- Today’s main news: Elevate Credit’s IPO on NYSE. Lending Club media sentiment of 0.27. P2P ISA data disappoints. 83North closes $250M fund for EU and Israeli startups. AnyTimeLoans fights its way into Singapore.
- Today’s main analysis: FinTech’s growing influence on financial services. Wealth Tech exit activity in one timeline.
- Today’s thought-provoking articles: Top 8 Renaud Laplanche/Upgrade news stories. MarketInvoice has ambitious expansion plans. Fintech partnerships reveal innovation insecurities. Top 10 fintech lending companies.
- Elevate Credit’s IPO on NYSE. GP:” I think Elevate Credit is more like Yirendai than Lending Club. I expect their stock to have a similar trajectory. Lending Club’s and OnDeck’s latest valuations and stock prices certainly hurt the IPO pricing and demand.”
- LendingClub receives media sentiment score of 0.27. GP:” We strive to be objective but we are still humans. Modestly, I do wish that more media was objective and looked at the numbers more though. I do think that being public did attract a lot of SEO and PR to Lending Club which shouldn’t be discounted. Also, the story based on ‘we are replacing the evil banks’ caught very well with a majority of the public. One shouldn’t underestimate a good story, or a pitch that is popular with the public. I am sure everybody remembers Google’s ‘don’t be evil’. “AT: “Lending Club’s press is getting better, signifying the company is making a comeback even as its ousted former leader is making his own comeback with a rival startup. This will be an exciting year for alt lending.”
- FinTech’s growing influence on financial services. AT: “FinTech has been likened to Uber’s move in on taxi services and Napster’s disruption of the music industry, but I see one fundamental difference. Instead of fighting the trend, legacy financial institutions seem to be embracing it with partnerships and innovative initiatives of their own. We can debate the effectiveness of these attempts to embrace FinTech, but they are at least trying. We couldn’t say that about the music industry’s response to Napster or taxi services’ reception to Uber and Lyft. The takeaway: Financial services have changed, for better or worse, because of FinTech (I say better), and legacy financial institutions are embracing that change, even if they are doing so with much chagrin.”
- Wealth Tech exit activity in one timeline. GP:” Investors usually invest based on exits, the likelihood, and their size. This info is key for fundraising. Very few people build companies with a large EBITDA and cash flow for dividends in mind.” AT: “In the world of finance, the exit every bit as important (maybe more so) as entrances).”
- Top 8 Renaud Laplanche news stories concerning Upgrade since yesterday. GP:” We would like to thank Renaud Laplanche for personally reaching out to Lending Times with the story.” AT: “Lending-Times was the first to report this news. Here are eight of the top news stories from the biggest news agencies in the world.”
- The long and short of MPL. GP:” A very short summary, which is rather focused on the negative sides using words like gamble when there is no real gamble in fact.”
- JPMorgan is rolling out a robo-advisor this year. GP:” What if JP Morgan Cahse rolled out their own small business lending product like Wells Fargo? What would happe to OnDeck’s stock for example?”
- 9 things that separate good lenders from bad. GP:” There is a lot to say here, from underwriting, to focusing on quality of the loans vs quantity over time. And the trade off between growth and yield.”
- Benefits of alt lending. GP:” A good summary is the phrase ‘ while equity markets were falling, the performance of these loans was unaffected’ “
- JPMorgan’s fintech strategy. AT: “Jamie Dimon’s annual shareholder letter has received a lot of press lately, mainly for his regulatory requests. But he also disclosed some of JPMorgan’s fintech plans. Remember when he was deadset against fintech?”
- P2P Isa data disappoints on year on. AT: “What’s interesting is what Stuart Law has to say about Isas. They may not have overwhelmed us in the last year, but when the Big 3 finally are approved, you could see a wave of acceptance and activity.”
- MarketInvoice has ambitious expansion plans. GP:” What I would do if I was in charge Learning from Lending Club’s experience: opening its underwriting data for free to the internet will attract a lot of attention, PR , SEO and build its credibility. Also having a secondary market will probably enable people to invest more freely as they will not be worried being stuck with paper for 3, 4 or 5 years.”
- 83North closes $250M fund focused on European, Israeli startups. GP:” It is worth knowing that the old name of the fund way Greylock IL.”
- Fintech partnerships reveal innovation insecurities. AT: “Legacy institutions are still trying to figure out how to use technology effectively.”
- Top 10 fintech lending companies and their worth. GP:” Where is Lending Club in this list? How can they not mention Lending Club? Or Yirendai ? Not a serious ranking at all. ” AT: “4 in China, 5 in the U.S., and 1 in the UK. The top 2 are in China.”
- Renren dumps SoFi shares. GP:” SoFi shares are a hot commodity as I can’t imagine their valuation going down any time soon. Most likely this was driven by RenRen’s needs for cash. Note that they still kept 85.9% of their shares in SoFi. “
- United States
- Elevate Credit pops more than 19% in trading debut, after pricing IPO below expectations, ( CNBC), Rated: AAA
- LendingClub Corp (LC) Receives Media Sentiment Score of 0.27 (Sports Perspectives), Rated: AAA
- FinTech’s growing influence on Financial Services (PwC), Rated: AAA
- Buying Options: Wealth Tech Exit Activity In One Timeline (CB Insights), Rated: AAA
- Top 8 Renaud Laplanche news stories since yesterday (Lending-Times Exclusive), Rated: A
- The Long and Short Of It: Marketplace Lending (Investmentu), Rated: A
- JPMorgan is Rolling out a Robo-Advisor This Year (Financial Advisor IQ), Rated: A
- 9 Things That Separate Good Business Lenders from Bad Ones (Business2Community), Rated: A
- Benefits Of Alternative Lending (ETF.com), Rated: A
- JPMorgan’s fintech strategy (Business Insider), Rated: B
- United Kingdom
- Peer-to-peer Isa data disappoints one year on (FT Adviser), Rated: AAA
- UK marketplace lender has ambitious expansion plans (Business Insider), Rated: AAA
- European Union
- 83North closes $ 250M fourth fund focused on European, Israeli startups (TechCrunch), Rated: AAA
- Fintech partnerships reveal innovation insecurities (Financial News), Rated: AAA
- Top 10 Fintech Lending Companies and Their Worth (TechBullion), Rated: AAA
- Renren Inc. Announces Disposition of Certain Shares of Social Finance, Inc. (Yahoo! Finance), Rated: A
- Don’t Let a Low CIBIL Score Come in the Way of your Dream Home (Business-Standard), Rated: B
- AnyTimeLoan fights its way into Singapore from the India chapter of Get in the Ring (The News Minute), Rated: AAA
Elevate Credit pops more than 19% in trading debut, after pricing IPO below expectations, ( CNBC), Rated: AAA
Elevate CEO on subprime lending Elevate CEO on subprime lending Elevate Credit shares bounced on their first day of trading on Thursday, despite a disappointing IPO pricing.
Shares closed at $7.76 per share on Thursday, up more than 19 percent. The stock began trading on the New York Stock Exchange under the symbol ELVT.
The company priced its IPO at $6.50 a share, well below the expected range of $12 to $14 a share, as investors express continuing skepticism of new online lending models. At a $6.50 share price, the market capitalization would be $260 million, down from $490 million had the stock priced at $14, the top end of the previous range.
“We raised just a little under the amount that we intended to raise, so we’ll be able to pay down the debt that we wanted to pay down,” CEO Ken Rees told CNBC’s “Squawk Alley” on Thursday. The company had at one point proposed to raise up to $100 million, but is now on track to raise less than $93 million.
The start-up offers alternatives to payday loans, title loans, pawn and storefront installment loans to “nonprime” consumers with credit scores of less than 700 in the U.S. and U.K. Backed by Sequoia Capital, the company grew gross revenue 34 percent year over year to $580.4 million by the end of 2016.
But net losses also swelled to $22.4 million by the end of 2016, up from $19.9 million the prior year. The effective annual percentage rate (APR) on the company’s loans have fallen about 42 percent since 2013, but are still about 146 percent, according to regulatory filings.
LendingClub Corp (LC) Receives Media Sentiment Score of 0.27 (Sports Perspectives), Rated: AAA
Headlines about LendingClub Corp (NYSE:LC) have trended positive recently, AlphaOne reports.
LendingClub Corp earned a daily sentiment score of 0.27 on AlphaOne’s scale.
These are some of the headlines that may have impacted Alpha One Sentiment’s scoring:
- Former LendingClub CEO Renaud Laplanche launches new online lender (feeds.reuters.com)
- JOHN MACK: ‘I’m worried about jobs’ (us.rd.yahoo.com)
- LendingClub Corp (LC) Receives Average Rating of “Hold” from Brokerages (americanbankingnews.com)
- Is Lending Club Really Like Amazon? (fool.com)
- Are Peer To Peer Loans Right For Your Portfolio? (forbes.com)
LendingClub Corp (NYSE:LC) traded up 1.91% during mid-day trading on Thursday, reaching $5.34. The company had a trading volume of 3,066,593 shares. The stock’s market capitalization is $2.14 billion. LendingClub Corp has a one year low of $3.44 and a one year high of $8.41. The company’s 50-day moving average is $5.63 and its 200-day moving average is $5.64.
FinTech’s growing influence on Financial Services (PwC), Rated: AAA
The Financial Services industry continues to be fuelled by FinTech’s influence. The fact that consumers are increasingly doing business with these non-traditional players will do little to calm uncertainty. As incumbents react to this they are attempting to come together with FinTech; to leverage the ecosystem it creates, turn the innovation to their advantage and alleviate their concerns around their business being at risk.
Access the PwC Global FinTech Report 2017.
Buying Options: Wealth Tech Exit Activity In One Timeline (CB Insights), Rated: AAA
Wealth tech startups are disrupting personal wealth management and institutional trading, with companies in the space seeing a record 74 deals in 2016.
Though a relatively nascent subindustry, there have been 29 wealth tech exits since 2012, including 28 mergers and acquisitions (M&A) and 1 IPO. Exit activity surged in 2015, with a record of 11 exits, all of which were from M&A. 2016 lagged 2015 with 8 exits, all of which were also M&As.
2017 is off to a strong start with 3 exits as of Q1’17.
- One of the earliest exits in the wealth tech space was a merger between Zecco and TradeKing in Q2’12.
- TradeKing went on to acquire GAIN Capital Securities in Q2’13, TraderOS in Q1’15, and MB Trading in Q3’15. TradeKing was acquired in Q2’16 by Ally Financial at a $275M valuation.
- Yodlee, a cloud-based data analytics software for wealth managers and investors, is the only wealth tech IPO since 2012.
- Envestnet, a publically traded wealth management software provider, has been one of the most active acquirers in wealth tech, tying TradeKing with 3 acquisitions.
Top 8 Renaud Laplanche news stories since yesterday (Lending-Times Exclusive), Rated: A
Yesterday, Lending-Times was the first to report that Renaud Laplanche has returned with a new Lending Club rival, Upgrade. Since then, other news agencies have reported on the same news. Here are 10 of the top stories on Renaud Laplanche and his new consumer credit platform Upgrade.
- Renaud Laplanche, Ousted at Lending Club, Returns as Rival to His Old Firm (New York Times)
- Lending Club founder Renaud Laplanche is back with a new startup and $60 million in funding (TechCrunch)
- Former LendingClub CEO Renaud Laplanche launches new online lender (Reuters)
- Renaud Laplanche debuts second act post-Lending Club scandal (San Francisco Business Times)
- Renaud Laplanche Foregoes Subtlety In His Fintech Rebound Relationship (Dealbreaker)
- LendingClub’s Ousted CEO Renaud Laplanche Is Launching a New Online Lender (Fortune)
- Upgrade, Inc. Launches New Consumer Credit Platform (Yahoo! Finance)
- Lyft, Upgrade, Trov are latest to raise VC cash (Silicon Valley Business Journal)
The Long and Short Of It: Marketplace Lending (Investmentu), Rated: A
Since its inception in the late 2000s, marketplace lending has seen good and bad years. Today, an imminent interest rate hike has made its future uncertain.
Lending Club sorts its loans into almost 40 risk grades. Annual interest rates range from 6% for high-credit borrowers to 36% for risky borrowers. That makes them very competitive with traditional debt investments. It’s no wonder that marketplace loans soared 700% between 2010 and 2014.
Take a quick look at the stock performance of OnDeck and Lending Club. It becomes pretty clear that there are some problems under the hood. Both companies are down almost 50% in the last year.
Oversight said that 30-day delinquency rates were as high as 18% for some marketplace lenders.
An investor might be willing to gamble on a 6% return when Treasury bills are yielding 1%. But if U.S. government debt is yielding 3% or 4%, then marketplace lending is significantly less appealing.
JPMorgan is Rolling out a Robo-Advisor This Year (Financial Advisor IQ), Rated: A
JPMorgan is developing an automated advice platform it says will be ready this year, Bloomberg writes.
The company is developing several “exciting new products,” and among them are “online vehicles for both individual retirement and non-retirement accounts, providing easy-to-use (and inexpensive) automated advice,” JPMorgan CEO Jamie Dimon wrote in his annual letter to the company’s shareholders, according to Bloomberg.
In addition to digital banking and electronic trading, JPMorgan will be rolling out the automated advice service later this year, Dimon says in the letter.
9 Things That Separate Good Business Lenders from Bad Ones (Business2Community), Rated: A
A direct online lender is a company that actually supplies the money it lends to borrowers. Many business-lending websites are mere matching services that send out your application to a network of lenders. That might sound good, but it’s not, because you end up paying much more for you capital.
Look for a lender with a streamlined, paperless online application process that can be completed in minutes.
A good lender looks beyond your credit score, makes a decision in minutes and gets you your money the next business day. A good lender will not do a hard pull on your credit. A bad lender may require extensive underwriting, which can waste days and still end up in a denial.
A business lender with a maximum loan limit of $25K or $50K won’t satisfy many small business borrowers who need more. Look for a direct lender who is willing to lend up to $150K.
Read the rest of the article here.
Benefits Of Alternative Lending (ETF.com), Rated: A
While nonbank loan channels have always existed parallel to traditional banking, these channels were historically small niches in the overall economy. However, a new breed of lender has emerged to become a significant presence in the market.
Today institutions are the predominant source of funding for alternative loans. For example, Lending Club, the largest U.S. platform, shifted from 100% retail funding in 2008 to 84% institutional funding in 2015.
Investors saw the same thing following the Brexit vote in June 2016. In both cases, while equity markets were falling, the performance of these loans was unaffected. Thus, there are times (though not all times), when an investment in these loans will help dampen portfolio volatility.
In both alternative lending and reinsurance, one reason these products offer equitylike expected returns without the equitylike volatility is the illiquidity risk that investors accept.
JPMorgan’s fintech strategy (Business Insider), Rated: B
Here are the areas in which JPMorgan is embracing fintech:
- Investing in new technologies.
- Developing new products.
- Promoting financial inclusion.
- Collaborating with fintechs.
- Doubling down on data sharing.
83North closes $ 250M fourth fund focused on European, Israeli startups (TechCrunch), Rated: AAA
European VC firm 83North (formerly Greylock IL), which since 2008 has focused on backing startups in Europe and Israel, has closed its fourth fund — taking $250M in a raise that it says was both oversubscribed and its largest to date, and bringing its total capital under management to $800M.
In a statement she noted that the fund has already backed companies from France, Germany, Greece, Italy, Spain and Sweden, for example, and said it’s expecting European activity to accelerate in tech hubs outside London because of Brexit.
83North has invested in more than 40 startups to date.
Fintech partnerships reveal innovation insecurities (Financial News), Rated: AAA
The world’s banks have poured billions of dollars into new technologies but many say their innovation strategies are falling short as concerns about cyber security, intellectual property rights and procurement hinder partnerships with fintech firms.
The law firm found that just 7% called their institution “industry-leading” on digital innovation and only 16% considered their collaboration with financial technology firms to be “highly effective”.
The biggest barrier to successful collaboration with startups was cyber security, according to 71% of respondents.
Among the other hurdles were cultural clashes between fintechs and incumbents and issues around intellectual property rights; in both cases around 50% of respondents to the Simmons & Simmons survey flagged these as concerns, while only 19% said that their procurement processes were ‘highly effective’.
A separate survey of more than 1300 financial services and fintech executives published today by PwC, found that more than 80% believed parts of their business were at risk from standalone fintech companies (SEE CHART).
Top 10 Fintech Lending Companies and Their Worth (TechBullion), Rated: AAA
According to the findings of Transparency market research, the value of fintech lending will command between $150 billion and $490 billion.
- Lufax is one of the largest fintech lending company in China and the world at large. The company has provided loans worth over US$2.5.
- Founded in 1998 with its headquarters in Chaoyang, China, JD Finance is valued at US$7 billion.
- SoFi was established in 2011 with headquarters in San Francisco, United States. Currently, the company is valued at US$4 billion.
- GreenSky was established in 2006 with its headquarters in Atlanta. The company is valued at US$2 billion.
- Avant Credit was founded in 2012 and is headquartered in Chicago. It is worth US$2 billion.
- Founded in 2005, Prosper has its headquarters in San Francisco. Today, the company is valued at US$1.9 billion.
- focusing on business loans, Funding Circle has, since its establishment, funded different businesses to the tune of $2.5 billion.
- Kabbage was founded in 2009 and is headquartered in Atlanta. The company is currently valued at US$1 billion.
- Established in 2013 with the head office in Beijing, Jimubox is a peer-to-peer loan provider.
- China Rapid Finance was established in 2001 in Beijing but only started online lending in 2011. The company is a leading peer-to-peer consumer lender in China. It is currently valued at US$1 billion.
Renren Inc. Announces Disposition of Certain Shares of Social Finance, Inc. (Yahoo! Finance), Rated: A
Renren Inc. (RENN) (“Renren” or the “Company”), which operates a social networking service and internet finance business in China, today announced that it sold preferred shares of Social Finance, Inc. (“SoFi”) to certain investors on April 4, 2017, in connection with SoFi’s most recent round of equity financing. The Company received net proceeds of $91.9 million for these shares. After this transaction, the Company still has 85.9% of its previous holdings in SoFi.
Don’t Let a Low CIBIL Score Come in the Way of your Dream Home (Business-Standard), Rated: B
Want to know your exact CIBIL score? Visit www.cibil.com and pay a fee to carry the process forward. Your score will range between 300 and 900. According to experts, 79% of loans get sanctioned if the minimum credit score is 750.
Peer to Peer Lending: Peer to peer (P2P) lending is also another option to consider if a low CIBIL score is standing in your way to secure that much-needed Home Loan. P2P lending matches lenders with borrowers and this is generally an online service. The service, because it is online, is more cost effective than traditional financial institutions. Lenders can hope to make higher returns and borrowers can borrow money at an interest that is best suited for them.
AnyTimeLoan fights its way into Singapore from the India chapter of Get in the Ring (The News Minute), Rated: AAA
Peer-to-peer lending platform AnyTimeLoan (ATL) won the India chapter of Get in the Ring on Thursday. ATL will now compete with startups around the world in the Global Startup Competition, which will be held in Singapore in May.
Twenty four startups participated in the competition of which sixe startups had a faceoff in front of the Jury. Paymatrix, Authbase, Gayam Motor Works, SpotDraft, ATL, NicheAI were the startups that made it to the round.
ATL is a peer-to-peer on demand lending provider which provides mortgages, small loans, overdrafts and loans against property. There is an algorithm that analyses information of the individual seeking a loan from 187 data points.