Wednesday August 8 2018, Daily News Digest

OnDeck KPIs

News Comments Today’s main news: SoFi reports $200M loss in Q2. OnDeck jumps 18%. LendingClub sees record net revenues in Q2. Alipay fined for regulation violations. Dianrong raises $40M. Even Financial raises $18.8M. Today’s main analysis: OnDeck’s Q2 2018 earnings presentation. Today’s thought-provoking articles: GreenSky, OnDeck, LendingClub earnings. Where did it go wrong for Wonga? OnDeck’s Q2 earnings presentation. United States SoFi reports […]

OnDeck KPIs

News Comments

United States

United Kingdom

China

Other

News Summary

United States

SoFi Is Said to Report Second-Quarter Loss of $ 200 Million (Bloomberg), Rated: AAA

Writedowns of underperforming loans drove Social Finance Inc. to a second-quarter adjusted loss of about $200 million, according to people familiar with the matter.

OnDeck jumps 18% after Q2 beat and raise (Seeking Alpha), Rated: A

OnDeck (NYSE:ONDK) surges 18% in early trading after reporting Q2 adjusted EPS that beat consensus by 8 cents and boosting year adjusted net income guidance to $30M-$36M.

OnDeck Reports Second Quarter 2018 Financial Results (Markets Insider), Rated: AAA

OnDeck today announced second quarter 2018 Net income of $5.8 million, Adjusted Net income of $10.0 million and Gross revenue of $95.6 million.

Source: OnDeck Earnings Presentation

Review of Financial Results for the Second Quarter of 2018

Net income was $5.8 million, or $0.07 per diluted share, improved from the Net loss of $1.5 million, or $0.02 per diluted share, in the year-ago period.

Adjusted Net income was $10.0 million, or $0.13 per diluted share, compared to Adjusted Net income of $4.7 million, or $0.06 per diluted share, in the year-ago period.

Unpaid Principal Balance grew 3% sequentially and 8% from a year ago to $1,027 million. Originations of $587 million were consistent with the prior quarter reflecting an increase in the number of loans funded and decrease in the average loan size.  Originations increased 26% from a year ago with growth in both term loans and lines of credit.

Gross revenue increased to $95.6 million, up 6% from the prior quarter and 10% from the year-ago quarter, driven by higher Interest income. The Effective Interest Yield was 36.1%, up from 35.6% in the prior quarter and 33.5% in the year-ago quarter, primarily reflecting increases in average loan pricing.

Source: OnDeck Earnings Presentation

Guidance for Full Year 2018

OnDeck increased its guidance for the full year ending December 31, 2018:

  • Gross revenue between $380 million and $386 million, up from between $372 million and $382 million,
  • Net income between $10 million and $16 million, up from between $0and $10 million, and
  • Adjusted Net income between $30 million and $36 million, up from between $18 million and $28 million.
Source: OnDeck Earnings Presentation

See OnDeck’s full Q2 2018 earnings presentation here.

Why On Deck Capital Stock Is Soaring Today (The Motley Fool), Rated: A

Shares of On Deck Capital (NYSE:ONDK) were soaring by nearly 25% as of 1 p.m. EDT on Tuesday as the company beat consensus earnings expectations in the second quarter and raised its outlook for the remainder of the year.

Lending Club: bob and weave (Financial Times), Rated: AAA

Now, the top-line numbers are improving. Second-quarter figures released after market close on Tuesday showed record net revenue, up 27 per cent from a year earlier at $177m, from record quarterly loan originations of $2.8bn.

On top of all that, there was a big writedown this quarter of an acquisition made four years ago, during an ill-fated push into supplying loans to medical patients. Over the first six months, total expenses came to $1.28 for every dollar of net revenue.

Roundup of Q2 2018 Earnings: GreenSky, OnDeck, LendingClub (Lend Academy), Rated: AAA

GreenSky went public just a few months ago on May 24, 2018. Their IPO was significant for a couple of reasons. One was the lack of US based fintech IPOs over the last few years and the second was that GreenSky is a wildly successful business. Last year they reported $139 million in net income on revenues of $326 million.

Source: Lend Academy

OnDeck reported net income of $5.8 million for the quarter with gross revenues of $95.6 million, up 10% year over and 6% from the previous quarter. Originations grew to $587 million, up 26% from the prior year period, but down slightly from the previous quarter. The company’s trend of increasing the number of loans funded and decreasing the average loan size continues.

Source: Lend Academy

CEO Scott Sanborn noted that LendingClub’s core business is firing on all cylinders with record revenue and originations. The company has seen a 50% increase in applications year over year. Originations were $2.8 billion, up 31% year over year and up from $2.3 billion in the previous quarter. For context, the company originated their last high water mark of $2.75 billion in the first quarter of 2016. Revenues came in at $177 million, up 27% year over year.

Source: Lend Academy

Even Financial raises $ 18.8 million from GreatPoint Ventures, Goldman Sachs and others (TechCrunch), Rated: AAA

Even Financial, a fintech startup that connects the disparate entities of the financial services industry, recently raised a $18.8 million Series A round led by GreatPoint Ventures with participation from Goldman Sachs, Canaan Partners, F-Prime Capital, Lerer Hippeau and others.

What’s missing from the OCC’s fintech charter (American Banker), Rated: A

Although the OCC emphasizes that it’s holding these special-purpose charters to standards equivalent to those demanded of national banks, this is only sort of true with regard to the named prudential requirements, and it looks to be completely incorrect on critical restrictions on competitive and financial risk. These omissions have significant consumer protection, safety and soundness and structural impacts. Absent egregious violations, a charter granted cannot be revoked. The OCC should be sure it isn’t a shadow-bank enabler before it hands out these high-powered charters.

Is the backing of the banks enough for Zelle to beat Venmo? (Marketplace.org), Rated: A

Rahul Chadha follows peer to peer mobile banking for the research organization eMarketer. His firm says Zelle will overtake Venmo this year.  Chadha spoke with Marketplace’s Lizzie O’Leary about the two payment systems.

US challenger banks: who’s who and what’s their tech (Banking Tech), Rated: A

BankMobile
A digital bank created by an established US-based financial services player Customers Bancorp. BankMobile opened for business in early 2015.

It caters mainly for students and offers a low-fee checking account with no monthly fees and no overdraft/non-sufficient funds (NSF) fees. It also provides personal loans.

Chime
Founded in 2014, Chime has raised over $100 million funding to date, values the business at around $500 million and has over one million accounts. It employs around 100 people.

Endeavor Bank
Endeavor Bank opened its doors for business in San Diego, California in January 2018, following an initial capital raise of $26.6 million and the backing of over 450 investors/owners. It is a brand new bank, with no merger legacy.

Finn
Finn is a digital bank account for smartphones created by JP Morgan Chase.

GoBank
GoBank was launched in 2013 by Green Dot Corporation, which claims it to be “the first bank account designed from scratch to be opened and used on a mobile device”.

Iam Money
Iam Money has its HQ in Chicago and an office in San Francisco. It also has two offices outside the US, in Dublin and London.

It has secured $3 million of funding, and plans to have $20 million when it launches.

Marathon International Bank
A start-up bank for the Ethiopian American community, based in the Washington DC area. Its founders are Tekalign Gedamu, a retired economist and former MD of the Development Bank of Ethiopia, and Tesfaye Biftu.

Marcus
An online platform launched by Goldman Sachs – named after Marcus Goldman, one of the firm’s founders – offering no-fee personal loans and high-yield savings to consumers.

Moven
Launched in 2011 by Brett King, Moven describes itself as “the world’s first real-time mobile money tool”. It is a digital bank account with a mobile app.

N26
A challenger bank from Germany, now working on its US presence, including obtaining a banking licence. It opened early access to users in the US in October 2017 and has an office in New York with eight staff.

PurePoint Financial
PurePoint Financial was launched in early 2017 by MUFG Union Bank. It is a “hybrid digital bank” offering savings accounts and certificates of deposit (CDs).

Revolut
European banking challenger Revolut opened early access to users in the US in September 2017. It says it aims “to clean up the American banking system”. It provides digital banking services to consumers and businesses.

Simple
Digital banking service Simple was founded in 2009 in Portland, Oregon. It describes itself “a tech company, not a bank”.

In early 2014, it was acquired by BBVA Compass for $117 million.

SoFi

In early 2017, it raised another $500 million, and spent $100 million (in stock) on Zenbanx, a mobile banking start-up. Zenbanx offered a mobile account in the US and Canada that lets people save, send and spend money in multiple currencies. This deal demonstrated SoFi’s interest in branching into other financial services, with a wealth management tool in beta at the time of the acquisition.

Stash

In early 2018, Stash raised $37.5 million in Series D funding for product expansion, and shortly afterwards teamed with Green Dot Corporation and its subsidiary bank, Green Dot Bank, to launch mobile-first banking services (underpinned by Green Dot’s Banking-as-a-Service platform).

Studio Bank
In 2017, Tennessee-based Studio Bank filed an application to become Nashville’s “first newly chartered de novo bank in nearly a decade”.

Varo Money
San Francisco-based mobile banking service Varo Money was founded in 2015. It applied for a national bank charter and federal deposit insurance in mid-2017, to form Varo Bank.

Treasury urges mortgage sector to embrace digital tech (National Mortgage News), Rated: A

The Treasury Department’s recent report on how to regulate nonbanks drew praise not just from tech startups but also from mortgage industry insiders.

In addition to recommendations for a new federal fintech charter and that regulators pull back from payday lending rules, the report contained a section that might be music to a mortgage banker’s ears, including support for the industry’s automation efforts and another call to soften the use of the False Claims Act against lenders.

Blend Launches Insurance Agency (Finovate), Rated: A

Mortgagetech company Blend is venturing into insurance. The San Francisco-based company launched Blend Insurance Agency, an extension of its digital mortgage platform that offers borrowers a range of options for homeowners insurance.

RealtyMogul Sells Four Real Estate Properties on Behalf of Digital Investors (Citizen Tribune), Rated: B

The first property is a 1,242-unit self-storage facility in Fayetteville, NC. It was acquired in December 2013 and sold in January 2018. It was acquired for $6,750,000 and sold for $9,645,000, representing a 43% increase in capital value from acquisition.

The second property is a 40,000-square foot office building in Tamarac, FL. It was acquired in May 2016 and sold in February 2018. It was acquired for $4,150,000 and sold for $4,900,000, representing an 18% increase in capital value from acquisition.

The third property is a 72-unit multifamily apartment building in Ogden, KS. It was acquired in July 2013 and sold in April 2018. It was acquired for $4,000,000 and sold for $4,450,000, representing an 11% increase in capital value from acquisition.

The fourth property is a 208-unit multifamily apartment building in Euless, TX. It was acquired in February 2015 and sold in May 2018. It was acquired for $12,375,000 and sold for $20,900,000 after a value-add renovation program, representing a 69% increase in capital value from acquisition.

Zillow gets into the mortgage business, acquires Mortgage Lenders of America (TechCrunch), Rated: B

Zillow, the publicly traded real estate portal and lead generation service, has acquired Mortgage Lenders of America. This is Zillow’s first move into originating mortgages.

DriveWealth and Bambu Launch Robo Platform for Registered Investment Advisors (BusinessWire), Rated: A

DriveWealth Holdings, Inc. (“DriveWealth”), a fintech company providing brokers, digital advisors and mobile online financial services companies seamless access to the U.S. securities market, and Bambu, a global provider of robo-advisory technology, today announced the launch of a white-label, end-to-end robo-advisory platform solution for the wealth management industry.

Arizona’s Regulatory Sandbox Is Open for Play (The National Law Review), Rated: B

To be considered for admission, applicants must complete the nine-page application and pay a $500 application fee.  Each application must be for an innovative financial product or service as defined by the enabling legislation.

United Kingdom

RateSetter: FCA marketing restrictions are “disproportionate” (P2P Finance News), Rated: AAA

RATESETTER has hit back at proposed marketing restrictions for peer-to-peer lenders, stating that they are “disproportionate” and “clunky”.

Where did it all go wrong for Wonga? (The Guardian), Rated: AAA

Just when things were meant to be getting better for Wonga, it emerged at the weekend that the payday lender’s investors had to rescue it with a £10m capital injection.

The emergency fundraising is the latest episode in Wonga’s rapid rise and fall. Just six years after the company was touted for a flotation that would have valued it at more than $1bn (£770m), it is reported to be worth just $30m.

Regulation didn’t wipe out Wonga – losing its reputation did (City A.M.), Rated: A

WHEN PAYDAY LENDER Wonga launched in 2007, it was tipped to become a £1bn success story. Today, the company is worth just £23m and has only managed to avoid insolvency thanks to a last-minute £10m boost from investors. So what went wrong?

Rothschild’s Augmentum receives £3.5m Zopa boost (Citywire), Rated: A

Augmentum Fintech (AUGM), the venture capital fund spun off from RIT Capital Partners (RCP) earlier this year, has received a £3.5 million boost from the revaluation of peer-to-peer lender Zopa.

LendInvest makes a series of changes to BTL product (Bridging and Commercial), Rated: A

The specialist lender has removed its requirement for a debenture or floating charge on limited company applications.

It has also reduced its ICR assessment rate to 5% across all products with the exception of the five-year fixed interest product, which remains at 4.19%.

Why brokers should be allowed to speak to decision makers (Bridging and Commercial), Rated: A

Roy Armitage, head of credit at LendInvest (pictured above), is clear that, for a specialist lender, a good working dialogue between the underwriters and the brokers placing the business is crucial.

Participate in the Cambridge Centre for Alternative Finance Research Study (Lend Academy), Rated: B

They are winding up their largest survey ever right now. In the past they have produced multiple reports targeting the various regions around the world including: the United Kingdom, Europe, the Americas, Asia and Africa. This year they are combining everything into one big study.

If you have not participated in the survey yet time is running out (while the survey says it closes on July 22nd, they have extended the deadline for another week or so). We need every platform in this country and around the region to participate. To learn more you can read more about this comprehensive piece  in 

China

China’s Central Bank Fines Alipay (PYMNTS), Rated: AAA

Alipay, a payment affiliate of Alibaba, has been hit with a $601,846 fine by the Shanghai head office for the People’s Bank of China.

According to a report in Reuters, citing the central bank, the fine was for payment services regulations violations. The regulator didn’t provide any other details.

Dianrong pockets $ 40 million funding amid mounting P2P defaults in China (Technode), Rated: AAA

Chinese P2P lending platform Dianrong announced that it has raised $40 million of funding from Dalian Financial Investment Group Co. Ltd. The current round will increase the company’s total funds raised to date to over $500 million. Its previous investors include big titles such as Standard Chartered, GIC Private Limited, Singapore’s sovereign wealth fund, CMIG Leasing, Simone Investment Managers, etc.

China’s P2P lending meltdown (CNBC), Rated: A

China’s P2P lending meltdown from CNBC.

International

Prime Trust to Enable Real Estate Syndicators & Securities Issuers to Accept Funds in Bitcoin & Ethereum (Crowdfund Insider), Rated: A

Prime Trust, a blockchain driven trust company, announced on Monday it has launched a new technology that enables real estate syndicators and securities issuers to accept funds from investors in the form of Bitcoin and Ethereum, frictionlessly and with zero crypto-market risks to the syndicator or issuer. According to Prime Trust, the technology enables holders of these virtual currencies to invest in real estate, crowdfunding and other private and public securities offerings without having to go through the cumbersome and often confusing process of liquidating tokens and then wiring funds in USD to an escrow account at Prime Trust.

TransUnion Partners with EXL to Create Turnkey Current Expected Credit Loss (CECL) Solution (MarketWatch), Rated: B

TransUnion TRU, +0.56% announced today it is partnering with global technology and analytics company EXL EXLS, +0.93% to create a seamless technology solution for lenders to comply with the new Current Expected Credit Loss (CECL) accounting rule. Information about the new accounting rule will be highlighted during TransUnion’s webinar, “Major Hurdles to Overcome to be CECL-Ready,” scheduled for 1 p.m. CDT on August 15.

Australia

Financial advice institutions to refund over $ 800 million (Business News Australia), Rated: AAA

As the revelations from the Royal Commission continue to pour in, the Australian Securities and Investment Commission (ASIC) has revealed that, in total, Australian financial advice institutions will refund customers over $800 million in reparations over fees for no service (FFNS) programs.

Australian challenger banks: who’s who (and what’s their tech) (Banking Tech), Rated: A

86 400

Launched in June 2018, the bank is led by former ANZ Japan CEO, Robert Bell, and ex-Cuscal Payments CIO Brian Parker. Joining as incoming chairman is Anthony Thomson, co-founder and former chairman of Atom Bank and Metro Bank.

Judo Capital

For its tech, it uses a variety of different vendors. Unifii’s Business Transformation Platform is used for its technical infrastructure. For its small business lending platform, it will use one from Realtime Computing, based in Perth, Australia.

Pelikin

Digital banking start-up Pelikin aims to reshape the way people save, send and spend their money in Australia and while travelling abroad. The company’s slogan is “spend like a local”. The founder is Sam Brown.

UBank

Unveiled in 2008 and developed and supported by National Australia Bank (NAB). It operates under NAB’s banking licence, and offers home loans, online savings accounts, and term deposit accounts. UBank has more than 400,000 customers.

Volt Bank

Sydney-based Volt Bank was given Australia’s first new restricted banking licence and is now working towards becoming a fully licensed bank.

Xinja

The neobank emerged from the shadows to unveil its plans for a mobile-only digital bank in 2017. It will have no bricks and mortar branches.

MENA

Visa Invests In Israeli Start-up Behalf (RTT News), Rated: AAA

Visa, Inc. (V) on Tuesday announced an investment and partnership with Israeli start-up, Behalf, to support small business growth through easy-to-access capital and financing.

Authors:

George Popescu
Allen Taylor

Wednesday July 5 2017, Daily News Digest

abs market overview

News Comments Today’s main news: SoFi to shut down Zenbanx. Red Ventures to buy Bankrate website for $1.24B. BofE to get tough on consumer lending. UK P2P lending surpasses 10B GBP. China re-thinks social credit. Korean P2P lending passes 300B won. LendInvest out of P2P lending. Today’s main analysis: US ABS market overview. Traditional wealth management challenged by robo boom. Today’s thought-provoking […]

abs market overview

News Comments

United States

  • SoFi to shut down Zenbanx. GP:”We do not know the details of the acquisition but we assume part of the due diligence SoFi was aware of this issue and therefore they didn’t purchase Zenbank for their customers or services, but perhaps for their team and know how?”AT: “I suspected this would happen. If they have the technology and the talent, what else do they need?”
  • US ABS market overview. GP:”steady growth in all segments except maybe auto”
  • How the market pushed Realty Mogul out of residential fix and flips. GP:”I continue to believe that fix and flip is highly correlated with the economic cycle and if a company relies on it there will be years with no origination in that market at some point.”AT: “Markets, and market conditions, change. This looks like a smart move for Realty Mogul. A good rationale, at least.”
  • Ally Bank online savings APY increases to 1.15%. GP:”Goldman Sachs online Bank increased it, Ally increased it… perhaps the FED rate adjustment is having an impact or perhaps the competition for savings dollars is increasing. Or both.  “AT: “If consumers can get better savings interest rates at online banks, why wouldn’t they?”
  • Inside the arms race between banks and startups. AT: “Focuses on negatives for banks. Seems a bit one sided. I don’t believe banks are out of the picture just yet, but we will likely see a steady decline soon. The survivors will be those banks that adapt and adopt the technology of online lenders.”
  • LendingTree, LeadsCon unveil first $25K startup innovation spotlight.
  • Tide raises $14M. GP:”Congratulations!”
  • Lifshitz&Miller investigate LendingClub. GP:”All public companies have an ongoing litany of lawsuits as soon as their stock does something un-usual. This is normal life for a public company in the US.” AT: “I don’t understand why now, a full year after the Renaud Laplanche issues.”
  • Red Ventures to buy Bankrate website for $1.24B. GP:”This is big news, and an amazing valuation. There is money in customer acquisition for fintech.”
  • Goldman raises $1B for real estate fund. GP:”Goldman has been in the real estate funding business for long time. focused on large commercial properties. Perhaps a good usage of the savings capital from Goldman Sachs bank could be real estate crowdfunding as well in the same way as Marcus works for unsecured personal lending? $1B for Goldman is not much money, this is not big news anyway. “
  • Suretly launched initial chocolate offering. GP:”Very amusing, but looks a little desperate.”

United Kingdom

China

European Union

Australia/New Zealand

India

Asia

News Summary

United States

Six months after acquisition, SoFi is shutting down Zenbanx (TechCrunch), Rated: AAA

Online lending company SoFi is closing down Zenbanx, the online banking provider it bought earlier this year. In an email sent to Zenbanx customers, the company announced that it will close all accounts at the end of next month.

According to a SoFi spokesperson, Zenbanx had a partnership with Wilmington Savings Fund Society (WSFS) that expired this month and, rather than renew it or find another partner, the company decided to just close existing accounts.

US ABS Market Overview (Finsight.com), Rated: AAA

Recent New Issue

The Market Pushed Us Out of Residential Fix and Flip (Realty Mogul), Rated: AAA

If you are like many investors, you loved our residential loan product. Short term investments with high yield (9-12%) and monthly distributions, what’s not to love? And as much as our investors love them, you will no longer find them on RealtyMogul.com. We stopped originating them.

The purely local nature of fix and flip lending changed with online lenders having nationwide reach and access to tremendous amounts of capital, either from retail or institutional investors. At one point, RealtyMogul.com had in hand nearly $1 billion in capital commitments to purchase fix and flip loans from institutional buyers – that’s a lot of homes!

In late 2015 we started to notice a market shift. Fix and flip loan pricing started to drop. First it was 11%, then 10%, then 9%, and in many major markets it dropped to 8%. Throw in the cost of servicing these loans and on an 8% loan, investors’ estimated return is 7%.

At 8%, there should be a relatively lower risk profile to a loan. But in fact, the opposite was true. The dramatic increase in capital in the market meant that riskier loans were demanding lower and lower rates. Borrowers with great experience, credit and lower leverage were able to get rates in the 4-5% range from banks, whereas the 9-12% loans were only available in markets where there were no alternatives and the risk was fairly high.

Ally Bank online savings APY increases to 1.15% (Reddit), Rated: A

Chat rep said that my account should reflect the new rate by the end of today.

Peek Inside The Fintech Arms Race Between Banks And Startups (International Business Times), Rated: A

Capital One is opening Capital One Cafes in major cities across the U.S., with hip decor and more laidback consulting vibes than traditional branches. JPMorgan is trying the same idea with its Manhattan technology hub. Bloomberg reportedthe bank’s $9.6 billion technology budget coincided with new startup-style offices featuring foosball tables, open workspaces and snacks. But it might be too little, too late.

While, money transfer apps like Apple Pay, Venmo and WorldRemit garner widespread adoption, some experts predict banks could also lose well over half their retail profits to fintech startups. Flashy offices won’t change the fact that the days of traditional banking are over.

Nubank looks beyond traditional credit scores, using cellphone data and driver’s license information to find creditworthy customers who would never meet the requirements of a traditional bank. Like SoFi mortgages in the U.S., Nubank interest rates are flexible and can change as the customer’s financial security increases. Combine that with a lack of fees plus a smooth mobile experience, and traditional credit cards seem very outdated by comparison.

According to a Gallup poll, the amount of Americans who feel confident in U.S. banks dropped from 49 percent in 2006 to just 27 percent by 2016.

A nationwide survey of 500 chief financial officers byWEX Virtual Payments found 55 percent consider mobile payment options very important, in addition to 54 percent who say to same of blockchain solutions.

53 million Americans aren’t served by the current credit score market,  but have great cash flow,” Thomas told IBT. Nubank in Brazil and the fintech startup Tala, which has distributed around 2 million micro-loans in places like in Kenya and Tanzania, prove there’s no need to restrict loan eligibility to traditional metrics.

LendingTree, LeadsCon Unveil First-Ever $ 25,000 Startup Innovation Spotlight (IT Business Net), Rated: A

LendingTree, the online loan marketplace, and Access Intelligence, a business information and marketing company, today announced a new initiative to showcase the top startup companies in financial technology (fintech) lead generation at LeadsCon this summer.

The “LendingTree Startup Innovation Spotlight” at LeadsCon’s Connect to Convert will recognize the most innovative fintech startups across the consumer lead generation, call center and customer experience sectors. Startups around the world can apply today at  a chance to receive exposure, bragging rights and $25,000 in cash. Finalists will be announced in August and selected live on stage amid 1,000 industry executives at LeadsCon’s Connect to Convert industry conference and expo, August 21-23 at the New York Hilton Midtown.

Banking startup Tide raises $ 14 million to ‘give small businesses back their time (Business Insider), Rated: A

Banking startup Tide raised $14 million in one of the largest Series A funding rounds closed by a fintech company this year.

Tide, a digital-only banking app aimed at small businesses, has also partnered with online lender iwoca, in a move to allow small companies access to loans of up to £100,000.

The funding round was led by specialist fintech investor Anthemis, along with Passion Capital, LocalGlobe and Creandum, the company that backed Spotify.

Lifshitz&Miller LLP Announces Investigation of LendingClub Corporation (PR Newswire), Rated: A

Lifshitz & Miller announces investigation on behalf of LC investors concerning whether LC’s former CEO, Renaud Laplanche, engaged in improper loan transactions and personal investments as a result of material weaknesses in LC’s internal controls.

If you are an LC investor, and would like additional information about our investigation, please complete the Information Request Form or contact Joshua Lifshitz, Esq. by telephone at (516)493-9780 or e-mail atinfo@jlclasslaw.com.

Bankrate website to be bought by Red Ventures for $ 1.24bn (Financial Times), Rated: A

Bankrate, the US personal finance website, is to be bought for $1.24bn by Red Ventures, a digital marketing company which is expanding its footprint in financial services.

Private equity-backed Red Ventures has agreed to pay $14 per share in cash for Bankrate, which produces online content focused on financial advice and research, such as mortgage and savings calculators and credit card and insurance comparison tools.

Goldman Raised $ 1B For A Real Estate Fund (Bisnow), Rated: B

Documents filed with the Securities and Exchange Commission show that the investment bank has raised $1B for a new real estate fund, Broad Street Real Estate Credit Partners III. Further documents show it is on the road looking to raise more capital for the fund, with a source indicating to Bisnow that it is looking to pull in the same amount again over the coming months.

Around $600M came from U.S. investors and the rest from overseas, the documents show. Goldman typically puts around 20% of the equity into the funds it manages.

Suretly launched an Initial Chocolate Offering (Newsbtc), Rated: B

NYC-based startup Suretly, which raised $350K during preICO round this May, launched an Initial Chocolate Offering.

The event took place in Copenhagen, Denmark during Money2020 conference. All guests, who has visited Suretly’s booth, were gifted with a chocolate souvenirs shaped in SUR-token. Each token was packed in the individual memorable wrapping with the future Suretly ICO information.

United Kingdom

The Bank of England is preparing to get tough on consumer lending (Business Insider), Rated: AAA

The Bank of England ordered British banks and other lenders on Tuesday to prove by September that they are not taking on too much risk with their increased lending to consumers.

The BoE’s Prudential Regulation Authority did not set out any new rules on Tuesday but its move was the first time it has ordered firms it supervises to apply consumer credit rule more conservatively.

The PRA said it was “requesting evidence from all firms with material exposures to consumer credit of how they will – across consumer credit portfolios- ensure” they are not taking too much risk after years of low interest rates.

Lenders will have until September to respond and could then be asked to fix any specific areas of weakness by the PRA.

ORCA celebrates peer to peer lending uk surpassing £10 billion mark (Orca Money), Rated: AAA

Peer-to-peer lending has reached a significant milestone since Zopa launched the world’s first P2P platform in 2005. Over £10 billion has been cumulatively lent across 23 UK P2P platforms. In the first half of 2017 alone, over £2 bn was invested through P2P.

Take a look at the UK alternative lending ecosystem.

Traditional wealth management challenged by robo-adviser boom (Raconteur), Rated: AAA

Survey after survey shows that millennials, and indeed most potential investors aged under the age of 60, are happy to entrust their savings to a digital platform or mobile app, so long as it’s credible, secure, trustworthy, capable of offering them a range of low-cost funds and some personal investment advice.

Of the robo-advisers in the UK, the largest is Nutmeg. Launched in 2012, it has so far raised £71 million in five funding rounds from venture capitalists and others. Nutmeg has more than £600 million under management, though it remains loss making, and escalating marketing and advertising costs meant that in 2015 its losses widened from 2014.

Other UK players include Wealthify, launched in 2015; MoneyFarm, launched in Italy in 2012, and in the UK in 2016; and Scalable Capital, launched in 2016.

Brewin Dolphin has launched a robo-adviser that allows customers with between £10,000 and £200,000 to invest in one of six model portfolios at a cost of 0.7 per cent of invested assets, plus underlying charges of between 0.11 per cent and 0.16 per cent.

 

LendInvest out of P2P sticks to managing funds (Anonymous Email), Rated: A

Our sources reported that LendInvest cancelled their FCA application due to their decision to completely exit the p2p lending space.

As can be seen on the FCA website:

Firm name: Lendinvest Limited
Interim Permissions reference number: 658890

 

Permission Description Status Limitation Against Permission Permission End Date
Consumer credit business Entering into a regulated credit agreement as lender; and exercising, or having the right to exercise, the lender’s rights and duties under a regulated credit agreement. Inactive 02/06/2017
Credit brokerage Credit broking
Or
Credit broking limited to credit intermediation
Inactive 02/06/2017
No right to canvass off trade premises

It appears that this decision was due to the 36(H) legal rules around peer top peer in the UK . It has apparently become “more difficul to stay within the new 36(H) rules without becoming a bank or fund manager”. As LendInvest was already a fund manager, the company has decided to remain a fund manager and focus on that structure as opposed to applying for FCA p2p regulation.

In a similar fashion the online lender Wellesley has taken a similar approach having ‘paused’ P2P yet still shows as active.

This change makes Assetz Capital the 2nd largest business and property lender who is P2P in Europe. See

Of £295m lent, c £290m is P2P retail investors.

Kuflink Debuts Property-Backed Innovative Finance ISA & New Investment Options (Crowdfund Insider), Rated: A

UK-based peer-to-peer lending platform Kuflink has launched its Innovative Finance ISA (IFISA) and also two investment options. This news comes just a few months after the online lender received full authorization from the Financial Conduct Authority (FCA).

Assetz Capital bids to lend £300m after profitable year (Bridging&Commercial), Rated: A

Assetz Capital has revealed that it made a seven-figure pre-tax profit during the 2016/17 financial year, while revenues have now reached over £10m pa.
The peer-to-peer lending platform saw a total of £126m lent through it to SMEs between April 2016 and March 2017 with £38m of that total being achieved in the final quarter.

Assetz Capital claimed it would lend over £60m during the first quarter of this current financial year as it bids to reach £300m of lending for the whole of the year.

It’s time to bring ghost houses back to the land of the living – Lendinvest (Mortgage Solutions), Rated: A

As the Council of Mortgage Lenders has previously pointed out, even if the government managed to push the building industry into producing 300,000 homes across the UK each year, 90% of the housing stock that will exist by 2025 has already been built. If we are to tackle the housing issues we face, it’s not just down to increasing the rate at which new developments spring up – we need to make far better use of the houses we already have, too.

An obvious problem with some of these ‘ghost homes’ is that in their current condition nobody would want to live in them. They may have been ignored for years, falling into disrepair to the extent that they may actually be unlivable.

But these are exactly the sorts of properties that savvy investors may be looking for, the worst house on the street which can be done up, turned into a nice, respectable home and then sold on at a profit.

Londoners Borrowed £17B in New Mortgages in 2016, Wimbledon & Wandsworth Top Borrowers (Crowdfund Insider), Rated: A

Londoners borrowed another £17 billion in new mortgages last year as the affluent southwest London neighbourhoods of Wimbledon and Wandsworth topped the borrowing league table and and 17 of the top 20 areas for new mortgage lending last year are in London, reported European P2P lending platform Lendy.

The highest non-London area among for new mortgages is Maidenhead, which placed 11th out of the 2,717 postcode areas in the study.

AI savings platform launches £700,000 crowdfunding campaign (P2P Finance News), Rated: A

AN ARTIFICIAL intelligence platform that has partnered with RateSetter to help people save and invest is looking to raise £700,000 through crowdfunding.

The fintech firm, Plum, has launched a crowdfunding campaign on Seedrs, to build its team and platform.

NatWest trials AI compliance tool to ensure financial advice is spot on (Internet of Business), Rated: A

The UK bank will use the Recordsure compliance tool based on artificial intelligence (AI) from regulatory risk specialist TCC Group in order to record face-to-face and telephone conversations between the bank and its customers – with those customers’ consent, naturally.

The AI technology is able to analyze an interaction and then classify sections of the conversation, according to Recordsure’s creators. For example, it could determine which aspects of the conversation were general chitchat, which involved financial advice, and what topics were discussed.

P2PFA Announces New Associate Membership, Publishes Names of First New Members (Crowdfund Insider), Rated: A

The Peer-to-Peer Finance Association (P2PFA) has created a new category of membership to boost its ranks and add perspective to the association that represents the UK’s top online lenders.

These new members include:

  • Alterest – Provides non-bank lending markets with loan intelligence infrastructure that enables: seamless exchange of lending data in a secure and timely manner, and flexible analysis of performance and risk of any loan pool or exposure.
  • Altus Consulting: A specialist provider of consultancy services to the financial services sector.
  • Equifax: A global information solutions company that uses data, analytics, technology and industry expertise to power organisations and individuals around the world by transforming knowledge into insights that help make more informed business and personal decisions.
  • Fox Williams LLP: A City law firm with one of the leading Fintech practices in the UK, acting for over fifteen P2P lending platforms.
  • Grant Thornton UK LLP: A global consultancy that is part of a network of over forty-thousand people in 130 countries. In the UK they are led by 185 partners and more than 4,500 people.
  • Orca Money: A platform that is driving the mainstream adoption of peer-to-peer lending by providing research, analysis and tools to empower investors.
  • Simmons & Simmons: An international law firm with a Fintech team that comprises a range of multi-disciplinary lawyers from across their European, Middle Eastern and Asian offices.
  • TLT LLP: Supports large corporates, public institutions and high-growth businesses on their strategic and day-to-day legal needs.

Hive Project Launches Blockchain-Based Invoice Financing Platform, Targets SMEs (Finance Magnates), Rated: A

Despite being the backbone of every economy, small and medium-sized businesses have traditionally faced challenges in securing access to short-term financing from traditional lenders. To resolve this issue, the Hive Project today announced the development of a cryptocurrency invoice financing platform to help SMEs overcome the hurdles they face when trying to get the financing they need.

WiseAlpha Founder & CEO Rezaah Ahmad Comments on Successful Crowdcube Round (Crowdfund Insider), Rated: B

WiseAlpha, a UK first online lending platform that gives investors access to high yield institutional bond and loan investments, has overfunded its £500k target on Crowdcube by 258%, raising £1.29 million.

The largest single investment was £150K.

“We’re thrilled to have overfunded our original target and glad that the 1452 people who have invested in us so far are backing our vision of a fairer investment world where everyday investors aren’t shut out from accessing the biggest and best investments.”

UK P2P Lender RateSetter Update: Targets New Business Borrowers (Crowdfund Insider), Rated: B

Now the lender is planning to boost its direct marketing methods to diversify its new business borrowers sources, according to Peer2Peer Finance News.

Lewis appointed on b2b brief for p2p lending platform (PR Week), Rated: B

Lewis has been appointed by ArchOver, a peer-to-peer lending platform for UK SMEs, to run a campaign aimed at business audiences.

China

China changes tack on ‘social credit’ scheme plan (Financial Times), Rated: AAA

Beijing has pulled back on plans to license big technology companies to develop “social credit” scores for consumers, based mainly on their online activity, because of concern over conflicts of interest, industry analysts said on Tuesday.

The People’s Bank of China, the central bank, selected eight tech companies in 2015 — including e-commerce group Alibaba’s Ant Financial and game developer Tencent — to develop pilot programmes to give consumers credit scores.

The pilots, which monitored spending patterns but also personal behaviour and social media activity, initially raised concerns about consumer privacy. Some of their metrics were seen as irrelevant, including proposals to factor in exercise routines or what time of day people went online. Others were considered more sinister, such as efforts to rate “honesty” or “trustworthiness” by linking credit scores to friends’ social media posts.

Beijing has now decided not to award any licences this year after regulators expressed increasing concern about the potential for conflicts of interest.

MYbank Deepens Push for Business Big Banks Won’t Touch (Bloomberg), Rated: AAA

MYbank, the two-year-old Chinese online lender that already has 3.5 million small-business customers, plans to push deeper into a segment that’s long been shunned by the country’s largest banks.

MYbank wants to capitalize on its links to billionaire Jack Ma’s Alibaba Group Holding Ltd. by offering loans to the more than 10 million smaller merchants that use the company’s e-commerce platforms, MYbank President Huang Hao said in a June 29 interview. Ant Financial, Alibaba’s financial affiliate, owns 30 percent of the online lender.

Formally known as Zhejiang E-Commerce Bank Co., MYbank was able to more than quadruple its lending through 2016, taking its outstanding loans to 33 billion yuan ($4.9 billion).

Its nonperforming-loan ratio was around 1 percent, Huang said, lower than the national average of 1.74 percent. The bank’s technology, which runs loan applications through more than 3,000 computerized risk-control strategies, has kept delinquencies in check, he said.

Still, last year’s lending explosion came at a cost, dragging its capital adequacy ratio down to 11.07 percent by December from 18.51 percent a year earlier.

Chinese tourists are driving mobile payments across the globe (IBS Intelligence), Rated: A

The number of Chinese tourists abroad hit 122 million in 2016, with a vast majority of them paying via their mobile phones. That’s according to a new study from Kapronasia and CANCAN. The survey pool contained 1,000 Chinese consumers abroad and 60 global merchants.

While 67% of respondents reported that they use Alipay or WeChat Pay for overseas purchases. This represents about 41% of overseas consumption and tourists used mobile payments for more than 10% of total transactions.

The report also highlights how Chinese tourists are spending more and more in retail ($900 on average in 2016), instead of luxury items. Only 5.7% spent more than $6,288, with a total amount of $109.8 billion throughout 2016.

80% of merchant respondents cited consumer demand as one of the main reasons for adopting mobile payments, with 70% adding that mainland Chinese consumers were their largest source of global revenue. Clothing, makeup, skincare, food and beverages top the list of goods purchased with mobiles, with travel and accommodation not far behind.

UAV Startup Clobotics Raised its First Round of Financing from GGV Capital (Xing Ping She), Rated: A

Recently, a Shanghai-based Unmanned Aerial Vehicle (UAV) startup—— Clobotics finished its first round of financing from GGV Capital, the amount was not disclosed. According to George Yan, the founder and CEO of Clobotics, this round of financing will focus on developing and iterating their products and technology, expanding the marketing layout, and accelerating the development of Clobotics in the key vertical field.

Set up in November 2016, Clobotics is a provider of business intelligence (BI) and visualizing data, focus on the research of UAV machine vision, industrial big data acquisition, and cloud big data processing and analysis. Unlike many of the domestic manufacturers that focus on hardware plane, Clobotics is good at using leading software, technology and platforms to embed advanced technologies in the field of artificial intelligence, so as to fully explore the value of UAV-collected data.

Police Arrest 32 Employees of Company Behind ‘Straddling Bus’ (Sixth Tone), Rated: B

The test site of China’s fantastical traffic-straddling bus was dismantled in June, and now the peer-to-peer financing company that backed the project is being investigated for illegal fundraising.

Following reports of unlawful conduct, a total of 32 suspects at Beijing-based Huaying Kailai Asset Management Co. Ltd. have been arrested, according to an announcement Sunday by Beijing police on their Weibo microblog.

European Union

Investor protection vs Access to Finance: The Growth of Alternative Finance (Crowdfund Insider), Rated: AAA

Clearly in Europe (Brexit aside) the UK has led sector growth. A combination of a culture of entrepreneurship and risk taking has combined with a supportive government and a regulatory body tasked with a mission of fostering competition – perhaps to the frustration of traditional financial firms. The rise of internet finance in the UK has engendered few occurrences of fraud to date. Growth has been sustained. Perhaps the Brits have gotten the balance right so far?

But which country has the largest alternative finance market in the world? China, of course.

Kleverlaan points to Italy as a country that has stumbled out of the gate. Something the country is attempting to rectify with recent rule changes specifically targeting equity crowdfunding.

View the full report on alternative finance here.

The European Investment Bank Pledges €18.5 million to Finance Continental European SMEs through Lendix (Crowdfund Insider), Rated: A

The European Investment Bank Group (EIB) through the European Investment Fund (EIF) has announced that it will provide €18.5 million to back a joint investment fund designed to lend money to SMEs through crowdlending platform Lendix.

Swedish tech elite’s darling startup Karma just bagged $ 4 million for its hyper-growing food waste app (Business Insider), Rated: A

Swedish startup Karma has built an app that helps restaurants, grocers and cafés reduce their food waste by selling their surplus to consumers at reduced prices.

The company has now raised between 30 and 40 million SEK ($3,5 – $4,7m) to take on Europe after a booming start in its Swedish home market.

The seed round comes from Swedish investor Eequity and global VC fund e.ventures, which has also backed the hyped Swedish fertility app Natural Cycles.

P2P Lender VIAINVEST Hits €10 Million in Funded Loans (Crowdfund Insider), Rated: A

Newly launched peer to peer lending platform VIAINVEST has announced topping €10 million in loans. The 7 month old Latvian platform said consumer loans issued by VIA SMS Group, came from the Czech Republic, Poland, Latvia and Spain.

Australia/New Zealand

Xpress Super and Australian P2P lender RateSetter announce partnership (Finder.com), Rated: A

RateSetter, Australia’s largest peer-to-peer lender, and self-managed-superannuation-fund (SMSF) administrator Xpress Super have today announced a partnership.

Through the partnership, SMSF investors will now have direct access to their RateSetter account via the Xpress Super platform, making it easier for SMSF investors to lend to creditworthy borrowers.

Introducing HashChing – an online marketplace for home loan deals (sa real estate news), Rated: A

Based in the heart of Sydney, HashChing is Australia’s first online home loans marketplace for broker-negotiated home loan deals.

All mortgage brokers are verified and rated through the website Artificial Intelligence Algorithm, selecting the brokers who offer the best services and then recommending them to borrowers in their area. Similar companies that had paved the way before HashChing had simply listed rates to the consumer through the bank or lender’s website.

Home loan rates on HashChing start from 3.59% p.a. and consumers can browse through the home loan deals page to see what offers are available.

Currently the company has helped over 14,500 borrowers with their home loan enquiries, all worth more than $7 billion dollars combined. Of which, $6 billion has come in the last 12 months alone, and the company also currently lists more than 600 verified mortgage brokers – including 30 mortgage brokers from SA.

Colliers’ alternative to bank funding (True Commercial), Rated: B

A new Colliers International service is providing an alternative to traditional bank funding by matching commercial property investors to development and investment opportunities.

The Capital Sourcing unit was established by Tim Lichtenstein, who has a track record in capital raising for commercial real estate assets.

India

UrbanClap Raises $ 21M in Series C (BW Disrupt), Rated: A

Home services start-up firm UrbanClap has raised $21 million in a series C funding round led by Internet investment fund Vy Capital. Led by Alexander Tamas, Dubai-based Vy Capital is a major investor in Zomato.

Early investors SAIF Partners, Accel Partners and series B investor Bessemer Venture Partners also participated in the round. Existing investors also spent approximately $1 million more to buy shares held by some employees and a part of stakes of angel investors Kunal Bahl and Rohit Bansal, the founders of Snapdeal, UrbanClap co-founder Abhiraj Bhal told LiveMint.

Reliance Capital arm invests $ 1 mn in P2P lending platform Billionloans (VC Circle), Rated: A

Billionloans Financial Services Pvt. Ltd, a Bengaluru-based fintech startup that operates a peer-to-peer (P2P) lending platform, has raised $1 million (around Rs 7 crore) in seed funding from Reliance Corporate Advisory Services Ltd, a wholly owned subsidiary of Reliance Capital Ltd.

Asia

Peer-to-peer loans pass 300 billion won for first time (Korea JoongAng Daily), Rated: AAA

The number of peer-to-peer loans more than doubled in just six months, going from 96.9 billion won ($84.5 million) in June last year to over 300 billion won in December.

The change represents a 220.5 percent increase, according to data provided by the Financial Supervisory Service and Financial Services Commission.

The number of users also surged 116.6 percent to 6,632 in June compared to December’s 3,062.

Singapore fintech startup Instarem raises $ 13 mn to expand payment infra (VC Circle), Rated: A

Instarem, a Singapore-headquartered cross-border payments company founded by Indian-origin entrepreneur Prajit Nanu, has raised $13 million in a Series B funding round led by Chinese venture capital firm GSR Ventures, a company statement said.

Singapore fintech startup Validus Capital raises US$ 2.9M to grow SME lending platform (e27), Rated: A

Singapore-based fintech startup Validus Capital has raised S$4 million (US$2.9 million) from Vertex Ventures.

It will use the newly-raised round to expand regionally and grow its online lending platform.

Chinese investors eye Indonesia’s P2P lending marketplace Investree for Series B (udaipur kiran), Rated: A

Indonesian peer-to-peer lending marketplace Investree announced recently that Chinese investors have initiated discussions for an investment in the company for its next Series B round.

If successful, the deal will become one of the first international investments in Indonesia’s fintech space. Previously, the startup has raised an undisclosed Series A round in 2016 from local venture capital Kejora which typically invest US$2 to US$5 million in their portfolio firms.

Authors:

George Popescu
Allen Taylor

Monday February 20 2017, Daily News Digest

funding circle

News Comments Today’s main news: Funding Circle tops 2bil GBP. Landbay launches IFISA. Lending Works re-opens IFISA to investors. Today’s main analysis: Is automated advice the way to go? Today’s thought-provoking articles: Real Estate Crowdfunding and secondary market in focus. China regulators warn 90% of P2P lenders could fail in 2017. United States 3 trends to watch for […]

funding circle

News Comments

United States

United Kingdom

European Union

Australia

China

  • 90% of P2P lenders could fail in 2017. GP:” While they could fail, will they fail, and should they fail? Chinese authorities want stability beyond everything else. 90% failure could lead to unrest.” AT: “I’m growing more and more skeptical of anything coming out of China. Is this what regulators predict or what they hope for? Will the regulators themselves be instrumental in those failures?”

Asia

News Summary

United States

TRN Report Highlights Secondary Markets in the Real Estate Crowdfunding Space (MENAFN.com), Rated: AAA

CFX secondary market is one of these secondary markets that allow RECF investors to transfer their private shares into multiple asset classes. This secondary market was launched by Chicago’s CFX Markets and is owned by PeerRealty, an RECF platform. The market is open and secure, allowing sellers to display their shares so that buyers can scrutinize them before making a decision. The entire transaction takes place on the secondary market. Besides its owner, other RECF platforms that are already using the market include American Homeowner Preservation, PropertyStake and CrowdFranchise.

Another secondary market is the Investor exchange. This is an automated secondary market owned by Acquire Real Estate. The market also allows RECF investors to sell their private shares to willing buyers. The sellers can locate prospective buyers, create required documents and consents, establish value of their shares, and sell the shares via an auction process. This market is currently available to Acquire Real Estate subscribers only.

Real Estate Crowdfunding: 3 Trends to Watch in 2017 (Forbes), Rated: AAA

Real estate crowdfunding continues to be a dynamic and ever-evolving industry, growing to an estimated $3.5 billion in 2016.

Institutional capital takes center stage

These accredited investors hold approximately 70 percent of all private wealth in the U.S., but account for only around 8.25 percent of all households.

When comparing an individual investor, who may have $50,000 or $100,000 to invest to an institutional investor that may be bringing $50 or $100 million to the table, it becomes apparent what makes institutional capital an attractive choice. Making the shift to institutional capital makes sense for real estate crowdfunding platforms that have a desire to accelerate growth by better servicing the supply side of the equation.

Non-accredited investors and eREITs gain steam

The SEC’s finalization of Title III of the JOBS Act opened the doors of real estate crowdfunding to non-accredited investors but online marketplaces have thus far been slow to utilize this new regulation. Instead, Title IV of the JOBS Act has been the more widely used regulation and in real estate, that has resulted in the creation of Reg A+ eREITs from some of the more well-known platforms.

Fundrise, for example, is reportedly on track to raise $250 million with its five eREIT options. If these, and other eREIT offerings continue to generate that kind of volume, I foresee other platforms following suit and taking advantage of Reg A+ availability to attract non-accredited investors to real estate. While individual non-accredited investors may have a lower degree of liquidity compared to their accredited counterparts, they greatly outnumber accredited investors so there’s a vast swath of opportunity that online marketplaces are positioned to tap into.

Consolidation allows the key players to emerge

I believe very strongly that tech is going to play an important role in determining which marketplaces make the cut and which don’t. Tech and its various applications, whether it’s through automation of manual processes or the incorporation and application of data for underwriting, will be a significant component in determining which companies are marked for success.

By the end of 2017, I predict that we’ll see no more than five platforms taking a spot in the top tier and collectively, it’s reasonable to estimate that those companies will have a transaction volume that’s measured in billions.

Is Automated Advice The Way To Go? (The Market Mogul), Rated: AAA

With Royal Bank of Scotland set to join the robo-advisory industry later this year, the world of robo advisors is starting to heat up. Joining the likes of leading asset managers such as BlackRock and Vanguard, the day when finance is taken over by technology is not as far away as one may think. With the leading asset managers driving this charge for automated advisory platforms, is robo-advisory really the way forward?

The head of HSBC’s Asset Management arm, Sridhar Chandrasekharan, makes a very crucial point: in a world of low returns, investment advice is in demand, but the appetite for fees is low. In the UK itself, a study by the Financial Conduct Authority (the Financial Advice Market Review) conducted early last year found that 69% of advisors have rejected clients in the past year as they were not perceived as “wealthy enough”.

These sentiments are supported by a survey conducted by PwC which found that, currently, more than 55% in the 18-35 age group in Italy are willing to receive investment recommendations from an automated advisory platform. In ten years time, this group of individuals will form the bulk of the working population.

However, in all its glory, robo-advisory still faces its biggest challenge: the regulators.

Weekly Online Lending Snapshot – February 17, 2017 (Orchard Platform), Rated: AAA

SoFi buying Zenbanx either signals the first Mega NeoBank or a unicorn losing the plot (Daily FinTech), Rated: A

Save, send and spend has a nice ring to it. It describes quite simply why we use a bank. Oh and borrow and that is what SoFi already enables.

So we expect a number of full stack global Neobanks to be successful. So both N26 and SoFi can be success stories, albeit with different strategies. As can Neobanks incubated within an incumbent such as BBVA and ING. Whether the starting point is a VC backed startup or a legacy bank, the end game is the same. This is the convergence thesis we first outlined here.

There’s a simple reason the percentage of people owning a home is at a historic low (Business Insider), Rated: A

The homeownership rate in the US has hit a historic low, and a big part of that is a significant drop in ownership among younger Americans.

A part of that decline is related to demographics. The 45-and-over population has increased, and older people are more likely to have a house.

However, younger people are also now less likely to own a home than they were 10 or 20 years ago, as the chart above highlights.

PAYDAY LOAN ALTERNATIVES WHEN YOU HAVE A SIDE HUSTLE AND YOU LOST YOUR JOB (Axcess News), Rated: B

If you’re in dire straits, here are a few payday loan alternatives to consider:

Personal Loans

There are several different places where you can apply for a personal loan, including:

  • Banks
  • Credit unions
  • Peer-to-peer lending sites

Of those options, peer-to-peer lending sites are the most flexible regarding minimum lending requirements, but you’ll still need a decent credit score and steady income.

Title Loans

Like payday loans, title loans should only be used as a last resort, because they almost always have very high interest rates and short terms, with the standard term on a title loan being 30 days.

United Kingdom

Marketplace lender Funding Circle tops £2bn mark (altfi), Rated: AAA

Funding Circle, the world’s largest online marketplace for small business loans, has now lent more than £2bn to small businesses in the UK. The firm is only the second marketplace lender in the UK to have accomplished the feat, with consumer lender Zopa hitting the milestone in late January.

After lending just £60m in August, Funding Circle set a monthly origination record in October, with £95m lent. The firm then lent more than £100m in November (becoming the first UK peer-to-peer lender to do so), and has lent around £100m in both December and January too.

Landbay Launches IF ISA Offer Today (P2P-Banking), Rated: AAA

Today secured by property p2p lending marketplace Landbay launches its Innovative Finance ISA (IFISA). The IF ISA offer carries an interest rate of 3,69%. The minimum investment amount for this product offer at Landbay is 5,000 GBP. There is no account opening fees, no ongoing fees and no transfer-in fee. There is a 50 GBP transfer-out fee.

Lending Works re-opens to IFISA investors (P2P Finance New), Rated: AAA

LENDING Works has re-opened its Innovative Finance ISA (IFISA) to investors, after experiencing “unbelievable demand” following this month’s launch.

The peer-to-peer lender had set an internal investment cap of £1m, which was filledwithin 24 hours due to an influx of new customers eager to take advantage of tax-free earnings before the end of the tax year.

Lending Works has now increased the cap to £5m due to increased loan volumes.

Assetz Capital hires Santander man Andrew Fraser for Northern Ireland push (Finextra), Rated: A

Assetz Capital, one of the UK’s largest and fastest growing peer-to-peer finance platforms, today committed to expansion in Northern Ireland under the guidance of recently appointed Regional Relationship Director, Andrew Fraser.

Fraser joins Assetz Capital from Santander UK Corporate and Commercial.

Assetz Capital has become known for its secured lending model where every loan is backed with property, and/or other realisable security in order to reduce the risk of actual loss for investors. As a result, the company has one of the lowest loss rates in the market.

A new Isa is offering tax-free returns of 12% – so what’s the catch? (The Guardian), Rated: A

It’s the new type of Isa offering returns of up to 12% – or perhaps even 20% in future. But are rates like this simply too good to be true?

Also, this is a lot more risky than sticking your cash in the bank or with National Savings & Investments. Your capital is at risk and, crucially, peer-to-peer isn’t covered by the official Financial Services Compensation Scheme, though many of the websites have their own safeguards in place.

There are three types of Isa: the cash Isa, the stocks and shares Isa, and now the innovative finance Isa, which allows investors to earn tax-free interest on their peer-to-peer loans when they are held within the Isa “wrapper”. Late last year the rules were extended so that these new products can also include debt-based crowdfunding, thereby allowing investors to lend money to things such as renewable energy projects and enjoy tax-free returns.

During the current tax year you can save up to £15,240 in one type of Isa or split the allowance across two or all three types. For example, you could save £10,240 in a cash Isa, £2,000 in a stocks and shares Isa and £3,000 in an innovative finance Isa. From this April, the total amount you can save each year into all Isas will increase to £20,000.

Companies must jump two hurdles: they require full authorisation from the Financial Conduct Authority, plus the approval of HM Revenue & Customs, to act as an Isa manager.

Two of the best-known are ethical investment platform Abundance, which allows people to get a return on their cash by funding renewable energy projects, and peer-to-peer platform Lending Works.

Others offering Isas include LandlordInvest, which lets people invest in residential buy-to-let mortgages and bridging loans, and is holding out the prospect of returns of “up to 12% per annum”; and LendingCrowd, which matches investors with small and medium-sized businesses seeking loans, and is offering a “target rate of return of 6% a year”.

Crowdfunding platform Crowd2Fund has an Isa and is quoting an estimated average return of 8.7% before fees and bad debts, while fellow crowdfunding site Money & Co, founded by City “superwoman” Nicola Horlick, says it aims to launch its Isa by early March.

Other firms that have been fully authorised but don’t appear to be marketing Isas yet include Folk2Folk, Peer Funding Limited, Crowd for Angels, British Pearl, Crowdstacker, Octopus Choice and CapitalStackers.

These investment trusts could help you to retire early (AOL), Rated: A

Investing in peer-to-peer lending can be a great way to boost your returns. But for investors who don’t want to go through the trouble of setting up their own account with a peer-to-peer lending platform, P2P Global Investments(LSE: P2P) offers an alternative route to gain access to the sector.

The investment trust, which focuses on buying peer-to-peer loans, offers investors exposure to the much larger US market, in addition to the UK, European and Australasian markets. This also adds diversification, which can help to reduce overall investment risk. In addition, the trust owns equity stakes in the lending platforms, which may offer investors potential capital gains on top of the steady income generated by its portfolio of loans.

Alternative Investing: Inbound marketing is the new cold calling (Redd-Monitor), Rated: B

The small print at the bottom of the alternative-investing.uk website explains that anyone wanting to hand over their cash to alternative-investing.uk has to declare themselves to be a Sophisticated Investor or High Net Worth Individual.

Anyone else should “exit the Website immediately”. Investors may lose the right to complain to the Financial Conduct Authority, or to the Financial Ombudsman Scheme. They may also have “no right to seek compensation from the Financial Services Compensation Scheme”.

According to Six & Flow (the company previously known as Grain that ran the media campaign), Heron Global Partners managed to raise £10.8 million in investments between January and October 2016. It’s odd (to say the least) that a company that has raised so much money is running its operations from two virtual offices and a co-working office.

Heron Global Partners is not registered with the Financial Conduct Authority. The company claims that it “does not provide investment tax or pension advice”. The company’s twitter account suggests otherwise:

European Union

Real Estate Crowdfunding Campaign Raises €1.8M to Construct Building in Madrid (Spanish News), Rated: A

The crowdfunded real estates platform, Housers has raised €1.8 million to construct their second building in Spain.

The crowdfunding campaign raised €1.2 million from 1,278 investors within 54 days.

Another €600,000 will be financed with a mortgage, to completed the investment.

Australia

Harmoney’s $ 200million Australian launch (Stuff), Rated: AAA

New Zealand’s largest peer to peer lender has opened its doors in Australia with A$200 million to lend.

Harmoney launched in New Zealand in late 2014, and since then has made over $410m of loans, with some of the money coming from ordinary investors seeking a better return on their money than they can get at the bank.

Now the peer to peer (P2P) lender has begun lending to Brisbanites, in a launch that’s more than a year later than Harmoney had once planned.

China

China regulators warn that 90 pc of peer-to-peer lenders could fail in 2017 (South China Morning Post), Rated: A

Nine out of 10 of the mainland’s peer-to-peer (P2P) lending platforms will struggle to survive this year as the government rolls out tightened regulatory supervisions, according to a multi-agency report on Friday led by the Beijing Bureau of Financial Work.

About 500 P2P companies, out of the total 4,856 players across the nation, are likely to maintain their operations this year, the report said.

The mainland initiated a review on P2P lenders following the introduction of tighter regulatory requirements in late 2016, such as the appointment of a custodian bank and full disclosure of the use of deposits.

In late 2015, Ezubao, one of the country’s largest P2P players, was found to have defrauded more than 1 million investors of about 100 billion yuan (US$14.57 billion).

Asia

PAYPAL IS LAUNCHING A FINTECH SCHOLARSHIP IN SINGAPORE (SMU), Rated: A

PayPal has announced that it will partner with SMU to roll out a fintech scholarship in Singapore worth S$180,000. Six undergraduates from the SMU School of Information Systems (SMU SIS) will receive S$30,000 through this scholarship over the next three years. They will also intern at PayPal, and gain access to the company’s business leaders, employees and resources.

The first scholarship is expected to be awarded to two undergraduates in the first half of this year.

Authors:

George Popescu
Allen Taylor

Wednesday February 8 2017, Daily News Digest

uk p2p average growth interest rate at origination

News Comments Today’s main news: What the SoFi acquisition of Zenbanx means for FinTech’s future. Promontory Interfinancial Network clears path for community banks to purchase SoFi loans. Fund investments into UK FinTech plunge 33%. Today’s main analysis: AltFi takes a closer look at the UK P2P sector. Today’s thought-provoking articles: Review, takeaways from 2017 private placement conference. 3 reasons FinTech […]

uk p2p average growth interest rate at origination

News Comments

United States

  • What the SoFi acquisition of Zenbanx means for FinTech’s future. GP:” With SoFi able to take deposits and looking at credit cards next, I now believe SoFi is the new leader in the fintech credit market. I continue to believe it is a market that is ripe for disruption, innovation and hundreds of billions of dollars in size.” AT: “This is really stating the obvious.”
  • Community banks to have ability to purchase SoFi loans. GP:” Lenders have two main problems: finding borrowers and capital. The bigger the lender the worse the capital issue becomes as borrowers you can nearly always buy by spending more money. Another great move for SoFi, but not a new move: Lending Club and many other lenders had done this years ago. ” AT: “This is a step in the right direction. Online lending really needs a secondary market.”
  • Review, takeaways from 2017 private placement conference. GP: “A healthy active issuance market.”
  • Patch of Land hires CFO, CMO. AT: “It looks as if the new CMO is already making great strides.”
  • Breakout Capital secures credit facility with Drift Capital Partners. GP:” A $25mil in revolving debt.”
  • 3 reasons FinTech is failing. GP:” Failing is in the eye of the beholder. Did Apple look like a failure at any point? Is losing billions of dollars failing? How much did it cost to develop the iPhone and was that expense a loss until revenue started coming in? I personally believe that, like in politics, one can really tell what is success and what is failure only once history has settled. “AT: “While an interesting read, it seems self-serving. FinTech isn’t failing so much as experiencing a few growing pains. I agree with the three points mentioned as “reasons,” but I don’t so much think the implication that all FinTech companies must follow a similar path to success is true. The key to success is differentiation.”
  • We need a government that embraces financial innovation. AT: “The underlying premise is a sound one, but the U.S. has never done anything like the rest of the world. That said, if we’re going to have a FinTech charter, it should foster innovation and help the industry grow.”

United Kingdom

United States

What the SoFi Acquisition of Zenbanx Means for the Future of Fintech (Lend Academy), Rated: AAA

Fintech companies of all kinds have started to partner with banks but this deal is different. It marks the first time that an online lending platform will have the ability to accept deposits.

The size of this deal brings to mind a similar deal from a few years ago when Spanish bank BBVA acquired the digital bank startup Simple for $117mn. Since that acquisition occurred, reporting shows that customer acquisition and disruption in the banking space is not as easy as it may sound. According to a Quartz report in May of 2014 the BBVA-Simple deal was a challenge from the start as the size of the deal raised alarm in the banking community and Simple’s customer growth was slowing down.

BBVA is still grappling with the ramifications of their 2014 acquisition, American Banker reports today that BBVA has taken nearly $90mn in goodwill impairment charges related to the Simple deal. While the charges seem steep, the company is still happy with the Simple deal from a digital standpoint and they have hired 260 more employees to help that part of the business run. Valuing a digital bank seems to be an inexact science to say the least; Simple went to BBVA for $117mn in 2014 and now BankMobile is on the market from Customers Bancorp in what analysts think will be a deal valued around $100mn.

Mike Cagney has also said that also on the list for SoFi will be their move into offering a credit card. As the roll out of their banking products begins, we will learn more about how this acquisition will affect their overall strategy.

Promontory Interfinancial Network Clears a Path for Community Banks to Purchase SoFi Loans (Yahoo! Finance), Rated: AAA

Promontory Interfinancial Network, LLC and Social Finance, Inc. (SoFi) today announced a new program to enable community banks to purchase super-prime student loans originated by SoFi. The program will help community banks gain access to SoFi’s high quality assets by streamlining the due diligence process.

To assist banks in assessing these loans, Promontory Interfinancial Network commissioned Promontory Financial Group, LLC, an IBM Company, to review and report on SoFi’s underwriting, operations, and systems.  The report provides information and analysis banks can use to complement their own due diligence and assists them in their efforts to satisfy regulatory expectations for loan purchases and third-party risk.

The report describes SoFi’s current loan origination and post-origination practices and outlines the controls that SoFi has in place, including those that promote regulatory compliance, consumer privacy, and information security.  In preparing the report, Promontory Financial Group reviewed SoFi policies, procedures, and contracts related to underwriting and servicing and tested loan files so as to confirm compliance with federal laws, regulations and guidance.

SoFi President and Chief Financial Officer Nino Fanlo said, “This unique partnership opens us up to a new group of bank investors and further diversifies our funding sources. Large banks have been buyers of our loans for several years, but this program will help small to mid-sized banks participate in the growth of this asset class, and we look forward to building relationships with them. With one of the largest bank networks of its kind, representing more than 47% of all U.S. banks, Promontory Interfinancial Network is an ideal partner for us.”

Review and takeaways from the 2017 private placement conference (Morningstar), Rated: AAA

The corporate bond market started 2017 with a healthy dose of new issue volume priced in the public debt markets. New issue supply in the corporate bond market totaled $178.5 billion in January. New issuance last week included several large new bond deals, such as Microsoft’s (rating: AA+, stable) $17 billion transaction. In December 2016, Morningstar Credit Ratings, LLC downgraded Microsoft by one notch, placing our AA+ corporate credit rating one notch lower than Moody’s and S&P. Our downgrade took into account the company’s trend toward higher use of debt, the result of a more aggressive shareholder-payout policy, and funding for the $26 billion acquisition of LinkedIn. Apple (rating: AA-, negative) also brought a large deal to market, pricing a $10 billion multitranche new issue. Again, our credit rating is lower than the other agencies, as we believe Apple’s credit profile has been affected by management’s trend toward more aggressive capital allocation and a dramatic increase in debt.

Patch of Land Adds Executives Including New CFO and  CMO (Crowdfund Insider), Rated: AAA

Real estate crowdfunding platform Patch of Land has announced several management changes with two executives. Min Lee will be joining the real estate marketplace as the Chief Financial Officer and Robert Greenberg has been appointed as its Chief Marketing Officer.  Patch of Land said the executives would help accelerate platform growth while stating the company has grown at a compound annual growth rate of more than 290%.

Greenberg has already implemented a program that has apparently grown monthly leads by nearly 270 percent compared to the average monthly totals of the previous nine months. Greenberg has also grown the number of crowdfunding investors registered on the company’s platform to more than 20,000 at year-end 2016.

Breakout Capital Secures Credit Facility with Drift Capital Partners (Benzinga), Rated: A

Breakout Capital, a technology-enabled small business lender, announced today it obtained a new revolving credit facility from Drift Capital Partners, LLC, an alternative asset management company based in Charleston, South Carolina. The facility is structured to scale in alignment with Breakout Capital’s rapid growth, and at least $25 million in revolving debt is expected to be available to provide working capital solutions to Breakout Capital’s current and future customers. Drift’s commitment equips Breakout Capital with significant incremental funding capacity to continue on its strong trajectory and to meet the robust and accelerating demand among small businesses nationwide for Breakout Capital’s transparent, flexible, and innovative financing solutions.

In addition to becoming one of the fastest growing lenders in the market, Breakout Capital is a Founding Member of the Coalition for Responsible Business Finance and a vocal advocate for comprehensive, standardized product and cost disclosure, and full transparency across all alternative finance products.

3 Reasons Fintech Is Failing (Forbes), Rated: A

Everyone from online lenders to bank technology companies has experienced elongated fund-raising cycles, missed targets, and mounting losses.

Right now, the pain is most acute in the online lending space, with industry juggernauts like OnDeck, Lending Club, and CAN Capital seeing depressed stock prices or worse.

While fears of a popping fintech bubble are justified, there is good news. It is by no means too late for the sector to pivot. The first step in saving the industry is to understand why it is failing.

Reason #1: There is a fundamental strategic contradiction between tech and finance

According to Mr. Flowers, “the tech idea that you must get big fast and dominate a sector” is at odds with the slow-moving nature of finance, and lending in particular.

Reason #2 Market realities encourage short-term thinking

If you engage with online lenders like Lending Club or OnDeck, you’d think that they were data companies first, and lenders second.

As competition increases, fintech organizations begin making riskier and riskier decisions. For companies like mine, it could mean accepting clients and deals that aren’t an ideal fit for our product. For online lenders, it means riskier and less desirable loans.

Reason #3: Incumbents in the market are powerful and resistant to change

Incumbents in the finance sector are incredibly powerful and complacent. Most don’t fear fintech companies looking to take their business because, frankly, not a single one poses a real threat at this time.

We Need a Government that Embraces Financial Innovation (Crowdfund Insider), Rated: A

The proposed Fintech charter is anti-FinTech. That’s right. Many Fintech firm founders started their companies because of the already undue burden placed upon the American populace. Most people struggle to access reliable banking products, cheaper credit, real-time payments and investment opportunities. Unfortunately, these are services and products that are rarely made available for the masses.

The OCC’s proposed charter will put us back at least a 100 years.

The white paper published by OCC spends most of its time arguing that the bureau has the “grounds” and certainly the “right” to establish a Fintech specialty charter. It reads like a legal opinion and argument on why the OCC is the single bureau to establish the Fintech charter and they are the ones that should regulate the charter membership. The white paper does not provide any incentive for Fintech companies to seek membership and gave no consideration to the undue burden the additional regulation will place on Fintech firms and established Fintech startups. It simply does not make any sense for any Fintech companies even to consider applying for the OCC’s proposed Fintech Charter.

OCC’s Proposed Fintech Charter is Anti-Innovation

The OCC provided us an illusion that somehow Fintech companies are at a disadvantage and only with a Federally issued bank charter would we finally become competitive to the banks.

This is simply not the case. The Banks support Fintech companies because they are not bound by outdated and overzealous regulation.

Innovative products and services from firms such as SoFi would have died on the table day one within larger institutions that are regulated by bureaus such as the OCC.

OCC’s Proposed Fintech Charter is Anti-Competitive

I have spent a fair amount of time recently in Australia and Asia, talking to Fintech founders and CEOs. Regulation and compliance is always a focal point of our conversations. Often, these conversations end up with their perceptive countries Fintech Sandbox.

The USA is Falling Behind

The United States has fallen far behind some of our global competitors such as China, India and the UK.

The last thing we need is for another government agency to throw its weight around and cast another shadow on our global competitiveness.

We want the OCC and other agencies to revise their proposal and provide the following:

  • A single national charter that allows Deposits, Money Movement and Lending regulated by a single agency and supersedes all state regulation. Not multiple charters for multiple activities and an industry that must adhere to local and state regulations on top of federal rules.
  • A Fintech sandbox that immediately allows all Fintech startups to move money through existing and alternative money movement rails. 
United Kingdom

Fund investments into UK fintech plunge 33% (Fund Strategy), Rated: AAA

A report by Innovate Finance and Pitchbook shows investment from venture capital funds fell 33.7 per cent in 2016 to $783m (£632.7m) compared to $1.2bn in 2015. Total investments following the referendum were $368m.

Fifty four per cent of investments came from UK-domiciled venture capital funds.

“Some of the steam is perhaps coming out of the peer-to-peer phenomenon with a shake out of the sector appearing likely as some of their portfolios start maturing.”

Globally the report found fintech investment increased 10.9 per cent to $17.4bn, compared to $15.6bn in 2015.

Alternative lending and financing accounted for 29 per cent of investment and challenger banks accounted for 20 per cent.

The US also saw investment decrease in 2016 to $6.2bn, down 12.7 per cent on the previous year. It was surpassed by China with deal value at $7.7bn.

Alternative Finance – a closer look at P2P (AltFi), Rated: AAA

Since the EU referendum vote last year, inflation in the UK has accelerated (thanks to sterling’s depreciation) but wage growth has remained stagnant, and mortgage rates have risen from their record lows but the interest rates on our savings haven’t budged. Life, as we’re often reminded, just isn’t fair.

Thanks to AltFi Data, we have also been able to track how this nascent industry has evolved since its conception. In particular, it is interesting to note how gross yields across the UK’s largest P2P lending platforms, despite the differing characteristics of their various business models, appear to have converged over time and currently sit around the 8 – 9 per cent range.

RateSetter, which pioneered the concept of a “provision fund” to shelter investors against losses from borrower default, is an outlier here with its consistently low average yields (around 4 per cent).

Another observation worth highlighting is how arrears have crept higher in recent years, driven predominantly by borrowers with lower credit ratings. AltFi Data’s numbers on Zopa, which provide us with the most granular data we have, suggests that borrowers in the A* band almost never fall behind on payments, while those in the lowest bands, C, D & E have seen their arrears rise steadily since 2014 (see Fig. 2 below). This has contributed to more instances of bad debt in the 2014 and 2015 vintages (see Fig. 3 below), although the overall picture remains fairly robust thanks to Zopa’s core A* offering anchoring the numbers.

Saving Stream Milestone: Value of Outstanding Loan Book Grows By 126% (Crowdfund Insider), Rated: A

On Tuesday, P2P lending platform Saving Stream announced its value of outstanding loan book grew by 126% during 2016. In its year review, Saving Stream stated over the last year, its outstanding loan book increased from approximately £73m in December 2015 to £165m in December 2016.

Saving Stream, which was founded in 2012 and is regulated by the FCA, stated its loan portfolio has also significantly increased, having now lent over £250m to property developers and purchasers. In addition, £60m has been repaid to investors. The platform has grown and has more than 13,000 registered users.

Nasdaq-listed fintech Pioneer Mitek launches in the UK (Yahoo! Finance), Rated: B

Mitek (MITK), a global leader in mobile capture and identity verification software solutions, has launched in the UK with a new office established in London. The US-based company works with over 5,500 organisations providing its technology to 70 million consumers across the globe. Mitek provides financial institutions and other highly regulated businesses with mobile verification technology underpinned by artificial intelligence (AI) that establishes an individual’s identity remotely to accelerate the digitisation of Know Your Customer (KYC) and Customer Due Diligence (CDD) processes around on boarding and payments.

This technology is already used by more than 70 million consumers, and is embedded in over five thousand apps by banks, insurance providers, payments providers, and other financial services. Mitek also offers “selfie authentication”, where the user can use their mobile device’s camera to perform a facial recognition scan in order to on-board into a service or authorise a transaction.

 

Authors:

George Popescu
Allen Taylor

Friday February 3 2017, Daily News Digest

direct lending

News Comments Today’s main news: American Banker pushes back on SoFi acquisition of Zenbanx. Billionaire Dan Loeb prepares to bet on MPL.  RateSetter updates lender terms ahead of provision fund changes Today’s main analysis: January International P2P lending volumes. Today’s thought-provoking articles: Rise in personal loans dominated by P2P lending. United States Where SoFi-Zenbanx deal falls […]

direct lending

News Comments

United States

United Kingdom

Australia

India

Asia

International

News Summary

United States

Where SoFi-Zenbanx merger falls short (American Banker), Rated: AAA

The announcement that Social Finance is buying Zenbanx marks an important milestone in SoFi’s ongoing evolution from a one-product company exploiting a pricing anomaly in the government student loan market to the preferred private bank for millennial achievers.

But as positive as this partnership is, it won’t solve all of the challenges facing an alternative lender like SoFi, which still needs a more direct banking capability to deliver sustainable funding for its loan portfolio.

For the last couple of years, SoFi’s quest to become the central financial services hub for its approximately 230,000 HENRY (High Earner Not Rich Yet) customers has had mixed success. While 230,000 is a large number of customers for a fintech startup, it pales into comparison to a money-center bank like Wells Fargo, which has more than 300 times as many customers and is much fewer than the customer count at private bank competitors like First Republic. More importantly, the vast majority of SoFi’s customers have only a single-serve (and not very profitable) student loan relationship because SoFi lacked the transaction banking and deposits capabilities needed to make it the center of its customers’ financial lives.

Billionaire Dan Loeb Is Preparing To Make A Major Bet On Marketplace Loans (Forbes), Rated: A

Billionaire hedge fund manager Dan Loeb of Third Point believes the election of President Donald Trump has created new opportunities for active investors, who will have newfound ability to outperform passive indices as growth and inflation set in, and correlations between stocks and other asset classes fall.

Loeb isn’t just re-positioning his stock bets for the Trump economy. As Forbes has reported, the hedge fund is bringing so-called ‘quantamental’ experts into its ranks, and has made significant investments in fintech and biotechnology.

Third Point is cutting its exposure to U.S. RMBS and moving heavily into the marketplace lending sector, where firms firms like Prosper, SoFi and LendingClub have filled a lending void left by banks. Marketplace lenders are increasingly pooling unsecured loans made to consumers into trade-able securities and distributing them to institutional investors such as hedge funds, bond funds, and even high net worth family offices. Third Point likes the duration of these loans, which normally are repaid in under three years, and appears to be stepping into the market at an opportune time.

That Third Point is stepping into market, however, indicates the fund sees a way to navigate the uncertainty of this nascent lending business. It also signals the hedge fund has not lost its excitement about novel fintech platforms despite a year of turbulence. The hedge fund’s VC arm, Third Point Ventures, is an investor in SoFi, Upstart and Swift Capital.

SoFi rides rally with new student loan securitization (Kitco), Rated: AAA

Social Finance seized the recent risk-on wave for consumer-related debt by dramatically pulling in pricing on Thursday on its latest student loan securitization.

The online startup priced the biggest part of its new US$561m bond at 45bp, or 10bp tighter than its prior broadly syndicated deal, according to bankers.

Lower rated tranches came even tighter in a 25bp-40bp range, according to IFR data.

SoFi’s CFO Nino Fanlo said the new deal attracted more than US$4bn of orders and the participation of about 40 accounts, or double the investor base in SoFi deals sold a year ago.

The US government provides a backstop for a huge chunk of the roughly US$1.3trn of outstanding US student loans – and SoFi has seized on refinancing its top earners.

Only US$5.7m of SoFi student loans had been charged off from the US$9.2bn pool it had originated as of December 31, according to Moody’s.

2017 is the year for Americans to get out of debt (MoneyLion), Rated: A

In fact, 54 percent of users surveyed expect their financial situations to improve in 2017. When asked how, respondents identified getting out of debt (63%), improving credit scores (57%), and better managing expenses (38%) as among their top objectives for the year.

The survey also revealed that 66 percent of respondents are relying on higher income in 2017 to pay for their expenses, yet only 52 percent expect to earn more this year. Added to this, a quarter of those surveyed do not track their expenses with 75 percent of that group saying it’s because they don’t know where to start.

Fintech Startups Want to Save One Key Page of Dodd-Frank (The Wall Street Journal), Rated: A

Section 1033 says that banks must “make available to a consumer, upon request…information relating to any transaction, series of transactions, or to the account” and “in an electronic form that can be used by computer applications.”

Fintech startups argue this language enshrines their right to pull data from customers’ bank accounts when the customers give them permission. Companies such as Betterment LLC, an online investment manager, say that accessing bank-account data helps them make it easier for consumers to use investing apps, borrow money or move dollars between accounts.

Banks, on the other hand, say that while they support customers’ right to share their account data, there should be certain restrictions as well. These are needed, they add, to protect consumers from third parties accessing more data than is authorized, or to track how data is used.

Already, Betterment and a group of well-funded fintech startups have created an industry group, called the Consumer Financial Data Rights group, in hope of protecting Section 1033 and pushing for broad implementation of it. The group, formed in January, said it would work with policy makers to promote “consumer choice and access.”

Other group members include Personal Capital Corp., Affirm Inc., Kabbage Inc., Varo Money Inc., and Hello Digit Inc.

Renovate America Completes $ 100 Million Credit Facility for Benji (Yahoo! Finance), Rated: A

Renovate America, a leading U.S. provider of home-improvement financing, announced today that it has completed a $100 million credit facility with Credit Suisse. The facility will enable Renovate America to expand Benji, the company’s unsecured consumer home-improvement lending product.

As Renovate America’s newest financing option, Benji is designed for well-qualified borrowers and is expected to rapidly expand to all 50 states. Benji can only be used to finance home improvements, from energy and efficiency upgrades to kitchen and bath projects. Benji offers consumer and small business protections which set it apart from other unsecured lending, including contractors agreeing to be paid only when homeowners have agreed that the project is complete, and post-funding dispute resolution support if needed.

Money360 Funds $ 8.3 Million Bridge Loan for Illinois Retail Center (SAT PR News), Rated: A

Money360, the leading commercial real estate marketplace lending platform, announced today that it has provided a bridge loan to the owner of a retail center in Jacksonville, Illinois.

Money360’s $8.3 million loan allowed the borrower to pay off a maturing loan on the Lincoln Square center, a 206,257-square-foot anchored retail property that is currently 82 percent occupied by a combination of 29 national and regional tenants.

IHT Realty Crowdfunding Offers Record High 28% Yield Investment Opportunity (Yahoo! Finance), Rated: B

We are pleased to announce that IHT Realty Crowdfunding has an opportunity for accredited investors.  Our Sponsor has acquired a beautiful, 2-home property to transition into a Residential Assisted Living Facility located in Jacksonville, FL.

The Sponsor is offering a 28% yield on the equity portion consisting of a 12% annualized yield and 16% deferred for 24 months. A majority of the equity is already pledged leaving a small tranche available for investment. The debt is already in place (crowdfunded by IHT in 24 hours) and the Sponsor has closed on the property and already started the rehab.

This investment will consist of repurposing 5.8 acres of land with two single-family homes.  These homes are great examples of the all-brick construction of the 1950’s and 1960’s.  The project starts with enlarging the homes’ heated areas from 1,488 sq. ft. to approximately 2,000 sq. ft. each by converting the oversized garages into 2 and 3 bedrooms with private full or half baths.

Sweet Water – Park LLC is the Sponsor for this project.

PayCommerce to use digital ledger for cross-border payments (The Asset), Rated: B

PayCommerce successfully conducted test payments between the US and India using its Federated Ledger, a blockchain-based technology.  This is the first phase of testing before an expected roll-out to PayCommerce network members at the end of Q2 2017. Other regions, such as Mexico, the Gulf Cooperation Council region, and the UK, are planned in 2017. Introduction is planned for Singapore, Canada and the Philippines in 2018.

United Kingdom

RateSetter updates lender terms ahead of provision fund changes (P2P Finance News), Rated: AAA

RATESETTER has published updated lender terms as it prepares to tweak its provision fund.

The new terms have been published on Thursday, one month ahead of the changes to the fund to address concerns that it is too “binary.”

Under previous rules, if the provision fund were no longer able to cover expected defaults, all loans would be assigned to the fund and losses would be distributed equally.

Under the new terms, RateSetter will be able to divert interest and capital into the provision fund if it thinks losses are becoming uncomfortably large.

Lenders with active investments can withdraw before 1 March 2017 if they are unhappy with the changes.

Podcast: Giles Andrews OBE, Zopa (Consult Hyperion), Rated: A

Giles Andrews was part of the team that founded Zopa in 2004. He became CEO in 2007 and moved to the role of Executive Chairman in 2015.

In this podcast, he talks about Zopa’s plans to launch a new, and more transparent, bank.

Listen to the podcast here.

MarketInvoice and Funding Circle represent P2P on fintech delivery panel (P2P Finance News), Rated: A

MARKETINVOICE and Funding Circle executives are among the industry experts selected for the Treasury-backed fintech delivery panel, which will aim to maintain the UK’s position as a global fintech hub.

Anil Stocker (pictured), chief executive of MarketInvoice and Martin Cook, general counsel at Funding Circle, are the only peer-to-peer lending professionals making part of the 24-strong panel, which will be run by Tech City UK.

Other fintech experts on the panel include: Michael Harte, group head of innovation at Barclays; Taavet Hinrikus, chief executive of TransferWise; Peter Smith, chief executive of Blockchain; and Jeff Lynn, chief executive of Seedrs.

Former NACFB chief launches SME funding platform (Credit Strategy), Rated: A

Tyler stood down as chief executive of NACFB in October 2016 after 11 years in the position and is now managing director of the online platform, FinancemyBusinessonline.

The platform, now live, provides a matching service between SMEs and lenders.

The platform has around 100 lenders registered including Paragon Bank, iwoca, Funding Circle and Aldermore.

Innovative Finance – a more interesting way to save? (Unbiased), Rated: B

The Innovative Finance ISA is a new breed of ISA, falling somewhere between a cash ISA and a stocks & shares ISA. It lets you loan your money out through peer-to-peer (P2P) lending and pay no tax on the interest.

The current ISA limit for 2016/17 is £15,240, split across all ISAs including cash, stocks & shares, Help-to-Buy, Lifetime ISA and Innovative Finance ISA. The total amount you pay into your ISAs each year can’t exceed £15,240 but if you want to, you can put the whole lot into one Innovative Finance ISA. From this April the ISA limit will rise to £20,000.

P2P platforms are required to have a provision fund to reimburse lenders for their potential losses. FCA regulation requires this fund to be at least £50,000 by April 2017, but the most reputable lenders have much larger funds totally millions of pounds.

Market Report: Direct Lending in the UK (BondMason), Rated: A

Since its inception in 2005, the UK’s P2P lending market has grown significantly. In 2016 there were 80+ Direct Lending platforms facilitating £3.2bn of lending, across many different types of borrowers from buy-to-let mortgages, property developers, SMEs, and consumers.

Here’s a snapshot;

  • The UK Direct Lending market is big and growing with plenty of room for growth
  • The big four platforms dominate but there are an increasing number of other operators
  • Regulation is improving but shouldn’t be relied upon to protect lenders’ returns
  • Attractive returns compared to other investment opportunities
  • Managing risk is key through choosing the right platforms, level of diversification, borrower, and loan selection
  • Services such as autobid and listed funds are increasingly popular for investors
  • The flight to quality will lead to a few platforms disclosing significant defaults in 2017 who may exit or scale back operations significantly
  • Why Direct Lending is likely to form a key component of any investor’s portfolio

Australia

Rise in personal loans dominated by peer to peer lending (Financial Buzz), Rated: AAA

Online marketplace lenders dominated personal loan applications during December 2016 quarter. The recent Veda credit agency report shows that the personal loan application numbers for this period were about 12.4 percent more compared to December 2015 quarter. The figures were taken from the most recent Quarterly Consumer Credit Demand Index.

There was a considerable rise in personal loan applications growth all over Australia. The Northern Territory and NSW led with a rise of anout 14.5 percent. Queensland was 13.1 percent. Victoria enjoyed a 12.5 percent increase in the growth rate. An upside of 7.7 percent was observed in consumer credit applications. Mortgage applications went up by 6.6 percent and credit card by three percent.

Your morning briefing (PaymentsSource), Rated: A

Sunglass pay: Wearables that can make payments are popping up in all sorts of garments, from gloves to rings, as developers look for what makes consumers comfortable. In Australia, sunglasses are getting a test. Business Insider reports Visa is testing the technology at Laneway, an upcoming music festival in five Australian cities. People will be able to make payments by tapping their sunglasses at checkout.(they take their glasses off, instead of bending over). Inamo, a local startup, developed the supporting technology, while Oberthur will handle risk management and Heritage Bank will be the deposit-taking institution.

India

FinTech startup SlicePay acquires P2P lending platform Trustio to enhance its credit offerings (The Tech Portal), Rated: A

SlicePay, a fintech startup which provides buy-now-pay-later kind of service to its users, has today announced that it has acquired Trustio, a NewDelhi-based peer-to-peer lending company.

The company has also recently tied up with a systemically important large NBFC which has a 2500+ crore loan book and are in the final stages of discussions with a publically traded NBFC that has 10,000+ cr book.

Mahindra Finance announces winners of Global Fintech Challenge with Matchi and KPMG India (Match.biz), Rated: A

Leading Indian NBFC, Mahindra Finance, is delighted to announce three winning solutions from their recent Global Fintech Challenge. All three solution providers will continue with Proof-of-Concept projects within Mahindra Finance with a view to roll out and implement their technologies.

Category 1 Theme: Real Time Credit Risk Assessment
Winner: EFL Global (USA)

Category 2 Theme: SME Risk Monitoring
Winner: NanobiData

Category 3 Theme: SME Cash Flow Management
Winner: Finansync (UK)

Asia

How Asia is making a new push into e-payments (The Asset), Rated: A

Malaysia in 2015 looked to revamp its bill payment system by introducing its JomPAY service. Operated by MyClear, a subsidiary of Bank Negara Malaysia the service looks to develop an open electronic bills payment platform for consumers, banks and billers. Currently the platform has 42 banks and over a 1000 businesses registered on the system.

The Vietnamese Ministry of Finance in 2015 instructed commercial banks to stop over-the-counter tax payments and work with tax agencies to create online portals to execute e-tax payments. Similarly the Indonesian Ministry of Finance last year launched its MPNG2 system, an automated tax management that aims to give taxpayers flexibility in payments and simplify the overall filing process.

India also last year saw the RBI (Reserve Bank of India) introduce its Unified Payments Interface (UPI) system, a tool that allows a user with multiple bank accounts to make payments via a single application. Currently the app is compatible with 29 banks including the likes of Axis Bank and ICICI Bank.

International

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

Funding Circle leads ahead of Zopa and Ratesetter. The total volume for the reported marketplaces adds up to 476 million Euro.

Zopa celebrated passing 2 billion pounds in loans lent since launch. That figure means  300,000 loans to 246,000 borrowers funded by around 75,000 lenders.

Further milestones reached this month were:

  • Harmoney passes 500 million NZD since inception
  • Assetz Capital passes 200 million GBP since inception
  • Twino passes 100 million EUR since inception

 

How fintech continues to dominate VC investment (The Asset), Rated: A

In 2015, as a share of global fintech capital investment, 56% was made in the US, with only 19% in China. However, as of September-end 2016, that number had dropped to 41% in the US, and more than doubled to 46% in China.

In the US, lending received 20% of VC investment in 2016, dropping down from 58% in 2015. Whereas VC investment in payments rose from 11% in 2015 to 14% in 2016; in blockchain 3% to 8%; in insurance 0% to 34%; and in wealth management, 0% to 7%.

Investment is shifting towards business-to-business based business models in the US, while China continues to focus on business-to-consumer based business models, as vast opportunities in consumer finance remain untapped by banks.

Authors:

George Popescu
Allen Taylor