- Today’s main news: SoFi’s loan losses pile up as wealthy borrowers default. Charles Schwab launches hybrid human-robo financial advice. GDR adds Avant as verification network partner. Vista to acquire D+H to merge with Misys.
- Today’s main analysis: Household debt edges up as auto, credit card, and student debt climb. The regulation of MPL.
- Today’s thought-provoking articles: Everything you should know about alt lending in Asia.
- SoFi’s loan losses pile up as wealthy borrowers default. GP:”Over the last year approximatively we have seen higher than expected defaults at Lending Club, Prosper, Circle Back, OnDeck and approximatively 5 securitizations hit triggers in the space before today. To be honest I am a little surprised that the SoFi securitization is also hit triggers. I look forward to the analysis behind the reason why this is.” AT: “The article doesn’t discuss reasons for default.”
- Household debt edges up as auto, credit card, and student debt climb. GP:” I expect this to be an indicator of a healthy full employment economy. Note that we haven’t quite overpassed the pre-2008 high. If the 2001-2008 cycle is a good indicator, at the present growth speed, we have another 3-4 years in this cycle. However the 2001-2008 cycle was probably fueled by the real estate equity growth which enabled consumers to get into higher debt. “
- Charles Schwab launches hybrid human-robo financial advice. GP:” We often see a cycle where a market goes from one extreme, all human, to the other extreme, all robot, to finally understand the pros and cons of each approach and settle at a reasonable ratio. In currencies for example trades below $5mil are done on aggregators, and over by humans. I would expect something similar here.” AT: “If it takes a hybrid approach to get people familiar with robo-advice, so be it. Older Americans are going to need that to make the transition. Millennials are comfortable with technology, but they’d prefer Betterment over Charles Scwhab. It’s just the reverse for older Americans.”
- The Regulation of Marketplace Lending: A Summary of Principal Issues. AT: “This is a must-read following the remand decision in Madden v. Midland Funding.”
- Global Debt Registry adds Avant as verification network partner. GP:” Global Debt Registry verifies data and after the Lending Club crisis it seemed like a required product for the industry. It has taken a lot of time for the solution to finally be publicly endorsed and used by a significant lender. We wonder why it took 1 year. But we are glad the solution is here and it can only help build credibility to the space by confirming that the loan data is indeed correct the overwhelmingly large majority of the time. “
- Kroll assigns preliminary ratings to Marlette Funding Trust 2017-1.
- Traditional advisor model will not last.
- Clarity Money marks continued growth with 100K customers.
- PeerStreet awarded Top Emerging Real Estate Platform by LendIt. AT: “Congratulations.”
- Jilliene Helman named Fintech Woman of the Year. AT: “Congratulations.”
- New conferences focuses on branded currency. AT: “This is an interesting concept. I didn’t realize branded currency was big enough to have its own conference. I do think this is a unique marketing opportunity for retail brands to build loyalty in the digital age, and it could give a boost to the cryptocurrency sector, as well.”
- Podcast: John Donovan of Bizfi.
- LendIt USA 2017: Sessions you may have missed. AT: “Significant for the number of people in attendance.”
- NACFB offers members ‘unrestricted’ insurance for P2P. GP: “Insurance has a cost vs risk. And it is usually calculated for the insurance company to make a profit. If the probability of a catastrophe is low and the catastrophe is extremely impactful, it may be worth it. Otherwise, it is probably better to just build an in-house fund.”
- UK, Japanese regulators agree to cooperate on fintech.
- Vista to acquire D+H for merger with Misys. AT: “This will create a truly global fintech powerhouse.”
- Everything you should know about alternative lending in Asia. AT: “I wouldn’t say everything, but I’m excited about the opportunities for investors in Southeast Asia.”
- solarisbank goes to Asia. AT: “Asia ia a market ripe for truly innovative banking models, or any banking model for that matter.”
- United States
- SoFi’s Loan Losses Pile Up as Even Wealthy Borrowers Default (Bloomberg), Rated: AAA
- Household Debt Edges Up as Auto, Credit Card, and Student Debt Climb (New York Fed), Rated: AAA
- Charles Schwab launches hybrid human-robo financial advice (WHTC), Rated: AAA
- The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler LLP), Rated: AAA
- Global Debt Registry Adds Avant as Verification Network Partner (Yahoo! Finance), Rated: AAA
- Kroll Bond Rating Agency Assigns Preliminary Ratings to Marlette Funding Trust 2017-1 (BusinessWire), Rated: AAA
- Traditional Advisor Business Model Will Not Last (Financial Advisor IQ), Rated: A
- Clarity Money Marks Continued Growth with 100,000 Customers and Senior Hires (BusinessWire), Rated: B
- PeerStreet Awarded ‘Top Emerging Real Estate Platform’ by LendIt (Yahoo! Finance), Rated: A
- RealtyMogul.com CEO Jilliene Helman Named Fintech Woman of the Year (Yahoo! Finance), Rated: A
- New fintech conference focused on branded currency comes to Omaha (siliconprairienews), Rated: A
- Podcast 93: John Donovan of Bizfi (Lend Academy), Rated: A
- LendIt USA 2017: Sessions You May Have Missed (LendIt), Rated: B
- United Kingdom
- NACFB offers members ‘unrestricted’ insurance cover for peer-to-peer (Bridging&Commercial), Rated: AAA
- UK and Japanese regulators agree to cooperate on fintech (Out-Law.com), Rated: A
- European Union
- CSI globalVCard Expands Globally (PR Newswire), Rated: AAA
- Vista to acquire D+H for fintech merger with Misys (Financial News), Rated: AAA
- Here’s Everything You Should Know About Alternative Lending In Asia (Forbes), Rated: AAA
- German Challenger Bank SolarisBank Goes to Asia (Fintech News), Rated: AAA
- Middle East
- The real estate property crowdfunder with an ethical conscience (Zawya), Rated: A
SoFi’s Loan Losses Pile Up as Even Wealthy Borrowers Default (Bloomberg), Rated: AAA
Social Finance Inc.’s online borrowers are defaulting at higher rates than underwriters for one of its bond deals had expected, the latest sign that an industry that hoped to upend banking is now getting tripped up by bad loans.
Losses on the company’s personal loans were high enough to breach key levels known as “triggers” last month on a bond deal issued in 2015 and backed by the loans, according to analysts at Morgan Stanley. If defaults keep rising, investors in bonds could end up missing out on expected interest payments.
Other online lenders have had similar trouble with defaults and triggers recently, which has broadly made it more expensive for the startups to fund their businesses. One pioneer in the business, CircleBack Lending Inc., stoppedmaking new loans as growing numbers of its borrowers defaulted.
Credit issues at Prosper Marketplace Inc. resulted in staff cuts at that company, and were largely the result of lending too much, too fast, and a “grow at all cost” attitude fueled by insatiable demand from investors, Prosper CEO David Kimball said at the New York conference last week.
Household Debt Edges Up as Auto, Credit Card, and Student Debt Climb (New York Fed), Rated: AAA
Aggregate household debt balances grew in the fourth quarter of 2016. As of December 31, 2016, total household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. Overall household debt is now 0.8% below its 2008Q3 peak of $12.68 trillion, and is 12.8% above the 2013Q2 trough.
Mortgage balances, the largest component of household debt, which stood at $8.48 trillion as of December 31, saw a $130 billion uptick from the third quarter of 2016.
Balances on home equity lines of credit (HELOC) were roughly flat, rising $1 billion to $473 billion.
Non-housing debt balances rose in the fourth quarter; with increases of $22 billion in auto loans, 32 billion in credit cards, and 31 billion in student loans.
Charles Schwab launches hybrid human-robo financial advice (WHTC), Rated: AAA
Brokerage Charles Schwab Corp on Tuesday launched a service that combines its automated investment management technology with human advisors, as financial institutions race to offer digital financial advice.
The service, called Schwab Intelligent Advisory, provides clients with a financial and investment plan, unlimited access to a human advisor via phone or video conference, and an investment portfolio of exchange-traded funds managed by computer algorithms.
The service, for clients with at least $25,000 to invest, includes an online platform that keeps track of financial goals and retirement plans, the San Francisco-based company said in a statement. It will charge a 0.28 percent fee on assets, with a quarterly maximum of $900.
The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler LLP), Rated: AAA
At the outset, it may be helpful for us to briefly discuss the scope of this paper and some of the terminology we use. There is no single or universally accepted definition of “marketplace lending.” In general, though, marketplace lenders can be viewed as companies engaged in an Internet-based lending business (other than payday lending) which are not banks or savings associations or otherwise regulated as financial institutions. They may offer a wide variety of financial products, including student loans, small business loans, and real estate loans, in addition to the unsecured installment consumer loans on which the industry initially focused. However, “marketplace lenders” may or may not actually be lenders. This term is a generic term to identify participants in marketing, originating, selling, and servicing loans. They also may fund their loans through a variety of means, including equity capital, commercial lines of credit, sales of whole loans to institutional investors, securitizations, and/or pass-through note programs. In this paper we focus on the consumer lenders since they are the most heavily regulated and have the highest loan volumes. However, much of the discussion herein—outside of matters pertaining directly to consumer lending regulation—will also apply to nonconsumer lenders.
Download “The Regulation of Marketplace Lending: A Summary of the Principal Issues” here.
Global Debt Registry Adds Avant as Verification Network Partner (Yahoo! Finance), Rated: AAA
Global Debt Registry (GDR), the asset certainty company known for its loan data validation expertise, today announced it has added leading online lending platform Avant to its verification network.
Investors in loans through Avant now have turnkey access to enhanced loan due diligence services and can easily add new data insights onto portfolios of loans without having to touch sensitive personally identifiable information (PII) about borrowers.
GDR’s eValidationSM and eVerifySM asset certainty tools require no technology investment, using existing data structures and processes to streamline the flow of information from the lender to the investor. In addition to digital scanning for traditional document verification and data integrity, GDR securely analyzes the Personally Identifiable Information (PII) to ensure borrower data can be independently confirmed in compliance with the investors representations and warranties.
Kroll Bond Rating Agency Assigns Preliminary Ratings to Marlette Funding Trust 2017-1 (BusinessWire), Rated: AAA
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Marlette Funding Trust 2017-1 (MFT 2017-1). This is a $257.44 million consumer loan ABS transaction that is expected to close on March 23, 2017. This transaction represents the third securitization collateralized by unsecured consumer loans originated by Cross River Bank, under the Marlette Best Egg Platform and sold to Marlette Funding, LLC (“Marlette”) or its affiliate.
Approximately $250 – $325 million of loans are originated through the Platform per quarter. Since March 2015, over $3 billion of loans have been originated though the Platform, and as of February 2017, Marlette has over $100 million of loans on its balance sheet.
The transaction has initial credit enhancement levels of 27.45% for the Class A Notes, 17.95% for the Class B Notes, and 9.10% for the Class C Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A and Class B Notes) and a reserve account funded at closing.
Traditional Advisor Business Model Will Not Last (Financial Advisor IQ), Rated: A
Several developments are creating a “perfect storm” that will revolutionize the financial advice industry and leave many advisors behind, John Lohr writes in Seeking Alpha.
First Ascent still uses real humans on its investment committee, while an independent advisor serves the client, Lohr writes. That model isn’t likely going away: even robo-advice pioneers such as Betterment now offer upgraded services that give investors unlimited interaction with a licensed advisor, he writes.
But Betterment’s annual fee for unlimited calls with an advisor is just .50%, according to Lohr. That means high-fee advisors are on the way out, he writes.
Clarity Money Marks Continued Growth with 100,000 Customers and Senior Hires (BusinessWire), Rated: B
Clarity Money, a revolutionary personal finance app that acts as the “Champion of your Money,” has reached 100,000 customers since its launch in January 2017. The app has been a “featured” personal finance app on the Apple App Store since its launch. Clarity Money was created by venture capitalist and serial entrepreneur Adam Dell.
To keep up with this growing demand, Clarity Money is pleased to announce three new additions to its team – Melissa Manne, Vice President of Product Management; Colin Kennedy, Chief Revenue Officer; and Marc Atiyeh, Chief Strategy Officer. The Clarity Money team already includes financial and technology veterans from Betterment, Google and IBM, as well as advisory board members Niall Ferguson, economic historian, and Dan Ariely, behavioral economist.
Clarity Money works by using data science and machine learning to provide personalized insights for customers. By utilizing a combination of techniques such as natural language processing, anomaly detection and spectral analysis, customers are able to take advantage of features such as: bill lowering, subscription cancellation, creating a savings accounts and providing tailored suggestions on things such as credit cards.
With the potential impact of financial deregulation and the weakening of the Consumer Financial Protection Bureau, consumers need a financial advocate now more than ever. Banks and financial institutions already have powerful tools designed to sell, market and retain customers, but consumers don’t have an equally powerful tool to level the playing field and protect against hidden fees and recurring charges. Clarity Money empowers consumers to take control of their finances, providing them with transparency, organization and actionable insights.
PeerStreet Awarded ‘Top Emerging Real Estate Platform’ by LendIt (Yahoo! Finance), Rated: A
PeerStreet, a marketplace for investing in real estate backed loans, is pleased to announce that it has been named the Top Emerging Real Estate Platform in the LendIt 2017 Awards. PeerStreet is an Andreessen Horowitz-backed platform, focused on democratizing access to investments in real estate debt.
The Top Emerging Real Estate Platform category focused on younger companies that have demonstrated the greatest potential to impact the future of real estate investing. PeerStreet stood out as the top platform with its unique model, as it is not a direct lender and brings an innovative offering to investors.
RealtyMogul.com CEO Jilliene Helman Named Fintech Woman of the Year (Yahoo! Finance), Rated: A
RealtyMogul.com CEO Jilliene Helman was named Fintech Woman of the Year at the first annual LendIt Industry Awards. Helman was honored for her “outstanding leadership, integrity, performance, and team-building support within RealtyMogul, as well as her contributions to the advancement of the industry.”
The awards, which showcased leaders from across the fintech industry, were part of the annual LendIt USA Conference held in New York City March 6 and 7th. Helman was selected by a panel of 30 industry expert judges from among a field of six leading fintech pioneers.
New fintech conference focused on branded currency comes to Omaha (siliconprairienews), Rated: A
Flourish: The Growth of Branded Currency is a fintech conference launching in Omaha this April 10 -12. The conference is focused on branded currency, and is targeting a range of retailers from those with a national presence to smaller Midwest retailers and their technology service providers.
K+H Connection is the company hosting the event. K+H is a fintech consulting firm based in Chicago, IL that focuses specifically on helping fintech companies integrate with merchants.
HG: Branded currency is actually a relatively new term. In short, it is any sort of tender that is branded and used for a specific purpose or at a specific merchant or location. It could be a gift card, promotional value you earn through a referral or loyalty program, points earned through a credit card program, prepaid mall-branded gift cards, etc. These types of products are more than just a form of tender, they incentivize spend and behavior.
We’re also focusing heavily on fraud within branded currency. Fraud has been the number one thing that people have asked us to discuss, so we are going to have a huge session on it.
Podcast 93: John Donovan of Bizfi (Lend Academy), Rated: A
Industry pioneer John Donovan talks about why he is excited to be at the helm of one of the leaders in small business lending.
LendIt USA 2017: Sessions You May Have Missed (LendIt), Rated: B
Thanks to everyone who joined us at LendIt USA 2017. Our growth surpassed our expectations and we had close to 5,900 attendees at the two-day conference.
NACFB offers members ‘unrestricted’ insurance cover for peer-to-peer (Bridging&Commercial), Rated: AAA
Under the terms of NACFB membership, brokers must have professional indemnity insurance covering them against mis-selling claims from clients.
UK and Japanese regulators agree to cooperate on fintech (Out-Law.com), Rated: A
On Thursday, the FCA and JFSA agreed a mutual referral system which will see the regulators provide assistance to fintech businesses that wish to expand UK operations into Japan, or vice versa.
The collaboration, which was confirmed by an exchange of letters, will also facilitate information sharing between the regulators on emerging market trends and regulatory issues pertaining to fintech, as well as information concerning referrals.
CSI globalVCard Expands Globally (PR Newswire), Rated: AAA
CSI globalVCard, a leading B2B payments company specializing in secure and rewarding payments, today announced that it has expanded services to Europe and has opened a London office, its first move in a planned worldwide expansion. The company plans to roll out its services across additional continents by year’s end. CSI will use the payment issuance capacity of PrePay Solutions (PPS), a subsidiary of Edenred (70% owned by Edenred and 30% by MasterCard), worldwide leader in prepaid corporate services. PPS will bring CSI its unique payment technology to issue and process all CSI virtual cards and wire transfers in Europe.
Expansion outside of North America was sparked by CSI globalVCard’s growing demand from multi-national clients, their increased need for native currency payments, as well as customer service support across local time zones. The global payments market is estimated at $1.2 trillion, of which B2B payments account for $550 billion. Ten percent of organizations make between 20 and 50 percent of their payments to foreign suppliers, and organizations earning over $2 billion in revenue pay the largest percent of their payments to foreign suppliers.1
Vista to acquire D+H for fintech merger with Misys (Financial News), Rated: AAA
Private equity firm Vista Equity Partners has struck a deal to acquire D+H, a Canadian financial technology provider, with an eye to merging it with UK-based Misys to create a financial software company with $2.2 billion in revenues.
US-based Vista said in a statement today that it will pay C$25.50 per share in cash for D+H, including the assumption of debt, in a deal that values the Toronto-listed firm at 4.8 billion Canadian dollars.
Misys chief executive Nadeem Syed said the combination of the two companies gives them the opportunity to create a “global fintech powerhouse”.
That powerhouse would have about 10,000 employees and 9,000 customers, including 48 of the top 50 banks, the statement said.
Here’s Everything You Should Know About Alternative Lending In Asia (Forbes), Rated: AAA
Over the last 5-10 years, China, India, and Southeast Asia have leapfrogged from a cash-based society to one where mobile payments are common currency, skipping adoption of credit cards, savings accounts and other consumer financial products common in Western countries. The result: a population that’s smartphone-savvy but still largely unbanked, without the credit histories necessary to access traditional small business or personal loans. It’s a prime market for alternative lenders, who usually use alternative means to assess creditworthiness, foregoing traditional credit scores altogether.
Here is a brief taxonomy of the many types of alternative lenders currently operating in both Asia and the West.
Chinese tech giants have aggressively pursued synergies between different divisions of their sprawling businesses. For instance, Sesame Credit, Alibaba’s alternative credit scoring program, looks at the frequency and cost of a customer’s purchases on Alibaba’s mobile payments platform Alipay in order to determine creditworthiness.
Meanwhile, India’s alternative lending market is in a much earlier stage. Giant tech companies don’t yet dominate the scene, and so the balance-sheet lending landscape includes a large number of small specialists like EarlySalary (payday loans), ZestMoney (point of sale), and Buddy (targeted at students). There are only about 30 P2P lenders in the country, which is surprising for a country where nearly 40% of the population is unbanked, and therefore without access to traditional loans.
Southeast Asia has one of the fastest growing economies in the world, but the small- and medium-sized businesses (SMEs) that make it up have more limited access to financial credit than the global average.
In Singapore, the financial center of the region, the major alternative finance players in Singapore are peer-to-company (P2C) lenders: specialized P2P lenders that only provide loans for SMEs. Market leader Capital Match was founded in 2014, but says it has already paid out more than S$32m (US$22.5m) in loans.
Malaysia is doing its part to meet P2P companies like Funding Societies in the middle, having recently updated its financial guidelines to include P2P lending. Thailand has done the same, issuing a consultation paper on regulations for P2P lending last fall.
German Challenger Bank SolarisBank Goes to Asia (Fintech News), Rated: AAA
The financial services subsidiary of the Bertelsmann Group, Arvato Financial Solutions, and the Japanese investor SBI Group will invest in solarisBank in a partnership that promises significant cooperation potential across international markets. In total, the Berlin-based bank raises EUR 26.3 million in the series A financing, meanwhile seed investors FinLeap, Hegus and yabeo Capital participate as well.
As the young bank steps up its internationalisation efforts, new executives are being added to its leadership team: Roland Folz will join the Management Board as CEO, while Gerrit Seidel will take over as Supervisory Board Chairman from HitFox Group and FinLeap founder Jan Beckers.
solarisBank intends to expand its activities in European and Asian countries over the coming years, and will establish joint venture companies with the SBI Group in order to develop businesses in Asia.
The real estate property crowdfunder with an ethical conscience (Zawya), Rated: A
As key professional in the Qatar real estate industry gather for the annual Cityscape exhibition in Doha, MercyCrowd, a brand new type of property crowdfunding platform, will offer for the first time to people in Qatar international real estate purchases through crowdfunding.
MercyCrowd is part of the Elite International Asset Group, an established international company promoting real estate investment in Europe with a specialty in the French and UK market. However, what makes MercyCrowd uniquely different is the company’s core belief that sustainable growth can only stem from real assets that generate real increments and tangible benefits to a society.