- Today’s main news: OnDeck Capital struggles. SoFi in talks with Silver Lake for $500M funding. UK FinTech funding bounces back
- Today’s main analysis: FinTech deal sizes are shrinking. The alternative income source top managers are buying.
- Today’s thought-provoking articles: Starling CEO says EU law is good for UK FinTech.
- OnDeck Capital struggling. GP:” We have repeated over the years, in the podcast, in writing: bad underwriting is sure slow death. Lending Club did very well releasing the data and letting note and whole loan purchasers do their own underwriting. That was a key to making sure while the company was still perfecting their own model people were comfortable. More companies in more market sectors should consider it. ” AT: “Investor concerns over underwriting policies can certainly affect stock prices. That in turn could lead to a spiraling down in originations. Let’s hope OnDeck figures a way out.”
- SoFi talking with Silver Lake about $500M funding. GP:”That will probably last them 1 month.” AT: “Close doesn’t guarantee a cigar.”
- Why online lenders keep disappointing. GP:” I disagree. Only OnDeck is dissapointing , and the remaining 490 or so lenders we are aware of are coming along nicely with a few bad apples only.”
- ArborCrowd announces $22.4M commercial real estate deal.
- FinTech deal sizes are shrinking. GP:” This is interesting and could be due to either a particularly large 2015 that biases the trend. Or to a bad 2016. I think we need to see how 2017 finishes. I would think that overall Fintech is growing in revenue fast and therefore sizes should increase, not decrease. “
- OCC FinTech charter good for both Democrats and Republicans. AT: “This op-ed is penned by former U.S. Senator Bob Kerrey, an advisor to Upstart.”
- U.S. regulatory environment threatens the rise of FinTech. AT: “The biggest threat to FinTech is the potential for a protectionist stance on behalf of traditional banks and financial institutions.”
- MPL a crowdfunding alternative. AT: “I find the attempt to distinguish MPL from crowdfunding a bit confusing.”
- P2P pressure. AT: “This sounds a lot like responding to the high school quarterback saying a freshman is destined to be the next great high school hero by saying, ‘he throws just like our current hero but not as far, and he’s only a freshman’. But he’s right that the article he references wasn’t all that substantive.”
- 5 common misconceptions about alternative lending.
- SoFi hires Danika Owsley as director of consumer communications.
- Folk2Folk joins P2PFA.
- The alternative income source top managers are buying. ” Invesco, Woodford, M&G, Aviva and AXA are among those turning to peer-to-peer lending for alternative streams of income.”
- UK FinTech funding bounces back. “U.K. FinTech startups raised $173 million across 16 deals in Q4 2016, an increase of $95 million from Q3, according to a report from CB Insights.”
- Uber launches financial advice for UK workers. AT: “Instead of saying MPLs are like Uber, we can now say Uber is more like MPLs.”
- Starling CEO says EU law is good and important for UK FinTech.
- Real estate less than 10.000 Euros is possible.
- United States
- OnDeck Capital shares plunge on downbeat outlook (Reuters), Rated: AAA
- SoFi Is in Talks for $ 500 Million Funding Led by Silver Lake (Bloomberg), Rated: AAA
- Why Online Lenders Keep Disappointing (The Wall Street Journal), Rated: A
- ArborCrowd Announces $ 22.4 Million Commercial Real Estate Deal (Crowdfund Insider), Rated: A
- Fintech deal sizes are shrinking (Business Insider), Rated: A
- OCC fintech charter: Something Ds and Rs can both love (American Banker), Rated: A
- US regulatory environment threatens the rise of fintech (TechCrunch), Rated: A
- Marketplace Lending, The Crowdfunding Alternative? (GlobeSt.com), Rated: A
- The Whaley Report: Peer-to-peer pressure (Market Intelligence Center), Rated: A
- 5 Common Misconceptions About Alternative Lending (Business2Community), Rated: B
- SoFi hires Condé Nast’s Danika Owsley for consumer comms (PR Week), Rated: B
- United Kingdom
- P2P Lender Folk2Folk Joins Peer to Peer Finance Association (Crowdfund Insider), Rated: AAA
- The alternative income source the top managers are buying (Trustnet), Rated: AAA
- UK FinTech Funding Bounces Back in Q4 2016 (Cryptocoins News), Rated: A
- Uber launching financial advice sessions and appeals panel for UK workers (Belfast Telegraph), Rated: A
- European Union
- The CEO of startup bank Starling says EU law is ‘important and good’ for UK fintech (Business Insider), Rated: A
- REAL ESTATE LESS THAN 10.000 EUROS, IT IS POSSIBLE! (The Quebec Telegram), Rated: A
- Experian Partners With Lenddo to use its Solution in Financial Inclusion efforts (Benzinga), Rated: AAA
- Investment group buys into SA peer-to-peer lending firm RainFin (BusinessTech), Rated: AAA
OnDeck Capital shares plunge on downbeat outlook (Reuters), Rated: AAA
OnDeck Capital Inc (ONDK.N) shares fell as much as 24 percent on Thursday after the online lender posted its fifth straight quarterly loss and set aside more money for future losses after determining its calculations were askew.
Like its digital lending peers, OnDeck has been struggling with investor’ concerns over the quality of its underwriting and ability to maintain a rapid pace of growth.
As a result, OnDeck’s provision for loan losses more than doubled during the fourth quarter, to $55.7 million.
Amid all the changes, OnDeck’s originations of $2.4 billion in 2016 were up 26 percent from the prior year, less than half the pace of growth it posted in 2015.
The company is taking several steps to slash costs by $20 million a year, including cutting 11 percent of its staff and reducing marketing and technology expenses, Breslow said.
SoFi Is in Talks for $ 500 Million Funding Led by Silver Lake (Bloomberg), Rated: AAA
Social Finance Inc. is close to raising about $500 million in a funding round expected to be led by private equity firm Silver Lake Partners to bolster the expansion of its online-lending businesses and personal financial services, according to people familiar with the matter.
The fundraising round values SoFi at $4.3 billion, higher than its previous valuation of $3.2 billion, one of the people said. The deal isn’t finalized and could still fall through, the people said.
Why Online Lenders Keep Disappointing (The Wall Street Journal), Rated: A
LendingClub shares fell 4.7% on Wednesday after the company gave disappointing guidance for 2017. Then, on Thursday morning, On Deck shares tanked by around 15% on a fourth-quarter net loss that was much bigger than expected. LendingClub’s stock fell again by around 6%.
The company’s fourth-quarter results show progress on all these fronts, but also the costs. Banks, which had shied away from buying the company’s loans after last year’s revelations, have largely returned, funding 31% of loan originations in the fourth quarter, up from 13% the previous quarter.
But LendingClub still disappointed investors by forecasting a bigger-than-expected net loss in 2017. Higher expenses are one reason, with stock-based compensation rising by 35% last year to $69.2 million. This likely has to do with the need to retain and attract talent in the wake of last year’s turmoil, says KBW analyst Jefferson Harralson. The company’s loan originations also have been basically flat for three quarters in a row, making it harder to grow revenue enough to overcome the higher expenses.
ArborCrowd Announces $ 22.4 Million Commercial Real Estate Deal (Crowdfund Insider), Rated: A
ArborCrowd announced on Thursday the launch of its latest real estate investment opportunity that is open to accredited investors. According to the portal, the “Southern States Multifamily Portfolio” features three multifamily properties in both Alabama and Mississippi.
Since its debut, ArborCrowd has provided the public with exclusive multifamily investment properties in New York City.
According to ArborCrowd, the $24.4 million Southern States Multifamily Portfolio was acquired in November 2016 by Varden Capital Properties, LLC as a value-add repositioning. ArborCrowd investors have the opportunity to own a piece of a $2 million equity stake in the Portfolio with a targeted 17 percent to 20 percent Internal Rate of Return (IRR) and a targeted investment hold period of two to three years.
Fintech deal sizes are shrinking (Business Insider), Rated: A
Global VC-backed fintech funding reached $12.7 billion in 2016, down 13% year-over-year (YoY) from $14.6 billion in 2015. However, deal numbers held firm at 836, down just 1% YoY from 848 in 2015. That suggests the decline in funding was the result of smaller deal sizes, and that’s backed up by a couple of other key pieces of data.
- Fewer mega-rounds. There were 38 mega-rounds ($50 million+) in 2016, down from 63 in 2015.
- Two deals in China accounted for $2.2 billion. Lending platform raised $1.2 billion, while JD Finance, a subsidiary of e-commerce giant , raised $1.0 billion.
OCC fintech charter: Something Ds and Rs can both love (American Banker), Rated: A
As the Office of the Comptroller of the Currency moves forward to grant national bank charters to fintech companies, unity of purpose could be achieved by stepping back to consider the broad policy goals that Democrats and Republicans typically seek in regulating and supervising financial services markets and businesses.
Both Democrats and Republicans want to address the financial needs of smaller Main Street businesses. Both parties understand that small and midsize businesses are the ones creating the jobs of the future. Both Republicans and Democrats prefer simplicity over complexity.
Concern for abuse of this charter by unscrupulous actors is legitimate and is best addressed by continuing to allow state regulators and attorneys general to enforce civil and criminal laws against fraud and unfair and deceptive practices, while consolidating supervision in a single strong agency at the federal level.
A charter is a perfect example of retaining significant state authority made possible by clear and simple federal rules. This federal-state partnership will produce strong governance and controls on a national scale through the supervisory process. It is the only way to achieve uniform requirements across all 50 states. Maintaining a costly, complex and time-consuming state licensing process while at the same time requiring companies to satisfy federal mandates will kill off a job-creating pro-consumer innovation.
US regulatory environment threatens the rise of fintech (TechCrunch), Rated: A
Fintech companies earned approximately ₤6.6 ($8.15) billion in revenue globally in 2015, according to a report commissioned by the Treasury of the U.K. government. Recent data on the sector from KPMG shows that while North America has fallen behind Asia in terms of regional investments in fintech, companies in North America still received $900 million of $2.4 billion, or more than 37.5 percent of funds, in the third quarter of 2016. KPMG notes that both the number of deals and total amount invested in American fintech companies has dropped significantly, while Asia continues to see growth in fintech investments.
The U.S. is producing many fintech startups attractive to investors — just not as attractive as the less numerous Asian startups. The third quarter of 2016 was the second of the year in which Asian fintech companies attracted more venture capital funding than North America, and pending fourth quarter results, total investment for the year by venture capital in Asian fintech outstrips that in North American fintech $4.7 billion to $4.5 billion. America remains a fintech leader, but its position is being challenged.
Not just the Treasury report, but investors themselves, as well as founders, have identified regulation as a main concern, and European regulators have responded by overhauling EU laws related to payment services to benefit fintech startups. In Asia, numerous countries have already adjusted regulations to promote fintech growth, including the largest consumer markets, China and India.
The problem with fintech regulation in the U.S. is not just what those regulations are, but persistent confusion about what those regulations are, and deep uncertainty about how they are evolving.
Marketplace Lending, The Crowdfunding Alternative? (GlobeSt.com), Rated: A
We sat down with Gary Bechtel, president of Money360, to talk about the growth in the market and the acceptance of marketplace lending platforms.
GlobeSt.com: What are the benefits of marketplace lending?
Bechtel: Speed, flexibility and creativity are huge competitive advantages, especially in the bridge lending arena, where the ability to react and close loans quickly is key. The ability to operate under reasonable regulatory oversight, and without the multiple layers of approvals and regulation that govern more traditional lenders, helps us speed up the process dramatically.
GlobeSt.com: What opportunities has this created for Money 360?
Bechtel: We are seeing more and more transactions that otherwise would have gone to traditional lending sources because of our ability to react quickly and be more creative with deal structures. We have grown to accommodate larger transactions, filling a void left by banks, credit unions, life companies and CMBS lenders. We see this opportunity as an ongoing trend and are building our business accordingly.
SoFi hires Condé Nast’s Danika Owsley for consumer comms (PR Week), Rated: B
Financial technology company SoFi has hired media specialist Danika Owsley as its first director of consumer comms.
Owsley will report to SoFi’s comms leader, VP of communications and policy Jim Prosser, when she starts in the role on February 28.
The San Francisco-based company hired Owsley to work in New York, home to most media outlets that are relevant to SoFi’s operations. SoFi bills itself as a “modern finance company” and many of its services are focused on millennials.
P2P Lender Folk2Folk Joins Peer to Peer Finance Association (Crowdfund Insider), Rated: AAA
Peer to peer lender Folk2Folk has joined the UK Peer to Peer Finance Association (P2PFA). The P2PFA is acknowledged as a stamp of quality operations as members are held to a high standard and required to follow certain transparency guidelines.
Founded in 2011 as a self-regulatory entity for the sector, the largest UK peer to peer lending platforms are members of the P2PFA and represent more than 75% of the UK P2P lending market. P2PFA members operate a diverse range of business models within this segment of finance and collectively lent almost £3 billion during 2016.
The alternative income source the top managers are buying (Trustnet), Rated: AAA
Industry powerhouses Invesco, Woodford, M&G, Aviva and AXA are among those turning to peer-to-peer lending for alternative streams of income, according to industry experts.
Indeed, over the past 18 months, UK gilts have performed particularly strongly, returning 8.59 per cent – though this has fallen back from highs in August 2016 where the index was up 17.23 per cent.
In fact, if not for a strong run for UK equities at the start of the year, gilts would still be outperforming the FTSE 100, which has returned 14.51 per cent over the period.
The industry brings a stable pool of capital to an industry that craves that stability of capital as knowing that the lender is there enables a much more attractive and reliable borrowing rhetoric, he adds.
His company runs the £682m P2P Global Investments PLC trust, which buys higher-quality loans (grade A, B and C) from the platform providers from across the market cap spectrum, though it currently focuses on the developed markets only.
Since its launch in 2014, the fund has grown its dividend in each year and currently pays out 5.48 per cent.
Over its lifetime, had an investors paid in £10,000 on the day of its launch, the trust would have paid £1,158, according to FE Analytics.
However, Sachin Patel, chief capital officer at peer-to-peer platform provider Funding Circle says delinquency rates are currently at historic lows.
While the sector will likely be hit by a financial crisis – such as the one seen in 2008 – as borrowers will be more likely to default, he says they are not seeing any signs of stress among their borrowers.
Indeed, with delinquency rates so low, the platform released the SME Income fund at the end of 2015 with the aim of giving investors a passive option to the asset class.
UK FinTech Funding Bounces Back in Q4 2016 (Cryptocoins News), Rated: A
U.K. FinTech startups raised $173 million across 16 deals in Q4 2016, an increase of $95 million from Q3, according to a report from CB Insights.
Despite an increase in U.K. financial technology investment during Q4 2016, across the whole year the amount raised only amounted to $494 million compared to $962 million in 2015. During Q4 2015, U.K. FinTech funding reached $275 million.
CB Insights found that in 2016, European venture capital funding reached $1.2 billion across 179 deals, down from $1.6 billion during 2015.
Uber launching financial advice sessions and appeals panel for UK workers (Belfast Telegraph), Rated: A
Uber is offering English courses, financial advice and introducing an appeals panel for its UK workers after facing criticism over lack of support and rights for its drivers.
It is now launching earnings advice sessions on how to best take advantage of the app, flexible pay options that allow drivers to cash out their fares before the end of the week and discounted online investment advice for products like ISAs and pensions.
The CEO of startup bank Starling says EU law is ‘important and good’ for UK fintech (Business Insider), Rated: A
The founder and CEO of digital-only, startup bank Starling says EU law has been good for fostering Britain’s flourishing fintech — financial technology — sector and says she fears Brexit may set it back.
However, Boden is worried that Brexit will cause the UK to miss out on laws such as the Payment Service Directive Two (PSD2), which forces banks to open up their data to new entrants. This will allow third parties to help people manage their accounts and loosen banks’ stranglehold of customer relationships. PSD2 comes into force in 2018.
Boden, a former executive of Allied Irish Bank, told the FT it is “disappointing” that Starling will be unable to launch across Europe using passporting rules. Theresa May has made clear that her government plans to sacrifice EU passporting rules, which let financial firms sell services across the EU from London, in order to regain control over immigration.
Starling has yet to launch but has gained its banking licence.
REAL ESTATE LESS THAN 10.000 EUROS, IT IS POSSIBLE! (The Quebec Telegram), Rated: A
Note: it is possible to lodge the shares in a PEA, to erase taxation. “However, we advise against investing below 5,000 euros, because the tax savings will be absorbed by bank charges , ” says Cyril Benchimol, CEO of Immovesting.
Experian Partners With Lenddo to use its Solution in Financial Inclusion efforts (Benzinga), Rated: AAA
Experian, the leader in global information services, will partner with Lenddo, a leader in non-traditional data solutions, as part of Experian’s Consumer Financial Inclusion Indexing platform in Indonesia and Vietnam.Using Experian’s global expertise and knowledge, the introduction of Lenddo’s technology into Experian’s platform will provide financial firms with more information to offer appropriate financial services. Consumers who are unbanked or underserved by major financial institutions will gain access to a gamut of financial services including remittances, savings, credit and wealth management services.
Southeast Asia is poised to remain one of the fastest groups of economies in the world, with an unbanked population of about 438 million people. With the wealth of alternative data and innovative technology available, financial access for the unbanked has seen a rapid rise and many opportunities created to serve this new and underserved market.
Investment group buys into SA peer-to-peer lending firm RainFin (BusinessTech), Rated: AAA
RainFin and the LeBashe Investment Group have concluded a transaction for the latter to acquire a 30% stake in RainFin, for an undisclosed amount.
Barclays Africa (Absa) originally acquired a 49% stake in the peer-to-peer lending firm in 2014, however, in late 2016, the company’s founders and directors said that they would buy that stake back.