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Friday January 6 2016, Daily News Digest

Fintech 2017

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United States

10 Who Had a Good Year (American Banker), Rated: AAA

Mike Cagney, CEO of SoFi

Competitors’ pain was SoFi’s gain in 2016. While Lending Club and Prosper Marketplace stumbled, San Francisco-based Social Finance emerged as the most formidable U.S. online lender. The privately held firm, which Cagney launched in 2011 to refinance student loans, now aims to become a full-service financial services provider for a relatively young customer base that figures to build its wealth substantially. The company began offering life insurance in 2016 after having added personal loans, mortgages and investment products.

Although SoFi was not immune from the funding problems that hit the entire online lending sector this year, it avoided some of the harsh scrutiny that its publicly traded peers received. And the company was helped by the huge war chest it built in 2015. Near the end of 2016, Cagney was back on offense, talking about international expansion plans, touting the potential benefits of the proposed new fintech charter, and renewing his long-discussed promise to launch a SoFi deposit product.

Mike Sha, co-founder and CEO, SigFig

SigFig may be the poster child for the rising prominence of bank-fintech partnerships. The San Francisco robo-advisory startup this year made a splash in retail banking, striking deals to provide automated investment services for some of the industry’s biggest names: Wells Fargo, UBS and Citizens Financial Group. It also raised $40 million along the way. The moves affirmed CEO Mike Sha’s growth strategy of giving banks access to cutting-edge technology and getting thousands of new users in return. Through its new partnerships, SigFig will have access to close half of all U.S. retail banking customers, according to Sha.

What 2017 Has In Store For Fintech (ValueWalk), Rated: AAA

One promising development in regards to the industry’s maturation has been the continued push toward securitization as a source of capital for marketplace lenders. Marketplace lending securitization reached $5.4 billion through 3Q 2016, up 86% YoY according to PeerIQ. This comes even as high-yield tumult and the Dodd-Frank 5% risk retention rule which went into effect on December 24 depressed overall ABS issuance 50% in 1H 2016. The new law requires certain issuers to hold 5% of assets on their own balance sheets in order to have “skin in the game.” The rule does not impact balance sheet lenders as their business model is predicated on exposure to the loans they originate.

Fintech 2017

The biggest upside in the online lending ecosystem may in fact come from the data and analytics platforms that serve as both loan data agents and data providers to buy-side firms. These firms include Orchard, DV01, MonJa and PeerIQ.

Select companies raising private capital in 4Q 2016

QUANTGROUP

Location: Beijing, China | Year Founded: 2014 | Capital Raised to Date: CNY500M

Latest Funding Date: November 2016 | Latest Funding Amount: CNY500M |

BLUEVINE

Location: Redwood City, CA | Year Founded: 2013 | Capital Raised to Date: $111.55M

POST-COLLEGE MILLENNIALS AND 2017 FINANCIAL GOALS (SoFi), Rated: A

With a new presidential administration set to take power, 32 percent of post-college Millennials said the election has changed their financial resolutions and priorities for 2017. We hadn’t expected this high a “Yes” response, and it made us wish we’d asked a follow-up of how it had been impacted, and why.

Most female respondents said that they’re doing as the same as their peers, while most male respondents say they’re doing better than their peers.

Use of payments apps are on the rise, both for commercial transactions and person-to-person exchanges, and Millennials are leading the way. PayPal dominates this space among our survey respondents, with PayPal-owned Venmo coming in second.

In our survey, we found older Millennials aren’t automating their savings, and could be missing out on bolstering their cash reserves as a result.

millennials savings

 

70 Percent of Small Business Owners Do Not See a Holiday as a Vacation from Work (Small Biz Trends), Rated: B

According to a recent study from Funding Circle, 70 percent of small business owners worked on Thanksgiving even though they had planned to take that whole day off.

And on Christmas and Hannukah and New Year’s Eve — the perfect days to get away from your small business? You guessed it. Only 49 percent of small businesses contacted by Funding Circle said they planned to take less than three days off the whole season.

United Kingdom

Accounts reveal perilous state of lender Wellesley (This is Money), Rated: A

Graham Wellesley, the Earl of Cowley, is seeking support from investors for his peer-to-peer lending company, Wellesley Group, and has asked the public to pump in £1.5million.

However, so far he has far raised less than £200,000.

Australia

Australian Fintech, Forecast for 2020 (PR Newswire), Rated: A

Australian FinTech revenue will grow at a CAGR of 76.3% and exceed A$4 billion by 2020, driven by reduced taxes on investments in startups, steady increase in mobile payments, and rise of Tech-savy digital natives. The Australian Fintech Sector generated A$247.2 million in 2015. Sharp growth in the Fintech market in 2016 and 2017, followed by steady increases through to 2020, is likely spur growth.

Frost and Sullivan defines the Australian FinTech sector as comprising three market segments: digital payments, personal and business finance, financial infrastructure and data analysis. Each segment’s unique method of disrupting the financial services sector relies on its own digital technologies.

Australian FinTech is in the development stage of the business cycle, and  the FinTech start-up space has grown rapidly and is set to  drive $10 billion of revenue away from existing financial institutions and ensure $3 billion worth of added revenue.

Innovation hubs provide a strong foundation for start-ups to operate and reach positive cash flow. A$438 million of investment in Australian FinTech in 2015 was concentrated in Sydney.

Some disruptors have been observed in the growing Australian FinTech market. New EFTPOS and online charging solutions will allow more merchants to be paid through credit cards but also drive down the cost of receiving payments.

China

Hong Kong regulators to push regtech in 2017 (The Asset), Rated: AAA

Increasing regulatory requirements are putting more focus on how the latest technology can be harnessed to enhance regulation and regulatory compliance, also known as “regtech”, in Hong Kong in 2017, says a report from Deloitte.

According to the report, various new solutions will emerge during 2017 for use by both regulators and regulated areas. The areas that are progressing quickly are in KYC (know your client) compliance processes, automated regulatory reporting, and communications monitoring.

Shanghai office vacancy rate spikes in 2016 (Global Times), Rated: A

A new report on property markets in East China revealed that the vacancy rate of Shanghai’s Grade A offices in 2016 rose 5.3 percentage points from the previous year, reaching 10.2 percent.

In the report, from global commercial real estate firm Colliers International, researchers said that declining new absorption, widespread retreats from tenants in the peer-to-peer lending (P2P) sector and new supply led the overall vacancy rate in the CBD to spike.

Why good investment advice is only for the rich in the age of financial technology (SCMP), Rated: A

Technologists are embracing and promoting financial technology as the next frontier of personal investing with a passion that makes Robespierre seem prudent. Consumers should beware of the pitfalls.

Competition in banking, from payment processing to asset management, have shifted some activities from traditional banks to non-bank institutions. It’s led to the emergence of a new class called “shadow banks”, which includes peer-to-peer lenders for small businesses and consumers and robo-advisors for wealth management. Distinctions between products and services have become blurred.

If you don’t have an account starting at about US$1 million, it is unlikely you will benefit from truly interpersonal, high quality investment advice and opportunities.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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