Daily News Digest Featured News

Thursday March 9 2017, Daily News Digest

News Comments

United States

  • LendIt Awards winners and PitchIt competition. GP:”In my eyes, Scott Sanborn winning best executive of the year is the award that stands out the most. The second award that was interesting is for Zopa winning best consumer lender award while also being the oldest (started in 2005!). Note: Zopa was also nominated among the most innovative platforms. Being the oldest, the one that stands out and among the most innovating is outstanding and certainly worthy of an award. A healthy industry that is growing also needs its celebrations. Having awards is a great way to bond the industry together and make it into an industry celebration. ”  AT: “Congratulations to all awards winners.”
  • Kabbage prices $525M securitization. GP:” ABS on small and medium business loans are less usual than on unsecured person. This securitization seem quite hot. Senior are anticipated to be rated A by Kroll. Expected to close arond March 20. Significantly oversubscribed. We can conclude that the SME securitization market is looking strong. We should look at the next OnDeck securitization with this in mind and hopefully be able to differentiate the market trends vs the company effect in that securitization. “
  • AlphaFlow launches new automated real estate investing platform.
  • Second sign in as many days that the short-term credit cycle will turn over. GP:” The articles on AlphaFlow are a mixed bag. One should critically evaluate the contents beyond the title. The defaults in auto and p2p are inching up as TransUnion showed recently. But very little and I wonder if it’s really significative. In p2p the defaults had inched up last year but it seemed to have been due to companies focused on growth too much. Recently OnDeck’s reserves for losses had to more then triple, however we haven’t seen this in their competitors. Perhaps not yet. I would conclude that we should watch what is going on but not panic, yet. “
  • TU bolsters fraud prevention exchange. AT: “As the number of consumers with personal loans rises the potential for fraud increases. This should be an area of concern for all lenders.”
  • Data aggregation for lending decisions.
  • CreditEase addresses top FinTech trends at LendIt.
  • Election years can disrupt Fintech too. AT: “Regulation is going to be a big discussion for the industry this year and next.”
  • StreetShares partners with Nor-Cal FDC.
  • Qapital raises $12M to expand Fintech app to more areas.

United Kingdom

European Union

China

India

Asia

News Summary

United States

Kabbage prices $ 525m securitisation (Finextra), Rated: AAA

Kabbage, a pioneering financial services, technology and data platform, today announced that on March 7, 2017, it priced $525 million of fixed-rate, asset-backed notes in a private securitization transaction.

The facility is expandable to $1.5 billion. The notes will be issued in four classes by Kabbage Asset Securitization LLC, a newly formed, wholly owned subsidiary of Kabbage Inc. The senior class of notes is anticipated to be rated “A(sf)” on the closing date by Kroll Bond Rating Agency (KBRA). Guggenheim Securities is serving as sole structuring advisor and initial purchaser of the notes. The securitization is expected to close on or about March 20, 2017, and is subject to customary closing conditions.

The securitization was significantly oversubscribed with interest from top-tier institutional investors. This represents the largest asset-backed securitization of small business loans in the online lending industry, next to Kabbage’s prior, expandable, ABS note issuance in March 2014.

LendIt Names PitchIt Competition And LendIt Industry Award Winners (PR Newswire), Rated: AAA

LendIt, the world’s largest show in lending and fintech, today announced the startup winner for its fifth PitchIt competition and 18 winners for its first LendIt Industry Awards in various categories including Innovator of the Year, FinTech Woman of the Year and Executive of the Year.

PitchIt is a leading global competition for fintech startups to earn mentorship, endorsement and exposure to institutions, investors and broad visibility. Out of eight PitchIt finalists, the judges winner as well as the audience winner was awarded to Nova Credit, the world’s first cross-border credit reporting agency. Nova Credit is fundamentally changing the way immigrants secure loans by enabling individuals to transfer their overseas data.

  • Best Journalist Coverage – George Popescu, Editor in Chief, Lending Times
  • Emerging Real Estate Platform – PeerStreet
  • Top Fund Manager – Prime Meridian Capital Management
  • International Innovator of the Year – Trulioo
  • Top Law Firm – Chapman and Cutler
  • Top Accounting Firm – Deloitte
  • Top Fintech Equity Investor – QED Investors
  • Most Innovative Bank – Cross River Bank
  • Top Service Provider – First Associates Loan Servicing
  • Best in Show – Deloitte – awarded to the best exhibitor at LendIt, judged on booth design and impression as well as staff conviction and enthusiasm.

AlphaFlow Launches New Investment Platform to Bring Automated Investing to Real Estate (BusinessWire), Rated: AAA

AlphaFlow, the leader in passive online real estate investment, today announced it has launched AlphaFlow Managed Portfolios. The company will build, manage, and rebalance a portfolio of 75-100 real estate loans for investors. This marks the first automated real estate investment service of its kind.

AlphaFlow provides clients with a first-of-its-kind set it and forget it automated service to build and manage a real estate portfolio. The company’s founders have been at the forefront of the disruption in real estate investing. In 2013, Sturm co-founded RealtyShares, one of the largest real estate crowdfunding platforms. Three years later, AlphaFlow was the first to offer funds that allowed investors to participate in loans across multiple real estate crowdfunding platforms with a single investment. AlphaFlow Managed Portfolios bring similarly innovative benefits to investors, including daily portfolio rebalancing that automatically reviews portfolios on a daily basis for opportunities to reallocate investments in order to increase diversification.

While many investors have embraced online equity investing, the real estate industry has traditionally been slow to change. As a result, the options available today are fairly limited for passive investors. AlphaFlow believes that in the next ten years, everyone will have some type of real estate in their investment portfolio.

The Second Sign In As Many Days That The Market Is Ready To Roll Over (Seeking Alpha), Rated: AAA

It has now been widely known that there is a bubble in the United States automobile market and recent exposes about subprime financing and recent commentary from dealerships about heavily discounted and incentivize selling have led us to this conclusion in a relatively straightforward fashion.

We also believe that the first loan default cracks would show in peer-to-peer lending, a riskier and lower credit worthy form of lending that exists in the spot where bankers simply used to not lend. Just days ago, we saw Lending Club, arguably the most popular peer-to-peer lender, report that delinquencies had risen significantly.

More importantly, this news pushes us further into our thesis that the short term credit cycle is likely about to turn over.

short term credit cycle

This was always a two pronged thesis: peer to peer lending and the auto market. With the second piece now falling into the puzzle, we think this is a great time to reiterate our notion that the market has hit its peak and that we think this is a great time to get hedged. In addition to having about 60% of our portfolio long and about 40% short at this time, we have also added some short-term S&P 500 puts to further hedge our long positions.

TransUnion Bolsters Fraud Prevention Exchange as Online Fraudsters Continue to Impact Personal Loan Delinquency Rates (Yahoo! Finance), Rated: AAA

Newly released TransUnion (TRU) data found that as personal loan delinquency rates rise, online fraud, which includes loan stacking, continues to make significant contributions to these increases. Serious delinquency rates (90+ days past due) at the conclusion of 2016 for personal loans originated in 2015 rose to 6.22%, up nearly 3% from the year-end 2015 delinquency rate of 6.05% for loans originated in 2014.*

Serious delinquency rates (90+ days past due) for personal loans with characteristics of online fraud stood at 11.02% at the end of 2016 for loans originated in 2015. Online fraud includes fraudulent loan stacking, which involves attempting to secure multiple loans from one or more lenders within a short period of time. While down from the 11.81% rate at the conclusion of 2015 for loans originated in 2014, it represents even more borrowers because of the continued growth in the personal loan space.

To combat online fraud, TransUnion has further expanded its Fraud Prevention Exchange to offer insights from the entire network of available TransUnion customer data — not just from Exchange members. These newest updates were unveiled today at LendIt USA 2017, a lending and FinTech conference.

The Exchange enables lenders to:

  • Reduce fraud losses without impacting the consumer experience and lending timelines.
  • Receive real-time alerts (within seconds) to mitigate instances where lenders don’t discover problematic accounts until days or weeks have passed and losses may have been incubating unknowingly inside live loans.
  • Utilize TransUnion’s vast network of customers inside and outside of the Exchange for more insight into originations fraud.
  • Quickly adjust and adapt to evolving fraud threats and trends.

transunion

Data aggregation’s new frontier: Lending decisions (American Banker), Rated: A

Financial data aggregation, long used to power digital personal financial management tools, has found a more moneymaking role — speeding up underwriting decisions.

Rather than faxing in documents or submitting PDFs of data downloaded from multiple websites, consumers and small-business owners are granting online lenders permission to use aggregation technology to grab their financial transaction data.

So long as the technology is working as intended, lenders will gain something they may have not been privy to before — years’ worth of transaction data, such as cash flows that aggregators think lenders should crunch as part of their credit analysis in addition to credit history data. And sure, banks may already count some applicants as customers and have access to their financial transactions. However, most consumers have multiple bank accounts that lenders would also need to mine.

Lenders in other countries like Australia and Europe appear to be further along than U.S. banks — especially in building open application programming interfaces to simplify the flow of data among apps.

CreditEase Addresses Top FinTech Trends at LendIt USA 2017 Conference in New York (Yahoo! Finance), Rated: A

CreditEase, China’s leading fintech company announced today that its subsidiary company, Yirendai (YRD), an leading online digital consumer financial service platform, together with CreditEase Fintech Investment Fund and CreditEase Offshore Private Credit Fund (“OPCF”) delivered a series of keynote speeches at the 2017 LendIt USA conference in New York from March 6 to 7.  LendIt annual conferences are recognized as one of the largest global fintech industry events dedicated to connecting the global fintech and lending communities.

On the main stage, Yirendai executives delivered a keynote speech named From Big to Strong: China FinTech Entering a New Era. Yihan Fang and Yang Cao of Yirendai shared with the audience the latest fintech industry trends in China, regulatory environment of online marketplace lending in China, and industry’s current challenges. In addition, Yirendai announced the launch of Yirendai Enabling Platform (“YEP”), a technology platform that enables partner companies to utilize Yirendai’s data acquisition, anti-fraud technology, as well as customer acquisition capabilities, to help optimize industry’s efficiency and enhance customer experience.

Anju Patwardhan, Senior Partner of CreditEase Fintech Investment Fund and member of Investment Committee delivered a keynote speech on financial inclusion issues for the middle class and also discussed the latest trends in fintech globally. CreditEase Fintech Investment Fund, launched in December 2015, is a venture fund investing in growth-stage fintech companies globally. The Fund has an equivalent of USD 1 billion in total committed capital.

LendIt: Election years can disrupt fintech, too (Housingwire), Rated: A

Congressman Patrick McHenry, a representative of North Carolina’s 10th congressional district and a member of the Republican Party, gave one of the first major speeches on the topic. Congressman McHenry has been a vocal proponent of fintech regulation overhaul and he discussed his priorities, beginning with the modernization of infrastructure underlying the IRS income verification form (4506T), which is used by lenders to make underwriting decisions (the form is currently manually handled by the IRS and takes 2- 8 business days for processing).

A counter-point to this speech was provided by Amias Gerety, who served in the U.S. Treasury during President Obama’s time in office. He outlined the ways in which the Treasury Department currently engages with emerging fintech companies through discussions, white papers and, eventually, changes in policy.

He addressed some of the popular requests of fintech companies including the demands for a “regulatory sandbox” for startups to innovate without the shackles of regulation.

Lastly, he discussed the shadow of the crisis on regulators’ minds as it relates to financial innovation, since many of the products that caused the 2008 recession were considered  “innovative” at the time. He encouraged companies to think about innovating across the whole spectrum of the customer value chain of acquisition, user experience, underwriting, funding and servicing / collections, since the last two stages of funding and servicing / collections tended to get overlooked during a growth cycle but tend to result in “immense bad behavior” during a downturn.

The third notable speech for the day was delivered by Thomas Curry, the Comptroller of Office of the Comptroller of the Currency. He highlighted the power of  “responsible innovation” by fintech companies to expand financial inclusion.

He confirmed that the OCC has the necessary authority and highlighted their capabilities, including “…experienced examiners who specialize in banking technology, have expert knowledge of payment systems, credit, and consumer protection, and know where companies can face pitfalls.”

He confirmed that the OCC has the necessary authority and highlighted their capabilities, including “…experienced examiners who specialize in banking technology, have expert knowledge of payment systems, credit, and consumer protection, and know where companies can face pitfalls.”

StreetShares Partners with Nor-Cal FDC to Serve California Veteran, Small Business Owners and Government Contractors (PR Newswire), Rated: A

As part of the statewide California bizWin™ and VetBizWin™ Initiatives, StreetShares has partnered with Nor-Cal FDC (Northern California Financial Development Corporation) to provide contract financing and small business lending solutions to California small and veteran-owned businesses.

As a Nor-Cal FDC premium partner, StreetShares will work with the Nor-Cal FDC Small Business Finance Support Team to assist small business and veteran business owners in obtaining funding needed to win new opportunities.

Qapital Raises $ 12M To Expand Its Fintech App Into More Areas (PYMNTS.com), Rated: A

Qapital, the FinTech startup, raised $12 million in venture funding to expand its app that enables users to make goals and save money to reach those goals.

With the app, users can integrate their checking, savings and credit card accounts, so in addition to setting financial goals, they can stay on top of their finances.

By including debit cards into the product, the report noted that it gives the startup a new revenue stream, because it can make money from the interchange fees.

United Kingdom

Zopa bags top consumer lender award (P2P Finance News), Rated: AAA

ZOPA reaffirmed its leading position in the peer-to-peer consumer space last night as it won the accolade of top consumer lending platform at LendIt’s awards in New York.

The world’s oldest P2P lender fended off competition from US consumer-finance heavyweights such as SoFi and Avant, bagging top scores on loan performance, volume, growth, and product diversity from a panel of 30 industry experts.

The new award caps off a bumper month for the platform, which posted record lending figures for February. It originated more than £81m of new loans last month – £24m more than the same month last year.

Forming new partnerships will be a key strategy going forward, according to Zopa’s chief product officer Andrew Lawson.

The P2P platform, which has so far focused exclusively on unsecured lending, is also looking to expand its range of loans and maturities. As Peer-to-Peer Finance News previously reported, this may include a move into the secured auto finance space.

Atom Bank raises $ 102M at $ 320M valuation for a mobile-only bank for millennials (TechCrunch), Rated: AAA

Atom Bank, a startup out of the U.K. that has built a mobile-only bank targeting consumers between the ages of 18 and 34, has raised another £83 million ($102 million) in funding led by BBVA, the Spanish bank and owner of Simple in the U.S. The funding gives Atom a post-money valuation of £261 million ($320 million), TechCrunch has confirmed with the company. BBVA also led Atom’s previous $128 million round in November 2015.

Robo-advice case study: Munnypot (Banking Technology), Rated: A

Munnypot looks like the archetypal disruptor. It is a sophisticated robo-advice service that allows consumers to manage their savings digitally. The platform makes straightforward and easy to understand financial advice available to everyone, at a fraction of the cost of most financial advisors or wealth managers.

First, from 2012, regulatory changes were introduced to provide much greater transparency to consumers, particularly around pricing. These changes have, however, made advice less affordable for people without large savings pots. This has contributed to the “advice gap” of 16 million people in the UK who could take advantage of financial advice if it were simpler and cheaper.

Second, the UK’s simplified tax rules similarly paved the way for providing advice to consumers on a range of more straightforward financial products.

Third, changing customer behaviour means most people are now comfortable with using technology for more and more purchases, whether via websites or apps.

Alternative lenders berate Chancellor for ineffective first budget (AltFi), Rated: A

Stuart Law, CEO and co-founder of secured business lending platform Assetz Capital, has berated Philip Hammond for delivering no news of any import for small businesses – “or indeed their lenders” – in his first budget as Chancellor.

Law said that Hammond has missed a chance to remove a “fatal flaw” from the Innovative Finance ISA tax wrapper, which allows investors to shelter peer-to-peer investments from income tax. The existing rules do not allow investors to spread their annual ISA allowance across multiple peer-to-peer platforms, which Law believes is making diversification “very difficult”.

Ex-ING Direct boss joins RateSetter board (Investor Daily), Rated: B

Peer-to-peer lender RateSetter has appointed former ING Direct chief executive Vaughn Richtor to its Australian board of directors.

European Union

PAYPAL FUNDS FINTECH PROF ROLE (Delano), Rated: AAA

The FNR Pearl chair in fintech will be jointly funded over five years by online payment giant PayPal and the National Research Fund (FNR), the government said in a press release following the signing of a memorandum of understanding on 6 March.

The chair will be established at the University of Luxembourg’s Interdisciplinary Center for Security, Reliability and Trust (SnT).

Personetics to Present Its Cognitive Banking Applications at Fintech 2017 in Zurich, Switzerland (Yahoo! Finance), Rated: A

Personetics, the leading provider of cognitive applications for the financial services sector, will present at Fintech 2017, Switzerland’s most influential fintech conference, which will take place in Zurich 9 March.

Personetics will be presenting a session entitled “Personalized Guidance: Turning Customer Data into a Delightful Customer Experience” at 10:50.

China

Zhong An plans to sell 5-10 percent stake ahead of IPO (Yahoo! Finance), Rated: AAA

Zhong An Online Property and Casualty Insurance plans to sell 5-10 percent of the company to a couple of strategic investors, to raise up to 10 billion yuan ($1.45 billion), ahead of a planned initial public offering in mainland China, according to four people with direct knowledge of the matter.

China’s first internet-only insurer, whose current major shareholders include two of China’s largest Internet companies – Alibaba Group’s Ant Financial affiliate with 16 percent and Tencent Holdings Ltd with 12 percent – is in early talks with potential investors, according to the sources who declined to be named.

China’s Biggest Blockchain Backer Launches Startup Accelerator (CoinDesk), Rated: A

A blockchain venture backed by Chinese conglomerate Wanxiang Group has launched a new startup accelerator.

The kick-off, which formally took place on 22nd February, comes soon after Wanxiang pledged to spend as much as $30bn on a smart cities initiative, set to be invested over a seven-year period. As part of that plan, Wanxiang, best known as the country’s biggest makers of automotive parts, said it would look to fund blockchain entrepreneurs.

The investors would be expected to commit at least 1 billion yuan each and the new funds would be used by Zhong An to expand its business and buy time before securing a green light from regulators for the IPO, one of the people said.

India

No misuse of Aadhaar biometrics, says UIDAI (The Indian Express), Rated: A

The Unique Identification Authority of India (UIDAI), which maintains the database of Aadhaar numbers, said on Sunday that there was no misuse of Aadhaar biometrics, which allegedly led to identity theft and financial loss.

Furthermore, with reference to the incident of misuse of biometrics reported in a newspaper, the UIDAI said it was an isolated case of an employee working with a bank’s business correspondent’s company making an attempt to misuse biometrics, which was detected by the authority’s internal security system and subsequently actions were initiated under the Aadhaar Act.

Asia

Ant Financial invests in Globe Telecom’s Mynt (Telecomasia.net), Rated: AAA

Alibaba’s Ant Financial is making its first foray into the Philippines via partnership with Ayala and an investment into Globe Telecom’s Fintech business unit Mynt.

Alibaba’s Ant Financial is making its first foray into the Philippines via partnership with Ayala and an investment into Globe Telecom’s Fintech business unit Mynt.

The flowering field of fintech (Infographic) (Tech in Asia), Rated: AAA

So, why are fintech firms so popular? What makes them better than other finance companies? One of the key reasons is that they have very stable and predictable business models, making people feel safe about their products and/or services. Investors are also attracted to businesses with predictable business models, as the risk is lower. Fintech companies are also low-cost yet deliver exceptional service.

fintech infographic

 

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

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