent ratings agency upgraded the peer-to-peer lending platform to a “favourable” rating and described its lending product as “approved investment grade.”

This puts it just one step below SQM’s top rating of ‘high investment grade.’

Credible Labs wants to be an ASX tech darling (Financial Review), Rated: A

US-based online student loans marketplace owner Credible Labs Inc is seeking an Australian Securities Exchange listing which would value the company at more than $300 million.

Credible is expected to seek to raise $67.5 million in a deal valuing the company’s equity at $306.6 million. If successful, it would be Australia’s biggest tech IPO this year.

India

Fisdom Raises $ 4M in Series B Funding (FINSMES), Rated: A

Fisdom, a Bangalore, India-based personal finance management startup, raised $4m in Series B funding.

The round was led by Accion Frontier Inclusion Fund, managed by Quona Capital with participation from existing investor Saama Capital.

Fintech company Payoneer to support e-commerce exports from India (The Hindu Business Line), Rated: A

Payoneer, a global cross border B2B digital payments provider, has decided to expand the scope of its offering in the Indian market to e-commerce related export businesses, it’s visiting CEO Scott Galit has said.

Galit said that India is the fastest growing digital market in the world and that more people are going digital in India than anywhere in the world.

India will move faster than China for a while, but on much smaller scale. The B2C e-commerce exports in India is around $ 500 million a year, while in China it is $ 400 billion, according to industry insiders.

Asia

The Future of Branch.. Banking? (Fintech News), Rated: A

My opinion is that both views are problematic in its own way, branch banking is still quite a distance away from being dead largely fueled by face to face KYC requirements and the need to serve different segments of the customer.

However, there’s one reality that bankers cannot escape from, banks are increasingly under pressure to close their branches.

The Digitised Branch

The whole idea of digital banking is the ability to perform banking on-the-go, to go to the bank to perform banking-on-the-go (what a tongue twister) seems to defeat the point entirely.

This approach enables bankers to still serve the segment of their customers prefer to conduct their banking activities through the branch or customers who for whatever reason need to visit branch all while still keeping the costs at bay.

Fintech investors striking a match (Business Times), Rated: A

Among the fresh fintech funds that have come into this space is GTR Ventures (GTRV), the venture capital arm of trade finance intelligence firm Global Trade Review. Operating in both Singapore and London, it is the world’s first investment platform targeted specifically at fintechs operating in the global trade ecosystem.

Kelvin Tan, co-founder and chief investment officer, told The Business Times that the fund screens fintechs that can help to close the annual US$1.5 trillion trade finance gap, particularly for SMEs.

MENA

How 690-million customer China Construction Bank has digitally transformed (Tahawul Tech), Rated: A

China Construction Bank’s name may not be a household one in the Middle East, but the stats speak for themselves in evoking the bank’s vast resources and influence within China, and across the world. With 363,000 employees on its books, CCB is consistently ranked in the top 30 of the Global Fortune 500 and currently has over $3 trillion worth of assets. In 2015, it was the second largest bank in the world by market capitalisation, and the sixth largest company in the world by revenue.

Africa

KiaKia launches alternative credit scoring, virtual lending platform (Vanguard), Rated: AAA

Aside its numerous products that are void of the usual financial bureaucracy and also offer easy access capital to SMEs and individuals, KiaKia, a licensed online peer to peer and direct lending platform, has introduced ‘Mr. K’, an artificial intelligence (AI) and machine learning powered alternative credit scoring, customer service, Direct and P2P lending virtual agent.

Speaking further on the new product, Abiola said 80 percent of KiaKia high scoring borrowers access the same loans at between 7.5 percent and 15 percent as against the 30 percent of its competitors, as well as, connecting credible borrowers with lenders offering loans as low as 5.5 percent interest rate for longer tenured loans.

Authors:

George Popescu
Allen Taylor

Friday October 6 2017, Daily News Digest

Funding Circle lending

News Comments Today’s main news: LendingClub completes second self-sponsored securitization. Pennsylvania AG sues Navient. Federal regulator clamps down on payday lending. Elevate supports rule on small dollar lending. RateSetter expected to profit next year. China’s pyramid schemes double in 2017. KBRA opens first European office. LendIt leadership changes. Today’s main analysis: Funding Circle’s October review. Today’s thought-provoking articles: Payday lending’s tough restrictions. Cordray’s […]

Funding Circle lending

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

News Summary

United States

LendingClub Corp Completes Second Self-Sponsored Securitization (Financials Trend), Rated: AAA

LendingClub Corp (NYSE:LC), America’s leading web marketplace connecting investors and borrowers, has contributed to and sponsored its second securitization contract. The Consumer Loan Underlying Bond Credit Trust 2017-P1 released $323.1 million in prime notes supported by consumer loan assets enabled through the LendingClub platform. It marks as the sixth securitization sponsored or supported by company, and the fourth rated securitization of company facilitated loans overall.

This deal was backed by around $350 million of collateral and comprises $217.3 million of Class ‘A’ notes rated “A-(sf)”, $51 million of Class ‘B’ notes rated “BBB (sf)” and Class ‘C’ notes worth $54.7 million rated “BB (sf)”. All ratings were given by Kroll Bond Rating Agency, Inc.

Pa. attorney general files suit against student-loan company (Philly.com), Rated: AAA

The Pennsylvania Attorney General’s Office filed suit Thursday against Navient, the largest U.S. student-loan servicer, alleging widespread abuses and deceptive acts involving its administration of student loans.

The suit against Navient Corp. and its subsidiary Navient Solutions LLC, formerly a part of Sallie Mae, could affect hundreds of thousands of Pennsylvanians, Attorney General Josh Shapiro said, adding that the office is seeking restitution for all borrowers affected by the practices.

That includes anyone who received private student loans from Sallie Mae or who has had federal or private student loans serviced by Navient and has had problems with repayment.

The Wilmington-based company, which has a large servicing center in Wilkes-Barre, already is the subject of a federal lawsuit filed this year by the Consumer Financial Protection Bureau (CFPB). Washington state and Illinois also have sued the company.

Pennsylvania residents have filed 1,059 complaints against Navient with the CFPB as of September, the Attorney General’s Office said.

Online lender Earnest sells to Navient, in a disappointing deal for investors (TechCrunch), Rated: A

Earnest, a well-funded fintech startup with bold ambitions to create a modern financial institution, is selling to the student-loan company Navient for $155 million in cash.

The exit isn’t so great for Earnest’s investors. They’d plugged roughly $320 million in cash and debt into the company, which was initially centered around providing small loans to people based on their earning potential and evolved over time to provide personal loans to a broader base of customers, as well as lend money to coding academies, as it told TechCrunch in late 2015.

Fintech deal suggests everything old is new again (NASDAQ), Rated: A

Everything old is new again in finance. Navient, which services debt, is buying startup student-loan refinancer Earnest for less than half its 2015 valuation. Even then, it’ll eat into the new owner’s earnings and share buybacks. Worse, Navient faces a fresh lawsuit over dodgy practices.

The Pennsylvania attorney general’s office filed charges on Thursday that follow ones from the U.S. Consumer Financial Protection Bureau in January with Illinois and Washington. All allege that Navient in some way or other cheated borrowers paying for college, which the company denies.

Earnest’s $155 million price tag suggests most in the industry have downgraded their expectations about profitable growth.

Navient shares tumbled 12 percent, erasing market value more than three times the value of the acquisition.

Elevate Expresses Full Support for CFPB Small Dollar Lending Rule (BusinessWire), Rated: AAA

Ken Rees, CEO of Elevate Credit, Inc. (“Elevate”), a tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, issued the following statement in response to the final “small dollar lending” rule issued today by the Consumer Financial Protection Bureau (CFPB):

“We applaud the CFPB, and we fully support this rule. We believe this rule is good for consumers and for the business we have built to better serve them. The small dollar rule protects consumers from the cycle of debt inherent in payday loans, short-term auto title loans, and certain balloon payment loans, and it encourages the kind of innovation we’re doing in underwriting, pricing and product development. We are heartened that regulatory uncertainty has been lifted with today’s announcement. Our current view is that the rule requires minimal or no changes to our business.”

Federal Regulator Clamps Down on Payday Lending Industry (U.S. News), Rated: AAA

Payday and auto title lenders will have to adhere to stricter rules that could significantly curtail their business under rules finalized Thursday by a federal regulator. But the first nationwide regulation of the industry is still likely to face resistance from Congress.

The Consumer Financial Protection Bureau’s rules largely reflect what the agency proposed last year for an industry where the annual interest rate on a payday loan can be 300 percent or more. The cornerstone is that lenders must now determine before giving a loan whether a borrower can afford to repay it in full with interest within 30 days.

Because studies by the CFPB have found that about 60 percent of all loans are renewed at least once and that 22 percent of all loans are renewed at least seven times, this cap is likely to severely wound the industry’s business model. In California, the largest payday loan market, repeat borrowers made up 83 percent of the industry’s loan volume.

The CFPB estimated that loan volume in the payday lending industry could fall by 55 percent under the new rules.

Roughly 12 million people took out a payday loan in 2010, according to the Pew Charitable Trusts.

In addition to the “full payment test” and the limits on loan renewals, the CFPB rules would also restrict the number of times a payday lender can attempt to debit a borrowers’ account for the full amount without getting additional authorization.

This Government Agency Is Seriously Overstepping Its Bounds (Fortune), Rated: A

The Consumer Financial Protection Bureau (CFPB) has a mission: to protect consumers from unfair, deceptive, or abusive practices. According to a new national poll by the Cato Institute in collaboration with YouGov, protection from deceptive practices is just what the American public wants. Asked to prioritize regulatory goals, the majority of respondents put “protect consumers from fraud” front and center.

Unfortunately, the CFPB continually misses the mark, issuing rules that make splashy headlines but in practice do little to stop bad behavior. Its latest proposed rule, expected to become final soon, doesn’t target fraud itself. Instead, it goes after an entire industry and will significantly reduce consumers’ access to credit at the exact moments they need it most.

As the Cato poll finds, the majority of payday borrowers say they receive good information about rates and fees from their payday lenders.

Payday Lending Faces Tough New Restrictions by Consumer Agency (The New York Times), Rated: AAA

The operators of those stores make around $46 billion a year in loans, collecting $7 billion in fees. Some 12 million people, many of whom lack other access to credit, take out the short-term loans each year, researchers estimate.

Industry officials said on Thursday that they would file lawsuits to block the rules from taking effect in 2019 as scheduled.

Under the new rules, lenders would be allowed to make a single loan of up to $500 with few restrictions, but only to borrowers with no other outstanding payday loans.

A dropoff of that magnitude would push many small lending operations out of business, lenders have said. The $37,000 annual profit generated by the average storefront lender would become a $28,000 loss, according to an economic studypaid for by an industry trade association.

Prepared Remarks of CFPB Director Richard Cordray on the Payday Rule Press Call (ConsumerFinance.gov), Rated: AAA

After a long process of research, outreach, and review of over one million public comments, the Consumer Bureau today has issued a rule aimed at stopping debt traps on payday and auto title loans. The rule is guided by the basic principle of requiring lenders to determine upfront whether people can afford to repay their loans. These strong protections cover loans that require consumers to pay all or most of the debt at once, including payday loans, auto title loans, deposit advance products, and longer-term loans with large “balloon” payments. The new rule also curtails repeated attempts to debit checking accounts that rack up fees and make it harder for consumers to get out of debt. This provision applies to the same kinds of loans and to high-cost installment loans as well. These protections bring needed reform to a market where far too often lenders have succeeded by setting up borrowers to fail.

Loans like these are heavily marketed to financially vulnerable consumers. Though they offer cash-strapped consumers access to credit, the full-payment requirement can make these loans unaffordable.

More than four out of five payday loans are re-borrowed within a month, usually right when the loan is due or soon thereafter. In fact, about one-in-four initial payday loans are re-borrowed nine times or more, as consumers pay far more in fees than they borrowed in the first place. Just like payday loans, the vast majority of single-payment auto title loans are rolled over or re-borrowed on the day they come due or soon thereafter. And one-in-five borrowers end up having their car or truck seized by the lender because they cannot repay the debt.

Our research has shown that the business model for payday and auto title lenders is built on miring people in debt.

The new rule also addresses how lenders extract loan payments from consumers’ accounts. This part of the rule covers short-term loans, balloon loans, and high-cost longer-term loans where the lender has account access. After two straight unsuccessful attempts, the lender cannot debit the account again unless it gets a new authorization from the borrower. In addition, lenders must notify consumers in writing before attempting to debit an account at an irregular time or for an irregular amount.

The final rule issued today applies the underwriting requirements only to lenders of short-term and balloon-payment loans. This is a change from our proposal, which would have required underwriting for a wider swathe of longer-term loans. We want to take more time to consider how the longer-term market is evolving and the best ways to address practices that are currently of concern and others that may arise as the market responds to the reforms prompted by this new rule.

The Bureau has spent five years developing this rule.

Despite Ban on Payday Lending, Public Pensions Profit from Outlawed Loans (NBC New York), Rated: A

Short-term, high-interest debt known as payday loans are illegal inside New York borders. But that hasn’t stopped state and city retirement funds from investing more than $40 million in payday lenders that operate in other states.

The Finance Industry’s Complaint Against the Consumer Financial Protection Bureau (U.S. District Court, Northern District of Texas), Rated: A

Read the full complaint here.

Fifth Third Bancorp’s Greg Carmichael Discusses the Relationship Between FinTechs and Banks (The Clearing House), Rated: A

This environment presents challenges to introducing technologies, products, or services. If we have an issue, we can’t advance the products or services. A zero-tolerance regulatory environment puts constraints on products and services that we may like to get into the marketplace. For instance, small dollar lending has been problematic. As you know, Jim, small-dollar lending is a very important product for our customers. Many customers are regularly going out to payday lenders, title loans, and pawn shops to get short-term access to dollars.

When you look at the amount of capital you have to hold, and the underwriting requirements for a small business loan versus a larger loan, the cost is the same. It makes it more difficult to serve small businesses, and you see small business lending by banks being significantly reduced over what you saw pre-crisis.

This partnership has already helped us form relationships with companies like GreenSky, ApplePie Capital, Transactis, and AvidXchange. This has enabled Fifth Third to accelerate our innovation in those different areas, whether it is unsecured lending, small business franchise lending, or accounts payable automation.

Well, the interesting thing with FinTechs is that most of them need a bank as a partner to be successful.

GreenSky doesn’t exist, Lending Club doesn’t exist, OnDeck doesn’t exist without liquidity and the safe harbor banks provide for the asset. Partnerships between a bank and a FinTechs are a potential strong win for our customers and a win for our banking shareholders because we’re more efficient in how we deliver innovative products and services.

Our $30 billion community commitment focuses on supporting low- to moderate-income borrowers. $11 billion of our five-year commitment is dedicated to mortgage lending; $10 billion is for small business lending; and $9 billion is for community development lending and investments.

Balance Credit Expands to California Consumer Credit Market (BusinessWire), Rated: A

Balance Credit, a leading online lender whose analytics and technology-driven solutions have enabled nearly $100 million in credit access for underserved Americans, has expanded its personal loan offering to residents of California. The expansion will allow Balance to assist the estimated 26 percent of Californians who are currently underserved by mainstream banking products. With the launch in California, Balance has expanded its geographic coverage from 19% to 31% of US consumers.

With today’s news, California marks the 9th state where Balance Credit operates, including Delaware, Missouri, New Mexico, Ohio, South Carolina, Texas, Utah, and Wisconsin.

5 ways to buy a home with a low down payment (KHOU.com), Rated: B

In fact, the average down payment, according to the National Association of Realtors, has been 6 percent for the last three years.

What do you do if you don’t have 20% lying around?

SoFi. SoFi is new to the mortgage lending space, but it’s setting itself apart in a big way. It accepts borrowers with a 10 percent down payment, but they primarily target borrowers with higher FICO Scores — think 700+. On the bright side, they do not charge mortgage insurance. In fact, SoFi doesn’t charge any loan origination, application or broker commission fees.

Lawmakers Call Ex-Equifax CEO’s Testimony Insufficient (Law360), Rated: A

House lawmakers on Thursday sharply questioned the former chairman and chief executive of Equifax Inc. over a massive data breach that left more than 145 million Americans’ personal information exposed, raising questions about why he had appeared to testify as opposed to current executives.

Appearing in his fourth congressional hearing over a three-day span, former Equifax Chairman and CEO Richard Smith faced a flurry of questions over the details of the breach, including over curious stock trades by top company executives just before the breach was made….

Ex-Bookkeeper Stole $ 1.6M From NJ Co. Via PayPal (Law360), Rated: B

Pennsylvania federal prosecutors Thursday filed an indictment charging a Philadelphia man with using PayPal to embezzle $1.6 million from his former employer, a New Jersey company that sells products for the cellular phone industry.

Peter Goodchild, 54, who was a bookkeeper at the Florham Park, New Jersey-based QwikSource LLC, allegedly pilfered the funds over a 10-year period. He also faces charges of money laundering, aggravated identity theft and filing false income tax returns.

Barclays US tests personal finance tool (Banking Technology), Rated: B

Barclays US is dipping its toe into the financial health business, testing a personal financial management tool that aggregates all of a customer’s Barclays credit cards, personal loans and savings products – as well as accounts with other banks – in one place, reports Banking Technology‘s sister publication Paybefore.

This new service, My Personal Bank, which will be announced soon, is embedded in the bank’s credit card mobile app.

Allrise Financial moves into downtown Reno (Northern Nevada Business Weekly), Rated: B

Allrise Financial Group has leased 5,500 square feet at 200 S. Virginia Street in Reno.

Did the CEO of Hardwick Clothes Cut Ties With the NFL Over ‘Unpatriotic’ Protests? (Snopes), Rated: B

In September 2017, Tennessee businessman and CEO of Hardwick Clothes Allan Jones withdrew all NFL-related advertising for his companies, in response to “unpatriotic” national anthem protests.

Source: Snopes

On 26 September 2017, Jones, who also owns Buy Here Pay Here U.S.A. and U.S. Money Shops, posted a screenshot to his Facebook page showing an email instructing his ad-buyer to stop any commercials for his companies from being broadcast during NFL games.

United Kingdom

RateSetter will return to profit next year, says CEO (P2P Finance News), Rated: AAA

RATESETTER will return to profit next year, its chief executive and co-founder has said.

The peer-to-peer lender was profitable in the financial years ended 2014 and 2015, but has fallen into the red since then, as it has invested heavily into scaling up the business.

The ‘big three’ platform published a recording of a recent speech by Rhydian Lewis (pictured) on its website on Thursday, in which he underlined his belief that RateSetter is a “sustainable and profitable model”.

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

Last month Funding Circle investors, like you, lent over £100 million to UK businesses to help them grow and develop.

Source: Funding Circle

September industry news

Thanks to investors, last year over £1 billion was lent to 10,000 businesses through Funding Circle, helping to create 25,000 new jobs.

We recommend lending £2,000 or more, so you can lend to 100+ businesses, with no more than 1% going to each one.

Source: Funding Circle

From peer-to-peer to here: Three issues that Zopa must solve (AltFi), Rated: AAA

Zopa is the world’s original peer-to-peer lending platform and the biggest consumer-focused platform in the UK. It has also been closed to new investors for the better part of eight months. The reason is explicitly that it cannot find enough new borrowers. Demand for its loans among existing investors is more than sufficient to match demand on the other side of the marketplace. For this reason, Zopa‘s Innovative Finance ISA has largely been an exercise in tax efficiently wrapping money that it already had on the platform.

A more meaningful initiative in the platform’s ongoing plight to attract borrowers might be its latest partnership with Saffron Building Society. This, for the first time in Zopa’s 12 year history, brings it into branches. Its loans will now be made available to Saffron’s 90,000 customers in any of its 11 branches across Hertfordshire, Essex and Suffolk, as well as via the building society’s website. Applicants can expect a quote within minutes.

Zopa may well have a bright future, but in the short-term it seems to me that it has three core issues that it must iron out:

  • Finding new origination channels in order to open to new customers once more, capitalise on the IFISA opportunity and take advantage of the cost benefits of deposit funding.
  • Meaningfully speed up whatever is delaying loan sales on the platform.
  • Find a way to maintain an attractive risk-premium for its P2P investors.

LendInvest CEO Christian Faes Challenges Government to Back SME Builders: Game On (Crowdfund Insider), Rated: A

“There are five times fewer small scale developers today than in the last housebuilding boom and not a single one of today’s top ten housebuilders was created before 1990. There is a clear monopoly in the sector,” clarified LendInvest Co-Founder & CEO Christian Faes.

Online Lender Lendy Seeks IFISA Permission & Announces Repayment For Largest P2P Loan (Crowdfund Insider), Rated: A

UK-based peer-to-peer property platform Lendy is currently seeking permission to launch an innovative finance ISA (IFISA). This news comes just after the online lender announced its 2016 earnings and additional growth plans.

Meanwhile, Lendy also announced the repayment of its largest p2p loan. Bridge and Commercial reported that the loan, which was secured against former the Kentish Town Studios building in North London, has been repaid in full 21-days ahead of schedule and even returned a gross 12% per annum in interest.

Digital wealth manager Moneyfarm acquires tech behind fintech chatbot Ernest (TechCrunch), Rated: A

Moneyfarm, the U.K.-headquartered “digital wealth manager” has acquired the technology behind personal finance chatbot Ernest. Terms of the deal aren’t being disclosed, though I understand that, along with the tech, this is an acqui-hire of sorts, seeing London-based Ernest’s CTO Lorenzo Sicilia join Moneyfarm to oversee technology integration.

Starling Bank expands to offer business accounts (Banking Technology), Rated: A

Starling Bank, one of the first banking challengers to offer a mobile-only current account in the UK, is expanding into the business market.

The Starling for Business account will initially be for entrepreneurs, sole-traders, and small business owners. The aim is to offer “fast, secure, and flexible” ways of managing business finance from mobile.

Can a robot give financial advice? (Which?), Rated: B

New guidance setting out how artificial intelligence services can give streamlined financial advice has been published by the Financial Conduct Authority (FCA).

Some of the most popular include:

  • Nutmeg: an online service that suggests a diversified investment portfolio tailored to the personal information you provide. Nutmeg will continually rebalance your portfolio in line with your risk profile, unless you change your preferences.
  • BestInvest: a platform to manage your investments online, offering research and analysis tools. Further advice is provided via phone by advisers.
  • RPlan: a tool for DIY investors, with the choice to choose, track and review investments online.
  • Barclays Financial Personality Assessment: this tool helps you identify your attitude towards risk and your composure levels. Users can then work with an adviser to build a portfolio.

Robo-advice on mortgages

Aside from investing advice, online services are also helping people make another major financial decision – applying for a mortgage.

A handful of robo-advisers for mortgages are currently operating in the UK market – Trussle and Habito are both up and running, while MortgageGym was granted a license from the FCA earlier this year.

Saving by app

  • Chip is a smartphone app which analyses your spending patterns and automatically transfers your money into a savings account, based on what it thinks you can add afford to save. While its standard interest rate is 1% AER, users can earn up to 5% AER by referring friends to the app.
  • Plum operates in a similar way, analysing your transactions and recommending savings, though it communicates via Facebook Messenger.
  • Cleo analyses your spending and suggests improvements to help you save more, but it won’t move your money for you.

Where are the top 10 buy-to-let postcodes? (Bridging&Commercial), Rated: B

Luton has held off Colchester to remain top of the LendInvest buy-to-let index, while Manchester has broken into the top three amid increasingly stronger metrics in northern markets.

The top 10 buy-to-let postcodes

Source: Bridging & Commercial

The bottom 10 buy-to-let postcodes

Source: Bridging & Commercial
China

Pyramid scheme investigations in China double during 2017 (NASDAQ), Rated: AAA

The number of pyramid schemes investigated by Chinese police more than doubled in the first nine months of the year, with cases involving nearly 30 billion yuan ($4.5 billion), the official Xinhua News Agency said on Thursday.

Police investigated 5,983 schemes from January through September, an increase of 118 percent, with internet-based pyramid schemes on the rise, many involving virtual currencies, according to the report which cited the Ministry of Public Security.

European Union

Rating agency opens in Europe (Structured Credit Investor), Rated: AAA

KBRA has opened its first European office, located in Dublin, Ireland, and intends to expand into further jurisdictions (SCI passim). Several new hires and some existing staff will support the European effort, which will have a concerted focus on infrastructure and aviation securitisation, along with traditional core business areas.

MyBucks Named ‘Best Financial Inclusion Company’ at European FinTech Awards 2017 (Next Billion), Rated: B

Luxembourg-based and Frankfurt-listed fintech, MyBucks S.A., was announced as the winner of the Award for ‘Best European Financial Inclusion Company’ at the European Fintech Awards 2017 taking place in Brussels, Belgium.

International

Leadership Changes at LendIt (Lend Academy), Rated: AAA

LendIt events today look and feel very different from our early events. Along with that LendIt as an organization has grown and matured. Last month we made some internal changes that I want to share with you here.

My partner Jason Jones, who has been the driving force in the growth of our business, took over the CEO role some time ago as the business became more complex.

As of early September, Jason has transitioned out of the CEO role and is now Co-Chairman along with me. This allows him to focus his entrepreneurial drive on areas of our business where he can make the most impact. He is turning his attention to become more client focused as major global financial services and technology companies become more involved in our business.

Bo Brustkern, who has until recently stayed in the background, is now taking on the mantle of CEO of LendIt.

Similarly, we have promoted Joy Schwartz, our longtime head of operations, to become President of LendIt.

Finastra, R3 and seven banks have blockchain plan (Banking Technology), Rated: A

FinastraR3 and seven banks – including BNP ParibasBNY MellonHSBCING and State Street – are working together to create a blockchain-fuelled online marketplace for the syndicated loan market.

Underpinned by Corda, R3’s distributed ledger technology (DLT) based platform, Fusion LenderComm exposes real-time credit agreement, accrual balances, position information and transaction data to lenders, from agent bank loan servicing platforms such as Finastra’s Fusion Banking Loan IQ.

How Prodigy Finance Helped Fund My MBA At London Business School (Business Because), Rated: A

Determined to boost her business skills and gain more international exposure, Argentinian Amelia Martinez decided to pursue an MBA at London Business School (LBS).

Coming from a developing country with high levels of inflation and currency fluctuations, she faced many hurdles funding her MBA, particularly when new government restrictions were imposed preventing her from taking money out of her country to pay for the last instalment of her tuition.

With a Prodigy Finance loan however, she was able to pay for and complete her degree. Having completed her MBA at LBS, she’s since gone on to work for the company that helped her do it.

Banks team up with IBM in trade finance blockchain (Financial Times), Rated: B

A group of banks are teaming up with IBM to build a new global system for trade finance using blockchain technology that is designed to track goods and automatically release payments as they move around the world by plane, ship or truck.

Bank of Montreal, Caixabank, Erste Bank and Commerzbank are joining the project called Batavia, which was launched by UBS and IBM last year and aims to start testing the technology using real transactions by early next year.

Australia

Millennial Money: We’re not willing to pay to keep our finances in check (Stuff), Rated: A

A 2014 survey by global investment banking company UBS found millennials preferred to seek advice from their friends rather than a professional.

Most millennials, like older generations, first looked to a spouse or partner for financial advice. Their next choice is their parents, followed by friends and other family members.

Non-millennials were much bigger champions of financial advisors: 40 per cent of non-millennial respondents reported seeking advice from one as their first port of call on a financial decision, while only 14 per cent of millennials said the same.

Source: Stuff

Blockchain Driven P2P Lending & Investment Platform Announces Crowdsale (Coin Idol), Rated: B

The crowdsale for the platforms ‘LoanBit Token (LBT)’ is scheduled to go live in November, with a presale beginning on 4th October 2017, and ending on 15th October 2017.

The ICO for LoanBit is set to go live on in November and will be open for only 31 days.

LoanBit – Legit Bitcoin Lending Interest Rates & Earning Platform? (Bitcoin Exchange), Rated: A

LoanBit is a lending platform created by an Australian startup called LoanBit Proprietary Limited. The platform is designed to work as a mediator between bitcoin lenders and businesses looking for short-term loans in bitcoin.

LoanBit promises to offer you a guaranteed daily interest rate of 2% to 5%, which adds up to triple or quadruple digit guaranteed returns per year. You can invest in LoanBit for as little as 0.01 BTC.

LoanBit claims to be a legitimately registered Australian company. The company lists an address in Canberra (17/7-17 Bunda St). They also have an Australian company number (610 418 794).

In any case, the LoanBit.net website was registered on February 16, 2017. The latest version of the website, which features the HYIP scam, only appeared online on September 10, 2017 – so it’s brand new.

Yes, LoanBit appears to be a scam, based on all of the information we can find online today.

India

P2P lending norms will bring order to industry, but speed bumps ahead (VC Circle), Rated: AAA

India’s P2P lending market, which is predicted to be worth $4-5 billion by 2023 according to community loan exchange platform Faircent, has several players operating in the space, such as LenDenClub, Monexo, BillionLoans, i-Lend, LoanMeet, i2iFunding and FinMomenta. However, so far, P2P lending had been operating in a regulatory grey area. As such, the rollout of these guidelines gives legitimacy to the business.

FinMomenta co-founder and CEO Brahma Mahesh Khaderbad believes it paves the way for P2P platforms to gain legality, transparency and credibility.

The RBI has said that every company seeking registration should have a net-owned fund of not less than Rs 2 crore.

The guidelines say that any fund transfer between participants on a P2P lending platform shall be through an escrow account, which will be operated by a trustee. At least two escrow accounts, one for funds received from lenders and pending disbursal, and the other for collections from borrowers, shall be maintained.

The central bank has said that the aggregate exposure of a lender to all his/her borrowers at any point, across all P2Ps, should be capped at Rs 10 lakh. The aggregate loans taken by a borrower at any point of time, across all P2Ps, has also been capped at the same amount. The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000.

Read more on the guidelines here.

P2P lending platforms to get transparent, safer (Business-Standard), Rated: A

The norms on peer-to-peer (P2P) lending platforms issued by the Reserve Bank of India (RBI) will help make them more transparent and also safer for customers. “The regulations ensure that P2P platforms will protect the interests of lenders and borrowers will get faster access to credit,” says Shankar Vaddadi, founder and director of i-lend.

What peer-to-peer lending is and how RBI’s guidelines will impact it (Financial Express), Rated: B

The RBI said P2P lending, even though of no significant in value, yet can “disrupt the financial sector and throw up surprises” in future, and the associated risks to the financial system are “too important to be ignored”.

The RBI has laid down following criteria for registering under Non-Banking Financial Companies (NBFC) :

  • P2Ps should have a minimum Rs 2 crore capital
  • P2Ps cannot take any loan exposure themselves
  • P2P will undertake credit assessment and risk profiling of the borrowers and lenders
  • P2P will maintain documents related to loan agreements
  • P2P will provide assistance in disbursement and repayments of loan amount
  • P2Ps cannot hold balance sheet or funds
  • P2Ps cannot cross-sell products except for some insurance products

“This is an extremely positive step for the P2P lending business. The retail millennial lenders, an investor demographic which has been focussed on extensively in the regulations will be leveraging the power of the crowd for the benefit of small
borrowers,” Vinay Mathews, Founder & COO, Faircent.com said.

Student micro-financing startup SlicePay raises Series A round (VC Circle), Rated: A

SlicePay, a digital payment platform catering to college students, has raised $2 million (about Rs 13 crore) in a Series A round from Japanese investment fund Das Capital and Russian early-stage investor Simile Venture Partners, its co-founder told VCCircle.

Existing investor Blume Ventures also participated in the round.

YES BANK launches second cohort of YES FINTECH accelerator (YourStory), Rated: A

YES BANK, India’s fifth-largest private sector bank, has been significantly contributing to the fintech space by collaborating with and mentoring more than 100 fintech startups to co-create innovative financial solutions for its Corporate, SME, and retail customer base. In March this year, they launched a business accelerator programme for fintech startups called YES FINTECH, in association with T-Hub, Anthill, and LetsTalkPayments.

YES BANK is all set to launch the second cohort of YES FINTECH, which will kick off on November 13.

The YES FINTECH roadshow in Mumbai will include a Fireside Discussion on GES (Global Entrepreneurship Summit) and its impact on Fintech and Mumbai as India’s Fintech Hub. In conversation will be Amit Goel, Founder LTP, Puneet Shukla, NITI Aayog and Vivek Belgavi, Partner, PwC. After this, Rajeev Chari, COO, Numberz and Arpit Ratan, Founder, Signzy, both startups that graduated from the Summer Cohort of YES FINTECH, will share their experience of being a part of the programme.

When: 6th October

Where: ISME Ace, One India Bulls, Lower Parel, Mumbai

Time: 2 pm-5pm

The YES FINTECH roadshow in Bengaluru will begin with a GES lead-up panel discussion on ‘Women in Fintech. Panellists will include Lizzie Chapman from Zestmoney, Prashanthi Reddy from YES BANK and Dr. Anna Roy of NITI Aayog.  Following this, Shankar, Founder, FRS Labs, and  Ankit Ratan, Founder, Signzy, both startups that graduated from the Summer Cohort of YES FINTECH, will share their experience of what it was to participate in the programme.

When: 11th October

Where: 91 Springboard, 8th Block Koramangala, Bengaluru

Time: 2 pm-5pm

Authors:

George Popescu
Allen Taylor

Friday September 1 2017, Daily News Digest

fintech adoption

News Comments Today’s main news: 2,000 IFISAs subscribed last year. Irish credit unions embrace Facebook Loans. Rubique launches new app features. Mexico has a new fintech law. Today’s main analysis: Mobile fintech vs . traditional banks: 15 things winners do well (a must-read). Today’s thought-provoking articles: The Personal Loan is Back. Is P2P lending headed for trouble? China’s $2T of shadow […]

fintech adoption

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Canada

Latin America

News Summary

United States

The personal loan is back (American Banker), Rated: AAA

The personal loan is hip again.

Well, let’s not get too carried away. Just 4.33% of millennials ages 21 to 34 took out unsecured personal loans in 2015, according to a recent analysis by TransUnion.

Peerform is Back With an Interesting New Investment Partner Random Forest Capital (Lend Academy), Rated: A

Late last year Strategic Financial Solutions (SFS) a leading debt settlement company, acquired Peerform and they have been building out new product offerings.

SFS looked at many marketplace lending platforms before deciding to acquire Peerform. They were impressed by their underwriting and regulatory sophistication, their strong brand presence online, their low customer acquisition costs and how they had been frugal with the capital they had raised.

Enter Random Forest Capital. They are a new investment management firm started last year with a focus on data science and machine learning. They love taking masses of unstructured data and not only making sense of this data but finding new predictive power in this data.

Peerform overhauled their APIs to be able to pull in thousands of data attributes and millions of data points for analysis.

The team at Random Forest was able to build proprietary credit models using this new data which they said was more data than is available from any other marketplace lending platform today. As Kevin pointed out, “the money will go where the data is”.

Random Forest also invests in other asset classes beyond consumer credit. They have positions in secured auto, fix and flip real estate and secured commercial debt – bringing their unique data science skills to each asset class.

Out of the shadows: How fintech is infiltrating the mortgage industry (Housingwire), Rated: A

A study released in the National Bureau of Economic Research maintains that nonbanks, such as Quicken and loanDepot, essentially tripled market share for mortgage lending between 2007 to 2015.

Meet Sophie — the AI assistant that wants to save you money (Business Insider), Rated: A

Called Douugh, the app is designed to be a financial control center. More intriguingly, it employs an intelligent virtual assistant named Sophie to help users fully understand and manage their finances.

Users start by plugging in all their bank account information into Sophie. Once she has access to those, she’s able to use them to map out users’ financial situations. From there, she can categorize users’ spending and see if they’re living beyond their means.

Taylor previously worked at SocietyOne, a marketplace lending platform he cofounded. While there, he realized how much of a problem financial literacy was in Australia and the US. That led him to launch Douugh last year.

Right now, Sophie is in training mode. Taylor said the company will remain in beta for the rest of the year and launch in February once Sophie has been trained on enough data. Eventually, Douugh plans to build out a full suite of financial products and make Sophie accessible via Alexa and Siri, he said.

In the future, Sophie could serve as a kind of personal banker for users, operating on autopilot and making transactions. For example, if Sophie sees that you’re about to be charged an overdraft fee for an account you’ve kept empty, Sophie could transfer a few dollars from another account to prevent it.

LendingTree Announces Starbutter AI as Winner of $ 25,000 Startup Innovation Spotlight (Business Insider), Rated: B

LendingTree®, the nation’s leading online loan marketplace, has announced Starbutter AI as the winner of its Startup Innovation Spotlight, a new initiative by LendingTree to showcase the top startup companies in financial technology (fintech) lead generation at LeadsCon.

Starbutter AI is a voice and chat app development company that creates AI-driven chatbots for financial products.

AI-based chat is disrupting lead generation in financial ecommerce, and 2017 has seen a massive shift in the digital landscape toward voice search. Voice search is now 25% of all mobile search and is projected to reach 50% in 3-4 years.

HIGH-FREQUENCY TRADING AND SPOOFING (All About Alpha), Rated: A

Six years ago Michael Coscia placed orders through the CME Group’s Globex platform via a trading algorithm that amounted to “spoofing.” He placed both large and small orders in the copper market, for example, with the large orders (cancelled within milliseconds) designed to create the illusion of market movement in order to create the reality of movements, whence the small order would reap its profits.

In November 2015 a jury convicted Coscia of commodities fraud and sentenced him to three years in prison.

Coscia argued on appeal that Congress’ language on spoofing is void for vagueness, that is, that it fails to provide traders with clear notice of what they are and aren’t allowed to do, and thus is inconsistent with due process of law.

The New York based law firm Cleary Gottlieb has made public a memorandum on the case.

London fintech opens first overseas office in Charlotte at WeWork (Biz Journals), Rated: B

PCI Pal, a London financial technology company focused on call-center compliance, is opening its first overseas office in Charlotte. The company has taken space at coworking giant WeWork’s new uptown location.

Barham says about 30% to 35% of the company’s clients have operations in the U.S., so the firm decided it was time to build out infrastructure here to support them.

BCU goes live on Microsoft Azure with the Temenos Lifecycle Management Suite (Temenos), Rated: B

Temenos (SIX: TEMN), the software specialist for banking and finance, today announces that Baxter Credit Union (BCU) has successfully implemented the Lifecycle Management Suite in Microsoft Azure. The implementation, which included the Collection, Service, and Loan Origination modules, incorporated an upgrade spanning four major releases, as well as the inaugural launch of the Lifecycle Management Suite in the Cloud.

United Kingdom

2,000 IFISAs subscribed last year as consumers eschew low-yielding cash ISAs (P2P Finance News), Rated: AAA

TWO THOUSAND Innovative Finance ISA (IFISA) accounts were subscribed in the last tax year, with retail investors collectively putting £17m in to the tax-free wrapper, official figures show.

ISA statistics released on Thursday by HMRC include IFISA data for the first time for the 2016-2017 tax year. The IFISA was first mooted by then-Chancellor George Osborne in July 2015, as a tax-free wrapper around alternative investments including P2P lending, and was officially launched in April 2016.

The average amount of money invested through an IFISA was £8,500 – slightly less than the average £8,623 put in to a stocks and shares ISA but almost double the £4,622 put in to a cash ISA.

Is peer-to-peer lending heading for trouble? (Which?), Rated: AAA

Two of the biggest peer-to-peer (P2P) lenders in the UK have been beset by problems over the past month, with RateSetter forced to make up a near £9m loan-deal gone sour and Zopa customers experiencing a severe cut in returns. So, is the market for peer-to-peer lending headed for trouble?

RateSetter lent a total of £36m to Vehicle Trading Group from 2014. This was wholesale lending, which meant that Vehicle Trading Group lent that money to other borrowers, including £12m to an advertising firm called Adpod (an unusual choice for a company that offers car loans).

Vehicle Trading Group went bust in May 2017. The Financial Conduct Authority (FCA) has warned P2P firms that lending to other lenders may be in breach of regulations.

RateSetter took over the struggling AdPod in the second half of 2016, but its customers didn’t find this out until shortly after Vehicle Trading Group went bust.

As well as winding down any new lending to wholesale lenders, RateSetter says it no longer issues business loans over £750,000.

Meanwhile Zopa, another well-known P2P website and one of the ‘big three’ players in the market along with Ratesetter and Funding Circle, has warned investors that they may see their returns cut for products with higher projected rates of interest due to a rise in consumer debts going bad.

Which? has been contacted by a member who complained to Zopa after putting £1,500 into Zopa’s higher-risk product, which typically projects returns of around 6% after bad debt. One year later, however, he had made only £42 – less than 3%.

Fintech could be risky if banks don’t cooperate, says the Bank for International Settlements (City A.M.), Rated: A

Banks will need to take measures over the coming years to mitigate the risks of financial technology (fintech), according to a new report from the Bank for International Settlements (BIS).

It noted that while research from McKinsey & Co in 2015 estimated that between 10 and 40 per cent of revenues and 20 and 60 per cent of retail banking profits could be put at risk by fintech over the next 10 years, other market observers saw the developments as more positive.

It also advised institutions to vet any outsourcers through a thorough due diligence process, saying that any risks and liabilities incurred during the operations would remain with the bank.

The new bank: Replacement of incumbents by challenger banks

However, new players could prove just too agile in their ability to push the boundaries of technology, the report warned. In this scenario, new banks or tech companies with a banking branch could steal market share.

The disintermediated bank: Banks have become irrelevant as customers interact directly with individual financial services providers, for instance by using distributed ledger technology

In this case, incumbent banks would no longer be a significant player because there would be no need for a trusted third party or for balance sheet intermediation. Customers could have a more direct say in choosing the services and the provider. This futuristic scenario can be seen in its nascent form in peer-to-peer lending platforms and cryptocurrencies.

China

China’s $ 2 Trillion of Shadow Lending Throws Focus on Rust Belt (Bloomberg), Rated: AAA

Regional banks in China’s rust-belt provinces are driving the rapid expansion of shadow banking in the country, fueling a web of informal lending that poses wider risks to the financial system, according to a study by UBS Group AG.

By analyzing 237 Chinese banks, many of them small and unlisted regional lenders, Bedford casts a new spotlight on underground financing and the risks it poses to the nation’s $35 trillion banking industry. Shadow loans grew almost 15 percent to 14.1 trillion yuan ($2.3 trillion) by December from a year earlier, equal to about 19 percent of economic output, he estimates.

Accounting for this financing, Chinese banks’ nonperforming loans could be three times higher than the official published level, he said.

Asset Quality

Bank of Tangshan is an unlisted lender in the struggling northeast city of the same name, which produces more steel than any other city around the world. The firm’s shadow loans grew 86 percent last year to a size equal to 308 percent of its formal book, the highest of any bank in China, according to Bedford’s report.

Still, the bank reported a bad-loan ratio of just 0.05 percent last year, the lowest of any bank in UBS’ analysis, exemplifying the “distortion” shadow loan books create in assessing asset quality, Bedford said. Bank of Tangshan representatives didn’t respond to an email seeking comment.

Shadow loans can be used to circumvent regulations capping loans to a single borrower at 10 percent of a bank’s assets, or 15 percent in the case of a group company and its subsidiaries, according to Bedford. For example, he said that Baoshang Bank, an Inner Mongolia lender, has extended shadow loans equivalent to 126 percent of its net assets to one borrower.

Car Finance Penetration Rate in China Expect to Double in Five Years (Xing Ping She), Rated: A

According to a public report, from 2005 to 2015, the ratio of purchasing cars by loan in China has grown rapidly from less than 10% to 25% ~ 30%. During the past ten years, auto finance in China has been developing so fast. And from 2016 to 2017, during the short two years, the car finance penetration Rate continue to rise. Now the rate has reached to 35%~40%, among which the luxury car financial penetration rate is even higher. Furthermore, it is expected to double in five years.

On the prevention of various types of ICO to absorb investment-related risks in the name of the tips (National Internet Finance Association), Rated: B

To protect the legitimate rights and interests of the public, the relevant risk issues are as follows:

First, some institutions at home and abroad use all kinds of misleading propaganda means to ICO in the name of engaged in financing activities, the relevant financial activities without any permission, which is suspected of fraud, illegal securities, illegal fund-raising and other acts. The majority of investors should remain sober, vigilant, beware of being deceived. Once found to have involved in illegal acts, should immediately submit to the public security organs.

Second, due to ICO project assets are not clear, lack of investor appropriateness, a serious shortage of information disclosure, investment activities are facing greater risk. Investors should be calm judgments, be careful to take their own investment risk.

Third, China Internet Finance Association member units should take the initiative to strengthen self-discipline, to resist illegal financial behavior.

European Union

Credit Unions embrace FinTech as loans flood in through Facebook (Independent.ie), Rated: AAA

Credit Unions around Ireland have entered the FinTech arena, with some credit unions reporting a 10-fold interaction with younger adult members since they began rolling out digital loan service initiatives earlier this year.

Since its launch, the “Facebook Loan” initiative has already been a huge success for several credit unions throughout the country – now accounting for up to 15pc to 20pc in loan enquiries per month for some credit unions.

Following an initial successful pilot project, this has now become an established channel for credit unions, with close to half of consumers using the facility to take out a loan never having borrowed from a credit union before.

New European fintech hubs are on the horizon (Business Insider), Rated: A

Sweden‘s deal share of the European fintech investment market is growing for the third consecutive year. Its share expanded 2% between 2015 and 2016 to reach 8%, and currently stands at 12%, meaning it’s already ahead of last year’s figure. The country’s share of deals is also increasing ever-more quickly, from 2% over 2015-2016 to 4% between 2016 and 2017 year-to-date (YTD).

France is also seeing its deal share increase for the third year in a row, and like Sweden, its 2017 YTD share (11%) has already overtaken its 2016 figure (10%). However, its deal share growth has slowed down slightly, from 4% during 2015-2016 to 1% between 2016 and 2017 YTD.

International

Mobile Fintech vs Traditional Banking products: 15 awesome things winners do well (Robosoft Technologies), Rated: AAA

As of 2017, banking executives are completely missing the mark at correctly understanding the rise in popularity for fintech products. It all comes down to the user experience. Banks are misinterpreting and miscalculating the role user experience plays in the overall satisfaction customers have with a banking product.

Fintech vs Traditional banks – attitudes and missed expectations

In 2016, Capgemini Consulting in collaboration with EFMA conducted a global study to gauge customers’ attitudes towards financial service companies – banks and fintech companies alike. As part of the study, the researchers asked customers to rate the most important reasons why they are using financial products coming from fintech companies. In parallel – they asked banking executives to do the same.

The results show a complete disconnect between what consumers want and appreciate about fintech and what banks think consumers appreciate about fintech products.

But what they completely missed is that 80% of consumers rank faster service and good experience as a primary reason why they’re using fintech products (the two being completely correlated). In contrast, only 40% of banking executives believe good service/ experience is critical to fintech’s rise in popularity.

Source: Invoiceinterchange.com

Banking executives do not understand what consumers want.

Consider the following stats to understand the result of banking executives missing the mark on user experience from the Millennial Disruption Index Report:

  • 71% of consumers would rather go to the dentist than listen to what banks are saying
  • 1 in 3 consumers are open to switching banks in the next 90 days if a better product is made available to them
  • All 4 of the leading banks in the US are among the ten least loved brands by Millennials
  • 33% of Millennials believe that in the next five years they won’t need to do business with a bank at all
  • Nearly 50% of Millennials believe that innovation in the banking industry will come from outside the banking industry
  • 73% of Millennials would be more excited about a financial service product coming from Google, Amazon, Apple, Paypal or Square than from their own national bank.

1. Integrated products & services (Mint and YES Bank)

It gets tiring to jump from one product to another at every given moment to get a good feeling of your overall financial life.

That is why Mint.com has managed to grow from nothing to 20 million active users in only 11 years. What Mint.com does is to order and organize your entire financial life in a seamless way to give to a bird’s-eye view of your financial life.

YES bank’s mobile solution, YES Mobile 2.0 is developed keeping in mind today’s customer’s mobile lifestyle. The app offers consumers with a seamless omnichannel experience across platforms – smartphones, tablets and smartwatches. Further, the mobile app also has some innovative features to enable easy transactions on the app. Some of these are:

  • One-touch bill payment.
  • Speech to text capabilities to enable hands-free complaints/queries registration
  • On-the-go bill payments from Wearables including Apple and Android smart watches.
  • Easy transfer of money to phone book contacts, Facebook friends and Twitter followers etc.

2. Personalized recommendations (Credit Karma)

Credit Karma is a simple credit history monitoring tool with an added benefit. Whereas they can use the service for free, they will receive personalized recommendations based on their credit reports, credit card usage and other factors. What is very interesting – and smart – for Credit Karma is that while offering these suggestions they also inform their users of their odds of acquiring a new line of credit – credit card, loans, mortgages and more. And most importantly, the user experience is clean, easy to follow and to act on it.

4. Access credit card balance without logging in (Citibank)

Remember how users ranked “speed of service” as the second most important criteria on why they love fintech products? Citibank actually leads the wave of banking institutions that allow their customers to do just that. Instead of logging in to see the most frequently sought for account information, their mobile app allows users to get a glimpse of their account simply by firing the app.

7. Seamless digital payment option (Apple Pay)

It is literally impossible for banks to create something simpler than this. For readers who are not iOS users, Apple Pay works by double tapping the home button. It then pulls up the Wallet application allowing users to pay at different retailers with the default card on file.

9. Text message notifications (Digit)

Digit is a fintech savings platform which analyzes a person’s checking account balance and spending habits and subtracts a small amount from the account every 2-3 days which is deposited in a savings account.

14. Password entering and password retrieval (Acorns)

First and foremost, Acorns has adopted the widely accepted retail practice of allowing users to unmask their password. This is an acceptable practice which reduces user authentication errors. By simply adding a “show” button, Acorns makes the login experience just a little easier.

In addition, the password reset flow is as simple as they come.

Fintech: beware the fake news (Banking Technology), Rated: AAA

A few years back, the general consensus was that banking as we knew it was over.

Fast forward two years and opinion has arguably swung too far in the other direction. The consensus now is that fintech firms tried to disrupt banks but couldn’t.

If we were to apply Gartner Hype Cycle terminology to fintech in general, we would argue that fintech went from the peak of inflated expectations to the trough of disillusionment in the last two years. If you look at the investment figures, however, the picture is not so clear. While there has been a correction in VC funding, Q2 2017 was the largest quarter of investment yet. Maybe Q2 was a blip, maybe we are heading out of the trough of disillusionment to the slope of enlightenment – or maybe investors are more sanguine about the prospects for fintech, seeing through the hype cycle.

The truth is that fintech is neither going to kill all banks nor is it a fad.

But the pessimism has become exaggerated for four main reasons:

1. Some extremely successful and highly disruptive fintech companies have been born, such as Ant Financial and PayPal (which, if a bank, would be one the ten largest in the US);

2. Adoption rates for fintech products are growing and are already material in many countries around the world (see chart below), meaning that fintech firms are successfully changing customers’ banking habits, which should help lower the cost of acquiring customers in future (a key hurdle for many fintechs);

3. Fintech companies are evolving, pushing further in middle and back office functions, extending the range of services they offer and generally becoming asset heavier and more vertically integrated, putting them in a position to compete more effectively; and,

4. Because the indirect impact of fintech has been massive.

Source: Banking Technology

UAE Remittance Giant Taps Ripple Blockchain for Instant International Payments (CryptCoinsNews), Rated: A

A report by regional publication Arabian Business has revealed that UAE Exchange, one of the region’s earliest remittance operators with some 800 offices across 31 countries, is looking to partner San Francisco-based FinTech firm Ripple to facilitate instant international money transfers.

The remittance operator sees blockchain technology as the solution toward faster and efficient money transfers at significantly lower costs for customers. Ripple uses its bank-friendly public blockchain, the Ripple Consensus Ledger, to link its international partners and facilitate real-time money transfers globally.

FinTech, The Financial Crisis And The Smartphone (Forbes), Rated: A

It is ten years since the Financial Crisis and I am often asked if FinTech was born out of the crisis.

In June 2007 two Bear Sterns hedge funds hit problems, by August BNP Paribas shut down access to hedge funds with sub-prime mortgage exposures, and in September Northern Rock, a UK savings and mortgage bank had a run on it, the first bank to suffer this consequence in 150 years in the UK.

It would be another full year before the collapse of Lehman Brothers in September 2008 and the global financial system melted down.

Chris Skinner, the global FinTech pundit, heralds the beginning of FinTech with the launch of Zopa, a UK peer to peer lender started in 2005. It was the first time he had heard the word FinTech.

US market place lenders Prosper, launched in 2005, and Lending Club, launched in 2006, were out of the gates before any evident signs of the impending crisis.

It appears FinTech was not born out of the Financial Crisis.

India

Rubique Launches New Features On Its App (DQ India), Rated: AAA

The interactive app will now focus on complete digitization of the loan and credit card application process. The most significant new feature of the app is ‘Digital Profiling’ and once the profile is created, all the bank policies and algorithms are run against the user’s profile for tailor-made offers.

The key features of an app:

  1. Digital profiling: created based on the back-end by collecting data through SMS scrapping, network type, device characteristics and certain key data points
  2. Pre-qualified offers: The data engine keeps evaluating the offers available on the platform versus customer profile available & proactively keep notifying users on the eligible offers
  3. Document Upload & instant approval: Aiming towards 100% digitization and create a paperless experience for the user, the app allows user to upload the supporting documents required & Rubique’s unique integration feature which is one of its kind in the entire industry, let user get in principal approval online for his/her requirement making it entie digital
  4. Status tracking: Due to direct integration with financial instituions’ system, user can check the application status in real time
  5. Wish List: The app also allows user can also maintain its wish list related to his/her futue loan & credit card requirement
Asia

Blockchain solution aims to stop trade invoice fraud (GT Review), Rated: A

Trade finance is rife with cases of document duplication and the industry is currently exploring ways in which blockchain can be used to prevent these cases of fraud. Earlier this year, warehousing company Access World experienced a number of cases of warehouse receipt duplication, while the costs of the Qingdao fraud, which also involved multiple warehouse receipts, are still being counted.

Invoice Check from Trade Finance Market (TFM), a Singapore-based fintech company, is one of the early products to launch with this aim in mind. It has been developed over the past year on the Ethereum platform and uses smart contracts.

Canada

Bianca Lopes of Bioconnect Presents Building the Human into FinTech (StartUp Toronto), Rated: A

Latin America

New fintech law: what you need to know (International Law Office), Rated: AAA

On March 23 2017 the draft Financial Technology Law was published. The law will regulate:

  • the organisation, operation, function and authorisation of companies that offer alternative means of access to finance and investment (so-called ‘financial technology (fintech) institutions’ (FTIs));
  • the issuance and management of electronic payment funds; and
  • the exchange of virtual assets or cryptocurrencies.

The Ministry of Finance and Public Credit Comments (SHCP) has sought comments on the draft law from the Mexican banking and financial industries.

Under the law, the main authorities in the fintech field are:

  • the SHCP;
  • the National Banking and Securities Commission (CNBV); and
  • the Bank of Mexico (known as Banxico).

Pursuant to the initiative, the following institutions that undertake financing, investment, savings, payments or transfer activities through interfaces, the Internet or any other means of electronic or digital communications will be considered FTIs:

  • electronic payment institutions – these offer issuance, management, accountability and transfer of electronic payments services. Electronic payment funds include:
    • the amounts or units of an asset that can be assigned a monetary value and are recorded in an electronic transaction accounting ledger; and
    • the amounts accepted by a third party as receipt of an amount of money or respective virtual assets;
  • virtual asset management institutions – these contact third parties through digital means in order to buy, sell or dispose of their own or a third party’s virtual assets and receive virtual assets to make transfers or payments to a person, including another virtual asset management institution. Virtual assets are digital units that have similar uses to the Mexican peso, as determined by Banxico in accordance with certain criteria; and
  • crowdfunding institutions – these serve as mediators to investment seekers and potential investors through digital platforms, such as websites or mobile applications, so that prospective investors can fund applicants through such digital platforms.

Authors:

George Popescu
Allen Taylor

Monday July 17 2017, Daily News Digest

FICO score

News Comments Today’s main news: CreditEase Wealth Management approved by SEC to be RIA. RateSetter sees decline in net lending volumes. Fluid expands into 32 states with no-interest student loans. Landbay loans achieve AAA rating. Funding Circle fund on track despite Brexit risks. BBVA rated best mobile banking service in the world. Today’s main analysis: Squaring all-time high credit scores […]

FICO score

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Africa

Middle East

News Summary

United States

CreditEase Wealth Management Became an SEC Registered Investment Advisor (PR Newswire), Rated: AAA

CreditEase Wealth Management has recently been approved by U.S. Securities and Exchange Commission (SEC) as a registered investment advisor (RIA). At its first stop overseas, the firm can start providing advice to investors in the U.S., representing a globalization milestone to better serve especially Chinese investors around the world.

Squaring All-Time High Credit Scores With Higher Delinquencies (PeerIQ), Rated: AAA

Citigroup, J.P. Morgan and Wells Fargo reported Q2 bank earnings last week as earnings season kicked off. All three banks beat analyst expectations for earnings, but also posted declines in trading revenue:

 

Source: WSJ, PeerIQ

J.P. Morgan reported better than expected second quarter earnings, beating on the top and bottom line due to the company’s strong loan growth, partly due to the success of Chase Sapphire Reserve product.

In this week’s newsletter, we illustrate the flaw of FICO as a forward-looking credit score.

Below is a histogram showing the distribution of FICO credit scores for Avant’s 2017 deal:

Source: PeerIQ

The distribution is relatively similar across historical ABS deals suggesting the credit risk across deals is similar. However, Avant has substantially tightened and improve credit quality in recent vintages. The FICO credit score is not able to capture this. For instance, as compared to AVNT 2016-C, the collateral in the AVNT 2017-A contains loans made to borrowers with a much smaller balance ($5,348 vs $6,589) and a shorter weighted-average remaining term of 33 months vs. 40 months in AVNT 2016-C. Also, AVNT 2017-A has 93.9% of loans under 36 month term, a significantly different collateral pool mix than that of AVNT 2016-C, which has only 47% 36-month loans. Shorter term 36-month loans carry less credit risk than 60-month loans all things being equal.

PayPal Holdings Invests in LendUp — What Investors Need to Know (The Motley Fool), Rated: AAA

On LendUp’s website, the company states that more than half of the U.S. population has a credit score under 680, meaning they cannot be approved for credit at most financial institutions. The site explains that consumers in this segment will pay more than $250,000 over the course of their lifetimes for basic financial services. LendUp believes it can make a profit by offering affordable financial products to these consumers, which will simultaneously help them build their credit.

Regular users of PayPal probably know that PayPal offers credit to its customers through its PayPal Credit platform. PayPal normally offers credit to customers at checkout, offering account holders no-interest payments on purchases greater than $99 if the loan is paid off within six months. PayPal also offers credit to small- and medium-sized businesses through its PayPal Working Capital program, which is then paid back through small amounts from each transaction going back to PayPal. Schulman believes both services are important to PayPal’s future.

In its most recently reported quarter, PayPal CFO John Rainey stated that loan losses for its consumer and retailer credit programs totaled $129 million, or approximately 4.3% of revenue. The net charge-off rate was 6.9%.

Fluid Expands into 32 States Providing No Interest Credit to Students (Crowdfund Insider), Rated: AAA

Fluid, a Fintech and Adtech startup has expanded its service to US students into 32 different states. The App based lender is available on iTunes allowing up to $500 in credit without any additional interest payments.  The description on iTunes explains it is exclusively designed for 22 million college students in the United States.  Fluid not only allows for an interest free loan but it empowers uses to build a credit profile. Fluid’s target market is Generation Zs (Age 7 to 21 as of 2017. Fluid notes there are 75 million and 1.8 billion Generation Zs that will start shaping this world in the coming years.

How To Find The Best Student Loan Refinancing Options (Forbes), Rated: A

Student loan debt now stands at a whopping $1.3 trillion. There are more than 44 million borrowers. And we’re coming up on the season when many recent graduates start paying down their student loans.

1. SoFi – SoFi only refinances loans for graduates with at least a Bachelor’s degree from a Title IV accredited university or program. Its credit and income requirements are also fairly strict, putting SoFi refinancing out of reach for many recent graduates.

2. CommonBond – CommonBond offers somewhat broader refinancing services since it refinances student loans and Parent PLUS Loans. It also offers borrowing services, if you’re considering consolidating your undergraduate loans and then going to graduate school.

Like SoFi, CommonBond expects borrowers to have a fairly high credit score (here are ways to check your score for free). Borrowers have a median income in the low six figures, as well.

3. Earnest – Earnest has a unique way of qualifying borrowers. Instead of looking at your income and credit score solely, it looks at how easily you can afford your expenses, how regularly you save, and whether you have a retirement account. It also allows you to choose your own monthly payment, and then it builds your interest rate and terms around that.

6. Purefy – Purefy allows married couples to refinance their loans together, which may or may not be a good idea for you. But if you decide to go this route, it will use the higher of your two credit scores to determine the interest rate.

Laurence Kotlikoff: Conventional banking is not the only game in town (Denton Record-Chronicle), Rated: A

Where do we see LPB taking hold? For starters, consider Bitcoin and other electronic currency vaults. They are essentially LPB cash mutual funds — mutual funds that hold only cash. They provide a safe payment system that can never collapse, barring technical disasters. Next, consider peer-to-peer lending. These are closed-end mutual funds that purchase the loans of small- to medium-sized enterprises. The investors have equity stakes and they can go online and check out their investments in real time. That’s a form of disclosure you will never get from, say, JPMorgan Chase.

What about mortgage lending? LPB mortgage mutual funds could materialize overnight, via either peer-to-peer lending or by slightly transforming the centuries-old Northern European covered-bond market by forcing investors to take on the default risk of the mortgages that cover the bonds.

In the information age, we don’t need trust-me banks that take our money and give us no clue where it’s invested. In this Bitcoin era, we don’t need trust-me banks to guarantee our holdings of cash. In this block chain world, we don’t need trust-me banks to assure us they will square up our bets. And we don’t need an enormous army of government bureaucrats to watch over trust-me banks gambling at the taxpayer’s expense.

LendingTree announces senior appointment (Mortgage Professional America), Rated: B

LendingTree has announced Brad Wilson as its new chief marketing officer. He will oversee the company’s brand strategy, marketing operations and consumer engagement as LendingTree continues to expand into new financial service categories.

Hybrid Advice Priced at 25 to 50 Basis Points (Insurancenewsnet.com), Rated: A

Nearly half – 48 percent – of managed account sponsors price their hybrid advice at between 25 and 50 basis points, or between $250 and $500 on a $100,000 account, according to a recent survey conducted by Cerulli Associates.

Another 28 percent of sponsors believe an internet algorithm backed by a flesh-and-blood advisor should be priced at between 50 and 75 basis points, or between $500 and $750 on a $100,000 account, the survey found.

‘New York doesn’t allow that’: Maria Vullo stares down fintechs, OCC (American Banker), Rated: A

Maria Vullo, the head of the New York State Department of Financial Services, is a skeptic of the so-called fintech revolution.

While some policymakers are eager to accommodate online lenders with regulatory oversight that is looser than what applies to banks, Vullo believes the word “fintech” is misleading.

TOP 10 CONSIDERATIONS FOR INTERNATIONAL INVESTORS INVESTING IN U.S. MARKETPLACE LENDING (dv01), Rated: B

We are now starting to see large inflows and investments into the leading U.S. based marketplace lenders. This growth has been driven primarily by investors from Asia, Europe, and Middle East (primarily Israel) who have started to provide their clients with more options to invest in MPL assets outside their home countries.

What are best practices for investing in the MPL asset class in the U.S.?

Jeremy has compiled his answers into this free report.

United Kingdom

P2P lender RateSetter sees decline in net lending volumes (AltFi), Rated: AAA

Two of the UK’s “big three” peer-to-peer lenders are authorised, and will soon launch their Innovative Finance ISAs. The other, RateSetter, is not yet authorised, and has had to make a few changes to suit the requirements of the regulator in recent months. Mostly notably it has had to put a stop to its wholesale lending business.

Whether or not RateSetter continues to make changes at the behest of the regulator is unclear. But what is clear, using the latest figures from AltFi Data, is that its lending is slowing down significantly. RateSetter posted its first negative month of net lending (new loans net of repayments and defaults) in April, and continued in the same direction in May, with a net lending figure of around -£5m for the month. In June, its net lending fell to almost -£15m.

UK peer-to-peer loans score AAA securitization (AltFi), Rated: AAA

Landbay originated loans have been included in a highly rated pool of mortgages. 

More than £30m of loans originated by UK peer-to-peer platform Landbay have been included in a larger securitization of buy-to-let loans awarded an AAA rating.

UK fintech shrugging off Brexit in 3 charts (AltFi), Rated: AAA

While the unfolding Brexit process has added to a list of summer worries for UK investors, those with a stake in the disruptive end of financial services have more reasons to cheer.

The rapidly growing sector is seeing resilient growth, according to data provider Fintech Global, who has found that growth is robust.

The firm’s research found UK fintech had seen growth of CAGR of 18.1 per cent between 2014 and 2016. In 2017 this trend has continued with fintech firms receiving funding of £769m.

Funding Circle fund on track but warns of Brexit risks (P2P Finance News), Rated: AAA

FUNDING Circle’s listed fund performed in line with expectations in its first full year of operation, which saw its net asset value increase by 11 per cent to £164.8m.

The Funding Circle SME Income Fund, which is quoted on the main market of the London Stock Exchange, launched in November 2015 to give a wider range of investors access to the peer-to-peer platform’s loans.

In its annual report for the year to 31 March 2017, released on Friday, it said that investors received dividends of 6.5p per share over the last four quarters, in line with the target of 6-7p per share.

Why I’m backing peer-to-peer lending (RateSetter), Rated: A

In finance we tend to seek an edge, a marginal advantage that inches a company ahead of its competitors.

What attracts me to RateSetter is the simplicity of the business. The primary function of finance is to connect those who want to invest money with those who can put that money to productive use. The peer-to-peer sector is solving this age-old challenge in a refreshingly simple and innovative way. A good example of this innovation is the Provision Fund, which spreads risk across the entire portfolio and allows even the smallest investor to achieve diversification.

FundingKnight, Part of GLI Finance, Receives Full FCA Authorisation (Crowdfund Insider), Rated: A

GLI Finance (AIM: GLIF) has announced that FundingKnight has been granted full Authorisation from the Financial Conduct Authority (FCA). FundingKnight is an online / P2P Lender providing access to capital for UK SMEs. FundingKnight has been operating under interim permissions since 2014, when the FCA commenced the process of regulating the peer-to-peer lending industry.

A new altfin investment aggregator has launched (P2P Finance News), Rated: A

A NEW platform connecting investors with alternative finance opportunities from around the world has launched.

Amsterdam-based Yieldport acts as a community and search engine, crawling the web for new projects using a custom search algorithm. It currently offers more than 2,000 opportunities – such as business loans, mini-bonds and equity start-up investments – from 30 different countries.

UK Marketplace Lender Growth Street CEO Greg Carter Talks Transparency, Brexit and Fintech Innovation (Crowdfund Insider), Rated: A

Growth Street, an FCA-authorized UK business finance platform focusing on SME loans, has aimed to become a flexible working capital solution since launching in 2014. Greg Carter founded Growth Street while still working at Arts Alliance Ventures, a venture capital firm that was founded in 1996 and has since backed over 40 companies, including Growth Street, which it incubated. Carter recently became the CEO of the platform.

Erin: Could you please share Growth Street stats? Milestones?

Greg: I’m very proud of the fact that six months since launching our first product for individual investors, we now have over 1,000 lenders signed up to use our platform. This includes small businesses, who are also taking advantage of our platform to lend themselves. Another key milestone was attaining Appointed Representative status, allowing us to accept individual investors; the next goal for us is to be fully regulated ourselves.

Erin: Please talk about Growth Street’s How to Improve Cash Flow tool.  How is it addressing UK SME cash flow ‘pain points’? Which other tools set Growth Street apart from its peers?

Many businesses could optimise cash flow better, but the tactics and strategies often vary from business to business. So, our How to Improve Cash Flow tool asks a series of questions to diagnose any cash flow problems within the business: respondents then get a bespoke, tailored assessment of their position from Growth Street, for free. How to Improve Cash Flow is the first in a series of tools we’ll be launching in the coming months to give businesses more data about their cash flow, helping them make better decisions and hopefully improving their access to capital.

Erin: What are your thoughts on transparency in the sector?  How much is too little, too much? Or is there ever enough?

Greg: I believe the most important goal for the sector is to achieve clarity for our customers about the risks and returns of marketplace lending. Transparency is important, but the way information is presented matters a great deal. I don’t think it is enough, for example, to just publish loan book statistics; we also need to explain in plain language how we use this data to manage risk. As the industry matures and looks to grow beyond a base of early adopters, I believe a focus on clarity will best help us to attract new investors.

One to One: John Goodall, chief executive, Landbay (Mortgage Strategy), Rated: A

Is Landbay ready for the PRA underwriting standards coming in from October?

Yes, we are. We introduced our broker portal in Q4 2016. It was built with PRA changes in mind and was designed to capture the additional information this would require from day one.

The buy-to-let sector has been buffeted by significant regulatory winds recently. What are the prospects for the sector?What have been some of your biggest professional challenges?

We are seeing a big uptick in applications from limited companies and we expect this to grow further from 1 October.

What have been some of your biggest professional challenges?

For investors, one of the key things that we needed to do was build trust. As a start-up lender with no record, you cannot do that overnight, so getting the credit function right was crucial. Now that we have been lending for three years, I think we have reassured investors and built that trust.

Which one change would you like to see in the market overall?

A greater focus on technology to improve the service for brokers and borrowers.

Emotional intelligence needed to win over next generation of shoppers (Internet Retailing), Rated: A

Payment company Klarna questioned 2,000 UK consumers, in a survey carried out by Censuswide, and found that members of the millennial generation, aged between 16 and 34, were three times more likely to feel excitement while adding items to their online basket, compared to older shoppers. Millennials are also more likely (68%) than shoppers aged 55 and over (24%) to feel anxiety and guilt at the point of payment.

Klarna suggests that allowing shoppers to try before they buy would be an easy way to build brand loyalty. Deferred payment options would also reduce anxiety among 20% of millenials, making one in five more likely to finish their purchase.

The consumer research judges a myth the idea that items added to a basket show a clear intention to purchase. It found that a significant 89% of millennials used the basket as a tool to review costs, while more than three quarters used their basket as a wishlist, compared with only 29% of over-55s. Meanwhile, nearly three quarters (74%) admit to “buzz browsing” – adding items to a basket with no clear intention to buy.

Selling to silver surfers: how e-tailers can develop emotional intelligence to appeal to an older demographic (Net Imperative), Rated: A

Luke Griffiths, General Manager at Klarna UK, looks at the psychological factors that come into play when older consumers embark on the online shopping journey.

The flip side of this excitement is lows caused by anxiety and guilt, with 52% of millennials saying that they worry that they can’t afford the purchase during checkout. That’s compared to 16% of over 55s, who in many cases will have more disposable income than their younger counterparts – showing there’s a sizeable prize for retailers who get the customer experience for older generations right.

While the millennial customer journey is full of twists and pitfalls, baby boomers are patient, calm, and rational shoppers. They experience low emotional responses, with only 3% of those surveyed feeling guilty when adding things to their basket, and only 5% feeling impatient.

The over 55s buy things because they need them – only 21% are more likely to make a spontaneous purchase online because they deserve a treat – so tapping into necessity is key. And over half (52%) of those surveyed said they would reconsider an online purchase due to high delivery charge, so retailers with costly fees should reconsider their charges or face losing custom.

Just Eat and fintech startup Funding Circle are partnering on a recipe for takeaway success (City A.M.), Rated: A

The peer-to-peer lender will offer the nearly 30,000 restaurants which use Just Eat to get takeaways into people’s laps a deal on loans.

“Our partners Just Eat directed us to Funding Circle who arranged the loan for us in a matter of days. By not spending months speaking with the banks I was able to get the finance I needed and focus on running the business and planning for the future.”

Gas fires firm lost £300k to online hack before going bust (Leicester Mercury), Rated: B

Gas Superstore lost hundreds of thousands of pounds in an online hack prior to going into administration, new documents reveal.

The Leicestershire retailer – which sold electrical goods and gas fires to the public – collapsed in April with debts of about £2.7 million.

FRP said trade creditors were owed more than £1.2 million when the business went bust – including the Google Adwords service, which was owed almost £50,000, and peer-to-peer business loan company Funding Circle, which was owed £275,000.

China

Blockchain sharpens Dianrong’s edge in P2P lending to small businesses (SCMP), Rated: AAA

Blockchains, the distributed databases conceptualised in 2008 as core components of the digital currency bitcoin, are increasingly finding their way into financial technology and helping to redefine the boundaries of traditional banking. They can be used as open, distributed digital ledger systems that can record transactions efficiently.

Dianrong and Foxconn are currently working together to apply the Chained Platform for Foxconn’s suppliers.

Dianrong is expanding its team in preparation for the increase in supply chain finance loans through Chained Finance. The company has plans to hire 500 more staff in Shenzhen in addition to the 60 they already employ, Htite said.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

By 2020, 60% of systems in China’s banking industry will be deployed in the cloud, most with the approval of the China Banking Regulatory Commission. According to the report, China Banking Regulatory Commission (CBRC) has been seeking to partner with 19 Chinese banks to establish a Fintech cloud stack, and the investment amount of each bank should not be less than CNY 20 million.

Online Market Lender Dashu Finance Raises CNY 800 million for Series C Round

On July 7th, Dashu Finance, a Shenzhen-based provider of online small and micro loan services, received CNY 800 million (USD 118 million) for its Series C financing round.

China’s Central Bank Issues Report on Financial Stability

On July 4th, The People’s Bank of China (PBOC), the central bank of China, released a financial stability report, warning China should redouble its efforts to regulate key risk (such as Bitcoin) in the financial sector to ensure financial stability.

China’s P2P Lending Industry Financing Drastically Decreases in the First Half of 2017

Statistics show, by the end of June, only 15 P2P online lending platforms received financing in China, and the total amount was just about CNY 4 billion (USD 5,987.1 million). Tuandaiwang.com completed the largest round of financing with CNY 1.8 billion, followed by xiaoying.com’s CNY 1 billion.

Alipay Makes Tuition Payments Easier

Thanks to a new cooperative effort between Hangzhou-based Alipay and other 30 banking financial institutions, Chinese students enrolled in primary and secondary schools are now able to pay their tuition online.

China’s Online Insurance Company Zhong An Introduces Flight Delay Insurance

Last week, Zhong An Insurance launched a WeChat-based fight delay insurance. Passengers can just buy the insurance on the Wechat platform 15 minutes before fights take off, rather than one day before departure as termed by the traditional delay insurance. The insurance pays a traveler RMB 10 if a departing or connecting flight is delayed by half an hour, and the compensation is up to RMB 120.

2017 LendIt Summit China was Held in Shanghai  (Xing Ping She), Rated: A

On 15th July, LendIt, the world’s largest and most high-profile summit of fintech was held at Kerry Hotel in Pudong, Shanghai. Including keynote speech, seminar and group discussion, the summit covered all the frontier topics of internet finance. Fintech, online lending, block chain, bank & technology, inclusive finance, Asia-pacific and global vision are the fileds discussed.

LendIt is known as the largest fintech summit around the world. It was founded in 2013 by Bo Brustkern, Jason Jones and Peter Renton. The original intention of the summit was to provide social networking and communicating opportunities for the entire online lending and financial technology community. So far, the annual summit has been held for several times in the US, Europe and China, and it is the second time for LendIt held in China.

Over 2000 elites from global fintech and traditional finance participated in the summit, including decision makers, institutional investors, and regulators. It worth mentioning that both Dr. Yang Li, the CEO of Xeenho and CSO of Xing Ping She, and Sherry Yang, the vice president of Xeenho, were invited to attend LendIt China, discussing the development and trend of global internet finance. On April 2017, Xeenho and Xing Ping She have officially reached strategic cooperation with LendIt.

LendIt China July 9th 2017 – Journal Entry: AMTD + LendIt: Fintech, The 4th Industrial Revolution. (Crowdfund Insider), Rated: B

AMTD-LendIt Conference officially kicked off today in one of the most metropolitan cities in the world, Hong Kong, China.

The 2nd annual AMTD and LendIt FinTech Summit is well attended by heads of state from PwC, FuTu Securities (Wealth Management and Robo Advisor), AMTD and many of the leading industry heavyweights giving the audience a preview of what’s to come.

PwC Global FinTech Survey

PwC unveiled their latest Fintech survey from hundreds of financial institution’s CEO and found that more than 60% of the CEOs are making investments into Fintech and some have dedicated 15% of their top line revenue into Fintech R&D.

Futu Securities

I was most impressed with Futu Securities Robo advisor chatbot. Leveraging artificial intelligence, Futu’s clients can pose a question to the A.I. assistant on what’s causing a particular stock in their portfolio to fall. The A.I. algorithm then mines social media sites, news sites and the internet, in general, trying to establish whether there was a press release, news articles that may have caused the drop in stock price.

European Union

BBVA, the best mobile banking service in the world (BBVA Compass), Rated: AAA

BBVA has the best mobile banking app in the world, according to Forrester Research’s latest report “2017 Global Mobile Banking Benchmark.” The study, which was published today, analyzed 53 apps from large retail banks in 18 countries, including the U.S., the U.K., FranceBrazilTurkeyChina and Australia.

BBVA Spain’s mobile banking services received a final score of 87 out of 100 – the highest score since Forrester began the global rankings in 2013.

Digital banks must diversify or die (VentureBeat), Rated: AAA

Across Europe the 10 largest digital bank financings have totalled $500 million so far, with Atom alone raising more than half that amount.

However, look more closely and it’s clear the era of digital-only challenger banks may actually be coming to a close. Systemic difficulties in turning profits with pure digital-only banking will drive more businesses to adopt a broad-based approach focusing on digital financial services, of which banking is part.

Customer acquisition costs (CAC) for pure digital banking businesses are rising – fast. The fundamental problem, in Europe as well as in the U.S., is one of demographics: Dozens of fintechs are chasing a small, well-defined target customer base. These customers need to have enough disposable income, be digitally-savvy, and usually live in key urban areas. It can easily cost $100-250 to acquire customers in certain segments, and it takes an awful lot of $5-10 transaction fees for single-use services to generate a return on these customers. It boils down to a supply and demand issue: The number of high-value prospects is static, but there is a glut of well-funded and aggressive fintechs chasing them.

 

International

Study says women are better at crowdfunding (Reuters), Rated: A

Consultancy firm PwC, together with The Crowdfunding Center, analyzed 450,000 crowdfunding campaigns across the globe over the past two years and found that those led by women were 32 percent more successful at reaching their target than those carried out by men.

The results of the study, which were published on Thursday, also found that female-led projects are able to attract an average $87 pledge per funder, while men received $83 on average.

IFSB view on Islamic Crowdfunding (Islamic Finance), Rated: A

To identify relevant crowdfunding platforms with a focus on equity- and loan-based platforms located in the Muslim world, the database of Crowdsurfer was consulted. It lists in 32 of the 57 member states of the Organisation of Islamic Cooperation (OIC) a total of 108 crowdfunding platforms.

The findings were somewhat surprising:

  • The platform that was characterised in its Crowdsurfer profile as a “Sharīʻah-compliant equity platform for SMEs and start-ups in Malaysia” (AtaPlus) did not mention the Sharīʻah compliance on its website. The only hint of Sharīʻah compliance was the list of activities in which a fund-seeking entrepreneur must not be involved.
  • Only one loan-based crowdfunding platform – Liwwa (Lebanon) – outlines the importance of Sharīʻah compliance and gives a brief explanation of its business model (based primarily on murābaḥah) in the FAQ section of its website.
  • A loan-based platform in the UAE – Beehive – applies a dual approach: it offers both conventional as well as Sharīʻah-compliant lending techniques. The Islamic option is explained in a rather detailed manner on the website.
  • One of the oldest equity crowdfunding platforms in Egypt – Shekra – quotes several previous Islamic awards on its website. It does not explain how it assures Sharīʻah compliance, but the founders have propagated their approach in journals and conference papers. The platform operates as a “closed investors network”, which is quite unusual for a crowdfunding platform.
  • Finally, an Indonesian platform for student loans – Danadidik – applies a profit- (or income-) sharing model to calculate the returns for investors. Although this is vaguely reminiscent of Islamic financing techniques and the platform claims to adhere to Islamic principles, the Sharīʻah compliance is uncertain.
Australia/New Zealand

Rivalry between banks expected to ramp up after launch of new reforms (Mozo), Rated: AAA

Federal Treasurer Scott Morrison has today announced new banking reforms that will allow credit unions and building societies to legally call themselves banks, in a move aimed at increasing competition between home loan providers.

Morrison and MP Kelly O’Dwyer said in a joint statement that the government will axe the restrictions deposit-taking institutions currently face, which mean they can only attain “bank” status with $50 million or more worth in capital.

Nearmap hires VP of marketing to support rapid growth (CMO.com.au), Rated: A

Aussie aerial mapping business, Nearmap, has appointed a new VP of marketing among two senior executive hires aimed at driving its next phase of international growth.

Silvia Arrigoni will be Nearmap’s new VP of marketing and Shane Preston will be vice-president of sales.

Arrigoni, who previously held positions as head of brand marketing at online lender, SocietyOne, and as group business director for marketing agencies such as Havas and Arnold Furnace, brings decades of experience to Nearmap.

India

YES Bank hunts for global partnership to develop fintech landscape (The Hindu Business Line), Rated: AAA

YES Bank, which runs a start-up accelerator programme called Yes Fintech, is looking at exclusive global exchange programme partnerships to help Indian start-ups gain access to developed markets in terms of business and investments.

Towards this end, the bank has already tied up with MaGIC (Malaysian Global Innovation & Creativity Center), a Malaysian government initiative. It is also looking for similar partnerships with the US, Sweden, Norway, Singapore, the UK and Israel over the next few years.

Funding dreams: Get a collateral-free education loan with just a click of a button (The News Minute), Rated: B

The cost of education has skyrocketed over the past decade by 160%, be it colleges or even elementary and secondary school. This has become a major setback for middle class families in India to provide their children with quality education.

Quiklo offers collateral-free loans to students with relatively smaller ticket size. Its biggest USP is that the loan is approved in a day and the amount is disbursed in the next few days

It runs on both a B2B and B2C model.

Quiklo offers collateral-free loans to students with relatively smaller ticket size. Its biggest USP is that the loan is approved in a day and the amount is disbursed in the next few days

It runs on both a B2B and B2C model.

Under the B2C model, parents can go to its website or download the app, enter their details, the student’s details, their financial problems, the course fees and submit the application. There is an algorithm that runs to check their credit worthiness depending on a few parameters like salary, etc.

Under the B2B model, Quiklo ties up with colleges and test prep companies. When a student goes there for admission, the college pitches Quiklo to them in case they are in the need of financing.

How new age investors are opting for alternative investment (Daily News & Analysis), Rated: A

Fixed Deposits, investment in gold, and many other traditional options are losing grounds when trying to woo the new age investors.

Digital gold currencies are issued by a number of companies like now Paytm as well, each of which provides a system that enables users to pay each other in units that hold the same value as gold bullion.

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

Asia

Online-only Chinese retail investment platform to launch in Singapore in third quarter (The Straits Times), Rated: AAA

An online-only platform for retail investors will launch here in the third quarter, China’s Ping An Group announced on Monday (July 17).

Lu International (Singapore) Financial Asset Exchange, a spin-off from the Shanghai-based Lufax, has received an in-principle approval from the Monetary Authority of Singapore for its capital markets services (CMS) licence.

The company, which will offer investments via mobile devices with no face-to-face encounters, hopes to attract customers who may have less wealth than those served by private banks.

ANGIN’s startup-investor site Connector.id to launch full version soon (Deal Street Asia), Rated: A

Connector – powered by Indonesian angel investor network (ANGIN) and the UNDP – has garnered over 400 startup applications since its beta version was introduced two weeks ago.

The idea is to help startup founders find the right investors for their ventures. Often, founders waste resources chasing the wrong investors, or even don’t have the channels nor the experience to source funding.

So far, Connector team has received more than 420 applicants, of which 70 per cent are technology companies. About 50 per cent have requested further connection (eg. pitch deck, call or meeting). Most applicants (38 per cent) are looking for equity, while the rest are looking for grants (14 per cent), collateralised loan (13 per cent), bridge loan (9 per cent), non-collateral loan (7 per cent), trade financing (5 per cent), and invoice financing (3 per cent).

Read more at:

Modalku launches new app (Deal Street Asia), Rated: A

P2P lending platform Modalku has announced that it will launch a new app next week. The app will be a “new innovation for lenders and debtors alike”, and is hoped to further bolster Modalku’s mission to support the small and medium enterprises in Indonesia.

Africa

SA fintech startup Yoco announces it has hit 10 000 SMEs users milestone (Ventureburn), Rated: AAA

South African payments company Yoco today announced that it now has 10 000 small and medium-sized enterprises (SME) clients in South Africa using its point-of-sale payments platform to accept card payments.

Maphai said the company is adding over 1 000 new SMEs to its base every month. This makes it the largest independent mobile point-of-sale player in South Africa by number of merchants, he claimed.

Yoco has in the past two years of operation, raised $7-million in funding from international investors and employs over 70 people in Cape Town and Johannesburg.

Middle East

Central Bank to Finalize Fintech Regulations (Financial Tribune), Rated: AAA

In light of the importance of regulating fintech firms to prevent any problem in the monetary market, the Center for E-Commerce Development’s deputy has announced that the Central Bank of Iran will define the framework of fintech operations by the end of summer.

According to CBI regulations, innovative financial services are allowed to operate as long as they are not involved in money creation, currency exchange and offering payment tools (like cards) and attract deposits.

Payment aggregators allow sellers to quickly launch a payment gateway on their website, without getting involved in the demanding process imposed by banks and other PSPs.

According to Oskouei, currently 50 fintech firms have announced their commitment to continue their operations until CBI regulations are ready for implementation.

Authors:

George Popescu
Allen Taylor

Friday July 7 2017, Daily News Digest

mobile banking

News Comments Today’s main news: Orchard Platform, Experian partner on big data. Marlette closes $369 ABS transaction. OCC seeks to make banks fintech enforcers. MarketInvoice Q2 results. Dashu Finance raises $117M. BNI Europa enters Portuguese market with Puzzle. TWINO expands into central Asia. Today’s main analysis: The state of consumers and technology (a must-read report). International P2P volumes. Today’s thought-provoking articles: High-tech, low-effort loans […]

mobile banking

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

News Summary

United States

Orchard Platform, Experian collaborate on big data challenges (Cision), Rated: AAA

Experian® and Orchard Platform, the provider of data, technology and software to the online lending industry, have joined together to announce a strategic collaboration that will give institutional investors access to Experian’s depersonalized consumer credit data. Orchard’s institutional clients can use depersonalized credit data for ongoing monitoring of borrower creditworthiness for loans in existing portfolios. Experian also will provide access to anonymized historical data sets for enhanced credit modeling, analytics and reporting.

Delivering greater transparency, high-quality data and analytical tools to the market is central to the mission of both companies. Orchard’s institutional clients should benefit from the use of Experian data to not only make more informed investment decisions through refined credit modeling but also through the ability to manage risks more effectively with more current loan data. Experian has been harnessing the power of data for many years to help consumers, financial institutions and governmental organizations make more informed and effective decisions. Raw data without the right level of interpretation is nothing more than untapped potential.

Marlette Funding Closes $ 369 Million Securitization Transaction (BusinessWire), Rated: AAA

Marlette Funding, LLC, a leading provider of online consumer lending platforms and services, announced it has closed its third securitization from its proprietary “MFT” shelf. Approximately $369 million of Best Egg unsecured personal loan collateral was financed via three classes of Notes and one class of Certificates with certain loan sellers retaining risk on a portion of the Certificates.

The transaction was significantly oversubscribed and successfully priced well inside the two previous Marlette sponsored offerings. In this transaction ratings for each of the offered Notes attained one higher category to AA (sf), A (sf) and BBB (sf), respectively, by Kroll Bond Rating Agency (KBRA). Underwriting the transaction were Goldman Sachs, who served as the structuring agent, Deutsche Bank and Citi.

This transaction, in similar vein to MFT 2017-1, involved the sale of loans by Marlette and four other whole loan buyers who accessed the securitization markets via the MFT shelf.

The State Of Consumers And Technology: Benchmark 2017, US (Bank Innovation), Rated: AAA

The US market is fueled by empowered customers, who experiment with and rely on technology. In 2017, for example, 14% of US online adults use a fitness tracker, 8% use a smart speaker with a personal assistant, and 7% use Apple Pay.1 Forrester’s Empowered Customer Segmentation shows that about a quarter of US online adults are Progressive Pioneers, the most empowered consumers who lead the demand for product and experience innovation. Smartphone and tablet usage is now common among mainstream US consumers: Three-quarters use a smartphone, and half use a tablet.

Get the full report here.

The high-tech, low-effort loans winning over online shoppers (American Banker), Rated: AAA

In a study of more than 2,000 consumers conducted by Researchscape and sponsored by Klarna North America, 47% said that when shopping online, they would like to be presented with the option of instant financing.

The customer types in very little information — in some cases, nothing more than a name and email address. No effort is required.

Behind the scenes, Klarna’s underwriting software takes in data from more than 100 sources and uses artificial intelligence to make a credit decision in less than a tenth of a second.

Jim Lofgren, Klarna’s CEO for North America, theorizes that instant loans have become popular as a reaction against widely publicized card fraud and data breaches. Essentially, people are drawn to not having to surrender a bunch of information.

“The phone is only this big and you don’t like the inconvenience of having to pull up the card and keypunch all those numbers in and verify everything every time you want to make a purchase,” Lofgren said. “Instant financing lends itself well to the smartphone environment.”

Aaron Allred, CEO of Acima Credit, a provider of instant leases at the point of sale, gives a lot of credit for the growing U.S. market in the U.S. to Affirm, a startup based here.

Lofgren calls Klarna’s credit issuing platform the “secret sauce of what we do.”

It takes into account more than 180 creditworthiness variables.

Goldman Sachs is working on an iPhone app for the masses  (Business Insider), Rated: A

Goldman Sachs, which has been expanding its offerings to retail consumers in recent years, is building an iOS app for its growing crop of digital retail banking services, according to a job listing on the company website.

Here’s the job posting (emphasis added):

We are looking for an expert iOS developer to work on a greenfield enterprise-grade project delivered on iOS platforms.  Our goal in engineering is to facilitate the creative, iterative, and data driven creation of our all digital retail bank. As a Mobile Developer you will be working closely with our marketing team and UX designers to build mobile user experiences which will be A/B tested for effectiveness and impact to our clients. The code you write will reach millions and help redefine the firm.”

BETTERMENT CEO: We ‘could become the Amazon of financial services’ (Business Insider), Rated: A

Betterment, the largest independent roboadviser in the world, with $9 billion under management and 270,000 customers, thinks it might be able to do the same in finance.

Chaparro: Incumbents have had their own robo offerings for years, and they have their big brand and infrastructure to back them up. What makes you so certain Betterment can survive up against such competition?

Stein: For the same reason why we often see those few innovators break out.

You could also ask “Why did Amazon break out and become the dominant online retailer?” — some would say dominant retailer period. And why wasn’t it Barnes and Nobles, Target, or Walmart, or anybody else? It is because Amazon has a specific focus. They didn’t have conflicts with a set of existing infrastructure and systems and people who were built around doing things the old way.

In Lending, Next-Day Payout Doesn’t Cut It (PYMNTS), Rated: A

“So, many of these lenders have been wrestling with this problem for a long time,” said Edwards. “The number one complaint they get after a loan is approved is, ‘Why do I have to wait on my money?’”

That speed factor is why some online lenders may lose market share to competition. If a borrower’s car breaks down and he needs the vehicle to get to work, an online loan that takes a week for funds to transfer to his account won’t be much help. Instead, Edwards said, those borrowers are going to go to someone who can provide cash immediately.

The emergence of push payments and instant funding perfectly addresses this need for lenders. Push payments use the same mechanism as pull payments — only in reverse, moving funds from a business to a consumer. They deploy existing rails to do this, instantly transferring funds to credit and debit cards or a PayPal account.

For Ingo Money, API technology has been critical to making it easy for lenders and other companies to deploy push payment capabilities.

What Fintech Entrepreneurs Can Learn From Big Tech Companies (Entrepreneur), Rated: A

You may have heard of a number of successful “big tech” execs leaving behind great jobs at companies like Apple and Google to develop a new passion project in fintech. The trajectory from big tech to fintech is becoming increasingly common. What makes for a successful transition and what can big tech folks take with them in their new ventures?

Mission matters.

This is a lesson I learned repeatedly at Google. What you are trying to do as a company, and often as a team within a company, matters. It’s not simply having a mission, but having a mission that galvanizes others to action.

Leverage the “tech method.”

A huge lesson I learned from my career is the benefit of building a platform that empowers an ecosystem. Think about Android, AirBnB or Amazon. If your business model is designed to benefit other participants in the ecosystem, rather than competing with them, it can have far-reaching impacts that turn an industry in your favor. If you can create a system that connects buyers, sellers, service-providers, etc., you have the ability to change how that industry functions.

Use your network.

Leverage your network in a way that also allows them to participate in your cause. The successful big tech to fintech pioneers do not view the companies they have left as something in the past, but rather an ongoing support group.

Get creative.

We do lots of things, but one amusing yet somehow successful example is taking pictures of people wearing our PeerStreet hats.

Finra Fines Have Skyrocketed for Offenders (Financial Advisor IQ), Rated: A

The industry’s self-regulator imposed 624 monetary sanctions in 2016 – a 10% drop from the 691 it doled out the year prior, according to the report. But revenues from fines grew to $173.8 million in 2016 from $80 million in 2015, according to the regulator.

Finra also ordered firms to pay back $27.9 million in restitution to investors last year, according to the report. The fines helped the regulator post net income of $57.7 million in 2016, compared to a net loss of $39.5 million the year prior, Finra says.

In addition to a boost from fines, the regulator’s portfolio returns grew $70.9 million year-on-year, according to the report.

Two major lending changes mean it’s suddenly easier to get a mortgage (CNBC), Rated: A

First, the nation’s three major credit rating agencies, EquifaxTransUnion and Experian, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete. Specifically, the data must include the person’s name, address, and either date of birth or Social Security number.

Of about 220 million Americans with a credit profile, approximately 7 percent have liens or civil judgments against them. With these hits to their credit removed, their scores could go up by as much as 20 points, according to a study by credit rating firm Fair Isaac Corp. (FICO).

In addition to the FICO changes, mortgage giants Fannie Mae and Freddie Mac are allowing borrowers to have higher levels of debt and still qualify for a home loan. The two are raising their debt-to-income ratio limit to 50 percent of pretax income from 45 percent.

Creating a Bridge Between Fintech and FinServ (qlik), Rated: A

With this in mind, I recently set out to create examples of utilizing the Qlik platform in the Fintech space.

Ripple distributed financial ledger:

Working with our Qlik partner (Pomerol Partners) we utilized the Restful API’s provided by Ripple to access all 8.7 million payments transacted on the Ripple platform.

Lending Club peer-to-peer lending and alternative investing:

Whether it is Fintech, Insurtech, Regtech or any other new & exciting technology, there is one certainty…the data from these systems will need to be combined with other information to get a complete picture of the customer relationship, profitability and risk profile of the business.

OCC SEEKS TO MAKE BANKS FINTECH ENFORCERS (Yodlee), Rated: A

But, even amidst serious uncertainty with regard to the future of a federal charter for certain fintech firms, the OCC continues to demonstrate that it has every intention of continuing to expand its jurisdiction over the fintech market. Earlier this week, the agency released supplementary guidance to its risk management bulletin on third-party relationships for federally regulated banks. The new guidance very broadly defines third-party relationships as “any business arrangement between the bank and another entity, by contract or otherwise.” The guidance further notes that “If a fintech company performs services or delivers products on behalf of a bank or banks, the relationship meets the definition of a third-party relationship,” and the OCC would require that the bank include that fintech firm as part of its OCC-supervised third-party risk management process.

Bank web lending can be faster and cheaper (Banking Exchange), Rated: A

The company, with four subsidiary banks in New York and Pennsylvania, continues to do a traditional community banking business. Yet, just as every local retailer is potentially competing with Amazon and Walmart.com, Tompkins and other commercial lenders face competition from the likes of Kabbage and other business-oriented online lenders that promise fast online service with minimal hassle.

A year and a half ago, the parent company began evaluating web-based services from outside vendors that could help its subsidiary banks deliver what customers desired. What they found was a service that could integrate with their existing systems and credit standards—as a pure technology play, not a substitute for the bank’s own lending.

In January the company began rolling out Lightning Loans, beginning with the Tompkins VIST affiliate.

Payday Lender Taps Wall Street For Cash As Regulations Bite (ValueWalk), Rated: A

As lenders grow, they’re turning to the ABS market for funding as a natural step of diversifying. Securitisation trades began in 2014 and are slowly gaining traction around the world. Last year, P2P Global Investments Plc and Zopa Ltd. produced Europe’s first securitization of unsecured consumer loans originated online. The $179 million transaction was backed by 27,137 lines from individuals. This deal followed Funding Circle’s first securitization of peer-to-peer loans, comprising small-business debt — another first for Europe.

And as the pace of securitization picks up for peer-to-peer, other short-term non-traditional lenders are looking to get into the market. According to the June 30 issue of the Asset-Backed Alert, payday lender DFC Global is eyeing securitization as a funding source.

At least one other payday lender, Check ‘n Go, is known to be looking at the asset-backed bond market as a funding source.

Legislative Update 160 (Experian Email), Rated: A

Highlights:

  • The CFPB estimated in its May 2015 study “Data Point: Credit Invisibles” that more than 45 million American consumers are credit invisible, meaning they either have a thin credit file that cannot be scored or no credit history at all.
  • On June 8, the US House of Representatives passed the Financial CHOICE Act on a strictly partisan vote with Republicans supporting the bill and Democrats opposing it. In addition to making broad changes to the Dodd-Frank Act, the bill would substantially transform the CFPB into an enforcement agency by repealing the Bureau’s supervision authority, abolishing the UDAAP provision
    and prohibiting the public disclosure of complaint data.
  • On June 12, the US Treasury Department released a report on the Administration’s priorities for financial regulatory reform. The report was requested as part of the President’s February Executive Order on Dodd-Frank Reform.
  • Massachusetts H.B. 157 stipulates that no person or company engaged in trade or commerce shall have a right to obtain, possess, sell, lend, distribute, disseminate or use any person’s account number without his/her prior written permission. Account number is defined to include each person’s social security number, driver’s license number, license plate number, bank account number, credit card number, account number at a retail store which sells goods or services, account number at a business which sells goods or services on-line, telephone number and all other account numbers of all kinds and varieties.

See the full legislative update here.

Public Pensions Should Weigh Pros and Cons of Alternative Investments (Plan Sponsor), Rated: A

The allocation to alternative investments more than doubled from 9% to 24% during 2005 to 2015, according to data by the Public Plans Database (PPD), which accounts for more than 95% of pension assets. Between 2010 and 2016, traditional equity returned about 14% compared to private equity at 25% minus fees.

In 2005, for example, the maximum share held in alternatives by any plan was less than 30% and half of plans held less than 10%. As of 2015, however, the maximum allocation among plans was more than 50%, and only 9% of plans held less than 10% in alternatives.

New Teeth Dental Solutions Provides Exceptional Dental Implant Dentistry (Digital Journal), Rated: A

Another unique service that New Teeth Dental Solutions offers is their financing options. Dental service is considered a compulsory service to all people, and at a patient’s convenience, the clinic provides a choice between dental loans (CareCredit, Healthcare lending) and patient financing plans (Lending Club) that allow a low monthly payment with no down payment for at least three to seven weeks.

18 States Sue Betsy DeVos for Refusing to Enforce Student-Loan Protections (New York Magazine), Rated: B

Federal law already allows borrowers to apply for loan forgiveness if they attend a school that deployed fraudulent advertising or violated state consumer-protection laws. But the process for securing such forgiveness can be cumbersome. And some schools limit their students’ capacity to win settlements in fraud cases, by forcing them to pursue justice through arbitration instead of the court system.

These defects became conspicuous during the Obama administration’s final years, as hundreds of for-profit colleges collapsed amid accusations of widespread fraud. The demise of the mega-chain Corinthian Colleges, alone, led to more than 15,000 loan discharges, totaling $247 million.

Eighteen states and the District of Columbia reject that rationale. On Thursday, 19 Democratic attorneys general, led by Massachusetts’s Maura Healey, filed a lawsuit against the Trump administration in federal court, accusing DeVos of refusing to enforce duly enacted regulations in violation of the Administrative Procedures Act. They are hoping to convince a federal judge to order the administration to implement the new rules.

Elevate to Release Second Quarter 2017 Earnings on Monday, July 31, 2017 (BusinessWire), Rated: B

Elevate Credit, Inc. today announced that it will release its second quarter 2017 financial results after the market closes on Monday, July 31, 2017.

United Kingdom

Peer-to-Peer Lender Flender Celebrates First Wave of Successfully Funded SME Loans (Crowdfund Insider), Rated: AAA

The recently launched peer-to-peer lending platform, Flender, announced on Thursday it is celebrating the successful funding of its first batch of SME loans. According to the online lender, companies that received their requested funding include one of Europe’s fastest growing lingerie retailers, a café, and coffee roasting chain, a further education provider and developers of non-toxic disinfectant technology.

MarketInvoice sees record-breaking Q2 (AltFi), Rated: AAA

The growth builds on its previous record set in Q1 2017, with the firm funded invoices worth £161.9m in Q2 2017 providing UK business with critical working capital.

June 2017 was the company’s busiest ever month funding invoices worth £64.2m. The value of invoices funded is up 57.2 per cent from £103m (Q2 2016) to £161.9m (Q2 2017), and the current cumulative value of invoices funded stands at £1.34bn.

VPC Speciality Lending fund sees income growth but NAV hit (AltFi), Rated: A

The £350m VPC Speciality Lending fund saw a fall in its net asset value [NAV] of 0.68 per cent in May after a 0.62 per cent income return but a -1.3 per cent capital loss. It’s income return was the fifth consecutive payout increase.

Bridging ‘dabblers’ expected to exit the market (Mortgage Solutions), Rated: A

Earlier this week, asset finance lender Borro announced it was leaving the bridging sector with new chief executive officer John Allbrook citing overcrowding in the market as the reason for the decision.

“However, if you are well funded and provide a first-class service there is plenty of business. I suspect the cost of funding was prohibitive for Borro which was only a small player. Potentially others will exit this market, such as the ‘dabblers’ who may excel elsewhere but have been drawn into the property market seeing the potential returns while not realising what is involved and how competitive it is.”

Some of the UK’s hottest fintech firms went down, including Monzo and Revolut (Business Insider), Rated: A

A number of UK fintech startups encountered technical issues on Thursday, warning customers that their payments may not go through.

App-only banks and firms including Monzo, Revolut, Loot, Starling Bank, and Curve all ran into problems due to a supplier that provides some of their underlying technology.

How fintech can beat the banks and offer you competitive savings rates (Startups.co.uk), Rated: B

Rather than the modest 0.1% or 0.5% offered by most banks, the alternative saving and investment sectors have seen significant growth, offering rates of up to 15% per annum.

Peer-to-peer loans

This is currently one of the most popular ways to obtain a higher interest rate, with the peer-to-peer (P2P) lending industry estimated to reach £7bn in 2017.

Equity crowdfunding

This allows you to pitch to purchase a stake in a small business or start-up. Usually through a platform like Crowdcube, the business states how much of a stake they are willing to give up based on their valuation e.g. 7% or 15%.

Product Savings Rate Per £1,000 per annum Source
Peer to peer loans 3.3% to 9.9% £1,033 Zopa
Innovative Finance 8% £1,080 Innovative Finance ISA
Property investing 3.5% £1,035 Landbay
Business loans 10% to 15% £1,150 Rebuilding Society
Guarantor loans 10% £1,100 Guarantor My Loan
Equity Crowdfunding 1% to 20% Depends Crowdcube
China

PAG, Primavera Lead $ 117M Round In Online Unsecured Loan Lender Dashu Finance (China Money Network), Rated: AAA

Asian alternative investment management firm PAG and China-focused private equity firm Primavera Capital Group have led a RMB800 million (US$117 million) series C round in Dashu Finance, a Shenzhen-based online lender of unsecured loans to small and micro enterprises that traditionally could not secure funding from banks.

Dashu specializes in credit analysis based on big data, a method traditionally applied only to credit card loans and micro loans. It has issued over RMB200 billion in accumulated unsecured loans to individuals over the past several years, it said in an announcement.

In addition, Dashu offers its credit analysis tools to traditional financial institutions such as banks. To date, it has helped commercial banks issue micro loans worth roughly RMB10 billion. The cumulative non-performing loan ratio of these loans is around 2.3%, it says.

P2P firm Jusheng gets new funding (Shanghai Daily), Rated: A

ONLINE finance firm Jusheng Assets announced yesterday in Shanghai to finish a new round of finance, which made its registered capital hit 300 million yuan (US$43.5 million) and triple the previous level.

The new investor Zhejiang Fengzhou has core business in tourism, hotel and construction materials, which will help the platform find projects related to consumption upgrade as the national strategy, said Yang Dengpeng, chairman of Jusheng.

European Union

Challenger Bank BNI Europa Announces “Puzzle”, an Online Lender to Streamline Consumer Credit (Crowdfund Insider), Rated: AAA

Announced today, “Puzzle“, as it has been named, is the first totally digital and real time credit application in the Portuguese market.

“Puzzle” offers credit of up to three thousand euros with different payment maturities and is intended to be a quick response to small credit needs.

Accel leads Series B round for PayFit (PE Hub), Rated: A

PayFit, which simplifies payroll management and core HR processes for SMBs, announces that it has closed a €14 million Series B investment led by global venture capital firm Accel, with participation from Xavier Niel and Otium Venture.

Founded just one year ago, the startup has grown to have more than 600 clients and a team of more than 40 employees. This round will enable PayFit to continue to expand its suite of digital HR processes, kickstart its international expansion, with an initial focus on Europe, and double its workforce by 2018.

PayFit’s ambition: become the go-to solution to manage core HR and payroll processes for SMBs in Europe
PayFit drastically simplifies payroll management, which can be complex, expensive and time consuming for businesses of all sizes, particularly SMBs in countries with complicated labor laws. PayFit’s Software-as-a-Service solution is fast, intelligent, intuitive and automated. It allows employers to easily manage payroll on their own, saving time and money, and comply with local labor laws without having to be a payroll expert.

Accelerating internationalization – first step: Europe
The startup is planning to launch internationally with an initial focus on Europe. Rollout will begin with Spain, Italy, Germany and the United Kingdom. Markets with labor laws that can be as complex as those in France are a particular focus, as PayFit can bring significant core HR and payroll improvements to local businesses. In each market, PayFit will launch a fully localised version of its solution, covering all relevant regulations.

International

Why Banks And Startups Should Collaborate On Fintech (Forbes), Rated: AAA

Volume migration to pure digital players remains in the low single digits in the US, multiple challenger banks in the UK are facing funding and regulatory issues before they are even out of the gate, and many of the more successful fintech insurgents have been bought by incumbent banks just as they matured into legitimate competitors. Disruption of the banking industry hasn’t turned out to be a dramatic big bang; instead, the erosion of bank profitability by low interest rates and increased regulatory costs has triggered an industry-level response in which banks are using technology to improve efficiency and the customer experience. Instead of going extinct, the dinosaurs have been evolving.

London-based TransferWise, which allows consumers to transfer money internationally at a fraction of the traditional cost, is actually disruptive because it lowers fees by smart trade matching between buyers and sellers.

But TransferWise is an exception. Most fintechs have struggled to create sustained competitive differentiation.

This doesn’t mean that banks can be complacent. The asteroid strike on the banking industry is still possible, but is far more likely to come from existing tech giants than small startups. Amazon is now lending a billion dollars a year to merchants on its platform, a drop in the ocean for the largest commercial banks, but a statement of intent. While it hasn’t happened yet, Accenture research suggests that the combined disruption from fintech startups and Google, Apple, Facebook and Amazon could cause full-service banks in developed markets to lose about 35% of their market share over the next five years.

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

 

The unconquerable attraction of cash (ATM Marketplace), Rated: AAA

An online survey of consumers in France, Germany, Israel, the U.K. and the U.S. poll revealed that fintech does appear to be gaining traction, with Israel emerging as a leader in early-adoption, according to a press release.

Nevertheless, cash remains king in most of these countries. For instance, in Germany, 75 percent of adults still use paper currency and coins to make purchases at least once a week.

What is more, nearly 1 in 10 Israeli adults say they have used alternative financing or lending services within the last 12 months.

Source: ATM Marketplace

 

Source: ATM Marketplace
Source: ATM Marketplace
Australia

KKR bids $ 500 million for Australian mortgage lender Pepper (PE Hub), Rated: A

U.S. private equity giant KKR & Co LP moved to bolster its presence in Australia’s lucrative mortgage market on Wednesday, joining a rush of players hungry for a slice of a property boom even as the sector shows early signs of slowing.

KKR Credit Advisors LLC made a $500 million bid for non-bank lender Pepper Group Ltd at an indicative price of A$3.60 per share, a 4 percent discount to Tuesday’s close. Pepper shares sank 7.2 percent to A$3.48 on Wednesday.

India

How alternative lending startups are rewriting traditional lending habits in India (India Times), Rated: AAA

People like Desai form the key clientele for financial-technology startup MoneyTap, which has developed a lending product called Credit Line—essentially, it assigns Rs 25,000 to Rs 5 lakh to a borrower deemed eligible for a loan.

The startup has nearly 300,000 registered users in about six months of launch. Like MoneyTap, which recently raised about $9 million from Sequoia India and others, a dozen-odd startups have attracted a string of investors to back them in the past few months.

EarlySalary secured $4 million from IDG Ventures and Diwan Housing Finance, and PaySense recently raised $5.3 million from Jungle Ventures.

The lending models are diverse—to allow customers to buy online; to buy consumer durables from regular stores; providing salary advances; or helping cover unplanned requirements such as medical bills.

Yes Bank taps AI to directly offer small loans to students (India Times), Rated: A

Yes Bank has partnered with fintech startups like Redcarpetup, Anytime Loans and FRS Labs among few others to adopt innovative technology based solutions for various businesses, such as lending, anti-fraud detection and easier customer onboarding processes.

Redcarpetup will allow the bank to lend to students, which is something banks have never done before. The technology company has identified about 100 colleges in the National Capital Region and underwrites applicants on the basis of the college, the type of course, their education background and their social circle.

Anytime Loans is an automated P2P lending platform that uses artificial intelligence to read facial features and feed it into a predictive model that determines the borrower’s propensity to default. The company has disbursed Rs 68 crore over the last 30 months to 38,700 entities for personal loans, business loans and education loans. Its gross defaults are at a low 0.6 per cent.

Where is fintech headed? Seven start-ups chart their course (livemint), Rated: A

Atyati Technologies: Mobile delivery

Bengaluru-based Atyati Technologies Pvt. Ltd, is a technology platform provider for the rural banking sector in India.

The company’s long-term vision is to have more services and products—custom lending products, insurance, e-tailing, etc.—across more geographies and more points of service, besides achieving quality-of-service levels in remote areas that are on a par with those in the metros.

FinBox: Banking on apps

This fintech aims to increase the revenue of lenders by increasing the number of customers on their books by reducing the cost of acquiring and servicing the loan—which it essentially does by building software tools such as application programming interfaces (APIs) and software development kits (SDKs).

FlexiLoans: Data-driven

The goal of FlexiLoans, the fintech platform run by Mumbai-based FlexiLoans Technologies Pvt. Ltd, is to provide working capital financing to small- and medium-sized businesses in India that are currently underserved by traditional institutional channels due to lack of collateral or inadequate credit history.

FundExpert: Robo adviser

Gumption Labs Software Solutions Pvt. Ltd, which launched FundExpert’s automated investing platform in 2016, wants to make monitoring investments “super-easy, using algorithms”.

IndianMoney.com: Financial guidance

Today, IndianMoney.com boasts of being “India’s largest financial education company”, with over 200 employees, serving 80,000 financial intermediaries and 3 million consumers.

KrypC: Blockchain riders

This fintech provides blockchain technology solutions to various organizations to enable them “to utilize blockchain features such as privacy, security and trust”, among others.

Turtlemint: Insuring its future

Touted as India’s first online-offline insurance platform, Turtlemint is building a pan-India network of offline partners and, according to co-founder and CEO Dhirendra Mahyavanshi, has been “a pioneer” in the online insurance aggregation domain with offerings like ‘match score’, ‘policy recommender’, ‘renew in a snap’, etc.

Fintech is now an innovator and enabler, says KPMG India’s Neha Punater (livemint), Rated: A

“This industry is definitely a force to reckon with,” Punater added, pointing out that the global annual growth of the fintech sector at 55% is not led by volume expansion but by investment, which shows investor confidence in the space. “Compared to about 12,000 global start-ups, there are about 900 Indian fintech firms—and over 120 of them were started in 2016 alone. An investment of $2.25 billion has been infused into Indian fintechs from 2010 to 2016,” she added.

The Indian fintech market, according to her, typically mirrors global trends. “Payments-related companies have the highest market share at 25% in India and in the world. Payments, lending and wealth management are growing, while P2P (peer-to-peer) lending, blockchains and payment banks are still nascent. Many payments-related activities are still in the business-to-consumer space but we haven’t seen much happening on the business-to-business side,” she added.

According to Punater, wealth tech is the third-largest sector in the fintech space and is still relatively small.

Asia

 

TWINO expands into Central Asia with Kazakhstan loans (IBS Intelligence), Rated: AAA

TWINO, a European peer-to-peer lending platform, has announced that it has started to list short-term loans via its Kazakhstan originator.

Kazakhstan is the sixth country to appear on the peer-to-peer lender’s platform. It is also the first time a European peer-to-peer lender has expanded into Central Asia.

The Kazakh loans have a duration of one month and will offer investors a return rate of 11% per annum.

Convenience drives growth of South Korean P2P lenders (Asian Review), Rated: A

The Korea P2P Finance Association said that accumulated loans of its 56 members reached 1.2 trillion won in June, up 665.1% from a year ago when the total reached 152.6 billion won. Month-on-month, total loans rose 17.5%.

“It is very convenient. Borrowers can get short-term loans quickly while investors enjoy higher profitability,” said Kim Soo-hyun, an analyst at Shinhan Finance Investment. “They may threaten banks’ business in the long term, if they become equipped with more advanced technology infrastructure.”

Lenders focusing on real estate projects are leading the market, with the biggest lender, Tera Fintech, accounting for 147.5 billion won of total loans in June, followed by Roof Funding with accumulated loans of 114.3 billion won.

Deputy Finance Minister I of Malaysia: Disruption in Banking is The Normal (SAT PR News), Rated: B

In a room of over 200 senior level bankers, Deputy Finance Minister I, YB Dato’ Wira Othman Aziz made a call to Malaysian banks during his opening speech at the 9th BankTech Asia Conference & Exhibition, an event co-organized by Knowledge Group of Companies, to disrupt themselves before others do it for them.

Quoting recent studies from Gallup which states that more than half of Malaysian banking consumers are indifferent towards their primary banks, YB Dato’ Wira Othmanbrought attention to this point to illustrate the industry’s need for an overhaul to remain relevant.

Authors:

George Popescu
Allen Taylor