- Today’s main news: Landbay launches new landlord products. Funding Circle secures additional funding from UK government.
- Today’s main analysis: 4 reasons FinTech potential remains untapped.
- Today’s thought-provoking articles: Ron Suber says victory goes to those who change. China’s P2P lending growth slows.
- 4 reasons FinTech potential remains untapped for 2017. AT: “This excellent analysis focuses on the relationship between the financial sector and technology. It’s optimistic in its outlook, which is one reason I like it. Another reason is, it looks at the industry from an investor’s POV and gives solid reasons why there’s still room for investment.”
- Suber: ‘Victory goes to the ones who change.’ AT: “This interview of Ron Suber by Crowdfund Insider reveals two things. First, Ron Suber understands that change is constant, and the answer for marketplace lending is blowing in the wind. Secondly, there’s no one-size-fits-all solution for addressing the constant. Every platform is different, but amid those differences is the one reality none can ignore – only those who adapt to the rapid changes can survive. MPL is a Man-vs-Marketplace story.”
- LendingTree to present at Needham Growth Conference.
- Kabbage could be best lending option. AT: “Geared toward small business owners, but there are a couple of nuggets to be gained from operators in the space.”
- Fintech, peer-to-peer lending among top terms in 2016.
- Landbay launches new professional landlord products. AT: “I expect more great things from Landbay this year. The landlord market is ripe for innovation.”
- A look back at key 2016 P2P events.
- Funding Circle secures more funding from UK government. AT: “Brexit continues to be a factor for many UK lenders, and this article highlights how the UK’s exit from the EU is affecting Funding Circle, which is why the government is doubling down on the sector. The UK is in the unique position of defending its lead on everyone else in a sector that has seen its ups and downs.”
- Popular FinTech companies in Lithuania.
- P2P lending growth slows amid new compliance rules. AT: “There’s always a balancing act with regulation. It shouldn’t stifle business. Rather, it should inspire innovation even if its main goal is to protect consumers. I think the China market will bounce back.”
- Banking regulator encourages consumer lending growth.
- United States
- 4 Reasons The Fintech Potential Remains Untapped For 2017 (NASDAQ), Rated: AAA
- Prosper President Ron Suber: “Victory Goes to the Ones Who Change” (Crowdfund Insider), Rated: AAA
- LendingTree, Inc. to Present at the 19th Annual Needham Growth Conference (Yahoo! Finance), Rated: A
- Kabbage could be the best lending option for the next phase of your biz (The American Genius), Rated: A
- Trump, fintech win big among top 10 financial terms of 2016 (CNBC), Rated: B
- United Kingdom
- Landbay Kicks Off 2017 By Launching New Professional Landlord Products (Crowdfund Insider), Rated: AAA
- A look back – the key P2P events of 2016 (P2P Finance News) Rated: A
- European Union
- Funding Circle secures additional financing from UK government (Financial Times), Rated: AAA
- Popular fintech Companies in Lithuania (TechBullion), Rated: B
- P2P lending growth slows amid new compliance rules (ChinaDaily), Rated: AAA
- Banking regulator encourages growth of consumer lending (Ecns.cn), Rated: A
- Indonesia Introduces New Regulation For P2P Lending Startups (News BTC), Rated: AAA
- P2P Lender Silver Bullion Passes $ 20M in Secured Lending (Crowdfund Insider), Rated: A
- Asset managers cannot afford to ignore robo-advice, digital ledger technology (The Asset), Rated: A
4 Reasons The Fintech Potential Remains Untapped For 2017 (NASDAQ), Rated: AAA
What if 40% of corporate profits were generated by an industry still fundamentally reliant upon a technology introduced over 140 years ago by Alexander Graham Bell? This disruption of financial services is the focal point of the fintech revolution, integrating digital technology for the modern economy and investor.
Increasingly, fintech is questioning the viability of this antiquated business model, leveraging digital technology much as Uber, Netflix and Amazon have to disrupt static industries. Here are four reasons the fintech potential remains as yet untapped.
1) Financials are Historically Tech Averse
This technological stagnation in financials is even reflected in its price action. In this chart, the financial sector exhibits only a weak correlation to technology as compared to the S&P 500 Index, lower on average by 0.277 points. This tenuous correlation suggests a fundamental disconnect between the financial and tech industries.
2) Fintech Can Compete on a Wide Economic Frontage
Finance’s historical aversion to tech adoption fosters a vast array of market opportunities for fintech, affording a wide range of revenue streams. While digital payments is perhaps the most mature fintech segment, itself a $450 billion industry, some of the most aggressive fintech activities focus on customer origination and sales, which accounts for 60% of financial revenues.
3) Fintech Grounded in a Strikingly Efficient Economic Model
nstead of being channeled through a series of agents and middlemen, each extracting fees for the “access” they provide, the fintech tactic allows for significant cost compression. In particular, digital lenders can operate at up to a 400 basis point cost advantage over status-quo actors, gains achieved through reduced fixed costs and overhead.
These technology-inspired solutions specifically target customer origination, one of the most lucrative business segments for banks with a 22% Return on Equity. With this competition from fintech, analysts at PriceWaterhouseCoopers project that 28% of retail banking revenues will be at risk by 2020.
4) Fintech Investment Dynamics Intensifying
Considering how embryotic the fintech movement is, the industry offers a remarkably dynamic investment space. As perspective on how early in the business lifecycle fintech is, consider that venture capital accounted for 86% of all fintech investment in Q1 2016; that is roughly 7 out of every 8 dollars. Moreover, the rate of investment into fintech is accelerating sharply reaching $22.3 billion in 2015, nearly as much as the preceding 5 years combined.
Prosper President Ron Suber: “Victory Goes to the Ones Who Change” (Crowdfund Insider), Rated: AAA
As investor demand declined, Prosper endured a decline in transaction fee revenue. The company predicted a further decrease in transaction fee revenue in the fourth quarter of 2016 vs 2015 as well.
The one constant in the lending universe of turmoil has been Prosper President Ron Suber.
Crowdfund Insider: 2016 was a challenging year for online lending, in your opinion what were some of the biggest issues the industry encountered during the year?
Ron Suber: What I’ve learned:
Change is the only constant. Victory goes to the ones who change and adjust best because companies evolve, technologies become outdated, regulations change, relationships morph and opportunities appear in a shifting landscape.
Crowdfund Insider: What about the securitization of marketplace lending loans?
Ron Suber: Securitizations are a critical component to the future success, growth and distribution of assets for the global online lending industry. They must be structured right from day one, consistently distributed to the appropriate investors, provide performance as expected along with transparency to continue successfully.
Crowdfund Insider: Demand for credit remains robust. How will online lending continue to be competitive?
Ron Suber: Each platform must continue to update/improve the pricing, credit, risk and underwriting models while incorporating new sources of data. The advancements in machine learning, identity/income/employment verification methods along with new borrower acquisition channels will enable the leading platforms to extend their competitive advantages.
Crowdfund Insider: What are your predictions for US online lending for 2017.
Ron Suber: Progress will continue to be made but it will not be a straight line.
LendingTree, Inc. to Present at the 19th Annual Needham Growth Conference (Yahoo! Finance), Rated: A
LendingTree, Inc. (TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced that it will participate in Needham & Company’s 19th Annual Growth Conference at The Lotte New York Palace Hotel in New York City.
Kabbage could be the best lending option for the next phase of your biz (The American Genius), Rated: A
Alternative lending companies aren’t typically as strict as big name banks, and therefore have higher acceptance rates. The leniency from alternative lending companies is great for small businesses with financial dings or questionable credit history. Alternative lending also offers benefits such as quicker approval times, more flexibility, and less paperwork.
Small businesses must have been in business for at least a year, and earn at least $4,200 in mostly revenue. Monthly revenue, transaction volume, and credit score are also deciding factors.
Once linked, Kabbage will review the data to determine loan eligibility. Compatible banks and online services include: Chase, Bank of America, Wells Fargo, PNC, U.S. Bank, Regions, BB&T, TD Bank, USAA, Citibank, Capital One, SunTrust, Navy Federal, BBVA Compass, Fifth Third Bank, PayPal, Authorize.Net, Stripe, Sage, Square, eBay, Shopify, Yahoo, Amazon, Etsy, and Intuit.
FYI: Kabbage also looks at personal credit score, which should be at least above 550.
Although we like Kabbage overall, it is our responsibility to tell you about the things we don’t like. The biggest complaint we have is the limited amount of time small businesses have to repay their loan.
Trump, fintech win big among top 10 financial terms of 2016 (CNBC), Rated: B
According to Investopedia, the Top 10 terms of 2016 were:
5. Fintech. “The financial technology industry continues to grow with investments pouring into the industry in 2016. Often conflated with the lending industry, fintech firms are revolutionizing everything from banking and payments to insurance, advising and everything in between. As the financial sector begins to understand the full impact of fintech, 2017 looks poised to be another winner for industry.”
4. Peer-to-peer lending. “The Lending Club scandal cast peer-to-peer (P2P) lending into the spotlight, and the light doesn’t seem to be fading anytime soon. Traffic for this term has doubled in popularity since last year. P2P lending allows individuals to borrow and lend money without the use of a middleman (like a bank).”
2. Blockchain. “With technology rapidly changing the world, the hype around blockchain skyrocketed in 2016. Blockchain has been popular with apps like Venmo and other mobile banking start-ups, but now traditional financial institutions are exploring this new technology for opportunities to better interact with customers, suppliers and competitors. Investors are paying attention. Blockchain is now a top 50 term on the site.”
Landbay Kicks Off 2017 By Launching New Professional Landlord Products (Crowdfund Insider), Rated: AAA
Landbay, a peer-to-peer lending platform, is now offering new products for professional landlords. The lender will now offer standard term tracker at 3.88% to 65% loan-to-value, along with offering fixed rate products from 4.2%, an HMO tracker starting at 3.98% and an expat tracker starting at 4.38%.
The launch of the professional landlord products comes just a couple of weeks after Landbay announced it received full authorization from the FCA for peer to peer lending.
A look back – the key P2P events of 2016 (P2P Finance News) Rated: A
By the third quarter of the year, UK P2P lending had hit £6.5bn, while globally the sector was valued at more than £106bn, a 271 per cent increase on the previous year. One by one, the UK’s biggest platforms reported record-breaking lending figures, while government initiatives such as the Innovative Finance ISA (IFISA) and the bank referral scheme ensured that P2P lending finally broke into the mainstream.
The year got off to a great start for the P2P sector, with the news that the UK peer-to-peer lending industry doubled to £2.2bn last year, with the number of borrowers increasing by 96 per cent.
In the US, Lending Club’s share price was down, and in China, Ezubao lenders were starting to question why the platform had suddenly gone quiet.
This was the month that China’s P2P bubble burst.
On 6 April, the game-changing IFISA was finally introduced, allowing consumers to make tax-free investments (up to £15,240 for the 2015/16 tax year) in P2P platforms for the first time.
This was the month that the Lending Club scandal broke, leading to the resignation of founder and chief executive Renaud Laplanche.
There is only one word to sum up June 2016: Brexit.
The Brexit effect finally reached consumers in August, as the Bank of England slashed the base rate to an all-time low of 0.25 per cent in an effort to increase lending and stimulate the flagging economy. These interest rates had an almost-immediate effect on high street savings accounts, and by the end of November the average cash ISA rate was just 0.73 per cent.
Zopa took the world by surprise when it announced its first securitisation deal at the end of September.
In the third quarter of the year, US securitisation hit a record $2.3bn with more than half of the loans now backed by assets, and Moody’s predicted that the UK is set to see a securitisation boom of its own.
Throughout October, banks began to tighten lending requirements, and SMEs struggled to find finance in the wake of the Brexit fallout. By the end of the month, the government launched the long-awaited bank referral scheme, which will see major high street banks refer SME borrowers to sources of alternative finance, including P2P.
Having announced the launch of a digital bank at the end of November, Zopa continued to ring in the changes with a full rebrand in December. Meanwhile, RateSetter completed another industry first by selling off £2.1m of bad loans to debt management company 1st Credit.
After months of consultation, the FCA finally laid out its regulatory plans for the P2P sector.
Funding Circle secures additional financing from UK government (Financial Times), Rated: AAA
Peer-to-peer lending platform Funding Circle has secured £40m from the UK government to support small businesses amid concern that the Brexit vote could constrain credit.
But the latest deal comes as doubt is cast over future support from EU states for small British businesses following the Brexit vote.
Funding Circle struck a deal before the referendum in June with the European Investment Bank, whose shareholders are members of the EU, for the bank to lend £100m.
Barclays research has found that one in five small companies believes Brexit is affecting their current or future funding requirements. The most common reasons cited were a need to start exporting to new non-EU markets, economic uncertainty and a need to replace current employees who are EU citizens.
Popular fintech Companies in Lithuania (TechBullion), Rated: B
Lithuania has made a significant progress in creating a suitable environment for the development of the Fintech sector: legal acts regulating P2P lending platforms have been adopted, simplified procedures for getting licences for the activities of payment and e-commerce institutions have been approved, and the government has approved the Draft Law on Crowdfunding.
TransferGo is Lithuanian Start-up that aims to change the way we see money transfer.
Licenced in 2016 in Lithuania, Moneta International offers an innovative and unique B2B payment and cash management.
Established in 2004, Paysera is an international electronic payment system that allows people to receive and send money all around the world, collect payment and exchange currency via the Internet or by SMS messages.
Coingate is a Bitcoin payment processor that allows businesses to accept Bitcoin and receive pay-outs in US Dollars, Euros or bitcoin.
Lenndy is the first real estate crowdfunding platform in Lithuania.
OPAY is an online payment collection system for e-commerce.
SAVY is the first P2P online lending marketplace in Lithuania focused on secured and unsecured consumer loans.
Mintos is a Latvia p2p lending marketplace that started to operate in Lithuania in 2015.
P2P lending growth slows amid new compliance rules (ChinaDaily), Rated: AAA
The growth rate of China’s peer-to-peer lending transaction volume dropped by nearly half in 2016, as the industry faced reshuffling amid a slew of compliance regulations.
Last year, the transaction volume of P2P lending nationwide, which involves small businesses or individuals borrowing money from online investors, exceeded 2.8 trillion yuan ($403 billion), increasing by 138 percent from a year earlier. But the growth slowed down to slightly more than half of the growth rate in 2014 and 2015, according to a report by P2P001, a Shenzhen-based financial web portal, on Monday.
As of the end of 2016, 184 P2P lenders, or 7.98 percent of 2,307 P2P lenders that were running without severe financial problems, launched a fund custody mechanism, which they established directly with commercial banks. Another 122 such companies signed a fund custody agreement with banks but had not yet launched the mechanism, the report said.
As of the end of 2016, the total loan balance of P2P lending companies hit a record high of 1.21 trillion yuan, increasing by 115.9 percent from the end of 2015.
Banking regulator encourages growth of consumer lending (Ecns.cn), Rated: A
China’s banking regulator will encourage the launching of more consumer finance companies while helping them improve comprehensive risk management.
Since the State Council agreed to launch a trial program on consumer finance companies in four cities, including Beijing and Shanghai, in 2009, the China Banking Regulatory Commission has approved the establishment of 17 consumer finance companies.
As of the end of September, total assets of consumer finance companies reached 107.72 billion yuan in China. Their total loan balance was 97.03 billion yuan and the average nonperforming loan ratio was 4.11 percent. These companies lent an accumulated amount of 208.44 billion yuan to 24.14 million clients, according to the CBRC.
Indonesia Introduces New Regulation For P2P Lending Startups (News BTC), Rated: AAA
In Indonesia, various fintech startups are active in the P2P lending sector. Until now, they have been unencumbered by existing financial regulation. But that situation will come to change, as the government issued a new regulation. Firms are required to have a minimum of Rp1bn when registering with the Indonesian Financial Services Authority. Additionally, there is a capital requirement of Rp2.5bn when applying for a business license.
P2P Lender Silver Bullion Passes $ 20M in Secured Lending (Crowdfund Insider), Rated: A
Silver Bullion is a one of a kind online lender. The peer to peer lending platform based in Singapore is a secured lender that backs up each loan with gold or silver bullion.
Launched in mid-2015, Silver Bullion has just announced it has surpassed S$20 million in lending from around 800 loans. According to their website, loans are ranging from 2.75% to 4% interest.
Asset managers cannot afford to ignore robo-advice, digital ledger technology (The Asset), Rated: A
Cerulli Associates, a global research and consulting firm, says that managers should not ignore the spread of roboadvice and the emergence of digital ledger technology (DLT).
Cerulli expects that a hybrid robo-advice model, which allows investors to benefit from robo’s lower fees and digital efficiency while bolting on specialist face-to-face consultation, will prove popular.