- Today’s main news: Invoice Cycle offers underwriting via API. LC hires JPMorgan’s head of new technologies. China Rapid Finance files for U.S. IPO.
- Today’s main analysis: Robinhood valued at $1.3B.
- Today’s thought-provoking articles: Zopa and Funding Circle disagree on becoming a bank. Banks no longer fear P2P lenders and robo-advice.
- Robinhood valued at $1.3B. GP:” An interesting valuation comparison for fintechs.” AT: “I’m excited about the disrupting potential for Robinhood. It will be interesting to see where stock trading technology heads next.”
- GDR adds Prosper to network. GP:” GDR now counts Avant and Prosper among its clients.”
- LC hires JPMorgan’s head of new technologies. GP:”Scott Sanborn has been hiring a lot of new executives since he joined the company. This new addition from a large bank looks very promissing. Beyond compensation, Lending Club has to pitch the new hires to convince them to leave a prestigious job to join them with an outstanding opportunity. I am very curious what they are told Lending Club’s plan is.” AT: “Interesting news, especially following yesterday’s report that Lending Club is in the top 10 companies that pay the most when poaching.”
- China Rapid Finance Ltd files for U.S. IPO of $100M. GP:” Yirendai’s success is generating interest.”
- 5 things to know about Elevate Credit before its IPO. GP:” Elevate Credit’s IPO is expected to price very soon.”
- Fundbox partners with Zoho to solve cash flow gaps. AT: “This is a marriage made in heaven. One of the best partnerships I’ve seen lately.”
- Plaid raises $44M. AT: “One of the most useful apps in FinTech. I can’t wait to see how they expand.”
- John Mack joins Lantern Credit as chairman. GP:” A prestigious board member. I am sure John Mack receives a lot of requests to join boards. Lantern Credit gains a lot of credibilty through this move.”
- Ally debuts online auto financing market.
- Cordray defends CFPB’s enforcement actions. AT: “How long will it be before we hear President Trump say ‘You’re fired‘?”
- Financial inclusion rules tougher than CRA. GP:” Discussing different implications OCC’s fintech charter, and in detail here the CRA requirements.”
- Fallen Stars: Lending Club. GP:” Author, like myself, believes that the tide is turning for Lending Club. “
- First lender/broker API goes live. GP:” Nearly every single company in our space uses Lending Club data to build their underwriting. Invoice Cycle goes even further and is offering underwriting as a service. I think this is a great product, great service and as long as it’s priced properly, I think they will do very well. I expect other firms should rather offer this service instead of trying to sell technology platforms as there are a dime a dozen already. ” AT: “I wonder why we haven’t seen more. Kudos to Invoice Cycle for breaking the ice.”
- P2P lending bosses split on whether to become a bank. AT: “Zopa is taking the right path. Funding Circle may be too, for its own business model. But I’m in favor of digital-only banks. For those who get in now, the competitive playing field of the 21st century will treat them well. This is the time to start a digital bank if you’re going to do it. I see Zopa being a leader in banking soon.”
- LendInvest launches pre-construction product.
- Robots can do more, if we let them.
- New members for the AABF. GP:” The creation of a new association in the UK.”
- Banks no longer fear MPLs, P2P lenders, and robo-advisors. AT: “With so many options on the table, I see no reason why they should.”
- The robo-advisors are coming.
- United States
- Robinhood stock trading app valued at $ 1.3 billion with big raise from DST (TechCrunch), Rated: AAA
- Loan Validation Firm Global Debt Registry Adds Prosper to Network (Crowdfund Insider), Rated: AAA
- JPMorgan’s Head of New Technologies Gets Hired by LendingClub (Bloomberg Quint), Rated: AAA
- China Rapid Finance Ltd files for U.S. IPO of $ 100 Mln (Reuters), Rated: AAA
- 5 things to know about Elevate Credit before the subprime online lender’s IPO (MarketWatch), Rated: A
- Fundbox Partners With Zoho To Solve Cash Flow Gaps (Yahoo! Finance), Rated: A
- Fintech Firm Plaid Raises $ 44 Million (WSJ), Rated: A
- John Mack Joins Lantern Credit as Chairman (Yahoo! Finance), Rated: A
- Ally debuts online auto financing market (Automotive News), Rated: A
- CFPB’s Cordray defends agency’s enforcement actions (American Banker), Rated: A
- Financial inclusion rules tougher than CRA in OCC fintech charter (American Banker), Rated: A
- Fallen Stars: Lending Club (Seeking Alpha), Rated: A
- United Kingdom
- First Lender/Broker API goes live (Invoice Cycle Email), Rated: AAA
- Peer-to-peer lending bosses split on whether to become a bank (AltFi), Rated: AAA
- LendInvest launches pre-construction product (Financial Reporter), Rated: A
- Robots can do more, if we let them (Actuarial Post), Rated: B
- New Members for the AABF (Fintech.finance), Rated: B
- European Union
- Banks “no longer fear” marketplace and P2P lenders and robo advice, finds study (AltFi), Rated: AAA
- Computer says . . . invest: the robo-advisers are coming (The Irish Times), Rated: A
- Numbers favour digital advice for retention and beyond (Super Review), Rated: A
Robinhood stock trading app valued at $ 1.3 billion with big raise from DST (TechCrunch), Rated: AAA
Zero-fee stock trading app Robinhood is completing a huge fund raise to fuel its attack on old brokerage firms that charge around $7 to $10 per trade. According to sources, the round is led by Yuri Milner investment vehicle DST Global and values the company at $1.3 billion.
Last year, it launched its primary revenue stream, a $10 per month premium Robinhood Gold option. That allows users to skip the three-day waiting period for deposits and make trades instantly, as well as borrow up to double the amount of money in their account to trade on margin with leverage.
Earlier today, Fortune reported that Robinhood was seeking a round of financing valuing it at more than $1 billion. Sources tell us that the deal is essentially done, and was led by DST Global, which put in money at a $1.3 billion pre-money valuation.
Loan Validation Firm Global Debt Registry Adds Prosper to Network (Crowdfund Insider), Rated: AAA
Global Debt Registry (GDR), a loan validation platform for institutional investors, has added leading online lending platform, Prosper Marketplace to its verification network. GDR says the partnership will enable Prosper investors access to their due diligence tools to ensure loan data integrity. Prosper successfully piloted GDR connectivity in 2016 and is now enabling investors to access GDR’s solutions as a turn-key autonomous solution.
JPMorgan’s Head of New Technologies Gets Hired by LendingClub (Bloomberg Quint), Rated: AAA
JPMorgan Chase & Co.’s head of new technologies has been hired by LendingClub Corp. as the peer-to-peer lending pioneer seeks to rebuild business following a scandal over its corporate controls.
Santiago Suarez will join the San Francisco-based company as Head of Strategy and Mergers and Acquisitions, he said on Twitter.
China Rapid Finance Ltd files for U.S. IPO of $ 100 Mln (Reuters), Rated: AAA
- China Rapid Finance Ltd files for U.S. IPO of $100 million – sec filing
- China Rapid Finance Ltd says ADSS have been approved for listing on new york stock exchange under the symbol “XRF”
- China Rapid Finance Ltd says Morgan Stanley. Credit Suisse, Jefferies are underwriters for the IPO
5 things to know about Elevate Credit before the subprime online lender’s IPO (MarketWatch), Rated: A
Now, following an opening of the IPO market and a possible easing of financial regulations, Elevate ELVT, +0.00% has set a $12 to $14 price range and plans to sell 7.7 million shares, which would raise up to $107.8 million. The company is expected to price its shares this week and begin trading on the New York Stock Exchange.
UBS Investment Bank, Credit Suisse and Jefferies are the lead underwriters on the offering.
- Rise and Sunny are both installment loans, commanding average percentage rates of 156% and 230% respectively. Elastic is a line of credit with an average interest rate of 91%. The company’s average APR was 146% for 2016, which the company notes is a drop from 2013, when the annualized premium was 251%.
- The company targets consumers with credit scores below 700, which is a sector Elevate calls the “New Middle Class” but most consider subprime. About 95% of loan applications are automated, without human review.
- Elevate recorded revenue of $580.4 million in 2016, up from $434 million in 2015, but net losses grew from $19.9 million in 2015 to $22.4 million in 2016.
- But President Donald Trump issued memorandums in January that could change Elevate’s risk level.
- Elevate receives debt financing for its Rise and Sunny loans from Victory Park Management, an affiliate of Victory Park Capital.
Fundbox Partners With Zoho To Solve Cash Flow Gaps (Yahoo! Finance), Rated: A
Fundbox, the leading cash flow optimization platform for small businesses (SMBs), and Zoho, the leading cloud-based business operating system, today announced a partnership in which Zoho will offer Fundbox to its user base in the U.S. Under the partnership, Zoho will provide access to Fundbox’s technology to streamline and automate the business borrowing experience within the Zoho ecosystem.
Fundbox addresses one of the biggest pain points for small businesses and freelancers: cash flow. A recent Fundbox study revealed that 64 percent of small businesses are adversely affected by late payments. Over 80 percent of small business invoices are over 30 days due. This integration will allow Zoho customers approved for Fundbox Credit to advance funds tied up in their receivables so they can focus on business growth.
Fintech Firm Plaid Raises $ 44 Million (WSJ), Rated: A
Plaid Technologies Inc., whose software allows a variety of financial-technology startups to access their customers’ bank account information, has raised $44 million in a new round led by a fund at Goldman Sachs Group Inc.
The new funding is a boost for apps and websites that use Plaid, which has now raised about $60 million total, as they work to ensure access to customer data held by banks.
John Mack Joins Lantern Credit as Chairman (Yahoo! Finance), Rated: A
Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, appoints esteemed banking industry veteran John Mack as Chairman of its Board of Advisors, joining current board members John Sculley, former chairman of Apple Computer, James Held, former president and CEO of the Home Shopping Network, Seth Johnson and Kevin Knight.
Mack brings vast leadership experience including Chairman and CEO of Morgan Stanley, Co-CEO of Credit Suisse Group and CEO of Credit Suisse First Boston. Mack is actively serving on several boards including Lending Club, Glencore International AG and Bloomberg Family Foundation. Mack has accumulated 25 years of experience as chairman, serving on the boards of Morgan Stanley, Pequot Capital Management Inc. and New York-Presbyterian Hospital.
Lantern Credit’s white label platform for financial institutions draws personal financial data including credit data, account information and personal goals to provide customers with real-time information to make informed choices designed to improve their financial wellness. Financial Institutions providing the Lantern Interactive Credit Report™ to their customers benefit from more engaged consumers and are better equipped to provide relevant offers to their customers. Instead of the traditional static credit report, Lantern’s Interactive Credit Report delivers access to a free credit report and score, model the effects of financial actions, receive and accept offers directly from lenders, and make payments on existing accounts.
Ally debuts online auto financing market (Automotive News), Rated: A
Ally Financial Inc. is launching an online auto finance marketplace that connects lenders and consumers.
Clearlane, which launches today, derives from Ally’s third-quarter acquisition of BlueYield, an online auto-lender exchange.
The Clearlane network includes more than a dozen national, regional and local finance providers that will connect with consumers to finance or refinance their auto loans. Consumers can also speak with live agents and purchase Ally’s F&I products.
CFPB’s Cordray defends agency’s enforcement actions (American Banker), Rated: A
Richard Cordray, the director of the Consumer Financial Protection Bureau, defended the agency on Thursday from industry allegations that the CFPB engages in “regulation by enforcement.”
Financial inclusion rules tougher than CRA in OCC fintech charter (American Banker), Rated: A
The Office of the Comptroller of the Currency’s proposal to require fintech charter applicants to draft and comply with a financial inclusion plan appears to have more teeth than similar Community Reinvestment Act requirements for banks.
The OCC has made it clear that it is not seeking to institute CRA requirements on nonbanks, in part because the 1970s-era law is widely considered outdated in how it promotes financial inclusion.
Fallen Stars: Lending Club (Seeking Alpha), Rated: A
I believe that the tide is turning for Lending Club. I believe there are a number of factors that will contribute to its success going forward. I believe the company will leave negative PR in the dust, grow, and regain a positive EPS. Make no mistake, this is a high risk (potentially) high reward opportunity. This is not an investment for the faint of heart.
The company has a market cap of $2.2B. It has fallen nearly 80% since its IPO and currently has negative earnings per share.
Regarding full year 2017 guidance, Lending Club expects 17% growth, a GAAP net loss of $84 to $69m, and positive EBITDA. In my opinion the company will go positive again in 2018 if current trends continue.
The company’s balance sheet is a star among mud. Lending Club has no debt. It has $1.29 of cash per share and a total book value of $2.45 per share. I love a company that has no debt.
Lending Club is obviously at the mercy of the consumer credit cycle. It goes without saying that if borrowers can’t pay their loans, the company will suffer. If charge offs increase Lending Club may lose investors providing the capital for the loans. Lending Club may also have to increase its rates which would reduce its competitive advantage over traditional banks.
First Lender/Broker API goes live (Invoice Cycle Email), Rated: AAA
Invoice Cycle – the UK SME lender – is excited to announce the release of a new API for partners. This development allows partners to interface directly with the Invoice Cycle proprietary risk algorithm and gain a pre-approval for an SME financing facility within seconds. The first partner to integrate this offering is FundingXchange – the cutting-edge business finance marketplace. This means that FundingXchange customers will be able to get an Invoice Cycle facility in place within hours of starting their funding search!
Gideon Shaw CEO of Invoice Cycle said of the development “One of our core principals is to provide the highest level service to our customers. In the fast paced world of business, decisions need to be made as soon as possible, we aim to turn an application around within 24 hours. This new API will help us meet these targets and allow us to provide a better service to both our client and partners. This release demonstrates how we strive to be at the forefront of technological innovation in the industry.”
Peer-to-peer lending bosses split on whether to become a bank (AltFi), Rated: AAA
“We at Funding Circle have no plans to launch a bank,” said Desai.
He went on to identify the three types of bank collaboration that have sprung up across the marketplace lending space: banks buying marketplace loans, banks referring customers to platforms and “co-branding” opportunities. He was critical of “lending-as-a-service” integrations, which broadly speaking entail platforms letting banks make use of their technology. Desai said there is “only one winner” in such arrangements.
Janardana confirmed in his speech that Zopa will be using deposits to fund loans through the marketplace.
LendInvest launches pre-construction product (Financial Reporter), Rated: A
LendInvest will offer a loan term of up to 18 months, and borrowers who then wish to apply for development finance with LendInvest after gaining planning permission will have their applications fast-tracked.
The pre-construction product has no exit fees and is available on loans between £75,000 and £5 million up to 65% LTV. Interest is charged at 1% – 1.50% per calendar month.
Robots can do more, if we let them (Actuarial Post), Rated: B
Ultimately the use of automated solutions will provide a more standardized service and increase the control the compliance department has on the quality of the service delivered. It will also help to reduce costs, thereby ultimately benefitting the customer by reducing the charges that need to be applied to the policy.
We should be looking at the arrival of robo-advice, not in terms of making huge changes but in terms of providing incremental improvements to our customer service levels, our ease of achieving our regulatory compliance and our ability to provide better value to life and pension customers. The impact of robots on the industry should be less like a technological disruption than a technology-supported evolution of service levels.
New Members for the AABF (Fintech.finance), Rated: B
Three new alternative lenders have joined the recently launched Association of Alternative Business Finance (AABF) – Invoice Cycle, Merchant Money and Reward Finance Group.
The AABF was launched on 1 February this year with the major ambition of championing and promoting the best standards of industry practice.
The seven founding members, Capify UK, Catalyst Finance, Credit4, Fleximize, Liberis, The Just Loans Group and YesGrowth established four clearly defined operating principles that members will be required to adhere to:
Banks “no longer fear” marketplace and P2P lenders and robo advice, finds study (AltFi), Rated: AAA
The new report from the Economist Intelligence Unit finds bank/fintech collaboration will be key to the survival of both ends of the market.
While P2P and marketplace lenders as well as robo advice firms are increasing their market share, big banks are less concerned by their technology-enabled competitors than before. The report found PSD2 and open architecture framework is widely seen as a game changer between banks and fintechs.
Acquisition costs are often higher than expected, compliance costs are climbing and margins are already falling in P2P lending and robo advice, Freidman says.
Computer says . . . invest: the robo-advisers are coming (The Irish Times), Rated: A
Now London-based ETFmatic is targeting the Irish market along with 31 other European countries, hoping that investors will be attracted by annual management charges starting from 0.3 per cent.
The minimum initial investment for ETFmatic, for example, is just €100. Portfolios with less than €25,000 carry a management fee of 0.5 per cent, falling to 0.3 per cent for portfolios above €25,000.
Consequently, the all-inclusive fee for an ETFmatic portfolio ranges from 0.4 to 0.85 per cent.
For now, robo-advisers remain a niche option, accounting for less than 1 per cent of assets under management. However, the space is a rapidly-expanding one that may account for 10 per cent of global assets by 2020, according to a BI Intelligence report last year. Almost half of wealthy investors not currently using robo-services would consider using them in the future, according to a PwC report last year.
Robo-advice may be here to stay, but the beneficiaries may be the big players who are increasingly moving into the space rather than startups such as ETFmatic.
Numbers favour digital advice for retention and beyond (Super Review), Rated: A
Today our experience shows most superannuation executives instinctively accept that digital advice will increase in importance as one means of delivering better service to all members. However, like any business investment, it needs a business case.
Retention of members is the number one priority for many superannuation providers. Decimal’s research shows it is also the area in which the greatest financial gains can be made.
Nevertheless, our data indicates that funds implementing digital advice that includes contribution related advice topics can reduce retention risk by approximately 15 per cent.
In the cases analysed, it was found 40 per cent of these passive members could be engaged with digital advice. Of that 40 per cent, 25 per cent moved through to actioning a Statement of Advice (SOA). That equates to 10 in every 100 passive members making some level of additional financial contribution.
In cases where members have had some level of engagement in the past but have never taken a real course of action, digital advice was found to be successful in re-engaging approximately 30 per cent.