How Amazon’s Alexa will upend wealth management. AT: “I don’t know so much that Amazon itself will impact wealth management, but perhaps the underlying technology of Alexa will cause the industry to change more rapidly. I can see Amazon directly impacting banking and finance for consumers, and they’ve already begun to.”
The future of banking investments. AT: “I agree that banks will adapt to the changing landscape of handling other people’s money, and they’ll do it their own way–probably in a way most of us least expect it.”
Instant gratification and real-time vacations. AT: “In 2005, my wife and I toured Germany by train. At that time, we had our laptops and managed to book hospitality services using the public railway system’s free wi-fi. We thought it was cool that we could plan a two-week vacation on the fly and move from one city to the next with minimal planning. Today’s technology is even better and more readily available for this type of ‘vagabonding’.”
One could almost say my returns are in a downward spiral. Since peaking in Q1 2014 at 12.44% my returns have decreased pretty much every quarter and for the last two years that decrease has averaged around 0.5% per quarter.
This past quarter my overall returns stood at 7.28% and the returns for my original six accounts were 5.07%. My worst Lending Club account was my original account there and it came in at 1.95% for the year. The only good news, if there was any, was that I did not have a negative quarter in any of my accounts this quarter unlike in Q1.
Source: Lend Academy
All the account totals and interest numbers are taken from my monthly statements that I download each month.
The Net Interest column is the total interest earned plus late fees and recoveries less charge-offs.
The Average Rate column shows the weighted average interest rate taken directly from Lending Club or Prosper.
The XIRR ROI column shows my real world return for the trailing 12 months (TTM). I believe the XIRR method is the best way for individual investors to determine their actual return.
The six older accounts have been separated out to provide a level of continuity with my earlier updates.
I do not take into account the impact of taxes.
Lending Club
While Lending Club shows an 8.19% return I ignore that number and do my own calculation. My TTM return here is at an all time low of 1.95% but at least I have reversed what happened in Q1 when I had a negative quarter.
Prosper
Source: Lend Academy
Direct Lending Income Fund
The Direct Lending Income Fund continues to be my most consistent performer returning solid double digit returns every quarter since I started investing back in 2013.
Advisors wondering how Amazon will enter wealth management should look to its cloud computing arm, Amazon Web Services, which is pitching the natural language processing, machine-learning brain behind its voice interactive service to wirehouses, broker-dealers and robo advisors.
Already, UBS has partnered with Amazon to enable clients and non-clients of the bank to get answers to financial and economic questions through Alexa.
I’ve actually had this subject on my mind for awhile. In my article “Customer Experience And Retail Banking: Why Banks Need To Enter The Modern World”, I discussed a day where my district manager came to show us the ABSOLUTE IMPORTANCE OF LOBBY LEADERSHIP!!!!!!! I was rather underwhelmed by its importance, but overwhelmed by the fact that the banks were all putting such a heavy focus on greeting customers at the door and making each trip to the bank “an experience”
One of the downsides of the future of banks—and one of the things that might compel someone to avoid bank stocks—is that they are slow to change. They are loathe to change.
Other businesses are trying to please their customers. Banks are trying to please their regulators. Because customers don’t issue multi-million dollar fines on banks when they don’t get what they want.
A New Challenger Has Entered The Battle!
Businesses always have competition within their field. Banks are no exception. Banks compete with other banks to provide their services to the global market.
Except now, with fintech growing at a record pace, banks face competition from small fintech companies and major technology giants such as Google and Apple.
We’ve seen companies like Lending Club take the world of lending andinvesting by storm with their peer-to-peer lending services. LendingTree has changed the way people shopped for mortgages, and LendKey is fast becoming a leader in student loans by acting as a broker for not-for-profit lenders and providing full after-funding services. I wrote a review about LendKey here.
For non-lending companies that aren’t brought to you by the letter “L”, there’s PolicyGenius (an online life insurance broker). There’s Acorns, a “micro investment” company that takes each of your debit card purchases, rounds them up to the nearest dollar, and invests the spare change into your investment portfolio. And of course, there’s PayPal, the legendary online payments/money transfer company.
Of course, the fintech firms aren’t even the largest future competitors! Ironically, it’s non-financial technology giants that pose the greatest threat to the future of traditional banks!
Why I Think Bank Stocks Are A Great Future Investment
No, I’m bullish on banks because I think that they will adapt, in their own unique way.
Last week the Cleveland-based bank announced it had taken an equity stake in the fintech firm Billtrust, which provides digitized and automated accounts receivable capabilities for companies. The investment is one of a series the $134 billion-asset Key has made in the space in the last two years.
Other banks are also making an effort to enhance commercial payments capabilities. Wells Fargo, for example, in June announced that receipt imaging would be available for commercial card customers who use the bank’s commercial card expense reporting service, which allows them to upload and manage receipts directly on mobile devices. U.S. Bank also began offering corporate clients a virtual payments service, for employees who need to make a one-off work-related payment or who make purchases rarely enough that they don’t need a physical plastic corporate card.
Time and reality have since set in, and the tone of the conversation has shifted away from “compete” toward “collaborate.” Banks increasingly see the value of capabilities developed by fintech firms, and those companies in turn are becoming better acquainted with the challenges of regulation and other barriers to bringing their products to market.
For banks, the wakeup call has been the realization that customers are coming to value—and expect—a frictionless banking experience. And if banks can’t provide that kind of frictionless experience, Henrichs says, they’ll turn to alternate solutions.
Keys to building a successful fintech strategy
1. Adopt the right cultural mindset.
First and foremost, the bank must have an appetite for innovation.
For some banks, this may involve a shift away from viewing fintech companies as simply third-party vendors or service providers, and instead as collaborators working side by side to develop something new.
2. Do something.
And size isn’t an excuse to sit back and wait, Henrichs adds. Rather, it’s about choosing an area of focus that makes sense for the bank in terms of available resources. While that may not always be a big, sexy innovation, banks can start by achieving smaller, incremental change—something as simple as building and beta testing a new email delivery system can help build up the bank’s “try and fail muscle” and help lay the groundwork for future, larger-scale projects.
3. Be forward-looking.
Consumers’ demands are shifting every day, and new products will continue to hit the market at an unrelenting pace. Knowing that, bankers must be able to keep an eye on the horizon.
According to the quarterly Fiserv “Expectations & Experiences: Borrowing and Wealth Management” survey conducted in June 2016, 49 per cent of consumers are interested in receiving financial advice from a robo-advisor.
However, there are limits to a robo-only approach. That is why we are witnessing an increase in wealth management firms that incorporate both digital advice and human advice to create a hybrid model, which is likely to become best practice in the industry.
Annualcreditreport.com is a free website and app which will allow you to get a free copy of your credit report every 12 months from each credit reporting company.
Nerdwallet.com is another free website and app. The site offers financial tools and objective advice to help people better understand their financial options and make the best possible financial decisions.
Mint.com is a free website and app that helps you create budgets that make sense today and set you up for success tomorrow.
Bankrate.com is a free website and app that will help you find and compare rates on financial products like mortgages, credit cards, car loans, savings accounts, certificates of deposit, checking ATM fees, home equity loans and banking fees.
On Monday, Funding Circle announced it is set to launch a new version of its existing Autobid and Autosell lending tools. Funding Circle will be eliminating the option to manually choose which businesses an investor may lend to and which loan parts to sell will be withdrawn. This is a significant shift in operation of the peer to peer lending platform as it begins to operate more like a fund.
Funding Circle created a new section on their web site dedicated to the explanation as to why they were moving away from peer to peer lending and becoming more like a fund by eliminating manual selection.
While many investors have enjoyed manually choosing loans, there are some drawbacks to it:
Many investors do not currently benefit from lending to all types of businesses.
It can mean your lending is not spread evenly across lots of businesses.
It can be confusing for investors.73% of new investors who join Funding Circle choose Autobid, and 80% of Funding Circle investors* say simplicity of lending is important to them.”
The FCA has launched a crackdown on peer-to-peer (P2P) lending, in the coming months, aiming to ensure protection for retail investors within this heavily risk-associated market.
These operations could weaken the internet companies’ credit quality, especially if their finances are consolidated on the technology companies’ accounts, Moody’s Investors Service said.
That’s because most internet companies don’t generate enough profits from operating these businesses, and they lack a track record of holding borrowers accountable for timely payments on their loans, Moody’s said.
After years of explosive but unruly growth, the online finance market requires cooling through tighter regulation.
On the contrary, there were few regulations to guide or hamper China’s Internet finance industry, with no such requirements as reserve levels or loan-to-deposit ratios. The near-absence of regulation greatly lowered the barriers to entry for the sector, which witnessed both explosive expansion and high failure and fraud rates as it grew. Take P2P lending platforms, for example. As of the end of July, 5,916 P2P lending platforms had been set up in China, but only 2,090 were operating normally, with the rest either encountering liquidity problems or simply closing, according to statistics from wangdaizhijia.com, a P2P industry portal.
Ant Financial has a big market share in the online payments industry in China. However, its ambitions go far beyond that. Recently, Ant Financial was known to get involved in the credit market.
Ant Financial seeks to merge the gap between the Yu ‘E Bao account and the general bank account through the online merchant bank. It hopes to connect the supply and demand side of the credit in its own account system, just as the bank account do.
But it won’t be easy. The biggest difference between the credit business and the payment business is that the credit business is a heavy capital business and a highly regulated licence business with a strong social spillover effect.
The Swedish startup Klarna made waves this summer by launching its own peer-to-peer payment app called Wavy and acquiring a full banking license, which sets Klarna apart as one of the few fintech companies able to compete with traditional banks head-on. TechCrunch described it as a $2 billion startup working the 700,000 e-commerce sites. In June, Visa Inc. announced it is buying a stake in Klarna plus forming a payments partnership. Klarna is now widely considered one of the world’s most promising fintech startups.
There is a small but growing demand for bitcoin in Sweden. Sweden’s central bank is even considering the merits of making its own national cryptocurrency. In the meantime, Safello aims to become the “ Coinbase of Europe,” since the European bitcoin landscape is far more diverse than North America in terms of regulation and user habits. Coinbase, arguably the world’s best funded bitcoin exchange, is already available in Europe. However, Safello sets itself apart by focusing exclusively on the needs of European users, including support in nine different languages.
So far, Schuil said Safello has facilitated $10 million worth of transactions involving tens of thousands of European users.
Klarna and Safello aren’t the only Swedish startups with the potential to completely overhaul how people interact with money. Among all the startups buzzing around Stockholm, Biohax International certainly stands out. Biohax CEO Jowan Osterlund told IBT his team has implanted 3,000 microchips in people’s bodies, usually their hands, most of which happened in the past year.
These microchips can be used for purchases like train tickets and food. The Wisconsin company Three Square Market now lets employees buy office snacks with the swipe of a bio hacked hand, while also using the chip as a workplace ID for office equipment.
The transparency agenda in online lending has taken a step forwards, as another analytics firm raises capital. AltFi Data has raised an undisclosed sum of equity funding, in tandem to forming a new advisory board.
Roger Spooner and Peter Wilson will join existing backer and executive board-member Michael Baptista on the newly established advisory board. Spooner was most recently a member of the management committee at global data firm Markit, where he was head of global client management. Following a 20 year career in private equity, Wilson was the inaugural CEO of British Business Bank Investments, where he was responsible for £1.5bn of government investment. In this role he oversaw a number of early institutional investments within the UK’s marketplace lending sector.
Sona 10 Newmarket, which is located next to the Teeling Whiskey Distillery, is being created in collaboration with the long-established Dublin Food Co-Op and will be hosted on its premises.
The brainchild of Adrian O’Connor, a Canadian entrepreneur who has lived and worked in the area for about a decade, Sona 10 has already raised some private funding to get the building open with some tenants already coming on board.
It is now seeking to raise an additional €25,000 via the Irish crowdfunding platform Flender to kit out the premises.
Being able to transfer money between accounts in real-time has become part of our daily lives, so much so that when these automatic services do not work, it becomes a problem.
Smartphones have become global standard: ‘conventional banking meant writing traveler’s checks and exchanging physical currency ahead of a trip, both of which are very expensive for the average consumer. Since then, new fintech providers – even in emerging markets – have dramatically increased the acceptance of foreign credit and debit cards,’ Likar said.
Vacationing in real-time is here: ‘you can now rent an apartment for same-day arrival on Airbnb or HomeAway, find last-minute dinner reservations through OpenTable, borrow a car near your location with Turo, and even book by-the-minute hotel rooms through the Recharge app.
Another aim of the fintech industry, in the same vein of the eradication of cash, is helping those that are unbanked and underbanked pay for services only available for those with credit cards. ‘Most airlines today accept payments from alternatives like PayPal. Other financial services companies, such as Affirm, offer three, six and twelve-month financing plans for customers who cannot afford to pay for the flight up front.’
WeSwap is a multi-currency card that can hold up to 18 different currencies, ensuring that consumers can lock in the exchange rate upfront rather than after the purchase,’ Likar mentioned.
As WisdomTree points out in a recent note, a massive chunk of global real estate investments are actually found outside the U.S. (See also: Eyeing Emerging Markets REITs? See These ETFs.)
Australia-based online lender SocietyOne announced on Monday it is celebrating its five-year anniversary of helping customers achieve their lending needs. This celebration comes less than two months after the lending platform surpassed $300 million in total originations. The lender revealed that more than 13,000 customers thanks to $325 million provided by its investor funders.
Southeast Asia’s first digital pawn shop PawnHero has closed a $9.7 million (P500 million) financing deal with a Philippine investment bank even as it signed a partnership agreement with the fintech arm of telco giant PLDT.
The key to the banks’ risk taking ability is aggregation. The bank is able to get the deposits at scale and at the same time lend to a large number of customers most of which are likely to pay back. In a portfolio of loans, historically, only a small percentage is non-performing. The individual lender has so far not had the ability to create a portfolio. The start of crowdfunding a few years ago began to change that. Crowdfunding works in the area of providing returns through some level of ownership of either the product itself or the company which is promoting it. For individual investors seeking a stream of steady income on the other hand, P2P Lending or Marketplace Lending makes more sense.
However, the speed of growth of P2P lending outstrips that of traditional banking. An excellent December 2014 whitepaper, A Trillion Dollar Market By the People, For the People published by Foundation Capital, describes the blistering pace at which P2P lending grew from a base of $870 million dollars in 2012. Estimates of the size of the industry vary from between $100 billion to $200 billion. The whitepaper predicts that the market size will be about $1 trillion by 2025.
On average, P2P lending platforms like Beehive are able to reduce interest rate spreads between sourcing and lending money by about 400 basis points (4 per cent). That’s because players in this space do not keep the loans on their balance sheets.
Walmart, Affirm getting closer to closing the deal. AT: “The news broke yesterday that Walmart is discussing the possibility of using Affirm to offer financing on point-of-sale purchases. If this happens, and it looks like it will, the floodgates will open to POS financing.”
You can now buy $400 pants with a subprime loan. AT: “Not friendly toward alt lenders, but an interesting read nonetheless, and the podcast even more so. This commentator is critical of Affirm and the pending Walmart-Affirm deal.”
The future of Simple. AT: “It’s refreshing to see a company admit it has strayed from its original path and is now going to repent.”
SuperMoney’s auto loan offer engine. AT: “Interesting that interest rate is the least negotiated factor among auto buyers when purchasing a car when it is where they spend the most on their purchase. I see the auto lending sector heating up in the next couple of years thanks to services like SuperMoney.”
Smart solutions for smart cities. AT: “This is the first time I’ve seen the connection made between the Internet of Things and marketplace lending. While JD Supra doesn’t spell it out, there are all sorts of solutions that can facilitate more a connected financial services sector with everyday living. They include apps for connected cars that allow you to apply for a loan from your bank or preferred lender at the push of a button. And you can just as well have one in your home, too–on the wall, on your TV, by voice command.”
A call for more considered critiques of P2P lending. AT: “I have noticed that a lot of the criticisms of the P2P lending sector seem to be veiled attempts at protecting legacy institutions. Let the marketplace decide who survives.”
Why are retailers so enamored with Affirm? Giving customers the option to take out an installment loan to finance a purchase gives customers more choices, making it more likely that they actually will make the purchase. Millenials and other younger demographioc consumers are often loathe to carry mountains of personal debt that way previous generations have.
However, it also has to do with the inflexible and sometimes excessive terms of store credit cards, which generally charge higher interest rates than the lowest portion of Affirm’s rate range. Still interest revenue and late fees from store cred cards contribute a significant amount of money to retailers’ bottom lines, making it difficult for them to commit to giving their customers more financing choices.
Overall though, retailers, banks and credit card companies are all starting to understand that at a time of massive change in how and where people shop, they need to make it easier for shoppers to close the deal. Mastercard may recognize this as well as Walmart does. The card network aligned with Verifone late last year to begin offering instant installment financing at the point of sale.
Affirm may be a relatively new company, but the service it offers isn’t particularly innovative: It’s taking the concept of layaway, a type of no-interest payment plan that became popular during the Great Depression that lets you pay for things in fixed installments and take them home once you’ve paid for it in full, and twisting it for millennials. Unlike layaway, Affirm delivers your purchases instantly — but the cost of instant gratification is interest rates as high as 30 percent. The service is basically a cross between credit cards and layaway, combining the worst aspects of both.
Once your Affirm loan is approved, you can choose to pay it off in 3, 6, or 12 months, and interest rates range from 10 to 30 percent. The average customer takes out a $750 loan with a 21-percent interest rate and pays it back in nine months. Compared to credit cards, which have an average APR of 17 percent, and personal loans that typically have interest rates ranging from 5 to 36 percent, Affirm isn’t a particularly good deal.
Man gets money from LendingClub without a loan. AT: “This is bizarre. If LendingClub’s platform was hacked, that could be a big deal. On the other hand, if their platform is being used by bad originators or hackers somehow getting their hands on people’s private financial information, then it could be a reputation issue for both the originator and for LendingClub. They should launch an investigation into this to prevent it from happening again.”
Transparency in alternative investing. AT: “This is interesting. The only categories where ‘very important’ is more important for traditional investing than for alternative investing are degree of liquidity and degree of risk. Survey respondents are senior asset managers and institutional investor executives, so their concerns are different than the average accredited investor. Degree of transparency is the most important concern, evidently, for both traditional and alternative investments, but alternative edges out traditional slightly. The interesting thing is they are more concerned about regulation for alternatives. I’m not sure why. It could be that they feel an inequity crunch.”
Who will win the robo-advisor IPO race? AT: “They dynamics of the financial advice industry are very different than for alternative lending. Pure robo-advisors have to compete with traditional firms that also have robo-advisors, and it appears they may be losing. It could be a while before we see a pure robo-advisor go public.”
But the uncertainty and risk that comes with the markets is very often a major deterrent, especially for women, who invest at a much lower rate than men in the US.
To combat this, former Wall Street executive Sallie Krawcheck launched Ellevest in 2016, a digital investing platform that puts female investors’ money in low-cost ETFs based on a pick-and-choose set of goals, like starting a business, buying a home, having children, and retiring comfortably.
This week, the startup raised $32.5 million in its latest round of funding, according to CNBC. Tennis superstar Venus Williams, who is a champion of equal pay and opportunity for women both on and off the court, was among Ellevest’s first investors.
Just 28% of women are willing to take on high risk to get a good return on their investment, compared to 45% of men, according to a 2015 report by BlackRock.
When 53-year-old Wyoming resident Duane La Varier found $6,180 had mysteriously appeared in his bank account, he never dreamed how hard it could be just trying to give money away.
He said he and his wife never filled out any applications and never sought any kind of loan.
The deposit a week ago had come from a company called LendingClub.
“I said, ‘I did not apply for this loan. Just take it back, just take it all out of my account.’ They said no.”
LendingClub is not the actual lender — it represents lenders — but Dudum said the company will take the hit for the $6,000 loan and its fees.
With its launch of Notarize for Mortgage, the company’s proprietary signing and remote notarization platform, Notarize recently completed the first-ever online mortgage closing. By integrating directly with eOriginal’s electronic vault, they enable lenders to leverage a joint solution that takes only a few short days to set up and launch before borrowers can start closing loans online. Together, Notarize and eOriginal allow lenders to quickly provide a seamless digital experience spanning the entire closing process all the way through registration with MERS (Mortgage Electronic Registration System, Inc.) and sale into the secondary market.
Connecting lenders, title agents, borrowers and notaries online 24 x 7 to digitize the closing process, the Notarize for Mortgage platform is approved by both Fannie Mae and Freddie Mac, underwritten by national title underwriters, and was launched with five lender customers and numerous warehouse lender and mortgage servicer partners. The platform is available to lenders online or via modern APIs that allow them to integrate an online closing process directly into their existing tools, automating their closing operations entirely.
eOriginal’s platform of integrated solutions delivers a fully digital mortgage and supports every type of digital closing strategy.
In February of this year, the Economist Intelligence Unit surveyed 200 senior asset managers and institutional investor executives to learn what factors are most important in the way they make their decisions. Several different types of institution were involved, including hedge funds,private equity firms, insurance companies, and nonprofits.
New Business Models – and Transparency
The 2008 global financial crisis of course had a negative impact on the alternative investments industry.
New business models have arisen to supply demand across the spectrum of investors, including those investors eligible for and interested in alternatives. Publicly traded limited partners are one important example.
It’s been a decade since the launch of the industry’s leading independent digital advice platforms — Betterment, Wealthfront and Personal Capital.
The question that now remains for all three: who will cross the IPO finish line first?
In terms of assets, the trio has kept their positions in the market respectively, with Betterment leading all independents with over $10 billion in AUM, followed by Wealthfront’s $7.4 billion and Personal Capital’s $4.9 billion.
Collectively, the three count just over 420,000 clients and over 548,000 accounts, according to SEC filings and company statements.
Personal Capital, which always tailored its services for HNW clients before lowering its account minimums (and then raising them up again) claims its average client account size is roughly $380,000; users with more than $1 million in investable assets, the company says, comprise about 40% of its AUM.
Every year Inc. pulls together a list of the top 5000 fastest growing private companies in the United States. This year there were around 250 companies that made it in the financial services category and there are several familiar names on the list.
With nearly half the American population carrying a subprime credit score, rent-to-own companies, online installment, storefronts and others are embracing new tools to intelligently navigate a market that has been largely overlooked.
Cash is only 14 percent of the share of transactions by value of payments (The Federal Reserve System Cash Product Office).
While the average American spends roughly $100 per day – not counting the purchase of a home, motor vehicle or normal household bills (Gallop), half of us are walking around with less than $20 cash (Bankrate.com).
If given the choice between a cashless and cash-only shop, most consumers in the wealthiest countries prefer the cashless option (ING Group/eZonomics).
Nearly 40 percent of Americans said that they would be happy to go completely without cash. (ING Group/eZonomics).
Standard Cognition is using machine vision to build the checkout of the future. Called autonomous checkout, the technology will allow shoppers to grab what they want and walk out of a store without having to go to a cashier. Standard Cognition believes it tech will enable those companies to save money and reduce theft.
Dharma Labs is building what it calls the first “protocol for debt on blockchains.” Citing the popularity of ICOs, the startup believes there’s a “proven demand for cryptoassets that look and act much like equity.” So Dharma has built a mechanism for decentralized peer-to-peer lending. “Anyone in the world can borrow and anyone in the world can lend.”
Emailage, a Chandler, AZ-based provider of global fraud prevention and identity verification using email address scoring, raised $10m in growth equity funding.
The round was led by Anthos Capital, with participation from Radian Capital, Wipro Ventures, Mucker Capital and Tallwave Capital.
The company intends to use the funds to expand existing partnerships, further advance its email address-based predictive scoring system, and accelerate growth in North America, EMEA, LATAM and other key markets.
Hopefully, increased revenues will help ease cash flow problems and in the end, improve profits. Other advantages of growing business may include the chance to bring in more qualified employees, acquiring more customers and improving credit scores.
Expand service areas
Companies that provide services to homes or other businesses may find that their hometown or neighborhood has a limited customer base.
Expanding to nearby locations is one of the most common ways that local businesses grow into regional businesses. This also allows the company to add some more geographic areas to a business website, directories, and social pages to show up in more local searches.
Expand services
Most small business owners have to work to manage cash flow, and this task is much tougher when revenues are only high for a few months but operational costs last all year.
These are some ways to expand services both offline and online:
One good way to promote this kind of service online could be through holding webinars with tax tips for small businesses or even individuals. Some tax preparers might also produce books or videos for sale to help startups and small businesses manage tax planning better.
Some of these plucky entrepreneurs have learned to keep business flowing by offering holiday specials for getaways. Others have opened their facilities up to host seminars or workshops for organizations.
He kept his local business website to attract repair customers, but he also added an online store to sell products to the DIY crowd all over the country. He promoted this online store by creating some how-to videos.
The problem is that these instant loans encourage impulse spending — and it doesn’t have to be a pricey vacation! Affirm will spread payments over a period of 12 months for loans of $100 or more.
To put that in perspective, you could easily pay more than $15 in interest on just a $100 loan!
Over the last 8 years, 150,000 investors have lent over $26 Billion in personal loans through the peer to peer LendingClub platfrom. On average, investors in the top grade loans earned 5-7% annualized with strong cash flow.
As an added bonus, LendingClub allows you to invest as little as $25 per note. That means it’s easy to spread your risk across dozens or even hundreds of loans.
First, you need to meet some strict investor requirements.
Income requirements: Must earn $70,000 annually ($85,000 in California)
Net Worth Requirements: Must have a net worth (exclusive of your home value) of $70,000 ($85,000 in California). People with a $250,000 net worth do not have to abide by the income requirements ($200,000 in California).
Kentucky residents must be accredited investors (earn $200,000 annually or have a net worth of $1 million)
Residents of Alaska, New Mexico, North Carolina, Ohio, Pennsylvania cannot invest in LendingClub
No more than 10% of your net worth can be investing in lending club notes
$1,000 minimum investment
LendingClub charges $100 per year for their self directed IRA accounts, but they waive that if you maintain $5,000 of investments in your first year or $10,000 in subsequent years.
Once you select your loans, LendingClub will help you evaluate the risk on your portfolio of loans. They will even provide a projected rate of returns based off of history.
TD Auto Finance is keeping a close eye on fintech startups as it evaluates “opportunities that might exist” for auto refinance and private-party transactions, President and Chief Executive Andrew Stuart told Auto Finance News.
TD Auto is already “in discussions” with several fintech players to evaluate “where that might go,” Stuart said.
If you’ve considered taking a personal loan online here’s what you need to know:
More accessible – Smaller, newer financial firms have stepped in to fill the gaps left behind by traditional banks since the crisis.
Tailored products – You can tailor the specifics of the loan, such as the timeline for payback and the purpose of the loan. Businesses can use everything from inventory to invoices without the need for a personal guarantee.
Pricing Variety – Whether the payments are amortized monthly or weekly. Whether the effective annual rate is as attractive as you expected.
Less Regulation – Alternative lenders and online loan providers are not regulated by the FDIC the same way as traditional banks.
More awareness – The lack of regulation means alternative online lenders have more flexibility to provide custom lending solutions. They can be as innovative as they want with these financial products. However, you need to be more careful when dealing with an online lender. Look into their history, get assurances from the company, and do your best to educate yourself about their business.
OFF3R has launched a new channel dedicated to Self Invested Personal Pensions (SIPPs), the tax-free vehicle for pension savings.
The investment aggregator’s SIPPs portal launched on Tuesday 22 August with an initial list of three pension providers: Hargreaves Lansdown, IG, and True Potential Investor. It details the various fees and investment thresholds of each platform, as well as information on the different management styles.
Neil Faulkner, managing director of peer-to-peer research and ratings agency 4thWay, explains that investors should pay close attention to published bad-debt figures (which cover loan write-offs as well as simple defaults) of the different platforms.
Zopa
When a loan is approved, Zopa makes an assumption about its likelihood of falling into default over the lifetime of the loan, and then revises this default expectation over the lifetime of the loan.
Source: YourMoney.com
Zopa divides up investor money between many borrowers matching the risk profile specified at the outset by the investor, to spread the risk. If a borrower misses four months of repayments, then a recovery process begins.
RateSetter
The headline rate to note is that over its lifetime, 98.31% of loans are up-to-date – in order words, around 1.7% are in some form of arrears.
Funding Circle
Funding Circle is a little different in that you are lending to businesses rather than people. Over the lifetime of the site, it says that around 2% of loans have turned bad.
Lending Works
To date, Lending Works has an actual bad debt rate of 1.1%.
Assetz Capital has shared that investors in aggregate have earned gross returns of more than £25 million on their investments in approximately four years. Assetz Capital says lenders earned an average of 8% gross interest across all Assetz Capital loans since platform launch, before allowances for tax or any losses not covered by a provision fund.
Currently, Assetz Capital has about 20,000 registered and active investors. The returns since the launch of the platform were generated from over £309 million lent to UK businesses from a range of industries looking to raise funds, including SME, bridging and development sectors.
Earlier this month, ThinCats received full authorisation from the Financial Conduct Authority (FCA), which allowed the firm to apply for ISA manager status from the HMRC. While a launch date has not been officially set, Stewart Cazier, head of retail, told Peer2Peer Finance News: “I’m definitely thinking 2017. I’d be very disappointed if it didn’t happen this year.”
China issued draft rules targeting illegal fundraising on Thursday, as the authorities step up a campaign to crack down on risky and illicit behavior in the country’s financial sector.
The draft rules, issued by the law office of China’s State Council, call for participants engaged in illegal fundraising to cover the losses stemming from those activities.
Regulators will guide financial institutions and non-bank payment service providers on tightening up their supervision of suspicious fund flows, the draft rules said.
Financial institutions and non-bank payment service providers, if found to be negligent, will be subject to having their illegal income forfeited. They will also be subject to a fine of more than 1 time but less than five times of the illegal income, the draft rules said.
The executives responsible for the illegal activity will be removed and banned from entering the financial industry for a certain period of time and could be subject to fines of between 50,000 yuan and 500,000 yuan each ($7,507-$75,072), the rules said.
Recently, China Rapid Finance (NYSE:XRF) released an unaudited financial report for the second quarter of 2017. In the second quarter, the company reported a gross income of $24.5 million, up 59% from a year earlier, and their net income was $15.2 million, up 9 percent year on year. The company posted a net loss of $13.5 million in the second quarter, compared with $5.9 million in the same period last year, as the cost of including customer incentives increased.
However, the company still held the “Low and Grow” business strategy. Compared to the profitability, there are more concerned about gross income. Through analysis of the company’s financial and business data, we can find that some business data is changing and the potential for profit is increasing.
Chinese internet companies SINA(NASDAQ:SINA) and Weibo(NASDAQ:WB) are closely tied to each other. SINA holds a 46% stake in Weibo, deriving 72% of its top line from the Chinese Twitter clone (as Weibo is referred to by some).
Weibo’s greater gains have made it more expensive with a trailing price-to-earnings (P/E) ratio of 132 as compared to SINA’s 30.
SINA relies on Weibo for 70% of its revenue, which means that investors can still enjoy the latter’s rapid growth via a stock with a lower valuation. Additionally, SINA’s non-Weibo business has started gaining some traction of late, with the company witnessing 8% year-over-year growth from this segment in the latest quarter.
While there is no denying that Weibo’s growth is still impressive — as the 28% year-over-year jump in its monthly active users boosted its advertising revenue by 72% last quarter — at the same time, there will be a limit to the company’s growth given its negligible presence outside China and the competition from the likes of Tencent‘s (NASDAQOTH:TCEHY) WeChat.
Fluid, a California based FinTech & AdTech startup announces today that it received LendIt LangDi FintechChoice Award from LendIt Conference in Shanghai, China.
Year-to-date, European fintech companies have raised close to $2.6B across 295 deals, meaning that at the current run rate 2017 could see 500 deals and $4.5B in total funding by year end. For perspective, funding to European fintech companies is already 30% higher in 2017 YTD than the 2016 total.
UNITED KINGDOM
UK early-stage fintech financing has remained above 15 deals quarterly since Q2’14. Total disclosed funding has been a bit choppier: at $27M, Q4’16 was the lowest quarter since Q2’14, while the following quarter (Q1’17) saw the third-highest total funding at $81M and the largest number of deals at 33. Most recently, Q2’17 figures fell to $41M across 16 deals.
For example, Monese, which provides banking services for immigrants and expats, raised a $10M Series A in Q1’17, while Wirex, which allows for the holding of fiat currencies and cryptocurrencies in a single account on its personal banking platform, raised a $3M Series A in the same quarter.
Insurance is trending up across Europe at large, with more than 20 early-stage deals closing for approximately $50M year-to-date.
GERMANY
Funding hit its peak in 2016 as well, at $135M, well above the previous high-water mark of $46M in 2013 and more than 4X the $31M total for 2015. 2017 is on pace to surpass 2016 early-stage fintech financing figures, with 22 deals and $83M year-to-date.
Germany has also seen an increase in early-stage deals to small business banking and API-focused mobile banking platforms. Financing rounds to this group have increased steadily since 2015, which saw 5 deals close for $17M and was followed by 7 deals in 2016 (for a much smaller $6M).
Klarna uses Hortonworks Data Platform (HDP) and Hortonworks DataFlow (HDF) to help drive its deep data mining and AI, and to thus mitigate risk for buyers and sellers.
Dubai has seen a surge of interest from fintech startups and banking assets over the last three years, according to the emirate’s financial center’s management body.
It’s fast becoming a destination for financial technology startups because of its location, private investment and innovation.
He told CNBC that the financial services industry contributes about 12 percent to Dubai’s total gross domestic product and it is expected to increase to 18 percent by 2024.
AXIS Capital Holdings Limited and its operating subsidiaries (“AXIS Capital”) (NYSE:AXS) today announced it has partnered with Plug and Play, a global digital startup innovation platform headquartered in Silicon Valley. By joining Plug and Play’s InsurTech platform, AXIS will gain access to world-class digital insurance startups and will provide mentorship and technical support, along with underwriting and actuarial expertise, to help turn their ideas into products or services.
To help address the rapid and transformative changes underway within the (re)insurance industry, AXIS will work with property and casualty, life/health and general InsurTech startups that have been accepted to Plug and Play’s InsurTech program. This 12-week program attracts applications from hundreds of startups from around the world that utilize technology, data and analytics to develop innovative new business models, products and services.
AXIS will focus on the areas of Insurance, Reinsurance, Health, IoT (Internet of Things), FinTech and Mobility, with leaders from different business areas serving as program mentors and technical advisors.
Superannuation fund member engagement via Decimal’s digital financial advice software increased 37% in the past year, latest quarterly statistics show.
Decimal’s digital insights report for the June quarter shows 2366 members in its superannuation client base decided to engage with super via the digital advice channel over a 12 month period, up from 1731 the year prior.
Total funds under advice increased to $8.4 billion, up 72% year-on-year, and Decimal Software chief executive Nick Pollock said compound growth is stimulating for the super sector.
“The insights show that 43% of all logins were by women, 28% of logins took place outside of business hours, with 31% of those logins happening between 10pm and 6am,” Pollock said.
Australian fintech has launched an expanded industry census, which will seek to unpack key issues like how to expand overseas and gender diversity and help set lobbying and policy priorities.
Working on the census, consultancy firm EY, and industry group FinTech Australia, have asked Aussie fintechs to complete it by 3 September.
FinTech Australia and Next Money, along with the State Government of Victoria, a gearing up for their inaugural week long Fintech event – Intersekt. The Fintech festival will be taking place in Melbourne, Australia from October 27 to November 3rd if you happen to be in Australia.
Confirmed speakers for Intersekt so far include:
Anthony Thomson, founder of the UK’s Metro and Atom Banks (and the current chairman of Atom Bank). Atom Bank is one of the leading UK Challenger banks.
Ron Suber, called the “godfather of Fintech” due to his globe-trotting reputation for promoting online lending and all things Fintech. Suber recently joined the leadership team at Credible, the multi-lender marketplace for student loans. Suber is also President Emeritus of Prosper Marketplace and holds a broad portfolio of Fintech investments.
Megan Caywood, chief platform officer for the UK’s mobile only Starling Bank, who has delivered a range of major customer experience improvements.
David Birch, an international thought leader in digital identity and digital money and author of “Before Babylon, Beyond Bitcoin”
Van Le, who is the co-founder of Xinja, which is on track to be Australia’s first independent, 100% digital bank made for mobile. Lucy Liu, co-founder and chief operating officer of Melbourne-based payments company Airwallex who was this year named as one of Forbes’ 30 Under 30
Emma Weston, CEO and co-founder of AgriDigital, which provides a blockchain-enabled, integrated commodity management solution for the global grains industry
Over 50% Indians think that their children will take care of them financially after retirement
44% Indians do not think they will ever retire from work
An average of 66% of randomly selected adult household members have a bank account.
Source: Zeebiz
The report found that the average Indian household holds 84% of its wealth in real estate and other physical goods, 11% in gold and the residual 5% in financial assets.
Source: Zeebiz
The report said that 44% Indians have not thought of retirement as “people like me cannot retire from work,” they said.
Only 13% people surveyed were actively saving for their retirement while 33% had absolutely no planning for retirement.
Only around 5% people had money invested in financial assets for their retirement planning while gold formed nearly 10% of this fund.
The team at SERV’D has a simple but ambitious goal: to organize India’s unorganized domestic workforce. That means bringing financial inclusion to millions of unregistered workers via a mobile contract and payment app.
The lack of written contracts also makes it difficult for low-income domestic workers to build a financial history. Without that, they struggle to save money or obtain insurance, which all but guarantees they will remain in poverty. Exclusion from formal financial services bars people from accessing health insurance, bank accounts, and can even inhibit them from finding affordable housing.
SERV’D seeks to replace the verbal work agreements made between customers and their hired help. Instead of tenuous oral contracts, the fintech startup wants employers and employees to create digital agreements on the SERV’D app. The platform also allows them to make digital payment transfers so neither party has to worry about dealing with cash.
Most importantly, the online payment trail creates traceable income records for poor, unbanked workers. With enough proof of income built up, they will eventually be able to open bank accounts and access financial products that are currently beyond reach.
Mobile payments startup Ezetap is the latest Indian fintech company to pull in new equity financing. The company has raised $16 million from investors including JS Capital Management, Social Capital and Horizons Ventures.
Prest Loans the new age FinTech NBFC, providing online loans to small businesses and MSME segment has expanded its operations by opening new office in Rajasthan.
LATTICE80, a Singapore based non profit Fintech hub backed by Marvelstone Group, has signed a Memorandum of Understanding (MOU) with FINOLAB in Japan to mutually boost their Fintech ecosystems and global networks. Marvelstone is a global VC group based in Singapore.
This Fintech bridge will seek to create a passporting system for Fintech’s in each country to expand into new markets.
Aldo Carrascoso, founder and chief executive officer of GlycoProX Biosciences, Veem, and Jukin Media & Verego, said that focusing on becoming “unicorns” detracts the purpose of why people launch startups in the first place.
Lee argued that the first unicorns were founded in the 1990s, Google Inc. being the clear “super unicorn” of the group with a valuation of more than $100 billion. Many unicorns were also born in the 2000s, although Facebook Inc. is the decade’s only super unicorn.
Other prominent unicorns today include Uber, Airbnb, Dropbox, Spotify, Pinterest, and Lazada, to name a few.
Treading the path toward that level takes mindfulness of revenue, a good business model, addressable market, and a product-market fit, said Carrascoso.
Benjamin cited Xoom, a San Francisco-based digital money transfer or remittance provider, which traces its foundations to serving clients between the Philippines and the US.
Since then the company has expanded to India and Mexico, among others, and was bought by PayPal for $890 million. Today, they do $9.1 billion in money transmissions and are operating in 18 countries with a demand for money remittance services.
THE Philippines may have its own “tech unicorns” or technology businesses valued at $1 billion in the future. But experts says more work and collaboration is needed to achieve this dream.
To date, no Philippine tech startup has managed to meet the goal of being a billion-dollar company.
Globally, the US and China lead in numbers, having produced the most number of unicorns like Facebook, Uber, Airbnb as well as Xiaomi and Alibaba. Meanwhile, Malaysia in Southeast Asia has produced two unicorns in Grab and the Lazada Group.
First, he said Philippine startups need to know how to be fundable. Instead of aiming to be a unicorn, he advised local startups to become a “cockroach” instead, one that characterizes strong survival skills, or a rhino, “big and realistic.”
“A key advantage of e-wallets is the low cost. You can make payments and transfer money at much cheaper rates than in conventional payment systems,” explains Gunther Zhen, the founder and CEO of iPayLinks Financial Information Service (Shanghai) Co Ltd.
For China, this is certainly the case. While incumbent payment systems that rely on Visa, Mastercard and UnionPay charge merchants an estimated 2.5% to 3% MDR (merchant discount rate), new rivals like Alipay charge between 0.7% and 1.2%.
In Malaysia, however, the landscape could be different as the current MDRs are already quite low. Bank Negara Malaysia’s Payment Card Reform Framework has slashed the MDR on debit and credit cards since July 2015 when it took effect.
Today, domestic debit cards have an MDR of only 0.56% while for international debit cards, it is 0.96%. Credit cards are still relatively expensive with an MDR of 1.35%, but that is expected to drop drastically by 2021 when Bank Negara will cap interchange fees (the largest component of MDR) at 0.48% — less than half the 1.1% ceiling imposed today.
Just look at Touch ’n Go Sdn Bhd, which booked RM15.3 million of interest income in 2015 on RM429.3 million worth of deposits in card balances. And this is merely from the relatively small balance in each card.
Alipay creation, Yu’E Bao, is one of China’s most popular internet-based funds. It had amassed RMB1.43 trillion as at end-June. By comparison, Bank of China, one of the four major commercial banks in the country, had total deposits of RMB1.6 trillion as at end-2016.
Pundi-Pundi, a Jakarta, Indonesia-based mobile payments and micro-loan startup aiming to create a cashless environment in South East Asia, closed a $4M pre-A round of funding.
The University of Cape Town (UCT) has become one of the first tertiary institutions in Africa to offer a degree specifically designed to equip students with the critical skills and knowledge to embrace the technological revolution in the financial services sector.
One of its key focus areas will be blockchain technology, or the distributed ledger system, that has given rise to new crypto-currencies such as bitcoin and ether.
The crypto-currency market is reportedly now worth more than $50bn and the use of virtual currencies is gaining traction in SA.
UCT has sought to tackle this problem by offering a new master’s degree in data science with a specialisation in financial technology, said Georg, who is also the course convener. The programme is due to commence in 2018.
Congresswoman asks FDIC to hold public hearing on SoFi bank charter application. AT: “This elevates the conflict over SoFi’s application for a bank charter to another level. The bright side is, it could shine a spotlight on alternative lending and bring it to more prominent position within the general culture, which could lead to more business for alt lenders. Even if SoFi’s bid fails, it could benefit the industry as a whole.”
LendingClub (NYSE:LC) has been hit with a lawsuit that names former CEO Renaud Laplanche alongside current and former board members and former CFO Carrie Dolan. The complaint, filed in the Court of Chancery in Delaware, states;
“Throughout the period December 11, 2014 and continuing through May 9, 2016 (the “Relevant Period”), the Individual Defendants breached their fiduciary duties to LendingClub by failing to institute adequate internal controls regarding financial disclosures, related party transactions, and data integrity and security, all while causing LendingClub to represent in the Registration Statement and a series of subsequent filings that such controls were sufficient.”
The suit has been filed by two shareholders; Kelvin Farley and Jay Fink.
Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, sent a letter to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, calling for the FDIC to hold at least one public hearing on Social Financial, Inc.’s (SoFi) application to establish an Industrial Loan Company (ILC).
In the letter, Ranking Member Waters states that changes in the financial services industry and financial regulation necessitate a public hearing to examine the policy and legal implications of granting federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (fintech) company like SoFi.
I am writing to request that the Federal Deposit Insurance Corporation (“FDIC”) hold at least one public hearing on Social Finance, Incorporated’s (“SoFi”) application to establish an industrial loan company (“ILC”) to provide FDIC-insured Negotiable Order of Withdrawal (“NOW”) accounts and credit card products. As you know, because de novo ILC formations have been affected by regulatory and statutory moratoria for several years, the FDIC has not approved a deposit insurance application for a new ILC charter for some time. Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), changes in the financial regulatory regime and financial services industry justify a public hearing to examine the policy and legal implications of granting Federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (“fintech”) company like SoFi, a number of which I will discuss in more detail below.
Appropriate regulatory oversight of any ILC is an essential prerequisite to approving any application for deposit insurance backed by taxpayers. The FDIC has previously acknowledged the importance of strong oversight of any insured bank and its parent company when discussing oversight of ILCs.[1] In reaction to a number of concerns previously raised on the regulation of ILCs, the FDIC even went so far as imposing several moratoria on its ability to approve ILC applications for deposit insurance in 2006 and 2007 to, in the words of former FDIC Chairman Sheila Bair in testimony before the House Financial Services Committee, “allow the FDIC to carefully weigh the safety and soundness concerns that have been raised regarding commercially-owned ILCs. At the same time… the moratorium provides an opportunity for Congress to consider the important public policy issues regarding the ownership of ILCs by commercial companies.”[2]
While some experts have touted the possibility that fintech firms can help promote financial inclusion, others have underscored the challenges posed for our current regulatory regime to oversee these types of companies and have underscored the need for policymakers to carefully evaluate the consequences of allowing them access to deposit insurance and the Federal Reserve discount window.[11] Thus, Federal regulators have taken a varying degree of actions focused on fintech companies and services. For example, while the Office of the Comptroller of the Currency (“OCC”), under its “Responsible Innovation” initiative, has proposed a Special Purpose National Bank Charter for fintech companies (“fintech charter”)[12] questions have been raised about whether the benefits to consumers for this new charter will be widely and fairly shared, and whether there is adequate legal authority, let alone a clearly defined and modern regulatory framework, for such a fintech charter.[13] Indeed, a lawsuit has been filed by state banking regulators challenging the OCC’s authority.[14] As should be the case with the OCC and its proposal to use its authority to federally charter fintech companies, the FDIC should thoroughly consider the implications of offering access to the deposit insurance fund for ILCs that will result in expanding the type of institutions to it, like fintech firms. Fintech firms, whose operations cross state and international boundaries, and may exist entirely online, were undoubtedly beyond original congressional intent in permitting ILCs to access deposit insurance and it is appropriate for stakeholders to weigh in on whether it is appropriate for these firms to have this access without proper oversight of their parent companies.
The chartering of a fintech company as an ILC also raises a number of consumer protection concerns that the FDIC should consider. For example, the California Reinvestment Coalition (“CRC”) has opposed SoFi’s application on the basis of concerns with the institution’s Community Reinvestment Act (“CRA”) plan, as well as its intended approach to financial inclusion, fair lending, and consumer protection.[17] CRC notes that SoFi’s business model targets “students from elite universities that have strong earnings and wealth potential,” and offers products and services “designed to exclude working class households.” CRC also notes that SoFi’s CRA plan is grossly inadequate, considering that: (1) SoFi’s assessment area will be limited to areas in Utah, but the company will accept deposits and operate nationally; (2) SoFi’s current core products are not designed to serve the “convenience and needs” of low- and moderate-income (“LMI”) communities in which the bank would operate,[18] but rather are focused on serving SoFi’s members; and (3) SoFi’s CRA plan does not encompass measurable commitments to lending, investments, and services for LMI communities.
On this episode of the Lend Academy Podcast I brought together both CEOs to talk about this merger; what it means for their respective customers as well as the industry as a whole.
In this podcast you will learn:
The original idea that led to the founding of both companies.
The strengths of both companies and why they are a complementary fit.
Why they decided to come together and merge companies now.
The scale and profitability of the combined company.
The unique aspects of the LendingRobot Series investment offering.
The platforms that the LendingRobot Series invests on.
The different funds that make up the Lending Robot Series.
The choices for non-accredited investors on the combined platform.
Their value proposition today for investors.
Who the target customer is today for the combined company.
How the two brands will operate going forward.
What the combined company will look like in 12 months time.
Two student loan refinancing companies, LendKey and Earnest, have changed their student loan refinancing interest rates in recent weeks, according to LendEDU.
Effective August 10th, LendKey’s variable interest rate range for their student loan refinance product was altered slightly. LendKey, a leading lending partner of both banks and credit unions, now offers a variable rate range between 2.67 and 6.31 percent for student loan refinancing.
This new variable rates for LendKey mark an increase on both the low and high ends of the range. Previously, the online lending partner offered a variable interest rate range between 2.52 and 6.16 percent since June.
Blend has landed a significant funding round to the tune of $100 million. The funding was led by Greylock Partners with participation by Emergence Capital. Existing investors joined in the round as well.
The Hive Project, which intends to build the world’s first cryptocurrency-based invoice financing platform, has raised 2,087 BTC, or over US$8.9 million, from 2,234 investors through its initial coin offering (ICO).
Using invoice finance, the business “sells” its outstanding invoices at a small discount to a financier. The business immediately receives up to 85% of the value of the invoice instead of having to wait the usual 30 to 90 days to get paid by customers.
Hive uses the Ethereum blockchain and smart contracts to assign a unique fingerprint to every invoice issued. These invoices are then tokenized and published on a blockchain, and made available as a shared source of liquidity for factoring and invoice financing.
JP Morgan CEO Jamie Dimon in his annual letter would agree that the banking system is safer and stronger today. Nevertheless, Mr. Dimon believes that economic growth and lending is below potential. For instance, JPM estimates $1 Tn in loans could have been generated in recent years generating an additional 50 bps in annual GDP growth thru regulatory reform.
The specific regulatory reform areas Mr. Dimon identified include:
Simplification of the annual stress-testing process
Release or enable banks to deploy excess capital towards small business loans, lower middle market, and near-prime mortgages
Rationalization of supplementary leverage ratios and operational risk capital
National servicing standards for the mortgage servicing market
Federal Housing Administration (FHA) reform
Complete securitization standards to encourage private capital and reduce exposure to taxpayers
Role for 3rd party risk infrastructure to strengthen markets
Large banks are increasingly playing the role of financial intermediaries that connect non-banks to the capital markets. Banks are providing liquidity facilities (“lending to the lenders”) and capital-light securitization programs. Although Yellen is right that lending continues to grow, critically, the nexus of credit formation–including for a majority of personal loans, auto loans, student re-fi loans, and even mortgages–now takes place between a consumer and a non-bank.
Under this new landscape, the soft underbelly of the credit markets has shifted from bank wholesale funding to non-bank wholesale funding. And when investor confidence seizes, the transmission mechanism connecting policy to the real economy can break down. Spreads widen, funding costs increase, and markets freeze exactly when policymakers seek to ease financial conditions.
Recently, Crowdfund Insider published an article about Marqeta signing a partnership with Visa on payments and loans. The marriage is designed boost innovations in commercial and consumer payments and online lending. Visa also made a strategic investment in Marqeta at that time to the tune of $25 million. Total investments in Marqeta now stand at over $70 million.
Isn’t this just all about borrowers getting a better interest rate [and investors earning more]?
Candace: Lenders are looking to increase renewals (repeat borrowers are easier to sell than new borrowers), beat out the stackers (top of wallet, top of mind) and decrease risk (new data on spending reduces risk for future loans). On the heels of 2016, these have become as important as the interest rate for the lender.
For the borrower, speed to funds has become increasingly important, and distributing loan funds to a card allows a way to immediately spend the funds without waiting for the funds to be deposited into the borrower’s bank account.
If Credit Cards drop their rates then they can become competitive. For Visa to partner with Marqeta – isn’t it just how the debt is carried? For the consumer / business, they are indifferent?
Candace: The rates apply to the underlying loan per the agreement between the lender and the borrower, not to a prepaid card that is used to assist with making purchases. The prepaid card bears no interest charge. The terms for the loan (from which the loan proceeds are distributed to the card) continues as agreed upon between the lender and the borrower. That debt does not change.
Ahead of Riskalyze CEO Aaron Klein’s speaking engagement at the Benzinga Fintech Summit in San Francisco, Benzinga caught up with him to learn more about how the company is upgrading financial advice.
BZ: How did you go about identifying this need for financial advisors? What kind of research did you do?
What’s interesting is that we invented a new space. There was no risk-alignment platform that helped advisors do that. There were questionnaire products that answered half the question, there were a few portfolio analysis tools that would answer the other half, but we invented the concept of the risk number. We can help advisors pinpoint the client’s risk number and then we score portfolios using that number.
Klein: I’ll talk about the two different sides of the coin. A lot of the innovation was figuring out those sides of the coin and bridging the two together. On the one hand, we took some concepts that had really never made it out of academia and into everyday use. They’re centered around the economic framework called prospect theory, which won the Nobel Prize for economics in 2002. We took prospect theory and built a bunch of proprietary technology on top of it to understand how to move up and down a client’s personal financial spectrum to understand when they prefer risk and when they prefer certainty.
Once we do that, we built a mathematical formula behind the scenes that lets advisors turn that into the client’s risk number. That’s how the client-side works.
On the flip side, we need to match that up with a portfolio. So, the inputs for that piece of the technology are largely market data. We effectively take daily pricing data for nearly a quarter-million securities — every U.S. stock, ETF, mutual fund, variable-annuity sub accounts, SMA third-party money managers, proprietary non-traded strategies, all kinds of different products. We take all the data for those, we have new data streaming into our systems every night on those securities.
American Express is in the hot seat this week as the Consumer Financial Protection Bureau (CFPB) ordered the credit card company to pay out a very large amount to consumers in Puerto Rico and the U.S. Virgin Islands. It’s being confirmed that over a 10-year period, American Express provided inferior card offerings to people in those territories than what was being offered in the U.S.
Here are the numbers:
$240 million | Amount Prodigy Finance raised in its venture capital equity funding round
$96 million | Amount CFPB ordered American Express to pay out to affected Puerto Rico and the U.S. Virgin Islands consumers
$200 | Starting point for potential Walmart installment loans
According to statistics from the U.S. census bureau, Millennials make up about 83 million of the nation’s current population. The unique experiences of the Millennials will shape the way we buy and sell, forcing companies and businesses to adjust their business strategy for decades to come.
For example, a growing number of Millennials are choosing to live with their parents. They have been reluctant to buy items such as cars, music, and luxury goods. Luxuries that used to be important for previous generations are not as important for Millennials. They are reshaping the real estate market and are responsible for the growth of the sharing economy.
A recent survey of Interns conducted by Goldman Sachs in 2013, found out that 30% of millennials do not intend to purchase a car in the future. 25% said they will only buy one if there is a need for it, otherwise they are indifferent. Another 25% said buying a car is important but not a big priority. 15% said purchasing a car is extremely important. And the last 5% do not feel strongly about it.
A recent report shows that student loans have increased by 84% over ten years with an average student having a loan balance of $29,000.
Online banks are now offering much higher rates on savings accounts — significantly higher than the current rates at traditional, bigger banks. So with that in mind, why not just move your savings to take advantage of the bigger return?
However, the platform has no immediate plans to launch its IFISA product, telling customers earlier this week that it intended to roll out the tax-free investment wrapper “before the end of the tax year.”
Fast forward to today, we’ve originated over £3.2 billion worth of loans through the platform. In the UK, that lending has helped create about 60 thousand jobs, and the £2.5 billion of loans has created about £5 billion of GDP or gross economic value added, according to an independent survey by the Centre for Economics Business Research.
In fact, we think we make up about 2 per cent of the total money that’s going to gross-lending small businesses. And if you actually look at the money going into the economy, we make up about a third of net new lending— which is the preferred Bank of England measure. We did about 300 million versus 600 million in the entire banking system in the first half of this year.
Say a small business decides to come to you: what is it they’re getting that they don’t get with a bank?
We turn around loan applications specifically within 24 hours. We are better in that we give better service; everyone can find an account manager.
We’re cheaper, in that our prices are very, very competitive, and often we’re often providing cheaper loans than businesses would be able to get at the bank. We also don’t have the overheads that banks have.
We all know that Brexit is going to shake up the financial sector. What can Funding Circle do to help businesses rise to the challenge?
Net lending by banks fell by 220 million in Q4 last year. Ours actually rose to 167 million.
On top of that, we’ve also had large insurance companies like Aegon, which is a big Dutch insurer, commit to fund £160 million in year one, but actually committed over a four-year period to purchase our loans. The fact a large foreign insurer would want to do that shows that actually, despite Brexit, there’s a vote of confidence in the UK economy, particularly in small business.
London-based FinTech startup Paybase has received a grant of almost £700,000 from innovation agency Innovate UK.
Expected to launch later this year, Paybase has developed an ‘end-to-end solution for payments, compliance and risk’, which can be accessed through a unified API.
There’s been much collective gnashing of teeth over the last few months at the evolution of peer to peer lending, as practised by Zopa, Ratesetter and most latterly Funding Circle. The big bone of contention has been a shift amongst all three – with FC falling into line just a matter of days ago – to a passive lending model. This means that lenders on said platforms now lend passively to a full slice of borrowers rather than picking their borrowers individually. To the critics this implies that the traditional peer to peer (P2P) model is slowly dying out. If you’re not lending to your peers, don’t you just sound like any other finance business such as a bank?
I’m not convinced by this criticism. Collectively a crowd – many peers – are still lending to another crowd, but just in a format that looks closer to a passive, collective fund basis rather than one on one. There is no bank balance sheet lurking around and the ‘crowd’ still sets the rate at which it’s happy to lend. Credit scoring has always been a feature of all the platforms, whether they be ‘pure’ P2P or passive P2P. Someone, somewhere at the centre of the online marketplace needs to set the lending criteria and make decisions about who to lend to.
In this week’s bonus episode co-founder Emma looks at the sharing economy, peer to peer lending, and explains why Library of Things have chosen to operate from a physical space.
It is almost true that borrowing money from traditional financial institutions is a thing of the past.
It has been observed that P2P online lending platforms are not the source of the problem or the risk. However, it seems to be the ease with which loans are available that causes the problems.
Online P2P lenders also offer student loans. It is very important to realize that student loans these days are available everywhere. But what is ultimately the truth is that the loans are burdensome. Any student that avails of such a P2Ponline student loan emerges as a graduate burdened with a heavy debt.
If an individual wants to apply for a P2P online loan, it is best to start with checking credit reports. It is a good idea to fix any errors that may be found on these reports. Otherwise, the interest rates may be hiked up. It is also a good idea to do some research prior to applying for the loan. It is worthwhile to find out as to which lender offers a lower rate of interest even if they fall outside the ring of online P2P lenders. Never decide on which loan to pick up by looking at the monthly amount to be paid. The total amount that you are going to repay and the time period of the repayment are the more important factors to be considered. This gives the total cost of the loan.
Bank of Communications, the nation’s fifth biggest lender, joined with Suning Holdings and its financial affiliate Suning Finance as strategic partners last week, the latest of the big five banks to ally with internet firms.
So far, all big-five banks, accounting for more than one-third of China’s banking assets, have allied with technology giants.
Industrial and Commercial Bank of China allied with e-commerce major JD.com for cooperation in sectors including fintech, retail financing, corporate credit and asset management. Agricultural Bank of China agreed to work together with dominant search engine operator Baidu. Bank of China and Tencent Holdings jointly set up a fintech lab, focusing on cloud computing, big data, block chain and artificial intelligence.
Earlier this month, mid-sized Industrial Bank and JD.com’s financial affiliate JD Finance launched a debit card in Beijing and most cities in affluent Zhejiang province.
China Life Insurance Group Co and Baidu Inc will form a 7 billion yuan ($1 billion) private equity fund, targeting internet and other technology investments, China Life’s listed arm said on Thursday.
The Baidu Fund Partnership will be capitalized by China Life through a special partnership, which will contribute up to 5.6 billion yuan, China Life Insurance Co Ltd said in a Hong Kong Stock Exchange statement.
Baidu, the Chinese language internet search provider, will contribute as much as 1.4 billion yuan.
Alibaba’s Ant Financial Services Group and JD Finance are at loggerheads in the Chinese, and increasingly, global e-commerce scene. In 2015, JD Finance recommended the use of “FinTech.” In December 2016, Ma Yun coined the ”TechFin” as a rebuttal, and as a show of thought leadership.
Ant Financial’s unveiling of “TechFin” shows the firm’s focus on building technology rather than financial products.
Critics believe there is not much difference between TechFin and FinTech. Critics believe Ant Financial coined TechFin to gain a foothold from the conceptual standpoint; a counteroffensive to JD Finance’s aggressive marketing of FinTech. This is inevitable considering “FinTech” as a term already achieved credibility within the finance and other related industries.
Ant Financial and JD Finance are more complementary than competitive
Onlookers see Ant Financial and JD Finance as longstanding rivals. JD.com’s recent sale of JD Finance for US$2.1 billion in cash was seen part of a deal to spin off its burgeoning finance arm and raise its game against Ant Financial.
Ant Financial focuses on the traditional model of the Internet while JD Finance focuses on product innovation, for a start. Each business model has its advantages.
Ant Financial also seeks to leverage on Ant Check Later (花呗), a virtual credit card, to open up a whole new road map for credit distribution in Internet finance. In contrast, JD Finance aims to boost user’s consumption through its products. Its Jingxiaodai (京小贷) appeals to merchants who need fuss-free and almost instant access to credit.
The Swedish e-invoicing giant posted 2,05 billion Swedish crowns ($254,2m) in revenue for the first two quarters of 2017. Meanwhile, operating profits jumped to 228 million ($28m) from last year’s 96 million ($11,9m), reports tech site Di Digital.
Worldcore announces an Initial Coin Offering (ICO), as part of their wider expansion plans.
The company envisions to become a worldwide reference for the financial tomorrow, by integrating its successful payment solution into the blockchain sector of economy.
Worldcore ICO starts on October 14 of 2017. In total, a maximum supply of one billion WRC tokens at $0.10 USD each, will be available for purchase.
Magic Circle law firm, Allen & Overy, has named Corlytics as one of the eight companies selected to move into its Fuse programme. Fuse is a newly launched innovation space where its lawyers and technology firms team up to develop legal, regulatory and deal-related improvements.
There was a time when digital banking was perceived as synonymous with online banking and mobile banking. Financial services industry, along with other sectors, is experiencing an explosion of digitization thanks to smartphones, tablets and access to affordable high-speed internet. The number of smart phone users is expected to equal the number of bank accounts in near future as all mobile users link their bank accounts to their smart phone and get onboard with mobile-based digital wallets and savings platform.
Given this, it is imperative to take a fresh look at whether digital banking means the same as it did a decade ago – both for banks as well as customers – especially since there does not seem to be a consensus on the definition of ‘digital banking’.
Customers today do not have the patience to navigate through multiple screens. They do not want to fill the same KYC details over and over for each product. Presenting paperwork at the branch to support an online application is a big no-no. They expect to resume the application they started on Smart phone on their home computer and may want to talk to the customer care executive on phone while doing that. They do not want to be bothered with cold calls and random sales pitches; they prefer to see only personalized and contextual cross-sell offers with direct purchase links. In short, digital customer today wants one-touch, one-click, personalized and integrated user experience across channels.
On the flip side, while customers enjoy the convenience of digital banking for routine tasks, they also want to continue using the branch when they need some face time with a seamless switch between digital and personal interaction. They do not want to forego the privilege of walking into the local branch despite being able to do all their banking via the web or smartphone.
Since its launch in June, fintech startup Ilumony has reported more than $7 million in financial investments. Of the $7 million, it has charged no fees for advice on $1 million worth of customer KiwiSaver money.
Though Flipkart launched in 2007, it was only in 2013 that e-commerce really took off in India. That was the year Amazon entered India through a marketplace model, and Flipkart too launched its own marketplace model.
From selling smartphones, books, and apparel to customers, the two of them now started offering warehouses, packaging, and logistics to sellers.
When ecommerce companies like Flipkart and Amazon wanted to expand to the nooks and corners of the country, they borrowed the idea and recently started offering “No cost EMI” option on selected products. Taking a step further, you now have many fintech companies that have lined up on ecommerce platforms to offer loans to consumers.
Launched in January 2017, EzCred is an alternate lending startup which offers loans to consumers who walk into shop at offline stores.
“Offline is a much larger play than online. A majority of transactions are still done offline,” says Maheshwari.
The startup now has plans to roll out an app for customers to enable them to apply for loans directly. The platform has a credit assessment system which enables the startup to assess the borrowers’ repayment capabilities. This involves various data sources like the borrowers’ CIBIL score, bank statements, information provided by customers, which are then matched with the credit policy of EzCred.
A draft data protection law, which is at the core of the Indian government’s stance that Aadhaar does not violate citizen privacy, will have user consent as its mainstay with a few exceptions.
The draft legislation is expected to be ready in about a year.
This was revealed in interviews with a member of the committee set up by the government to come up with the draft framework — B N Srikrishna, a former Supreme Court judge who is heading it, and a second person with knowledge of the committee’s thinking.
In a bid to impart vibrancy to the fledgling peer-to-peer (P2P) lending space and also further the cause of financial inclusion, the Reserve Bank of India is believed to be looking at allowing players in the sector to have an offline presence besides an online one.
On-the-ground presence may help the platforms reach out to those who are currently not being served by banks/non-banking finance companies and also help break the vice-like grip of money lenders on local lending, especially in rural areas and small towns.
Peer to peer lending (P2P lending) first entered the wider public’s consciousness when it rose from the ashes of the global financial crisis in 2007. By cutting out traditional intermediaries, such as banks, the lending platforms, were able to offer borrowers lower interest rates and lenders higher returns. They were populist alternatives to the casino capitalism that had brought Wall Street to its knees.
According to a 2015 report by Deloitte, in Indonesia, Malaysia, the Philippines, Singapore and Thailand there exists “a clear disparity between what SMEs want and expect from banks and what the banks can deliver”. In Indonesia, the report found as few as 6% of SMEs were able to access bank loans.
Recent statistics from the Asian Development Bank show that the situation is similar in Myanmar, which the bank says suffers from a $2 billion shortage in available credit, a shortfall that Brad Jones, CEO of Wave Money, attributes to the country’s excessively cautious banking regulations.
According to data from Singapore-based venture capital fund Dymon Asia Ventures, less than 0.1% of loans in the region currently originate from P2P lending sources, compared with 10% in China and 2-3% in the UK and US. There is, therefore, sufficient growth potential for the Southeast Asian P2P lending market.
Despite the rising trend of peer-to-peer (P2P) lending in Indonesia, an economist believes that online-based businesses have increased risk of bad debt if the lenders ignore the importance of supervision.
The credit application mechanism in P2P lending is risky. There is no integrated costumer blacklist data-base like in the banking industry, said Samuel Aset Manajemen economist Lana Soelistianingsih said in Jakarta on Friday.
Moreover, she said P2P lending offered annual interest rates of up to 18.5 percent to investors, adding that such aggressive offers could increase the risk of business failure.
Flinks, a financial API for banks and credit unions, announced a partnership with Merchant Advance Capital, an online lender for small and medium-sized businesses.
Merchant Advance Capital partnered with Flinks to reduce loan approval time for its customers. Flinks will allow Merchant Advance Capital to connect its app directly with customers’ banks, allowing the company to validate account ownership, account balances, and transaction histories.
Factors that push millennials toward auto, personal loans instead of credit cards. AT: “The larger story could be that digital lending is so disrupting credit card usage that we could be witnessing the decline of bank cards altogether. It’s still too early to tell, but Gen Z is coming up behind Gen Y (millennials) and they were born the year the World Wide Web went commercial. That means Gen Z is the first truly digital native, and who knows where they will stand on credit cards? The future of bank cards may be the mobile app. In fact, I would say it is likely the mobile app.”
Banks send warning signs for the economy. AT: ” ‘After a period of strong lending, it is also typical for defaults to start ticking up as levels of indebtedness rise and bills come due.’ Naturally.”
Non-prime boomers struggle financially, but less than other generations. AT: “This study is a nice complement to TransUnion’s study on millennials and Gen Xers. It follows, of course, that non-primes of any generation will struggle more than primes, and I would expect that older generations have figured out some way to cope with their financial struggles more so than younger generations, so I’m not sure we learn much from this research.”
How Gen Z will affect the future of the P2P economy. AT: “Beyond P2P lending, this touches on many aspects of the sharing economy. Gen Z could be a greater economic force to reckon with than the millennials, but they are just becoming of age so it remains to be seen exactly how they will impact the economy and how they will use financial services technology. My guess is that Gen Z will accelerate what Gen Y started, but by how much?”
Our risk team implemented a credit tightening in July aimed at removing certain populations of borrowers from originations on a go-forward basis. As a result of this credit tightening, the overall distribution of the book shifted slightly towards lower risk loans. This slight shift resulted in an overall portfolio coupon decrease of 45bps and an overall return estimate decrease of 26bps.
Additional highlights from the July Update include:
Charge-off levels in 2016H2 vintages continue to show meaningful improvement compared to 2016H1 vintages.
Periodic delinquencies moved higher for 2016 and 2017 vintages.
The top two executives of Mozido, a financial technology company that raised some $300 million to develop a mobile payments business, have quietly left the company.
On its web site, Mozido currently lists Todd Bradley as its CEO, but Bradley said in a brief interview that he left the company in June. Bradley’s departure appears to have left Mozido without a chief executive officer. Bradley has also left Mozido’s board but the company’s web site still lists Bradley as a director.
Scott Ellyson, Mozido’s chief financial officer who is listed on Mozido’s web site as its second-most senior executive, has also left the company, according to Bradley. Ellyson’s LinkedIn page currently does not mention his time at Mozido. He did not respond to a request for comment.
Three weeks ago, Michael Liberty, the founder of Mozido, was sentenced to four months in prison and a $100,000 fine by a federal judge. Liberty pleaded guilty in November 2016 to making illegal campaign contributions.
As the first generation to be fully immersed in mass-market digitalization, Millennials are slowing their credit card usage while increasingly using other credit products such as personal loans. A just-released TransUnion (NYSE:TRU) study found that Millennials are carrying on average two fewer bankcards and private label cards than Generation X (“Gen X”) consumers at the same respective ages. Conversely, Millennials’ appetite for new auto and personal loans has grown at a faster rate than Gen X borrowers at the same age points.
Credit Cards Out of Fashion; Cars and Personal Loans in Style
The study found that, in addition to carrying fewer credit cards than Gen X consumers, Millennials also are maintaining lower balances on those cards. TransUnion analysts believe that this is partly driven by the CARD Act of 2009, which limited the marketing of credit cards on college campuses. The increased use of debit cards also plays a role in this shift. The study pointed to recent Federal Reserve data, which found that debit card transactions grew from 8 billion in 2000 to 60 billion in 2015. In contrast, credit card transactions only increased from 16 billion to 34 billion in that same timeframe.
Source: TransUnion
Millennials and Mortgages
Among all major credit products, the mortgage market has been the slowest to recover from the Great Recession, with home ownership rates still below levels observed in 2009. Overall, homeownership is down 0.8% since the Recession, but this number grows to -1.6% for 35-44 year olds and -2.1% for those under 35.
As a result of credit access being limited and, per the U.S. Census Bureau, affordability being affected by income gaps between the two generations, TransUnion’s study found the percentage of Millennials opening mortgages between the ages of 21-34 (5%) is nearly half of the Gen X group (10%) when they were that age. TransUnion observed a smaller but still material gap (13% for Millennials vs. 16% for Gen X) within the Super Prime risk tier, suggesting that this dynamic is not driven solely by credit supply.
TransUnion’s study found that access to mortgages has declined dramatically for 21-34 year olds. In 2000, 39% of mortgage originations in this age range were comprised of non-prime borrowers. In 2016, non-prime borrower originations declined to 20%.
Further impacting mortgage originations to Millennials are lower income levels. Per the U.S. Census Bureau, median household income of consumers ages 25-34 declined from $60k in 2000 to $57k in 2015. The impact can be seen in the housing status of these consumers: a larger portion of younger adults ages 25-29 are living with their parents, rising from 15% in 2000 to 25% in 2014.
Despite these challenges, a TransUnion survey of 1,340 consumers in July 2017 found that nearly 75% of Millennials ages 23-37 said they plan on purchasing a home in the future.
The Office of Management & Budget of the White House has approved the Department of Labor’s request to push back the final implementation date of its fiduciary rule — originally scheduled for January — to July 2019, the Wall Street Journal reports.
Being a key transmission mechanism for savings, investment and spending, the banking sector is worth watching as a barometer for the health of the overall economy. Lately it has been acting as one would expect toward the end of an expansion phase.
Most glaringly, after strong lending growth for several years, momentum clearly is slowing. In its quarterly report on the sector, the Federal Deposit Insurance Corp. found that total loans and leases by banks and other insured institutions rose by just 3.7% from a year earlier at the end of June. That is the third consecutive quarterly deceleration and is down from a 6.7% pace of growth a year ago.
After a period of strong lending, it is also typical for defaults to start ticking up as levels of indebtedness rise and bills come due. This is indeed happening, at least among consumers. Credit-card charge-offs soared by 24.5% in the second quarter, according to the FDIC, marking the seventh straight increase. Charge-offs on loans to commercial and industrial borrowers, however, declined by 9.7%, possibly due to a recovering energy sector.
The Madden case held that National Bank Act preemption of state usury laws applies only to a national bank, and not to a debt collector assignee of the national bank. The decision has potentially broad implications for all secondary markets in consumer credit in which loan assignments by national banks occur: securitizations, sales of defaulted debt and rent-a-BIN lending.
Unfortunately, the “Madden fix” bills are overly broad and unnecessary and will facilitate predatory lending.
The actual “valid-when-made” doctrine provides that the maker of a note cannot invoke a usury defense based on an unconnected usurious transaction. The basic situation in all of the 19th-century cases establishing the doctrine involves X making a nonusurious note to Y, who then sells the note to Z for a discount. The discounted sale of the note can be seen as a separate and potentially usurious loan from Y to Z, rather than a sale. The valid-when-made doctrine provides that X cannot shelter in Y’s usury defense based on the discounting of the note. Even if the discounting is usurious, it does not affect the validity of X’s obligation on the note. In other words, the validity of the note is a free-standing obligation, not colored by extraneous transactions.
A small business lender knows that a certain percentage of loans will become NPLs and typically has parameters the business must stay within to remain profitable. The lender may pursue NPLs on an in-house basis indefinitely past the charge-off date or turn them over to a collections agency at some point. Both options create problems in the fintech business model.
The best recovery option for online small business lenders is to manage NPLs in-house until they become charge-offs, then use the services of a reputable commercial debt buyer. This is how it works.
The lender works with the commercial debt buyer on a one-time basis, periodically, or in a forward-flow relationship where NPL information is sent regularly to the buyer.
A non-disclosure agreement (NDA) is signed and the lender provides information to the buyer on the pool of non-performing assets. This includes the number of accounts and amount of outstanding balances.
Buyer assigns a value to the NPLs and offers a price.
Lender signs the purchase agreement. Typically, buyers in forward-flow relationships will send payment within 24 hours.
Reputable buyers then work to collect the debts over time, without using the lender’s name and in a sensitive manner, and without reselling the debt.
Ten-X Commercial, the nation’s leading online real estate transaction marketplace, today announced that it has partnered with Money360, a technology-enabled direct lender focused on commercial real estate (CRE), to offer financing for properties available for sale. The partnership will expand the investor pool for commercial properties listed on Ten-X by giving prospective buyers assurance they will be able to procure the necessary financing to fill the deal’s capital stack, while providing sellers and their brokers increased confidence that once terms are agreed upon, buyers will be able source a loan and close the deal.
Under the agreement, Money360 will work with Ten-X to determine which commercial properties listed on the Ten-X platform are appropriate for pre-arranged financing, and will then pre-underwrite bridge and/or permanent loans for qualifying properties. The lender’s offers will be listed on the Ten-X property detail page, informing prospective buyers about the available financing terms. After the property trades, Money360 will work with buyers to underwrite, process and close the loans to facilitate the transaction.
Despite the widespread perception that Baby Boomers (ages 51-64) are struggling to make ends meet more than any other generation, new research from Elevate’s Center for the New Middle Class has found that Baby Boomers are actually struggling the least. In fact, Baby Boomers are the most likely to have steady employment and run out of money less often, compared to data from previous studies.
“These findings come as a surprise, as they are counter-intuitive to many of the trends we have seen widely covered around Baby Boomers,” said Jonathan Walker, executive director of Elevate’s Center for the New Middle Class. “Recently, it was reported by the Federal Reserve that Baby Boomers are leaving the workforce in such large droves that they are skewing employment numbers, but we’ve found that 60 percent of non-prime Boomers have had no employment change in the last 12 months, compared with 59 percent of Gen-X and 43 percent of Millennials.”
But even though they struggle less than other non-prime generations, they are still facing challenges in the new economy, especially when compared to their prime counterparts. Non-prime Boomers are more likely to hold more than one job and are 10 times more likely to run out of money every month.
Additional key findings include that – compared to their prime cohorts – non-prime Boomers are:
2.2x as likely to say that their finances cause them significant stress
4x as likely to live paycheck to paycheck and 1 in 6 use payday loans
14x as likely to express difficulty predicting monthly income and are 2.5x more likely to overdraft on bank account
3x as likely to take a loan against their 401k
46 percent less likely to go on vacation
More likely to be living in households with 3 or more working adults
Born in the mid-1990s to late 2000s, Gen Z accounts for one-quarter of the U.S. population. They are considered the most diverse and most multicultural generation the U.S. has ever seen. The highly influential Gen Zers are the first digital native generation. They are already impacting the current peer-to-peer (P2P) economy and will have an enormous effect on how this economy evolves.
A Gallup study found that about 8 in 10 students in grades 5 through 12 reported that they wanted to be their own boss rather than work for someone else.
Additionally, a millennial branding studyreported that 72% of high school students and 64% of college students want to start their own business.
The SEC may suspend trading in a stock when the SEC is of the opinion that a suspension is required to protect investors and the public interest. Circumstances that might lead to a trading suspension include:
A lack of current, accurate, or adequate information about the company – for example, when a company has not filed any periodic reports for an extended period;
Questions about the accuracy of publicly available information, including in company press releases and reports, about the company’s current operational status and financial condition; or
Questions about trading in the stock, including trading by insiders, potential market manipulation, and the ability to clear and settle transactions in the stock.
The SEC recently issued several trading suspensions on the common stock of certain issuers who made claims regarding their investments in ICOs or touted coin/token related news. The companies affected by trading suspensions include First Bitcoin Capital Corp., CIAO Group, Strategic Global, and Sunshine Capital.
Online real estate marketplace RealtyShares announced on Tuesday the closing of two industrial real estate financing transactions in San Francisco and Boston MSA. The amount raised between the deals was $10.3 million.
RealtyShares stated it secured $8.7 million industrial debt loan for a San Francisco located mixed-use, industrial warehouse and office space in the city’s South of Market (SoMa) neighborhood.
Following impressive results using Clear FraudTM to mitigate losses in targeted auto lending transactions, Westlake Financial Services has expanded its relationship with Clarity Services to strengthen its auto portfolio nationwide.
Westlake, which has a network of more than 50,000 new and used auto and motorcycle dealers throughout the United States, began testing Clear FraudTM a year ago in select markets. The California-based finance company has enhanced its profitability by using Clear FraudTM to provide loan terms that are more attractive to both consumers and dealers.
By incorporating Clarity’s credit data, Westlake is able to more accurately price and structure deals with profitable loan terms, and determine down payment requirements. Westlake’s use of Clear FraudTM helps the lender evaluate subprime applicants with credit scores below 600. Clear FraudTM also makes it easy to integrate scores into Westlake’s existing scorecard.
AirFox, the company making mobile data and the internet more affordable for millions of people, today announced it closed its $6.5 million ICO pre-sale weeks earlier than scheduled. The ICO will open at 10 a.m. ET on September 19, 2017. AirFox will use the ICO funds raised to further develop and launch its new blockchain consumer platform, AirToken (AIR), in order to tokenize mobile access by unlocking mobile capital from the smartphone for the underserved and underbanked prepaid mobile subscribers in emerging markets.
Not too long ago, when small- to mid-sized business (SMB) Orion First, a business credit ratings firm, needed a loan, its only option was to visit a local bank, fill out myriad application forms and wait several weeks or months to (maybe) get approved. Fast forward to today, and the small business lending process has undergone a significant overhaul.
With a growing number of FinTech players competing in the lending space, small businesses now have improved access to a range of loan options — and, in most cases, funds are disbursed in as little as 24 hours.
New services that can expedite the lending process for companies like Orion First are already gaining popularity with SMBs and consumers who need short-term loans. The Innovative Lending Platform Association (ILPA), a trade organization representing several companies in the space — including prominent players like small business loan provider Kabbage and financial consultant and insights provider PayNet — says its member companies have distributed more than $14 billion in capital loan disbursements to small businesses to date.
The millennial population is estimated at roughly 83 million, and a recent survey found almost half of millennials (49 percent) plan to start their own businesses within the next three years.
A recent survey by YouGov found 81 percent of both retail consumers and SMBs who turned to digital lenders said the ease and speed of completing a loan application were the reasons they made the switch. In the same survey, 77 percent of respondents cited the rapid pace of loan decision making as the key appeal for these platforms.
Online lenders have faced increased competition from other more established fintech companies. Furthermore, banks such as Goldman Sachs have started their own lending arms
Publicly traded firms have made great strides in improving financials; the analyst consensus has Lending Club moving into positive GAAP earnings by year end in part driven by securitizations as a lower-cost source of capital
SoFi has made strides towards becoming more bank-like after adding mortgage loans, wealth management services and acquiring (and subsequently shuttering) online bank and money transfer service Zenbanx
As the latest PitchBook fintech analyst note points out, some of the most notable companies are becoming more like banks, with SoFi the most prominent example, as it expands from student loan refinancing into unsecured consumer credit, wealth management and more. Yet as some online lenders establish a foothold, there are still significant hurdles to overcome.
Online lender Funding Circle is kicking off a £12 million ($15 million) marketing campaign with a prime-time TV advert during the Great British Bake Off.
LATTICE80, a fintech hub owned and operated by Singapore-based private investment firm Marvelstone Group, announced on Monday it is set to open a fintech hub in London as part of its global expansion. The organization revealed that as of August 2017, its UK entity has been registered, but a suitable hub space remains to be found. It is currently in talks with relevant parties in the private and public sectors, with plans to secure and open a hub by 2018.
In particular, the UK market has lots of new entrants (now in excess of 100 providers) but the number of clients seems to be static at about 40,000-45,000. In order to remain competitive, lenders are required to compete on price and terms, which increases their risk and often reduces their return.
Customers also have more choice in the market, in that they have access to working capital both from banks and alternative lenders such as peer-to-peer (P2P) platforms. Consumers are becoming increasingly aware of the non-traditional players in the market that are harnessing technology. The new generation of borrowers is more tech-savvy and more comfortable embracing P2P capabilities, which makes new players more attractive.
Richard Spielbichler, ABL director North West, Independent Growth Finance
“The main pitfall to consider is whether the business has a USP that will protect their position in the market. Many businesses suffer from ‘me too’ syndrome, where their USP is very similar to an existing organisation.”
Angelika Burawska, COO, Startup Funding Club
“It depends on the type of financing. In the case of loans and various types of trade finance, the main pitfalls lie in payment terms, such as how much and when, late payment fees and what happens if a company fails to pay.
“In the case of equity funding, businesses have to pay attention to the valuation they raise which may be too high or too low; and the control rights they give to investors.”
In the first half, a total of 59 Chinese technology, media and telecommunication (TMT) companies sold shares through initial public offerings (IPOs), a surge from 10 a year ago.
In value, the firms raised a combined 25.8 billion yuan (US$3.9 billion) in the first six months, five times the amount a year earlier, said the accounting firm in Shanghai.
The trend is a continuation of a boom that began in the second half of 2016, when there were 58 IPOs of such companies raising a total of 33 billion yuan.
On 25th August, Zhushang Financial, a P2P lending platform specialize in providing auto financing services, announced the closing of Tens million RMB in series A funding. Toulang Capital led the round, with participation from Cailang Capital. The “Zhushang Financial” brand has been upgraded from the “Zhushang Dai” brand and announced with this round of financing.
Zhushang Financial is based in Chengdu, a developed city in west China, providing P2P auto financing services for small companies and individuals. Currently, it has established branches in many western cities, including Chongqing, Guizhou Province, Kunming, Xi ‘an, Taiyuan and Lanzhou. Also, the company has signed agreements on depository with both Zhejiang Mintai Bank and Hunan Rural Commercial bank (Youxian Branch). Up to now, the total volume of the platform has reached over 500 million RMB.
According to the report of Central Bank, China’s auto financing market reached 700 billion RMB in 2016 and may exceed 1.85 trillion RMB in 2018. Its rapid growth comes not just from the wave of “car service”, but also from the policy support. Actually, according to the policy issued last year, the net loan assets must be small and dispersed, and since then auto finance has become a new hotspot of P2P lending industry.
August 29, the first financial reporter from a block chain technology business executives were informed that the China Securities Regulatory Commission recently to some of the block chain enterprises on the ICO (Initial Coin Offering, virtual currency initial public offering) for advice, the current In the stage of collecting comments and discussions, the SFC expressed particular concern about ICO projects for pyramid schemes in the name of virtual currency.
According to Bloomberg News, Fintech Quantifiers currently selected JP Morgan and Morgan Stanley as US financial adviser to the US IPO, the IPO size of about 200 million US dollars.
Klarna, the online payments firm based in Sweden, and one of the unicorns that came of age with a more than $1-billion valuation, posted results Friday detailing growth for the first half of the year.
The company said that net profit came in at 228 million crowns, or about $28.4 million, up 138 percent year over year, on sales of 2.05 billion crowns. Sales were up 21 percent.
On Friday the company reported sales and profit results for the first half of 2017 that represented gains of 21% and 138%, respectively. The strong financials come amid a series of headlines that show the Swedish payments company making strides on a number of fronts. This includes rumors that Klarna is partnering with Stripe to better access the U.S. market. Such a partnership would make Klarna the only non-credit card option available on the platform, and enable customers to take advantage of Klarna’s signature “pay after delivery” service. A deal between Klarna and Stripe also would provide what an anonymous source quoted in Nordic Business Insider referred to as “potentially an important piece of the puzzle” of Klarna’s plan for expansion in the U.S.
Last year, Klarna launched the “Smoooth” campaign with a series of award winning and critically praised advertisements showing just how smooth payments should be. Now Klarna takes the next step by fully implementing the concept of “Smoooth” across all aspects of the brand. This includes not only a new logo, graphic identity and checkout touch-points but towards a completely new user experience – transforming rational payment transactions into an emotional shopping experience for consumers.
Ice-cream melting on warm car hoods, shampooed long-haired dogs and pencils being pushed into huge jelly pastries. Klarna`s new identity is definitely not your average bank speaking.
“We are on a journey to transform Klarna from a traditional payment provider to a stronger consumer brand. Our new identity is more modern and expresses our focus on the consumer experience, innovation and simplicity in payments. It’s time for a new kind of bank.” Sebastian Siemiatkowski, CEO of Klarna
This is not only an update of the visual identity of Klarna but also changing the way consumers interact with the company. The concept of “Smoooth” will be evident when watching an ad or pushing a button to pay in the Klarna app. Every Klarna touchpoint has a new unique graphic and will be smarter and more intuitive. That will ensure a better user experience for consumers, but will also support in driving growth, conversion and consumer loyalty for all Klarna merchants.
There are three intuitive ways to shop with Klarna:
Pay now. – Pay directly at checkout. No credit card numbers or passwords to remember.
Pay later. – Try first, pay later. Klarna lets you have 14 days or more to decide if you want to keep your goods or not.
Slice it. – Get all your payments on one invoice and choose how much to pay each month.
As of today, Klarna has released all touchpoints that can be updated automatically, and over the coming months will continuously roll out “Smoooth” updates to the touchpoints of all merchants.
Submit your application to PitchIt, a competition for fintech startups, taking place at LendIt Europe–one of the largest international lending and fintech conferences in Europe. This exclusive programme will nurture emerging talent throughout the competition, provide selected finalists with unparalleled access to industry expertise as well as invaluable exposure, branding and more at the event.
The August edition of the PYMNTS.com Disbursements Tracker™, powered by Ingo Money, highlights several notable developments that explain the waning influence of the paper check, and how new disbursement tools could impact the workplace, pension systems and mobile payment options.
The August edition of the PYMNTS.com Disbursements Tracker™, powered by Ingo Money, highlights several notable developments that explain the waning influence of the paper check, and how new disbursement tools could impact the workplace, pension systems and mobile payment options.
Hike recently added a digital payments wallet to its app, allowing money transfers between customers using the country’s United Payments Interface (UPI) service. Skype is another messaging service helping users quickly send money to one another using popular payment option PayPal. The partnership between Skype and PayPal enables users to send money to fellow Skype users in 22 countries, including the U.S., Canada and more than a dozen nations in Europe, through PayPal in the Skype mobile app.
Australian businesses are turning to crowdfunding, peer-to-peer (P2P) lending and online loans for finance, according to new research from Businessloans.com.au. The Small Business Credit Survey, conducted by ACA Research, found that the most sought-after alternative funding source was equity finance (34%), followed closely by online lenders (30%) and P2P business loans(21%).
However, while small- to medium-sized enterprises (SMEs) are embracing alternative sources of capital, not all of them are receiving the loans they hope for. The survey revealed that while 84.1% of businesses were successful in their applications, less than half of those (38.9%) of those were approved for all of the credit they applied for.
It is interesting to note that the number of businesses which were declined a loan is only 1.6% of respondents. The remaining 14.3% of the “unsuccessful applicant” group was approved for less than half of the loan they had asked for. Over one-third of this group (35%) had applied for more than or equal to $250,000.
The survey found that a rejected application seriously affects a business. Respondents that did not receive the full amount applied for delayed or could not expand their businesses (34%), delayed or were not able to fulfil existing orders or contracts (27%) or did not hire new employees (17%).
Peer-to-peer lender RateSetter has accredited 2,000 brokers on its lending platform, amidst a rise in P2P popularity within the general public.
Lending volumes through the broker channel, especially in auto and home improvement loans, are doubling every six months, according to the lender’s most recent settlement figures.
Across the direct and broker channels, RateSetter has also passed $150m in lending facilitated since 2014. In the last five months alone, lending grew 50% across both channels, passing the $100m milestone in March.
The other “illustrative outcomes” are developing alternatives to banks and improving access to capital for MSMEs through ‘Peer to Peer Lending’ and ‘Crowd funding’, providing a credit rating mechanism for MSMEs to provide them easier access to funds, addressing the problem of inverted-duty structure and also balancing it against obligations under multilateral or bilateral trade agreements, studying the impact of automation on jobs and employment, ensuring minimal/zero waste from industrial activities and targeting certain sectors to radically cut emissions.
Dianrong and FinEX Asia today announced the launch of Asia’s first financial technology (fintech) asset management platform. FinEX Asia was established in 2017 to connect Asian investors with US consumer lending assets, such as credit card loans.
FinEX Asia combines its risk management expertise with Dianrong’s advanced fintech capabilities to give Asian investors access to a diverse and attractive portfolio of U.S. consumer lending assets. FinEX Asia’s fintech solutions offer advanced risk modeling capabilities, blockchain data security, performance monitoring, and secondary marketplace liquidity.
This seminar looks at the regulation of P2P lending in the US, People’s Republic of China, Japan, and the UK, and discusses how regulators can help develop P2P as a safe and effective source of financing for SMEs.
Top VC funds in Fintech in Argentina (TechFoliance), Rated: A
Currently, Argentina has four major investment funds that have Fintech companies within their portfolios.
NXTP
Kaszek – Founded in 2011, it recently announced the release of a third fund of $200 million to be used for young technology throughout the region. To date, Kaszek has invested USD 1.4 billion in 43 companies, including Nubank, Brazil’s largest digital bank.
Canada’s largest bank has announced that its mobile banking app will soon provide users with “actual insights about our client’s financials and a fully automated savings solution that uses predictive technology to identify money in a client’s cash flow that can be automatically saved.”
Dubbed ‘NOMI Insights’ and ‘NOMI Find and Save,’ the services are currently in a pilot release. A full launch is expected later this fall.
IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), a leading online lender to small businesses, announced today its results for the three and six month period ended June 30, 2017.
FINANCIAL HIGHLIGHTS
Loan originations for the second quarter ended June 30, 2017 were US$26.2 million versus originations of US$31.8 million for the same period last year. Loan originations decreased by 17.8% due to changes made to the Company’s lending policies in response to increased delinquency levels. We anticipate that these changes will have a positive impact on our loan portfolio over the course of 2017. For the first half of 2017, loan originations amounted to $48.2 million, representing a decrease of 15.7% over the origination of $57.1 million for the same period last year.
As of June 30, 2017, IOU’s total loans under management amounted to approximately $65.7 million as compared to $79.6 million in 2016. On June 30, 2017, the principal balance of the loan portfolio amounted to $41.6 million compared to $35.5 million in 2016. The increase is consistent with the Company’s strategy to retain more loans on its balance sheet. The principal balance of IOU’s servicing portfolio (loans being serviced on behalf of third-parties) amounted to approximately $24.1 millioncompared to $44.1 million in 2016.
IOU recorded gross revenue during the second quarter of $4.4 millionversus $3.5 million for the same period last year, representing a 24.5% increase. The increase in gross revenues was primarily driven by a 55.3% increase in interest income from $2.4 million in 2016 to $3.7 million in 2017, as a result of an increase in the size of the loan portfolio. For the six-month period ended June 30, 2017, gross revenues improved to $8.7 million compared to $6.8 million for the same period in 2016.
Interest expense during the three-month period ended June 30, 2017increased by 44.3% to $1.0 million, up from $0.7 million over the previous year. The increase is attributable to an increase in borrowings under the credit facility partially offset by a reduction in the cost of funds borrowed versus the previous year. For the six-month period ended June 30, 2017, interest expense amounted to $1.9 million compared to $1.3 million in 2016.
Provision for loan losses (net of recoveries) increased to $2.4 million for the three-month period ended June 30, 2017, up from $1.2 million for the previous year. The increase is primarily attributable to an increase in defaults by borrowers and partially due to an increase in the size of the loan portfolio. To improve loss performance, IOU Financial has made changes to its lending policies and deployed its next generation proprietary IOU Risk Logic Score. In addition, the Company has implemented certain process changes to improve its servicing and collections which includes an aggressive litigation process against businesses who intentionally default on their loan obligations. For the six-month period ended June 30, 2017, IOU recorded a provision for loan losses of $4.3 million compared to $2.0 million in 2016.
Excluding non-recurring costs, operating expenses decreased 18.1% to $2.5 million for the three-month period ended June 30, 2017 as compared to $3.1 million for the previous year. During the quarter ended September 30, 2016, the Company adopted a plan to reduce operating expenses. The Company is on track to achieve its target of quarterly operating costs of $2.0 million to $2.2 million on a normalized basis in the third quarter. In the second quarter, IOU recorded non-recurring costs of $0.5 million related to vendor contract cancellations and impairment of intangible assets. For the six-month period ended June 30, 2017, operating expenses amounted to $4.9 million, excluding non-recurring costs, compared to $6.0 million in 2016.
IOU closed its second quarter 2017 with a net loss of $2.1 million, or $0.03per share, compared to a net loss of $1.5 million or $0.02 per share during the same period of 2016. For the six-month period ended June 30, 2017, the net loss amounted to $3.1 million versus $2.8 million in 2016.
IOU closed its second quarter 2017 with an adjusted net loss of $1.3 million, which excludes certain non-cash and non-recurring items, compared to an adjusted net loss of $1.1 million in the second quarter of 2016. For the first half of 2017, the adjusted net loss was $1.9 millioncompared to an adjusted net loss of $1.6 million for the same period in 2016. Assuming the cost reduction plan was fully implemented on January 1, 2017, IOU’s pro forma adjusted net loss for the three-month and six-month period ended June 30, 2017 would have been approximately $0.8 million and $1.2 million, respectively.
The same quandary that now faces established banks stood before landline telecoms operators 15–20 years ago. In terms of fintech, it seems likely that the answer will become clear over the next few years, as different banks adopt different strategies.
Global consultancy Accenture calculates that fintech threatens more than a third of traditional banks’ revenue. Due to the march of technological innovation and the emergence of more attractive investment regimes, the challenge posed by fintech is only likely to grow.
Fintech is not just a threat to established banks but also to other companies in the financial services sector. Visa, for instance, is built on technology developed during a previous financial technology revolution, and should be able to capitalise on the fintech boom.
Other attempts to integrate the two worlds include PayDunya, an online payments system that allows African e-businesses to accept payments from credit and debit cards, as well as mobile money wallets. Similarly, Yoco provides retailers with an integrated card acceptance and point-of-sale solution, incorporating a mobile app, and either wireless or plug-in card reader.
Some established banks have sought to compete by becoming incubators for fintech. Standard Bank and Barclayshave both launched startup support programmes, with the most successful companies taken under their wing at the end of their periods of support.
RateSetter hires Dave Bibby for North of England. AT: “I’m seeing a lot of personnel migrations between banking and online lending. It seems to be going both ways, but mostly toward online lending. This is a good thing. If online lenders want to grow their businesses to really compete with banks, it makes sense to hire the bankers.”
In 2007, the first online loans from OnDeck to small businesses in the United States created a new type of commercial lender, one that believed the Internet could revolutionize how small business owners access capital. Today, OnDeck celebrates a decade of innovation on behalf of entrepreneurs, having emerged as the nation’s largest online lender to small businesses. To date, OnDeck has provided over $7 billion in capital to more than 70,000 customers in 700 different industries across the United States, Canada and Australia.
Flash forward to 2017 and the company has now provided small businesses more than $7 billion in capital. In the retail industry alone, OnDeck has lent more than $1 billion online.
“OnDeck started lending online to small businesses ten years ago with a customer-first philosophy and a relentless commitment to providing capital online with speed, efficiency and top-quality service to America’s small business owners. This is still the hallmark of our business today as we celebrate a decade of innovation on behalf of small business owners, truly the lifeblood of our economy.”
Now, SoFi CEO Mike Cagney is sharing more information about those suits, which were filed by the same lawyer, Robert Ottinger. In a new post, he also stresses that he’s taking the complaints seriously, writing:
“While we’re confident in our positions in these cases, we take these types of claims seriously. Our legal team is hard at work preparing our responses, and as part of that work, we’ve had many discussions with current and former employees about these issues.
Based on these discussions, we’ve discovered that the same lawyer has been trying to collect information relating to alleged sexual harassment at the company, and that he has several people who are prepared to formally allege they were the victims of or witnesses to improper activity at our Healdsburg operations office.
To be blunt, that kind of behavior has no place at SoFi, and we’re not going to tolerate it.”
Social Finance Inc., the hot online lender known as SoFi, has launched an internal investigation into claims of sexual harassment at the San Francisco company.
In a post on the company blog, co-founder and Chief Executive Mike Cagney wrote Friday that outside attorneys are conducting an investigation in response to a lawsuit filed last month and amended this week by a former employee.
The executive board of ride-hailing company Uber recently hired a new chief executive to replace Travis Kalanick, who left amid complaints of sexual harassment, discrimination, bullying and retaliation at the San Francisco-based firm.
In our recent earnings overview, we highlighted OneMain Financial as the pack leader across non-bank lenders. And it shows – initially slated for $639 Mn, OneMain increased the deal size by almost 50% to $947 Mn due to strong investor demand. OneMain differentiates via their high touch approach, unique distribution channels, and strong servicing, and decades of historical underwriting data.
Source: Kroll Bond Ratings Agency, PeerIQ
OneMain Financial continues to deliver some of the safest bonds in the consumer lending space. For instance, the KBRA net loss range is 115 bps better (6.85% to 8.85%)–a lower loss-rate than even the super-prime borrowers in SoFi’s SCLP 2017-4 (not shown).
Capital Structure and Pricing
Although OMFIT 2017-1’s structure is much closer to SLFT 2017-A than OMFIT 2016-3, its senior tranche has a much shorter WAL than both. OMFIT 2017-1’s A-2 floater pays LIBOR + 80bps with no floor or cap. This introduces a layer of interest rate risk because the underlying loans are not variable rate. At the same time, the floater enables investors to guard against rising rates.
Source: Kroll Bond Ratings Agency, PeerIQ
Amortization Triggers and Revolving Period
An early amortization event will be triggered if OMFIT’s ANL is greater than 17% for any rolling 3-month period. As you can see, OneMain typically has a generous cushion between its 1-month ANL and the 17% trigger.
The year 2016 will be forever remembered as the annus horribilis in the marketplace lending industry in the US.
According to Pitchbook, online lending equity investment was $2.3 billion in the USA in 2016. Through August 3rd of this year the total stood at $2.5 billion. While this is still down from the heady days of 2015 when $5.6 billion came flowing into the industry we are having a much better year in 2017 than in 2016.
Here are some interesting deals that have closed so far in 2017:
SoFi raised $500 million in a Series F round led by Silver Lake.
Kabbage raised $250 million in a Series F led by SoftBank.
Bread raised $126 million in a Series B led by Menlo Ventures.
Funding Circle raised $100 million in a Series F led by Accel Partners.
Upgrade raised $60 million in a Series A, the largest ever Series A for a US fintech company.
The biggest segment of online lending is still unsecured consumer loans. And with millennials now coming into their peak borrowing years this will provide a significant tailwind for the industry in the US.
One of the struggles when lending to an SME is the cost that goes into making a lending decision. It is estimated that at regional and community banks, $4-5K in operational costs go into processing each loan under $100K, leaving very little margin for bad loan decisions. In fact, these small loans take nearly as much time and manpower to process as much bigger loans. This is where automation and artificial intelligence (AI) can come into play.
Unlike traditional models of underwriting, which focus on only a handful of credit attributes, machine learning can analyze thousands of data pointsfrom various sources, which allows for a bank to model credit risk for SMEs more accurately than ever before. These machine learning techniques are able to radically outperform traditional scorecards in SME lending. In the not-distant future, a bank could use robots and predictive AI to 100% automate lending decisions in cases where the SME is under a certain amount and the predictive analytics give the applicant a certain baseline score.
Upgrade’s founders are Renaud LaPlanche and Soul Htite. This may not be the first time you’ve heard these names used together because they were both co-founders of LendingClub, America’s largest loan marketplace.
LendingClub has arranged over 28 billion dollars in loans to over 1.5 million customers. Htite also founded one of China’s largest marketplace lending platforms, Dianrong.
So, both founders have a good track record in the online lending business.
Upgrade’s application process is online, and the personal loan structure is pretty standard. It offers term loans with fixed interest rates and charges an origination fee. All loans are unsecured, so no collateral is required.
A differentiating factor about the company is in their plan to help people manage and improve their credit. If applicants are denied, they will have the necessary support to help them improve their credit and work towards getting approved in the future.
Pros
Easy and fast online application which doesn’t hurt your credit score
Plans to provide credit monitoring, alerts, and mentoring
Can pick your payment due date
No prepayment penalties
Founders very successful in past online lending ventures
Competitive fixed interest rates
Funds are quickly transferred to bank account upon approval
Cons
Company is still very new
Charges an origination fee
Doesn’t offer lowest-advertised interest rate range on the market
Only offers fixed interest rates, no variable rates
Local officials are supporting efforts to limit interest rates on advance or “payday” loans in Ohio, which are the highest on average in the country — close to 600 percent; two or three times higher than neighboring states.
That bill — currently in committee in the Ohio Statehouse — modifies the Short-Term Loan Act of 2008, which capped interest rates at 28 percent but also contained a loophole allowing lenders to keep charging whatever fees they want through another loan law.
One in 10 Ohioans — about a million people — have borrowed from a payday lender, according to a May study from the Pew Charitable Trusts. In Ohio, the average APR is 591 percent, meaning a $300, five-month loan could end up costing Ohioans between $780 and $880, according to the study.
When Kevin Karrels first joined the digital team at First Tennessee, he knew a drastic overhaul was in order.
“I inherited a broken and weak digital platform,” said Karrels, senior vice president and digital channel strategy executive at the $29.4 billion-asset bank.
Karrels also realized the online and mobile experience was not up to snuff, especially when it came to meeting the expectations of digital-savvy millennial consumers.
For that reason, First Tennessee ditched its multiple vendor relationships to revamp both online and mobile with D3 Banking, a relatively new entrant in the banking technology space; it was founded in 2008.
Cordray’s term as the bureau’s first and only director doesn’t expire until next summer. But there is widespread speculation that he will run for the Democratic nomination for governor of his home state of Ohio.
His departure could leave the controversial watchdog agency, created in the aftermath of the 2008 financial crisis, in limbo for months and jeopardize regulations covering consumer arbitration clauses and payday lending.
At the risk of sounding cliché, I’m a millennial with almost no investing experience. I have a 401(k) retirement account, but all my non-retirement savings has been stashed in a standard savings account from Bank of America.
Plus, I knew there was a possible alternative. As someone plugged into the tech world (and someone who listens to a lot of podcasts with ads), I’d been hearing about so-called robo-advisors, apps that automatically manage and invest your money for you. The meeting with the financial advisor got me intrigued about whether these apps might offer a better alternative. So I went home that night and downloaded the two most popular ones, Wealthfront and Betterment.
Not only did the apps take much less time than the human advisor to offer similar advice, they came with a big cost advantage. Wealthfront manages your first $10,000 for free. After that, both Betterment and Wealthfront charge an annual fee equal to 0.25% of your investments.
One other benefit: You can start an account with either service by investing just $500, which is significantly less than what traditional financial advisors typically require.
Race car driver Scott Tucker and lawyer Timothy Muir are slated to stand trial soon on charges they ran an illegal $2 billion payday loan operation that they tried to hide behind the sovereign immunity of three Native American tribes, proceedings that are expected to intensify scrutiny of how tribes participate in the business of high-interest online lending.
For originators, Optimal Blue delivers an Enterprise Secondary Marketing Solution that completely automates their operations including product and pricing, lock desk workflow, pipeline risk management, secondary market commitment and delivery, and more.
For investors, Optimal Blue provides an Investor Network Management Solution that automates compliance, product and pricing distribution, marketing, and business intelligence capabilities.
For providers, Optimal Blue’s best-in-class eCommerce platform leverages state-of-the-art API capabilities to integrate with their leading technology and service solutions used by originators and investors throughout the loan life cycle – wherever, whenever it matters most.
Responding to reports that the Consumer Financial Protection Bureau’s (CFPB) final payday loan rule will be narrower in its coverage than originally proposed, Rep. Jeb Hensarling (R-TX) is questioning CFPB Director Richard Cordray on the reported change.
The CFPB’s original proposal established limitations for a “covered loan” which could be either a short-term consumer loan with a term of 45 days or less or a loan with a term of more than 45 days where the total cost of credit exceeds an annual rate of 36 percent along with other qualifications.
Online lender SoFi announced this week its program, SoFi Accelerate, will be heading to Chicago later this month. According to the lending platform, SoFi Accelerator is the first-of-its-kind career incubator that gives “ambitious” professionals the time and space to think big – and the tools and structures to make it happen.
Nowadays, we are seeing an increase in platforms providing investors with the chance to join forces and capitalize on real estate properties to diversify and enhance their investment portfolio.
Not only are you able to join other investors in launching a new company and receive the benefits from those companies, now “you are also able to choose from multiple investment opportunities and gain the full return on investment targeted at the beginning of your investment process” says, Craig Cecilio, CEO at DiversyFund.
You want to look for a platform with tools that allow you to:
Analyze an investment opportunity the same way the platform is analyzing it. Trust a company that shows you all their research, pictures, market studies, etc.
Keep a close eye on the development process of an investment property. Make sure they send you regular updates, so you can feel comfortable every month until payout time.
Have a profile dashboard where you can keep track of your earnings as well as new opportunities in the market. A platform you can trust is always creating new ways to help its investors grow their earnings.
Be virtually anywhere in the world, but still able to invest when the time is right for you. The world is a lot smaller these days, thanks to technology itself. Your investments should be able to be with you and travel with you anywhere you go.
The report concluded that fintech lending has “penetrated areas that could benefit from additional credit supply, such as areas that lose bank branches and those in highly concentrated banking markets,” and that the use of alternative information sources has allowed some borrowers who would be classified as subprime by traditional criteria to be slotted into “better” loan grades and therefore receive lower-priced credit.
The report relied upon five sources of information for its analysis: data on loans that were originated through an online alternative channel (specifically, loan-level data from the Lending Club platform), data on loans that were originated from traditional banking channels, consumer credit panel data, banking market concentration data and bank branch information, and economic factors.
The Federal Reserve Bank of Philadelphia noted an increasing disparity between the rating grades of Lending Club and FICO scores. While the lender’s rating grades initially tracked the FICO scores of borrowers (with roughly 80 percent correlation in 2007), the similarities have dropped to only 35 percent in 2016, seeming to indicate that Lending Club is relying more on other information.
Overall, the study found that Lending Club’s rating grades have served as a good predictor for the borrowers’ probability of becoming at least 60 days past due within the 12-month period following the loan origination date, “despite the fact that the rating grades have a low correlation with the FICO scores.”
Diversification is important because it spreads risk across multiple types of investments within a single portfolio.
Asset allocation is important because it reduces the risk of an outsized impact on an investor’s portfolio from a market moving change in one asset class. In addition, asset allocation takes into account each individual investor’s risk tolerance, time horizon and investment goals.
Real estate is an important part of a well-diversified portfolio, and the advent of online real estate investing makes it easy, convenient, and transparent for all investors to add real estate to their investment strategy.
Since opening its first East Coast office in Chesterfield County in late 2015, LendUp Global Inc. has hired 50 employees locally, and company officials say they expect to add more jobs in the area as the company grows.
Nelson and other LendUp managers say the company expects to broaden its hiring in the Richmond area soon to include more engineers and technology specialists.
California-based LendUp Global Inc., is an example of a social justice enterprise that has the potential to help ameliorate the lives of millions of poor people — without a single dollar of government funding.
They conceived the idea of tapping the emerging FinTech industry to make small loans to an estimated 100 million Americans, mostly poor with low credit ratings and income volatility, who cannot get loans from traditional banks. In early 2016, LendUp raised $150 million in venture capital with the goal of becoming a better small-loan provider.
As with payday lenders, LendUp’s interest rates are extremely high on small, short-term loans. A $250 loan repayable within a month would carry a finance charge of $44, equivalent to an annualized interest rate of 214 percent. Interest payments must cover the transaction costs of making the loans, after all. They also reflect the increased risk on non-payment by low credit-score borrowers.
Earlier this year, LendUp passed the $1 billion mark in loans provided. It has made more than 3.5 million loans.
LendingTree recently announced a pair of changes to its management, promoting its chief financial officer to its board of directors and replacing him with the company’s senior vice president of corporate development.
Gabe Dalporto, who served as the LendingTree’s CFO since 2015 and who previously served as the company’s chief marketing officer from March 2011 to June 2015, was promoted to the company’s board of directors.
Replacing Dalporto as CFO will be J.D. Moriarty, who joined the company earlier this year as SVP of corporate development.
Stock-trading app Robinhood is joining the stampede of Bay Area fintechs heading to lower-cost cities to create jobs. Utah and Florida are among the big winners.
RATESETTER has hired high street banking veteran Dave Bibby (pictured) to join its specialist property development team.
The ‘big three’ peer-to-peer lender said that this was a newly created role and that Bibby would have responsibility for developing its property finance business across the North of England.
Bibby has more than 30 years of experience in the banking sector, having worked at NatWest and Santander.
Today, Assetz Capital, one of the UK’s largest Peer-to-Peer platforms, announced it has received full authorisation from the UK regulator, the Financial Conduct Authority (FCA).
As the UK’s second largest peer-to-peer business and property lending platform, to date it has lent more than £316 million to businesses nationwide. Following its successful FCA application, Assetz Capital is now in the final stages of completing its work on its Innovative Finance ISA (IFISA), which will be ready for roll out in Q4 2017.
RATESETTER has helped fuel a locomotive repair specialist best known for overhauling the famous Flying Scotsman.
Investors on the peer-to-peer platform have helped fund a £420,000 loan to restorer Riley and Son to help restructure existing debt and improve cashflow.
The company – one of only three in the UK able to carry out locomotive repair work on the scale of The Flying Scotsman – which is 70ft long, 13ft high and weighs around 10 tonnes – had been given 18 months’ notice to move premises.
Peer-to-peer Isas failed to gain much popularity in their first year, while the amount held in cash Isas fell by nearly £20 billion.
Just 2,000 Innovative Finance Isa accounts were opened in the tax year 2016/2017, according to the latest statistics from HMRC.
Across the 2,000 IF Isa accounts opened, £17 million worth was subscribed. The average subscription per account was £8,500 – about the same as the average stocks and shares Isa account subscription.
Overall, the amount held in Isas in 2016/17 fell to £61.5 billion, compared with £80 billion the previous tax year. This decline was largely driven by a steep fall in the amount held in cash Isas. In 2015/16, a total of £58.7 billion was held in cash Isas; in the latest tax year this fell by a third to £39 billion.Across the 2,000 IF Isa accounts opened, £17 million worth was subscribed. The average subscription per account was £8,500 – about the same as the average stocks and shares Isa account subscription.
The UK’s peer-to-peer lenders are shifting towards passive investment strategies. Funding Circle, the leading online marketplace for small business loans, called a halt to manual loan selection at the end of August. Henceforth it will funnel customers into one of two passive investment accounts, with a view to generating more consistent returns for all of its investors.
The change has earned the platform a number of disgruntled investors. One investor, commenting on an AltFi article, called it “the last straw”. “I’ll be withdrawing all my funds from FC and placing them on more attractive P2P platforms,” he wrote.
Investors in P2P Global Investments (P2P) are no longer being compensated for the risks they are taking, according to Canaccord.
Alan Brierley and Brian Newell, analysts at Canaccord, have downgraded the peer-to-peer lending trust from ‘hold’ to ‘sell’ because they expect returns will stay below the 6% to 8% target until the end of 2018.
Atomico, the venture fund set up by Skype founder Niklas Zennstrom, led the £18.5m series B round with existing investors Ribbit Capital, Mosaic Ventures and Revolutionary (ad)Ventures also participating.
It brings total funding for the startup – which is also backed by the entrepreneurs behind Transferwise and Funding Circle Taavet Hinrikus and Samir Desai respectively – to £27.5m. City A.M. exclusively revealed its first major round of funding earlier this year.
Atomico, the venture fund set up by Skype founder Niklas Zennstrom, led the £18.5m series B round with existing investors Ribbit Capital, Mosaic Ventures and Revolutionary (ad)Ventures also participating.
It brings total funding for the startup – which is also backed by the entrepreneurs behind Transferwise and Funding Circle Taavet Hinrikus and Samir Desai respectively – to £27.5m. City A.M. exclusively revealed its first major round of funding earlier this year.
Global online payments leader PayPal has inducted five new FinTech startups into its PayPal Incubator in Chennai.
The give startups to be selected are Finbox, Neoeyed, Paymatrix, Scalend and Tybo.
“In its 5th year, the PayPal Incubator has received an overwhelming response with over 250 applications from early stage FinTech startups – a 150% growth from last year, reflecting both the need for an incubation program, as well as the FinTech industry’s potential,” said Guru Bhat, GM Technology & Head of Engineering – PayPal.
FUNDING Circle’s upcoming shift away from manual lending will soon mean the three biggest peer-to-peer lenders in the UK only offer auto-bid options, but there is still plenty of choice for investors still looking to self-select their loans.
The manual versus auto-bid debate is important in P2P as it dictates the level of due diligence and diversification an investor will need to conduct.
PEER-TO-PEER lending poses little threat to the traditional banking business model, new research claims.
A report by the Bank for International Settlements – an international financial institution owned by central banks – looks at ways in which fintech could change how mainstream lenders and regulators operate.
The report suggests this scenario, where P2P becomes a primary source of lending, is unlikely to become significant in the short to medium term.
RENEWABLES and ethical investment peer-to-peer platform Abundance took the biggest slice of the Innovative Finance ISA (IFISA) market in the last tax year, figures show.
HMRC data last week revealed that 2,000 IFISAs had been opened in the first tax year of the scheme, with £17m subscriptions.
Now Abundance has revealed that its customers opened 1,436 IFISA accounts last year, equating to total investment of £10.5m.
It is worth reminding ourselves what an important part SMEs play in the UK economy. At the start of 2016, there were approximately 5.5 million private sector businesses in the UK, of which 99.9% fell within the SME definition. These businesses employ 15.7 million people, accounting for 60% of all private sector employment in the UK.
The launch of the government portal, enabling SMEs declined by high street banks to be referred to an alternative lender, will hopefully help in terms of access, although the Treasury has commissioned an early review of bank referrals to the portal as usage has been lower than anticipated. Meanwhile, banks stand ready to lend and there are also many new lenders on the market—start ups, peer to peer platforms, crowdfunders, fintechs—offering innovative products, with a desire to provide finance for SMEs and encourage entrepreneurs.
Manchester has been flagged as the UK’s new buy to let hotspot following a boost from new developments, according to the latest report from LendInvest.
Following the decline that has marred the buy to let sector in London, investors have been seeking a new location to turn to. Manchester has seen strong growth in both culture and economy, as well as through infrastructure. The report found that Manchester has the fastest rental growth in the UK, with rental prices up 7.53 per cent in the last year. The city is also ranked number one for rental yields in the UK, offering average returns of 6.11 per cent for landlords and buy to let investors.
Now in her 70s and caring for her husband, she always has a lot on which is why she didn’t immediately scrutinise the name on a letter that arrived in July.
It turned out to be from agency Pastdue Credit Solutions chasing £588.60 on behalf of its client, payday lender Wonga.
While it detailed Ann’s address correctly, it named not her but a relative who had not lived there for over 20 years.
Ann’s ignorance about the laws governing credit and the way the sector operates led her to fear both for her relative and her home being blacklisted, so she decided to settle the account.
She adds: “They accept my money no problem, but have never explained how they got my address or the issue of any double payment.
I didn’t vote for Brexit. But is all this doom and gloom justified?
Traditional banks might be looking elsewhere today, but we only need to pay attention to office lettings to realise that London is already the place to be for tomorrow’s leaders.
China on Monday banned and deemed illegal the practice of raising funds through launches of token-based digital currencies.
Individuals and organizations that have completed ICO fundraisings should make arrangements to return funds, said a joint statement from the People’s Bank of China (PBOC), the securities and banking regulators and other government departments that was posted on the central bank’s website.
In total, $2.32 billion has been raised through ICOs, with $2.16 billion of that being raised since the start of 2017, according to cryptocurrency analysis website Cryptocompare.
By creating and issuing digital tokens, entrepreneurs can raise large sums quickly — sometimes hundreds of millions of dollars in minutes — with little or no regulatory oversight. But unlike traditional fundraising, token holders are generally not given any share in the particular project, nor any security.
In a statement yesterday, the National Internet Finance Association of China warned that ICOs may be using misleading information as part of fundraising campaigns, urging investors to proceed with extreme caution. The group, which works with government agencies on regulatory matters, further stated its intention to toughen security measures.
To promote the exchange of financial and technological fields between China and the United States, local time from August 23 to 24, by the Peking University Digital Finance Research Center (IDF) and the Shanghai New Financial Research Institute (SFI) organized by the US financial technology delegation , To San Francisco financial technology enterprises and regulatory agencies to visit and study.
This week, as Sthlm Tech Fest gathered the Swedish tech elite under one roof, fintech stood out as a key theme. Recent breakthroughs by homegrown payment giants like iZettle, Klarna and Bambora catalyzed a vivid discussion.
Izettle co-founder and CEO Jacob de Geer pointed towards key fintech trends: increased consolidation, lower startup valuations, and the importance of making money on other things than just payments.
This week, as Sthlm Tech Fest gathered the Swedish tech elite under one roof, fintech stood out as a key theme. Recent breakthroughs by homegrown payment giants like iZettle, Klarna and Bambora catalyzed a vivid discussion.
Izettle co-founder and CEO Jacob de Geer pointed towards key fintech trends: increased consolidation, lower startup valuations, and the importance of making money on other things than just payments.
Banks operating in the U.K. could face approximately €15 billion ($17.8 billion) in restructuring expenses, plus potentially another €40 billion in extra capital requirements, according to a study by Boston Consulting Group Inc. and Clifford Chance LLP. Some of these costs could be passed on to companies.
Small and medium-size enterprises are particularly exposed to higher charges, as they often rely on a single bank and lack contingency plans to deal with the fallout from the U.K.’s departure from the European Union. Firms with annual revenue of up to €10 million are defined as small businesses. Medium-size ones earn maximum revenue of €50 million, according to the EU Commission.
U.K. banks in June charged SMEs an average of 3.89% for an overdraft facility and 3.12% for a loan, according to the Bank of England. A year ago, the rates were 4.11% and 3.36%, respectively.
New legislation on the European financial markets, MiFID II, is expected to come into force on January 3rd 2018 and will impact Fintech’s future. Through regulating trading activities and enhancing investors protection, it will aid the creation of more transparent and robust financial markets. It will also extend the regulatory coverage to non-equity products, including cash and derivative instruments in fixed income, foreign exchange and commodities.
The amended directive will also apply to more industry stakeholders engaged in investment services, such as investment banks, portfolio managers, brokers and market makers.
Kreditech has a controversial business model. The company’s 29-year-old chief executive Alexander Graubner-Müller spends a good deal of time explaining how the company rates clients and gives them credit.
Kreditech looks at potential borrowers’ Facebook friendships, among other factors, to score their credit. Based on that score, the company might offer them a loan – but in some cases with double-digit interest, which critics say is excessively high.
But that hasn’t kept Kreditech from securing the kind of high-caliber investors few German fintech firms can match. Besides World Bank’s IFC, the company counts US private equity firm J.C. Flowers among its backers, as well as Paypal founder and Donald Trump supporter Peter Thiel.
Payment services provider PayU, owned by the South African media conglomerate Naspers, spent €110 million ($129.9 million) on a roughly one-third stake.
Timelio, an online invoice financing marketplace operating in Australia, has received the backing of Anthony Thomson – a leading Fintech entrepreneur who is founder and Chairman of Atom Bank and founder and former Chairman of Metro Bank. Atom Bank is a digital only platform that received a banking license in 2015 establishing itself as a “Branch-free, Paper-free and Stress-free Bank.” Specific details on the investment were not made available.
To date, Timelio has now funded over $100 million in invoices since platform launch, just over 2 years ago.
Disruption is not just happening to retail, hospitality and taxis. It’s also happening in financial services, especially banks, where borrowers and lenders are finding ways to engage, cutting traditional players out of the picture.
At best, in this scenario, both investors and borrowers can end up winning, with better lending rates and higher returns.
The lenders
Funds are available for personal commitments such as car and housing loans and refinancing existing debts as well as those seeking small business loans.
One of the largest companies in the market is SocietyOne. It offer consumer loans from $5000 up to $50,000 for up to five years with principal and interest repayments fortnightly or monthly. It also lends to the agricultural sector. SocietyOne does not pool loans like some industry rivals; rather investors can select individual loans in which to invest.
At RateSetter, supply and demand for products determine the rates of return. Minimum investment is just $10, for terms of 1 month out to five years.
ThinCats Australia deals in secured business loans for Australian companies. Lenders bid for amounts for fixed rate loans, with a minimum bid of $1000, the maximum being the value of the loan.
New research from Businessloans.com.au has found that small businesses are embracing peer-to-peer lending, crowdfunding and online loans. However, while businesses are looking outside the traditional and applying with fintech lenders, not all SMEs are getting the loans they hope for.
Not for profit Good Shepherd Microfinance says the fifth anniversary of its low or no-interest Good Money shops, now operating in three states, has proved the worth of the three-way partnership between business, community and government.
Since beginning as a pilot store in Victoria, Good Money has grown to seven Australian stores located in Victoria, South Australia and Queensland and is the result of a partnership between banking group NAB, state governments and community organisation Good Shepherd Microfinance.
Good Shepherd Microfinance CEO Adam Mooney told Pro Bono News the stores had provided more than 5,800 low or no-low interest loans to “vulnerable Australians” living on a low income.
IT was not until moving to Perth a couple of years ago that Alyssa Cranston’s hearing impairment was discovered.
The initial test was expensive and the device costed $2500, compounded by the fact Mrs Cranston had been struggling with her own health issues and about the same time was told she needed hearing aids.
They decided their “last resort” was to take out a personal loan through SocietyOne, which uses marketplace lending that connects borrowers with private investors.
Square Capital, the digital lending arm of India’s largest real estate transaction platform Square Yards has underlined its market dominance by becoming the largest organized distributor of secured mortgages in the country. It is currently facilitating USD 30- 40Mn (INR 200cr – INR 260cr) of loan disbursals every month, contributed majorly by secured mortgages spread across 50+ banking partners for their different products in home loan, home against property and business loan.
An incubator for non-profit startups, backed by big names like MakeMyTrip founder Deep Kalra and Paytm chief Vijay Shekhar Sharma, has picked 10 early-stage startups for a six-month programme.
The applicants include non-profit startups by graduates from top institutions such as Harvard, Yale, Princeton, Stanford, Oxford, Indian Institutes of Technology and Indian Institutes of Management, the statement said.
It was early 2016 and Rajiv Anand, the Executive Director of Retail Banking at Axis Bank, was hard at work with his team to figure out the impact of the digital world on banking. Among the questions he asked his team was whether the present day consumers know how a bank would look in the future.
His team realised that the answers are not going to come from their bank, but from the people outside his company. Young people in urban centres are no longer going to be in a physical bank branch, but are going to be exploring the bank digitally.
One can say that in July 2017, the marriage between Axis Bank and startups was the best move that happened in the banking sector since a decade. Axis Bank’s acquisition of mobile wallet company FreeCharge for Rs 385 crore in an all-cash deal has taken that relationship further, quite possibly opening the doors to more such deals in the future.
Therefore Axis Banks’s first bunch of startups which are S2Pay, FintechLabs, Perpule, Pally, Paymatrix, and Gieom are indeed defining how banks should function in the future. Of these startups Pally, FintechLabs and Gieom have been selected for long-term engagements with the bank.
YES Bank has tied up with BankBazaar to showcase loan products, including personal loans, home loans, and car loans. The big daddy of them all, State Bank of India, whose balance sheet size is Rs 41 lakh crore, has also entered into the agreement with BankBazaar to display its home loan products on bankbazaar.com and initiate door-step delivery.
Mobile payments and loans startup ftcash too has launched Unified Payment Interface(UPI) for merchants in association with ICICI Bank.
WikiLeaks recently published a report claiming that the Central Intelligence Agency, the CIA, in its cyber spying efforts may have compromised Aadhaar data. The report alleges that the CIA is using tools devised by US-based technology provider Cross Match Technologies for cyber spying. However, the official sources have rubbished the reports.
A Mumbai-based firm, Global E-services, has reportedly dragged Amazon India to Bombay High Court over non-payment of rental dues.
Indian startup OYO announced the launch of OYO Asset Management Service. The service is geared towards building a nationwide network of hotels through a partnership with real estate asset owners.
Mumbai-based technology company Zeta has started partnering with banks to deploy solutions around BharatQR, Unified Payments Interface, and card payments to capitalise on the spurt in digital transactions for retail payments.
XSTOK PayLater card is a “Purchase Now, Pay Later” payment option enabled through a line of credit sanctioned to a buyer (member), for making purchases on XSTOK.com.
Two years of fin tech driven reach has helped banks grow about 15 to 20 per cent indicating that banks’ dependence on `feet-on-street’ to campaign for loans may recede in a few years. Bankers said nearly a third of their customers below 30 years were on-boarded through the digital platform.
Reserve Bank of India data showed retail loans grew 15 per cent while overall banking credit grew 4.7 per cent on a year-on-year (YoY) basis. Personal loans grew the most at 35.7 per cent followed by credit card outstanding at over 32.5 per cent. Loans to weaker sections also grew over 11 per cent on a YoY basis.
If Fintech is such a big revolution, why not seize the opportunity? This is exactly what the emerging start-ups of India are doing and consequently, providing efficient and cheaper financial services with Paytm, Mobikwik, Freecharge, Bank Bazaar etc. leading the way and several others following in to test their Fintech ideas. To share some numbers, the first quarter of 2017 saw global investments in Fintech, to the tune of approximately $3 billion which includes a $1.4 billion investment in Indian giant- Paytm! PwC estimates that within the next 3-5 years, the total investment in Fintech would rise to a whopping $150 bn globally. Needless to say, the age of Fintech entrepreneurs is here to stay!
Let us now explore the Fintech ecosystem and the sectors in Fintech which will roll the next set of innovations!
Blockchains
Alternate lending- Traditional banking industry found it unprofitable to lend to small entrepreneurs. Fintech entrepreneurs took advantage of this opportunity by diving into Peer to peer (P2P) based lending and building web platforms to bring together the lenders and borrowers at lower interest rates.
Robo advisory- Earlier intermediaries played an important role between the stock market and the investors. Many times this led to non-traceable and inefficient transactions. Robo advisory will make the stock market easier to access, transparent and traceable and give more value addition to the smarter investors.
Digital payments- Fintech start-ups have increased the speed and convenience of payments. Mobile wallets have already replaced traditional wallets in a lot of places and will penetrate further with better and faster payment options.
Insurance sector- Currently, we can find various online market places where consumers can compare their insurance policies and take prudent decisions.
Indian organisations rank quite low in cybersecuritypreparedness, with online fintech startups being the worst performer among them, a report said on Friday.
According to a report by Bengaluru-based cybersecurity startup FireCompass, the online fintech startups scored eight out of 100 as per security benchmark.
Most industries performed moderate, like telecom (61%), IT (52%), manufacturing (51%), insurance (45%) and small banks (43%).
UangTeman, an Indonesian firm offering online loans of up to USD 350, recently announced it has secured USD 12 million in Series A funding from Thailand’s K2 Venture Capital, US-based Draper Associates, Indonesia’s Alpha JWC Ventures, Malaysian angel investor Terrence Teong Chee Hooi and multiple unidentified local investors. Hong Kong-based STI Financial Group also lent the firm an undisclosed amount. UangTeman plans to invest a portion of the funding in research and development offices in India and Singapore.
BORROWERS are finding themselves with more options from a financial technology (fintech) startup that aims to secure loan refinancing business worth Bt3.4 billion in transaction value by the end of this year.
The operator, refinn.com, is looking to get 1,700 debtors on board to secure the year-end goal.
Three Colombian fintech startups have been selected to participate in an exclusive accelerator program coordinated by Washington-based venture capital firm Village Capital that will award a $75,000 USD investment to top-performing early-stage Latin American companies.
Payment platform ePayco, short-term loan provider RapiCredit, and tuition savings facilitator ESCALA Educación are the three Colombian companies that have been chosen to compete in the first ever regional “Village Capital FinTech – Latin America 2017” program.
Along with these finalists, eight other fintech startups from across Latin America were picked out of the nearly 100 companies that applied for the program, which is supported by PayPal, Citibanamex, and BlackRock in addition to Village Capital.
Upgrade appionts Western Union executive as general counsel. AT: Western Union has does surprisingly well to keep up with the times. This is an interesting cross over because John Dye has a diverse and valuable experience that can be of huge benefit to Upgrade.”
LendingClub CEO Scott Sanborn’s interview with Bloomberg. AT: “Lending-Times has already posted the video, but LendingClub offers a short analysis on its own blog, detailing how they are benefiting borrowers and investors. It’s a good read.”
The top fintech trends driving the next decade. AT: “Artificial intelligence and machine learning are at our doorsteps now. One interesting prediction here is the Internet of Things connection with banking and payments. You don’t hear that very often, but I think it’s right on the money. Connected devices have a lot of practical application in financial services, but few people have realized it yet. Not only can automobiles be facilitated to make financial services more convenient, but homes and businesses, as well.”
Scott Zoldi of FICO. AT: “Another Lend Academy podcast. You should really listen to this one.”
Fintech loans are sometimes a costly lifeline for small businesses. AT: “I don’t know whether to call this predatory lending or bad business thinking. $331 a day for a loan? I understand the necessity of higher interest rates, but this just doesn’t make sense. It seems like a clerical or technical error of some kind.”
P2P Isa fails to take off. AT: “The FCA has been slow to roll out approvals, but it’s not over yet.”
Funding Circle’s TV ads. AT: “We could be entering into a period where traditional media advertising becomes an experiment for alternative lenders. SoFi’s Superbowl ad last year got a lot of press and seems to have been successful in getting their name known. I’d be curious to see how Funding Circle’s marketing campaign goes. But for the record, I’m underwhelmed by the content.”
Upgrade, Inc. Appoints Western Union Executive as General Counsel (Upgrade Email), Rated: AAA
Upgrade, Inc. (), the new consumer credit platform launched by LendingClub founder Renaud Laplanche earlier this year, today announced the appointment of John Dye as General Counsel. Prior to joining Upgrade, John was Executive Vice President, General Counsel and Secretary of The Western Union Company. He was also Chairman of the Board of Directors of the Western Union Foundation.
Before joining Western Union in November 2011, John was Senior Vice President, Interim General Counsel and Corporate Secretary of Freddie Mac from July 2011. From 2007 to July 2011, John served as Senior Vice President, Principal Deputy General Counsel, Corporate Affairs of Freddie Mac, where he worked on corporate transactions and managed attorneys in the areas of corporate disclosure, securities, intellectual property, contracts and human resources.
Prior to joining Freddie Mac, John spent 13 years at Citigroup Inc. in New York City, where he held senior leadership positions, and served as Senior Vice President and Senior Counsel at Salomon Smith Barney.
Upgrade also hired Louis Shansky, a partner on the securitization team at the law firm of Mayer Brown, as Deputy General Counsel.
The macroeconomic backdrop: While macro trends are generally positive—low unemployment, low interest rates, low inflation and low oil prices with an increase in consumer confidence—credit card debt levels are near all-time highs. Today, there is more than $1 trillion in outstanding credit card debt in the U.S.
Borrowers are not alone: LendingClub borrowers are not alone in seeking a lower interest rate solution: credit card debt in the U.S. is at an all-time high1 and credit cards tend to carry high interest rates. Sixty to 70% of our customers are currently taking advantage of our personal loans to pay off credit cards which helps them to get on the path to financial success.
LendingClub is enabling more new investors access to an old asset: Fifteen percent of our investor base still invests directly through the retail website, with the balance accessing the asset through other means.
Institutions want more: In Q2 2017, we had record high subscription from more than 100 institutional investors participating on the platform. Banks were 44% of our overall investor mix last quarter, attributed to LendingClub’s assets offering solid returns with a short duration.
Reaching new investors through securitization: More than 20 new investors engaged with LendingClub via the first deal, which demonstrated high demand for the asset.
Here is a glimpse at the technologies driving bank innovation today—as well as a look ahead to the technologies coming down the pipeline that will change the way banking is done over the next 10 years.
Digital Lending (here and now) – Unsecured consumer lending is the first market where digital lending has made an impact and is by far the most mature. Today, the two leading consumer lending platforms (Lending Club and Prosper) originate roughly $2.5 billion in loans quarterly. Small business lending has quickly followed and is rapidly digitizing. ABA has endorsed the digital commercial lending solutions offered by Akouba, providing banks of all sizes the use of these platforms to enhance customer service and significantly reduce underwriting costs.
Biometrics (1-2 years) – Passwords are only secure to the extent that they are kept private and cannot be guessed by a keen observer. The problem is that these passwords often rely on observable pieces of our life like our birth date, our children’s names, or our pets (my personal favorite), which are all readily available to criminals using social media and public databases. A 2015 study by TeleSign indicated that one in five people use passwords that are over 10 years old, with 73 percent of accounts being secured by the same password. Compounding this problem is the fact that we now have so many accounts that require a password, that it is impossible to keep them straight.
Customer Data (1-3 years) – Today, customer data at banks is often unstructured—housed in systems that are inconsistent and may not talk to each other. A single customer may have multiple accounts with a bank that are all housed in different systems, with inconsistent identifiers. A number of banks, as well as core processors, are working to reconcile these systems. Some are working to build additional data warehouses that aggregate disparate customer data to create a unified view of customers.
Regtech (3-5 years) – Regulatory reporting is one area that seems ripe for digital disruption. Today, filing call reports is a quarterly activity that requires significant time. It would not be hard to imagine a software solution that was tied into a bank’s back-end systems and prepopulated all of the key reporting fields. Moreover, it would be possible for regulators to receive a steady feed of data from a bank that would give them an ongoing view into the bank and may reduce the frequency with which exams are necessary.
Artificial Intelligence (5-10 years) – One way this could help bankers is by improving fraud detection. Traditional fraud monitoring systems rely on specific non-personal rules (like geography) to detect fraudulent transactions. Machine learning could be applied to analyze the transactions of each customer, flagging transactions that are out of their normal habits.
Internet of Things (8-10 years) – For example, banks may be able to use internet-connected devices to make better loans and monitor collateral. Inventory or livestock for a small business can be monitored in real time. This would allow a bank to monitor a customer’s balance sheet on an ongoing basis, giving it the tools to make better decisions about lending or adjusting credit lines in real time.
The biggest long-term impact that IoT is likely to have is in payments. Connected devices are already able to talk to each other, but will also require the ability to make payments back and forth. Today, this may be as simple as using your smart watch to settle a bill, but could evolve to the point at which your refrigerator pays for groceries that are running low. A number of auto makers are experimenting with enabling cars to make payments.
The Chief Analytics Officer at FICO talks about their use of artificial intelligence in credit models, fraud, alternative data, financial inclusion and more.
In this podcast you will learn:
Why his background in theoretical physics was perfect for studying fraud and credit risk.
What the company FICO actually does and how it interacts with the credit bureaus.
What his role as Chief Analytics Officer entails.
Some examples of the 130+ patents that FICO has been granted.
The importance of being able to explain how a credit model works.
How their advanced machine learning models can be explained to regulators.
How FICO has been using artificial intelligence for decades.
What Scott thinks about the sudden embrace of artificial intelligence in the last couple of years.
What he worries about with so many new companies coming into the AI fray.
How Scott views alternative data and using new data sources.
His thoughts on disparate impact and the use of alternative data.
How the FICO XD score helps expand access to credit.
How FICO’s fraud product called Falcon became the industry standard for banks.
Scott’s views on how a 700 FICO score today compares with the same score 10 years ago.
What Scott is most excited about today in his work at FICO.
Citizens Financial Group Inc. is the latest bank to start a robo-advisory product as part of its larger push into wealth management.
Citizens, a regional bank based in Providence, Rhode Island, is providing the technology to customers beginning Wednesday through a previously announced partnership with SigFig Wealth Management LLC, which uses algorithms to provide financial advice at lower fees than traditional human advisers.
The minimum initial investment in the Citizens offering will be $5,000, according to the firm. The annual asset-management fee is 50 basis points, or about half the typical cost of a traditionally advised account.
Last month, crowdfunding giant RealtyShares bought smaller rival Acquire Real Estate. This news was a significant in the multibillion-dollar sector, which is not even five years old. It begged the question as to whether this deal was a product of synergies between two platforms or a case of a larger player protecting its turf by taking a smaller rival off the board?
Whatever the answer, one thing is clear: We are likely looking at the start of a push toward consolidation in real estate crowdfunding. While there are hundreds of platforms now vying for a capital pool that is almost halfway to 12 figures, some clear-cut market leaders have emerged, and a movement toward economies of scale would signal continued maturation. Over the next year or so, it would not be surprising to see companies like Fundrise, CrowdStreet and Patch of Land join the market for acquisitions, especially as the space continues to establish mainstream legitimacy.
Looking at origination characteristics for the four largest MPL originators, we see origination volume continue to rise: 21% for 2Q17 over 1Q17, and up 52% over 2Q16. Loan coupons have risen from a 14.20% GWAC for the 2Q16 vintage to a 14.31% GWAC for the 2Q17 vintage, while the two year treasury has rallied approximately 50bps over the course of the year. PTI is relatively unchanged, coming in at 9.05% for 2Q17 versus 8.99% for the 2Q16 vintage.
Average FICO has increased significantly: 703 for the 2Q16 vintage to 711 in 2Q17.
Prosper closed its second $500MM Consortium securitization, PMIT 2017-2, on which dv01 was loan data agent. Data from PMIT 2017-2 is available for accredited investors through dv01’s Securitization Explorer, and is updated monthly.
Download and read the full report (with charts) here.
Fifth Third Bancorp is borrowing inspiration from the fintech world as part of its effort to woo millennial customers and compete with megabanks for consumer deposits.
The Cincinnati bank on Tuesday is scheduled to roll out a stand-alone app designed to help its customers pay student loan debt. The app, called Momentum, lets customers link Fifth Third debit cards to student loan accounts held by more than 30 servicers. Customers can have their debit card purchases rounded up to the next dollar, or have a dollar added to every purchase; the money is applied weekly to the balances on designated loans once a minimum of $5 is contributed.
“I see Momentum as being complementary” to apps such as Acorns and Digit, she said. “This [millennial] generation is sitting on $1.3 trillion of [student loan] debt. We wanted to take a relatively simple concept and offer something to help them in their day-to-day life.”
The U.S. captured 54% of the $127 billionin global venture capital invested in 2016. This access to capital has allowed some American fintech startups to succeed despite the regulatory burdens. Yet, the U.S. underperforms in fintech venture capital compared to our share of overall venture capital. In 2016, the U.S. obtained only 33% of the $13.6 billion in worldwide fintech venture capital investment.
I am working with Arizona policymakers to introduce a sandbox in Arizona that would reduce entrepreneurs’ barriers to entry without sacrificing core consumer safeguards. This would be the first state sandbox in the United States.
Attorney General Mark Brnovich is calling for Arizona to become the first state in the country to adopt a “sandbox” like regulatory environment that would reduce fintech entrepreneurs’ barriers to entry into local markets in a new op-ed penned for American Banker magazine. Key to creating sandbox regulatory systems is ensuring core consumer safeguards are not sacrificed. Sandboxes have already been implemented in countries such as the United Kingdom, Singapore, UAE, Malaysia, and Australia.
Che Al-Barri remembers feeling like he was drowning in debt last year. He had taken out a $70,000 loan for his small cleaning company, but was struggling to repay it.
The lender, a financial technology — or fintech — company, automatically collected $331 from his bank account daily, Monday through Friday. The frequent hits depleted his income and took a toll on his business, he said.
For Al-Barri, taking a big loan seemed like a great opportunity at first. Large clients were taking months to pay him, he said, and he wanted to buy equipment and hire employees to expand. But he underestimated how much he would earn, making it very difficult to repay the loan plus the $30,000 in interest he owed.
A new Stanford study analyzing Airbnb users and data suggests measures that enhance a user’s reputation, like stars or reviews, can counteract these harmful prejudices. The results, the researchers said, indicate sites that use reputational tools create a fairer and more diverse online marketplace.
The share economy, also referred to as “collaborative consumption” and “peer-to-peer lending,” has allowed everyday citizens to turn into entrepreneurs, taking advantage of an industry that’s projected to grow to $335 billion by 2025, according to the Brookings Institution.
The researchers in this study focused on a certain type of bias called homophily, a natural tendency to develop trustful relationships with people similar to themselves, and how best to counteract it. The study is part of a broader research project analyzing trust and technology at Stanford.
Data from real estate crowdfunding firm Sharestates says there has been a 650% increase in demand from investors wanting to put their cash into property in Fishtown.
That’s because of an attractive 11.8% return on investment and the ratio of the total loan amount compared with after repair value is 14%.
Speaking at an AFL-CIO Labor Day picnic in Cincinnati, Cordray did not address one of the most—if not the most—crucial issue facing the agency—whether Cordray will resign to run for the Democratic nomination for governor in the Buckeye State.
And when questioned afterward, he declined to comment on his intentions.
The CFPB is working on its most high profile set of rules—those governing the payday lending industry. The bureau is believed to be planning to release those final rules this month.
Benzinga, a leading financial media and events company, announced Thursday that it will team up with the nation’s leading online loan marketplace LendingTree to award $10,000 to the winner of an on-site fintech demo competition at the inaugural Benzinga Fintech Summit in San Francisco September 28.
The Fintech Innovation Challenge Presented by LendingTree will award $10,000 to the company whose product best demonstrates scalable, material innovation to the Summit’s audience.
Assetz Capital, one of the largest peer-to-peer lending platforms in the UK, has announced it has received full authorization from the Financial Conduct Authority (FCA). Additionally, Assetz Capital has claimed second place in the ranking of UK’s largest P2P lenders as it reports lending in excess of £25 million per month on average to SMEs throughout the UK.
To date, Assetz Capital has lent over £316 million to businesses across the UK.
HMRC has revealed that 2,000 Innovative Finance individual savings accounts (IFIsas) were opened during the last tax year.
The average investment into IFIsas during 2016/17 was £8,500 which meant £17m was invested collectively.
HMRC also reported that the amount invested in cash Isas had fallen from £58.7bn in 2015/16 to £39.2bn in 2016/17, while investment in stocks and shares Isas edged up from £21.1bn to £22.3bn.
Peer-to-peer Isas failed to gain much popularity in their first year, with just 2,000 Innovative Finance Isa (IF Isas) accounts opened in the tax year 2016/2017, according to the latest statistics from HMRC.
The biggest problem is that many peer-to-peer platforms have struggled to gain approval from regulators to become IF Isa providers. There are currently around 60 firms that have received approval from financial regulators, with most of these only starting to operate within the past few months.
Across the 2,000 IF Isa accounts opened, £17 million worth was subscribed. The average subscription per account was £8,500 – about the same as the average stocks and shares Isa account subscription.
Peer-to-peer platform Abundance claims it sold the majority of IF Isas in the last tax year. It says 1,436 Abundance IF Isas were opened, representing 72% of all IF Isa products opened last year.
Overall, the amount held in Isas in 2016/17 fell to £61.5 billion, compared with £80 billion the previous tax year. This decline was largely driven by a steep fall in the amount held in Cash Isas. In 2015/16, a total of £58.7 billion was held in Cash Isas; in the latest tax year this fell by a third to £39 billion.
Samir Desai, co-founder and chief executive of Funding Circle, Britain’s largest peer-to-peer lender, says that his business, which has arranged $2.7 billion of loans to small companies, could be lending at least $100 billion within a decade.
Peter Behrens, co-founder of Ratesetter, one of Funding Circle’s main rivals, believes that his platform could double its annual loans within the next two years to £4 billion.
The A-share market, due to its profitability requirements, remains off-limits to most Chinese fintech firms, particularly peer-to-peer (P2P) lending platforms that were once regarded as an important part of the mainland’s reform of the banking system.
The increasing demand for financing has prompted a clutch of fintech firms to kick off their overseas IPO processes, most of which plan to complete fundraising in the next 12 months.
Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, is seeking to raise as much as US$1.5 billion via a Hong Kong IPO.
After five years in business, Zhong An has developed a customer base of about 500 million people.
The Chinese regulators’ ban on ICO has heightened, and the financing of various tokens of the virtual currency has been put to death. In a consequence, the ICO asset value has evaporated nearly $20 billion, and more than 100,000 investors may be affected.
However, some ICO initiators still don’t want to stop. ”I don’t think the central bank’s oversight of ICO is going to be that severe,” a charger of the Digital Currency Asset Exchange said, ”and we would wait and see the specific notice of the local financial office and then decide what to do with it.” But in some communities of the ICO, we can see initiators start to announce the withdrawal of investors’ assets.
According to fintech incubator FinLeap, which is behind the venture, more than 70% of German companies were affected by cybercrime activities within the last two years, but only one out of ten SMEs holds an insurance policy that covers the resulting damages. Because Perseus offers a platform, it can connect services and offer “best-of-fit” tech solutions.
There is no specific date yet, but it also plans to add an industry-specific cyber insurance proposition to its portfolio of services.
IRISH peer-to-peer lending platform GRID Finance has ruled out the UK as part of its current expansion plans.
The business lender announced it had received €3m (£2.7m) of finance yesterday that will help to fund expansion into new markets, but chief executive Derek Butler says the UK market is already very competitive.
He said he was focusing on scaling the business in Ireland first and competing with the country’s two main banks, Allied Irish Bank and Bank of Ireland.
EU banking rules treat software as a cost rather than an investment, forcing lenders to cover expenditure on digital applications with an equal amount of capital.
If expenditure on software, which amounts to roughly half of banks’ total digital investment, were treated in the EU as it is in the U.S. it could free up more than 20 billion euros ($24 billion)in capital this year alone, one banking lobbyist said.
Many European banks have been slow to invest in adapting to rapid changes in the way consumers use technology for finance, with so-called fintech firms starting to steal market share in a variety of sectors from payments to lending.
There are cases when the authorization callback from Klarna doesn’t get processed until after the user arrives at the confirmation page. The reason is that the callback and the redirect are made almost simultaneously by Klarna, so it’s a bit random which wins.
Workaround: If currentOrder is null, sleep for 500 ms and try again (GetCurrentFinalizedOrder). Repeat for 10 seconds.
CrowdExplorer, a marketplace for “Crowd-investing”, has won the special prize for “Fintech” at this year’s “Digitale Innovations” competition.
CrowdExplorer is designed to provide investors with a platform to compare access to the international Crowd Investments. CrowdExplorer has launched with the following four categories: Equity, Real Estate, Loans and P2P lending.
Index Ventures started as a European firm in 1996, but 20 years on, it has a strong presence on both sides of the Atlantic and has backed startups in 39 cities in 24 countries.
Among well-known Index-backed companies are Dropbox, Slack, Farfetch, Funding Circle, Adyen, Squarespace, Deliveroo, Just Eat, King and Supercell.
Online lender Spotcap has this week announced the launch of a Fintech Scholarship program, with $10,000 being awarded to an Australian student attending university in a fintech-related field. The lender launched the program with the aim of supporting local fintech talent and ensuring the longevity of financial innovation in Australia.
Spotcap is also offering one paid internship placement at its offices in Sydney alongside the program.
The Bank for International Settlements – known as the ‘central banks’ central bank’ – says the rapid adoption of financial technology or ‘fintech’ and the emergence of new business models pose an increasing challenge to incumbent banks “in almost all the scenarios considered”.
According to the venture capital analysis group CB Insights non-technology companies now invest more in technology than tech companies.
In the firm’s recent report into fintech investments by major US banks, six – Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — have made strategic investments in 30 fintech companies since 2009.
The key sectors banks are investing in – and this is true across the globe, to differing degrees – are payments, data analytics, personal technology, distributed ledgers and/or digital currencies and peer-to-peer lending.
Peer-to-peer loans are the perfect alternative investment instrument for income-seeking investors. It enables you to offer personal loans to borrowers for an array of purposes while eliminating intermediaries such as banks, NBFCs, and unorganised lenders.
Furthermore, a good P2P lending platform can make available all the relevant information on borrowers to lenders, assisting them in assessing the credit profile of a borrower in an efficient manner. It can provide each lender with a customized dashboard with relevant informatics and data to help make an informed decision.
As per our research, lenders on our platform can earn gross returns to the tune of 18 to 24 percent p.a on an average by building a diversified borrower portfolio. These returns are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, real estate, bank deposits, and gold. Income-seeking investors who specifically want to diversify their investments get good returns at the end of the day. As a rule of thumb, at least 20 percent of total investments should be in alternative investments like art, commodity, P2P lending etc.
Peer to peer lender Amartha has formed a partnership with the largest state-owned micro credit guarantee company in Indonesia, Perum Jamkrindo. This follows a similar partnership with Bank Mandiri. Amartha is an online lender designed to connect Micro Businesses and SMEs that seek affordable working capital with investors who want to fund their business based on credit risk and expected return. This is a significant agreement for Amartha. Indonesia is the fourth most populous country in the world and support of small business is vital to the economy.
Jamkrindo is a state-owned enterprise that has been given a special mandate by the Government to guarantee credit and financing, as well as financial transactions particularly in the SME and micro segments. Jamkrindo is the largest credit guarantee company in Indonesia with total guarantee value of more than Rp 270 Trillion and 8 Million credit.
There are a few technologies in fintech that haven’t launched but are being tested around the world—these include using bitcoin as a remittance channel, using electronic health records for life insurance underwriting and a financial robo-adviser/wallet that has a holistic view of an individual’s finances.
Things are altogether different in Asia’s developing economies. First, in these countries, the infrastructure is developing. Apart from India, the concept of digital identity is only evolving in countries such as the Philippines and Indonesia. Moreover, in these countries, bureaucracy is generally a bottleneck since multiple government agencies work in silos with differing incentives.
Developing Asian countries need to prioritize different issues depending on their economies. For example, remittances are of utmost importance in the Philippines and Bangladesh.
For example, robo-advisers are a great way to enable the burgeoning middle class to put their savings into equities with a view toward investing and long-term retirement preparation; Thailand has none of those at the moment. There are international brokerages such as interactive brokers that enable robo-advisers to operate in other parts of the world and are licensed in Thailand. However, there are no traditional Thai banks/ brokerages that provide these new services to their consumers. Elsewhere in Asia, Indonesia is a great example of where the regulators have worked with new businesses to create regulations around peer-to-peer (P2P) lending.
Private equity fund manager Senturia Capital has reportedly announced a partnership with peer-to-peer financing platform Funding Societies to expand alternative financing access and capital solutions for Malaysian businesses.
Mitsubishi UFJ Financial Group Inc. will launch a financial technologies unit Oct. 1 in collaboration with 32 regional banks nationwide.
MUFG will put up ¥3 billion in capital to start Japan Digital Design Inc., which is expected to develop new services including those for cashless settlements using smartphones at small shops. It will also promote the automation of operations through artificial intelligence.
Square to apply for industrial bank license. AT: “New technologies often change the landscape of entire industries. It is certainly the case that online technologies are changing banking. If there was ever a case to be made that non-banking institutions have the right ingredients for acquiring an ILC, this is it. Forcing startups into a particular business model in order to protect incumbents is not only unfair to startups, but it hurts the consumer. I’d like to see more alternative lenders apply for an ILC.”
SoFi CEO pulls out of Goldman fintech conference. AT: “I don’t think this a PR move so much as it is about managing time and resources. I’d imagine Cagney is up to his ears right now in Q&As.”
Why broker-dealer robo-advisors miss the fintech point. AT: “This is an excellent read. Brokers may not like robo-advisors, but it’s hard to imagine that they aren’t here to stay even if they exist only as hybrids. A financial advisor is a financial advisor. Its make up doesn’t change its face.”
RealtyMogul launches MogulReit II. AT: “Where MogulREIT I is more diversified, investing in multifamily, retail, office buildings, industrial, and even self-storage, MogulREIT II appears focused only on multifamily. Considering that renting is a hot sector right now, this should be a good thing for investors for the time being, but you’ll want to keep an eye on the market. If the market tips to buyers again and renting goes south, so too could this REIT.”
LendingRobot CEO exits. AT: “It’s unclear whether this is a forced exit or not, but it is sad to see Marot go so quickly after LendingRobot’s acquisition.”
Payment processor Square is seeking an industrial loan company, according to several sources familiar with the matter, further sparking debate over whether fintech companies should be allowed to use the controversial charter.
“ICBA’s feeling about Square applying for an ILC is the same about SoFi,” said Camden Fine, the president and CEO of the Independent Community Bankers of America. “If these entities want to be banks, they should apply for banking charters and come under full and unified banking supervision.”
Square’s main purpose for the charter will be to extend its small-business lending business, the spokesperson said. Though it also intends to take deposits, which would provide some amount of funding for its on-balance-sheet loans, the lion share of the company’s loans would still be sold off to third parties.
Square also felt the ILC charter was best suited to its structure, as the company owns a point-of-sales hardware appliance business and even a food delivery service called Caviar.
Renaud Laplanche, the former Lending Club chief ousted over a governance scandal last year, is stepping up lending at his new venture, determined to re-impose himself on the market for refinancing more than $1tn of credit card debt.
Mr Laplanche launched his firm, Upgrade, in April, having raised $60m in Series-A funding from a group of investors including Union Square Ventures, Ribbit Capital and CreditEase, China’s leading online lender. As at Lending Club, he is homing in on consumers struggling with big balances on credit cards — offering to swap a floating rate of, say, 17 per cent for a fixed rate about 5 percentage points less.
While Mr Laplanche declines to say how much business he has done so far, he has begun to boost volumes, responding to steady demand from consumers and also for high-quality assets from half a dozen core institutional investors. That new cadre of investors is unfazed by the scandal which erupted in May 2016, he said.
Social Finance Inc. Chief Executive Officer Mike Cagney was supposed to take the stage at the Goldman Sachs FinTech Conference in New York City on Thursday, but he backed out amid a lawsuit and internal investigation at the firm.
Launching a robo advisor does hold appeal among broker-dealers. Many of their reps are asking for it, either because it’s an easier way to handle smaller clients, or just to have a robo advisor option for millennial clients. Who wouldn’t want a button for the advisor’s website that young people can click to open up small accounts that will grow with time? And from the broker-dealer’s perspective, ideally, this helps them address the coming generational shift of assets from baby boomers down to millennials.
But for a broker-dealer that in the aggregate is losing 3% to 5% a year in asset outflows a decade from now, it’s a crisis, because a broker-dealer still has a multi-decade open-ended timeframe as an ongoing business entity. This is why we see broker-dealers, as well as RIA custodians, so obsessively beating the drum about advisors needing to focus more on younger clients. It’s not actually because advisors desperately need younger clients for our businesses to survive. It’s because they, the broker-dealers and RIA custodians, need us to get younger clients for them so their businesses survive and so they have younger clients after we’re gone and retired!
And so from the broker-dealer’s perspective, if millennials are pursuing robo advisor solutions, then the broker-dealer wants to roll out a robo advisor to get those younger clients and solve its own long-term generational issue. But here’s the problem with the strategy: robo advisors live and die by their ability to get clients online, and that’s not easy for anyone, especially a large base of independent registered representatives.
DOOMED TO FAIL
Betterment is just over $10 billion in total assets after six years. Wealthfront is just over $7 billion AUM in that same duration. Schwab made news for $15 billion dollars of assets, but has actually noted only a third of that total was new assets. Vanguard is now over $80 billion, but remember they had much of their assets already as well. Vanguard is direct-to-consumer through the Internet already; those in Vanguard’s Personal Advisor Services were predominantly existing Vanguard investors, simply upsold to human advice. Even Edelman online, which launched in early 2013, has accumulated barely 1,000 clients and just $62M of AUM after four years (and their average robo client is actually a baby boomer anyway.)
RealtyMogul.com, the online marketplace for commercial real estate investing, today announced the launch of the company’s second real estate investment trust or “REIT,” MogulREIT II.
MogulREIT II aims to invest in multifamily apartment communities across the United States that have demonstrated consistently high occupancy and income levels across market cycles. MogulREIT II also plans to invest in multifamily properties that offer value add opportunities with appropriate risk-adjusted returns and potential for appreciation objectives.
According to the U.S. Census Bureau’s Housing and Vacancy Homeownership Report, the U.S. apartment market has experienced a strong recovery, as evidenced by the steady drop in vacancies and an average annual effective rent growth of 3.9% per year, between 2010 and 2015.
MogulREIT II plans to only consist of properties that satisfy RealtyMogul’s rigorous zero-based underwriting process, which analyzes each potential deal from scratch through a combination of proprietary in-house analytics and underwriting. RealtyMogul also spends over $1 million annually for the use of third-party data and technology to vet each deal. The process is so intensive, fewer than 1% of the requests reviewed by RealtyMogul pass its high underwriting standards. Keep in mind there are risks to investing, including loss of capital, so one should evaluate the full offering materials.
RealtyMogul MogulREIT II Survey Data (RealtyMogul Email), Rated: A
Overview
RealtyMogul recently commissioned Harris Poll to conduct an online survey among over 2,000 U.S. adults to better understand the reasons people choose to rent over buying a house.
Americans have shifting priorities and owning a home might not be at the top of the list
Roughly 7 in 10 Americans (71%) believe the home buying process is overwhelming
70% of Americans believe people these days will need to rent well into their 30’s in order to save enough money to buy a home
Over a third of Americans (35%) would prefer renting over owning a home to maintain a flexible lifestyle
Roughly a third of Americans (34%) would rather save their money to spend on traveling than to put it towards buying a home
A third of Americans (33%) would prefer to rent than own a home if it meant they could still afford small luxuries (e.g. eating out, fancy coffee, avocado toast) in their everyday life
Emmanuel Marot has left LendingRobot, the peer-to-peer lending company he co-founded in 2013. He served as CEO of the startup for the past four years, navigating LendingRobot through a merger with NSR Invest in August.
Marot isn’t sure what his next career move will be but remains General Manager of Zenvestment.com, according to LinkedIn.
Legislative Update 162 (Experian Email), Rated: A
Highlights this issue:
On September 7, the House Subcommittee on Financial Institutions and Consumer Credit has scheduled a hearing to review “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime.” The Subcommittee has not released the full agenda, but it is expected that the hearing will focus on several bills affecting consumer credit.
Congress continues to consider legislation that would repeal the CFPB’s Arbitration Rule using an expedited legislative process under the Congressional Review Act (CRA). The House of Representatives passed a resolution of disapproval on July 25. The Senate is expected to take up the measure upon their return from the August recess, although there is uncertainty when a vote will take place given other priorities that Congress must pass by September 30, which is the end of the US Fiscal Year.
On August 30, three Democrats on the House Energy and Commerce Committee sent a letter to the Government Accountability Office (GAO) requesting that GAO further evaluate post-breach identity protection products used by government agencies.
Legislators in California continue to debate legislation that would enact a broadband privacy law in the state, similar to the one first issued by the FCC and then overturned by Congress. A.B. 375 would prohibit an internet service provider from using, disclosing, selling or permitting access to customer personal information.
The actual listing is not yet live on the StartEngine platform. The filing indicates that up to an additional 100,000 shares may be issued as “bonus shares”. There are no selling shareholders and the entire proceeds will go to the company. According to the filing, the minimum investment is $500.
The bureau imposed a $100,000 fine on California company Zero Parallel LLC, which as a “lead aggregator” identifies potential borrowers and then sells their information. The action shows the agency has its eye on the online side of the industry, which crosses state lines and has grown in recent years. Potential borrowers fill out web forms and then are immediately sent to a lender’s site to take out the debt.
According to a CFPB statement, Zero Parallel sold applications to lenders it knew did not follow states’ usury laws, interest-rate restrictions and prohibitions on who can make the loans, and kept borrowers in the dark about risks and costs.
Zero Parallel simply sold leads to the highest bidders, according to the CFPB, and borrowers did not know they were taking out illegal loans.
Zero Parallel will pay the fine without admitting or denying the allegations, the CFPB said. The agency also said it had reached an agreement with Zero Parallel’s owner, Davit Gasparyan, to resolve similar charges filed last year against his previous company, T3Leads, with a $250,000 fine.
Global Payout, Inc. (OTC: GOHE) makes payment solutions available to clients around the world, serving the needs of everything from commercial enterprises to government institutions. Its Global Reserve Platform is a web-based banking platform that includes everything domestic, foreign exchange, and international payment service providers need to conduct financial transactions. It handles online banking, compliance, mobile wallets, card management, biometric payments, authentication, merchant payment processing, bill payments and more, while also offering core and traditional banking products. Global Payout’s primary focus in this area is logistics, in addition to small to medium size companies, banking, and travel firms.
Yesterday, the CEO of Able Lending, Will Davis, reached out to me to clear the air. Here is his unedited statement:
We believe this story originated by the fact that we’ve been in active discussions with a number of originators to acquire Able, and there’s a non-zero chance this story was placed in order to throw an interested party off the trail.
This anonymous source doesn’t seem to be anyone close to Able, because Able does not own a portfolio of loans (it originates and distributes loans to direct lenders, who then hold those loans on their balance sheet) and therefore has no portfolio to sell. In any event, we have no plans to go out of business and no plans to declare bankruptcy.
The wealth of new crowd-funding opportunities in CRE is just the latest addition to a long line of traditional equity funds, REITs and ETFs already offering investors the chance to invest without the high upfront cost traditionally associated with a direct CRE investment. It sounds easy, right? But how truly “passive” are these opportunities?
The only problem with passive investing in CRE? Pure 100 percent passive investing doesn’t exist.
ROCK-BOTTOM interest rates are now challenging the convention that someone with £1m in savings could live off the interest, RateSetter claims.
The peer-to-peer platform’s latest savings tracker found on average UK adults think they would need an income of £26,140 per year to live comfortably, but £1m in an average savings account would pay just 0.14 per cent interest, equating to £12,500 each year.
£1m invested in a one-year bank bond with an average rate of 0.79 per cent would earn just £7,900, while the same amount could earn £45,000 in a RateSetter account earning 4.5 per cent interest.
Investors opting to put their £1m into FTSE 100-listed stocks would have earned £80,000 in interest over the 12 months to the end of August, the research found.
The challenge was to find an emotional positioning that resonated with Funding Circle customers while instilling trust and confidence as a financial services company. Rooster Punk helped Funding Circle to identify a common thread that connects small business owners, investors and the people who work at Funding Circle. Results revealed they share a uniquely driven yet positive attitude to work and life, a restless determination to succeed and the tenacity to get there. The agency called this ‘Made to do More’.
Rooster Punk’s founder, Paul Cash, commented: “Developing Funding Circle’s new position and identity had to go deeper than a product message around faster business loans. We set out with the ambition that we didn’t just want people to buy from Funding Circle, instead we wanted them to buy into them.
This warning comes from Tony Duggan, chief executive of fintech firm Crossflow Payments, a company which acts like a cog between corporations, their suppliers, and funding providers – ensuring that suppliers don’t have to wait for a month or more to get paid.
Duggan’s warning is not just a reference to Brexit, but centres on the introduction of new payment practice laws, which will make it a criminal offence for a corporation not to make public whether it is paying suppliers according to the terms of the contract.
The code looks to stamp out problems with late payments. Ultimately it aims to improve the cashflow of businesses – largely suppliers – by making sure they are paid by their corporate customers on time.
Crossflow is a no frills sort of business; it’s basically a B2B version of peer-to-peer lending, and one that is currently pretty unique in the UK arena.
Peer-to-peer lending platform Linked Finance has funded its 1,000th loan for a small or medium sized company here.
Figures published by Linked, which facilitates loans from individuals directly to businesses outside the banking system, show €31m has now been borrowed through the platform.
The company, which was launched in 2013, also said that €2.5m in interest has already been repaid to Linked Finance lenders.
Capital One was an early pioneer in big data, data driven decision making , customer centricity and human centred product design.
Back in 2014, a lot of banks were talking a lot about being customer centric but when you get inside the banks there was little evidence to back that up. [Ed: Have things changed?]
Customer obsession is very much behind the growth of peer-to-peer lending.
When Andrew joined Zopa in 2014 they were a team of around 50 people lending about £20mill per month.
Zopa was awarded Superbrand status in the early part of 2017. The annual Superbrands’ league table is based on independent research to identify the UK’s strongest brands, as voted for by marketing experts and thousands of British consumers.
Zopa still thinks of itself as a start-up despite the fact that they have been going for 13 years now.
In that time Zopa have never spent any money on growing their brand and have grown organically and via word of month.
Zopa has recently moved to a system of self-organising teams and that is helping them to achieve more and deliver more on their customer promise.
In the first quarter of 2016 they delivered more than they had in the whole of 2015 with the same number of people.
Ultimately, it’s all about creating an environment where you find and allow great people to go and solve problems.
Andrew’s role is all about ensuring they have the right people in the right tribes solving the right problems. It’s not about him being able to come up with all the answers as that just doesn’t scale.
In terms of mistakes, initially they found that their tribes went too tribal and it was difficult seeing what was going on within the tribes. That was a problem particularly given the level of technical and strategic dependencies that exist between tribes.
On a day to basis, their teams work in a way that is akin to a modern agile environment and are able to pick the right model (1 week sprints, 2 week sprints, kanban etc) depending on their context and preferences.
As is the nature of agile working, they are constantly tweaking and looking for ways to improve.
Other challenges they have faced include the management of people from different backgrounds, skillsets and with different experiences.
Given that they are now 250 people in London, the next big challenge for them will be how do they move this system into a remote context.
The heart of their success has been in creating those relationships where there weren’t relationships before i.e. between business people and tech people. It’s easy when you sit next to them or are in the same office but more difficult when you are in different locations, time zones or even speaking different languages.
They embraced a lot of Spotify’s approach as there are lots of things written about them and by them on how they organise themselves (videos, talks, blog posts, slide shows etc). Google ‘Spotify and Tribes’ to find more.
Don’t make assumptions around customers needs. Go and ask then as you will almost certainly be wrong.
The Equifax cybersecurity incident. AT: “A letter sent to Equifax customers regarding the cybersecurity breach, and where to go for assistance.”
Consumers who seek help from Equifax may lose right to sue. AT: “Arbitration clauses are in place for a reason: They are an insurance policy for corporations against class-action lawsuits, and could save companies millions of dollars. If consumers sign them, they could be giving up their right to join a class-action lawsuit at a later date. Evidently, Equifax wants consumers to sign an arbitration agreement before it helps them rebound from data breach. I think the more important thing is that you get your privacy and security back.”
Square becoming a bank is brilliant. AT: “If it makes sense for any company to become a bank, it’s got to be Square. This article brings out the one huge benefit for companies like Square: If they become a bank, they may not longer need to partner with Fintech is no longer a boutique financing optiona bank. This could be why banks are so vociferous in opposing them. It would give Square a fair advantage.”
Goldman Sachs to take on UK retail banks. AT: “Might as well. The UK market is the one to beat, so if your plans are to be the premier international online investment bank, then you should compete against the early leaders. They’re in the UK.”
Online lenders, cryptocurrency deals feel the heat. AT: “It’s interesting that Chinese regulators are banning crypto-products, but not online lending where the biggest problem has been. Could this be about something else? Maybe their worried about how it will impact fiat currency.”
Klarna is reportedly testing credit cards with employees. AT: “This is an interesting approach. First, issue credit to your employees. If it goes over well, expand it to your existing customers, then go beyond those to the wider world. Klarna is getting serious about this banking thing.”
At Equifax, we recognize that consumers and customers expect us to provide superior data security, and we work hard to do that every day. Unfortunately, on September 7th, 2017, we announced a cybersecurity incident involving consumer information. This cybersecurity incident strikes at the heart of who we are and what we do. Above all else, our first priority is to support consumers and you, our customers, by doing what we can to make this right.
What happened?
On July 29, 2017, Equifax identified a cybersecurity incident potentially impacting approximately 143 million U.S. consumers. Criminals exploited a U.S. website application vulnerability to gain access to certain files. Equifax discovered the unauthorized access and acted immediately to stop the intrusion. We promptly engaged a leading, independent cybersecurity firm that has been conducting a comprehensive forensic review to determine the scope of the intrusion, including the specific data impacted. We also reported the criminal access to law enforcement and continue to work with authorities.
What information may be impacted?
The information accessed primarily includes names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers. Criminals also accessed credit card numbers for approximately 209,000 U.S. consumers, and certain dispute documents with personal identifying information for approximately 182,000 U.S. consumers.
Additional Information:
We have found no evidence of unauthorized activity on Equifax’s core consumer or commercial credit reporting databases. In addition, we have found no evidence that this cybersecurity incident impacted Equifax’s core consumer or commercial credit reporting databases, including, ACRO, Workforce Solutions, including The Work Number payroll data, NCTUE, IXI and CFN.
To see if you are potentially impacted, you can click on the Potential Impact Tab
To enroll in complimentary identity theft protection and credit file monitoring services and how to find out if your personal information may have been impacted, you can click on the Enroll Tab.
To learn more about the complimentary offering, you can click on TrustedID Premier Tab. TrustedID Premier provides you with copies of your Equifax credit report; the ability to lock your Equifax credit report; 3-Bureau credit monitoring of your Equifax, Experian and TransUnion credit reports; Internet scanning for your Social Security number; and identity theft insurance.
To speak to someone directly, we have also established a call center at 866-447-7559, available every day (including weekends) from 7 a.m. – 1 a.m. EST, for individuals to ask questions.
On Thursday credit bureau Equifax said a data breach put personal information of 143 million people at risk. Now its response is drawing more outrage, as lawmakers and others accuse it of encouraging consumers who come to it seeking answers to sign away their chance to seek recourse in the courts.
Following the breach, which compromised tens of millions of Social Security numbers and other valuable data, Equifax set up a website to help worried consumers determine whether or not their information was at risk. That website encouraged visitors to sign up for a program known as TrustedID Premier, the company’s credit monitoring service, which provides automated alerts to credit changes and up to $1 million in ID theft insurance. That’s where the trouble began.
TrustedID’s terms of service include an arbitration clause, insisting that customers agree “all claims, disputes, or controversies…shall be finally settled by arbitration” rather than a court of law. Such clauses aren’t unusual for credit monitoring services — or indeed many other consumer products. But in this circumstance, it created the impression that Equifax was asking consumers it had harmed to surrender their legal rights — including becoming part of a class-action law suit — before it would agree to help them.
One key legal avenue that arbitration clauses typically close off for consumers is the class-action lawsuit. That could be significant for Equifax — at least on one proposed class-action lawsuit was already filed against the company late Thursday, according to Bloomberg.
The 143 million Americans whose information was compromised by the Equifax data breach may still be on edge even with the free credit monitoring service being offered by the company.
Everything from names, addresses, social security numbers and credit card numbers were hacked in the Equifax data breach.
Kuehner said right now the company is sending out letters letting people know if they have been potentially affected. They can also check online at equifaxsecurity2017.com.
However, it is not only the breach that has consumers concerned, it is the company’s response.
“We’re taking unprecedent step of offering every U.S consumer in the country a comprehensive package of identity theft protection, ecredit file monitoring at no cost,” said Rick Smith, Equifax Chairman, and CEO, in a statement released online.
This past Wednesday, FASB released an update to the current expected credit losses methodology (CECL) for estimating credit loss allowances. This new accounting standard, which was initially published in June 2016 (in conjunction with regulators such as the FDIC, OCC, and NCUA), will apply to financial assets carried at amortized cost, including loans held for investment and held-to-maturity debt. Once in place, these assets must be held on the balance sheet net of an expected loss account. Changes are effective for fiscal years beginning after Dec 15, 2019, for all for-profit companies that file with the SEC.
Once firms adopt CECL, management will have increased discretion around forecasts and ultimately net asset carrying value. This represents a dichotomy for investors. Assets should be carried at more accurate levels and better reflect the organization’s financial position. However, management estimates will significantly affect the balance sheet and income statement.
The major change with the CECL methodology is that organizations are expected to include forward looking information when determining credit losses. Banks will need to calculate expected credit loss at the loan level for the entire life of the loan and then aggregate with similar instruments.
Since ECL is calculated for the life of the financial asset, rather than the annual rate, almost all held-to-maturity instruments that are not risk-free will have a credit loss allowance. These long-dated assets may appear more volatile than financial statement users are accustomed to because their impairment has large implications for the balance sheet and income statement. Under the new regulation it will be more important to have correct, auditable, and explainable expected credit losses.
Source: PeerIQ, FASB, FDIC
Overall, we applaud the coming changes to US GAAP and expect investors to respond favorably.
However, there is much more to this story. In fact, this strategic decision could be one of the best moves the company has made. Square’s decision could start a revolution and revamp the entire financial institution structure to address the changes in the transaction and lending environment.
Although the banking sector has tried, most banks still have too many fees and capital requirements to provide business accounts with their needs. Numerous freelancers or startups just can’t satisfy those requirements because banks are still designed with the larger business in mind.
More small businesses need smaller sized loans to tap into for their launches and expansion. Recognizing how peer-to-peer lending has grown together as an entire industry illustrates how ripe the financial industry is for more competition. Peer-to-peer lending is more personal, with a much needed boost to the financial sector in watching to find new ways to provide the much-needed financial support of smaller entities and businesses.
With these products, it makes sense that the company could become a one-stop shop for financial needs. To become a one-stop service requires obtaining a bank charter, which is what the company has now applied for under the moniker, Square Financial Services Inc.
While your average American doesn’t have much in the way of savings, the younger “millennial generation” is actually saving at a higher rate than any other generation. More than 80% of those “investment professionals” will then go on to underperform the market and get paid anyway.
If all of this sounds too daunting already and you want the easy way out, use Betterment.
Founded in 2013, Los Angeles startup PeerStreet has taken in just over $21 million in funding from investors that include Andreessen Horowitz to build “a marketplace that provides unprecedented access to high quality real estate loan investments“. Before you start getting too excited, take note that you’re going to need some cash to bring to the table. PeerStreet shows you some dropdown boxes when you create your account and unless you choose the one that says you make $300,000 a year or the one that says you have $1 million in assets, you’re not going to be allowed in. Those of you who were smart enough to major in a STEM subject are more likely to be squared away here while those of you who majored in underwater basket weaving should probably just stop reading right now.
Right away we can see that this is a property that is out of reach for the majority of Americans with a hefty $3.78 million price tag.
This means that the amount of money we could get from selling our property falls to around $3 million which still makes it very easy to pay off a $2 million loan. In fact, the only point we would start to worry is if property prices fell more than -53% over an 18-month period. This would represent a “black swan” type of event which has a very low probability of occurring. Of course there’s always the risk of PeerStreet going under but then you still have the property as collateral for the loan and you are first in line to receive payback should their property portfolio be liquidated. For providing everyone with this great service, PeerStreet takes a reasonable .75% fee which is paid each month alongside the interest payments.
The first thing to note here is that the price of entry is an extremely attractive $1,000. You’d be joining the 295 other investors who have already plunked down an average amount of $6,169 which brings the loan up to 91% funded. If you then went out and found 9 other properties to invest in, you’d have a nice little diversified portfolio of 10 various property investments that are transparent and relatively simple to understand (provided you took the time to understand the risks as we have done with this example), all for just $10,000.
The early days of peer to peer lending have morphed into a far more complex and data driven credit service that is competing against not just innovative Fintech startups but traditional lenders seeking to maintain relevance. Crowdfund Insider recently asked Lend360 organizers a few questions on their perspective of the online lending industry and what has changed – and what they expect going forward.
What has changed in the lending environment in the past 12 months?
The biggest change is that Fintech is no longer just viewed as a boutique financing option, but a key component of today’s lending market. For proof of this change one only needs to look at the push for a national Fintech charter.
Where do you see current opportunities?
As long as there is a demand for credit, there will be an opportunity for Fintechs to step up and fill the void.
New research, “The unGolden Years: Non-prime Baby Boomers,” from the Elevate Center for the New Middle Class indicates that non-prime Boomers are borrowing against their 401k accounts three times as frequently as prime Boomers do. The survey found that 4% of prime Boomers have 401k loans, while 13% of non-prime Boomers have borrowed against these retirement plans.
Less than half—43%—of the non-prime Boomers in the company’s research feel comfortable with their ability to manage their day-to-day finances, let alone prepare for retirement. Not that prime Boomers all feel confident, either, with 76% saying they can manage daily financial needs.
Elevate’s study, based on a survey of over 1,000 prime and nonprime consumers, found that non-prime Boomers are 14 times as likely as prime Boomers to have difficulty predicting monthly income—and 4 in 10 say they live paycheck to paycheck. They also tend to have difficulty predicting monthly expenses and are therefore more likely to experience unexpected expenses, the research says.
Among non-prime boomers, 7 in 10 run out of money at least once a year, in spite of generally decent employment levels—frequently, in fact, with more than one job apiece.
The study asked respondents how they would meet an emergency need for $1,200. Among the non-prime Boomer respondents, nearly half had difficulty coming up with a source of funds—1 in 8 could think of no solution at all.
22% of non-prime Boomers could cover the $1,200 surprise through savings—about half of the portion of prime Boomers who could do so.
22% said they could use a credit card to cover the surprise, but less than a third said they could pay off that borrowing before it began to accrue interest.
11% said they could tap family or friends for the money. Interestingly, only 2% of prime Boomers would go that way.
A small portion—4.4%—of non-prime Boomers would use payday lenders, deposit advances, or overdraft programs. Interestingly, in a separate question, 13% of non-prime Boomers said they’d used a payday loan in the previous 12 months.
HedgeCoVest is pivoting away from being a platform to help investors access hedge funds in favor of being a turnkey asset management platform. To reflect the change, the company is rebranding as SmartX Advisory Solutions.
And as part of the change, SmartX is bringing on 27 new investment strategies from firms like Blackrock, Morningstar Investment Management and Nasdaq Dorsey Wright. The models will cover strategies including ETFs, income portfolios, international equities, global/macro investing and U.S. equity strategies.
RIA in a Box Introduces Trade Monitoring
The technology company has a new employee trade-monitoring tool for its MyRIACompliance software platform that RIA in a Box says will help firms comply with Rule 204A-11, which requires the submission of securities holdings and transaction reports. The new tool digitizes the process, provides an interface for employees to electronically link applicable personal brokerage accounts, and provides chief compliance officers with supervision, administration and reporting capabilities.
Cryptocurrency IRAs
CoinIRA, a subsidiary of Goldco focused on digital currencies, is launching Digital IRA Bundles, new investment products that come prepackaged with combinations of popular cryptocurrencies such as Bitcoin, Litecoin and Ethereum.
Commonwealth Selects Quovo for Aggregation
Commonwealth Financial Network announced the completion of an upgrade to the account-aggregation features within Investor360 using Quovo.
We all know payday lenders, loan sharks, and credit cards profit when you go into debt and, therefore, they can be dangerous. But many of these companies conceal their danger with clever marketing. Beware: a debt trap by any other branding is just as dangerous.
Over at the Outline, writer Gaby Del Valle discusses one such company, Affirm. v
The difference between this service and a typical subprime loan seems to mostly lie in the marketing. Unlike other loans, Affirm is a bit more upfront about the terms you’re getting into.
Everyone is picking on Affirm here, but the issue is not unique to them. This reminds me of the recent fiasco with Navient, the student loan servicer that was sued by the Consumer Financial Protection Bureau (CFPB) over shady business practices like misapplying student loan payments. In the lawsuit, Navient said they have no obligation to act in their customers’ best interest. But that’s not exactly the message that comes across on their “Financial Tips Blog.” These companies use financial literacy to hook you into making bad financial moves.
High-interest debt, such as credit cards, sometimes seems impossible to pay off.
Peer-to-peer loans are unsecured — you don’t have to tie any collateral to them. They’re attractive to borrowers with high-interest rate debt because they provide concrete payoff dates and an option for a fixed — and potentially lower — interest rate.
In fact, according to peer-to-peer platform Lending Club, its borrowers — on average — secure a 24% lower interest rate when using its peer-to-peer loans to consolidate debt.
SS&C Technologies Holdings, Inc. (Nasdaq:SSNC), a global provider of financial services software and software-enabled services, today announced the availability of Precision LM™ 3.0, the latest version of the company’s loan origination, servicing, accounting and asset management solution. The new version marks the culmination of significant input and engagement from Precision LM clients as well as SS&C’s proven ability to execute on its comprehensive development roadmap.
Automated financial advice is becoming more commonplace in the hunt for bigger returns, yet Pefin bills itself as “the world’s first [artificial intelligence] financial advisor.” The company aims to use machine learning to deliver a range of financial planning and investment advice via a chat interface.
“I started Pefin mainly because when you think about less affluent people, there’s really no access to financial advice aside from robos,” Joseph told CNBC in an interview recently.
“Robos are trying to execute a transaction, while we are trying to manage your finances. Investing is optional with us, and we’ll help you if we think it’s the right move for you” rather than generating fees for the company, she told CNBC.
Pefin, the world’s first Artificial Intelligence (AI) financial advisor, welcomed Catherine Flax as Chief Executive Officer today.
Flax has had a multi-decade, distinguished career on Wall Street, as the Managing Director and Head of Commodity Derivatives, Americas at BNP Paribas and as Chief Marketing Officer of J.P. Morgan. She was named the Most Influential Woman in European Investment Banking in 2012 and one of the 100 most influential women in European Financial Markets in 2010 and 2011. Flax has been a leader in the FinTech space, as a Board Member of leading blockchain company, Digital Asset Holdings, and for the last two years, as an Advisor to Pefin in matters of Marketing, Regulation, Business Development and International Growth.
CoverWallet, the winner of Best Insurtech Solution at the 2017 Benzinga Global Fintech Awards, has hired Paul Rosen, formerly the chief sales officer at On Deck Capital IncONDK, as its chief operating officer.
Insurtech reminds Rosen of what fintech looked like five to six years ago, he told Benzinga.
Pearl Capital Business Funding, a provider of direct financing to small and midsize businesses, announced Jared Kogan joined the company as chief revenue officer.
Kogan joined Pearl following a 10 year career in the fintech space, most recently serving as the director of OnDeck’s broker division where he funded 10,000 loans for over $650 million in volume and was able to grow production from $14 million to over $40 million per month. Prior to OnDeck, Kogan served as vice president at Newtek, the largest non-bank SBA lender in the country.
Typically, these lenders operate only on the web and promise quick assessment and disbursal with less bureaucracy. Some specialist bad credit lenders are ready to structure loans according to your convenience. You can also look at peer-to-peer lending platforms that give you access to individuals who are looking to invest their money in different ventures. Again, these platforms can get cash relatively more quickly into the system.
Goldman Sachs is looking to expand its retail banking business to the UK, replicating its mass-market offering in the US, as it continues a steady march from Wall Street to Main Street.
The New York-based investment bank began to pivot in the US about 18 months ago, offering high-interest online savings accounts for a deposit of as little as $1. Last October it took a step further by launching Marcus by Goldman, a digital consumer-lending platform that seeks to rival the San Francisco trio of Lending Club, Prosper and SoFi.
Now Goldman is taking it international, aiming to launch an online deposit business in the UK about the middle of next year. According to Stephen Scherr, the bank’s head of strategy, the lender plans a greenfield start in the UK under the Marcus brand, but could look to buy a book of deposits — as it did in the US — if the opportunity came its way.
The data behind Zopa’s lowered return projections (AltFi Data Email), Rated: AAA
Zopa has an enviable track record of delivering net returns as evidenced by a more than 10 year track record of delivering 4-7% returns (after losses and fees).
INVESTORS rank the expected rate of return as the most important factor when choosing an investment provider, research shows.
Analysis by bond provider Minerva Lending, based on a poll of 1,000 adults with more than £50,000 to invest, found 61 per cent consider the rate of return as the most important factor when choosing who to trust their money with.
The research, released on Friday, does not refer to peer-to-peer lending but investors appear to be looking for many factors that P2P firms offer.
THE UK is facing a technology skills shortage that may worsen because of Brexit, Zopa’s co-founder and chairman has warned.
Giles Andrews (pictured) said that the peer-to-peer consumer lender’s decision to open a hub in Barcelona was partly due to a concern that it would be harder to recruit top tech talent following the UK’s departure from the EU.
Assetz Capital, part of the Manchester-based Assetz Group, has relocated from Newby Road in Hazel Grove where it occupied 3,000 sq ft of a 6,000 building, to take the newly refurbished Building 3 on a 10-year lease.
On Friday, Caixin, a Chinese business news outlet, reported that financial authorities have decided to shut down virtual currency exchanges.
Beijing appears eager to eliminate money laundering and choke off capital outflows by shutting down bitcoin exchanges and other virtual currency trading platforms. It is also tightening its grip on peer-to-peer lending, in which individuals privately contract to borrow and lend.
Some exchanges have temporarily halted trading in response to the report. Investors rushed to sell their digital currencies for cash, sending bitcoin about 20% lower versus the yuan at one point on Saturday, compared with the day before, to below 24,000 yuan ($3,703).
Regulators in China are said to be considering a move to close all domestic bitcoin and cryptocurrency exchanges.
As of now, no official announcements from regulators have been seen. However, there are reasons to believe the report may be authentic.
The work group was first launched by China’s State Department in 2016 to tackle market risks in the country’s financial technology industry such as p2p lending.
According to report from the Central Bank, in the second quarter of 2017, banking financial institutions have handled 36.247 billion electronic payment services, amounting to 545.58 trillion RMB, which was down about 4.4% from the same period of last year.
Actually, non-bank payments including Alipay and wechat Pay are growing rapidly. The Central Bank’s data also shew that in the second quarter of 2017, the scale of non-bank payment market reached to 570.95 trillion RMB. Compared to the amount of 23.35 trillion in the same period last year, it has significantly increased 34.87 percent.
On September 6th, Zhao Jianjun, deputy director of the Department of Finance at Ministry of Education, announced at a press conference that online marketplace lenders are banned from lending to college students in China.
On September 6th, Zhao Jianjun, deputy director of the Department of Finance at Ministry of Education, announced at a press conference that online marketplace lenders are banned from lending to college students in China. According to WeChat Pay, users of the new product will be able to make payments and transfer, send Hongbao, pay back credit card debt and be awarded with interest on their digital wallet balances.
As response to the latest regulation, NEO Council announced it would offer refunds for NEO purchased through its ICO.
On September 4th, China’s leading digital payment service Alipay announced to expand its operation to Norway.
Early this week, Proptech BBT announced that the platform had managed to secure RMB 60 million Pre-A funding from Hongdao Capital at the beginning of August.
Since Klarna received its full banking license this summer, there have been many questions as to how exactly it would be leveraged. One among many speculative scenarios includes launching the company’s very own credit- and bank cards.
Now there are some initial reports indicating that the credit card rumours are for real. Referring to internal documents it has been able to access, Breakit reports that the Swedish e-invoicing giant, valued at $2,5 bn, is testing credit cards in-house.
A memo sent through the company’s intranet has supposedly given Klarna’s Swedish employees the opportunity to test proprietary payment cards for a limited amount of time.
SME lender Grid Finance is expanding its offering to include a digital pension product targeted at the owners of small businesses. The company has engaged Conexim to provide the back office infrastructure on the product – as well as the regulatory umbrella – while Grid will act as distributor.
It is the latest piece of innovation being undertaken by the company, which is looking to build what chief executive Derek F Butler calls “a small business bank in all but name”.
The 10 selected entrepreneurs reflect the acceleration of the Swiss fintech scene in the recent years and the impressive quality of its startups. They will join the intense journey taking place from September 10 – 16 in New York.
Advanon, Phil Lojacono: Advanon in its basic version is an online platform that allows SMEs to pre-finance their open invoices directly through financial investors.
Algo Trader, Andy Flury: The startup provides an algorithmic trading software that allows automation of complex, quantitative trading strategies.
Creditgate24, Teddy Amberg: CreditGate24 is an independent Swiss company and a fully automated platform for lenders and borrowers which offers efficient, transparent and scalable credit processing at high quality.
KiWi (eBOP), Christian Sinobas: KiWi transforms merchant’s phone into a smart point of sale.
Monito (Global Impact Finance), François Briod: Sending money abroad? Monito is the Booking.com for money transfers, helping migrants and expatriates find, review and compare money transfer services.
OneVisage, Christophe Remillet: OneVisage is a leading cyber-security company developing biometric solutions to help financial services eliminating identity theft and increasing user’s digital experience.
SONECT, Sandipan Chakraborty: SONECT enables every shop in the neighborhood to act as a virtual ATM.
Consultancy firm Accenture found that 68% of global consumers would be happy to use robo-advice to plan for retirement, with many feeling it would be faster, cheaper, and more impartial than human advice.
Joe Ziemer, vice president of communications at Betterment, a US robo-adviser with more than $9bn under management, says: “The Betterment service takes your information and uses a series of algorithms to create an asset allocation plan, which might be, for example, 90% equities and 10% bonds for a retirement saver.”
Wealth Wizards, for example, typically charges £65 for investments up to £30,000, and 0.30%, or £300, on a £100,000 investment pot. Betterment charges 0.25% a year.
That’s peanuts compared to human advisers’ fees, which come in at about £580 for advice on a £200-a-month pension contribution, or £1,000-£2,000 for guidance on what to do with your £100,000 pot when your retire, according to UK adviser network Unbiased.
The young lender says the total amount of investments now exceed €1.8 million. Approximately €400,000 in loans were added in August. The average invested amount per investor gained 2.2% to the previous month at €3,270 in August. In regards to the number of investors using the platform, in August Robo.cash added 188 users. Currently, there are more than 900 investors in total who have joined the platform in the first six months of operation.
For the first time at FinovateFall, Mitek (NASDAQ:MITK) (www.miteksystems.com), a global leader in mobile capture and identity verification software solutions, will demonstrate Mobile Verify® for Lending. This new, five step digital lending experience enables lenders to verify identity and bank account information in real time for fast loan decisions with a simple process for borrowers.
When applying for a consumer loan from a desktop computer, the borrower will first log into their online bank account and agree to have their account information shared with the lender. A text message is then sent to the borrower’s smartphone directing them on how to take four photos: front and back of their driver’s license, a selfie and a photo of their pay stub or other trailing document, to complete the loan application process. This new digital experience is quick and easy for the borrower and provides the lender with real-time identity and bank account verification.
Moroku lands on the BNP Paribas Radar (Moroku Email), Rated: A
Dear friends
Last week Moroku was identified as one of the top 4 Fintech’s globally best positioned to take on the battle for Millennials
The financial technology boom has transformed the way over a billion people engage with financial services, particularly when it comes to making payments, but Larry Fink, chief executive of BlackRock, the world’s largest money manager, said that no company has yet managed to use technology successfully to get people investing for the long term.
Both in China, and in Europe and North America, a plethora of investment platforms and robo advisory services are evolving, but none has yet reached critical mass.
Eurasia, the platinum, palladium, iridium, rhodium and gold production company, is pleased to announce it has entered into a Memorandum of Understanding with GoldMint PTE (“GoldMint”), a Singapore based Limited Company.
More brokers will diversify into the SME loan space due to increased competition in traditional markets and growing demand from clients, the lender’s head of sales Michael Burke said.
“Brokers are not only looking to move into online lending because of the speed and ease of doing business it offers, but because their time-poor customers are demanding a more convenient solution involving faster turnaround times.”
As well as providing a digital platform to facilitate the loan process, OnDeck’s underwriting policy also helps ease the broker’s burden, Burke told Australian Broker.
PledgeMe, the equity crowdfunding and peer-to-peer lending platform, has joined rival Equitise in signalling plans to enter the Australian market ahead of a law change coming into effect across the Tasman this month.
Co-founder Anna Guenther will relocate to Brisbane for six months to establish the Wellington-based company’s Australian arm, according to a PledgeMe blog post. PledgeMe will participate in the Queensland government’s HotDesQ programme, which provides networks, support, and funding for companies to relocate to the state.
SoftBank Vision Fund, the world’s largest pool of private capital, placed its second major bet on an Indian startup in a span of two months with its investment in OYO Rooms. The $250-million funding has taken OYO’s valuation from $460 million in August last year to between $850 million and $900 million.
Allow me to set the scene: in the wider region of Southeast Asia that surrounds Singapore, where Lattice80, our not-for-profit fintech hub that we launched last year is based, there is a huge unbanked population. KPMG estimates put the number at about 438 million. In poor countries like Cambodia, the population with a bank account falls to just 5 percent.
McKinsey did a similar study in 2010 on the world’s 2.5 billion unbanked. Asia’s emerging markets were identified as a hotbed of unbanked. The same study suggests that reaching the unbanked population in ASEAN could increase the economic contribution of the region from US$17 billion to US$52 billion by 2030.
Q WHAT IS THE ATTRACTION OF MULTI-ASSET INVESTING?
A It is the ability to combine a range of asset classes with different and largely independent economic drivers in order to achieve consistent return and reduce downside risk.
Years of central bank intervention in markets have depressed interest rates and left investors hunting for reliable yield. More asset classes beyond traditional equities and bonds have become more accessible in the past decade.
Q WHAT IS THE COMPOSITION OF YOUR MULTI-ASSET PORTFOLIOS?
More recently, we added peer-to-peer lending, mortgage and corporate funds that offer excess return over corporate bonds for a similar level of risk, litigation financing and credit funds. The world’s largest institutional investors have already diversified into these assets. Now, smaller institutions and individual investors can too, through our multi-asset strategies.
Millennials would rather give up voting in the next two elections than pay student loans. AT: “No one really wants to pay off a loan. We’d rather get free money and get on with our lives. But where this gets interesting is that millennials would rather get out of paying off their debt than to influence an election that could have far greater consequences to their lives for as long as it takes to pay off the debt. The question for lenders is, How can you capitalize on this sentiment?”
Working to expose Silicon Valley’s dark side. AT: “If you can get past the self-reverential tone, this piece is important to understanding how journalism works. Often, the best (or worst) stories come from tips because someone recognizes that a particular topic is of interest to the journalist. This should encourage lending firm leaders to be on their best behavior.”
There’s a new REIT in town. AT: “We’ve gone past crowdfunding websites offering REITs to crowdfunding websites specializing in REITs. A nice development.”
Pave rolls out new decentralized Global Credit Profile. AT: “Everyone in the industry recognizes that lack of access to credit is a big problem globally. Pave’s new online platform promises to put a dent in that. We’ll see how this develops.”
Samsung working with banks on retail pop-ups. AT: “I’m not sure how this is going to solve the problem for people who don’t want to visit bank branches. Mobile banking does not mean drive up to my street corner.”
Last Thursday evening we announced a cybersecurity breach potentially impacting 143 million U.S. consumers. It was a painful announcement because of the concern and frustration this incident has created for so many consumers. We apologize to everyone affected. This is the most humbling moment in our 118-year history.
Equifax Security first discovered the intrusion on July 29. Understandably, many people are questioning why it took six weeks to report the incident to the public. Shortly after discovering the intrusion, we engaged a leading cybersecurity firm to conduct an investigation.
At the time, we thought the intrusion was limited. The team, working with Equifax Security personnel, devoted thousands of hours during the following weeks to investigate.
dv01, the data management, reporting, and analytics platform that offers institutional investors transparency and insight into lending markets, today announced a $5.5M Series A round, led by OCA Ventures. Ribbit Capital, Illuminate Financial, and CreditEase Fintech Investment Fund also participated in the round, joining existing dv01 investors Leucadia National Corporation and Pivot Investment Partners.
OCA advisor Jack Lavin has joined dv01’s board, and will work alongside existing board members from Jefferies LLC, a subsidiary of Leucadia National Corporation, and Quantum Strategic Partners Ltd., a private investment vehicle managed by Soros Fund Management LLC.
SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced that it has surpassed half a billion dollars in funded SBA loans. This milestone comes on the back of other recent successes for SmartBiz, including the addition of a fifth bank to its software platform and ranking as the number one facilitator of traditional SBA 7(a) loans under $350,000 for the 2016 fiscal year, over Wells Fargo and other major banks according to SBA lending data released in November, reflecting its 2016 fiscal year.
The company’s first-of-its-kind software platform automates a bank’s underwriting to cut time and costs by up to 90 percent for processing SBA loans under $350,000. By automating the underwriting process, the platform helps banks get low-cost capital into the hands of small business owners in a matter of weeks instead of months. This is vitally important to any busy, small business owner who needs capital.
The $500 million in funded SBA loans reflects not only continued growth for SmartBiz, but also for the entire market of bank-originated, small-sized business loans. Post-2008, banks reduced the number of smaller business loans they made because they couldn’t process them efficiently enough to make a profit.
The number of people with student loan debt is staggering. According to the latest numbers from the U.S. Department of Education, 42.3 million Americans are paying back $1.33 trillion in federal student loan debt. Lenders are collecting payments on another $64 billion in private student loans. A survey of borrowers by the Federal Reserve puts the median student loan debt balance at $17,000, with monthly payments of $222. Student loan debt can be suffocating for those who are struggling to make payments each month.
A staggering 49.8% of all respondents said they would give up their right to vote in the next two presidential elections in order to have their debt forgiven
Ride-sharing services like Uber or Lyft don’t seem to matter to millennials quite as much as some of the other options in the survey. According to the results, 43.6% were willing to give up these services forever in exchange for debt forgiveness
Interestingly, 42.4% of respondents would also give up traveling outside of the country for 5 years, while only 27.0% said they would be willing to move in with their parents for 5 years
Millennials seem to value texting more than the other options – only 13.2% reported being willing to give up texting and any mobile messaging equivalent for the next year in exchange for having their debt forgiven
Only 8.2% of respondents chose to select none of the above and said they would rather keep paying off their student debt
Even before the ink was dry on an article Nathaniel wrote last year about an online lending start-up, Social Finance, and its unusual success — headlined “SoFi, an Online Lender, Is Looking for a Relationship” — he began hearing from people who painted a very different picture of what life looked like inside the company.
But in the intervening months, tales of sexual harassment and wrongdoing in Silicon Valley took center stage, in part because of Katie’s own reporting, which exposed a dark side to an industry known for growth, wealth and fantastic employee perks. Companies like Zenefits, Theranos and Uber made it clear that many venture capitalists and the companies they funded were incentivized to focus on growth at any cost, with good governance and corporate culture getting short shrift.
We are already getting more emails and phone calls that point to where the story might go from here — both with SoFi and the issue of bad behavior in Silicon Valley more broadly. These issues aren’t going away anytime soon.
stREITwise is introducing a new way to invest in real estate online commission-free by allowing direct investment on its website. Today they announced a Regulation A+ initial public offering for their first Real Estate Investment Trust (REIT) – 1st stREIT Office – which seeks to provide a diversified portfolio of institutional-quality office buildings with a revolutionary low-cost structure. Because it’s filed as a Regulation A+ offering, 1st stREIT Office will allow accredited and non-accredited investors alike the opportunity to participate.
This announcement comes shortly after 1st stREIT Office successfully raised over $20 million in a private offering to acquire the Panera Bread HQ Property in St. Louis, MO. At 99% occupancy in three separate buildings, the Panera Bread HQ Property includes over 290,000 square feet of Class “A” office space that is leased to many large tenants, including Panera Bread (World HQ), New Balance (Regional HQ), Wells Fargo, Edward Jones, Nationwide Insurance, and others.
With the Panera Bread HQ Property acquisition, 1st stREIT Office has been able to make 10% annualized dividend distributions to its existing investors. The company seeks to acquire more high-quality, stabilized office buildings in undervalued markets across the United States.
While Non-Traded REITs typically charge upfront fees of 10-15%1, stREITwise caps its upfront fee at just 3% by cutting out the middleman, eliminating financial advisor commissions, and passing the savings on to investors.
The New York firm said Tuesday that loans to wealthy clients, companies and consumers would contribute almost half the $5 billion in revenue growth it is projecting by 2020.
Harvey Schwartz, a top lieutenant to Goldman Chief Executive Lloyd Blankfein, on Tuesday said persistently low volatility in financial markets meant that the third quarter would be a “challenging” one in terms of trading. J.P. Morgan ChaseJPM 0.29% & Co. CEO James Dimon and executives at CitigroupInc. and Bank of America Corp. projected trading declines of between 15% and 20% for the quarter.
Goldman on Tuesday laid out a detailed plan to grow revenue, which has remained flat since the financial crisis. Its target of $5 billion in new revenue by 2020 hinges on businesses that have been footnotes for most of the firm’s 147-year history: lending, asset management and tending to the mundane needs of corporate clients and money managers.
Lending to wealthy clients, companies and consumers could add $2 billion of new revenue over the next three years, said Mr. Schwartz at a global financial-services conference hosted by Barclays PLC.
Online lender Lenda has announced plans to expand its reach to more states along with increased investment in its software platform, which offers a complete refinancing or mortgage origination transaction online.
Pave, Inc announces an initial coin offering (“ICO”), scheduled for mid-October to fund Pave’s Global Credit Profile project, which could provide a ground-breaking solution to the problems associated with credit reporting worldwide. Based on its deep knowledge of lending to individuals with limited credit history (“thin files”), Pave’s GCP will give consumers and credit institutions access to richer and more accurate personal financial data than traditional credit bureaus provide, while significantly improving data security. GCP has the potential to unlock access to credit for millions of people — such as millennials and immigrants — who are marginalized by the current financial system.
While the centralized systems of companies such as Experian, Equifax and TransUnion continue to perform a valuable service by acting as a reliable source of information for third parties, they are plagued with systemic problems including a lack of transparency and control over personal data, vulnerability to fraud and data theft and unnecessary administrative costs. Using blockchain and related technologies, Pave’s GCP will decentralize the storage and ownership of an individual’s financial data by placing the user in control. The GCP thereby removes the reliance on a singular record keeper making security breaches infinitely less likely.
DigiFi, an enterprise financial technology company, announced today the launch of its cloud-based digital loan origination system (“LOS”) for banks, credit unions and consumer finance companies. DigiFi’s next-generation LOS enables the automated online delivery of multiple consumer lending products through a single platform, driving better customer experiences and lower operating costs.
DigiFi’s proprietary technology was built over three years to digitize the consumer lending process, offering consumers immediate feedback and funding from any device at any time. The platform supports multiple products including Personal Loans, Credit Cards, Personal Line of Credit, and Student Loan Refinancing, and DigiFi is adding additional products, including Home Equity, Auto and Mortgages.
The platform is highly configurable, empowering banks, credit unions and consumer finance companies to utilize their own risk models, documents and procedures.
Shields, a longtime purveyor of payment technology, is the founder and former CEO of Vancouver-based Hyperwallet Systems Inc. After handing the reigns of that company over to Brent Warrington in 2015, she went on to launch Fi.Span, a provider of cloud-based platforms for commercial banks.
In the second half of the podcast, data mining expert Ellison Anne Williams also addressed the predominantly male demographic of her field. The effect it has on her approach is next to none, she said.
As the CEO and founder of data securitization startup Enveil, Williams brings more than a decade of experience in large scale analytics, information security and privacy.
The U.S. banking regulator, the Acting Comptroller of the Currency, said on Wednesday that he is not ready to accept applications from financial technology companies seeking a special purpose federal charter.
His comments underscore the broader difficulties faced by regulators globally as they attempt to keep up with dramatic changes in banking industry brought about by the increasing use of digital technologies which threaten to undermine traditional financial services businesses.
Banks may soon be experimenting with a new way to engage with customers: retail pop-ups.
Samsung’s head of sales for financial services, Reginald Jones, told Tearsheet that the company is in talks with its financial services customers about rolling out retail pop-ups “sooner than in a year.”
Those could be in a variety of formats, he said: a bus promoting a certain bank that drives a number of customers to an NFL game; a university campus presence where banks look to attract customers as they become of banking age; a shopping center that normally just has ATMs where banks could roll up for a weekend service to attract these potential new customers. Samsung, the consumer electronics giant, provides the devices that change how bank employees conduct business — to better influence the customer outcome.
Samsung has been working with bank branches for the last five years, incorporating its display screens into retail spaces as they take old signage and posters and move them to digital platforms. In some branches, greeters and bankers are also using Samsung tablets, he said.
Fintech companies around the world have moved swiftly to fill the gap left by mainstream lending institutions due to constraints related to interest rates and profit margins. Big lenders in the market are under constant pressure to increase profit margins, which limits the size of their addressable market, especially when trying to woo small and medium-sized business borrowers. Their interest rates are often high as they seek to remain competitive in the larger spectrum of the financial services industry.
One of the largest beneficiaries is LendingClub Corp. (NYSE:LC), which has seen its revenue increase 1,278% in under five years, from just over $37 million to over $500 million as of June 30 on a trailing 12-month basis.
Brazilian-based fintech companies are paying investors about 22% returns per year while borrowers are charged interest rates from as low as 1.7% to as high as 6.3% per month based on their credit profiles.
The Federal Reserve Bank of Philadelphia announced that it will hold a FinTech seminar in conjunction with the Journal of Economics and Business on September 28-29, 2017, focused on consumers, banking, and regulatory policy.
Aptly named FinTech: The Impact on Consumers, Banking, and Regulatory Policy, the conference will feature keynote speeches and research from industry experts on consumer protection; roles of alternative information; FinTech lending; blockchain-based currencies; machine learning and artificial intelligence; the new FinTech landscape; and marketplace lending and crowdfunding. The conference will also focus on the disruptive factors of blockchain technology and to what measure they continue to shape regulatory policies.
Star Mountain Capital, LLC (“Star Mountain”), a specialized investment manager focused exclusively on the large and underserved U.S. lower middle-market, is pleased to announce that industry veteran Erik A. Falk has joined the firm as a strategic personal investor and Senior Advisor.
Mr. Falk is a senior executive focused on strategic initiatives at Magnetar, a $13+ billion alternative asset management firm. Until early 2017, Mr. Falk oversaw the private funds as a Head of Private Credit within KKR’s (Kohlberg Kravis Roberts & Co.) $35 billion credit business and served on the Private Credit Investment Committee, the Leveraged Credit Investment Committee and the Portfolio Management Committee. He also oversaw KKR’s investment in Star Mountain. Before joining KKR in 2008, Mr. Falk spent eight years at Deutsche Bank where he held several roles including founding the Special Situations Group and Co-Heading the Global Securitized Products Group. Mr. Falk began his career in the Asset-Backed Securitizations group at Credit Suisse First Boston where he knew Star Mountain’s Chairman, Brian Finn, whose prior roles include Co-President of Credit Suisse First Boston and Head of Credit Suisse Alternatives (with approximately $100 billion in AUM at the time).
The UK’s annual inflation rate climbed to a higher-than-expected 2.9% in August, matching a four-year high reached in May, the Office for National Statistics (ONS) said on Tuesday, two days ahead of a key meeting by members of the Bank of England’s monetary policy committee.
The consumer prices Index (CPI) climbed from 2.6% in July, the ONS said on Tuesday. The August reading matched the highest since April 2012 and beat the 2.8% average forecast by economists polled by investing.com.
The annual core inflation rate, which strips out volatile food and fuel costs, also jumped to 2.7% from 2.4% in July, topping the 2.5% expectation by economists in an investing.com survey.
Advisory firms need to do more to attract the next generation of clients or risk selling themselves short, financial adviser Keith Churchouse has said.
His firm Chapters Financial is developing a chatbot platform for its online advice business Saidso.
The chatbot will be aimed at the generation of clients who are more comfortable with changing and emerging technology. They are usually 45 years old or younger; the typical age group of customers who already use the Saidso website, which has been operational for the past two years.
The UK City watchdog has warned investors of the “high risk, speculative” nature of initial coin offerings as their popularity booms, becoming the latest global regulator to sound the alarm.
The Financial Conduct Authority warned that ICOs are mostly unregulated and potentially fraudulent, while investors may be provided with “unbalanced, incomplete or misleading” documents by the ICO issuer.
Even if an ICO is not fraudulent, the regulator said, investors still had “a good chance” of losing their entire investment.
Advantages of platforms with a track record –I prefer platforms that have a track record and have operated at least 1 or two years.
Loan term and loan types – There are three main types: consumer loans, SME loans and property secured loans. SME loans has further subtypes like invoice financing. It can be a good idea to diversify over different loan types and different platforms.
Diversification – Diversification can be achieved faster on platforms with very many comparable consumer loans, and will take longer on property platforms which launch only few large property loans.
Autoinvest – Before you use the autoinvest I suggest to spend the first days/weeks making manual investments on the primary market to get a better understanding of the loans on offer.
Secondary market – Before you use the secondary market, I suggest you first spend some time investing on the primary market to deepen your understanding of how the platform works.
Cash drag – Investors only earn interest on money invested into loans. Cash deposited, but not (yet) invested will earn no interest.
Unsecured vs. secured loans – Consumer loans listed on platforms are mostly unsecured (exception some car loans). SME loans offer no or or some type of asset as security and property loans typically offer a first or second charge on the property as security. Usually it is preferable to lend with some kind of security offered.
Recovery process – A certain percentage of loans will default. This is normal in p2plending and nothing to worry about as long as this percentage stays in a healthy relationship to the interest offered for the risk.
Tax – If the country you live in does not allow you to offset default losses against interest income earned, it may be a good idea to invest into loans with lower interest rates, but also lower default rates, to achieve higher returns after tax than with a more risky strategy.
Final tip – Start slow. P2P lending has somewhat of a learning curve.
Klarna Bank AB (publ) today announces that the acquisition of German online payments company BillPay has been completed. This will strengthen Klarna’s position as one of the leading e-commerce payment providers in Europe and further accelerate its growth in Germany, Austria, Switzerland and The Netherlands.
However, it wasn’t clear how much money had been invested. Now Swedish tech site Di Digital has revealed that Visa took part in Klarna’s $75 million euro acquisition of Billpay, a German competitor, in February.
Out of the $57 million euro share emission that went to financing the deal, Visa paid roughly a third, or $22 million.
GoldMint is a comprehensive P2P solution that allows businesses like pawnshops to raise credit.
Recently, a Time article revealed that 28 percent of college educated millennials between the ages of 23-55 have accessed short-term lending from pawnshops and payday loan providers in the last five years.
Dmitry has had an eye on the pawnshop segment since 2015, when he noticed that while the pawnshop business was immensely profitable, it was void of technological progress. He worked with a team of four people in 2016 to address the four main issues that faced the pawnshop businesses:
realization of unclaimed pledges
wired payments
funding of pawnshops (lending)
the introduction of unified standards (consolidation)
GoldMint is holding an initial coin offering (ICO) in less than a week’s time starting Sept. 20, 2017. They have published a detailed whitepaper which lays the details of their crowdsale.
We started by developing the Smart Contract. It was ideal to begin with the token escrow contract, which allows the collateral to be held securely in the Smart Contract until the borrower repays the loan. If the borrower does not repay, the lender can claim the tokens and realize any losses. We made many interesting findings during the development and wrote the white paper after Alpha DApp. We believe this is a big advantage for us since practice does not always follow theory. Also, delivering an Alpha for the Ethereum main-net is important proof-of-concept wise.
7. Do you think the system will be more popular among individuals or companies?
Hard to tell since at the moment individuals are more keen on using cryptocurrencies. ETHLend has received a lot of interest from miners who want to expand their mining facilities or purchase more rigs. There are also growing tendencies for companies to use blockchain technology. We have received inquiries about pledging some of the ICO tokens for financing pre-sale marketing efforts. What I would like to see is that merchants who use cryptocurrencies would adopt ETHLend for financing and increasing their business.
8. What is the difference between the type of crediting ETHLend offers and the scheme “have sold the possessed currency-have bought ETH for raised money”.
Good point. Since our main financing instrument is pledging digital tokens, it provides opportunity to receive ETH when one does not want to sell digital tokens. Such might be the case when one has a token portfolio, investment funds like TaaS or ICONOMI. Funds or individuals could easily keep the possession of the token positions and still get more liquidity for growing their portfolio. On the other hand, a blockchain startup might keep more tokens at their possession when pledging the token before an ICO for a loan and repaying the loan after an ICO. A strategy like that leaves more tokens for the startup to recruit more talent.
11. How much time do you think you need to launch the project in case you obtain sufficient financing?
ETHLend has an extensive roadmap that stretches to the late 2019. At the moment we are still developing the ETHLend DApp. However, we need further resources to comply with the features set in the roadmap. We are also looking to add more developers and financial experts to the team. The basic collateral based lending is available on ETHLend but there are lot of functions that require more time to develop, such as being able to borrow Bitcoin or to use the price feed for the collateral value. We aim to have a fully sophisticated DApp by the end of 2019.
14. The last tricky question: is lending good or bad?
Lending is an instrument that should be used in the correct circumstances and for the correct funding goals. Lending could be compared to other products – when consumed wrongly, they might be bad and vice versa.
Igors Puntuss, co-founder of Bulkestate.com, explained that as wages rose rapidly and with it “population welfare”, meaning disposable income and savings, people living in Baltic countries began to look for safe and profitable ways to invest their spare cash. But banks are not able to provide smaller investors with attractive interest rates on deposits and, as the market of real estate crowdfunding is far from maturing, there are opportunities to be had.
He added that high reliability does not equate to low profit, when it comes to real estate crowdfunding. The website offers an annual interest rate of 14% at a low threshold for those who are risk adverse, and the minimum investment required is just 50.00 euros at Bulkestate.com.
Anne Boden of Starling Bank and Zopa’s Jaidev Janardana will be speaking at LendIt Europe, which brings together fintech experts from across the continent.
The conference takes place on 9-10th October at the InterContinental London – the O2, where more than 120 speakers will take to the stage with experts from banking, lending, technology and regulation.
Anne will be speaking on LendIt’s keynote panel, which will look at the digitalisation of finance and how customer expectations are changing.
The latest edition of the PYMNTS.com B2B API Tracker™, a FI.SPAN collaboration, examines how APIs are helping both banks and smaller businesses address their fears and embark on new ventures in new markets.
Recent research indicates merchant anxiety over non-payments is widespread. According to a study by Payoneer, 75 percent of small- and medium-sized businesses (SMBs) have backed away from global trade over concerns of not getting paid for their services.
OpenTap, a fintech firm that enables peer-to-peer lending for middle and low income borrowers, aims to facilitate ₹100 crore in short term loans by the end of 2018.
The Chennai-based fintech firm provides alternate financial services to blue-collared workers, which is two times of net salary. As on date, it has provided credit worth ₹3 crore to 1,200 borrowers.
Wish Finance, based in Singapore, has announced the launch of its blockchain-based lending platform for small and medium businesses. The company has reportedly issued 100+ loans in 2017 during a soft launch with every loan successfully repaid and 0% default rate. Wish Finance plans to keep its entire portfolio on the public blockchain, anonymized, so investors can audit its performance at any given time.
Wish Finance is offering merchant cash advances and business loans with interest rates based on the company’s real cash flow, not assets. Wish Finance said it has direct access to POS terminals infrastructure to see real time financial transactions, which it combines with the local market data for scoring. Wish says it issues a loan in 24 hours, and then deducts a few percents of the merchant customer’s’ payments to automatically repay the loan. In this way, repayments are made seamless and effortless for SMEs. Each loan is said to be insured from customer’s bankruptcy.
The global trade finance gap has fallen from US$1.6tn to US$1.5tn, but the impact of fintech has been minimal to date.
But despite the industry’s zeal for digitisation, just 20% of firms reporting have used digital finance platforms. In line with global trends, peer-to-peer lending is the most-used fintech model (23%).
74% of rejected trade finance transactions are for SME and midcap applicants, with 29% of these being rejected over KYC concerns. Last year’s survey showed that 56% of SME trade finance proposals are rejected, compared with 10% of multinationals.
Singapore-based financial technology company Six Capital Groupresponded Thursday to complaints from users who say they’re unable to cash out from the firm’s web-based strategy game.
The game, called Tagg Switch, works similarly to how trading currencies works: Players purchase one of six types of so-called “Nodes” that represent a different currency — either the U.S. dollar, Singapore dollar, British pound, euro, yen or the Australian dollar.
Did lending just change permanently? AT: “A must-read. This really gets to the heart of what the CFPB no-action letter means for alternative lending. An interesting question for me is, how could this impact the ILC discussion. Long-term, if this analysis is correct, the prospects could be good for online lenders to own banks.”
Former SEC head says SoFi may have mussed up chances to become a bank. AT: “I hope their decision doesn’t hinge on SoFi’s corporate culture under Cagney. The company will get a new CEO, and with that, a change in culture is likely to occur. More importantly, the decision needs to be based on the rule of law.”
Fat cat frat boys ape the worst of banking and tech. AT: “Interesting comparison between the SoFi incident and past bank problems focusing on SoFi’s lending practices that have been questioned, which is where the focus should be.”
As you may be aware, ICBA recently filed a comment letter with the FDIC objecting to the deposit insurance application of SoFi Bank, an industrial loan corporation to be chartered by the state of Utah. In our letter, we urged FDIC, for safety and soundness reasons and to maintain the separation of banking and commerce, to not only deny SoFi Bank’s application but also impose a moratorium on ILC deposit insurance applications. Furthermore, we said that Congress should close the ILC loophole because it not only threatens the financial system but creates an uneven playing field for community banks.
The news that Square also intends to apply to the FDIC for deposit insurance as an industrial loan corporation has significantly increased our concerns and made it even more urgent that the FDIC immediately impose a moratorium on approving deposit insurance applications for ILCs. As we noted in our SoFi Bank letter, the ILC charter is nothing more than a loophole in the law to circumvent the legal prohibitions and restrictions under the Bank Holding Company Act.
SoFi Bank and Square are applying as ILCs and not as commercial banks because their parent companies and their affiliates do not want to be subject to the legal restrictions and supervision attendant to the BHCA. Square, for instance, already owns a point-of-sale hardware appliance business and a food delivery service and therefore could not own a commercial bank without divesting its commercial activities. For safety and soundness 2 reasons and to maintain the separation of banking and commerce, the FDIC should deny SoFi Bank’s application and impose a moratorium for at least two years on future ILC deposit insurance applications, including any application by Square.
Bank lending regulations have rarely been thought of as dynamic or exciting but last night’s ruling by the Consumer Financial Protection Bureau (CFPB) to allow a lender to begin using alternative data in their underwriting could herald the beginning of a new era in lending and how banks work.
Why is this significant?
US banks have traditionally been guided by three key pieces of legislation, the Truth in Lending Act of 1968, the Equal Credit Opportunity Act of 1974 and the Community Reinvestment Act of 1977.These three acts were created before the era of personal computers yet still guide bank lending today.Since the rise of marketplace lending, which began in 2006, where borrowers go through a platform and investors fund those loans, it is becoming increasingly apparent that many of these regulations are in need of updating.
In an overly simplistic interpretation (and I am not an attorney), the regulator is giving an online consumer lender the right to underwrite loans using ‘alternative data’ which before was not in line with how the Equal Opportunity Act is interpreted by lenders.It is not clear what data will be allowed but in a CNBC interview, Upstart co-founder Paul Gu suggested that SAT scores, college grades and even college majors are data points which are helpful in predicting loan defaults.
So assuming the change stands, what is next?
As alternative lenders have more scope to use alternative data, machine learning complex data analysis is opening up an entirely new space for investors.Gone are the days where banks only competed against each other with marketplace lenders now allowing investors to allocate capital in a similar way to banks, choosing loans to fund based on their own ideas and risk profile. For now, this is mostly impacting consumer credit, but in the years to come, look for marketplace lending to impact all areas of lending as investors get more comfortable investing in this space regulations start to adapt.
SoFi’s application to become a bank has almost no chance of approval in the wake of a sex scandal that forced out its chief executive, says a close adviser and former chairman of the Securities and Exchange Commission.
But last week’s departure of Mike Cagney, the co-founder, chairman and chief executive, has effectively killed the application, said Arthur Levitt, a former chairman of the SEC, who began advising the company two years ago.
“This departure of Mike makes that a very questionable attainment,” Mr Levitt said, referring to the charter.
He noted that the FDIC had turned down this type of application “many times” before.
We turned first to SoFi, a consumer-finance unicorn that has raised more than a billion in equity, and over $2 billion in total. The company is now down a CEO after allegations of misconduct brought censure upon its CEO, Michael Cagney, and the company’s culture.
The article also described employee concerns about lending practices and alleged that investors had been misled over a 2012 financing.
SoFi complained in a public blog about “inaccuracies” in the Times report, but focused on defending its lending practices.
If the allegations are true, SoFi and LendingClub have many of banking’s worst attributes with Silicon Valley’s warts layered on top.
Meanwhile, the allegations of doctored loans and conflicts of interest at LendingClub were reminiscent of some of the excesses of the bankers who fed the subprime mortgage market.
Goldman Sachs has been pilloried for lackluster results from its trading division (paywall), so this week the bank gave investors a peek into its plans (pdf) for making more money. Surprisingly, the Wall Street powerhouse thinks it can generate as much revenue from online consumer loans—a market targeted by many fintech startups—as from buying and selling securities.
Specifically, Goldman thinks it can make $1 billion in extra revenue from its consumer lending business over the next three years, as much as it expects for its trading operations. Combined with new lending for the wealthy and companies, the bank expects to bring in $2 billion in additional sales from loans. Goldman co-chief operating officer Harvey Schwartz said it’s one of the fastest-growing lending platforms ever launched, even though he says the bank is taking its time with the nascent business. The bank’s digital consumer-lending arm called Marcus is expected to have lent out $2 billion by the end of the year.
Meanwhile, big banks have access to cheaper funds than peer-to-peer lenders like Lending Club or Zopa. With consumer deposits and the billions of dollars they routinely borrow in credit markets, banks can undercut the loan rates offered by smaller companies.
That said, Schwartz acknowledged that consumer lending isn’t immune to economic downturns, and analysts cited by Bloomberg were skeptical about Goldman jumping into a market outside its core expertise.
It might seem like it is only a matter of time before the tech giants knock on banking’s door. In fact, a recent World Economic Forum report posited that big tech companies present a greater challenge to banks than fintech startups. The report notes that regulators will accept a more “oligopolistic distribution of financial services products by tech firms.” Already, the fintech providers Social Finance and Square have applied for FDIC-insured banking charters, just as the Office of the Comptroller of the Currency continues work to develop its limited-purpose fintech charter. Are the largest tech firms next in line?
Incumbents still hold the upper hand. The risk of an Amazon or Google or Apple dominating the traditional banking sector is nowhere near a slam dunk.
In every scenario, the tech giants would need to persuade regulators to grant them some kind of charter access in order to effectively compete and level the playing field on funding costs. This would involve easing traditional limits on commercial firms owning banks, and potentially navigating opposition from members of Congress.
But more fundamentally, tech giants have had mixed experiences in rolling out financial services such as Google Wallet and Apple Pay. And despite the reported consumer skepticism of legacy institutions, banks still continue to maintain a high volume of customer relationships.
In the fallout of the Equifax breach, the leading credit bureaus are dealing with an overwhelming volume of credit freeze requests from consumers. While it is still too early to tell, it seems that the genie is out of the bottle. The breach is sparking additional focus on FinTech innovation to protect consumers (e.g., digital identity verification, disposable card numbers, etc.).
Beyond the headlines, SoFi’s growth engine continues. In Q2 2017 alone, SoFi funded $3.1 Bn in loans with $134 Mn in revenue and $61.6 Mn in adjusted EBITDA. Revenue and adjusted EBITDA were up 67% and 60% year over year respectively. The news of Cagney’s resignation coincided with SoFi marketing its latest personal loan deal which priced this Friday. Interest in SCLP 2017-5 was initially strong, however the bond priced somewhat wider than guidance.
SoFi’s Latest Consumer Lending Deal: SCLP 2017-5
After Mike Cagney’s resignation on Friday, the lead underwriter re-launched SCLP 2017-5. Since guidance was released before the critical NY Times article on Tuesday, we have a close (but imperfect) control to study the consequences of management upheaval on deal execution.
ABS investors reacted negatively to the news; the bonds priced 10 to 15 bps wider than guidance on Monday.
Source: PeerIQ, Company Filings, S&P, Kroll Bond Rating Agency
LendingClub’s Self-Sponsored Prime Consumer Deal: CLUB 2017-P1
This is the second self-sponsored deal from LendingClub, and it follows the success of CLUB 2017-NP1. LendingClub expects to alternate between prime and near-prime securitizations at least once a year going forward. Of the $363 Mn outstanding, approximately $100 Mn came from LendingClub’s balance sheet (a shift from prior management’s business practice); the remaining loans were contributed from investors.
The CLUB 2017-NP1 and CLUB 2017-P1 deals total to approximately $628 Mn in loans, yet LendingClub has facilitated almost $29 Bn in loans on its platform as of Q2 2017 making it a small part of LendingClub by dollars loaned but a meaningful portion of EBITDA.
Source: PeerIQ, Company Filings, Kroll Bond Ratings Agency
DiversyFund, a real estate crowdfunding marketplace, is selling pre-IPO shares in a Series A crowdfunding round through a Reg D 506(c) offering.
The Form D filed with the Securities and Exchange Commission (SEC) indicated that Diversyfund had sold $200,000 of a $6 million funding round as of August 31st. Minimum investments of $100,000 are being accepted from accredited investors only.
Fintech has become a major force over the decade since the financial crisis, with $12.8 billion in venture capital flowing into the sector in 2016 alone. But of the nearly 500 deals that took place in the U.S. last year, less than a dozen went to companies founded by women.
“It’s lonely to be a woman in fintech, especially as a CEO,” says Rachel Mayer, cofounder and CEO of Trigger, an automated tool for investing alerts.
At Anthemis, based in London, 56% of employees are women, a remarkably equitable gender breakdown that is consistent at every level.
Former banking executive Sallie Krawcheck is following a similar playbook with her female-focused investing service, Ellevest. Since founding the company three years ago she has raised over $50 million in venture funding.
A survey of U.K.-based fintech firms published last week revealed that women represented just 3 in 10 employees. Of fintech board directors globally, just 8% are women.
In an interview Friday, Upstart co-founder and CEO Dave Girouard explained why the fintech applied for the letter and how it works.
Is it fair to think of a no-action letter as a stay-out-of-jail-free card?
DAVE GIROUARD: We’re careful about not trying to interpret it in any way that is different than what the CFPB says it is. The letter makes it clear that they have reviewed what we do and how we do what we do and that they don’t find issue with it.
How do you feel about the agreement?
We’re pleased that the CFPB recognized the consumer advantage of alternative data and machine learning, the fact that it could make affordable credit more broadly available to more people.
So it’s not just about Upstart for sure — it’s the acceptance of these more modern techniques because they can and will benefit consumers broadly over time.
The new hire is accompanied by the completion of the company’s SOC 2 Type 2 Certification, which affirms that Sharestates now meets the security requirements and parameters for storing information on the cloud as laid out by The American Institute of CPAs (AICPA).
ReliaMax®, the complete private student lending solutions provider for banks, credit unions and alternative lenders, today announced at the 23rd Annual ABS East 2017 Conference a new whole loan trading service, ReliaMax Portfolio Placement, as an extension of its existing capital markets and liquidity programs. The ReliaMax Portfolio Placement service will facilitate qualified existing private student whole loan portfolios for sellers and buyers.
The ReliaMax Portfolio Placement service provides unique value to the private student lending marketplace in multiple ways including insurance, default prevention, credit analysis, and servicing. Some benefits include:
State-of-the-art servicing through ReliaMax helps buyers maximize the value of their portfolio, providing compliance and regulatory support and staffing to manage student loan-specific servicing requirements.
Loan insurance through ReliaMax Surety Company covers 100% principal and interest and mitigates risks, reduces defaults, and provides better cash flow.
Portfolio review and credit analysis provides guidance around the price at which the portfolio might transact.
ReliaMax has been involved in many third-party portfolio transactions. For example, in December 2106, MetaBank acquired a $151 million student loan portfolio which ReliaMax Surety Company now insures. The transaction also included the conversion of the portfolio servicing onto the ReliaMax Platform. Over the last three years, ReliaMax has provided insurance and/or servicing on 12 portfolio placement transactions.
Lendio, the nation’s leading marketplace for small business loans,today announced a partnership with Ocrolus, the emerging leader in bank statement review automation. The PerfectAudit API, powered by Ocrolus, analyzes uploaded bank statements with 99+% accuracy, replacing manual review with automation. Ocrolus technology allows lenders, for the first time, to review every potential borrower’s bank statement data automatically, regardless of whether or not the borrower provides sensitive bank login credentials.
In April, Lendio became the first lending marketplace to integrate with Ocrolus, whose clients include banks, alternative lenders, accounting firms, law firms, and government entities. The PerfectAudit API gives Lendio the ability to systematically combat bank statement fraud and conduct a hyper-accurate review for every potential borrower.
From peer-to-peer lending to online banking, the fintech industry is a rapidly growing area for technology investment. In the first quarter of 2017 alone, U.S. venture capital-backed fintech start-ups raised $1.1 billion across 90 deals, according to CBInsights Global Fintech Report. The only region to outdo the U.S. during this same period was Asia, which reported for the same group investment of $2.7 billion across 226 deals.
There exists a wide range of technologies that fall under the definition of fintech, and each is seeing significant growth. One such technology is artificial intelligence, which, according to the PricewaterhouseCoopers 2017 Global Fintech Report, 30 percent of large financial institutions are investing in. For example, another factoid from a separate PricewaterhouseCoopers report, projects that, by 2020, AI will automate a considerable amount of underwriting.
Mobile payments are another rapidly growing area of fintech, with TechCrunch reporting that there will be an estimated $60 billion worth of payments made on mobile platforms in 2017. The site also predicts that, by 2020, 90 percent of smartphone users will have made a mobile payment, which serves to underscore just how commonplace this fintech will be within a very short time.
A new report from Aon discusses the contemporary market for alternative risk premia: where it is, how it got here; where it may be headed.
The authors, Matthew Towsey and Chris Walvoord, begin with some very basic considerations of what ‘risk premia’ are. They are, on the one hand, the payments one receives for taking on a risk that others do not wish to hold (providing insurance), or they are on the other the winnings one pockets on strategies that take advantage of market anomalies.
How does NerdWallet create its content and recommendations? Do data and algorithms play a role in your platform? I’m curious about the company from a fintech perspective.
It’s actually a mixture of both — algorithms and incredibly smart, financially savvy humans power our recommendations, reviews and expert advice.
The company seems to simplify financial information for everyday consumers. Do you think NerdWallet has helped to democratize the space?
That’s the goal! I truly believe that a person that has spent no time at all thinking about personal finance and can’t afford a financial advisor, should be able to make the same quality of choice as the most financially savvy person in the country
Experts deliver new alternative investment advice and resources for individuals being impacted by the giant 2017 Equifax data breach. This includes all new episodes of SDIRA TV with national finance experts and investment advisors, as well as a side by side comparison white paper on retirement investing options.
Deeper concerns have surfaced as it was discovered three Equifax executives sold off substantial amounts of personally held stock before making the breach known.
Peer-to-peer lending involves a group of people coming together to lend money to each other. You can look for an entrepreneur peer who is willing to fund ideas similar to yours.
Online Lending
There are several online lending service providers. Good examples are Kabbageand OnDeck.These online lenders will process your application within hours as opposed to traditional lenders.
In general, those are new untested platforms, which may or may not do well for you over time. These investments have not been time tested during a recession. In addition, I do not understand very well how investment assets are segregated in those platforms, and how things would work out if a project you invested in fails miserably.
He’s talking about fintech, which has leveled the playing field for non-New Yorks to flourish in financial services. Inspired by emerging tech trends, Raznick and Benzinga are taking stakes in Michigan’s future by spearheading the new Detroit Fintech Association.
The nonprofit trade organization will enhance the community’s exposure, connect startups with national leaders and mentors, support talent recruitment and magnify the Detroit voice in U.S. regulatory discussions. The DFA also aims to improve financial literacy in the city through work with Detroit high schools and higher education institutions.
Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a provider of real estate, mortgage and technology services, today issued the results of its inaugural Default Servicing Survey, a survey of over 200 mortgage default servicing professionals. According to the study, nearly three-quarters (71 percent) of servicing professionals surveyed predicted FHA/VA loan volumes would increase within their organizations in the next 12 to 24 months; 41 percent believed FHA loans will offer their organizations the most portfolio growth over the same time period.
According to the U.S. Department for Housing and Urban Development, FHA loans accounted for over 17 percent of newly originated mortgages in 20161 and currently constitute 35 percent of all loans delinquent for 30 or more days2. As the issuance of FHA loans grows, so does the potential increase in volume of default assets. Thus, it is not surprising that 93 percent of servicing professionals surveyed stated that foreclosure/trustee and Claims Without Conveyance of Title (CWCOT) capabilities are important factors to consider when evaluating a vendor to manage growing default portfolios.
Servicing Professionals Cite Challenges Stemming from Costs of FHA Conveyance and Managing CWCOT Programs
Servicing professionals (29 percent) cited remitting fees, costs and financial obligations associated with FHA conveyance as the greatest challenge for effective CWCOT programs. For servicing professionals working with third-party vendors to manage CWCOT portfolios, 15 percent said overall vendor management is a challenge associated with managing CWCOT programs while another 15 percent pointed to timeline delays and increased costs due to attorney oversight; 11 percent cited not having enough in-house personnel on staff to effectively manage the program.
Third-Party Expertise and Central Coordination are Critical to Successful CWCOT Program Administration
In order to overcome the financial, regulatory and oversight challenges associated with their vendors’ CWCOT programs, servicers must carefully evaluate their third-party vendor strategy to ensure vendors possess the right expertise and resources to execute the program. Most servicing professionals surveyed (97 percent) said they are exploring options including a single-vendor approach to help achieve their objectives; 91 percent identified FHA asset management experience as an important criterion for vendors. When specifically evaluating single vendors, 72 percent of servicing professionals surveyed said consistency and efficiency in managing REO properties is a very important consideration; 69 percent also pointed to compliance management.
Equifax, the US credit-reporting company at the heart of a cyber-security scandal, has admitted that as many as 400,000 UK consumers may have had their personal information stolen.
The company said that while its UK systems were not affected by the massive cyber raid that targeted information for as many as 143m Americans, UK customer data “may potentially have been accessed”, because it was stored on US systems between 2011 and 2016.
If Equifax’s forecast is borne out, the data breach will be the biggest in UK cyber history, bypassing that of payday lender Wonga, which affected more than 250,000 customers.
RATESETTER has launched a hire-purchase (HP) product for individuals looking to buy vehicles.
Consumers will be able to borrow up to £25,000, but the peer-to-peer lender expects the agreements typically to be around £6,000. The terms range between 12 and 60 months, with APRs going from 19.9 per cent to 49.9 per cent depending on the customer’s creditworthiness.
Peer to peer lender Assetz Capital is reporting it has seen a year-on-year increase of 175% in the number of property development projects funded around the UK. The online lender says this rise comes following sustained growth in the funding pool for property developments, as investors hunt for a piece of the development market.
But as new types of Isa have emerged and new rules have been introduced, the situation has become more complicated.
And some Isa features – notably “flexibility”, which allows account holders to make withdrawals and then pay the money back in during the same tax year while keeping the tax benefits – have not been introduced by all providers, which has further muddied the waters.
A Help to Buy Isa, a type of cash Isa, is also an option. First-time buyers can deposit £1,200 in the first month and £200 a month thereafter to put towards a home purchase. The Government then tops up savers’ money by 25pc.
However, you can’t pay into a normal cash Isa and Help to Buy Isa in the same year, unless you choose a provider that allows you to split the cash. Nationwide and Aldermore both offer this option; they pay 2pc and 1.75pc respectively.
Lifetime Isas
The Lifetime Isa is the newest addition to the Isa family.
Consumers between the ages of 18 and 40 can use the accounts to save towards their first home or retirement. Up to £4,000 can be put away each year into either a cash Lisa or a stocks and shares version. Eligible savers can continue to contribute until the age of 50.
Hargreaves Lansdown, Britain’s biggest fund shop, and rivals including AJ Bell, The Share Centre and Nutmeg, an online wealth manager, offer investment Lisas.
Innovative Finance Isas
These Isas shield peer-to-peer investments, which allow consumers to offer unsecured loans to individuals and businesses through online platforms such as Zopa and Ratesetter, and certain “crowdfunding” investments, from tax.
Lending Works was the first to offer the new Isa, paying the same return as the firm’s existing accounts.
Zopa allows existing customers to sell their loans and buy them back within the Isa. They can also transfer their Isas with other providers to Zopa.
There are a lot more people in the world that can collectively lend micro loans on a regular basis than there are corporations that can regularly distribute loans above the value of a thousand dollars.
“A network of independent lenders committed to distributing micro loans could potentially rival long established financial organisations in terms of the combined value of peer to peer loans serviced to borrowers on a world wide scale” says Richard Ochieze, Managing Director at Ledgermark, LTD.
The case for Digital Collateral
The internet makes non repayment of loans a marvellously simple task for borrowers and as such; organisations like the Funding Circle, a peer to peer lending firm, are left wide open to have the profits of their retail investors depleted due to this lingering risk.
Traditional financial institutions have been able to maintain a fortress of checks and balances such as strict collateral requirements for both business and personal loans in order to provide themselves with a means of recourse should a borrower fail to repay his debt.
In this digital age in which peer to peer transactions are becoming the norm, this same form of protection must be made available to the average individual who wishes to loan his money out to borrowers in return for profit.
However, the question must be asked: how can a borrower pledge his house or farm as collateral via an online loans application?
Prior to the invention of the Blockchain such an asset did not exist and now that it does, the door has been opened to allow individuals based anywhere in the world to distribute and/or become the recipient of a secured micro-loan.
Robo-adviser Wealth Wizards, for example, typically charges £65 for advice on investments of up to £30,000, and 0.30%, or £300, for guidance on what to do with a £100,000 retirement savings pot.
A typical financial adviser, meanwhile, charges about £580 for telling you how to invest a £200-a-month pension contribution, or between £1,000 and £2,000 for at-retirement advice on your £100,000 pot, according to figures from UK adviser network Unbiased.
China will strengthen its supervision of overseas investment risks and capital flows from insurance funds, the insurance regulator said on Monday, adding that it will urge companies to improve their risk monitoring systems.
The China Insurance Regulatory Commission (CIRC) will step up supervision over the use of insurance funds, with focus on “chaos” such as irrational stock market fundraising and overseas acquisitions, said Guo Jing, vice head of the finance and accounting department of the CIRC.
Shanghai-based BTCC is the largest and first domestic bitcoin exchange in China. On September 14th, BTCC announced that it would immediately stop new user registration and close operation in China on September 30th.
The 2nd China Fintech Conference (2017) will be held on September 17th, 2017 in Beijing.
IDC Financial Insights announced the 2017 Fintech Rankings and Real Results at Finovate Fall New York 2017. This year, 4 Chinese companies won the honor to be named in the 2017 IDC Fintech Rankings. They are Ping An Technology (38), Hundsun Technologies Inc. (54), Pactera Technology International, Ltd. (55) and ECCOM Network System, Ltd. (64).
Last week, China’s financial and educational regulators announced to ban online lenders from offering loans to college students, and encouraged commercial banks to offer micro-credit products for the campus market. As a response to the call, Industrial and Commercial Bank of China (ICBC) has launched its own student loan product Rong e Loan this week.
Sofort has been bought by Klarna. Although everything should function as normal according to Klarna, since the switch the order is not going into “pending” after checkout — order status is “in checkout”.
commented
This is a good place trying to get this sorted. My questions are:
Is this a new shop or one that runs for a while and worked OK before?
From the screenshot it looks like Sofort sends notifications pretty often, is that true?
The expectation is that the first of those notifications should switch the status to pending and confirming that to Sofort so that they know you got it and then they wouldn’t notify you again, right?
commented
That’s exactly why this is failing. The Ubercart payment module wants to write into its table the value Aus sofort-Überweisung wird Klarna into the field method.
You should notify Sofort AG about this problem and I will do the same.
Today we are proud to announce a new partnership with global technology company Wacom® that further accelerates Klarna’s expansion in the U.S. Wacom is now bringing our simple retail financing solution to the world of creative interface technology and software.
Financing a purchase over time has historically been optimized for brick and mortar stores. But the online equivalent can often be an ordeal, with redirects, lengthy forms and unclear information. Our process only requires a few fields of information, and lets consumers know instantly if they qualify for the financing solution.
Digital technology has changed financial services. It has facilitated innovation, increased competition and made the mobile customer experience the key differentiator.
This embodies a strategic threat with McKinsey estimating that legacy financial institutions will see profits decline by up to 60% by 2025 if they fail to evolve, a figure which should be motivating incumbents to look outside of traditional practices for growth and sustainability.
Millennials and digital natives have turned away from traditional banks in search of mobile alternatives. They are drawn to the best products and experience, and banks with the right level of service can win over this large market. Mobile-only banks like N26 are leading the way.
SME lending also offers a significant opportunity for growth. The European Commission’s SME Performance Review estimated just under 23 million small and medium enterprises generated €3.9 trillion in value add and employed 90 million people in 2016-2016, and McKinsey has identified a $350 billion untapped lending opportunity within this sector.
One path is acquisition, which banks like BBVA have followed by acquiring companies like Finland’s Holvi and neobank Simple. This is an expensive option complicated by having to find a company with the right fit for the business.
Given the technology available, a cleaner option would be to build a digital banking spinoff which can operate like a FinTech.
The far reaching nature of the internet has allowed the myriad of local economies that exist in the world to become merged into one, global, interwoven marketplace.
Despite this, it is still incredibly difficult for people to get a loan from an international organisation – without offering some form of collateral and/or proving credit worthiness.
The average size of deposit needed to get a mortgage is 62% of annual income, and in London, it’s 131%.
As a result, only 20% of 25-year-olds own their home today compared with 46% 20 years ago – less than half.
If you have a bad (or no) credit history, it is virtually impossible to borrow from a mainstream lender.
Banks and building societies advertise temptingly low rates, but they only need to apply to 51% of successful applicants, so almost half of all borrowers pay a different rate – probably higher.
Director of Ledgermark LTD, Richard Ochieze, explains:
An alternative should be offered to people who are being let down by the traditional banking system. We believe that the Meridian system can do a lot to alleviate some of the problems that exist in today’s online lending market.
The Meridian service offers users the opportunity to procure a loan of up to one Bitcoin at a time.
To qualify for a loan users must pledge a certain amount of Meridian tokens as collateral.
Meridian tokens can be purchased during the ICO on 12 October 2017 and will then become tradable on all alternative currency exchanges.
Google is expected to launch a mobile payments app in India next week, according to several news reports. Google Tez, which means “fast” in Hindi is the anticipated name of the payments service, which Indian news outlet The Ken says is “largely fashioned on the company’s global product – Android Pay“.
As TechCrunch notes, “this is a big deal because Google hasn’t made a big push into payments outside of the US.”
In a first of its kind for India, ICICI Bank will partner with e-commercefirms to provide automated payday loan-type credit to customers at the bottom of the digital pyramid. Unlike other software-based loans, the digital credit planned by the bank will be available to non-customers and new-to-credit borrowers.
Speaking to TOI, Anup Bagchi, executive director, ICICI Bank, said that the bank would price these loans similar to credit card advances. In the West, payday loans are advances that fund the low-income individuals to make up for cash shortfalls until their salary. The difference in the ICICI Bank loan is that for the first month, the buyer will get free credit for up to 45 days. It is only if they do not pay on the due date that borrowers will be charged interest at close to credit card rates.
The bank will lend to new-to-credit customers based on their track record with the e-commerce provider.
“The RBI is concerned that this can go big and get out of control,” says Harish.
Faircent—which is backed by financial institutions like JM Financial, venture fund Aarin Capital and Mohandas Pai-promoted 3one4 Capital—is seen as the largest online P2P lender in India. Other names include Lendbox, Rupaiya Exchange and LenDen Club.
There are typically three models through which such lenders operate, says Aditya Kumar, founder and chief executive officer at Qbera.com, an online lender that began operations in February this year and claims to have a Rs 10 crore loan book. “While there are at least 30-40 P2P players, who connect lenders to borrowers, 15-20 do marketplace lending (where money is raised from banks and other financial institutions) and then there are loan aggregators who have been around for longer,” says Kumar.
While Kumar says the total P2P lending market size would be around Rs 25 crore, Rajat Gandhi, founder and CEO at Faircent, puts the figure at Rs 50-70 crore on an annualised basis.
Figures available with Peer2Peer Finance Association (P2PFA) suggest that the global P2P lending market saw cumulative lending of £8.5 billion during the first quarter of 2017, against £5.8 billion three quarters before. In the same period, the number of lenders grew by a fifth from 1.5 lakh to just over 1.8 lakh.
The discourse around P2P lending has always been centered around what it means for borrowers and the advantages they can derive. However, what gets missed is that P2P lending has the potential to be a great source of investment for the lenders contributing to their retirement fund.
P2P lending is an investment delivering multiple benefits when building a retirement plan:
1. Add Lending to your Portfolio Mix: The adage that talks of not putting all your eggs in one basket still holds true. An investor should not limit his portfolio to only a few asset class, but focus on investing across investment opportunities so that market fluctuations do not have a huge negative impact on their retirement funds.
2. Steady and high returns not Linked to Stock Markets: P2P lending adds to building such a diversified investment portfolio while delivering returns that are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, and SIPs.
Lenders on Faircent.com are earning gross returns to the tune of 18% to 24% per annum on an average by building a diversified loans portfolio.
3. Income Generation & Power of Compounding: Another reason that P2P investment does well is because investors can compound their earnings. Lenders are earning back part of their investment, both principal and return, every month.
MicroMoney co-founder and CEO Anton Dzyatkovsky on attracting new customers, recruitment issues and risks in greenfield countries.
Now that we’ve opened new offices in Myanmar, Thailand and Sri-Lanka, our decision to start with Cambodia can be seen as a definitive step which enabled us to embrace the largest community of unbanked people in the region, bringing the advantages of Blockchain as the key technology for global financial inclusion.
Cambodia is all about banks
For us as Europeans, the first surprise was the population’s absolute trust in local banks.
The US dollar is as used in Cambodia as the local currency is, and the exchange rate has remained stable for over 20 years. State regulators do not exercise particular pressure on the financial industry, and by the time we stepped into the game, 50 organizations had been involved in the consumer loan industry, each with an average capital of $1.5 mln and an ARPU of $5,000.
30-day overdue loans in Cambodia account for only 0.9 percent of the total, so the PAR ratio (portfolio at risk) is quite profitable (according to the local Central Bank).
Our Cambodian lessons
A growing share of the middle class due to the growth of GDP. For instance, Cambodian GDP grew six percent in 2016.
A market capable of generating cheap leads. We discovered all Cambodians belonging to the target audience have at least one active Facebook account, and for them Facebook often equals Internet in general: every national mobile operator provides free access to Facebook.
Dormant or non-existent competition. in Cambodia there were no paperless lending services without an escrow of land or real estate property.
Eager audience in need of a product. when we were checking out the market, we found only five percent of the population had a credit record. According to McKinsey, the number of ‘unbanked’ people in Asian region overall ranges from 65 to 80 percent of the adult population.
Collaboration at the local level. It helped us understand local customers and comply with local regulations (in this case you must be ready to assign 51 percent of your newly established company to a local partner).
Funding Societies, which started in Singapore in 2015, is one of the first peer-to-peer (P2P) financing companies to open its doors here in Malaysia in February this year. It is also present in Indonesia.
Wong, who learned about alternative financing while studying at Harvard Business School, says P2P is well-suited for the Malaysian and South-East Asian markets where there is a big gap in SME financing. He estimates financing needs for small businesses in Malaysia to be at RM80bil.
According to Research and Markets, the global P2P lending market was valued at US$26bil in 2015 and is projected to reach US$460bil by 2022, growing at a compound annual growth rate of 51.5% from 2016 to 2022.
Funding Societies has made it to the Fintech 250 list, which is recognised and regulated by Securities Commission Malaysia, to provide financing to SMEs. The company also provides flexible investment opportunities with rigorous risk assessment and returns of up to 14% per year for investors, says Wong.
So far, the company has done more than 800 deals and disbursed more than RM180mil in financing to SMEs in Malaysia, Singapore and Indonesia.
Taiwanese could soon be able to open bank accounts denominated in foreign currencies on the Internet after the central bank on Thursday gave its go-ahead to the plan.
Local banks could seek approval for the new accounts by the end of this year, or 60 days after the introduction of the new regulations, the central bank said in a statement.
Taishin, the banking arm of Taishin Financial Holding Co (台新金控) and the nation’s largest online lender by the number of accounts, told reporters that it aims to be the first applicant when the notification period begins.
Outsurance is to acquire a 25% stake in passive investment manager CoreShares, as the insurance company’s robo-adviser, Outvest, goes live.
The acquisition complemented Outvest, an online, automated advice business, the companies said in a statement on Monday.
In SA, financial advisers, to more effectively service their clients, are predominantly using these platforms, although there are platforms available to retail investors.
New lawsuit against SoFi filed. AT: “Just when you thought it couldn’t get worse, it looks like we’ll be reading this news for awhile. With so many allegations on the table, it makes me wonder how many lawsuits in the end will be filed, and it seems highly plausible that it could become a class action situation.”
Why startup founders should be required to sign a ‘no go, bro’ clause. AT: “I couldn’t agree more. The days of a slap on the wrist for ruining a company’s public image should be days gone by. Accountability has to happen at the gut level, and that means shareholders need to be involved. If company executives lose financial benefits when they misbehave, perhaps we’ll see fewer shenanigans. At least, we can hope so.”
The ultimate anti-competitive mergers. AT: “It should be noted that there is a great distinction between a bank engaging in commerce and a commercial entity owning a bank. In the latter scenario, the bank could be a subsidiary that takes no direction from its corporate parent. In the former, the implication is that the commercial activities are directed by the bank. Huge distinction.”
A former loan reviewer at Social Finance Inc. claims in a lawsuit she was repeatedly sexually harassed while working there, ratcheting up pressure on the embattled fintech startup.
Sonoma County Superior Court court clerk confirmed by phone that the complaint was filed Thursday.
Top management indulged in the inappropriate behavior, which then trickled down through the ranks, according to the complaint. Cagney dated subordinates at SoFi’s San Francisco office — where his wife works as chief technology officer and vice president of engineering — and attended parties with SoFi’s Healdsburg staff while intoxicated, Zamora alleges.
Yulia Zamora, who worked as a loan reviewer at SoFi’s Healdsburg, Calif., office from October 2015 until October 2016, said in a complaint against the company that a manager had propositioned her for sex and retaliated against her when she refused.
She added that SoFi exhibited a “hostile work environment where sexually inappropriate behavior became widely accepted and laudable by upper management.”
In her complaint, Ms. Zamora said that a SoFi director of operations who had authority over promotions approached her during and after an office Christmas party in December 2015. The manager, Adam Cobb, told her that he was “intimidated by [her] beauty” and that he “want[ed] to do sexy things” to her, according to the complaint. She denied his advances, the complaint added.
In the weeks following those comments, Mr. Cobb refused to promote Ms. Zamora and refused to write her a letter of recommendation after she resigned from the company, according to the complaint. She raised the issue with supervisors just after the party, but said that they found the story “entertaining rather than upsetting.”
Startup CEOs like Cagney, Travis Kalanick at Uber, and Taylor Freeman at UploadVR—accused in a recent lawsuit of bragging with his co-founder Will Mason about how many girls they were going to have sex with at company parties, and designating a room at the office as a “kink room”—can destroy as well as create billions of dollars in value for their companies, all while creating toxic work environments.
Whether they resign like Cagney and Kalanick or remain with the company like Freeman and Mason, startup executives typically own a large percentage of company stock. That often leads investors and boards to treat them gently when it comes to sexual harassment allegations and other forms of misconduct—but it should not.
Before making a big investment in a startup, investors should use their power to require CEOs to sign a clause under which they forfeit a large proportion, or potentially all, of their stock, if fired for misconduct, including reasons such as sexual harassment and misrepresentations to investors.
With the LendingClub Invest app, you can log in via your fingerprint, view information like your current value and return, as well as transfer money.
Keep in mind that this is for investors, not borrowers. It’s for those using the service who want to manage their accounts and view the details of their current investments. Borrowers using LendingClub don’t have an app just yet.
The full log for this initial release is below:
WHAT’S NEW
Access your LendingClub investor account through a convenient experience optimized for your mobile device.
In this initial version you can:
– Log in to your account with a touch of the finger (for Android 6.0 or above)
– View and manage your account
– See your Net Annualized Return (NAR)
– Invest in Notes
– Use your saved filters to find the Notes you want
– Set up and update automated investing
– Transfer money between your LendingClub account and your bank
Hackers roamed undetected in EquifaxInc.’sEFX +2.76%computer network for more than four months before its security team uncovered the massive data breach, the security firm FireEyeInc.FEYE +0.24%said this week in a confidential note Equifax sent to some of its customers.
FireEye’s Mandiant group, which has been hired by Equifax to investigate the breach, said the first evidence of hackers’ “interaction” with the company occurred on March 10, according to the Mandiant report, which was reviewed by The Wall Street Journal.
Equifax has said it didn’t discover the breach until July 29. Days later it called in Mandiant. Equifax didn’t disclose the breach until Sept. 7.
In a progress report that accompanied that announcement last Friday, Equifax said hackers accessed consumers’ data from May 13 through July 30. It didn’t mention in that report that the attack had begun at an earlier date.
Mandiant’s report this week noted the hackers accessed one of Equifax’s servers by taking advantage of a flaw in software called Apache Struts, used by many companies to build interactive websites.
Two days before the access occurred, on March 8, security researchers at Cisco SystemsInc. warned of the flaw in Struts and a patch was issued by the Apache Software Foundation. Equifax in its report last week said its security staff “took efforts” to fix the system, saying it understood the intense focus outside the company on patching efforts and that its review was ongoing.
After interacting with Equifax’s server in early March, the hackers then entered the computer command “Whoami,” Mandiant wrote. This command would have given the attackers the username of the computer account to which they had just gained access, an early step in a hacking attempt.
When you need a new mortgage in the future, will your only options be AmazonWellsFargo or AppleChase? The prospect of a mash-up of banking and commerce keeps people like George Washington University law professor Arthur Wilmarth up at night. “This would mean an end to healthy innovation and startups and competition,” said Wilmarth. “I think it is that dire.”
In principle, these maneuvers could inject competition into a banking industry controlled mostly by four Wall Street giants, making financial services more accessible and flexible to modern needs. But special charters also let fintech evade critical regulatory scrutiny. And the tentative steps by SoFi and Square seem like a dry run for the day Silicon Valley’s giants decide to get in the game, building sprawling businesses the government has aimed to prevent for decades.
Banks get all sorts of privileges from the government—and if banks can also function as ordinary commercial enterprises, they have unfair advantages against other businesses (who are also their clients).
Members of Generation X (those born between 1965 and 1980) now sit at the age where they anchor the country’s economic and social structure. Yet, new research from Elevate’s Center for the New Middle Class shows that Gen-Xers face a slew of economic challenges that perpetually keep them off balance. Worse still, that lack of balance means they can’t plan for the future or get back on track.
Non-prime Gen-Xers, in particular, lack stability – in their employment as well as their income. They have difficulty predicting their monthly income, and consequently act like cash accountants in managing their day-to-day finances. Non-prime Gen-Xers are thus the least likely generational cohort to be able to save money—an important aspect of financial planning. Compared to their prime counterparts, non-prime Gen-Xers are:
4x as likely to be living paycheck to paycheck
4.5x as likely to worry about meeting monthly expenses
2x as likely to have been laid off in the past year, and almost 3x as likely to be laid off in the last 5 years
5x as likely to feel “significant stress” over finances
5x more likely to say that in the prior 12 months they were never able to plan for a major expense
The planning gap between prime and non-prime Gen-Xers is wider than any other generation, and 1 in 5 reports running out of money every month. When it comes time to pay for unplanned or unexpected expenses, such as medical bills or car repairs, only 13 percent feel confident they could come up with $1,200. This lack of confidence may be due to lack of reliable options. Though 80 percent of prime Gen-Xers have a solid option – savings, credit or turning to family/friends – only 44 percent of their non-prime counterparts have a solution for coming up with the funds.
Peer-to-peer lending platform Lending Club is finally starting to show signs of growth after several quarters of stagnant loan originations. With the stock down 74% since its first trading day in 2014, there’s certainly potential for a big investment win if things continue to go well.
For the second quarter of 2017, Lending Club’s loan originations grew by 10% year over year as well as sequentially, which came as a pleasant surprise to investors. Revenue grew by an impressive 35% from last year, and profit margins improved tremendously. What’s more, Lending Club’s CEO said that the company could approach GAAP profitability as we head into 2018, which would be a major improvement from the first half of the year.
Lending Club’s loan portfolio is currently about $11.1 billion in size, which may sound like a lot, but consider that the U.S. nonrevolving (loan) consumer lending market has more than $2.7 trillion in outstanding balances, not including mortgages, according to the Federal Reserve.
Hyundai Capital America, the car maker’s US lending division, has partnered AutoGravity, a US-based digital car shopping and financing platform, to extend its loans more easily to consumers looking to buy a Hyundai, Kia, or Genesis vehicle.
Hyundai Capital will be one of several auto lenders that consumers can borrow from via the platform.
JPMorgan Chase partnered online car marketplace TrueCar in August 2016 to launch an end-to-end digital platform, Chase Auto Direct, for finding and financing a vehicle. Additionally, Ford Motor Credit Co., the car giant’s lending arm, started leveraging US marketplace lender AutoFi’s software in January to make it easier for customers to buy and finance a vehicle without going to showrooms.
The Saatva Company, the largest online luxury mattress retailer, has formed a strategic partnership to offer financing plans to its customers with Klarna, a global payment solutions company that works with other top U.S. brands like Microsoft and Taylormade.
Through this partnership, Saatva customers now have the option to “Slice Up Your Payment” through Klarna and spread the cost of purchases over time with convenient, stress-free low APR financing offers. It is available immediately under all three Saatva Company brands – Saatvamattress.com, Loomandleaf.com and Zenhaven.com.
After selecting the perfect mattress, customers can apply for Klarna financing at checkout through a simple three-step instant credit approval process. Customers are approved for an open line of credit that may also be used at any other merchant where Klarna is accepted.
In a recent sampling of 10,000 purchase loans from LendingTree, a leading online loan marketplace, the closing times on mortgages saw a sharp decrease thanks to more digital lending; approximately 74 percent on average from May 2016 to May 2017. According to the report, the average closing still takes roughly 72 days, but this rate is influenced by several other buying factors as well as digital integrations.
The study shows the average amount of days to close in Boston (79.5) strongly differs from the time spent in a city like Denver, (56.2); a 23.3 day difference. New York closely followed Boston at 79.2 days and Cleveland at 71.5. Phoenix and Dallas barely ranked above Denver at 57.5 and 57.6 days respectively. The time to close also varies largely by state, with Montana measuring at 52.7 days until closing and New York at 91 days.
Nine months after raising $22 million for its unique take on the cash-advance business, Activehours has gone back to the venture capital well and pulled out another $39 million in financing.
Led by Andreessen Horowitz, with participation from the company’s early-stage investors Matrix Partners, Ribbit Capital, and March Capital Partners, Activehours has managed to now raise nearly $65 million since its launch in 2013.
The Palo Alto-based company skirts regulation as a payday lender because it doesn’t charge interest on the cash that it fronts to customers. Instead, the company asks that users pay a small voluntary fee for access to their money ahead of their payday.
An online lender accused of striking “rent-a-tribe” deals with a Native American tribe in order to benefit from tribal immunity urged a Virginia federal judge Tuesday to dismiss a proposed class action over its lending practices, saying it is, in fact, a sovereign arm of the Chippewa Cree tribe and therefore immune from the litigation alleging false immunity.
The CFPB, which was created under Dodd-Frank supposedly to protect consumers and prevent the next big financial crisis, is now being used to try to discourage payday lending, vehicle title, and certain high-cost installment loans. The rule will require customers applying for a small-dollar loan – the average of which is $350 — to submit extensive personal financial information in support of their applications. In addition to determining a customer’s ability to repay the loan, the lenders will be required to share this information with each credit reporting agency (CRA) registered with the Bureau.
With this data all in one place, it will be vulnerable to a potential hack.
“Everything we do has been digitized. The one thing that has not yet been digitized is regulation. We’re still very much an analog regulator of digital markets.”
And most importantly, Giancarlo stressed that it is imperative that U.S. regulatory structures catch up with the fast-moving digital economy.
eOriginal, Inc., today named Michael Coluzzi as Chief Financial Officer (CFO), another valuable addition to the executive team of the rapidly growing financial services technology firm.
Coluzzi is the third key addition to eOriginal’s leadership following a growth capital investment by LLR Partners. In addition to the new CFO, Brian Madocks joined as Chief Executive Officer in April 2017 followed by Timothy Wall as Chief Revenue Officer earlier this month. These hires and the existing eOriginal management team together will drive the business towards achieving full potential.
Personal Capital, the leading digital and professional advisor based wealth management firm, today announced that Bruce Felt, the Chief Financial Officer of DOMO, has joined Personal Capital’s Board of Directors and will chair the Audit Committee.
Felt is the CFO of DOMO, one of the fastest growing SaaS companies in the country. Previously, he was the CFO of SuccessFactors, where he guided the company through six acquisitions, a public offering and the sale of the business to SAP. Felt has spent 25 years managing financial operations for high-tech companies and serving on multiple boards of directors.
The Registered Office of the corporation in the State of Delaware is changed to 251 Little Falls Drive, in the City of Wilmington, DE, County of New Castle, Zip Code 19808. The name of the Registered Agent at such address upon whom process against this Corporation may be served is Corporation Service Company.
In its Ageing Population Project, the FCA found that older people’s needs are not being fully met which may result in exclusion, poor customer outcomes and possibly even harm.
It has called on retail banks, advisors and the savings industry to think about the vulnerabilities which older people – defined as those who are aged 55-plus – may face.
The aftermath of the financial crisis has seen investors pour capital into income generating alternative assets perceived to be low risk but market watchers have warned the dangers won’t be evident until interest rates rise.
The AIC said 70 per cent of the investment trust launches over the past five years have been in the alternative income sector.
Jonathan Davis, who runs Jonathon Davis Wealth Management in Hertford, said he has been preparing his clients portfolios for higher inflation, and higher interest rates, and generally avoiding UK equities.
THE 30 September deadline to secure the necessary funds to purchase the threatened Tafarn Sinc pub in Rosebush is fast approaching.
“The aim now is to see a sum of £200,000 in shares achieved by 1 October and also the committee has endorsed a special Peer to Peer (P2P) lending scheme where a four per cent gross interest rate is offered to individuals who can lend a £5,000 sum to the co-operative to secure the total funds.
“As a target for the P2P we have 20 lots of £5,000 loans we are seeking and then this will bring in the needed final sum to purchase the pub and ensure it is owned by local people.”
ZhongAn Online Property & Casualty Insurance Co priced its IPO at the top of an indicated range, raising $1.5 billion in Hong Kong’s biggest ever financial technology stock offering, IFR reported on Friday.
China’s first internet-only insurer priced 199.3 million new shares at HK$59.70 ($7.65) each, the top of a HK$53.70-HK$59.70 range said IFR, a Thomson Reuters publication. It cited people close to the deal.
ZhongAn Online Property & Casualty Insurance Co priced its IPO at the top of an indicated range, raising $1.5 billion in Hong Kong’s biggest ever financial technology stock offering, IFR reported on Friday.
China’s first internet-only insurer priced 199.3 million new shares at HK$59.70 ($7.65) each, the top of a HK$53.70-HK$59.70 range said IFR, a Thomson Reuters publication. It cited people close to the deal.
Zhongan Insurance, which was co-founded by Jack Ma of Alibaba, Ma Mingzhe of PING AN and Pony Ma of Tencent, is the first internet insurance company in China. Because of its strong background, every move of Zhongan Insurance is closely concerned. On September 17, Zhongan Insurance revealed it would be listing in the main board of Hong Kong stock exchange. More details, the price range will be set at HK$53.7- 59.7, and the company plans to raise HK$10,948 million in total, it is scheduled to begin trading on the main board of the Hong Kong stock exchange on September 28. If the plan is implemented, Zhongan will become the first publicly listed fintech unit of China.
Tiger Brokers, a Chinese online securities brokerage start-up backed by Wall Street billionaire investor Jim Rogers, said on Thursday it has landed an investment from Interactive Brokers Group, one of the largest electronic brokers in the United States.
The Beijing-based Tiger Brokers, which offers an app to allow Chinese investors to trade on US stock markets and the Hong Kong exchanges and in Chinese A shares, did not disclose the size of the investment by Interactive Brokers.
The United States is home to the most unicorn companies in the world, with over 100 such companies, according to a new report by HowMuch.
8. Lu.com ($18.5 billion): China
Lu.com is an online finance marketplace which started as a peer-to-peer lending platform. Since 2011 it has service over $2.5 billion peer-to-peer loans.
What happens when a cookie of a Brit in London lands in the server of a community bank in the U.S. if, on an off-chance, the Brit browses the bank’s website?
It’s unclear, experts say, but U.S. banks — especially small and midsize banks — need to go find out because the European Union’s General Data Protection Regulation (GDPR) could affect them, unlike the EU privacy regulations before it.
The countdown is ticking on GDPR’s website. The law, approved by the European Parliament in April 2016, will take effect in late May 2018. It will apply to “all companies processing and holding the personal data of data subjects residing in the European Union, regardless of the company’s location,” the website said.
Their presence begs a question of the Vision Fund, whose backersinclude Apple Inc. and Saudi Arabia. Is its long-term goal to get into everything from ride-hailing apps to indoor farming, or is it more about getting juicy returns?
One Fund to Rule Them All
SoftBank’s $93.2 billion Vision Fund is the world’s largest private equity fund.
Anshu Jain, Deutsche Bank’s former co-chief executive officer and key architect of its rapid growth in markets prior to the credit crunch, was an adviser at SoftBank-backed U.S. based online lender Social Finance Inc. until recently.
While SoftBank put in equity to the tune of $28 billion, its partners, including the government funds of Saudi Arabia and Abu Dhabi, hold part of their stakes via preferred instruments, also known as mezzanine capital. It means they’re owed yearly payouts, similar to a dividend.
Saudi Arabia’s Public Investment Fund, for instance, is injecting $45 billion, but only $18 billion of that is straight equity, the Wall Street Journal reported in May. The preferred units will earn about 7 percent interest annually over the life of the fund, expected to be 12 years.
Banks typically spend 80% of their IT budgets on legacy technology maintenance and a tier one bank could easily spend up to $300m a year on existing software which constantly needs expensive updates in order to meet regulatory requirements.
Why so much? Because most of those systems are written in programming languages that no one knows anymore. Anna Irrera writes on Reuters that 43 percent of US banks’ core systems are written in COBOL.
$3 trillion in daily commerce flows through COBOL systems. The language underpins deposit accounts, check-clearing services, card networks, ATMs, mortgage servicing, loan ledgers and other services.
In another report, Autonomous Research said the banks with the most potential to do better than analysts’ profit expectations because of digitisation were: JPMorgan Chase and SunTrust in the US, Spain’s CaixaBank, Lloyds Banking Group in the UK and KBC in Belgium.
Autonomous ranked the banks based on two criteria: their current level of digitisation and their transformation outlook. It assessed 18 attributes from customer ratings of mobile banking apps to IT expertise on the board of directors. Banks viewed as being behind on digitalisation included HSBC, BNP, Credit Suisse, Intesa Sanpaolo and Standard Chartered; the three biggest Japanese banks: MUFG, Mizuho and Sumitomo Mitsui Financial Group; and the four big Canadian banks: TD Bank, Royal Bank of Canada, Bank of Montreal and Bank of Nova Scotia.
Among those leaving the building is Wayniloans (‘an online peer to peer lending platform based on bitcoin technology. Wayniloans INC was founded in 2015 and is based in Buenos Aires, Argentina’).
According to Juan Salviolo, Wayniloans co-founder:
On Wayniloans part of our business is achieved thanks to bitcoin, and in May we agreed to a sentence to reach consensus for the good of the ecosystem. This sentence was later changed to a longer agreement without our notice, and it was known as the New York Agreement (NYA). At the time we didn’t know that existing developers wouldn’t support it, or that most Latin American bitcoin users, our customers, would view it as a contentious proposal.
Which brings us back to Fickling’s point. The connection between Bitcoin and the real economy is sentiment and therefore, ipso facto, prima facie, mutatis mutandis, sentiment is the sole driver of value.
Findings from a joint study by KPMG, the Cambridge Centre for Alternative Finance and the Australian Centre for Financial Studies, released today, reveals that Australia’s alternative finance market size grew by 53 per cent from 2015 to 2016 and has now reached US $609.6 million.
According to the Second Asia Pacific Alternative Finance Industry Report, Australia has leap-frogged Japan to become the second largest alternative lending market (behind China) across the Asia-Pacific.
Outside of China, Australia now contributes 30.42% of the total market in Asia Pacific and stands well ahead of Japan (US $398.45 million) and South Korea (US $376.31 million) in terms of market size.
China is the biggest kid on the block when it comes to the emerging alternative finance market in the Asia Pacific region. In fact, China has the largest alternative finance market in the world driven by a fast growing economy, a highly connected population via mobile devices, and a need for access to capital not serviced by traditional state owned banks. But rapid alternative finance growth is not isolated to just China in the Asia Pacific region. Australia experienced growth of 53% from 2015 to 2016, according to the recent research report published by the Cambridge Centre for Alternative Finance. Australia’s alternative finance market has now reached US $609.6 million.
MoneyPlace CEO Stuart Stoyan echoes Bertoli’s sentiment regarding online lending;
“We have now moved on from being an ‘early stage’ and ‘cottage’ industry to be a legitimate source of funding for Australian borrowers,” he said.
Daniel Foggo, CEO of RateSetter Australia, explained that while trust and confidence in banks continues to erode, peer-to-peer lenders are building a sustainable, technology-led alternative to the bank model, offering better value to Australian investors and borrowers.
Technology is an increasingly important aspect of the financial marketplace. With the rapid introduction of platforms such as crowdfunding, peer-to-peer lending and new crypto-currencies, it is important for fin-tech users and providers to protect their intellectual property (IP) from infringement and ensure they are not at risk of infringing the IP of another.
Businesses that provide fin-tech services are at risk of infringing the trademarks of other such providers. For instance, one European peer-to-peer facilitator attempted to register a trademark for their brand, only to be challenged by a similarly branded business. This resulted in an expensive negotiation that lasted for almost a year and a half.
While the recent Reserve Bank of India (RBI) notification treating all peer-to-peer (P2P) lending platforms as non-banking financial companies (NBFCs) is likely to bring some credibility to the business, experts say it’s a battle half won by the fintech firms.
The RBI proposal, they say, might cripple the operations of small players who won’t be able to comply with some of the new requirements such as keeping net available funds of Rs 2 crore.
The Cambridge Centre for Alternative Finance together with the Australian Centre for Financial Studies at Monash University and Tsinghua University today released their second annual alternative finance report.
Source: Lend Academy
Alternative finance volume totaled $245.28 billion in 2016, up from $103.31 billion in 2015. It’s amazing to see alternative finance continue to grow in the region. Not surprisingly, China is the main driver accounting for 99.2% of the total Asia Pacific market. China represented approximately 85% of the entire global market in 2016.
Other findings from the report include:
China continues to see “distinctively low levels” of institutional participation in alternative finance compared to other markets such as the US and UK, with only five per cent of peer-to-peer business lending coming from institutions in 2016.
In the Asia Pacific outside of China, about $1.5 billion was raised by businesses through alternative finance channels, up 72 per cent from the previous year, with an estimated 43,000 business entities utilising alternative channels of business finance.
In China, 72 per cent of peer-to-peer consumer lending platforms see cyber-attacks as the biggest threat to the industry, while more than 50 per cent across all platforms in China see current and proposed regulatory norms to be adequate.
Outside of China, 69 per cent of platforms in Japan see existing regulation as inadequate or too relaxed, while in Singapore, Australia, New Zealand and Malaysia around two thirds of platforms see current regulations as adequate.
The intermediaries tasked with passing along interest payments for the cash-strapped nation haven’t received the funds for an $185 million coupon that was due Sept. 15, according to people with knowledge of the matter. Investors interviewed by Bloomberg say they haven’t been paid, and brokers say their clients are still waiting on the cash.
The government has a 30-day grace period — now 25 days — to make good on the payment before triggering an event of default on the notes.
SoFi CTO, Cagney wife, resigns. AT: “This really is not surprising, but unfortunate. SoFi’s entire corporate culture has unraveled from the top down.”
Fundrise, Wealthfront spar over future of real estate investing. AT: “This is an interesting debate. Criticize Fundrise any way you want, but they are actually opening the door to investors who might not have had a chance to invest in REITs without the platform making their products available. That’s not to say that I don’t admire Wealthfront for what they’re up to, as well. Disclosure: I have written for Fundrise in the past.”
How can men support women in fintech? AT: “This is a podcast hosted by Moven’s Brett King, but it isn’t exclusively about women in fintech. One interesting tidbit from the podcast: Amazon is the largest holder of digital wallets.”
June Ou, chief technology officer of online lender Social Finance Inc and wife of its former CEO Mike Cagney, plans to leave the company, according to a source familiar with the situation.
The exact date of her departure from SoFi, has yet to be decided, according to the source. Ou did not immediately respond to requests for comment.
Ou, who joined SoFi in 2012 and is also the company’s vice president of engineering, is the latest senior executive to depart the embattled financial technology firm.
It all started when Andy Rachleff, the CEO of Wealthfront, a California-based roboadviser with nearly $8 billion under management, went after the business model of Fundrise, a Washington DC-based real-estate crowdfunding company. Source: Business Insider
The Bizfi marketplace is slated to live on, according to Stephen Sheinbaum who joined World Business Lenders (WBL) as a managing director in July. On Wednesday, WBL purchased several assets from Bizfi including the brand, the marketplace, the Next Level Funding renewal book, and other related pieces of the company, he says. Sheinbaum founded Bizfi (then Merchant Cash and Capital) in 2005.
WBL, a Jersey City-headquartered small business lender will also be a lender on the platform.
The growth of alternative sources of capital has opened a door for online and marketplace lenders, combining the availability and flexibility of capital with speed and transparency.
“Upward of $100B in loans are coming due and there is a gap,” Money360 President Gary Bechtel said. “The banks, life insurance companies, agency lenders, can only provide so much capital, and this is the void that nonbank lenders like Money360 are filling. And many of these firms have a technology component to them.”
Marketplace lending has become a popular alternative for student loans, credit card and small-business debt, but the commercial real estate industry has yet to fully participate. For Bechtel, it is a missed opportunity.
Money360 lifts those constraints. Because it does not have the same balance sheet requirements and regulations as traditional lenders, borrowers seeking financing for any asset class can apply for a loan on the platform. The platform offers loans between $1M and $20M on both bridge and permanent loans, with competitive terms and features similar to traditional lenders. Bridge loans are interest-only, and like banks, permanent loans utilize 25- to 30-year amortization schedules.
Worthy, a digital investment app that redefines how Americans access investment products, diversify their portfolios and save for retirement, announced the successful closing of its seed financing round. The funds will be used for the full-scale roll-out of the Worthy mobile app, and will enable Worthy to expand its growing user base as well as to broaden the array of investment product options it offers retail investors.
Although yield-starved sophisticated investors have been increasingly allocating more and more of their capital to alternative asset classes such as real estate and private company debt, most retail investors are still unaware that modern technology and a new regulatory regime allows them to access these products online in very small aggregates.
Speaking at the Online Lending Policy Summit in Washington, DC, Acting Comptroller of the Currency Keith Noreika discussed the online lending industry and his perspective on responsible innovation. Noreika told the conference participants;
“I see the growth of online lending and marketplace lenders as the natural evolution of banking itself. Your industry demonstrates a certain entrepreneurial spirit to seize economic opportunity that begins with your new idea. The idea may be leveraging the lending power of groups or using new data to assess creditworthiness. Or, the idea may be a way to make decisions faster or to give consumers more control of their financial lives.”
Noting that US marketplace lenders have originated about $40 billion in consumer and small business loans in the past ten years, Noreika said that online lending represents a substantial portion of all consumer unsecured credit in the US. Some prognosticators expect that online lending will top $1 trillion by 2020.
Here are the rules– we shouted out a list of 20 fintech trends and our cocktail-fueled audience shouted their opinion on whether the trend is hot or not*.
The hottest
Regtech
I was fairly surprised to hear the audience react so strongly to this trend, since the U.S. is lagging in regtech startups and adoption.
What’s hot
AI –As we close out 2017, players in the fintech sector seem to be in all out hype mode on the subject.
Open Banking –Though the U.S. doesn’t have any pending open banking regulation, folks still seemed quite optimistic about this trend.
Mobile account opening –Certainly a necessity for mobile-centric onboarding, mobile account opening has been around for awhile. It seems to have received new life with many enabling technology developments and IoT device launches throughout the years.
Challenger banks –With the lack of challenger bank launches in the U.S. (that is, compared to the U.K.), it was surprising to see the group cheer on challenger banks so vociferously. Perhaps a sign that more challenger banks are coming to the U.S.?
Insurtech – The audience seemed to heavily favor this trend over others, despite the relative lack of insurtechs in the U.S.
New York on Monday announced a settlement with two payday lender operators — barring them from working in the state and forcing them to forgive roughly 20,000 loans worth roughly $12 million.
While payday lending is illegal in New York, state residents can fall prey to the predatory loans through out-of-state lenders trolling online.
Vullo called out E-Finance for making “unlawful misrepresentations” to New Yorkers when requesting payments and negotiating payment agreements.
TAR, headed by Jeremy Schaffer, and E-Finance, headed by Joshua Mitchem, according to court papers, will pay a $45,000 penalty plus as much as $15,000 to cover the cost of sending notices to consumers whose loans were forgiven.
South Dakotans for Responsible Lending will hold a meeting Thursday aimed at creating a nonprofit to help South Dakotans get small-dollar loans without taking on debt.
The effort comes months after South Dakota voters opted to cap interest rates on payday lenders, crippling the industry in the state.
The grant and donation-funded Minneapolis group helps participants pay back loans over a 12-month period with no fees or interest. Since 2015, the group has helped 131 loan participants refinance $90,072 and save $355,042 in interest.
Sara Nelson-Pallmeyer, the group’s executive director, said South Dakota voters have already taken a significant step in reducing payday loan debt by eliminating the industry. In its place, banks and credit unions should look to offer additional loans, she said.
Although I would never diminish it or deny its existence, I just don’t see sexism as an escalating problem in FinTech – or anywhere in the developed world for that matter. In fact, what I see trending is the exact opposite.
Extraordinary women in FinTech are all around us. I read about them every single day – not only in leading industry rags like FintekNews, Bankless Times and Crowdfund Insider, but also in long-established financial periodicals. In fact, FintekNews, which is published by Cindy Taylor, an accomplished FinTech visionary in her own right, devotes an entire section just to
Brett King is back on the show, talking about diversity in fintech with Anouska Streets, head of engineering at Finkit, a unit of digital banking software company Monitise, which was recently bought by Fiserv; and Colleen Wilson, founder and CEO of consulting firm Collaborate Chicago.
Our next guest on the Lend Academy Podcast is the CEO and co-founder of AutoGravity, Andy Hinrichs. After spending two decades in auto finance Andy decided he wanted to do something to finally bring the car buying experience into the 21st century. He started AutoGravity less than two years ago but they are already seeing great traction.
First Associates Loan Servicing announced a new lineup of loan support and lending solutions today to better serve the expanding needs of their industry–leading clients.
Top-notch investor, credit bureau & regulatory reporting
Secure fund flow & control
Capital Markets Support
Backup servicing, Contract Verification, Borrowing Base Calculation or Validation, Custodial Services & Treasury Services (Collateral & Payment Agent)
Pre-Funding Support
To help ensure loans are properly originated and funded: Applications by Phone, Customer Service Call Support, Borrower Verification Calls & Document Verification
Post-Funding Support
Customer Service Call Support, Multi-channel Collections Support & Borrower Verification Calls
Starting tomorrow, acclaimed financial futurist and best-selling author Jack Uldrich will begin a series of four separate presentations on the future of finance in four consecutive days. His first presentation will be for leaders with Atlantic Trust in Denver, Colorado, followed by presentations in Chicago, Washington D.C., and ending in Toronto on Sept. 29th.
Uldrich is a prolific speaker on future trends in wealth management, finance, and banking, speaking to dozens of finance groups globally each year, including some of the biggest names in these industries.
ZOPA investors are now able to sell their loans within a few days on the secondary market, after the peer-to-peer lender made improvements to speed up processing times.
Earlier this month, Zopa promised a “large change” to address investor concerns about the time it is taking to sell loans.
GLI Finance, a listed investment company that backs fintech businesses, on Monday wrote down the value of its investments in eight peer-to-peer lending platforms by £12.6 million to £28.9 million, citing “concerns over the collectability of some platform loans.”
The disclosure came after concerns were raised above fast-growing peer-to-peer lender Lendy Finance over the weekend.
The backdrop to all these disclosures is a surge in unsecured consumer borrowing and rising inflation in 2017, factors which are combining to fuel fears people may be unable to pay back all they have borrowed. Unsecured consumer borrowing hit £202 billion in July, the highest level since 2008. Meanwhile, inflation is running at 2.9%, well above wage growth.
With this in mind, let’s look at the three main challenges that the Small Business Commissioner will need to address in the coming year:
Late payments: Time and time again we are reminded of the late payments crisis damaging small businesses, who are owed a collective £26.3 billion. Research from the FSB shows that poor payment practices are on the rise, causing 50,000 business deaths each year.
Funding: SMEs bring a combined turnover of £1.8 trillion to the UK economy and we must encourage people to follow their dream of running their own business. In addition, some will need educating about using alternative finance methods, such as P2P lending, invoice financing and crowd funding.
The world’s second-largest economy doesn’t have a widely accepted system to gauge creditworthiness among a fast-expanding middle class with growing paychecks, a hunger for consumer products and little or no credit history.
Chinese household debt is growing rapidly, outpacing broad credit growth every year since 2013 and reaching 38 trillion yuan ($5.7 trillion) by the end of the second quarter of this year. But household debt remains relatively low by global standards, at about 44% of gross domestic product, and the absence of a widely used standard of creditworthiness is keeping consumer borrowing from growing even faster, hampering access to credit for some 500 million potential borrowers.
China’s central bank has sought for nearly three years to put in place an answer to the FICO credit-scoring system predominant in the U.S., created in 1989 by data firm Fair Isaac Corp.
Technology giants Ant Financial Services Group and Tencent Holdings Ltd., along with several smaller companies, are developing competing credit-rating systems. Tencent began testing its system in August, two years after Ant, an affiliate of e-commerce giant Alibaba Group HoldingLtd. , launched its Sesame Credit personal scores.
But none of these projects has emerged as a single standard that’s widely used and trusted by lenders nationwide.
Paving the way?
Regulators in March set up a new clearinghouse, Wanglian, to centralize the processing of online payments.
Meanwhile, Ant’s Sesame Credit has a head start on its competition. Launched in 2015, Sesame derives a person’s credit score—which the individual can view on Ant’s popular Alipay payment platform—by mining data on the consumer’s e-commerce activity and other online behavior. Higher ratings confer perks such as waived deposits at some hotels and faster security screening at Beijing’s airport.
There are small credit bureaus in major cities including Beijing and Shanghai, but they have never gained traction and often lack access to borrowers’ financial data. Such bureaus reach only a third of Chinese borrowers, compared with 90% of borrowers in the U.S. reached by credit bureaus there, according to consulting firm Oliver Wyman.
Operators of automated, algorithm-driven financial planning services, or so-called robo-advisers, in Hong Kong need to significantly step up their game if they are to compete with Chinese and US institutions, according to Freeman Tsang, head of China and Hong Kong for asset management firm Legg Mason.
Only a few securities brokerages have entered Hong Kong’s robo-advisory market, which unlike the one in the US, lacks an open, computer interface that allows access to investors’ portfolios across different companies to develop an overall view of their financial status.
Such a foundation is vital for robo-advisers to be able to offer more customisable financial advice and support transactions across different investment tools and firms.
A large group of over 70 European fintech companies are warning that new EU rules on payments processing could unfairly pit them against large banks and decimate the industry if they are passed into law.
The rules are part of the European Union’s Payment Services Directive (PSD) and would ban the practice of “screen scraping,” a common practice used by fintech companies to “scrape” display data from one application (like an online banking service) and display it on their own.
In their manifesto, the 71 fintech firms argue that the ban on scraping is unreasonable and a backdoor method for traditional banks to claw back control as the Fintech revolution threatens to upend their business models.
Revised payment services directive
The European Union’s Payment Services Directive (PSD), originally passed in 2007, built a single market for cashless payments in Europe, making cross-border payments as easy and efficient for European consumers and businesses as domestic transfers.
Most importantly, the revised PSD (also known as PSD2) mandated that banks loosen their grip over customer account data and allow third parties to be able to access it with customers’ permission.
Klarna, a global payments provider, has been honored with an International ANDY Award by the ADVERTISING Club of New York for its 2016 “Smoooth” campaign that illustrates how ‘smoooth’ payments can be for consumers and online merchants using its platform.
The award was presented at the 14th annual “Stars of Madison Avenue” luncheon.
The AD Club’s International ANDY Awards jury chose this year’s six honorees for making an impact on marketing, commerce, culture and social responsibility through brave and creative advertising and marketing campaigns.
Klarna’s “Smoooth” campaign kicked off with a series of critically acclaimed ad spots. Samples of the campaign are available here and here.
At the top of the list, High-Tech Grunderfonds has made nearly 200 deals to 150+ German companies since 2012, making it the top investor in European tech VC by a long shot. Notable recent deals include a $3.4 million seed round to POSpulse (shopper intelligence platform) and participation in a $2 million seed round to MoBerries (HR and workforce management company). Since 2012, German tech companies have seen more than 1,600 deals worth over $10 billion.
The UK has seen the highest number of deals and total funding deployed to tech companies, at more than 3,200 deals worth nearly $20 billion since 2012, according to CB Insights.
Top investors in European tech by country (as of 30 August 2017), according to CB Insights:
Starting today, SMEs looking for a loan online can go to New10, an initiative of ABN AMRO. New10 lets them know within 15 minutes whether they qualify for a loan and under what terms and conditions. New10 meets the needs of this group of SMEs that want to take out a loan entirely online.
New10 provides loans ranging between EUR 20,000 and EUR 1 million.
Ensnared by the allure of entrepreneurship, Bala ventured into the promising world of fintech with MoneyTap, a consumer lending startup that was launched last September.
Touted as India’s first app-based credit line, the fintech startup is working to democratise credit in a country where 19% of the total population is still unbanked.
“The reason we started MoneyTap was that we wanted to solve the problem of consumer credit. Clearly, India is very credit starved. Less than 1% of Indian consumers have access to any form of unsecured credit from a bank or any financial institution. Most people, whether it’s from middle class or lower middle class, need credit, but they have to use informal methods,” explains Bala.
Based on his interactions, he concluded that there are four main reasons behind this pervasive inadequacy of consumer credit in the country:
Historical baggage/legacy
Lack of data
High overhead in small-ticket loans
Finally, the emergence of a new class of demanding consumers
Between 2003 and 2007, a number of banks in India were issuing loans without doing any detailed checked. At the time, there was no credit bureaus or Aadhaar. Even PAN was not widely used. When the subprime crisis hit in 2008, all these banks got burned. In the period prior to that, around 24 Mn credit cards were sanctioned in India, of which nearly 10 Mn crashed.
In a country with a population of over 1.31 Bn, only 220 Mn people have PAN cards. Other forms of KYC (know your customer), including voter ID, Aadhaar and ration cards are not considered as the sole identity proof, especially when it comes to financial activities. Credit information companies (CIC) – such as TransUnion Credit Information Bureau Ltd. (CIBIL), Experian India and Equifax India – still do not have records of a large section of the country’s banked populace.
As per Bala Parthasarathy, the cost of evaluating and issuing a credit line/loan/credit card for a bank is extremely high and thus they prefer to give big-ticket loans to few people rather than small ticket loans for a large group of people. The average loan ticket size in this country is between $4,629 – $7,715 (INR 3 Lakh-INR 5 Lakh).
If you think of India as a pyramid in terms of the net worth of people, all these banks focus on only around 12 to 15 Mn customers at the top of the pyramid because they are capable of applying for a loan worth $4,629 to $7,715. The problem, according to him, arises when someone wants a $463 (INR 30,000) loan because the overhead, in this case, is too high for the bank to make any profit.
The consumer lending startup claims to currently cater to customers with monthly income ranging between $308-$1,080 (INR 20,000-INR 70,000).
On the MoneyTap platform, consumers can borrow anywhere between $46-$7,715 (INR 3,000 to INR 5 Lakh) with an option to choose the repayment duration from as little as two months up to three years.
At present, MoneyTap charges a one-time setup and origination fee of $7.7 (INR 499) plus tax.
Inspire Asean is back on 29 September at Sofitel Phnom Penh Phokeethra for an afternoon of presentations, exchanges and networking. One of our larger events, this edition will have six engaging presentations from top Fintech startups, infrastructure providers and international banks to discuss digital wallets, big data, blockchain technology, cryptocurrencies and alternative lending models.
The speaker lineup includes:
Brad Jones, chief executive officer of Wave Money in Myanmar and previously CEO of Wing in Cambodia.
Hong Samarkkeenich, regional sales director at Lenddo, is responsible for bringing the company’s technology to new and underserved market segments in Indochina.
Sim Chankiriroth is the founder and CEO of BanhJi, a free and localized online accounting software, built for Asean MSMEs.
Vincent Ling, deputy general manager of UnionPay International SEA, is responsible for regional brand and communications as well as the Core Products portfolio.
Steve Miller is the founder of CryptoAsia, a growing Bitcoin startup based in Phnom Penh.
Tomas Pokorny is the CEO of PiPay, a Cambodia-based fintech company that combines payment and lifestyle (social) application solutions.
A survey conducted by Deloitte showed that the respondents feel that analytics will become more important to their organizations in the next three years and that its greatest benefit is a key factor in making better decisions, and Singaporean companies are picking up on this.
This trend is great news for the local data analytics sector. In Singapore, the industry is expected to contribute at least $1 billion to the economy this year alone according to the Economic Development Board.
However, being in the service industry, these firms often lack significant physical collateral and assets, leaving them unable to turn to banks and similar financial institutions for financing. This results in cash flow issues that could limit the growth of these companies, if not hamstring them completely.
Acudeen is an organization opens its business to small and medium enterprises (SMEs) looking to boost cash flows, thereby answering an unsolved business need.
Ayannah is a leading provider of digital financial services to the world’s emerging middle class, most of whom are migrants or unbanked coming from the base of the pyramid.
PayMaya Philippines, Inc. (formerly Smart eMoney, Inc.) is the pioneer in mobile money and payments, having established brands such as PayMaya, the first prepaid online payment app that enables the financially underserved to pay online without a credit card; PayMaya Business, the company’s system solutions provider that allows businesses to receive online and card payments anytime, anywhere; Smart Money, the world’s first e-wallet linked to a mobile phone; and Smart Padala, the leading remittance network in the Philippines with over 15,000 agents across the country.
Singapore has publicly stated ambitions to be the world’s leading fintech and innovation hub. It is also one of the biggest and busiest global trade centers with many large, multinational companies basing their regional treasury offices in the country. For these reasons, and to support our rapidly-growing customer base across Asia-Pacific markets – including Standard Chartered, a Ripple investor, member of the RippleNet Advisory Board, and early adopter of blockchain technology to power payments – we are excited to announce we have opened a new office in Singapore.
Mr. Lanre used to be hesitant about loaning his colleagues at work money, having suffered from bad debts. Luckily for him, his organisation launched a co-operative scheme to manage employees’ finance. Among other things, the co-operative allows anyone with an urgent financial need to easily request and get assistance.
Nonetheless, as CEO of a financial management service platform, Salami Abolore reveals that over a million co-operative bodies exist in Nigeria.
He says this with confidence because his company, Riby, helps co-operatives and their members remotely control both their finance and financial operations.
Riby happens to provide the technology that helps Mr Lanre’s company to manage their (employee) co-operative scheme.
The Riby peer-to-peer lending module allows companies to run internal co-operatives within their fold. A case in point is a savings rotation mechanism that auto-debits employees and credits whoever is due to receive money for the month. For both modules, Riby charges a per-user fee of ₦200 upfront, amounting to ₦2000 per annum and ₦500 on a quarterly basis.
The agent management platform, Riby’s third module, is another exciting proposition that raises an innocent suspicion as to whether Riby is taking the competition to the commercial banks. This is apparent in their overall quest to include everyone in the system.
About 40% of Nigerians are yet to register with any financial institution in the country, according to the Central Bank of Nigeria. Statistics from the Nigeria Inter-Bank Settlement System (NIBSS) further show that there are only about 40 million registered bank accounts across the country. These accounts are enrolled by just 20.8 million customers, some having more than one account. It is therefore apparent that co-operatives can be used to reach the unbanked.
Fintech startup MaTontine was named winner of the Senegal round of the global Seedstars World competition over the weekend, earning the chance to represent the country at the global final in Switzerland next year to compete for up to US$1 million in equity investment.
MaTontine emerged the overall winner for its solution that provides access to small loans and related financial services like microinsurance by digitising traditional savings circles.
SoFi lawsuits don’t seem to be affecting its brand. AT: “This is either because of the quick reaction to the news by Cagney and the SoFi board of directors to have the CEO step down as soon as the news hit or it may be because millennials don’t care about such things if they don’t affect their finances. More likely, its a combination of the two.”
Prosper loses unicorn status. AT: “Not much new here, except the observation that the $50M raise that sealed the company’s devaluation is a sign of the state of MPL.”
Banks tell Equifax to get it together. AT: “What would the world of credit look like with only two credit bureaus? Not very good, and it could hasten the development of alternative credit scoring models.”
The resignation of the company’s co-founder and former CEO, Mike Cagney, amid lawsuits from employees stemming from sexual harassment allegations and other workplace issues has thrown into question whether the brand can continue to be known as a “different kind of finance company,” as it markets itself. But despite the bad news so far, the damage to the company’s standing seems to have been contained — the result of being in the shadow of bigger scandals in Silicon Valley and the company’s actions in the aftermath of the scandal.
Based on online sentiment expressed on Twitter, Facebook, Instagram, blogs, forums and news sites between Aug. 12 and Sept. 23 (when the news of lawsuits first emerged), 71 percent of categorized mentions of the brand were positive, according to social media analytics firm Brandwatch. While sentiment dips Sept. 12-16 (reaching the level of 86 percent negative on Sept. 16, coinciding with Cagney’s resignation), feelings quickly rebound by Sept. 19, showing a certain resilience despite the negative press.
In addition, the quick timing of Cagney’s resignation reduced the effects of the negative news, said Crenshaw.
“I guess I don’t really care as it pertains to my loan,” said Alex Nocella, 27, a SoFi customer since 2013. “It damages my view with the way they’re operating their business, but it doesn’t change the relationship I have with them. It wouldn’t stop me from getting another loan with them.”
In addition, he said, the company was proactive about informing customers of Cagney’s resignation prior to the news becoming public by giving them a heads-up on the customer-only Facebook group.
Square Capital has distributed more than $1.8 billion in loans to over 140,000 merchants since its inception in 2014. In 2Q17, Square Capital loan volumes rose at 68% year-over-year to $318 million.
In the business of supplying alternative financing to merchant customers, Square competes with PayPal (PYPL), Amazon (AMZN), and LendingClub (LC). PayPal says it has distributed $3.0 billion in small business loans through its credit arm, while Amazon says it has supplied more than $2.5 billion in credit to its merchant clients.
Why Square Is Pursuing a Bank Charter
Square is pursuing its application for a bank charter because it’s seeking more independence in its financial services business. Square Capital head Jacqueline Reses told the Wall Street Journal, “As we scale, it’s becoming increasingly important that we have direct relationships with regulators.”
While a partnership with Celtic Bank has helped Square Capital grow, Square prefers running a financial services operation that it controls. The US (SPY) small business alternative lending market is forecast to originate $52 billion in loans by 2020 compared to $5.0 billion in 2015, according to BI (Business Insider) Intelligence.
Source: Market Realist
Why Square Opted for an Industrial Bank Model
Square (SQ) is seeking an industrial bank license rather than a traditional bank license. Why? In deciding to go for an industrial bank license as opposed to a traditional bank license, Square chose the easy way out.
Source: Market Realist
How SFS Could Change Square Capital
Square has applied for an industrial bank charter so that it can take its lending business to a higher level and potentially unlock more growth.
However, Square intends to keep its consumer-facing financial services separate from its main bank unit.
Through Square Cash, Square is targeting the multibillion-dollar P2P (peer-to-peer) payments market. According to Forrester Research, global P2P transactions will reach $17 billion by 2019. According to Javelin Strategy and Research, the number of Americans using the P2P payment service will increase to 126 million by 2020 from 69 million in 2016. $1 trillion alternative financing market
SFS, to be capitalized with $56 million in cash, will provide credit and offer deposit account services to merchants. The Polsky Center estimates that US (SPY) alternative loan volume rose to $34.5 billion in 2016 from $28.3 billion in 2015. Globally, the alternative financing market is forecast to grow to $1.0 trillion in the coming decade.
Square’s bank CEO will be Lewis Goodwin, an executive who recently joined the company from Green Dot (GDOT). Goodwin was CEO and president of Green Dot for several years.
Green Dot is a provider of prepaid debit card services. In 2016, Goodwin’s last full year as the company’s head, Green Dot’s revenue grew to $718.8 million from $694.7 million in the prior year.
Equifax has been the Bad News Bears of financial services lately. First there was the massive data breach that sent the personal information of most of the U.S. adult population to the dark web for exploitation. Then there was the fake phishing site to which the credit rating agency accidentally referred a bunch of recently breached people, as they could not distinguish their own site from a cloned version of it. Thankfully, that site was actually set up by a security researcher to illustrate a flaw, not a real cybercriminal – but still, it hasn’t been a good fortnight for Equifax.
And now the banks – i.e. the lenders who supply credit rating agencies like Equifax with the data they need to feed their scoring model – are making loudly discontented noises in Equifax’s direction.
“If there’s only two players, then they have less ability to play them against one another” in negotiating prices for credit reports, Thomas said.
But the willingness of lenders to support Equifax is damaged by the firm’s handling of the hack so far, which has failed to impress anyone.
The U.S. Consumer Financial Protection Bureau (CFPB) is seeking the BC Supreme Court’s help to compel a group of former employees of a Langley company that allegedly ran an illegal online payday loan business through a web of affiliated companies in Canada and Malta.
The U.S., on behalf of the bureau, filed a petition in BC Supreme Court on September 8, naming Roo Chang, Annie Wang, Juila Zhu, May Chan, Doug Patton, Andrew Hung, Michelle Duncan and the Bank of Montreal as respondents.
The petition is related to a lawsuit filed by the bureau in New York in July 2015 over alleged violations of the Consumer Financial Protection Act “by using a series of interrelated Canadian and Maltese companies … to operate an illegal online payday lending business targeting U.S. consumers in all fifty states.”
Yesterday, I attended the second annual Online Lending Policy Summit in Washington DC. It was headlined by the Acting head of the OCC, Keith Noreika, Congressman Greg Meeks (D-NY), Congressman Tom Emmer (R-MN) and William Isaac, the former head of the FDIC.
William Isaac was the head of the FDIC under President Reagan and he painted a stark picture of the US today where 60% of the population cannot get a bank loan. He said that we have to do better and figure out a way to lend to a broader cross section of the population.
I found Congressman Meeks to be the most engaging speaker of the day. His enthusiasm for financial innovation was infectious. He said that fintech should focus more on being an enabler than a disruptor. We need to enable more access to credit through partnerships with traditional financial institutions. He brought up the idea that fintech platforms could partner with black-owned banks that are struggling to keep up with the technological changes happening today.
In Madden, the Second Circuit ruled that a nonbank that purchases loans from a national bank could not charge the same rate of interest on the loan that Section 85 of the National Bank Act allows the national bank to charge. Yesterday, at the Online Lending Policy Summit in Washington, D.C., Acting OCC Comptroller Keith Noreika advocated a Madden “fix” as an example of an action Congress could take “to reduce burden and promote economic growth.” Mr. Noreika stated that the OCC supports proposed legislation that would codify the “valid when made rule” and provide that a loan that is made at a valid interest rate remains valid at that rate after it is transferred.
Mr. Noreika also was asked whether, as we have previously suggested, the OCC would address the risk posed by the theory that a bank making loans is not the “true lender” if a nonbank marketing and servicing agent acquires the “predominant economic interest” in the loans. Unfortunately, Mr. Noreika stated that “true lender” guidance might be unnecessary at this time due to prior guidance issued during the tenures of former Comptrollers Hawke and Duggan.
With regard to the OCC’s special purpose national bank (SPNB) charter proposal, Acting Comptroller Noreika stated that the OCC is continuing to consider the proposal and intends to defend its authority to grant an SNPB charter to a nondepository company in the lawsuits filed by the NY Department of Financial Services and the Conference of State Bank Supervisors.
Mr. Noreika also indicated that the OCC intends to revisit its guidance on deposit advance products, observing that its views on such products are not necessarily consistent with those of the CFPB.
An innovative new online golf club upgrade and financing program, developed by TaylorMade Golf (www.taylormadegolf.com) in collaboration with Klarna (www.klarna.com), provides golfers access to the newest and most advanced equipment as soon as it is released.
In the first five months since its inception, the program has experienced significant success, with a 30 percent overall lift in conversions and a five percent increase in average order value.
‘The Turn’ is a first-of-its-kind upgrade program for purchasing golf clubs. It is named for when golfers finish the ninth hole of a round of golf and then ‘turn’ for home. The program allows TaylorMade Golf fans to finance their purchases over 18 or 30 months on the TaylorMade Golf website, and keep or exchange their clubs for the latest models toward the end of the payment period. If a customer chooses to upgrade, payments on the existing clubs will stop and payments on the new clubs will begin.
The program is powered by Klarna, a global leader in providing instant financing solutions to e-tailers and customers. Customers opt-in to the program by applying for financing at the point of checkout through a simple, instant credit approval process that provides them with an open line of credit that may be used wherever Klarna is accepted.
Commercial real estate crowdfunding platform ArborCrowd announced on Tuesday it is now offering a $40.8 million multifamily real estate deal to investors. The property, Quarry Station Apartments, is located in San Antonio, Texas.
Another hack: Deloitte said Monday it suffered a cyberattack. But the hacker accessed data affecting only a “very few” of the big accounting firm’s clients and “no disruption has occurred to client businesses, to Deloitte’s ability to continue to serve clients, or to consumers,” the firm said.
ReliaMax, the complete private student lending solutions provider for banks, credit unions, schools and alternative lenders, today announced it has acquired the assets of FUTR Corporation, a San Francisco- and Texas-based private student loan servicing provider. The acquisition brings over 40 new lenders and $55 million in borrower servicing to The ReliaMax Solution, the only fully-integrated private student loan solution that includes borrower acquisition, origination, servicing, insurance, and capital markets/portfolio liquidity support.
The participants’ claim that Fidelity breached its fiduciary duties by selecting and hiring Financial Engines—an online financial advice provider commonly known as a robo-adviser—also fails, Burroughs wrote. The allegations were premised on the notion that Fidelity, rather than the plan sponsor Delta, hired and selected Financial Engines, but the plan’s language contradicts this premise, Burroughs concluded, granting Fidelity’s motion to dismiss.
LEND360 announces LendingTree, the nation’s leading online loan marketplace, will award a $10,000 prize to the winner of the LEND360 Startup Innovators Program, an on-site competition where fintech startups will present cutting-edge solutions that are propelling the online lending ecosystem forward.
Startups in the fintech space will pitch solutions on the LEND360 Innovation Floor Spotlight Stage. Each company will have approximately five minutes to make their pitch followed by a brief Q&A session. All LEND360 attendees are invited to attend.
Members of the LEND360 Investor Advisory Board will judge all presentations and attendees will submit their choice via our conference app. The winner will be announced on Friday morning, October 13, and will have the opportunity to pitch their solution on the mainstage.
But after NFL players and coaches challenged President Donald Trump and many took a knee during the national anthem played before their games over the weekend, Jones said he is through sponsoring the wardrobes or advertising on stations that air the National Football League.
“Our companies will not condone unpatriotic behavior!” said Jones, CEO of the payday lending chain Check Into Cash and owner of Hardwick Clothes — America’s oldest suit maker.
Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today announced that it will acquire FolioDynamix, a provider of integrated wealth management technology solutions.
According to SoFi’s own refinancing calculator, people who refinance with SoFi save on average almost $23,000 total, or $288 a month — not an insignificant chunk of change. (Other lenders boast similar returns.) “If you’re paying an 8 or 9 percent [interest rate], and you can refi down to 4 percent, and you can lower the term — take it from 15 years to 10 years — you’ve cut the interest rate, you’ve cut the length, you would have been paying double the interest for a longer period of time,” Bradford explains.
By combining your all federal and private loans into one new private loan, you lose out on certain protections that come with federal loans, like income-based repayment or student loan forgiveness, according to the Consumer Financial Protection Bureau.
Research by LendEDU found that 57 percent of applicants qualify, so there’s little excuse not to at least try. And according to Student Loan Hero, across the top six student loan refinancers, it takes on average less than 20 minutes total to check your rates and apply online (or even on an app).
Zopa, the UK’s first peer-to-peer lender, is aiming to reopen to new investors by the end of this year following a long-running imbalance between those who want to lend money via the platform, and those who want to borrow.
Zopa’s website offers annualised projected returns of up to 4.5 per cent to those prepared to lend money to individuals via its platform for five years. However, high demand meant Zopa stopped taking new client money last December. After re-opening temporarily, it stopped again in March, and started a waiting list which has details of 15,000 potential investors waiting to lend.
Andrew Lawson, Zopa’s chief product officer, said the company was growing its book of new loans at 50 per cent year-on-year but was finding it harder to lure appropriate borrowers due to declining credit quality and fierce competition among peer-to peer lenders.
The platform’s existing investors have also been hit by long delays after a surge in demand for Zopa’s Innovative Finance Isa, which allows peer-to-peer loans to be held within the popular tax-free wrapper.
Online small business lender Funding Circle lifted the lid on business performance on Wednesday, showing revenue passed £50 million for the first time last year.
Revenue rose 59% to £50.9 million;
Operating expenses rose by 43% to £103.1 million;
Losses dipped by 3% to £35.7 million thanks partly to a foreign exchange boost;
Earlier this year, a series of media reports highlighted a report from auditor BDO which stated that Wellesley & Co was “dependent on raising further capital to continue to operate for 12 months”. This statement referred to the firm’s performance as at December 2015.
However, Graham Wellesley told Peer2Peer Finance News that these reports were misleading as they referred to the firm’s mini-bonds only, and not its peer-to-peer lending platform.
LendInvest has launched its first property development course for brokers, in partnership with the NACFB.
Aimed at providing brokers with a better understanding of how to add more value to clients that require development finance, the courses outline in detail what it takes to make sure small-scale developments run smoothly.
QuidCycle is a so-called peer-to-peer lending company, which brings together borrowers and savers.
There is just one bond available now, paying 6.1 per cent for five years. You must invest at least £500 and your money isn’t accessible until the fixed term expires.
THE RISKS: The worry is that the borrower won’t be able to make repayments. QuidCycle has a Provision Fund, a pot of money set aside in case borrowers can’t pay.
Your money is spread across at least five borrowers to limit your risk exposure, and there’s an option to lend a maximum of £100 to any single borrower.
A leading UK financial technology company has strengthened its position in the market with the appointment of new chairperson, Lazaro Campos, and chief technology officer, Scott Leckie.
The Edinburgh headquartered business, established in 2010, has won some major clients in the UK and North America. These include a large UK retail bank, Prosper Marketplace, Marlette Funding, OakNorth Bank, eMoneyUnion, and Fair Finance. Over the last 12-months alone, the volume of transactions facilitated by the company has grown by 15% month over month.
New chairperson Lazaro Campos brings over 30-years C-level experience in banking technology, having previously served as a non-executive director of The ID Co. from 2014. He is also co-founder of innovation ecosystem company FinTechStage, member of the advisory board of financial services company Payoneer and Senior Advisor to management consulting firm Booz Allen Hamilton. Elsewhere Lazaro served at SWIFT, the global banking network, in various executive roles and was its CEO from 2007 until 2012.
Avalon Capital Group, Inc. has announced that it is inviting investors from around the world to make investments in its initial coin offering. With a well-established base of research, development and operations, the company is introducing cryptocurrency and initial coin offerings as a new way of transaction for its valued customers. In addition, the rising private investment company is backed by HSBC bank with 4,000,000 USD investment already.
This blockchain based crypto lending model will open new possibilities of lending money online safely and easily. Furthermore, this decentralized peer to peer lending platform will enable anyone to lend and borrow money is a safe and secure environment online.
The SME business opportunity in India can be seen in possibly every sector – financial services, telecom, education, automobiles, media, food, real estate and so on. SME businesses are the biggest contributor to the economy of any country and the same goes with India. After agriculture, small business in India is the second largest employer of human resources. Also, in recent years, this sector has been weaving some of the most inspiring business success stories. In fact, MSMEs were found to account for 46% of the industrial production and 95% of the total industrial units.
From inefficacy of measures in credit flows (such as credit scoring for SMEs) to information asymmetry faced by banks and financial institutions, there are plentiful challenges that have impacted the contribution and performance of small and medium enterprises in the Indian economy. More than 80% MSME entrepreneurs are forced to resort to other unorganized avenues of financing to obtain credit assistance.
Although still in its infancy as a market, P2P lending firms in the US and UK in 2010 generated cumulative lending of USD 1.5m and this increased to USD 7bn in 2015 so unprecedented rise in the demand. In the US alone, in 2015, P2P platforms issued approximately $6bn in loans and based on our global analysis, this is expected to grow to $150bn by 2025 (25 times or 2400% over 10 years).
The estimated P2P lending to be generated in India over the next 5 years is pegged at circa USD 4bn (160 times the current lending size). Still this is way too low compared to China where there are circa more than 2000 P2P lending firms with a lending book size north of circa USD15bn indicating the potential to grow exponentially in India.
What are the risks involved in P2P lending?
1. Weak underwriting process resulting in bankruptcy of the P2P firm due to poorly executed business model resulting in granting loans to scrupulous borrowers with poor credit history
4. Data privacy laws could be breached if the platform firms disclose the names of the borrowers and lenders in their website.
5. If KYC and AML checks are not carried out robustly, the platform firms could be used for money laundering and routing illegal sources of funding.
Our perspectives
1. Platform based lending will invariably gain huge momentum over the next 3-5 years due to competitive interest rates and ease of making finance available.
2. Secured lending may have a better preference from a risk averse investor stand point due to the fact that this business has progressed very well since the past 5 years and there are established RBI regulations governing this type of lending.
4. Over a period of time, if unsecured P2P lending is well established like in the developed markets (e.g. Funding Circle in the UK), banks and institutional investors will potentially look to buy blocks of P2P loans to add to their portfolios.
Online consumer lending platform CrediFiable, which is operated by Bengaluru-based OneFiable Technologies Pvt. Ltd, has raised an undisclosed amount of funding from Kae Capital, the startup said in a statement.
Disruptive innovation in digital technology is on the horizon, with bankers and toll road operators beginning to replace manual jobs with digital machines, raising concerns that millions of jobs in the finance and service sectors will be replaced.
Meanwhile, banks are opening fewer physical branches, putting more money into developing digital banking and digital offices.
State lender Bank Mandiri, the largest bank in terms of assets, has announced that it plans to open only 100 branches this year, far fewer than the annual plan of 400 to 600. Such a move will lead to a reduction in the number of new recruits taken on.
Other lenders joining the digital wave include private lender BTPN, which spent 1.3 trillion rupiah (S$131 million) on developing a digital platform, dubbed Jenius, over the past three years, while DBS Indonesia launched Digiland, an entirely paperless and signature-free banking experience.
But southeast Asia isn’t China. While Ant Financial knows China like the back of its hand, and vice versa, the company recognizes the limits in its abilities outside the country. Because of that, Ant Financial and Alipay’s work in southeast Asia is done through local partners.
It’s the Facebooks and Googles of the world that really keep the banks up at night, not the explicit fintech companies, says Yew.
CIMB says more than 90% of its total banking transactions are done through digital and self-service channels at this point.
Global startup competition G-Startup Worldwide announced aquaculture investment platform GrowPal as the first-place winner of G-Startup Indonesia 2017.
GrowPal is a P2P lending platform that aims to help freshwater fishermen raise funding for their business.
Specifically, 72% of investors surveyed said they feel financially secure in the current economic climate and 68% said they are comfortable taking risks to get ahead. However, if investors were forced to choose between safety and performance, 83% would choose safety.
76% of investors surveyed believe that some fund managers charge high fees for just tracking an index, which investors say they can also do and at a lower cost.
Another area in which investors could benefit from good advice is alternative investment strategies that go beyond stocks and bonds. Although many investors are open to alternative investments, the Natixis study suggests a lack of education in this area may be a roadblock. For example, 71% of investors believe alternative investing is too complex and 65% say these investments are riskier than traditional asset classes.
PayPal could be eyeing acquisition target. AT: “PayPal has been on a buying spree, most likely to boost its portfolio earnings and to enlarge its lending footprint. Targeting a company like Square, Klarna, or Stripe would do both and make the company stronger in the long run. I can see this happening.”
The next billion-dollar startups. AT: “It’s fun to predict who the next unicorns will be. Forbes narrows the list to 25, three of which are tech companies in the alt lending space. If the Plaid prediction is correct, one of whose chief investors is Goldman Sachs, then we are likely to see a lot more bank-fintech partnerships. This will likely happen anyway, but a breakout success of tech companies focused on that union would accelerate the partnerships.”
Shinola partner with Affirm. AT: “If it isn’t Affirm, it’s Klarna. We are seeing these announcements more and more frequently. How long will it be before non-credit card POS financing is the norm rather than the exception?”
Cash-rich PayPal Holdings (PYPL) is likely to pull the trigger on a big acquisition soon, and may be eyeing Europe or a big target like Square (SQ), says a Wall Street analyst.
Ellis says PayPal has $6 billion in cash on its balance sheet and could raise $4 billion or more by selling off its consumer credit business.
“While there are a number of potential candidates, we see the acquisition of a European payments asset as the most likely,” added Ellis in the report. “We believe the top candidates are Adyen, Klarna, Square and Stripe.”
Both Square and Stripe, however, would be costly acquisitions. Square’s market valuation tops $10 billion, while privately-held Stripe’s latest funding round in December gave it a whopping $9.2 billion valuation.
LendingTree, Inc. (NASDAQ: TREE) announced today that it has acquired certain assets of Snap Capital LLC, a tech-enabled online platform connecting business owners with lenders offering small business loans, lines of credit and merchant cash advance products through a concierge-based sales approach.
The acquisition purchase has a possible total consideration of $21 million, which consists of $12 million in cash at closing, and contingent consideration payments of up to $9 million.
Every year for the past three, Forbes has gone looking for 25 young U.S. companies with a strong shot at reaching a valuation of $1 billion or more. This year, with the help of TrueBridge Capital Partners, we asked venture firms which companies they thought most likely to hit the billion-dollar mark soon. Then we cut that list down to a final 25, evaluating strategies, funding and competitive challenges as well as estimating current revenues.
What it does: Makes cloud-based software that lenders use to originate mortgages online. Today, Blend works with about 30 mortgage originators, including Wells Fargo, U.S. Bancorp and Mason-McDuffie Mortgage. It also plans expansions into student and auto loans.
Fundbox
Founders: Yuval Ariav, Tomer Michaeli, Eyal Shinar (CEO); Equity raised: $108 million; Estimated 2017 revenue: $55 million; Lead investors: General Catalyst, Khosla Ventures, Spark Capital
What it does: Provides short-term financing to small businesses. Fundbox intends to reduce the cash-flow headaches of small companies, both those waiting for payment and those that need short-term credit to pay what they owe. Fundbox started as an invoice-financing company, lending money to small businesses against their accounts receivables at rates lower than those for cash advances and without prepayment penalties. Its new model, expected to launch in 2018, is meant to work like a credit card for business-to-business transactions. A company that owes money has Fundbox pay the invoice. The company that is owed gets its cash immediately (minus a small interchange fee). Meanwhile, the first company has 60 days to repay Fundbox before being charged interest. With U.S. businesses doing some $41 trillion in business-to-business transactions a year, the potential market is enormous, but setting up such a network is hard.
Plaid
Founders: William Hockey, Zach Perret (CEO); Equity raised: $60 million; Estimated 2017 revenue: $40 million; Lead investors: Goldman Sachs, New Enterprise Associates, Spark Capital
What it does: Makes software that helps technology startups and banks work together. Plaid’s products provide authentication of accounts and routing numbers, income validation and real-time balance checks. Among its customers: Venmo, Robinhood, Coinbase and Clarity Money.
Affirm, Inc., the company started by Max Levchin to provide fair and honest consumer financing, today announced that Detroit-based design brand, Shinola, is using Affirm’s point of sale service to put customers first in an era when a merchant’s values often outstrip price for shoppers’ making a buying decision — especially among millennials.
Known for its dedication to thoughtful manufacturing by creating jobs and making watches, bicycles, leather goods, journals, jewelry, and audio equipment of the highest quality, Shinola is obsessive about customer experience to ensure a high-touch shopping experience that accurately matches the finely crafted watches, bicycles, jewelry, bags, accessories and gifts for sale on its website.
Since Shinola began offering Affirm’s financing to its shoppers, the company’s average order value (AOV) has increased by 52 percent. Also, 50 percent of the Affirm users on Shinola’s site are now between the ages of 18 and 34, a market Shinola has been working to grow.
Nearly 90 percent of marketers said customer experience would be their primary differentiator this year, according to a recent study by research and advisory firm Gartner, Inc. And, the majority of respondents — 55 percent — in a recent survey conducted by Affirm and Qualtrics of more than 1,000 22 to 44-year-olds in the U.S. said they prioritize a company with high values and ethical business practices, over minimizing their out-of-pocket costs.
Jason Burian: The number of closed-end private real estate funds in the market raising capital over the past three years:
January 2015 – 478
January 2016 – 492
January 2017 – 525 (record high)
Closed-end private real estate dry powder over the past three years:
December 2015 – $229 billion
December 2016 – $237 billion
July 2017 – $255 billion (record high)
CPE: Is the real estate crowdfunding industry a solution? What are the risks?
Burian: I see real estate crowdfunding as an alternative to traditional private equity real estate and an alternative source of investors and not as a solution to any problem. As we know, it is just an avenue for every day individual investors seeking exposure in their portfolios to real estate without acquiring shares of REIT’s.
Government regulation is always a risk for this relatively new industry sector. There are questions about the amount of government regulation and whether there is enough to make it a safe playing field. Until crowdfunding matures, with the proper level of regulation, there is always a risk that someone is taking advantage of that gap that currently may exist.
A new survey has concluded that then it comes to researching mortgages, Millennials prefer the D.I.Y. aspect of the online world, while Baby Boomers prefer to communicate with people.
According to the survey, “The Digital Mortgage Experience: A Study of Shifting Borrower Expectations,” from Los Angeles-based Velocify, more than one-third of all borrowers prefer self-service websites, especially during the research stage of getting a mortgage. But as the process evolves, demographic shifts occur. The survey found Millennials were 45 percent more likely to find their lender online than Baby Boomers, who were 87 percent more likely to use their current bank or lender for their home loans.
Boost Insurance USA, a NY-based technology-enabled insurtech development platform provider, raised $3m in funding.
The round was led by Norwest Venture Partners with participation from IA Capital Group, Greycroft Partners, and re/insurance industry leaders State National Companies (NASDAQ: SNC) and Nephila.
DATA SOURCE: TD AMERITRADE. PRICES AS OF SEPT. 26, 2017.
Finally starting to grow again
Peer-to-peer lending platform Lending Club has lost roughly three-fourths of its market value since its first trading day in 2014, thanks to several quarters of stagnant growth and a scandal that worried investors.
However, the company’s most recent earnings report shows that things may finally be starting to pick up, with 10% growth in loan originations, higher profit margins, and impressive revenue growth. In addition, the company said it could be on the verge of profitability by the start of 2018, and it expects double-digit sequential revenue growth in the third quarter of this year.
Lending Club’s current loan portfolio represents roughly 0.4% of the U.S. consumer lending market, and if the company could even manage to boost its market share to one or two percent, it could mean a big payday for the company’s investors.
After raising $23 million in a Series D funding round last September, Kyriba says today it has raised $45 million in a growth equity round led by Sumeru Equity Partners, a tech-focused private equity firm that specializes in mid-market deals. Previous investors Bpifrance, Iris Capital, Daher Capital (all growth equity funds) joined the deal, along with HSBC.
The venture rounds are over for Kyriba, a cloud-based provider of corporate treasury and financial management software that is based in New York and San Diego.
Daniel Ketchum prides himself on his low fees and independence, but after 27 years as a financial adviser he is finding it harder to make a living working with smaller clients.
Increased government regulations and savers becoming more knowledgeable about investing have created what he calls the “Amazon effect” for US financial advisers.
But the US Department of Labor’s fiduciary rule, which came out this year, is making it harder for him to make a profit from advising small plans, he says.
The regulation requires advisers servicing retirement accounts to work in the best interest of the client and has disrupted the wealth management industry.
“I am trying to see if there’s an area where we can do this online and don’t need to leave the office,” he says. “If every plan had the economics of the smaller guys, it would be tough to pay staff, office rent and marketing.”
Max Levchin, a cofounder of PayPal and former chairman of Yelp who is now CEO of the online lending startup Affirm, told BuzzFeed News on Wednesday that Amazon has “not yet” become a monopoly because of competition from major retailers like Walmart as well as from smaller brands, which are investing in ways to attract and keep customers in the real world as well as online.
Walmart is still much larger than Amazon in terms of net sales. During 2017 fiscal year, Walmart reported$485.9 billion in revenue and $481.3 billion in net sales. Amazon, on the other hand, reported about $136 billion in net sales in 2016.
The UK’s largest marketplace lending platform marginally narrowed its losses in 2016. Funding Circle, a business loans marketplace, lost £35.7m in 2016, slightly down from £36.9m in the previous year. Meanwhile the platform boosted revenues by 59 per cent to £50.9m, and saw its total loans outstanding climb 61 per cent to £1.37bn, according to a Companies House filing.
Funding Circle has also flagged that its group operating results for the first half of 2017 demonstrate that revenue growth has accelerated further, approximately doubling year-on-year.
Crowdfund Insider recently spoke with Raghavendra Rau to better understand his perspective on the crowdfunding market. Rau is the Sir Evelyn de Rothschild Professor of Finance at Cambridge Judge Business School. He is also a founder and Director at the Cambridge Centre for Alternative Finance (CCAF). At the most recent CCAF annual conference in Cambridge, Rau shared some insightful research he had recently completed on the global crowdfunding market.
First, to clarify, in the UK crowdfunding encompasses both debt and equity so peer to peer lending (IE Marketplace Lending) is included in aggregate terms. It is more about many people (and perhaps some institutions) funding a single project. Rau, in his research, emphasizes that in the UK the debt crowdfunding market is far larger than the equity side. This makes sense and mirrors the public markets. Yet access to capital at a very early stage may require equity capital. But globally, over 90% of the crowdfunding market is debt, not equity. It is a debt financed world, at least for SMEs, said Rau.
“Yes, there is definitely potential here. Usually you have two types of firms. Most small enterprises do not require equity. They require debt. Debt means you have to have approximately stable cash flows. Equity means you have to convince the investors that you have an amazing idea that is going to pay off in several years and I am going to let you (the investor) share in this. This is more risky for the investor and so all SMEs are not suitable candidates to raise equity.”
Rau said there are two different paths. Banks or crowdfunding. With crowdfunding there is less paperwork. It is easier to process and in some instances less risk averse. Banks are pulling back from lending across the spectrum. SMEs, the engine of economic growth, are not getting the necessary capital via the traditional route.
So has the UK crowdfunding system been effective?
In the broader scope of things, China is the largest alternative finance market in the world. The US comes in a distant second. The UK is a strong third. But given the relative size of the UK economy, Rau calls the UK performance “extremely impressive.”
The UK is recognized as the top Fintech hub in the world but this required policymakers to be more creative and to take some chances. So far, it has paid off.
Wealth Mosaic aims to build “a resource covering all of the main business needs of wealth managers” in about a dozen verticals, says its co-founder Stephen Wall, who has worked as a wealth management consultant with Boston-based Aite Group and Scorpio Partnership in London. At first, though, he says the service will focus where it’s needed most: on technology and data resources as well as consulting and research options.
Though Wall sees a role for Wealth Mosaic with all “different types of wealth managers,” he sees particular growth opportunities helping “smaller independent” firms that lack in-house consulting arms to help them match their needs to third-party providers, whether the services in question are critical to the firm’s core mission or add value around the edges.
A panel of experts at the Chartered Institute for Securities and Investment’s financial planning conference in Newport today (26 September) said robo-advice did not necessarily pose a risk to financial advice as long as advisers adapted.
George Rooke, head of UK portfolio management at Wealthsimple, said there were advisers who would “struggle” because of their refusal to engage with robo-advice.
Michelle Pearce, co-founder of robo-adviser Wealthify, said advisers did not necessarily have to worry about being replaced by companies such as hers.
THE BRITISH Business Bank (BBB) has published a new report underlining the importance of diverse sources of funding for smaller businesses, including peer-to-peer lending.
The report, titled The Benefits of Diverse Finance Markets for Smaller Businesses, explains why and how the state-backed lender works to increase the number of providers and finance options available to small firms in the UK.
“To date £135m is committed to five fintech alternative lending partners. These partners cover a wide range of products including P2P term loans, invoice finance and merchant cash advances.”
Spotcap, an online lender for SMEs, has announced Mohammed Hussan as the winner of its Fintech Fellowship 2017. The Fellowship awards one aspiring masters or MBA student with a £8,000 stipend towards their studies.
ZhongAn, the online insurance seller with ties to China’s two largest internet companies, raised $1.5 billion from its Hong Kong IPO as investor flocked to the biggest listing to date by a new generation of Chinese financial technology (fintech) companies.
Shares of ZhongAn Online Property & Casualty Insurance Co. Ltd. were priced at HK$59.70 ($7.64) apiece, representing the top of their previously indicated range, according to a company announcement on Wednesday to the Hong Kong stock exchange. The offering raised HK$11.5 billion after being nearly 400 times oversubscribed.
ZhongAn Online Property & Casualty Insurance Co jumped 18 percent on debut on Thursday after the biggest ever IPO by a financial technology firm in Asia, boosting Hong Kong’s hopes of luring future Chinese technology startups away from New York.
It also bodes well for expected listings from other fintech giants in Hong Kong, including Alibaba affiliate Ant Financial and peer-to-peer lending and wealth management platform Lufax.
Both Ant Financial and Lufax are considering IPOs in the city, sources previously told Reuters, although the timing for the deals is uncertain.
THIS July, Hong Kong’s private wealth management industry recorded a 14% increase in assets under management (AUM) compared to a year ago. Hong Kong’s wealth management professionals believe that the growth is primarily driven by mainland China’s growing wealth, according to a recent report.
The estimated total private wealth in terms of AUM in Hong Kong is over US$800 billion as of July 2017, according to a survey by Private Wealth Management Association (PWMA) and PwC. This is an increase of 14% from US$700 billion in July 2016. PWMA’s annual members survey was produced with PwC in July 2017, with 33 out of 45 PWMA member firms participated.
In the survey, 100% of respondents cited mainland China as the main driver of growth in Hong Kong’s private wealth AUM. This may be unsurprising, as China has become home to the highest number of billionaires in the world. According to Hurun Report in 2016, China now has 568 billionaires, surpassing the 535 billionaires in the US, and now ranks first globally.
Ant Financial, the payment affiliate of Alibaba Group Holding Ltd, said it will create a joint venture this year with CK Hutchison Holdings Ltd to operate its payment app in Hong Kong, ending Ant’s solo management of the service.
The new venture will allow Ant Financial’s Alipay to offer services via companies under CK Hutchison, which operates ports, retail, infrastructure and telecommunications businesses across 50 countries.
Ant Financial currently operates its payment app under the Alipay brand in Hong Kong, which offers transaction services at around 4,000 outlets in the city. The new joint venture will take over operation of the app, though it will still be branded Alipay, it said on Tuesday.
Kommunalkredit is a specialist bank for infrastructure financing based in Vienna, with a branch office in Frankfurt am Main. Its new online offering KOMMUNALKREDIT INVEST targets retail investors, who want to deposit their savings at attractive conditions. Their funds will be used to support key infrastructure investments made by Kommunalkredit such as schools, hospitals, care homes, wind farms, solar energy installations, waste-to-energy facilities, and transport projects.
FinTech Group provides a broad range of fully digital solutions and interfaces for KOMMUNALKREDIT INVEST: they include frontend processes such as online account openings, e-banking, and identification solutions such as video identification, e-signature and mTAN. On the backend side, FinTech Group will also run a data warehouse and carry out compliance monitoring as well as regulatory reporting.
Thirty firms – ranging from start-ups to established corporates – have already selected the Fintech District as their home; they include businesses working in crowdfunding, peer-to-peer lending, blockchain and cryptocurrency-based technologies, and robo-advisory.
Trade finance revenue is slipping at the world’s largest banks, especially as companies struggle in a global trade environment operating with a $1.5 trillion gap in trade finance availability.
According to the ADB’s latest survey findings, though, outlined in its Trade Finance Gaps, Growth and Jobs report, FinTech players have yet to make a meaningful impact on the trade finance industry.
The survey polled more than 515 banks and 1,336 companies across 103 countries, finding that FinTech innovators can, indeed, help address the $1.5 trillion trade finance gap which disproportionately impacts small- and medium-sized businesses (SMBs).
Approximately one-fifth of the companies surveyed said they had used some type of digital finance, alternative lending or FinTech platform to access trade finance, according to the ADB results.
Banks aren’t just dealing with customers who want lending and credit information faster. Government regulations are also requiring them to do so, such as Australian banks requiring affordability checks as part of new consumer loans.
Venkat Srinivasan, Head of Lending at Monzo, said that as a new digital bank, they began to question why it was often a month or two months before consumers could see the transaction come through on their banking or credit card. Venkat noted that while technology is improving and customers are evolving, data availability is evolving at the same time.
Roger Vincent, Head of Banking and Innovation at Equifax, discussed how they’re finding new ways to store data, facilitate data movement, and turn data into insights in the form of scores and characteristics.
Phil Grady, CEO of Castlight Financial, discussed how they created a business that has taken traditional credit data from consumers and integrated it with transactional data. This involves categorizing income and expenditures, and then determining essential expenditures versus non-essentials. This enables Castlight to determine consumers’ real disposable income, which in turn helps lenders make better lending decisions. This type of granular level data has allowed Castlight to create the first real-time Financial Capability Formula.
Only three per cent of 162 advisers surveyed said they offered fully automated wealth management services, the research found.
The study, which was conducted by research firm Platforum on behalf of JP Morgan, also found that only 14 per cent plant to implement it in the next two years.
Australia’s alternative finance market has grown by 53% over 12 months according to a report released by KPMG, becoming the second largest in the Asia-Pacific region.
The report revealed Australia’s alternative finance market increased from US$27 million in 2015 to US$610 million in 2016 as Aussies turn to peer-to-peer lending (P2P), balance sheet business lending and crowdfunding.
In the US$245.28 billion Asia-Pacific alternative finance market, China was found to be the leader, accounting for 99.2% and representing 85% of the total global market.
P2P consumer lending was Australia’s second most popular alternative finance model behind balance sheet business lending, increasing from US$43 million in 2015 to over US$158 million in 2016.
Funding Societies, Singapore’sand Southeast Asia’s leading crowdfunding platform, has announced the launch of its chatbot Miyu. This is the first such chatbot created by a crowdfunding company in Southeast Asia. Miyu works round the clock to answer queries that a business owner or an investor may ask about the products and services offered by Funding Societies.
“We created Miyu via self-learning with guidance from our seniors. She is different from most other chatbots in the financial services space. Personally, I like that Miyu can escalate to human support whenever required, giving our users a seamless experience,” said Sherman Lim, who is a Singaporean and majors in Economics and Strategic Management at Singapore Management University (SMU).
The future plans for Miyu include acting as a Virtual Relationship Manager who can assist SMEs in loan application, and help investors navigate through the platform, initiate video chats with real customer experience managers as well as perform account opening and management activities such as investments, deposits, withdrawals, etc. without human intervention at any time of the day.
Financial Technology (Fintech) firms are in early discussions with the government and Micro Units Development & Refinance Agency Ltd (MUDRA), exploring opportunities under the Pradhan Mantri Mudra Yojana (PMMY), said three people close to the development.
So far, PMMY loans have been extended by all public sector banks, regional rural banks (RRBs), cooperative banks, private sector banks, foreign banks, micro finance institutions and non-banking finance companies. Fintech companies have not been involved yet.
Under Shishu, refinancing is provided for loans up to Rs50,000. Kishor offers refinancing for loans above Rs50,000 up to Rs5 lakh whereas, Tarun provides refinancing for loans above Rs5 lakh up to Rs10 lakh. Mudra also offers services like credit guarantee for micro units and securitization of loan assets against micro enterprise portfolios.
Emcredit, a subsidiary of Dubai Economy, and the UK-based Object Tech Group have signed a partnership deal to facilitate financial transactions through contactless payment.
Emcredit and Object Tech will develop a competitive, accountable and legally compliant emCash ecosystem together. Several associated products to protect emCash wallet and digital documents, enable direct real-time settlement and peer-to-peer lending, and provide credit rating based on the distributor ledger of emCash will also be developed.
emCash is based on blockchain technology and will be the digital currency in emPay wallet. The payment method, according to Dubai Economy, will allow the UAE residents to make varied payments through the near field communication (NFC) option on their phones. With emCash, emPay users will have the option of a secure digital currency, and merchants can receive such payments in real time without going through intermediaries.
It’s estimated that in 2017 alone, nearly $60 billion worth of payments will be made on mobile platforms. Comparing these figures to just two years ago, only $8.71 billion worth of transactions were made digitally in 2015.
In line with other frontrunners in the industry, such as London, Silicon Valley and New York City, Toronto, Canada, my hometown, stands apart as an emerging FinTech ecosystem, and it’s become a well-recognized leader amongst the largest and most stable financial centers in the world.
Ontario has been a global leader in digital payments for more than a decade, with Toronto leading in a high concentration of cryptocurrencies,blockchain, alternative lending and e-commerce growth verticals.
SoFi CEO hiatus stalls bank plans. AT: “Until now, it’s been speculation, but it makes sense that SoFi will have to wait to get their coveted bank “because regulators assess whether a company has a capable CEO before allowing it to accept deposits.” Square could be the first fintech to actually see it happen.”
Square wants to a bank, and the real banks are pissed. AT: “The decision should not be based on how banks and their executives feel about it. Rather, the decision should be based on law, and whether or not there is a benefit to consumers and the financial marketplace.”
Acting Comptroller of the Currency comments on fintech charter and online lending. AT: “A rehash of what’s already been reported, but with editorial comments (as usual) by PeerIQ. Always prescient, I particularly like this insight: ‘Our interpretation of the above is that, under the FinTech charter, commercial firms such as Walmart, Amazon, Google, and Facebook would have a path to offering banking services’.”
Zopa searches for new borrowers with brick-and-mortar partnership. AT: “In conjunction with banks offering digital lending products, through partnerships and otherwise, this is another path marketplace lenders can pursue to grow their business–partnerships with brick-and-mortar institutions to offer loans through traditional channels.”
One of the most valuable private financial technology startups in the United States, SoFi’s $4.3 billion valuation was based on expectations it could develop into a major lender but Cagney’s departure this month and the circumstances around his exit complicate efforts to create a new-generation bank that could compete against JPMorgan or Bank of America.
The company has hired headhunters over the past few days to help find his replacement, but an appointment is not expected to take place until the end of the year, a source familiar with the matter told Reuters.
The gap at the top is likely to stall SoFi’s application for a banking license, according to the source, because regulators assess whether a company has a capable CEO before allowing it to accept deposits.
A banking license was a key part of Cagney’s push to grow SoFi beyond its core business of student loans and unsecured personal loans.
But without Cagney at the helm, the emphasis is expected to shift.
The company will be more disciplined about testing new products before selling them widely, a source close to the company said.
Small businesses love Square because it charges them less than the bigger, bank-owned payment processors, and the little white card-swipes that plug into a smartphone are easier and more convenient than handheld credit card terminals. Square also — through a partnership with a tiny bank in Utah — makes loans to small companies and entrepreneurs banks would turn away.
As much as small merchants love Square, smaller banks distrust it, particularly now that the company, which is based in San Francisco, has applied to become an industrial loan company (ILC), a controversial type of banking license offered in Utah and a few other states.
And while Square insists it only wants to make small loans to the merchants it serves, banks see this as a backdoor way into their bread-and-butter business of taking deposits and making loans, both to businesses and consumers.
And Square, with its at least 2 million merchant customers, may look to today’s bankers a lot like Walmart did a decade ago. The company has been aggressively soliciting the merchants who use it as a payment processor, offering them small-dollar loans by email.
Take Courtney Foster, who runs a one-chair salon in the Murray Hill neighborhood of Manhattan and has used Square to accept payments for years. One day she got an email from Square Capital with an offer of a loan of $1,000 to $1,500, which would be paid back directly out of her payments processed through Square.
She has since borrowed about $3,000 in total from Square using the money (supplied by Celtic Bank) to start her own line of hair products.
The average loan approved by Square is about $6,000, and the company has either advanced or loaned almost $2 billion since 2014. The amount due back is typically 10% to 16% more than the amount loaned out — which is on the low end for similar types of small business finance — with payments coming out of a fixed percentage of the merchant’s receipts received through Square. The whole balance is due after 18 months, though Square customers can repay early.
Utah has 16 industrial banks, and most fall into the latter category, while some are retailers that issue their own loans, like BMW. Other companies that operate Utah industrial banks include American Express, USAA, UBS, and Sallie Mae.
Also, in a major shift from prior OCC Head Tom Curry, Noreika affirmed that the proposed FinTech charter could be granted to commercial firms. Former Chair of the FDIC, William Isaac, was also constructive on the concept of enabling commercial firms to engage in banking to drive greater competition, customer choice, and expand access to credit to the 60% of Americans that cannot access a loan from a US bank. Historically, the separation of banking and commerce under the Bank Holding Company Act has prevented commercial firms (outside the ILC charter) from offering banking services. Our interpretation of the above is that, under the FinTech charter, commercial firms such as Walmart, Amazon, Google, and Facebook would have a path to offering banking services.
Cross River Bank CRO Adam Goller moderated a panel including PeerIQ (Ram Ahluwalia), Affirm (Alex Karram), Marlette Funding (Jeff Meiler), and former Massachusetts Commissioner of Banks, David Cotney. PeerIQ cited data and research from Columbia and Harvard Law concluding that the lack of regulatory clarity stemming from Madden-Midland has reduced the availability of credit in District 2.
On Timing for Issuing Charters:
“Interest also remains in the possibility of the OCC offering special purpose national bank charters to nondepository fintech companies engaged in the business of banking. … We have not, however, decided whether we will exercise that specific authority to issue special purpose national bank charters to nondepository fintech companies. We will keep you posted.”
PeerIQ Context: The Conference of State Bank Supervisors and NYS Dept of Financial Services have challenged the OCC’s authority to issue charters. Also, the OCC may be waiting for the nominee of Head of OCC Joseph Otting to be confirmed by the US Senate before introducing the FinTech Charter. Otting was approved by the Senate Banking Committee in early September.
“The Fintech Charter Decision is an unlawful assertion of power that usurps New York consumer protection laws and would preempt plaintiff’s ability to regulate any number of the over 600 non- depository institutions she currently regulates,” wrote Matthew Levine, the executive deputy superintendent for enforcement at the department.”
“Acting U.S. Attorney Joon Kim, representing the defendants, argued that DFS lacks standing in the complaint because the OCC’s regulations addressing the special-purpose national bank charter have resulted in no injury-in-fact, because the office has not reached a final decision on whether it will offer the specific type of national bank charter that does not take deposits and conducts activities other than fiduciary activities. The U.S. Attorney’s Office also argues that the complaint should be dismissed for failure to state a claim.”
One of the leading accelerator programs today is Plug and Play, they claim to be the world’s largest startup accelerator. Lending Club and many other big names have gone through their program. In 2014 they started a dedicated fintech accelerator program, founded by Scott Robinson, who is our latest guest on the Lend Academy Podcast.
Man Group, which has about $96 billion under management, typically takes its most promising ideas from testing to trading real money within weeks.
What spooked him was an experiment at his firm, Man Group Plc.Engineers at the company’s technology-centric AHL unit had been dabbling with artificial intelligence—a buzzy, albeit not widely used, technology at the time. The system they built evolved autonomously, finding moneymaking strategies humans had missed. The results were startlingly good, and now Ellis and fellow executives needed to figure out their next move.
The program stayed in quarantine until 2014, when a senior portfolio manager with a Ph.D. in mathematical logic named Nick Granger decided it was time to take it out of testing. He gave the AI system a small amount of money from a portfolio he was managing—then more, then more again. At each step, the program was profitable.
Matic Insurance Services (Matic), a digital insurance agency that enables borrowers to purchase homeowner’s insurance during the home-buying transaction, today announced a new partnership with LendingQB, a provider of “lean lending” loan origination technology. Matic announced the news as part of a live demonstration at San Francisco’sDigital Mortgage conference.
Matic’s integration with LendingQB’s flagship loan origination software (LOS) makes it easy for borrowers to upload or secure a homeowner’s insurance policy during the mortgage application process. The result is a less stressful experience for borrowers and the elimination of costly insurance-related delays for LendingQB’s lender clients.
Fintech generally refers to companies like SoFi, TransferWise, and Revolut, whose ambition is to use technology to challenge traditional banks. What Yahoo Finance is doing is a little different—its app will add online brokers like Fidelity and E-Trade to its platform, but it won’t make any money from the brokerage charges. Instead, Yahoo Finance (now part of Oath, a Verizon-owned company), which has about 41 million mobile users, is trying to boost usage of its app.
The platform is targeted at devoted investors and provides more financial data for free than you can get outside of a Bloomberg terminal, according to Michael La Guardia, Yahoo Finance’s head of product.
Alipay almost accidentally started the world’s biggest money market fund (paywall) when it gave users a way to park their money from mobile payments. Amazon, meanwhile, offers credit to its merchants and has made more than $3 billion of loans, according to the World Economic Forum (WEF). Facebook has ambitions for its app to do just about everything, including financial activities. Tencent’s WeChat in many ways already does.
Zopa is partnering with a building society to offer its loans as it seeks to add more borrowers to the platform.
The online peer-to-peer lender will provide loans at 11 bricks-and-mortar branches of Saffron Building Society across Hertfordshire, Essex and Suffolk, as well as online.
On Friday, online lending platform Zopa announced the latest update of its credit risk model. This news comes just a few weeks after the lender announced updated on improving loan sale time progress, rebate period, and ISA transfer-in. Chief Product Officer at Zopa, Andrew Lawson, revealed he and his team are continuing to monitor leading macroeconomic indicators carefully alongside how Zopa’s loans are performing compared to expectation:
Zopa, the world’s first peer-to-peer lending company, hoped the partnership whereby drivers for the ride-hailing app were directed to its website for loans would mark its entry into a multibillion-pound market for secured loans in the UK.
But barely six months after the deal was struck it collapsed, with the partnership failing to attract as many drivers as expected.
Zopa’s experiment with Uber underlines the enormous difficulty faced by marketplace lenders attempting to find new borrowers. These borrowers are crucial for the platforms to grow at a time when there is strong interest from institutional investors to provide crowdfunded loans.
Source: Financial Times
According to Mr Zhang, institutional investors such as hedge funds, asset managers, pension funds and family offices now account for between 30 and 40 per cent of peer-to-peer consumer and business lending, compared with less than 5 per cent before 2014. BlackRock, the world’s largest asset manager, made its first significant retail investment in peer-to-peer loans last year when it bought a stake in Funding Circle’s investment trust.
So far, however, they have struggled to attract borrowers to match this demand. Competition is increasing from traditional banks — Goldman Sachs has its own online lending platform — especially for prime and super-prime debt that is less likely to default.
Assetz Capital, one of the UK’s fastest growing peer-to-peer finance platforms and the largest property backed peer-to-peer lender, announced on Friday it has lowered its entry interest rate for commercial mortgages from 7.9% to 6.9% in an unprecedented move to give access to even lower rates for lower-risk borrowers looking for commercial mortgages. This is one of the lowest rates available from any alternative finance providers.
Around three million of Britain’s small businesses do not accept card payments, despite the UK rapidly becoming a nation of card-only shoppers.
One in six British shoppers now uses cards only to pay. A further 38pc would typically try to pay with a card first before they have to pay with cash, according to a study by Square, the payment company belonging to Twitter founder Jack Dorsey.
Small companies could be missing out on millions of pounds’ worth of business by not offering card payment facilities, Square warned.
Card payments overtook cash payments as the main method of purchases in the UK for the first time in July this year, according to the British Retail Consortium. The average Brit has just £32.54 in cash in their purse or wallet right now – not enough to cover more than one of the average transaction size of £18.42.
The company, which has been overhauled under new management after being accused of targeting the vulnerable and being forced to compensate nearly 200,000 borrowers who overpaid owing to “system errors”, cut its annual pre-tax loss from £80.2million to £64.9million.
Revenue grew by 18 per cent to £76.7million as more products boosted customer numbers by 6 per cent.
Britain’s biggest payday lender Wonga has revealed it remained deep in the red last year with losses of £64.9m, but confirmed plans to return to profit in 2017.
Nutmeg’s 2016 losses have widened £9.3 million as it continued to invest heavily, as it presses ahead with developing the ‘most approporate’ advice proposition for its customers.
The loss, revealed in its accounts published on Companies House, follows the £8.9 million loss it posted in 2015. Its operating expenses rose from £10.8 million to £11.9 million over the year.
At the end of the year Nutmeg managed around £600 million in assets under management on behalf of 25,000 clients.
Turnover rose by almost 50% from £1.72 million to £2.56 million.
One area of fintech that is of interest is wealthtech. This sub-sector is likely to become more visible over the next few months. Wealthtech has become defined as utilising technology to enhance wealth management and the retail investment process.
The most visible players in the UK are the robo-advisors with Nutmeg the best known (and RiskSave following behind!) but other concepts are also deserving of attention, such as Munnypot.
These developments will soon be more visible at branch level.
An offering of automated financial advice from the retail banks could go a long way towards alleviating this. Santander and HSBC have already launched product offerings in this space, RBS is trialling a service through its Coutts’ sub-brand and Lloyds (with a quarter of the UK market) are sitting on the sidelines awaiting the results of the regulator’s Financial Advice Market Review (FAMR).
Fintech start-up Curve will now let users claim business expenses across multiple bank cards through its app.
The London-based firm’s app allows its users to link all of their bank cards to one contactless MasterCard. Curve said it hopes to automate the tedious process and remove any friction associated with business expenses. It is predominantly targeted at small business owners and the self-employed.
Curve said Monday it would add online accounting software developer Xero to the app, meaning users will now be able to claim business spending across all their accounts.
As London’s startup community awaits the result of Brexit negotiations – and its impact on single-market access – one might think tech would have ground to a halt. But growth continues: the last 18 months have seen billion-dollar valuations for TransferWise, Funding Circle and Improbable, and a near-unicorn valuation for Deliveroo.
Monzo
Monzo wants to make banking smarter. Founded in 2015 by Tom Blomfield, Jonas Huckestein, Jason Bates, Paul Rippon and Gary Dolman, it offers pre-paid cards connected to an app that tracks spending and lets its customers analyse their financial activity.
Nested
One of a growing number of UK property – or proptech – startups, Nested guarantees that it will sell your house within 90 days, or buy it themselves.
Habito
Habito scours more than 15,000 mortgage products to suggest the best option, and takes a commission from the eventual lender. In January 2017, the startup raised £5.5 million in a Series A round led by Ribbit Capital.
Ravelin
Founded in 2014, Ravelin analyses online behaviour in real time to reduce payment-related fraud. According to its clients – including Deliveroo, Karhoo, and Easy Taxi, its technology reduces fraud incidence by more than 50 per cent. The company has raised £4.3 million to date from backers including Passion Capital and Errol Damelin.
Some commentators estimated nearly half a million new investors would try their hand at P2P lending when the Innovative Finance ISA brought eligible platforms into the ISA fold.
This is unsurprising given that, according to government statistics, British consumers have around £500 billion either saved or invested in ISAs.
However, the stampede has not arrived yet.
Plenty of people think the FSCS offers an insurance policy against poor investment performance. It does not. If a share portfolio tanks, for example, the scheme will not be there to save you. That is the risk you run by choosing to invest in the equity markets.
The FSCS is, however, on hand to compensate investors if a provider has been shown to mismanage its product, and has subsequently gone bust. Only then does it offer up to £50,000 (2017/18 tax year), not the larger amount doled out to savers.
LendInvest’s buy-to-let index ranked the city as the fifth best buy-to-let postcode for landlords in the third quarter of 2017, up from 33rd in the second quarter.
“Cities such as Hull and Nottingham making significant gains in the Index (up #33 to #5 and #35 to #12 respectively) is encouraging, and points to competitive market conditions in those areas and higher than average levels of activity.
The top 10 areas for investors in order of ranking are Luton (#1), Colchester (#2), Manchester (#3), Rochester (#4), Hull (#5), Stevenage (#6), Romford (#7), Southend-on-Sea (#8), Ipswich (#9) and Ilford (#10).
China’s wealth-management industry is undergoing profound changes, shifting away from short-term, fixed-income products to longer-term, equity-based investment, said Tang Ning, chief executive of Beijing-based fintech conglomerate CreditEase.
Last year, the Forbes listed a record 400 billionaires from the Chinese mainland, compared to 335 a year ago. The listed members held a total of $947 billion assets, a 14% rise from the previous year. Meanwhile, China’s per-capita GDP exceeded $8,123 in 2016, up from $8,069 a year earlier, according to the World Bank.
Unlike investors in the U.S. and other developed market, Chinese investors have long favored most the fix-income products like bonds and bank bills, betting on governments’ implicit payment guarantee. But as China’s economy slows and its financial market liberalizes, the government has become increasingly hesitant to offer such sweeping guarantees.
A number of wealth management companies including CreditEase have launched private equity FOF over the past few years. In early September, the China Securities Regulatory Commission (CSRC) approved the first batch of six firms including China Asset Management, China Southern Fund Management and Manulife Teda Fund Management to set up publicly offered FOF products.
Tang estimated that there are 200 million active investors in China who do not have access to human advisers and asset managers because of their hefty fees.
When the heads of three of China’s most prominent companies join hands to launch a start-up, investors notice.
Jack Ma Yun of Alibaba Group Holding, Tencent Holdings‘ Pony Ma Huateng, and Peter Ma Mingzhe of Ping An Insurance Group — collectively known as the “three Ma’s” — did just that. Looking to turn Ping An into a full-blown financial technology company within ten years, Peter also enabled the growth of Lufax, which started as a peer-to-peer lending platform in 2011 and became one of the most valuable e-finance company worldwide as of September.
Four years ago they founded China’s first online-only insurer. It was a company with an untested business model and making no money, but it sparked an investor frenzy.
Mobile banking continues to soar in China. According to China Internet Watch, total transactions of China mobile banking clients totaled 55.63 trillion yuan (US$44 trillion), up 5.1% quarter on quarter. China Construction Bank (26.1%) and Industrial and Commercial Bank of China (21%) have a combined market share of close to half of mobile banking in Q2 2017.
The French real estate crowdfunding market grew by 50% in 2016 and keeps growing at the same linear growth pace in 2017. While new platforms continue to join, first entrants strongly dominate the nascent market. With €160 million worth of real estate projects funded, the French platforms have a positive record of delivering expected returns.
It has since grown at a fast, but more linear pace of +53% to reach €68 million in 2016, and is expected to grow by 50% again in 2017.
French real estate crowdfunding attracts new platforms. In 2016, their number grew from 26 to 42, with 19 new entrants and 3 withdrawals. Indeed, more than 90% of real estate crowdfunds are raised by the top 10 platforms and 75% by the top 5. Between them, the two leaders, WiSeed and Anaxago, account for more than 50% of the market.
The winners of the 15th annual Investor Allstars awards were announced this week, with Funding Circle co-founder and CEO Samir Desai being crowned Entrepreneur of the Year and CoderDojo winning the Tech4Good award.
The Entrepreneur of the Year award went to Samir Desai of Funding Circle and online property lending and investment platform LendInvest was announced as Europe’s Allstar Company.
The full list of award winners is:
Exit of the Year: Skyscanner (Scottish Equity Partners)
Growth and Buyout Fund of the Year: Livingbridge
Entrepreneur of the Year: Samir Desai (Funding Circle)
VC Fund of the Year: Idinvest Partners
Europe’s Allstar Company: LendInvest
Corporate Development Team of the Year: Sage Group
Investor of the Year: Benoist Grossmann (Idinvest Partners)
VCT of the Year: Octopus Ventures Specialist
Debt Provider of the Year: Kreos Capital
Seed Fund of the Year: LocalGlobe
Service Provider of the Year: Orrick
Tech4Good Award: CoderDojo Foundation (part of Raspberry Pi Foundation)
It seemed too good to be real. A hairy creature, which some people guessed was an afghan hound, effortlessly floats underwater and moves its arms with the grace of a ballet dancer. It’s pure euphoria, captured in a video that lasts only a few seconds.
When Klarna, a tech bank with a focus on online shopping, posted the video to its Instagram account on Sept. 17 with the caption, “When you’re swimming into the weekend like… #noworries,” many people assumed it was a video of a real animal swimming in a pool. Or maybe they just wanted to believe.
It’s an animation that is part of an ad campaign for Klarna, which is trying sell people on the company’s “smooth” payment system.
Deals to regtech startups have increased steadily (if at times slowly) over the past few years, from 83 deals in 2013 to 147 last year. At the current run rate, deals in 2017 are on track to hit a new high, while funding is on pace to grow 14% to nearly match record funding levels set in 2015.
In 2017 YTD, regtech startups have seen 103 deals worth $894M in disclosed equity funding. At the current run rate, deals in 2017 are on track to reach a new high of 148 (up slightly from 147 in 2016). Funding is also on pace to grow, potentially bringing total disclosed equity investment over the last 5 years to more than $5B.
Source: CB Insights
Last quarter saw 34 deals, dipping 13% from Q1’17 to hit a 6-quarter low. Though deals were down, funding was up 14% from the previous quarter — and grew 64% year-over-year — to reach $326M.
H1’17 has seen 73 investments, up 3 deals from H1’16, while funding is up approximately 54% over the same period.
Peer-to-peer lender, RateSetter, says 56 per cent of money invested with it is from savers withdrawing their money from their bank savings accounts.
Yield-hungry investors are understandably frustrated with earning next-to-nothing on their cash held at their banks, with interest rates at historic lows and likely to stay that way for the foreseeable future.
With the the advent of peer-to-peer (P2P) lenders, online platforms that match investors and borrowers, investors can get up to three times the interest paid by term deposits.
New Zealand has the highest per capita fintech lending volumes of any country in the Asia Pacific, and has embraced fintech faster than any other neighbouring Asia Pacific countries.
According to the research, peer-to-peer consumer lending forms the bulk of market activity in here. The second largest was donation-based crowdfunding, for which US$16.8 million was raised in 2016 – an increase of around 100% over the previous year. Equity-based crowdfunding was the third largest model in New Zealand with US$13.85 million across 2016 – up from US$11.86 million in 2015.
UK startup Appetise looks to list on the ASX, Study Loans has secured seed funding and P2P lender RateSetter Australia has closed additional funding from a private equity (PE) fund.
Melbourne-based fintech Study Loans, which offers a credit engine targeted at the student loans sector, has raised A$2 million ($1.56 million) in seed funding from investors that include the Simonds family and RMY Corp, as well as A$5 million ($3.9 million) in debt equity.
RateSetter Australia, a peer-to-peer (P2P) lending platform, has secured A$8.5 million ($6.65 million) from private equity fund Five V Capital. The deal values the company in excess of A$100 million. Existing equity investors in RateSetter are RateSetter UK, Carsales and Strattons.
Chqbook – a fintech startup that allows customers to explore, compare, book and get personal finance products like home loans, personal loans and credit cards, raises undisclosed funds from Youwecan backed Startup Buddy, Apurva Chamaria, global head of corporate marketing, HCL, Sachin Arora, ex-CTO Myntra, Bharat Gupta, Founder of Net Asset Consulting LLP, Amit Manocha, Private equity professional based out of Singapore, and others.
Indonesian Financial Services Authority (OJK) revealed that peer-to-peer (P2P) lending platforms in Indonesia in total has channeled up to IDR1.4 trillion (US$106 million) in funding for small and medium enterprises (SMEs) in the country. The number is a 496.5 per cent year-to-date (YTD) growth from December 2016’s number of IDR242.48 billion (US$17.9 million).
Singapore’s and Southeast Asia’s SME crowdfunding platform Funding Societies announced on Friday it was named the first southeast Asia company to win the Global SME Excellence Award from United Nations’ ITU Telecom, which was held this year in Busan, South Korea.
Vea, 67, now heads Voyager Innovations Inc., the digital arm of PLDT and the one behind digital platforms such as Smart Padala (mobile remittances), PayMaya Philippines Inc. (formerly Smart e-Money), Freenet (free sponsored data platform), VYGR (digital performance-based marketing), Tackthis! (electronic commerce platform), Hatch, (marketing technology and innovations platform), Lendr (digital consumer loan platform), FINTQ (financial technology unit) and Voyager DX (digital transformation). Voyager, which has 600 employees, introduces solutions that allow customers to participate in the digital economy such as by using digital money.
Marzan presented data showing that 60 million or 58 percent of the Philippines’ 103 million people are Internet users. Active social medial users are 60 million as well.
“In the Asia-Pacific region with 4.2 billion population, 46 percent are already Internet users and active social media users are 1.5 billion or 36 percent. Mobile connection is 3.99 billion and active mobile social users are 1.44 billion. This is exponentially growing and we have to prepare for it,” Marzan said.
TrueMoney, a new financial technology player, seeks to have one TrueMoney center in each of the country’s more than 42,000 barangays to serve those who need a remittance network but have no bank accounts.
To meet that goal, TrueMoney teams up with cooperatives and groups in different regions. Its latest partnership is with Cebu People’s Multi-Purpose Cooperative (CPMPC), a community-based savings and credit cooperative with over 55,000 members to-date.
At this point, TrueMoney has over 5,000 centers in the Philippines.
Beehive, MENA’s leading peer to peer lending (P2P) platform, has secured $5m investment as part of a Series A round led by Riyad TAQNIA Fund and supported by the Mohammed Bin Rashid Fund (MBRF), the financial arm of Dubai SME, as well as several other regional investors. This latest fundraise brings the total raised by Beehive to $10.5m since its launch.
To date, Beehive has successfully facilitated finance over $35 million (AED 130 million) to more than 200 business funding requests and registered more than 5000 international investors.
South Africa’s first black billionaire Patrice Motsepe has reportedly invested in TymeDigital, an online lender that has recently been awarded an operating license by the South African Reserve Bank.
African Rainbow Capital (ARC), an investment firm founded by Patrice Motsepe, recently acquired a 10% stake in TymeDigital, which is a subsidiary of the Commonwealth Bank of Australia, one of the world’s largest banks.
SoFi’s plans to become a bank isn’t going so well. AT: “This is starting to sound like a broken record, and it will soon be nothing more than stating the obvious. If it isn’t already. But Bloomberg goes into a little deeper analysis than most folks making this pronouncement, and they bring up one very good, interesting point: The next CEO will have his own vision. Where will that take SoFi?”
Navient buys Earnest. AT: “Navient wants to get into student loans. Evidently, purchasing Earnest will help them do that more efficiently and effectively.”
How tough can Schwab get with digital upstarts? AT: “This is the nature of competition and the downside of being an upstart. Legacy players with money can rely on their financial strength. When you have capital, you don’t have to be first.”
Fintech lenders, bank take note. AT: “An excellent analysis of the Upstart No-Action Letter and what it means for other alternative lenders and banks.”
Roofstock raises $35M in Series C. AT: “Roofstock is on the rise and has a lot of potential to dominate the single-family rental market.”
Now, with Cagney felled by a flurry of sexual harassment allegations, the question is whether SoFi has any chance of building the financial supermarket he envisioned. This was always going to be a tall order given the intense competition from entrenched players and fintech startups alike, but now the SoFi brand has been tarnished as well.
“There are a lot of question marks,” says Alois Pirker, research director at advisory firm Aite Group. “The new CEO will need to find his or her bearings there and that will tell which direction they’ll be going.”
Some members of the board consider the moves into life insurance and wealth management Cagney “pet projects,” according to a person familiar with their thinking. Directors prefer to focus on more mature businesses such as personal loans and mortgages that are more predictable and established, said the person, who requested anonymity to discuss a private matter.
The firm reported revenue of $134 million in the second quarter, according to an email from Cagney to investors in August. It had adjusted earnings before interest, taxes, depreciation and amortization of $61.6 million and extended over $3.1 billion in student loans, personal loans and mortgages during that time frame. Personal loans are the most profitable, the person said, followed by student loans and then mortgages.
The wealth management unit had just $12 million in assets under management as of early September, according to a filing. This is far short of the more than $100 million the firm had set as an internal goal, people familiar with the matter have said.
Social Finance is returning to the securitization market with $626.4 million of bonds backed by loans used to refinance the student debt of borrowers with advanced degrees and high incomes.
The transaction, SoFi Professional Loan Program 2017-E (internal link; not in original source article), comes just weeks after the marketplace lender experienced a management shakeup; its chief executive officer and chief financial officer both resigned.
Most people are not fans of student loan debt, but last week, SoFihosted a party at Front & Palmer in Philadelphia to celebrate it as a means of opening doors to education and more opportunities.
Recent college grads were invited to attend for free and to gain admittance, only needed to bring a proof of their student loan debt.
Financial technology start-up Earnest has agreed to be acquired by student loan servicing giant Navient for $155 million in cash, the companies said on Wednesday.
Earnest, an online lender that has focused on refinancing student loans, will remain a distinct brand and will continue to be led by its current management team, including founder and CEO Louis Beryl.
The acquisition will be a launching pad for Navient to begin originating its own student loans.
As its robo-assets soar to seemingly effortless heights, Charles Schwab & Co. is hiring an intriguing ex-Betterment talent to ensure that its good fortune holds.
The San Francisco-based investments giant, with $24 billion* of assets under automated management in Schwab Intelligent Portfolios and Schwab Intelligent Advisor, hired Cynthia Loh, the ex-general manager of Betterment for Business, the division that oversees the New York-based robo‘s 401(k) unit.
The Schwab robo-launch’s differentiators were its “zero” fee, its 24/7 access to service personnel and its national advertising. Yet the look and offering of the Schwab Intelligent offering are considered plain-vanilla in scope.
Outlining his firm’s strategy for battling digital disruption, Schwab CEO Walt Bettinger envisioned it would push client asset revenues lower, while relying on its brand and established market share to grow.
Reacting to his statement, industry observers expect an uphill slog for independents as the largest firms gear up for a price war on three fronts: financial advice, online trading and ETFs.
An early study by A.T. Kearney predicted incumbents would slash prices to compete with robo advice upstarts. While that never came to pass, the 2015 study still predicted industry revenues would drop by as much as $12 billion by 2020.
“[Schwab has] $3 trillion in client assets. They have very positive brand recognition and customer satisfaction scores that are the envy of most of the industry. They have demonstrated a willingness to cut price to gain market share, as seen with their recent commission cuts in online trading. So yes, they can throw their weight around.”
The wisdom of possessing a trifurcated digital advice offering — Schwab Intelligent Portfolios, a digital-only service, an institutional platform for RIAs, and the hybrid robo advisor Schwab Intelligent Advisory — also becomes clearer, McDermott notes. (Schwab’s robo now has $20 billion in AUM).
Robo advice is expected to collectively top $1 trillion in assets under management in fewer than five years, according to Boston-based consulting firm Aite Group. But micro-investing will partly feed such growth, it predicts, noting over 60% of millennials already are subscribed to such apps.
While Upstart’s No-Action Letter has narrow applicability, it may serve as a tool for other FinTech lenders in implementing innovative products and services and establishing relationships with banks.
According to Upstart, its underwriting technology uses traditional underwriting methodologies in combination with other variables that are correlated with financial capacity and “repayment propensity.” Upstart states that its model understands and quantifies risk associated with all borrowers—both those with credit histories and those without credit histories. As a result, the Upstart loan program is able to offer credit to segments of the population with limited credit or work histories at more favorable rates. In other words, it appears Upstart is underwriting consumer loans without reliance upon traditional criteria, such as credit scores and length of employment history.
The No-Action Letter is only applicable to Upstart’s automated model for underwriting applicants for unsecured non-revolving credit, as described in Upstart’s original Request.
The No-Action Letter will expire three (3) years after its issuance, at which time Upstart may seek to renew the No-Action Letter.
The No-Action Letter is subject to modification or revocation at any time at the discretion of the CFPB staff for any reason, including where the CFPB’s staff determines that such modification or revocation is appropriate to protect consumers or is otherwise in the public interest.
On one hand, a no-action letter may be particularly useful for a FinTech company, utilizing innovative technology and operations, to obtain guidance concerning the permissibility of its business model under specific regulatory constructs. A no-action letter may also be useful for a FinTech company seeking to establish joint ventures with banks.
On the other hand, a CFPB-issued No-Action Letter has narrow applicability as it is only applicable to the requesting applicant, a specific regulatory issue and the facts and circumstances identified by the applicant in its request submitted to the CFPB. Should a fact or circumstance fail to be conveyed accurately, or should a fact or circumstance change, the No-Action Letter may be rendered useless.
Housing investment platform Roofstock raised $35 million in a Series C funding round as it looks to cash in on growing interest in single-family rental housing.
Roofstock CEO Gary Beasley said the firm will use the money to hire and to expand into new markets. The company has raised a total of $68 million from investors, according to Beasley.
LendingTree, an online loan marketplace, has released the findings of its study on shopping timelines for purchase mortgages. The study analyzed data from a sampling of more than 5,000 closed loans from March 2016 through May 2017 and reviews the timeline for the entire mortgage shopping experience – from first submitting a loan request and being matched with a lender to the date of the mortgage loan closing. The study revealed that the median time from early rate shopping to closing on a purchase mortgage declined 7 days from 2016 to 2017.
From 2016 to 2017, LendingTree has seen a 19% increase in the number of loans closed within 30 days and a 27% increase in loans closed in 60 days.
Back in December 2013 Renaud Laplanche testified on Capitol Hill on small business lending. He was CEO of Lending Club back then and when a Congressman asked Laplanche a question as to how the government can best help he said to make IRS data more easily accessible to online lenders.
Fast forward four years and there appears to finally be some movement on this. Last week Congressman Patrick McHenry (R-NC) along with Senator Cory Booker (D-NJ) introduced a billthat would help the IRS move into the modern age and allow the automated retrieval of tax information through an API.
The IRS Data Verification Modernization Act of 2017 as it is called will require the IRS to create an API that will allow lenders to verify income in real time.
RealtyShares – New Small Balance Multifamily Program (RealtyShares), Rated: A
RealtyShares is now financing Small & Large Balance Commercial Multifamily, Apartment, Retail, & Hotel Assets.
Typical dwellings/ deal structure:
Class A, B & C+ dwellings
Typically like properties within a 30 mile radius of a popular MSA (but not necessarily a deal breaker as long as the project looks good)
The minimum loan financed needs to meet 1MM (Acquisition w/ renovation)
Asset Based Lender but having an experienced client who has done deals in the particular area is a great compensating factor
Project Summary
Loan Information
Loan Amount
Duration (term)
Closing deadline
Reason for deadline
Lien Information
Amount of existing first lien
Amount of other liens
Collateral Information
Collateral Type
Number of Units
Total Square Footage
Street Address
Purchase Price and Purchase Date (if refi)
“As Is” Real Estate Value
Date of “as is” Appraisal/BPO
Net Operating Income (NOI)
Capital Expenditures since Purchase ($)
Vacancy (%)
Guarantor(s) Information
Net Worth of Guarantor(s)
Estimated liquid assets of Guarantor(s)
FICO Score of Guarantor(s)
Guarantor(s) investment in collateral – current or proposed
Sponsor’s Website
Use of Proceeds:
Please provide a concise description, a few sentences, on the Use of Proceeds (i.e., discuss: acquisition, refinance, site improvement, tenant improvements, planning, design/permitting, carry costs and etc.)
Exit Strategy:
Please provide a concise description, a few sentences on the Exit Strategy (e.g. discuss prospective buyer, prospective permanent financing).
When you are working in the equity crowdfunding space, particularly as a company that is private, you certainly don’t have the liquidity that you would for a publicly traded stock that’s on the exchange.
On this episode of Industry Focus: Technology, host Dylan Lewis is joined by Motley Fool contributing writer Daniel Kline to talk about the dangers of this type of investing. They break down all the risks associated with purchasing shares in a company that does not have to report as much financial data as a traditional publicly traded company.
Elevate Credit, Inc. today announced that it will release its third quarter 2017 financial results after the market closes on Monday, October 30, 2017. Ken Rees, Chief Executive Officer, and Chris Lutes, Chief Financial Officer, will also host a conference call on the day of the release (October 30, 2017) at 5:00 pm ET to discuss Elevate’s financial results.
Interested parties may access the conference call live over the phone by dialing 1-877-407-0792 (domestic) or 1-201-689-8263 (international) and requesting the Elevate Third Quarter 2017 Earnings Conference Call. Participants are asked to dial in a few minutes prior to the call to register for the event. The conference call will also be webcast live through Elevate’s website at
These new mobile investment features include a dividend reinvestment plan (DRIP), fund screener, consolidated search functionality and enhanced visualization. Through the Citi Mobile App for iPhone, any Citi client with a brokerage account now enjoys one-touch access to their financial advisors and the ability to manage their investments personally, without switching to another channel.
Dividend Reinvestment Plan: Now clients can enroll eligible securities in a dividend reinvestment plan (DRIP) right within the app. Once a customer has opted in, this feature helps our clients put their cash dividends to work, instead of idling in their accounts.
Investment Search: This consolidated search function makes investing easier for clients interested in managing their portfolios themselves.
Performance Visualization: An enhanced visualization enables clients to track their portfolio’s performance and make adjustments right within the app.
Startup, app-only bank Atom has passed £900 million in deposits less than two years after launching its first savings product.
The disclosure comes as Atom’s annual accounts show that the startup had £538 million in deposits from over 17,000 customers at the end of March. It means the app-only bank has attracted around £400 million in four months.
The bank’s accounts, filed with Companies House this week, show Atom has received over £300 million of small business loan applications and lent out close to £100 million in loans and mortgages by March this year.
Atom had a net interest loss of £1 million for the year, due to paying out interest on its 1.95% and 2.5% fixed savings accounts, at the time market-leading interest rates, before the launch of its lending products.
Lending across all of the peer-to-peer platforms in 2017 to date is already higher than in the whole of 2016, according to data from research agency 4thWay.
According to the data, total lending across all peer-to-peer platforms is likely to be at least 20 per cent higher this year than last with the largest platforms, Funding Circle and Zopa, leading the way.
Funding Circle has lent £865m in 2017 to date, compared with £825m in the whole of 2016.
Zee Germans are leading the pack with 4 unicorns and we also see that fintech and ecommerce make up half of all the sector allocations.
Company Name
Funding
Country
Sector
Spotify
$8.53
Sweden
Internet Software & Services
Otto Bock HealthCare
$3.50
Germany
Healthcare
Auto1 Group
$2.80
Germany
eCommerce/Marketplace
Klarna
$2.50
Sweden
Fintech
VistaJet
$2.50
Malta
On-demand
Adyen
$2.30
Netherlands
Fintech
Hellofresh
$2.09
Germany
eCommerce/Marketplace
CureVac
$1.65
Germany
Healthcare
BlaBlaCar
$1.60
France
On-Demand
Saxo Bank
$1.45
Denmark
Fintech
Global Fashion Group
$1.10
Luxembourg
eCommerce/Marketplace
OVH
$1.10
France
Big Data
Avaloq Group
$1.01
Switzerland
Fintech
AVAST Software
$1
Czech Republic
Cybersecurity
letgo
$1
Netherlands
eCommerce/Marketplace
MindMaze
$1
Switzerland
VR/AR
Big Brand Payments, Part 1
Another big player from Sweden is Klarna, founded in 2005 and now valued at $2.5 billion. With $521.44 million in funding from investors like Sequoia and Visa, Klarna is one of the most popular e-commerce payment solutions in Europe, used by Burberry, Overstock.com, J.Crew, Nike, Lenovo, and hundreds more.
Adlibris, one of Europe’s largest booksellers, used Klarna to improve its mobile checkout solution, resulting in an 80% conversion increase.
Big Brand Payments, Part 2
With a valuation just shy of its Swedish colleague Klarna, Netherlands-based Adyen (valued at $2.3 billion), has established a firm foothold in the world of merchant payments by providing a “friction-less payment experience”. Founded in 2006 and funded with $266 million to date, Adyen has some huge customers in its corner, including Netflix, Uber, Etsy, Spotify, Groupon, and LinkedIn. The secret is in its platform, which features support for a wide variety of payment options (250 worldwide, to be exact) in a single system, including Apple and Android Pay, all major credit cards, direct debit for recurring payments, in-app purchases, and much more. The Cambridge Satchel, a UK handbag company, saw its Black Friday sales rocket by 124% after switching to Adyen’s platform. In addition to one-time purchases, the platform also facilitates subscriptions and recurring payments more seamlessly.
Trelix, a provider of due diligence, quality control, licensed fulfillment and non-licensed fulfillment products and services across the origination and securitization lifecycle, today announced that it has been approved as a third-party due diligence provider for DBRS-rated transactions. DBRS is a full-service credit rating agency respected for its independent, third-party evaluations of corporate and government issues. DBRS’s approval process, before adding a company as an accepted provider, includes an on-site review to assess companies’ staffing, infrastructure and capabilities relevant to securitization-related services.
As part of Altisource’s Origination Solutions platform, Trelix offers clients a unique combination of technology and risk management tools that position it to have a meaningful impact on the securitization market.
Mambu today announced that New10, ABN AMRO’s newly launched FinTech, has selected the SaaS engine to power a range of small and medium enterprise (SME) lending products in the Netherlands. New10, which aims to provide credit decisions within 15 minutes, went from concept to launch within 10 months, in line with ABN AMRO’s vision of digitisation and innovation.
Mambu took a collaborative approach working with the New10 team in order to complete implementation within four months. In a highly regulated environment, Mambu’s partnership with Amazon Web Services (AWS) which has received Dutch regulatory approval, helped smooth the path to market. New10 launched on 21 September 2017 with a fully digital SME lending platform with plans to broaden the portfolio and potentially expand into new markets.
collectAI, the service for digital receivables, has processed receivables at a volume of 25m Euro since its foundation in 2016. collectAI automates and digitises invoices, dunning and debt collection processes and is the first digital end-to-end provider in receivables management.
Examples of successful KPIs on the clients’ side include: Introducing digital communication channels lead to an increase of the collection rate of 33 percent, while processing costs have been reduced by up to 41 percent.
While 23 percent of invoices are overdue Europe-wide (EHI 2016 – online retail only), the invoice remains the most popular payment method in Germany with a market share of 30,5 percent (EOS 2016). Even though returns from receivables and debt collection are essential for revenue and thus liquidity, only 18 percent of companies have digitised their receivables to date (EOS/Kantar 2017).
In 2016 there were a reported 5.4 million SMEs in operation in the UK alone and our economy depends heavily on the success of these “little guys”.
Fintechs and banks are now lending faster than the speed of light, but when it comes to uncovering fraudulent activity, are they actually left standing in the dark?
Invoice finance lenders have to be particularly vigilant when it comes to a different type of fraud: fresh air invoicing.
One way to avoid being stung by paper fraud is to lend against accurate financial data extracted directly from a company’s accounting package, rather than lending against a PDF or excel file that can be amended. Advances in technology means lenders are now able to access this level of data directly, securely and efficiently, so they can be sure they’re providing fair financial support to loan applicants.
BitProperty, the blockchain-powered real estate investment platform, has announced that it will launch a closed beta release on October 5, 2017. Ten days later, on October 15, it will kick off a token sale to raise funds for further development of the platform.
The BitProperty platform is built on the Ethereum blockchain and uses two different types of tokens. The first type is an asset token that represents a share of a particular asset. When a real estate owner lists a property on the platform, the number of asset tokens issued against the property represents its value. Investors can purchase these asset tokens and will then receive income based on the performance of the asset (property) and the size of the stake that each investor holds.
The second type of token is the BTP token, which represents the inherent value of the platform backed by the pool of the company’s managed assets.
The Reserve Bank of India (RBI), on October 4, issued directions for non-banking financial companies (NBFC) that operate peer-to-peer (P2P) lending platforms. According to the directions, from now on no NBFC can start or carry on the business of a P2P lending platform without obtaining a Certificate of Registration. Every company seeking registration with the bank as an NBFC-P2P shall have a net owned funds of not less than Rs 20 million or such higher amount as the bank may specify.
They have been asked to apply for registration as NBFC-P2Ps within 3 months.
These Directions provide a framework for the registration and operation of NBFC-P2Ps in India.
(2) Process of Registration
(i) Every existing and prospective NBFC-P2P shall make an application for registration to the Department of Non-Banking Regulation, Mumbai of the Bank, in the form which will be specified by the Bank for the purpose. Existing NBFC-P2Ps shall apply within three months from the issuance of these Directions.
(ii) The Bank, for the purpose of considering the application for registration, shall require the following conditions, among others, to be fulfilled:
The company is incorporated in India;
The company has the necessary technological, entrepreneurial and managerial resources to offer such services to the participants;
The company has the adequate capital structure to undertake the business of Peer to Peer Lending Platform;
The promoters and the Directors of the company are fit and proper;
The general character of the management of the company is not prejudicial to the public interest;
The company has submitted a plan for, or implemented, a robust and secure Information Technology system;
The company has submitted a viable business plan for conducting the business of Peer to Peer Lending Platform;
Public interest shall be served by the grant of CoR;
Any other condition as may be specified by the Bank, fulfillment of which, in the opinion of the Bank, is necessary to ensure that the commencement of or carrying on the business in India shall not be prejudicial to the public interest.
6. Scope of Activities
(1) An NBFC-P2P shall-
act as an intermediary providing an online marketplace or platform to the participants involved in Peer to Peer lending;
not raise deposits as defined by or under Section 45I(bb) of the Act or the Companies Act, 2013;
not lend on its own;
not provide or arrange any credit enhancement or credit guarantee;
not facilitate or permit any secured lending linked to its platform; i.e. only clean loans will be permitted;
not hold, on its own balance sheet, funds received from lenders for lending, or funds received from borrowers for servicing loans; or such funds as stipulated in paragraph 9;
not cross sell any product except for loan specific insurance products;
not permit international flow of funds;
ensure adherence to legal requirements applicable to the participants as prescribed under relevant laws.
store and process all data relating to its activities and participants on hardware located within India.
(2) Further, NBFC-P2P shall-
undertake due diligence on the participants;
undertake credit assessment and risk profiling of the borrowers and disclose the same to their prospective lenders;
require prior and explicit consent of the participant to access its credit information;
undertake documentation of loan agreements and other related documents;
provide assistance in disbursement and repayments of loan amount;
render services for recovery of loans originated on the platform.
(3) NBFC-P2P shall not undertake any activity other than those stated in paras 6(1) and 6(2) of these Directions. Deployment of investible funds by an NBFC-P2P in instruments specified by the Bank, not for trading, shall however be permitted.
11. Transparency and Disclosure Requirements
(1) An NBFC-P2P shall be required to disclose the following:
(i) to the lender
details about the borrower/s including personal identity, required amount, interest rate sought and credit score as arrived by the NBFC-P2P.
details about all the terms and conditions of the loan, including likely return, fees and taxes;
(ii) to the borrower – details about the lender/s including proposed amount, interest rate offered but excluding personal identity and contact details;
(iii) publicly disclose on its website:
overview of credit assessment/score methodology and factors considered;
disclosures on usage/protection of data;
grievance redressal mechanism;
portfolio performance including share of non-performing assets on a monthly basis and segregation by age; and
its broad business model.
(2) NBFC-P2P shall ensure that the providing of services to a participant, who has applied for availing of such services, is backed by appropriate agreements between the participants and the NBFC-P2P. The agreements shall categorically specify all the terms and conditions among the borrower, the lender and the NBFC-P2P.
(3) The interest rates displayed on the platform shall be in Annualized Percentage Rate (APR) format.
The finance ministry today welcomed the central bank’s move to treat peer-to-peer, also known as P2P, lending platforms as non banking financial companies, saying it would improve financing for smaller firms.
The government has declared RBI (Reserve Bank of India) as the watchdog for P2P (peer to peer) lending marketplaces that have been segmented as NBFCs (non-banking finance companies). While this might elevate prices for online lenders via compliance needs, most have greeted the decision claiming that it provides them identification.
The Reserve Bank of India will make prepaid payment instruments like e-wallets, gift cards and meal coupons interoperable for customers complying with the central bank’s know your customer guidelines.
Inter-operability among KYC compliant prepaid instruments will be implemented in six months after the RBI issues its revised norms within a week by October 11, the central bank said as part of its developmental and regulatory policies.
The so-called unicorn startups and their founders have become role models for the millennials. Hardly any town or city in India is left untouched by the startup fever and its multi-million funding stories.
1. Sport helps build character: Sanjay Darbha, the founder of Peerlend, a peer-to-peer lending platform and a sports enthusiast who competes in Senior Men’s circuit tournaments of the International Tennis Federation (ITF), explains, that sports inculcates attributes such as discipline, focus, and patience.
2. Sports lets you, be yourself: If entrepreneurs want to know the better or bitter side of their team members – make them play a sport.
3. Sport is a medium to connect beyond business: Ecosystem players should find innovative ways to connect with each other to get a better understanding of other’s needs and challenges.
4. Sport helps in building lasting bonds: A playground in an excellent incubator that helps in the construction of robust and long-lasting relationships.
Startups could use games to let their team members explore possible synergies between them.
Canada
Aspire FinTech is closing down (Aspire Email), Rated: AAA
Hey all,
I wanted to share the news today that Aspire Financial Technologies will be officially shutting down this week. Sadly, the search for a strategic partner we started in the summer wasn’t successful, and our funding has now run out. As a result, we no longer have the resources to continue the build of our loan data and analytics infrastructure solutions.
I’ll be running a sale process of Aspire’s IP (Aspire Gateway and ALD Explorer solutions) over the next month or so, looking for a quick outcome. Feel free to contact me to discuss.
Thanks to all that have supported Aspire over the past two years. Despite the odds, we made it this far, with your help. Unfortunately, expensive and complex build requirements, with long institutional sales cycles, combined with a lack of scalable professional seed-stage funding in Canada, have been our undoing. Any one of these being different would likely have yielded a better outcome, but all three together have proved to be terminal.
Mark and I have had a great team to work with. We thank them for all the hard work and long hours, and wish them well as they move on to their next challenges (and hopefully a bit more stability!).
For me personally, I’ve made and consumed a great deal of “FinTech Kool-Aid” over the past two years, which has permanently altered by view of the future, and the role that technology will play in the delivery of financial services to consumers, small businesses and corporations going forward. I’m excited to see this play out, and the role I can play in making it happen.
Best regards,
David A. Fry, MBA, CFA
Co-Founder and CEO
Aspire Financial Technologies Inc.
Money360, a technology-enabled direct lender specializing in commercial real estate (CRE) loans, today announced it closed more than $100 million in loans in the third quarter of 2017. This brings the company’s total loan closings to over $450 million, with a target of $600 million in transactions by year-end.
Notable loans closed in the third quarter include:
A $15 million bridge loan for a six-story, 310-room hotel property in Bloomingdale, Illinois.
A $12.5 million bridge loan for a hospitality property in Burr Ridge, Illinois.
A $9.9 million bridge loan for a three-story, multi-tenant office property in Fresno, California.
A $7.6 million bridge loan for a multi-family property in Bemidji, Minnesota.
A $6.9 million bridge loan for an office property in Denver, Colorado.
A $4.4 million permanent loan for a retail property in Mount Olive, New Jersey.
A $1.2 million bridge loan for a two-story apartment building in Miami, Florida.
Amazon.com Inc. has profoundly changed the way clothes and books are sold and is now targeting food shopping. Its next project may very well be taking on the heart of Wall Street.
Amazon is not alone. Others, such as PayPal and Google, have also entertained banking ideas. In fact, they’ve joined forces, creating a lobbying group called “Financial Innovation” together, according to American Banker.
Below are some of the highlights of the Marketplace Lending Securitization Tracker for Q3:
This quarter saw six marketplace lending securitizations with quarterly issuance of $2.6 Bn, representing 7.6% growth in issuance over 3Q 2016. To date, cumulative issuance equals $23.8Bn across 96 deals.
Lending Club (NYSE:LC) issued its first deal with prime loans with borrowers having FICO scores of at least 660. The weighted average FICO score on this deal is 692, which is a shift in borrower profile as MPL lenders seek out higher quality borrowers.
All deals this quarter were rated. DBRS continues to lead the rating agency league table, while Kroll dominates the unsecured consumer sub-segment. We see continued engagement from the top 3 ratings agencies like Fitch, with their rating of PMIT 2017-2A. Goldman Sachs, Deutsche Bank, and Morgan Stanley continue to top the issuance league tables with over 49% of MPL ABS transaction volume. College Avenue, a nascent MPL student loan originator, issued its first securitization CASL 2017 -A, managed by Barclays.
Spreads at issuance are marginally tighter in the consumer space on higher rated tranches. As priced 14bps tighter on average, while Bs and Cs priced 1-2bps wider. In the student space, As priced 51bps wider, while Bs and Cs priced 46bps and 61bps wider respectively.
Credit support requirements remain stable as rating agencies get more comfortable with collateral performance. We see deterioration in credit performance, but investors are well protected due to structural features and senior tranches deleverage rapidly to gain greater protection. Demand remains robust in this sector.
Goldman Sachs purchased $300Mn of solar loans from Mosaic. It would be interesting to see if they would participate in future Mosaic securitizations, as they have in the Marlette transactions. 3Q17 saw a benign macro environment and low volatility. The Fed announced the beginning of its balance sheet reduction program to start in October, and prepared the market for an interest rate hike at the December meeting.
Source: PeerIQ
Download the PeerIQ Marketplace Lending Securitization Tracker Q3 here.
For decades, the three major credit bureaus, along with a smaller fourth player, Innovis, have operated in the shadows of Americans’ finances.
Here’s a quick look at a timeline:
1960s: TransUnion’s original business was not compiling credit data on consumers. It bought a data collector, Credit Bureau of Cook County in 1969.
1970: Congress passed the Fair Credit Reporting Act, aimed at regulating the reporting of credit information.
Around 1970: TransUnion started using automatic tape-to-disc transfer to compile data, which was a lot faster than entering data manually. TransUnion later was the first bureau to offer banks, credit card companies and other creditors online access to data.
1988: TransUnion gains a nationwide presence. Credit reporting takes off.
1989: FICO scores as we know them were introduced.
March 2000: FICO creator Fair Isaac Corp. took legal action against an online lender, E-Loan, after E-Loan provided loan applicants with their credit scores.
September 2000: It wasn’t until this time that consumers could pay about $8 to the credit bureaus to get their own FICO credit scores, which had a top score of 850.
2003: Congress amended federal law to require the credit bureaus to give consumers a copy of their credit reports at no cost once a year.
2006: Equifax, TransUnion and Experian formed a joint venture to introduce Vantage scores, which were quite different than FICO scores.
2013: Discover, First National Bank of Omaha and a couple of other major issuers became trendsetters by providing credit card customers with their FICO credit score every month as part of their statement.
2014: The Consumer Financial Protection Bureau, a financial regulator, said it fielded 31,000 consumer complaints in 16 months. About 75 percent of the complaints concerned information in credit files that consumers said was inaccurate.
Jan. 2017: The CFPB said Equifax and TransUnion lied to consumers about the credit scores they were being sold, and ordered Equifax and TransUnion to pay $17.6 million in restitution to consumers and imposed fines of $5.5 million.
March 2017: Experian joined its counterparts and got busted by the CFPB for lying about the credit scores it peddles to consumers.
Sept. 2017: Equifax makes a bombshell disclosure that a cyber thief stole personal information, including Social Security numbers and birth dates, for 145 million people. It’s by far the biggest data breach in U.S. history.
We’ve rolled out an automatic investment tool, AutoInvest, to help our investors more easily access investment opportunities that meet pre-selected investing criteria.
We think you’ll see several nice benefits from Patch of Land’s new AutoInvest feature:
Automatically participate in first-lien real estate loans based on pre-selected investing criteria
A new lower minimum investment amount ($1,000 per opportunity) versus the $5,000 minimum for manual investing, to help facilitate better portfolio diversification
Priority access to opportunities before they are publicly available on Patch of Land’s platform
RealtyShares, a leading online marketplace for real estate investing, has deployed more than $10.1 million for a pair of commercial real estate transactions in Texas, collaborating with two different sponsors to provide fast and flexible financing for their projects.
RealtyShares secured a $2.4 million equity investment for a 302-room, full-service Sheraton hotel in Irving, Texas.
The hospitality equity transaction was sponsored by The Buccini/Pollin Group, a real estate acquisition, development and management company with four offices across the U.S. and more than $1 billion under management. Along with its hotel management affiliate, PM Hotel Group, Buccini/Pollin has acquired and developed 40 hotel properties, and possesses experience managing all aspects of project acquisition, finance, development, construction, leasing, operations and dispositions.
Global Debt Registry (GDR), the asset certainty company known for its loan validation expertise, today announced the successful completion of its Service Organization Control [SOC] 1 Type II and SOC 2 Type II attestation reports. Performed by KirkpatrickPrice, the independent audit confirms GDR’s internal security controls meet the American Institute of Certified Public Accountants’ (AICPA) applicable Trust Services Principles and Criteria. These latest verifications reaffirm GDR’s position as a leader in the online lending space for security and operational integrity in providing asset certainty and validation through its suite of digital due diligence solutions.
The SOC 1 Type II audit assessed GDR’s consistent application of internal controls and processes to protect consumer data, maintain operational integrity and comply with industry regulations over a six-month period. The SOC 2 Type II review compared the strength of those internal policies and controls with the AICPA’s own Trust Services Principles of security, availability, confidentiality and processing integrity. The SOC 2 Type II attestation provides a comprehensive and integrated assessment of an organization’s data security and integrity control framework to industry stakeholders — and is missing from organizations which choose to obtain a SOC 1 Type II exclusively and point to their cloud provider’s or vendors’ SOC 2 Type II attestation reports.
The new regulation, announced this week, could significantly restrict lenders of short-term, very high-interest loans, known as payday loans. The practice has long been criticized by Consumers Union, the advocacy and mobilization division of Consumer Reports.
Consumers, in fact, may have better alternatives with community banks and credit unions. And experts say the CFPB’s new rule could pave the way for even more lending by these types of financial institutions.
The payday lending rule is set to take effect in July 2019, unless it is rolled back by Congress. The Congressional Review Act gives Congress 60 days from the time a new regulation is published in the Federal Register to rescind it.
Assuming the rule remains in effect, it’s unclear whether the bulk of the payday industry could adapt. Some payday lenders are changing their practices already, creating less risky, longer-term loans.
Regardless, two types of consumer lenders that are exempt from the CFPB rule—community banks and credit unions—could step into the breach to serve payday loan clients.
The nation’s nearly 6,000 community banks are another potential source for small loans. But community banks don’t actively market their small-dollar loans, explains Lilly Thomas, a senior vice president and senior regulatory counsel for Independent Community Bankers of America, based in Washington, D.C. Rather, they respond to inquiries by individual customers.
But, she added, the CFPB rule changes could change that.
By the CFPB’s own estimates, the regulations as written will cut the number of short-term loans in the U.S. by more than half, and industry estimates put that figure closer to 80 percent. Other than perhaps the very largest players in the game, most loan lenders can’t soak that kind of volume loss, since payday lending (contrary to public opinion) is not a high-margin business to start with. The average storefront lender clears about $37,000 in profit – and under the new regulations, that annual profit would become a $28,000 loss, according to an economic study paid for by an industry trade association.
Payday Lending (And Its New Rules At A Glance)
Payday lending is a big segment in the U.S., as storefront short-term loan lenders outnumber McDonald’s locations, and collectively lend out about $46 billion per year in loans to about 12 million borrowers.
The typical payday lending customer, according to the Pew Charitable Trusts, is a white woman aged 25 to 44.
Roughly 22 percent of borrowers renewed their loans at least six times, leading to total fees that amounted to more than the size of the initial loan.
Payday lenders do in fact collect a lot of money in fees – about $7 billion as of last year. Default rates are estimated at 20 percent on the low end, while at a mainstream financial institution (FI), that rate is a lot closer to 3 percent on average.
Cannon, the firm’s global director of research and chief equity strategist, agreed. Today, KBW, traditionally focused on bank equities, also covers firms like PayPal, Square, and Green Dot. And a bit over a year ago, KBW, in cooperation with Nasdaq, launched the KBW Nasdaq Financial Technology Index, an eclectic mixture of 50 publicly traded fintech firms across multiple industry categories.
“We expect that bank M&A will shift over time to bank/fintech M&A with the largest banks looking to acquire successful fintech firms. This will be pushed by the limitations on bank acquisitions by the largest banks, and by the need of fintech firms to partner with banks to expand their operations. While regulators are looking at a new fintech bank charter, we expect that to be limited in scope.”
Banking Exchange:What started you thinking about a bank/fintech M&A trend?
I’ve been puzzled by the lack of new start-ups since the financial crisis. Most of the discussion around this has concerned regulatory constraints. But as I dug into this, I began to think that maybe the historical entrepreneurship in finance—traditionally folks starting new banks to get their economy going—has shifted from the banking sector to Silicon Valley.
Banking Exchange:Do people just not want to invest in new bank charters anymore?
In the wake of the financial crisis, a lot of capital—such as from private equity firms—that might have gone into new charters went into recapitalizing existing banks. Postcrisis, there certainly was a regulatory element, insofar as increased regulation and FDIC’s reluctance to insure new banks. But while people talk about that, I haven’t heard about people applying for charters and getting turned down by FDIC.
Mid-sized banks are looking for creative ways to build loan books. They already have an advantage in lending to small- and mid-sized companies and in doing commercial real estate loans. But they’re starting to see those sources of assets ebb. And they, too, will be looking toward asset generation from electronic delivery through fintech-type operations.
Banking Exchange:There is also the opposite trend—some of the fintechs, such as Varo, SoFi, and Square are seeking bank or industrial bank charters. Do you see that gaining momentum?
A year or so ago, my son-in-law was refinancing his student loans. Now, remember that part of the key to SoFi’s initial, extremely rapid growth was this: They cherry pick the government program borrowers. They will give strong borrowers a 4% loan to replace the government’s 7% all day long.
In the second half of 2016, the fintech-credit bubble began to show signs of losing air when investors and funders signaled declining confidence in fintechs by withdrawing their investments — triggering some fintech closures. In trying to scale up, some providers went outside their core markets and struggled as their credit models failed (e.g., CAN Capital). Some faltered in attempting to diversify into different loan types, while others — which are now retrenching (e.g., LendingClub) — struggled with costs far outrunning revenues.
The market is ripe for consolidation and beneficial partnerships. Indeed, the remainder of 2017 and 2018 will see more partnerships between the banks and fintechs for the following three reasons.
The influx of technology into the alternative lending industry has drastically changed the way small businesses access financing. As the co-founder of the online alternative lending platform Kabbage, Kathryn Petralia has been helping to lead this change.
Q: What drew you to the alternative lending space? Why did you think the market would support a lender like Kabbage?
A: I’ve been in alternative lending since the late ’90s.
Q: When a space is so crowded, like yours, what can you do to differentiate yourself?
A: Additionally, we are the only lender to offer SMBs the option to apply, qualify and draw funds entirely through a mobile app. Our Kabbage card allows qualified customers to draw from their line of credit at checkout or any point of sale (POS).
Kabbage is also unique as we license our technology to global banks, providing them more reach and a better user experience to serve their small business customers in a meaningful, cost-effective way. We have bank partnerships with Santander, Scotiabank and ING.
Q: What makes alternative lending an attractive option for small businesses?
A: It’s much faster and easier than traditional processes, and the anonymity of an online application process takes some of the stress out of what is traditionally a very anxiety-ridden experience.
CommonBond, a financial technology company that helps students, graduates and employees pay for higher education, today launches Women in Tech Week, which runs through October 15. Together with partners including Betterment, Birchbox, Duolingo and others, CommonBond spent the last several months creating Women in Tech Week to recognize the contributions of women in technology and support the next generation of women leaders.
Women in Tech Week consists of three components:
1. A whitepaper on what women want in the tech workplace: CommonBond commissioned a survey of over 600 women in tech to learn what companies can do to attract and retain women, as well as create environments where women can thrive. The research found women want to see their companies implement the following changes, in order:
More women in leadership roles.
Better long-term career planning processes.
Additional training and professional development opportunities.
2. A social media campaign to support the next generation of women in tech: CommonBond has partnered with Girls Who Code to help fund the next generation of women technologists. CommonBond will donate to Girls Who Code for each social media post that:
Answers the question “Why are you proud to be a woman in tech?” or “Why are you proud to support women in tech?”
Includes hashtag #2017WITW.
3. A female founders event to encourage and inspire women in tech: On Ada Lovelace Day, a holiday on October 10 that celebrates the achievements of women in STEM, the co-founders of companies such as The Muse, PolicyGenius and WayUp will share their stories with students and professionals pursuing technology careers at an event in New York City.
New rules issued this past week by the federal Consumer Financial Protection Bureau are meant to rein in payday and auto title lenders. The rules require enhanced credit checks for some loans and cooling off periods after three loans in a row to a single borrower.
“In Ohio, payday and auto title lenders are not operating under the intended statute,” Horowitz says. “They’re using a loophole that lets them operate as loan brokers.”
A 2008 law capped yearly interest rates at 28 percent. But the Ohio Supreme Court has upheld the loophole used by lenders.
Led by tech innovators like Betterment, SigFig and Wealthfront, the more than 200 current U.S. robo-advisors in existence collectively boast some $53 billion in assets under management, with global robo assets poised to surpass $2.2 trillion by 2020. With such explosive growth in this space, many traditional full-service financial advisors feel compelled to beat their drums louder, when meeting prospects and onboarding new clients.
Despite the robo phenomenon, studies show that most individuals still value human interaction over technology. According to a survey conducted by online student loan marketplace LendEDU, 46.41% of millennials are working with a financial advisor, while only 24.30% have used a robo-advisor.
Furthermore, of the three-quarters of millennials who have yet to take the robo plunge, 61.58% say they’re reluctant to do so because they’ve never heard of robo-advisors, suggesting that general awareness still has a way to go. Finally, 68.92% of those polled said they believe financial advisors are more likely to yield greater returns on their investments.
Another program that gets high marks from founders is the Financial Solutions Lab (FinLab), an offshoot of the Center for Financial Services Innovation, a 13-year-old nonprofit focused on serving unbanked and underbanked customers.
Broadly speaking, it’s a 2.5-year-old program that aims to find and nurture fintech startups that are helping Americans save, access credit and build assets, and it is itself fueled by a $30 million, five-year grant from JPMorgan.
Among those startups it has worked with so far is Propel, a startup that helps people who receive food stamps manage their benefits.
Another company that’s currently a part of the program is Dave, an app that alerts consumers ahead of an upcoming overdraft and can advance them money.
Jornaya, the fast-growing consumer journey insights platform, today announced that LendingTree®, the nation’s leading online loan marketplace, has integrated TCPA Guardian from Jornaya to manage compliance risk associated with the Telephone Consumer Protection Act (TCPA).
Jornaya’s TCPA Guardian integrated with LendingTree’s marketplace provides lenders with ability to validate that the consumer was shown necessary and approved disclosures, including monitoring the size, text, and overall visibility of the necessary TCPA disclosure. What’s more, the solution documents the proof of that consent, allowing both LendingTree and its lenders to deter and help defend the costly and rising number of TCPA complaints.
Technology and regulation are intersecting in ways that create uncertainty in a number of areas, but for those who work in compliance, the big question is whether advanced technologies like artificial intelligence and blockchain will ultimately replace people.
When BBVA Compass recently began using robotic process automation to carry out specific pieces of compliance, such as retrieving statements, employees were worried.
New Leaf Communities is seeking $4,500,000 in Preferred Equity. The sponsor is offering a 10% preferred return with 8% as a current pay and 2% accrued. RealtyeVest, who is exclusively housing the offer on their crowdfunding platform, will raise the capital in a series of Class A, B and C stocks of $1.5 million each.
It’s first come first serve as the tranches will close once the total for each is raised. Participants in the Class A tranche will receive an 80/20 waterfall participation after the 10% preferred return. The Class B tranche will receive a 70/30 waterfall participation after a 10% preferred return. Lastly, the Class C tranche will receive a 60/40 waterfall participation after a 10% preferred return.
According to proponents, the new rules are a real positive for consumers. They see the following as pros.
Requiring lenders to ensure that borrowers can repay loans protects them from a cycle of debt.
While some lenders will be prohibited, consumers can still borrow from those that meet the new requirements.
Voters generally prefer stricter guidelines for payday lenders.
The new regulations will stop lenders from exploiting loopholes in the law.
Limiting the number of times a loan can be rolled over limits the effective APR.
Preventing multiple attempts to withdraw from bank accounts will stop excessive overdraft charges for consumers.
The payday lending industry, the Community Financial Services Association of America (CFSA), researchers at Pew Charitable Trusts, the banking industry and even some consumer advocates have pointed out what they see as the cons of these new rules.
The proposal exceeds the authority given CFPB by Congress and will be subject to expensive lawsuits.
The new rules still allow payday loans with interest rates of 300% or higher.
Banks and credit unions will be discouraged or prevented from entering the market with lower-cost loans.
Ultimately, the rules will inhibit consumer access to credit, driving them to far worse alternatives.
Many payday lenders will be forced out of business, costing jobs and creating credit “deserts” in areas where payday lending currently thrives.
Losing the ability to roll over loans will hurt consumers who need more time to pay off debt.
Revenues for the $6 billion payday loan industry will shrivel under a new U.S. rule restricting lenders’ ability to profit from high-interest, short-term loans, and much of the business could move to small banks, according to the country’s consumer financial watchdog.
Under the new rule, the industry’s revenue will plummet by two-thirds, the CFPB estimated.
A joint statement issued by the Texas Fair Lending Alliance and Texas Faith Leaders for Fair Lending noted from 2012 to 2016, Texans paid $7.5 billion in fees for high-cost loans.
Texas Appleseed, a public interest center based in Austin, noted for borrowers who do not refinance their loans, a typical $500 payday loan costs $1,351 in installments over five months.
According to a 2016 Funding Circle survey, about half of small business owners plan to take less than three days off during the entire holiday season; in fact, nearly 70 percent confess that they at least check emails on Thanksgiving Day, when most businesses nationally close.
Speaking at the LendIt conference in London, Jaidev Janardana (pictured), chief executive of Zopa, said banks have focused too much on products that help their business rather than the customer.
He revealed that Zopa Bank would offer unsecured personal loans with no early repayment charges and credit cards with no introductory offers but a flat rate as well as savings and investments that prioritise existing customers.
It will also offer auto-loans, allowing users to do a soft-search for products.
The peer-to-peer platform will be changing the current two fees for early withdrawal to a single and clear transfer fee for each market.
The transfer fee will be fixed for each market and will be a percentage of the capital being withdrawn (the fee will apply only to capital requested to be withdrawn, not interest).
Speaking to ITProPortal, Luke Griffiths, MD of Klarna UK, noted that consumer flexibility in terms of payment methods is helping change merchant habits too.
Griffiths revealed that just shy of three million customers in the UK will have used Klarna’s services in some form, with the company counting the likes of the Arcadia Group and JD Sports as clients here.
This includes a “pay after delivery” option, which allows consumers to order their goods, receive them, but only pay after either 14 or 30 days if they are fully satisfied. Targeted mainly towards the fashion online retail space, Griffiths notes that this service has seen great pick-up from both merchants and customers, with the former seeing increased conversion and a drop in returns (as buyers become more confident that they will only pay for the goods they want to keep) and the latter getting a more successful online transaction and “turning the sitting room into the fitting room”.
FUNDING Circle co-founder Samir Desai (pictured) has ruled out launching a bank as he outlined the advantages of running a peer-to-peer platform over traditional financial models.
He said banks would find it hard to keep up with emerging technology such as artificial intelligence or machine learning due to the level of regulation.
Desai cast doubts on the ability of traditional banks to move into the online small and medium sized (SME) lending lending space, claiming Germany’s Commerzbank had seen loans underperform since entering this area.
Peer-to-peer business lending platform ArchOver announced on Monday it has nearly doubled its overall lending in the first nine months of 2017. The company reported that since 2017 its total lending has reached £21.39 million, bringing its cumulative total that has been lent to date to over £48 million.
Linked Finance, Ireland-based peer-to-peer lending company, announced on Monday the launch of its new type of pension account. The account allows holders of self-managed pensions to make P2P lending to Irish SMEs part of their pension investment portfolio.
One of the UK’s leading financial technology specialists, The ID Co., has announced it is the first software specialist to offer lenders the capability to calculate and base lending decisions on customers’ real earnings, known as verified income.
UK based Fintech, The ID Co., says it is the first software specialist to offer lenders the capability to calculate and base lending decisions based on customers’ real earnings or verified income. The ID Co. has major clients in both the UK and North America including a large UK retail bank, Prosper Marketplace, Marlette Funding, OakNorth Bank, eMoneyUnion, and Fair Finance.
German economist and politician Jörg Asmussen has moved into an advisory role at Funding Circle, leaving the London-headquartered peer-to-peer lender’s board after a year and a half.
Recently, the official WeChat of Shenzhen Internet finance association issued a notice concerning the exit guide of shenzhen’s marketplace lenders (solicitation draft). It was known as the first exist guide for P2P lending platforms in China. According to the notice, this guideline was drafted to direct and standardize the P2P lending institutions to smooth out of the P2P loan industry, as well as to protect the legitimate rights and interests of lenders, borrowers and P2P institutions. Before officially released, the exposure draft of guide is soliciting opinions from the industry.
Already, China has climbed to account for 23% of the world’s total 214 unicorns (compared with the U.S. at 50% and India at 9%). China claims such highly valued companies as ride-hailing service Didi, hardware innovator Xiaomi and online lender Lu.com plus newcomers to the 2017 list: bike-sharing service MoBike, news aggregator Toutiao and e-vehicle maker Neo.
Moreover, China is getting with a new class of billion-dollar valued companies, so-called decacorns or startups with valuations past the $10 billion mark. Of 14 current decacorns, Silicon Valley has 5 and so does China — four in Beijing and one in Shenzhen, according to an analysis by GSR Ventures shared by managing director Richard Lim at the recent HYSTA conference.
How and where will the next generation of unicorns be formed? Research by GSR shows that the unicorn action is in China by Chinese returnees. There were 30 unicorns founded by Chinese in China versus 9 U.S. unicorns founded by Chinese.
Moody’s Investor Service has upgraded 4Finance‘s credit ratings to B2 from B3. The upgrade comes as 4finance says it has passed € 5 billion in loan originations. The 4finance S.A. senior unsecured issuer rating was also upgraded to B2 from B3. The outlook on all ratings is stable.
The European Central Bank says banks under its jurisdiction appear well-prepared to face unexpectedly higher interest rates, but may be less ready for disruption from online banking.
The ECB’s banking supervision division released results Monday of a stress test that showed suddenly rising rates would increase net interest income, an important part of bank finances.
A recent study from Forex Bonuses finds the countries among the 20 largest economies who are adapting quickest to using cashless systems like phones and contactless cards – revealing that Canada narrowly edges out Sweden for the top position.
Investigating twenty of the world’s most significant markets, the study looks into contactless card saturation, number of debit and credit cards issued per capita, usage of cashless methods, growth of these cashless payments, and the proportion of people who are aware of which mobile payment services are available.
Cashless Economies
The top position has gone to Canada, who, while only having contactless functionality in 26% of their cards (compared to 41% in the UK and 56% in China) and the lowest number of debit cards per capita included in the research (0.7), were found to have over two credit cards per person, a figure only exceeded by their neighbours in the US, who had just under 3.
Likewise, the majority of their payments were made using cashless means at 57% of transactions, outmatched only by 2% in both Sweden and France. The UK reached 52% on this scale, while China, despite the majority of cards being contactless, used cashless methods in only 10% of transactions. China were also the most educated on mobile payment services, with 77% of survey respondents claiming they were aware of the options available to them in this regard. In comparison, only 47% in the UK claimed the same.
In three years, online lender Spotcap has issued more than €120 million in credit lines to small and medium-sized enterprises (SMEs).
The fintech also raised an additional €22 million of equity and debt funding from its existing investor network. It has now raised €100 million of investment since its launch in September 2014.
In this week’s B2B venture capital breakdown, alternative lending for small- and medium-sized businesses (and their employees) is the clear winner.
SalaryFinance
The company, based in the U.K., recently announced about $52.5 million by Legal & General, while Blenheim Chalcot also participated, according to reports. The funding round will need approval from the Financial Conduct Authority, reports added.
Taulia
This supply chain financing company has been mum about the funding, with reports only catching onto the investment of about $20 million (so far) through a Securities and Exchange Commission (SEC) filing. According to reports, the firm plans to raise a total of $33.29 million, though it is unclear who provided the funding or when Taulia will officially announce the raise.
Siigo
Colombia’s Siigo, which provides accounting and administrative software for small- and medium-sized businesses, raised an undisclosed sum late last week by Accel-KKR, reports said.
One of the biggest and most profitable sectors of the financial industry is the lending sector. Most financial institutions have used the existing models to create new ones that better fit their business models and reach their profit targets.
2. Payments
Another major role played by banks is to facilitate the transfer of funds between parties. Banks have been rumored to make at least $4 billion annually just from fees obtained during funds transfers.
4. Facilitating speedy payments
For a business to thrive, its invoices should be paid on time and in a prescribed way. One of the things that make businesses go under is the accumulation of bad debt. When invoices are not paid on time, the business suffers because the business owner must find other means of paying his creditors.
Singapore’s OCBC Bank is integrating Siri to help conduct corporate banking across 12,000 customers. Voice commands send payments and can also inquire about account balances. Alexa is now available in India, and will soon debut in Japan later in the year.
JG Summit’s unit, Express Holdings Inc, inked an exclusive partnership with Greater China-based Oriente to create a peer-to-peer lending solution for “under-banked” consumers.
Peer-to-peer (P2P) lender SocietyOne has announced three lending milestones for 2017 with the year not even over yet, showing how Australians are embracing this innovative way to borrow and invest.
This is a record for SocietyOne, as it has now originated more than twice the loans of the company’s nearest competitor and had seven successive quarters of growth.
The first three-quarters of 2017 also saw a record amount of funding made available by investor funders. The total number of funders has risen to 320 since SocietyOne’s inception and there is $61 million of committed available funding as at 30 September 2017.
Online lender Spotcap has announced it has issued more than $180 million in credit lines to small- and medium-sized enterprises (SMEs) globally in just three years. The lender offers lines of credit up to $250,000 and has been operating in Australia since 2015.
Spring FG Ltd (ASX:SFL) is planning a pre-Christmas launch of its innovative fintech platform, MyMoney247.
MyMoney247 will allow consumers to link hundreds of Australian bank, brokerage and investment accounts and retail and industry super funds.
Spring’s platform will employ customised technology from Australian fintech company, MoneyBrilliant, including advanced budgeting, cashflow management, bill management and spending analysis.
With the Reserve Bank of India spelling out guidelines for regulating peer-to-peer (P2P) lending, many of these lenders are looking at ways to comply with the norms by restructuring their business models. Further, companies find Rs 10 lakh cap on lending restrictive, given the phenomenal growth of the sector in the past couple of years.
Banks and NBFCs usually offer personal loans to a salaried employees having minimum income salaried between Rs 1.20 lakh – to Rs 2.40 lakh with loan eligibility salaried between Rs 15 lakhs and Rs 20 lakhs.
Bengaluru-based fintech startup SlicePay has raised $2 Mn as part of its ongoing Series A funding round. The investment was led by Japan-based Das Capital, Simile Ventures from Russia and few undisclosed angel investors.
Existing investor Blume Ventures also participated in the round, who earlier invested $500K in association with Tracxn Labs in February 2016. With the raised funds, SlicePay plans to expand in three more cities, as well as make some senior-level hiring.
Lending activity will gather pace on peer-to-peer (P2P) platform with the sector getting NBFC status even as the compliance burden on them may eliminate some entities out of the market, industry players say.
The guidelines from the RBI norms for disclosures are welcome. The disclosures on how companies are calculating credit scores are welcome to borrowers. Right now, with many companies looking to build credit scores through by looking at cash-flows and information on how the platforms collect this information is crucial. Companies such as EarlySalary are building credit profiles based on information on social media. Meanwhile, there are untested methods which profiles people psychologically on seeing if they are eligible for a loan.
Singapore’s OCBC Bank wants to use Siri to help corporates do their banking.
OCBC said in an announcement on Wednesday (Oct. 4) that it is integrating its Business Mobile Banking app with Apple’s voice assistant Siri for more than 120,000 corporate customers. The integration means professionals will be able to initiate B2B payments and funds transfers to other OCBC business accounts using Siri voice commands.Singapore’s OCBC Bank wants to use Siri to help corporates do their banking.
One of South Korea’s leading P2P lending platform operator Lendit appears to have taken advantage of its maturing big data. The accumulated volume of personal loans originated from the firm doubled in six months as of early September to some 70 billion won ($61.6 million), after some 28 months of operation.
The database allows an individual lender to invest 10 million won at maximum in a “customized” package composed of possibly hundreds of bonds in different interest rates, while promising the lender a return of between 6 percent and 10 percent including tax and commission fee.
Kim, 31, believes Lendit could help mitigate the rapid growth of the national household debt, projected to have exceeded 1,400 trillion won in the third quarter. Household debt in Korea is considered a powder keg of the national economy amid looming signs of central banks ending expansionary monetary policies. Consumer loans take up nearly 20 percent of all household debt in Korea.
Argentina-based peer-to-peer (P2P) lending platform Afluenta recently announced during its fifth-anniversary celebration it was launching commercial loans to the fifth version of its lending platform. According to the lender, in the latest version, it will add its own proprietary credit scoring and introduces commercial loans for people with commercial activities, which is noted to usually not served by traditional banks.
Micro-lending and small business financing are a critical component of economic growth around the world, and the need for access to low-cost capital is especially important in developing countries.
The Catch-22 is that these countries are also the ones where the lending markets are the least developed, and where most financial institutions are reluctant to lend money to people who don’t have any credit history (what the industry calls “thin-file” customers).
The problem is especially acute in Mexico, where only 39 percent of the population has a bank account and 75 million people still have no access to the kind of financial services and lending support they would need to start micro- and small- businesses.
In Ontario, the payday-loan industry offers sums of cash of less than $1,500 for short terms — less than 62 days — at very high interest rates: there are currently 657% on an annualized basis on the average 10-day term, down from 766% before the regulations took effect.
These lenders fill a unique niche in Ontario’s lending market for customers known as ALICE — an acronym for Asset-Limited, Income-Constrained, and Employed. More than two-thirds of ALICEs earn less than $50,000 per year. And while payday lenders’ reputation for being the somewhat shifty cousins of banks is not entirely undeserved, they nonetheless provide a real and needed service to people who, for a variety of reasons, can’t or don’t have the cash to meet their needs. The majority of people who take out a payday loan are doing so to avoid late charges, NSF fees, or maintain power in their digs.
TD Ameritrade now offers stock trading through Facebook Messenger. AT: “There’s no telling what kind of financial services that will someday be offered through Facebook Messenger. There seems to be an increase in services piggybacking off Facebook’s reputation and user base. Maybe someday we’ll all do our banking through Facebook.”
TD Ameritrade Holding Corp. customers are now able to trade equities and exchange-traded funds using Facebook Inc.’s Messenger services, according to a company statement Monday. Clients can also make deposits, access quarterly performance video statements and receive weekly alerts that rehash market moves.
Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics manufacturer, participated in a US$16 million Series B fundraising program to invest in US-based digital wallet start-up Abra, the new firm said on Monday.
Barhydt said that Abra’s existing investors — Arbor Ventures, American Express Ventures, Jungle Ventures, Lehrer Hippeau and RRE — also participated in the fundraiser that closed on Monday.
The program helped Abra reach more than US$35 million in total capital, Barhydt said, but did not elaborate on potential uses of the additional US$16 million.
A startup called Zero thinks it has a solution to this and it is gearing up to launch a credit card that functions like a debit card. The startup is also raising $8.5 million in a funding round led by ENIAC Ventures, including participation from NEA, Lightbank and others.
In a recent survey it was revealed that 81% of people use the same password for multiple accounts with that number being even higher, at 92%, for millennials.
The introduction of Touch ID on the Apple iPhone in 2013 was a seminal moment in the history of biometrics. People could suddenly use their thumb or finger print as an identity verification tool and forgo using a password. Today, on my phone I can login to my bank account, buy music or apps, buy a plane ticket, even check my Lending Club account all with the press of my thumb.
While still primarily in the testing stage in banking, this past summer Bank of America announced the trialing of iris scanning technology from Samsung. In the UK, TSB is becoming the first European bank to start using this same technology, also with Samsung phones.
Behavioral biometrics can capture things like hand-eye coordination, pressure, hand tremors, keystroke dynamics, gait analysis, mouse use characteristics, navigation, scrolling and other finger movements.
USAA offers three variations of biometrics authentication already in their mobile app. Just this week Samsung announced a partnership with Biocatch to bring behavioral biometrics to its Nexsign biometric authentication platform.
Cross River banks some of the biggest names in fintech, including at least a dozen online lending companies like Affirm, Marlette and Rocket Loans. It has also developed payments solutions for faster, more secure and lower-cost transfers that have been integrated by TransferWise and the bitcoin wallet Coinbase, as well as Google Wallet and Stripe in the past.
It’s been almost a year since you announced your VC funding. How have you been using it?
We have absorbed the capital very quickly, managed to deploy it on the marketplace lending side. We like to retain loans from the origination platforms so instead of selling 100 percent of the origination we retain 10 percent. As our partners are growing nicely, naturally that 10 percent has kept increasing.
Can both banks and fintech vendors deliver banking-as-a-service?
We’re strong believers that BaaS has to be delivered by a bank. The fintech players need access to payment rails and they’re going to use a bank ultimately to do that. As a service, the bank could be either the facilitator of a transaction or the purchaser of the BaaS technology to provide it to consumers. There is a level playing field now — consumers can have the same functionalities in a small bank in Nebraska that they can have with a Chase or Wells Fargo.
Are banks prepared?
Most banks are not equipped or not API-driven, ubiquitous, priced properly — and the banks that are, the big banks, have been unwilling to do that because it would cannibalize some of their business or presents high risk — do they have the required compliance and adequate staff to be able to manage the operations?
What’s going on inside Almond?
Almond is our exploratory R&D lab for us to understand the aspirations of consumers. We’re trying to develop a front-end solution that could possibly be a killer app that we could white label and sell as one BaaS functionality — so that would be an online or mobile app for a bank account. We’re moving from the back end to the front end.
Today loanDepot announced an agreement with OJO Labs, Inc. to act as the mortgage provider of its machine-powered assistant known as “OJO.” By matching OJO’s leading AI technology with loanDepot’s digital lending platform, melloTM, the combined offering will allow house hunters to access real estate and mortgage information, and get pre-qualified, through an entirely digital, mobile-first experience.
While large banks and fintechs are ostensibly working more closely together than ever, in private conversations and even publicly at a few conferences, fintech leaders have expressed increased frustration about working with bank partners.
Though they won’t name names, they claim tier-one U.S. banks string them along, fail to communicate, don’t pay anything and, worst of all, out-and-out steal intellectual property.
More seriously, fintechs claim large banks are bad at paying for new technology and services.
Parker Crockford, commercial director for the U.S. at identity verification software startup Onfido, said at the RegTech conference in early October that when he’s engaging with large financial institutions, “we get pulled into a lot of innovation conversations where they just want to pick our brains and look cool. I don’t have time for that any more. I’ll say, ‘I’m happy to give you a white paper or a 20-minute chat over the phone.’”
Entrepreneur Lynn P. Smith is the founder and CEO at Buy The Block – one of the only Black-owned platforms in the country that is dedicated to making investments in real estate as a group more accessible. The movement is presently on its way to recording massive success in funding for diverse development projects across Black communities in the US.
This enviable initiative offers every Black American an opportunity to invest as little as $100, and connect with other investors – with an added advantage of helping every member buy a piece of their first block.
Evolve Capital Partners,Inc. is proud to announce that its client, CleanFund Commercial Capital, Inc., the leading direct provider of commercial Property Assessed Clean Energy (“C-PACE”) financing, recently announced its first closing of a $15 million equity financing round, led by Vulcan Capital affiliated entities. The financing will accelerate CleanFund’s growth across the U.S. and help the company continue to meet growing demand from commercial property owners.
Thrive Inc. (Thrive) is excited to announce the compelling performance of its digital lending technology, ensuing from its multi-year technology licensing agreement with Horizon Community Bank (HCB), a leading Arizona-based FDIC insured bank and subsidiary of Horizon Bancorp, Inc.
Key Performance Highlights:
Application Time: Avg. of 5 minutes, as opposed to days
Automated Decisioning: 90% of applications are instantly decided; powered by Thrive’s configurable credit rules based algorithms
Time to Decision: <1 Day, as opposed to several weeks
Loan Booking Rate: 100%, as applicants prefer the quick digital application and decision process
Offer to Close: 1.5 Days, digital closing enables efficiency
Customer Acquisition Costs: <$200, driven by leveraging internal bank customers as well as new customers
Delinquent/Charge-Off: 0%, effective underwriting and real time loan monitoring is driving modern and powerful risk management while also compressing loan reviews
Monthly Origination Growth: 60%, driven by customer demand for a quick, efficient and friendly loan application experience
IBM says it has launched an “industry first” solution to support the full lifecycle of peer-to-peer (P2P) transactions, from the back office of financial institutions to the mobile device.
The project is a collaboration with Zelle, a P2P network in the US built on the clearXchange platform. Zelle now includes over 20 banks and credit unions, and is poised to reach an estimated 85 million US customers this year.
For instance, Jennifer Tescher, founder and president of The Center for Financial Services Innovation (CFSI), has helped launch financial inclusion initiatives by incubating startups addressing U.S. financial health through their Financial Solutions Lab. Some of these startups include Propel, which streamlines the food stamp process; Bee, a mobile alternative to potentially predatory financial services for low-income people; and popular startups that aim to assist with savings and debt repayment including Digit, EarnUp and LendStreet.
Founder and CEO Shivani Siroya, of California-based Tala, is trying to fix the challenge of low access to financial services by providing alternative credit scoring and instant credit delivery via mobile wallet.
Mexico, for instance, sees 38% mobile wallet use, compared to 17% overall in the US, even though 93% of Americanshave access to financial services.
Real estate crowdfunding hit $2.5B in 2015 and shows no sign of slowing down.
Platforms like RealtyShares and Fundrise offer several loan options and flexible payment terms, and cater to different asset classes. The latter prioritizes small-deal properties valued under $50M, and the former charges no fees for the first two years, or until an investment earns a 15% annualized return.
2. Nondirect Marketplace Lenders
Nondirect marketplace lending uses technology to connect lenders directly with borrowers, bypassing traditional banks, reducing barriers to transaction, and offering strong savings for borrowers and good returns for lenders. Popular for auto and student loans, financial institutions have increasingly stepped into the commercial lending role on these platforms, creating a marketplace in which loans are packaged and sent out to individuals, hedge funds, wealth advisers and banks.
3. Direct Lenders
Money360 is a direct lender with discretionary capital that ensures certainty of execution and timely closings. The lender offers loans between $1M and $20M on both bridge and permanent loans, with competitive terms and features similar to traditional lenders. Bridge loans are interest-only, and like banks, permanent loans use 25- to 30-year amortization schedules.
1. How much do you need for a small business loan for your startup?
Microloans work with the Small Business Association (SBA). They are for businesses that need to borrow between $35,000-$50,000 and have a limited credit history.
2. How quickly do you need access to loan funds?
If you’re positive that you need $100,000 right-off-the-bat, then an installment loan may be a better option. If you need $50,000 to start, but believe you’ll need additional capital down the road when you start to grow, you may want to look into revolving credit.
3. What is the loan going to be used for?
4. How long have you been in business?
If your business is still in the early stages, it may be difficult to secure a loan from traditional lenders like a bank since they require a positive credit history, collateral, business plan, projected financial statements, and cash flow projections.
In this situation, you may have to search for a small business loan from an alternative lender like an online lender like Lending Club.
5. Do you have collateral?
Do you have an property or inventory that you can put up as a collateral? If not, you may not qualify for a loan from a traditional lender. Instead, you may have to seek alternative funding options where you would offer accounts receivable, future sales, or a percentage of the company in exchange for the loan.
6. Eliminate your bad debt.
7. Research possible loan provider options.
Do your due diligence and seek lenders that are transparent with their rates, terms, and have positive reviews from customers.
The parent company of payday lender Speedy Cash has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol CURO, with Credit Suisse listed as left lead underwriter. The Kansas-based company reports $33 million of net income of $442 million of revenue for the first half of 2017, and is owned by private equity firm FFL Partners.
Our new survey finds out the top 10 ways that people across America would spend their money if they won a $1 billion jackpot, including how many would buy a mansion, and how many wouldn’t give any to charity.
The owner of brands including Topshop, Topman, Miss Selfridge and Dorothy Perkins has joined forces with payment provider Klarna to offer online customers the option of paying for goods 30 days after delivery, without being charged interest.
20% of millennials said they would feel less guilty if they were offered deferred payment options, while one in five were more likely to complete a purchase if they knew they could spread the cost over time.
Nested, a London, UK-based PropTech startup, raised £36m in its third round of funding.
The round was led by Global Founders Capital.
The company, which has raised almost £50m in total funding to date, intends to use the capital to expand its business reach, initially within London and in the near future expanding across the U.K.
Fintech startup TransferWise has built a solid reputation when it comes to transparency. The startup just announced new fees for transfers initiated from the U.K. And it’s quite hard to understand if transfers are going to be cheaper or not after the change.
TransferWise is switching from a simple variable fee to a flat transaction fee with a lower variable fee.
Let’s take an example. If you’re trying to transfer £1,000 from the U.K. to the Eurozone. With the old fee, you’d pay 0.5 percent (or the equivalent of £5) in fees. With the new fee, you now pay 0.35 percent + £0.80, which represents £4.30. You eventually get more euros.
For a £1,000, you now pay 14 percent less if you take into account all fees. But this percentage is going to change depending on your transfer.
Because of this tiny little flat transaction fee, you’ll now pay morethan before if you transfer less than £530.
This is even worse for GBP/USD transfers. If you transfer less than £800, you now pay more than before. But it’s now cheaper if you transfer more than £800.
THE PEER-TO-PEER Finance Association (P2PFA) has reported yet another quarter of increased lending among members in the sector, and the figures show just how beneficial ISA manager status can be.
P2P platforms offering Innovative Finance ISAs (IFISA) have previously said that most inflows have been coming in this tax year, and the latest P2PFA data shows just how much of a boost the fully regulated firms are getting.
Lending Works and Landbay, which both received full Financial Conduct Authority (FCA) authorisation and launched IFISAs at the start of this year both recorded some of the biggest increases in loanbook sizes and lenders.
For LendInvest Real Estate Opportunities, a small Luxembourg-based fund run by the former peer-to-peer lending platform LendInvest, post-referendum it has provided an opportunity.
Assets in the fund have more than doubled to £130 million since the Brexit vote as investors have viewed its investments in short-term loans to property developers as a different way to get exposure to bricks and mortar.
The fund can be held in a self-invested personal pension (Sipp) but is not an eligible investment for an individual savings account (ISA).
The real estate fund has become a key focus for LendInvest as it has moved away from peer-to-peer lending after the Financial Conduct Authority (FCA) made it clearer what it thought P2P actually meant.
The fund lends to professional investors, developers and landlords who use their property portfolio as a prime source of income, transact several times a year and operate as a business.
‘He then went into discussions with the bank because he wanted to keep the asset and let it out, so refinanced. It had a valuation of £10 million, so 100% return in 10 months. We charged 15% interest.’
With interest rates that high it is not surprising perhaps that the fund has so far achieved its annual target of an 8% net return.
UK startup Countingup has raised €750,000 led by Frontline Ventures along with private investors to support sole traders.
Uniting business banking and accounting into a single product, Countingup aims to use the funding to build an accounting bank to serve 1m entrepreneurs.
A new crowdfunding platform is allowing retail investors the chance to back residential property developments by investing as little as £500.
The start-up, called Homegrown, is giving individuals the chance to invest in developments – such as a converted milk processing factory that’s being turned into flats and offices – and claims projected annual returns of around 12 per cent over roughly two years.
While credit conditions have continued to improve over the last 12 months there is still an issue for smaller businesses when it comes to the best finance options available and information on how to access them. There has been rapid developments in the different types of funding available to businesses, including peer-to-peer lending, crowd funding and business angel finance, but small businesses don’t always have the time to navigate around all the types of finance available.
Businesses can discover the funding options available to them including The Start Up Loans Company by using the Business Finance Guide (published by the British Business Bank in partnership with the ICAEW, and a further 21 business and finance organisations).
Equity finance
Whether you’re starting out or experiencing a high-growth phase, equity can be an important resource to provide finance as well as broader expertise. There is a breadth of equity funding options available, including the Northern Powerhouse Investment Fund, which provides early or late stage equity finance ranging from £50,000 to £2m.
Debt finance
At any stage of its development your business is likely to need a mix of different forms of debt, all of which have their advantages for business growth. The Northern Powerhouse Investment Fund offers microfinance covering micro-finance ranging from £25,000 to £100,000 and debt finance covering larger business loans £100,000 to £750,000.
In H1 2017, UK attracted $564 million of VC investment, up 37% on H1 2016. FinTech is worth $9.25 billion to the UK economy and now employs 60,000 people.
About 77% of UK businesses are aware of FinTech products and services and 65% have adopted at least one FinTech application, with a fifth (19%) taking on four. MarketInvoice, a London-based invoice financing firm found that these as result of using FinTech products and services, adopters reported saving (on average) over £5,500 a year.
London consistently attracts foreign direct investments (FDI) from around the world. Between 2006 and 2016, the capital has recorded investments from 67 different countries. The US, India, China, Japan and Spain together accounted for 56% of the investment. Of top source countries, the fastest-growing contributors to FDI into London are China, which has seen a tenfold increase over the last 10 years, Italy (+450%), and Canada (+400%).
For example, if your business is already two-years old try Funding Circle.
Thirty per cent equity and 70% debt is a good ratio and can make the company easier to manage.
2 Test your financial model – it must be robust
3 Be realistic about your valuation
4 Decide on the appropriate people to approach
In the £1 to £5m area, try EIS/SEIS funds and VCT funds. This is where an expert adviser can be helpful in providing introductions and knowledge. For smaller amounts contact Angel Investors.
5 Make contact and ensure you follow-up
6 Prepare the right information for the right stage in the process
According to data provided by professional services firm RPC, the number of trade marks registered by financial services firms has jumped 35% in five years – from 3,141 in 2011 to 4,228 in 2016.
Examples of fintech companies and challenger banks that have registered a number of trade marks recently include Atom Bank, Monzo, and Redwood Bank. Last year, the raft of fintech and financial services trade marks registered in the UK comprises names like “ Zentity” and “Numus Cash”.
One day in July, Carina Shi awoke to incessant phone calls by angry, loud men, seeking repayment on a 20,000 yuan loan taken out by a friend.
Unbeknown to Shi, the 20-year-old college student had been listed as the contact by a friend who defaulted on a loan borrowed from Qudian Inc, the Beijing-based online lender at the centre of the fourth-largest US initial public offering this year. Debt-collection calls only ceased after Shi called her friend’s mother in Inner Mongolia to resolve the debt.
Shi’s experience offers a glimpse into the inner workings of Qudian, a provider of micro loans that ballooned within three years into a sizeable lender offering a loans book of 38.2 billion yuan (US$5.6 billion) to 7 million active users during the first six months of 2017.
The annualised interest rate on 59.5 per cent of loans lent last year surpassed 36 per cent, according to the company. That compares with between 12 and 14 per cent among the country’s largest commercial banks.
That crackdown gave Qudian and other online lenders like Ppdai, Fenqile and Hexindai the niche to build a market, which expanded by 23 per cent in two years to 452.4 billion yuan at the end of last year.
China’s sizable middle class is on fire. A McKinsey & Company report projected that they would account for 76% of the country’s urban population by 2022.
When we say Chinese people are becoming increasingly tech-savvy, we don’t only refer to the fact they are the first adopters of cutting-edge technology software and voracious buyers of smart gadgets. We also have a knack and understanding for technologies to seek better investment returns. The report shows that tech stock is the most popular category for Chinese-speaking investors.
As digital natives, the country’s younger generations are first-movers to the sector. The report points out that post-80s gen represents nearly half (47.2%) of the users with post-90s gen comes as a close second (36.2%).
Over 65% of Chinese traders prefer Chinese companies when investing in the US.
Over 55% of Chinese investors will hold a position for over three months, and 20.03% for longer than a year.
Using data from Renrendai, one of the largest P2P lending platforms in the People’s Republic of China, we investigate how the amount of punctuation used in loan descriptions influences the funding probability, borrowing rate, and default. The empirical evidence shows that the amount of punctuation is negatively associated with the funding probability and borrowing rate. We propose that the use of punctuation affects the readability of a loan description and reflects borrowers’ self-control and cognitive ability.
Investors sent the stock of Chinese online microcredit company QudianInc.QD 7.00% —which literally translates as “Fun Shop”—up nearly 50% on its first day of trading on the New York Stock Exchange last week. But on Monday, following criticism of Qudian’s high lending charges in Chinese social media and newspapers, the stock tanked, dropping almost 20%.
The market does seem ripe for growth: Nonmortgage consumer loans are only around 20% of household deposits in China, according to Bernstein analysts.
Still trading at 6.6 times book value even after Monday’s share price tumble, Qudian is asking for a lot of faith compared with more-established lenders.
Online lending companies are facing a number of issues when planning an initial public offering in Greater China and the US, according to panelists at last week’s IFLR Fintech Asia conference in Hong Kong. Regulators’ attitudes towards business models,
accounting requirements and risk reserves are issues companies need to be mindful of.
China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF), one of China’s largest consumer lending marketplaces, today announced the appointment of Zhou Ji‘an, Executive Director and General Manager of China United SME Guarantee Corporation (“Sino Guarantee”), to its board as a non-executive independent director.
A seasoned chief executive in the financial industry, Mr. Zhou brings to the Company more than 18 years of experience in global organizations, financial institutions and government.
AltFi Data Analytics, published by investment bank Liberum, shows that the ratio of operating costs to the loan portfolio at the crowdlending platforms is lower by almost 40% comparing to banks.
Today, there are 214 unicorn startups globally — private companies that have reached a hefty valuation of over $1 billion.
Of these, the United States has taken the largest share of the world’s most valuable private companies, with 127 US-based startups reaching unicorn status since 2013. China follows in second place, producing 59 unicorn companies over the same time period.
Since 2013, the share of new unicorns born each year in the United States has consistently dropped, from 75 percent of all unicorn births in 2013 to less than half (49 percent) by 2015. That number sunk even lower to hit just 43 percent last year.
Chinese unicorns rising
In 2017 YTD, 16 new unicorns have been born in China.
In the third quarter of 2014, Lu.com, a finance marketplace that deals largely with P2P lending, reached a $10 billion valuation after a VC round backed by Morgan Stanley and Ping An Insurance.
Looking at companies with the highest valuations upon their entrance into the unicorn club, 7 of the top 10 spots go to China-based companies, with the US claiming the remaining 3.
BLOCK TRIBUNE: Could you tell us a bit how Wish Finance got started?
EUGENE GREEN: A decade ago I was a small businessman. Several of my closest friends are small businessmen in Asia, Europe and the US. All of them had the same massive problem, which I had – an inability to get a loan. So I founded Wish Finance to solve this major pain point.
BLOCK TRIBUNE: Where do you see the value of Wish tokens in the medium to long-term and the ultimate benefit for token holders?
EUGENE GREEN: We are not selling digital candy wrappers, but a token convertible to real company equity. The token price will go up with the company valuation, and comparable FinTech lending companies showed a fiftyfold valuation growth in only a few years. So the token holders could stand to benefit in a big way.
A research paper published by the Bank of Japan on October 23 suggests using specific purpose companies and specific purpose trusts to strengthen investor protection in the field of P2P lending.
P2P lending matches borrowers and lenders online without making use of traditional financial intermediaries such as banks. In recent years, the amount of outstanding loans in the P2P sector has grown significantly in the UK, the US and China.
The Australian government published draft laws on Tuesday that would let financial technology companies operate without a full licence, a measure it said would encourage innovation without compromising existing levels of consumer protection.
Financial technology companies would be able to test products involving non-cash payments, crowdfunding, consumer credit and provide financial advice on pension funds, life insurance and domestic and international securities.
Industry superannuation funds need to adopt digital advice into their offering to retain those members who eventually seek advice elsewhere and inevitably leave their industry fund.
Through digital advice, super funds should begin focusing on what Cheung terms as “incremental advice”.
Instead of providing just intra-fund and single-issue advice, super funds should provide members with the ability to deal with cashflow, debt management, or protection and insurance needs, as needed.
HackerEarth, a leader in innovation and talent management software, has been selected by Fintech Valley Vizag – a Government of Andhra Pradesh initiative, to host Finackathon 2017.
The hackathon will be held in two stages. The idea phase which began on September 14th is currently underway with entries set to close on October 30th. The shortlisted teams will participate in the final round to be conducted in the first week of December in Visakhapatnam. The winning teams in each category (Banks, Insurance, Capital Markets, and NBFCs) will be awarded a sum of INR 3,00,000. The winners will also be given a chance to carry out Proof of Concept (PoC) with corporates and will need to be executed in Fintech Valley Vizag. Investor network of The Fintech Valley, Vizag will be invited for Hack Day, where they will go through the prototyped solution.
The hackathon is looking for solutions across the following 5 themes:
Lending Loop, a Canadian P2P lending platform, has officially provided financing of more than $10 million across the country.
The company says it has supported the expansion of over 180 small businesses through a system that allows investors to reach out to small businesses on Lending Loop’s digital marketplace.
Lending Loop’s investment model moves away from institutional or accredited investors; Canadians can even invest $50 into a pool of larger loans.
Restaurant News reports that hourly employees can use a smartphone app to access money for hours worked and have it deposited on a debit card. The amount is limited to 50 percent of what’s earned and–to discourage impulse buying–employees only have an hour after their shift to access the money. There’s no fee for the worker, but businesses pay Instant Financial $1 per active user per month.
Barha is aiming to put a dent into the burgeoning payday loan industry, which was used by approximately 12 million Americans in 2015. His service is also being looked at as a potential recruiting and motivation tool by employers, particularly in — but not limited to — the retail and restaurant industries.
According to a recent USA Today report, almost 150,000 employees at more than 50 companies like McDonalds, Outback Steakhouse and Dunkin’ Donuts as well as other restaurants and retailers, trucking companies and staffing firms have access to the service.
GDS Link, a global provider of risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business lending and leasing, today announced that it has joined the Canadian Lenders Association (CLA) as an affiliate member and will be sponsoring the Canadian Lenders Summit.
GDS Link is sponsoring the Canadian Lenders Summit, which has partnered with the CLA. The inaugural event will take place on October 26, 2017 in Toronto, Canada. Representing GDS Link is Rich Alterman, EVP of Business Development.
Brazilian startup Nubank said on Tuesday it would expand from credit cards into digital accounts allowing users to make transfers, pay bills and earn more interest than average savings account, beefing up its challenge to traditional banks.
Tech-savvy millennials have been the core demographic for Nubank’s credit card, but Velez said he hoped new accounts would serve some of the roughly 60 million Brazilians – around 30 percent of the population – who do not have a bank account.
Venture capital firms including Sequoia Capital, Kaszek Ventures, Tiger Global Management and DST Global have invested $179 million in Nubank since 2013, giving it a value of $500 million in early 2016 that made it the largest Brazilian fintech startup.
Kabbage sued by small business borrower. AT: “Lawsuits will continue to be a thorn in the side of alternative lenders until the true lender debate is resolved.”
A small business (SMB) in Massachusetts borrowing funds via marketplace lender Kabbage has sued the platform, igniting new debate in the conversation over the definition of a “true lender,” according to reports in the National Law Review on Tuesday (Oct. 31).
The small business that sued the parties is reportedly arguing that Celtic let Kabbage “rent” that bank charter to originate loans with excessive interest rates, despite Kabbage being the “true lender,” because Kabbage, not Celtic, bears the risk of loss. The plaintiffs are using state usury and consumer protection statutes, the publication said, as well as the federal RICO statute and Lanham Act.
Orchard Platform’s online lending industry data and insights will be made available to Bloomberg terminal subscribers, providing a wealth of information on an asset class that offers a number of potential investment opportunities.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by SoFi Consumer Loan Program 2017-6 (“SCLP 2017-6”). This is a $591 million consumer loan ABS transaction.
Preliminary Ratings Assigned: SoFi Consumer Loan Program 2017-6
DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of notes issued by SoFi Consumer Loan Program 2017-6 LLC (SCLP 2017-6):
— $315,000,000 Class A-1 Notes at AA (sf)
— $175,000,000 Class A-2 Notes at AA (sf)
— $75,000,000 Class B Notes at A (sf)
— $26,000,000 Class C Notes at BBB (sf)
FinTech lenders continue to gain market share in the personal loan space while maintaining their portfolio risk-return performance. Results from TransUnion’s “Fact versus Fiction: FinTech Lenders” study were released today during the Digital Lending + Investing Conference in New York.
To better understand the personal loan market, TransUnion studied unsecured personal loan originations over the past several years, as well as more detailed portfolio performance between 2014 and 2016. The analysis differentiated between those loans issued by banks, credit unions, FinTechs and traditional finance companies to compare performance across lender types. The study found that the balance share of these loans originated by FinTechs had dramatically risen in recent years. At the end of 2016, FinTechs represented 30% of all personal loan balances, up from about 4% in 2012 and less than 1% in 2010. This trend continued through the first six months of 2017, with FinTechs now representing 32% of personal loan balances.
Share of Originated Personal Loan Balances
Timeframe/Lender
Banks
Credit Unions
FinTechs
Traditional Finance
2017 (Through June)
29
%
24
%
32
%
15
%
Full year 2016
26
%
23
%
30
%
21
%
Full year 2015
27
%
22
%
28
%
23
%
Full year 2012
35
%
32
%
4
%
29
%
As part of this study, TransUnion developed a coarse risk-return metric*. While loans provided by FinTechs experienced higher delinquencies than competitors, specifically within the lower credit risk tiers, TransUnion’s study found that they generated effective portfolio risk-return ratios that exceeded those of banks and credit unions. As of Q2 2017, FinTechs averaged an 8.7% return compared to 6.7% for banks and 6.3% for credit unions. Traditional finance companies average the highest return at 11.5%.
The study demonstrated how FinTechs focus their originations in the near prime and prime risk tiers. As of Q4 2016, 59% of FinTech balances originated were in those two risk tiers. This is slightly higher than the 57% rate in Q1 2014.
Personal Loans Continue to Grow
The study also observed general personal loan trends. Personal loan total balances and consumer participation have both grown considerably. As of Q2 2017, 16.1 million consumers possessed a personal loan, compared to 14.8 million in Q2 2016 and 13.1 million in Q2 2015. Just five years ago in Q2 2012, approximately 9.8 million consumers had a personal loan. Total outstanding balances have risen from about $45 billion in Q2 2012 to $106 billion in Q2 2017.
While conventional wisdom holds that personal loan borrowers fall in the subprime risk bucket, TransUnion data through Q2 2017 show that personal loan adoption is greatest in the near prime (26%) and prime and above (49%) risk levels. Subprime constituted only 25% of such loans.
The most recent TransUnion data show that the number of lenders issuing personal loans has decreased in recent years from 7,245 in 2012 to 6,896 in 2015 and 6,680 in 2016. However, the number of lenders issuing large volumes of personal loans (at least 10,000 annually) has nearly doubled in the last 5 years from 68 in 2012 to 128 in 2016.
October was another very active month for the FT Partners team as we announced seven significant FinTech transactions. We are pleased to announce our role advising:
6th Avenue Capital, LLC (“6th Avenue Capital”), a provider of small business financing solutions, announced today its securement of a $60 million commitment from a large institutional investor. The investor made their commitment based on 6th Avenue Capital’s industry-leading underwriting, compliance standards and processes. 6th Avenue Capital will draw from this commitment to offer merchant cash advances to small businesses through its nationwide network of Independent Sales Organizations (“ISOs”) and other strategic partnerships, such as banks and small business associations.
This month, the Consumer Financial Protection Bureau took an important step toward making that potential a reality with its release of consumer-authorized data-sharing and aggregation principles. In the principles, the bureau reiterated consumers’ right to share data, recognizing that connectivity is the underlying magic fueling the consumer fintech revolution. The guidelines will promote innovation, competition and consumer control.
Data sharing often requires consumers to provide their bank account usernames and passwords to third parties. In the guidance, the CFPB clarified that granting consumers access to their data does not necessarily mean sharing login credentials. At the same time, the bureau made it equally clear that if banks and others want to prevent the sharing of credentials, they need to find another, more secure way to provide access. Both banks and data aggregators should have an incentive to eliminate the use of credentials.
Third, banking regulators could update their third-party vendor risk management guidelines to clarify the kinds of due diligence banks are required to conduct on parties with whom they share data.
Elevate Credit, Inc. (NYSE:ELVT) (“Elevate” or the “Company”), today announced financial results for the third quarter ended September 30, 2017. Elevate has posted its third quarter earnings release to its Investor Relations webpage at
Robinhood, the fintech brokerage that offers commission-free trading through a mobile app, announced Wednesday it’s launching a web platform.
Bhatt says the web trading platform is primarily geared towards informing people who are interested in investing about the stock market. However, the company faces an interesting product design challenge, in that about half of its users have invested previously on another platform.
LendingTree®, the nation’s leading online loan marketplace, today released its quarterly list of the top customer-rated lenders on its network based on actual customer reviews for the third quarter of 2017. The list features the top lenders in multiple loan product categories, including Mortgages, Personal Loans, Business Loans and Auto Loans, all of which are included in LendingTree’s online loan marketplace.
The online lenders set up to upend US retail banking in the wake of the financial crisis are still expanding in spite of scandals and setbacks at some of the biggest names in the business.
Financial technology groups originated $15bn of personal loans in the first half of the year, according to figures published on Thursday by TransUnion, the credit bureau whose database covers the borrowing habits of 220m consumers.
That was almost a third of the total US market for new personal loans — a bigger share than banks or credit unions or other traditional consumer finance companies — and compares with just 4 per cent in 2012 and 28 per cent in 2015.
R3 is working with 22 of its member banks to build a real-time, cross-border payments solution on Corda, the consortium’s “blockchain inspired” distributed ledger.
The banks include U.S. Bank, TD Bank, Barclays, BBVA, CIBC, Commerzbank, DNB, HSBC, Intesa, KBC, KB Kookmin Bank, KEB Hana Bank, Natixis, Shinhan Bank and Woori Bank, R3 said Tuesday.
It’s long been a mantra in the fintech community: Traditional underwriting models that rely heavily on conventional credit scores leave out people who haven’t built up a credit history. A percentage of these people are creditworthy, but without a history to go on, the credit bureaus haven’t created profiles of them yet.
To assess whether unscored people can repay loans, lenders are increasingly looking at “alternative data” — information that comes from someplace besides a traditional credit bureau that can help predict how a potential ….
Which is why we’re excited to have led the Series B for CoverWallet, an online insurance broker for small businesses which is upending the industry.
Small-to-medium business (SMB) insurance is a profitable, but highly fragmented $100 billion/year market. At the present, SMB insurance is sold through 40k+ brick-and-mortar insurance brokers, which employ 500k+ agents and move 99% of premiums. The typical SMB insurance application has 27 pages, and is completed while having “the talk” with the agent, which will include many upsell & cross-sell attempts. The typical SMB insurance quote takes 7-10 days. For SMB owners, this process is time consuming and painful.
Affirm, a popular web service that allows users to buy online and pay off their purchases in fixed monthly payments, has launched their Android and iPhone app.
Remitly, a Seattle, WA-based independent digital remittance company, is to raise up to $115m in Series D funding.
The financing – subject to applicable third party and regulatory approvals – will be led by Naspers’ fintech investment division PayU, a global online payment service provider, with participation from existing investors Stripes Group, DFJ, and DN Capital. In conjunction with the funding, Laurent le Moal, PayU CEO, will join Remitly’s board of directors.
When you see prominent investors such as George Soros, Larry Silverstein and Goldman Sachs participating in the real estate crowdfunding business – it means something. So, let’s follow the smart money. The real estate crowdfunder that everyone is talking about now is CityVest, which claims a top pedigree of founders and investors. And CityVest.com is living up to its mission – Smarter Real Estate Investing.
CityVest provides wealthy individuals with online access to institutional real estate funds and the higher rates of return they generate.
Prospective home buyers overwhelmingly want to head south, according to a recent LendingTree analysis. The online loan marketplace looked at the 1.5 million mortgage requests it received from October 2016 to October 2017 to come up with the results.
Which state do home buyers most want to move to?
But of all the Southern states, which was the most desirable? Drumroll please … that would be Florida. The Sunshine State was the top destination for folks from 18 states, or about 9.14% of those looking at loans on LendingTree.
Which state do home buyers most want to leave?
Vermont residents were the most likely to want to hightail it out of the Green Mountain State. Despite its popular ski resorts, only about 76% of locals were looking for in-state mortgages.
Which state do home buyers most want to stay in?
Texans were the most happy of any state’s residents to stay put. About 92.5% of folks looking for potential mortgages wanted to stay within Texas, according to LendingTree’s report.
So as a techie, how does one go about evaluating not just the real estate but also the platform offering the investment?
That’s why it’s critical for real estate investing platforms to be willing and able to answer questions from prospective investors — even those would-be investors without a ton of prior real estate knowledge. These companies should take a page out of Amazon’s book and develop a customer obsession.
Be leery of any cliché claims of leveraging big data to automate underwriting. Underwriting is as much science as it is intuition/experience, and the best commercial real estate professionals have a carefully tailored mix of both.
In the long run, the track records of the platforms will speak loudest.
Steven Dupree was SoFi’s first marketing executive and VP of marketing for 3 years. He and his growth-oriented team took SoFi from originating 10 loans a day to over 1000.
The three most basic ingredients for being able to succeed in FinTech are:
1) “Good enough” technology
2) Tremendous capital markets expertise
3) Some sort of customer acquisition strategy
Companies like Experian and Equifax know if you have loan balances, and specifically they know if you have student loan balances. We sent pre-screened offers to prospects with outstanding student loan debt through physical mail about how SoFi could help them with those loans.
QCash Financial, a CUSO providing automated, cloud-based, omni-channel small-dollar lending technology for financial institutions, announces it will co-host a free webinar with Filene Research Institute and the Center for Financial Services Innovation to discuss the opportunities for credit unions in offering small-dollar lending on November 14.
During the webinar, QCash Financial will address our industry’s impact and opportunity to deliver small dollar loans. QCash Financial, the Center for Financial Services Innovation and Filene will collaborate to discuss the omni-channel lending solution that serves members in search of small, short-term unsecured loans.
Registration information can be found at filene.com. The webinar is scheduled from 2 p.m. CST / 12 p.m. PST until 3 p.m. CST / 1 p.m. PST.
Ken Rees, Chief Executive Officer at Elevate, a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, will speak on a panel session at Dallas Techweek on Thursday, November 2, at 9:15am CT. The panel will focus on data intelligence, breaking down the hype around data science, and exploring ways companies can turn that hype into actionable business intelligence.
Rees will be joined by local tech talent and founders, including Clarisa Lindenmeyer, Chief of Strategy/Partnerships at Launch DFW; Sravan Ankaraju, President of Divergence.Academy, CEO of Divergence.AI; Dave Copps, CEO of Brainspace; and Steve Hebert, Co-Founder & CEO of Nimbix, Inc.
U.S. Sen. Elizabeth Warren warned Wednesday that the nation’s largest student loan servicer has positioned itself to stealthily strip consumer protections from unwitting borrowers across the country. In an interview with International Business Times, she also said the loan servicer, Navient, should not be permitted to be a government contractor handling student loans on behalf of the U.S. Department of Education.
The Massachusetts Democrat was sounding an alarm about Navient’s recent acquisition of online lender Earnest. She said the transaction opened up the possibility that the company will try to boost its profits by selling debtors on refinancing their current federal student loans with the company’s own private loans — the kind that she said to do not necessarily permit income-based repayment options.
A new robo-advisory platform has hit the market, under the moniker BrightPlan.
Important to note, according to the firm, clients are not required to invest through BrightPlan in order to receive financial planning advice. They can manually input external account balances or link external accounts from more than 10,000 financial institutions to BrightPlan, which will monitor goal progress and provide advice to stay on track.
Avant has created an online lending platform that uses Big Data and machine learning algorithms to streamline the loan decision process helping borrowers consolidate debt through personal loans. The company, led by CEO and co-founder Al Goldstein (pictured), raised $325 million in Series E financing back in September 2015, with General Atlantic leading a round at a $2 billion valuation.
Avant isn’t alone, with competitors like publicly traded Lending Club (NYSE: LC) and VC-backed Kabbage using a similar strategy: automating the credit creation process.
Two new appointments have been made at data-enabled platform Attune, the company jointly created last year by American International Group, Hamilton Insurance Group and Two Sigma Investments.
Martha Dreiling takes on the role of head of analytics and corporate operations, while Richard Stamets has been appointed head of underwriting strategy.
RATESETTER is changing the way it deals with defaulted property development loans, which could involve taking control of the project and completing it itself.
The peer-to-peer lender said on Wednesday that if a property development is only partially completed and has gone into default, it will now examine whether maximum value would be delivered via an immediate sale or by completing the development and then selling it.
UK-based peer-to-peer property platform Lendy announced on Thursday it has broken all previous records for loan repayments generated in any one month, recovering £20 million in total in October 2017 alone. The online lender reported that this exceeds its previous September 2016 high of £14.5 million. The record figure includes repayments on P2P loans on three caravan parks in Christchurch, Dorset, totaling £7.6 million and a Manchester mill of £1.35 million.
A digital invoice finance platform in the U.K. will provide business loans to its customers for the first time, it was announced Wednesday.
The firm said it would expand into the business lending market, pitting it against established players such as U.S. listed peer-to-peer lender LendingClub and Britain’s Funding Circle. The latter raised £82 million ($100 million) in funding from venture capital investors earlier this year.
CEO and co-founder Anil Stocker told CNBC that MarketInvoice will take advantage of an incoming European Union regulation called the Second Payment Services Directive (PSD2), which forces banks to open up data about their customers to third party companies.
Brexit may be roiling Westminster and inflating prices on supermarket shelves, but don’t tell that to financial institutions eyeing the U.K.’s burgeoning online-lending industry.
In the latest sign of confidence in the sector, Citigroup Inc. has agreed to provide a fintech firm called LendInvest Ltd. with funding for mortgages, the startup said in a statement Wednesday.
LendInvest, a Fintech marketplace platform for property finance, has agreed a long-term warehouse facility with Citi boosting its entry into the UK’s £40 billion buy-to-let (BTL) market.
‘We’re taking business from the banks, from the invoice discounters and from the traditional suppliers of finance, in ever larger amounts,’ says Angus Dent, chief executive of ArchOver, a P2P lender that launched in September 2014. ‘We only lend to companies with strong balance sheets and we only lend against accounts receivable (ARs). We will loan up to 80 per cent of the value of the ARs. Once the loan is made the ARs must be maintained at 125 per cent of the value of the loan, monitored by us on a monthly basis. This provides a quickly realisable asset for our investors in case the borrower gets into difficulties over repaying for the loan.’ The minimum amount that ArchOver expects clients to invest is £1,000 per project.
For Anil Stocker, chief executive and co-founder of MarketInvoice, P2P lending against receivables (amounts owed to a business) offers a particularly interesting investment class ‘because it’s of short duration, a liquid product, with invoices typically taking 45 to 50 days to be paid.
IMLA found that lending by specialists has grown by an average of 19% each year from 2009 to 2016, with a total of almost £17bn lent last year. That’s enormous growth from a sector that was particularly badly dented by the effects of the financial crisis.
Even with these enormous annual increases in lending, the market share of these specialists remains modest. According to IMLA it has grown from 3.5% in 2009 to 6.8% in 2016, and that still lags significantly below the levels seen before the onset of the financial crisis.
Britain’s leading financial technology start-ups are celebrating a record-setting week as they accelerate their push to take market share from high-street banks in areas such as payments and lending.
TransferWise will on Thursday announce that it has collected $280m from investors, a record fundraising round for a UK fintech, to finance expansion of its cross-border payments service into more countries around the world.
Meanwhile, Funding Circle has for the first time outstripped net new lending by the major high-street banks to UK small businesses, according to figures released by the Bank of England this week and data provided by Europe’s largest peer-to-peer lender to SMEs.
Of 1000 small biz owners quizzed by WorldPay, more than half say that they are planning for growth in 2018, yet 52% admit to being concerned that the traditional routes to finance, such as bank loans, are not going to be as easily available in the coming year.
While 21% of business owners aged 44 or under say they’re still most likely to apply for a bank loan when looking for funding, nearly as many respondents (17%) say they’re more likely to look at crowd-funding, while 11% prefer P2P lending, and six per cent say they favour business cash advance.
HSBC’s head of retail wealth, Dean Butler, provided his perspective on automated advice, and the bank’s plans for new products in the area, at the UK Robo-Advice Innovation Forum on Wednesday, attended by BI Intelligence.
Earlier this week, Landbay and Buy to Let Club completed lending to a new building in Southgate, a suburban area of north London, in under two months. The initial case was reportedly submitted on the broker portal by Buy to Let Club on August 24th.
Fast-growing fintech firm MarketInvoice has launched a new business loans service that expands its solutions beyond invoice finance.
Businesses will now be able to obtain unsecured business loans from £10,000 to £100,000 over a 12-month term, with no early repayment fees.
By expanding into the £35 billion business loans sector, MarketInvoice aims to increase support for businesses which need working capital around their invoice finance requirements.
Stuart Lunn, co-founder and chief executive of Edinburgh-based P2P business lender LendingCrowd, sees the benefits of both.
“For P2P investing to become truly mainstream, it’s essential to simplify the products on offer and enable greater comparability between opportunities,” he asserts.
“Passive products force greater diversification and I think that will benefit the sector as a whole.”
Funding Circle and RateSetter have been placed at number eight and number 21, respectively, in the ‘LinkedIn Top 25 Companies – Startups’ list, which was released on Thursday morning.
Funding Circle was the highest-ranking P2P platform, and it was praised for funding more than 28,800 companies over the past seven years, with more than £2.8bn allocated to borrowers.
A North East company has been named by social media site LinkedIn as one of the country’s 25 most disruptive companies.
Durham ’s Atom Bank, which is shaking up the banking world with its mobile-based app and personalised services, is named alongside companies including Deliveroo, Uber and Airbnb, on a list of start-ups which LinkedIn says are changing the UK business landscape.
Today, leading European payments provider Klarna has announced a UK partnership with ASOS – one of the world’s leading destinations for fashion loving 20-somethings.
The news means that UK customers with the iOS or Android ASOS app can now use Klarna’s ‘Pay later’ solution to pay for their items up to 30 days later – with no interest or fees.
The alternative finance services firm has announced that Dan Walker will take over from current MD Caroline Langron in January 2018.
The group is part of GLI Finance, which acquired peer-to-peer lending platform FundingKnight in 2016. Earlier this year, FundingKnight was moved into Sancus BMS Group, was awarded full FCA authorisation in July.
In recent years, with the rise of Internet financial and the change of macroeconomic environment, the traditional commercial banks did go through a “severe winter”. Since 2011, banking climate index has been down all the way. It is not until 2017 that the new season of spring is coming.We selected 38 listed Chinese Banks in exchange of Shanghai, Hong Kong and Shenzhen as the performance comparison samples, and analyzed their comprehensive profitability based on the financial data of the first half of 2017.During this time, the total net profit of the 38 banks selected in this paper was 823.93 billion RMB, up 4.14 percent from the same period last year. The chart below described the profit data of all the 38 banks in the first half of 2017.
Profitability Banks Ranking
Among the 38 listed banks, we can also find the Top10 earning banks as follows, including 5 large-scale commercial banks and 5 joint-equity commercial banks. In addition, the net profit of Ping An Bank and Beijing Bank has reached the threshold of 10 billion RMB.
Chinese listed banks VS internet giants in profitability
According to the total value and earning data of the selected 38 listed banks as follow, their total market capitalization is about 10 trillion RMB, and the total net profit was 823.93 billion RMB. That means the net profit ratio was about 0.082.
As for the BAT giants which are closely watched in the Internet industry, the three Internet companies are worth about 6.5 trillion RMB in total for the first half of 2017, and the net profit reached 52 billion RMB. That means their net profit ratio was just 0.008, much lower than the listed banks. Obviously, Banks still have an advantage over emerging Internet companies in terms of profit creation.
In fact, research shows that the rise of the Internet financial companies has little impact on the profitability of large commercial Banks and rural commercial Banks, while has a great influence on city commercial Banks, and Joint-stock commercial Banks have been promoted instead because they can seize the Internet financial opportunities. In general, though the development of Internet finance has brought adverse effects on the profitability of commercial Banks, and also forced it to actively adjust the profit model and promote the diversified development of the profit structure.
Senmiao Technology, a early-stage Chinese marketplace for peer-to-peer lending, filed on Monday with the SEC to raise up to $20 million in an initial public offering.
Chinese facial recognition start-up Megvii Face++ has raised $460m in an investment round led by a government fund, as the country pours money into efforts to become an artificial intelligence superpower to rival the US.
The Beijing-based Face++ said on Wednesday that it had raised money from China State-Owned Venture Capital Fund and the China-Russian Investment Fund, which is backed by the sovereign wealth funds of both countries. Private investors including Alibaba’s payments affiliate Ant Financial also participated.
On October 17, Handing Yuyou(300300.SZ), a listed company that was suspended from trading, began to transfer its assets of internet finance continuously. On October 30th, the company announced that it would transfer a 2 percent stake in the Wei Dai Network for 170m RMB, and then they announced to transfer a 1.5 percent stake in the Wei Dai Network for 127.5 million RMB. Through the two deals, Handing Yuyou(300300.SZ) will receive nearly 300 million RMB in cash. Deducting the previous investment costs, Handing Yuyou(300300.SZ) won over 100 million RMB in less than half a year. In the past three years, according to the company’s history of the investment in Wei Dai Network, we can find that the company has earned at least 10 times to the original investment.
The transferee of this transaction is Beijing Qianshan Xinyuan Investment Management co., LTD. According to the public information, Beijing Qianshan Xinyuan Investment Management co., LTD. was established in 2015 with the registered capital of 10 million RMB. Its parent company, Qianshan Capital Management co., LTD is a private company registered in 2016. The parent company also have the other several subsidiary corporations, including Qianshan Venture Investment Management co., LTD., Beijing Qianshan Wealth Management co., LTD., etc. Currently, the parent company has a total capital size of 1 billion RMB.
Starting from today, November 1, 2017, we have removed the 1% fee for selling loans on the secondary market of the Mintos marketplace. This means from now on, there are absolutely no fees for investing through Mintos.
Telecoms giant Orange launches its own bank on Thursday, aiming to win 25 percent of France’s online banking market by capitalizing on the rising use of smartphones to steal share from established lenders with inferior technology.
Orange is starting from a small base – Coisne says it has 25,000 customers have expressed interest ahead of the launch, a tiny fraction of the company’s 21 million mobile clients. But the timing of its entry gives some room for optimism.
In France, 793.4 million online banking e-payments were made last year according to the European Central Bank, up from 586.2 million in 2014.
Financing and loans are even being re-thought of with new forms of capital raising, such as ICOs, crowdsourcing/crowdfunding, and P2P lending, making banks and legacy financial institutions even less needed.
Small business loan marketplace Lendio announced it has provided more than $25,000 in loans to over 1,200 small business owners in 75 countries around the world through its employee-based Lendio Gives program in partnership with Kiva.
The top five sectors supported by Lendio’s funding are agriculture, food, retail, clothing, and services. Of the loans Lendio has funded, 86 percent have gone to women or women’s groups. The top countries Lendio has supplied funding to include Zimbabwe, Peru, Haiti, the Democratic Republic of Congo, Ecuador, the Philippines, Kenya, El Salvador, and Senegal.
To gauge the IMF’s most recent analysis: A speech last month, at the Bank of England, by the IMF’s Managing Director—Christine Lagarde—analyzed potential challenges posed by fintech innovations to central banking.
In my remarks here today—focusing on implications of fintech for cross-border payments—I’ll explore three broad areas: [1]
First, a sketch of the economic framework on how fintech applications will affect financial services and the market structure.
Second, the current landscape of cross-border payments, and the possible evolution of cross-border payment systems; and
Third, the role of central banks, themselves, and the possible reasons for them to issue their own digital currencies.
Alternative asset classes – in particular, real assets, private equity and private debt – will more than double in size, reaching $21.1trn by 2025, accounting for 15 per cent of global AuM as investors diversify to reduce volatility and target specific return and risk outcomes, according to research by PwC.
Zelle – a new, real-time payments network from bank-owned Early Warning Services – has added ACI Worldwide, CGI, D3 Banking Technology, and IBM to its growing list of technology partners.
It is now mandatory for entities proposing to undertake this business to be registered as ‘NBFC-P2P Lending Platforms’ with the RBI (NBFC-P2P). To ensure business continuity, existing players have been given a period of three months to apply for this licence. Applicants will be scrutinised for scalable and secure technological capabilities, financial standing as well as fit and proper management.
Fundamentally, the NBFC-P2P is expected to operate only as an intermediary and not undertake any lending activities itself or hold any funds of its participants (lenders or borrowers) on its books. Towards this end, an escrow mechanism for movement of funds has also been envisaged.
The exposure of each lender and loans (not exceeding a three year maturity period) availed by each borrower across all NBFC-P2Ps has also been capped at INR 10 lakhs, with each borrower not permitted to avail more than INR 50,000 per lender.
In addition, directions also prescribe that NBFC-P2Ps adopt minimum standards of transparency, disclosure requirements and fair practices.
Impact on Aggregators
To the extent P2P lending platforms are servicing individuals and/or unregulated entities, there is merit in regulating such operators to contain any systemic risks. However, there are existing players in the market who primarily service regulated financial institutions (viz. banks and NBFCs) as lenders. The Master Directions fail to recognise this distinction.
Separately, banks and NBFCs today use distribution channels including web-based loan aggregators.
PrimechainTechnologies announced on Wednesday that the country’s largest bank, State Bank of India (SBI), will adopt blockchain technology to manage the mandatory Know Your Customer (KYC) details in its system. Intel Corporation will act as a technology provider to facilitate the implementation.
Korea’s accumulated peer-to-peer lending reached 1.47 trillion won (US$1.31 billion) by end-September as more and more borrowers are embracing the new, more convenient platforms for connecting with investors.
Considering that the figure accounts for only 60 members of the Korea P2P Finance Association among the industry estimates of 130 lenders, the market is actually bigger. It also reflects a sharp upward trend; back in June 2016, when the association first began compiling data, accumulated loans granted by 22 members stood at just 152 billion won.
Against this background, Kim founded PeopleFund in March 2015. Since then, the bank has been on a roll. On Nov. 1, its accumulated loans stood at 121 billion won, compared to 19 billion won in February. It’s the No. 3 player in the local industry.
The South African SME sector is set for a major crisis unless access to adequate business funding can be ensured as a matter of urgency. This was the key takeout from the just-released Key Funding Challenges for South African SMEs 2017 report developed by online lenderLulalend.
“76% of respondents to our national survey of SMEs said they had undergone a tedious months-long paperwork-heavy process in applying for businessfunding from traditional lenders, only to have their applications denied.
Considering access to credit was the #1 business challenge for nearly three out of every five SMEs surveyed, this disconnect between the needs of business owners and the lenders that have traditionally supported them is creating conditions of high risk and volatility.”
